Pagaya Technologies Ltd.

Ladies and gentlemen, greetings and welcome to the Pagaya Technologies fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Fagan, Head of Investor Relations. Please go ahead.

Thank you and welcome to Pagaya's fourth quarter and full year 2024 earnings conference call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya, Sanjeev Das, President, and Evangelos Peros, Chief Financial 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 first quarter and full year of 2025. 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 percent of network volume, and core operating expenses will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available to the extent available without unreasonable efforts in our earnings release and other materials which are posted to our investor relations website. We encourage you to review the shareholder letter, which was furnished with the SEC on Form 8K today, for detailed commentary on our business and performance in conjunction with the accompanying earnings supplement and press release. With that, let me turn the call over to Gal.

Thank you for joining us today for a discussion of our fourth quarter and full year 2024 results. as well as an update on our business as we enter 2025 on the strongest overall footing in our company's history. You will see from our press release this morning that we closed out 2024 with an annual revenue of more than $1 billion, up 27% year over year, FRLPC of $407 million, up 54% year-over-year, and adjusted EBITDA of $210 million, up 156% year-over-year. All of our key reported metrics were at record levels and beat our prior guidance. As we close out 2024 and as part of our regular quarterly process, we have updated the fair market values for our risk retention securities tied to 2021, 2022, and 2023 loan vintages. We noted during the third quarter 2024 earnings that we expected to have taken the vast majority of expected impairment charges associated with our 2023 vintages, along with prior vintages by year-end 2024. The 2023 risk retention securities, which totaled at $275 million at the end of the third quarter, were marked down by $145 million this quarter, which impacted our P&L. Even with the vast improvement in credit performance, the values of these securities, as mentioned in the past, were extremely sensitive to even small changes in underlying credit in prepayment assumptions because of the challenging funding environment that existed during 2023. We believe that we are now poised to generate consistent growth going forward that is profitable, and as such, we are providing our first ever gap net income profit guidance as part of our 2025 outlook. IPI will provide more detail on our financial results later in the call. I want to take a step back and revisit where Pagaya is in its evolution, What it is sets our product and company apart and underscores the value that we bring across our network, our ecosystem, and to our shareholders. We created Pagaya to enable lenders to provide more credit products and services to more customers, customers who have traditionally been excluded from the financial ecosystem. These are good borrowers, hardworking mainstream Americans. And the country's biggest lenders are increasingly leveraging Pagaya's differentiated product value proposition to do exactly that, offering more credit products and services to more customers. And when they do, they retain and add more customers and more valuable depositor accounts They maintain and enhance customer lifetime value, and they boost return on marketing spend, all without bearing the balance sheet costs. Recently, several lending partners have expanded the use of our unique solution to further engage existing customers, to boost cross-sell and further solidify relationships. As important as the unique value proposition our products offer is the deep level of integration within our partners' internal lending funnel. This enables Pagaya to seamlessly add and service customers on behalf of these lending partners. The best evidence of our solution is the industry demand and usage with over 2.6 trillion of loan application running through across our network, resulting in a $28 billion of loan originated, provided to 2 million people. To put things in perspective, that's nearly 1% of all adult Americans. And with this demand and success, the flywheel is only getting stronger. Each application across our network provides Pagaya more valuable data, which is used to make our underwriting technology even stronger. This, in return, enhances the value we provide to our partners, and when our partners thrive, Pagaya thrives. The timing has never been better for Pagaya to help our 31 lending partners in the fast-changing environment. Momentum on the funding side of our network is just as robust and truly underscores the support from several of the largest institutional investors in the financial investment world. Look no further than our recently announced forward flow agreement with funds managed by Blue Owl Capital to purchase up to $2.4 billion in consumer loans through Pagaya Network over 24 months. This is the second large forward flow agreement announced in just less than six months, a testament to the demand for the high-quality consumer loan originated on our network. In addition to that, we have raised $27 billion in our ABS program across 66 transactions with over 130 institutional funding partners. We closed our sixth AAA-rated ABS transaction in the first quarter and executed our third pass-through securitization of the year in December for $100 million. we expect that all of our funding programs will continue to experience strong, growing, and oversubscribed demand as Pagaya becomes a one-stop shop for big institutional investors that are looking to get exposure to the space in the form of personal loans, auto loans, or point-of-sale loans. Our current management team is highly experienced, having navigated challenging credit businesses through various cycles. This management job has been to drive the maturity of our operating model and financial structure to amplify and maximize the value we can provide, not only to our partners, but to our shareholders as well. Over the last year, we have built the strongest and most efficient funding mechanism in Pagaya's history. we have restructured our balance sheet, enhanced our liquidity profile, and that means we are now fully self-funded. Investors may wonder if we need to raise equity capital to support the business given the quarter's outside gap net loss. The answer is simple. It's no. We do not expect to need any equity capital moving forward. Our certainty is derived from the optimization our team achieved on our funding and operating model in 2024. We worked tirelessly to increase our net fees reflected in FRLPC by 55% year-over-year to 4.5% of our volume. while at the same time reducing our net cash requirement to fund our volume from 3% to almost 1.5%. Along with high-quality liquid securities on our balance sheet, this paves the way to positive cash flow, eliminating any need for an equity raise. We believe that we now have the operational and financial momentum, balance sheet strength, maturity and deep institutional credit skills to manage through various environments. We expect that our growth will be disciplined, and while credit impairment will always be part of any credit-related business, for Pagaya, their impact is expected to be far smaller. This is reflected in our inaugural gap net income guidance, which we will discuss later in the call. We are entering 2025 at a pivotal point where we believe that we have achieved the scale of rating and structural efficiency to be gap net income positive by the second quarter of 2025. In closing, I could not be more excited standing here today in front of you, ahead of what Pagaya will deliver to the investment community and partners throughout this year and going forward. This inflection point is an important one. We will continue our mission to boost financial inclusion, to bridge mainstream and Wall Street, and at the same time, showcase our ability to generate powerful and consistent EPS growth for our shareholders. We look forward to demonstrating the benefits of all of our hard work and investment to maximize the value of one of the country's most unique and in-demand lending networks. With that, let me turn the call over to our president, Sanjeev Das, to provide an update on our product and growth strategy.