Good morning. My name is Joe Yanchunas, a research analyst at Raymond James, and I'm pleased to be joined with Triumph Financial. With us today is CEO Aaron Graft, CFO Brad Voss, Executive Vice President and COO Ed Schreyer, and Head of Investor Relations Luke Wise. I'd like to have this be as interactive as possible, so if you'd like to ask a question, let me know. With that, let's dive into some Q&A. Aaron, you've had a rather busy start to the year, where you launched a new business segment surrounding your data. You have several new initiatives that went live, including LoadPay and your factoring-as-a-service offering. Last week, you announced the acquisition of GreenScreens.ai. Can you tie all these moving pieces together and explain how they work and connect?
Yeah, yeah. No, that's a perfect place to probably start. We are Triumph. We are a bank. We do not talk a whole lot about that piece of our business, but I'll try to help you see how we see the world. Our North Star, and you're going to hear us talk about this in the letters going forward, our North Star, and we previewed this some time ago, is $1 billion of revenue in transportation. Today, we generate $210 million of revenue in our transportation business. We have three ways in which we go to market. Number one is our factoring business. If you followed us, been around a long time, we acquired that business in 2013. We are the second largest factoring company in the United States.
We generate $150 million of revenue in good times, which this is not good times, but in good times, 40% operating margin, very, very profitable business. In our billion-dollar journey, we think that business is going to double. How are we going to double it? Number one, we have not organically grown our own factoring business in years because of the payments, what we were doing with our payments network. That is changing. I called that out in the last letter. Number two, we launched factoring-as-a-service, which means large freight brokers, C.H. Robinson being the one that's already been announced, but others are coming, are going to use our platform, use our balance sheet to grow their own factoring business. This has been something they've wanted to do for a long time. It allows them to monetize payments to their carriers.
It allows them to have a better carrier relationship. Our factoring business is going to grow. You're going to see that happen even in the face of a weak market. The second thing we do, and I'm getting to tie it all together for you, is payments. If you followed us for any period of time, you know about our payments business. Our payments business generates $60 million of revenue in a single-digit EBITDA margin. We started that at the absolute worst time in the height of the market, and we have grown it despite the worst freight cycle we've seen since 1980. That business is going to continue to grow. The legacy part of that business, and this is the core, and you need to understand this. We talk about our network, network transactions, platform, whatever word you want to use.
Here is the core of what our payments business does. It is the transmission and auditing of data for purposes of making a payment. I'll say it again. Transmission and auditing of data for purposes of making a payment. That is our core transaction. That is what we do more of than anyone in the world. Everything we do has some bearing back to that. For example, when you are factoring someone, you are just making the payment before the transmission and auditing of data is complete under its standard contractual terms. It still goes back to that data set. We have been doing that for a long time.
Right now, our average payor, which is generally going to be a large broker, is going to pay us roughly $0.75 an invoice to do audit for them and pay us $1.25 an invoice to do payments for them, $2, in other words, for a fully integrated payor. That is 33% above what I told you three years ago I thought the market would bear. I thought it was $1.50. We're actually having more success there with our scale. On the payee side, who is being paid in our payments business? It's either the carrier or the factor. In 60% of instances, that invoice was sold to a factoring company. We're a factoring company that gets paid. There's about 400 other factoring companies that get paid.
Oh, and by the way, there are some new factoring entrants coming into the market who are using our factoring-as-a-service, who I think are going to take a lot of market share because they just have a better mousetrap because they can layer things in with their capacity. The payees are paying us right now between $0.50 and $1 per invoice. That makes the network transaction. At one point, I thought we would generate $5 of revenue on network transactions, $1.50 on the payor side, $3.50 on the payee side. It seems to me where the market is, and again, you read our shareholder letters, we go into excruciating detail because we believe transparency is the key to trust. We are going to be between $2.50-$3 per network transaction. The network, just so you understand, means we are connecting system of record to system of record.
The system of record for the payor, that would be the transportation management software that tells the broker who to pay, how much to pay. The system of record for the payee, either the carrier's TMS, their own architect, their own tech stack, or if it has been sold to a factoring company, the factor management system. The problem some factors have, and the reason we have not generated quite the revenue on the payee side, is the factor management systems that we are paying do not have the technical capability to absorb data about the load before the load is hauled because we happen to have the data a day or two before the load ever moves. I cannot push that data to the legacy factoring industry because their technology will not support it. I can push it to my own.
For the people who are joining us with factoring-as-a-service, I can push it to them. That is a really powerful thing. Our payments business, $60 million of EBITDA, I still believe it will be one-third of our billion-dollar journey going forward. I think that you are going to see EBITDA margin continue to improve over long periods of time. The brokerage industry, I would say we have monetized half of it. We have announced a bunch of names. We have 55% of all freight touches our network in brokered freight, but we have not monetized all of it. We have not made a cent from C.H. Robinson. As I told you, that comes in the back half of the year. There is a lot of infill selling to go do.
The other parts of payments that we will eventually monetize, the second thing would be the shipper part where shippers are paying brokers. We are not doing much there right now. We do a couple billion dollars in payments. It is not a high-priority area of growth because, frankly, we're just really busy with the other things we're doing. That part of the market stays there. The final part, and this, Joe, is what we announced, is LoadPay. LoadPay, I go back to what I said, the core transaction is the transmission and auditing of data in furtherance of making a payment. That is the core of our network.
LoadPay just is the bucket that hangs off the end of our network because we knew that we're paying out billions of dollars every month to these carriers, and we knew those carriers were spending that money at fuel stops and to buy fuel. We created a product. We didn't just create the product in isolation. C.H. Robinson said, "Hey, we think we should jointly, we see this opportunity to create a virtual wallet." They will not be the only one. There will be other people who join us in this virtual wallet experience. There is no true incumbent who can compete with us because we have direct connection to the payment rails because we are the bank, so we can move money 24 by 7 by 365.
We have the marketing prowess of having the largest payers in the industry in addition to us saying, "This is how you're going to get paid." It ultimately just comes to how do you monetize it. I think we've been real specific with investors. We said that by the end of this year, we should have between 5,000 and 10,000 accounts and that we think at scale those accounts generate $750 of revenue and that the bulk of that revenue is interchange fees. That does not hit our balance sheet, very high margin, high-value revenue. There's probably 200,000-300,000 accounts to go get in the world if you think about all the small truckers. We won't get all of them. We touch hundreds of thousands of carriers every month, and no one else does that.
You put that in payments, and that's well over a $100 million revenue opportunity, and that is what makes our payments business. The legacy payments where we're generating $60 million of revenue, the shipper market, which we're not really doing much in, and LoadPay. LoadPay is built. There are feature sets being added. We push code every week just to make it more reinforced that it's different than anything else out there. It is a bank account, with an attached debit card where we're both the issuing bank and the program sponsor. The interchange fee belongs to us. We can use that to incentivize and work with our customers, but we own it all. We don't have to share it with someone. That's our payment segment.
You take factoring plus payments, you get to $650 million of what we want to go do. Today, we're at $210 million. In other words, we're a third of the way there to what we want to go generate. The last thing, which you just asked about, is intelligence. This has been in the works for a couple of years. I've tried to breadcrumb it for investors. I knew we would take criticism announcing a segment with not much revenue, but I put myself in your shoes. If I were in your shoes and I thought intelligence or the monetization of our data was something I was going to go do, then I felt like you deserved to know that. I couldn't tell you everything at once because I knew what was coming, but we could only reveal certain things. Here's what it means.
GreenScreens is the fastest-growing intelligence provider for pricing in the marketplace. There are only three, and they are taking market share really quickly, doubling revenue Year- over- Year, and they're doing it on about $15 billion of volume. In other words, it's a consortium. Brokers give data. They get data back, anonymized, curated, tells them how you should price a lane. If you're a broker, you care a lot about that because 85% of my expense as a broker is hiring trucks. That's by far my largest expense base. The reason we bought GreenScreens is we have more clean data than anyone in the world about the freight brokerage industry. Roughly 55% of all freight, we know where it went, what was paid, what accessorials were charged, what lane. Nobody, no entity has clean data at that scale. We had two options.
We could have built the technology to sit on top of this to offer intelligence to the market ourselves, which would have taken us probably $20 million in two years. Or we had saved up $260 million of excess capital over the last few years, and we decided to buy the fastest-growing company that was a culture fit with us and empower them to take our data. Lastly, the reason we did it is we had a lot of large customers, large brokers ask us. They're like, "Aaron, I know you all have this data. I know you have it. It would be valuable for my business to get that data either in an API or in a single pane of glass to be able to log in and to see that." We preempted a process, paid a big premium. We knew we were doing it.
We can see the pathway because the raw material that GreenScreens needs to grow is what we already have. Our gross margin in our SaaS business will be well over 90% because we do not need to go acquire that material anywhere else because we get it in our payments segment. They needed the relationships and the good housekeeping seal of approval with the large brokers to not just focus on the long tail of small brokers. Those are all my clients. Every one of those people we do business with. We knew we could have that conversation. That business, over time, I think there is a $300 million revenue opportunity. If you push those things together, that is what we think about.
Our bank generates $110 million of revenue, not even talking about that at a 50% efficiency ratio, steady state, do the right thing, keep cost of funds low. We need to take $210 million of our revenue in transportation and grow that. If you can do that without diluting shareholders, and you can just get halfway there to $500 million-$550 million, that's like $5-$6 a share of EPS because the margins are high. We have built so much to invest in the infrastructure to get here. All of our focus is on growing in those three segments. Hopefully that helps people understand how it all fits together.
That was a very thorough answer.
Last meeting of the day, I feel like people deserve to hear a thorough answer.
Can you dive into GreenScreens a little more and how much faster can they grow as being part of a Triumph or as independently?
Yeah. That is hard for me to answer. Let me caveat this with we have not closed yet. We do not have regulatory approval to close yet. That should happen in the second quarter. Their ability, so they are a venture capital-backed firm. They have grown very quickly, and they work on the consortium model. Right? You give all of your data into a pool, and you get all of the pool data back on an anonymized basis. They get about $15 billion of data for 200 brokers, right? Small brokers, if you are going to have that kind of gross number with that many brokers. Their average contract signing to go live is 45 days.
If you've followed our payments business, it's like six or nine months because our integration, and this is one of the hardest things about our business. This is the problem on the factor side and on the broker side. Our payments integration is so invasive that we need to be able to write back to the system of record. And so we have to get the technology provider to allow us a very different level of integration than you would need if you were just taking an output. Right? That's a different level of integration. So you're going to close GreenScreens. In the meantime, right now, obviously, we're working on building our intelligence product that doesn't just do pricing, but it also does performance, which is the ISO acquisition.
It's going to tell the broker, "What should I pay this carrier, and is this the right carrier for this load?" If it's a load of water bottles, nobody cares. If it's consumer electronics on a lane I'm not familiar with, with a carrier I'm not familiar with, I would like to know what percentage of the time they show up on time and full. I really care about that. We have that data, and we can layer that in. Their scalability is different than what we do in payments because in payments, there's one truck. It's a linear platform. Right? A load gets tendered. Only one truck can haul that load versus a non-linear platform like a YouTube platform where one video can be viewed tens of thousands of times. Our data can be viewed thousands and thousands of times.
It's not a one-to-one ratio. When I said in that last shareholder letter that network fees are, in the end, not going to be the most scalable and profitable thing we do, I was alluding to the monetization of our data is, in my opinion, it's got to go get proved out. You all are going to go channel check it. Be my guest. You're going to find glowing reviews, I think, about GreenScreens across the board. People, you can verify what our data is. I mean, that's been reported to you. That should grow much quicker than anything else. The price point's lower. The integration already exists. The relationship already exists because we know these brokers, and we already have the data.
Is there a capacity issue with how quickly or how many brokers you can onboard at the same time?
There always, sure. There always is, but
what does that funnel look like?
I mean, it's much tougher in payments, especially because not every broker has a standardized TMS integration. They've written their own code, or they have a certain way they want to see things, and so we have to map to all their fields. I think GreenScreens, their ability to use our data set, if we think about the third and fourth quarter of this year, once they're onboarded, once the product is rolled out because we're not going to put a Frankenstein product out there, it's going to feel like Triumph. I've got too many years invested with building credibility with the marketplace. Once that full product's out there, I mean, you could be signing contracts, new contracts every week, right? Because the data exists. You're just turning on an integration.
A lot of these people, I don't even have to ingest their data. We already have their data. That's the key. I don't know that investors were able to understand this. I will drive it home in our next shareholder letter. The only reason you do this is because the core of the core transaction for us, the transmission and auditing of data for purposes of making a payment, is the exact thing that feeds the GreenScreens model. We have more of it than anyone on earth. Clean payment data is very hard to get, and it's taken us years to get there. We already have that data. It'll just be creating a login for a lot of these people.
That was great, Do you think we could switch over to some of these other new initiatives like LoadPay and factoring as a service and if you could just discuss kind of how they've been progressing and how you see the acceleration to come in, say, the intermediate term?
Yeah. Factoring as a service is going slower than LoadPay. I think we're figuring things out there. In both of these initiatives, if you've tracked our stock for a while, you need to know five years ago, we were standing on a hillside with a horn yelling at the market, "If you join the network, you're going to experience less friction and less fraud." That was true. It is only because it's true have we gotten half the market to move all their volume to us.
The difference with LoadPay and factoring as a service is both of those ideas came from our customers. They said, "Hey, we want to move into this space." Right? We do not monetize payments at this time. If I'm a broker and I'm making a 14% margin on a $2,000 load, I lose the ability to make any money the second the ACH goes out to pay either the factor or the carrier. I'm going to make no more money on that load. If, though, I'm able to build something where I can participate in the financing, the quick pay of that revenue, which some brokers already do, but nobody does it at a big scale because factoring is so much more pervasive than quick pay.
If I can participate in the interchange fees and the float of how the money actually gets spent in the fuel stop, I might be able to add 10% to my margin. That matters a lot to me. I mean, the average revenue generated when you factor a load is $20. The broker is living on $160 right now, and they're not going to get all of it. Their option was, "Go build this technology yourself. Good luck. You can go do it. And you got to create a balance sheet to hold it." The option was, "Come to a trusted partner. We already built the technology. We have instant decision, instant funding, all the stuff you've heard me write about, and we have the balance sheet. Someday, if you overwhelm our balance sheet, that's great.
We'll securitize it off because institutional markets should ultimately be the counterparties for 30-day trade payables. Absolutely. All day. It's just never gotten there because of a lack of standardization. We will bring standardization. LoadPay is built. Every week, we're pushing code to make it better, make it more trucker-centric. It's a checking account. We have hundreds of thousands of checking accounts already at Triumph. It's just created with a digital opening that has feature sets in it that make it trucker-centric. It connects to our payments platform so we can move money 24 by 7 by 365 because of the parent-child relationship accounting we can do inside the bank. If you're not a bank, you cannot do that. You do not have that option. LoadPay is ahead of schedule.
We told you we'd end between 5,000 and 10,000 accounts at the end of the year. I believe we will do that. I believe we will do far more than that. You are going to see other people come into the market to be selling LoadPay alongside us, which we welcome. That is a marketing channel. It is really powerful. Factoring-as-a-Service. Onboarding someone into a factoring relationship is more complicated than setting up a virtual wallet. It just is. We are seeing that grow. We are helping our customers. In other words, our customer, when I talk about Factoring-as-a-Service, is the broker who wants to provide factoring. We are teaching them everything we have learned in a decade of factoring. Here is how you sell this. Here is what you should do.
Ultimately, how they need to do this, in my opinion, is very much how American Airlines uses credit cards. American Airlines, Visa card. Right? They're not the issuing bank. Doesn't sit on their balance sheet. They don't do the onboarding. A bank does all that. They know they can drive adoption because people want to be executive platinum even if they don't want to fly 150,000 miles a year. The way forward for a broker is to attach the right lanes, the right routes to those who factor with them. No factoring company has that option. I don't move freight. I can't give my factoring customers a certain lane. The training of how this is working and the onboarding is where we are right now. If I knew I needed to sell factoring and I needed what would be the competitive advantage?
All factoring companies have figured out how to do fuel discounts. All factoring companies are generally figuring out how to fund things quickly. The ability to match that with preferred routing for a carrier who wants to get home on Friday night versus stay over in a truck stop, that's a big deal. It is coming. Whether we do it or not, we could see it coming, and we positioned ourselves to be part of the solution.
Factoring as a service has the potential to be extremely disruptive to the industry. I understand it's early on in the process, but have you seen any of the current factoring companies respond in any way? What could they do?
I mean, I don't know what you can do. Look, nobody loves when new competitive pressures come into an industry. What I told them, this was coming.
Some of these large brokers were already down the road with fintechs who did not really know factoring. Yeah, I'd say that was. This tide was coming. We just happened to be able to do it in the way that factoring should be done versus how I see some fintechs do it who take undue risk. Look, if I'm one of the 400 factoring companies, I got to figure out what do I do. What is my value proposition? Of the top 10, most of them are attached to a broker, not one of the top 10 brokers. They have already got, look, it would be a little hypocritical for them to say, "I do not like the fact that a freight broker is doing FAS," when four of the top 10 factoring companies were started by freight brokers. I do love reminding them of that.
You do remember how you started. The other ones are attached to fuel providers, right? Because that's going to be the second largest cost center for a trucker behind salary is the fuel spend. These aggregators of fuel providers, that's going to be they're going to play to their strength. The third piece is some people just have customer service niche, and they're customers who trust them, and they're going to continue to win. The days of just throwing out a blanket email offering 2% discount to get paid tomorrow are over. It was going to happen whether Triumph was part of it or not. I don't know what they can do. You're going to have to adapt. I mean, if you try to. One of the freaking old dudes from. Market forces say I'm going to no buy C.H. Robinson. Really old?
Tell me why I had a dream that. Factoring company. We're not going to buy C.H. Robinson paper. I mean, come on. That would crush your business. We're giving and the other thing, we're telling them, "If you upgrade your technology, we will do for you exactly what we do for others." To me, we've built the factory, not factoring, the factory. I'll let anybody run on those rails. It's just until people start seeing their market share, see, I don't think they will. It is what it is.
We just have a couple more minutes to see if there's any questions in the audience.
Yeah. Is this all applicable to entities outside of transportation or are you just focused on that? Look, right now, there are investors in this room who think I think too much anyway. We are just focused on transportation.
There will be no more segments. We have laid out for you finally a plan that's been in the works for two years. I am laser-focused on getting to a billion dollars of revenue in transportation using the three things that we do, all of which relate back to the core transaction. Because if we do that, that will create a lot of shareholder value. If somebody takes what we've done and applies it elsewhere, more power to them, we're only going to do transportation.
As we think about that billion dollars that you're chasing, you've laid out some of the buckets of what each of your businesses are going to provide. What's the first one you think that gets their target?
I mean, factoring is the one we can control. I mean, we could wallet whip it to I'm not going to do that.
I know how to do factoring. We've done that for a long time. We have intentionally not grown for a lot of years. Now we have a big incentive to grow because we have customers who are saying, "We've hired you to grow." Now what we're seeing is small truckers are still leaving the system. Mid-sized truckers are picking up the slack, which probably means an inflection point is coming when, I have no idea, but utilization. We are buying more invoices from fewer truckers, which is a very rare phenomenon for us. Payments, the LoadPay is the only thing we sell right now where I don't have a sales force, and every day new people are signing up. Because I can see it. We have a Slack channel. I can see each time someone's.
You got a lot of names to get to, right, to get through that. Data, I hesitate to say we haven't even closed on it yet. I know that what we're buying already had a very high rate of growth. Otherwise, we wouldn't have paid mid-teens revenue multiple. You wouldn't do that unless you knew it was going to grow and unless you knew we had what they needed without any additional cost to us. That was the critical thing. I mean, there's going to be dev work to make it all fit together. On the denominator being so small in data, it will probably show the highest % growth. If we're talking about gross dollars to the bottom line, what's going to drive EPS from where it is now to where we want it to go? I'd say factoring probably.
I'll take any of them. Right?
All right. I think we're about out of time. Thank you for joining, and we're going to.