Triumph's Graft: The Concept is Proved; On to Producing Revenue at TriumphPay

With another quarter under Triumph Bancorp's belt, CEO Aaron Graft gave the world an update on the company's plans to dominate the processing of factored payments.

The metrics poured out during a call with analysts. While a year ago, the focus of its analyst call might have been how Triumph Business Capital, its factoring arm, was performing, now the attention is overwhelmingly on TriumphPay, its rapidly expanding operation to process factored brokerage freight. Triumph Bancorp TBK bought HubTran earlier this year. Graft even said he was no longer going to discuss the company's community banking operations on earnings calls, not because they weren't doing well but because that's not where Triumph's future lies.

Graft, according to a transcript of the earnings call provided by SeekingAlpha, noted that Triumph Bancorp has a unique setup: a community bank and a factoring company that is throwing off enough cash "to invest in a technology platform that is going to transform an industry, and even while doing so we are achieving market-leading profitability." (FreightWaves also listened to the earnings call.)

And the progress at TriumphPay is now at the point, Graft said, where he was "comfortable declaring that we have established a proof of concept." He defined that as having established an "ecosystem that improves the experience for all involved, which is why we continue to experience such exponential growth." But he said, "volume alone is just vanity" and the proof of concept needed to require revenue growth.

As for the numbers, Graft said in the third quarter, TriumphPay processed about 3.8 million invoices and paid almost 117,000 "distinct" carriers. In the second quarter, TriumphPay said it processed about 3.2 million invoices.

With greater volumes and higher rates, the amount of money processed through those invoices was higher as well. Payments processed totaled about $4.2 billion, Graft said; data for the second quarter shows a corresponding number of $3.4 billion. 

Graft also gave an update on growing the network of brokers or factoring companies that are using TriumphPay. In the quarter, TriumphPay added six factoring companies, for a total of 66. In the second quarter, that growth was five. More significant might have been Graft's comment that it has not lost any factoring companies since signing them up to TriumphPay. 

On the brokerage side, the number of freight brokers on the system is 532. Of the top 25 brokers, Graft said it has eight out of 25, with Integrity Express Logistics the latest addition among what he said were the tier-one brokers using the system. 

The current "waypoint" for TriumphPay is to process $75 billion in payments and have the system push out $100 million in revenue. Graft said those numbers would not constitute a final goal. Rather, he said, that figure is just a stop on the way to what he thinks is a business that will generate $500 million in annual income "as it gets fully integrated into this industry."

As far as when the $75 billion/$100 million goal might be reached, Graft said his best prediction would be three years. There is a ways to go; Graft said earlier in the call that the annualized run rate in September for invoices processed by TriumphPay was $17.8 billion. 

The primary product at TriumphPay has been quick pay services, bringing in invoices from brokers and shippers to process their obligations and get money rapidly in the hands of drivers. But as Graft has said,  generating fees from financial transactions using the HubTran platform within TriumphPay will now be the focus. 

Revenue from the changes at TriumphPay will not become "meaningful" until 2023, Graft said. And it's going to take some spending to lift that revenue on the road to profitability. Graft projected that in the next year, the expenses "run rate" might rise by 15% as new staff members are added.

The revenue model he laid out to meet the $100 million target would be based on subscription and network fees from factoring companies, as well as subscription fees and syndication fees from brokers. It would also involve interest income from its quick pay services.

As far as Triumph Business Capital, its factoring arm, the parent company reported that its book of factored loans, 90% of which are in transportation, rose to $1.47 billion by the end of the third quarter, up from $1.28 billion in the second quarter and $953.4 million a year ago.

Some performance measurements weakened. The average yield declined to 13.75%; it was 14.99% in the second quarter and 15.59% a year ago. Charge-offs rose to 0.24% from 0.04% in the second quarter. It was 0.09% a year ago but shot up to 3.95% in the fourth quarter of last year. 

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