0001883085-26-000031
SEC filingPagaya's Q1 2026 revenue grew 10% to $317.9M, driven by Network Volume growth and improved AI fee economics, with operating income up 68%.
Pagaya's Q1 2026 total revenue and other income increased 10% to $317.9M from $290.0M in Q1 2025. Revenue from fees rose 6% to $299.0M, primarily due to a $15.4M increase in Network AI fees, driven by improved economics and 9.3% Network Volume growth. Contract fees increased modestly by $1.0M. Interest income more than doubled to $17.7M, reflecting changes in portfolio composition, and investment income turned positive at $1.3M. Operating income surged 68% to $80.0M as cost growth lagged revenue growth. Production costs rose only 6% to $177.6M, despite volume growth, resulting in a slightly lower FRLPC margin of 4.6% versus 4.8% last year. Operating expenses declined 6% overall, with technology costs down 18% due to lower depreciation and general and administrative costs down 28% from reduced losses on loan purchases and lower compensation. Net income attributable to Pagaya more than tripled to $24.7M, with diluted EPS of $0.28 versus $0.10. Adjusted EBITDA grew 18% to $94.2M, and adjusted net income rose 27% to $67.5M.
Pagaya's revenue is derived from two primary fee streams. Network AI fees, which include AI integration and capital markets execution fees, represented 89% of fee revenue in Q1 2026. This segment grew 6.1% YoY, benefiting from improved economics with certain partners and Network Volume expansion. Contract fees, comprising management, performance, and servicing fees, grew 3.2% to $32.1M, reflecting a larger asset base in securitization vehicles. The company does not report separate operating income by segment, but the revenue dynamics highlight the platform's ability to scale fee revenue while managing production costs. Interest and investment income, while smaller, contributed significant growth and diversification.
Management's outlook focuses on continued Network Volume growth, partner expansion, and AI technology improvements. Key risks include geopolitical instability, elevated interest rates, and potential impacts on consumer credit performance. The company highlighted its diversified funding sources, including the 2025 Revolving Credit Facility and securitizations, and noted repurchases of its 2030 Senior Notes at a discount. No specific quantitative guidance was provided, but the company emphasized maintaining operational efficiency and scaling FRLPC. The ongoing conflict in the Middle East and macroeconomic pressures are monitored, though management believes current liquidity of $380M is sufficient for the next twelve months.
As of March 31, 2026, Pagaya held $317.8M in cash and cash equivalents, plus $62.2M in restricted cash. Total assets stood at $1,648.6M, with investments in loans and securities at fair value of $941.4M. Total debt was $895.4M, comprising a $114.7M revolving credit facility, $156.3M in secured borrowings, $149.4M in exchangeable notes, and $475.0M in long-term debt. Shareholders' equity (Pagaya) was $529.3M, with accumulated other comprehensive loss of $(32.3)M and accumulated deficit of $(838.0)M. The company has no inventory.
Purchase commitments total $9.2M as of March 31, 2026, primarily for cloud computing services, with $6.3M due within one year and $2.9M thereafter. Additionally, Pagaya has guarantees under forward flow agreements with an unfunded maximum potential of $135.4M, against which $55.5M is segregated in restricted cash. The company also has operating lease liabilities of $32.6M.
During Q1 2026, Pagaya repurchased $7.4M of its 2030 Notes at 87.3% of par, recording a $0.8M gain. Capital expenditures were $3.2M for property, equipment, and software. The company borrowed $114.7M under its revolving credit facility and $49.3M from secured borrowings, while repaying $88.0M of secured borrowings and $6.5M of long-term debt. Net debt increased $71.1M. No share buybacks or dividends were declared. Subsequent to quarter end, the company repaid the full $114.7M revolver balance, received $65.0M in secured borrowings, and repurchased an additional $3.8M of 2030 Notes.
No segment reporting is disclosed in the Notes. Revenue is generated from Network AI fees ($266.9M) and contract fees ($32.1M), with related party revenues of $158.9M (53% of total revenue).
For Q1 2026, Pagaya generated $43.2M in operating cash flow, up from $34.4M in Q1 2025, a 25.4% increase. Net income including noncontrolling interests was $24.2M, resulting in a CFO-to-net-income ratio of 1.79x, indicating strong cash conversion. Key non-cash adjustments included $38.0M in gains on investments, $7.2M in share-based compensation, and $5.2M in amortization of deferred costs. Working capital was a net use of $30.0M, driven by increases in fee receivables ($17.4M) and accrued interest ($9.3M), partially offset by income taxes payable ($4.9M).
Capital expenditures totaled $3.2M, consistent with the prior year's $3.8M, reflecting low capex intensity. Free cash flow was not explicitly stated but can be approximated at $40.0M (CFO minus capex). The company did not repurchase shares or pay dividends; instead, it raised $49.3M in secured borrowings and $114.7M from a revolving credit facility, while repaying $87.9M in secured borrowings and $6.5M in long-term debt. Financing activities provided $64.2M net.
Overall, operating cash flow comfortably covered capex and debt repayments, with excess funds used to grow cash balances by $91.7M. The company's cash generation appears solid, with minimal reliance on external financing for operations.