Pagaya Technologies .(US:PGY)2023-08-11 01:35Financial Data and Key Metrics Changes - The company expects to achieve an annualized profit of $40 million to $50 million, which is ten times higher than the previous year [2] - Total revenue grew by 8% year-over-year to $196 million, with fee revenue increasing by 14% year-over-year [40][69] - Adjusted EBITDA reached $17.5 million, more than triple the prior year period, marking the second highest EBITDA in the company's history [63] Business Line Data and Key Metrics Changes - Application flow increased by 20% sequentially over the prior quarter, leading to a record network volume of approximately $2 billion [5][39] - The conversion rate remains low, slightly below 2%, indicating potential for growth as the macro environment stabilizes [5][52] - The company raised $3.1 billion across seven different ABS deals in the first half of the year, maintaining its position as the number one personal loan ABS issuer [37] Market Data and Key Metrics Changes - The company is seeing improving trends in asset performance, with early-stage delinquencies declining in its two largest markets: personal loans and auto loans [42] - Investor sentiment appears to be improving, with consumer unsecured ABS issuances higher this quarter than the prior two sequential quarters [44] Company Strategy and Development Direction - The company aims to expand its network and enhance its value proposition to both lenders and investors, focusing on technology and data to improve access to credit [36][64] - The strategy includes maintaining a low conversion rate while managing to deliver record network volume, indicating a cautious approach in the current macro environment [52][68] - The company plans to continue investing in growth while maintaining cost discipline and driving operating leverage [48][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for new partnerships, particularly with large banks, and anticipates landing another big bank partner within the next 12 months [53] - The company is raising its full-year outlook for network volume and adjusted EBITDA, reflecting strong momentum in the business [48][74] - Management remains prudent regarding the conversion rate in light of ongoing macro uncertainties, indicating a cautious but optimistic outlook [48][103] Other Important Information - The company has implemented cost-saving initiatives, achieving $50 million in annualized cost savings earlier than expected [47] - The weighted average coupon remained stable, contributing to improving returns for investors despite a low conversion rate [42] Q&A Session Summary Question: Can you discuss the strong network volume trends? - The record network volume was driven by strong demand from both sides of the network, with a 20% increase in application flow [76] Question: What is the outlook for the conversion rate? - The conversion rate is being kept low to manage investor returns, with potential for improvement as the macro environment stabilizes [52][103] Question: How is the company managing partnerships with larger banks? - The company is in discussions with many of the top 25 banks and expects to see more conversions based on past successes [53] Question: Can you elaborate on the performance of ABS funds raised? - The company upsized an ABS deal from $600 million to $800 million, indicating strong demand and capability in funding strategies [9] Question: What is the company's strategy regarding personal loans and auto loans? - The company sees personal loans as a complementary product and is focusing on subprime auto lending, which has good penetration with leading lenders [115][116]