Q3 2025 Pagaya Technologies Ltd Earnings Call

Speaker #1: Greetings. Welcome to Pagaya Q4, 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Josh Fagen, Head of Investor Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Thank you, and welcome to Pagaya's third quarter, 2025 earnings conference call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya, Sanjiv Das, President, and Evangelos Perros, Chief Financial Officer.

Speaker #2: You can find the materials that accompany our prepared remarks in a replay of today's webcast on the Investor Relations section of our website at investor.pagaya.com.

Speaker #2: 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 fourth quarter and full year of 2025, our actual results made different materially from those contemplated by these forward-looking statements.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: We encourage you to review the shareholder letter, which is 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.

Speaker #2: With that, let me turn the call over to Gal.

Speaker #3: Thank you, and welcome, everyone. Our third quarter results demonstrate continued execution against our long-term operational and financial goals. We are nearing the end of the year for Pagaya, where not only have we achieved consistent GAAP net income profitability, but raised it again to an exit rate of over 120 million dollars on an annual basis.

Speaker #3: Most importantly, the results demonstrate the momentum and strength of our platform, the diverse and high-quality revenue drivers, and the stability of our unit economics, and our very deliberate and responsible approach towards scaling in a complex environment.

Speaker #3: The outcome is a through-the-cycle business consistently growing with minimal investments for years to come. After laying the groundwork through disciplined optimization and capital efficiency earlier in the year, we have shifted our focus to product-led growth.

Speaker #3: In short, the next 18 months will be all about perfecting our products and our solutions to ensure we solve the fundamental challenges facing lenders and consumers.

Speaker #3: Our value proposition remains the same: helping lenders serve more customers. As partners recognize the increasing value of our platform, existing partners deepen their engagement, while new partners join the network.

Speaker #3: Our ability to design these products is truly unique. It is rooted in our vast data network, a core advantage for Pagaya. We embed data and machine learning as a backbone of our offering, across the entire lending funnel.

Speaker #3: From verification to underwriting, and as far up the funnel as affiliate channel optimizations. This creates unparalleled optimizations for lenders and investors. I'm very proud to announce that we have now the highest number of partners in our onboarding Q on the history of Pagaya.

Speaker #3: We are in the process of onboarding up to eight partners across all of our asset classes, ranging from fintechs to banks. Inclusive of the two partners that were added this quarter, we now have a robust Q that is set for the next 12 months.

Speaker #3: In addition to the progress we have made in lending to new partners, we have continued to refine our product strategy by listening to our partners, ensuring we meet their needs with our product suite.

Speaker #3: Just this quarter, in the course of our regular ongoing meetings, Sanjiv and I met with many of our partners and prospects to truly understand their growth and value drivers.

Speaker #3: And to continue to progress our products towards these needs. Solving for the needs of our partners, improves our product ecosystem. And solving for product effectiveness enhances every partner relationship in return, further propelling our flywheel.

Speaker #3: In short, the more value we add for partners, the more deeply they engage with our products and solutions, which in turn provides more opportunity to add value.

Speaker #2: Sanjiv will discuss later how we are evolving into a best-in-class B2B enterprise growing our key partners to $1 billion relationships and locking in our commercial terms through multi-years contracts.

Speaker #2: This will continue to define Pagaya's next chapter and accelerate our journey to become a necessary utility for every lender in the U.S. As we continue to mature and diversify our funding network, demand for our assets remains consistent and robust.

Speaker #2: During the third quarter, we issued $1.8 billion in our ABS program across four transactions, which were marketed to our network of more than 150 institutional funding partners.

Speaker #2: Outside of our ongoing core funding mechanism, we announced our first out-of-forward flow and strategic funding on residual certificates. The momentum on the corporate funding side is just as notable.

Speaker #2: We were rated by all three major credit rating agencies and raised $500 million in corporate debt. In addition, we expanded our corporate revolver with four new major banks at a significantly lower cost, boosting our capital efficiency.

Speaker #2: Together, we continue to diversify our sources of capital while improving efficiency across our funding and corporate capital structures. We reached consistent profitability and record quarterly network volume of $2.8 billion, with sequential application flow growth of 12%.

Speaker #2: Showcasing the continued growth of our network. Our growth is strong and increasingly diversified, with POS and auto representing 32% of total volume, versus 9% in the same quarter just a year ago.

Speaker #2: We are expanding existing partner relationships across our growing set of products and growing access from newer partners. This disciplined growth is demonstrated through our steady application to funding conversion, which has remained at 1%.

Speaker #2: At the same time, we continue to drive new high-potential partnerships to the platform. And across all of these segments, we see our network effect compound.

Speaker #2: We have an opportunity to truly reimagine the way consumer credit works as we build a platform that connects lenders with better data more automation and smarter decisions.

Speaker #2: This enhances and accelerates our ability to generate the assets that best meet the need of our investors in line with our balanced approach towards long-term profitability and resilience.

Speaker #2: Our goal is to be the plug-and-play solution for lenders getting credit spending risk deals and asset types all delivered in a seamless white-label solution powering the next generation of lending.

Speaker #2: We are extremely proud of how far we have come. And ask you to stay tuned on what is on the horizon. The journey is long, but will be innovative for consumers, partners, and investors.

Speaker #2: With that, I would like to hand it off to Sanjiv for a review of our operating business and more on our product-led growth strategy.

Speaker #3: Thank you, Gal. Pagaya's growth continues to be driven by disciplined expansion with existing partners as well as addition of new partners to the platform.

Speaker #3: We are continuing to strengthen our business by institutionalizing our relationships with lending partners using best practice B2B disciplines such as long-term agreements and product and fee agreements, while ensuring responsible underwriting and risk management using consumer credit disciplines.

Speaker #3: Let me first provide an update on existing partners. Just to remind you, Pagaya currently has 31 lending partners on its platform. Our relevance among our existing partners remains extremely high.

Speaker #3: Banks and fintechs are increasingly focused on consumer growth, customer retention, and maximizing customer lifetime value. Pagaya continues to solve for what lenders care about most while providing efficient capital markets execution and driving fee income growth for our partners.

Speaker #3: We achieved our growth of growing five accounts to over $1 billion relationships driven by multiple product adoption by our partners as well as expanded access to their application flow.

Speaker #3: Our existing lending partners are at varying stages of maturity with Pagaya. We define the level of partner maturity with us based on the number of Pagaya products that partners adopt which eventually drives the volumes on our platform.

Speaker #3: As one would expect, the partner lifecycle with Pagaya includes onboarding, ramp-up, scaling with declined monetization, and eventually expansion across our products. Our multi-product partners are leveraging the full suite of our products from declined monetization to our direct marketing engine and affiliate optimizer engine in personal loans to fast-pass and do a look in auto.

Speaker #3: Multi-product expansion enables our partners to significantly grow volume fee revenue incremental new customers and long-term value from existing customers. A number of our personal loan and auto partners are currently expanding into Pagaya's products.

Speaker #3: Let me pivot for a second and give you a product view of our business in addition to the partner view you just heard. Products above and beyond declined monetization are already contributing significantly to Pagaya's volume and revenue.

Speaker #3: In personal loans, approximately half our current volumes already come from products other than declined monetization. Let's take the affiliate optimizer engine as an example.

Speaker #3: Pagaya has been enabling our partners to originate loans in the affiliate channel such as credit karma, lending tree, experience, and others for many years now.

Speaker #3: But last year, we productized affiliate channels separately and commercialized this offering as a standalone affiliate optimizer engine product. We are currently rolling it out across all our partners that are at scale with our decline monetization product.

Speaker #3: And we are increasingly seeing that partners who have successfully leveraged affiliates to scale their credit card businesses are now starting to use affiliates to grow in personal loans by adopting Pagaya's affiliate optimizer engine.

This quarter's announcements underscore several examples of the strength and performance of our Auto franchise, including the scale, the sale of the residual certificates to 1 William Street in our latest RPM deal. And our inaugural auto forward flow agreement, with Castle Lake, which we announced last week.

Before closing, I will touch briefly on our response to the macroeconomic credit and risk.

As G mentioned, not much has changed for pagaya with respect to the consumer credit performance and lending partner actions.

Despite that we continue to build a robust through the cycle business, by staying disciplined on consumer, credit and long-term commercial agreements with partners.

We know that the institutional franchise that we are building can mitigate normal business cycle fluctuations.

This management team has done this before in highly cyclical consumer credit businesses and is confident that it can do it again.

With discipline growth, we remain fully committed to our mission to help bridge Wall Street to Main Street for the long term.

And now it's my pleasure to turn the call over to EP to cover the quarters Financial results and Outlook.

Thank you. There is also our third quarter, earnings demonstrates steady and sustainable growth and most importantly growing profitability. Network volume grew 19% year-over-year to a record 2.8 billion led by 31% growth in personal loans.

Application to fund the conversion held firm at 1% reflecting disciplined underwriting.

We expect conversion rates to remain stable as we focus on prudent profitable growth through the cycle.

Total revenue and other income Rose 36% to a record. 350 million driven by fear Revenue growth outpacing volume.

The outperformance of Revenue growth versus volume growth is a strong indicator of our ability to monetize our volume and reflect the value added to our partner Network.

For LPC, we increased 39% to $139 million, reaching 5% of the Network. Volume is up 70 basis points year over year, a clear signal of monetization efficiency. In line with our financial strategy, we launched in early 2024 to focus on improving unit economics.

We expect FRPC as a percent of volume to normalize within the 4% to 5% range as we scale into POS and diversify our funding.

And this year, we have shifted our focus on driving consistent and sustainable total referral PC growth in dollar terms.

Adjusted a bit. I increased 91% to a record 107 million with margins expanding 9 points to 30.6%

Fueled by strong fig growth and discipline expense management.

Core Opex dropped to 34% of frpc the lowest since going public.

Incremental adjusted with that margin represented more than 100% of frpc growth in the third quarter.

Operating income climbed 257% to 80 million and operating cash flow. Hit a record 67 million exceeding, outflows for Investments.

Gaap, net income of 23 million represented. Our third consecutive positive quarter, and improved from a net loss of 67 million. In third quarter 24, fell by 36% Revenue growth lower operating expenses and lower impairments.

This equated to a 6% margin as compared to a 5% margin last quarter and negative 26% in the year-ago quarter.

We are also enhancing transparency in our Disclosure by introducing, a new reporting line called gains and losses on investments in loans and securities.

This new line includes gains and losses on investments, which were previously included in other expense net.

Investments reported in this new line totaled, a 20 million loss versus 14 million in the prior quarter and 78 million in the prior year quarter.

Interest expense fell to $22 million, down $1 million sequentially, and should decline further as the benefits of our unsecured refinancing fully phase in, driving $12 million in annualized interest savings and $40 million in added cash flow.

Third quarter, gaap net, income included, the negative impact of several non-operating, and non-recurring items.

We incurred a one-time cost of $25 million associated with the issuance of our corporate bond and the early retirement of existing debt.

In addition, we recorded a non-cash warrant expense of 5 million.

To partially offset this, we recorded a one-time tax-related benefit of $20 million.

Share based compensation, expense of 14. Million was up 1 and down 5 million from last quarter and is expected to remain broadly at those levels.

Turning to credit performance is in line with expectations across, personal loans, Auto and POS, and remains within our disciplined risk tolerance. Also evident by the robust demand. We see across all our asset classes from institutional investors willing to underwrite our production at increasingly higher levels.

We appreciate the increased investor attention around credit across financials. So I will spend a bit more time covering this today.

Macro Trends and overall consumer Behavior, remain healthy. And we continue to monitor closely through the data Advantage. We have of working with 31 different partners across multiple asset classes. We are always ready to shift if and when needed

Let me give you some perspective on how our credit positioning has evolved.

As you may recall during 2024, our credit performance was driven by a sharp focus on achieving consistent through the cycle. Gap profitability, in addition since the beginning of this year, we have been benefiting from our positioning to reflect protracted, volatility and uncertainty.

This is a luxury Pega can afford given our gaap net income profitability, and our commitment to deliver sustainable growth and not just growth at any cost.

This positioning means that we have been underwriting with a cushion against the market and running the business in that way, while benefiting from the lower cost of capital.

And from the investor's point of view, we have been assuming future losses in our guidance, as shown in our earnings supplement.

Turning to some performance metrics, our personal loan, cumulative, net losses, across 2024, quarterly vintages are trending approximately 35 to 40% lower than Peak levels. In the fourth quarter of 2021, at month on book, 8 to 17

Auto production continues to deliver strong performance evident by the investor demand for auto ABS, the first sale of our certificates in 2021 and our inaugural auto forward flow.

Auto loan CNL. Across quarterly 2024 vintages are trending approximately 50 to 60%, 65% lower than levels during comparable 2022 periods at Mountain book, 9 to 18.

60, Plastics across 2025 vintages are higher when compared to 2024 levels and lower relative to 2023 levels. And well within our expectation,

Offsetting this 2025 net, recoveries and roll rates are trending significantly better than the 2023 and 2024 vintages, driving the strong performance.

For POS credit Trends, remain stable and in line with expectations validated by the continued. Strong demands. We see for this product from our funding partners,

Overall funding continues to be robust with a focus on improved efficiency and diversification.

During the third quarter, we issued 1.8 billion in Arabs programs across 4 transactions.

Last week, we announced our inaugural 500 million auto forward flow agreement, with Castle Lake expanding our relationship in 2 asset classes. Additionally, in early October after the quarter, we closed a 400 million, 400 million RPM Auto transaction. Which included the sale of the residual certificate to strategic funding partner, 1, William Street, Capital Management and last week we closed our second PS ABS transaction which was over subscribed.

Starting to our balance sheet, we ended the quarter with 265 million in cash and cash equivalents and 888 million of investments in loan and securities.

We completed the 500 million, senior unsecured notes offering that reduced our cost of capital by approximately 2 full percentage points to 9%.

As part of their financing of higher cost facilities, we bolstered our corporate liquidity with a release of over 100 million in highly liquid collateral.

After the quarter, we announced an expansion of our existing revolving credit facility with 4 new bank Partners as well as expanded commitments from our prior for existing lenders.

This lowers the facility interest rate by nearly 35% to suffer plus 350.

After this expansion, substantially all of pagaya corporate borrowings are now at or below the high heel Bond coupon of 8.875%.

In the third quarter, the fair value of the overall investment portfolio and allowances, net of non-controlling interest, and prior to any new additions, was adjusted downward by $32 million versus $20 million last quarter.

We also added $38 million in new investments in loans and securities. Net of paydowns from prior investments, the majority of which is our required risk retention related to our ABS securitizations.

As provided in our supplemental filing this morning, we maintained our scenario a illustrative Assumption of 100 to 150 million enrolling, 12 month Forward credit related impairments which is reflected in our guidance.

Now, let me turn to our updated Outlook.

Our full year 2025 outlook reflects the momentum and resilience in our business today and our unique operating leverage, while maintaining our cautious stance given the protracted volatility.

Key drivers include consistent levels of personal loan production and continued growth in auto and POS products.

We continue to expect the flpc to grow steadily in dollar terms and range between 4 to 5% as a percent of Network, volume for the year versus staying at the levels of this past quarter.

profitability Trends will reflect continued scale and operating Leverage

our guidance to reflect potential scenarios related to Future credit related impairments. If any as laid out in our earning supplement which imply a range of 25 to 37.5 million per quarter over a rolling 12 month period.

Core of X is expected to be slightly elevated in the fourth quarter, as a result of higher funding issuance.

Interest expense is projected to trend lower as a result of the recent refinancing notes transaction for the full year. We're updating our expected network volume to a range of $10.5 to $10.75 billion, total revenue and other income in the range of $1.3 billion to $1.325 billion, and adjusted EBITDA in the range of $372 to $382 million. We are increasing our GAAP net income for the year to a range of $72 to $82 million with that. Let me turn it back to the operator for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad, a confirmation total 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 1 moment, while we pull for questions.

Our first question is from John hat with Jeffrey's please proceed?

Hey guys. Uh, congratulations on a good quarter. Um, EP. You gave a lot of detail around credit, but I'm wondering if we could just, um, you know, step back maybe call give a. If you look at the different products, your different, you know, maybe different income ranges, within the programs and so forth. Can you maybe give us, uh, your prospective on credit quality now and the consumers, uh, and borrowers ability to, to, to, you know, manage their credits.

Around the writing and what how that has reflected in our performance? You know, it's interesting like during the last few months, people were have been asking us why we don't grow faster. Well, this is exactly the reason, right? We have been positioning well, uh, for anticipating more volatility more uncertainty and how that could potentially have any impact on the consumer. So we're benefiting from that, that that sort of positioning and I would highlight, we're quite unique in our ability to do so why we're a B2B company. We have the highest fee rates. Free margins, you see. However EPC has been growing. We have the most diverse partner said and more importantly, very excited about the partners that are coming in in our own boarding queue. And all of that translating to proof that ability which allows us to be uh, positioning. Uh, the way we have over the last multiple quarters. Um, and not to, you know, to remind everyone, a lot of that we have already.

Reflected, uh, in our guidance as potential impairments down the line. So we don't see any reason for us. Obviously, based on anything to deviate from that. Uh, approach. And obviously the provided guidance. I don't know, go, if you want to add anything. Yes. So, John, I, I, I, I think thank you for your question, um, and I think putting that question in in prospective that's what is important for us on this call. Um, the way I want, I want you to think about it, or at least the way we think about it is that in

In the context of our business model, it's really relatively easier to manage the credit side of the business. So think about it from a very high level.

And as you can imagine, this is more a philosophical question. Um, this is build in a way and for a reason in how we like to run our business,

we chose the B2B versus the b2c in consumer credit approach.

Although as you can imagine in the early days, it was the least straightforward decision.

But the reason we chose, it usually is b2c lenders have very strong correlation between marketing spend and approval rate increasing um and therefore, they are growing with the cycle.

So they need to have good days to be able to approve more and therefore spend more. And that's how they are growing, but the same phenomena is the other side of it. That when the cycle show, weakness, you expect a good bit to see, um, and most of our partners are like that to reduce approval rates. And therefore, you will see less file power to spend on marketing power and the result as you can imagine is much lower growth rate.

All of this to say that credit is a super crucial Backbone in the b2c organization, ability to grow, especially in an increasing competitive world.

And what I know many of our investors still still think of us as another b2c organization because we deal with Consumer Credit. The reality, that this is

Far from the truth, the way we designed the company, which is expanding, as you know, through more partners and products, IE. The B2B concept of consumer credit was purposely designed to reduce the level of fluctuation of the cycle. Because we do not have marketing, spend that moves up and down with approval rates. Now, none of that to say that we are immune. Um, we are not immune to the cycle and therefore we are very closely monitoring.

But remember that we have entered this year with a very tight thinking around it, so the sector is rightfully focusing here in general, but we do want to highlight that the relative impact from changes in consumer. Credit behavior on pagaya is much more muted.

So we are trying to solve for a specific. We're not trying to solve for a specific growth rate in a specific quarter. The long term is what matters for us and that leads to a high ability and degree of discipline of a quarter.

Great. Thank you guys very much.

Our next question is from Peter Christensen with City. Please proceed.

Uh, good morning. Thanks for the question. Nice performance here. Um, go. Uh, EP did a good job. I think talking about collateral performance. Uh, looking pretty good there. Uh, I'm just curious, you know, with with uh, a lot of, uh, successful ABS issuances this year so far, I think a lot of them over subscribed. Can can you talk to maybe how risk retention may have changed or your, your strategy there how it could evolve, uh, over over the coming months, uh, given the environment that we're in today and how, how you foresee that potentially changing should, uh, the market, um,

start showing, you know, any signs of of increased volatility, as, as you mentioned,

Great, thanks mate. Um, I mean look you you can see that when it comes to the demand for bagay, origination continues to be uh very robust and actually improving. Um if I take you back quality a year ago or so remember we're 100% uh ABS funded uh since then we have really Diversified our funding currently across all our products. It's we're approximately that 64% Mark between coid ABS and the other structures like forward flows, um, and pastors and things like that. You saw a couple of the announcements where we sold our certificate actually um, in our recent RPM deal, which was the first time since 2021. Uh, and at the same time, since then, again, uh, let's not lose sight of the fact that our ABS now has a triple play across all our products. So always keep in mind how that has involved uh, over time, um, uh, to our benefit. Uh, and obviously given the scale that we have, you know, people were worried the same thing back in April, when tariffs came along and then,

We managed to absorb and actually do most of our, some of their highest issues back then. Um, still we have very strong, you know, uh funding uh, as I said, Diversified funding and uh, funding sort of uh, expertise across the different products. Um, and given where we are as a business, more importantly, from a cash flow, generation perspective, if things move for whatever reason again. So

With the, the, the risk retention. If we need to put in more of that where um, best positions in our history to actually do that. So we're not worried about managing that through the cycle.

And then and then finally can you just talk about the your, your 4 full pipeline? I mean, obviously you're adding a lot more Partners here. That looks really encouraging. Uh, but from your flow Partners, whether existing or potentially new, can you speak to that. And, and and, and and whether or not you're seeing increased traction there. Thank you.

Yep, I think the traction is evident by what we have delivered already. You see how we have moved from just personal loans and foreclosures now to auto forward flow, and we continue to see traction across all our products.

The next level of diversification, I would say, is now actually bringing more parties with which we do forward flows. We are on track to deliver that as well while maintaining sort of that view that we should get to that, call it a 50/50% mix between, call it ABS and other structures like the forward flow.

Great. Thank you.

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

Hey, thank you. Great quarter, guys. My question is for Golf. I've always seen a lot of other consumer lenders report, but they're mostly consumer-facing B2C channels.

You have to spend a lot, you know, to get new customers. Could you just remind us? You know how different your model is on the B2B to C level? Thanks.

Yes, definitely, Hal. Uh, thank you very much for the question. So I will start with a little bit high level and then sanjiv, um, will take you further to speak about, uh, the on both stages and the different parts. So I, I will start with, with the statement as, as we said, uh, we do have the biggest number of Partners in the queue ever, um, but I think the real question and interesting part is how we got there.

So, step back. Think about the fact that we have been really focusing on the last deal.

is to perfect our valuable position and the product suit behind it.

so that the new partner considering pagaya should be very clear for them for him um how the partnership with pagaya is becoming a meaningful contributor for them over the 2 3 years after going live

Becoming something that is how to resist from a partner perspective and therefore they are investing the time the engagement the tech. Um, and we we see the growth in the, the, the on boarding queue last sentence before I'm heading over to sanjiv, um, to speak more specific. I will say that the point in the cycle where lenders are looking to ramp up their growth um and looking to become more on the offense rather than on the defense call it 2 years ago, combined with slightly more um attractive regulatory regime is actually bringing many more conversations to rotation um and to actually

Acting on rather than in an exploratory type of situation that was before Sanji. Maybe you want to share a little bit about the specifics of the bottles.

For sure, I did want to say that, you know, to have a question that will be to B and B to C. I did want to say that, essentially at its core because you and I have talked about, because squarely at B2B business models. And, uh, how I mean the way we think about this is we are, uh, in the business of essentially growing the business of our lending partners. That's the business we're in, and so we provide them the ability to approve more customers across the entire value chain through the Pagaya system, or the Pega platform.

So in that respect, we are more like a, you know, a first data, which is, of course. Now 5 sir, where I worked for many years to establish the same B2B disciplines that we are now instituting at pagaya. What that means is, um, gal and I very focused on establishing the disciplines of long-term agreements with our partners, uh, the certainty of locking in predictable long-term fee contracts with our partners, uh, clear Rules of Engagement, uh, around the new products that call described, uh, which shared economics of growth, uh, better focused on our partners needs. And what we see, you know, sort of uniformly, uh, demanded by Partners across our lending platform. So, it's very institutionalized and, you know, just to be clear. We have started the process of B2B long-term contracts with our Mega, sort of billion dollar partners that I described, uh, in, in the earlier, um, earlier script. Um, and it's been very well received. So our partners now cons, you know, clearly consider these institutionalized

B2B relationships, very valuable, they want certainty in the long term pagaya partnership as well. And we have now, 3 to 5 contracts that are fairly late stages of contract, final finalization. Having said that where, um, our B2B business sort of spirits a little bit into some of the b2c disciplines is in risk management and consumer Behavior.

Uh, where we manage our business and descript disciplines which as I'm sure you know uh given sort of the world class uh, consider experience of this team. Uh, we have done it on highly cyclical consumer businesses several times.

And this is something we believe we do quite well. Um, so essentially that's what we are. Building a solid B2B business, would need to see disciplines of building it for the long term. We do not consider ourselves beholden, uh, to being slaves of volume through credit expansion, we believe the right way to grow our volumes into partner expansion, and product expansion, which is what we talk a lot about today and in future uh uh on its reports essentially in a market that has a damn over 500 billion of which we represent.

10 billion.

Great.

I think that's 1 follow up. You know, you mentioned, you know uh the most amount of Partners is in the queue but I think Sanji you mentioned

You know, you've you've got a lot of Technology kind of pre-built that uh, that allows a much faster onboarding scale. And could you could you just, you know,

Basically go over that again. Describe what you've built and what will allow maybe next year to be a uh 1 of your bigger years of onboarding. Thank you.

Yeah, uh, so you're right. So um let me answer your um, Tech. Uh, question first, because again, I'll go back to what gal said. So what's happened? How is that we've built out all these products? Uh,

Um, back to the number of Partners. We now have several new partners that we are currently on boarding, um, and, uh, several more that we will onboard in the next quarter. Uh, these include a mix of, uh, all 3 asset classes that pagaya represents today. So we have onboarding partners that are in personal loans, onboarding, partners, and auto, and onboarding partners in point of sale. Um, they include a couple of banks including a major regional Bank, uh, point of sale fintech, uh, uh, uh, institutions and auto mono lines

um,

You know, as we said, and I said, this is very proudly because it took us some time to sort of build the product, a robust product proposition on our platform. We now have partners that we are in our onboarding queue for the next six months that are truly the highest we've had in our history. As again, as G mentioned. In fact, we...

Totally know that we will achieve our guidance of 2 to 4 Partners, uh, a year both for 2025 and 2026 in the next 6 months. Um, I should also mention how that we are seeing very very strong demand of cross-selling uh to existing Partners uh that want to expand into other asset classes. So for example, right now we have 1 of our biggest personal loans partners that wants to expand into POS and they intend to be a very significant POS player and we already in the ecosystem, so we have those discussions and we'll just expand with that. Another major.

Our personal loans partner wants to expand into auto, and most interestingly, I should mention that a very significant auto partner wants to expand into our pre-screen personal loans program, which we talked about before. So, cross-selling across asset classes with our existing partners is truly becoming a strong value proposition, in addition to onboarding new partners.

Thank you, s, very helpful.

Our next question is from.

Company, please.

We are, um, can you talk a little bit about what you're seeing um, in the macro? Um, uh, you know, in macro in general just um are you seeing any pockets of uh, weakness or where are you seeing strength? Thank you.

Uh, thank you for your question. Uh, this is Sanji, uh, so as I think both ET and G mentioned, uh, consumer performance has been very stable. Um, uh, you know, AP said our credit performance is in line with our expectations. And then to be the case, um, I'm sure you're all hearing this across the board from most lenders.

And it's what we hear from most of all lending Partners whom we check in with regularly. I mean, this factors that we have 31 lending Partners. So we have the benefits of talking to all 31. You also have the benefit of looking at 3 asset classes. So there's 1 Dieter and 1 asset class. It's clearly a signal for the others and we can take actions proactively. Um, but having said that, we are closely monitoring early stage credit performance, for any Downstream impact, uh, that we keep hearing about, you know, you know, fed or the macro in terms of inflation or the impact of tariffs, but so far,

and maybe I will add to that on the investor side, which is another part that could from a micro perspective impact. Um, I think that

Putting the Liberation Day, a little bit of like, over volatility aside. Um,

This year, demand for the different parts of the capital structure is very robust. So, when we look at the...

um, in your

The spreads of the senior Capital stack, um, it's actually been fairly steady throughout the year and on the junior pieces, actually came a little bit, even tighter something like a 50 basis points. Um, call it January February versus now. Um, there was points in the market of a little bit of overheating where people just wanted to deploy for the sake of employment, that went out to you. So a steady health

See environment, which actually, that's what we love. Uh, we prefer that on, um, overheating or over cooling. So definitely the trajectory of travel is something that we are feeling very confident in.

Very helpful. Thank you.

Our next question is from Kyle Joseph.

With Stevens please proceed.

Hey uh good morning guys. Thanks for taking my questions. Um

The ability to cross-sell but just, you know, thinking about you guys are in in 3 assets. Um, and this might be longer term, but are are there any other asset classes? You could see yourselves expanding into over the years?

Hi Kyle, it's gal here. Thanks for the question. Um, so I will tell you that. Um, this question is actually a question. We are dealing a lot with and it has more philosophy rather than the specifics. So, let me share with you a little bit how we think about it. Um, and the process of what we are seeing in, in, in, in reality,

So so when you think about what's the next so-called um asset class, we prefer to call it Market that we are looking to expand into. There are few must-haves that we need to make sure we're feeling comfortable with before we are going though.

So the first 1 is that the time is big enough. That when we are doing that, that's actually going to be something that is Meaningful meaningful for us is things that we believe we can produce um 2 to 3 billion dollars in relatively um short period of time. Which you can think about it as the 2 3 years term

The second piece is we need to see the adaptation or the interest of, um, more than 1 Partners, more than 2 partners are actually going through this way. Because, do remember,

There's a lot of the operational heavy piece is not sitting within pagaya and therefore we want to see the Best in Class pieces, um, that are coming to that particular, um, market. So if you have only 1 partner, that is doing very well, something it's less of an interest for pagaya. But if you will see a phenomena of 3 to 4 partners that are going into 1 Direction, that's starting to become. Um, very interesting, very interesting for us. And then the third piece, it needs to be um, less sickly color. Not sickly color. So anything which we believe that is a little bit more cyclical because of Relativity of high sensitivity to interest rate like, um, home equity or refi of Auto. He thinks that we might do a little bit, but not something that will put all of the, what we call the pagaya machine behind. Because when it takes you something to build a year or 2 or 3, and then you're over the cycle. Well, what's the point, right? We are not a trading shop. We are a technology business and, and, and the reality is that, to choose it. You need to have

A very strong understanding of the financial piece, but in the same time, the understanding of the tech piece of what does it take to build and where is your, um, where is your actually answered? So in general, I would say that these are the things that are driving our decisions.

Um, specifically to what we see with the partners and send you. I don't know if you want to add, um, any more after that. But I would just give the very high level

Home Improvement.

Is starting to be something that we feel is gaining some traction. We see a few partners that are going to adopt and to do that. Um, and therefore, potentially a candidate in the future to think on that. Obviously, we need to see that, uh, partners are are doing it and doing it properly and and to a major scale. But I think the bigger picture, um, is really that the, the opportunities that are in front of in front of us, is really all the consumer credit per se. And as we see things that are sticking growing and becoming meaningful, you should expect that the guy will participate in that, um, capacity rather early on after that's becoming to be institutional and you have anything to add. I know, I just to reinforce what you just said, because which is essentially being very, very disciplined around the criteria that our partners are, you know, the products of our, the market demands. Um, and we are seeing some very consistent stable, demand across some of the things uh, products that

You, uh, talked about, um, and we follow a very strict discipline of making sure the TAM is there, the through-the-cycle performance is there, and there's robust investor demand for those kinds of assets, and they're consistent with what we, what we.

Um, certainly home improvement, credit card standard, uh, but having said that with the new regulatory environment, as you mentioned call, uh, earlier, uh, there's a lot of demand for our existing products from new players. Uh, banks in general are sort of leaning in to growth. So we are seeing a very strong demand to stand up. Brand new uh, personal loans programs for banks. Stand up brand new, personal loan programs. For many of the mono lines, uh, very successful to us more lines. Uh, so the focus on the existing business itself. Uh, I think it's demanding. A lot of us actually.

Great. Thanks for taking my question.

Thank you. We have reached our

I would like to turn the conference back over to G. Caribbean for closing remarks.

So, thank you everyone for joining us today. As you can see, this quarter's record results are truly starting to reflect the benefits of the B2B business model that we worked so hard to build.

Increasingly Diversified growth, drivers, responsible and disciplined underwriting. A highly Diversified partner and funding mechanism. All with the increasing efficient capital and operating structure that we have, the result is through the cycle stable growth and increasing profitability.

I'm even more excited about the long term.

as we enter our next stage of the long term growth,

We have optimized and perfected our product suite and value proposition to maximize the value we provide to partners. We are defining and accelerating our tailored, multi-product roadmap for B2C financial institutions. From day one, this underscores the organic opportunity for our B2B solutions and has driven a record number of partners in our onboarding pipeline. We remain laser-focused on the long-term potential of Pagaya and look forward to sharing progress with you over the coming years. Thank you very much.

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