Pagaya Technologies Ltd.

Welcome to the Pagaya 3rd Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Smith, Investor Relations. Thank you. You may begin.

Thank you and welcome to Pagaya's third 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, and John Dobres, Chief Financial Officer. You can find the materials that accompany our prepared remarks and replay 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 fourth 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 you file from time to time with the SEC, including our 10-Ks, 10-Qs, and other reports, for more detailed discussion on 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 and included in the accompanying materials. We also provide an outlook for the fourth quarter and 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 efforts 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 to 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 everyone for joining us today. We had another outstanding quarter. We delivered record gap net income of $50 million. We grew network volume by 29%. We held cost flat, driving nearly 100% to the bottom line. Today I want to discuss the key drivers of the quarter, and then to discuss the progress we have made on our partner and product strategy that led us to become a profitable company in 2025, put Pagaya on a task to generate $172 million of gap net income in 2026, and set us up for a record year in 2027. Higher rates increase our cost of capital in Q3, and therefore reduce our SLRPC margin, driving us to a lower end of our 4-5% range. We have taken action by raising APRs in September and October, and this will result in a higher SLRPC percentage as we close out Q4 and enter into 2027. On credit, our performance is strong and in line with expectations in both auto and personal loans. We have been laser-focused on credit performance through market titles. As reflected in the profile of the borrowers we underwrite, and that continues to pay off. Funding availability is very robust. In fact, it is stronger than ever. We raised $3 billion in AVF this quarter to support our metal production. and we are using that availability to strengthen our long-term funding stability. We also executed on the funding diversity we discussed last quarter with a focus on long-term committed capital. More of our funding now comes through revolving structures that can be grown, repaid and reused. That capacity carries forward so it does not have to be rebuilt every quarter and it gives us more stability across market environments. Now to what excites me most, 2027 and the long-term vision behind it. Pagaya is really becoming an important part of the infrastructure for lenders. To gain and retain valuable deposit customers, banks need to meet product demand. Multi-year lead time for product development or conflicting balance sheet strategies is no longer an excuse to forego that path to deposit growth. We are that solution. We are this partner that gives banks the products the decision is, and the capital network to move faster. This is precisely the demand that is reflecting in our pipeline. Cities as an FNBO are the latest proof points of this momentum. These two banks joined the network this quarter, bringing our new partners down to six this year. Their integration is a signal that we are becoming a utility for financial institutions. More partners and more products bring more applications. More applications' data widens our moat and improves decisioning. Better results deepen those relationships and bring more volume back into the network. And with the operational expenses held flat, that growth increasingly reaches the bottom line. We enter the fourth quarter with the largest partner pipeline in Pagaya's history, and we are seeing the early innings of unnaturally lending outside of the bank balance sheets. Consumer credit in the U.S. represents nearly $1 trillion in annual origination, compared with our current annualized volume of about $14 billion. We have substantial room to grow. Banks can counter our infrastructure through every part of the cycle, and that infrastructure only gets stronger as we grow in scale. Thank you to our team for executing this quarter. The result definitely belongs to them.