Triumph Financial (TFIN) 20 Oct 232023 Q3 Earnings call transcript

[Audio Gap] One, we do not yet see improving. We remain excited about the possibilities and our progress in spite of that. Last evening, we published our quarterly shareholder letter. That letter and our quarterly results will form the basis of our day.

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

our Q&A. I'd call for to are For harbor to to that evening. to Aaron refer statement. subject Aaron? turn comments shareholder With kick the harbor in over that, All today's details, and last to letter off a during the made welcome safe our published like please statement safe call

morning. Thank made good all for the Thank quarter We and you, fronts. you joining us. significant third Luke, in progress on several

Our in expectations. thought quarter. financial First, TriumphPay's shareholder outlined the financial own our important also performance results night, things Those included: has X were to better the were prior periods. I about and last our released than momentum to In even I exceeded that communicate letter investors

from a to near in had the unique we Second, expense quarter unlikely is perspective repeat that term. an

could has worse Third, market the it gets get before freight not better. and rebounded it

finally, us related we value that, create us make term. will believe short that for in things the the uncomfortable term, long And in the to

hard would been of the that without an have As headlines. a and ago. few had days announcement some imagine a something was to produced days know FreightWaves few the that interesting loads tech-enabled its it shutting pulled points, months down process that Convoy, last have That those forthcoming. third and broke is a that in story relates broker detailing ago, just well-known now Two Convoy fourth We sale. freight a is to

many of carriers saddens I'm could But reality however, several capitalism industry, that speculating fate. freight customers. about think that people to feel and face with how the employees me about this to in it, similar a it disruption will this many followed and I brokers the and friends is have stories bring works. Additional more

the our industry. about is beholden are the instead capital on bearish were of private And are believe am reasons bringing term attempting is funding. to And we because freight force anytime this disruption believe The some outside healthy of money the Triumph have able may innovation to I without that cost another a short not propped earn industry capitalism. in will will ever that I capital additional know of the what of while change significant I of eventually companies difference to is is and the being bringing Financial I advancement the I exit freight banking going up a profitability. My with XXXX not we profitable also and believe cycles, stage through over is fail. through to we're deep and return what process to remain at leaves toughest artificially that need profitable started amount that venture in journey even one bring appreciation specifically do. the that that and you built are Companies XXXX soon. to and to the doing equity of into that TriumphPay and industry that this achieving

in sheet have. industry, of our we it difficult through Convoy, brokers balance as expect to we outstanding, remain relates the risk the counterparty our collect continue times, to less we of always has will short while additional on protecting go And some which As to Triumph as own order. of XXX,XXX needs servicing focus than in vigilant we attention

also is real, that Before months it or let turning it makes next explain me bullish bearishness over my Triumph for on the so Financial. future extremely me the about long-term questions, for XX while

for a sheet balance freight soft a business have that We a prepared market. plan and is

stronger companies have share a we should materially greater do those of through now. one be than this, market we will who We emerge and

in the time inquiries inbound more receiving are We past. I at any than recall can

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In Financial conclusion, desire bank be is Triumph one. typical we to a not nor do

in more now needs We that are effort. a one building a ever. requires payments communicating network that than market

help informed significant those efforts of I a time hope amount view. you take shareholder With investors put your energy to questions. valuable. that, we an our and into ready So to letters find achieve we're

Michael Instructions] Our Q&A. [Operator We from KBW. go will comes from first question now Perito to

the Good I things Hi, helpful. on. off to your touch one, few everybody. shareholder morning. Aaron, of letter comments, very I wanted had was Number just a

the around pretty around was in On and also the for a I and environment. at I mean on It obviously, comment release margin. very expense But that's just TriumphPay, was there strong thoughts sounds a noticed I thanks the flow So quarter. couple things. highlighted. imagine like high side, curious, you color current guys one were -- I of know I the

current Or if longer that can volatility should of expect were sustainable a be think pay try that higher to fair around dissect the was it and do kind levels that, wondering just was any I contributor? in that, margin maybe you And that? you to quarter. of float So contribution for freight stay EBITDA what is the at

Sure. in funds intersegment for at of The past, Fed is we -- the float purposes the overnight. accounting explained as rate we've calculate how

rate very the Fed track million high in rate us. for margin valuable that that that is That of contribution Fed And That float it's for So believe course, so And funds funds I of us. -- $XXX revenue. is under very to $XX do. pretax roughly X.X%. be just at that of would going is -- million what

definitely grows we in that's grow that we payment the then to we revenue market that over will if a we and because for believe higher stay component our happen our grow XX will So longer, float expect months. next as expect volume

network volume of more the expect grows? you as transaction continue volume rates to was -- does the volume, that are obviously, to the question your the but to rates, the grow that Yes,

as Yes, participants, shipper to we expect move be growth. we Especially upmarket -- into that further the we have would exponential do.

secondly, appreciate And And to near wanted then credit stood for to business out. you trying guys. impactful of thought that and I around of Eric, less ask, still a comments some I your term. what I your you're Okay. percentage become, but It's of

it credit did see about some build that just looks in ticked nonperforming so provisioning reserve we wondering color up, really the if give And we maybe saw you I part and much. on just like model I us factor side but should any change what the expectations the 'XX? the didn't reserve as you early near-term could that out around or assets was of

I'll Yes, that one. take

to So That's no nonperforming assets, answer tick the in short assets reserve the covered question. up those happen there particular was so required. on to the be that that well

if go As credits and good through stress feel same to look that the additional testing about continue we're we the there analysis, be already portfolio downgraded, of forward, sources are we'll but need repayment. to we secondary very

to the shareholder market on or you add, X know can look years was that doesn't time sure Mike, the That perfectly vigilant with was go to is our credit being do balance our correct, we we far it at submit And happen. and I than because more were right? from what sheet. year you make weren't would that growing it now. you letters when back I if is a got competitive But And just ago, I obsessed if never

cycles, we operates in because know we were market this And disciplined. very

will We us are on serve thoughtful that our well. credit believe very we And when I take books.

to would navigate the did we book but sit our good to And Because people when our lot work waters to I when lot something when us feel and there ago has brought and I that. very it But credits we're this I have we in know of showed have how we about a things. the about we I team the a through X approached some to have relative not. position that sure we have loan material these expect -- and discipline collateral up. we market thinking I'm be where so do losses? underwriting along will a way, were were going the fewer may cycle. we surprise these in to Do years in

last, on the there's just here. then questions outlook And factoring I'm too ask sure so term. But just much I want near to

think As think the Or trends gives -- sounds recessionary think events time. kind you just you it that near-term should of for of incremental average even and be of you directionally about the it's How like mentioned, Darrin, of there or current what to you be the continues kind that in kind as for industry you invoice you that of? do do model? clarity have guys we if some continue could you kind kind expectations the volume environment any guys around invoice size mean we the that outlook thinking of

see to improvement or rates numbers in We Mike, late soft. move still very a closely even the to up. at in reacting monitor to that increased freight freight that that took items one rate and market in time I'll didn't lockstep. the market how vibrant one. fuel. see quarter. long those is very it And We third is significantly, the take a we in catch market, actually fuel look thing In quarter, the the will those where more for still until you

So expense invoice of through not we driven amount, the side driven average the more see much so demand increase business. in fuel as as the

it. Got

TPA term? to Okay. sustain appreciate factory be But high that business near you guess The for in little good. Okay. a a able margin at is it's the level, the I if even time improvement nice I on the to all for light business guys EBITDA color. investment in comes

Our from Stephens. from Wendler Thomas comes next question

the maybe for Good network per that like? Can looks just to back wanted conversations are pricing to the target? mass some going I legacy go the moving volume us morning, TPA. of how up $X transaction what And then you critical an with of closer to everyone. idea give the

Yes.

that I -- are needs processing about we us X out Right out we to is projections Aaron. of be freight take that, transactions now, can for My of touching the on I road industry hopefully X transactions. critical X our and making mass, think for X. think the over payments what brokered

clients then to to And position to so and on get beyond. that bring network and out to further is continue our goal the build

transaction In transaction models to all pricing. per terms of $X include of have been business per for updated pricing our pricing, the the new

today. there's as existing clients be be new But some on repricing are to progress onto that they there in there. we that participants, all get board on how price we create value the are to well we that them happens going the chasing there have to the network However, for as made and pricing cases the always creativity where and deals substantial been has holding business creative

TPay, brokers? then into color. Great like network some And sticking with expansion that opportunity verification color with What audit does give clients? us only only your look participants around can of the you

Yes.

you So glad that's question. a asked beautiful I'm it.

or technology XX transactions little as the to $XX So order have point the carrier need we are network application over do in -- $XX that TriumphPay, conforming our validation transactions making and spend. factors cash payments, in is in expanded we and we're billion touching over to their billion -- of a capabilities verification, processes. data while provide

data platform on to have factoring audit our are only industry. so very associated the we brokers with And valuable the that

sets doesn't able even couple network data the not so to they the to to be -- been last able value the over attached begin of we've conforming into working quarters, end, see transactions so on front data on and are the transactions to though our is data on include it. that that the to those payment And utilize technology

credit. And moving over just then to

seen loan and the increased theme of fears CRE more loan any specific then modifications, You've I -- for an to in was expecting see uptick group have any to around modifications noticed loans? modifications And the there CRE, any some you are forward? behind going

allude that shareholder variable in those credits. The theme a the letter. is are little rate did that bit to We

basis XXX borrowers And at so variable that period puts up some a credit stress. rate short when in that price of a points time, obviously, you have is

And to had rate to modifications so We that ended up at okay. address is we make that. a still

good there's equity perform. continue as but love, not that allows properties. to And to those Our would continue -- loans are it we loan those still to economics in as

to work borrowers basis. a on willing the are long-term with So us

next reality the we more over more So environment. that variable few borrowers of of occur expect new course to and rate of those as of dealing the months the with are more the

from question Our next Raymond from comes James. Joanne Tunis

Good morning, all.

expenses. on of kind So

that expense noninterest segments mentioned clients. out flesh you corporate? in Medibank could ramping payment growth shareholder by factoring you expect of different you I -- for that wondering You had that guys letter your and XXXX, X% was growth absent large if any

Bulk in next see of side. be the payment you'll to incremental the spending is year that likely

corporate, corporate, see as XX% but probably corporate, You'll roughly. payments, it XX% a little bit would XX% in I couch

new to then is the whether onboarding deepening XX of months? And much the on contracted network to brokers, through come volume or how next X the annualized customer in payment to penetration

Yes.

So only we brokers in for speak Joe, the you, is are way I would that that active describe integrations. about

And we amongst that expect in carrier annualized in of board approximately on so and represents in represent on come what QX, those board QX contracted integrations active are in billion to payments and them. that's then QX all $X

for them and they're their typically ramp-up they've which X stage, ramp. months to fully takes again, in of XX to Some onboarded them, been

other you signed brokers billion incremental $X factor if have in So or the all no would on equal, network, up volume. else

then And I mean. Okay.

Yes, remains autos same. right. the Yes,

Of course.

for we the broker lot momentum the type of a of the side. side, seen major factoring on on haven't you've announced wins So TPay, same but

I large which think be and the be looks some Can at quarter add discuss companies. quickest front see on to invoices might factoring this transaction you wins to way X% all large the point, progress would increase of in about penetration the the to we when there? some that network

that me Let one. take

of every were allude of And out be factoring them. X out fact to issue, -- greater my X I payments believe a X or later of towards network every making X. will to X. out and to data on it you we making every X is were read the and every then that providing participation the we're factor -- now this of the the we has opinion, out letter. been section X we X where sooner if it network day the rather of So X at driving coming X in than date gating every out in of

to get is processes. use the that you to penetration, once promise factoring their TriumphPay to change your start And that makes the industry. now mean can factoring of technology to companies brand level I that

pickup $X invoice. approximation. it roughly other subsidiary, for our large look processing carrier, a And whether join you price want get provide you If to the their factoring if significant or don't small a amount transactions. we but you factor costs it the per do And be to our back-office for own network, it's would because make be just at to to be that audit data able as need on a fleet, demonstrate $X to to tremendous aren't to, need of do payments we can that own depends them. a that's Well, conforming down amount margin every that a significant good We we us and of generalization going use let's to a a for for able $X. benefit

mark. closing that are in We on

in FMS factoring invoice improvement to for ingest to them created. load built an was that. is be able do second data to technology is management most required The issue before No there able is ever gating systems

they validity is cost the the of data can of having to they our It's so -- the invoice. FMS own have more be able have, assurance is the industry, we so brand pick are easily up the ability offer through expertise TriumphPay. built that that to about the and them. X the of of talk the to savings to ingest be savings of this That we -- can to some are so promise is that that -- we We letter we operational the can and in thinking data to had our improved things we cost the factoring the that how ingest and technology promise

are It's Joe. We delivering on fair that. a question, very

achieve think working faster that that that. in a we and penetration much Melissa comes we I are alluded it rate to, XX% towards after

[Operator Davidson. comes Instructions] from question Our Gary Tenner D.A. from next

the of ask like didn't letter to the view but wanted bearishness sound your comments the universal, or world. in certainly it was industry pessimism freight your I Aaron, about regarding your

like really mean spot man recent van cliff. load want seems at of the that last you lack or that moving a going of a big over rates little data? ratio I of DAT, for say, little after the But it's of data move the more summer to couple spot the seen and a As from coming bit system? kind view your capacity you've higher, van of the lows. rates from, look load is Is up driver the weeks, out forward

point, I the return that industry the wrong, wouldn't particularly healthy that, that the us to in hope That's either. data We to who us the all of XXXX we're of would begin any that want tie was I very industry just point. through acknowledge, right? the it I levels, time with It in although term profitable that I start that lived to Gary, know think think in in that. with don't was period. I any short XXXX X

believe the normally invoice What we that would the the spot in more and so cost. up marking the market to look see spot see one. is, system. moves spot would were about movement at market we sensitive pick marking-to-market And the bullwhip went end to diesel is the those to a which that rates this of we input -- some large that part are certainly market on you input a moving the been believed in of of this the diesel this capacity. we through people very has rate night. costs while. at right written why Because that end is it's in the It's cost, If at you a tight coming if -- think we phase all marking if very of season, for got would about were just of destocking to retailers that what I season, It's the it's point rates every effect the in

We of me are just the believe excess not seeing system. that. plus the capacity just have we all And leads to things we that, see in

very many, significant a rate unable that now. cost think number would carriers capital, loads I spot of small of their right taking are earn to

That's in exceptions, client own think on believe the But you're a Of you're is why I are you're seeing in be course, lane. if to market. the base. our attrition I the that there certain true. softness seeing And that why across whole, factoring

it is. And so my it what is is view

is where we're of has freight to think think So it? we their that, capacity I it rebounded be can the will cost carriers to not we what which recreate do hope lead takes wrong. I don't the How point equilibrium. need I And to are. earn most order catalysts. means to there in system capital, long

think at last few what's you these then with announcements the to, in referred happened slow like first always it the If days accelerate. they things start and about seems we've

And this recalibrates to than and XX expect. the industry so the industry next now, takes months for equilibrium. would more is the out right it itself achieve own be may personal my quickly I view sort that But

And my since there your the was well. one-term that plays into recent that kind just don't you industry? at were really you to and was tech-enabled, were know but that. they understand a kind think I there they freight was view particularly anything of kind interesting, wind that of carrier that appreciate anything and of doing was I that But of -- down, Convoy alluded to news company

to have in Convoy built tech-enabled just -- build Like using traditional shippers if haul of lot The technology. brokers that. phones freight exceptionally tremendous They carriers model, a to were that and to using brokers about think people. business they done scalable. with brokerage, margin, loans talented to traditional it find XX% these with think was other loads was and then and beautiful those make from and order move and I have highly people of contracting freight exceptionally smart what that well go brokerage. is you A some problem

to this has move freight Take disagree digital should that. the conceptually, XX last been And years, with I marketplaces. there we don't create

get The all dynamics right. very chain. it's the into is exceedingly global idea is execution attached the -- the the trucking this to in priced hard scale is hard that bring to It's think and vibrant, just industry get supply hard. that I very exceedingly hard-to-predict

think Convoy So things. did I great

tech-enabled is think inability known cool where the brokers there up none even make that freight didn't and at We marketing day, over but freight have capital it's to many good it. this technology coming. that we've will We cool cause inception back not in this we've us at for technology. know And factoring our And has -- exactly business before other I bear. are the to markets of really since that cost of for really the factoring who and business exactly the as are, know of built capital. But a bought in brought job earn are didn't because your our had the our market surprised what day Triumph would decade, when. XXXX frankly, it of counterparties our we brokers end

what about think have it the interface, best discipline can to know job in way. we it's our is the That it's a has discipline payment us when -- banking goes forgotten technology repay afford is never best who's when the and a like or who to because not we who is user that due. We it's has other

be suspect know us on, better. will will will industry all to there just talented land to to and we'll industry people this and freight make more. technology really of hope have the suspect I you I've I gotten some live improve the do for continue So places I these this. It's that

for us with build You have Triumph. to things

it to in way have build you. that against turns a the market when You inevitably

a seriously. discipline take is afford And making can we keep You investments. to that very

second the or on a quarter, kind that's in Really the similarly Payments thinking last the from I I there assume fourth the point modeling normalization appreciate fourth the closer question, of thoughts segment on follow-up of threw quarter, really question. the segment. up in X a a weighted and to quarter quick towards about return just jumping that. perspective. expenses I expense

similar, I of Gary, to pretty fourth quarter segments. the look quarter would second to expect across our the each

thing one those the think about. talking add on spikes we're we understand in of that that about what But is broker I in Gary, freight we cycle talking and all that and long-term investment be where a expense. best those that, appropriate, a may And is expense that's I sometimes onboarding to the control kind should if are expenses TriumphPay tied relationship. large a have expense Because are contractual in that of an --

a of significant And that but we upfront. so we a take lot expense, not all take that of of expense it, amount

And to duration broker more those do every quarter, yet large is leave gets the very of proving ecosystems. we a to ever have we go long. customers, our have for forward And deeper. and The relationship freight these relationships be

a take lightly. expenses. So part for over creates of lot us. I term, will specific take the But to we all don't thoughtful spikes, We expense it know of it long want value be every base, I about the day those that day because

Securities. question from from next Our comes Riley Hal Goetsch B.

about banking to side the want Just of ask core the business.

can not your the of balance You the of sheet. really growing asset word side true

now that love areas real some I make selective for great get team loans are estate And you the wanted year-over-year. One growth segment. to very on banking to conditions that. good feel your just in thoughts does seeing of to some your on where just your opportunities right

of all some I really borrowers, the it but of interest lot rate have. this in And well. really economy are risk-adjusted environment new There Not them characterized adjusted Yes, to tenants, there. have you this great returns. where out strong really strong of realities see we think a opportunities

business, for will open to we and still be are We continue so.

So growth yes, that's quarter. last the drove what

on other at no are Thank this you. time. questions line There this

thank joining speaking my day. was doing, to look We are today. we soon. your a We you and what attentiveness conclude us great call. forward for that in with appreciate you invitation Have the all Assuming we to