Pagaya Technologies Q4 Earnings Call Highlights

Key Points

• Pagaya finished 2025 profitable and cash-generative, logging its fourth consecutive quarter of GAAP net income (Q4 GAAP net income of $34M, $80M operating cash flow) and full-year $1.3B revenue with $371M adjusted EBITDA.
• Management tightened risk posture to cut tail risk, trimming about $100M–$150M of volume (exit-rate monthly reduction) while maintaining profitability targets and embedding a governance impairment range of $100M–$150M into 2026 planning; FY2026 guidance targets $1.4B–$1.575B revenue and $410M–$460M adjusted EBITDA.
• Funding and product diversification accelerated with forward-flow deals (e.g., Castlelake, Sound Point), $2.9B issued across seven ABS in Q4 and roughly $3B of revolving ABS capacity, while onboarding new partners (Achieve, GLS, a major BNPL) and expanding products beyond decline monetization (prescreen, affiliate optimizer, dual-look).

Pagaya Technologies NASDAQ: PGY reported fourth quarter and full-year 2025 results that capped what management described as a year of “discipline,” highlighting a shift toward sustained profitability, tighter risk posture, and a growing set of products and funding structures intended to reduce volatility through the cycle.

2025 profitability and cash flow milestones

CEO Gal Krubiner said the company ended 2025 with its fourth consecutive quarter of GAAP net income profitability. In the fourth quarter, Pagaya posted $34 million of GAAP net income and $80 million in operating cash flow. For the full year, management reported $1.3 billion in revenue (up 26% year-over-year), $371 million of adjusted EBITDA (up 76%), and $81 million of GAAP net income, which Krubiner said was an improvement of $483 million versus 2024, with EPS of $0.93.

CFO Evangelos Perros said the financial results reflected work over multiple years to strengthen Pagaya’s operating model, capital structure, and data and risk infrastructure. He added that as uncertainty increases, the company is designed to reduce exposure to higher-risk segments, even if losses have not yet materialized.

Quarterly metrics: revenue growth outpacing volume

Perros reported fourth quarter revenue of $335 million, with Fee Revenue Less Production Costs (FRLPC) of $131 million and adjusted EBITDA of $98 million, representing a 29% adjusted EBITDA margin. He said FRLPC was 4.9% of network volume, which management framed as strong monetization while remaining disciplined on risk.

Fourth quarter network volume was $2.7 billion, up 3% year-over-year. Perros noted that personal loan, auto, and point-of-sale (POS) volumes combined grew at a double-digit rate, partially offset by zero SFR volume during the quarter. Personal loans represented about 65% of quarterly volume and grew 10% year-over-year, while auto and POS represented 19% and 16%, respectively.

On the revenue mix, Perros said fee revenue rose 16% to $321 million and represented 96% of total revenue, while interest and investment income increased to $14 million in the quarter (about $40 million for the year). He emphasized that revenue growth outpaced volume growth, which he attributed to improved monetization and higher revenue and profit per unit of volume and risk.

Risk posture: reducing “tail risk” and higher-volatility segments

Management repeatedly returned to a late-quarter decision to tighten production in areas that remained profitable but could have more variable outcomes in a downside environment. Krubiner said the company did not see consumer deterioration in its data, but opted to pull back exposure to higher-risk credit yields to reduce potential tail risk.

Perros quantified the action, saying the decision reduced fourth quarter volume by approximately $100 million to $150 million without impacting profitability targets for the quarter. He also described the change as a dynamic reallocation away from higher-risk segments, with an intent to redeploy into volume from new application flow and newer products.

In the Q&A, Krubiner said Pagaya’s ability to act quickly comes from seeing signals across 30+ lenders and three asset classes, allowing it to be proactive rather than reactive. He cited market volatility and changing sentiment as reasons to reassess risk appetite, while noting the company did not see specific deterioration in measures such as cumulative net losses (CNLs) or prepayments.

President Sanjiv Das and Krubiner said they observed a shift in lending partner behavior over the course of the year, with partners moving from a more expansion-oriented posture earlier to a more cautious stance later. Management also indicated partners value stability; Krubiner said partners would prefer “15% growth in the midpoint and a stronger Pagaya” versus faster growth followed by a pullback.

Asked where the pullback occurred, management said it was across the portfolio, with more focus on personal and auto, noting POS has secular growth that Pagaya continues to emphasize.

Product and partner expansion, with emphasis beyond “decline monetization”

Pagaya highlighted new partner additions and expanding product adoption within existing partners. Krubiner said the company onboarded Achieve, Global Lending Services (GLS), and a “leading fast-growing buy-now-pay-later provider” in North America, and expects additional launches in coming quarters. Das described onboarding as becoming “industrial-grade,” citing pre-built API integration for the product suite and an 18-month joint roadmap to accelerate scaling.

Management also emphasized growth from products beyond its traditional “decline monetization” model, including:

• Direct Marketing Engine / prescreen, which Das said helps partners grow originations and has shown substantially better performance and economics.
• Affiliate Optimizer Engine, including expanding presence on platforms such as Credit Karma and Experian Activate. Das noted LendingClub was onboarded onto Credit Karma to present personal loan offers to consumers in partnership with Pagaya.
• Dual-look/concurrent look in auto, which management described as evaluating loans at the same time as partners conduct first look.

Krubiner and Das also pointed to long-term agreements with partners, including agreements with two of Pagaya’s largest partners in auto and personal loans, as a way to create more stability through fee and application-flow commitments.

Funding and capital structure: forward flows and revolving ABS capacity

On funding, management said it continues to diversify away from reliance on pre-funded ABS structures toward more committed capital arrangements. Das said the company expanded forward-flow agreements across all three core asset classes, including inaugural agreements with Castlelake (auto) and Sound Point (POS), and broadened its Castlelake agreement to cover both personal loans and auto.

Perros said Pagaya issued $2.9 billion across seven ABS transactions in the fourth quarter, and noted an $800 million ABS deal closed the prior week that he said was oversubscribed after being upsized from $600 million. Management also highlighted revolving ABS structures, including a $350 million revolving personal loan ABS with 26North. Combined with two POS ABS revolvers, Pagaya said it has roughly $3 billion of revolving capacity across those transactions.

Perros discussed “fees from capital markets execution,” which he said were negative $6 million in the quarter and negative $21 million for the year, reflecting pricing agreements with forward-flow partners and ABS risk-adjusted pricing. He said negative fees can reflect additional cash contributions into securitization structures to support against potential future credit losses and reduce earnings volatility tied to certificate investments held on the balance sheet.

Pagaya ended the quarter with about $288 million in cash and cash equivalents and $945 million in investments, loans, and securities. Perros said the company repurchased $7 million of corporate notes in December at an approximate 12.5% discount to par and repurchased an additional $7 million the prior week.

Credit performance and outlook for 2026

Perros said credit performance across personal loan, auto, and POS remained in line with expectations and within risk tolerance. He cited comparative vintage metrics, including that personal loan cumulative net losses for the second half of 2024 through first half of 2025 vintages were running 30%–40% better than 2021 peak levels, and auto CNLs were running 50%–70% better than 2022 vintages. For auto, he noted 60-plus delinquencies were higher than 2024 following the year’s pullback and broadly in line with 2023, while recoveries and roll rates were better than both 2023 and 2024.

Looking ahead, Perros said guidance reflects continued caution due to macro and credit uncertainty. He reiterated that guidance includes a governance range of $100 million–$150 million of rolling 12-month forward credit-related impairments, which he said is not a forecast of losses but an embedded risk framework. In Q&A, management said there was no change to that impairment range.

For first quarter 2026, the company guided to:

• Network volume: $2.5 billion to $2.7 billion
• Total revenue and other income: $315 million to $335 million
• Adjusted EBITDA: $80 million to $95 million
• GAAP net income: $15 million to $35 million

For the full year 2026, Pagaya guided to:

• Network volume: $11.25 billion to $13.0 billion
• Total revenue and other income: $1.4 billion to $1.575 billion
• Adjusted EBITDA: $410 million to $460 million
• GAAP net income: $100 million to $150 million

Perros said both quarterly and full-year guidance reflect the full impact of the fourth quarter’s exit-rate volume reduction of roughly $100 million–$150 million per month. He also said 2026 FRLPC margin is expected to be 4%–5% and to “revert lower within that range” from current levels due to POS expansion, new partner contribution, and funding mix. In response to a question on the tax rate assumption, Perros suggested modeling around a 20% tax rate, while noting moving parts as the business transitions from prior losses to profitability.

About Pagaya Technologies NASDAQ: PGY

Pagaya Technologies is a financial technology company that applies artificial intelligence and machine learning to the credit and asset management industries. Through its proprietary data-driven platform, Pagaya analyzes vast datasets from consumer credit portfolios to build predictive risk models, enabling institutional investors to gain access to alternative credit products. The company’s solutions streamline underwriting, optimize portfolio construction and facilitate the efficient securitization of consumer loans, credit card receivables and other asset classes.

Founded in 2016 and headquartered in New York, Pagaya has expanded its operations to serve financial institutions and asset managers primarily in the United States.

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