Pagaya Technologies .(US:PGY)2024-02-21 11:54Financial Performance - Record network volume of $2.4 billion, grew by 33% year-over-year, driven by new partnerships in auto and real estate verticals[6] - Record total revenue and other income of $218 million, grew by 13% year-over-year, with 18% growth in revenue from fees[7] - Record revenue from fees less production costs (FRLPC) of $76 million, increased 42% year-over-year, with FRLPC margin expanding to 3.2%[8] - Record Adjusted EBITDA of $34 million, exceeding outlook, with an annualized run-rate of over $135 million based on Q4 results[9] - Adjusted net income of $12 million, improved by $16 million year-over-year, marking the third consecutive quarter of positive adjusted net income[10] - The company achieved record network volume of $8.3 billion in 2023, with total revenue of $812 million and Adjusted EBITDA of $82 million[56] - In Q4 2023, network volume grew 33% year-over-year to $2.4 billion, with total revenue increasing 13% to $218 million and FRLPC growing 42% to $76 million[61][66][68] - The company delivered record adjusted EBITDA of $34 million in Q4 2023, with an adjusted EBITDA margin of 16%, marking the second consecutive quarter of positive GAAP operating income[76][77] - Revenue from fees increased to $772.8 million in 2023, up 12.7% from $685.4 million in 2022[103] - Net loss attributable to Pagaya Technologies Ltd. improved to $128.4 million in 2023, compared to $302.3 million in 2022[103] - Non-GAAP adjusted net income was $16.6 million in 2023, a significant improvement from a loss of $32.7 million in 2022[103] - Net Loss Attributable to Pagaya Technologies Ltd. for Q4 2023 was $(14.4 million), compared to $(34.0 million) in Q4 2022, showing a significant improvement[110] - Adjusted Net Income for Q4 2023 was $12.4 million, a substantial improvement from $(3.7 million) in Q4 2022[110] - Adjusted EBITDA for Q4 2023 was $34.2 million, compared to $(9.0 million) in Q4 2022, indicating strong operational performance[110] - Fee Revenue Less Production Costs (FRLPC) for Q4 2023 was $75.9 million, up from $53.5 million in Q4 2022, reflecting higher efficiency[110] - Fee Revenue Less Production Costs Margin (FRLPC Margin) for Q4 2023 was 3.2%, consistent with the previous year[110] - Network Volume for Q4 2023 was 2.38 billion, an increase from 1.79 billion in Q4 2022, showing growth in transaction volume[110] - Revenue from fees for Q4 2023 was $210.4 million, up from $178.2 million in Q4 2022, indicating revenue growth[110] - Production costs for Q4 2023 were $134.5 million, compared to $124.7 million in Q4 2022, reflecting increased operational scale[110] Partnerships and Integration - U.S. Bank integration progressing, with thousands of clients approved for personal loans using Pagaya's technology, achieving double the average activation rate[11] - Westlake integration completed Phase 1, expanding to ~4,000 dealerships, with full go-live expected by early 2025[14] - The company expects to add 2-4 large enterprise-level lending partners in 2024, with approximately 15 late-stage opportunities currently in the pipeline[45][46] - Approximately 40% of lending partnerships generate FRLPC from both lending and investor products, while 60% generate FRLPC only from the investor product, indicating significant future margin improvement potential[48] Capital and Liquidity - Closed a $290 million credit facility in February 2024, led by major financial institutions, strengthening capital and liquidity position[15] - Total cash as of December 31, 2023, was $223 million, with investments in loans and securities of $717 million, reflecting gross risk ownership holdings as an ABS sponsor[84] - Net holdings after accounting for non-controlling interest of $106 million amounted to $611 million, representing a 3.3% ratio of exposure for deals completed between 2019 and 2023, totaling over $20 billion in funding raised[84] - The company closed a $290 million credit facility with BlackRock, UBS O'Connor, and JPMorgan Chase, extending corporate debt maturity from 2025 to 2029 and bolstering liquidity and balance sheet strength[85] - In 2023, the company successfully executed 15 ABS deals and added 31 new investors, leveraging its 100% pre-funded model to generate billions in network volume[83] - The company has raised funding across 49 ABS transactions since 2018, supported by leading financial institutions like JPMorgan and BlackRock[86] - Investors' risk appetites are improving in 2024, reflected in positive price and demand dynamics for recent ABS structures[83] - Proceeds from secured borrowing increased to $338.5 million in 2023, up 142.7% from $139.4 million in 2022[109] Growth and Future Outlook - Expected adjusted EBITDA for 2024 in the range of $150 million to $190 million, with positive net cash flow anticipated by early 2025[26] - The company expects to achieve positive total net cash flow by early 2025, assuming no significant changes in the macroeconomic environment[51] - The company is actively developing new products, such as pre-screen online programs and a new car loan underwriting product, expected to become accretive to growth beginning in 2025[49] - The company expects Q1 2024 network volume to range between $2.2 billion and $2.4 billion, with full-year 2024 network volume projected between $9.0 billion and $10.5 billion[88] - Q1 2024 total revenue and other income are forecasted to be between $225 million and $240 million, with full-year 2024 estimates ranging from $925 million to $1,050 million[88] - Adjusted EBITDA for Q1 2024 is expected to be between $32 million and $38 million, with full-year 2024 projections ranging from $150 million to $190 million[88] - The company aims to achieve net cash flow generation by early 2025, driven by disciplined growth, liquidity optimization, and efficient funding strategies[88] Operational Metrics - Darwin platform added ~7,600 new homes in 2023, with ~4,600 more expected in H1 2024, totaling over 13,000 homes under management[13] - The fee-generating business makes up over 95% of total revenue, with stable and predictable fee revenues expected to be the key contributor to future earnings[43] - Total assets grew to $1.21 billion in 2023, up from $1.05 billion in 2022[107] - Cash and cash equivalents decreased to $186.5 million in 2023 from $309.8 million in 2022[107] - Investments in loans and securities increased to $714.3 million in 2023, up 54.3% from $463.0 million in 2022[107] - Share-based compensation decreased to $71.1 million in 2023, down 70.6% from $241.7 million in 2022[104] - Net cash provided by operating activities was $9.6 million in 2023, compared to a net cash used of $40.0 million in 2022[109] - Total liabilities increased to $468.4 million in 2023, up 67.5% from $279.7 million in 2022[107] - Share-based compensation for Q4 2023 was $13.7 million, down from $18.7 million in Q4 2022, indicating reduced equity-based expenses[110] - Impairment loss on certain investments for Q4 2023 was $12.6 million, up from $8.8 million in Q4 2022, reflecting higher write-downs[110] Corporate Strategy - The company moved its corporate headquarters to the U.S. and will voluntarily file on U.S. domestic issuer forms starting with Q1 2024 results to enhance transparency and attract institutional investors[58] - New investment firms added in 2023 contributed to 4% of the funding raised in 2023, with the top 5 ABS investors contributing 4% of ABS funding in 2023, compared to 70% in 2022[41]