Pagaya Technologies Ltd. — FY 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide clear Q4-only financial results. Financial statements are audited under U.S. GAAP.
Business context
Pagaya operates an AI-driven network connecting financial-services Partners that originate assets with Financing Vehicles and investors that fund or acquire them. Pagaya says it is not a consumer lender or loan servicer. Its asset classes include personal and auto loans, credit cards, point-of-sale receivables and single-family rental real estate. Network Volume is the gross amount of assets originated with Pagaya’s technology and acquired by Financing Vehicles.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total revenue and other income | $748.9 million | $474.6 million |
| Revenue from fees | $685.4 million | $445.9 million |
| Operating income (loss) | $(251.5) million | $(5.8) million |
| Net loss attributable to Pagaya | $(302.3) million | $(91.2) million |
| Adjusted EBITDA (non-GAAP) | $(4.8) million | $45.9 million |
| Net cash from (used in) operating activities | $(40.0) million | $49.8 million |
| Network Volume | $7.3 billion | $4.9 billion |
- Total revenue and other income rose 58%; fee revenue increased 54%. Network Volume rose 49%, while management reported assets held by Financing Vehicles grew 14% to $6.4 billion.
- Production costs increased 94% to $451.1 million. Research and development, sales and marketing, and general and administrative expenses also rose substantially, reflecting growth investments and higher share-based compensation.
- Share-based compensation was $241.7 million, including $172.2 million related to vesting of performance-based options. Adjusted EBITDA excludes specified items and is a non-GAAP measure; it should not be treated as a substitute for GAAP results.
- Other loss, net was $24.9 million, versus $55.8 million in 2021. The improvement mainly reflected a favorable $65.9 million change in warrant fair value, partly offset by $33.7 million of impairment losses on investments.
- At year-end, cash and cash equivalents were $309.8 million and restricted cash was $27.3 million. Cash, cash equivalents and restricted cash totaled $337.1 million. Pagaya reported $765.4 million in total shareholders’ equity, including $553.5 million attributable to Pagaya.
- Year-end borrowings included $139.6 million of secured borrowings and $15.0 million drawn on the revolving credit facility. The $167.5 million revolver had $132.5 million of remaining borrowing capacity after letters of credit; the company reported compliance with its covenants. Contractual obligations totaled $227.2 million, including leases and financing obligations.
- Net cash used in investing activities was $265.4 million, primarily reflecting purchases of loans and securities and capital expenditures. Capital expenditures were $22.0 million, up from $6.6 million in 2021.
Material changes and unusual items
- Pagaya completed its business combination and $350 million gross PIPE investment on June 22, 2022; its Class A shares began Nasdaq trading the following day. The merger and PIPE generated $291.9 million of net cash proceeds from share issuance after transaction costs, as reported in the cash-flow statement.
- Revenue growth did not translate into improved profitability: GAAP net loss widened to $302.3 million from $91.2 million, and Adjusted EBITDA moved from positive $45.9 million to a loss of $4.8 million.
- One Financing Vehicle had its first negative month in December 2022. Pagaya also reported losses associated with risk-retention holdings and purchases of loans from Financing Vehicles.
- Related-party fee revenue was reported at $653.5 million for 2022. Separately, the customer-concentration note says three related parties each exceeding 10% of revenue together represented approximately 42% of total revenue; investors should reconcile the differing disclosures and definitions.
Outlook, risks and contingencies
- No specific 2023 revenue or earnings guidance is provided. Management said it expected year-end cash and cash equivalents and operating cash flow to cover working capital, capital expenditures and known obligations for at least 12 months, based on current plans and assumptions.
- Pagaya identified access to investor funding, higher interest rates and cost of capital, deterioration in consumer credit, Financing Vehicle performance, and concentration among Partners and asset investors as key business risks. Four large asset investors supplied approximately 57% of Network Capital in 2022.
- On January 18, 2023, the company announced a workforce reduction of approximately 20%. It estimated about $30 million in annualized savings and a roughly $4 million severance charge; actual savings and costs may differ.
- Pagaya acquired Darwin Homes on January 5, 2023 in an all-stock transaction valued at approximately $18 million at closing. Integration, execution and real-estate market risks remain; purchase accounting was incomplete when the filing was prepared.
- In April 2023, Pagaya agreed, subject to shareholder approval, to sell 60 million Series A preferred shares for $75 million. The proposed shares include conversion rights and a liquidation preference; closing and final effects depend on approvals and governing terms.
- SVB held approximately $15 million of Pagaya’s cash at December 31, 2022. Pagaya said it withdrew those deposits in March 2023, retained access to its revolver and confirmed the receivables facility was unaffected.
- Other material risks include evolving consumer-finance and AI regulation, possible algorithmic bias claims, data privacy and cybersecurity, legal or licensing challenges to Partner lending arrangements, securitization-market access, and Pagaya’s Israeli operating environment. The company reported no pending litigation it believed likely to have a material adverse effect.
- The founders’ Class B shares carry ten votes each; the founders collectively held approximately 77.6% of voting power, concentrating control. The filing also highlights potential dilution from equity awards, warrants, registered resales and the $300 million B. Riley committed equity facility; no shares had been sold under that facility by year-end.
Most important facts for investors to verify
- Review the audited statements and notes for the drivers of the widening GAAP loss, particularly share-based compensation, investment impairments, and risk-retention exposure.
- Reconcile related-party revenue and customer-concentration disclosures, and assess how much reported revenue depends on Financing Vehicles and a limited set of counterparties.
- Track cash burn, unrestricted versus restricted cash, covenant headroom, financing maturities and actual utilization of the revolver and committed equity facility.
- Monitor credit performance and investor returns in Financing Vehicles, funding concentration, and the effect of interest rates on origination volume and funding costs.
- Assess whether workforce reductions deliver the stated savings and whether Darwin integration and the proposed preferred financing proceed on disclosed terms.
- Note that management concluded disclosure controls were effective, but the filing did not include management’s assessment or an auditor attestation on internal control over financial reporting; the auditor gave no opinion on control effectiveness.