Pagaya's Earnings Call: Navigating Contradictions in Product Expansion, Economic Risks, and Credit Quality

Record Financial Performance:
- Pagaya Technologies Ltd. reported record total revenues of $326 million for Q2 2025, marking a 30% increase from the previous year.
- The growth was attributed to increasing value provided to existing partners, improved funding efficiency, and strong unit economics.

Operational Efficiency and Cost Management:
- The company's adjusted EBITDA reached a record $86 million, a 72% increase from the previous year, with a margin improvement of 6 percentage points to 26.4%.
- This improvement was driven by strong top-line growth and operational leverage, with core operating expenses as a percentage of FRLPC nearing record lows.

Enhanced Credit Performance:
- Personal loans were the largest contributor to volume, up 23% year-over-year, while auto volumes increased to 30% of total volumes, up from 9% a year ago.
- This growth was supported by stable consumer credit performance and disciplined underwriting standards that maintained solid credit quality.

Successful Capital Markets Transactions:
- Pagaya successfully raised $500 million through its first corporate bond issuance, reducing its cost of debt from approximately 11% to 9%.
- This transaction enhanced cash flow, simplified the capital structure, and improved liquidity and flexibility, providing access to deeper pockets of institutional capital.