Pagaya Technologies Ltd. Q1 FY2025 earnings call

• Performance: Achieved positive GAAP net income of $8 million in Q1, ahead of expectations, with revenue up 18% and FRLPC up 26%. Adjusted EBITDA doubled year-over-year. - Diversification: More lending partners contributing to volume, with 2x as many lenders having at least $100 million in volume vs. a year ago. Product types and selection expanded. - Product progress: Prescreen solution enables proactive customer engagement with frictionless lending via data analytics. Marketing acquisition engine drives new customers to lending partners via affiliate channels. Auto loan volume up nearly 50% sequentially, annualized to over $1.1 billion. POS business has strong demand with ongoing investment and ramp.

Pagaya Technologies saw revenue grow 18% year-over-year, reaching an annualized run rate of nearly $1.2 billion. Fee revenue less production costs (FRLPC) grew by 26% to an annualized run rate of over $460 million. Adjusted EBITDA was up 100% annually to approximately $320 million. GAAP net income was positive at $8 million this quarter. Network volume was $2.4 billion, in line with year-ago levels, slightly below the guidance range of $2.5 billion to $2.7 billion primarily due to lower SFR volume. Excluding SFR, volume grew 26% year-over-year and 6% sequentially. Personal Loans volume grew 17% year-over-year, with FRLPC as a percent of network volume rising 100 basis points year-over-year to 4.8% (5.2% excluding SFR impact). Auto and POS products continued to grow.

For Q2 2025, expects network volume in the range of $2.3 billion to $2.5 billion, total revenue and other income in the range of $290 million to $310 million, and adjusted EBITDA in the range of $75 million to $90 million, with GAAP net income expected to be breakeven to $10 million. For full-year 2025, expects network volume in the range of $9.5 billion to $11 billion, FRLPC to grow to range between 4% and 5%, expenses to reflect discipline and operating leverage, credit-related impairments in line with scenarios, interest expense to remain similar, and stock-based comp to range between $15 million and $20 million.

• Macro and geopolitical uncertainty, including potential impacts on consumer credit behavior and market volatility. - Market fluctuations affecting funding costs and fair value of assets. - Uncertainty regarding inflation and unemployment and their potential effects on lending volumes and credit performance.

Q: Are expense levels sustainable?

A: Evangelos said current expense levels are sustainable, with operating leverage expected as the business grows on the top line and expenses held reasonably flat. The operating leverage is a key differentiator, and the business is positioned to grow with built infrastructure and disciplined capital allocation.

Q: What's the status of funding markets?

A: Gal noted ABS market has short-term volatility, but Pagaya accounts for this in asset pricing. Retention levels are a buffer, and there is ongoing demand in the market despite short-term fluctuations. The prefunding nature of ABS deals helps mitigate immediate market impact.