Pagaya Technologies .(US:PGY)2024-05-09 20:14Financial Performance - Net loss including noncontrolling interests for Q1 2024 was $31.66 million, compared to $98.62 million in Q1 2023, representing a significant improvement[22] - Total revenue and other income for Q1 2024 was $245.28 million, up 31.4% from $186.64 million in Q1 2023[19] - Revenue from fees in Q1 2024 was $237.00 million, a 35.2% increase from $175.25 million in Q1 2023[19] - Operating income for Q1 2024 was $7.69 million, a turnaround from an operating loss of $24.98 million in Q1 2023[19] - Net loss attributable to Pagaya Technologies Ltd. for Q1 2024 was $21.22 million, compared to $60.97 million in Q1 2023[19] - Basic and diluted net loss per share for Q1 2024 was $0.33, improved from $1.03 in Q1 2023[19] - Comprehensive loss attributable to Pagaya Technologies Ltd. for Q1 2024 was $45.95 million, compared to $61.52 million in Q1 2023[22] - Net loss for the three months ended March 31, 2024, was $31.662 million, compared to a net loss of $21.223 million for the same period in 2023[25] - Net Loss Attributable to Pagaya Technologies Ltd. improved to $21.2 million in Q1 2024 from $61.0 million in Q1 2023[182] - Adjusted Net Income improved to $13.3 million in Q1 2024 from a loss of $11.0 million in Q1 2023[204] - Adjusted EBITDA rose to $39.8 million in Q1 2024 from $2.0 million in Q1 2023[204] - Net loss per share attributable to ordinary shareholders for Class A and Class B shares was $0.33 for the three months ended March 31, 2024, compared to $1.03 for the same period in 2023[127] Revenue and Fees - Revenue from fees for Q1 2024 increased by $61.8 million (35%) to $237.0 million, driven by a $65.1 million increase in Network AI fees[186] - Network AI fees totaled $215.3 million for Q1 2024, up from $150.2 million in Q1 2023[43] - Contract fees for Q1 2024 were $21.7 million, down from $25.1 million in Q1 2023[45] - Total revenue from fees for Q1 2024 was $237.0 million, compared to $175.3 million in Q1 2023[50] - Revenue from related parties totaled $178.5 million for Q1 2024, up from $153.8 million in Q1 2023, primarily from securitization vehicles[90] - Revenue from fees grew by 35% to $237.0 million in Q1 2024 compared to $175.3 million in Q1 2023[185] - Total Revenue and Other Income increased by 31% to $245.3 million in Q1 2024 from $186.6 million in Q1 2023[185] - Interest income decreased by 26% to $7.7 million in Q1 2024 from $10.4 million in Q1 2023[185] - Investment income declined by 46% to $528,000 in Q1 2024 from $987,000 in Q1 2023[185] - Fee Revenue Less Production Cost (FRLPC) increased to $92.1 million in Q1 2024 from $50.2 million in Q1 2023[204] Expenses and Costs - Production Costs rose to $144.9 million in Q1 2024, up from $125.1 million in Q1 2023, driven by increased Network Volume[173] - Technology, data, and product development expenses decreased to $19.4 million in Q1 2024 from $21.1 million in Q1 2023[182] - Sales and marketing expenses dropped to $10.3 million in Q1 2024 from $14.3 million in Q1 2023[182] - General and administrative expenses increased to $63.1 million in Q1 2024 from $51.1 million in Q1 2023[182] - General and administrative costs rose by $11.9 million (23%) to $63.1 million in Q1 2024, driven by transaction-related expenses and miscellaneous costs[195] - Other expense, net decreased by $32.6 million (49%) in Q1 2024, primarily due to lower credit-related impairment losses[196] - Share-based compensation expense was $17.30 million in Q1 2023[24] - Share-based compensation expense for the three months ended March 31, 2024, was $15.5 million, compared to $16.4 million for the same period in 2023[119] Balance Sheet and Assets - Total cash, cash equivalents, and restricted cash decreased to $310.048 million as of March 31, 2024, compared to $316.762 million as of December 31, 2023[28] - Total assets increased to $1.483 billion as of March 31, 2024, up from $1.208 billion as of December 31, 2023[17] - Total liabilities rose to $683.026 million as of March 31, 2024, compared to $468.377 million as of December 31, 2023[17] - Shareholders' equity increased to $725.911 million as of March 31, 2024, up from $665.749 million as of December 31, 2023[17] - Cash and cash equivalents increased to $274.495 million as of March 31, 2024, up from $186.478 million as of December 31, 2023[17] - Investments in loans and securities increased to $892.853 million as of March 31, 2024, compared to $714.303 million as of December 31, 2023[17] - Secured borrowing increased to $331.156 million as of March 31, 2024, up from $271.713 million as of December 31, 2023[17] - Accumulated deficit increased to $563.860 million as of March 31, 2024, compared to $542.637 million as of December 31, 2023[17] - Secured borrowings as of March 31, 2024, were $331.2 million, up from $271.7 million as of December 31, 2023[54] - The outstanding principal balance under repurchase agreements was $310.1 million as of March 31, 2024, with a weighted average interest rate of approximately 14%[55] - Investments in loans and securities available for sale had unrealized losses of $3.166 million as of March 31, 2024[68] - The allowance for credit losses for investments in loans and securities was $126.36 million as of March 31, 2024[70] - Proceeds from sales/maturities/prepayments of investments in loans and securities were $35.897 million for Q1 2024[70] - Total investments in Pagaya SmartResi F1 Fund, LP and other proprietary investments amounted to $26.9 million as of March 31, 2024, up from $26.4 million in December 2023[71][72] - The company's consolidated VIEs (Risk Retention Entities) held net assets of $122.9 million as of March 31, 2024, down from $132.7 million in December 2023[76] - The company's direct interest in unconsolidated VIEs had a carrying amount of $777.5 million and maximum exposure to loss of $777.5 million as of March 31, 2024, up from $591.0 million in December 2023[79] - Operating lease liabilities totaled $48.5 million as of March 31, 2024, with maturities of $59.7 million through 2032[82] - The company has a remaining contractual obligation of $7.3 million with a cloud computing provider, with $4.9 million due in the next 12 months[84] - The maximum potential future payments under guarantees totaled $29.0 million as of March 31, 2024[85] - Investments in loans and securities available for sale had a fair value of $894.2 million as of March 31, 2024, with gross unrealized losses of $31.3 million[65] - The warrant liability decreased to $1.3 million as of March 31, 2024 from $3.2 million in December 2023 due to a $1.9 million change in fair value[95] - The company's long-term debt outstanding was $235.0 million as of March 31, 2024[61] - Cash, cash equivalents, and restricted cash increased to $310.0 million as of March 31, 2024, up from $222.5 million as of December 31, 2023[100] - Total assets not measured at fair value on a recurring basis were $432.6 million as of March 31, 2024, compared to $336.2 million as of December 31, 2023[100] - Investments in loans and securities available for sale increased to $894.2 million as of March 31, 2024, up from $507.2 million as of March 31, 2023[97] Capital and Financing - The company completed a 1-for-12 reverse share split on March 8, 2024, with all share amounts retroactively adjusted[31] - The company entered into a Credit Agreement on February 2, 2024, providing a $25 million Revolving Credit Facility, later increased to $35 million, and a $255 million Term Loan Facility[57] - As of March 31, 2024, the company had $10.0 million in letters of credit issued and $25.0 million remaining capacity under the Revolving Credit Facility[62] - The company issued 298,057 shares under the Equity Financing Purchase Agreement for net proceeds of $5.2 million during Q1 2024[108] - The company priced an offering of 7,500,000 Class A Ordinary Shares, raising approximately $90.0 million in net proceeds[109] - The company has the right to sell up to $300 million of Class A Ordinary Shares to B. Riley Principal Capital II under the Equity Financing Purchase Agreement, with 298,057 shares issued for net proceeds of $5.2 million in Q1 2024[220][221] - The company filed a shelf registration statement allowing it to offer and sell up to $500 million of Class A ordinary shares, debt securities, and/or warrants[222] - The company priced an offering of 7,500,000 Class A Ordinary Shares, generating approximately $90.0 million in proceeds after deducting underwriting discounts and fees[223] - The company expects to fund operations with existing cash, cash equivalents, and cash generated from operations, including cash flows from investments in loans and securities, and additional secured borrowings[215] - The company may raise additional capital through borrowings under a new credit facility entered into in February 2024, or through the sale or issuance of equity or debt securities, including up to 1,666,666 Series A Preferred Shares[215] - The company could receive up to $169.6 million in proceeds if all public and private placement warrants are exercised for cash, with each warrant entitling the holder to purchase one Class A Ordinary Share at $138 per share[217] - As of May 8, 2024, the price of the company's Class A Ordinary Shares was $10.50 per share, making it unlikely for warrant holders to exercise warrants if the market price remains below $138[218] Cash Flow - Net cash provided by operating activities was $20.47 million for Q1 2024, compared to a net cash outflow of $23.67 million in Q1 2023[224] - Net cash used in investing activities was $230.89 million in Q1 2024, compared to $99.67 million in Q1 2023[224] - Net cash provided by financing activities was $298.74 million in Q1 2024, compared to $103.02 million in Q1 2023[224] AI and Technology - The company has evaluated over $2.0 trillion in application volume since inception, driven by improvements in AI technology and data network[154] - The company's AI technology enables partners to increase originations by up to 25% in some cases[152] - The company's economic model is evaluated using the metric FRLPC (fee revenue less Production Costs), which is highly correlated to Network Volume[149] - Network Volume increased to $2,419 million in Q1 2024, up from $1,850 million in Q1 2023, reflecting a 30.8% growth[164] - Network Volume grew by 31% from $1.9 billion in Q1 2023 to $2.4 billion in Q1 2024[186] Taxes and Compensation - The company's income from Preferred Technological Enterprise (PTE) is subject to a 12% tax rate, effective for tax years 2020 through 2024[120] - The company's effective tax rate for the three months ended March 31, 2024, was -18.8%, compared to -7.3% for the same period in 2023[124] - The company's tax rate is affected by recurring items such as tax rates in foreign jurisdictions and the relative amounts of income earned in those jurisdictions[124] - Unrecognized compensation expense related to unvested share options was approximately $46.7 million as of March 31, 2024, expected to be recognized over 1.0 year[112] - Unrecognized compensation expense related to RSUs was approximately $31.2 million as of March 31, 2024, expected to be recognized over 0.9 years[114] - Unrecognized compensation expense related to options to restricted shares was approximately $18.0 million as of March 31, 2024, expected to be recognized over 1.5 years[117] Fair Value and Valuation - The weighted average discount rate for Level 3 fair value measurement of loans and securities as of March 31, 2024, was 16.7%, with a range of 8.0% to 20.0%[98] - The weighted average loss rate for Level 3 fair value measurement as of March 31, 2024, was 17.2%, with a range of 6.2% to 31.0%[98] - The weighted average prepayment rate for Level 3 fair value measurement as of March 31, 2024, was 9.1%, with a range of 0.0% to 40.0%[98] Related Party Transactions - Total fee receivables from related parties increased to $88.7 million as of March 31, 2024, up from $84.8 million as of December 31, 2023[88] - Revenue from related parties totaled $178.5 million for Q1 2024, up from $153.8 million in Q1 2023, primarily from securitization vehicles[90] Noncontrolling Interests - Net loss attributable to noncontrolling interests decreased by $27.2 million (72%) in Q1 2024, driven by consolidated VIEs' performance[199]