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DATE

Monday, Nov. 10, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Gal Krubiner
  • President — Sanjiv Das
  • Chief Financial Officer — Evangelos Perros
  • Vice President, Investor Relations — Josh Fagen

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TAKEAWAYS

  • GAAP Net Income -- $23 million, representing the third consecutive positive quarter and a turnaround from a net loss of $67 million in Q3 2024.
  • Network Volume -- $2.8 billion, achieving a 19% year-over-year increase with 31% growth in personal loans.
  • Total Revenue and Other Income -- $350 million, up 36% year over year with revenue growth outpacing volume.
  • Fee Revenue Less Production Costs (FRLPC) -- $139 million, up 39%, rising to 5% of network volume, 70 basis points higher year over year.
  • Adjusted EBITDA (non-GAAP) -- $107 million, up 91% year over year, with margin expansion of nine points to 30.6%.
  • Operating Income -- $80 million, marking a 257% increase over the previous year.
  • Operating Cash Flow -- $67 million, exceeding investment outflows.
  • Core Operating Expenses -- Reduced to 34% of FRLPC, the lowest level since going public.
  • ABS Issuance -- $1.8 billion issued in the asset-backed securities (ABS) program across four transactions.
  • Corporate Debt and Liquidity -- $500 million raised in corporate debt and an expanded revolving credit facility with four new banks, lowering interest costs.
  • Partner Growth -- The highest number of partners in onboarding in company history; the onboarding queue includes up to eight partners across all asset classes.
  • Product Diversification -- Point of sale (POS) and auto accounted for 32% of total network volume, up from 9% a year earlier.
  • Application to Funding Conversion -- Conversion rate held steady at 1%.
  • Personal Loan and Auto Loan Credit Performance -- 2024 vintages show cumulative net losses trending approximately 35%-40% lower than peak 2021 levels for personal loans (at months on book eight to 17) and approximately 50%-65% lower than comparable 2022 levels for auto loans (at months on book nine to 18).
  • Interest Expense -- Decreased to $22 million, with $12 million in annualized interest savings projected from debt refinancing.
  • 2025 Full-Year Guidance -- Updated to network volume of $10.5–$10.75 billion, total revenue and other income of $1.3–$1.325 billion, adjusted EBITDA of $372–$382 million, and GAAP net income of $72–$82 million.

SUMMARY

Management reported record-high profitability and cash flow, emphasizing operational discipline and improved capital efficiency. Funding diversification advanced through both ABS issuance and new forward flow agreements, including the inaugural $500 million auto forward flow with Castlelake. Leadership cited cross-product adoption and integration as major factors in accelerating partner onboarding and driving multi-billion-dollar relationships. Loan credit performance metrics improved, with cumulative net losses and delinquency rates for recent vintages trending below prior periods, while net recoveries and roll rates outperformed 2023 and 2024 levels. The company disclosed non-operating items affecting quarterly net income, including a $25 million one-time debt restructuring cost and a $20 million tax benefit, alongside a new reporting line for gains and losses on investments in loans and securities.

  • President Sanjiv Das directly stated, multiproduct partners represent only 30% of Pagaya Technologies (PGY +15.91%) partners by number, but their contribution to volume is more than two-thirds.
  • CEO Gal Krubiner emphasized that the company now has the highest number of partners in its onboarding queue in its history.
  • Chief Financial Officer Evangelos Perros noted, FRLPC increased 39% to $139 million, reaching 5% of network volume, up 70 basis points year over year.
  • Core operating expenses dropped to the lowest percentage of FRLPC since the company’s public debut, reflecting expense management initiatives.
  • Updated guidance continues to consider a range of $25 million to $37.5 million per quarter over a rolling twelve-month period for future credit-related impairments.
  • Leadership highlighted sector resilience, stating macro and consumer credit trends remain healthy, and monitoring continues through the data advantage of working with 31 different partners across multiple asset classes, while also confirming continued partner appetite for cross-selling and product adoption.
  • A new disclosure line titled gains and losses on investments in loans and securities has been introduced for enhanced financial transparency.

INDUSTRY GLOSSARY

  • FRLPC (Fee Revenue Less Production Costs): Non-GAAP measure representing fee revenue minus direct costs to originate platform loans; a key profitability and unit economics metric for the company.
  • ABS (Asset-Backed Securities): Bonds or notes backed by pools of loans—such as personal loans or auto loans—that the company packages and sells to institutional investors.
  • RPM Deal: Refers to a specific auto asset-backed securitization structure, frequently used in the company’s auto financing transactions.
  • Forward Flow Agreement: Pre-arranged contract to regularly sell new loans or receivables to a funding partner over time, diversifying funding sources for originators.
  • CNL (Cumulative Net Loss): The sum of loan losses net of recoveries over a defined period, expressed as a percent of original balances for a specific vintage.
  • 60 plus DQ: Loans that are 60 or more days delinquent; an early indicator of credit deterioration within portfolio vintages.

Full Conference Call Transcript

Josh Fagen: Thank you, and welcome to Pagaya Technologies Ltd.'s Third Quarter 2025 Earnings Conference Call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya Technologies Ltd., Sanjiv Das, President, and Evangelos Perros, Chief Financial Officer. You can find the materials that accompany our prepared remarks and a replay of today's webcast on the Investor Relations section of our website at investors.pagaya.com. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts with respect to, among other things, our operations and financial performance, including our financial outlook for the fourth quarter and full year of 2025. Our actual results may differ materially from those forward-looking statements.

Factors that could cause these results to differ materially from our expectations include, but are not limited to, those risks described in today's press release and our filings with the US Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements as a result of new information or future events. Please refer to the documents we file from time to time with the SEC, including our 10-K, 10-Q, and other reports for a more detailed discussion of these factors. Non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, fee revenue less production costs or FRLPC, FRLPC percentage of network volume, and core operating expenses will be discussed on the call.

Reconciliations to the most directly comparable GAAP financial measures are available to the extent available without unreasonable efforts in our earnings release and other materials, which are posted on our investor relations website. We encourage you to review the shareholder letter which is furnished with the SEC on Form 8-K today for detailed commentary on our business and performance in conjunction with the accompanying earnings supplement and press release. With that, let me turn the call over to Gal Krubiner.

Gal Krubiner: Thank you, and welcome, everyone. Our third quarter results demonstrate continued execution against our long-term operational and financial goals. We are nearing the end of the year for Pagaya Technologies Ltd. where not only have we achieved consistent GAAP net income profitability, but raised it again to an exit rate of over $120 million on an annual basis. Most importantly, the results demonstrate the momentum and strength of our platform, the diverse and high-quality revenue drivers, and the stability of our unit economics. And our very deliberate and responsible approach towards scaling in a complex environment. The outcome is a through-the-cycle business consistently growing with minimal investments for years to come.

After laying the groundwork through disciplined optimization and capital efficiency earlier in the year, we have shifted our focus to product-led growth. In short, the next eighteen months will be all about perfecting our products and our solutions to ensure we solve the fundamental challenges facing lenders and consumers. Our value proposition remains the same: helping lenders serve more customers. As partners recognize the increasing value of our platform, existing partners deepen their engagement, while new partners join the network. Our ability to design these products is truly unique. It is rooted in our vast data network, a core advantage for Pagaya Technologies Ltd.

We embed data and machine learning as a backbone of our offering across the entire lending funnel. From verification to underwriting, and as far up the funnel as affiliate channel optimization. This creates unparalleled optimizations for lenders and investors. I'm very proud to announce that we have now the highest number of partners in our onboarding queue in the history of Pagaya Technologies Ltd. We are in the process of onboarding up to eight partners across all of our asset classes ranging from fintechs to banks. Inclusive of the two partners that were added this quarter, we now have a robust queue that is set for the next twelve months.

In addition to the progress we have made in lending new partners, we have continued to refine our product strategy by listening to our partners, ensuring we meet their needs with our product suite. Just this quarter, in the course of our regular ongoing meetings, Sanjiv Das and I met with many of our partners and prospects to truly understand their growth and value drivers. And to continue to progress our products towards these needs. Solving for the needs of our partners improves our product ecosystem, and solving for product effectiveness enhances every partner relationship in return, further propelling our flywheel.

In short, the more value we add for partners, the more deeply they engage with our products and solutions, which in turn provides more opportunity to add value. Sanjiv Das will discuss later how we are evolving into a best-in-class B2B enterprise, growing our key partners to $1 billion relationships and locking in our commercial terms through multi-year contracts. This will continue to define Pagaya Technologies Ltd.'s next chapter and accelerate our journey to become a necessary utility for every lender in the US. As we continue to mature and diversify our funding network, demand for our assets remains consistent and robust.

During the third quarter, we issued $1.8 billion in our ABS program across four transactions, which were marketed to our network of more than 150 institutional funding partners. Outside of our ongoing core funding mechanism, we announced our first auto forward flow and strategic funding on residual certificates. The momentum on the corporate funding side is just as notable. We were rated by all three major credit rating agencies and raised $500 million in corporate debt. In addition, we expanded our corporate revolver with four new major banks at a significantly lower cost, boosting our capital efficiency. Together, we continue to diversify our sources of capital while improving efficiency across our funding and corporate capital structures.

We reached consistent profitability and record quarterly network volume of $2.8 billion with sequential application flow growth of 12%, showcasing the continued growth of our network. Our growth is strong and increasingly diversified with POS and auto representing 32% of total volume, versus 9% in the same quarter just a year ago. We are expanding existing partner relationships across our growing set of products and growing access from newer partners. This disciplined growth is demonstrated through our steady application to funding conversion, which has remained at 1%. At the same time, we continue to drive new high-potential partnerships to the platform. And across all of these segments, we see our network effect compounds.

We have an opportunity to truly reimagine the way consumer credit works as we build the platform that connects lenders with better data, more automation, and smarter decisions. This enhances and accelerates our ability to generate the assets that best meet the needs of our investors, in line with our balanced approach towards long-term profitability and resilience. Our goal is to be the plug-and-play solution for lenders, getting credit, spending risk deals, asset types all delivered in a seamless white-label solution powering the next generation of lending. We are extremely proud of how far we have come and ask you to stay tuned on what is on the horizon.

The journey is long, but we'll be innovative for consumers, partners, and investors. With that, I would like to hand it off to Sanjiv Das for a review of our operating business and more on our product-led growth strategy.

Sanjiv Das: Thank you, Gal Krubiner. Pagaya Technologies Ltd.'s growth continues to be driven by disciplined expansion with existing partners as well as the addition of new partners to the platform. We are continuing to strengthen our business by institutionalizing our relationships with lending partners using best practice B2B disciplines such as long-term agreements and product and fee agreements, while ensuring responsible underwriting and risk management using consumer credit discipline. Let me first provide an update on existing partners. Just to remind you, Pagaya Technologies Ltd. currently has 31 lending partners on its platform. Our relevance among our existing partners remains extremely high. Banks and fintechs are increasingly focused on consumer growth, customer retention, and maximizing customer lifetime value.

Pagaya Technologies Ltd. continues to solve for what lenders care about most while providing efficient capital markets execution and driving fee income growth for our partners. We achieved our growth of growing five accounts to over billion-dollar relationships driven by multiple product adoption by our partners, as well as expanded access to their application flow. Our existing lending partners are at varying stages of maturity with Pagaya Technologies Ltd. We define the level of partner maturity with us based on the number of Pagaya Technologies Ltd. products that partners adopt, which eventually drives the volumes on our platform.

As one would expect, the partner life cycle with Pagaya Technologies Ltd. includes onboarding, ramp-up, scaling with decline monetization, and eventually expansion across our products. Our multiproduct partners are leveraging the full suite of our products from declined monetization to our direct marketing engine and affiliate optimizer engine in personal loans, to FastPass and DualLook in auto. Multiproduct expansion enables us to significantly grow volume, fee revenue, incremental new customers, and long-term value from existing customers. A number of our personal loan and auto partners are currently expanding into Pagaya Technologies Ltd.'s products. Let me pivot for a second and give you a product view of our business in addition to the partner view you just heard.

Products above and beyond declined monetization are already contributing significantly to Pagaya Technologies Ltd.'s volume and revenue. In personal loans, approximately half our current volume already comes from products other than decline monetization. Let's take the affiliate optimizer engine as an example. Pagaya Technologies Ltd. has been enabling our partners to originate in the affiliate channels such as Credit Karma, LendingTree, Experian, and others for many years now. But last year, we productized affiliate channels separately and commercialized this offering as a stand-alone affiliate optimizer engine product. We are currently rolling it out across all our partners that are at scale with our decline monetization product.

And we are increasingly seeing that partners who have successfully leveraged affiliates to scale their credit card businesses are now starting to use affiliates to grow in personal loans by adopting Pagaya Technologies Ltd.'s affiliate optimizer engine. Becoming multiproduct presents a significant growth opportunity for partners who are currently only leveraging a decline monetization program. In fact, while multiproduct partners represent only 30% of Pagaya Technologies Ltd.'s partners by number, their contribution to our volume is more than two-thirds. So the more products that partners have with Pagaya Technologies Ltd., the more volume, the more revenue, new customers, and lifetime value they get from the partnership.

This underscores the notable organic same-store growth opportunity ahead for Pagaya Technologies Ltd. for its 31 partners. Similar to our affiliate optimizer engine, our direct marketing engine offers our partners the ability to grow their business by leveraging our response engine to book new personal loans while providing them with the same superior capital markets execution. Now a very quick update on our new partners. We are currently seeing the highest number of partners in onboarding in Pagaya Technologies Ltd.'s history. Pagaya Technologies Ltd.'s new partner onboarding now includes prebuilt integration for all the products I just described. For example, pre-integration with Credit Karma, pre-integration with Experian, and so on, along with declined monetization capabilities.

This significantly accelerates scaling and unlocks more value for our partners sooner. Partners currently in onboarding represent a mix of all three Pagaya Technologies Ltd. asset classes, as in personal loans, auto, and point of sale, and include leading banks and fintechs. For the banks, the focus continues to shift toward growth against the backdrop of a more favorable regulatory environment. As they do, they are increasingly focused on building and scaling loans, auto, and POS franchises. It presents a growth opportunity for Pagaya Technologies Ltd.'s bank-ready platform that has been tested and scaled with US Bank, Ally, and others.

I'd like to take a moment to review each of our loan categories, their performance during the quarter, and going forward. As discussed before, in personal loans, we are penetrating deeper into our existing partner base as they adopt our products while simultaneously ramping up volumes with partners we have already onboarded in the last twelve to eighteen months. On the funding side of personal loans, we are still the largest ABS issuer while also continuing to successfully diversify into forward flow agreements. Point of sale continues to make notable progress on both sides of the network.

While still a relatively newer business, we have been able to quickly grow annualized POS volumes to about $1.4 billion, up from $1.2 billion last quarter. On the funding side, we closed our second AAA-rated POS ABS offering in November, underscoring the demand and performance of our POS ABS shelf. In auto, annualized auto volumes grew to $2.2 billion, up from $2 billion last quarter. This quarter's announcements underscore several examples of the strength and performance of our auto franchise, including the sale of the residual certificates to 1 William Street in our latest RPM deal and our inaugural auto forward flow agreement with Castlelake, which we announced last week.

Before closing, I will touch briefly on our response to the macro economy, credit, and risk. As Gal Krubiner mentioned, not much has changed for Pagaya Technologies Ltd. with respect to the consumer credit performance and lending partner actions. Despite that, we continue to build a robust through-the-cycle business by staying disciplined on consumer credit and long-term commercial agreements with partners. We know that the institutional franchise that we are building can mitigate normal business cycle fluctuations. This management team has done this before in highly cyclical consumer credit businesses and is confident that it can do it again.

With disciplined growth, we remain fully committed to our mission to help bridge Wall Street to Main Street for the long term. And now it's my pleasure to turn the call over to Evangelos Perros to cover the quarter's financial results and outlook.

Evangelos Perros: Thank you, Sanjiv Das. The results of our third quarter earnings demonstrate steady and sustainable growth and most importantly, growing profitability. Network volume grew 19% year over year to a record $2.8 billion, led by 31% growth in personal loans. Application to funding conversion held firm at 1%, reflecting disciplined underwriting. We expect conversion rates to remain stable as we focus on prudent profitable growth through the cycle. Total revenue and other income rose 36% to a record $350 million, driven by fee revenue growth outpacing volume. The outperformance of revenue growth versus volume growth is a strong indicator of our ability to monetize our volume and reflects the value added to our partner network.

FRLPC increased 39% to $139 million, reaching 5% of network volume, up 70 basis points year over year, a clear signal of monetization and in line with the financial strategy we launched in early 2024, to focus on improving unit economics. We expect FRLPC as a percent of volume to normalize within the 4% to 5% range as we scale into POS and diversify our funding. In this year, we have shifted our focus on driving consistent and sustainable total FRLPC growth in dollar terms. Adjusted EBITDA increased 91% to $107 million with margins expanding nine points to 30.6%, fueled by strong fee growth and disciplined expense management. Core OpEx dropped to 34% of FRLPC, the lowest since going public.

Incremental adjusted EBITDA margin represented more than 100% of FRLPC growth in the third quarter. Operating income climbed 257% to $80 million, and operating cash flow hit a record $67 million, exceeding outflows for investments. GAAP net income of $23 million represented our third consecutive positive quarter and improved from a net loss of $67 million in the third quarter of 2024, fueled by 36% revenue growth, lower operating expenses, and lower impairments. This equated to a 6% margin as compared to a 5% margin last quarter and negative 26% in the year-ago quarter. We are also enhancing transparency in our disclosure by introducing a new reporting line called gains and losses on investments in loans and securities.

This new line includes gains and losses on investments, which were previously included in other expense net. In the third quarter, credit-related fair value adjustments reported in this new line totaled a $20 million loss versus $14 million in the prior quarter and $78 million in the prior year quarter. Interest expense fell to $22 million, down $1 million sequentially, and should decline further as the benefits of our unsecured loan refinancing fully phase in, driving $12 million in annualized interest savings and $40 million in added cash flow. Third quarter GAAP net income included the negative impact of several non-operating and non-recurring items.

We incurred a one-time $25 million in costs associated with the issuance of our corporate bond and early retirement of existing debt. In addition, we recorded a noncash warrant expense of $5 million. Partially offsetting these one-time items, we recorded a one-time tax-related benefit of $20 million. Share-based compensation expense of $14 million was up $1 million year over year and down $5 million from last quarter and is expected to remain broadly at those levels. Turning to credit, performance is in line with expectations across personal loans, auto, and POS, and remains within our disciplined risk tolerance.

Also evident by the robust demand we see across all our asset classes from institutional investors willing to underwrite our production at increasingly higher levels. We appreciate the increased investor attention around credit across financials, so I will spend a bit more time covering this today. Macro trends and overall consumer behavior remain healthy, and we continue to monitor closely through the data advantage we have of working with 31 different partners across multiple asset classes. We're always ready to shift if and when needed. Let me give you some perspective on how our credit positioning has evolved. As you may recall, during 2024, our credit performance was driven by a sharp focus on achieving consistent through-the-cycle GAAP profitability.

In addition, since the beginning of this year, we have been benefiting from our positioning to reflect protracted volatility and uncertainty. This is a luxury Pagaya Technologies Ltd. can afford given our GAAP net income and our commitment to deliver sustainable growth and not just growth at any cost. This positioning means that we have been underwriting with a cushion against the market and running the business in that way while benefiting from the lower cost of capital. And from investors' point of view, we have been assuming future loss in our guidance, as shown in our earnings supplement.

Turning to some performance metrics, our personal loan cumulative net losses across 2024 quarterly vintages are trending approximately 35% to 40% lower than peak levels in 2021, at month on book eight to 17. Auto production continues to deliver strong performance evident by the investor demands for auto ABS, the first sale of our certificate since 2021, and our inaugural Auto Forward Flow. Auto loan CNLs across quarterly 2024 vintages are trending approximately 50% to 65% lower than levels during comparable 2022 periods at month on book nine to 18. 60 plus DQs across 2025 vintages are higher when compared to 2024 levels and lower relative to 2023 levels, and well within our expectation.

Offsetting this, 2025 net recoveries and roll rate are trending significantly better than 2023 and 2024 vintages, driving the strong performance. For POS, credit trends remain stable and in line with expectations, validated by the continued strong demand we see for this product from our funding partners. Overall funding continues to be robust with a focus on improved efficiency and diversification. During the third quarter, we issued $1.8 billion in our ABS programs across four transactions. Last week, we announced our inaugural $500 million auto forward flow agreement with Castlelake, expanding our relationship into two asset classes.

Additionally, in early October after the quarter, we closed a $400 million RPM auto transaction which included the sale of the residual certificate to strategic funding partner One William Street Capital Management. And last week, we closed our second POS ABS transaction which was oversubscribed. This underscores the attractiveness of Pagaya Technologies Ltd.'s assets as we grow our auto and POS product offering. Turning to our balance sheet, we ended the quarter with $265 million in cash and cash equivalents, and $888 million of investments in loans and securities. We completed the $500 million senior unsecured notes offering that reduced our cost of capital by approximately two full percentage points to 9%.

As part of the refinancing of higher-cost facilities, we bolstered our corporate liquidity with a release of over $100 million in highly liquid collateral. After the quarter, we announced an expansion of our existing revolving credit facility with four new bank partners, as well as expanded commitments from our prior four existing lenders. This lowered the facility interest rate by nearly 35% to SOFR plus 350. After this expansion, substantially all of Pagaya Technologies Ltd.'s corporate borrowings are now below the high-yield bond coupon of 8.875%.

In the third quarter, the fair value of the overall investment portfolio and allowances net of non-controlling interest, and prior to any new additions, was adjusted downward by $32 million versus $20 million last quarter. We also added $38 million of new investments in loans and securities net of paydowns from prior investments, the majority of which is our required risk retention related to our ABS securitizations. As provided in our supplemental filing this morning, we maintained our scenario A illustrative assumption of $100 to $150 million in rolling twelve months forward credit-related impairments which is reflected in our guidance. Now let me turn to our updated outlook.

Our full-year 2025 outlook reflects the momentum and resilience in our business to date, and our unique operating leverage while maintaining our cautious stance given the protracted volatility. Key drivers include consistent levels of personal loan production and continued growth in auto and POS products. We continue to expect FRLPC to grow steadily in dollar terms and range between 4% to 5% as a percent of network volume for the year versus staying at the levels of this past quarter. Profitability trends will reflect continued scale and operating leverage.

Our guidance continues to reflect potential scenarios to future credit-related impairments, if any, as laid out in our earnings supplement which imply a range of $25 to $37.5 million per quarter over a rolling twelve-month period. Core OpEx is expected to be slightly elevated in the fourth quarter as a result of higher funding issuance. Interest expense is projected to trend lower as a result of the recent refinancing notes transaction. For the full year, we're updating our expected network volume to a range of $10.5 to $10.75 billion. Total revenue and other income in the range of $1.3 to $1.325 billion, and adjusted EBITDA in the range of $372 to $382 million.

We are increasing our GAAP net income for the year to a range of $72 million to $82 million. With that, let me turn it back to the operator for Q&A.

Operator: Thank you. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from John Hecht with Jefferies. Please proceed.

John Hecht: Hey guys, congratulations on a good quarter. Evangelos Perros, you gave a lot of detail around credit, but I'm wondering if we could just, you know, step back, maybe Gal Krubiner, if you look at the different products, your different, you know, maybe different income ranges within the programs, and so forth. Can you maybe give us your perspective on credit quality now and the consumers' borrowers' ability to manage their credits?

Evangelos Perros: Yeah. Thanks, John. I'll start. So, credit, like Pagaya Technologies Ltd.'s credit is performing well and well within our expectations. And I think the important thing here is that this is not an accident. We appreciate obviously the focus on credit performance over the last few weeks or months, but I want to remind everyone that we have taken a very balanced and conservative approach on our underwriting since the beginning of the year. We're very pleased with the disciplined approach that we have been doing in our underwriting and how that has reflected in our performance. It's interesting, like during the last few months, people have been asking us why we don't grow faster.

Well, this is exactly the reason. Right? We have been positioning well for anticipating more volatility, more uncertainty, and how that could potentially have any impact on the consumer. So we're benefiting from that sort of positioning, and I would highlight we're quite unique in our ability to do so. Why? We're a B2B company. We have the highest fee rates, fee margins, you see how FRLPC has been growing. We have the most diverse partner set and more importantly, very excited about the partners that are coming in our onboarding queue and all of that translating to profitability which allows us to be positioning the way we have over the last multiple quarters.

And, not to, you know, to remind everyone, a lot of that we have already reflected in our guidance as put impairments down the line. We don't see any reason for us obviously based on anything to deviate from that approach and obviously the provided guidance. I don't know, Gal Krubiner, if you want to add anything.

Gal Krubiner: Yes. So, John, I think thank you for your question. And I think putting that question in perspective, that's what is important for us on this call. The way I want you to think about it, or at least the way we think about it, is that in the context of our business model, it's really relatively easier to manage the credit side of the business. So think about it from a very high level. And as you can imagine, this is more a philosophical question. This is built in a way and for a reason in how we like to run our business.

We chose the B2B versus the B2C in consumer credit approach, although, as you can imagine, in the early days, it was the least straightforward decision. But the reason we chose it usually is B2C lenders have very strong correlation between marketing spend and approval rate increasing. And therefore, they are growing with the cycle. So they need to have good days to be able to approve more and therefore spend more, and that's how they are growing.

The same phenomenon is the other side of it, that when the cycles show weakness, you expect a good B2C, and most of our partners are like that, to reduce approval rates and therefore you will see less firepower to spend on marketing power. And the result, as you can imagine, is a much lower growth rate. All of this to say that credit is a super crucial backbone in the B2C organization ability to grow, especially in an increasingly competitive world. And what I know, many of our investors still think of us as another B2C organization, because we deal with consumer credit, the reality is that this is far from the truth.

The way we designed the company, which is expanding, as you know, through more partners and products, i.e., the B2B concept of consumer credit, was purposely designed to reduce the level of fluctuation over the cycle, because we do not have marketing spend that moves up and down with approval rates. Now none of that to say that we are immune, we are not immune to the cycle. And therefore, we are very closely monitoring. But remember that we have entered this year with a very tight thinking around it. So the sector is rightfully focusing here in general.

We do want to highlight that the relative impact from changes in consumer credit behavior on Pagaya Technologies Ltd. is much more muted. So we are trying to solve for a specific, we're not trying to solve for a specific growth rate in a specific quarter. The long term is what matters for us, and that leads to a high ability and degree of discipline over quarters.

John Hecht: Great. Thank you guys very much.

Operator: Our next question is from Peter Corwin Christiansen with Citi. Please proceed.

Peter Corwin Christiansen: Good morning. Thanks for the question. Nice performance here. Gal Krubiner, Evangelos Perros did a good job, I think, talking about collateral performance. Looking pretty good there. I'm just curious, you know, with a lot of successful ABS issuances this year so far, I think a lot of them oversubscribed. Can you talk to maybe how risk retention may have changed or your strategy there, how it could evolve over the coming months, given the environment that we're in today and how you foresee that potentially changing should the market start showing, you know, any signs of increased volatility as you mentioned?

Gal Krubiner: Great. Thanks, Pete. I mean, look, you can see that when it comes to the demands for Pagaya Technologies Ltd. origination continues to be very robust and actually improving. If I take you back, call it a year ago or so, remember we're 100% ABS funded. Since then, we have really diversified our funding to current across all our products. We're approximately at that 60/40% mark between call it ABS and the other structures like forward flows, and pass-throughs and things like that. You saw a couple of the announcements where we sold our certificate actually, in our recent RPM deal, which was the first time since 2021.

And at the same time, since then, again, let's not lose sight of the fact that our ABS now has a triple layer across all our products. So always keep in mind how that has evolved over time to our benefit. And obviously given the scale that we have, people were worried the same thing back in April when tariffs came along and then we managed to absorb and do most of our some of our highest issuance back then. Still, we have very strong funding as I said, diversified funding and funding sort of expertise across the different products.

And given where we are as a business, more importantly from a cash flow generation perspective, if things move for whatever reason against that, the risk retention, if need to put in more of that, we're best positioned in our history to actually do that, so we're not worried about managing that. The cycle.

Peter Corwin Christiansen: And then finally, can you just talk about your forward flow pipeline? I mean, obviously, adding a lot more partners here. That looks really encouraging. But from your flow partners, whether existing or potentially new, can you speak to that? And whether or not you're seeing increased traction there? Thank you.

Evangelos Perros: Yep. I think the traction is evident by what we have delivered already. You see how we have moved from just personal loan forward flows now to auto forward flow. And we continue to see traction across all our products. The next level of diversification, I would say, is now actually bringing more partners with which we do forward flows. And we're on track to deliver that as well. While maintaining sort of that view that we should get to that call it 50/50% mix between call it ABS and other structures like the forward flows.

Peter Corwin Christiansen: Great. Thank you.

Operator: Our next question is from Harold Lee Goetsch with B. Riley Securities. Please proceed.

Harold Lee Goetsch: My question is for Gal Krubiner. We've seen a lot of other consumer lenders report, but they're mostly consumer-facing, B2C channel. Have to spend a lot to get new customers. Could you just remind us, you know, how different your model is on the B2B2C level? Thanks.

Gal Krubiner: Yes. Definitely, Harold. Thank you very much for the question. So I will start with a little bit high level and then Sanjiv Das will take it further to speak about the onboarding stages and the different parts. So I will start with the statement as we said, we do have the biggest number of partners in the queue ever. But I think the real question and interesting part is how we got there. So step back, think about the fact that we have been really focusing in the last deal is to perfect our value proposition and the product suits behind it.

So that a new partner considering Pagaya Technologies Ltd. should be very clear for them, for him, how the partnership with Pagaya Technologies Ltd. is becoming a meaningful contributor for them over the two, three years after going live. While we have a very clear value proposition, we did, I think, a better job in defining the different parts of the product.

To be able to show to the partners what is the sequencing of ramping them as Sanjiv Das has explained in the call, and the ability to take partners to the first decline monetization product, therefore a few others that you have a very clear and precise eighteen months plan of how we roll out the different products to get them access to all of the Pagaya Technologies Ltd. products over time. Now that is creating a very clear, concise of at least $1 billion of origination already in year two or three for many of these potential partners.

And the combination, for example, in the personal loan space, between the decline monetization and the pre-screen or in the auto, the decline monetization and the fast pass. Is really becoming something that is hard to resist from a partner perspective and therefore, they are investing the time, the engagement, the tech, and we see the growth in the onboarding queue. Last sentence before I'm handing it over to Sanjiv Das to speak more specifically, I will say that the point in the cycle where lenders are looking to ramp up their growth and looking to become more on the offense rather than on the defense, call it, two years ago.

Combined with a slightly more attractive regulatory regime is actually bringing many more conversations to fruition, and to actually acting on rather than an exploratory type of situation that was before. Sanjiv Das, maybe you want to share a little bit about the specifics of the partners?

Sanjiv Das: Sure. I did want to say that, you know, to have a question between B2B and B2C, I did want to say that essentially, at its core, Gal Krubiner, you and I have talked about Pagaya Technologies Ltd. as squarely a B2B business model. And Harold, I mean, the way we think about this is we are in the business of essentially growing the business of our lending partner. That's the business we're in. And so we provide them the ability to approve more customers across their entire value chain, through the Pagaya Technologies Ltd. system or the Pagaya Technologies Ltd. platform.

So in that respect, we are more like a, you know, First Data, which is, of course, now a Fiserv, where I worked for many years to establish the same B2B disciplines that we are now instituting at Pagaya Technologies Ltd. What that means is, Gal Krubiner and I are very focused on establishing the disciplines of long-term agreements with our partners. The certainty of locking in predictable long-term fee contracts with our partners, clear rules of engagement, around the new products that Gal Krubiner described, which shares economics of growth. Better focused on our partners' needs, and what we see sort of uniformly demanded by partners across our lending platform. So it's very institutionalized.

And you know, just to be clear, we have started the process of B2B long-term contracts. With our mega sort of billion-dollar partners that I described in the earlier script. And it's been very well received. So our partners now can clearly consider these institutionalized B2B relationships very valuable. They want certainty in the long term with Pagaya Technologies Ltd. as well. We have now three to five contracts that are at fairly late stages of contracts on the finalization. Having said that, where our B2B business sort of pivots a little bit into some of the B2C disciplines is in risk management and consumer behavior.

Where we manage our business with the strict disciplines, which, as I'm sure you know, given sort of the world-class consumer experience of this team, we have turned it on highly cyclical consumer businesses several times and this is something we believe we do quite well. So essentially, that's what we're building, a solid B2B business with B2C disciplines. Building it for the long term, we do not consider ourselves beholden to being slaves of volume through credit expansion. We believe the right way to grow our volumes is through partner expansion and product expansion, which is what we've talked a lot about today. And in future earnings reports.

Essentially, in a market that has a TAM of over $500 billion, of which we represent about $10 billion.

Harold Lee Goetsch: Wait. I can ask one follow-up. You mentioned the most amount of partners in the queue. But I think, Sanjiv Das, you mentioned, you know, you've got a lot of technology kind of prebuilt that allows a much faster onboarding and scaling. Could you just, you know, basically go over that again, describe what you've built, and what will allow maybe next year to be one of your bigger years of onboarding? Thank you.

Sanjiv Das: Yeah. So you're right. So let me answer your tech question first. Again, I'll go back to what Gal Krubiner said. So what's happened, Harold, is that we've built out all these products. You know, the decline monetization product. In addition to that, we now have the direct marketing engine product, the affiliate optimization product in personal loans. And in auto, we have in addition to declined monetization, we have fast pass and the dual look program. So we're going further up the ecosystem. These products are now prebuilt and integrated into the Pagaya Technologies Ltd. platform. So now when we go and onboard a platform, these products are already there. And the partner literally has to turn them on.

And we have, back to the number of partners, now have several new partners that we are currently onboarding. And several more that we will onboard in the next quarter. These include a mix of all three asset classes that Pagaya Technologies Ltd. represents today. So we have onboarding partners that are in personal loans, onboarding partners in auto, and onboarding partners in point of sale. They include a couple of banks, including a major regional bank, point of sale fintech institute, and auto monolines. As we said, I say this very proudly because it sort of took us some time to sort of build the product, a robust product proposition on our platform.

Now we have partners that we are in our onboarding queue for the next six months that are truly the highest we've had in our history, as, again, as Gal Krubiner mentioned. In fact, we totally know that we will achieve our guidance of two to four partners a year, both for 2025 and 2026 in the next six months. I should also mention, Harold, that we are seeing very, very strong demand of cross-selling to existing partners that want to expand into other asset classes. So for example, right now, we have one of our biggest personal loan partners that wants to expand into POS. And they intend to be a very significant POS player.

And we're already in the ecosystem, so we have those discussions, and we'll just expand with that. Another major personal loans partner wants to expand into auto. And most interestingly, I should mention that a very significant auto partner wants to expand into our prescreen personal loans program, which we talked about before. So cross-selling across asset classes with our existing partners is truly becoming a strong value proposition in addition to onboarding new partners.

Harold Lee Goetsch: Thank you, Sanjiv Das. Very helpful.

Operator: Our next question is from Rayna Kumar with Oppenheimer and Company. Please proceed.

Rayna Kumar: Hi. Good morning. Good results here. Could you talk a little bit about what you're seeing in the macro, you know, in macro in general, just are you seeing any pockets of weakness, or where are you seeing strength? Thank you.

Sanjiv Das: Thank you for your question. This is Sanjiv Das. So as I think both Evangelos Perros and Gal Krubiner mentioned, consumer performance has been very stable. You know, Evangelos Perros said our credit performance is in line with our expectations, and that is so the case. I'm sure you're all hearing this across the board from most lenders. And it's what we hear from most of our lending partners whom we check in with regularly. The fact that we have 31 lending partners, so we have the benefits of talking to all 31. We also have the benefit of looking at three asset classes.

So if there's one deterioration in one asset class, it's clearly a signal for the others, so they can take actions proactively. But having said that, we are closely monitoring early-stage tech performance for any downstream impact that we keep hearing about, you know, from, you know, the fact of macro in terms of inflation or the impact of tariffs. But so far, credit is really looking great.

Gal Krubiner: And maybe I will add to that on the investor side, which is another part that could from a macro perspective impact. I think that putting the deliberation day a little bit of, like, of volatility aside. This year, demand for the different part of the capital structure is very robust. So when we look on the senior, the spreads of the 50 basis points call it, January, February versus now. There were points in the market of a little bit of overheating where people just wanted to deploy for the sake of deployment that went out too. So a steady, healthy environment, which actually that's what we love. We prefer that on overheating or overcooling.

So definitely the trajectory of travel is something that we are feeling very confident in.

Rayna Kumar: Very helpful. Thank you.

Operator: Our next question is from Kyle Joseph with Stephens. Please proceed.

Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. You guys talked a lot about product expansion and the ability to cross-sell, but just, you know, thinking about you guys are in three asset classes, and this might be longer term. But are there any other classes you could see yourselves expanding into over the years?

Gal Krubiner: Hi, Kyle. It's Gal Krubiner here. Thanks for the question. So I will tell you that question is actually a question we are dealing a lot with, and it has more philosophy rather than the specifics. So let me share with you a little bit how we think about it. And the process of what we are seeing in reality. So when you think about what's the next so-called asset class, we prefer to call it market, that we are looking to expand into. There are a few must-haves that we need to make sure we're feeling comfortable with before we are going down. So the first one is that the TAM is big enough.

That when we are doing that, that's actually going to be something that is meaningful, meaningful for us is things that we believe we can produce, $2 to $3 billion in a relatively short period of time, which you can think about it as the two, three years term. The second piece is, we need to see the adaptation or the interest of more than one partner, more than two partners, are actually going through this way. Because do remember, that a lot of the operational heavy piece is not sitting within Pagaya Technologies Ltd., and therefore, we want to see the best in class pieces that are coming to that particular market.

So if you have only one partner that is doing very well something, less of an interest for Pagaya Technologies Ltd. But if you will see a phenomenon of three to four partners that are going into one direction, that's starting to become very interesting for us. And then the third piece, it needs to be less cyclical or not cyclical.

So anything which we believe that is a little bit more cyclical because of relativity of high sensitivity to interest rate, like home equity or refi of auto, it seems that we might do a little bit, but not something that we'll put all of the what we call the Pagaya Technologies Ltd. machine behind because when it takes you something to build a year or two or three and then you're over the cycle, what's the point, right? We're not a trading shop, we are a technology business.

And the reality is that to choose it, you need to have a very strong understanding of the financial piece, but at the same time, understanding of the tech piece of what did it take to build and where is your actually answer. So in general, I would say, that these are the things that are driving our decisions. Specifically to what we see with the partners and Sanjiv Das, I don't know if you want to add any more after that, but I would just give the very high level. Home improvement is starting to be something that we feel has is gaining some traction. We see a few partners that are going to adopt and to do that.

And therefore potentially a candidate in the future think on that. Obviously, we need to see that partners are doing it and doing it properly and to a major scale. I think the bigger picture is really that the opportunities that are in front of us is really all the consumer credit per se. And as we see things that are sticking, growing and becoming meaningful you should expect that Pagaya Technologies Ltd. will participate in that capacity rather early on after that's becoming to be institutional. Sanjiv Das, anything to add?

Sanjiv Das: No. I just reinforce what you just said, Gal Krubiner, which is essentially being very, very disciplined. Around the criteria that our partners are, you know, the product of our market demands. And we are seeing some very consistent stable demand across some of the things products that you talked about. And we but we follow a very strict discipline of making sure the TAM is there, through the cycle performance is there and there's robust investment demand for those kinds of assets. They're consistent with what we certainly home improvement credit card stand out.

But having said that, with the new regulatory environment as you mentioned, Gal Krubiner, earlier, there's a lot of demand for our existing products from new players banks in general are sort of leaning in to growth. So we are seeing a very strong demand to stand up brand new personal loan programs for banks stand up brand new personal loans programs for many of the monolines. Very successful POS monolines. So the focus on the existing business itself I think, demands a lot of our attention.

Kyle Joseph: Great. Thanks for taking my question.

Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the conference back over to Gal Krubiner for closing remarks.

Gal Krubiner: So thank you, everyone, for joining us today. As you can see, this quarter's record results are truly starting to reflect the benefits of the B2B business model that we work so hard to build. Increasingly diversified growth drivers, responsible and disciplined underwriting, a highly diversified partner and funding mechanism, all with the increasing efficient capital and operating structure that we have. The result is through-the-cycle stable growth and increasing profitability. I'm even more excited about the long term. As we enter our next stage of long-term growth, we have optimized and perfected our product suite and value proposition to maximize the value we provide to partners.

We are defining and accelerating our tailored multi-product roadmap for B2C financial institutions from day one. This underscores organic opportunity for our B2B solutions and has driven a record number of partners in our onboarding pipeline. We remain laser-focused on the long-term potential of Pagaya Technologies Ltd., and look forward to sharing progress with you over the coming years. Thank you very much, everyone.

Operator: Thank you. This will conclude today's conference. You may disconnect your line at this time, and thank you for your participation.