Good afternoon. My name is Pete Christensen, here with Gal Krubiner, CEO and co-founder of Pagaya, which has been a fascinating story since 2025 and has been our top pick in our lending lend tech coverage of names. I think at one point, I mean, before this market hit some of the more recent turmoil, Pagaya was the best performing out of all fintechs, at least in our screening. It has just been an amazing year for the company, obviously not just from the stock price moving in the right direction, but just what has gone on underneath. We are going to dig into that right now. I think we want to start off with first is, you know, last quarter, how I think you and EP and Sanjiv talked about building sustainable growth, sustainable network growth, and focusing on sustainable expansion there. Not something you hear from a lend tech company that often. Would be great if you could elaborate on how you're creating sustainability for Pagaya's growth algorithm. Definitely we'll go into that. Pete, thank you so much for having me. Thank you for all the support. I think we had very few weeks, many of the conferences that people are digging in, want to learn more, especially the long-only looking for that. What's the real thesis over the cycle? Yes, market, not markets, really, what you're trying to build and where the company is going. Appreciate all the support here and the interest from everyone. What we'll try to do today is to get a little bit more granular to the big concept and how they are performing in life and, to your point, how it's interesting fundamentally. To your question, which is, what's your perception or take on sustainable growth? Why this is sometimes different than the lending peers? I would say, to put it very simply, our B2B strategy is definitely different. It is by design. When we are thinking about how we grow, we are thinking about how we are lending more partners. We are thinking about how do we perfect our products to be more value-driven to the customers and the lenders that we already have, and how we are focusing our effort to be in areas where once you get that growth, it's a sticky growth and not something that is moving because the market has moved. There are many different examples on the B2C side of the houses that they are very much driven by marketing spend, opening the credit box, and then when market goes against you, cut off marketing spend, cut off. Playing the cycle. It's always the cycle, right? When we went into this, and I think this is the thing that I'm most excited about, like actually 2026, because I think we managed to bring the product suite to a place where we talk about the different markets and asset classes. We started the year and we were going to listen to our partners. We're like, okay, what are you facing? The first very obvious product that you have is the Decline Monetization product. Then we heard, actually, we are looking on the PL side to rent. They are looking to be more with the CK, the Credit Karma, and the Experian Activate and the affiliates because we're trying to bring more customers to our door. In the same time, we're trying to open more credit to our folks. We took that and we literally created the Marketing Affiliate product that is helping these types of lenders to be very effective in Credit Karma, to be very effective in these places. The combination of being able to take it, partner, and move it from the Decline Monetization product as a solo, and to add that as additional, let us help you in the Credit Karma and in these different affiliate channels has been driving a lot of the proliferation that we see. In the same vein, we just go on auto. One of the biggest questions that you have in auto, and especially on the dealerships or people that are coming to the dealership, you have two types of non-prime lending or approval. You can have your approval for the loan, but you need to show me your income, and therefore you need a verification. You have the ability to say you are fully approved, and that's what's mainly happening on the high cycle, 800, 750, etc. When you're asking the question of what is the biggest motivation and ability to solve from a value perspective, the product that suits for the dealerships, it's the highest ability to say you are approved full stop. Not subject to W-2, not subject to the manual verification. What's happening is the dealership, when he sees that in his profile, he will say, okay, you know what, I'm going to give you a different offer. We took that capability, we call it FastPass, we're developing a lot of index technology of the ability to predict what's going to be your income, what's going to be the power, predictability, and accuracy of your income. For this population that we see that we have a very strong handle on, we're giving them a bypass of this manual decline. Actually being able to give them the FastPass and increase massively the verification and performance and all the other sides, not just working the same, but sometimes even working better because you get better population coming through that way. All of that to say that the product suite and trying to solve bigger problems, and I'm trying to deliver the message that the way we run Pagaya is a B2B business. We have product roadmap, we have a client roadmap, we have an 18-month roadmap of each client, each product. What you should expect to see from us more in 2026 is how these different products are driving more value with existing partners, but more interestingly, how they're pushing the queue and the onboarding queue to be more robust and more relevant because there is no coincidence that we have eight partners in our longest ever queue of going onboarding. It's because we fit the product. Now we're sitting with a PL partner and we're telling them, hey, we're not just going to do $300 million of volume with you through the decline, but we can help you in seeking another $300 million, and we can help you in direct mailing another $300 million. Here is that $1 billion volume of continuity. Therefore you see these organizations are committing quickly on quick curve. Because you're becoming a mission critical value proposition. You're ranking your partners up higher on the marketplaces and things like that. Discoverability is enhanced. You're also working against adverse selection, those sorts of things, higher quality. It's almost like you're becoming a mission critical component for your partner. Another way to think about it is a lot of the knowledge and capabilities and things that we're developing on the fintech side, and we're now delivering that more to the incumbents. The FIs is really taking a bigger shape and a bigger performance. Actually, funny enough, the government that is becoming more welcoming for business is allowing these incumbents to actually say, you know what, we're going to do the extra mile. We're going to invest in the technology. We're going to partner with a Pagaya or others. Becoming an easier thing to do. That has been fascinating to see how the shift of mind when the FIs, like there is like point of sale, right? We are point of lending. We are helping people to improve their lending in the point where people are coming to us for that lending. It has been fascinating to see how the FIs are focusing on the same type of issues, which is how do we grow more, how we become more seamless to the dealerships and the experience. We are tapping on these challenges, creating products, and increasing our growth. You see your partners relying on you more. That sounds great. I mean, you still do have credit, any lender has to deal with credit cycles and navigating through them. There's been a lot of noise, I think, on the credit picture this year and how things are kind of evolving. On the last call, I think you illustrated well how your structures are performing versus some of the post-COVID levels, which is materially better there. Delinquency still looks like they're fine. They're at healthy levels. Just curious on your sentiment read on the capital market side, also from your partners on where conditions are right now. I would say, as you said on the call, the performance is in line with what we expect. We see that performance to your point, VQs are coming at the right level. There are a lot of permutations of how you think about that and what does it mean. I think the biggest driver that is happening across the U.S., and you would see that more forming into 2025, and people do not talk about that enough, is the reduction in the cost of capital. If you look on the benchmark rates, 2025 versus 2024, you saw 150 basis points of cheaper cost of capital. From the benchmarks, from steady spreads, the 80% of your capital structure, which is tied to the IG, etc., is very, very, very efficient these days and much more efficient than it was in 2020. When you are thinking about that, and I think that's the piece that people are missing, it's even stronger in auto, but even in PL, you are computing to another way of this. What's the asset return that they need to be? When you're asking the question of what you're setting the threshold to be, the return of the asset that you are solving for, it's the parts of the pieces of cost of capital and the VQs and the recoveries and the different pieces. I said in auto, you have even the recoveries, which is much bigger and more important, right? It's the recovery at the end of a car that you're possessing is 40% or 55%, changing completely the equation. If cost of capital is 150 basis points lower, so you sold for something which is a nine and a half hour way, but now you're solving for an eight. What you will see next year, this is coming into the CNS or the VQs, you should not assume that 2024 or 2023, which was the tightest credit days in the U.S. environment ever, to be exactly the same as what you expect in 2025. When we are speaking on the call and we are talking to investors and we are trying to compute all of that to an actual other way on a portfolio management and risk management meeting that's happening on a weekly basis, this is definitely consumer credit and the credit side of the house. We are asking the question with all the different things that have changed since the last quarter, year, etc., am I solving for the right ROA? We are asking that from the question of what's the unit economy that is left for me. The unit economy has never been so strong because the cost of capital driver was so going down and recoveries are so going high that actually the percentage that you are keeping to yourself from a profit perspective is very high. That even sometimes goes with a little bit higher delinquencies as you are entering into different parts of the cycle. That's the point I'm taking from this. Sure. You have more degrees of freedom, more wiggle room to do different things, infrastructure things in certain ways. You do not have to be as creative perhaps as in prior years, prior vintages. Is that unit economic bucket that you are talking about, is that a toggle that Pagaya wants to manage so that it is still conducive for driving network growth? Exactly. I think that when we are solving for the sustainability of growth and the point where we do not need to cut massively or increase massively, it is keeping that margin very, very healthy. That you can see in the FLNPC and that you see in the different parts that are going through the spectrum. You see that in the cost of capital that you have into what we are putting into the deals and what is being written on our balance sheet. We are managing that very carefully. That is why you did not see us increasing and opening the trade box in the last two quarters. The growth of Pagaya was 20%-25%, and that is it. We are not looking for the 30%, 50%, 60% because we do not like the volatility. We told you, we are a bit to the side of what we spoke before. We just want stability. It is all come back to the fact that as of now, the consumer is in a very strong shape. It is where it is coming from. We are seeing some questions about the private credit side on AI and on the corporate. That is definitely a question that is happening around the discussion. The consumer has not been written yet. We are definitely on the watch. We are definitely watching. If something will go the other side, we will cut and we will reduce even the conversion and we will become more conservative. We have the luxury that we started the year very conservative on that side. We did not open the trade box. We did not invest a lot of marketing dollars because it is not our business. Healthy economy, healthy situation, ready for future, whatever it may be. You do not need to open up the credit box to improve your partner conversion. No, because the reality is that let's talk about what's going to drive your growth next year. It's going on Experian Activate, which is another aggregator like Credit Karma, and you do it with six partners, and here you have another $500 million of growth. Not by opening the credit box because now you need to approve not six boats, six credits. Because now you're at the top of the list. Exactly. You're optimizing against that for selection. That's powerful. You did talk about things that you're watching. It seems like consumer spending, job growth, that kind of stuff. Those are where your eyes are focused right now to see if there's any material changes. Also, other pieces, how competitive the area of personal lending is becoming. That is a very strategic undefined issue. There is a very big, what we saw in 2021, part of it was people became too aggressive too quickly, and then it was hard to keep up in getting the right population to the right places. That is definitely something we are watching. For us, these turbulence markets are getting good for estate stability. The other piece is the actual delinquencies of how many people are stopping, right? The actual MOBs data that are coming, and we are very much monitoring. The point is it is all in the right context and into what we are solving, which is the ROA, which is the margin. Those pieces are moving as it goes through the cycle, but you still keep the same spread to make sure you have enough buffer. The last point I want to make is another example on the auto loan, which is very interesting. One of the pieces that as we think about going down the cycle, if something will happen in the future or not, we are moving to much younger cars. You will see the average age of the cars that we are approving on the auto loan for them move from four and a half years to three and a half years. Now, by definition, you will see higher recovery of these cars if people are going into VCOs and when they're going into VCOs, right? That is requiring potentially a little bit higher VQs because they're sold for the same amount. There are a lot of different nuggets that you're trying to sort for the different parts that all in all are getting us to be very comfortable in managing this kind of thing. That's interesting. I do want to look at the capital market side, equally an important conversation that investors are talking about right now. It is interesting. It does seem like we're seeing more at-will demand in the ABS market, structured markets that seem to be operating quite healthy. I'm just curious on your views, where are some areas that you're seeing strengths? Where are some areas where you'd like to see a little bit more support? Maybe there's a little bit of weakness there or there's just noise that you think equity investors are missing? I think that let's tailor that to the Pagaya impact on the financial. I think that's something we've been doing this morning and with a few other folks to get the right viewpoint of the business. The capital market and the health of the funding markets is actually a very big focus of Pagaya in 2024. We did a lot of changes and progression into the unit economy and the cash and the cash flow. We were happy this year to see that we are cash flow positive and we show it to the script and people started to appreciate the power of that. I think in a very strong title, the credit, sorry, the cash profile of the business that we have built has started to be accretive. I want to walk through the pieces of that which are very much correlated to the question you've asked about how the ABS has been functioning there and what we are going to look in the future into. Think about the fact that we are today originating the $10 billion and it's being done in three sleeves, the personal loan, the auto loan, and the POS. The real big question that we ask ourselves from a cash flow profile perspective is what is the required risk retention that we need to do inside the different types of the markets? Let's take the personal loan first to start, big push to go to forward flow that you don't need to require any risk retention. Today, 40-50% of our production is through that channel. Then you have 50% that is actually with a 5% risk retention. The reality is that the structure and the ability to take value from the ABS world, we have designed it in a way that once you put 5%, you are getting after two, three months back reserve that you needed to hold for the prepending period and other pieces that is coming back as a 2% to Pagaya. The actual net risk retention for the two, three months after we see the deal is net risk. All in all, it brings PL 50% zero, 50% free to be a one and a half on a net basis. You take that 2% back to put into the next deal. To the next deal. We'll talk about it in a second while we're dealing with the excess cash. On the auto loan side, actually you have a higher leverage. You're getting to a 98% leverage. You need to put up from two points of cash and another three points is for the value you created from the value, the spread. It's a little bit complicated, but that's the bottom line of it. The other piece is we announced with CustomEdge just recently another forward flow agreement of $500 million. Call it 10-20% is already on the forward flow. You have 2% at 80%, 0% on the 20%, again, one and a half, 28%. Real quick sidebar. On point-of-sale though, you can, I think, be a little bit more aggressive, right? Because it's a different lending model. POS even more. POS, we went out, and that's the third one. We went out with the structure that is revolving. You put 5% as a risk retention on a $300 million, that's $15 million. The power capacity of that $300 million to buy over the next 24 months is $1 billion. $15 million on $1 billion is 1.5%. You got to the point. It's a billion. We got to the point that we are at one and a half points across the three asset classes. You go back and you look on Pagaya and you say, okay, FLNPC, four and a half, five. Minus one and a half that we just spoke about, which is the blended, what you need to put in investment, you are left with, call it three and a half, right? That three and a half, three, three and a half, there is the cost of the business, two points each. That is how much Pagaya costs, employees, offices, etc. You are left with half a point to a point. That is your free cash flow. Now the question is what to do with it. Your question. We are doing this. We said we're going to do this because this is a lot of the power of how you're propelling more yet more income. We're using your cost of capital over the cycle. We are starting to be able to retain the B-bonds, which is the place where capital market is still not efficient. You can sell a B-bond at a 15% or 17% leverage. That is not your top tranches. That is not your residuals. In between. In between. Okay. In between. Okay. How many B-bonds have ever lost money in Pagaya? Zero. Zero. Never. Okay. We are already on the risk because we are holding the residual. It's below. We're already on the hook for the risk, right? The point is, you're holding something that is 15%-17%. You potentially season it one year and then sell it. You potentially hold it until the end if you want. When you season and the risk materialized, you sell it at 10%. The compression of the spread is actually creating for you a 30% ROE. It's very accretive. It's as accretive as equal to 0.25 or 50% of stock on FLNPC or other pieces that, because Pagaya was a smaller company that didn't have the $1.5 billion-$2 billion on the balance sheet, couldn't retain. When you look on the OneMain Financials of the world or the Affirm of the world, all of them are selling a B-bond. Point being is, and I will hand it over to you back, on the investment grade, the world is super efficient. Every insurance company in the world is throwing a lot of money on it. Never been any issues. You are talking about a spread of 150 basis points, 200 basis points over the two-year tenor, very, very efficient. On the non-IG, if you ask me what is our three, five-year plan, it is that we do not need capital market for the non-investment. We are mimicking the concept of funding of OneMain Financial and many others. It actually has been a much more robust balance sheet to be able to propel two things. Higher GAAP net income, very important for earnings, more than people think. Number two, lower cost of capital allowing you to be more competitive and therefore to get the best of the best in the cost of the business. That is the flywheel of how utilizing the cash is actually going to invest in the extensive part of the capital stack that is not affecting anything. You are creating a much more stable company with a long-term vision and the ability to propel that over time, over and over. The high bond was part of the strategy of being more. You're also improving the overall structure that's in the ABS market, making that asset more liquid, more fungible. The last piece I would say to people, again, it's very complex, but a lot of the positions that we have put on the balance sheet in 2020, 2024, next year are going to come to maturity. Maturity, I mean, after two years, you can resecuritize it and sell the risk retention or resecuritize it. We started to do that already in the market. That's starting to get us cash. Next year, there is another source of strong cash. Cycle from good performance leading indicators that are coming and being moved from a position on the balance sheet to actual cash. That cash too is going to be invested into reducing the cost of capital of the investment. The things that were challenging from a fair value mark in previous, once that starts coming to maturity, there's got to be recoveries associated. That's what's happening. Yeah. So you expect at some point in the future, maybe in the next 12, 24 months. Next three months. Three months. In Q1. We'll start seeing. Because the vintage of the '24, they're going to mature from the resecuritization time is two years. In 2026, you're going to start seeing cash that we can take out of these residuals and parts that are moving to cash. Parts are going to still keep on the balance sheet as a residual, but parts are going to be cash at end. That doesn't go into the normal GAAP accounting. It's not GAAP accounting. It's not GAAP. It's cash flow. It's cash flow, right? Your cash flow will be just as important a story going forward. Value. Yes. I mean. Because they take this cash more. We are now already, if you look on all the required pieces I illustrated before, we are already cash accounting. We're generating cash. We're taking this additional cash to reduce the cost of capital on our balance sheet by holding more of the base and things that never have been in charge in the past. That's the plan. Let's talk a little bit. I know we talked about it earlier in the year. Obviously, Pagaya has got this great post-screening solution. Maybe I'm phrasing that incorrectly. Correct. Right. You have the opportunity to move this to be in front of the screen for a lot of your partners. What's driving the motivation there? What do you think the opportunity is? If you think about on every legacy business in lending, one of the biggest drivers of value is the return on investment. You gave to someone a loan, performed well, and then you want to offer them either a second loan or refinance of the loan or a loan in a different setting. The Pre-screen Engine for us is the way for us to help the lenders to propel more lifetime value from the customers that already been either customers in the past or they went to their website and were almost becoming a customer. It means the marketing cost is already done. Now when you do a targeted approach to them, and it's a different type of the tech. The tech is how do I give you the right offer that you're going to activate it on and how I know to price you well that you're not going to go to somewhere else and that may cost me money or through the app or whatever. I need to do it as effective as possible. What we're starting to do and rather effective is to screen all the historical customers that so far had a LendingClub or Festech and whatever and say there is actually 100,000 customers that we want to name them and then we make a loan. If they make a loan, it's our loan and we do the split. It's good for them, more client interaction, more customer, more lifetime value, and more good returning customer to us. The end goal is that will become 25% of our production because the normal B2C is 25-30% of the production. We needed to solve a little bit how you do it with the partner and what's there and what's there. The beauty is that the reason why we went after that opportunity is because we saw many customers, many lenders. You have a referral base there. You can't let it just sit idle. So you're like, okay, if they're looking into doing it and they're looking to do it, let's do it centralized place. That's the product team I'm speaking about all the time. Now we have a true product. You come in and tailor it. You come in, and then you have five new partners on that product. The vision of that in the future is, okay, now we have with Eli Northern, actually the auto loan business, right? Five countries go actively to their customers with Eli Northern and talk to them, hey, personal loan. More likely than not, and not speaking on behalf of Eli, it's the concept, but let's use Eli as an example. They have been dying to do a personal loan for many years, but they said, okay, the investment and the credit risk, models and stuff, but we can be a plug and play, not a plug and play in the sense it's happening today, but an ability to drive that value rather quickly with taking on the credit risk. They don't need to take the credit risk. It's like them. Of course, they're going to do it, increase the lifetime value, increase the engagement with the customers. That is a little bit our strategy. We are developing these pieces that will become a very effective, think about it, the credit is a matrix of all the products, auto, PL, credit card, ta ta ta ta ta ta ta, up to Morgan, Morgan, and then the credit spectrum 800 to 500. A perfect organization in lending is the one that has all of this, all of this. That's called more likely than not JPMorgan or whatever. Right. Citi. Thank you. In that capacity, you are asking the question of what the organization doesn't have and how you react to that and you help them do it. Because Citibank has all of this, they don't need us maybe, but others will. Point being is super regionals or different parts. It's the same journey, by the way, that SoFi has been, right? They started with student loans, they moved to personal, but they do it themselves. We are taking that capability. We're saying. Vendors. You could drive that externally in a partnership kind of framework rather than having build. Be responsible for the whole thing. It's like build partner. That's Pagaya. Are the unit economics any different though? Same. For us, it's a way to source good customers. Just giving you value proposition to these partners, you just become a whole lot thicker. I got it. That's the concept of the B2B. I got it. I know. I got I got it. That is fascinating. I think we have to address this. Obviously, you had a successful bond raise this year. Just curious if you could talk a little bit about Pagaya's own funding needs, its own capital allocation, how should investors think about the company's strategy and funding going forward? Yeah. I think you should expect for us to increase the forward focuses, but not more than 50%. The market is not that big in that. You do not have that many of these things. You have good big names, but you do not want to be overly leveraged one. So 40-50% is a good mix. We have to do that in the POS. We need to do it a little bit more in the auto. In the PL, we are in a good place to say we will add two, three partners. That is part of the plan in 2026. You should expect to build more from that, not more on that from us. The two other pieces are, while it was a bit painful, we were very successful in opening every possible capital market account: Convert, High Yield, Equity because we are public, EDS, or Asset Bank. From a funding perspective and equity and Convert, no need for free cash or new cash. We're not going to raise any dilutive instruments whatsoever. That's out of the picture. It's been the days of building that, but it's not in the cards anymore. We are trying to build the value. That's out of the picture. On the other pieces of creating much more efficient funding on the high yield, we will look to increase the rating over time, how the GAAP net income is playing into that, and therefore you need to hold more on your balance sheet. This is part of the game, how you keep the cash profile to be as such that people can see that you're building that. That's point number one. Point number two is on the ABS is how you continue to propel more and more partnerships to be more efficient even on that piece. We do not have a major rating agency yet, like the Moody's and the S&P. That is the next step on the ABS side. It is now on the corporate side, which is a very big jump, very helpful, derated, strong story, big understanding, but the next level of that will be how we take it to the asset side to continue to compress the spreads, to continue to be more big, you know, implement. By the way, we attended S&P's analyst day. They're talking, they're coming to you by the way. Right. It's an interesting convergence. Exactly. The POS. Moody's as well. Yes. The different pieces. Posh, which is the POS, but AAA rated from four others. I think the bottom line is, like I said about the metrics before on the lending side, the metrics of IG, non-IG, private, public, is all corporate, non-corporate, on balance sheet, off balance sheet, is all open for us. We are trying to optimize in between these pieces. IG, the most optimal piece is on the ABS side. The non-IG in between the corporate to the forward flow to the other pieces. Where you can make a difference and control. Right. All right. We have one minute and 51 seconds left. What's Pagaya in 5 to 10 years? Pagaya in 5 to 10 years is the. No, scratch funding. It's just that. Ten years is the leading technology company that is solving lenders' core heart problems and enabling them to become the best version of themselves, their customers, any service spectrum, any market or asset class, from credit cards to home equity, to auto loans, to POS, and all the spectrum. Can Pagaya be replicated? I hope not. I feel that not. It's going to be very tough and challenging with the ones in there. At the same time, it sounds like you're more mission critical. The B2B, the enterprise level, the going deep, hearing your customers, reacting, solving for their big needs. They are our lifeblood. We appreciate them. We love them. We learn so much from them every day. We are going to do whatever we can to make them more successful. What's the pipeline look like over the next 12 months? Do you feel like you're getting more bandwidth from the biggest piece? The biggest piece is to solve the product market piece of the different pieces. You see that the first focus is to get these eight up and running. Then to have another six, another six, another six. We do see very strongly. You feel like you have the full suite right now. You can go full force into our banking or the partner community. Very exciting days. It is. Exciting time. You saw it before in many other ways. Yes, absolutely. Thank you so much, Gal. That was super insightful. Great, great summary of what's going on. Very exciting time for the company. Great to see you. Thank you so much. Thank you so much. Thank you. Thanks, everyone. That's good.