Greetings. Welcome to Pagaya Technologies Ltd.'s Fourth Quarter Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. I will now turn the conference over to Josh Fagen, Head of Investor Relations and COO of Finance. Thank you. You may begin.

Thank you, and welcome to Pagaya Technologies Ltd.'s fourth quarter and Full Year 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 first quarter and full year of 2026. Our actual results may differ materially from those contemplated by 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. 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 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. 2025 was a hallmark year for Pagaya Technologies Ltd. In Q4, we achieved $34 million of GAAP net income and $80 million in operating cash flow. In the beginning of 2024, we set the goal to become GAAP net income and cash flow positive, which we continue to accelerate in the fourth quarter this year. For the full year, we achieved revenues of $1.3 billion, up 26% year over year, adjusted EBITDA of $371 million, up 76% year over year, and GAAP net income of $81 million, up $483 million versus 2024 with an EPS of $0.93. More importantly, these results and achievements were the outcome of growing and investing in our business across verticals, further expansion into first look and second look loans, and optimizing our unit economics and balance sheets. Before discussing our results and outlook, it is important to recall that 2025 was a year of discipline for Pagaya Technologies Ltd. We fine-tuned the foundations of our business and approach towards risk management and underwriting. In turn, this drives further consistency for our investors as we continue to serve our lending partner needs. All of that while being an enterprise focused on sustainable through-the-cycle growth. This discipline drove us to proactively take action later in the fourth quarter in face of persistent consumer uncertainty and trends. While our data does not indicate consumer deterioration, we have the privilege of being able to pivot our production to focus on prudent and disciplined credit performance across asset classes remain in line with our expectations. However, we pulled back our exposure to higher risk and less profitable credit deals which have potential for higher relative losses in a downside scenario. As we mature as a company, we are shifting more and more of our focus…

Thank you, Gal. As we wrap up the year with our fourth consecutive quarter of GAAP net income profitability and look ahead, our growth strategy is clear. Continue to build a sustainable and profitable business, that is increasingly embedded in the US financial ecosystem, Pagaya Technologies Ltd.'s growth continues to be driven by institutional-grade scaling of existing partner relationships as well as new partner additions. In fact, we just added three new partners to our platform. Achieve, GLS or Global Lending Services, and a leading fast-growth buy now pay later provider in North America. Our onboarding process is becoming industrial grade. Minimizing partner resource requirements. All new partners have a prebuilt API integration for the Pagaya Technologies Ltd. product suite. Prebuilt product APIs along with an eighteen-month joint roadmap will enable accelerated scaling. We also established long-term agreements with all of them that encompass volumes, fees, and all other protections. Our onboarding pipeline remains the busiest in Pagaya Technologies Ltd.'s history with demand and traction from leading lenders in the country across banks, fintechs, and other lenders. In fact, a lot of these leading lenders are proactively engaging with us on all which is a testament to Pagaya Technologies Ltd.'s relevance and strong product-driven value proposition. We are planning to announce some new names in the coming quarters. With our existing partners, we've been consistently delivering and diversifying across products, including the direct marketing engine, affiliate optimizer engine, and dual look. This diversification provides Pagaya Technologies Ltd. with new volume beyond decline monetization, increased value and stickiness with existing lending partners, and most importantly, provides future growth for Pagaya Technologies Ltd. without expanding our own risk appetite. Existing partners continue to actively adopt our products. In fact, our largest existing partners signed definitive term sheets and adopted the direct marketing…

Thanks, Sanjiv. I will start with the big picture. In 2025, we achieved several important milestones that position Pagaya Technologies Ltd. up for sustainable profitable growth. Over the last few years, we have been deliberately reshaping this company, strengthening the foundation tightening the operating model, improving the capital structure, and most importantly, building a much more resilient scalable, and differentiated technology platform in consumer lending. In this past year, we made sustained investment in our data and risk infrastructure combined with intentional decisions around risk management balance sheet optimization, and how we grow. The cumulative result of all that work became evident in the financials as we're exiting 2025 with four consecutive quarters of GAAP profitability. As it relates to our 2026 growth outlook, it reflects our long-term objective to grow the platform, while remaining disciplined and adaptive in how we manage risk. And even more so in an uncertain environment. We actively manage the business as a portfolio of products partners, and risk bands adjusting exposure as conditions evolve. When uncertainty increases, the appropriate response is to reduce exposure to higher risk segments. When conditions improve, we will reassess and reallocate accordingly. We remain focused on growth from increased product usage penetration and new partners. Let me walk through the numbers. For the full year 2025, we delivered $1.3 billion of revenue, up 26% year over year, $512 million of FRLPC, also up 26%, $371 million of adjusted EBITDA, up 76% and $81 million of GAAP net income representing a $483 million improvement versus last year. This reflects meaningful progress in profitability and operating leverage showing up at scale. For the fourth quarter specifically, revenue was $335 million FRAPC was $131 million, and adjusted EBITDA was $98 million. Representing a 29% margin. We reported GAAP net income of $34…

Thank you. We will now be conducting a question and answer session. 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. Our first question is from John Hecht with Jefferies. Please proceed.

Good morning, guys, and thanks for taking my questions. Maybe just go a little deeper, you know, in this concept of moving away from variable outcomes. Is it pricing in the market? Are you seeing something change with respect to payment trends? Or is this, you know, is it related to certain channel partners or certain types of products? Maybe just another layer of details on this.

Definitely, John. Appreciate the question. So before I'm going into the market dynamics, I want just to start with reiterating that that message that we gave from Pagaya Technologies Ltd.'s perspective has been the same for the last year. That we will always prioritize prudent risk management over short-term growth. And that principle that we have it you drew call it a year, a year and a half back, is now fully embedded in the way we run the company. Now the main reason for that is that we are a different type of animal. And we are not like many consumer finance platforms, that rely on marketing spend to generate volume. We don't need to grow at any cost to justify our expense base. And this structural advantage is obviously giving us more flexibility to be disciplined, especially when we see early signs of different market softness. Now when you think about that and the data we collect, it's really come to the core strengths of our platform, which is the ability to remove what we describe as tail risk or the reliability outcomes, as you pointed out, in real-time. Through the fact that we see signals across 30 plus different three asset classes, that are a lot of data that allows us to be proactive rather than to be reactive. Now the first point I would point out to your question is the market dynamics. So from a market perspective, there is just a lot of volatility. You don't need to look very hard to see that in the last period, mainly since Q4, the amount of volatility and declining rationality that we have seen has just reached a new level. Financial markets are demonstrating much volatility driven by geopolitical, private credit. You see notable shifts in sentiment.…

Yeah. And maybe, I'll jump in so as we know to try this this action translates somewhere between $100 million and $150 million volume cut in the fourth quarter. So effectively, that's a $1.5 billion of volume into 2026. And remember, we're more than offsetting that with new with the volume from new and new products. So, effectively, what we're doing is we're replacing higher credit risk volume with volume from new products and new partners that come in as a much more balanced risk. And if you think about I'm sure you're wondering, like, okay. To jump ahead, what's next for 2026? What does that mean for the guidance? What needs to happen for that to change? I would say, you know, these reflect we we are assuming this decision does not reverse. For purpose of our guidance in 2026. And, if we are right, we would not be chasing our tail for the year. And if we're wrong, will reverse. And in that case, we would have left some money on the table for a few quarters. So something has to really dramatically change really in 2020 to go below, the guidance that we have provided. The other thing I want to point out, though, and to close the question is, just just think about in the long term, there is no real impact in the long term of the business. We're still looking at the 15-20% growth of this business, especially if you start thinking about the annualization of the new volume that comes 2027 into 2028. And the last thing is obviously to keep in mind and let that sink in, is this is still a business that's generating a $100 million plus of GAAP net even in that scenario.

Okay. And then your follow-up question, which I think is somewhat similar to the last question in terms of where your focus is. It seems like there's more commentary about being focused on volume outside of decline monetization. Maybe talk about what products might have, like, increased momentum there and do the economics of those transactions differ from the decline monetization?

Sure, John. I'll take it. This is Sanjiv. Absolutely, I think you got it you hit the nail on its head with your question. So essentially, what's diversifying our products into the direct marketing engine that we've talked about before. We talked about the affiliate optimizer engine before. Of course, dual or concurrent look in auto where we look at loans at the same time that our partners do essentially first look. The dynamics of the direct marketing engine where we essentially help our partners grow their originations is very, very strong and very positive. And the performance is also substantially better. Same with the Affiliate Optimizer engine. We've essentially a business that has about a third of its dependency on Credit Karma and Experian continues to grow very, very strongly similar to what credit card businesses do. We are doing the same thing in personal loans. And we are substantially improving our partner presence with our existing partners in both of those both of those platforms. So that is something that has done extremely well for us. This is where the shift in the business is happening. And this is exactly where we are we are emphasizing that because of because of the performance of these products, the economics in these are substantially better. Than what we have traditionally provided because of better risk performance and better ability to charge better economics. So that's something that we definitely want to talk about. We have, as you know, 31 existing partners. Our top five partners are already on these new products. We have signed agreements on our prescreen product, which is our direct marketing product. As well as agreements on Credit Karma and the affiliate channels and we are starting to increase our our dual look performance very substantially. I do wanna emphasize one other thing that is extremely important, which is that we have also onboarded a record number of new partners. Carl talked about two that are onboarding right now. There's a third that's in process. And I fully expect that by the end of the second quarter, we will have onboarded maybe seven, potentially eight new partners, which will be like a record for Pagaya Technologies Ltd. What EP, Gal, and I are trying to do is emphasize is that we are focusing more on the shift in the business our existing 31 lenders to more profitable partners. We're also focusing substantially more on getting new partners, essentially demonstrating that we are becoming part of the financial ecosystem in US consumer lending, and we are managing the risk in a very thoughtful, responsible way as a growing franchise in the long term.

Great. Thank you very much.

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

Hey, good morning, guys. Thanks for taking my questions. Been a lot of headlines on private credit and the alts recently. Just wanted to get you guys gave an update on the funding side, of business, but, you know, how you're thinking about funding in into your 'twenty-six outlook given all the headlines we've seen in that world recently? Thanks.

Yes. Thanks, Kyle. Thanks for the question. I'll take it. I mean, look, the demand for our product and production is very robust. Look at Q4, a couple of the things that we announced, you know, a new deal with twenty-six North, which combined with the post deals generates more than $3 billion of capacity across these two products from in in from the revolver structure of these, the sale of the certificate in auto, new forward flows in auto, and POS, the sale of the certificate that we set on OWS. So generally very strong demand and validated by the execution that we're delivering for our investors. What I would say is if you step back, 2025 was a year where you had the very frothy sort of private credit market deploying capital. And now it's becoming a little bit more normal and much more disciplined and we're actually benefiting from that. I take it I would take it a step further and say that some of the actions that we took is actually fueling more demand for our product and production You look at the last ABS deal that we did a few days ago, market with $600 million of size. And it got upsized, by 30% and still oversubscribed. So I think what you see is the platforms that have a very robust and very diversified set of investors, working that they work with, like Pagaya Technologies Ltd., we're benefiting from all of this. We'll continue to obviously, continue to try and diversify our funding further. I know that is on our pipeline. So I think we feel very good about the funding environment relative to our positioning in the marketplace.

And maybe one thing to add is that a lot of the colleagues around, which obviously, impacting this the full funding world, but, like, it's much more around the corporate side of the world. And specifically around SaaS, etcetera, and companies that have been in the sphere of trying to grab market share there. I think on the consumer side, which is a byproduct of that, but, like, you don't see that level of volatility or or or kind of, like, changes in the last quarter, but it is calling for everything to be.

Great. Thank you. And then just a just a quick follow-up, a a modeling question. For you. On on the impairment side of things, you know, given the underwriting changes you guys have made, you know, what what sort of level should we expect, you know, to get to your your GAAP EPS guidance for '26? Thanks.

Yes. Thanks. No change on that. We're still guiding to the call it under scenario in our guidance of a $100 million to $150 million range for the year. Same as it was in 2025. So no changes there, given the, ongoing credit performance.

Great. Thanks for taking my questions.

Our next question is from Hal Ghosh with B. Riley Securities. Please proceed.

Hey. Thank you, guys. Got a question. Yeah. It's it's a bit counterintuitive given the macro trends we've seen. Over the year with falling inflation. Rates coming down, job market generally good, And I think EP mentioned, hey. You know? Your action in the last quarter was based on increased uncertainty not an increase in in credit losses. So just wanted to you know, could you give us any more qualitative or quantitative color on what you saw your partners doing in in in your in your response. It it just seemed a little counterintuitive. It seems like things are going in the consumer's direction to be better credits. And this is just a little bit it's a little bit need a little more flushing out. Thanks.

Hello. Hi. I think it's a it's a great observation. In fact, those are some of the countervailing forces that we had in our mind as well. At the end of Q4. On one hand, the macro was what it was in terms of inflation and rates coming down. As you pointed out, on the other hand, we're observing very specifically from our 31 lending partner platform was some of the partners that had been talking about credit expansion in the middle of the year were feeling less certain about credit expansion by the third, fourth, fourth, so the the sheer uncertainty in the market. And by that, as Gal outlined in his his opening comments, there's clearly know, geopolitical uncertainty, which was causing some uncertainty in the financial markets. There was there was some stuff going on at the at the tail end of certain certain businesses. Certain markets. And so we felt that the most responsible thing for us to do, and and that's the beauty of being a B2B2C market is that in some ways, we are shielded from the c. The b that's between the c and us responds or gives us signals that based on which we were able to take actions at what we thought would be the most marginal risk tier in the business. And it is this theme of uncertainty in the potent potential uncertainty in the credit markets that drives us to think, that we should be responsible and prudent rather than aggressive And but, you know, having said that, our ability to scale and be nimble is extremely high. So if things change in the market, which could change I mean, rates could change, the market could change by the second half of the year, But we all we need to do is basically prudently turn that back on And that's just the reason why our guidance range is is wide. But having said that, we as a management team have very, very high conviction that we will deliver profitable volumes, which is why our gas net income number, it will get. Don't even add anything to it. Or It's it's

I think the new one. Okay. One one point to take in mind, like, when you see losses, it's a little bit too late. And when you are taking a proactive before, that the way to be disciplined. So, like, you don't need always to look on the duration of your outcomes on the CNL to say, now I need to take action, and I think again, it's given where we stand and what we see. It's enough to actually say, you know what? I'm gonna be more conservative on that part of the spectrum, and that's it.

Okay. And unlike maybe 2023 when you're still building the relationships with the with the lending partners, Your your pullback in in the in some of those riskier tiers, that you know, your your your lending partners were were okay with that as well. You know, there wasn't a a relationship issue. Because I think was key in 2023, 2024 to build a platform build those relationships. In the in in this case, it was this kind of pullback is is is okay with the partner.

So a, it's a good question. B, it exactly what we told you that in 2022, it's a different situation. Yeah. Okay. And c, the answer is no. They appreciate that. From them, you know, 15% growth in the midpoint and a stronger Pagaya Technologies Ltd. is much better than 20, 25% growth. But then in three months, six months, nine months, we take it down all that. So stability is key for the actual gross number.

Yeah. That makes sense. Thank you.

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

Good morning. Thanks for taking my question. Could you just talk about like where you started to pull back? Like, was it a particular asset class, or was the actual taken across the board?

Hi, Reyna. It's primarily across like the entire portfolio. With a little bit more focus on the personal and auto side, because of the secular growth that we see in POS. And that was obviously the later part of the quarter, And, effectively, that's why you see that sort of as an exit rate change into 2026.

Understood. That's helpful. And then, just on your target four to 5%, FRLPC margin for '26, obviously, it's a very, wide, range that, you highlighted earlier. Can you just talk about, like, you know, how much conservatism is baked in at the low end and like, what are the puts and takes to get from the bottom to the top? And then if I can just sneak in one modeling question, if you can just tell us your assumption for 26 gap tax rate. Thank you.

Yeah. So as we have said before, as it relates to FRPC rate, appreciate obviously that is a wide range and we look to narrow that down going forward at some point. But ultimately, the way to think about think focus on FR LPC in dollar terms. So the more volume you get from your partners and newer products that come in at a lower rate, you may see sort of dilutive impact on the actual rate, but still coming in at higher volumes and therefore higher dollars, at the top line. And then vice versa, if there is potentially, let's call it, the slow run when you think about the mix of the portfolio, If you see a slow ramp for the new product, new partners, you may end up with call it, the low range of the of the rate of the guidance on volume, but obviously achieving a relatively higher FRPC. That's how a little bit how to think about that across the board. So it shouldn't materially change sort of the key dollar amounts. All the, on the, tax rate question, generally speaking, I would point to call it a 20% type of, tax rate. But, obviously, there's a lot of moving parts there because, obviously, the business is coming out from a period where it was two years ago losing money now into getting to capital and profitability. But that's what I would assume for, going forward.

Thanks for the color.

Our next question is from David Scharf with Citizens Capital Markets. Please proceed.

Hi, good morning. Thanks for taking my questions. Maybe just to sort of dive in a little more to Hal's question and and perhaps what your kind of behavior you're you're seeing from lending partners. You know, that this was you know, so far, an earning season where a lot of lenders you know, pretty much said, things are stable. There are no certainly no rush to widen their credit boxes, but there there certainly weren't indications that things were tightening either. You know, just just so we understand, did you start to see by the end of the quarter you know, more evidence of of turndowns, of of loan application by your partners that may have been approved by your partners six months earlier? Is that how we should sort of interpret the behavioral changes you're seeing?

I think the best way to look on it is many more expansion that were in play. Or in plan became not in play. So it's not to say that people are not saying, hey, we are going to continue to grow, but it has been shifted much more towards how do we do more asset classes, how do we get more to our customers rather than oh, the pricing are high and just wanna make it more aggressive. Or the losses are too low, and therefore, we're approve more type of population. So you definitely see a difference And and by the way, I think you will see on the gross numbers of all of the reporting companies. We talked about that the growth going forward from top line is not what it used to be. Last year, especially on the personal loan and other side of the business.

Got it. No. That that's helpful. I mean, obviously, you're as you noted, your your business is in a unique position to kinda see the activities of multiple lenders as opposed to just observing your own portfolio. So that that's helpful. And then just as a follow-up, should we think about maybe the recalibration on credit extending to in reducing tail risk, does that extend to how you approach your discretionary investing in securities in addition to originations or loan approvals?

Dave. This CP. No, I think these are two different aspects, right, two sides of the network. One doesn't necessarily tie to the other.

Got it. Understood. Thank you.

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

So I want to thank everyone for joining us today. As you can tell, our results demonstrate the power of the B2B2C model we have worked so hard to build at Pagaya Technologies Ltd. Increasingly diversified growth, with an underlinking focus on disciplined underwriting along with a growing list of partners and funding mechanism that keeps evolving, and improving. I look forward for 2026 and to share journey with you as we grow Pagaya Technologies Ltd. to a key partner for all US consumer lending solutions, continuingly optimizing our product suite value proposition to maximize the value we provide to our partners. We remain laser focused on the long-term potential of Pagaya Technologies Ltd. as we penetrate this enormous market opportunity a market that we created and that we lead. Thank you very much for your time today.

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