PGY - Earnings call transcript Q3 2024 | Pagaya Technologies Ltd.

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Operator

Ladies and gentlemen, greetings, and welcome to the Pagaya 3Q 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Fagen. Thank you. Please go ahead.

Josh Fagen

Thank you, and welcome to Pagaya's Third Quarter 2024 Earnings Conference Call.

Officer. talk Executive business Das, Officer Evangelos Chief to Gal results President; today Perros, Chief Krubiner, of Financial me about and our are and Joining Pagaya; Sanjiv

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

outlook things, current forecasts with financial respect remarks include statements the forward-looking including and Our for the that are performance, among and expectations of other our quarter today will based operations, financial on full our XXXX. third to, our year

to Our today's actual are could but contemplated statements. release with filings press forward-looking from these results We as Securities file cause may these events. refer undertake more that include, in those expectations to statements not differ the and Exchange or of our limited reports materially materially detailed including for Factors Commission. and U.S. differ our a a by other the from to, result these time with update obligation those we future and to to new information results described our XX-K, Please forward-looking time risks discussion no documents XX-Q factors. the SEC, any of from

call. today detailed earnings available earnings net me with in was turn measures including let on review and to efforts business release to adjusted our financial you furnished adjusted Gal. unreasonable the non-GAAP extent or Additionally, commentary over the measures, which call that, the press our on Investor financial letter, revenue supplement GAAP conjunction EBITDA other Relations for materials, income, margin, our X-K release. With website. to on most SEC the accompanying which comparable are less with Form the the the FRLPC and and encourage are shareholder posted performance We Reconciliations and EBITDA, be available core on will in discussed adjusted percentage fee directly FRLPC, costs, production to without operating expenses

Gal Krubiner

with use momentum sets looking loans all the $XX GAAP improve generated of to started billion $XXX good funding always they and our efficiency read of results, and $X everyone. With which fee that deliver business had chance you approximate our to to third their and is million the in our product retained of driven you, financial quarter the to our new by drive $XXX of profitability customers is billion of Thank of generation, and and for our annual Pagaya is our of scale fee level This Pagaya we profitability. million both during and can of reaching is X a economies next an XXXX. The letter. of Pagaya as laser-focused result of execution are shareholder flow product strong now added scale, or the increasing costs morning, lenders improve to revenue less production our the at customers. over offer they EBITDA. hope total value cash goals million revenues, I demand positive brings adjusted has products to unique The our rate by since approximately of partners. value

with they and As only acquire The play to are growth network to customers more looking and partners time. Existing a serve plan. Pagaya moat and enabling are way. partners is in each our XXXX with is perpetual our becoming to engine lending bigger, our role we grows application more sending critical data getting their are powerful our

customers' lifetime value more of products, for enhancing these partners are As our both return, and additional in opportunities plans, of revenue relationships. creating and our part for their Pagaya asking of partners the

key in franchises. Growth growth. generating have line of of power network driver a is our our vertical year volume, to the channeling in existing X of over continue to inroads over the customer a our country. next expect of $XXX the bank bank our per We X to make point-of-sale year In top The relationships million pipeline of well. largest onboarding strategy, long-term our with we with continues progress

integration, quarters Additionally, Bank's is Elavon, also happy network. our multiple live U.S. of I'm following onboarding to that and now arm report on point-of-sale

pipeline next personal will lending In not more able And lenders network, the right the more more several and optimistic to improving are expansion our terms our to speak Between be extend top consumers. expansion front backdrop, are to combined these partners, about us. sheet-level of of other with opportunity and future auto. to the currently are some prospective access in about of credit be XX could ongoing of we macroeconomic term product the we discussions expecting for with year. point-of-sale names Sanjiv momentarily. I across announce in loan, conditions

into to the want important profitability Pagaya sustainably focus transitioned This profits is business flows. cash generation. We year As without equity this a as cash growth flow our revenues capital. be is raising that can laser I opportunity and on and to external clear. convert past

generation, will improve All X drive of this that funding strategy split XXXX core brings me greater into to areas focus. of economy and fee efficiency of financial our to scale. I

fees line First, higher benefit we Cost are dollar more results. earning we our of has generate, reaching of quarter. record every the savings bottom a fees level on volume network on this amplified

consistent to we in adding our as execution improvement Next, have demonstrated network. well terms our ABS our as funding in funding, diversified more of sources

our program. have achieved structural ABS through changes in We this

on a personal program. rating loan program For loan example, AA rating our AAA a achieving and our auto on

We our funds channels broadened managed flow, have also to funding forward and pass-throughs.

and in both X level material a retention years. this over improvement the of our All resulted costs in funding risk lowest in

risk a future cushion to retention assets. addition significant against created impairments has this on that, In our

stable as leveraging performance result adjusting reduce additional underwriting showcase stronger and performance. September growing all, sustainably us increasing and unparalleled balance model the and growing that of growth parallel has and we have over of will The in sheet the sheet interest our a months transactions by these the the series significance debt, we to negative become efficiency. demonstrate liquidity. fees, operating stronger as true data with to in the capital a our retention business will expect unlock much leverage a and of credit iterate balance last which potential XXXX model, discuss continues a XX of our our expenses the business profitable to impact Lastly, are created in of in XXXX. earnings us, EP of has to our refinance risk continue all from the positions behind high-cost advantage. we on this moment. In All initiatives, significant helped we improvement end announced

year We of investment. enhanced never improving franchise in and our power advantage some we a investment, underwriting a and turn the enterprise. the credit-related to when proud to environment. I delivered To technology company earning take a financial multiproduct most build-out of close, we have of am true I offer lending our significant technology I with sticking in impacting successful the more which that and it as consumer, of start vision network came U.S. demonstrate grew our with results The our of to been top our lending team investors, institutional XXXX. become excited cost U.S. company say deliver that, corner lenders and the to consistently could business, our value our any ability future to massive our with to not remarks. to I to a Sanjiv be more As of our investors a capabilities richer one was our of will has positioned is of journey today returns. confident the partners, to on few the over in-demand about set for strongly shareholders. With data of are our the and the hand and solutions our

Sanjiv Das

on multipronged minutes focused an a growth with Thanks, update strategy to incremental more partners and growing to originations our as loan Gal, for new our understand well our is and exciting and important everyone. want and partners as on new products our than their our good morning, It on how through conversion. I products. do existing just progress spend few developments provide

existing being portfolio products used Our partners. a growth the within are additional increasingly of for catalyst our as

to benefit our the partners can looking This credit customer. and existing their includes sheet a products for helping of offering breadth value retention responsibly. balance by lifetime expand increasing solutions in the is are credit customers existing of customers our the partners associated of opportunities are risk. common We most without taking increasing offer revenue they The additional

in Additionally, importance relationships great banks, retaining of valuable their to a and regulatorily depositor the in is revenue case creating of especially constrained environment. growth, fee-based

our growth increasingly and to time, offered seeing As within which customers partners, of witnessing we existing is on macroeconomic grow businesses. These At of their driving this with and backdrop. a valuable increasingly more to is product to for This products the lenders normalizing are consumers customers. the multiplicative. strengthen increasingly is an and we potential lending result, deposit so are Pagaya's banks being are Pagaya that critical vigorously stability enterprises existing leaning funding and to offerings compete their

In are in see partners an their plans Pagaya's billion XXXX result from because increasingly we finalizing phenomenon of XXXX, in their propelling strategy. volume. our record growth XX tailwind quarterly the this existing partners are that and This fact, $XXX surpassed of quarter, growth will a indeed, third And beyond. of integral as for Pagaya's we application products in part

new partnerships. Turning to

Our pipeline asset it all notable classes. across recognizable and brands and includes is strong,

changes our highlights we like in First, structural I'd to of discuss some are pipeline. witnessing

X/X roughly great demand our banks exceptionally levels of regional This of high mix banks. payments includes seeing product, and comprising pipeline. major point-of-sale global for We are brands, a money center of our

regional turning from our continued serve partners. banks in new our real with value. forward and with classes. banks and change pipeline the of American regional constraints, of create growing and fee-driven is growth XX% that's by growth customer business. other The revenue to grew across sequentially year-on-year asset notable boost demand sheet comprised and continue quarter, XX% X/X Starting to approached to We regional regional communities. And ahead volumes of us ramp our is balance this point-of-sale large local light business, look regulatory of to Currently, number the and these of In this now to uncertainty helping needs a partner all of existing banks partner large them have banks. from

Our we partnership is a significant expect with where volumes. a Klarna point at in now ramp

contribute We ticket to fourth duration Elavon, will in financing begin the loans. are longer focused larger and quarter. size are working onboarding to tech the Bank on U.S. additional arm, results completed our has and to include that point-of-sale products

Additionally, Pagaya looking money bank. The more to the a auto conditions challenging Returns achieve vehicle expectations. we has stages and growth currently values. years onboarding sector and of the are now couple normalized last our with the of partners are in backdrop faced payments both to business over lending top of macroeconomic are stable in late more center X volatility

on mainly Westlake. and platforms lenders on focused OneMain our We Ally, are premier as such

more quarter, moment about creating product to a a with excited extremely we flagship to market reach the before product. X demonstrating our a specifically prescreen road the on to third prescreen This underwriting. has products I'm Over this are continue lending we company's over the focus we successes. quarter, is months, growth increased, X next to bring I partner now currently in our expect noticeable our more map, to other opportunities Pagaya to which live their asset discuss existing into Overall X.X% customers, This it X our percentage hand loans, we has the take pipeline. extremely highest partners. enable XX offer is book our demand FRLPC connected of class, our early segments. In prudent in in expect Personal across based we designed partners, of from the have our and third partners want EP, offering XXXX. But trend to to to the expanded value of which on product I a product achieved

trust partners use further excited We discuss me ramp Pagaya's What connectivity which win, that the all and we And our to of our value integration lenders. let the this be is drive win. With in utilization of results. to power leveraged hand network expect that, prescreen partners. to over lifetime most to our when existing to franchise EP now our and financial all about can ultimately of offering, XX product across epitomizes a I'm

Evangelos Perros

and you, of everyone. We million, $XXX fee million Thank $XX morning, EBITDA Sanjiv, $XXX total good reported third of revenue million. and less quarter production revenue of adjusted costs

progress progress our our key through on reach cash to generation results, flow discuss made to milestones, Before we focused financial XXXX. This at total the is financial I profitability, to which expect I GAAP of strategy walk and this achieve quarter's beginning we the X due sustainable to during year. out set that want the we execution

economics. First, on unit

with volume record a of quarter was cost and million network Third revenue at X.X% fees across production channels. increased fee partners $XXX less multiple

quarter, a operating reflected approximately $XX overall reduce in annually, we operating portion efficiency. which Next, to by improved expenses the million leverage, third on took of action was core driving operating

optimized and the capital In optimized reducing retention potential our portfolio. efficiency, while diversified of use for risk sources terms the related ABS We business. our that of Last, securities down liquidity impairments capital structures our future achieved we against debt. funding corporate and this release we've our expensive capital to to debt unlocking lower of as our collateral paying the serve through our by structure derisked and that

addition, $XX highlighted quarter on the million, expense debt conference paydown our interest is In earnings to approximately reduce second an we expected opportunity call. by

expect prior on related XXXX. increasingly profitability, sustainable of and to as on income vintages and majority This, more challenging. with further our evident our we capital any of positioned for adjustments the future we in portfolio to have conditions XXXX, of to recognized much in will cushion against In our losses We originated in reach become profitable supports which these to produce products when to GAAP XXXX book XXXX. net value expect were we the have company coupled This leverage enter during seasoning remaining Based market losses, vintages, the created our XXXX. demand path to and fourth securities the fair these growth. quarter we we

to third revenue grew growth towards record of to of personal volume. revenue continued fees to our than of $XXX billion Network fees fee costs X.X% to FRLPC expanded basis $X.X by Turning loan X.X% by XX% strength continues income a most up from in personal less It production higher $XXX XX% results. XX% production driven total points network half percent the mature by in XX% production respectively. volume costs million, XX% year-over-year, revenue high quarter XX year. the in from prior to of second our volume an year-over-year end our to million, X.X%. The was up range target XXXX and note million. be less loans, revenue businesses, meaningfully Total lending and year-over-year important of to FRLPC partners, the that revenue. comprised largest network generated revenue other vertical, as XX% XX% volume in of POS year-over-year of in less Fee which costs Fee and to is grew with XX% and $XXX year-over-year a versus our X.X% quarter growth grew which with the our and our

Looking unit and backdrop. forward, in businesses growth further we favorable anticipate macroeconomic more improving auto economics point-of-sale as a from both our scale we

$XX While in FRLPC XX% business, year-over-year X% in along benefits going leverage by losses strong and in related leverage older expenses of XX% million quarter a quarter, operating purchases operating level cost flattish of demonstrates ABS XX% continued since the operating sequentially. drove the and XX% This Core initiatives our transactions. The embedded loan public. lowest were from down Total the the savings prior impacted the the grew fees down FRLPC, and showcasing quarter excludes expenses loan of in $XX third and adjustments higher to announced June. net items of operating were we from operating expenses such combination the whole EBITDA was incremental the Credit-related positive in the core year $XX of $XX were with in which XXXX. quarter the earnings as XX.X%, third underlying power noncontrolling in year-over-year, basis million share-based of Pagaya net fair of grew a of noncash reported value $XX in of Adjusted of million, adjustments attributable adjusted to the loss was $XX million, EBITDA million Net expense other by value a XQ fair interest. Adjusted loss quarter. amounted business. to other compensation points. margin million $XX net income, up margin negative XXX million compared in to

credit line with during While continued expect to the normal that for business, we we as top will losses sustainable be profitability of our XXXX. expect all reach businesses, part we GAAP is lending case growth, a

to moving performance. Now on credit

portfolio we XX% CNLs XX% shift XX% personal XXXX loan notable the and in peak data improved Credit levels XX% products our latest in a expectations. both and more the in relative trends saw our both show businesses peak show seen macro driven improvements auto in our across latest environment with improvement stability our we has performance improvement of loan The for relative by resilient that of have now in to our The have and portfolios. personal auto peak to loan XXXX. The months. to levels in We to over for the XXXX. combination to relative to significant data loan our line saw X an is XX businesses all credit improving last an borrowers losses

funding. time, pricing ABS our made significant to this environment assets At We've funding was by Turning optimizing improved demand which a for capital meaningfully and our continues in consumer has of far challenging the efficiency program compared terms and sources. progress diversifying to strengthen to year more XXXX, same industry. the for

at have came As our It third early XX, transactions. was XXXX, our we at effective In closed quarter, we of transaction year-to-date oversubscribed. September capital of significantly ABS that XX net $X.X since $XXX ABS seen a million across and about lowest deal, priced program in we've billion the our cost cash was X%. retention the second risk issued in AAA-rated

executing XXXX. plans our transactions X the next our $XXX program the completed the notional to network the X% range the amount. pass-through same months minimal to account barring of at remain we October, non-ABS time, levels or funding the will be flow for in X% represents At require total ahead, environment, at total of retention with X% these forward to X% of retention average expect around continue X risk few million. These anticipate net we retention in valued funding to just Looking transactions in total the anticipate XX% the of which such risk have risk more in of In no volume, risk net retention. to quarter loan XX% scale our year over we cycle. funds We securitization notional deals expand changes net the personal target successfully our around expect to In our programs, and total, second privately fourth X% on which managed further size. funding any significant to ABS to to and we little channels

September, be announced our securities. down series transactions, expected These balance transactions improve and will to a sheet. to high-quality million $XX opportunistic our excess an million, borrowings. reduce and Turning to we in used to with sheet Proceeds expected upsizing balance of the note balance $XX loan of an of high-cost In strengthen collateral million approximately pay access by raising executing annual expense and $XXX sale liquidity our meaningfully of $XXX exchangeable approximately by cash interest million. sheet, are release term

complete expect end We to the the year. these of transactions by

impairment This noncontrolling quarter, $XX of million. interest net we a fair of value recognized

our XX unrealized million We million. in and securities. securities other shareholders' September remaining equity. related comprehensive our These booked also loss was our in The approximately reported fair change $XXX of $XX to vintage income of of as a were gross value XXXX charges XXXX primarily

to the any recognized remaining cost the in earning XXXX high of true even up setting of capital The changes impairment in relative As majority the environment. us we sensitivity in vintages fourth in charges. the a I XXXX, ABS to resulted noted credit-related better business quarter were issued high power demonstrate be adjustments of structures small in fair value earlier, losses to related these of to expect XXXX. These

with continue invest value. of mentioned, growth building As focus long-term time, our Gal to franchise in on a the during shareholder we that

capital GAAP normalized our in which income will much positive improvement during markets change in cushion impairments, enable results against ongoing reach future coupled step Our with us with coupled capital a XXXX. higher in more efficiency, growth business to net

remainder the outlook close Now year. of the with let me our for

our metrics. we narrowing XXXX, ranges our full of target For across are year all key

accelerating laser-focused on most our we cash generation stay our to flow we profitable directing profitability, channels. production are and As

volume network and year between range $X.X full to $X.X billion expect billion. We

other and We expect $X.XXX and income total range between $X.XX billion billion. to revenue

expect of We excited milestones and million. To range adjusted and accelerated we all we that about $XXX million to to are achieve profitable the between goal. growth towards $XXX our EBITDA have achieved close, trajectory

GAAP We that, quarterly income expect for operator me back results. With net XXXX to it let to provide the guidance formal positive to will Q&A. turn during at next and XXXX turn our

Operator

question Joseph [Operator comes from first Instructions] Vafi The Canaccord. with

Joseph Vafi

just Nice progress funding to business of the facets side. the we along see start many here. on maybe Thought

you've a deeper of Could sounds volume into nice more little got the developed And on go than funding a have of sources. follow-up. sources? we network how traditional set then maybe for economics you Now you bit across I'll mechanics sources loan these maybe allocated of little bit it And different various like some on other -- funding a volume, funding is a then quick ABS? the the

Evangelos Perros

take This is Joe, thanks for one. EP. I'll the that question. Yes.

-- rate across to and QX to So X%, of entire obviously we're combined one to X% very looking around our sources have diversified that, be pass-through excited at the are all we structures our which expect volume. at mix we terms currently about of side, ] X% X% structures, now where with QX from to range On blended expect funding. and funding which we're flow, our ABS forward to optimized [ exit in we as we significantly

and flow programs. significant and We we're continue in in further pass-through to to see the demand agreements. discussions to scale programs grow We these forward particular, opportunity explore

demand, of in that very pricing which the different is significant investors, and our And All amongst in from obviously, as the already a guidance reflected of X.X% X.X% hints about. any that at a of of percent of excited to FRLPC changes we're structures volume. all

Joseph Vafi

a a EP, detail little just volumes more allocated -- how across these you how more get maybe bit on funding like different -- that way little any there Is it. Got there. there, vehicles,

Evangelos Perros

to alternative our flows funds pass-throughs, managed think -- have I with remaining forward XX% well, XX%. in and we taking XX% the of currently our And provided our to would privately some as but volume information sources XX% Sure. the XX% about ABS across letter approximately being

Joseph Vafi

sounds point-of-sale day? you've up compared Got logos loan think be a big like It on to then relative we volume in point-of-sale the Could Or point-of-sale. should some do one loans? it. and of Obviously, How there's network it lot large there. some got pipeline. about loan how And maybe already of to of some other cohorts you other types? that it the like over time your personal one see signed

Sanjiv Das

This take is I'll Sanjiv. that.

yes, with into of super So for substantially totally relationship way describe asset already a size it ticket growth have that's the The also exciting with grow And new is longer or sort agree class, as go I said, you. with which obviously we've loans. area point-of-sale emerging going we is new duration, we'll it. know, I Elavon. longer Klarna people very us, to because That, BNPL set Same you the as many as up. of

major some substantial seeing most time that across a are for happen phenomenon in in banks. banks. quite this We are have center We payments very payments or the that banks getting into been We regional of way. across at and money that getting into -- see see

strongly will And some whether of really big answer be it we will and investing we not They we very, personal that so think forward profitable, credit be to this that personal it it lot if short lending very, absolutely and card a the very are business, to as and it. at as loans look to believe totally or will. And in little money PL believe the like duration are fact we as a size increasing that makes area are and -- as that bit loan and so big an we. adjacent business on about loans, question like that as appear is equally ways behave that. least [indiscernible] And your This we the partners. is the in

Operator

question from Palmer Mark The Benchmark. next with comes

Mark Palmer

balance with the then leverage about quick additional has I thinking and expense regard platform the The expense through in job great operating you of the are company's control How a in that's terms going done shining between margins? a And to of follow-up. and forward? through reductions, company creating really and what's the profitability. have investments one implication question

Gal Krubiner

Mark, for the it's Gal question. you here. Thank

hand then take it over So perspective, remarks. I a few financial to and business will we'll it a EP first for from

So of differentiator this perspective, from the is Pagaya. think of I pieces one a business biggest

you think perspective, or the that is partners that reality from As about it is to infrastructure an XX XX not different. manage

say we the of don't to that build higher scale an not And a the that it's to have it knows X to of X or XX% needs, year. add think that related X% expenses something onboard amount we it's but about X between to or and magnitude engine So that.

force mainly that that as grow of we where we where be. more that the platform, stay So the That's the we reduction revenues, should from can that I and call whatever that's initiatives. place right to going view the we to you perspective, how high double-digit our cost is sorry, role, it, is to -- high we in did is revenues while That's into numbers. The flat, staying in the add additional expense only or to a his want view Sanjiv net single execute basis continue business. effectively in many piece other to are where with now. And today we in especially running front are came to the lean what believe we strategic not wanted

the could road for ability that of because build In Pagaya. a asset in products business, and more to story same the to that's our really high the classes even it's leverage and scalable down be more concept addition,

Evangelos Perros

deliver about the and said, on continue to operating down. to It's opportunities on thing business growth want without incremental to one inherent has differentiator. of an Gal key advantage ability expenses It's managing the take double And any more leverage that investments. I Yes. about down a it's less necessarily and our our strategy it's

incremental costs XX%. than any driven about opportunities has point of The If they're continue us is infrastructure. growth cost investment the and less take year-over-year, this at of incremental all ahead more by -- production advantage on yet you our look of we on our that material has or fee costs flat, without execute grown can strategy revenue to

Mark Palmer

And one quick question. follow-up

a We the week election. are U.S. presidential now since

to what from your get the new for environment are wanted for thoughts the administration expectations in initial particular. on regulatory under perspective, a the operating Just Pagaya

Gal Krubiner

So Mark, sure.

generally very, that without happen is time, speaking a that there and speaking, about right, market constructive are same a in belief I think the So there. that strong situation regulatory will U.S. be I that say, more is and belief from growth really should politics, a we the in the perspective, would in

the type a we you supportive properly. And about pay and of For to take different same will a in strong can of pieces that and to space, time, X are ability as is these perspective, for strong think debt that imagine, the bring the it consumer a for tailwind into this technology into Pagaya, capabilities banks to us. other have well as us for and our that narratives fit definitely more disruptive the in and more you the as

So in for by the the actually tailwind all something all, exploring value and into ecosystems is us. banks drive opening more definitely to is ability that and technology different a

Operator

John Hecht comes with Jefferies. question next The from

John Hecht

FRLPC like about Maybe loan more different just talk continuing that the it's to against versus the because new know retention can I mature, also, growth about Maybe product, more products? on it's execute talk risk maybe scaled. And lines. the like the Congratulations other with you that plan. across product the the personal

Evangelos Perros

for question. the thanks John,

that unit loans, which the company of is try across you the a as When closer to today, that quarter to other FRLPC I grow we we loan X.X%, more opportunity is auto close a to would is areas personal retention products, to you basically profitable. third and FRLPC we and more a investment at what on the are different loan. opportunity product, the see say economics as is of in expect are a These looking apply And X.X%. X% I retention reported continue the as we the success risk those mature there we're as map the end products. our then that for see we saw, And dissect areas risk behind. From to road forward. you few product it's significantly us, we're same moving if quarters that's would significant in It's to across a mature X.X% What a to range. as as little fronts. it which upper replicate to an already say at had X%, where but to to well just record take products right, example, close between personal relates continue these personal in entire a the still a So perspective, POS, we difference to that is

John Hecht

rate? been It's And downward Okay. despite growth. on can volume fact you've very about That's the trend are a conservative. maybe talk very you we you -- the you what in kind guys? Where had -- conversion that reversal helpful. the cycle that It's that trend that then might rate? a might might see does opportunities conversion in still present solid to And the of that we of what

Evangelos Perros

than more our change franchise little looks of to that the $XXX Yes. continues growth of built little sure and we Listen, see opportunity seen to be returns. quarter. per continue conversion have not it used sort less in expense And partners as want We flow to a a application than of at our significant we through profitability and do point, coming obviously make in rate, opportunity, We now your to of at bit lower that than may grow, and the that in but materially XX a the we form X%, you have that to be. growth to profitable right? have billion bit, what

to newer continue surely -- and ] -- start our of up you conversion we [ will move coming on we As relations naturally more ratio an some that partners see XXXX. particularly naturally in we increase increase with in flow get the mature, and

Operator

question Sakhrani next from the is Sanjay line KBW. of with The

Steven Kwok

This is and seem the I actually It fine. Steven Sanjay. to like seems just Kwok credit want filling this in impairment for I credit quarter. on credit be drill down trending metrics to guess

the led Just auto XXXX you personal credit -- side the just we curious on related could to side? If it seems as or on loan it what's provide like the was details. just And more down to could it If to vintage. this some drill was impairment quarter.

Evangelos Perros

Sure. I'll [indiscernible]. that take

to the if business net to related that future. GAAP to in reflecting in XXXX the either company look, I way, And any, very is a mainly the vintages. today income drive were well to impairments, So the as positioned underscore impairments profitability XXXX want and

to XXs continues that all range want XX%. across XX%, CNLs I performance XXs lot and and that multiple better XXXX improve we addition, or significantly has the and of they on are is of the than to clear, to quarters. XX% even make at the in credit a provided In information for our our improving been you vintage products, When look

Effectively, and -- types and positions, not a is on took related funding position is expected investors Pagaya during And of building retention these credit. What looking very from So up we're perspective, assets. growth the environment risk liquidity returns challenging to this these done environment. we related focusing specifically 'XX our very planting have that for you're the was having at in you future to the was to here was franchise, to growth. continue our invest high underwrite of in

you we didn't effectively to from changes losses, -- what even anticipate us those susceptible is though structures in even impact impact performance. have So here left the credit that financial small ABS

that's are A obviously, is by as XXXXs. The where and what I today. there. driven of impairments question here drove primarily things we these couple key So said,

all significant markets have positive. our leading a and and diversified of environment impairments. all, better structures First we the to obviously, against is our importantly, most optimized future funding funding But funding, that any of and capital cushion significantly significantly

the be going earnings take XXXX we away the fourth want call, the leading business the to to noise as the majority expect vintage any obviously So of that on profitability GAAP to taken vintages, noted in power in as impairments net that to relates quarter. And we it income I demonstrate of of forward to sort and the for remaining XXXX.

Steven Kwok

Got you be? the fourth in as it. how credit large could And have any expectations impairment today, of of the quarter do preliminary

Evangelos Perros

we the sheet is, provide impairments terms need to we the you in highlight particularly would and the portfolio that and I for XXXX. season, to order XXXX do the we approximately position. be Yes. at can any earlier, half get And out to retention can be this second did that, really data that, on mark as quarter. magnitude total. We balance give million that to that's No, we the still there And that guidance. I clarity is us predictive And risk of impact. do important expect need pointed to in of to of the position our I taken more fourth get as $XXX today, What stands remaining in majority of

Operator

The line next JMP. from of is Scharf question David the with Citizens

David Scharf

very to about outlook? average personal quarter, auto kind business on I'm weighted to wondering, above personal conversely, in other should particularly we part margin FLRPC asset like class expecting the wanted you of we the outlook, as accelerate, X% loans X% this lower the mean about I a of a lower mix the be I revisit thinking products of sounded where kind are bullish FLRPC long-term structure as margin? point-of-sale. thinking the evolves you're should based the evolves. the current the X.X% Or commentary on recorded scale, to And be to point as the loans mix, it

Gal Krubiner

David, it's Gal here.

reality that loans platform we across, a personal but comes asset second. you is are X from you them right because rather big to unique and take is very have the as that, way in perspective the or is the major are over and very of right more all less or when loan, intense or you most markets, infrastructure building of any complicated a lifetime, generation mentioned, So same. you and business same auto growing, the to and the get need FRLPC the the concept, it scale will for And are it credit United want of size, for actually of with profit that different margin the What The that these produce point-of-sale. States. or to all infrastructure to contribution the the one assets here want to to put I in

expect these should to closer reaching So you numbers. to see autos

reach number. You should that expect point-of-sale to to

Now different spectrums. remember, of there lot for a modifications or credit or are duration different normalizations do

thereafter think all not of way is creating I same the a double-digit and same and personal which to you drive loan markets the below loan, we by clarity. funding, So did happen I over consideration, with But returns, XX. the to as to you same efficient Pagaya while and the hope higher more ability see remain you provide will that as the into will in we take point-of-sale mean X-month the the loan, a with personal profits at high you that, will and X.X% think the way bigger classes spread a asset expect should that should point-of-sale. you that, with you that together gave about X.X% to auto all mature about that of of if excess

Sanjiv Das

to of same think spot go. loans talked terms what reached about potential kind it to of even that talked I what roughly of And of wanted what summary of no performance if I we was means the which loans where prescreen to can -- could say defense -- classes I personal add financial Obviously, just this Sanjiv. about the the performance. Gal kind Gal said product. the will on. converge Gal in I just But is just asset Gal I of was said, the to personal by this have will in add it.

getting our bank, very in partner. an portfolio. So growth I'll we existing now as large entire their terms The give an into lending Pagaya in starting talk lending That's existing improvement powerful -- as an all of home partners, about loans example. to very, to offering loan are of are personal we you unsecured very

go. long So personal a loans has to very trajectory

much of is the class. because of newly emerging classes of the way also know, point will the market course, these is Gal's a And FRLPCs. we product economics or asset more that X less the is with all are TAM [indiscernible] more growing you personal the which mature will POS horizontally extremely course, are grow loans, strong auto asset now is products the to As because more converge across But less or point. of all large. And

to want So [ ]. just reiterate

David Scharf

a you been There's lenders. demand you approval no, side. serve in just some change flow you by flowing other a follow-up, partners partner, And as robust of noticing among of your a shifting clients. Are any very lending personal lately, your volume any the a had sector of into to coming loan just private lot No, primary Got Obviously, lending not But capitalized? Pagaya's pickup you helpful. approval better lot application looks rates way. as the are in but very the it. behavior seeing credit of rates maybe become that's they second

Gal Krubiner

here. David, it's Gal Yes,

the to want question. I take first, first So

So you're right.

more a We therefore, shops and have much credit heard what at with growth cetera, call private the et pieces. many we the of starting That lending sector leaning lending generally alternative will, and in. result leaning for and be is in end, in peers, constructive our to that the for different

have that see we because And days, private is at it this XXX a every different see. we to a shop. We public the of these -- So well, shop partners. over wants be we efficacy phenomena have surprised, you are will

lenders constructive to that we their forward. that and much still to approval are as yet that are want more you we And enabler credit in one between good we starting the I rate and starting So are consumer we where environment reality an is even, rates. very interest thing call out a the a not private if increase do assets. The become high will, environment are tissue go connectivity credit and flowing in into are phenomena massively things is to

did expect return people reduce environment them and further in That for we're it see obviously, better for phenomena open more refinance. the They another on started that means to in future. even the losses the But their get to to because that opportunities boxes. we happy So financed could much to do many consumer, is so. margins,

as your is and growth. it not have mode phenomena such. we with started, to But other, massive have us, growth but irresponsible have prudent the all, growth a see question, in all with started definitely, So don't started

Operator

line The Securities. next Riley with of is question from Hal the Goetsch B.

Harold Goetsch

credit that on support and year customers what's go aren't to inflation a the heard want That's difficult rates going poor that in deals had of higher, fair to lot hearing of were a... crisis was bank's and an want I high, And to still structures the I want middle caused had as make guys helpful you XXXX to to much sensitive, correctly. We more that the consumer staying your of year. get to Am in I I performance sensitive I had that right you banking sure structures to environment fears a marks credit again. for to Like the back extremely value we interest then today that's invest did XXXX. you the what changes you're sheets. in outlook business small balance doing your for

Gal Krubiner

clarify that. we Hal,

So...

Harold Goetsch

I that, the and up thoughts event market's wanted on hung get that. and on to XX-year your

Gal Krubiner

Yes.

let's name So out. it

in return. partners did to happy filled and time returns. to investors speaking different investors gap, In believe XXXX, for it reality So in really unique great we'll great as investor responsibility you're to is these tell you flow the Pagaya you The let's our going is the That the platform, no that Every a that start end That's are itself investment speak partners, in U.S. every do our the day, to big make what. all both And deployment, massive the their here Bank, past. from network. network, now we is Pagaya? that day, that about. heard XX matter and are best XXXX. a where -- the gap. in was much to David deliver going need we is sure network the is time, today, a the that will enterprise a looking investment. In in you the and open value you what is which investors which see Pagaya flowing We XXXX others was outcome, same because security a business invested best many a to with an them from

are we the choice. first So

losses we going that of us if got changing. the The potential that is that giving in So we that to to manage like next many momentum our to same sure is of and funding about others, to we production what about. new how things less nothing where that have capturing that, in in is we some to that future different managing to how diversification get a are for the the even reality funding very make and the cycle forward we changes not well. Two all in we're flow speak have did, the things much time cycle, the of situation One, ready situation. are structural internal going left are to moment us we particular did the even risk confidence the vehicles and be type are impairment

because to what risk just we of I now less talking used you with a XX% all it balance shared just year that ago be are changes these putting different reference, sheet you. We our on versus retention structural that are for dollars to

and the Now behaving out the future. to is how left of is on last we impairment that the is figure expect what point production of should today from that the level

And we for GAAP is out we a that strong put be target and XXXX, XXXX expectation, leading to company think expecting with of profits, our put even full flows normal about is from retention and the So probability far different used about And that versus one things that much away to like operational XXXX. income. potential are losses answer rather XX% cash the it is did The get about much a expectation of than that a and as what year have we consideration sheet, what likelihood strong we saying that what leverage which happening lower. impressive putting write-downs, ABS to said is your impaired. on some structural made what very the them in us, the we the balance be when different from that before dollar in and a EP that what's much, when Why? these think into first more impaired therefore, we it Because fintech, we're word. is the the a in young the of is it's speak and to are much, loss get to last to you net And that our platform there confidence. taking generates risk

Operator

As are like to questions, I Gal no would there for comments. hand closing Krubiner the further now to conference over

Gal Krubiner

up what have beyond. We you And massive successfully sustainable, you our one product, to with to Thank ahead of in looking this growth The business this and us growth very of say are you, our for forward soon. that much, the We everyone. catching XXXX as as every goals. heard deliver to I proud close, opportunities just achieved XXXX demand we you profitable partnership call, very year. your positioned the for than stronger want and to Thank in executed and is against of I'm very always, ever.

Operator

Thank teleconference. you. concludes This today's

disconnect lines at your for time. this may You your participation. you Thank

Pagaya Technologies (PGY) 12 Nov 242024 Q3 Earnings call transcript