Pagaya Technologies Ltd. Q1 FY2024 earnings call

Key Points from Gal Krubiner

• Proud of first quarter results, with record $2 billion in funding, added Elavon and 18 funding investors, network connected to 30 lenders and 116 funding partners.
• Financial results exceeded outlook with network volume $2.4B, total revenues $245M, adjusted EBITDA $40M, FRLPC up 84% y/y, and positive GAAP operating income.

From Sanjiv Das

• Reorganized operating business into growth and monetization areas to increase capital efficiency and margin. Growth team focuses on adding new partners, monetization team on maximizing revenue and efficient capital allocation.
• Credit performance strong with low delinquencies in 2023 vintages, outperforming market in PL and auto.

From Evangelos Perros

• Detailed financials including network volume $2.4B, total revenue $245M, adjusted EBITDA $40M. Discussed capital efficiency strategies like diversifying funding with whole loan sales and forward flow, aiming for cash flow positive by early 2025.

In the first quarter, Pagaya achieved record-breaking financial results. Network volume reached $2.4 billion, total revenues were $245 million, and adjusted EBITDA was $40 million. Fee Revenue Less Production Costs (FRLPC) was up 84% year-over-year to $92 million, with a FRLPC margin extending 109 basis points year-over-year to 3.8%. Personal loans were the largest driver of network volume, accounting for 55% of the total. The average personal loan FRLPC margin more than doubled year-over-year to 6%.

Second Quarter 2024

• Expected network volume to range between $2.2 billion and $2.4 billion.
• Total revenue and other income expected to range between $235 million and $245 million.
• Adjusted EBITDA expected to range between $40 million and $45 million.

Full Year 2024

• Expected network volume to range between $9 billion and $10.5 billion.
• Total revenue and other income expected to range between $925 million and $1.05 billion.
• Adjusted EBITDA expected to range between $150 million and $190 million.

Q: John Hecht asked about the cadence of $1 billion flow arrangements.

A: Gal Krubiner responded that they are in negotiations with strong connectivity to asset managers and hope to announce near-term.

Q: Joseph Vafi inquired about underwriting and network volume vs application flow.

A: Gal Krubiner explained disciplined approach focusing on higher unit economics channels, and Evangelos Perros added on higher quality flow leading to inverse ratio of application flow to network volume.

Q: Michael Legg asked about cost of capital and loan portfolio.

A: Gal Krubiner said cost of capital is below 7% and the portfolio mix is shifting to higher quality debt, improving P&L and balance sheet.

Q: David Scharf asked about risk retention timeframe and Elavon.

A: Evangelos Perros stated they are progressing with funding diversifications, and Sanjiv Das mentioned Elavon is moving towards POS lending with Pagaya's solution.

Q: Harold Goetsch inquired about automotive partners.

A: Gal Krubiner discussed auto rollout progress on Ally and other partners, and capital allocation based on unit economics.

Q: Steven Kwok asked about unit economics improvement.

A: Evangelos Perros and Sanjiv Das mentioned ongoing efforts to improve fees and FRLPC through disciplined unit economics strategies and pricing power with top accounts.