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Pagaya Technologies Ltd. (PGY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 delivered first GAAP profitability as a public company with total revenue and other income of $290.0M, Adjusted EBITDA of $79.6M, and GAAP net income of $7.9M; FRLPC margin rose to 4.8% on $2.4B of network volume .
  • Versus S&P Global consensus, PGY beat on revenue ($290.0M vs $285.1M*) and EPS ($0.69 adj diluted vs $0.462*), while EBITDA (SPGI definition) was below ($55.4M* actual vs $67.1M* est), reflecting definitional differences versus company Adjusted EBITDA of $79.6M .
  • Management raised FY25 guidance for revenue, Adjusted EBITDA, and GAAP net income; introduced Q2 guidance (NV $2.3–$2.5B; TR&O $290–$310M; Adj. EBITDA $75–$90M; GAAP NI breakeven–$10M) .
  • Funding momentum remains a key catalyst: $1.4B ABS raised in Q1; funding partners expanded to 135; non-ABS funding expected to comprise 25–50% in 2025; post-Q1, launched AAA-rated POS securitization (POSH 2025-1) enabling $1B+ capacity, and executed multiple AAA-rated personal loan ABS in 1Q/2QTD .

What Went Well and What Went Wrong

What Went Well

  • Early GAAP profitability and operating leverage: GAAP NI $7.9M, Operating income $47.7M; Adjusted EBITDA doubled YoY to $79.6M; CEO: “we have exceeded expectations on… GAAP net income profitability” delivered a quarter early .
  • Monetization strength and mix: FRLPC rose 26% YoY to $115.6M (4.8% of NV); lending product fees increased to 77% of FRLPC vs 63% a year ago, supporting durability .
  • Funding diversification and capital efficiency: $1.4B ABS across 3 transactions in Q1; 135 funding partners; non-ABS expected at 25–50% of 2025 funding, lowering net risk retention; CFO emphasized business is self-funded with $230M cash and $760M investments .

What Went Wrong

  • Network volume light vs guide due to SFR: Q1 NV $2.4B (below $2.5–$2.7B outlook), with SFR volume the driver; excluding SFR, volume grew 26% YoY and 6% QoQ .
  • Credit/fair-value items remain a watch: Net credit-related losses in “Other expense, net” were $24M (vs $229M prior quarter); ~$6M whole-loan impairments in G&A; while management views these as normalized, they remain a sensitivity .
  • Near-term capital markets volatility: ABS spreads widened 60–70 bps post-tariff headlines; management expects normalization and offsets via borrower pricing to maintain profitability .

Financial Results

Income statement, monetization and EPS trajectory (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Total Revenue & Other Income ($M)$257.2 $279.4 $290.0
Revenue from Fees ($M)$249.3 $275.7 $282.7
Network Volume ($B)$2.351 $2.604 $2.400
FRLPC ($M)$100.3 $117.5 $115.6
FRLPC %4.3% 4.5% 4.8%
Adjusted EBITDA ($M)$56.1 $64.2 $79.6
GAAP Net Income (Loss) ($M)$(67.5) $(237.9) $7.9
Diluted EPS ($)N/A (loss)$(3.20) $0.10
Adjusted Net Income ($M)$33.1 $13.2 $53.2
Adjusted Diluted EPS ($)$0.44 $0.17 $0.69

Q1 2025 vs Wall Street (S&P Global) consensus

MetricActualS&P ConsensusSurprise
Revenue ($M)$290.0 $285.1*+$4.9M
Primary EPS (Adj diluted proxy)$0.69 $0.462*+$0.23
EBITDA ($M)$55.4*$67.1*−$11.7M

Values with asterisk are retrieved from S&P Global. Note: S&P Global’s EBITDA definition may differ from the company’s Adjusted EBITDA ($79.6M) .

KPIs and mix

KPIQ3 2024Q4 2024Q1 2025
Lending product fees as % of FRLPC71% 71% 77%
FRLPC ex-SFR (%)——5.2%
Cash, cash equivalents & restricted cash (end of period, $M)—$226.5 $229.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Network VolumeFY25$10.25–$11.75B $9.5–$11.0B Lowered
Total Revenue & Other IncomeFY25$1.15–$1.275B $1.175–$1.3B Raised
Adjusted EBITDAFY25$265–$315M $290–$330M Raised
GAAP Net IncomeFY25($10)–$40M; GAAP profitable in Q2’25 $10–$45M Raised
Network VolumeQ2’25—$2.3–$2.5B New
Total Revenue & Other IncomeQ2’25—$290–$310M New
Adjusted EBITDAQ2’25—$75–$90M New
GAAP Net IncomeQ2’25—Breakeven–$10M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
GAAP profitability and operating leverageTargeting 2025 GAAP profitability; FRLPC 4.3% in Q3; 4.5% in Q4; core OpEx/FRLPC improved to 49% in Q4 GAAP NI +$8M; Adjusted EBITDA +100% YoY; “exceeded expectations… delivered… earlier” Improving
Funding diversification (ABS, forward flow, pass-through)AAA PL and AA Auto shelves; forward flows/capital efficiency; non-ABS expected 30–40% in Q4’24; Blue Owl forward flow $2.4B $1.4B ABS in Q1; 135 partners; non-ABS 25–50% in 2025; post-Q1 AAA ABS and new POSH program launched Strengthening
Credit performance and impairments2023 vintages markedly better; majority of remaining fair value adjustments expected in Q4 Net credit losses $24M vs $229M prior qtr; adjustments normalized; still monitoring macro/policy uncertainty Stabilizing
Auto verticalRestart after caution; strong sequential ramp; improving funding/returns Auto volumes up nearly 50% QoQ; ~$1.1B annualized run-rate Accelerating
Point-of-Sale (POS)Klarna live; Elavon onboarding; 170% seq growth Q4’24; >$1B exit run-rate Demand “extremely robust”; POSH 2025-1 AAA revolving financing to scale $1B+ Expanding
Prescreen & affiliate (AI-driven distribution)Prescreen moved from 1 to 2 live partners; 7 in pipeline Tests “extremely encouraging”; scaling in 2H; TAM ~60M customers within existing partners Scaling
Macro/regulatory and tariffsCautious outlook; improving funding backdrop No observed impact from tariffs/macro in data; monitoring; ABS spreads widened 60–70 bps then expected to normalize Watchful but steady

Management Commentary

  • “We have exceeded expectations on key metrics and particularly on the GAAP net income profitability, which we have delivered 1 quarter earlier.” – Gal Krubiner, CEO .
  • “FRLPC… rose 100 bps YoY to 4.8%… Excluding SFR’s impact, FRLPC… was 5.2%… Lending product fees of 77% in the quarter compared to 63% 1 year ago.” – Evangelos Perros, CFO .
  • “Our business plan is self-funded… we do not need nor plan to raise equity capital… $230M cash and $760M investments.” – Evangelos Perros, CFO .
  • “Auto volumes [were] up nearly 50% sequentially… [with] strong returns and margins.” – Sanjiv Das, President .
  • “Prescreen… enables lenders to… grow customers with significantly lower acquisition costs… we expect to roll it out in the second half.” – Sanjiv Das, President .

Q&A Highlights

  • Macro positioning and downside scenarios: No current data-driven tariff/macro impact observed; would dial back production in pockets under higher unemployment, and reprice for inflation; diversified funding provides resilience .
  • Prescreen and FRLPC: Prescreen lowers acquisition costs and is expected to positively impact FRLPC over time; rollout planned for 2H .
  • Fair value marks: 2025 GAAP NI guidance embeds a conservative impairment scenario; base case reflects normalized losses; majority of legacy vintage drag behind .
  • ABS markets: Short-term spread widening of ~60–70 bps following tariff noise; management offsets via borrower pricing; residual retention steady .
  • Expenses/operating leverage: Core OpEx levels seen as sustainable; leverage to scale volumes without material incremental investment .

Estimates Context

  • Q1 2025 results vs S&P Global: Revenue beat ($290.0M vs $285.1M*); Primary EPS beat ($0.69 vs $0.462*); SPGI EBITDA miss ($55.4M* vs $67.1M*), reflecting definitional differences versus company Adjusted EBITDA of $79.6M .
  • Potential estimate revisions: Raised FY25 revenue/Adjusted EBITDA/GAAP NI ranges likely drive upward revisions to revenue/EPS; NV guide reduced (SFR) may modestly temper top-line unit volume assumptions .
    Values with asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability inflection achieved: First GAAP-profitable quarter, with rising FRLPC margins and improving capital efficiency signaling earnings power durability .
  • Guidance raised on core P&L: FY25 revenue, Adjusted EBITDA, and GAAP NI moved higher; near-term Q2 guide underscores continuity of profitability focus .
  • Funding optionality is a competitive moat: Robust ABS access plus forward flow and pass-through channels (25–50% non-ABS in 2025) reduce risk retention/cost of capital and support growth through cycles .
  • Vertical momentum: Auto rebounding (nearly 50% QoQ), POS expanding with dedicated AAA ABS (POSH), and prescreen initiatives poised to enhance partner monetization .
  • Watch items: Residual credit/fair-value normalization, SFR-driven NV volatility vs mix uplift to FRLPC, and short-term ABS spread moves (management offset via pricing) .
  • Near-term catalysts: Q2 profitability delivery, further ABS/forward-flow executions, prescreen scale-up in 2H, and additional POS merchant integrations .