All right. Well, good morning. My name is Joe Yanchunas, a research analyst at Raymond James, and I'm pleased to be joined by Triumph Financial, a financial and technology company focused on payments, factoring, intelligence, and banking. With us from the company is CEO Aaron Graft. Aaron, thank you for being here. Thank you. And I just hope you could start off with providing us an overview of the company, and then we can dive into some questions. Yeah. Yeah. So we, Triumph,
we are a and have been a publicly traded bank for quite some time and for most of our journey we have chosen to focus on providing financial technology payments and other solutions to the transportation industry and so as we sit here today we're about six and a half billion in assets We have created and maintained the largest network of payments network in all of transportation, touching about 65% of all of brokered freight. And we provide, as you talked about, intelligence, payments, audit, balance sheet solutions to people in the trucking industry.
So with all these different segments, can you talk a little bit about how they all interact together?
Sure. Sure. So I think if you think about companies that create enduring value, you focus on a value chain, right? That thinking's been around a long time. So if I think about the five things we do, all of those things have some, all of them go back to the, what does it take to move a load from point A to point B? There's preload, there's onload, and there's postload. preload is if I am a shipper or a broker and I'm trying to find someone to move my freight how do I find the right carrier and how do I equip that carrier to get my freight to where it needs to be when it needs to be there on load how do I make sure that that freight is going where it's supposed to be going how do I track and trace and we don't do a ton of track and trace but we have partners who do. How do I make sure that freight is headed to its final destination? And in post load, how do I reconcile the delivery of the load, the auditing of the invoice, the remittance of payment, etc.? And so our value chain touches all of that. Number one, we audit invoices. We audit more invoices in brokered freight, and I think in all of freight, than anyone in the world, which is just the reconciliation of the invoice submitted by the carrier back to what was agreed to in the broker's system of record and we use technology been building technology that technology is evolving very rapidly the second thing if you're going to audit an invoice again that's something that happens post load then if you have the ability to make the payments you should do that And as a bank, we're uniquely equipped in our space to actually handle the remittance of funds. That's where our network is a little different than a Visa or MasterCard network. Visa and MasterCard do not move money. They provide remittance instructions to the sponsor banks who move the money. We actually, in most cases, move the money on behalf of our clients. We pay the end user, which might sound simple until you live in our world and you understand that who you pay in our world is, in most instances, not the person who actually moved the freight. They will have sold their accounts receivable to a liquidity provider, and you have to manage that through the process. And if you're making payments and you're auditing invoices and you're a bank and therefore you have a balance sheet and a low cost of funds, what you ought to do, and this is kind of where we started, it's not like this was the third thing we thought of, it was actually the first thing, is you should provide liquidity to companies who need it. So we also, in addition to making the payments, we will buy the accounts receivable for a small trucker. We're doing that for about 7,400 small truckers, that gets reported in our factoring segment. That business is on its way to a 40% operating margin. We run the second largest factoring business in transportation in the world, and we buy about $1.1 billion to $1.2 billion of invoices per month. Right now, we're averaging about $1,820 for a transportation invoice, which is definitely higher than it has been for many years. And if you're doing that, if you're buying the invoice, therefore you're paying the carrier, then we thought, well, we should build them a bank account. And that's load pay. That's our virtual wallet, which is a full business, digital business companion for the trucking industry. And therefore, instead of ACH-ing money out of our own bank to another bank or a credit union, why not create the bank account and all the things that go with it and deliver that to the trucker? And so that's something we've been scaling rapidly and continue to scale very rapidly and we're very excited about load pay and its prospects. And then finally, if you're auditing invoices, paying invoices, buying invoices, then that gives you a data set that is very hard to replicate it gives you real-time data on where what it's taking to clear a lane what is the bid-ask spread right now in any lane in the United States and we have I think until it's proven to me otherwise we have more data than any other party in the world on actual payments not what what a load is posted for but what did it actually move for across the United States and as I alluded to earlier, approaching 65 to 70 percent of all loads that are moved in brokered freight, which is a $110 billion market. So those five things, that's how they all work together. That's
how the value chain works. Okay, so just kind of picking up on your last point on the data. So let's talk a little bit about the intelligence segment. What's the thesis behind the intelligence
segment and how are you able to monetize that data yeah well the the the natural buyer of intelligence is going to be freight brokers who want visibility on lanes they don't generally run like no sophisticated freight broker needs us to tell them what a chicago to dallas lane costs but they might want to know what is a hazmat load cost from wisconsin to iowa because that's not a lane that they run regularly or a team lane where you know team drivers so you're doing expedited freight on a secondary or tertiary lane that's really interesting to them so that's the natural buyer how green screen started the business we acquired was they not only had the data they had a give get relationship right that's how most data companies work you submit your data and it gets anonymized and aggregated and then it comes back to you and and green screens had built using machine learning models they had built technology to make predictions for freight brokers about where the market is going because it and that's very important if you're a broker because 85 percent of my cost as a broker is buying the truck purchasing i don't own the truck but i'm buying the use of the truck to move the lane and so being having some visibility on where pricing is going incorporating diesel and all the things like where's the spot market going is really important that's what we acquired and that works really well for smb brokers right people who don't have data scientists on staff and are just needing a user interface to go build something and um and and and for them to build their own sort of intelligence program and to run their loads through there where we have taken it is to the enterprise brokers who don't need a user interface and sometimes don't even need our technology to make predictions for the future they may or may not want that but some of these large brokers have three four hundred data scientists already on staff what they're looking for is the data and they don't want lagging data that where they're getting data the incumbent that's seven day old data well this market moves very very fast I mean and it has been especially in the last few months so for those customers we're just it's an API they can ingest the data on an anonymized and aggregated basis and I think it's been eye-opening to them and I think that's what you're seeing. I think we've added 13 logos since the first of the year in our intelligence segment. We are uniquely equipped to provide that because we have all the underlying audit and payment data. That's the natural buyer. There's secondary buyers, hedge funds, financial investors, et cetera. I mean, to be honest with you, we haven't gone very deep there. I think that's out over the horizon. right now we just want to provide that data to the brokers and then we provide it it's not the same level of fidelity but we do provide data to the carriers as well it's not going to be as precise but in our load pay app a carrier can now take you know be in one zip code and enter in another zip code and we will give them a range of where freight you know what the rates have been on that lane, which is helpful to the carrier as they begin the bid-ask process with a broker. So that's how we use it.
So you've previously laid out a long-term vision of capturing $1 billion in transportation-related revenue. And generally speaking, it's divided up a third, a third, a third between intelligence, factoring, and payments. What are some KPIs we can look at with relation to the intelligence
segment as you progress along this journey well the first kpi that you know is are you making money at what you're doing um our gross margin and intelligence approaches 90 percent 85 to 90 i don't think you'll ever see it fall below that i mean i'm not making a long-term prediction for the future but we acquire that data in our other businesses so if that's true then just how quickly can you scale the business and we've been pretty clear that you know we think we can double that business this year you're not going to double into perpetuity but i know how big the market is i mean i think that market to consume intelligence on what is happening in the in the in the spot freight market or in brokered freight i mean that market is easily a billion dollars is being spent between financial investors the brokers the shippers the carriers it's a huge marketplace right and we're not and and it probably is a marketplace where it's winner take most I don't think it's winner take all and so we're just doubling down on we have the data we have the proven reserves how do we refine that data in a way that is valuable to the market so that I mean I I expect that to be, on a percentage basis, our fastest growing segment for the foreseeable future.
Okay, that was great. And then sticking with technology, so AI was recently a theme and brokered free. I haven't heard of this. Tell me about this AI thing. Well, I'll let you take it from there on your thoughts on the disruption.
you know i mean we were at another conference uh two weeks ago having and and talking to investors about um just what we're seeing the strength of the freight market that we haven't seen since 2021 and and i looked down at my phone and on my my apple stock tracker i have our stock obviously and then like a bunch of freight stocks that i track and i was like we must have attacked iran like what happened like we're all off 12 15 robinson was off 25 we hadn't attacked iran we've since done that but what had happened is an is a news article came out about a company that used to be a karaoke machine manufacturer that they'd created a freight product i'm like are you are you serious so i mean here's how we think about it if we just built technology if that's all we did um i can see i can see the threat if you're going to tell me that ai is going to sit on both sides of transactions and clear payments then ai is going to have to go a long way really fast so i mean you guys are investors the fear i mean to i just am not distracted by the noise i still you I mean, it's out there publicly. I haven't bought Triumph stock in the open market in a long time, and I bought a significant amount for me last week because I think it's crazy. If you don't think we're using AI to make ourselves more efficient, then you have a low opinion of us, right? Like, we can see the use case, and we are running very quickly to that. And, again, network effects and platforms, that's a very different thing. and actually moving, you know, the movement of money is a differentiator. Now, I agree, we don't sit back on our heels and believe that we have impenetrable moats, but I think you're going to see us be a whole lot more efficient. It is certainly transformative technology in the same way that the online shopping experience in the late 90s became transformative, but there's also a tremendous amount of people who seem to make a living posting things on linkedin about the end of all you know the end of times or the best of times and i think like most things the truth will be somewhere in the
middle so you talked a little bit there about getting more efficient you know for your 2026 outlook you've kind of guided two expenses being flat to down what kind of what gives you the confidence that you'll be able to achieve that with the backdrop of 20 or at least 20 percent you know transportation related revenue growth and uh just to piggyback off that what are
some other expense levers that you can pull well i mean the primary expense lever in our business 65 of our expense is people right and and i don't think you're gonna see us do unending rounds of mass layoffs that's that's really we're a growth company but i do think that you'll see us be able to grow without adding much expense there because we're getting more efficient now underneath what's happening is our saw you know we spend on a 400 million dollar ish expense base we spend 125 million on technology like we're not i think some financial institutions try to position themselves as technology companies and they're not really and so our engineers are getting way faster using ai tools way more efficient their ability to ship code test code implement code we're becoming so much faster and so we have all these things we want to do to make our value chain better and five years ago that would have got to add more engineers you got to add more developers you gotta you know all these things and and now not so much so that's that's one and I mean frankly we don't need as much office space as we thought. That's why we sold the office building. I think we can consolidate with the team we have, mainly, and get all the things done we want to do because it's not just AI-driven, but also we're just starting to see. We've spent years building this, and you're just starting to see it. The integrations into the system, the various systems of record are now built, and it just things started we've pushed the rock far enough up the hill that I think we can get better from here more efficiently than what it took to get to this point
and I was hoping we could talk about load pay a little more like what value does load pay bring to small carriers and how differentiated is this product versus what else is out there in the market? Today
it is marginally differentiated by the end of this year it's going to be massively differentiated this will be the only virtual wallet in freight that number one offers you the ability for 24 by 7 funding with no fees and that's because we make so many payments and if I can make a payment if you have an account with me I can make a payment to you 24 by 7 without using ACH rails or wires and i don't have to charge you for it and if we can use machine learning which we do to approve invoices without human intervention that means you can submit an invoice to me and i can return the funds to you in less than 30 seconds all hours of the day nobody else can do that nobody else has the that out there or there's a fee would be a fee of charge with it secondly it is built to ingest whatever fuel cards you want to carry right we're not forcing you into our fuel card we have a fuel card we'd love for you to use our fuel card but we purposefully built it so that you can offload money into various fuel cards and that may not mean anything to those of you sitting in this room but i'll tell you to a trucker who's trying to decide where to stop and where to fuel up, that's a very big deal. The third thing is it's got a screen and the ability to show you all the things that you need to run your business. If you are a factoring, it'll show you your reserves. It'll show you equipment finance offers, insurance. It'll offer the ability to finance your insurance premium. Right now, it probably costs $12,000 to $15,000 per power unit to buy insurance. That's doubled since I've been in this business and maybe even more than that it probably tripled since I got in this business and then it's got intelligence baked into it so it has become it is becoming a business companion for a small trucker and and with payroll cards and all the other things with it that are in our product roadmap there and there are fuel cards right in the industry well-known big companies and we marginally compete with them uh but there's not ever been a well capitalized effort to create a virtual wallet that that gives the trucker every it's not just venmo like it's every think about like an embedded almost quickbooks type experience for a trucker capturing the data they need in the workflows they need to make their business more competitive and nobody with a a substantial market position has ever offered that. On the back end of it, because we are both the issuing bank and the program sponsor, the interchange fees we generate are over 1.6 to 1.7%. That doesn't cost our carriers anything. That's what gets spent by the trucker, not on fuel. You're not going to get that kind of interchange on fuel, but on the rest of their spend. I think the addressable market for load pay is probably 200,000 carriers. It goes beyond. I think it has an opportunity to not just be in people who haul in brokered freight, but also leased on drivers who work for larger companies. Because if I have a leased on driver, I want a financial companion for that driver to make sure he or she doesn't go out of business because they weren't planning for maintenance expenses and all of these things. And that technology and those partnerships are built into the load pay experience so don't sleep on load pay i mean that's all i would say i i think you're you it's you know we said we're going to triple revenue in that business this year um that's a really i think we're so well positioned to deliver that product we didn't just build the technology we have the distribution we have our own distribution which obviously we're very well known in freight but ch robinson rxo there will be others reselling load pay and uh you just can't compete with that kind of reach um so we're we're very excited about where that's going i mean you could compete with it but like that distribution model doesn't exist
in the marketplace let me say it that way so you just mentioned two of your partners ch robinson rxo both of them are involved in your factoring as a service platform can you talk about you know First of all, what that is and what type of progress you've made and where it's headed.
Yeah, I mean, factoring as a service, the thing I consistently tell brokers, if you go back 10 years ago, there was a significant source of revenue of brokers would quick pay a carrier. You haul my freight for $2,000, that was what we agreed to. I'll pay you $1,950 today instead of $2,000 30 days later. That was, and some of the large brokers would have a 20% quick pay penetration, and that's just found revenue for them, right? You're monetizing a vendor who needs immediate liquidity. Along comes the factoring industry, and the factoring industry figured out how not only to do that, and instead of signing up for quick pay programs with 15 different freight brokers, you had one party one factor who would give you liquidity on all those and secondly the factoring industry figured out how to aggregate all the purchases of all of their customers with the fuel providers and that is a big deal the aggregation of fuel purchasing because there's a lot of margin and fuel there didn't used to be but after coming out of the great financial crisis the consolidation you have three companies who generally control the dispute you know selling diesel to the trucking industry pilot flying j loves and ta and they've done a really good job of maintaining good margin on their diesel um so you can save i mean our carriers can save between 40 and 50 cents a gallon on diesel that is a big deal um so if you can give carriers liquidity a fuel discount the factoring industry already figured out how to do that But the third thing, especially, and it's less true today than it was six months ago, but it will be true again because this is a cyclical business. What I tell these large freight brokers is the third thing they want is desirable freight. They want freight on lanes they want to run so they can get back home versus being out for 13 days. If you're a broker and you want a carrier to be loyal to you, you become their financial provider, you help them with the aggregation of fuel, and you give them desire, or you at least reveal desirable freight to them before you reveal it to your entire network. It's a very powerful recipe. so if i'm a large freight broker which is the you know a balance sheet light business i don't want to go build the entire back office and i don't want to fund those receivables because you know there's a timing difference for them those brokers are they have their own ar that they're dealing with upstream of them and so what triumph steps in and says we've got the balance sheet we've got the back office we've even got a sales force to come alongside you we will white label under your name what we built and you can use our technology our balance sheet because we know all these carriers right and and you can win carrier business win carrier relationships that triumph wouldn't have been able to do and that's great so that that's how it works great and i just wanted to
open up any questions from the audience um well feel free to ask one after this one so on the last call it sounded like you've made a lot of progress converting brokers who were not paying the full rack rate to becoming paying customers can you talk
about the progress that you've made on that front yeah I mean we wrote about it in quite a bit of detail we historically monetized to try to get to prime the pump so so to speak for the network we would just monetize the quick pay revenue right if we use the payments network to help grow quick pay revenue for these brokers we did a revenue split today almost every broker is now paying us fees for audit and payments and that number is growing you know the the i think in the last uh quarter luke 38 of all invoices we monetized on a fee basis and that number is going to grow pretty significantly this year, which is what is part of the projections for growth in our payment segment, which I think many investors may find to be our most valuable segment. It's just the power of network effects. I mean, we had to run that business for three years at a loss, which is a very hard thing to do in a bank, very hard thing to do. But we believed in the long-term vision, and we stayed committed to it, and we kept improving the product and we improve the strength of the network and our customers can now see if you're able to drive through a repricing last year then you a you better given what was happening in freight you had a really good product and you have really good relationships in the industry in order to pull that off um and and we went to our customers there was no i mean my customers can listen to this and we went to them and said here's the value we're delivering here's the cost saves of ftes here's the less the the lack of misdirected payments here's the things we ate on your behalf because money ended up in the wrong place but because we're who we we we are and because we're big enough to do it we protected you from that and so um here's how much you're saving we want a percentage of that that's a good partnership and to go i think we went a hundred out of 137 customers that had that discussion, 135 agreed to it. So clearly there was a value proposition. Now we fast forward to what's happening in the market now, and man, things are changing very fast. Flatbed is parabolic, I think is probably the right word. ISM print above 70. This era of enforcement is, I mean, we have taken supply and are continuing to take supply out of this marketplace. And if you get another demand shock, housing, anything, I mean, I'm not an economist, so I don't make predictions on what demand looks like in freight, but I will tell you the freight market has probably never been more fragile. Routing guides are strained because the capacities that's left the system invoice prices have increased through the first quarter and into february which i have only seen one other time in my career which was on the back end of covid so um you know this re-regulation of trucking we had deregulation in 1980 we're now re-regulating trucking to keep our roadways safe and protect businesses who actually obey the law is, it's an interesting time. And so our solutions are even more desirable, I think, for our customers than they've ever been. And then just as we kind of come up against
the clock, what aspect of the Triumph story do you think is misunderstood by investors?
I think just the long term, can you continue to grow at mid-teens to 20% revenue growth organically? Is the market big enough? And I think most, many investors don't understand really how big this marketplace is and the ways in which we can monetize and deliver value on invoices and payments and all the things we can do. I think we've demonstrated revenue growth and margin expansion over the last several quarters. If we keep doing that, eventually investors will believe it. We believe it and we'll just keep doing it. Okay, perfect. Well, I think we're out
of time. Thank you for joining us and we will continue the discussion downstairs in Cordova 6 for the breakout. Thank you all.