own origination system of about 36-odd partners, which is a very big deal. And once you do that, then you start moving upstream, up the funnel with our partners, which is what we have demonstrated we have done with pre-screen, with affiliate marketing, with counter flows, and that is now starting to become a very large part of our flow. In fact, I'd say greater than 45% of our flow comes from non-decline types of flow, and I think that's a very important point for everybody to understand. So product-led growth, which is what we've been calling this, has been really important in shifting the positioning of Pagaya from a decline-only partner to using decline to leverage the embeddedness within a partner and grow up the funnel. That's really, really an important point. The second point is as a consequence of this, we have, and this is another misconception that we would like to straighten out, is that we are a, you know, I don't think people understand that as a result of moving up the funnel, we've actually significantly shifted the profile of the borrower that comes into Pagaya. So the average borrower income is now about $120,000. The average FICO is about 680. 37% of them are homeowners, and they have an average DTI of about 28%. To me, that looks like middle america or mass america and as you know middle america is not the bottom of the spectrum middle america manages its finances quite responsibly and we've seen that across credit cards and other unsecured products through some of the other lenders and so that's kind of how we are growing right now we are growing through product we are growing through top of the funnel and that is starting to be evidenced both in our auto business as well as in our personal loans business, and certainly not the OS business.

Really helpful. And then just one follow-up for me. In terms of point of sale, obviously some moving parts there in terms of your partners adding some, losing one. But just kind of talk about your expectations for volumes from point of sale specifically given what's going on there. Thanks.

Yeah, so when you think about point of sale through the rest of the year, you know, you'll see some volume decrease there from the roll-off of one of our POS partners. That being said, you know, that partner represents very, very little in terms of FR-LPC margin. So while it might have an effect on, you know, late Q3, Q4 volume, has really no effect on FR-LPC. And obviously, as we get into next year, toward the end of this year and next year, as we scale new POS partners, you'll begin to see that volume ramp again.

Very helpful. Thanks for taking my questions.

Can I just add one little thing to what John just said? John rightly pointed out the rolling off of one of our partners, but we continue and we continue to grow in partners like Sizzle, partners like FlexPay with existing partners like Upgrade. And we are in pretty intense discussions with our existing partners who want to grow into areas like home improvement loans, purchase finance, and so on. Loans that have structures very similar to our personal loans business, which we understand quite well. And I know that in some of the earnings calls that you've had with some of our lending partners in the last few days, they're all talking about growth in other areas of the NPL. We are right alongside them in our growth across that particular asset class.

Our next question is from David Scharf with Citizens Capital Markets. Please go ahead with your question.

Hi, good morning, and thanks for taking my questions. I wanted to ask about a couple drivers of further operating leverage. And, you know, one is on just the OPEX side. As you noted, remarkably, it's been flat for about 18 months. despite the amount of growth you've seen, you know, just based on the portfolio of products that you've introduced now, should we pretty much for the next 18 months expect that core OPEX figure to be, you know, in a pretty tight range? I mean, is most of the heavy lifting of investment spending behind you, or is there another step function, you know, somewhere down the line that you foresee?

Thanks for the question. You know, obviously, we don't guide into 2027, but as we've said many times, our core OPEX, we believe, is right-sized today for, you know, significant growth in our three major asset classes. So, I don't think you should, you know, model much growth there at all.

Yeah, good clarification.

And then, And I think maybe it's another point. I think there is another classification. As you think about the core business and the things we have right now, which is the POS, the auto, the PL, the platform that we are operating and building that is repeatable, scalable, and actually at this point even predictable, about adding new partners. And just to put things in perspective of how much we think about ourselves as an enterprise-grade type of organization, the average contribution margin of a customer to us is $8 million. So to that core business and the platform that we have built and just now rolling out more of the products to more of our partners and to be able to bring more partners from the 35, 40 that we have now, hopefully to the 80 or the 100, there is very minimal investment that is needed. It might be that in the future, because of the very heavy operational leverage that we have and the earning power and the profits that we are starting to gain and to get, we will look for more avenues to accelerate even growth further, to invest in new initiatives of where the world goes, maybe in other areas. But the core business as it stands right now needs very limited, if any, investment to be able to handle twice the volume, three times the volume, twice or three times the partner, and rolling out all of our amazing products to the partners that we enjoy so much supporting.

Got it. No, that's great feedback, Al. I mean, you know, notwithstanding all the margin expansion at the bottom line you've experienced so far, it sounds like there's even more operating leverage to come.

And that's how we think about the earning, That's how we think about the earning power of the business, that the margins are going to continue to go up and the scale is going to continue to go up. And that's how you should think, again, why we're not giving guidance for the next three years, but you can just illustrate the next three years with that trajectory and ability to drive all of that value through a rather stable OPEX to get to a very interesting number that are the enterprise capability.

Just a quick follow-up. more on the consumer and credit side, you know, notwithstanding all of the kind of quarter to quarter commentary, you know, the conversion rate has been holding around 1% for really several years now. Is there anything, whether it's kind of inflation, unemployment, I mean, And just trying to get a sense for if there's anything out there that you keep an eye on or looking for that would notably change that. Or maybe what might also be helpful is to understand not so much the conversion rate, but your approval rate. Has that actually been holding steady as well?

I mean, David, let me take this.

Look, I think you're absolutely right. You know, the environment keeps shifting. As I said before, we feel pretty good about the shift that we have made in the consumer to essentially end the shift in our business model to the more top of the funnel. And we think that we understand this consumer quite well. Having said that, for those of us that have gone through several cycles in the market, we are extremely humble about what it is that we don't know, which is why in the last quarter, in anticipation of a potentially shifting market, we took out our highest risk tiers and we have the ability to do that. When you get a trillion dollars worth of flow coming in and you're only issuing 1% of that, you in some ways have a lot of the ability to be fairly discerning, which is what we constantly watch. Now, one other thing is that across 36-odd partners, you constantly watch credit performance of the flow that's coming in, and you can fine-tune your performance to optimize for best performance that comes in into the system. So that's kind of how we think about it. Obviously, we are very tuned into things like inflation and unemployment and what it does to the discretionary spending part of our consumers, and we work very closely with our primary lenders to make sure that we are seeing what they are seeing. We work very closely with them. But the good news in all of this is that the credit box of our primary lenders has stayed stable. We expect it to continue to remain stable. As you know, in situations like this, the flow increases because they spend more in marketing, and they keep their credit box stable. so our outlook for ourselves in terms of the stability of the flow and the discretionary ability to manage underwriting carefully continues to remain pretty good. So we feel pretty good about where we are at right now. And that's called, but John won't add something here.

Just keep in mind one interesting stat from this quarter. For the first time, we had over $300 billion of applications coming in. So, you know, we have the ability to be selective, and to keep, you know, that conversion rate that Sanjeev described while still, you know, growing the business quite nicely.

Thank you very much.

Our next question is from Joseph Vafi with Canaccord 6. Please proceed with your question.

Hey, guys. Good morning. Great results. Great operating leverage. Really nice to see. So maybe we start. Can we get an update on the forward flow market? I know that, you know, there were some moving parts there a couple quarters ago. Wondering how you're viewing that market. And then a quick follow-up.

Thanks, Joe.

Let me – this is John. I'll take that one. And the way I'll answer it is how we think about funding generally. And, you know, I think how you should think about it when it comes to the GAIA. So our funding channels are more committed and diversified than ever. Today, about 40% of our flow comes from the non-prefunded ABS product. Funding diversification remains a core strategy and focus. This doesn't just mean ABS and forward flow, right? We think of it as different forms of long-term committed capital. So the market demand for our securitizations, as you can see, just from the last couple weeks in the last quarter is extremely high, even with elevated benchmark rates. So, you know, just throwing out some numbers, last quarter, Q2 rather, we have $3.7 billion raised with 12 new investors. So our full investor base right now is around $175. The last three deals were upsized and both, you know, paid an RPM. Our pre-funded ABS, which is, you know, sort of our core and historical product, provides committed clarity for kind of going forward looking a quarter. forward flow, where we remain active. We've announced new forward flows this year. You'll continue to hear from us. Provides, you know, additional clarity for a six to 12 month period. But importantly, beyond that, we've executed longer term, one to two year committed revolving structures and are in process with several other agreements with large asset managers, as well as bank partners. So all in all, we see Pagaya as an evolving, committed, funded sort of suite of funding solutions, where forward flow remains an important one, but it's just one of several.

Great. That's helpful. Thanks, John. And then, you know, with all the operating leverage emerging, and I appreciate the kind and a fixed transaction processing side of OPEX. Just wondering if there are areas of, you know, say, marketing spend that you see at this point that could have attractive ROIs and, you know, put some of this emerging operating leverage back to work in the business.

So, actually, I will take it. It's Gal here. So, again, I want to just emphasize what I said before. The platform and the way it's been operating doesn't require any more investment from that perspective in the business models that we are. So, directly to your question, no. There is no marketing dollar or other pieces that will need to be ramped up and therefore could erode the operational leverage in the future. We are looking in areas of ROI and places where you can bring specific knowledge that could help our ability to even sharpen further our product and value proposition and offering, but it's nothing in the magnitude that you will see as a major expense item. And the last piece I would say, and we don't talk about it a lot because this is a little bit embedded in the way we operate, but the agentic world kind of like revolution and company like ours that all of us are either computer science and data science engineers or on the other hand side, financial leaders, we are very much enjoying from that leap of growth, of the ability to get access and do many of the tasks that once in the past have needed to be relied upon, many analysts now to be much more driven by the gigantic world, by our ability to have the data that we have in a such organized manner. So as we think about the future productivity for our business, we actually think about doing more with the same rather than the other way around great thanks for that caller much appreciated thanks next question is from hal goch with b riley securities please go ahead with your question hey thanks guys and congratulations on a great quarter and start to the first half

of the year back to the auto uh you mentioned the 83 of loans close at the dealer desk and you're making more competitive offers at that point of sale, essentially, at the dealer channel. I think you mentioned, Sanjay, you kind of mentioned that you're using information to find out what the other offers might be. I'm just trying to figure out how you get access or how you triangulated the competition to make a better offer that's accepted by the car buyer? Can you elaborate on how you maybe formulated this information that gets a better offer to the car buyer?

Hi, Hal. How are you? And thank you again. Good to hear your voice. Hal, a couple of things. One is, you know, I'll take it back a little bit. In the past, what used to happen was, you know, there was an offer that came in. There's an application that comes in through the lender to us, and we made essentially what I would call a static point-in-time one-dimensional offer to the consumer. Now what happens is we have access through our lenders to essentially the interaction that they have with the dealer in terms of essentially what the dealer comments are, what the dealer is saying in terms of what will make the application work or not work, and we leverage that information essentially to build in as input into our underwriting decisioning process. Instead of giving one static approval, we are now able to give multiple choices. What if you reduced your down payment? What if you increased your down payment? What if you got a higher back-end approval? So we have now the offer across various dimensions and across various options. And how do we do it, which is the core question that you're asking, is we get it because we are now able to leverage the information between the dealer and the consumer through our lender much, much more than we ever did before.

All right. Thank you very much.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from Raya Kumar with Oppenheimer & Company, Inc. Please go ahead with your question.

Hi, this is Guru Anfarrena, and thanks a lot for taking our question. We were just wondering...