Pagaya Technologies Ltd. · NASDAQ:PGY
Pagaya Technologies — Q1 2023 Earnings Presentation
48 slides from Pagaya Technologies's earnings presentation, May 16, 2023
Slide 1: 1Q23 Results
PAGAYA TECHNOLOGIES LTD. 1Q23 Results May 16th, 2023
Slide 2: Legal Cautionary Notes About Forward-Looking Statements
Legal Cautionary Notes About Forward-Looking Statements This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Disclaimer Act of 1934, as amended, that involve risks and uncertainties.
Slide 3: Agenda
01 02 1Q23 Pagaya’s value highlights proposition Agenda 03 04 Financials Q&A and outlook
Slide 4: Mission statement
MISSION STATEMENT Empowering our partners to deliver more financial opportunity to more people, more often
Slide 5: 1Q23 highlights
01 1Q23 highlights 5
Slide 6: Exceeded 1Q23 guidance across all metrics, with a return to positive adjusted EBITDA
Exceeded 1Q23 guidance across all metrics, with a return to positive adjusted EBITDA METRIC (IN $ MILLIONS) 1Q23 ACTUAL 1Q23 GUIDANCE Network Volume $1,850 $1,700 to $1,800 Total Revenue & Other Income $186.6 $175 to $180 Adjusted EBITDA $2.0 ($5) to $0 Note: See “Appendix” for a reconciliation of n
Slide 7: 1Q23 operating highlights
1Q23 operating highlights FINANCIALS FUNDING PARTNERSHIPS Return to positive #1 issuer of 20% of network adjusted EBITDA personal loan ABS1 in volume from new Adjusted EBITDA of ~$5M excluding the US partners & products the impact of recent Darwin New partners scaling rapidly within 1 With >30% shar
Slide 8: Our value proposition
02 Our value proposition 8
Slide 9: Premier AI network powering financial possibilities
Premier AI network powering financial possibilities Partners Institutional Investors Financial institutions that AI network helping partners grow Asset managers, pension funds, originate consumer loans and investors achieve sovereign wealth funds, etc. outperformance 9
Slide 10: Helping partners grow originations and investors achieve outperformance
Helping partners grow originations and investors achieve outperformance Pagaya’s Institutional Partners Powerful Investors AI network And other large asset managers, pension funds, and counterparties capabilities And 20+ other financial institutions Pagaya earns fees from partners and investors for
Slide 11: Operating in multiple markets with significant TAM
Operating in multiple markets with significant TAM Capturing less than 1% of the TAM based on full-year 2022 network volume Personal Auto Credit card and Single-family rental point-of-sale $144B $737B $1.1T $4T Sources: Trailing 12-month originations, TransUnion; 2021 Receivables, Nilson report; McK
Slide 12: Well-positioned to consistently deliver for partners and investors
MARKET TRENDS PAGAYA’S CAPABILITIES ✓ Ability to react quickly Higher cost of funding with AI technology and rapid changes in Well-positioned ✓ Upfront funding model interest rates (lock in cost of funding ahead of to consistently pricing assets) deliver for ✓ Multiple funding channels Lower liquidi
Slide 13: Unique business model that enables lower volatility through cycles
Unique business model that enables lower volatility through cycles Network volume (or equivalent measure) Total revenue (or equivalent measure) indexed by quarter to 1Q22 indexed by quarter to 1Q22 140% 120% PGY PGY 100% Fintech 80% Fintech lenders1 60% lenders1 40% 20% 0% 1Q22 2Q22 3Q22 4Q22 1Q23 1
Slide 14: Partners originate assets using Pagaya's network
Partners originate assets using Pagaya’s network Partners Institutional Investors Financial institutions that AI network helping Partners grow Asset managers, pension funds, originate consumer loans and Investors achieve sovereign wealth funds, etc. outperformance 14
Slide 15: Enable growth through the power of AI
VALUE PROPOSITION TO OUR PARTNERS Enable growth through the power of AI
Slide 16: Growing and monetizing our network to deliver our medium-term ambition
Growing and monetizing our network to deliver our medium-term ambition ✓ Expanding our network with existing and new partners: delivering network volume CAGR of 114% over the last 2 years ✓ Improving economics: targeting 3-4% fee revenue less production costs (“FRLPC”) margin as our network grows ✓
Slide 17: Partners see increasing value over time
Partners see % of loans originated on Pagaya’s network increasing of total origination volume for our top 3 personal loan partners1 value over time 10% 14% 26% Pagaya’s technology can significantly enhance growth 1Q21 1Q22 1Q23 Pagaya originated volume Non-Pagaya originated volume 17 1Represents top
Slide 18: Network expansion enabling increased monetization
Network AI integration fees earned for volume originated on Pagaya’s network expansion as % of notional of assets enabling +230 increased bps monetization of additional 7.8% AI integration 5.5% fees for every $100 of assets created 1Q22 1Q23 18 Source: Pagaya internal data
Slide 19: Rapid growth of new partners and products
Rapid growth of Auto scaling rapidly, supported by Driving accelerated growth for large Auto recent addition of large Auto bank bank in first year post onboarding new partners and Total Auto application volume ($B) Network volume originated evaluated by Pagaya’s network by Pagaya’s largest Auto part
Slide 20: Resulting in significant network expansion since 2020
Resulting in significant network expansion since 2020 Adding new partners every year while existing partners grow at a rapid pace Network volume from 4.6x existing and new partners (onboarded within the $7.3B calendar year) $0.7B $4.9B $1.1B $6.6B $1.6B $3.8B $0.7B $0.9B 2020 2021 2022 Existing part
Slide 21: Path to $25B annual network volume ambition with just existing partners and products
Path to $25B annual network volume ambition with just existing partners and products Network volume ($B) ~$27B ~4X 2022 network volume 6 new partners Pagaya’s Assuming no growth from added to our network potential network partners added in 2022, with contribution over time $7.3B prior to 2022 30% AN
Slide 22: Targeting ~$1 billion in FRLPC
Targeting ~$1 billion in FRLPC assuming 3-4% FRLPC margin target range Network Volume ($B) FRLPC ($B) ~$27 $0.8-$1.1 $7.3 $0.2 2022 2022 Future in As shown 1 2022 At $27B 2 in previous slide network volume 22 *Figures shown not drawn to scale
Slide 23: Network volume is funded by institutional investors
Network volume is funded by institutional investors Partners Institutional Investors Financial institutions that AI network helping Partners grow Asset managers, pension funds, originate consumer loans and Investors achieve sovereign wealth funds, etc. outperformance 23
Slide 24: One-stop shop access to multiple markets at scale with consistent outperformance enabled by AI
VALUE PROPOSITION TO INVESTORS One-stop shop access to multiple markets at scale with consistent outperformance enabled by AI
Slide 25: Expanding our funding network to support partner growth
Expanding our funding network to support partner growth ✓ Consistently raising funding: #1 US personal loan ABS issuer ✓ Diversifying our investor base: with a growing ABS orderbook of 80 unique institutional investors ✓ AI-enabled asset selection to deliver target ROA: consistent outperformance of
Slide 26: Offering access to consumer assets at scale
Offering access to consumer assets at scale With expansive network, capital markets expertise and unique investment opportunities 38 $16B #1 issuer Growing # of securitizations Total funding raised in US personal loan investor since 2019 since 2020 (across all vehicles) ABS market1 base Across 5 pro
Slide 27: Ability to raise capital consistently due to strong demand
Ability to raise capital consistently due to strong demand Consistently issuing at scale even in severe market dislocation Recent personal loan deals have been oversubscribed by 2-3X Pagaya ABS issuance across all products TTM beginning 2Q19 ($B) Pagaya’s publicly rated personal loan deals since Jan
Slide 28: Top-tier personal loan ABS issuer
Top-tier personal loan ABS issuer PERSONAL LOAN/POS ABS ISSUERS ISSUANCE AMOUNT($B) TRAILING 12 MONTHS Pagaya $6.5 OneMain $2.0 Affirm $1.5 Reached #1 ranking in personal loan ABS issuance in 4 years Marlette $1.5 $1.1 #11 #3 #2 #1 #1 Upstart Freedom / Achieve $1.1 2019 2020 2021 2022 2023YTD Oportu
Slide 29: Growing and diversifying investor base
Growing and diversifying investor base Enabled by a consistent track record of asset outperformance vs market benchmark Growing ABS orderbook depth ABS investor base diversifying over time with new top-tier investors 77 80 67 67 50 52 47 47 42 36 22 2020 1Q23 5 5 6 6 7 1 2 Asset Manager Sovereign We
Slide 30: Repeat investments by existing investors
Repeat investments by Increasing investments by repeat investors fuels existing investors network expansion over time reflect strength of Pagaya’s network ✔ Investments by repeat investors grew by an average of 83% from 2019 to 2022 ✔ GIC, top sovereign wealth fund, extends existing funding agreemen
Slide 31: Asset performance
Asset performance
Slide 32: Maintaining prudent credit standards to optimize asset performance
Maintaining prudent credit standards to optimize asset performance 56% growth Applying peak 3Q21 conversion rate to in application volume 1Q’23 FY22 application volume would have implied vs 3Q’21 $10B+ of network volume in 2022 -46% decline in conversion rate 1Q’23 vs. 3Q’21 1Q'20 2Q'20 3Q'20 4Q'20
Slide 33: Performance back to early 2021 levels
Performance back to early 2021 levels Personal Loan portfolio performance consistently outperforming market benchmark, with significant improvement vs Q4’21 market-wide deterioration Pagaya Personal Loan portfolio vs. Dv01 Consumer Unsecured benchmark1 30-day+ DQs plus cumulative gross charge-offs (
Slide 34: AI-driven asset selection enables delivery of target ROA for investors
AI-driven asset selection enables delivery of target ROA for investors Pagaya Personal Loan portfolio weighted average coupon (WAC) vs 30-day+ DQs plus CGL at MOB3 25.00% 4.00% 20.00% 3.00% +83bps Delivering increase in spread between 8-12% 15.00% WAC (%) DQs (%) WAC and early-stage DQs 2.00% since
Slide 35: Pagaya is at an inflection point
Pagaya is at an inflection point Increased Network Strengthening Sustainable monetization expansion AI data moat profitability and scale Existing partners are More data points With a track record for Enabled by a resilient growing and we’re improving power enabling growth and business model and and
Slide 36: Financials and outlook
03 Financials and outlook 36
Slide 37: Reaching an inflection point to sustainable profitability
Reaching an inflection point to sustainable profitability ✓ Significant runway for growth: with momentum from both existing and new partners and investors ✓ Resilient business model: targeting 3-4% FRLPC margin through cycles ✓ Increasing operating leverage: right-sizing our expense base to deliver
Slide 38: 1Q'23 financial highlights
1Q’23 financial highlights ($ millions) 1Q’23 1Q’22 %∆ Network Volume $1,850 $1,650 12% Total revenue & other income $187 $171 9% Revenue from fees $175 $158 11% Production costs $125 $92 36% Revenue from fees less production costs $50 $66 (24%) (FRLPC)* Operating Expenses ex. SBC $70 $72 (2%) (R&D,
Slide 39: Return to profitability in Q1; raising FY23 adjusted EBITDA guidance
Return to profitability in Q1; raising FY23 adjusted EBITDA guidance Adjusted EBITDA ($ millions) ✓ 2022 impacted by significant discretionary investments ✓ Focus in 2023 on disciplined growth, return to $15-$30 positive adjusted EBITDA in 1Q23 ahead of +$5 New FY23 guidance outlook $45.9 ✓ Raising
Slide 40: Stable take rate through cycles
Stable take rate through cycles Higher AI integration fees offsetting lower capital markets fees 1Q22 1Q23 (higher liquidity environment) (lower liquidity environment) 9.6% 9.5% 1.1% 1.4% 0.3% Low liquidity = High liquidity = lower capital 3.0% higher capital markets fees markets fees Increasing AI
Slide 41: Increasing network monetization to offset capital markets volatility
Increasing network monetization to offset capital markets volatility ($ millions) Capital Markets fees Net AI integration fees1 Contract fees & other $50 Cap markets fees bottoming in current $35-$40 market per quarter environment $23 $21 $16 $6 – 1Q22 1Q23 Exit rate 1Q22 1Q22 1Q23 1Q23 1Q22 1Q23 Ex
Slide 42: Targeting 3-4% FRLPC margin in 2023
Targeting 3-4% FRLPC margin in 2023 Fee revenue less production costs (FRLPC) as a % of network volume 9.6% 9.6% 10.0% 9.5% 8.4% 2023 7.0% 6.7% FRLPC 6.7% 5.6% target range 5.4% 4.0% 3-4% 2.9% 3.0% 2.7% 3.0% 1Q22 2Q22 3Q22 4Q22 1Q23 Fee revenue % of network volume (take rate) Production costs % of n
Slide 43: Improving operating leverage
Improving operating leverage Core operating expenses (excluding share-based compensation, one-time expenses and depreciation) 1 Decline of $10M in core operating expenses sequentially vs 4Q22 (excluding impact of Darwin acquisition) $67 ✓ ~23% decrease in non-compensation $62 $61 $57 expenses vs. pr
Slide 44: 2023 Outlook
Financials and outlook 2023 Outlook (in $ millions) 2Q23E FY23E Network Volume $1.8B to $1.9B $7.5B to $8.0B Total Revenue and Other Income $180M to $190M $775M to $825M Adjusted EBITDA $5M to $10M $15M to $30M
Slide 45: Q&A
04 Q&A 45
Slide 46: Appendix
Appendix 46
Slide 47: Reconciliation of Non-GAAP Financial Measures: Adjusted Net Income and EBITDA
PAGAYA TECHNOLOGIES LTD. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) FOR THREE MONTHS ENDED March 31, 2023 AND 2022 (In thousands) Three Months Ended March 31, 2023 2022 Net Loss Attributable to Pagaya Technologies Ltd. ($60,971) ($18,272) Adjusted to exclude the following: Share-based
Slide 48: Reconciliation of Non-GAAP Financial Measures: FRLPC
PAGAYA TECHNOLOGIES LTD. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) FOR THREE MONTHS ENDED March 31, 2023 AND 2022 (in thousands) Three Months Ended March 31, Fee revenue less production costs (FRLPC) 2023 2022 Revenue from fees $175,254 $158,325 Production costs (125,057) (92,280) Fe