Triumph Financial (TFIN) 21 Jul 222022 Q2 Earnings call transcript

Good morning. Welcome to the Triumph Bancorp Conference Call to discuss our Second Quarter 2022 Financial Results.

Before we get started, I would like to remind you that this call may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to publicly revise any forward-looking statements.

to earnings Harbor release refer shareholder in please and letter published details the statement Safe our For last evening. during made Safe comments today’s subject are All to Harbor statement. call that and morning and our Triumph’s Financial this Melissa Brad Ritterbusch, Brenner, Forman, Bank, Todd President of Voss; Graft; Triumph our joined I’m CEO Officer, Vice Chairman of our CEO, by Chief TBK Geoff TriumphPay. President of Aaron Business Capital; call the of way, like over out to the Aaron. housekeeping that With to I’d turn

letter shareholder this the published that time hope We everyone. you call for morning, was evening preparing we’re the for questions. call. we helpful for open Good last this any up ready in to At

right. All

you feature If the feel your use to raise and any hand have camera. questions, free activate

feel your Our first question comes from Michael to Michael question. free Rose James. from ask Raymond

going nearer costs, of structurally insights we Thanks. to any as you move term size. up chatter through kind morning, there, Thanks a in fuel average and prices I dig invoice seem down just been just had of us lot get expect the lot forward? and of were dynamics better back things a the my like questions. Good It that. moving this to Can costs think labor of trucking thanks. there love definitely but space kind and context TBC. trade we would they’re taking kind might everyone. we like invoice think just invoice kind prices where get just quarter, they but to Obviously direction of parts for for the about some first the of modeling walk repositioning maybe a you into doesn’t into I of lot has higher what pre-COVID to been Hi, than It and wanted prices and of given efforts, held love

This take is that I’ll Michael. Hi, Geoff. one.

factors into and gradual diesel held invoices had normal. and size has the to higher we’ve we that them you benefited average imputed from a these think we as – from know we’ve I in heightened is return the invoice which up been prices think prices diesel for, called what

dynamic that or several current XX%, optimistic if levels flat current or about prices about return their if cautiously QX. diesel years utilization certainly ago. an return eventual And to So occurred level, seen at which looking about holding stays QX anticipate what and stay we into at in you’d or and then its back would is

to and begin you slower generate at to become network profitability? the like – does perhaps just updated the thanks. any kind think about maybe updates than intermediate on Okay, guys then And as least expect ramp breakeven as just expecting, I the be to to term, was then look is little the a there. of Thanks. we network the any really color modeled. trends side, on just there little what think follow up is may than bit but love we weaker I just some a – But when we’d It for there a bit

coming – Melissa a we ones needle associated in is that’s they those because the such – the they it. I’ll the if steady We that And correct It’s – of describe letter, pointed ones market just Yes, chunky one a are control have certainly out Xs billion are that large business, wrong, focus them just of Tier pipeline. and But because the identifiable great in into we the volume clients question. each those say on, drip, names. take XX the really tried come anything we’ve over quarter and that. every as I individually there in as ecosystem. with amount are of the the pipeline collectively. large the very There’s to TriumphPay will move

where given are even actually to expect I integration in the perhaps the invoice for do we just would where QX be volume if prices down schedule, the in gross slightly more. are moderate So flat payment year to we the total,

a expect to We the the comes And we because function step spike time big upwards of there part a be a it who with size. there from on new one this are in just it’s chunky their to of first be new clients, live go when QX of will group or pipeline. going each in be

conforming transactions or And at fees. we XX size that XXX positive business that. gross that to And million a exit move so in ultimately, track upon of this doing we on volume, pace a right ever along generates which growing with will will payment that revenue revenues portion over scaled we billion of be that’s are with business being XXXX will And EBITDA. at think and sort be that charge we that network an believe

that intact. still is So timing

quarter very – have onto first we a seeing in pause a long. live but last just the didn’t won’t system, where someone that You’re quarter that bring the while

I then an finally me was contract, the the the I any in on for update didn’t updates And just shareholder for – know there. maybe but shipper at market there see helpful. potential much Okay, love about letter some, about we some point, mean, just you talked that. I

were a you there math efforts, should the in I lot this that? I has then results and guys. X% about just quarter, moves had your been repositioning think we be the could X% of by of Thanks forward noise moving kind numbers? mean, we outlook of I expect because there. with previously cleaner lot of a slides. kind think much to there And of kind thinking What’s And the the of You volume

The shipper.

Yes.

shipper onto did the in we one Tier market, think I QX. come shipper on platform X have the

that And so, we’ve some business. in growth seen

We investment which company to the made in freight an of Intelligent Audit, that also initiatives space further our additional segment in audit is in our that market.

a in available the addressable XXX $XXX billion the we market a total you opportunity. or shipper around significant size it about is space. shipping, there look at it’s When so, And contract

relationship we’re the and with there building there. we’re investment that open additional to within So TriumphPay. our market reposition our line network continuing strategy out allowed be really then IA in invest has to for our us And more with the to

So more you’ll see on side. that soon coming

Intelligent as overlook Mike, wouldn’t with being go Yes. Audit what consistent get said. market that to investment another yet I we’ve is more always of. There

billion go We of couple have a to but lot more a it, there’s get.

few expecting And in noise. clean and want of happening. parts are this likely we are said, as still in as to near to to business we’re quarter won’t this have anywhere want what we where think that it there are strategy. we things way then with so present everyone I But doing a I our next result, to amount period where But are a never opportunities your quarters, is to predict is question themselves. can that last And And the of to reallocate go. about what quarter to response you going quarters consistent towards it turning things be of going along understand, we things strategically future the

one. anything it be I be noise don’t in expect to there So to come, this quarters like but may

questions. Appreciate all for Thanks the my taking color.

it. got You

And comes Olney from question our next Matt Stephens. from

morning. Good guys. Hi,

Matt. morning, Good

down can not TriumphPay. amount of higher And increased want showed dollar similar improvement to linked of I of receivable invoices, if also XQ least the amount some but in were at declined. receivables TPay. you or We number thought metrics what the invoices, dig was declined the Any I I of higher quarter. amount dollar I’m dollar the was us more the on clear discount saw or to most into of why times rate turn color give average forecasting.

Yes. average receivables are going of in that invoice be tied would invoice. alignment with the themselves direct to That the amount the down. price The

has see drop. that softened we’ll portfolio, within that the revenue as so And

curious appreciate are Okay. investments appreciate also And there. you that you’re that but it’s ramp TriumphPay the we When expense help the in spend to to about to what close that? How then of I within segment. us expect that TriumphPay do trying achieve, ramp moderate? vital the

folks. our our right is primarily investment in So now operations

and volume the So as grow contact payment customer we it that. side for continue support service center requires the on of platform, support the to

look ready of we that’s Aaron is growth we the That platform. future as our billion mentioned, pipeline up onto $XX increase. kind in our come As significant and at to a stacked what’s have

staffing training, our et the we so of up teams able in to smoothly cetera, for have customers. are preparation volume, so for to that our in be that that And and place we’re it prepared handle

XXXX. So you’ll continue go support to see and growth that us continue operationally to will through out invest to the

Yes.

the Matt, to I shape significant some a on little bringing very in question probably us strategy. this TriumphX, a with and amount flattening to of whether very valuable glide slope hiring but help building members bit. think expensive, did We your team is

ads most update to the breathing always forward support. mean in are go a operational but ecosystem. the investments the living thing, that’s So are software I of

it – a it growth from So have won’t flatter be be it’ll won’t here. –

helpful. And Okay. lastly, That’s you some then Thank for doing in TriumphPay. we’ve eventually past the just, within about talked I syndications that. guess

this initiative to XXXX? Or how is see towards year? more syndications. we these Is Just of something remind us of end are in close this more could we see the impactfully seeing that this we’ll

be to issue, think I of Matt. a XXXX going more it’s

sheet balance repositioning done. the as from all constrained has we’ve – not that know We’re you been that everything

for the of and the would problem have for inside and wanted plumbing do like We that’s be sheet not assets we’re opportunities, to create think those XXXX, demonstrate But just it. coming we have when investors. syndication plumbing so balance to state system. to to finance a the it that a us to of just make need we nevertheless, be where in selling equipment we significantly our across And for position TriumphPay, volume counterparties we one wise syndication the more future in room works allocation for ourselves the

even So see I year. to do next it room you’ll us first have one the of balance think sheet all, if those hold the we

queue. step the I’ll back Thanks. in Okay.

next Steve Our B. question from Riley. Moss from comes

morning. Good

morning, Steve. Good

is come guys the in there’s annualized contracted, of that API all not volume include billion some or is $XX here, here of mentioned integration that integration? in On started also online. what that you pipeline like terms it yet Is just – is but – in contract payment

a it’s final contracting the integration, end, haven’t contract When that we – both is signed right? or in we the the volume is Yes, but integration. and completed already have this started phase

Okay.

are is get also long would These time on contract, by the a It’s pipeline working a linear that just the – the the you’re as – working you’re because you on more not into long. point means you integrations it’s so where of as expect. process

of then up. And quarter volumes just imply terms a in Okay. just of end conforming numbers here, transactions, your conforming healthy the step

maybe go year. of about growth the kind second think half here over we transaction conforming how Just as of the we

Yes.

enabled conforming payment a in brokers. And on share that ones conforming step network, to get volume a have plumbing in, existing of spent as we will payments as well. the those for up we our we So quarter, to the lot level be them as come last then time the volume, the clients they where reengineering

So conforming capable. fully integrated

So of But them. take the there’s has to still a that with existing making reintegrating of to lot existing our get for clients amount happen. reengineering them time significant and there. plumbing Those team spent do work

So you’ll that. see grow us continue to to

that add continuing into as factors We’re well. network to

they So can receive that data.

that completely a to reengineering team them efforts on side the some on well. we is get So take existing does clients our there. just customer development focused as It have

of to their we’re little significant of availability those kind progress. the changes. bit making a we’re mercy at But So make

you the change transactions of of it large brokers the see conforming XX% be to which the payments kind to in going for take this believe a take they’re just on from that come network. their certain as need to universe, a just advantage ecosystem their number Steve, in that first, of to factory make sense freight They have business and models to it’s granular more side to for to order right? goes through of And level,

for side, flip system more freight want see factors large on to the a the because more to brokers efficient that creates them this On way together. work

look Capital the receive XX% receives, TriumphPay. that Triumph at of payments Business they the from you now, market right If

can more $XX here end X% industry going all the deliver X%, lag So payments in that’s market to make on, all of we going to what before in coming the transactions, working which don’t amount we’re far there’s conforming XXXX, of brokers the About a that the fully of the it’s pipeline, that’s making plus you the same at When as we is our things is the be in that integrated. when than network are because XX% factory to through volume of sure as those conforming point, freight add you penetration other billion of for factors. if transactions. almost conforming and join day

the model to other business efficiencies players with have. the that Your to will compete struggle going is

question here, quarter-over-quarter, just And any I about that on just Appreciate inflationary guys curious, quarter? more hear on one color. helpful. you but you guide stable seeing then That’s pressures of maybe [indiscernible] Okay. are beyond third expense additional the expenses the kind

the lost our I but I think asking inflationary – you pressures half second about your Steve, of you just overall. expense based on were question,

team type talent, especially we’re And venture way say who a back on seen in good the a round happening feeling It clearly aboard But point, all out we feels a been that. pretty market at conditions. competition wage new that, a is be accelerating moderating anything people lot an I lot it the that’s on extent. is that have getting but to of what be our startup it’s just do a that have – funding. don’t definitely bit other position We folks not the technical relative beholden And to of anything it side. are like continuing. We wouldn’t there we’re we’re we time we’re tell next as pulling bringing definitely technical or as this and are would though very may – little of material bringing to to companies because that in

Thank right. you the much. time. Appreciate All very

Thanks, Steve.

Milsaps And our from Piper comes next from question Sandler. Brad

guys. morning good Hey,

Good morning, Brad.

the Aaron, That thanks was shareholder very for helpful. letter.

actions some wanted this that the Just to of around quarter. of timing kind took you ask the of

to end the if don’t how impacted think just were that there, more on the the your of the lost QX you timing at some talk was of results. both know kind But on at deploy ability was earnings, replace those you end assets you loans. quarter kind equipment the the then million of and like the to of sitting sale would it be of what the of for unsure factoring wanted cash just I than means you $XXX got looks but I quarter. sale in on us curious mainly about

So through those just think moving kind of to of some parts. wanted

June. of the half both those back in closed transactions Brad, Yes. of

where So to balance we you that is inflated see be. normally that definitely cash relative would it have

we’re that. us investments CLO purpose more some do as far invest reinvest, holding there own measured kind a think market several that. opportunities of opportunity already but of has The to it and capital As that, liquid to have few things another We’ve going as about those capital We to We’ll to are another for top some go loans a we could buckets relevering that given with and securities ways the at to excess an of for stack shares of market and buckets like of one variety pace. think in started a that. looking the our different day is our do to another. at back liquid in as continue

of kind in that of all in at totality. look we So

margin ice I and As given on net little scheduled more But not continue retain speak. a reminder, pin amortizing because in And balance fully just so bit interest set mentioned those of loans. shareholder totality over sale. the year, bit out up That’s rough equipment to numbers. about fluctuate a far our the from a and in a $X XXXX as originate they’re this equipment of million those factoring melting of is relationships another bit interest quite over is we what more General little the to up margin assets as a down, those a involved, over cube million with as think portfolio. as is net we’re giving letter we harder the that the $X we’re giving balance of same that customer But customers. quite a up, to

$X.X million We’re margin net receive probably those at that about on assets. will looking of interest not

revenue portion over it’s Brad, quarters. to assumption of And few assume safe that a replace probably a will we and that the next conservative

I it sheet the stay size around think is. roughly the balance will

period some with the be it’s where extent, we So some If period certainly be next to we when to consistent that hasn’t and but this backfill, a in strategy. the margin To been opportunities, backfilled. going period, we backfill, loan you’ll see believe there’s growth. there’s going

So growth from will that very coming balances it’s going the continued as Everything pay it appropriate additional the either Capital otherwise or makes of around do, else and quick it’s Triumph into its come be if and and volume community to likely the sense. this bank TriumphPay in Business markets. transportation core edges

So it’s ways buy its freight When are excess audit TriumphPay we pull accelerate is back looking priced in at pay. excess invest to growth of use close the stock when capital where back our period the other believe zero. we’re option And okay a that’s during have to should us and capital. to we to good own this evaluating opportunity that time, for to to call TriumphPay think that in the level the we market a of

do going led quarters. are with very we to over decision a if a cents So to we’re maintain protect to than margin excellent less earnings, back that. not few in we give be next I comfortable mean, because two optionality, we the just

helpful. That’s

year see TPay of a filled with in [indiscernible] you interim, out factoring back in end kind So revenue step more of in the traditional towards revenue that. back of kind the the might

Correct.

And I ask know on I’ll not these calls, but about cool bank to the question. talk it’s the

at you deposit lift of probably than X you into you banking through the the that curious, the have XXXX sold. you asset as impact – in of more bank given improvements income see Do the Just just expect move the assets base, much net your sort the since ever XXXX? you’re been, at interest segment to pretty

our that our deposit are deposits liquid at I what as very really not and those that, just the any fairly not intense of well. deposits rate I rate base remain so for that now sensitive. would deposit seen about price be mean quality XX% yes, banks base, – consider to think is environment far. high non-maturity Other looking I We’ve particularly competition

a appropriate. are be environment. or $X feel is if relative would margins We flat looking be the probably million, of as this as specific would rate in changes the responding balance But at – to we’re I what rate as million recall, to we about interest about situations the far of year what over net $X impact

of another curve. $X projecting year. the $X we’re at should $XX or million or suggest. this points it another after the over I that, So modeling short looking end balance on that would million produce the of And million million, that XXX what so the increases or of basis $X And I over think beyond the six next if months then recall,

Okay, you back I’ll queue. in guys. great. hop Thank

final from D.A. comes our Gary from Tenner And Davidson. question

Good up a everybody. in mostly Thanks. segment. another I’m question. to the a morning, the quarter, like it bit was kind be of the plant the quite going in ask Noticed looks to And bank provision related branches. bank bit, the of cancellation sell provision to mundane was obviously tiny the

about wonder since the you Thanks. ACL So have may or of if you changes probably could highest stages just been it’s talk otherwise made early model to the COVID. ACL’s your

drove results this a unemployment. probability drives recalibrate of economic period. higher a ACL environment in Yes. a higher We got recessionary And the those of model did our that’s of what increase type that and we’ve lot and

you. Thank

one phone on more All This question line. Olney from and from to go We’ll comes Matt one right. Stephens. we’ll this the line, take then

class. the Thanks and I asset portfolio, want lendings equipment more follow-up. lending dig for into the to equipment

more premium economic of cautious But guys that that such more sale could resulted investors be loan I think this he and the class. a are on becoming in of hinted nice a a sales you the some it headwinds. in to asset announced due lot

So portfolio have to you dig in of for the we’d planned more just for and this future into kind love else what this?

for our Yes, This to serve sales without completely do so I’ll solutions in continue equipment these clients we growing future. sheet. with Thanks consistent with definitely overall the to of is intend balance our necessarily take our Matt desire the Yes, one. more this transportation to finance question.

to assets. the as securitize be. just forward. bank. plan continue best to case, or a originate pace eager so, very to the And faster banks was In to other execution to would either we current our And sale the and execution whatever continue pace another was that us at for least a be would for then sell accumulate to maybe bank this earning And going balance

they were to price a a willing So than else. It anyone was pay higher process. competitive

it haven’t thought more, go which to basically was able sales clients, internal out them finance originate for our to allows for that we move out take the and past. within a equipment And market credit to potentially so team, good limits to back really send reload our clients other us gain that stay be also the we for to in existing pursued us

And hurdle own that We expectations that But well. higher future. open we rates for for we markets with us the rate assets we make the those that high lower quality, have for sheet. idea balance clients assets our new what as would pretty keep after up in and we the would on go sell could

So relationships the tool retain transparent to this finance this think ever the borrower, to as serve and to And the way really we’re ability completely structured well I with being equipment to as do as positions our clients just we’ve committed transportation to with we were. so. us a

are be not our product. trucking, trucks, that do there of waste in And lending independent in we portfolio. size is owner you it for more trailers, to for small equipment that medium should borrowers just lending Class equipment. subprime finance, means and Matt, our many in It’s whether and of There don’t the have is And it’s any finance us portfolio. a is equipment, construction for also smallest that operators of clarity. over-the-road largely The hauling. heavy probably construction fleet trucking, so in obviously A that type equipment And there around

discipline. because to If are you know, get into as we – pricing you large to competitive fleet, going have try we’re we be not

and it’s you the trucking in financials companies produce well which would our quality the the be to as it because has difficult why like to who we things performed enough actual expect, that, who is about would So amortize they built. on team, the so. amortizing amortizing. quickly, we fully basis do value on down were there’s continue a the higher They’re we’ve relationships they’re will end on And have always But made that fully regional we produce many team the credit that loans sure so made that that universe have of because all the takes. banks talking you’re in that counterparty and to focusing

I have think right investors equipment so finance And are to concerns portfolios. about

I I you’re those to do. have black worried proven box. been think market. be I be not mean algorithms concerns people about not in that we underwrote right That’s those successful scale. at has given in what any loans a to would really who using

their us our have now. many knows borrowers, team companies, relationships whom with equipment of Our deposit

can we credit did, fine bank a we I would’ve risk. that buyer looked market, you and hope that I we well the demonstrates the the them with of know to tooth are So that through their this hope equipment finance And portfolio. and it sale loan well. comb and enough imagine that understand you quality to that judge And the to

excess lastly, got like constraints company. And sense. at makes capital all And you’ve today. to It of I plenty That’s about capital want seems ask that Yes. just and capital helpful. the

I [ph] capital no bill, think assuming because continued XX%. dividend. still I’m CT-X your over there’s

You talk about capital. up freeing

guess what me see I capital as appreciate help sales. you today the is the it? You’ve picture constraint done big loan some

current I been basis, as assets don’t we to watched, capital quarters. the And we there an we’ve future on done the mix into that more you and think mean, ourselves. so focused its us balance Matt, is organic of constraint. several our level centric for on take at shift hold far for underneath sheet relatively Well, transportation a envision I have

capital, comes to our two capital that. the radar. So shares back would one and uses on buy executed constraint to of the only Number which are other on we’ve then down be

proposition. hesitate in TriumphPay see use we the audit our support of intrinsically not on we did we’ll back with at our that capital and if is invested technology pull intelligent and this long-term We’re much you’re would not we’ve of moment, will but if a all And value to to at freight option use the because zero, see it would companies that tool pay right second audit. as can be executing we we buy that said, to pricing shares growth the like that we buy it

of the you underlying expect capital base even intangible, As for would have. a many the is which a if profitable, use investments, creates those company becomes significant we

what an be So to sheet intangibles that’s our constraints ultimately and presented – own would long-term because would believe create still which show the in the I would intangible. would the see of where shares be additional up, buying to if back adding that balance the doing opportunity where we’re itself value also then we given we trade

guys. Thanks helpful. that’s Yes,

Thank you.

any questions you. Thank hand Chelsea from line. over things the to phone for I’ll right. All

from will Instructions] question you. Thank [indiscernible]. [Operator Our first come

medium that Term longer to sheet? restraint you’d balance sheet, expect on see there term, in the balance to growth is the any

Adam. No,

think, our more be chance over here. always XX nimble I consider be to small extremely not in an That’s we’ll opportunistic. that. or I going would assets. part want roadmap of to going think is, say no I ever we There billion than We would

the our sheet we and payments will we that trucking receivables through so shrink the are play ourselves, ubiquitous And the are the between we allow and now is the we for are industry own network in generated parties to and instate that if instate say for would called syndications. term, balance from successful Then long I if we to being at you structure here. the have over the think

which your earnings approximates your I about don’t approximates the understand whatever to generate. directionally capital need just any forward, it strategic how buy free or and GAAP your optionality you EPS you going but you So guidance, your think really whether for try excess means return vis-à-vis to technologies to capital shareholders, just capital generation, and

We would agree.

Thank Fine. you.

you. Instructions] questions There telephone. All the right. [Operator further Thank via are queue no in the

Thank joining us. for you all

you. portion. Q&A the Thank concludes This

with forward Thank We today. joining us Have Sorry. soon. for to all look day. speaking great you you a