Pagaya Technologies .(PGY) - 2024 Q2 - Quarterly Results

Financial Performance - Record total revenue and other income of $250 million, exceeding the outlook of $235 to $245 million and growing 28% year-over-year[2] - Record adjusted EBITDA of $50 million, surpassing the outlook of $40 to $45 million and nearly 3x higher than Q2 2023[2] - Revenue from fees less production costs (FRLPC) reached $97 million, a 49% year-over-year increase, with FRLPC % improving to 4.2%[2][3] - Raised full-year outlook for total revenue, adjusted EBITDA, and FRLPC % target range to 3.5% to 4.5%[7][8] - Second quarter network volume grew by 19% year-over-year to $2.3 billion, driven by strength in personal loan, single-family rental (SFR), and POS businesses, with personal loan contributing approximately 60% of network volume[27] - Fee revenue less production costs (FRLPC) grew by 49% to $97 million in the second quarter, with FRLPC % reaching a record 4.2%, up 84 basis points year-over-year and 35 basis points compared to 1Q'24[28] - Adjusted EBITDA increased by $33 million year-over-year to a record $50 million, with an adjusted EBITDA margin of 20%, the highest level since the company went public in 2022[31] - The company expects to achieve an FRLPC % between 3.5% and 4.5% for the remainder of 2024, up from the previous target range of 3.0% to 4.0%[30][42] - The company raised its full-year 2024 outlook for total revenue & other income to $975M to $1,050M and adjusted EBITDA to $180M to $210M, while tightening the network volume outlook to $9.25B to $10.25B[42] - Revenue from fees for Q2 2024 increased to $242.594 million, up from $185.685 million in Q2 2023[49] - Total Revenue and Other Income for Q2 2024 reached $250.344 million, compared to $195.612 million in Q2 2023[49] - Adjusted Net Income (Loss) for Q2 2024 was $7.188 million, compared to $886,000 in Q2 2023[50] - Adjusted EBITDA for the six months ended June 30, 2024, was $90,120 thousand, compared to $19,542 thousand for the same period in 2023[53] - Fee Revenue Less Production Costs (FRLPC) for the six months ended June 30, 2024, was $189,115 thousand, up from $115,269 thousand for the same period in 2023[54] - Network Volume for the six months ended June 30, 2024, was 4,750 million, compared to 3,807 million for the same period in 2023[54] - Fee Revenue Less Production Costs % (FRLPC %) for the six months ended June 30, 2024, was 4.0%, up from 3.0% for the same period in 2023[54] - Revenue from fees for the six months ended June 30, 2024, was $479,598 thousand, up from $360,939 thousand for the same period in 2023[54] Partnerships and Agreements - Signed a $1 billion forward flow purchase agreement with Castlelake and achieved an AAA rating on the personal loan ABS program[4][18] - Onboarded OneMain Financial, a top 5 nationwide personal loan originator with $13 billion in annual originations and over 3 million customers[3][10] - Expanded partnership with LendingClub and secured exclusivity arrangements with select partners for second-look application flow[11] - POS lending is expected to contribute over 30% of the business at scale, with partnerships including Elavon, Mastercard, and Klarna[13][15] - The company signed its first $1 billion forward flow agreement, which is expected to fund over 15% of annual personal loan network volume based on 2Q'24 run-rate[36][40] - The company achieved its first AAA rating on its personal loan ABS program, lowering the cost of capital and risk retention requirements[36][41] Operational Efficiency and Cost Management - Reorganized the business to reduce core opex by $25 million annually and $10 million in H2 2024[5] - The company expects to deliver positive cash flow by early 2025, driven by continued top-line growth, disciplined expense management, and capital efficiency[37] - The company aims to achieve positive net cash flow by 2025[46] - Share-based compensation expense for Q2 2024 totaled $18.044 million, down from $20.208 million in Q2 2023[50] Funding and Capital - The company secured an additional $825 million in funding across 3 ABS deals in the second quarter, adding 22 new funding partners for a total of 120 institutional investors on the platform[35] - Net cash provided by financing activities for the six months ended June 30, 2024, was $362,434 thousand, compared to $213,359 thousand for the same period in 2023[52] Financial Position and Assets - Total assets increased to $1,452,977 thousand as of June 30, 2024, compared to $1,208,376 thousand as of December 31, 2023[51] - Cash and cash equivalents grew to $233,593 thousand as of June 30, 2024, up from $186,478 thousand as of December 31, 2023[51] - Total current liabilities increased to $241,254 thousand as of June 30, 2024, compared to $74,925 thousand as of December 31, 2023[51] Risks and Challenges - The company faces risks related to market interest rates, inflation, and geopolitical conflicts, which could impact future performance[46] Non-GAAP Metrics and Financial Outlook - Adjusted EBITDA is used as a key metric for evaluating the company's financial performance, excluding non-cash and non-recurring items[48] - Fee Revenue Less Production Costs (FRLPC) as a percentage of network volume is a key non-GAAP measure used internally for decision-making[48] - Pagaya provides financial outlook for Q3 2024 and full-year 2024 on a non-GAAP basis, including Adjusted EBITDA[48] Net Loss and Liabilities - Net Loss Attributable to Pagaya Technologies Ltd. for Q2 2024 was $74.785 million, compared to $31.297 million in Q2 2023[49] - Net loss including noncontrolling interests was $(114,341) thousand for the six months ended June 30, 2024, compared to $(130,762) thousand for the same period in 2023[52]