Greetings. Welcome to Pagaya Technologies Ltd. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to Josh Fagen, Head of Investor Relations. Thank you. You may begin.

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 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 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. 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 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…

Thank you, Gal. 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 our partners 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…

Thank you, Sanjeev. 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 fund the 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%…

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.

Hey guys, congratulations on a good quarter. Pete, you gave a lot of detail around credit, but I'm wondering if we could just, you know, step back, maybe go all give a 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.

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 were 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, if you want to add anything.

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 phenomena as 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 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.

Great. Thank you guys very much.

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

Good morning. Thanks for the question. Nice performance here. Gal, EP 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.

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 s 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.

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.

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.

Great. Thank you.

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

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.

Yes. Definitely, Hal. Thank you very much for the question. So I will start with a little bit high level and then Sanjiv 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 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 to speak more specific, 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, maybe you want to share a little bit about the specifics of the partners?

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, Carlos, you and I have talked about provides squarely a B2B business model. And Hal, 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 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 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 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.

Wait. I can ask one follow-up. Mentioned most amount of partners in the queue. But I think, Sanjay, 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 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.

Yeah. So you're right. So let me answer your tech question first. Again, I'll go back to what Gal said. So what's happened, Hal, 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 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 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, Hal, 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.

Thank you, Sanjiv. Very helpful.

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

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.

Thank you for your question. This is Sanjeev. So as I think both EP and Gal mentioned, consumer performance has been very stable. You know, as EP said, our credit performance is in line with our expectations, and then so be 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 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.

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 was 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.

Very helpful. Thank you.

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

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?

Hi, Kyle. It's Gal 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…

No. I just reinforce what you just said, Gal, 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, 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 monologues. Very successful POS mono lines. So the focus on the existing business itself I think, demands a lot of our attention.

Great. Thanks for taking my question.

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.

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 the 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, Shannon.

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