Executive Summary

Q2 2025 delivered record revenue ($326.4M), record FRLPC ($126.2M), record adjusted EBITDA ($86.3M) and second consecutive positive GAAP net income ($16.7M), with raised FY25 guidance across revenue, adjusted EBITDA and GAAP net income .
Versus consensus, revenue modestly beat while adjusted EPS slightly missed: Revenue $326.4M vs S&P Global consensus $324.9M; Adjusted diluted EPS $0.64 vs $0.674; adjusted EBITDA matched the high end of company guidance but “EBITDA” definitions differ between company and S&P Global estimates* .
Funding and capital structure were key catalysts: $2.3B ABS issued in Q2 (largest quarterly total), first AAA-rated Auto ABS ($300M), inaugural AAA-rated POS ABS ($300M), and a 5x-oversubscribed $500M 8.875% senior unsecured notes due 2030, expected to lower cost of debt ~200 bps and add ~$40M annual cash flow savings .
Management emphasized product-led growth (Direct Marketing/Prescreen and Affiliate Optimizer), diversification (POS and Auto volumes now 30% of total), and selective underwriting (conversion ~1%) as drivers of sustainable profitability and guidance raise .

What Went Well and What Went Wrong

What Went Well

Record top-line and profitability while beating original Q2 guidance: Revenue $326.4M vs $290–$310M guided; adjusted EBITDA $86.3M vs $75–$90M guided; GAAP net income $16.7M vs breakeven–$10M guided .
Funding engine and capital markets execution: $2.3B ABS across 6 deals (quarterly record), first AAA-rated Auto ABS ($300M), AAA-rated POS ABS ($300M revolving capacity >$1B), new $2.5B Castlelake forward flow, and $500M unsecured notes to refinance costlier debt .
CEO tone on strategic differentiation: “Our unique data advantage and AI underwriting advantage continues to compound… enabling more precise credit decisions,” with confidence to raise full-year outlook .

What Went Wrong

Adjusted diluted EPS modestly below S&P consensus ($0.64 actual vs $0.674 estimate)* .
Higher ABS issuance costs temporarily elevated operating expenses; CFO expects normalization next quarter .
Ongoing credit-related fair value adjustments and loan losses continued to weigh on “Other expense, net”: credit-related FV loss ~$11M and loan-related losses ~$4M in Q2 (improved vs prior quarter) .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Total Revenue and Other Income ($USD)	$279,394,000	$289,989,000	$326,398,000
GAAP Net Income Attributable ($USD)	$(237,922,000)	$7,893,000	$16,655,000
Diluted GAAP EPS ($)	$(3.20)	$0.10	$0.20
Adjusted Net Income ($USD)	$13,225,000	$53,189,000	$50,624,000
Adjusted Diluted EPS ($)	$0.17	$0.69	$0.64
Adjusted EBITDA ($USD)	$64,173,000	$79,583,000	$86,283,000
FRLPC ($USD)	$117,465,000	$115,621,000	$126,249,000
FRLPC % of Network Volume (%)	4.5%	4.8%	4.8%
Network Volume ($USD)	$2,604,000,000	$2,400,000,000	$2,648,000,000

Versus estimates (S&P Global):

Metric	Q2 2025 Actual	Q2 2025 S&P Consensus	Surprise
Total Revenue ($USD)	$326,398,000	$324,854,830*	Beat (~$1.5M)
Adjusted Diluted EPS ($)	$0.64	$0.67394*	Miss (~$0.034)
EBITDA ($USD)	$86,283,000 (Adj. EBITDA, company)	$86,116,820*	Note: definitions differ (Adj. vs S&P “EBITDA”)*

Segment/vertical indicators and KPIs:

KPI	Q4 2024	Q1 2025	Q2 2025
Funding partners (count)	>130	135	145
POS and Auto share of volumes (%)	9%	—	30%
POS annualized run-rate ($USD)	—	—	$1.2B
Auto annualized run-rate ($USD)	—	—	$2.0B
ABS issuance ($USD)	$6.0B in FY24	$1.4B in Q1	$2.3B in Q2
AAA-rated transactions	Personal Loan AAA shelf maintained	—	First AAA Auto ABS $300M; AAA POS ABS $300M

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Network Volume ($USD)	FY 2025	$9.5B–$11.0B	$10.5B–$11.5B	Raised
Total Revenue & Other Income ($USD)	FY 2025	$1.175B–$1.300B	$1.250B–$1.325B	Raised
Adjusted EBITDA ($USD)	FY 2025	$290M–$330M	$345M–$370M	Raised
GAAP Net Income ($USD)	FY 2025	$10M–$45M	$55M–$75M	Raised
Network Volume ($USD)	Q3 2025	N/A	$2.75B–$2.95B	New
Total Revenue & Other Income ($USD)	Q3 2025	N/A	$330M–$350M	New
Adjusted EBITDA ($USD)	Q3 2025	N/A	$90M–$100M	New
GAAP Net Income ($USD)	Q3 2025	N/A	$10M–$20M (includes ~$5–$10M net loss from one-time bond issuance/retirement and tax benefit)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI underwriting/data advantage	Emphasized model improvements and underwriting selectivity	“Unique data advantage and AI underwriting… enabling more precise credit decisions”	Consistently reinforced, compounding advantage
Funding diversification and ABS cadence	$6B FY24 ABS; #1 personal loan ABS issuer	$2.3B Q2 ABS; AAA Auto and AAA POS; Castlelake $2.5B forward flow	Accelerating, multi-asset, AAA ratings add resilience
Capital structure optimization	2024 refinancing steps, term loan upsizing	$500M 8.875% senior unsecured notes, ~200 bps lower cost of debt, ~$40M cash flow gains	Transformational step, reduces risk and cost
Product-led growth (Prescreen & Affiliate)	Early framing of product expansion	Piloted and moving to term sheets; rollout expected to smooth growth and scale without heavy partner tech lift	Execution phase; near-term rollout
Credit performance	Addressed legacy vintages; re-marked	CNLs ~30–40% lower (PL) vs 4Q21 peaks; Auto ~30–60% lower vs 2022 comps	Improving/stable
Bank/BNPL partnerships	New/expanded partnerships (U.S. Bank/Elavon, OneMain)	Active onboarding with top-20 US bank; BNPL traction with card issuers discussed	Pipeline strengthening

Management Commentary

CEO: “Our unique data advantage and AI underwriting advantage continues to compound… enabling more precise credit decision, fueling model improvements and enhancing outcomes for our lending partners.”
CFO on unsecured notes impact: “Reduced our cost of debt from ~11% to ~9%… ~$12M annual interest savings… ~$40M annual cash flow gains… extends maturities to 2030 and opens access to public debt markets.”
President on product expansion: “We successfully piloted prescreen marketing initiatives… and are working with leading affiliate platforms… plug and play solutions that require minimal integration effort.”

Q&A Highlights

Banks/BNPL opportunity: Management sees rising bank interest in BNPL and broader lending collaborations as tech constraints ease; term sheets signed with announcements expected in coming quarters .
Capital structure transformation: The $500M unsecured bond is a step-function improvement, non-dilutive capital access, and risk reduction across the franchise .
Growth smoothing via new products: Direct Marketing (Prescreen) and Affiliate Optimizer engines expected to smooth partner-driven lumpiness; early term sheets signed, rollout targeted by Q4 2025 into 2026 .
Onboarding rigor for banks: Multi-month process across model risk/compliance, true lender legal, and tech integration (6–9 months) with high entry barriers that cement durability once live .
Credit health: Consumer performance solid across PL and Auto; selective underwriting continues; “FastPass” verification streamlines friction for high-quality customers without incremental risk .

Estimates Context

Revenue beat: Actual $326.4M vs S&P Global consensus $324.9M* .
Adjusted diluted EPS miss: Actual $0.64 vs S&P Global “Primary EPS” consensus $0.674* .
Adjusted EBITDA matched high end of company guidance; S&P Global “EBITDA” may differ from company-reported adjusted EBITDA definition*, so use caution comparing directly .
Implications: Modest revenue beat alongside a slight adjusted EPS miss suggests higher issuance/setup costs and continued fair value/loan cost dynamics; FY25 guidance raise indicates confidence in margin leverage and funding efficiency .

Note: Values with asterisk are retrieved from S&P Global.

Key Takeaways for Investors

The pivot to sustainable profitability is tracking: back-to-back GAAP net income quarters, with raised FY25 GAAP NI and adjusted EBITDA guidance .
Capital structure optimization is a clear earnings/cash flow lever (+$40M annual cash flow, ~200 bps lower debt cost), reducing funding risk and elevating institutional access .
Funding diversification and AAA-rated execution across Auto and POS are strategic moats that support lower cost of capital and broader investor demand .
Product-led growth (Prescreen/Affiliate) should drive application funnel expansion at partners with limited tech lift, smoothing quarterly cadence and supporting FRLPC scaling .
Credit performance and selective underwriting remain disciplined; FRLPC % sustained at 4.8% while POS/Auto mix expansion improves durability through cycles .
Near-term trading: Positive catalysts include FY25 guidance raise, AAA-rated deals, and unsecured notes; watch Q3 one-time costs in GAAP NI and operating expense normalization.
Medium-term thesis: Scaled, fee-based network model with multi-asset funding, bank pipeline, and capital-light growth engines positions Pagaya for compounding profitability and reduced cyclicality .

Appendix: Guidance and One-Time Items Notes

Q3 and FY25 GAAP net income guidance include ~$24M bond issuance/retirement costs and a one-time tax benefit; combined net one-time impact ~$5–$10M loss reflected in guidance .

Sources

Q2 2025 Press Release and 8-K 2.02 with shareholder letter:
Q2 2025 Earnings Call Transcript:
Preliminary Q2 Results:
Capital Markets press releases (unsecured notes, ABS):
Prior quarter releases for trend context: Q1 2025 , Q4 2024

Note: S&P Global consensus values are used for estimate comparisons and marked with asterisk.

Pagaya Technologies Ltd. (PGY)·Q2 2025 Earnings Summary