Executive Summary

Q4 delivered record operating metrics: total revenue and other income $279M (+28% YoY), FRLPC $117M (+55% YoY; 4.5% of volume), and adjusted EBITDA $64M (+88% YoY), all above company outlook, while network volume hit $2.6B (+9% YoY) .
GAAP results were dominated by non‑cash credit‑related fair value charges tied to 2021–2023 risk‑retention assets: $156M portfolio mark‑down, $79M OCI reclassification, and $229M total credit‑related impairments, driving a GAAP net loss of $(238)M; management says these vintages should not materially impact future performance .
2025 outlook introduced: GAAP profitability targeted in Q2’25; Q1’25 guide network volume $2.5–$2.7B, revenue $280–$295M, adjusted EBITDA $65–$75M, GAAP NI $(20)M to breakeven; FY’25 GAAP NI $(10)M to +$40M, with FRLPC % expected within 3.5–4.5% toward mid‑point .
Strategic catalysts: diversified, lower‑cost funding (AAA personal loan ABS, pass‑throughs, and a new $2.4B Blue Owl forward flow) and strong product momentum (POS volumes +170% q/q; auto run‑rate near $1B), supporting monetization and capital efficiency without equity issuance needs according to management .

What Went Well and What Went Wrong

What Went Well

Monetization and operating leverage improved: FRLPC reached a record 4.5% of volume (top of H2 range) and core opex fell to 49% of FRLPC, both company records, underscoring pricing power and cost discipline .
Funding strength/efficiency: executed 6th AAA‑rated ABS in Q4, a $100M pass‑through, and announced a $2.4B Blue Owl forward flow, with non‑ABS channels expected to be 25–50% of 2025 funding, reducing risk retention and cost of capital .
Product momentum: POS network volume grew >170% sequentially; personal loans FRLPC % at 6.3%; auto exit run‑rate near $1B with ~40% q/q growth, supporting mix and medium‑term growth .

Quote: “We do not expect to need any equity capital moving forward…along with high‑quality liquid securities…this paves the way to positive cash flow” — CEO Gal Krubiner .

What Went Wrong

Large non‑cash fair value adjustments: $156M mark‑down and $79M OCI reclassification led to $(238)M GAAP net loss; ~90% of losses tied to sensitive 2023 vintages executed in a high cost‑of‑capital environment .
Impairments higher than expected: management acknowledged Q4 losses were bigger than anticipated but reiterated most legacy vintage impairments are behind them .
Estimate benchmarking unavailable: S&P Global consensus retrieval failed; while results exceeded company outlook, third‑party estimate comparisons were not accessible this cycle (see Estimates Context).

Financial Results

Core P&L and KPIs (YoY and sequential)

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Network Volume ($B)	$2.380	$2.331	$2.351	$2.604
Total Revenue & Other Income ($M)	$218.044	$250.344	$257.234	$279.394
FRLPC ($M)	$75.946	$96.992	$100.318	$117.465
FRLPC % of Volume	3.2%	4.2%	4.3%	4.5%
Adjusted EBITDA ($M)	$34.219	$50.305	$56.085	$64.173
Adjusted EBITDA Margin %	—	—	21.8%	23.0%
GAAP Net Income ($M)	$(14.418)	$(74.785)	$(67.476)	$(237.922)
GAAP Diluted EPS ($)	$(0.24)	$(1.04)	$(0.93)	$(3.20)
Adjusted Net Income ($M)	$12.389	$7.188	$33.122	$13.225
Adjusted Diluted EPS ($)	$0.20	$0.10	$0.44	$0.17

Notes: Adjusted figures exclude share‑based comp, fair value adjustments, and other specified items . Q4 GAAP results reflect $229M credit‑related impairments and a $79M OCI reclassification .

Product/Vertical KPIs and Operating Efficiency

KPI	Q4 2024
Personal Loans share of network volume	~60%
Personal Loans FRLPC %	6.3%
Auto sequential volume growth	just under 40% q/q; ~$1B annualized exit run‑rate
POS sequential volume growth	>170% q/q; >$1B annualized exit run‑rate
Applications processed	$197B applications in Q4; <1% funded (prudence)
Core opex as % of FRLPC	49% (record low)
Cash & Cash Equivalents	$227M at YE
Investments in loans & securities	$764M at YE
Net cash required to fund volume	~1.5%–2.5% overall; 2%–3% personal loans

Q4 2024 Actuals vs Company Outlook (proxy for “vs estimates”)

Metric	Q4 Outlook	Q4 Actual	Result
Network Volume ($B)	~$2.4–$2.6	$2.6	At high‑end
Total Revenue & Other Income ($M)	~$257–$272	$279	Beat
Adjusted EBITDA ($M)	~$49–$59	$64	Beat
FRLPC %	3.5%–4.5% (H2 range)	4.5%	At high‑end

Why: Strong partner monetization, product mix (PL and accelerating POS), and improved funding costs/structures lifted fee yields and operating leverage; GAAP loss driven by legacy vintages’ fair‑value marks and accounting reclassification .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Network Volume ($B)	Q1 2025	—	$2.5–$2.7	New
Total Revenue & Other Income ($M)	Q1 2025	—	$280–$295	New
Adjusted EBITDA ($M)	Q1 2025	—	$65–$75	New
GAAP Net Income ($M)	Q1 2025	—	$(20) to breakeven	New
Network Volume ($B)	FY 2025	—	$10.25–$11.75	New
Total Revenue & Other Income ($B)	FY 2025	—	$1.15–$1.275	New
Adjusted EBITDA ($M)	FY 2025	—	$265–$315	New
GAAP Net Income ($M)	FY 2025	—	$(10) to +$40; GAAP NI profitable in Q2’25	New
FRLPC %	FY 2025	H2’24 guide 3.5%–4.5%	3.5%–4.5% toward mid‑point for FY	Maintained range, updated context

Commentary: Guidance assumes disciplined growth across PL, Auto, POS; improved funding mix and lower interest expense; and minimal incremental investment, with potential impairment scenarios outlined in the supplement .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2’24, Q3’24)	Current Period (Q4’24)	Trend
Funding diversification & cost	Q2: First AAA PL ABS; $1B forward flow; capital‑efficiency step‑change . Q3: Risk retention down to 2–3% by end‑Q3; structural ABS improvements .	6th AAA PL ABS in Q4; $100M pass‑through; $2.4B Blue Owl forward flow; non‑ABS 25–50% of 2025 funding .	Improving, broadening
Credit/vintage performance	Q3: Improving FRLPC, de‑risking; PLL/ABS structural strength .	2023 PL CNLs 20–35% below 2021 peaks; Auto 30–50% below 2022 peaks; legacy vintages largely addressed .	Better credit, legacy drag abating
POS momentum	Q3: POS +67% YoY; Elavon live .	POS >170% q/q; >$1B exit run‑rate; strong partner pipeline .	Accelerating
GAAP profitability visibility	Q3: “Well on the way” to GAAP profitability in 2025 .	First‑ever GAAP NI guide: profitable in Q2’25; FY $(10)M to +$40M .	Visibility increased
Equity needs & liquidity	Q2/Q3: Balance sheet optimization, refinancing actions .	Self‑funded model; no equity raise expected per mgmt; $227M cash, improved asset mix .	Liquidity strengthened

Management Commentary

Strategy and operating leverage: “FRLPC as a percent of volume at a record 4.5%…Core operating expenses were 49% of our FRLPC, the lowest in our public history” — CFO .
Funding breadth: “Forward flow…with Blue Owl…up to $2.4B…third pass‑through securitization…$100M…non‑ABS funding channels to represent 25–50% of our 2025 funding sources” — CFO .
Equity and cash: “We do not expect to need any equity capital moving forward…this paves the way to positive cash flow” — CEO .
Product momentum: “POS…over 170% sequential growth…year‑end exit rate >$1B” — President .
Legacy vintages: “We believe we have taken the majority of our losses related to historical vintages…do not expect them to have a material impact, if any” — CFO .

Q&A Highlights

Fair‑value framework and residual risk: ~90% of Q4 losses tied to 2023 vintages; 2023 marks were sensitive due to high cost of capital; management included potential impairments in 2025 guidance scenarios and does not expect material legacy drag going forward .
Guidance conservatism: Scenario A in the supplement embeds an additional $100–$150M potential impairment for FY’25 guidance; base case assumes no further losses on existing portfolio .
Growth range drivers: Range reflects pace of new partner ramps; operating environment stable (PL delinquencies down; auto stable; no rate cuts assumed) .
Mix outlook: Higher POS could reduce risk retention; focus on Auto and POS for higher ROI growth; Elavon contribution modeled conservatively .

Estimates Context

Wall Street consensus (S&P Global) was not retrievable due to an API limit during this session; as a result, beat/miss versus third‑party consensus cannot be presented here. Values would normally be retrieved from S&P Global.
As a proxy, results versus company outlook showed beats on revenue ($279M vs $257–$272M) and adjusted EBITDA ($64M vs $49–$59M), and FRLPC % at the top of guidance (4.5%) .

Key Takeaways for Investors

Operating engine is inflecting: monetization (FRLPC %) and operating leverage (core opex/FRLPC) reached records, positioning for stronger flow‑through as volume scales .
2025 set up: initial GAAP profitability targeted for Q2’25; FY guide implies continued adjusted EBITDA growth with a more efficient funding mix and lower interest expense tailwinds .
Funding diversification lowers capital intensity and risk: non‑ABS channels (forward flows, pass‑throughs) expected to represent 25–50% of 2025 funding, reducing risk‑retention requirements .
Product mix tailwinds: rapid POS and improving Auto augment steady PL, supporting medium‑term growth and pricing power (PL FRLPC 6.3%) .
Legacy vintage overhang addressed: management believes the majority of vintage 2021–2023 impairments are now recognized; GAAP losses were non‑cash and tied to marks/OCI reclassification .
Execution watch‑items: track FRLPC progression toward mid‑range in 2025, partner ramp cadence (new bank/POS relationships), and any residual fair‑value adjustments in 2025 relative to guidance scenarios .
Near‑term trading implication: potential for relief as investors refocus on operating metrics/guidance and non‑cash nature of Q4 GAAP loss; funding announcements (e.g., Blue Owl) and POS momentum are likely sentiment positives .

Pagaya Technologies Ltd. (PGY)·Q4 2024 Earnings Summary