Pagaya Technologies Q2 2025 Earnings Report

Pagaya Technologies EPS Results

• Actual EPS: $0.20
• Consensus EPS: $0.62
• Beat/Miss: Missed by -$0.42
• One Year Ago EPS: -$1.04

Pagaya Technologies Revenue Results

• Actual Revenue: $326.40 million
• Expected Revenue: $299.26 million
• Beat/Miss: Beat by +$27.14 million
• YoY Revenue Growth: +31.00%

Pagaya Technologies Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 8:30AM ET

Pagaya Technologies (NASDAQ:PGY), a product-focused technology company, deploys data science and proprietary artificial intelligence-powered technology for financial institutions and investors in the United States, Israel, the Cayman Islands, and internationally. The company develops and implements proprietary artificial intelligence technology and related software solutions to assist partners to originate loans and other assets. Its partners include high-growth financial technology companies, incumbent banks and financial institutions, auto finance providers, and residential real estate service providers. Pagaya Technologies Ltd. was incorporated in 2016 and is headquartered in New York, New York.

Pagaya Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2 Pagaya delivered record GAAP net income of $17 million and $326 million in revenue, and subsequently raised its full-year 2025 guidance for network volume, revenue, and adjusted EBITDA.
• Positive Sentiment: The company launched new product solutions—Direct Marketing Engine, Affiliate Optimizer, and FastPass—designed to help lending partners expand application funnels and streamline loan funding.
• Positive Sentiment: Pagaya bolstered its capital structure by issuing $500 million in senior unsecured notes at ~9% interest, reducing its debt cost and securing AAA ratings on personal loan, auto, and POS ABS transactions.
• Positive Sentiment: Originations mix has diversified, with point-of-sale and auto lending growing to 30% of volume versus 9% a year ago, while regional banks and fintech partners advance through term sheets and onboarding.
• Positive Sentiment: Credit performance remained robust, with cumulative net losses 30–60% below prior vintage peaks and a stable ~1% application-to-funded conversion rate, reflecting disciplined underwriting.

Presentation

[Operator]

Good day, everyone, and welcome to today's Pagaya 2Q twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call is being recorded.

[Operator]

I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Josh Fagan, Head of IR.

[Joshua Fagen, COO of Finance & Head - IR at Pagaya Technologies]

Thank you, and welcome to Pagaya's second quarter twenty twenty five earnings conference call. Joining me today to talk about our business and results are Gal Kruvinder, Chief Executive Officer of Pagaya Sanjeev 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 investor.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 third quarter and full year of 2025. Our actual results may differ materially from those contemplated by those forward looking statements.

[Joshua Fagen, COO of Finance & Head - IR at Pagaya Technologies]

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 U. S. 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 ks, 10 Q and other reports for a more detailed discussion of these factors.

[Joshua Fagen, COO of Finance & Head - IR at Pagaya Technologies]

Additionally, 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 was furnished with the SEC on Form eight ks 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.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Thank you, Josh, and welcome everyone. This was our second consecutive quarter of positive GAAP net income at a record high of $17,000,000 Total revenues of $326,000,000 was also a record, as well as our $126,000,000 in revenues from fee less production cost. And lastly, our $86,000,000 of adjusted EBITDA. Our strong results underscore the tremendous work we have done to provide increasing value to our existing partners, while building our new partner pipeline. This also reflects our improved funding and operating efficiency with strong unit economics, which Jatim will walk through in more details later.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Given the sustainability of our growth, unique economic attribution, improving corporate structure and increasing demand for our product, we are raising our full year financial outlook. Our unique data advantage and AI underwriting advantage continues to compound and enabling more precise credit decision, fueling model improvements and enhancing outcomes for our lending partners. These results are a strong reflection of our execution against several unique attributes, delivered by extremely strong team. Before I discuss our results and our strategy moving forward, I do want to spend a few minutes just to remind the audience what it is that makes our business model and the company so unique. First, it's the way which we source assets.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

We are not a direct to consumer or a balance sheet lender. We help over 31 different lenders to acquire and retain customers. The benefit of the network to Pagaya is clear. Sizable loan flow at almost $250,000,000,000 per quarter without spending a single marketing dollar. This allows us to remain highly selective while still profitably growing volumes, underwriting just 1% of applications over the past three years.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Second, is the value proposition we provide to our lending partners, especially to the banks. With a heavy regulatory burden and stringent capital rules, banks cannot truly respond to opportunities presented to them, leaving good customers and depositors behind. Gaia ensures banks can serve such creditworthy customers without taking any credit risks. The third attribute is our ability to produce diversified assets at scale for large pools of capital raised by private capital funding partners such as Blue Owl and Castlelake. Over 150 sophisticated investors look to us to provide this flow in a consistent fashion.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Last is the unique economic profile as we monetize this flow. Ours is a fee based model generating revenues from both sides of our network. That coupled with a strong operational leverage positions us to drive high levels of sustained long term profitability. Turning back to our second quarter results, we have continued to diversify several key aspects of our platform. As such, 30% of originations come from point of sale and auto lending versus only 9% just a year ago.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

On the funding side, with our recent forward flow expansion with Castlelake, we have added roughly $5,000,000,000 in forward flow capacity since the 2024. This represents 25% of our overall funding mix. The increasing diversification and capacity for our funding sources adds much more resiliency and stability through cycles and better supports our growth and earning power. We have continued to demonstrate strong operational leverage with the second quarter core operating expenses near record lows as a percentage of FRLPC, thanks to the wide usage of technology and automation in our business, driving continued GAAP net income growth. While the operating environment is showing some stabilization and credit performance remains solid, we remain deliberately conservative in managing volumes and credit such that we can respond effectively to any macro shift.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Pagaya is targeting strong and sustainable growth through all cycles. While these results were delivered in our second quarter, we continue to execute as we enter the third quarter. We successfully raised $500,000,000 through our first corporate bond issuance. This was a strong external validation of our business model. Our appeal to an increasing array of capital providers would not have been possible without our rentless focus on the stability and consistency of our business and our disciplined execution on driving towards GAAP profitability.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

This bond offering is designed to grow our earning power, provide us access to less expensive capital and evolve our corporate capital structure to one that is more mature, diverse, and sustainable. When I look forward towards the next eighteen months of Pagaya, I see a disciplined focus on growing our enterprise. The main objectives of our growth strategy are simple, to lend more partners and to offer additional value added products to support our existing lenders businesses. Our core technology advantages allow us to further support our partners' growth across the different markets in which we operate in. Today, our core program boosters our partners' ability to reach a large customer base.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Recently, we have started to support our partners' ability to actually increase application flow into their funnels, as well as to reduce the friction to fund loans through expedited verification. Initiatives and products, such as the Pagaya direct marketing engine, the Affiliate Optimizer, and the FastPass solutions are a crucial part of our future growth. Sanjeev, my co founder and president, will expand on the way in which product innovation boosts the appeal to our network of lending partners as a growth solution. We are coupling product expansion with our strong and consistent funding network and underwriting capabilities. And it is important to mention that all of these loans, even from the new initiatives, continue to be funded by the Pagaya Funding Network.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

We have made great strides in the past eighteen months in stabilizing our funding, financing and operating structure through a disciplined approach. We will now shift to focus and execute of our growth strategy, which we are excited to share more about in the coming quarters. In closing, we continue to demonstrate that our greatest strengths lies in our ability to combine advanced data AI capabilities and scale infrastructure, making us a partner of choice to many leading lenders to drive sustainable profitable growth. The result is a highly efficient cost model. And as bank and lenders look for new ways to expand and growth, we're helping them get there, sharpening our solution, scaling efficiently and delivering impact where it matters the most.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

With that, I would like to hand it over to Sanjeev for a review of our operating business and more on our product led growth.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Thank you, Gal. Our business continues to benefit from robust consumer demand, a healthy consumer, continued improvement of our credit modeling, as well as Pagaya's unique data advantage and network benefits. Existing lending partnerships remain the primary source of near term volume growth. We see very significant expansion potential to our product solutions, given our now proven track record of success and the strong demand from existing partners for incremental growth opportunities. With the credit environment stabilizing, our lending partners are actively pushing growth opportunities.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

However, many initiatives are constrained at our lenders by their limited technology resources and competing internal priorities. Anticipating this challenge, Pagaya began investing nearly eighteen months ago to build marketing capabilities designed to accelerate our partners' growth without them taking any incremental risk. In recent quarters, we successfully piloted prescreen marketing initiatives as part of our direct marketing engine, and have since initiated long term commercial discussions to scale these programs. Additionally, we are working with leading affiliate platforms to develop plug and play solutions that require minimal integration effort, enabling lending partners to launch growth initiatives quickly. Our embeddedness in our partners' technology enables seamless expansion into new product solutions.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Pagaya is expanding the way in which it works with its lending partners beyond declined monetization. We are growing our product suite to include marketing products to further accelerate their customer growth. Our direct marketing and affiliate optimizer engines help our lending partners expand their application funnel, which in turn creates a significant growth platform for Pagaya. As we expand our product offerings, we consistently leverage Pagaya's core capabilities, underwriting advantage and funding efficiency. Demand also remains robust for new partner additions, a longer term growth driver.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

We see continued interest from regional banks and leading fintechs. With several term sheets signed, we expect a few announcements in the coming quarters. Importantly, all of these current and evolving business drivers remain within our B2B2C core competency and focus. We have no plans to go directly to consumers. And as Gal said, it is something that uniquely differentiates our model in the world of consumer lending.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Now let me provide some highlights for each of our product offerings. Within our personal loan segment, our value proposition continues to mature, and partners are keen to embrace expansion into newer product offerings, such as direct marketing and affiliate optimization. Agaia is increasingly aligned with our lending partners as our products continue to evolve to best drive higher volumes, higher revenue and expanded customer lifetime value. It is worth spending a bit of time on each of our evolving product solutions. Direct marketing engine for our lending partners, including our prescreen solution, encapsulates Pagaya's continued efforts to help lending partners capture more application flow.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

It represents Pagaya's next generation of products designed to help partners not only monetize peak lines, but also grow their application flow. We are helping to prescreen existing customers using our models, and send them offers through email, direct mail, and other channels. We are on track to sign multiple new prescreen term sheets with existing lending partners over the next few quarters, all of which completed successful pilots earlier this year. Next, our Affiliate Optimizer engine for lending partners, which leverages our unique data advantage to help lending partners grow volumes through major affiliate programs such as Credit Karma, Experian, LendingTree, and others. This enables partners to attract new customers at scale via a major source of customer acquisition.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

We are also expanding the market opportunity for affiliates by introducing new lending partners to their platforms. Our goal is to further streamline the onboarding process for lending partners, accelerating their growth with a plug and play solution on affiliate platforms. This eliminates the need for significant technology resources for onboarding, which is currently a challenge for our lending partners. This will in turn drive accelerated growth for Pugaya. Moving to our auto lending business, which is building on strong growth trends, optimizing and growing existing partnerships such as Ally and Westlake.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

First, we are growing our decline monetization programs and expanding our lending partners' access to high quality application flow by assessing applications that would be approved by partners. Further, we are rolling out value added features, including tailored income, employment, and other verification strategies via a new feature known as FastPass. These features, under our partners' brands, have already demonstrated promising results with potential to scale auto volumes. This improves the dealer and customer experience without incremental credit risk and drives cost savings for our lending partners. In terms of our pragmatic and balanced approach towards growth in auto lending, we have notably improved our underwriting model performance.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

The performance of our RPM ABS shelf and improved funding efficiency have led to lower cost of funds and capital requirements. We achieved our first AAA rated auto ABS this quarter, a testament to our prudent underwriting. This has driven unit economics on par with the more mature personal loan segment. Our point of sale segment continues to demonstrate strong volume growth. Similar to the auto loan segment, we are enabling decline monetization for our lending partners and providing offers on application flow that could otherwise be approved by them.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

We have made notable progress on both sides of this business. Starting with the lending side, we have demonstrated profitable growth with Clarna, our anchor partner. We are helping Elavon grow their advanced product while making advancements with new partners. On the funding side, our innovative Posh ABS offering was AAA rated out of the gate and oversubscribed. We continue to explore additional long term growth levers from multiple verticals, ticket sizes, and terms.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

In terms of our new partner pipeline, demand for our solutions remains robust. Among areas of focus, we see ongoing strong demand from US regional banks. In this market, we are in several late stage discussions, spanning personal and auto lending as well as point of sale financing opportunities. With several term sheets signed, we expect a few announcements in the coming quarters, with some banks already in the process of onboarding. In particular, we are in the onboarding stage with a top 20 U.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

S. Bank by assets to help in the relaunch of their personal loans business, as well as some of the largest U. S. Private banks to help expand their point of sale financing business. And now it's my pleasure to turn the call over to EP to cover the quarter's financial results and outlook.

[Evangelos Perros, CFO at Pagaya Technologies]

Thank you, Sanjeev.

[Evangelos Perros, CFO at Pagaya Technologies]

As always, I will cover our financial and operating results and provide updated guidance for Q3 and full year 2025. But first, I want to take a moment to highlight a pivotal milestone in our journey as a public company. Our inaugural corporate credit rating and successful execution of our unsecured notes issuance. This marks a key step in the continued optimization and maturity of our capital structure and serves as a strong validation of our team's execution. Let's revisit the foundation we laid in early twenty twenty four when we introduced our revised financial strategy.

[Evangelos Perros, CFO at Pagaya Technologies]

At that time, we committed to two core goals, achieving GAAP net income profitability and generating positive cash flow. Having delivered on board with continued momentum, we shift our focus towards fully leveraging our next generation product led financial platform, one that is resilient, increasingly capital efficient and built to support great scale. These attributes are what enable us to drive compounding value for our partners and shareholders, supported by disciplined underwriting, strategic capital deployment and structural operating leverage. To that end, the successful completion of our $500,000,000 senior unsecured notes offering supported by all three major credit rating agencies was a step toward that goal and the evolution of our long term financial strategy. You can find the details in our shareholder letter, but I want to highlight some of those benefits.

[Evangelos Perros, CFO at Pagaya Technologies]

First and foremost, we have reduced our cost of debt from approximately 11% to approximately 9% without effectively altering net leverage. Second, we improved GAAP profitability with approximately $12,000,000 in expected annualized interest savings. Third, we enhanced cash flow by an estimated $40,000,000 annually, driven by both interest savings and the retirement of secured debt that would otherwise amortize. Fourth, we simplified our capital structure by eliminating legacy restrictive covenants, extending debt maturities to 2,030 and releasing valuable liquid assets, improving both liquidity and flexibility. Finally, this transaction is an endorsement of our strategy and opens access to the deepest pockets of institutional capital.

[Evangelos Perros, CFO at Pagaya Technologies]

It elevates our positioning across all of our constituents from funding partners to lending institutions. I'm incredibly grateful for the trust placed in us by top tier investors. Turning to our financial results, we reported record results across all our key metrics. It's at or above the high end of our original second quarter guidance. Most importantly, our results underscore the consistency and profitability of our network volume growth.

[Evangelos Perros, CFO at Pagaya Technologies]

Network volume grew 14% year over year to $2,600,000,000 above the high end of our guidance. Personal loans were the largest contributor of volume in the quarter, up 23% year over year. At the same time, our results are increasingly diversified with POS and auto volumes comprising 30% of total volumes versus nine percent one year ago. In line with the past three years, our conversion of applications to funded loans was at approximately 1%. We expect this level to remain steady in the near term as our increasing flow applications enable us to adhere to our stringent underwriting standards and through the cycle profitable growth.

[Evangelos Perros, CFO at Pagaya Technologies]

Total revenue and other income was a record $326,000,000 this quarter, up 30% from a year ago levels, with revenue from fees growing by 31%. FRLPC reached a record 126,000,000 up 30% year over year outpacing network volume growth. Our focus on profitable growth drove FRLPC as a percent of network volume up 61 basis points year over year to 4.8%. FRLPC contribution from lending partner fees continues to grow at 81% of total FRLPC in the quarter versus 69% in 2Q twenty twenty four and only 1% in 2022. Adjusted EBITDA reached a record $86,000,000 an increase of 72% from the 2024, representing six points in margin improvement at 26.4%.

[Evangelos Perros, CFO at Pagaya Technologies]

This was due to a combination of strong top line growth and our unique operating leverage with core operating expenses as a percent of near the lowest level since going public. In fact, incremental EBITDA margin as a percent of

[Evangelos Perros, CFO at Pagaya Technologies]

FRLPC FR topped 100% on a year over year basis. Core operating expenses have risen sequentially in the second quarter due to higher ABS issuance of $2,300,000,000 versus $1,400,000,000 last quarter and our inaugural POS ABS. These excess issuance drove expenses higher, which we expect to normalize next quarter. Excluding ABS setup costs, comp and all other non comp combined as percent of FRAPC continued to decline, demonstrating the inherent operating leverage of our business. These same factors drove GAAP net income growth of $9,000,000 sequentially and $91,000,000 year over year to $17,000,000 This represents a 5% margin in our second consecutive quarter of GAAP net income profitability versus 3% last quarter and negative 30% a year ago.

[Evangelos Perros, CFO at Pagaya Technologies]

Credit related fair value adjustments reported in our other expense net amounted to a loss of $11,000,000 in the quarter versus $24,000,000 in the prior quarter. In addition, there were $4,000,000 in loan related losses versus $6,000,000 in the prior quarter. Interest expense was 23,000,000 approximately $2,000,000 but down nearly 16% from third quarter twenty twenty four levels when we undertook a set of balance sheet optimization actions. We expect interest expense to decrease meaningfully going forward following the recent unsecured note issuance. Adjusted net income was $51,000,000 which excludes share based compensation and other non cash items such as fair value adjustments.

[Evangelos Perros, CFO at Pagaya Technologies]

Credit performance remains strong and stable consistent with the last two years. Starting with personal loans, second half twenty twenty three and first half twenty twenty four vintage cumulative net losses are trending approximately 30% to 40% lower than peak levels in the 2021 at month on book 11 to 20. For auto loans, CNLs across second half twenty twenty three and first half twenty twenty four vintages are trending approximately 30% to 60% lower than levels during comparable 2022 periods at month on book 11 to 20. In terms of our funding, we continue to execute at scale, advantage of the strong momentum we are experiencing, while remaining disciplined in our credit underwriting. During the second quarter, we issued $2,300,000,000 in our ABS program across six transactions.

[Evangelos Perros, CFO at Pagaya Technologies]

Our institutional funding network currently stands at 153 unique partners, up from 120 last year. We closed our first AAA rated auto ABS transaction and maintained our AAA rating on our personal loan ABS. Additionally, closed our inaugural $300,000,000 AAA rated point of sale ABS transaction. With its revolving feature as loans are repaid, funds are redeployed into our new loans during the eighteen months tenure of the facility, thus equating to over $1,000,000,000 in prospective funding capacity over the life, fueling significant growth potential in our POS business. We expect ABS net risk retention requirement levels to continue to range at 4% to five percent of the notional size of our personal loan ABS deals and may opportunistically increase retention levels to the extent it lowers our cost of funding and it's accretive to our earnings.

[Evangelos Perros, CFO at Pagaya Technologies]

Following the quarter, we announced a new forward flow agreement with Castlelake, a testament to the success of our initial agreement in 2024. The new agreement represents a total of up to $2,500,000,000 in personal loan purchase commitments over sixteen months, a notable change from the 2024 commitment of $1,000,000,000 over twelve months. We expect to continue to diversify our funding to favor capital efficient structures and other strategic funding partnerships. Turning to our balance sheet. As of June 30, we held $242,000,000 in total cash and cash equivalents and $870,000,000 of investments in loans and securities.

[Evangelos Perros, CFO at Pagaya Technologies]

The quality and composition of our balance sheet was improved materially over the last twelve months, providing enhanced access to liquidity. We will continue to proactively evaluate our balance sheet for further optimization opportunities, particularly within the context of our recent success in the public debt markets and the broader environment. In the second quarter, the fair value adjustment of the overall investment portfolio and allowances net of non controlling interest and prior to any new additions was $21,000,000 versus $45,000,000 last quarter. We also added $122,000,000 of new investments, loan and securities, net of paydowns from prior investments, the majority of which was discretionary. This is part of our accretive deployment strategy, which drives our overall cost of funding lower and increases the buffer against any future losses.

[Evangelos Perros, CFO at Pagaya Technologies]

Turning to our outlook. Our full year and third quarter outlook reflect both the momentum and resilience in our business to date. At the same time, we remain cautious due to the protracted uncertainty. We will continue focusing on driving profitable prudent growth, not chasing any growth at all costs, while monitoring the macro environment closely. Notable drivers include consistent levels of personal loan production and continued growth in auto and point of sale products.

[Evangelos Perros, CFO at Pagaya Technologies]

We expect FRAPC to continue growing as we focus on our most profitable and growing verticals. We continue to expect FRLPC as a percent of network volume to range between 45% for the year. Profitability trends will continue reflecting our scale and operating leverage. We expect credit related impairments, if any, to be in line with the scenarios laid out in our earnings supplement and already reflected in our guidance. Interest expense is projected to trend lower as a result of our recent refinancing of unsecured notes transactions.

[Evangelos Perros, CFO at Pagaya Technologies]

Our third quarter and full year GAAP net income guidance includes the impact of several one time items, including approximately $24,000,000 in costs associated with the issuance of our corporate bond and costs associated with the early retirement of existing credit lines. Partially offsetting this loss, we expect to record a one time benefit associated with the resolution of certain tax related matters. The combined impact of these items is expected to be a net loss of approximately $5,000,000 to $10,000,000 already reflected in our 3Q and full year net income guidance. With that in mind, for the 2025, we expect network volume in the range of 2.75 to $2,950,000,000 total revenue and other income in the range of $330,000,000 to $350,000,000 and adjusted EBITDA in the range of 90,000,000 to 100,000,000 We expect GAAP net income in the range of 10,000,000 to $20,000,000 reflecting the aforementioned one time costs. For the full year, we are increasing our expected network volume range to 10,500,000,000 to $11,500,000,000 total revenue and other income in the range of $1,250,000,000 to $1,325,000,000 and adjusted EBITDA in the range of $345,000,000 to $370,000,000 We are increasing our GAAP net income for the year in the range of 55,000,000 to 75,000,000 With that, let me turn it back to the operator for Q and A.

[Operator]

We'll take our first question from Peter Christiansen with Citi. Your line is open. Please go ahead.

[Pete Christiansen, Equity Research Analyst at Citi]

Good morning. Thank you for the question. Wow. Really really impressive results. Great execution this quarter.

[Pete Christiansen, Equity Research Analyst at Citi]

A lot to like. Gal, you you talked earlier in the call about banks not having the technology particularly when it comes to things like point of sale. I was just wondering if you could share some of the conversations that you've been having with potential new partners on the banking side. I'm thinking particularly some of the large card issuers where it may seem logical for them to diversify them their offerings and perhaps add BNPL capabilities. Are you seeing some traction there potentially and seeing some new partners on this side on the BNPL side coming in? Thank you.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Hi, Pete. Thank you for the kind words. So yes, it's Gal. I'm going to take it. So the short answer is yes.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

I think in general in The U. S. There is a lot of enthusiasm about buy now pay later as it relates to the ability to provide to customers the ability to have additional way to pay their bills. And to your point, banks who have a big credit card businesses are looking to that to make sure they are going to stay in the game. So in the last few quarters, I would say on that and generally even broader on banks, to a regulatory environment that has been shifting a little bit to the positive side.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

And in the same time with the stabilization of the environment that we are seeing out there, more and more banks are actually asking the question, how do we grow? And part of the growth initiative are coming in the form of collaborating with Pagaya. And if you'll notice, we did mention that we signed few term sheets just in the last quarter and hoping to do some progress in the last few quarters that we can tell you all about that. But to sum it up, the answer is yes. Buy now, pay later is one of them, but we see that actually across the board in PL and buy now, pay later and in Autolome.

[Pete Christiansen, Equity Research Analyst at Citi]

Thank you. That's helpful. And then I certainly want to double tap into the successful oversubscribed bond offering you had in the quarter. It seems like this changes the glide path for capital structure planning as we think forward and certainly a reputational benefit here. Just wondering if you want to if there's anything you can add there and and how you see this deal being transformational for Pagaya? Thank you.

[Evangelos Perros, CFO at Pagaya Technologies]

Sure. Thanks, Pete. This is Epi. Yes, we're obviously very happy with the execution of this transaction and we laid out all the benefits that we get out of it, which I encourage you to go through because it's truly a transformational transaction for us. Maybe another way to think about it is that this bond effectively is a step function in our evolution and provides probably the biggest call it risk reduction in our business and our franchise as a whole.

[Evangelos Perros, CFO at Pagaya Technologies]

Have if you think about the corporate debt structure that we have in place now in combination with a convert we put that out four, five years and get a lot of call it cash savings out of that which we can really plow back into the business and focus on sort of growing the business. That's one way to think about it. And it opens up obviously access to capital and down the line if we need access to capital, we can do it through this venue and obviously in a non dilutive way. So very pleased with the transaction and what it does for us. And obviously, it provides for all of the constituents an extra layer of scrutiny now that we're basically engaging with the rating agencies.

[Pete Christiansen, Equity Research Analyst at Citi]

Thank you, Ipi. That was really helpful. Congratulations again on the great execution.

[Operator]

And we'll go next to Kyle Joseph with Stephens. Your line is open. Please go ahead.

[Kyle Joseph, Managing Director at Stephens Inc]

Hey, good morning, guys. Thanks for taking my questions. And yes, echo, congratulations on a really strong results. Gal and Sajid, you guys talked a lot about kind of your focus on new products in your prepared remarks, whether it's prescreening or affiliate optimization. I'm just thinking how does this kind of impact your growth profile with the partner model?

[Kyle Joseph, Managing Director at Stephens Inc]

You had good growth, but it could be fairly lumpy. Is this something where you think about kind of smoothing out results? And then in terms of the impacts on the P and L, where are we on it? And then what how are you thinking about kind of the timing and magnitude? Thanks.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Sure. Thank you, Kyle. This is Sanjeev. So, yes, you're right. We have spent a fair amount of our time in fact over the last eighteen months in investing in our new products.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

In some ways, we anticipated that our partners in this cycle would be looking for growth. And so we essentially shifted, if you really think about Pagaya's products, our core flagship product was always the decline monetization product based on which we built our core flagship personal loans business, auto business and POS business. And if you really think about what we've done in the last eighteen months is we've invested heavily now in the growth initiatives with our partners. So the direct marketing engine and the affiliate optimization engine essentially does two things. The direct marketing engine enables our partners to now grow the personal loan side of their business with existing personal loans customers who could take a second loan or existing personal loan customers that may have applied in the past but have paid off that personal loan and are good performers.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

What we do using Pagaya's direct marketing engine is using the analytics, we select the best customers that our partners should reach out to under their brand and we offer them the same full scale Pagaya solution of underwriting those loans and eventually funding those loans. So the partners continue to grow and continue to own fees. Same thing with the affiliate side. As Pete mentioned earlier, our partners play very heavily in cards. So they use affiliate programs like Credit Karma and Experian, but on personal loans, they don't use Credit Karma and Experian as much.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

And what we are doing is essentially connecting them to Credit Karma and Experian on the personal loan side to grow that side of the business, again, providing our engine for them to optimize their results and show their growth. And then we fund we provide them a funding solution on those loans so they earn more fees through those capabilities as well. So moving much more from a decline monetization engine to now a direct marketing engine and an affiliate engine to help our partners grow. Why does it matter to them? Because our partners care about growth a lot.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Why does it matter to us? Because from a personal loan standpoint, think about it this way, we have 31 existing partners, and we are showing each one of them how to now grow, given that we already embedded into their ecosystem. So it's a very powerful value proposition for them. We've done pilots with five of our top partners, as I mentioned as we mentioned in our shareholder letter as well as in our announcement today, we're in the process of signing about five term sheets, so that we can start to roll this out. But to answer your question, we absolutely expect it to impact the growth in our PL business very soon.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

We expect to roll this out by the fourth quarter, so we expect 2026 is when we'll start to see the full impact of this. And we totally expect it to smoothen out the lumpiness, as you mentioned, of the franchise, which is seasonal and so become much more problematic because they're so it's so tuned to our partners' success in terms of their growth.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Just one thing to add, it's Gal here. From a P and L perspective and from an airport perspective, think we are reaching to a point of scale that we are choosing products that are one time investment for us, but then could be utilized with many of our partners. So if you think about the marketing direct marketing engine that Sanjeev has mentioned, we are building it once, but then we can offer that to six, seven, 10 and up to 31 partners. So even from the cost that is needed to happen in order to provide that value from a P and L perspective on the Pagaya side is very accretive. And the same goes to the affiliate when you think about Experian that's going very strongly into creating a marketplace like Credit Karma has.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

So our ability to connect to them and to deliver that direct instant connection to many of our partners is becoming a very strong added value that with the Pagaya capabilities in between making it much easier for them to add them to the platforms and make it seamless through the integration. So both from the investment time and from the expenses versus the benefit that we get, these things should be very accretive now that we got to a scale of 30 plus partners that it makes sense to do it better.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Correct. And just to add one more thing, which is if you think about it, we've sort of served 2,500,000,000 consumers already in the years that provides in there. The TAM in this market of existing customers with our existing partners is about 60,000,000 customers. So it's a massive TAM, and as Karl said, one fixed investment that is made, but it's replicating exactly the Pavaya model of of the analytics, supporting the partner, and then providing them a funding solution for more.

[Kyle Joseph, Managing Director at Stephens Inc]

Really good color, guys. Thanks for answering my question. Sounds like an exciting opportunity.

[Operator]

And we'll go next to John Hecht with Jefferies. Your line is open. Please go ahead.

[John Hecht, Managing Director at Jefferies]

Hey, guys. Great quarter. Gal, you mentioned you you talked about your unique model early in your prepared remarks. I'm wondering, do you guys see others entering? And what do you think the market direction is and the competitive dynamics are, especially kind of considering your kind of first mover advantage?

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Definitely. So let me try to answer this question, John, from both a product and a company perspective. I think from product perspective, let's talk about what it is and design it. So when we are speaking about what we build, we build an extended platform that is actually allowing many lenders in The US to be able to provide more consumer credit offers to their people. Now, in short, let me tell you this.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

I believe that everyone, every bank, every lender should have a version of this business of the extended platform. And this is really the message that we have been trying to provide to the state for the last few years since we started or since we became known. This is, in fact, Pagaya, the product we have built and brought to the world. Now, you may see in different occasions specific lenders that are building partially by their own extended platform that are mainly around funding platforms that allowing for part of their application to be funded through other pieces. And we're actually very bullish and happy about it because we think that this is a tremendous big opportunity.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

And we think that as long as it become more known, more relevant, more mainstream, it actually make our job to attract many more lenders to our solution easier and more explainable. So we are welcoming any type of ability of anyone to do and to go after that. Now the interesting part, and that's what we love the most, is that the way we do it is very, very different. Systems. We are connecting directly to the affiliate, as Sanjeev said before.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

There is a very hard coded tax stack that is needed to be built and integrated through these organizations to make sure that our business is sustainable, efficient, and growing over time. So I think that major first differentiator is allowing us to have the right margins and the ability to be scaled across the spectrum meaningfully. And the second piece is when you're thinking about the extended platform of Podia that is providing funding stability to these lenders, and this is maybe the most important piece, We are never relying on one funding partner. Behind the API connectivity of ODAI, you have 150 sophisticated investors that partially they will have more appetite or less of your time, but as a whole, it's a very strong and stable solution and one that you should and should be able to offer to a bank. Lastly, would say that we have so much mastered that concept that we have managed to do it in three major different asset classes.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

So the unique capabilities that we have is not just being delivered to the FinTechs that part of you are more familiar with, but it's across industries and markets that even much more traditionally haven't been doing these things in the past. And if you think about it from a company perspective, as I said, we think that Pagaya can become the biggest extended platform in The United States and the capabilities and the tech that we have built are an absolute capable of dominating the majority of this market. For us, the evolution that we are talking about and hopefully leading well is the same evolution that corporate debt has been ran through the last twenty years with the concept of syndication. So we consider ourselves as the leading and the category leaders in the ability to create the concept of a syndication market into the consumer credit. So from here, I'm truly calling for every bank, every lender in The U.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

S, big and small, who wants to make the product to the customers more efficient and more valuable to contact us and to start working on their similar strategies. And I will add with maybe the most important thing, don't forget that the result is neither us nor the bank. It's really about helping consumers getting the credit that they need.

[John Hecht, Managing Director at Jefferies]

That's very good context. Thank you so much.

[Operator]

And we'll go next to Sanjay Sakhrani with KBW. Please go ahead.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

You. Good morning. Sanjeev, maybe we could talk a little bit about the health of the consumer. Obviously, you mentioned credit is doing quite well. And obviously, we've seen those marks come down encouragingly.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

But maybe just a little bit more detail around what you're seeing and what the path forward is in terms of credit quality? Thanks.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Sure, Sanjay. How are you? Yes. So we have seen across all our principal asset classes, but definitely in personal loans and auto that the consumer performance has been extremely good. What we are seeing based on the the work that we are doing is that consumers continue to make not only continue to make their payments, but we are watching and still watching very carefully on a couple of things, especially the impact of student loans and what we are reading in terms of consumers increasing their savings rate.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

But their performance rate has been their performance with respect to loan repayments have been very good. And I say that say that put the caution in there because our risk management, we particularly tightened tightened up, and it's one of the reasons why I would say that the discipline that we've put in at our side, even though we have the ability to potentially dial up more, we are being very careful about making sure that we approve only those loans that are that continue to be solid credit quality. Having said that, what we did in our auto business was we started this construct of essentially using sophisticated models to see where we could remove some of the steps that were very intense for high credit quality customers, and that we saw has actually not only increased our volumes, but we look at the credit quality there. That's also been pretty steady. So net net, that's kind of how we think about today in terms of responsible lending, but also how we think about not necessarily opening up the credit box, but making sure that we make the process more friction free in order to improve the flow.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

So we have been very cautious, but also very, I would say, tactically very smart, so to speak in terms of making sure that we continue with flow.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

It's That's great. And maybe just a follow-up for Gal, EP. Obviously, you guys have made substantial progress on funding and all the liquidity you have. The credits, as Sanjeev mentioned, is moving in the right direction. And then the GAAP profitability also helps the flywheel in terms of your capacity to originate.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

I guess as we look forward now, and I know you guys provided and upgraded sort of the network volume assumptions, like what's your capacity now? Like I mean, can you just give us some dimensions? Because you have a lot of growth, vectors that you're trying to tap into. So how should we think about what the growth profile today could be over the next couple of years? Thanks.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

Sure, Sanjay. So I want to take a specific definition of the word growth that is the way we think about it and connected to the great question you had about capacity. So the way we think about growth is really how much our platform is connected to many more lenders and how many more solutions we are providing to our partners inside of these in the inside of their channels that they are originating through. And we're doing that as we said in personal loan and also loan and many others. On the other side, the same type of like a growth is actually funding capacity.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

So making sure we have more AAA buyers on the ABS. We have more forward flow buyers from that perspective. So it's really about growing the enterprise and trying to build the so to speak a perfect extended platform for all the different types that a lender might need even if it's to grow their business with a direct mail like Sanjeev said or help them get accelerated on the affiliate channels or just help them capture more of the applications coming through their door, but they didn't have real solution for and everything through our credit underwriting and funding. The short answer to how much capacity we have, I would say that we can easily see for the next eighteen months or so the ability to have the 2x capacity at least. So it's not anymore a capacity question.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

The question is when you are lending more partners and it takes time to integrate them and to perfect them and to bring them to the profitable growth that you want to see without having years on years of investment, without actually creating any marginal profits. So we want to make sure we are actually in a very disciplined profitable growth. So the way we think about growth from that perspective is to continue to actually generate higher GAAP net income numbers. So this is what we are focusing on. We are focusing on having a very healthy organization that will have enough capacity as an organization to stand even potential downside in the future and that is being our focus.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

And in order to do that, we are doubling down on all the heavy infrastructure that you need to do in these deals in between connecting to more partners and our pipeline is very solid and into extending our funding partners to build more channels that are sustainable and diversify to be able to do that. So that's the overall arching thing. And then as you think about the goals, the double digits usual as we are planning and targeting for that's what you should expect going forward.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thank you.

[Operator]

And our last question comes from Hal Getsch with B. Riley Securities. Your line is open. Please go ahead.

[Hal Goetsch, Managing Director at B Riley Financial]

Hey, great quarter, guys. A quick question on just the affiliate program you mentioned. And I just wanted to know more about when you're onboarding a bank partner with limited technical resources, what are some of the workflows and assets you bring to do that? So it's better understand like the process it takes to get through an onboarding from after signing in a term sheet. Just any color you could give us would be super helpful in understanding what you guys are going through to bring on new partners. Thanks.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Hi Hal, this is Sanjit. So yes, so when we sign a term sheet with a bank and we get into the onboarding process, generally, people assume that we jump straight into the tech integration, but that's not quite true. What happens is because it's a bank, we first have to go through a very rigorous process of making sure that our models relative to the banks, both risk management process as well as the bank's compliance process in terms of model approval, how the models work, how the model variables, that goes through that complete a very, very deep analysis. So first, the risk guys, the compliance guys on both sides sort of connect with each other to make sure that the model review process is done with a great deal of detail. Now we consider that part of the onboarding process.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

It's a very fundamental process, making sure that it's regulatory compliant. As you know, we've passed muster on that with U. S. Bank and several other banks. So that happens first.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

Then the issue gets on to the legal side. So how does a bank qualify as a true lender? We go through that process, make sure that there's an extensive test of about eight or 10 items for a lender to qualify as a true lender. We go through that with a great deal of detail, make sure that the bank on the other side is completely comfortable. Then we get into the compliance side, and then finally we get into the tech integration side.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

And that whole process end to end can take about six months, six to nine months. And so that whole process what happens is it's one of the reasons why when we sign a term sheet with a bank, we don't necessarily announce it. We announce it as soon as we get into the onboarding phase, which is kind of where we are at with a couple of banks right now. And so just wanna make sure that well, I'll make sure that I understand that that answers your question.

[Hal Goetsch, Managing Director at B Riley Financial]

Okay. Thank you. Yeah. So that's that's some great context on on the heavy lift it does to get something live after a long discussion. Thank you.

[Sanjiv Das, Co-Founder & President at Pagaya Technologies]

The good news in that is that because the entry barriers are so high, once you're in, you're in.

[Hal Goetsch, Managing Director at B Riley Financial]

Yes.

[Operator]

This does conclude today's question and answer session. I will now turn the program back over to Gal for closing remarks.

[Gal Krubiner, Co-Founder, CEO & Director at Pagaya Technologies]

I just want to say thank you, everyone, for all the audience and all the investors supporting us throughout the years. And we are hoping to see you soon again in our next early quarter announcement. Thank you very much, everyone.

[Operator]

This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Participants

Executives

• Joshua Fagen, COO of Finance & Head - IR
• Gal Krubiner, Co-Founder, CEO & Director
• Sanjiv Das, Co-Founder & President
• Evangelos Perros, CFO

Analysts

• Pete Christiansen, Equity Research Analyst at Citi
• Kyle Joseph, Managing Director at Stephens Inc
• John Hecht, Managing Director at Jefferies
• Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)
• Hal Goetsch, Managing Director at B Riley Financial