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Operator: Thank you for standing by, and welcome to the BARK, Inc. Second Quarter Fiscal Year 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Michael K. Mougias, VP of Investor Relations. You may begin. Good morning, everyone, and welcome to the Second Quarter Fiscal Year 2026 Earnings Call. Joining me today are Matt Meeker, Co-Founder and Chief Executive Officer, and Zahir M. Ibrahim, Chief Financial Officer. Michael K. Mougias: Today's conference call will be webcast in its entirety on our website, and a replay will be made available shortly after the call. Additionally, a press release covering the company's financial results was issued this morning and can be found at our Investor Relations website. Before I pass it over to Matt, I want to remind you of the following information regarding forward-looking statements. The statements made on today's call are based on management's current expectations, which are subject to risks and uncertainties that could cause actual future results and outcomes to differ. Please refer to our SEC filings for more information on some of the factors that could affect our future results and outcomes. We will also discuss certain non-GAAP financial measures on today's call. Reconciliation of our non-GAAP financial measures is contained in this morning's press release. And with that, I will now pass it over to Matt. Matt Meeker: Thanks, Michael, and good morning, everyone. Midway through the year, we are on track with expectations and gaining confidence and momentum as we go. But first, I am happy to start this call with an important update. Last week, we paid off our $45 million convertible note using cash from our balance sheet. BARK, Inc. is now debt-free. We are proud of our decision and our ability to pay this off in cash rather than refinance it, which reflects our long-term confidence in the business. In addition, we extended our $35 million credit line with Western Alliance Bank, continuing a nearly decade-long partnership that gives us added flexibility on competitive terms. Together, these actions strengthen our balance sheet and position BARK, Inc. to grow and create long-term value even in a volatile macro environment. Our confidence comes from how well we have executed on the plan we set at the start of the fiscal year to drive revenue diversification and maintain bottom-line discipline. This quarter reflects that progress, with total revenue of $107 million above the high end of our guidance range and adjusted EBITDA of negative $1.4 million within our guidance range. Adjusted EBITDA would have been stronger, but we chose to invest roughly $1 million in incremental efficient growth during the quarter, an investment we expect will pay off as the year goes on. So let's talk about our progress this quarter on diversification and the bottom line. First, our Commerce segment delivered another standout quarter with $24.8 million in revenue, up 6% year over year and representing 24% of total revenue, an all-time high revenue mix contribution. Year to date, we are seeing strong traction across key partners, including Walmart, Chewy, Amazon, and Costco, where our popular advent calendar is already sold out for the holiday season. And speaking of Chewy and Amazon, you can now find our Bark in the Belly kibble on both of their digital shelves following an August launch. Second, when it comes to diversification, BARK Air continues to exceed expectations, delivering $3.6 million in revenue this quarter, up more than 138% from last year and 54% from the prior quarter. We also maintained a 99% five-star review rate, which speaks volumes about the quality of experience we are delivering. This quarter, we achieved our highest gross margin driven by a 93% seat fill rate. BARK Air continues to validate the incredible demand for dog-first travel and reinforces our belief that we are solving a real problem for dog parents. And finally, as a reminder, we received the green light from the Girl Scouts to participate in their annual cookie program and will begin shipping products next summer. This partnership represents a huge opportunity not just for revenue, but for awareness. Millions of families will see BARK, Inc. alongside one of the most iconic brands in the country, and we are thrilled to partner with the Girl Scouts. Each of these are initiatives that only BARK, Inc. can do. When we do BARK, Inc. things, we excel. So we made great progress on diversification this quarter. Now let's talk about our bottom-line performance. This has been a challenging year with tariffs, changes at the U.S. Postal Service, and a volatile macro environment. But as planned, we are emerging stronger. A meaningful milestone this quarter was moving our last-mile delivery to Amazon. That means your BarkBox now arrives on those Amazon blue trucks. We are off to a great start with this partnership, which reduces our last-mile delivery costs and gets packages to customers about a day faster. That's a meaningful improvement to the customer experience. In addition, this quarter marked the lowest customer acquisition cost we have seen since fiscal 2023, and with that efficiency, we saw an opportunity to deploy an additional $1 million beyond our plan at a highly efficient rate to drive both short and long-term growth. And for the second quarter in a row, two-thirds of our new subscribers opted into our more premium Super Chewy and ComboBox offerings. On top of that, we have seen six consecutive months of improvement in subscriber retention as we continue to capitalize on the Shopify platform. One driver of that progress is finding new ways to deepen our relationship with dog parents and strengthen our core offering. Last month, we launched our subscriber perks, a new membership benefit that gives BarkBox subscribers access to exclusive discounts and offers from BARK, Inc. and our partners, delivering up to $1,500 in annual value at no additional cost. It's another way we are rewarding loyalty and adding everyday value for our most engaged customers. Bringing all of that together, we acquired more new subscribers than planned, at our most efficient rate in several years. Those subscribers are retaining longer, and with partnerships like Amazon for last-mile delivery, they will generate higher margins for us while enjoying an even better customer experience. Our brand now extends well beyond subscriptions, with strong sales across 50,000 retail locations and record passengers and revenue for BARK Air. Finally, we feel so good about our performance that we paid off our convertible debt in cash, ahead of schedule, without refinancing or selling equity to do it. Our strategy is working. We are balancing growth and profitability, expanding into new categories and channels, and doing it with a debt-free balance sheet. I am excited about what's ahead in the second half of the fiscal year. And with that, I'll turn it over to Zahir. Zahir M. Ibrahim: Thanks, Matt, and good morning, everyone. We have made solid progress executing our plan through 2026. We are diversifying revenue beyond our subscription business, and our profitability discipline remains strong. And as Matt highlighted, BARK, Inc. is debt-free for the first time as a public company, a tremendous milestone for our team and our shareholders. Let me walk you through the quarter in more detail. Total revenue for the second quarter was $107 million, above the high end of our guidance range. This outperformance was driven by stronger than expected DTC performance and a modest timing benefit in commerce. Excluding BARK Air, DTC revenue was $78.5 million, down versus last year, primarily from entering the year with a smaller subscriber base and our decision to moderate marketing spend in light of tariff and macro uncertainty. However, as we saw stronger new subscriber momentum in the quarter and highly efficient acquisition costs, we leaned in and invested an incremental $1 million on marketing spend. Even with the incremental spend, total marketing expense will still be down 18% versus last year, and we expect H2 to decline at a greater pace. While total subscribers are down year over year, retention remained strong, and the customers we are acquiring today are higher value. This improvement reflects our deliberate shift away from discount-driven acquisition toward higher-value loyal customers, supported by ongoing Shopify enhancements and initiatives like Amazon last-mile delivery. Our commerce segment delivered another strong quarter with $24.8 million in revenue, up 6% year over year and reaching 24% of total revenue. This segment continues to be a highlight, and we expect sustained growth in the years ahead as we expand both retail distribution and product assortment over time. BARK Air also continued to outperform expectations with $3.6 million in revenue, our strongest quarter yet. Consolidated gross margin was 57.9%, down 250 basis points year over year. Two primary factors impacted the quarter. First, revenue mix as commerce and air represented the largest share of total revenue, 26.5% versus 20% last year, and second, higher tariff-related costs. Through the first half, we have incurred roughly $7 million in elevated tariff-related costs, and we expect to incur between $12 million and $13 million for the full year. Vendor pricing, productivity improvements, and the move in DTC from box to bag have partially offset these costs. In addition, in 2026, we will further mitigate these headwinds by sourcing products from other geographies and implementing a price increase in commerce. As a result, we expect gross margins in both DTC and commerce to improve in the balance of the year. Turning to operating expenses, marketing was $15.4 million, down 18% year over year, reflecting continued discipline and a focus on efficient customer acquisition. Shipping and fulfillment expense was $31.5 million, down about 8% year over year, driven by lower DTC volume. G&A expense was $25.7 million, down over 11%, benefiting from lower headcount and ongoing cost management. Adjusted EBITDA for the quarter was negative $1.4 million, within our guidance range. As I mentioned, this includes the additional $1 million investment to acquire customers more efficiently, which we expect will contribute to near-term and long-term growth. We ended the quarter with $63 million in cash, down $22 million sequentially, primarily due to working capital timing, including higher receivables tied to stronger commerce sales and inventory build ahead of the holiday season. We expect to exit the year with lower inventory than the prior year-end, despite carrying the impact of added tariff costs. As mentioned, we also repaid our $45 million convertible note in cash days ago, which will be reflected on our balance sheet next quarter. With the debt fully repaid and our $35 million credit facility extended, we have strengthened our financial flexibility and simplified our balance sheet. Turning to guidance, we are continuing to maintain a cautious stance as many external variables remain fluid, including supplier transitions and tariff developments. As such, and consistent with previous quarters, we will only be providing this quarter's guidance. For the fiscal third quarter, we expect total revenue between $101 million and $104 million and adjusted EBITDA between negative $5 million and negative $1 million. In conclusion, we are in a strong position entering 2026. Revenue is tracking well to expectations, we are maintaining strong cost discipline, building strong momentum across each segment, and our gross margin should improve thanks to a number of measures we have taken this year. We are proud to be debt-free, and with our ongoing focus on profitability and diversification, we are confident that BARK, Inc. will exit fiscal 2026 as a stronger, more resilient, and more diversified company. And with that, I'll turn the call over to the operator for Q&A. Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of Ryan Robert Meyers from Lake Street Capital Markets. Your line is open. Ryan Robert Meyers: Hey, good morning, guys. Thanks for taking my questions. First one for me, congrats on getting the convertible debt paid off. So I am just curious, what kind of flexibility do you think that now provides you guys with? Are you able to go out and invest more in the business, drive more subscriber growth, drive more of the commerce business, just kind of, you know, at a high level now that you guys do not have to, you know, worry about that potential overhang, how does that really change things for you? Matt Meeker: Hey, Ryan. This is Matt. Thanks for the question. I think you heard some of it. You know, we ended the quarter, ended September with $63 million in cash on the balance sheet, paid off $45 million, like, you get a sense of where the cash is right now, which as we have executed through the year, that has been our plan all along was to not dilute the shareholders any further by issuing equity to raise capital and pay off that debt to pay off the balance sheet as we did. Not to burden our financials with interest payments in order to service it by refinancing it. So that has played out exactly as we hoped or even better than we hoped. And that kind of carries forward into the answer here, which is keep going. Keep executing because we are just as the year goes on, we are executing well and a little bit ahead of the plan in a pretty tumultuous environment. So we are happy about that, but not yet because of the external environment and a place to take really big swings or risks because you never know where like, in the I think in the past thirty days, the tariffs from China were 3013020%. So we really have to look around those corners and not get too far up over our skis. So the simple answer is keep delivering, keep executing our plan, get the bottom line stronger and stronger, reinvest that back into growth as we go on. But it is keep executing. Ryan Robert Meyers: Okay. Got it. And then I just want to circle back to commentary that you guys have provided last quarter as far as for the full year expecting to be profitable on an adjusted EBITDA basis by the end of the year. I know you guys gave the third quarter guidance. But what's your level of confidence or comfortability in kind of that full-year profitability that you guys communicated last quarter? Zahir M. Ibrahim: I mean, that's our goal still, Ryan. And, you know, we expect to be in that ZIP code. But as Matt just said, obviously, there's a lot of volatility out there, a lot of unknowns still. Particularly in respect to tariffs also the broader consumer sentiment. So we're just bearing that in mind in terms of goal is still to deliver EBITDA positive and we expect to be somewhere in that zip code. Ryan Robert Meyers: Okay. Got it. And then lastly, the commerce growth for the quarter, obviously nice to see that now roughly 25% or so and growing. But can you unpack kind of the growth within the commerce business? Is that just increased demand at the retailers that you are selling? Is it more products? Is it more stores? Just so we can get a sense of that business. Zahir M. Ibrahim: Yeah. It's a combination of factors. Right? We continue to expand our toy distribution across existing customers as well as some new customers but primarily existing customers. Example, you know, we increased our footprint within Walmart in the quarter, and that will continue to benefit us in terms of growth. We continue to grow on Amazon and Chewy for the year to date. And that's just a function of product being available online, level of reviews increasing, therefore, you continue to grow in terms of your momentum on those channels. Overall, the quarter benefited slightly from timing as well, from a couple of million of orders that shifted into Q2 from Q3. But, yes, we feel really good about the growth year to date on commerce. And expect growth in the second half of the year to continue. Ryan Robert Meyers: Okay. Got it. Thanks for taking my questions. Operator: Your next question comes from the line of Maria Ripps from Canaccord. Your line is open. Maria Ripps: Great. Good morning and thanks for taking my questions. So, Matt, you talked about acquiring more new subscribers at an efficient cost and seeing improved retention. Can you maybe give us a little bit more color in terms of what's driving that? Are there any specific media channels or tactics that you would highlight? And then secondly, can you maybe talk about retention within your existing subscriber base? And at what point would you expect that to stabilize given all the improvements that you've outlined? Matt Meeker: Let me take the first one and I wasn't quite sure I heard or understood the second. But, the first is there is a bit more of a favorable mix on channels and more short so towards organic channels. So direct customers, those that we're acquiring via our email and SMS list. So anything that would be more on the organic or brand side. So as we've ramped up some of our brand activities, we've shifted those dollars away from the meta channels, from Google channels, that seems to be paying off. Instead of paying those very high rates to acquire a customer, you pay very, very little for someone who just shows up on the platform. So it's a more favorable mix and that seems to be pretty sustainable and should grow as time goes on. But we're happy that the rate has come down to the level it has and that there seems to be good momentum in acquisition. On the retention side, I wasn't quite sure I heard or understood the question properly. Maria Ripps: Yeah. I was just trying to see if you can talk about retention within your existing subscriber base. And, you've talked about sort of all the improvements on the platform, so that are driving sort of high retention, at least within the new subscriber base. So I was just wondering if you can talk about retention within your existing subscriber base. Matt Meeker: Sure. I mean, overall, we've seen retention improve each month throughout the year as a whole. Some of the newer cohorts, they're still fairly new, obviously, if we start at the beginning of the fiscal year in April, they're maybe six months in here at most. What we see is certainly higher quality in terms of they are opting more for our super chewy line, which has a higher AOV. And a pretty similar retention. They are upgrading into higher value plans, like adding an extra toy to their plan. Prepaying at higher rates, so instead of paying their six or twelve-month commitment month to month over that term, pay it all at once upfront for a discount. All those things are really, really good. And we seem to be making just bits of improvement each month. As you mentioned, some of that is platform related. Some of that is returning value to the customer and making them happier with what we're delivering. And we still see a lot of possibility in that, especially as some of these trends continue out over time. The new, as I said, the newer customers who are in their first six months are showing pretty good signs. But they're certainly coming in at a different environment right now. So we want to see how that plays out before getting too excited about it. Maria Ripps: Great. Thank you so much for the color. Operator: Your next question comes from the line of Kaumil Gajrawala from Jefferies. Your line is open. Kaumil Gajrawala: Hey guys, congratulations on being debt-free. You maybe just talk about are there areas of investment or things that you would want to do now that your balance sheet is in a different place? Or are you thinking about buybacks as it relates to cash that you'll generate in the coming? Matt Meeker: Yeah. Similar to what I had said to Ryan, really looking at continuing to execute the plan to, as Zahir was talking about, our aim is still to be EBITDA breakeven for the year. And in a year like this, that's a real challenge. But that's still the goal. That's still the aim. While we invest in the diversification. So more of the business moving over to commerce as it has the air business, more than doubling revenue this year on a similar level of investment. And adding more services and new products into the mix. All of that has been part of the plan, and then we are meeting with our board next week and we'll be talking about our long-range plan and the new state of our balance sheet and our investments and our plans for capital. So I'd say over the next six months or the rest of this year, execute the plan, try everything we can to keep this company on the positive side of EBITDA, and gear up and really understand what our long-term investments need to be. Kaumil Gajrawala: Okay. Got it. You mentioned something very interesting when asked the last question on churn reducing. Is there something specific about those customers, or there's something related to your marketing or your execution that is sort of driving that? Matt Meeker: I think it's a combination of factors. One is we've spent basically the last year getting our Shopify tools or the oriented Shopify tools or platform to do what I would call a lot of little blocking and tackling things, put those in place, that each one of them might contribute a tenth of a point, but you add up all of those and all of a sudden you've got, like, a point and a half or two points of monthly retention. And they're either, like, silent wins or silent killers depending on how you look at it, but it's a lot of platform gains that we've made throughout the year. And there are still more of those in front of us, but we've made great progress. So that's one element of it. Another is as we've had really good wins over the years in our supply chain, and getting our cost into a much better place. We're now able to and we've started to return some value to the customer that makes them happier. And therefore, it leads to better retention. And then I'd say finally, is when we're not, I guess that favorable mix of an organic customer coming in hearing about BARK, Inc. from word-of-mouth because we returned value because the customer is just happier with us overall. Versus reaching to the furthest customer we can reach to on Meta with the most aggressive offer we can, an organic customer is going to return better. So as we've shifted that mix, we've also brought in higher value customers that have a better retention profile and a better profile overall. So it's kind of a mix of all those elements. Kaumil Gajrawala: Got it. Thank you. Operator: And that concludes our question and answer session and today's conference call. Thank you for your participation and you may now disconnect.
Operator: Good day. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to monday.com Ltd.'s Third Quarter Fiscal Year 2025 Earnings Conference Call. I would like to turn the call over to monday.com Ltd.'s Vice President of Investor Relations, Mr. Byron Stephen. Please go ahead. Byron Stephen: Hello, everyone, and thank you for joining us on today's conference call to discuss the financial results for monday.com Ltd.'s Third Quarter Fiscal Year 2025. Joining me today are Roy Mann and Eran Zinman, co-CEOs of monday.com Ltd., Eliran Glazer, monday.com Ltd.'s CFO, and Casey George, monday.com Ltd.'s CRO. Roy Mann: We released our results for the third quarter fiscal year 2025 earlier today. You can find our quarterly shareholder letter along with our investor presentation and a replay of today's webcast under the News and Events section of our IR website at ir.monday.com. Certain statements made on the call today will be forward-looking statements, which reflect management's best judgment based on currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Additionally, non-GAAP financial measures will be discussed on the call. Reconciliations to our most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations website. Now let me turn the call over to Roy. Roy Mann: Thank you, Byron, and thank you everyone for joining us today. In Q3, we delivered another quarter of strong results and disciplined execution, putting us firmly on track toward our Investor Day revenue target of $1.8 billion for FY 2027. We saw robust net additions of over 100k+ and 500k+ paying customers reflecting the strength of our go-to-market engine and the expanding demand of our platform. We also reported our largest ever non-GAAP operating profit reinforcing our ability to scale efficiently while continuing to invest in innovation. The combination of accelerating customer expansion, record profitability, and surging engagements with our AI offering position monday.com Ltd. strongly for its next phase of growth. Our Q3 results follow a highly successful Investor Day where we showcased our evolution into a multi-product and AI-powered platform. The event drew nearly 1,000 online participants, over four times the viewership from 2023, reinforcing investor confidence in our vision and the significant opportunity ahead as we execute toward our FY 2027 goals. Additionally, our Elevate User Conference in New York City and London reached new heights in both scale and impact. Attendance more than doubled year over year reflecting our growing excitement around our platform and the new AI capabilities. These events not only amplified customer enthusiasm and engagement, but also generated record engagement and strong pipeline heading into 2026, setting the stage for continued customer expansion and growth. Let me now turn it over to Eran to walk you through some of our business highlights for the quarter. Eran Zinman: Thank you, Roy. The investments we have made in our sales organization over the past year continue to drive strong results. We delivered solid net additions among larger customers, saw improved net dollar retention for accounts over $50,000 in ARR, and achieved accelerating growth, all reinforcing the effectiveness of our upmarket strategy and disciplined execution. We continue to rebalance our go-to-market investment towards mid-funnel channels that target larger opportunities. While these motions come with longer sales cycles, they are yielding higher quality pipeline and position us well for sustainable growth. Moving on, our multi-product strategy is delivering strong results, expanding monday.com Ltd.'s reach across more teams and use cases. New products now account for over 10% of total ARR, surpassing our 2025 goal ahead of schedule. New bundle offerings combining work management with CRM service and dev provide a unified, cost-efficient experience like accelerating cross-sell momentum. And within CRM, our new AI-powered monday campaigns product has seen rapid adoption since its September launch, reinforcing our vision of a connected sales and marketing suite. Since its gradual release in July, Monday Vibe has seen rapid adoption, with customers creating more than 60,000 apps to power their unique workflows. Built directly on monday.com Ltd.'s enterprise-grade infrastructure, these apps are secure, scalable, and fully integrated with granular permissions and team contacts. To better reflect the value customers are realizing, we introduced a new pricing model that lets users select a tier aligned with their AI needs, from unlimited free access to build and test apps to paid tiers that scale as the usage grows. We also recently introduced Agent Factory, a new AI product that lets anyone design and manage intelligent agents to automate complex workflows. Operating as a standalone solution with flexible consumption-based pricing, these agents function as integrated team members handling tasks like updating CRM records, sending emails, and scheduling follow-ups. And to simplify the AI experience, we are rolling out a new AI credit system in Q4, shaped by extensive customer feedback, providing a more transparent and intuitive way to scale AI usage and measure impact across organizations. This quarter's results reflect the incredible dedication of our teams and the trust our customers place in monday.com Ltd. every day. With accelerating customer expansion, record profitability, and growing enthusiasm for our AI-powered platform, we are entering the next phase of durable profitable growth that will create meaningful long-term value for shareholders. With that, I will now turn it over to Eliran to cover our financials and guidance. Eliran Glazer: Thank you, Eran, and thank you to everyone for joining our call. Q3 was another strong quarter for monday.com Ltd., highlighted by solid revenue growth, supported by our success with larger customers and continued improvement in operational efficiency. Total revenue came in at $317 million, up 26% from the year-ago quarter. Our overall NDR was 111% in Q3. We continue to expect overall NDR to be stable at 111% for fiscal year 2025. As a reminder, our NDR is a trailing four quarters weighted average calculation. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. We have provided reconciliation of GAAP to non-GAAP financials in our earnings release. Third quarter gross margin was 90%. In the medium to long term, we continue to expect gross margin to be in the high 80s range. Research and development expense was $57.8 million in Q3, or 18% of revenue, up from 17% in the year-ago quarter. Sales and marketing expense was $151.8 million in Q3, or 48% of revenue, compared to 52% in the year-ago quarter. General and administrative expense was $27 million in Q3, or 9% of revenue, compared to 9% in the year-ago quarter. Operating income was a record $47.5 million in Q3, up from $32.2 million from the year-ago quarter, and operating margin was 15%. Net income was a record of $61.9 million in Q3 2025, up from $45 million in Q3 2024. Diluted net income per share was a record $1.16 in Q3 based on 53.3 million fully diluted shares outstanding. Total employee headcount was 3,018 employees, an increase of 151 employees since Q2. We continue to expect to grow headcount by approximately 30% in fiscal year 2025. Moving on to the balance sheet and cash flow. We ended the quarter with $1.53 billion in cash and cash equivalents, down from $1.59 billion at the end of Q2. Marketable securities were $211.7 million at the end of Q3, up from $60.1 million at the end of Q2. Adjusted free cash flow for Q3 was $92.3 million, and adjusted free cash flow margin was 29%. Adjusted free cash flow margin is defined as adjusted free cash flow as a percentage of revenue. Adjusted free cash flow is defined as net cash from operating activities less cash used for property and equipment and capitalized software costs plus costs associated with the build-out and expansion of our corporate headquarters. Now let's turn to our updated outlook for fiscal year 2025. For 2025, we expect our revenue to be in the range of $328 million to $330 million, representing growth of 22% to 23% year over year. We expect non-GAAP operating income of $36 million to $38 million and an operating margin of 11% to 12%. For the full year of 2025, we expect revenue to be in the range of $1.226 billion to $1.228 billion, representing growth of approximately 26% year over year. We expect full-year non-GAAP operating income of $167 million to $169 million and an operating margin of approximately 14%. We expect full-year adjusted free cash flow of $330 million to $334 million and adjusted free cash flow margin of approximately 27%. Let me now turn it over to the operator for your questions. Operator: At this time, I would like to remind everyone, in order to ask a question, we ask that participants please limit themselves to one question and one follow-up question. Your first question comes from the line of Kash Rangan with Goldman Sachs. Please go ahead. Kash Rangan: Hi. Thank you very much. Good to see the quarterly results. I am also curious to get your perspective on two things. One is as you look at the spending environment for the next calendar year, calendar '26, what is top of mind for your customers? And where does monday.com Ltd. stand in terms of spending priority? Also, secondly, when you look at the results, this looked like a smaller magnitude of beat relative to what we have come to expect of monday.com Ltd. in the past prior quarter. So if you could talk about what might be behind the numbers, is it the go-to-market transition, etc., that hopefully was set you up for very good success in the years ahead? But I want to know if the go-to-market transition, the pivot towards larger deals also causes the kind of upside that we have come to expect. In the results and the guidance looking forward into the fourth quarter and the year ahead, if there is any go-to-market transition that we should be thinking about as you work through these numbers. Thank you so much. Eran Zinman: Hey, Kash. This is Eran. Maybe just to start, before I start answering your question, I know this is your last earnings call covering us. So just want to say thank you for the whole period and the coverage throughout the year. Just to your first part of the question, and then I can defer to Eliran about guidance and Casey. So in terms of customer demand, like you mentioned, we see a transition in the business basically across customer segments, the 50k, 100k, half a million. We see acceleration. Our go-to-market strategy in terms of adding bigger accounts is working really well, and we see accelerating on all fronts. In terms of what customers are asking for, so definitely, we see an increase in terms of our profitability. More customers are buying more products. Definitely, more and more customers are interested in AI features and AI products, and I think a lot of the new announcements and new features that we learn really resonate with customers. So overall, we see a very healthy demand across all customer segments. We see healthy demand with our existing products and specifically with the new AI features that we offer and we announced during the Investor Day. Eliran Glazer: Yeah. Thanks, Eran. Hey, Kash. It's Eliran. With regards to the guidance and in Q3 and what we provided, so the more measurable bit is mostly due to timing effect. As we rebalance investments, our higher ROI area, and it relates to your question. So we see the direct sales, the new products like monday.com Ltd. service CRM, and PLG channels such as video and social media actually providing higher ROI. And they tend to have a longer sales cycle, but we see a very positive momentum when you look at the 50k customers, 100k customers, 500k customers, they are all accelerated in this quarter going into next year. So this provides us a lot of confidence with regards to our next year assumptions. And maybe, Casey, you can add what is top of mind for customers next year. Casey George: Yeah. We just finished up our world tour with Elevate. So tens of thousands of customers and partners came out to hear everything we had to offer, especially around our AI offerings. The consensus back was, you know, I am not taking full advantage of monday.com Ltd. And, obviously, when we only have 6% of our customers consuming more than one product, the opportunity for us is significant. And so as we start this multiproduct journey, which obviously has just begun, all indications are we are going to have a much more material impact on the revenue associated with customers consuming more than one product. So at this point, it is early, but all signs and indications are that this is going to be a significant contribution for us going forward. Kash Rangan: Thanks so much, and best wishes for the journey ahead. Operator: Thanks, Kash. Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets. Please go ahead. Jackson Ader: Great. Thanks for taking our questions. The first one that I had was on the move upmarket and its impact on deferred revenue or billings. As you guys keep signing kind of longer or larger customers and maybe longer-term contracts, heavily weighted towards annual and even multiyear, I would expect deferred revenue to have to outgrow recognized revenue. And so I am just curious what the dynamics are there that are causing deferred revenue to come in below revenue. Thank you. Eliran Glazer: Hi, Jackson. It's Eliran. Just as a reminder, with regards to billings, we said that in the past, this is not the perfect measurement of our business because it is based on a cash basis, not an accrual basis. As a reminder, we tend to be more conservative on that. So therefore, there are some fluctuations with regard to that. And we think a better measurement of this is an RPO. RPO is a new metric for us that we disclosed in the Investor Day. And as you can see, it is accelerating quarter over quarter. And it also reflects the full contract value that we see going upmarket. So we think there is going to be some timing of the billings, which is why it is not a perfect measurement. Therefore, we tend to see the RPO as a better measurement going into next year. Jackson Ader: Okay. Alright. Great. That is fair. And then, what should we take from the implied growth rate here for the fourth quarter is like 20.5%, 23% or so year-over-year growth. What should we take as a signal for the right level to be thinking about 2026? Eliran Glazer: Oh, so we are going to provide our initial expectation for fiscal year 2026 in our next quarter earnings. And I think in the Investor Day, we provided a good outline. We said that we are going to be $1.8 billion by fiscal year 2027, and we are committed to achieving this number and to the guidance we have provided during the Investor Day. So this is something that not only are we growing on the revenue, but also expecting operating and free cash flow margin to expand. Jackson Ader: Got it. Thank you very much. Operator: Your next question comes from the line of Arjun Bhatia with William Blair. Please go ahead. Arjun Bhatia: Yes. Perfect. Thank you so much. I want to maybe just go back to the fact that in '26 might see some improvement if given that you are rebalancing investment. Can you just maybe elaborate a little bit on where the investment is going, what you might expect your kind of goals are for 2026 to either reaccelerate growth? And then, I think, Eliran, I heard you say 30% increase in headcount this year. I am curious how your plans are shaping up for 2026 within that investment framework. Thank you. Eran Zinman: Yeah. Hi, Arjun. This is Eran. So I can start. So look. We feel very confident on the strategy and how it is going so far. Specifically, I can point out our going upmarket worked really well. Just as a reminder, just three years ago, it seemed like a big stretch. But right now, the majority of the business is based on 50k, 100k, half a million dollar accounts. We see those accounts have much better retention, much more expansion, much more stability. Definitely changes the nature of the business, and we see some of that as part of the results, but we are very confident on where we are heading with those customers. We feel the potential to do more cross-sell, more expansion over time will really pay off. In addition, as we mentioned during the Investor Day, we do a lot of investment in terms of product. We are executing in the last three or four quarters like never before. Adding a lot of AI features, functionality, those are really well received with our customer base. There is a lot of excitement. Casey mentioned Elevate. We got great feedback from customers across the board. So all in all, looking at all the investments we made and all the innovation in the product, we feel very confident in where we are headed and how our customers are using the product. Eliran Glazer: Hey, Arjun. This is Eliran. Just to answer your question on headcount. So as we said, we expect hiring to remain focused on sales, product, and R&D this year. We estimate it to be around 30% growth in headcount by the end of the year, and we think that as for next year, we already said it in the Investor Day that we believe the numbers are going to be closer to 20% in terms of adding additional headcount. It is going to start to decelerate already in H2 of this year going into next year. And we think most of the investment already is behind us, so we are going to see less investment in headcount next year. Arjun Bhatia: Okay. Understood. Very helpful. Thank you. And then one just on Vibe because it seems like it is getting very good adoption. 60,000 apps, I think, in a short number of months. What are customers building on Monday Vibe? And is that different from what you see them how you have seen them historically use sort of the Monday work management platform? Roy Mann: Yeah. Hi. It is Roy here. So, Vibe is amazing. Like, we see that customers are really leaning into it. And it is filling up a lot of gaps. And I feel like as a product, it triggers their imagination. You know? Like, whatever they want out of software, they just, like, put in there, and they build, like, stuff we would not have imagined. Like, some of them we shared in the investor letter. Fill gaps, build, like, the software of their dreams, and it is all built on top of the monday.com Ltd. infrastructure meaning it is, like, enterprise-grade, the data is saved. Everything they expect from the platform itself, like, get into Vibe, and some of them are leaning really hard into it. Arjun Bhatia: Perfect. Thank you so much. Operator: Your next question comes from the line of Joshua Phillip Baer with Morgan Stanley. Please go ahead. Joshua Phillip Baer: Great. Thanks for the question. I wanted to ask on the product bundles that you are starting to introduce this quarter in Q4. I guess, first, is there a change on the product from a capabilities or integration perspective? Or is it more about the go-to-market and pricing? And I guess the follow-up is, what is the change here? Is it effective discounts? Like, what is the goal here, and which of the market are you trying to target with this? Thanks. Casey George: Yeah. Casey George here. I will take this one. So we just launched bundles. We launched three bundles here this last month. So this quarter, we obviously have a lot of visibility in how customers use our products. And what we saw in the market, there were three in particular that stood out where there were pretty consistent use cases with work management and service CRM and work management in and around our CRM and service. And so what we did was we put those into the market, and there is some commercial advantage for the customer to consume those, but it is also ease of use. Because these are ready-built bundles that they can deploy very quickly and get value from them immediately. And again, we saw in particular industries where these were pretty pervasively used, and therefore, we bundled them up, made them available to the market and our sales team in early days, but we are seeing very good traction with these bundles here in the first quarter since they have been launched. Joshua Phillip Baer: Okay. Great. Thank you. Operator: Your next question comes from the line of Brent Thill with Jefferies. Please go ahead. Brent Thill: Thank you. Just going back to the guidance, I do not think there is a time in our model where you did not raise guidance on the quarter out. So I think many are asking, you know, what is happening? What are the causes for this obviously to your stock premarket and what is happening? So I think a little more explanation is needed to better understand what happened there. Eliran Glazer: Yeah. Hi, Brent. It is Eliran. So maybe as a reminder, which we keep saying it every quarter, it is important our guidance approach is consistent with prior quarters. It has not changed. And we did not change the philosophy. As we said, in prior quarters, the more measured bit reflects timing effects as we rebalance investments towards ROI areas. So we are investing in performance marketing where we see the return on investment. And due to our big brand capabilities, when we see high returns, we are investing in performance marketing and we see immediate dollars. As we started to shift towards upmarket, obviously there is a timing effect because the investment is taking longer to see the results. However, the momentum and the trends are very positive. So there is a timing effect, as I mentioned, that is flowing into the next quarters, and it is impacting the numbers that we are seeing this year in terms of revenue and ARR. Brent Thill: Okay. And, you know, from Casey's approach, I know it is still early in his journey, but I think many are asking how that transition is going. Upmarket, what is still needed to go, what is going well. I think everyone loves to hear his thoughts. Casey George: Yeah. No. Thank you. It is going exceptionally well. If I point you back to the key metrics that we follow around moving upmarket, the 50, 100k, 250, and 500k. We accelerated on all of those. And why and may ask yourself why is that important? If you understand that the first deal is typically a $50,000 deal, not a million-dollar deal, and it starts at the 50, goes to $250, and then accelerates into hopefully a seven-figure deal. We are seeing that trend continue. I will point to you know, three big wins we had in the quarter, all over a million. All three of those started three or four years ago at probably around $50,000. And they accelerated over the course of the three, four years. Love to talk about a couple of those opportunities, and particularly, one of them large logistics company in Europe. That is consuming 5,000 seats, 1,500 of those are CRM. We obviously have work management and then there are service fees associated with that win. So here is a large logistics company that is consuming 5,000 seats across three of our products. That was over a million this quarter. We had a large tech company that uses our product across about 10 different departments. Most importantly, they use it to manage all of their M&A. And that is another company that started with us you know, three, four years ago around $50,000. So all of the metrics that we follow are accelerating and obviously encouraging signs for our ability to move upmarket. Brent Thill: Great. Thank you. Operator: Your next question comes from the line of Mark Murphy with JPMorgan. Please go ahead. Mark Murphy: Thank you very much. The metrics are clearly strong with your larger customers. Can you speak to what you saw in mid-market and below? For instance, how did the down-market business trend versus internal plans? Or is there much of a spread in the growth rate there if we compare it to that over 100k cohort? Eran Zinman: Yeah. Hi, Mark. This is Eran. I can start. So look, you know, looking at Q3, top-of-funnel trends were choppy overall. We saw some continued volatility in paid search performance. However, the good news is that towards the end of the quarter, we saw encouraging stabilization in new sign-up and top-of-funnel. So overall, I would say going forward, the pipeline remained healthy. A lot of it is based on upmarket, but also the bottom-up mid-market part also looks healthy going forward. So we saw solid growth in large and high-quality opportunities, both touch and no touch. And overall, I say we remain confident that all the actions that we have done in terms of top of the funnel, how we rebalance our acquisition channels, and all the investment we have made in the last quarter will pay off going forward. Mark Murphy: Okay. And as a follow-up, at what point would you think the traffic buildup you are seeing from LLMs? I think refer to that as AIO, and some of the other channels would be able to make up for what you are losing on the Google search side? Is it conceivable to get back to a net neutral position coming out of Q4 or maybe sometime in 2026? Roy Mann: Yeah. Hi. It is Roy. So what we see is that we are able to shift the budget of our marketing towards like a more sales-led sources and rebalance them and get an ROI. And like Eliran mentioned, these channels take a bit longer to mature, and that is what we see now. We also are getting a lot of traffic from an increasing amount of traffic from AIO, it is too soon to tell if it will fill that gap, but we are already filling it with a different strategy. Mark Murphy: Thank you. Operator: Your next question comes from the line of Scott Berg with Needham. Please go ahead. Scott Berg: Hi, everyone. Thanks for taking my questions here. I think it was Eran earlier had talked about some early traction with some of the AI functionality that your customers are using. Just wanted to see if you had some you know, maybe any specific use cases or maybe internal, you know, corporate departments that you are willing to call out that you are seeing the maybe the most early traction from some of the AI use cases? Thanks. Casey George: Yeah. Casey George here. It is actually been pretty fascinating. We launched a lot of these offerings at Elevate and I had the opportunity to spend some time with some pretty significant customers at Elevate. And the resounding feedback was this is a very powerful tool. It could solve a lot of problems in our organization. But specifically, we had a large highly regulated insurance company in Europe who needed to solve the reporting issue. Right? And typically, had to acquire some software to go do that at roughly $150,000. That they really did not want to spend. They did not get a ton of value out of this out of the software. And so they went home that night or to their hotel and in twenty minutes, they built a better tool that they could use that would effectively get far more value out of. And obviously, they did not have to spend $150,000. There was another large retailer I spent time with who pretty much did the same thing. They had a reporting gap in their organization. They have been trying to solve it for an entire year. They are on the spot. With some help from our team, developed a reporting tool in a matter of less than thirty minutes and effectively solve the problem, as I said, that they have been trying to solve for a year. So it is a super powerful tool. And as Roy mentioned, it is on a platform or an enterprise platform that is already integrated in their organization. So their ability to deploy that and get value from it instantaneously is super powerful for them. So we continue to see use cases like that pop up all over the place. So, obviously, we are pretty encouraged with early signs. Scott Berg: Understood. Helpful. And then maybe a modeling question for Eliran. As you pivot to some of these other channels that you guys started last quarter from a sales and marketing, go-to-market kind of perspective is, how should we think about leverage of sales and marketing kind of in the near term? Do those channels still require, I guess, some overinvestment here in the short term to effectively turn them on? Or would we or do you expect to still see some leverage there given that you are not spending in maybe that Google channel as much? Thank you. Eliran Glazer: Hey, Scott. Eliran here. So as a we have a hybrid model, which is a combination of PLG, the performance market spend that we already mentioned, we are shifting to other channels. As well as the headcount that the quota carrying around partners, sales channels, and customer success. So, overall, when we are thinking about going into you know, the investment, we believe that the share of the performance marketing as a percentage of total S&M is going to decline potentially in total dollar value, it may stay flat or slightly below. But we are going to see the investment mostly in headcount. It is going to be more moderate than what we have seen in the past. And the momentum, as we said, continues to be very strong. We are expanding within existing customer base. You can see it with the NDR. So 50k customers, 100k customers, and upmarket motion, ACV is going up, landing is bigger. So this would be an area of investment, but more moderate to what we have seen in the past. Operator: Your next question comes from the line of Steve Enders with Citi. Please go ahead. Steve Enders: Okay, great. Thanks for taking the questions this morning. I guess I will just dig a little bit more into just the performance marketing channel specifically and just I guess, would be great to kind of get a breakdown for kind of what you saw within you know, the paid Google channel, I guess, hopefully, through October if you have that. And then I guess, you know, secondarily, just how the, how the kind of the ramp in the other channels is working and, you know, how that kind of is trending versus your expectations there? Eran Zinman: Yeah. Hi, Steve. This is Eran again. So look. As I mentioned, we talked briefly about this during the Investor Day. You know, our Google AdWords channel accounts for less than 10% of new revenue. And overall, like I mentioned, we saw some choppiness in Q3, but towards the end of the quarter, saw stabilization. And that is across Google AdWords and across all other channels. We see very healthy double funnel activity. Also, the pipeline looks very healthy. It is growing according to our plans. So look, I think overall, we feel confident going forward. We are with our acquisition strategy. And, also, you know, we also mentioned during the Investor Day the quality over quantity. We continue to see a trend of this high-quality customers, bigger lands, more expansion, high retention. So overall, we feel confident about the strategy and confident about our ability to continue and acquire new type of funnel activity. Steve Enders: Okay. Alright. Great. That makes sense. And then I guess on the guidance, again, just I understand Q4 is coming down a little bit. I guess, on the back of that, I guess, what maybe gives the confidence as we think through you know, '26 and '27 that you know, you still feel good about that $1.8 billion number especially as we think about lapping some of the price increases going into next year? Just yeah. How should we think through those factors and what gives you all the confidence behind those numbers? Eliran Glazer: Hey. Hi, Steve. Good question. So, you know, when we think about a few reasons why we are confident in next year's numbers. First, demand and expansion from our larger customers. So we are accelerating new year-over-year growth for all upmarket customers. So you have seen 50k, 100k, and 500k, I mentioned earlier. We are accelerating year-over-year growth of RPOs. And we are improving 50k NDR. In addition to that, we have the multiproduct adoption that continues to trend positively. CRM is becoming very significant with more than $100 million in ARR. And we are seeing customers increasingly adopting multiple solutions. We are only in the early innings of, you know, customers that are adopting more than one product, and only, I think, it was 6% that we said in Investor Day, now we are doing much, much better. AI product engagement is accelerating. We were focused on educating, and we are focused on adoption of customers in the market, and we see a very healthy adoption of AI products, that we believe are going to monetize next year in a more significant way. And as Eliran mentioned, we have signs of stabilization in top of funnel at the end of the quarter that we are encouraged by that going into the fourth quarter and into next year. Steve Enders: Okay. Perfect. Thanks for taking the questions. Operator: Your next question comes from the line of Alex Zukin with Wolfe Research. Please go ahead. Alex Zukin: Hey, guys. Maybe just since we are bundling kind of all the new products into one category, now maybe what is the latest on monday.com Ltd. CRM service products in terms of traction in the quarter? How much they are contributing to net new ARR today? Then I have got a quick follow-up question on the model. Casey George: Yes. Casey, I will take this one. So CRM, as we just mentioned, eclipsed $100 million this year in a very short amount of time, I think less than two years. We continue to see traction of course across SMB and mid-market in particular. With service, this has really been a great story for us. It is only nine months in, but we continue to see even more significant contribution coming from service. I believe our size of service customers is, you know, 2x those that of other products. The service continues to accelerate, nine months in, we do not have a year-to-year compare. But we are very bullish on both of those products going into next year. Alex Zukin: Got it. And then maybe Eliran, just for you, if you have had a couple of questions regarding, how you feel maybe about next year specifically. I think it is just given some of the changing dynamics that you are mentioning around channels and how you are going to market and shifting spend. What seemingly is a little bit of a change in terms of your guidance for Q4 versus previous years and periods in terms of passing through the beat and this timing adjustment. Maybe just help us pace how we should think about the growth. Are you comfortable with where consensus is for next year? Is it something where it may be a little bit more back-end loaded, and you could actually see acceleration in '27 because of some of these timing adjustments that you are calling out, I think it would be really helpful for us to just understand the pacing of growth given some of these evolving dynamics. Eliran Glazer: Hey, Alex. Eliran here. So I think I mentioned it earlier about if you think about where we are going to be in fiscal year 2027, we said that we are going to achieve $1.8 billion in revenue. We feel very confident with that. We feel very confident with the number based on everything that we see today. And, you know, this is something that we when we made the assumptions, we took into account the trends that we see today. We made some assumptions about the cross-sell motion, the new product that we are launching to the market, the fact that AI is going to be monetized to a certain extent, and the fact that we are going to expand within existing customer base. So having all of this into taking all of this into account, we feel that the $1.8 billion in fiscal year 2027 is achievable. In the interim, we are confident with the consensus number for next year as well. Alex Zukin: Perfect. Thank you, guys. Operator: Your next question comes from the line of D. J. Hynes with Canaccord. Please go ahead. D. J. Hynes: Hey, good morning, guys. Eliran, the new AI pricing model and the introduction of Agent Factory feel like it gives you more or less visibility into the model? I am just trying to think about how these changes may impact the ability to forecast the businesses. If AI becomes a more, you know, meaningful driver going forward? Eliran Glazer: Hey. It is Eliran. So, you know, with regards to visibility, early days. As I said earlier, we are focused on education and adoption within our customer base. It gives us confidence that we see that there is a strong momentum. However, it is not something that is going to be very meaningful in terms of revenue next year. So we take it into account, but it is not very meaningful. D. J. Hynes: Okay. And maybe I can go back to Jackson's question. I mean, obviously, we saw the acceleration in the RPO metrics that you are sharing. Are you seeing changes in contract duration as you go further upmarket? Is that a tailwind to that RPO metric? Casey George: Yes. This is Casey. For sure. Obviously, as you move upmarket, we would like longer-term contracts and obviously our customers would as well. So we are seeing an acceleration on the term length for our contracts as we move upmarket. Eliran Glazer: Yeah. Maybe I will just go to Yeah. Just to add to, Casey, kind of, what we see is basically the percentage of ARR in terms of contract duration. So multiyear is becoming more meaningful in terms of the numbers coming from, you know, 5%, five years ago to now around 13%. We see the annual contracts are going from 65% to 70%. So altogether, when you combine the annual plus the multiproduct, you are getting more than 80% of ARR coming from annual plus multiproduct. And this is something that the trend continues. D. J. Hynes: Okay. Got it. Thank you. Operator: Your next question comes from the line of Raimo Lenschow with Barclays. Please go ahead. Raimo Lenschow: Perfect. Thank you. Can I stay on RPO? Like, if I look at the old deck and the new numbers, it looks like you restated it and the numbers came down a little bit. Can you just explain what was going on there? Eliran Glazer: Yeah. Sure. It is Eliran. So when we presented the numbers in the Investor Day was during mid-August. And the RPO is a new metric for us. And upon further review, post-Investor Day, we made some adjustments to ensure consistency and accuracy across periods. This was part of our auditor's review of Q3, and they signed off the RPO data presented in our Q3 earnings. And we are confident that these metrics, as I said earlier to Jackson's question, provide a clear and reliable view in terms of our contracted revenue base and future growth visibility going into next year. Raimo Lenschow: Okay. Perfect. Okay. So then we should be clean on RPO going here. Or it is just a change on accounting, basically. Eliran Glazer: Yes. Correct. Raimo Lenschow: Okay. Perfect. Okay. That is all I have. Thank you. Operator: Your next question comes from the line of Derrick Wood with T. V. Cowen. Please go ahead. Derrick Wood: Great. Thanks. So you mentioned that, March motions carry longer sales cycles. But you did see really strong growth in upmarket KPIs, new customers accelerating, RPO accelerating. So are you seeing upmarket pipelines tracking even higher than your revenue growth? And if not, for longer sales cycles, you could you know, be even stronger. And I guess given Q4 tends to be when larger deals have seasonal flush dynamics, how do you think Q4 is setting up? And anything to share with how the quarter is tracking to date? Casey George: We do continue to see an acceleration in our pipeline as we move upmarket. As it relates to the quarter, all I would say is that you know, when you move upmarket, obviously, you create somewhat of a hockey stick in the quarter. And in the year. As we progress upmarket, we continue to see that phenomenon play out. But we are very encouraged with the pipeline that we have built upmarket. And again, we have not really even started with the cross-sell motion. So we are bullish that that will only add additional pipeline to the year. Derrick Wood: Got it. Thanks. And on the AI side, I mean, when you look at Magic, Vibe sidekick, agent builder, what would you call out as getting the most traction or how would you rank this group in terms of potential adoption over the next year or two? Casey George: So Vibe is definitely taken off. That is there has been a resounding excitement around that offering. Obviously, we just announced it, but I had the opportunity, as I mentioned, spent some time with thousands of customers at Elevate. There was a ton of excitement around that. As I mentioned a couple of use cases, there is a dozen more that I could speak to where customers are literally using it that day and getting value from it. So we are obviously, as I mentioned, very early on, but we are super excited about the prospects of Vibe most particularly because we are in the market to absorb that. So we are the, you know, work management company. We are in a perfect spot for customers to you know, change how they work and actually do work for them. Instead of just managing it. And these offerings do absolutely that, whether it is our agents or Vibes. So, again, pretty excited where we are. Looking forward to next year and seeing how that develops as we go. Eran Zinman: Maybe just to add to what Casey mentioned, this is Eran. So I 100% agree. Vibe right now presents the best opportunity for monetization. And we see the most momentum with it. I would say in addition to that, we feel that monday.com Ltd. agents can also unlock new go-to-market, a new type of customer that we did not have before. So we are clearly excited about this one both for our existing base, but also for our ability to tap into new type of customer audiences. Derrick Wood: Great. Thank you. Operator: Next question comes from the line of Rob Oliver with Baird. Please go ahead. Rob Oliver: My question is for Casey. So Casey, obviously, a lot of changes going on your side. On the comment relative to sales cycles, I just the first part of my question is on the longer sales cycles. Obviously, those are going to lengthen as you move upmarket, but it does sound like that comment is a bit of a change from when you were on stage a few months ago. So just wanted to understand putting aside the obvious change in sales cycles as you move upmarket, is clearly having success, kind of what changed in the market? And then I had a quick follow-up. Casey George: I do not think there has really been a whole lot of change. What I would say is we have to do two things at once and we are. We still have our high-velocity business in SMB. That continues to pace at a healthy rate. And then we layered in the upmarket motion, which I am stating the obvious, which those sales cycles typically a little bit longer. But, again, we have to do two things at once, and we are. So still very encouraged. My strategy has not changed, and it is consistent with what I mentioned at Investor Day. Rob Oliver: Got it. Helpful. And then, as you think about that move upmarket, obviously, you guys have a very powerful partner network in the low to mid-range. And, you know, I know you are thinking a lot about partners moving upmarket as well. Is there a way for us to think about how partner contribution may play a role, and perhaps as a percentage of new business or how you are thinking about those partner relationships and also ownership of those accounts terms of internal versus a partner basis? Thanks. Casey George: Yeah. The ecosystem has always been very strategic to us and will continue to be. We continue to grow our partner ecosystem almost daily. Especially as it relates to some of our new offerings. We have new partners coming on board that want to take advantage of our CRM offering, our service offerings, and obviously now our AI offering. So it is not just about the existing ecosystem we have today. It is about recruiting the right partners to give us depth and breadth across the different regions. Obviously, depending on the region, they play a more significant role. Especially as you look at some of the emerging markets in APJ and LatAm. They play a very significant role and we are really growing in those regions on the back of that partner ecosystem. So I am super excited about where we are with the ecosystem. Even more excited about where it is going. Rob Oliver: Helpful. Alright. Great. Thank you. Operator: Your next question comes from the line of Tom Blakey with Cantor. Please go ahead. Tom Blakey: Hey, thanks for taking my questions here. Just two for me. On the sales cycles and the move upmarket, I am thinking of you guys any that is necessarily new. You have been very articulate in terms of laying that out even before Analyst Day. Just wondering if anything maybe kind of like downtick in terms of expectations there in the most recent couple of months. Things are just maybe taking a little longer. The deals getting more complicated as they become more penetrated, you know, a victim of success, so to speak. And then secondly, clicking on the SMB. You are doing so well in these metrics that you are talking about with regard to NRR and RPO at the high end. And the deceleration that is kind of implied into this $1.8 billion estimate for calendar 2027, has anything changed in terms of know you have been asked a couple of times on the call, but gross churn on the SMB side near term? And what are your expectations? You did a good job articulating what the calendar '27 estimates are, kind of a bridge there. What are you expecting in terms of SMB with regard to that $1.8 billion so near term and long term on SMB? Yes. Thank you so much. Casey George: So this is Casey. I will answer the first part and I will hand it to Eliran. So if you understand when we talk about moving upmarket, it does not necessarily mean we are talking about the Fortune 100. Right? We are moving up through mid-market. And quite honestly, the larger accounts are coming to us. So as it relates to some of the sales cycle, this is just the natural sales cycles we see as we move upmarket. That has not changed. That is consistent. We plan for that and that has played out in a very healthy way in the numbers. Right? On the SMB side, that has been a very consistent business for us. It continues to be. We see acceleration especially with the opportunity to sell a full platform. Because we can sell, you know, the full platform into that customer set, including our AI offerings. So really no change. I would not highlight any concern whatsoever. It is playing out exactly as I expected. In some instances, it is actually playing out better. But I will hand it to Eliran for some of the guidance on the SMB. Eliran Glazer: Yeah. Tom, hi, it is Eliran. To your question on gross retention, so gross retention is now historically high. And we see this improvement going from fiscal year 2023. This is a result of the fact that we are going upmarket, but also as part of the price increase that we have done and the quality of the customers that are joining the platform has been better. With regard to your question about sales cycle, I just want to give kind of, more of a macro overview. I think that, you know, over the past few quarters, not only for monday.com Ltd., but in general, there is some choppiness in the market. It is uncertainties. And therefore, customers, with regards to all businesses, are making probably decisions. It takes them longer. With everything that is going on. And I would say it is more from a macro deal, a macro thing, but we are seeing positive momentum as part of our, you know, experience with Casey. Tom Blakey: Thank you. Thank you. Very helpful. Operator: Your next question comes from the line of Matthew John Bullock with Bank of America. Please go ahead. Matthew John Bullock: Alright. Great. Appreciate you taking the question. I wanted to ask about sales force productivity. Obviously, you are adding, you know, quite a few quota-carrying reps on the managed sales side. Is sales productivity tracking in line with expectations? Maybe remind us how long it takes a typical, you know, enterprise or upmarket sales rep to ramp? And then should we start to see more of those benefits in '26 as we get more maturity at Salesforce? Casey George: Yeah. We are seeing productivity move in the right direction, a very healthy direction. I would tell you, this is the part I am most excited about. Right? If you think about all the offerings we have available to the market, we are going to be our best reference. And when I say that, we are using the technology that we are taking to market to effectively make our sellers more productive. So we have our AI agents. We have our customer success agent, customer success AI agents. We have a number of internal processes that we are leveraging AI. So it is not just about us going to market with these offerings. It is about making our sellers more productive, and AI is playing a huge role in that. So our productivity continues to improve. I do expect an even greater improvement next year because of some of the changes we are making with our AI agents. Matthew John Bullock: Fantastic. And then one quick follow-up if I could. It sounds like maybe the embedded contribution for 2026 from AI products is expected to be a little bit more measured, but maybe if you could, you know, help us think about what is embedded in terms of the assumptions for the 2027 revenue target. Is there anything you can give us in terms of the embedded AI product contribution? Or, you know, if not, maybe just the core versus the multiproducts? That would be helpful. Thank you. Eliran Glazer: Hi. It is Eliran. So as I mentioned earlier, there are not going to be any new products, other than the AI product that we introduced to the market. As a reminder, we have more than 250,000 customers and very few of them are using a very low percentage of them are using more than one product. So the cross-sell motion is going to be very strong between, for example, service and work management. CRM will continue to be strong with the monday.com Ltd. campaign that we introduced just recently. We are expecting some revenue from AI products, but as you said, it is going to be more moderate. But the impact of that can be on the retention of our existing customer base. It is not directly revenue, but the fact that our gross retention is better, the fact that we have more stickiness on the platform, is generating more revenue opportunities that are going to impact other products as well. So taking all of this into account, you know, provides us with the confidence on going into $1.8 billion in fiscal year 2027. Operator: Thank you. Your last question comes from the line of Taylor McGinnis with UBS. Please go ahead. Taylor McGinnis: Yeah. Hi. Thanks so much for taking my questions. Maybe just the first one, I know you guys have gotten, you know, the question in a number of ways, but just to be a little bit clearer. So if it is my understanding, it sounds like the success that you guys are seeing upmarket maybe is not just yet to offset some of the choppiness or softness downmarket. And so maybe that is what led to the 4Q guidance cut. So can you just talk through and give a little bit more clarity on like what got tougher? Is it that you thought upmarket would have been growing fast to offset the slower growth downmarket? Or did something within SMB and downmarket get softer than before? Eran Zinman: Hi, Taylor. This is Eran. So I do not think it is a matter of something that got harder in terms of acquisition. It is just a shift in the type of customer that we acquired during this quarter. So as we said, we have pivoted some of the budget to different channels. We saw those bringing great pipeline. Just this pipeline takes a little bit longer to convert. So it is not that one is at the expense of the other. It is just a different type of customer, but overall, this serves our strategy. Going upmarket, higher quality of customers, and if anything, just accelerates the motion that we already started. Taylor McGinnis: Perfect. Thanks. And then just my last one is Eliran, you talked earlier about comfort in the street numbers for next year. Just curious, like, in order to hit those numbers, do we need to start to see, like, stabilization in the core work management, you know, business maybe adjusted for some of the bigger changes in price? And then if so, could you just speak to when it sounds like there is still choppiness in some trends out there, is that something that is embedded in the outlook for next year? Or maybe you could just speak to, you know, your comfort in the assumptions and how we think about that number going forward. Thanks. Eliran Glazer: Hey, Taylor. So with regards to numbers for next year, as I said, we are going to present them in our next earnings release in February. We are going to provide you full visibility and transparency with regard to the assumptions that we are taking into account. I did say that we have some confidence in next year's numbers as a fact of everything that all the trends that we are seeing now, the momentum that we are seeing upmarket, as well as the fact that we are starting to see stabilization in our downmarket top-of-funnel activity. These are the things that make us feel comfortable about the consensus for next year. Roy Mann: And, hi. It is Roy. I can add that, like, work management is our leading product, and we see that we are succeeding with our upmarket strategy mainly through work management. It is like we are leading that market, and we see, like, great potential going forward and growing with it as well. Taylor McGinnis: Thank you so much. Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Greetings. Welcome to Pagaya Technologies Ltd. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to Josh Fagen, Head of Investor Relations. Thank you. You may begin. Josh Fagen: Thank you, and welcome to Pagaya Technologies Ltd.'s third quarter 2025 Earnings Conference Call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya Technologies Ltd., Sanjiv Das, President, and Evangelos Perros, Chief Financial Officer. You can find the materials that accompany our prepared remarks and a replay of today's webcast on the Investor Relations section of our website at investor.pagaya.com. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts with respect to, among other things, our operations and financial performance, including our financial outlook for the fourth quarter and full year of 2025. Our actual results may differ materially from those forward-looking statements. Factors that could cause these results to differ materially from our expectations include, but are not limited to, those risks described in today's press release and our filings with the US Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements as a result of new information or future events. Please refer to the documents we file from time to time with the SEC, including our 10-K, 10-Q, and other reports for a more detailed discussion of these factors. Non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, fee revenue less production costs or FRLPC, FRLPC percentage of network volume, and core operating expenses will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available to the extent available without unreasonable efforts in our earnings release and other materials, which are posted on our investor relations website. We encourage you to review the shareholder letter which is furnished with the SEC on Form 8-K today for detailed commentary on our business and performance in conjunction with the accompanying earnings supplement and press release. With that, let me turn the call over to Gal. Thank you, and welcome, everyone. Our third quarter results demonstrate continued execution against our long-term operational and financial goals. We are nearing the end of the year for Pagaya Technologies Ltd. where not only have we achieved consistent GAAP net income profitability, but raised it again to an exit rate of over $120 million on an annual basis. Most importantly, the results demonstrate the momentum and strength of our platform, the diverse and high-quality revenue drivers, and the stability of our unit economics. And our very deliberate and responsible approach towards scaling in a complex environment. The outcome is a through-the-cycle business consistently growing with minimal investments for years to come. After laying the groundwork through disciplined optimization and capital efficiency earlier in the year, we have shifted our focus to product-led growth. Gal Krubiner: In short, the next eighteen months will be all about perfecting our products and our solutions to ensure we solve the fundamental challenges facing lenders and consumers. Our value proposition remains the same: helping lenders serve more customers. As partners recognize the increasing value of our platform, existing partners deepen their engagement, while new partners join the network. Our ability to design these products is truly unique. It is rooted in our vast data network, a core advantage for Pagaya Technologies Ltd. We embed data and machine learning as a backbone of our offering across the entire lending funnel. From verification to underwriting, and as far up the funnel as affiliate channel optimization. This creates unparalleled optimizations for lenders and investors. I'm very proud to announce that we have now the highest number of partners in our onboarding queue in the history of Pagaya Technologies Ltd. We are in the process of onboarding up to eight partners across all of our asset classes ranging from fintechs to banks. Inclusive of the two partners that were added this quarter, we now have a robust queue that is set for the next twelve months. In addition to the progress we have made in lending new partners, we have continued to refine our product strategy by listening to our partners, ensuring we meet their needs with our product suite. Just this quarter, in the course of our regular ongoing meetings, Sanjiv and I met with many of our partners and prospects to truly understand their growth and value drivers. And to continue to progress our products towards these needs. Solving for the needs of our partners improves our product ecosystem, and solving for product effectiveness enhances every partner relationship in return, further propelling our flywheel. In short, the more value we add for partners, the more deeply they engage with our products and solutions, which in turn provides more opportunity to add value. Sanjay will discuss later how we are evolving into a best-in-class B2B enterprise, growing our key partners to $1 billion relationships and locking in our commercial terms through multi-year contracts. This will continue to define Pagaya Technologies Ltd.'s next chapter and accelerate our journey to become a necessary utility for every lender in the US. As we continue to mature and diversify our funding network, demand for our assets remains consistent and robust. During the third quarter, we issued $1.8 billion in our ABS program across four transactions, which were marketed to our network of more than 150 institutional funding partners. Outside of our ongoing core funding mechanism, we announced our first auto forward flow and strategic funding on residual certificates. The momentum on the corporate funding side is just as notable. We were rated by all three major credit rating agencies and raised $500 million in corporate debt. In addition, we expanded our corporate revolver with four new major banks at a significantly lower cost, boosting our capital efficiency. Together, we continue to diversify our sources of capital while improving efficiency across our funding and corporate capital structures. We reached consistent profitability and record quarterly network volume of $2.8 billion with sequential application flow growth of 12%, showcasing the continued growth of our network. Our growth is strong and increasingly diversified with POS and auto representing 32% of total volume, versus 9% in the same quarter just a year ago. We are expanding existing partner relationships across our growing set of products and growing access from newer partners. This disciplined growth is demonstrated through our steady application to funding conversion, which has remained at 1%. At the same time, we continue to drive new high-potential partnerships to the platform. And across all of these segments, we see our network effect compounds. We have an opportunity to truly reimagine the way consumer credit works as we build the platform that connects lenders with better data, more automation, and smarter decisions. This enhances and accelerates our ability to generate the assets that best meet the needs of our investors, in line with our balanced approach towards long-term profitability and resilience. Our goal is to be the plug-and-play solution for lenders, getting credit, spending risk deals, asset types all delivered in a seamless white-label solution powering the next generation of lending. We are extremely proud of how far we have come and ask you to stay tuned on what is on the horizon. The journey is long, but we'll be innovative for consumers, partners, and investors. With that, I would like to hand it off to Sanjiv for a review of our operating business and more on our product-led growth strategy. Sanjiv Das: Thank you, Gal. Pagaya Technologies Ltd.'s growth continues to be driven by disciplined expansion with existing partners as well as the addition of new partners to the platform. We are continuing to strengthen our business by institutionalizing our relationships with lending partners using best practice B2B disciplines such as long-term agreements and product and fee agreements, while ensuring responsible underwriting and risk management using consumer credit discipline. Let me first provide an update on existing partners. Just to remind you, Pagaya Technologies Ltd. currently has 31 lending partners on its platform. Our relevance among our existing partners remains extremely high. Banks and fintechs are increasingly focused on consumer growth, customer retention, and maximizing customer lifetime value. Pagaya Technologies Ltd. continues to solve for what lenders care about most while providing efficient capital markets execution and driving fee income growth for our partners. We achieved our growth of growing five accounts to over billion-dollar relationships driven by multiple product adoption by our partners, as well as expanded access to their application flow. Our existing lending partners are at varying stages of maturity with Pagaya Technologies Ltd. We define the level of partner maturity with us based on the number of Pagaya Technologies Ltd. products that partners adopt, which eventually drives the volumes on our platform. As one would expect, the partner life cycle with Pagaya Technologies Ltd. includes onboarding, ramp-up, scaling with decline monetization, and eventually expansion across our products. Our multiproduct partners are leveraging the full suite of our products from declined monetization to our direct marketing engine and affiliate optimizer engine in personal loans, to FastPass and DualLook in auto. Multiproduct expansion enables our partners to significantly grow volume, fee revenue, incremental new customers, and long-term value from existing customers. A number of our personal loan and auto partners are currently expanding into Pagaya Technologies Ltd.'s products. Let me pivot for a second and give you a product view of our business in addition to the partner view you just heard. Products above and beyond declined monetization are already contributing significantly to Pagaya Technologies Ltd.'s volume and revenue. In personal loans, approximately half our current volume already comes from products other than decline monetization. Let's take the affiliate optimizer engine as an example. Pagaya Technologies Ltd. has been enabling our partners to originate in the affiliate channels such as Credit Karma, LendingTree, Experian, and others for many years now. But last year, we productized affiliate channels separately and commercialized this offering as a stand-alone affiliate optimizer engine product. We are currently rolling it out across all our partners that are at scale with our decline monetization product. And we are increasingly seeing that partners who have successfully leveraged affiliates to scale their credit card businesses are now starting to use affiliates to grow in personal loans by adopting Pagaya Technologies Ltd.'s affiliate optimizer engine. Becoming multiproduct presents a significant growth opportunity for partners who are currently only leveraging a decline monetization program. In fact, while multiproduct partners represent only 30% of Pagaya Technologies Ltd.'s partners by number, their contribution to our volume is more than two-thirds. So the more products that partners have with Pagaya Technologies Ltd., the more volume, the more revenue, new customers, and lifetime value they get from the partnership. This underscores the notable organic same-store growth opportunity ahead for Pagaya Technologies Ltd. for its 31 partners. Similar to our affiliate optimizer engine, our direct marketing engine offers our partners the ability to grow their business by leveraging our response engine to book new personal loans while providing them with the same superior capital markets execution. Now a very quick update on our new partners. We are currently seeing the highest number of partners in onboarding in Pagaya Technologies Ltd.'s history. Pagaya Technologies Ltd.'s new partner onboarding now includes prebuilt integration for all the products I just described. For example, pre-integration with Credit Karma, pre-integration with Experian, and so on, along with declined monetization capabilities. This significantly accelerates scaling and unlocks more value for our partners sooner. Partners currently in onboarding represent a mix of all three Pagaya Technologies Ltd. asset classes, as in personal loans, auto, and point of sale, and include leading banks and fintechs. For the banks, the focus continues to shift toward growth against the backdrop of a more favorable regulatory environment. As they do, they are increasingly focused on building and scaling loans, auto, and POS franchises. It presents a growth opportunity for Pagaya Technologies Ltd.'s bank-ready platform that has been tested and scaled with US Bank, Ally, and others. I'd like to take a moment to review each of our loan categories, their performance during the quarter, and going forward. As discussed before, in personal loans, we are penetrating deeper into our existing partner base as they adopt our products while simultaneously ramping up volumes with partners we have already onboarded in the last twelve to eighteen months. On the funding side of personal loans, we are still the largest ABS issuer while also continuing to successfully diversify into forward flow agreements. Point of sale continues to make notable progress on both sides of the network. While still a relatively newer business, we have been able to quickly grow annualized POS volumes to about $1.4 billion, up from $1.2 billion last quarter. On the funding side, we closed our second AAA-rated POS ABS offering in November, underscoring the demand and performance of our POS ABS shelf. In auto, annualized auto volumes grew to $2.2 billion, up from $2 billion last quarter. This quarter's announcements underscore several examples of the strength and performance of our auto franchise, including the sale of the residual certificates to 1 William Street in our latest RPM deal and our inaugural auto forward flow agreement with Castlelake, which we announced last week. Before closing, I will touch briefly on our response to the macro economy, credit, and risk. As Gal mentioned, not much has changed for Pagaya Technologies Ltd. with respect to the consumer credit performance and lending partner actions. Despite that, we continue to build a robust through-the-cycle business by staying disciplined on consumer credit and long-term commercial agreements with partners. We know that the institutional franchise that we are building can mitigate normal business cycle fluctuations. This management team has done this before in highly cyclical consumer credit businesses and is confident that it can do it again. With disciplined growth, we remain fully committed to our mission to help bridge Wall Street to Main Street for the long term. And now it's my pleasure to turn the call over to Evangelos Perros to cover the quarter's financial results and outlook. Evangelos Perros: Thank you, Sanjeev. The results of our third quarter earnings demonstrate steady and sustainable growth and most importantly, growing profitability. Network volume grew 19% year over year to a record $2.8 billion, led by 31% growth in personal loans. Application to fund the conversion held firm at 1%, reflecting disciplined underwriting. We expect conversion rates to remain stable as we focus on prudent profitable growth through the cycle. Total revenue and other income rose 36% to a record $350 million, driven by fee revenue growth outpacing volume. The outperformance of revenue growth versus volume growth is a strong indicator of our ability to monetize our volume and reflects the value added to our partner network. FRLPC increased 39% to $139 million, reaching 5% of network volume, up 70 basis points year over year, a clear signal of monetization and in line with the financial strategy we launched in early 2024, to focus on improving unit economics. We expect FRLPC as a percent of volume to normalize within the 4% to 5% range as we scale into POS and diversify our funding. In this year, we have shifted our focus on driving consistent and sustainable total FRLPC growth in dollar terms. Adjusted EBITDA increased 91% to $107 million with margins expanding nine points to 30.6%, fueled by strong fee growth and disciplined expense management. Core OpEx dropped to 34% of FRLPC, the lowest since going public. Incremental adjusted EBITDA margin represented more than 100% of FRLPC growth in the third quarter. Operating income climbed 257% to $80 million, and operating cash flow hit a record $67 million, exceeding outflows for investments. GAAP net income of $23 million represented our third consecutive positive quarter and improved from a net loss of $67 million in the third quarter of 2024, fueled by 36% revenue growth, lower operating expenses, and lower impairments. This equated to a 6% margin as compared to a 5% margin last quarter and negative 26% in the year-ago quarter. We are also enhancing transparency in our disclosure by introducing a new reporting line called gains and losses on investments in loans and securities. This new line includes gains and losses on investments, which were previously included in other expense net. In the third quarter, credit-related fair value adjustments reported in this new line totaled a $20 million loss versus $14 million in the prior quarter and $78 million in the prior year quarter. Interest expense fell to $22 million, down $1 million sequentially, and should decline further as the benefits of our unsecured loan refinancing fully phase in, driving $12 million in annualized interest savings and $40 million in added cash flow. Third quarter GAAP net income included the negative impact of several non-operating and non-recurring items. We incurred a one-time $25 million in costs associated with the issuance of our corporate bond and early retirement of existing debt. In addition, we recorded a noncash warrant expense of $5 million. Partially offsetting these one-time items, we recorded a one-time tax-related benefit of $20 million. Share-based compensation expense of $14 million was up $1 million year over year and down $5 million from last quarter, and is expected to remain broadly at those levels. Turning to credit, performance is in line with expectations across personal loans, auto, and POS, and remains within our disciplined risk tolerance. Also evident by the robust demand we see across all our asset classes from institutional investors willing to underwrite our production at increasingly higher levels. We appreciate the increased investor attention around credit across financials, so I will spend a bit more time covering this today. Macro trends and overall consumer behavior remain healthy, and we continue to monitor closely through the data advantage we have of working with 31 different partners across multiple asset classes. We're always ready to shift if and when needed. Let me give you some perspective on how our credit positioning has evolved. As you may recall, during 2024, our credit performance was driven by a sharp focus on achieving consistent through-the-cycle GAAP profitability. In addition, since the beginning of this year, we have been benefiting from our positioning to reflect protracted volatility and uncertainty. This is a luxury Pagaya Technologies Ltd. can afford given our GAAP net income and our commitment to deliver sustainable growth and not just growth at any cost. This positioning means that we have been underwriting with a cushion against the market and running the business in that way while benefiting from the lower cost of capital. And from investors' point of view, we have been assuming future loss in our guidance, as shown in our earnings supplement. Turning to some performance metrics, our personal loan cumulative net losses across 2024 quarterly vintages are trending approximately 35% to 40% lower than peak levels in 2021, at month on book eight to 17. Auto production continues to deliver strong performance evident by the investor demands for auto ABS, the first sale of our certificate since 2021, and our inaugural Auto Forward Flow. Auto loan CNLs across quarterly 2024 vintages are trending approximately 50% to 65% lower than levels during comparable 2022 periods at month on book nine to 18. 60 plus DQs across 2025 vintages are higher when compared to 2024 levels and lower relative to 2023 levels, and well within our expectation. Offsetting this, 2025 net recoveries and roll rate are trending significantly better than 2023 and 2024 vintages, driving the strong performance. For POS, credit trends remain stable and in line with expectations, validated by the continued strong demand we see for this product from our funding partners. Overall funding continues to be robust with a focus on improved efficiency and diversification. During the third quarter, we issued $1.8 billion in our ABS programs across four transactions. Last week, we announced our inaugural $500 million auto forward flow agreement with Castlelake, expanding our relationship into two asset classes. Additionally, in early October after the quarter, we closed a $400 million RPM auto transaction which included the sale of the residual certificate to strategic funding partner One William Street Capital Management. And last week, we closed our second POS ABS transaction which was oversubscribed. This underscores the attractiveness of Pagaya Technologies Ltd.'s assets as we grow our auto and POS product offering. Turning to our balance sheet, we ended the quarter with $265 million in cash and cash equivalents, and $888 million of investments in loan and securities. We completed the $500 million senior unsecured notes offering that reduced our cost of capital by approximately two full percentage points to 9%. As part of the refinancing of higher-cost facilities, we bolstered our corporate liquidity with a release of over $100 million in highly liquid collateral. After the quarter, we announced an expansion of our existing revolving credit facility with four new bank partners, as well as expanded commitments from our prior four existing lenders. This lowered the facility interest rate by nearly 35% to SOFR plus 350. After this expansion, substantially all of Pagaya Technologies Ltd.'s corporate borrowings are now at below the high-yield bond coupon of 8.875%. In the third quarter, the fair value of the overall investment portfolio and allowances net of non-controlling interest, and prior to any new additions, was adjusted downward by $32 million versus $20 million last quarter. We also added $38 million of new investments in loan and securities net of paydowns from prior investments, the majority of which is our required risk retention related to our ABS securitizations. As provided in our supplemental filing this morning, we maintained our scenario A illustrative assumption of $100 to $150 million in rolling twelve months forward credit-related impairments which is reflected in our guidance. Now let me turn to our updated outlook. Our full-year 2025 outlook reflects the momentum and resilience in our business to date, and our unique operating leverage while maintaining our cautious stance given the protracted volatility. Key drivers include consistent levels of personal loan production, and continued growth in auto and POS products. We continue to expect FRLPC to grow steadily in dollar terms and range between 4% to 5% as a percent of network volume for the year versus staying at the levels of this past quarter. Profitability trends will reflect continued scale and operating leverage. Our guidance continues to reflect potential scenarios to future credit-related impairments, if any, as laid out in our earnings supplement which imply a range of $25 to $37.5 million per quarter over a rolling twelve-month period. Core OpEx is expected to be slightly elevated in the fourth quarter as a result of higher funding issuance. Interest expense is projected to trend lower as a result of the recent refinancing notes transaction. For the full year, we're updating our expected network volume to a range of $10.5 to $10.75 billion. Total revenue and other income in the range of $1.3 billion to $1.325 billion, and adjusted EBITDA in the range of $372 to $382 million. We are increasing our GAAP net income for the year to a range of $72 million to $82 million. With that, let me turn it back to the operator for Q&A. Operator: Thank you. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from John Hecht with Jefferies. Please proceed. John Hecht: Hey guys, congratulations on a good quarter. Pete, you gave a lot of detail around credit, but I'm wondering if we could just, you know, step back, maybe go all give a if you look at the different products, your different you know, maybe different income ranges within the programs, and so forth. Can you maybe give us your perspective on credit quality now and the consumers borrowers' ability to manage their credits. Evangelos Perros: Yeah. Thanks, John. I'll start. So, credit, like Pagaya Technologies Ltd.'s credit is performing well and well within our expectations. And I think the important thing here is that this is not an accident. We appreciate obviously the focus on credit performance over the last few weeks or months, but I want to remind everyone that we have taken a very balanced and conservative approach on our underwriting since the beginning of the year. We're very pleased with the disciplined approach that we have been doing in our underwriting and how that has reflected in our performance. It's interesting like during the last few months, people were been asking us why we don't grow faster. Well, this is exactly the reason. Right? We have been positioning well for anticipating more volatility, more uncertainty, and how that could potentially have any impact on the consumer. So we're benefiting from that sort of positioning, and I would highlight we're quite unique in our ability to do so. Why? We're a B2B company, we have the highest fee rates, fee margins you see how FRLPC has been growing. We have the most diverse partner set and more importantly, very excited about the partners that are coming in our onboarding queue and all of that translating to profitability which allows us to be, positioning, the way we have over the last multiple quarters. And, not to, you know, to remind everyone, a lot of that we have already reflected, in our guidance as put impairments down the line. We don't see any reason for us obviously based on anything to deviate from that approach and obviously the provided guidance. I don't know, Gal, if you want to add anything. Gal Krubiner: Yes. So, John, I think thank you for your question. And I think putting that question in perspective, that's what is important for us on this call. The way I want you to think about it, or at least the way we think about it, is that in the context of our business model, it's really relatively easier to manage the credit side of the business. So think about it from a very high level. And as you can imagine, this is more a philosophical question. This is built in a way and for a reason in how we like to run our business. We chose the B2B versus the B2C, in consumer credit approach, although, as you can imagine, in the early days, it was the least straightforward decision. But the reason we chose it usually is B2C lenders have very strong correlation between marketing spend and approval rate increasing. And therefore, they are growing with the cycle. So they need to have good days to be able to approve more and therefore spend more, and that's how they are growing. The same phenomena as the other side of it, that when the cycles show weakness, you expect a good B2C, and most of our partners are like that, to reduce approval rates and therefore you will see less firepower to spend on marketing power. And the result, as you can imagine, is much lower growth rate. All of this to say that credit is a super crucial backbone in the B2C organization ability to grow, especially in an increasingly competitive world. And what I know, many of our investors still think of us as another B2C organization, because we deal with consumer credit, the reality is that this is far from the truth. The way we designed the company, which is expanding, as you know, through more partners and products, i.e., the B2B concept of consumer credit, was purposely designed to reduce the level of fluctuation over the cycle, because we do not have marketing spend that moves up and down with approval rates. Now none of that to say that we are immune we are not immune to the cycle. And therefore, we are very closely monitoring. But remember that we have entered this year with a very tight thinking around it. So the sector is rightfully focusing here in general. We do want to highlight that the relative impact from changes in consumer credit behavior on Pagaya Technologies Ltd. is much more muted. So we are trying to solve for a specific we're not trying to solve for a specific growth rate in a specific quarter. The long term is what matters for us, and that leads to a high ability and degree of discipline. Over quarters. John Hecht: Great. Thank you guys very much. Operator: Our next question is from Peter Corwin Christiansen with Citi. Please proceed. Peter Corwin Christiansen: Good morning. Thanks for the question. Nice performance here. Gal, EP did a good job, I think, talking about collateral performance. Looking pretty good there. I'm just curious, you know, with a lot of successful ABS issuances this year so far, I think a lot of them oversubscribed. Can you talk to, maybe how risk retention may have changed or your strategy there, how it could evolve? Over the coming months, given the environment that we're in today and how you foresee that potentially changing should the market start showing, you know, any signs of increased volatility as you mentioned. Evangelos Perros: Great. Thanks, Pete. I mean, look, you can see that when it comes to the demands for Pagaya Technologies Ltd. origination continues to be very robust and actually improving. If I take you back, call it a year ago or so, remember we're 100% ABS funded. Since then, we have really diversified our funding to current across all our products. We're approximately at that 60/40% mark between call it ABS and the other structures like forward flows, and pass s and things like that. You saw a couple of the announcements where we sold our certificate actually, in our recent RPM deal, which was the first time since 2021. And at the same time, since then, again, let's not lose sight of the fact that our ABS now has a triple layer across all our products. So always keep in mind how that has evolved over time. To our benefit. And obviously given the scale that we have people were worried the same thing back in April when tariffs came along and then we managed to absorb and do most of our some of our highest issuance back then. Still, we have very strong funding as I said diversified funding and funding sort of expertise across the different products. And given where we are as a business more importantly from a cash flow generation perspective, if things move for whatever reason against that, the risk retention, if need to put in more of that, we're best positioned in our history to actually do that, so we're not worried about managing that. The cycle. Peter Corwin Christiansen: And then finally, can you just talk about your forward flow pipeline? I mean, obviously, adding a lot more partners here. That looks really encouraging. But from your flow partners, whether existing or potentially new, can you speak to that? And whether or not you're seeing increased traction there? Thank you. Evangelos Perros: Yep. I think the traction is evident by what we have delivered already. You see how we have moved from just personal loan forward flows now to auto forward flow. And we continue to see traction across all our products. The next level of diversification, I would say, is now actually bringing more partners with which we do forward flows. And we're on track to deliver that as well. While maintaining sort of that view that we should get to that call it 50/50% mix between call it ABS and other structures like the forward flows. Peter Corwin Christiansen: Great. Thank you. Operator: Our next question is from Harold Lee Goetsch with B. Riley Securities. Please proceed. Harold Lee Goetsch: My question is for Gal Krubiner. We've seen a lot of other consumer lenders report, but they're mostly consumer-facing, B2C channel. Have to spend a lot to get new customers. Could you just remind us, you know, how different your model is on the B2B2C level? Thanks. Gal Krubiner: Yes. Definitely, Hal. Thank you very much for the question. So I will start with a little bit high level and then Sanjiv will take it further to speak about the onboarding stages and the different parts. So I will start with the statement as we said, we do have the biggest number of partners in the queue. Ever. But I think the real question and interesting part is how we got there. So step back, think about the fact that we have been really focusing in the last deal is to perfect our value proposition and the product suits behind it. So that a new partner considering Pagaya Technologies Ltd. should be very clear for them, for him, how the partnership with Pagaya Technologies Ltd. is becoming a meaningful contributor for them over the two, three years after going live. While we have a very clear value proposition, we did, I think, a better job in defining the different parts of the product. To be able to show to the partners what is the sequencing of ramping them as Sanjiv has explained in the call, and the ability to take partners to the first decline monetization product, therefore a few others that you have a very clear and precise eighteen months plan of how we roll out the different products to get them access to all of the Pagaya Technologies Ltd. products over time. Now that is creating a very clear, concise of at least $1 billion of origination already in year two or three for many of these potential partners. And the combination, for example, in the personal loan space, between the decline monetization and the pre-screen or in the auto, the decline monetization and the fast pass. Is really becoming something that is hard to resist from a partner perspective and therefore, they are investing the time, the engagement, the tech, and we see the growth in the onboarding queue. Last sentence before I'm handing it over to Sanjiv to speak more specific, I will say that the point in the cycle where lenders are looking to ramp up their growth and looking to become more on the offense rather than on the defense, call it, two years ago. Combined with a slightly more attractive regulatory regime is actually bringing many more conversations to fruition, and to actually acting on rather than an exploratory type of situation that was before. Sanjiv, maybe you want to share a little bit about the specifics of the partners? Sanjiv Das: Sure. I did want to say that, you know, to have a question between B2B and B2C, I did want to say that essentially, at its core, Carlos, you and I have talked about provides squarely a B2B business model. And Hal, I mean, the way we think about this is we are in the business of essentially growing the business of our lending partner. That's the business we're in. And so we provide them the ability to approve more customers across their entire value chain, through the Pagaya Technologies Ltd. system or the Pagaya Technologies Ltd. platform. So in that respect, we are more like a, you know, First Data, which is, of course, now a Fiserv, where I worked for many years to establish the same B2B disciplines that we are now instituting at Pagaya Technologies Ltd. What that means is, Gal and I are very focused on establishing the disciplines of long-term agreements with our partners. The certainty of locking in predictable long-term fee contracts with our partners, clear rules of engagement, around the new products that Gal described, which shares economics of growth. Better focused on our partners' needs, and what we see sort of uniformly demanded by partners across our lending platform. So it's very institutionalized. And you know, just to be clear, we have started the process of B2B long-term contracts. With our mega sort of billion-dollar partners that I described in the earlier script. And it's been very well received. So our partners now can clearly consider these institutionalized B2B relationships very valuable. They want certainty in the long term Pagaya Technologies Ltd. as well. We have now three to five contracts that are at fairly late stages of contracts on the finalization. Having said that, where our B2B business sort of pivots a little bit into some of the B2C disciplines. Is in risk management and consumer behavior. Where we manage our business with the strict disciplines, which, as I'm sure you know, given sort of the world-class consumer experience of this team, we have turned it on highly cyclical consumer businesses several times and this is something we believe we do quite well. So essentially, that's what we're building, a solid B2B business with B2C disciplines. Building it for the long term, we do not consider ourselves beholden to being slaves of volume. Through credit expansion. We believe the right way to grow our volumes is through partner expansion. And product expansion, which is what we've talked a lot about today. And in future earnings reports. Essentially, in a market that has a TAM of over $500 billion, of which we represent about $10 billion. Harold Lee Goetsch: Wait. I can ask one follow-up. Mentioned most amount of partners in the queue. But I think, Sanjay, you mentioned you know, you've got a lot of technology kind of prebuilt that allows a much faster onboarding and scaling. Could you just basically go over that again, describe what you've built, and what will allow maybe next year to be one of your bigger years of onboarding? Thank you. Sanjiv Das: Yeah. So you're right. So let me answer your tech question first. Again, I'll go back to what Gal said. So what's happened, Hal, is that we've built out all these products. You know, the decline monetization product. In addition to that, we now have the direct marketing engine product, the affiliate optimization product in personal loans. And in auto, we have in addition to declined monetization, we have fast pass and the dual look program. So we're going further up the ecosystem. These products are now prebuilt. And integrated into the Pagaya Technologies Ltd. platform. So now when we go and onboard a platform, these products are already there. And the partner literally has to turn them on. And we have back to the number of partners, now have several new partners that we are currently onboarding. And several more that we will onboard in the next quarter. These include a mix of all three asset classes that Pagaya Technologies Ltd. represents today. So we have onboarding partners that are in personal loans, onboarding partners in auto, and onboarding partners in point of sale. They include a couple of banks, including a major regional bank point of sale fintech institute and auto monolines. As we said, I say this very proudly because it sort of took us some time to sort of build the product a robust product proposition on our platform. Now have partners that we are in our onboarding queue for the next six months. That are truly the highest we've had in our history, as, again, as Gal mentioned. In fact, we totally know that we will achieve our guidance of two to four partners a year, both for 2025 and 2026 in the next six months. I should also mention, Hal, that we are seeing very, very strong demand of cross-selling to existing partners that want to expand into other asset classes. So for example, right now, we have one of our biggest personal loan partners that wants to expand into POS. And they intend to be a very significant POS player. And we're already in the ecosystem, so we have those discussions, and we'll just expand with that. Another major personal loans partner wants to expand into auto. And most interestingly, I should mention that a very significant auto partner wants to expand into our prescreen personal loans program, which we talked about before. So cross-selling across asset classes with our existing partners is truly becoming a strong value proposition in addition to onboarding new partners. Harold Lee Goetsch: Thank you, Sanjiv. Very helpful. Operator: Our next question is from Rayna Kumar with Oppenheimer and Company. Please proceed. Rayna Kumar: Hi. Good morning. Good results here. Could you talk a little bit about what you're seeing in the macro, you know, in macro in general, just are you seeing any pockets of weakness, or where are you seeing strength? Thank you. Sanjiv Das: Thank you for your question. This is Sanjeev. So as I think both EP and Gal mentioned, consumer performance has been very stable. You know, as EP said, our credit performance is in line with our expectations, and then so be the case. I'm sure you're all hearing this across the board from most lenders. And it's what we hear from most of our lending partners whom we check in with regularly. The fact that we have 31 lending partners, so we have the benefits of talking to all 31. We also have the benefit of looking at three asset classes. So there's one deterioration in one asset class, it's clearly a signal for the others, so they can take actions proactively. But having said that, we are closely monitoring early-stage tech performance for any downstream impact that we keep hearing about, you know, from, you know, the fact of macro in terms of inflation or the impact of tariffs. But so far, credit is really looking great. Gal Krubiner: And maybe I will add to that on the investor side, which is another part that could from a macro perspective impact. I think that putting the deliberation day a little bit of, like, of volatility aside. This year, demand for the different part of the capital structure is very robust. So when we look on the senior the spreads of the 50 basis points call it, January, February versus now. There was points in the market of a little bit of overheating where people just wanted to deploy for the sake of deployment that went out too. So a steady, healthy environment, which actually that's what we love. We prefer that on overheating or overcooling. So definitely the trajectory of travel is something that we are feeling very confident in. Rayna Kumar: Very helpful. Thank you. Operator: Our next question is from Kyle Joseph with Stephens. Please proceed. Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. You guys talked a lot about product expansion and the ability to cross-sell, but just, you know, thinking about you guys are in three asset classes, and this might be longer term. But are there any other classes you could see yourselves expanding into over the years? Gal Krubiner: Hi, Kyle. It's Gal here. Thanks for the question. So I will tell you that question is actually a question we are dealing a lot with, and it has more philosophy rather than the specifics. So let me share with you a little bit how we think about it. And the process of what we are seeing in reality. So when you think about what's the next so-called asset class, we prefer to call it market, that we are looking to expand into. There are a few must-haves that we need to make sure we're feeling comfortable with before we are going down. So the first one is that the TAM is big enough. That when we are doing that, that's actually going to be something that is meaningful, meaningful for us is things that we believe we can produce, $2 to $3 billion in a relatively short period of time, which you can think about it as the two, three years term. The second piece is, we need to see the adaptation or the interest of more than one partner, more than two partners, are actually going through this way. Because do remember, that a lot of the operational heavy piece is not sitting within Pagaya Technologies Ltd., and therefore, we want to see the best in class pieces that are coming to that particular market. So if you have only one partner that is doing very well something, less of an interest for Pagaya Technologies Ltd. But if you will see a phenomenon of three to four partners that are going into one direction, that's starting to become very interesting for us. And then the third piece, it needs to be less cyclical or not cyclical. So anything which we believe that is a little bit more cyclical because of relativity of high sensitivity to interest rate, like home equity or refi of auto, it seems that we might do a little bit, but not something that we'll put all of the what we call the Pagaya Technologies Ltd. machine behind because when it takes you something to build a year or two or three and then you're over the cycle, what's the point, right? We're not a trading shop, we are a technology business. And the reality is that to choose it, you need to have a very strong understanding of the financial piece, but at the same time, understanding of the tech piece of what did it take to build and where is your actually answer. So in general, I would say, that these are the things that are driving our decisions. Specifically to what we see with the partners and Sanjiv, I don't know if you want to add any more after that, but I would just give the very high level. Home improvement is starting to be something that we feel has is gaining some traction. We see a few partners that are going to adopt and to do that. And therefore potentially a candidate in the future think on that. Obviously, we need to see that partners are doing it and doing it properly and to a major scale. I think the bigger picture is really that the opportunities that are in front of us is really all the consumer credit per se. And as we see things that are sticking, growing and becoming meaningful you should expect that Pagaya Technologies Ltd. will participate in that capacity rather early on after that's becoming to be institutional. Sanjiv, anything to add? Sanjiv Das: No. I just reinforce what you just said, Gal, which is essentially being very, very disciplined. Around the criteria that our partners are, you know, the product of our market demands. And we are seeing some very consistent stable demand across some of the things products that you talked about. And we but we follow a very strict discipline of making sure the TAM is there, through the cycle performance is there and there's robust investment demand for those kinds of assets. They're consistent with what we certainly home improvement credit card stand out. But having said that, with the new regulatory environment as you mentioned, Gal, earlier, there's a lot of demand for our existing products from new players banks in general are sort of leaning in to growth. So we are seeing a very strong demand to stand up brand new personal loan programs for banks stand up brand new personal loans programs for many of the monologues. Very successful POS mono lines. So the focus on the existing business itself I think, demands a lot of our attention. Kyle Joseph: Great. Thanks for taking my question. Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the conference back over to Gal Krubiner for closing remarks. Gal Krubiner: So thank you, everyone, for joining us today. As you can see, this quarter's record results are truly starting to reflect the benefits of the B2B business model that we work so hard to build. Increasingly diversified growth drivers, responsible and disciplined underwriting, a highly diversified partner and funding mechanism, all with the increasing efficient capital and operating structure that we have. The result is through-the-cycle stable growth and increasing profitability. I'm even more excited about the long term. As we enter our next stage of the long-term growth. We have optimized and perfected our product suite and value proposition to maximize the value we provide to partners. We are defining and accelerating our tailored multi-product roadmap for B2C financial institutions from day one. This underscores organic opportunity for our B2B solutions and has driven a record number of partners in our onboarding pipeline. We remain laser-focused on the long-term potential of Pagaya Technologies Ltd., and look forward to sharing progress with you over the coming years. Thank you very much, Shannon. Operator: Thank you. This will conclude today's conference. You may disconnect your line at this time, and thank you for your participation.