All right. Well, good morning. My name is Joe Yanchunis, a research analyst at Raymond James. 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.
I was hoping you could start off with providing us an overview of the company, and then we can dive into some questions.
We, Triumph, we are a, and have been, a publicly traded bank for quite some time. For most of our journey, we have chosen to focus on providing financial technology, payments, and other solutions to the transportation industry. As we sit here today, we're about $6.5 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. We provide, as you talked about, intelligence, payments, audit, balance sheet solutions to people in the trucking industry.
With all these different segments, can you talk a little bit about how they all interact together?
Sure. I think of I think if you think about companies that create enduring value, you focus on a value chain, right? That's, that's, that thinking's been around a long time. If I think about the five things we do, all of those things have all of them go back to the what does it take to move a load from point A to point B? You know, 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?
Onload, how do I make sure that freight is going where it's supposed to be going? How do I track and trace? 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? Postload, how do I reconcile the delivery of the load, the auditing of the invoice, the remittance of payment, et cetera? 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. We use technology. Been building technology. That technology is evolving very rapidly.
The second thing, if you're gonna audit an invoice, again, that's something that happens postload, then if you have the ability to make the payments, you should do that. 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 sounds, 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. You have to manage that through the process. 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. 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. You know, we buy about $1.1 billion-$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. 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 LoadPay. That's our virtual wallet, which is a full business, digital business companion for the trucking industry. 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?
That's something we've been scaling rapidly and continue to scale very rapidly, and we're very excited about LoadPay and its prospects. Finally, if you're auditing invoices, paying invoices, buying invoices, 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, what is the bid-ask spread right now in any lane in the United States?
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 a load is posted for, but what did it actually move for. Across the United States, as I alluded to earlier, approaching 65%-70% of all loads that are moved in brokered freight, which is a $110 billion market. Those five things, that's how they all work together. That's how the value chain works.
Just kind of picking up on your last point on the data. 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?
Well, 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. They might wanna know what does 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, you team drivers so you're doing expedited freight on a secondary or tertiary lane. That's really interesting to them. That's the natural buyer. How Greenscreens.ai 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.
Greenscreens had built, using machine learning models, they had built technology to make predictions for freight brokers about where the market is going. That's very important if you're a broker, because 85% 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. 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. 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 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, some of these large brokers have 300-400 data scientists already on staff. What they're looking for is the data, and they don't want lagging data. The, where they're getting data, the incumbent, that's seven-day-old data. Well, this market moves very, very fast. I mean, it, and it has been, especially, in the last few months. For those customers, we're just, it's an API. You know, they can ingest the data on an anonymized and aggregated basis, and I think it's been eye-opening to them.
I think that's why 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. Those, that's the natural buyer. There's secondary buyers, you know, 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 wanna provide that data to the brokers, we provide, it's not the same level of fidelity, but we do provide data to the carriers as well.
It's not gonna be as precise, but in our LoadPay 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. That's how we use it.
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? Our gross margin in intelligence approaches 90%, 85%-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. We acquire that data in our other businesses. If that's true, just how quickly can you scale the business? We've been pretty clear that, you know, we think we can double that business this year. You're not gonna double into perpetuity. I know how big the market is.
I mean, I think the market to consume intelligence on what is happening in the spot freight market or in brokered freight, I mean, that market is easily $1 billion is being spent between financial investors, the brokers, the shippers, the carriers. It's a huge marketplace, right? We're not... it probably is a marketplace where it's winner take most. I don't think it's winner take all. 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? That, I mean, I expect that to be, on a percentage basis, our fastest growing segment for the foreseeable future.
Okay, that was great. Sticking with technology, so AI was recently a theme in brokered freight.
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. Which broke-
You know, I mean, we were at another conference two weeks ago, talking to investors about just what we're seeing, the strength of the freight market that we haven't seen since 2021. I looked down at my phone, and on my Apple stock tracker, I have our stock obviously, and then, like, a bunch of freight stocks that I track. 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. What had happened 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 serious?" I mean, here's how we think about it.
If we just built technology, if that's all we did, I can see, I can see the threat. If you're gonna tell me that AI is going to sit on both sides of transactions and clear payments, then AI is gonna have to go a long way really fast. I mean, you guys are investors. The fear, I mean, I just am not distracted by the noise. I still, you know, I mean, it's out there publicly. I haven't bought Triumph stock in the open market in a long time. I bought a significant amount for me last week, 'cause 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? We, we can see the use case. We are running very quickly to that.
Again, network effects and platforms, that's a very different thing. 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 gonna 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 nineties became transformative. 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.
You talked a little bit there about getting more efficient. You know, for your 2026 outlook, you've kinda guided to expenses being flat to down. What kinda, what gives you the confidence that you'll be able to achieve that with the backdrop of 20% or at least 20%, you know, transportation-related revenue growth? 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? I don't think you're gonna see us do unending rounds of mass layoffs. That's really. We're a growth company. 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. You know, we spend on a $400 million-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. 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.
We have all these things we wanna do to make our value chain better. Five years ago, you gotta add more engineers. You gotta add more developers. You gotta, you know, all these things. Now, not so much. That's one. 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 wanna do because it's not just AI-driven, but also we've spent years building this, and you're just starting to see it, like, the integrations into the system, the various systems of record are now built.
It just things started, you know, 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.
I was hoping we could talk about LoadPay a little more. Like, what value does LoadPay 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 24/7 funding with no fees. That's because we make so many payments. If I can make a payment, if you have an account with me, I can make a payment to you 24/7 without using ACH rails or wires, and I don't have to charge you for it. 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 that out there, or there's a fee to charge with it. It is built to ingest whatever fuel cards you wanna 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. We purposefully built it so that you can offload money into various fuel cards. That may not mean anything to those of you sitting in this room, 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 factor, 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-$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. Then it's got intelligence baked into it, so it is becoming a business companion for a small trucker and with payroll cards and all the other things with that are in our product roadmap there. There are fuel cards, right, in the industry, well-known big companies, and we marginally compete with them. There's not ever been a well-capitalized effort to create a virtual wallet that gives the trucker every. It's not just Venmo.
Like it's think about like an embedded, almost QuickBooks-type experience for a trucker capturing the data they need and the workflows they need to make their business more competitive, and nobody with a substantial market position has ever offered that. You know, on the back end of it, because we are both the issuing bank and the program sponsor, the interchange fees we generate are over like 1.6%-1.7%. That doesn't cost our carriers anything, right? That's what gets spent by the trucker, not on fuel. You're not gonna get that kind of interchange on fuel, but on the rest of their spend. I think the addressable market for LoadPay 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. That technology and those partnerships are built into the Loadpay experience. Don't sleep on Loadpay. I mean, that's all I would say. I think you're, you know, we said we're gonna triple revenue in that business this year. 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. C.H. Robinson, RXO, there will be others reselling LoadPay, and you just can't compete with that kind of reach. 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.
You just mentioned two of your partners, C.H. Robinson and 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. 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, the factors, factoring industry figured out how not only to do that, 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.
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 in 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, you know, selling diesel to the trucking industry, Pilot, Flying J, Love's, and TA, and they've done a really good job of maintaining good margin on their diesel. You can save a, I mean, our carriers can save between $0.40 and $0.50 cents a gallon on diesel. That is a big deal. If you can give carriers liquidity, a fuel discount, the factoring industry already figured out how to do that.
The third thing, especially, and it's less true today than it was six months ago, 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 wanna 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 become their financial provider, you help them with the aggregation of fuel, and you give them or you at least reveal desirable freight to them before you reveal it to your entire network. It's a very powerful recipe.
If I'm a large freight broker, which is the, you know, a balance sheet light business, I don't wanna go build the entire back office, and I don't wanna fund those receivables because, you know, there's a timing difference for them. Those brokers, they have their own AR that they're dealing with upstream of them. 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 you can win carrier business, win carrier relationships that Triumph wouldn't have been able to do." That's great. That's how it works.
Great. I just wanted to open up any questions from the audience. Well, feel free to ask one after this one. 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?
I mean, we wrote about it in quite a bit of detail. We historically monetized to try to get to prime the pump, so to speak, for the network, we would just monetize the QuickPay revenue, right? If we used the payments network to help grow QuickPay 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, I think in the last quarter, Luke, 38% of all invoices we monetized on a fee basis, and that number is gonna 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. We believed in the long-term vision, and we stayed committed to it, and we kept improving the product, and we improved the strength of the network. Our customers can now see, if you're able to drive through a repricing last year, then 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. We went to our customers. I mean, my customers can listen to this.
We went to them and said, "Here's the value we're delivering. Here's the cost saves of FTEs. Here's the lack of misdirected payments. Here's the things we ate on your behalf because money ended up in the wrong place. Because we're who we are and because we're big enough to do it, we protected you from that. Here's how much you're saving. We want a % of that." That's a good partnership. Out of 137 customers that had that discussion, 135 agreed to it, right? Clearly there was a value proposition. We fast-forward to what's happening in the market now, and man, things are changing very fast.
Flatbed is going, 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. 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. I will tell you, the freight market has probably never been more fragile. Routing guides are strained because of the capacity 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.
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. It's an interesting time. Our solutions are even more desirable, I think, for our customers than they've ever been.
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? I think most many investors don't understand really how big this marketplace is, right? The ways in which we can monetize and deliver value on invoices and payments and all the things we can do. I think we gotta go. 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. We'll just keep doing it.
Okay, perfect. Well, I think we're out of time. Thank you for joining us. We will continue the discussion downstairs in Cordova 6 for the breakout.
Thank you all.