• Annual Revenue: Over $1 billion, up 27% year over year.
• FRLPC: $407 million, up 54% year over year.
• Adjusted EBITDA: $210 million, up 156% year over year.
• Network Volume: $2.6 billion in Q4, 9% growth.
• Personal Loan Volume: Grew 24% year over year to $1.6 billion.
• Auto Lending Volume: Fourth quarter sequential growth of just under 40%.
• Point-of-Sale Loan Volume: Over 170% sequential growth in Q4.
• Adjusted Net Income: Positive $13 million for the sixth consecutive quarter.
• Net Income: Loss of $238 million, impacted by fair value adjustments.
• Cash and Cash Equivalents: $227 million at year-end.
• Investments in Loans and Securities: $764 million at year-end.
• Q1 2025 Guidance: Network volume $2.5 billion to $2.7 billion; Total revenue $280 million to $295 million; Adjusted EBITDA $65 million to $75 million.
• Full Year 2025 Guidance: Network volume $10.25 billion to $11.75 billion; Total revenue $1.15 billion to $1.275 billion; Adjusted EBITDA $265 million to $315 million; GAAP net income negative $10 million to $40 million.

• Warning! GuruFocus has detected 6 Warning Signs with PGY.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pagaya Technologies Ltd (NASDAQ:PGY) reported an annual revenue of over $1 billion for 2024, marking a 27% increase year over year.
• The company achieved a record adjusted EBITDA of $210 million, up 156% year over year.
• Pagaya Technologies Ltd (NASDAQ:PGY) has secured a forward flow agreement with Blue Owl Capital to purchase up to $2.4 billion in consumer loans over 24 months.
• The company has raised $27 billion in its ABS program across 66 transactions with over 130 institutional funding partners.
• Pagaya Technologies Ltd (NASDAQ:PGY) is providing its first-ever GAAP net income profit guidance for 2025, indicating confidence in future profitability.

Negative Points

• The 2023 risk retention securities were marked down by $145 million, impacting the company's P&L.
• Pagaya Technologies Ltd (NASDAQ:PGY) reported a net loss of $238 million, primarily due to fair value adjustments.
• The company faced significant impairments related to 2023 vintages, with a total of $156 million in fair value adjustments.
• Despite improvements, the challenging funding environment in 2023 led to higher-than-expected losses.
• The company does not expect to need equity capital moving forward, but past performance has been disappointing due to legacy issues.

Q & A Highlights

Q: Can you provide more details on the fair value marks in the quarter and what gives you confidence that there won't be ongoing fair value marks as we go through 2025? A: Gal Krubiner, CEO, explained that the impairments were primarily related to 2023 vintages due to challenging funding conditions. The company has built a robust infrastructure to predict outcomes better and does not expect similar losses in the future. Evangelos Perros, CFO, added that the 2023 vintages were marked down significantly, but the credit performance is better than previous years. The company has optimized ABS structures and diversified funding sources to mitigate future risks.

Q: How should we interpret the guidance on slide 21 regarding write-downs and impairments in the loan portfolio? A: Evangelos Perros, CFO, clarified that the base case drives the expectation for 2025, with scenario A providing an additional $100 million to $150 million potential impairments, if any. This scenario is included in the full-year guidance for 2025, not specifically for Q2.

Q: Can you discuss the factors influencing the wide range in network volume growth guidance for 2025? A: Gal Krubiner, CEO, stated that Pagaya perceives itself as a network rather than an originator, focusing on adding more customers and products. The company aims for a steady 20% CAGR over the cycle, driven by factors like model performance, product sales, partner acquisition, and cost of capital. Sanjiv Das, President, added that predictability is crucial for partners, and the operating environment appears stable.

Q: How do you see the mix of network volume evolving this year, particularly with point-of-sale (POS) loans? A: Evangelos Perros, CFO, mentioned that personal loans will continue to grow, but the focus is on higher ROI areas like auto and POS loans. Sanjiv Das, President, highlighted strong growth in POS, with partnerships like Elavon and Klarna driving expansion.

Q: Is it too early to establish a normalized fair value adjustment margin or percentage of FRLPC or network volume? A: Gal Krubiner, CEO, indicated that while some assumptions are stable, the company is not yet ready to characterize it as a percentage. The GAAP net income guidance includes some fair value adjustments, and further details can be discussed post-call.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.