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

Financial Performance - Total assets increased to $1,452,977 thousand as of June 30, 2024, compared to $1,208,376 thousand as of December 31, 2023[9] - Revenue from fees for the six months ended June 30, 2024, was $479,598 thousand, up from $360,939 thousand in the same period in 2023[10] - Net loss attributable to Pagaya Technologies Ltd. for the six months ended June 30, 2024, was $96,008 thousand, compared to $92,268 thousand in the same period in 2023[10] - Operating income for the six months ended June 30, 2024, was $12,717 thousand, compared to an operating loss of $35,214 thousand in the same period in 2023[10] - Comprehensive loss attributable to Pagaya Technologies Ltd. for the six months ended June 30, 2024, was $167,502 thousand, compared to $89,592 thousand in the same period in 2023[12] - Total revenue and other income for the six months ended June 30, 2024, was $495,620 thousand, up from $382,250 thousand in the same period in 2023[10] - Net loss for the period ending June 30, 2024, was $82.679 million, compared to a net loss of $114.341 million in the previous period[14] - Net loss including noncontrolling interests decreased to $114.3 million in H1 2024 from $130.8 million in H1 2023, reflecting a 12.6% improvement[16] - Net cash provided by operating activities improved significantly to $36.0 million in H1 2024 from a net cash used of $25.5 million in H1 2023[16] - Net loss attributable to Pagaya Technologies Ltd. ordinary shareholders for the three months ended June 30, 2024, was $61.6 million for Class A shares and $13.2 million for Class B shares[107] - Net loss per share attributable to ordinary shareholders for the six months ended June 30, 2024, was $1.41 for both Class A and Class B shares[107] - Net loss attributable to Pagaya Technologies Ltd. was $74.8 million for the three months ended June 30, 2024, compared to $31.3 million in the same period in 2023[150] - Non-GAAP adjusted net income improved to $7.2 million for the three months ended June 30, 2024, compared to $0.9 million in the same period in 2023[150] - Net Loss Attributable to Pagaya Technologies Ltd. for the three months ended June 30, 2024 was $(74,785), compared to $(31,297) in the same period in 2023[188] Revenue and Fees - Revenue from fees for the six months ended June 30, 2024, was $479,598 thousand, up from $360,939 thousand in the same period in 2023[10] - Total revenue and other income for the six months ended June 30, 2024, was $495,620 thousand, up from $382,250 thousand in the same period in 2023[10] - Network AI fees grew 36.0% to $437.1 million in H1 2024 from $321.5 million in H1 2023[30] - Contract fees increased 7.9% to $42.5 million in H1 2024 compared to $39.4 million in H1 2023[33] - Total revenue from fees for the three months ended June 30, 2024 was $242.6 million, a 30.6% increase from $185.7 million in the same period in 2023[37] - For the six months ended June 30, 2024, total revenue from fees was $479.6 million, up 32.9% from $360.9 million in the prior year period[37] - Revenue from related parties for the six months ended June 30, 2024, reached $353.8 million, compared to $302.0 million in the same period in 2023[73] - Revenue from fees increased by $56.9 million, or 31%, to $242.6 million, primarily due to a $54.3 million increase in Network AI fees, with Network Volume growing by 19.1% to $2.3 billion[154] - Total revenue and other income increased by $113.4 million (30%) to $495.6 million for the six months ended June 30, 2024, driven by a $118.7 million (33%) increase in revenue from fees[167] - Network AI fees increased by $115.6 million to $437.1 million for the six months ended June 30, 2024, driven by improved economics in AI integration fees and a 25% increase in Network Volume to $4.8 billion[168] - Revenue from fees for the three months ended June 30, 2024 was $242,594, a 31% increase from $185,685 in the same period in 2023[187] Assets and Liabilities - Total assets increased to $1,452,977 thousand as of June 30, 2024, compared to $1,208,376 thousand as of December 31, 2023[9] - Total current liabilities increased to $241,254 thousand as of June 30, 2024, from $74,925 thousand as of December 31, 2023[9] - Cash and cash equivalents increased to $233,593 thousand as of June 30, 2024, from $186,478 thousand as of December 31, 2023[9] - Total non-current assets increased to $1,091,780 thousand as of June 30, 2024, from $904,974 thousand as of December 31, 2023[9] - Total shareholders' equity as of June 30, 2024, was $615.574 million, down from $665.749 million at December 31, 2023[14] - Accumulated deficit as of June 30, 2024, was $638.645 million, up from $542.637 million at December 31, 2023[14] - Non-controlling interests as of June 30, 2024, were $89.592 million, down from $106.028 million at December 31, 2023[14] - Total shareholders' equity as of June 30, 2023, was $703.123 million, down from $765.423 million at December 31, 2022[15] - Accumulated deficit as of June 30, 2023, was $506.467 million, up from $414.199 million at December 31, 2022[15] - Non-controlling interests as of June 30, 2023, were $179.940 million, down from $211.903 million at December 31, 2022[15] - Cash, cash equivalents and restricted cash decreased by 19.2% to $267.9 million as of June 30, 2024 from $331.4 million as of June 30, 2023[17] - Secured borrowings increased to $400.2 million as of June 30, 2024, up from $271.7 million at December 31, 2023[40] - The outstanding principal balance under repurchase agreements was $367.7 million as of June 30, 2024, compared to $251.4 million at December 31, 2023[41] - Long-term debt outstanding was $232.6 million as of June 30, 2024, with aggregate future maturities totaling $248.6 million[45][46] - The fair value of investments in loans and securities was $911.4 million as of June 30, 2024, up from $716.8 million at December 31, 2023[49][50] - Investments in loans and securities, available for sale, totaled $1,150.8 million in amortized cost and $911.4 million in fair value as of June 30, 2024[53] - The balance of allowance for credit losses was $(178.1) million as of June 30, 2024, compared to $(100.9) million at the beginning of the period[58] - Equity method and other investments totaled $26.6 million as of June 30, 2024, up slightly from $26.4 million as of December 31, 2023[61] - Consolidated VIEs had net assets of $111.2 million as of June 30, 2024, down from $132.7 million as of December 31, 2023[63] - The company's direct interest in unconsolidated VIEs was $807.0 million in carrying amount and maximum exposure to loss as of June 30, 2024, up from $591.0 million as of December 31, 2023[65] - Total fee receivables from related parties increased to $88.5 million as of June 30, 2024, up from $84.8 million at the end of 2023[71] - Investments in loans and securities (Level 3) increased to $853.418 million as of June 30, 2024, up from $626.368 million at the end of 2023[82] - Cash, cash equivalents, and restricted cash increased from $222.5 million as of December 31, 2023, to $267.9 million as of June 30, 2024[86][87] - Total assets grew from $336.2 million as of December 31, 2023, to $394.4 million as of June 30, 2024[86][87] - Cash, cash equivalents and restricted cash as of June 30, 2024 was $267.9 million, a 20% increase from $222.5 million as of December 31, 2023[189] Investments and Loans - Investments in loans and securities increased by 49.5% to $408.5 million in H1 2024 compared to $273.3 million in H1 2023[16] - The fair value of investments in loans and securities was $911.4 million as of June 30, 2024, up from $716.8 million at December 31, 2023[49][50] - Gross unrealized losses on investments in loans and securities totaled $12.6 million as of June 30, 2024, compared to $3.8 million at December 31, 2023[52] - Investments in loans and securities, available for sale, totaled $1,150.8 million in amortized cost and $911.4 million in fair value as of June 30, 2024[53] - Proceeds from sales/maturities/prepayments of investments in loans and securities were $66.8 million for the six months ended June 30, 2024, down from $91.4 million in the same period of 2023[57] - Additions to allowance for credit losses were $(79.9) million for the six months ended June 30, 2024, compared to $(85.6) million in the same period of 2023[57] - The company purchased $19.5 million of loan principal from Financing Vehicles in the six months ended June 30, 2024, recognizing an $18.4 million loss[65] - Investments in loans and securities (Level 3) increased to $853.418 million as of June 30, 2024, up from $626.368 million at the end of 2023[82] - The weighted average discount rate for Level 3 fair value measurements increased to 15.4% as of June 30, 2024, from 15.0% at the end of 2023[84][85] - The company purchased $19.5 million of loan principal from Financing Vehicles in the first six months of 2024, resulting in a loss of $18.4 million[74] Cash Flow and Financing - Net cash provided by operating activities improved significantly to $36.0 million in H1 2024 from a net cash used of $25.5 million in H1 2023[16] - The company raised $244.7 million from long-term debt and $89.9 million from ordinary shares sale in H1 2024[16] - Cash, cash equivalents and restricted cash decreased by 19.2% to $267.9 million as of June 30, 2024 from $331.4 million as of June 30, 2023[17] - The Receivables Facility maximum principal amount was increased from $32 million to $45 million in June 2024, with the term extended until June 2026[42] - The Company entered into a new Credit Agreement in February 2024, providing for a $35 million revolving credit facility and a $255 million term loan facility[43] - Net cash provided by operating activities for the six months ended June 30, 2024 was $35,961, compared to $(25,513) in the same period in 2023[201] - Net cash used in investing activities for the six months ended June 30, 2024 was $(351,287), compared to $(190,867) in the same period in 2023[201] - Net cash provided by financing activities for the six months ended June 30, 2024 was $362,434, a 70% increase from $213,359 in the same period in 2023[201] - The company issued 298,057 shares under the Equity Financing Purchase Agreement for net proceeds of $5.2 million during the six months ended June 30, 2024[198] - Net cash provided by operating activities for the six months ended June 30, 2024 was $36.0 million, an increase of $61.5 million from net cash used in operating activities of $25.5 million for the same period in 2023[202] - Net cash used in investing activities for the six months ended June 30, 2024 was $351.3 million, primarily due to purchases of risk retention assets of $408.5 million[205] - Net cash provided by financing activities for the six months ended June 30, 2024 was $362.4 million, including $230.4 million from issuance of long-term debt and $90.0 million from the ordinary share offering[206] - The company entered into a Credit Agreement on February 2, 2024, providing a $25 million revolving credit facility and a $255 million term loan facility[206] Expenses and Costs - Depreciation and amortization expenses increased 67.3% to $13.4 million in H1 2024 from $8.0 million in H1 2023[16] - Share-based compensation decreased 8.4% to $33.5 million in H1 2024 from $36.6 million in H1 2023[16] - Share-based compensation for the period ending June 30, 2024, was $20.093 million, down from $37.710 million in the previous period[14] - Share-based compensation for the period ending June 30, 2023, was $22.395 million, down from $39.691 million in the previous period[15] - Rent expense was $5.8 million for the six months ended June 30, 2024, down from $6.8 million in the same period of 2023[66] - Sublease income was $2.0 million for the six months ended June 30, 2024, down slightly from $2.1 million in the same period of 2023[66] - Total operating lease liabilities amount to $45.956 million as of 2024, with imputed interest deducted at $10.283 million[67] - The company has a remaining contractual obligation of $6.1 million with a third-party cloud computing provider, of which $4.9 million is due within the next 12 months[69] - The maximum potential future payments under guarantees total $29.2 million as of June 30, 2024[70] - Production costs increased by $25.0 million, or 21%, to $145.6 million, driven by increases in Network Volume and new Partners onboarded[158][159] - Technology, data, and product development costs increased by $4.3 million, or 24%, to $21.9 million, primarily due to higher depreciation of capitalized software[160] - Sales and marketing costs decreased by $1.2 million, or 8%, to $13.3 million, driven by reduced compensation expenses and marketing-related costs[162] - General and administrative costs increased by $11.4 million, or 22%, to $64.4 million, excluding a $13.4 million loss from loan purchases, costs decreased by $2.0 million[163] - Production costs increased by $44.8 million (18%) to $290.5 million for the six months ended June 30, 2024, due to higher Network Volume and new Partners onboarded[172] - Technology, data and product development costs increased by $2.5 million (6%) to $41.3 million for the six months ended June 30, 2024, primarily due to higher depreciation of capitalized software[173] - Sales and marketing costs decreased by $5.3 million (18%) to $23.6 million for the six months ended June 30, 2024, driven by lower compensation expenses[175] - General and administrative costs increased by $23.4 million (22%) to $127.5 million for the six months ended June 30, 2024, excluding a $18.4 million loss from loan purchases[176] - Other expense, net increased by $23.7 million (28%) to $107.5 million for the six months ended June 30, 2024, due to higher interest expenses and credit-related impairment losses[177] - Non-cash charges for the six months ended June 30, 2024 included impairment losses on investments in loans and securities, which increased by $1.6 million[203] - Share-based compensation decreased by $3.1 million, while depreciation and amortization increased by $5.4 million primarily from capitalized software[203] Shareholder Equity and Compensation - Total shareholders' equity as of June 30, 2024, was $615.574 million, down from $665.749 million at December 31, 2023[14] - Share-based compensation for the period ending June 30, 2024, was $20.093 million, down from $37.710 million in the previous period[14] - Share-based