Core Insights - Pagaya Technologies reported strong financial results for Q4 2025, with revenue of $335 million and adjusted EBITDA of $98 million, reflecting a 29% margin [1][3][4] - The company emphasized a disciplined approach towards profitability and risk management, achieving its fourth consecutive quarter of GAAP net income [3][4][7] Financial Performance - Q4 revenue was $335 million, with Fee Revenue Less Production Costs (FRLPC) at $131 million, representing 4.9% of network volume [1][4] - For the full year, Pagaya achieved $1.3 billion in revenue, a 26% increase year-over-year, and $371 million in adjusted EBITDA, up 76% [3][4] - GAAP net income for the year was $81 million, with earnings per share (EPS) of $0.93, marking a significant improvement from the previous year [3][4] Risk Management - The company has tightened its risk posture, reducing exposure to higher-risk segments, which led to a volume reduction of approximately $100 million to $150 million in Q4 without impacting profitability [6][10][11] - Management noted that credit performance across personal loans, auto, and point-of-sale (POS) remained within expectations and risk tolerance [23] Product and Funding Diversification - Pagaya expanded its funding and product offerings, issuing $2.9 billion across seven ABS transactions in Q4 and establishing new partnerships [5][19] - The company is diversifying its capital structure away from reliance on pre-funded ABS structures towards more committed capital arrangements [18] Future Guidance - For FY 2026, Pagaya targets revenue between $1.4 billion and $1.575 billion, with adjusted EBITDA guidance of $410 million to $460 million [6][27] - The company anticipates a FRLPC margin of 4% to 5% for 2026, with expectations of a reduction due to POS expansion and new partner contributions [25]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved GAAP net income of $34 million and operating cash flow of $80 million, marking a significant turnaround from a loss of $238 million in the previous year [6][27] - For the full year 2025, revenues reached $1.3 billion, up 26% year-over-year, with adjusted EBITDA of $371 million, up 76% year-over-year, and GAAP net income of $81 million, a $483 million improvement compared to 2024 [6][21] - The fourth quarter revenue was $335 million, with a 29% adjusted EBITDA margin, and FRLPC (Fee Revenue Less Production Costs) was $131 million, up 12% year-over-year [22][24] Business Line Data and Key Metrics Changes - Personal loans accounted for approximately 65% of total network volume, growing 10% year-over-year, while auto and point-of-sale (POS) represented 19% and 16% of quarterly network volume, respectively [22] - The company reported a network volume of $2.7 billion for Q4, up 3% year-over-year, with full-year network volume at $10.5 billion, up 9% [22][23] Market Data and Key Metrics Changes - The company noted a proactive tightening of production in certain areas to mitigate higher variability of credit outcomes, which resulted in a reduction of approximately $100 million-$150 million in fourth quarter volume without impacting profitability targets [23][24] - The company has diversified its funding sources, creating almost $3 billion of revolving capacity through ABS structures across point-of-sale and personal loans [12][30] Company Strategy and Development Direction - The company is focused on sustainable, profitable growth, emphasizing prudent risk management over short-term gains, and aims to build a B2B2C platform that integrates deeply into the U.S. financial ecosystem [8][13] - Future growth is expected to come from onboarding new partners and deepening existing relationships, with a robust pipeline of new partner launches anticipated [9][14] Management's Comments on Operating Environment and Future Outlook - Management highlighted that while consumer performance remains strong, there is increased uncertainty in the market, prompting a cautious approach to credit exposure [18][66] - The guidance for 2026 reflects a cautious outlook, with expected GAAP net income ranging from $100 million to $150 million, assuming current market conditions persist [35][61] Other Important Information - The company has established long-term agreements with major partners, enhancing business stability and alignment [10][14] - The company reported a significant improvement in operating leverage, with core operating expenses declining to 36% of FRLPC, a 13-point improvement year-over-year [26] Q&A Session Summary Question: Can you elaborate on the decision to move away from variable outcomes? - Management emphasized the importance of prudent risk management over short-term growth, noting that they are not reliant on marketing spend to generate volume, allowing for more flexibility in decision-making [37][40] Question: How is the funding environment looking for 2026? - Management indicated strong demand for their products and noted that the funding environment is becoming more disciplined, which is beneficial for the company [58][59] Question: What specific actions were taken to pull back on risk? - The company primarily pulled back across the entire portfolio, with a focus on personal and auto loans due to the growth seen in POS [73]

Financial Data and Key Metrics Changes - For the full year 2025, the company achieved revenues of $1.3 billion, up 26% year-over-year, and adjusted EBITDA of $371 million, up 76% year-over-year [6][23] - GAAP net income for 2025 was $81 million, a significant improvement of $483 million compared to a loss in 2024, with an EPS of $0.93 [6][30] - In Q4 2025, the company reported GAAP net income of $34 million and operating cash flow of $80 million [6][24] Business Line Data and Key Metrics Changes - Personal loans accounted for approximately 65% of total network volume, growing 10% year-over-year, while auto and point-of-sale (POS) represented 19% and 16% respectively [24] - Network volume for Q4 was $2.7 billion, up 3% year-over-year, with full-year network volume reaching $10.5 billion, up 9% [24][25] - Fee revenue in Q4 was $321 million, up 16% year-over-year, making up 96% of total revenue [26] Market Data and Key Metrics Changes - The company has diversified its funding sources, creating almost $3 billion of revolving capacity through ABS structures across point-of-sale and personal loans [12][33] - The capital markets environment remains supportive, with strong demand from insurance funds and traditional asset managers [18][60] Company Strategy and Development Direction - The company is focused on sustainable and profitable growth, emphasizing prudent risk management over short-term volume expansion [7][13] - Future growth will come from deepening existing partner relationships and onboarding new partners, with a robust pipeline of new partnerships [9][14] - The strategy includes reducing exposure to higher-risk segments while optimizing the balance sheet and operating costs [12][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while consumer performance remains strong, there is increased uncertainty in the market, prompting a cautious approach to risk management [7][70] - The guidance for 2026 reflects a cautious outlook, with expected GAAP net income ranging from $100 million to $150 million, assuming current market conditions persist [39][62] Other Important Information - The company has established long-term agreements with major partners to stabilize business and align interests [10][14] - Adjusted EBITDA margin for Q4 was 29%, with core operating expenses declining to 36% of FRLPC, a 13-point improvement year-over-year [29] Q&A Session Summary Question: Can you elaborate on the decision to move away from variable outcomes? - Management emphasized the importance of prudent risk management over short-term growth, highlighting the ability to proactively manage risk based on data from multiple lenders [41][42] Question: What specific actions were taken in response to market conditions? - The company pulled back on higher-risk segments across the portfolio, particularly in personal and auto loans, to mitigate potential downside risks [78] Question: How does the company view the current funding environment? - The demand for the company's products remains robust, with recent ABS deals being oversubscribed, indicating strong investor interest [60][61]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved GAAP net income of $34 million and operating cash flow of $80 million, marking a significant turnaround from a loss of $238 million in the previous year [5][30] - For the full year 2025, revenues reached $1.3 billion, up 26% year-over-year, with adjusted EBITDA of $371 million, up 76% year-over-year, and GAAP net income of $81 million, an improvement of $483 million compared to 2024 [5][23][30] - The fourth quarter revenue was $335 million, with a 29% adjusted EBITDA margin, and FRLPC (Fee Revenue Less Production Costs) was $131 million, up 12% year-over-year [24][26] Business Line Data and Key Metrics Changes - Personal loans accounted for approximately 65% of total network volume, growing 10% year-over-year, while auto and point-of-sale (POS) represented 19% and 16% of quarterly network volume, respectively [24] - The company reported a total network volume of $2.7 billion for Q4, up 3% year-over-year, with full-year network volume at $10.5 billion, up 9% [24][25] Market Data and Key Metrics Changes - The company has diversified its funding sources, creating almost $3 billion of revolving capacity through ABS (Asset-Backed Securities) structures across personal loans and point-of-sale [12][33] - The capital markets environment remains supportive, with strong demand from insurance funds and traditional asset managers, despite increased volatility in private credit [19][55] Company Strategy and Development Direction - The company is focused on sustainable, profitable growth, emphasizing prudent risk management over short-term gains, and aims to build a B2B2C platform that integrates into the U.S. financial ecosystem [6][13][14] - Future growth is expected to come from deepening existing partner relationships and onboarding new partners, with a robust pipeline of new partnerships [9][10][14] Management's Comments on Operating Environment and Future Outlook - Management noted that while consumer performance remains strong, there is increased uncertainty in the market, prompting a cautious approach to credit exposure [6][19][60] - The guidance for 2026 reflects a cautious outlook, with expected GAAP net income ranging from $100 million to $150 million, and a focus on maintaining profitability while managing risk [39][46] Other Important Information - The company has made significant investments in data and risk infrastructure, enhancing its ability to manage credit risk effectively [21][22] - The fourth quarter saw proactive steps taken to reduce exposure to higher-risk segments, which impacted network volumes but did not affect profitability targets [20][25] Q&A Session Summary Question: Can you elaborate on the decision to move away from variable outcomes? - Management emphasized the importance of prudent risk management over short-term growth, highlighting the ability to proactively manage risk based on data from multiple lenders [39][40] Question: How is the funding environment affecting your outlook for 2026? - The company noted strong demand for its products and a more disciplined private credit market, which is beneficial for its funding strategy [55] Question: What specific actions were taken to pull back on credit exposure? - The company indicated that the pullback was across the entire portfolio, with a focus on personal and auto loans due to the growth seen in POS [63]

PAGAYA TECHNOLOGIES LTD. 4Q'25 Earnings Supplement February 9, 2026 1 Forward Looking Statements and Non-GAAP Information 01 Financial Metrics Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the Pagaya website, or from Pagaya Investor Relations. Any forward-looking statement made in this presentation speaks only as of the date on which it is made. The Company assumes no obligation to update or revise any forward-look ...

Core Insights - Pagaya Technologies Ltd. reported strong financial results for Q4 and the full year 2025, highlighting significant growth in net income and revenue, driven by strategic investments and improved operational efficiency [2][5][6]. Q4 2025 Highlights - Record GAAP net income attributable to Pagaya shareholders reached $34 million, an increase of $272 million year-over-year, surpassing the outlook of $25 million to $35 million [5]. - Network volume was $2.7 billion, a 3% increase year-over-year, or 34% excluding SFR [5]. - Total revenue and other income amounted to $335 million, reflecting a 20% year-over-year increase [5]. - Revenue from fees less production costs (FRLPC) was $131 million, up 12% year-over-year, driven by improved performance in Personal Loan and Auto verticals [5]. - Adjusted EBITDA for Q4 was $98 million, an increase of $34 million compared to the prior year [5]. Full Year 2025 Highlights - Full-year GAAP net income attributable to Pagaya shareholders was $81 million, up $483 million year-over-year, exceeding the outlook of $72 million to $82 million [5]. - Network volume for the year reached $10.5 billion, a 9% increase year-over-year [5]. - Total revenue and other income for the year was $1.3 billion, a 26% increase year-over-year [5]. - FRLPC for the year was $512 million, a 26% increase year-over-year [5]. - Adjusted EBITDA for the full year was $371 million, an increase of $161 million compared to the previous year [5]. Future Outlook - For Q1 2026, the company expects network volume to be between $2.5 billion and $2.7 billion, with total revenue projected between $315 million and $335 million [6]. - For the full year 2026, network volume is expected to be between $11.25 billion and $13 billion, with total revenue projected between $1.4 billion and $1.575 billion [7].

Financial Performance - Q4 network volume reached $2.7 billion, growing 3% year-over-year and 34% excluding SFR, surpassing the outlook of $2.65 - $2.9 billion[3] - Total revenue and other income for Q4 was $335 million, a 20% year-over-year increase, exceeding the forecast of $333 - $358 million[4] - Adjusted EBITDA for Q4 was $98 million, reflecting a 53% year-over-year growth and an adjusted EBITDA margin increase of over 6 points to 29%[6] - GAAP net income for Q4 was $34 million, representing a 10% margin and a significant increase of $272 million year-over-year, driven by fee revenue growth[7] - The company achieved a record full-year revenue of $1.3 billion, growing 26% year-over-year, with adjusted EBITDA for the year at $371 million, up 76%[15] - Full year 2025 revenue reached $1,301 million, up 26% year-over-year, with adjusted EBITDA of $371 million, reflecting a 76% increase compared to 2024[52] - Total revenue for Q4 2025 reached $334.8 million, a 19.8% increase from $279.4 million in Q4 2024[101] - Net income attributable to Pagaya Technologies Ltd. was $34.3 million in Q4 2025, compared to a net loss of $237.9 million in Q4 2024[101] - Operating income for the year ended December 31, 2025, was $263.8 million, significantly up from $66.8 million in 2024[101] - Non-GAAP adjusted net income for the year was $275.3 million, compared to $66.9 million in 2024, reflecting a substantial increase[102] Funding and Investments - The company issued $2.9 billion in ABS across 7 transactions in Q4, enhancing funding capacity and diversifying funding sources[9] - The company diversified its funding structure, with about two-thirds of personal loan business funded by ABS in 2025, compared to almost entirely in 2024[41] - The company announced a $350 million revolving Personal Loans ABS transaction, providing up to approximately $3 billion of funding capacity[79] - Discretionary investments in loans and securities totaled approximately $171 million during 2025, enhancing liquidity and interest income[81] - The company is leveraging its capital structure to make opportunistic investments, with one-third of Investments in Loans and Securities being discretionary[81] Operational Efficiency - Approximately half of Q4 originations came from outside decline monetization, indicating a successful conversion of a core Personal Loan partner into a multi-product relationship[13] - The onboarding pipeline is the most robust in the company's history, with three new partners launched and multiple additional partners expected to go live in the coming quarters[36] - The company signed several long-term agreements with leading partners to enhance application flow size and quality, which is expected to unlock accelerated growth[40] - The company experienced a significant reduction in general and administrative expenses, decreasing from $240.8 million in 2024 to $159.6 million in 2025[101] - Core operating expenses as a percentage of FRLPC improved to 36% in 2025 from 56% in 2024, demonstrating enhanced operational efficiency[109] Future Outlook - For 2026, the company anticipates more measured volume and revenue growth, prioritizing credit risk over market share gains[27] - The company expects 2026 revenue to be between $11.25 billion and $13.0 billion, supported by new products and partner growth[58] - For Q1 2026, the company expects Network Volume between $2.5 billion and $2.7 billion, and Total Revenue & Other Income between $315 million and $335 million[87] - The full-year 2026 outlook includes Total Revenue & Other Income projected between $1.4 billion and $1.575 billion, with GAAP Net Income expected between $100 million and $150 million[87] - The FRLPC margin is expected to be between 4.0% and 5.0% for the year, reflecting potential credit-related impairments[86] Credit Performance - Credit performance remains stable, with cumulative net losses for personal loans trending approximately 30% - 40% lower than peak levels in Q4 2021[70] Shareholder Returns - The company repurchased approximately $7 million of its 8.875% senior unsecured notes at a discount of approximately 12.5% to par[82] - The weighted average shares outstanding for basic shares increased to 81.9 million in 2025 from 74.3 million in 2024[102]

Core Insights - Pagaya Technologies (PGY) utilizes AI for decision-making and underwriting, enhancing credit approval efficiency for banks and fintech partners, leading to increased approval rates and credit volume [1][11] - The company experienced a significant turnaround in 2025, achieving three consecutive quarters of positive net income after previous losses, indicating improved fundamentals and profitability [2][11] - Pagaya's diversified model includes 145 institutional funding partners, allowing multiple revenue streams and reducing reliance on any single lender or product [4][11] Business Model - Pagaya does not retain most loans on its balance sheet; instead, it securitizes them, transferring credit risk to institutional investors, which supports a capital-light and scalable business model [5][11] - The company benefits from a data flywheel effect, where increased loan applications enhance the AI model's accuracy and performance [5][11] Competitive Landscape - Upstart Holdings, Inc. (UPST) operates similarly as an AI-powered lending marketplace but temporarily holds loans on its balance sheet, contrasting with Pagaya's capital-light approach [6][7] - LendingTree (TREE) functions as a financial services marketplace, matching consumers with providers without underwriting or holding loans, focusing on a fee-based model [8][9] Financial Performance - Pagaya's stock has increased by 33.2% over the past year, outperforming the industry's decline of 23.9% [10][11] - The current price-to-sales ratio for PGY is 0.84X, significantly below the industry average of 3.02X, indicating potential undervaluation [12][11] - The Zacks Consensus Estimate for PGY's earnings is $3.10 for 2025 and $3.41 for 2026, reflecting year-over-year growth of 273.5% and 10%, respectively [13][16]

Core Viewpoint - Pagaya Technologies Ltd. (PGY) is identified as a top small-cap investment opportunity for 2026, despite its stock being down 63% from its 52-week high [1] Company Summary - Pagaya Technologies is set to report its Q4 earnings next week, indicating an upcoming event that may impact its stock performance [1] - The company is currently experiencing significant stock price depreciation, which may present a buying opportunity for investors [1] Analyst Background - The analysis is backed by a former managing editor with experience in financial media focused on mid and small-cap companies, providing credibility to the investment insights [1] - The analyst's academic background in financial markets and institutions enhances the depth of research and analysis presented [1]

Core Viewpoint - KBRA has assigned preliminary ratings to eight classes of notes issued by Pagaya AI Debt Grantor Trust 2026-R1 and Pagaya AI Debt Trust 2026-R1, indicating a structured approach to evaluating the creditworthiness of this unsecured consumer loan ABS transaction [1] Group 1: Credit Enhancement - The initial hard credit enhancement levels for the Class A Notes are set at 47.00%, while the Class E Notes have a lower enhancement level of 5.85% [1] - Credit enhancement is composed of overcollateralization, subordination (excluding Class E Notes), and cash reserve accounts [1]