Operator: Hello, and welcome, everyone, joining today’s Pagaya First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this call is being recorded, and we are standing by. It is now my pleasure to turn the meeting over to Craig Smyth, Investor Relations. Please go ahead.

Craig Smyth: Thank you, and welcome to Pagaya’s First Quarter 2026 Earnings Conference Call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya; Sanjiv Das, President; Evangelos Perros, Chief Financial Officer; and Jon Dobres, Chief Strategy Officer. You can find the materials that accompany our prepared remarks and a replay of today’s webcast on the Investor Relations section of our website at investor.pagaya.com. 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 second quarter and full year 2026.

Our actual results may differ materially from those contemplated by these forward-looking statements. 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 U.S. Securities and Exchange Commission. 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. Additionally, non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, fee revenue less production costs, or FRLPC, FRLPC as a percentage of network volume, core operating expenses and core operating expenses as a percentage of FRLPC will be discussed on the call.

We also provide an outlook for the second quarter and the full year 2026 on a non-GAAP basis. Reconciliations to the most directly comparable GAAP financial measures are available to the extent available without unreasonable effort in our earnings release and other materials, which are posted on our Investor Relations website. We encourage you to review the shareholder letter, which was furnished with the SEC on Form 8-K today for detailed commentary on our business and performance in conjunction with the company earnings supplement and press release. With that, let me turn the call over to Gal.

Gal Krubiner: Thank you, and welcome, everyone. Before turning to the quarter, this morning, we announced that EP is stepping down as CFO after nearly 5 years with Pagaya. He has been a great partner to Sanjiv and me and was instrumental in laying the foundation for positive GAAP net income and cash flow, one of the most important pillars for our long term success. The transition takes effect June 15, with EP remaining as a strategic adviser through year-end. We are grateful for his contribution and look forward to continuing to work with him in the future. We are also excited to announce Jon Dobres as the CFO of Pagaya. Since joining Pagaya in 2021, he has worked closely with me, Sanjiv and EP on our corporate strategy and key financing initiatives, including our term loan and high-yield bond offering.

I’m confident he is the right leader for this role. He knows our business inside out and has been a driving force behind our financial transformation. He will continue to strengthen our balance sheet, drive profitable growth and sharpen our engagement with the investor community that is here on the call. With that, let me turn to our quarterly results. I’m pleased to report another strong quarter for Pagaya. Despite the macro environment full of volatility, we stayed focused on what we can control, our core business drivers, and delivered GAAP net income of $25 million. This is now 5 consecutive quarters of profitability. These results reflect a team that is executing a clear plan, drive sustained profitability by expanding our partner network, building a differentiated product and operating a platform that is designed to perform through cycles.

Now let’s turn into the consumer. What we see is a resilient consumer, supported by stable labor markets and credit conditions. Our first quarter credit performance is in line with expectations with some benefit from seasonal tax trends. But I want to be clear, we are not relying on those tailwinds to extend risk. We continue to maintain our selective posture, and that strategic cushion is what allows us to execute our long-term plan regardless of short-term market dislocation. As you will recall, in the fourth quarter last year, we intentionally pulled back origination volumes in selected segments. Throughout the first quarter, we maintained that same credit posture unchanged. We are data-dependent and flexible, and we believe that a measured approach today is what secures our ability to scale tomorrow.

On funding, we have raised $2.1 billion this quarter, attracted 5 new investors into our deals and expanded our investor base through our first-ever auto resecuritization. The consumer credit public market continued to demonstrate strength despite recent volatility. In fact, we are seeing an influx of new investors participating in this market. We also reached another important funding milestone. We welcomed Fitch into our capital market platform, marking the first time we have added a major rating agency alongside Kroll. This is meaningful because it provides enhanced stability to our capital market presence and reinforce confidence in our asset performance. Now while private credit markets are going through a period of repricing, we have strategically leaned into the public ABS markets.

While volatile markets may create some near-term earnings pressure, the diversified funding structure we have built allows us to lean on different sources depend on market conditions, giving us great flexibility. Whole loan buyers remain an important pillar of our funding, and we will continue to have relationships there, evidenced by an additional term sheet that we have signed just a few weeks ago and an ongoing discussions with additional parties. However, we are not dependent on any single channel. This is the benefit of how we are built. It is the same focused execution that continues to drive our B2B2C business model forward. And what I would say is that our growth enterprise strategy is working well. Since the start of the year, we reached a new onboarding record with 4 partners joining our network this quarter and making progress with regional banks in the pipeline.

Allow me to provide a quick overview on our businesses. On the personal loan, we expanded our platform capabilities by adding Experian Activate and continue to operate across significant affiliate marketplaces in consumer lending, broadening the reach of our partners to be active in more marketplaces through our products. On our auto loans business, the auto business reached record performance this quarter with volume hitting all-time highs. Auto has become a true structural growth engine for Pagaya, enhanced by product improvements and network pricing efficiency. Finally, to our POS business. Our POS business continued to evolve. Instead of just being an enabler of point-of-sale, we have embedded longer-term larger ticket lending capabilities inside POS platforms like Sezzle and Flex Pay — Upgrade — buy now, pay later solution.

Sanjiv will give you more color on what we have accomplished and the momentum we are seeing across the business. Before we close my section, I want to step back. We have built a business that operates through volatility with clarity and purpose. As we approach our 10-year anniversary, I am reminded that the companies that endure are the ones that build through cycle. We are capital disciplined, and by proving our model yet again, we are separating Pagaya as the preferred technology partner for every major consumer lender in the United States. With that, let me turn the call over to Sanjiv.

Sanjiv Das: Thank you, Gal. First, I want to thank Evangelos, who has been an excellent partner and collaborator over the last couple of years. He’s clearly accomplished a great deal for Pagaya, and he has my sincere best on what’s next for him. Jon Dobres has been a key part of the management team, and I am looking forward to partnering with him. We’ve structured this as a deliberate transition with EP remaining actively involved over the coming months to ensure continuity. Now to the quarter. Our focus this quarter has been clear, drive GAAP net income through disciplined execution. Simply put, we are diversifying the business as we expand to the top of the origination funnel. More partners, more products, more channels. And as we do that, we are becoming deeply embedded with our lending partners, and that is strengthening our foundation for durable bottom line growth.

What’s important is that these growth levers don’t require us to expand our credit box. They are driven by the combination of existing and new partner growth. And our relevance to those partners remains very high. Banks are solving for noninterest income and customer lifetime value. Fintechs are solving for return on acquisition spend. And that’s exactly what we enable, and that is why our pipeline remains so strong. As Gal mentioned, we are very intentional about pulling back on marginal risk exposure since late last quarter. Consumer behavior right now is in line with our expectations, but we are watching it closely. Our product suite is robust, it’s market tested, and it’s what’s driving our balanced growth this year. New partners, meanwhile, are setting the stage for growth in the back half of the year and beyond.

So let me walk you through the details of what we have accomplished this quarter and what we are on track to execute over the remainder of the year. Starting with new partners. We continue to work through the onboarding pipeline we announced at the end of last year, which is a healthy mix of banks, fintechs and auto players. Year-to-date, we completed the onboarding of 4 partners, Global Lending Services, or GLS, Upstart, Sezzle, and Flex Pay, which is a buy now, pay later solution from Upgrade. It’s still early days, but all 4 are showing healthy progression in their ramps, which is very encouraging. On top of that, we are in the process of onboarding regional banks that we expect to announce soon. As a reminder, our onboarding process is truly industrial grade at this point.

Every new partner gets a prebuilt integration with our entire product suite from day 1, which accelerates scaling. Turning to our existing partners, I’m really excited about the momentum we are seeing. Think about it this way. We are evolving from what was a single product, single channel company into a multiproduct, multichannel platform that touches the entire cycle of our lenders’ underwriting processes. This is a meaningful shift, and we are now in execution mode, building a true multiproduct enterprise that is increasingly embedded in our partners’ businesses and loan origination funnels through products like our Affiliate Optimizer Engine and Direct Marketing Engine. Our largest lending partners continue to move through the Pagaya lifecycle by adopting more products, and that translates directly into more volume and revenue for both sides.

As we’ve discussed before, partners who adopt our products see material growth in their partnership. To give you a concrete example, we increased volume with one of our partners by 37% this quarter versus the same period a year ago, simply by onboarding them onto a leading affiliate marketplace. So that really highlights the value add of our affiliate channels. As we are expanding these strategic relationships with the affiliates, we have partnered with Experian, which enables our personal loan partners to join Experian Activate. This partnership allows our personal loan partners to tap directly into Experian’s high-intent marketplace, fueling a mutual increase in volume and profitability. Following a successful launch of a top 5 partner this quarter, we have a robust pipeline of major lenders that are scheduled for onboarding throughout the remainder of the year.

On the Direct Marketing Engine, we continue to onboard more partners to our prescreen solutions across e-mail and direct mail. We have now completed 12 campaigns across 5 partners, and each campaign gives us additional insights that allow us to enhance our response models to drive higher efficiency for future campaigns. Now turning to our asset classes. We are increasingly operating a diversified platform across personal loan, auto, and point-of-sale. We are rebalancing our products and channels towards more stable, scalable economic and are continuing to optimize flow through pricing and activation tests. Pagaya brings longer-term larger ticket lending capabilities to our POS partners. Together, we can pursue enterprise merchants with a full lending solution that further differentiates the partner within their verticals.

Personal loans remains our flagship asset class and represents 63% of production this quarter. Our Affiliate Optimizer Engine will continue to drive near-term growth, while our Direct Marketing Engine will support growth over the longer term. Auto remains a key focus for us. We are seeing significant growth and strong profitability driven by access to additional flow sources, improved ABS execution, optimized pricing and frankly, some tax season tailwinds as well. Our auto volumes now stand at a record annualized run rate of $2.3 billion. That is double where we were in the first quarter of last year. On the product side, we have been focused on transaction optimization at the dealership level, which has allowed us to better address what dealers actually need.

Now turning to funding. Funding remains robust across all asset classes. This quarter, we raised 4 ABS transactions totaling $2.1 billion in funding across our paid and RPM shelves, and we did that despite the increased market volatility. That is a testament to the quality of our assets and the strength of our investor relationships. So stepping back, our foundation is strong, and we continue to build a resilient B2B2C business. The diversification across partners and products is what drives the value of our platform. It gives us unique access to data and insights, an unparalleled vantage point and the ability to stay nimble. As we continue to grow net income and cash, we are strengthening the business fundamentals for the long term. Before I hand the call over to EP for a detailed review of our financials and outlook, I just want to say we are executing with discipline and momentum across our business as we continue to build it across new and existing partners, across products and across asset classes.

We remain focused on building an enduring platform.

Evangelos Perros: Thank you, Sanjiv. Before I get into the quarterly results, I want to briefly note that this will be my final earnings call as Chief Financial Officer. It has truly been a privilege to serve as CFO of Pagaya, and I’m proud of what we’ve built, architecting a financial and business foundation to deliver and grow GAAP net income profitability and expand access to capital. After careful consideration, I have decided this is the right time for me to step down and pursue my next chapter. I remain very confident in the company’s strategy and the strength of the team. I’m also excited for Jon, as he steps into the role. Jon and I have worked closely together since joining the company, and I’m confident in both his leadership and the strength of the finance organization that we built over the last 2 years.

We’re focused on a seamless transition and continuity across, particularly in the areas of investor engagement and capital efficiency. I will remain heavily involved as a strategic executive adviser to Jon on Pagaya’s long-term funding strategy for its next phase of growth. Jon is joining us here today also. So Jon, perhaps you can say a few words.

Jonathan Dobres: Thanks, EP. I’m honored to step into the CFO role and grateful for EP’s partnership over the past several years. We’ve worked closely together across capital formation and balance sheet strategy, and I look forward to building on the strong foundation already in place. Our priorities and financial strategy remain unchanged, and I’m excited to continue working with the team as we execute through the next phase of evolution.

Evangelos Perros: Thanks, Jon. Turning to results. We delivered our fifth consecutive quarter of GAAP net income, generating $25 million of profit while continuing to operate within a disciplined risk framework in a challenging macro environment. More broadly, what you’re seeing is the strength of our model, optimizing for credit discipline, growth and operating efficiency while positioning the business for long-term success. At the same time, we remain cautious given the current geopolitical and macro backdrop. So let me take you through the numbers. For the first quarter of 2026, we reported revenue of $318 million, fee revenue less production costs of $121 million and adjusted EBITDA of $94 million. FRLPC as a percent of network volume was 4.6%.

Network volume was $2.6 billion, up 9% year-over-year and 23% excluding SFR from the same quarter last year. As it relates to SFR, Darwin Homes, our tech-enabled property manager, continues to be the main engine of our SFR business, managing over 15,000 homes, and we expect to continue to add more homes under management as the platform scales. Strategically, our focus remains on consumer credit and becoming the partner of choice for lending institutions in our industry. So we will continue to assess strategic alternatives for Darwin and our SFR business. Application to volume conversion was below 1%, consistent with our deliberate shift towards higher-quality borrowers and tighter underwriting, reflecting the actions we took in the prior quarter.

Total revenue and other income grew 10% year-over-year to $318 million. Revenue from fees grew 6% to $299 million, driven by higher volume and partially offset by lower take rate and FRLPC percent rate. Interest and investment income almost doubled as a result of our continued growth in our investments. Fee revenue less production costs grew 5% year-over-year to $121 million. FRLPC as a percent of network volume contracted by 19 basis points year-over-year to 4.6%, driven by new partner contributions and tighter pricing on our ABS transactions, reflecting higher cost of capital. As I discussed last quarter, tighter pricing flows through FRLPC in the form of lower fee revenue from capital markets execution, reducing upfront fees but providing support against potential future earnings volatility.

In practical terms, we are effectively pricing at higher loss assumptions relative to the rating agencies in the range of approximately 125 to 175 basis points, creating a more clear risk boundary for our investors. Turning to profitability. Adjusted EBITDA was $94 million, up $15 million with a margin of 29.6%, an increase of 200 basis points year-over-year. Core operating expenses remained well controlled, flat sequentially and modestly higher year-over-year, and represented 39% as a percent of FRLPC. We continue to see strong operating leverage with substantially all of revenue growth translating into adjusted EBITDA growth in dollar terms. Operating income was $80 million, up 68% year-over-year. GAAP net income was $25 million, up $17 million compared to 1Q ’25, driven by total revenue growth, cost discipline and lower interest expense.

This equated to an 8% margin compared to 3% in the year ago quarter. Gains and losses on investments in loans and securities amounted to a loss of $38 million. Turning to credit performance. All asset classes are performing in line with underwriting expectations. 2025 vintages reflect normalized production levels and underwriting at a lower cost of capital by approximately 200 basis points versus 2024, and up to 400 basis points lower versus 2023. In personal loans, though still a few months of seasoning is needed, early-stage delinquencies are stabilizing and loss trends remain consistent with our expectations. In auto, recent vintages continue to perform well relative to prior periods with delinquencies and losses within expected ranges and recoveries improving.

POS credit performance also remained stable. Turning to funding. Despite volatility in private credit markets, demand for our production remains strong. This quarter, we issued $2.1 billion through our ABS program across 4 transactions marketed to our network of more than 160 institutional funding partners. Additionally, new investor participation accelerated quarter-over-quarter, highlighting the continued quality and demand of our paper. I would highlight 2 key milestones here. Firstly, we received our first AAA rating from Fitch on our personal loan resecuritization shelf. And secondly, we successfully executed our first auto securitization. These are meaningful achievements that further validate the strength of our credit performance and our platform.

In fact, the resecuritization is actually becoming a key part of our capital market strategy. It gives us 2 things, first, a repeatable mechanism to return capital from prior vintages on an accelerated basis, and second, lower funding costs by refinancing seasoned collateral with more predictable credit performance. This is a very powerful combination. Over the last 12 months, we have generated $44 million in net cash flows from this type of transaction while attracting new investors to our platform. As we have discussed, we continue to diversify our funding channels to reduce reliance on any single source and to mitigate market volatility. In recent months, we have leaned more into our ABS execution. This week, we completed another $800 million ABS transaction that was upsized from $600 million.

And within ABS, we have different flavors like public and private structures, giving us significant flexibility. Turning to the balance sheet. Asset quality and mix continue to materially improve, increasing both liquidity and flexibility. Approximately 35% of our investment portfolio is in bonds from our sponsored ABS transactions, which provides both accretive returns and access to financing. Over the last 12 months, we have sold $30 million of these notes above cost and have received gross funding of approximately $180 million in secured borrowings, which we have raised and paid off during this period in line with our needs, highlighting the flexibility that these assets provide. Towards the last 2 weeks of the quarter, we drew down on our revolver as a precautionary measure given geopolitical uncertainty and paid it back in April.

We also continue to deploy capital opportunistically, repurchasing $7 million of our corporate notes in February and an additional $4 million in April. During the first quarter, the fair value of the overall investment portfolio and allowances prior to new additions was adjusted downwards by $21 million compared to $50 million in the prior quarter. Now turning to guidance. We expect network volume growth to be driven by deeper engagement with existing partners, primarily in auto, contribution from new partners and new product initiatives. FRLPC margin is expected to be between 4% and 5% for the year, and we assume that the cost of capital remains elevated at current levels for the rest of the year. For the second quarter of 2026, we expect network volume in the range of $2.875 billion to $3.075 billion, total revenue and other income in the range of $345 million to $365 million and adjusted EBITDA in the range of $100 million to $115 million.

We expect GAAP net income for the quarter of $25 million to $45 million. For the full year 2026, we are expecting network volume in the range of $11.45 billion to $13 billion, increasing the lower end of the range by about $200 million versus prior guidance. Total revenue and other income remains in the range of $1.4 billion to $1.575 billion. We are increasing adjusted EBITDA guidance to a range of $420 million to $460 million. We are also increasing GAAP net income guidance for the year to a range of $110 million to $160 million. With that, let me turn it over to the operator for Q&A.

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Operator: [Operator Instructions] We will take our first question from John Hecht with Jefferies.

John Hecht: EP, I wish you the best. Great working with you. Jon, look forward to working with you. So first question is the quarter showed relatively stable outcome. I mean, it was a good quarter, but it reflected a lot of stability despite a period of volatility in funding markets, ABS markets and then a lot of headline noise with the private credit markets. Gal, I’m wondering, maybe can you talk about how you’re managing these markets and how the volatility in those — in your funding markets, how you’re able to strategically work with that volatility?

Gal Krubiner: Thanks, John. This is Gal. I’ll take that. Pleasure again working with you, and you’re staying in great hands with Jon. So first, broadly speaking, keep in mind that we were very well positioned in this environment given some of the actions that we took in the last year — in the previous quarter. When you think about the funding environment, it’s obviously very dynamic. And I would say we’re very fortunate given the sort of access to capital that we have to some of the deepest pocket institutional capital out there. Maybe I’ll step back and give you a little bit of how we think about it and how we see things. Think about the funding markets across 2 dimensions, one being, call it, public versus private and then the other one being consumer versus, let’s say, corporate, particularly in the context of what’s happening in the marketplace right now.

So what we see today, most of the, call it, stress is in the private corporate credit side, not on the consumer credit. Keep in mind that the consumer overall is resilient and overall consumer credit performance is attractive, particularly relative to the corporate side. So on the public consumer side, very constructive, very robust. We continue to see very strong demand. In fact, I would go as far as saying that some of the capital is trying to find its way from, call it, the corporate side into the consumer because insurance capital, pension funds and everything have to continue to deploy their capital. And they’re finding their way primarily through the consumer public side. And that’s also evident in our execution. Look at — we just announced a new deal this week on the personal loan side.

We upsized that during the short marketing period, very similar to the one we did also in January. So all of that to say that we have continued to see very strong demand on the consumer side of things. On the private side, it’s obviously — it’s something that we have been focusing on, as you know, and have executed well over the last 12 to 24 months to continue to diversify and have access to different types of structures like forward flows, pass-throughs, revolving ABS, many flavors there. But we do see on the private credit market side, obviously, an industry that is going through a repricing. And obviously, we’re monitoring very closely for a potential contagion. And therefore, we are leaning tactically more so a little bit into the public ABS side at this juncture.

Keep in mind, there is 2 things that we’re able to do to allow us to do that. First, we have the access to capital. We can very easily pivot, and if anything, some of the things that we have been doing have accelerated the interest from new investors into ourselves. And second and most importantly, we remain very disciplined and laser-focused on continuing to deliver and grow GAAP net income profitability and not just execute at any price point. All of that to say is that, obviously, there is a recalibration in the marketplace. But the key point here for us is that we’re not relying on a single funding channel. We have a very robust model, very well diversified, and that allows us to have that stability and pivot as market conditions evolve.

John Hecht: Second, a follow-up question. Your expense management was a good surprise this quarter. And I know you’ve been focused on that in the past. I’m wondering to what degree should we think about efficiencies in the business and cost management? I guess, how high is that on the priority list for you guys?

Evangelos Perros: So obviously, I would say 2 things here. First, look, one of the key differentiators of the business is the operating leverage, right? This is a quite unique business. You can continue to grow the top line without having to really put a lot more capital to work to grow the business. The infrastructure is already built out. When you think about capital allocation, growth into the business, there is not much there. And that’s a great place to be. And second, I would say a lot of the actions that we have taken in the last 3 years are really playing out and continue to play out. There was obviously going to be investments in certain areas, but the operating scalability and efficiencies that we have will continue to play out to our favor over many, many years.

As you continue to see us in the existing asset classes, everything that we do can be effectively achieved again with a minor investment, and the levels of growth and targets that we have without any incremental investment. And that’s something you should take obviously into consideration when you think about modeling the business.

Gal Krubiner: I think, John, maybe one thing to add. Think about it as a design, not a period. Now it’s not to say that this number will be forever the number, but we are running in purpose a very laser-focused, slim, communicating type of company that is highly leveraged with technology. And now with the world of agents in the world of AI, we would even potentially see that acceleration of these pieces and our ability to be relevant and to do more things with even deeper and more sophisticated technology embedded, which is our bread and butter and place where we grew up.

Operator: Our next question comes from Rayna Kumar with Oppenheimer.

Unknown Analyst: This is Gur on for Rayna. Maybe just one on AI, right? As AI underwriting becomes more commoditized, how do you ensure that Pagaya’s data advantage remains differentiated and proprietary?

Gal Krubiner: So definitely great question. And funny enough, I think you have the answer in your question. But the bottom line is that the things that are becoming a little bit more commoditized are actually the models and the ability to build them. A lot of the models that are implying Pagaya are not LLMs by nature, and actually LLMs are not very relevant for these areas. So for the underwriting itself, it’s really all about the data that we have. We have 30 different partners. We have now history of millions of customers with dozens of millions of historical performance and payments. All of them are actually in a very specific segment that we are operating in, the 670, 680 FICO, personal loan, auto loan, the same. So the unique data advantage is not something that is easily to be replicated, and we are living in a world of very strongly regulatory regime for the good because banks and other lenders are not that easily can work with start-ups or new ideas or to provide them that data because it’s proprietary.

And it’s definitely a very strong ability to continue to have advantage. I will point out that the agentic AI, and these are things that you can imagine, we’re speaking today starting to be fine, but could provide a very leap growth for our business, but in many different avenues. So think about the connectivity to the different banks, and that’s why we’ll be able to be done with agents — or at least some way with agents could accelerate our ability to get connected to these pieces. When we have our very unique data capabilities, then to be able to have even a deeper, more robust way of risk management, data science with enhanced capabilities for agents and LLM is definitely an additional pillar. So for us, it’s definitely a progression. We are not ready to talk about the holistic strategy of that right now, but we are definitely forming it, and it’s something that we believe will drive a lot of quality outcomes in the future.

And at the same time, will be a major driver to the growth of all of that. And as you can imagine, maybe the last sentence, a lot of the banks and the lenders around us are viewing us as a technology provider. So for us to have the conversation with them and potentially to help them go through the AI era is definitely something we are looking very deeply into and starting to actually have interesting conversations around.

Operator: We’ll move next to Alex Howell with Stephens Inc.

Alex Howell: Congrats on the quarter and the CFO announcement, and we’ll miss working with EP. Just a quick question, and this was touched on in the prepared remarks a bit, but could you help us better understand the mechanics of these resecuritized ABS from a credit and risk transfer and collateral standpoint? And how we can think about the longer-term benefits of these transactions as market and credit conditions change?

Evangelos Perros: Alex, thanks for the question. It was a pleasure working with you. Yes. So look, the resecuritization is increasingly becoming a key part of our capital market strategy. In simple terms, what it does is basically 2 things. One, it’s a repeatable mechanism for us to get capital back from deals that we had done in previous times and do that from seasoned entities and do that on an accelerated basis. If you think about the life of the ABS, it’s 3 or 4 or 5 years or so. We’re managing to do that effectively in 2 years post the deal. The second piece is as the collateral has seasoned, we can achieve that first at a lower cost of capital and therefore, allows us to extract effectively more economic value through higher cash.

So putting a little bit in perspective, we did 2 resecuritizations year-to-date, 1 in personal loans and 1 in auto. We refinanced $800 million or so of seasoned collateral. And through that, we managed to get cash back that would otherwise come back to us in a few years out. And effectively, this is becoming now from a pure corporate balance sheet perspective a very powerful tool to recycle the capital that we have put into these deals. And you can see how that plays out. I encourage you to look at our shareholder letter and see how these dynamics have played out over the last 12 months. So I think it’s a very powerful tool. The other thing I would say is it’s actually helping the business in a different way as well. These are different types of structures, somewhat different from the marquee, call it, prefunding ABS, and it actually allows us to attract more institutional investors into ourselves that over time get more access to Pagaya and therefore, could become partners of ours for some of the other structures.

So I think it’s a very powerful tool, and you should continue seeing us do more of that in the future.

Operator: We’ll move next to Pete Christiansen with Citi.

Peter Christiansen: I want to tap into 2 areas. First, risk posturing and then also a little bit more detail on the pipeline and how momentum is going there. But first on the risk side, given the posture change last quarter, and you called it out in your shareholder letter that you’re not extending current credit performance at this time, more data dependent. Gal, can you walk us through what areas are you worried about? And then on the data dependency side, like what’s your perceived green light, red light in terms of any future changes in risk posturing just generally?

Sanjiv Das: This is Sanjiv Das. Let me address your pipeline question first, and then Gal will come back on the consumer risk issues and what we are seeing ahead of us. In terms of the pipeline, very specifically, we had mentioned — we had given kind of guidance last quarter that we had about 5 partners that we were onboarding, and we are very much on track with that. We have, in fact, announced partners like Achieve, GLS, Sezzle, Upstart and are now in the process of onboarding Flex Pay, which is an existing partner, Upgrade that is getting into the POS business. But essentially, the pipeline of new partners has been very robust. 5 partners in a couple of quarters is like way higher than what our target was. And we have about 3 or 4 more that are in the process of being onboarded.

And I might just add that those are principally regional banks, and our appeal there has been very strong. I also want to articulate the fact that our pipeline constitutes all 3 asset classes that we’re in, so personal loans, auto loans and point-of-sale. And the pipeline beyond that also continues to be very strong with several banks that are positioned where we are in late stage, some in economic and term sheet discussions and several in sort of business case discussions. I would say that there are 2 major banks and about 5 or 6 regional banks that we are in those stages of discussions with. And the appeal has been primarily around 3 or 4 major attributes. One is we are actually helping some of the regional banks now stand up a stand-alone personal loans business, which completes the consumer product repertoire for them, which is extremely important to them for their depositors as a product offering.

So we are standing up an entire PL, personal loans business for them, not just a decline monetization partner, but more than that in terms of the entire product offering. For others, the appeal with the new pipeline is helping them grow beyond their organic personal loans businesses into the marketplace with what we call the affiliate channels, such as Credit Karma and Experian. And that appeal, including with some of our existing banks, has been very powerful for them. And so our pivot to what we call product in the last few quarters has actually proven to be a very, very good acquisition tool for our new partners. In auto, the fact that we are now talking about massively improving our dealer satisfaction through our product range extension in terms of longer-term products, higher APR products, has had an incredible appeal with some of the new auto partners we are talking to.

So long story short, 5 partners onboarded, check the boxes on that, 3 more partners in the process of being onboarded and about, I would say, 8 to 10 partners that are in the pipeline, which constitute banks and fintechs. Over to you, Gal.

Gal Krubiner: Peter, regarding your consumer health question. So obviously, this is our business. So the risk management nature and the way we think about risk is instrumental to the way we think about growth. And what we’re trying to do is to continue to grow our business model without touching at all the ability to need to extend or to increase the credit risk. So under that kind of belief system and philosophy, which is a philosophy, the short answer is that the consumer is behaving in line with our expectations this quarter. So we did not have any change to our credit posture. However, as I said before, this is our business model, we continue to monitor it closely and try to see signs beyond the first quarter, which was a very strong tax season, and to see what’s going to play out in the rest of the year.

So we didn’t taken off our very observatory eyes and to see what’s happening. But we do believe that we are in a better situation, but at the same time, happy that we took the decision that we did. Just 2 things on a more softer piece, when we are thinking about what could potentially go wrong. This is a lot around the negative headlines regarding inflation that could come from geopolitical conflicts or others. And we continue to position our portfolio very strongly around strong high-income earners. So while our FICO is 670, 680, which is definitely in the middle, on the personal loan side, our average annual income of these borrowers lately has reached as high as $115,000. The same on the auto loan that we are going slightly to a lower FICO ranges, we are still talking about $80,000, $85,000 of annual income, which is above and beyond the average American numbers as we know them.

So all in all, just to summarize that up, we have built a very disciplined growth strategy that is really the core and heart of our business model, that we are not growing through opening the credit box or marketing spend by adding more products, as Sanjiv mentioned, and adding more partners, as Sanjiv mentioned. So growth and credit posture could go hand-in-hand for us. And we feel good on where we are today, and we are on the watch of what needs to come in the future.

Peter Christiansen: It’s good to hear that growth is primarily driven by pipeline expansion. Sanjiv, I just want to expand on your comments a little bit. I guess if we think about the cadence over the next, I don’t know, 3 to 4 quarters, would it be fair to say that the current pipeline is more constrained by lender onboarding or integration timing and less so by available capital or risk appetite?

Sanjiv Das: 100%. Yes, I would totally agree with that, Pete. Not at all constrained by capital, totally a function of execution, as Gal said. And I would just add that even that whole process has been highly systematized and the lender onboarding process has been significantly reduced, which is how we were able to get — we told you guys there are about 8 partners that we would onboard in about 2 to 3 quarters. Remember, our typical guidance is to be 2 to 4 a year. Now we are talking 8 in about 2 to 3 quarters. So the speed of being able to do that. I just wanted to add one more thing. EP mentioned operating leverage in the past. I will say that we added all this without one single headcount being added to the system. So that’s the power of the platform that we’ve built. But yes, short answer to your question, not at all constrained by anything else other than just execution.

Operator: We’ll move next to Lemar Clarke with Freedom Capital Markets.

Lemar Clarke: I wanted to ask a question on your multiproduct growth strategy and the continued momentum you’re seeing in Q1. Maybe if you could provide some color around the interest you’re seeing from various lending partners across the newer products? And are there any specific insights you’re able to share around how certain products resonate with your lending partners across the different asset classes?

Sanjiv Das: This is Sanjiv. I’ll take it. So yes, great question. As we mentioned earlier, our growth is being driven — the way we think about our growth is in terms of growing the network, which is new partners, and growing our products within the existing network. So our volume growth will come from those 2 vectors as opposed to credit box expansion. So let me talk a little bit about product expansion. On the personal loan side, we said before that our partners grow either organically or they grow through their extension into marketplaces. Those marketplaces, we call affiliates. And we have a product called the Affiliate Optimizer Engine, which in the personal loans business is, as a category that is not as well developed as it is in credit cards.

I think it’s fair to say that Pagaya now kind of owns that category in the personal loans business and is building out the Affiliate Optimizer Engine as a very successful distribution expansion engine for our lending partners, and we’ve had tremendous success on it. Just to give you real evidence of that, one of our top 5 partners, just by virtue of getting on another affiliate marketplace, grew their business by 37% with Pagaya by virtue of just getting on another affiliate platform. The 2 principal affiliate platforms, as you know, are Credit Karma and Experian. And now on Experian Activate, we have about 5 lending partners that are in the pipeline to grow. And we have our top 5 partners in there. So think about where the personal loans business could grow for Pagaya, by helping our partners extend into these new distribution channels.

So that’s on the personal loan side. I should also add that on the personal loan side, we have run about 12 prescreen campaigns, which we talked about earlier, and have now built out our direct marketing campaigns for these top 5 partners. We have built the credit models for them. We have built the response models for them, and they have been built for each lending partner. The economic terms have now been agreed to with these partners, and you can see the trial period extending into a rollout by the end of the year with our top 5 partners. So in our personal loans business, that’s how we are going to expand horizontally. On the auto side, as Gal and EP mentioned, we’ve had obviously outstanding growth in our auto business, even if I should say so.

And a lot of it has been through product expansion on the dealer side. We expanded — we sort of modified the loan terms in keeping with where consumer loans are right now. We started extending the loan amount and higher APR caps. These 3 things led to a massive growth in our auto business and continue to be very, very powerful in terms of improving or reducing friction at the dealer with the consumer and significantly growing our auto business. Again, none of these are credit box expansion. These are all what we call product feature or product expansion. What are we seeing in terms of interest from lending partners, I would say that on the PL side, the ability to get into marketplaces, which Pagaya now is the principal interface between our lenders and these marketplaces, is really where the focus has been.

And we do about $2.8 billion to $2.9 billion in these affiliate platforms already. We think our ability to grow these businesses, these marketplaces, is very high. So that is of great interest. And I would say that on the auto side, the continued focus with dealers and improving the dealer interface has been of great interest to our lending partners.

Operator: We’ll move next to David Scharf with Citizens Capital Markets.

David Scharf: I’ll echo the congrats on the CFO transition for both Jon and EP. One quick question on funding. Obviously, 12, 18 months ago, funding mix was a very large topic and funding diversification. And as you noted this morning, an awful lot of very positive developments in your ABS funding has taken place recently, adding Fitch, adding revolving securitizations, auto. Can you just remind us, to the extent that the ABS markets continue to become increasingly attractive, do you still have sort of a ceiling placed on what percentage of your total funding you’ll allow to come from securitizations and the accompanying risk retention? Or are you kind of thinking things are a little more fluid just based on recent developments?

Gal Krubiner: David, I’m going to take it. So no, we don’t think about these things in terms of ceilings. I think the better word to use is infrastructure. So as you know, to develop a funding strategy is not something that takes a quarter or 2 to build. Sometimes it takes 18 months or even 3 years to get to the level of efficiency you will need. We definitely started from the capital market side, that was our bread and butter, and over the years have pushed ourselves more to the private side and whole loan and all of the things that EP mentioned, but the key word is diversification. And as the company execution, you should continue to expect from us to build the pipes, the capabilities, the partnerships, et cetera, on both sides, almost equally.

So as much as we are working on the Fitch rating, we are working on the next forward flow or the next whole loan buyer to make sure it’s going to be on top of our platform. Now there is a different question of like how do you utilize these assets and these relationships and the infrastructure that you have built in order to fund in a specific quarter, in a specific year, in a specific time. And there, the discipline of pricing, the discipline of the earnings combined with the capability to have diversification is really the equation that we are solving for. So I would say that regardless of this or that last quarter, we are not trying to solve for a specific percentage in a specific time frame. We do solve strongly for a very robust fundamental infrastructure across the board.

So if you will see some dislocation in one market or the other, our ability to move away and to rely on the other is going to be seamless and at the same scale. And that goes really to the world of diversification.

David Scharf: A quick follow-up on the product diversification expansion and specifically products like the Direct Marketing Engine. As we look a couple of years down the road, are more of the products going to be tied to sort of maybe less predictable one-off events like a marketing campaign by your partners? Or is the kind of visibility and predictability of volumes going to remain unchanged in your mind?

Sanjiv Das: I think we are seeing a lot of moving parts right now in the whole direct marketing piece with our lenders. We are seeing, as I mentioned before, a significant shift towards marketplaces. We are seeing a significant shift within those marketplaces to folks using — consumers using AI platforms for shopping. So there’s a lot of consumer trends that are going on simultaneously. From our perspective, we can see that even the marketplaces themselves are trying to adapt to these consumer shifting trends. We are not sure where this is going to land in terms of how consumers finally shop through using AI, for example, but we know for a fact that the banks and fintechs right now are extremely focused on going through the affiliate channels and also leveraging really good consumer selection and credit box and credit spectrum expansion using our products.

So for us, that’s turned out to be a really valuable product catalyst for our growth in the PL business. Gal, I’m not sure if you want to add anything there.

Gal Krubiner: No, I think that’s definitely right. And as we scale and as we become more valuable, we become a much organic and more organized way of not just going after campaigns, but many more other ways. So fully aligned here.

Operator: At this time, we’ve reached our allotted time for questions. I’ll now turn the call back over to Gal Krubiner, CEO and Co-Founder, for any final or closing remarks.

Gal Krubiner: So I just want to say thank you to everyone today. This was obviously a very strong quarter that demonstrates our B2B2C model in action and the discipline in the way we think about underwriting and growth. Looking forward to see you in the future, and thank you to everyone for listening. Have a great day.

Operator: Thank you. This concludes today’s meeting. We appreciate your time and participation. You may now disconnect.

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PAGAYA TECHNOLOGIES LTD

Q1 2026

Earnings Transcript

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