Triumph Bancorp, Inc. Aktie

Good morning. It's 9:30 in Dallas, and we're ready to get started. Thanks for joining us this morning and for your interest in our third quarter results. We're glad you're here. Aaron's shareholder letter published last evening outlines a quarter of strong operating progress. Transportation revenue grew materially, margins expanded in factoring and payments and LoadPay continue to gain scale.

The letter also discusses the freight environment, our evolving North Star metrics and the work underway to translate the investments we have made into greater operating leverage and earnings. That letter and our quarterly results will form the basis of today's discussion.

Before we begin, I would like to remind you that this conversation 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 statement. For details, please refer to the safe harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to that safe harbor statement.

With that, I'd like to turn the call over to Aaron for a welcome and to kick off our Q&A. Aaron?

Thank you, Luke. Good morning, everyone, and thank you for joining us. Last evening, we released our shareholder letter. And by way of introduction, let me reiterate its opening message because I've learned that if you have something important to say you should probably say it multiple times. What we wrote is we told investors we would invest through the freight cycle and we did exactly that. Not everyone agreed with the strategy, but we were true to our word. Investors should now expect that same level of commitment as we take the steps necessary to translate that potential we built into earnings performance consistent with our historical results and beyond.

In doing so, we'll demonstrate the returns on the investments we have made. So our priorities have evolved, but our commitment to delivering on what we say we will do has not. And with that, I'll turn the call over for questions.

[Operator Instructions] Our first question is from Joe Yanchunis from Raymond James.

I'm going to start off. So you've now formally established a sub-$400 million expense target for 2027. As you called out, requires at least $20 million of efficiencies from the current run rate. Are you able to give some more color on where those savings will come from? How much is already identified versus still to be executed and whether we should expect those efficiencies to materialize kind of evenly throughout the year? Or do you think that will be more back half weighted?

Well, the first thing I would say is if you've known us a long time, Joe, if we tell you that there's $20 million of efficiencies to go get, you should assume that we have a pretty good idea of what we're going to do. I don't know that this is the appropriate venue to give you specifics on where those efficiencies are -- what I would say is you should expect those efficiencies very much sooner than the back half of next year.

Okay. That's helpful. And then -- last quarter, you discussed roughly $7 million of annual pretax income sensitivity for every change in average invoice price. And you've actually been calling out the $7 million for a few years now. So in this quarter's shareholder letter, you noted that the $100 swing should generate $12 million in revenue and $8.5 million of pretax income. So I'm going to try to sneak in a 2-parter here. One, what caused the increase from $7 million to $8.5 million of pretax income? And two, why isn't that contribution margin higher for the change in invoice price? I just assumed any change would fall right to the bottom line.

Two things, Joe, to your question. The reason that it is more sensitive to changes in invoice prices than it was before is because we've got more of it on our balance sheet. We're starting from a higher base. So from a percentage basis, it hasn't moved a lot, but we are when we reran those numbers, we've got a higher base of revenue to work with. The reason that, that $12 million goes to $8.5 million comes down to funding costs. So if you look at our factoring business, that revenue number, we haven't really talked about that in this perspective a whole lot, but about 1/4 roughly of our factoring revenue is given back to incremental funding costs. So that's the difference between the $12 million and the $8.5 million.

Our next question is from Gary Tenner from D.A. Davidson.

On the funding comment question, another really good quarter on the mortgage warehouse deposits, and you've really used those to materially reduce the brokered funds over the last several quarters. As those get down to 0, how do you think about kind of funding the balance sheet on a go-forward basis? Obviously, the factor receivables have had some great momentum as well. And real nice contribution to revenue. So just kind of thinking of balancing the warehouse deposit business against the funding needs.

Number one, our warehouse business, if you just look over the last year, that deposit business has grown materially. Just looking at the changes in the balance sheet over the last year. As you noted, yes, we've driven our wholesale funding down to near 0. That was about $1 billion of funding a year ago. And we've taken our cash balances up about $1 billion as well. I wouldn't expect a ton of incremental growth from here in that mortgage warehouse deposit business. What we are not going to do is constrain our growth in the factoring business. We will find other places to make room for that if we need to. I wouldn't anticipate much incremental overall balance sheet growth. But you've got to remember, we do have all of that capacity to add funding on the wholesale side should we need it.

Our next question is from Timothy Switzer from KBW.

First one I have is, could you update us, Aaron, on the progress of monetizing TPay? The broker revenue per invoice rose about I think 3%, that's pretty good progress. But wondering how that metric should track over the next year or 2. And with everything going on in the industry right now, have you seen any new challenges to pricing?

Yes, I'll take that one. So yes, we've seen nice growth in revenue per invoice. A lot of that came as a result of the repricing effort. That repricing effort is largely complete at this point. And so I think you'll see much slower growth in revenue per invoice going forward from here. At this point, the shift is really in driving more volume and more cross-selling. The cross-selling will drive additional growth in the revenue per invoice, but it will be slower than what we've seen in the last year.

And Tim, if I can, first of all, Todd's leadership in payments has been exceptional, right? You can see it in the financial results. We called it out in the letter. I mean, what a journey it's been from logos to density to revenue, to EBITDA margin, now to operating income. But just -- I think it's important investors understand. We can talk about cross-selling individual products and where we price certain products, but where we're really going. If you think about the customer in that business is a broker. And a broker's job is really hard, but it's also really simple.

It's how do I make margin between what my customer is paying me and where I hire the truck, that's number one. How do I make sure I hire a truck that's defensible, especially in a post-Montgomery world? How do I avoid liability? And number three, how do I reduce my back office administration once I've done the first 2 things, right? And the power of what we've built is audit, payments and intelligence all speak to those 3 questions. And so as we're engaging with the market, 69 of the top 100, 560 brokers, there isn't anyone else out there who can go to a broker and say, in all 3 dimensions of how you achieve your goals, we can help. And so it's not just about where we price individual components or repricing. It's about total value contribution to the customer, and I'm very, very excited about where we're going in that regard.

Yes. Very helpful. And Aaron, your letter -- made it very clear that a tight truck market is here to stay. But if I read between the lines, do you also expect demand and volume in truckload to pick up? Or is it more a comment on the lack of driver availability if that occurred?

Yes. So we have no firm view in demand. Next year could be extraordinary. Next year could be a full-blown recession, like we just -- we don't know. I can point you to things that would suggest there's green shoots and I can point you to other things that say it's completely uneven. So let's just talk about what we do know. What I do know is that it is difficult.

You can own a truck, but it is difficult to find a qualified driver to operate that truck. And so we're not the only one saying this. Knight-Swift reported yesterday, J.B. Hunt reported a week ago. Everybody is saying singing out of the same hymn book. This is a supply-driven market. And so the question is, what changes a supply-driven market.

There's only 2 things that can happen. Number one, you have radical demand destruction, which would mean we go into a recession next year. I don't think that will happen. But like I said, we don't know. But then the second thing would be new entrants come into the market. That's what we saw in late 2021 and early 2022. It is very difficult for me to see how you're going to get a flood of capacity coming into this market where brokers can no longer just choose the cheapest truck, and a lot of them never did that. But just if we generalize here, it's not about choosing the cheapest and closest truck. It's choosing the truck that is a defensible hiring decision, it's kind of hard for new capacity to come into a market like that. So we don't know about demand, but we are pretty confident that supply constraints will continue as a result of regulation and litigation for the foreseeable future.

Got it. Yes, that makes sense. And if I could have 1 more. I appreciate all the color on the challenges in the Intelligence segment and the difficulty becoming integrated to customers. Could you provide some more details on if that has been more like a technical issue or just like the solution, was it properly aligned with customer workflows? And what are you guys doing to fix that?

Yes. So let me start off, then I'll let Ben finish with how we fix it because I need to own the problem. We have not come out of the gates in intelligence nearly as quickly as we anticipated. And I could point you to a lot of things, not the least of which is many of the customers of the Intelligence business we acquired in this new market are struggling to make it, and so you've got customer attrition. But also -- it's on us about some of the things we could have done better.

So I can sit here and own that, right? Don't shy away from it. But I can tell you, it's not -- as I think about where intelligence goes, I am absolutely convinced. We, as a team, are absolutely convinced that the industrial logic of us using the largest payments data set available in the world for U.S. trucking to deliver value back to our customers is unquestioned. So we didn't choose to join the wrong race. We just came out of the blocks, not as fast as we wanted. And I've got a lot of confidence in the things we're now doing. And one of the things you should read through in the letter before I turn this over to Ben is one of the things we've learned is the value is in the data.

I mean there is obviously value in building customized models and point solutions, but the value is in the data, and we are a platform business, meaning we will allow other companies to use our platform to achieve their goals and licensing that data to them gives us a tremendous opportunity. Ben, any like specifics on where you would say what people can look for in the next few quarters?

Yes. Absolutely. On our side, like we said, on the churn side, we've identified it. We're working really closely with our clients. We're truly understanding where the product needs to go now. On our side, we acknowledge the fact that when we initially went down this path, we looked at it through the lens of data products where we're going now is a data platform, which is truly embedded into workflows and we truly believe that this is the process where our valuable data becomes a form and function of where the market participants really want to use it. Yes, we will continue building on data products but we also are going to offer a platform that allows others to build on top of our verified transaction data. And so we confidently believe that the thesis is correct, and we're moving in the right direction.

Our next question is from Matthew Olney from Stephens.

Aaron, I appreciate you providing that letter last night with the thoughts, always a great read. Within payments, the letter highlighted just the focus remains on cross-selling the existing clients. I think you already kind of touched on this briefly. Can you also talk about the volume growth from here? I think the number of invoices processed has been pacing at that 7% level year-over-year in the last few quarters. Just curious if you think that kind of mid- to high single-digit growth is reasonable. I guess what's kind of embedded in that question is just the pace of new wins in that business.

Sure, Matt. Thanks for the question. I'll take it. So if you look at the broker universe, there are still an awful lot of brokers out there that we don't serve. So there's a lot of opportunity to add additional volume. The 7% growth figure that you referenced, high single digits. It seems very attainable to me going forward. As you reflect on how we've had to focus on repricing over the course of last year. Of course, that involved using our salespeople to help with that effort. And now that that's in the rearview, we can refocus on selling our core business and cross-selling from here. So yes, I think high single-digit growth is very attainable.

And I guess kind of a similar topic on the payment side. That invoice pricing has always been lower than on the factoring side. And as I understand, that's from just shorter routes on the payments, not just the long-haul routes. Correct me if I'm wrong on that. But outside of this, should we assume the general trend of invoice pricing within payments will be similar to factoring? Or is there any other nuances we should consider within that?

No, I think that's exactly right. The trend will be very similar to what you see in factoring, it will just be at a different level.

Our next question is from Eric Bedell from Bloomberg Intelligence.

I was just wondering if you could tell us a bit more on the LoadPay update. You identified 1.1% of payment volumes going through the Triumph network. And I'm curious if you have a target percent in mind that you like to capture up from that 1.1%.

Thanks for the question and thanks for noticing the new metric in there. I don't think we have a feeling of where that can end up getting to, right? It's a natural progression that we start -- where we're starting at that 1% and moving closer and closer to 70%. We don't think we're going to ever get to 100% share, but we don't think it's unreasonable to jump from 1% to 2% to 5% to 10% over the course of the next couple of years.

And Eric, one of the things we put in this letter, it was an interesting thing for me to read or as our team prepared it. So I hope you captured that we paid 2,500 different financial institutions in the last quarter. And that the number of institutions where truckers bank has got to be way higher than that. And the reason I can say that is because many of the payments we make go to factoring companies who then remit funds to who the trucker banks with, so that would be masked from us.

So here's how we think about it. And with what David and the business we're building, if you have a marketplace that is that fragmented of where truckers bank. We know this. They did not choose their financial institution because that financial institution held itself out as passionate about trucking. I think we're a universe of one of the only company -- the only bank that feels as passionately about trucking as we do. So they chose that their bank for all the reasons people choose banks, okay? So as we now think about going and winning market share, we have to convince them that whatever made them like the bank they are currently using, LoadPay can match many of those features and give them many more features and savings and rewards and opportunities that help them run their business. And that, we think, is compelling.

The second thing that's compelling. And if we were just doing it that way, that would be a marketing exercise. And you could probably win, but understand, no one in the world pays as many truckers as Triumph. And so if we're pushing out $70 billion a year, and we can then go to the end user and go if you have a LoadPay account, you will get that money faster and cheaper, and we are offering you a product that's tailored for your business. We think that is a right to win because we're competing against incumbents who don't wake up every day and think about trucking. So we can't predict how much we'll get, how soon we'll get there, but it's the value chain of being on both sides of the transaction, making the payment and owning the bank account on the receiving end and then building a product that is tailor-made for truckers, that's why we're excited about investing in LoadPay.

Got it. And just a quick follow-up on this as well. Where are you seeing more increase in LoadPay use? Is it on the larger account size or some of the smaller account adds that you talked about in the last few quarters?

Yes, absolutely. And so we've really been focused on the small fleet. And so for us, it's about 7 power units or lower. And so we've seen higher adoption, higher utilization of the tools within that. What we've actually seen though in the third quarter is that started to ramp up north of 7 power units, up to 20 power units. And we're now hearing back from carriers on all the utilization that they're able to do. Some of the things that we unlocked in the first half of this year, were larger fleets being able to issue out expense cards to their drivers. And so when Aaron says, we're getting adoption away from the traditional operating makeup they may have been, is because some of these very bespoke or tailored solutions that are being built that are industry-specific are making even larger fleets move into LoadPay.

And then just one last quick one, if I can. Should we expect a similar growth rate in the accounts on both the total and active carrier over the next few quarters?

We think we're running at the same pace for the next couple of quarters. And what it looks like. It will be -- we'll exit this year right around 14,000 accounts. And as we look forward into next year, we'll probably on a very similar run rate for the remainder of 2027.

Our next question comes from Joe Yanchunis from Raymond James.

Just have a couple more. So in the shareholder letter, you noted that you added 706 new factoring customers year-to-date despite the broader carrier population contracting. So without spilling the secret sauce, how are you accomplishing this? And do you believe that the current pace of customer additions will be sustainable throughout '27?

Yes, I'll take that, Joe. I do. I mean, I think that when I look at our payments network and the amount of carriers that they pay, and we were paying about 6,000 -- or sorry, 8,000 carriers in the factoring business. I think we have a large runway and to your point, without giving away the secret sauce, the one thing we do is we immediately cover liquidity on the factoring side for the carrier. But to pair what David was saying is we've given them a tool to manage their business and their money in one place. And so I feel like that's where the value chain comes in for the carrier.

And Joe, Kim is too kind because what she should have said is she needed her CEO to get out of the way. Like I owned it in the letter, our caution as we were building the open loop payments network, we pulled back on factoring growth, and she and that team have been troopers despite their misguided CEO at certain times. And so now I'm like I'm out of their way and go build because we learn things, right? You have a thesis you execute on the thesis and then hopefully, you're humble enough to learn when your thesis was wrong, admit when you're wrong and course correct.

And the last thing I would say on that in addition to pursuing factoring, this is really important. We have built a tremendous factoring product. There are other really, really good, and probably even other tremendous factoring products in the marketplace. Building a product is one thing distributing it is another. And the power of 15 years of doing the same thing under the Triumph brand and being known as people of our word, that's helpful. Number two, the fact that we paid 134,000 carriers last quarter, that's really helpful. And number three, when you have businesses like C.H. Robinson and RXO and more to come that build factoring as a service on top of our platform, that's all very helpful.

So our distribution to the marketplace of 90 -- last quarter, we paid 93,000 factored carriers. Almost 70% of all carrier payments went to a factoring company. The distribution we have, the reputation we have, the product we have and the partners we have and the excellence with which Kim and her team service our customers, that's the value proposition.

Okay. That was great. I was also kind of hoping to talk about this 2027 framework of low double-digit transportation revenue. Can you help us unpack the segment level growth assumptions embedded in that framework? And specifically, how much growth are you contemplating from factoring versus payments and intelligence? And within factoring how much is driven by continued market share gains versus higher average invoice prices?

Yes. Let me take that top down and then Brad can clean up in the segments because there's a purpose that, that was in there. I mean like you've seen our letters. We're not in the business of giving forward guidance. Like that's not what we do, except as it relates to expenses. So all we were -- what we were trying to do with that very simple metric is say, if you assume normal credit cost, which that's what we assume, this quarter didn't love. There were some episodic things but like normal credit costs and expense discipline that I think we've been very transparent about and that won't stop going forward, which is a pivot from what we've done historically. And then if you just assume 10% transportation growth, I don't think that's the shot we're going to call for next year.

We haven't updated the North Star metrics, but we just did it for purposes of this exercise. And I don't think we're ready to go into each individual segment. But Joe, let me tie it to a broader narrative on this 2027 earnings bridge. I mean every analyst who's asked us a question on this call save one, is a bank analyst, right? And so while we are very different than almost any of the 3 -- almost 300 other publicly traded banks, we are a bank. And if we look at the last 4 years, our investors have -- I mean, some have not liked it. Some have given us permission. I mean -- but as a company, we said we were going to invest and we had no idea the freight cycle we were about to go into, right? And it was the worst of times to be investing.

But once we made the call and we believed in the long-term value, we stuck to the call. But you can't run a financial institution, and we don't want to run a financial institution with -- that's in the bottom quartile of publicly traded companies from an ROA perspective. But on the other hand, we also weren't willing to sacrifice the long-term vision. So if you think about that 2027 earnings bridge, right? If you take the median of all publicly traded banks and many of them are stabilized business models, right? 1.2% ROA is rough median right now, and I'm not telling you anything you don't know. So I think our earnings bridge in 2027, if you assume invoices remain flat, get somewhere between 1% and 1.2%.

That's what we already wrote in the letter, so I might as well say it out loud here. The point I want everyone to understand is if you get there at a time when LoadPay and intelligence are still a drag on earnings. And you believe that LoadPay and intelligence have a future where they don't just break even, but they actually are meaningful contributors. And on top of that, you believe there is a lot of opportunity to grow factoring which is running at over 5% pretax ROA right now. Then you start to see the earnings power of what we've built is very different than our "peer group" of banks.

So like I said a lot, but that's the reason it was -- it's in there. That's what's driving our thinking on operating efficiency and profitability, and it will be in next quarter's letter where we get a little more specific on giving you any updated targets for 2027. But don't -- we didn't assume that invoices were going to continue to go up because we can't make that prediction. What we can tell you is October quarter-to-date invoices have continued to rise and new clients have continued to join. And so that's obviously meaningful for factoring. So I hope I answered your question, but I hope I also did it in a way that's helpful for people to understand the context behind it.

No, I appreciate it. That was a thoughtful response. And then the last kind of question I had was on the incentive comp. You had talked about potentially there being $6 million that was going to be spread across the back half of the year. And then in the same vein, you talked about how in this quarter, you outperformed a lot -- on a lot of the several operating metrics, which determine us. I guess how much of that should we expect to be accrued in the fourth quarter?

We don't -- so an interesting thing, we try to be extremely transparent, right? We've been wrong many times in -- I think this is our -- my 47th earnings call, which is hard to believe. We always try to be transparent. We're wrong often. But if we tell you something, that's what we believe at the time. And this is where, I suppose, transparency came back to bite us because we tried to give you that guidance that we were thinking because I didn't want anyone to be surprised. But in the real world, you have to react to what's happening.

And frankly, delivering 70 basis points of ROA this quarter and all the things with the credit noise and like it just -- it did not seem appropriate to take that additional bonus expense in the quarter, even though many things are going well. And so like it's our job, right, the permanent tension that exists between capital and labor between investors and the team is to manage that. I can't tell you with any specificity of what we're going to do in Q4. What I would tell our team is we've done certain things remarkably well this year. We've done other things not so well this year. And so we're always trying to think about how do we reward the team for what went right but also make sure we're rewarding investors for taking the risk and investing in us. So we gave you $100 million of guidance for Q4. That's as specific as we're going to get as it relates to what we do compensation wise for that quarter.

Our next question is from Eric Bedell from Bloomberg Intelligence.

Just had a few follow-ups. Number one, I'm curious how you're thinking about freight market where we might see more broker consolidations. Has anything changed in your approach to how you serve your clients?

No, nothing has changed in the approach that we take to serve our clients. As we've reported, a lot of our business comes from the largest freight brokers. That tends to be the sweet spot for us. And so more broker consolidation is exactly what we expect and exactly where we aim to play.

And then if I could just get one more quick one on the LoadPay side. Was the tick down in the revenue per account just primarily due to that late adds in the quarter that you talked about? And also, do you still have the same target for annualized revenue per account?

So what we see there, and we highlighted it in a footnote underneath that chart, right, where we -- what you're looking at is a month-over-month comparison for that one. But if we actually dive into the third quarter. What we saw was we saw a continued growth on a month-over-month basis. And so we didn't have a down quarter. We just had that tough comparable with the number of accounts being opened, the number of active accounts on a June to September. And so that's -- it was just a little bit of noise, a touch of seasonality and the account issue. So we have -- we still have high levels of confidence in our target rate. And if we look at the accounts that have been opened over 120 days, we're still at north of $1,200 in revenue on an annualized basis per account. And so we feel very confident as we move forward.

Thank you. There are no more questions at this time. I'd now like to turn the call back over to management for closing remarks.

Thank you, everyone, for joining us. We look forward to seeing you next quarter. Have a great day.

Good morning. It's 9:30 in Dallas, and we're ready to get started. Thanks for joining us this morning and for the interest in our second quarter results. We're glad you're here. With that, let's get to business. Aaron's letter last evening outlined an outstanding quarter. We saw material expansion on our core initiatives against the market backdrop that finally gave us some tailwinds. The positive momentum is palpable, and the results of that are visible in Aaron's comments in the shareholder letter. That quarterly shareholder letter published last evening and the quarterly results will form the basis of our call today.

However, before we get started, I would like to remind you that this conversation 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 public obligation to publicly revise any forward-looking statement. For details, please refer to the safe harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to the safe harbor statement.

With that, I'd like to turn the call over to Aaron for a welcome and to kick off our Q&A. Aaron?

Good morning, everyone, and thank you for joining us. Before we begin, I'd like to welcome Ben Volkwyn, our Head of Enterprise Data and Intelligence, who is joining us for today's discussion. I hope you'll ask Ben more questions than me because his accent is certainly more pleasing to listen to than mine. In the Q&A on the last earnings call, I referred to the freight market with the statement that the market may be changing. And as we sit here today, I think I can say definitively that the market has changed. We are in a different market. And this market is good for many, but it is also difficult for some. And we tried to explain that in the letter we published yesterday.

And so I would say if you look through the noncore expenses and the noise in the quarter, what you will find for Triumph is a business model that is performing materially ahead of its recent history. And more importantly, to me, we are seeing validation that our value chain is working and delivering what its promise to the market. And so with that brief introduction, I will turn the call over for questions.

We will now move to our question-and-answer session. [Operator Instructions] Our first question will come from Joe Yanchunis with Raymond James.

So in the shareholder letter, you noted that the original 4Q '26 EPS target of roughly $0.50 to $2 run rate assumed average transportation invoice prices of about $1,800. So based on the sensitivity you've previously provided, today's 2,200 invoice environment seems to imply an incremental $0.20 to $0.25 a to that quarter, on top of that guide. So 2 partners here. One, is that the right way to think about your outlook? And two, aside from higher noninterest expenses and a slower contribution from the Intelligence segment, what are some of the other things that have changed that would impact this outlook since you originally provided it?

So Joe, the way that you characterize the impact of invoice prices is solid. We do have about a $7 million annualized pretax income change for a $100 change in invoice prices over the course of the year. So that math is pretty straightforward. So yes, I believe that you've characterized that correctly. As far as the other things that might impact the outlook going forward, it's really -- obviously, any changes in invoice prices would be the biggest mover. But the core trends are pretty well in place.

I think that the continued momentum of our penetration in sales is kind of what drives us from where we are today through the rest of the year. Shouldn't see a whole lot of volatility in expenses beyond what we've already called out. We are continuing to seek ways to get more efficient, looking for about $98 million in the in the current quarter in Q3 and -- excuse me, 99% in Q3 and about 98% in Q4. Beyond that, you can just expect us to continue to maintain that discipline going forward.

Okay. I appreciate that. And now I want to shift everything a little more strategic question. So Amazon, they've been steadily expanding Amazon Freight recently introduced Amazon supply chain, bringing together all these logistical capabilities under the single platform. As Amazon continues to build a more integrated logistics ecosystem, how do you think about the potential impact on the brokered freight market? And does that represent a competitive threat to Triumph over time? Or could it ultimately create additional opportunities for your payments and intelligence platforms.

Yes. Great question. And I think that there are several people in the market who actually move freight who are better equipped to speak to whether Amazon is truly a competitive threat to the established brokerage community or not, so I will defer to those experts. What I would say is Triumph moves data and money. And last time I checked, Amazon, just like anyone else, needs somebody to move money on their behalf when they hire a carrier to run for them.

So if somebody is going to be active in brokered freight, we're going to be talking to them and trying to meet their financials, their liquidity and their data needs. And our view on that doesn't matter whether it's Amazon to name on it or any other broker. We're going to give them our best efforts to help them achieve their business goals.

Your next question will come from Timothy Switzer with KBW. .

Good to hear. Is there any update on the 20% transportation revenue growth year-over-year you guys are expecting for Q4. I mean it seems like you'll at least easily beat the factoring mid-teens guide you guys gave. So just curious on if there's any updated numbers you can provide on that.

Well, Tim, I would say the most updated numbers I could give you, you can find in the shareholder letter. And one of the things I wanted to point out in that letter is roughly, if you were to just pull apart the increase in invoice sizes we've seen as a result of supply constraints. I peg our organic growth in the mid-teens, like pretty much right on par with what we told the market, our North Star metric was for transportation revenue growth. So my own view is that we are organically growing across almost all of our segments by deepening our relationships with existing customers, delivering more value to them, therefore, delivering more value to us. .

And I think most encouragingly, and I would not miss this by winning new business, especially in our factoring business, and you're talking about winning new customer relationships in a marketplace that is shrinking, that should not be overlooked. So put all that together, that mid-teens organic core growth that we held ourselves accountable to. Add on top of that, the market forces as a result of what's going on in the Middle East, supply reduction as a result of litigation, legislation, regulation, all of these things, and that's how you get to that 30% growth.

So it's very difficult for me to see how we won't eclipse the growth target for transportation revenue growth by a material amount at the end of this year. Some of that, I think, we deserve credit for because of what we've done. Some of that appropriately, we should point out the market has changed. But one last thing I'll leave you with. The market was never going to stay at $1,800 invoices in perpetuity because the input costs for carriers have gone up so much, they could not earn their cost of capital.

Now I'm not smart enough, and I don't think anyone at this table is smart enough to have predicted for you absolutely when that was going to change. We just knew that the market would change. And what's gratifying for us, I can speak for me. What's gratifying for me is that we built a business model that we believed would do very well when the market normalized and return to what I believe is equilibrium. I don't think we're anywhere close to even where we were in 2021 if you inflation adjust those numbers. But the business model is working largely as we predicted.

So I gave you a lot there, but I just want you to understand that we're organically winning business like we called our shot we would do. And then undoubtedly, we're benefiting from normalization of the market.

Okay. Yes, that was very helpful. And then I had a few on loan pay looked like some great trends there, especially revenue per active carrier getting really close to that $750 million number you guys have talked about. If I recall, I think you guys are kind of trying to finalize some new features and products within load pay by the end of Q2, and then you're going to start pushing for growth that product even harder than you have been. Can you update us on are all those features in place? And should we expect an acceleration in growth now in that business? .

Absolutely. And we're really proud of the work that we got done in the first half of the year. We've added the ability to do factoring, banking, integration with fuel and some of our intelligence all within a single tool for our carrier population. And we've seen that, as you mentioned, come through in both the account growth numbers and revenue per account and what's really fun for the team to see is that our revenue is growing faster than our account growth. And so there's a lot of things build on.

As we look into the back half of the year, we think we are uniquely positioned in 3 ways to keep winning share. right? We have distribution that's unparalleled based on the number of carriers that we touch across our entire payments network. We have integrations across 400-plus brokers, making load pay the best place for carriers to come receive payments.

And last but not least, we differentiate ourselves in our economics by being a bank at the end of the day. So we're really confident about the back half of the year, and we think we're going to see trends continue in the way that they are.

Okay. And if I can get 1 more on the expense outlook. Just given some of the noise with the incentive accruals at the end of the year. If we put those aside, like how should we think about the outlook for '27? Is it down from that $98 million with more cost saves -- or is there going to be a modest growth from that? Just kind of hard to tell if all the incentives going around.

Sure. It likely trends a little bit higher. I would tell you that any incentive accruals that hit in the back half of this year would reset at the beginning of next year. So the bar will get reset higher than it was this year. So any incremental incentive payments that we have next year would have to be because we outperformed our targets next year. But we do always have compensation resets and so forth. -- and there will be a lot of churn underneath the surface as we're looking to deploy resources into the most effective areas. But I would expect those numbers to trend modestly higher next year.

And just to add on to that, I think it's appropriate analysts, investors focus on expenses, and I completely understand that. What I'm focused on is operational leverage. So if expenses increase next year, that can only happen if we grow revenue more than expenses. And we have generated a significant amount of expense savings over the last few quarters as we've really doubled down on efficiency and technology deployment and streamlining the things we're doing. .

But we have intentionally taken some of those savings and redeployed it into a stronger sales organization and into other things we're working on that we believe over the long run will create more investor value. So as we get to the back half of this year, we'll start getting more explicit with you on what we expect expenses to look like for the year 2027. I completely agree with Brad. I think that those expenses will be slightly up. Underneath that, a lot of things are happening. There will be material expense savings in places and there'll be investment in other places.

But as importantly or I think more importantly is each of those North Star metrics has in it an idea that it's not just revenue growth, it's also margin expansion. And so we're going to only deploy those dollars if we think that we can grow margin and revenue and ultimately push that to the bottom line for the benefit of our investors. So I hope that helps. That's at least how we think about using the resource that we have of expenses and really using it as an investment to create shareholder value.

Your next question will come from Matt Olney with Stephens.

Eric, similar to your last point, I want to ask more about the factoring business. And the operating margin there looked great this quarter. But as you mentioned in the letter, much of that's from the improved invoice pricing. Where is the company as far as moving down this cost structure with technology? I'm trying to appreciate that, that longer-term margin could be quite a bit better than your goals if this higher invoice pricing continues and the cost structure improves?

Yes. So if you're asking from an enterprise technology and efficiency standpoint, I would say we're in the early innings of a game, we never intend to end, right? I mean if you think about Triumph's journey, and Matt, you've known me for a long time, you've known this company for a long time. we've generally been pretty good at growing revenue, being creative, at least compared to -- if you set our peer group as banks, which I'm not sure is exactly where our peer group is.

And what you've seen in this down cycle, if you just go back, think about '21 and '22, the market is incredibly demand-driven. We're making a significant amount of money. We're investing in things and then all of a sudden, the music stopped, and you saw all those shareholder letters. And what we said was the plan was to stick to the plan. We were going to focus on value delivery to our customers. What I should have emphasized more at that time, what I should have understood more at that time is not just using technology for the offensive application. I mean you have to do that. Your audit product has to be great. Your payments product has to be great. Intelligence has to be great.

But to make yourself more efficient internally. And I would say for a season, that was lower on the priority list. That is no longer the case. I expect you will see the organization and Kim's leadership in factoring continue to drive automation which not only increases the number of invoices per FTE, therefore, creates operating leverage but also improves the customer experience because you got to put the customer at the center of this thing.

So -- all things being equal in what is a cyclical business, as you all know, I would expect margin to continue to increase because we will get more efficient. We have a playbook we can run, all things being equal, I would expect revenue in factoring to grow because we have a great sales team and as has been alluded to already here, the best distribution platform in the marketplace for both our own business and factoring as a service.

So 40% is a great place to be. And you cover other finance companies like the 40% is an exceptionally high operating margin in a business like this. I want to finish with one last thing because I think it's very germane to that. I want to see factoring get above 40% and stay there, which would be a 5% to 7% return on average assets and that's tremendous, and that's very profitable. But I also want to point out, and this is really important for long-term investors. There is more to factoring than the revenue that it generates. -- factoring and I didn't maybe used to think that way, but factoring is now the entrance into the Trump transportation technology platform. And so these factoring customers now are becoming load pay customers, equipment finance customers, intelligence customers. And that is a change that 12 years ago, when we got into this business, that's not exactly how it was thought about, but it's how we think about it now.

And so I think you'll both see margin expansion in that segment, but you'll also see the intangible benefits across the enterprise. So I hope that helps.

Yes. Great point. I appreciate the color on that. And then switching gears over to the banking segment. Aaron, I can't help myself. I have to ask what the banking segment. We saw some nice positive trends in the second quarter, and it seems like it was, in some ways, the opposite of what we saw last quarter when the revenue trends declined. Coming into the year, I think we assume the banking segment would be stable with less volatility, but it's been the opposite so far. It's been more volatile than we expected. Any more color on kind of what we saw in the second quarter and were expectations of this segment from here?

Yes. So I view the second quarter is a quarter of progress for us, not a quarter of volatility. We had to do some things in the second quarter. We earned some new business that might have looked like volatility in the results. But as we set the stage for the third quarter and fourth quarter, we've created some additional efficiencies. We feel really good about the business we put on the books and our deposit -- our core deposit costs continue to be very stable. So I think the outlook is pretty smooth from here.

Your next question will come from Eric Bedell with Bloomberg Intelligence. .

Thanks for having me. I was wondering if we could just unpack the factoring segment a little more, particularly within invoice size. And could you tell us a bit about how much fuel surcharges changed the price of the average invoice in the quarter.

-- do you want to take that one? Or do you want me to take it I think you should answer it.

Okay. Well, we know that average invoice price -- well, for a client specifically, we know that about 25% of the carriers' cost goes to fuel -- and so if you think about that against our invoice price, you would see that it was about 25% of that increase there.

Exactly. And I think that's what people missed that Kim pointed out. And the other thing Eric when you're asking us about the spot market, that is -- that includes everything, right? It doesn't just include diesel. That includes tightness in the market seasonality I don't know that we will ever be able to totally isolate. But I think it's important. If people say diesel is up 30% quarter or year-over-year, whatever the number is, -- just remember that is maybe 25% to 30% of a carrier's cost.

So the impact to the invoice size is not 30%. It's 30% multiplied by whatever it is to the carrier's cost added to a much larger math problem that takes into account the entire marketplace and kind of where shippers and brokers are tendering freight. So we can imprecisely and directionally give you visibility into that. But I don't think anybody can measure it with precision because it's just part of many different inputs.

Yes. No, that's helpful. And I'm curious more on -- as well on the large carrier mix. You mentioned it was about 75% of the invoice volume on the factoring side. How much of that is more contract rate focused? And I guess, how can we expect that rate to change as we get into the back half of the year?

Yes. We -- if this is not a precise calculation when we looked at the portfolio, we do know that 70% of our paper is for shipper versus -- sorry, 70% is broker and 30% a shipper. And so we make assumptions when we talk about contract rate in our larger carriers. So we looked at our average invoice prices and we figured it was about 65% to 70% from the large carrier segment.

As far as the change goes with contract rate, I would assume when RFPs are ready to come around, they are going to probably increase and negotiate higher rates to make it more standard with the spot right?

Yes. Ben, anything like from the intelligence side, do you want to speak to that as well?

Yes, absolutely. I think what we are going to see in the back half is what some of the pattern that we've seen throughout the period is there is a reset happening on the RFP cycle. And absolutely, we will continue seeing a breakdown of those routing guides as we go through to the back end of the year.

And one last thing that I think just to be pointed out that we don't oversimplify things, there are carriers who run for brokers on dedicated lanes, which function a little more contractually than just in the spot market. So there's a whole lot of things going on underneath, but hopefully, the data points that Kim and Ben gave you can help you form a picture of that. .

And then lastly, could we get an update on how factoring as a service has helped new client generation for you?

Yes. Factoring as a service is just an embedded distribution offering for us with a strong partnership with the 2 companies that we have in our portfolio -- and so they continue to grow just as our portfolio does as well. So it's a continued distribution offering for us with a very low acquisition cost, by the way, which is helpful to improve our margin as well.

And we would go back to tell you what I said earlier that the value of factoring is never just the revenue alone. And that's especially true when you're talking about factoring as a service and our partners there who actually move freight. So the financial relationship with the carrier in addition to the transactional or contractual relationship with the carrier to move freight makes it a much more holistic relationship. And so their ability to win business and attract carriers looks different than Triumph's ability because we don't move freight. That's not what we do. And so it's going well, and it's one of the growth -- the strategic growth initiatives for us going forward.

Your next question will come from Gary Tenner with D.A. Davidson.

A couple of questions. First on Load pay. You have mentioned in the shareholder letter, Aaron, that you expect to recast the payments EBITDA target at some point, inclusive of load pay. I'm just curious, specific to load pay though, given the trajectory of growth there, do you have any sense or projection as to when that part of the payments segment alone will kind of hit an EBITDA breakeven number? .

So what we're looking at right now is we're going to continue to invest in the product. We still have other things across the total Triumph offering for carriers that we're going to embed within the overall arching load pay experience. But as we move through 2027, we expect load to begin to be breakeven.

And I would say, Gary, my history of predicting the timing of profitability is like -- is not very good. So I can't give you precise data, but I think what David said at the end of 2027. And on those North Star metrics, you brought it up, you give me an opportunity to talk about it. I think appropriately, in 2027, when load pay is a more material part of our story and intelligence, we more materially understand what it can do, what it should do and what investors should hold us accountable to do that those North Star metrics should change, right? I mean we know gross margin for intelligence is going to stay high because of the structure of the business, and that's great. But now what you need to hold us accountable to do is use that great structure and grow revenue and expand margin.

And the same thing, Load pay, it's great, 49% Q-over-Q revenue growth, but ultimately, just like payments, it's got to earn the right to continue to have capital invested in it. And so I would love to see it by the end of next year, breakeven and continue to grow from there. And as you know, I think we pointed out that is a balance sheet-light business. You don't take credit risk in that business. And it's just a natural extension of the customer experience, the injection of liquidity when needed in factoring, and then the use of those funds by the end user for the things they need to keep their business running.

So we'll see that. I really do expect 2027 North Star metrics to be updated to reflect that. And I'd also just end with the Payments segment on a GAAP basis, if you add low pay back ends over 25% EBITDA margin, like things are trending well. We're just breaking out so you can see each individual piece of the business and judge for yourself whether we're delivering on what we should be delivering on.

Fair enough. Appreciate that. And then since you mentioned it, Aaron, the Intelligence segment, I guess I'm curious there, revenue has kind of been flattish for kind of or fees from that for kind of 4 quarters here. Is there anything that you're seeing initially that's surprising to you in terms of kind of the revenue or interest in the product? Maybe talk about just the Intelligence segment a bit and kind of what the last year has looked like there?

Yes. I'll start this answer and then I want Ben to finish with where we're going because he's the subject matter expert. But Gary, we've done lots of acquisitions since Triumph was founded. And what I've learned is they never quite earn out exactly like you think whatever you underwrite, that's probably what's not going to happen. It is disappointing to me, and I won't explain it away. I won't -- I'll just own it. It's disappointing to me, Intelligence did not scale faster in the first 4 quarters. .

But I've done this long enough to be able to isolate that disappointment from what I believe to be the long-term value opportunity for the offering. The industrial logic of Triumph, who touches more invoices on an audit and payment basis and factory basis for that matter, than anyone in the world in brokered freight, the industrial logic for us to give real-time data back to our marketplace is -- I'm as sure as that as I was before. What we needed to do was we've got to make that offering an enterprise offering. And I think we are doing that. I can see things that you can't yet see, all we can report is the numbers looking backwards. I can see the things of where we're going, where Ben is helping lead us.

So the race isn't always won by those who come out of the blocks most swiftly. It's won by those who can increase their pace over time and we're committed to that. And you can hold us accountable for that. And we're not going to shy away from that. So that's what I believe. The second thing just to say on that is intelligence also has intangible value in the customer discussions with payments, audit factoring and other parts of our business. And that alone is not enough to justify the investment. That's not alone enough to justify its existence. But I do want you to understand that there are intangible benefits to this business showing up elsewhere. But with that kind of long predicate of how we think about M&A, and judgment of the acquisition, then like talk about like where we're going operationally because I think that's what matters from here.

Yes, absolutely. I think for us, we've taken a deep look at where we are and what the last 12 months has been like what I'll call out is we've had absolutely great customer demand. The demand has come through all different gates all the way through Tier 1 through 5, there's clear demand for our data the way we package it, the way we productize it. And so that is where our distinct focus is right now. We're taking a tool that initially was just focused on pricing and really unpacking it totally to become a complete platform to that gives you intelligence from pricing, capacity, market insights, it will give you the tool set that allows brokers to truly capitalize on the data set that we currently possess.

We obviously have a lot of work ahead of us, but I don't think the team is going to shy away from any of it. We clearly need to increase our retention. We need to make sure that our product has perfect market fit. We listen to our client needs. And we need to grow ARR. That is where our focus is, and that's what we will build building our foundational product on top of.

Our next question will come from Hal Gouch with B. Riley Securities.

The deposit growth and the bank bank loan growth has been flat like we expected, and most of the asset growth was in the factoring business. But on the core banking side, the interest rate on your average loan was up almost I think 80 or 90 basis points sequentially. Any color on that for us?

This is Todd. I'll take that question. I think the interest rate that you're seeing there includes the impact of the growth in factoring. So that's not core loan interest rate growth. That includes the blended effect of the factoring growth as well.

There are no more questions at this time. I'd now like to turn the call over to management for closing remarks.

Thank you all for joining us today. We'll talk to you soon.

Hello, and welcome, everyone, to the Annual Shareholders Meeting of Triumph Financial Inc. My name is Carlos Sepulveda, and I serve all of you in the capacity of Chairman of the Board. I'd like to welcome those shareholders here in person and those attending by webcast. I'd like to introduce my fellow Board members here this morning, Charles Anderson, Debra Bradford, Davis Deadman, Laura Easley, Aaron Graft, Melissa McSherry, Mike Rafferty, and Todd Sparks.

At this time, I'd also like to thank the 3 directors whose terms are expiring at this Annual Shareholders Meeting. Harrison Barnes, who's on our Board for 5 years; Richard Davis served us for 16 years, and Maribess Miller for 12 years. I'd like to thank these directors for their diligence and their many contributions over these time frames.

Also present are executive officers of the company and other members of senior management of the company and its subsidiaries. Brad Voss, Executive Vice President, Chief Financial Officer; Ed Schreyer, Executive Vice President and Chief Operating Officer; Adam Nelson, Executive Vice President, General Counsel and Corporate Secretary; Todd Ritterbusch, President of Payments and Banking of TBK Bank. Also present is Oscar Santillan of Crowe LLP, our independent registered public accounting firm. He will be available to answer any questions you might have.

Adam Nelson, our Executive Vice President, General Counsel and Secretary, will act as Secretary of today's meeting, and Brad Voss, our Chief Financial Officer, will act as the Inspector of Elections.

I'll now turn the meeting over to Aaron, the company's Vice Chairman and Chief Executive Officer. Following the conclusion of the meeting, Aaron will be available to answer shareholder questions, if any. Aaron?

Thank you, Sir. I am Aaron Graft, President and Chief Executive Officer of the company, and I will serve as the Chairman of this meeting, which I have now officially called to order.

The business items on the agenda today were outlined in the company's notice of proxy provided to all shareholders. The matters to be voted on at this meeting consist of: one, election of each of the directors named in the proxy statement for election to the Board for a term to expire at the next Annual Meeting of Shareholders; two, approval of a nonbinding advisory resolution regarding to the compensation of the company's named executive officers as disclosed in the proxy statement; three, ratification of the appointment of Crowe LLP as our independent registered public accounting firm for our current fiscal year.

At this time, those shareholders who vote -- who hold proxies please deliver them to the Inspector of Elections and those shareholders who desire to vote in person, please give their names to the Inspector of Elections. The Inspector of Elections will give you a ballot for matters to be voted on today. While we are waiting for the Inspector of Elections to determine if a quorum is present, let me ask the Secretary whether proper notice was given to this meeting.

I have available a certified list of the holders of the common stock of the company at the close of business on February 24, 2026, the date fixed by the Board of Directors for determining the shareholders entitled to notice of and to vote at this meeting. I also have available the notice of meeting, proxy statement and proxy and affidavits of the company's representatives as to the due mailing thereof.

Thank you. I would ask that those documents be filed with the records of the company. This now brings us to the determination of a quorum. Our bylaws provide that the presence in person or by proxy of a majority of the votes entitled to be cast on a matter, constitutes a quorum. May I know -- may I now have the report on whether a quorum is present?

There are present in person or represented by proxy, the holders of 20,490,372 shares of common stock or 86% of all shares authorized to vote at this meeting. Consequently, a quorum is duly present and authorized to transact business on the matters that were submitted to the shareholders for approval.

Will the Secretary please introduce each order of business for the meeting.

The first order of business is the election of each of the directors named in the proxy statement to our Board of Directors for a term to last until the next Annual Meeting of Shareholders. A summary of the proposal begins on Page 5 of the proxy statement.

I move to approve the election of such directors.

I second the motion.

Our bylaws require the shareholders to provide advanced notice of their intent to nominate candidates for directors. No shareholder has provided notice. I therefore declare the nomination for directors closed.

The next order of business is the approval of the nonbinding advisory resolution regarding the compensation of the company's named executive officers as disclosed in the proxy statement. A summary of the proposal begins on Page 62 of the proxy statement.

I move to approve such nonbinding advisory resolution.

I second the motion.

The next order of business is the ratification of the appointment of Crowe LLP as our independent registered public accounting firm for our current fiscal year. A summary of the proposal begins on Page 63 of the proxy statement.

I move to ratify such appointment.

I second the motion.

At this time, we ask each shareholder voting in person to please mark your ballot and deliver your completed ballot to the Inspector of Elections. All the shareholders present in person or by proxy have had the opportunity to vote. I will now declare the polls closed at the time is 9:36 a.m. on April 23, 2026. The Inspector of Elections will examine the proxies and the ballots submitted. Mr. Voss, would you provide the results of the vote?

I have with me the final tabulation report for each of the proposals.

With respect to the election of directors, the election of Mr. Sepulveda is approved with 97% of all shares voted in the meeting, in favor of reelection. The election of Mr. Graft is approved with 99% of all shares voted in the meeting in favor of reelection. The election of Mr. Anderson is approved with 95% of all shares voted in the meeting, in favor of reelection. The election of Ms. Bradford is approved with 99% of all shares voted in the meeting, in favor of reelection. The election of Mr. Deadman is approved with 99% of all shares voted in the meeting in favor of reelection. The election of Ms. Easley is approved with 99% of all shares voted in the meeting, in favor of reelection. The election of Ms. McSherry is approved with 99% of all shares voted in the meeting in favor of reelection. The election of Mr. Rafferty is approved with 98% of all shares voted in the meeting in favor of reelection, and the election of Mr. Sparks is approved with 98% of all shares voted in the meeting, in favor of reelection.

Consequently, each of the directors nominated for election as set forth in our proxy statement has hereby been elected for a term to last until our next Annual Meeting of Shareholders.

With respect to the proposal to approve the nonbinding advisory resolution regarding the compensation of the company's named executive officers, as disclosed in the proxy statement, such proposal is hereby adopted with 71% of all shares voted in the meeting in favor of such proposal.

With respect to the proposal to ratify the appointment of Crowe LLP as our independent registered public accounting firm for our current fiscal year, such proposal is hereby adopted with 99% of all shares voted in the meeting, in favor of such proposal.

With no further business, I hereby make a motion that this meeting be adjourned.

I second the motion.

As previously noted in Carlos' remarks to start the meeting, we will now take questions from any shareholders present at the meeting.

Before I begin, let me remind you that we may make comments that might be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995. Generally speaking, comments regarding the company's or management's beliefs, expectations, intentions, goals, plans, outlooks or predictions of the future are forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to vary materially from the anticipated results, implied by these forward-looking statements. These risks and uncertainties are detailed in the company's filings with the SEC, which are publicly available on the SEC's website. I now open the floor for questions.

Hearing none, I believe we are done. Thank you all for attending.

It's 9:30 in Dallas. Thanks for joining us this morning and for the interest in our first quarter results. We're glad you're here. We've all had our coffee, so let's get to business. Aaron's letter last evening outlined a quarter of real progress on the things that matter most. During the slowest quarter of the trucking calendar, we grew factoring customers and outgrew the general market's seasonal decline. Payments demonstrated with the revenue growth margin expense were joint alluding [indiscernible] accounts than we have factoring clients. The positive momentum is palpable. And you can see the results in Aaron's comments in the letter. That quarterly shareholder letter published last evening and our quarterly results will form the basis of our call today.

However, 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 statement. For details, please see the safe harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to that safe harbor statement.

With that, I'd like to turn the call over to Aaron for a welcome and to kick off our Q&A. Aaron?

Thank you, Luke. Good morning, and thank you all for joining us. For those of you who read the letter before the call, I hope you appreciated the shift in tones. It was intentional because Triumph is now in a different place. We have moved from talking about logos and density and product development pipelines to talking more about revenue and margin. And that shift has shown up in our numbers even with the seasonality Luke talked about. Now the shift in tone does not mean we are done innovating or investing for the future. For example, load pay and intelligence are not yet profitable, and we still continue to invest in them because we see the growth and the opportunity to create long-term value. It's the same vision we had years ago for Factoring and for the Payments Network, both of which have paid off.

Speaking of those 2 lines of business, our operating margin in factoring is 8% better than it was a year ago. And the core payments network is growing rapidly and is on its way to achieving a 50% EBITDA margin. I believe those are industry-leading numbers. The cascading requirements for being a successful technology company are: first, can you build it? Second, can you distribute it? And third, can you be profitable at scale? We are at the third step of that analysis for a large part of our transportation business, and I believe the results speak for themselves. We grew transportation revenue over the last year by 23%. And that was done in a freight environment that was very difficult.

We expect to grow at least 20% again this year. There is a lot of good to celebrate after what has been a very long winter in freight. Speaking of a long winter in freight, I'm not sure outsiders have appreciated how much the freight recession of the last 4 years has tried to throw sand in the gear of what Triumph has been building. It's been a tough slog but we stayed committed to our vision. And if we get a more normal market from here, we are very well positioned to benefit from it.

With that, I'll turn the call over for questions.

We will now move to our question-and-answer session. [Operator Instructions] Our first question will come from Gary Tenner with D.A. Davidson.

I had a couple of questions. First, in your shareholder letter, Aaron, you have a lot of kind of updated thoughts around profitability margins the KPIs, et cetera where it leads off with the -- sorry, looking for my question here, where it leaves off with the North Star commentary below that first table and talking about if you achieve the revenue growth and margin targets, all else equal, you should generate roughly $1 of incremental earnings annually. What is that relative to? I'm not quite clear in terms of my understanding of kind of what that is relative to kind of what the base is and what you're comparing.

Sure. What I meant by that is our target was 15% greater transportation revenue growth annually. If you can do that, at the margins at which we currently operate, which are not yet to those final North Star metrics, but at the margins we currently operate at, you're going to generate about $1 per share of earnings if operating income in the bank stays relatively flat. The corporate expense -- the corporate segment stays relatively flat. So that's -- that was what we were trying to show. Does that make sense?

I think so. I'll -- if I have a follow-up to that, I'll do so. And then I'm curious, and I've had some inbound questions about kind of the yields this quarter. It looks like the yields really in all 3 segments came down, the bank segment, particularly I'm just curious about noise there, what the drivers were. And frankly, beyond the bank segment. I mean in the Factoring and Payments segment, I know that, obviously, there's an element of timing of collections that impact the yields, but just curious what the moving parts were there.

Yes. I'll take the bank segment part of that question. There are really two main drivers, one of which impacts our bottom line and one of which actually doesn't impact our bottom line. The one that impacts our bottom line, of course, is the rate environment. So the declining rate environment certainly contributed to lower yields, and that was a significant part of the overall decline you saw. The one that doesn't is related to the additional mortgage warehouse deposits that brought in, in the quarter and the fact that the way that those are compensated is through the form -- through loan rebates. So rebates on the yield of the mortgage warehouse loans. Net-net, that benefits us as an enterprise, but it does compress the yields as they reported.

And Gary, in the other segments, I would assume you're also referencing the Factoring segment, which Kim and I can speak to. But I would just say that -- that is always going to be driven by mix shift, right? Or the mix of large enterprise factoring clients versus smaller clients, which we wrote about in this letter, the difference between having a single fleet with 500 trucks versus 500 owner operators. And then secondly, I just think the industry technology, a lot of things are working together to make the industry more efficient. And so that yield profile reflects meanwhile Triumph's getting better, we would be foolish to think we're the only people getting better at being efficient. So I think those would be the two largest contributing factors there.

I appreciate it. I'll step back.

Your next question will come from Timothy Switzer with KBW.

I was looking for a little bit more color on the freight environment. Aaron, I really appreciate your comments in the letter. But do you guys believe we can continue to see truckload freight pricing move higher even if this Dalilah Law is not passed rather than just pricing stay where it is? And I mean, do you guys have a sense at all for this law passing and the time line for it, even it's a midterm year where war going on, all that can kind of distract Congress a bit.

Yes. Well, Obviously, this is the question that a lot of people have. And I'm going to start, and then I'd love for Kim to follow up on because I think our Factoring business, it tells part of the story and just what we've seen there. We're -- look, there is a whole lot getting written about this in our industry. We agree with the overall sentiment that this is supply-side driven. We are seeing a structural change in trucking capacity as a result of multiple regulatory initiatives, some of which are new, some of which are just enforcing laws that are on the books. And we started seeing that last year. .

The question is will we see that continue? And I think the answer is yes, because I don't even know that you need to Dalilah's Law to pass to see what's already been in flight from the Department of Transportation and FMCSA. The second big question is what happens if that -- if supply stays structurally changed as it now appears to be and you see demand increase throughout the rest of the year. Well, that would create a very tight market. So we think it holds on the supply side. But Kim, I think it would be great to speak about what we're seeing with 8,000 clients in our factoring business.

Yes. So right now, we're seeing a pretty solid healthier pipeline than we saw the previous year. And exiting 2025, we started to see an increase of capacity -- or sorry, a decrease in capacity of carriers leaving the market just with the English proficiency that was coming out the nondomiciled conversations that we're hearing. And so I think that we're seeing the movement in the spot rate continue to improve.

Yes. Could you -- I think, like specifically, like let's talk about what we've seen a year ago now and what we've seen even quarter-to-date?

Yes. So our average invoice price a year ago was about $1769 and ending the quarter was $1897. And today quarter-to-date, we're seeing $2,011.

Wow. Interesting. Okay. And on the other side of the outlook here, at what point do higher oil prices begin to offset the higher pricing in the factoring business, higher invoice levels. Is there an oil price level or the length of time where the costs remain elevated that just fully offsets the benefit from higher invoice prices.

Well, I mean, you're asking a question there. If you're just talking about the math of an average invoice, then higher diesel prices improves margins, right? Because it's going to drive up especially in the spot market, average invoice prices. But the increase in the spot market has started before oil prices move materially in March. It really started in December continued in January and then it has picked up since March. So really, the test, Tim, is at what price of oil do we start to slow down the overall economy? Because if we slow down the overall economy, then we see demand degradation. What we have seen so far in what should have been our slowest quarter and I presume, will be is that we have not seen demand fall off. We haven't seen it tick up other than in flatbed but it's been relatively flat you've seen a structural change from capacity leaving the market.

And then since March, which doesn't really show up in a lot of our numbers but will probably show up in you're seeing the impact of the spot market adjust and the contract market will follow and adjust for higher diesel prices which is, as Kim alluded to, you're seeing average invoice prices month-to-date in April over $2,000. We're not back to Q1 or Q4 of 2021, Q1 of 2022, which was $2,500 invoice prices. That was a very different market. But you are seeing strengthening despite the supply leaving the system, like demands hung in there. And so it's just a question of when do higher oil prices hurt demand and we're not economists. We're not able to answer that question.

Got you. Totally understand. I'll jump back in the queue. But I mean, I know you guys have always been hesitant to kind of call the bottom of the freight recession, which think you can prove right on. But it seems like this is maybe the most optimistic scenario you guys have had in front of you in terms of the Factoring business over the last, I don't know, 3 or 4 years.

I mean, I used the term long winter in the opening, and there was a reason that we use that term. And I think, look, our job is to create value for customers, which translates into value for investors. The test, in my view, isn't what it does for Triumph. The real test is can a law-abiding carrier earn their cost of capital. And I would submit to you that since the middle part of 2022 through now through the present or let's call it the end of last year, a significant portion of law abiding carriers struggled to earn their cost of capital because of a market that was soft for a variety of reasons, not the least of which was capacity operating within it that was not following all of the laws, rules and regulations. And so we, as a society, have passed those laws because we want safe roadways. And we, as an industry, should want a marketplace where shippers, brokers, carriers, factors, everyone can earn their cost of capital. And what we are seeing right now is Dawn may be breaking for what's been a long time. Who knows what will happen. We're in the midst of a war, there's geopolitical risks, there's all sorts of risks. But as we look at it right now, I'm as optimistic as I've been in a very long time.

Love to hear that.

Your next question will come from Joe Yanchunis with Raymond James .

It sounds like the grand hall didn't see a shadow.

We hope not. .

So I was hoping to start with the Supreme Court case over broker liability and the potential impacts to Triumph for the industry lose that case. So I would assume it would be a headwind for your payments and factoring segments, but could potentially be beneficial to your intelligence segment and insurance division, but I mean I could be wrong there. Any thoughts on this would be helpful.

Well, business, all businesses desire certainty, right? And that's what we've had for many years, with understanding that the responsibility for licensing of carriers is a governmental responsibility. I think I can speak for all of Triumph that we would take the position of the industry or of the brokerage industry of where we would land on that Supreme Court case. We don't know how it will play out. I mean, here's what we do know that, number one, the government has -- appears to have woken up to its responsibility with licensing, regulation and enforcement. And that is most welcome. We really appreciate that. We don't think it is effective for the industry, for industry providers to be tasked with that. That feels like a governmental responsibility. .

If that Supreme Court case goes the other way, and so there's no longer federal preemption of all the state law, tort negligent and trustmet claims. What does it mean? Well, number one, freight is still going to move and brokers are still going to be very important in freight moving because that's -- the industry is built that way. It's going to change what role insurance would play for sure. And it will likely change how brokers think about tendering freight to certain carriers. I mean brokers pay attention to that already. But of course, you're going to now be thinking through what will it mean in this state? What is precedent in the state. So it's going to create a lot of friction around the business.

We need safe roadways, we need a clear operating parameters because we deal with the marketplace where there can't be prolonged negotiations over the movement of freight. It has to move quickly. We need a repeatable transactional process. So I don't know that if -- where the Supreme Court lands is really going to have an effect on Triumph's business. I think it will inject volatility. And we generally are in a position that we can weather that or even in some cases, benefit from it. But in our hope for the good of the industry, we think federal preemption is the right answer, coupled with, so long as it's coupled with proper enforcement of the regulations that are on the books to keep our roadways safe.

Okay. I appreciate that. All right. So shifting to the outlook. That calls for 20% or at least 20% transportation-related revenue growth in 2026, which as a 4Q assumed that right environment. Well, the freight market seems to be on fire right now. Red Hot, C.H. Robinsons in the market calling for spot rate growth of 17% ex fuel. Your shareholder letter, you reiterated that Factoring segment revenue growth would be in the low teens. How do we square that with what we're currently seeing in the market? The recent -- I think you noted that average invoices were over $1,000. Recent market share gains. I mean, what type of invoice volume growth and what average invoice size are implied in this low teens growth outlook for Factoring?

Brad, do you want to take that one?

Sure. So Joe, as we look at the Factoring portfolio specifically, just look at what has happened over the last year. Our number of invoices purchased in the first quarter of this year was about 12% higher than it was in the first quarter of last year. So that low teens growth, we were approaching that in the year that we just followed. I think that we should be able to continue that. anything that we get on top of that from invoice price growth would certainly be welcome. We're not counting on it, but we would certainly appreciate the tailwind.

And we're not going to recast, mean when we gave you those projections and even in the North Star metrics, the metrics that matter most, those are not forecasts. They were guidelines. And I can appreciate that investors will -- is that a distinction without a difference. If you run the business, it's a very important distinction. We weren't trying to forecast what was going to happen in the market. What we were trying to do is for Kim and Todd and Don and David and the people who lead our businesses. What do we need to do to position ourselves, grow revenue, and we will not make any assumptions about what the market might do because -- and that's -- that's not our job as operators. I mean of course, we pay attention to it.

And when I look at take Factoring, for example, I mean -- and what Kim and the team have done there to be positioned to organically which we have not done in several years. And to do that while improving back-office efficiency, I'm thrilled with that. if we, in addition to that, catch a tailwind, then maybe those mid-teen numbers change. But we're going to stick to the guidelines we gave of -- because that's how we're running the business. But we acknowledge we operate in a business where the environment changes every day. And right now, it's been very positive changes. What it will be a quarter from now, we have no idea. But we certainly are appreciative of where things are now.

Got it. So it sounds like it could potentially be conservative outlook for '26 if trends currently stay. And I was going to save this for a follow-up question, but because you touched on it, I'm going to hop in here, if you don't mind. So kind of with that AI -- and improved efficiency, by my math in 1Q you purchased roughly 7,200 invoices per FTE in factoring, which was a massive increase from the 5,600 in the prior year, underscoring that narrative. I know AI can be a moving target given its rapid improvement. But by your estimation, what inning are we in for the use of AI and automation for improving fraud detection and providing analytics to some of your payments clients?

Yes. We have a lot on our road map right now to improve automation through AI and large language models. And so I think we're just in the beginning innings to be honest, operationally. So I think you're going to see an improvement with volume of invoices versus our full-time head count. .

And within the payments business, our application of AI is actually aimed more at delivering a better client experience. So as we use AI to improve our audit product, for example, that means that we're having to refer fewer invoices back to the brokers for adjudication. We're handling them ourselves, that's real value for the client. It's not just creating cost efficiencies. There are other opportunities for us to apply AI for the purpose of cost efficiencies. But right now, our focus is primarily on a better client experience.

Your next question will come from Matt Olney with Stephens.

We talked in the past about the invoice pricing, how the exposure had predominantly been on the spot rates, but also now has some exposure to the contract market. And Aaron, as you said, the contract market could lag the spot market. So just remind us of the exposure of the company within factoring in payments and how much currently is spot versus contract and how that could change?

Yes. It's difficult to put an [indiscernible] number on the amount of contracts. We see a higher average invoice price on the factoring portfolio because of the diverse commodities that our carriers are hauling in the different size that we see and I know we've said in the past, we have about 30% of our portfolio that's directly to shipper. So seeing more contract and dedicated lanes through that. So that's probably the closest I can give you as far as a potential contract and dedicated line number. .

Okay. That's helpful. And I know it seems like we're a lot more focused on the transportation growth on this call, but it looks like the challenge in the first quarter was within that banking segment that's still at the company revenue. And Todd addressed the question around the loan yields. But it sounds like the bank loan balances will be down this year. So help us think about the drag that we could see on banking revenue in '26. If I just look at year-over-year 1Q '26, first 1Q '25, it looked like core banking revenue was down 12%. So is that level of drag likely to continue throughout the year? .

Do you want to take that, Brad?

Yes, Matt, I don't think that you're going to see a lot of degradation from here. I think our intent is to hold things flat. I would remind you though that we are a bit asset sensitive. So as rates have declined in the overall economy, that would account for a good portion of what you saw relative to the first quarter of last year. In addition to things like our ABL and liquid credit portfolio is running to a smaller level, which you'll likely continue over the course of this year. But our mandate to those teams is to keep it in a fair way, keep credit quality clean and keep the balance sheet pretty stable.

[Operator Instructions] And our next question will come from Eric Bedell with Bloomberg Intelligence.

I'm curious a bit on the factoring invoice purchase volume. What should we expect in terms of how much you're going to pick up over the next few quarters? I know we touched on it a bit. But just curious to see if we're going to see similar levels to 2Q '26.

Yes. In Q1, you'll normally see a seasonality drop although because we saw some additional client count in the first quarter, we only dropped by about a little over 3% so I think quarter-over-quarter, you'll see that increase, especially when we see such a solid pipeline coming in.

Yes. We've answered this, Eric, in the past is if it's hard to -- it's not a perfect comparison because what you have is client growth, right? And when we start growing clients, which we're now doing, and then that you can't compare period factoring numbers and say, "Well, that's what the industry did. And that's why we encourage you in the letter to look at what the payments business spoke to, although, frankly, it's growing as well. So you have to interpret our organic growth.

But the three things we've always thought about. Number one, client growth, which we've talked about, we're growing. The pipeline is really interesting. Number two, is utilization per carrier which Kim can speak to, but that's going to be tied to seasonal factors like are these carriers what percentage utilization are they at? And then number three, what's the average invoice price. And I would just point out that Triumph factoring's average invoice price at over $2,000 currently is materially higher than probably what you're going to see with any other factoring business if you want to see where the average invoice price for all freight, which I don't know that the average tells you a lot because there's such a variability.

But you should look at our payments numbers, which is going to be more like $1,200 or $1,300. And that's because A significant portion of our factoring portfolio is with larger carriers who are doing things for shippers that generate either longer length of haul or a different type of freight. So I think that there are directional signals for what you're looking for in our factoring business and in our payments business, but don't overlook the fact that we're organically growing and so it never gives you a perfect period-over-period comparison.

That's helpful. And I was wondering if we could just shift to the payment side. Appreciating the revenue per invoice and increases there. Is there a target level that you have for dollars per invoice into the end of the year?

We don't have an aggregate target for Dollar Spring voice. We've shared in the past that our price on a per customer basis should be $1.25 for the core payment service. And then audit on top of that generally adds about $1 per invoice. So you could put those together and say, $2.25 would be the target on a customer level. we won't achieve that for the entire portfolio, but that would be an aspiration for every client. .

And just the repricing on those. How long does that take to come through? Should we expect that on a 12-month basis?

The pricing ramps for clients that are beginning to pay us now are generally about a 3- to 4-quarter ramp period. And so what you'll see in the second quarter is a lot of brokers that began paying us just a little bit on January 1 are now going to be paying us significantly more. And we're bringing a whole new slug of clients on board to begin paying us. So those two things will have a nice additive effect to our overall pricing.

I would just, Eric, on that, the the migration from where the payments network was to where the payments network is today, we have -- I think over the last 4 or 5 years, we've had a lot of investors ask about why aren't you pricing faster and our belief, and we wrote it in the letter and our belief for the whole world to see our customers to see is value-based pricing. And so we want to make sure we are delivering more value than we are asking for, for our customer because that's the only way to make this sustainable. So we've given you in the letter like the pricing ramps that are coming, that's only because they're tied to value ramps that came before. We take that very, very seriously. So I just know that I'm sure others could go faster in pushing pricing, but Triumph's focus is can we go to our customers and show them the value of the network, not just audit and payment in isolation, but the value of the network, which is becoming more real every day and I think there's a lot of exciting things to come from the value it creates and distributes back to not just the people making the payments, but the people are receiving the payments. And that's what we try to do with networks. .

That's helpful. And I just had one last one on load base account growth. What are you doing to kind of convert those new accounts into the active accounts? And what's that relationship like certainly turn yet. Just curious to hear some more color.

Yes. So we're really excited about the growth that we saw in the first quarter, right? It shows it shows the amount of demand that's out there. And one of the features at Triumph is our ability to have wide distribution to the carrier network from the work that we've done historically within factoring indices payments business. As Aaron just mentioned, right, we're about creating additional value and some of the feature sets that we enriched in the first quarter started to show why an uptick in those number of active accounts. And we will have another set of material upgrades in the second quarter, and we'll see that level of active accounts grow. And what we're already seeing is more and more of a carrier's total workflow is now being done within the Load Pay application. And so someone who logged in on December 1 versus logging on April 1, is getting a much richer experience in order to successfully run their business and be a profitable carrier.

[Operator Instructions] And we'll return to Joe Yanchunis with Raymond James.

Thanks for bringing back on here. So I was saying we could talk a little more about expenses. So how much of the 2Q $97 million guide is fixed versus variable? How much should professional bees and salaries trend from here? And then if you could provide some more color on your tech spend over the past couple of years. And when we could expect to see that start to moderate, which would materially impact your operating leverage going forward. I'm just trying to ask what needs to happen for you to get your quarterly expenses back to, say, the $80 million range?

Well, I think $80 million a quarter is very aspirational given our growth plans in our transportation businesses. That's not what we're trying to do. We're trying to keep our expenses really from growing in a material way. We're happy to do things like pay commissions and bonuses when we're able to grow our business. But the tech spend that we've had over the last few years, specifically to that question, most of what we need is in place. You shouldn't see a huge amount of growth there. We're always looking for ways to become more efficient. We're looking for ways to become more efficient in our operating businesses as well. So if you look over the next couple of years, what I would expect is the corporate expenses, the fixed or head type of expenses to be -- grow at inflation at the most and hopefully decline a little bit. And in our operating businesses, you should see our expenses grow materially slower than revenue, and that's what we're trying to do.

Yes. Joe, I appreciate the question, but it's -- I don't -- it's conceivable for us to grow transportation revenue, 15% or 20% out into the future and cut expenses at the same time. I mean, I just -- I think we've pulled $30 million of expense out of the business. There's a churn underneath that. There's probably more expense coming out. We would finish at $96.5 million. And I just return to the North Star metrics because I get it. There are investors who look at us that come at it from a bank lens, some of them come from a payments lens, and some of them come at it from a fintech lens.

And that's why we wrote the metrics the way they are. Number one, revenue growth over 20%. We've already told you -- I don't call it a North Star metric, but we've already told you that we're going to hold expenses relatively flat. So if you get 20% transportation revenue growth, the bank stays flat and expenses stay flat, you're creating operating leverage. Number two, Inside of that revenue, we're telling you that the operating margin in our factoring business is going to exit the year around 40% operating margin, which is materially higher than any sort of commercial finance business that I'm aware of. We're telling you that the EBITDA margin in our payments network is growing towards 50%.

Where do we finish this year? I don't know. I mean, I think we're progressing towards 40% and then we're telling you that the intelligence gross margin, which already lives where it lives, will stay there while we're growing revenue materially. So if investors are looking for us, I just want to be frank. If your investors are looking for us to reduce quarterly expenses to $80 million, you're looking in the wrong place. What we're telling you is we're going to grow transportation revenue 20% off the expense base we largely have in place now. And doing so, going back to the opening of what we wrote in the letter and what Gary asked about. Doing so, if I told you we're exiting last year at roughly $1 of earnings run rate, right, in Q4 which is generally one of our better quarters from market where the market is. And then we come into Q1, and we stayed at roughly $1 a share, right? You can make whatever adjustments you want to make. It means we grew through the seasonality we should have expected.

And I want to emphasize this, like normally we would see 7% to 9% falloff in transportation revenue. We stayed flat, which I think is a material win from Q4 to Q1. If you go and repeat what we did last year and we hit those margin targets we're giving you, you're going to double earnings, right? If you just use one and we told you we would add $1 and maybe we do worse than that, maybe we do better, but we're trying to call our shot there. But I just -- I need everyone to understand because I don't want to disappoint anyone and I want to be truthful with everyone, putting it back to $80 million a quarter is not the play. Play is holding where it is and growing revenue from here.

That was crystal clear. So a couple more from me here. Shifting over to your intelligence product, how would you characterize current demand for that offering? And similar to your payments division, do you expect you'll try to build density before increasing pricing?

Yes, the intelligence business, the demand is strong. We've actually -- in the past 2 quarters, we've brought on about 50 net new logos, right? Demand is very strong. The top of the funnel pipeline is very strong. deals are taking a little bit longer to materialize in the P&L just because of, to Aaron's point, showing customer value through [indiscernible] concept. It's been a year, right? It's been years since Triumph acquired green screens and Isotoform intelligence. We have now integrated 3 teams, 2 products and the data Triumph network and Triumph that acquisition to really monetize the data. We are now there. and working through the market, voice the customer to find the best fit products for each segment of the market. And again, pipeline is strong. Net new bookings have been really strong for the past 2 consecutive quarters. So we're really happy with where we are right now.

I appreciate that. And then last one for me here. So how quickly will you be able to wind down your ABL and liquid credit portfolios? And assuming they're all completely gone, what impact would that have on your provision? .

Yes. In response to your question about how long it will take, we will have the ABL credits that we're exiting off the books probably within the next 2 to 3 quarters. We may choose to keep one on through the next renewal, which could take a bit longer, but you're going to see that by and large wound down by the end of this year. And I'm sorry, what was the second part of your question? .

Yes, the impact of the provision from reducing balances here. I mean I would think that the provision could kind of grind lower. Is that accurate?

Yes. Yes, the way the math works, provision will grind lower.

Joe, I think that you could anticipate looking at the provision on those kinds of business just as a percentage of loan balances is going to be higher than our overall average. .

There are no more raised hands at this time. I'd now like to turn the call over to management for closing remarks.

Thank you all for joining us. Have a great day.

Good morning. It's 9:30 in Dallas and cold and icy, but we all made it. We're looking forward to visiting with you this morning. Thanks for your interest in Triumph, and thanks for joining us this morning to discuss our fourth quarter 2025 results. With that, let's get to business. Aaron's letter last evening highlighted our progress on our stated goals, revenue growth and our focus on lean operations. Aside from the core business improvements, there were a few nonrecurring items that went our way also. This demonstrates 2 things. First, our focus gives us the ability to hold noncore elements of our operations loosely and execute on capital creating opportunities when they arise. Second, our results this quarter demonstrate metrics moving in the right direction for our long-term goals and that we are keeping the main thing, the main things. The quarterly shareholder published last evening and our quarterly results will form the basis of our call today.

However, before we get started, I would like to remind you that this conversation 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 statement. For details, please refer to the safe harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to that safe harbor statement.

With that, I'd like to turn the call over to Aaron for a welcome and to kick off our Q&A. Aaron?

Good morning. Thank you for joining us us. As Luke mentioned, the conditions outside are not stellar, but we all made it for the call. Before I do some opening remarks, I want to welcome David Waller to the table. President of LoadPay. Since he was the new guy, he made him wear a tie for this call. But going forward, we'll see. Maybe he can take the tie off. But welcome, David, Glad you're here. And we're glad [indiscernible] to do this, and as usual, we're going to jump into Q&A quickly, but I did want to make 1 or 2 brief comments before I turn the call over for questions. .

I know that different investors have different perspectives. Some of you are focused on growth, some are focused on efficiency, and some are focused on balance sheet strength and credit quality. All 3 of those we know are important. As a management team, our goal is, first and foremost, to help the industry transact confidently. That means strengthening our network so that people can more efficiently and securely transmit data and payments. Pursuit of that goal over the last 5 years has generated volume and revenue growth even as the trucking industry has been mired in a historically bad recession. We believe in the value proposition of what we're doing as to now of the largest 10 freight logistics companies in the country.

To that end, we were excited to recently welcome J.B. Hunt to our network. The second thing, as I alluded to earlier, that is important to investors is to translate our vision of a secure network into profits for our enterprise and investors. We are on that trajectory. Growing revenue and holding expenses in check is a sure path to greater profitability. That is what I expect to continue to do this year. For just one example, our core payments business will trend above its 30% EBITDA margin currently in 2026 and on its way to our ultimate goal of 50% or greater. And if you look out over the longer term, LoadPay should contribute in that segment at even more accretive and capital-efficient margins. so that in the end, our Payments segment should have all the financial metrics of the most successful financial technology companies, underline that the industrial logic of directly connecting the payer and the pay across the payment rails of our bank is very clear to us, and it is becoming increasingly clear to the market.

And finally, we want to build the network and improve our margins and profitability with a balance sheet that is strong enough to withstand unforeseen cycles. We have done that to date. And going forward, we will continue to do the same. Even as we work through legacy assets and narrow our fairway for credit exposure going forward. In doing that, we will always maintain enough capital to persevere through a rainy day or mini rate days. That is our plan. We will now turn the call over for questions.

[Operator Instructions] The first question is from Joe Yanchunis from Raymond James.

So I was hoping to start with expenses here. So in your shareholder letter, you reiterated your 4Q '26 expense outlook. And with the sale of the building and airplane and the subsequent $6 million savings baked into that initial guide? Or are those expenses being redeployed to other areas?

It'll be a combination, Joe. We've got so many moving pieces coming in and out, but you're always going to see a jump in expenses a little bit in the first quarter of any year, just given the natural resets that happened. And that's going to require us to find additional -- is going to find us -- require us to find additional efficiency as we go throughout the year. But yes, that building and the playing the savings from that, about that $6 million a year. That is baked into the first quarter estimate is it will be part of the run rate going forward.

Okay. I appreciate that. And then kind of shifting over to LoadPay. So maybe, David, you could help with this? So LoadPay exited the quarter with annualized revenue of $1.5 million you guided to tripling this amount in 2026. So I know you're working on some enhancements to the product that could increase the revenue per account to triple load pay revenue in 2026, what are the underlying assumptions around account growth versus increase in revenue per account? .

Yes. So it's going to be a combination of the 2 things in 2026. So first and foremost, right, we're expecting to open between 7,000 and 12,000 accounts over the course of the year, building off the momentum from last year. And second, what we really look for is being able to link and fund the accounts, right? So account opening is our first step in the process, but then getting high levels of utilization. So as we talked about in the letter, we still forecast that we about $750 per account on a revenue basis. But if we look at the total portfolio, our customers are very different in the way that they use the account.

And so some we haven't had linked and funded. However, we -- our top 10 accounts are all tracking to over $5,000 a year in revenue. So in that mix is how we're going to get to 750. And so the goal of the team, as we look at improvements throughout the course of 2026 is really about how do you drive that LinkedIn funded percentage higher.

The next question is from Tim Switzer at KBW.

My first question, Aaron, on the outlook you provided in your letter, specifically on the low teens growth in factoring, what -- how much of that is driven by factoring as a service if it contributes a lot at all? And what does that assume in terms of the freight recovery? And like what's the potential upside if we get a true recovery in the industry?

Sure. If I answer that second question, Tim, who's sitting next to me, would start punching me. So I'm going to be circumspect in how I answer that. But on the first part, factoring as a service as a percentage of that low teens growth is immaterial. It is growing way faster than everything else, but you're talking about growth off of a very low revenue base versus the rest of the business. .

Secondly, for the projections of next year, we just assume the market stayed as it finished Q4. Now remember, and remember this from an earnings perspective, in Q1, you will see. I very much expect you will see a decline over where we ended the year because of normal seasonality in our business.

So we assumed a flat great market for the course of the year, which just means that as we work as the team is growing our factoring business organically, we're widening the the amount of customers we serve. We're going deeper with those customers. Kim has the difficult job of both serving the very largest end of the market. We serve some extremely large customers in our factoring business. And then we also serve thousands of small carriers who also use us for load pay. And so the assumption is that we will organically grow that penetration, and that's where the underlying low teens revenue growth comes from.

Interesting. Okay. That's helpful. And then another thing in your letter you talked about was only 22% of your customers are using both payments and audit within TPay. But now that you've reached agreements with -- it sounds like most of the legacy contract customers, how does that change over the rest of the year? I assume a lot of them are now going to be on next-gen audit. We'll probably be using payments and audit. Yes, just curious like how that moves. And I assume that helps revenue quite a bit.

Certainly. So when we talk about the fact that we have not cross-sold payments and audit to the extent that we would have liked. A lot of that goes back to the legacy of how we built the network and the acquisitions that we made. So a lot of the audit clients came over with the Hub Train acquisition, whereas the payments network was built basically on our own, bringing clients on to payments 1 after another. The intersection there obviously has a lot of room to improve. And as we get through repricing of the payments business, keep in mind that the audit business is always charged a per invoice fee. You'll see more and more overlap more and more opportunity for us to be able to leverage part of the relationship with the other. .

Okay. Got you. And I think historically, you guys have disclosed in the letter, like the percentage of payments for what you charge a fee, I think it was 31% last quarter. Are you guys able to update us on where that was in Q4?

Sure. So for fourth quarter as a whole, it moved up to 35%. In December, it was 38% and January was another key date where more of the new contracts went into effect. So you'll see significant increases in the first quarter. .

Next question is from Matthew Olney at Stephens.

I want go back to the factoring discussion, and I think that pretax margin of factoring was around 33% in the fourth quarter, really good improvement over the last year. Can you talk more about the drivers of that improvement? And then looking forward, that pretax margin within factoring. What does the guidance imply as you exit 2026? And then longer term, would you expect that pretax margin to approach?

Yes. So the margin expansion is really from our focus on technology and automation and also a reduction in head count through the back end of 2025. And so our focus is to continue to drive all of our automation in our back office. And so you'll continue to see that margin expand through '26 and '27.

And Matt, on the long term I think what you would expect. And first of all, just backing up to set the context for a few things. one, there was a season of time in the building of the network where growth in factoring was not prioritized. And I think it was a quarter, we made it clear that we now see that the opportunity to grow is very real and connecting factored customers to load pay accounts back to the network is a very real thing even while we serve network factors, right? Those 2 things can both be true. And so that being said, you're seeing us now and you will see, I expect, over the course of this year, us to grow customers in a way that we haven't in the past. The second thing is just to understand, at least as it relates to last year, we held a higher staffing base as we were trying to understand what the volume of growth in factoring as a service would be which was not coming out of the gates quite as fast as we thought.

And so we've normalized that base. And then finally, the addition of technology, the use of artificial intelligence, machine learning that sits on top of these massive piles proprietary data that we've built up that allows us to do things well. If you extrapolate that into the future, I believe that our core operating margin in factoring will eventually be over 40%. Will it be there this year? I don't think so. But as we go forward, that would be our target. And of course, in certain windows of time and if invoices spike, that will push up margin a lot. One of the fantastic things that I think Kim and team have done in that business is the margin improvement of where we sit now didn't just come from invoice size growth. It came from getting more efficient. And those efforts are not done. And I'm very excited about where it's headed.

The next question is from Gary Tenner at D.A. Davidson.

I want to ask in terms of the transportation growth out of the 25% i the payments revenue specifically for 2026. I think that's -- the overall mix of revenue growth for this year is kind of similar to what you kind of suggested in October. Obviously, that -- I guess that would suggest that J.B. Hunt and any revenue impact from that relationship is already embedded in the guide as you're looking out to 2026. .

That's correct.

[indiscernible] be any more specific about what type of revenue contribution or benefit you'd expect from that relationship over the course of the year?

Yes. We can't talk to the specifics of pricing or revenue associated with any individual client. I would just say that generally, it's consistent with the guidance that we've provided in the past about how we intend to price relationships.

Okay. And then the follow-up. In terms of the -- I think you guided to EBITDA margin about 30% or better in the first quarter and the payments segment. Can you give us a sense of kind of the TPA or a specific expense run rate you'd expect for the first quarter? Just trying to kind of get a sense of how that moves relative to your more consolidated guide on expenses for the first quarter.

Certainly, yes. So within the core payments business, that's the business where we reported the 29.5% EBITDA margin for last quarter. We're going to see continued revenue growth associated with the repricing associated with the new names that are coming on board, and we're going to hold expenses relatively flat. They're not going to be completely flat, but they won't grow anywhere near as fast as the revenue is growing. And so that's what's going to drive that EBITDA margin higher.

And that core bank [indiscernible] Sure.

Well, I just want to make it clear, hopefully, for you and for investors listening, when we describe -- I mean, we have a payment segment. And the Payments segment. By the way I view the world, you have payers, which are generally brokers and shippers and you have pays, which are generally carriers and their factoring companies. And I think based on feedback from analysts and investors. They want to understand what the core business has done. That's the business we announced back in 2021, although I'm not sure it really is the business we've announced back in 2021 because so many changes learned so much. It shocks me how little we knew when we set off on this journey as I look at it now in hindsight. But that business is generating a 30% EBITDA margin and is trending higher. And you already heard Todd talk about the number.

The percentage of invoices that we are monetizing continues to grow because the value has grown. But when we say that, I think it's important for the long-term thinkers to understand that doesn't mean load pay is not core to payments. Like loan pay is once again a drag on earnings, right? Just like back in the day, core payments was a drag on earnings. But load pay over the long term and all that connectivity and the source and the type of revenue is really exciting. And so when you look at a 16% EBITDA margin for that segment, just know that there's a lot of investment in LoadPay. Obviously, we believe in that investment. We think we can triple revenue next year. But I just want to say that we'll continue to describe "core" payments, so that people can see what has happened to the business we began in 2021 and mark our progress. Totally understand want to be accountable for that. But please don't ever view that what payments is doing and load pays part of that as anything other than part of the core long-term strategy. And together those business believe will generate 50% EBITDA margin or better. You will see it continue to progress and the type of revenue in that segment is going -- is extremely attractive. So sorry to riff on that. I just think it's helpful, and I want you to understand how we think about it. so investors can understand internally how we view those 2 lines of business working together in a single segment.

The next question is from Joe Yanchunis from Raymond James.

I was hoping we could pivot to the Intelligence segment. So segment revenue was relatively flat. But in your shareholder letter, you noted you contracted $1 million of incremental annualized revenue.

So when should that begin to show up in reported results. And then additionally, what is the expected revenue contribution from the trusted freight exchange with Highway excuse me, embedded in your 2021 outlook? And kind of a little more on that, how should we think about the potential intermediate-term revenue opportunity from a exchange?

Yes. Thank you for the question. So the bookings from Q4 were generally 30 days, right, from booking to billing. So that has already started to show up in the Q1 numbers and that will continue to do so. As for TFX, the contribution, TFX is still very new. While we are counting on it as a driver for revenue growth for this year, it is not the largest opportunity that we see. We believe the largest opportunity is actually the cross-selling opportunity with our audit and payment customers. That, for example, only 14% of our current audit and payment customers are also using our intelligence solution. So that's really where we see the largest opportunity. And Todd and I are both already working very closely with our sales and commercial team to ensure that, that happens in '26. .

That was very helpful. And just with the inter-quarter and excellence of J.B. Hunt, as you mentioned earlier, 8 of the 10 brokers are now in your paying with network. I understand [indiscernible] business model has evolved since inception. Success really isn't reliant on the adoption from competing factory companies. But at what point of factors feel pressure from the brokers to adopt your payments network? I'm curious to hear your opinion on that potential catalyst.

Yes. That's a great question. I don't -- the answer is, Joe, I don't exactly know. The -- if you think about how the network actually works and how factors work. And factors are very technological forward businesses, way more, I think, than people expect. And so what they are trying to consume in the network is information about the transaction to make a prepurchase decision.

And I'm going to let Kim come clean up anything I say afterwards because she knows this stuff so much more deeply than than I do. But the -- we have 60 to 70 network backers, and we serve those factors. We try to make their processes easier. Obviously, we're pushing data to them. So I don't know if, ultimately, the "pressure" comes from the brokerage industry, I think at some point, factors will just decide, -- have they updated their own technological stack to be able to ingest the data we can give them in a way that makes their business easier, more than its brokers forcing them to do something they don't want to do. Kim add on to that.

Yes. What I would say is, I think the payments network really helps factors become more efficient and being able to transact through payments rather than directly with the broker. And so you have 1 place to go for many rather than contacting many brokers for just a single invoice.

One last -- I mean it's a great observation. I think we owe it to you to admit or we can celebrate what we got right, but we should also own what we got wrong. Like I thought the way this would work for factors would turn out differently than it has. The network has grown in ways I didn't foresee. The ability of other factoring companies to come in and use this has had some success the majority of the top 100 use it. But for the largest, they haven't they don't consume it in quite the same way I foresaw. So look, that's what happens is when you set off to do something that hasn't been done before. You get some things right and you get some things wrong. .

And I totally understand that and completely fair. But with the current business model, if a top 10 factor were to opt in, you're going to see those conforming or network transactions go up in general for the network. But is there enough volume right now where a factoring company could derive savings from lower head count from joining the network?

Yes, I would absolutely think so. I mean if you're talking about a top 10 factor, you're talking about a lot of invoices that are being processed. And so you're not looking at just prepurchase decisions. You're also looking at payment statuses. So I do think that they're going to get front-loaded and back loaded efficiencies through the network.

So it sounds like the biggest -- we're still at the carat phase of getting factors to join versus the stick phase. Is that fair?

Yes. And I don't -- look, I don't think you build the best business models doing anything with a stick. That's just not in our DNA. It's not how we we operate. Like we have a value proposition we've offered to shippers, brokers, carriers and other factors and when we tell you what the value is going to be, we're going to do our dead-level best to deliver it. And if that works for you and the way you run your business because not every factor runs their business the same way, not every factor uses the same technological stack technology stack, then I think that they can trust our brand reputation to do what we say we will do. But if they built their business in a different way, then I think they'll continue to operate in a different way. And ultimately, Joe, I think we talked a lot about network transactions. We still report it as a I'm not sure it's the greatest KPI as important as it once was. Since we gave it to you, we want to continue to give it to you. I think things that I focus on is what Todd disclosed earlier, which we need to put in the letter going forward, which is the percentage of actual payments that we are charging a fee on because that means that demonstrates in black and white that the network has gotten more valuable. So in the end, the way the network is delivering value and is being monetized is not exactly what we thought it would be 5 years ago. but the long-term prospects are at least as rosy as we thought it was going to be 5 years ago. .

And the final question is from Donald Broughton at Bolton Capital LLC.

It sounds a little bit like the qualified versus unqualified opinion by an auditor, right? I read it a couple of times, I'm like, I think I know what it means, but [indiscernible] rate, what does that mean? Okay. I am so sorry. But first of all, what we saw on our side was a picture of 2 very attractive dogs when you started [indiscernible]

[indiscernible]

[indiscernible] then it went blank the audio went out for a second. Sorry, indulge you about what does what mean.

It's one of those things is kind of like a qualified or unqualified opinion by auditors. It's though it's counterintuitive, I sat there [indiscernible] the negative credit loss expense in that benefit.

Negative credit loss expense just implies that we had greater recoveries than we did new provisions or charge-offs -- those recoveries of prior period expense that we took.

That would have been my guess, but it was like I really don't know. So I don't feel special, play a companies either GE and others who had all kinds of issues let's say, these are things. Can you explain a little bit more about the risk in that business? Is it duration matching what your borrowing and what you're lending at? Is it improperly assessing the creditworthiness of the of the person you're lending? Is it the assets underlying? Where is the risk exactly?

So if you're referring to our credit loss expense in aggregate, I would say it's the second of those things. It's understanding the risks associated with the underlying borrowers we lend in a lot of different ways to a lot of different clients. And looking specifically at those clients within each of those businesses is the most important thing that we do. It's not really about duration. Duration plays to our advantage because we have a very, very short duration on average, specifically in our factoring business and the mortgage warehouse. And so as we think about how we manage credit risk going forward, we're focused on things, first of all, that are aligned with our transportation strategy. So those are areas where we're going to tend to lend more and more over time. And we will continue to lend in other areas that provide other strategic benefits to us. So if you take the Community Bank, for example, that is the source of our low-cost deposits, which really is valuable to the enterprise as a whole. Other lending businesses may contribute to the business, but it's very important for those businesses to have very tight credit policies and discipline to avoid creating any noise or distraction for management or for investors. And so that's how we look at those businesses. .

So the ABL business, I would think that would be not necessarily as what you want to be pursuing the most places isn't it just kind of a complementary business to the things you're doing? Using your factor freight bill than I own trucks and trailers and those are assets use obviously understand.

Sure. The ABL business, we did expect to have strategic benefit to transportation. You can think of other offerings, ABL light, ledgered lines, things like that, that might work with clients that no longer need factoring or for which those offerings would be a better solution than factoring. In practice, that hasn't really played out. We haven't seen that really take off. And so we've been left in the ABL business with nontransportation-related exposure. And so -- yes.

Okay. That makes a lot more sense. I would have thought would have been something complementary to your business, but like many businesses, do you think that's going to be a great thing and you're walking into it and then you spend a little time and you go, well, not quite one of our plan. But -- congrats on a good quarter.

There are no more questions at this time. I would now like to turn the call over to management for closing remarks.

Thank you all for joining us. Stay warm, and we'll see you next time. .

Good morning. It's 9:30 in Dallas. We'd like to thank you for your interest in Triumph, and thanks for joining us this morning to discuss our third quarter 2025 results. With that, let's get to business.

Aaron's letter last evening outlined a quarter of continued execution on our revenue growth goals as well as the initial results of our push towards lean operations.

There was a bit of noise this quarter related to our restructuring efforts, and we highlighted those nonrecurring portions of that in our commentary. There was a lot of positive momentum in the quarter through a very tough market, as evidenced by continued revenue growth of our payments business. We plan to continue executing on our ability to grow revenue, expand operating margins and improve shareholder returns in whatever market we face. That quarterly letter published last evening and our quarterly results will form the basis of our call today; however, before we get started, I would like to remind you that this conversation 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 statement. For details, please refer to the safe harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to that safe harbor statement.

With that, I'd like to turn the call over to Aaron for a kickoff and to welcome you to our Q&A.

Aaron?

Thank you, Luke. Good morning, and welcome. This quarter's letter, I think, is reflective of the evolution in our business that I've been talking about for the last few quarters. A focus on revenue growth continues to be sure. but also demonstrating a commitment to operating margin expansion. I believe we made meaningful progress this quarter toward that end with our restructuring efforts, which will reduce our expense run rate and also in our revenue growth efforts as they continue to gain traction. Now one thing I'm happy to talk about on this call is the freight market, but I will not talk about it as an excuse. It is what it is.

We must play the cards we're dealt, not explain how things would be better for us if our cards were better. Irrespective of what the freight market does, we expect revenue to go up and expenses to be flat at this time next year. We can't always control the offense we can play, but we can certainly control our defense. Now through the tech investments we've made, we have created a unique value proposition to the transportation market. We've also been able to realize efficiency in operations that when you couple them with the announced restructuring allowed us to cut 5% of our expense base with the majority of those savings commencing in the fourth quarter.

This restructuring does more than that. It also organizes our go-to-market strategy around our customer verticals, brokers, carriers, shippers and factors. This realignment allows us to better serve our customers while creating operational leverage that supports margin expansion. We have called for 20% annual growth in transportation revenue, and we intend to deliver. We also intend to drive margin expansion by becoming more efficient while growing revenue. Finally, I want to address Tricolor. We have included in our quarterly disclosures and update on our position in that credit that is based upon our review of the most up-to-date information available to us.

At present, we believe we remain adequately secured in that credit. We remind investors that this is a highly fluid and evolving situation, subject to ongoing legal proceedings. As such, we're unable to provide further detail or comment at this time beyond the information we provided to you in the letter. We will, of course, have further updates for investors in future periods as this matter progresses.

With that, I'll welcome everyone to the call and we'll open it up for questions.

[Operator Instructions] The first question is from Matthew Olney.

I wanted to start on the Intelligence segment. When do you expect to take the fully integrated product to market -- just trying to get some thoughts on what to expect from Intelligence segment in 2026.

Thanks for the question. I appreciate it. the fully integrated product is actually in market right now as we speak. So look, we've been part of the Triumph family for 160 days. We've achieved quite a lot of things from integrating the legacy Triumph team, the Greens and the ISO team. We've relaunched the brand. We've revamped our go-to-market strategy. And as per your question, most importantly, we've integrated the products, which in my 30 years' experience in this industry is unprecedented.

There's plenty of examples of companies that have grown through acquisition and still haven't integrated the business or the brands in years, right? So I'm very proud of that achievement. I'm pleased that the company gave us the opportunity to do that. And now we have that integrated product, and it's my job and the team's job to go out and win the market.

Okay. I appreciate the details there. And then if I move over to the factoring segment, it looks like the -- the revenue growth has been in that mid-single digit to high single digit over the last year. And I know you're investing a lot in that business from factoring as a service, the increased automation -- any more color on what that revenue growth could look like next year within factoring? And obviously, the macro is [indiscernible]. So just assume no change in the macro. .

Yes, Matt, thanks for that question. Our target for growth is 20%, and we're looking in a variety of different ways. We're going to market right now with the most robust playbook that we ever have had. And I think it creates opportunities for us to drive revenue, not only with our core factoring product, but with the bundled products that we have. So I think the opportunity, not only in the large segment because we still see opportunities there. through the fall in Angels people who have come out of the banking environment into the factoring space as well as continued consistent growth in our small carrier segment.

The next question is from Tim Switzer at KBW.

Sage Robinson, jumped on board TPay a quarter or 2 ago, RxO just joined pretty recently. Can you help give us an idea of how much of their expected total volume is onboarded. Are they fully onboarded at this point? Was it all in the Q3 run rate? Or what should we expect in terms of that ramp?

Yes. In terms of their payments business, all of their payments volume is onboarded at this point. .

Tim, is just that the -- the payments business is onboarded, I think the revenue growth opportunity in those partnerships because it's not just a vendor relationship there. I mean, certainly, we're providing a vendor service in managing their payments, but -- in those instances, we're talking about a partnership to revenue from those is just beginning. That is not fully in the run rate.

Got you. Okay. Okay. And were they fully in the run rate for Q3 in terms of TPay volume?

Well, the [ TPA ] volume was in, but we have not charged them fully for the payment services yet that's part of the area.

The payments volume is on ramping up the revenue associated with the payments volume. .

Okay. And is the contract organized in a way that eventually they will be paying 100% for every invoice?

We don't ever Tim, for any customer. We're never going to speak about the details of their contract. -- right? I think we told you in the letter -- in saw where you did the analysis of what we charge on audit and payment. And as with any business, when you're dealing with large customers, they are there are terms and contracts, the timing difference between beginning the service and when they're paying their ultimate rates, there's going to be a lag in that, but we would never comment on a specific customer's contract.

What I can tell you is if you look at payments, and we gave you the numbers in the letter of what the infill opportunity is in our existing customer base. if all those customers are paying full rates. And I think over time, they will because the network is that valuable for them. This exercise of collaborative selling and going and showing these people what they're saving and what they're saving in fraud by outsourcing their payments to us.

I'm a believer in the value of our proposition and obviously, the marks a believer. But if you just look at that, like the infill opportunity plus the revenue growth opportunity for that business on just the fee income side before we get into anything else related to interest income, liquidity -- the float, all of those things, the market is seeing the value in the network. After 6 years of a lot of work and a lot of investment they're seeing it. And if you were to just look at payments and you were not to include the investments we're making in load pay, -- the EBITDA margin in that payment segment would be almost 30% because load pay is a start-up piece of our payments business.

Now if you think about that margin, it's plus the growth rate of revenue in that business, looking at last quarter and this quarter, I think that's pretty exceptional. It's taken us a long time to get there, but we've delivered on it and we intend to continue to deliver on it.

The next question is from Joe Yannis at Raymond James.

So I'd like to tackle the revenue question a different way. in 3Q, you had $240 million of annualized transportation revenue, and you continue to target growing translation revenue by 20% a year. So this implies roughly $50 million of growth in 2026 absent a freight recovery. I think roughly $20 million will probably come from intelligence and load pay. And you also called out $42 million very high-margin revenue opportunity from increasing pricing for Triumpay customers. Generally speaking, can you help us bridge that $50 million revenue gap that's implied in your outlook?

Well, I think you've already started along that journey. So if we just take it segment by segment, I mean, Tim just spoke earlier about factoring. So factoring for the quarter was roughly $40 million of revenue. what's going to change over the next year to move from a single-digit growth rate to a higher growth rate? The answer is not what the freight market will do. The freight market is going to do what it will do, but I -- that's not -- that does not affect our analysis. What does affect our analysis is this will be the first full year in many years where growth in factoring has been a very high priority for us.

You will remember a couple of years ago, we were limiting growth. That is no longer the case. Number two, the value proposition we are offering to the market. It's not just about liquidity and converting receivables into cash. It's about load pay and all the other things we do about instantly getting funded on weekends. No 1 else can do that. So even with a slow growth market, even with all the headwinds, my expectation is that factoring is going to grow 20%, and we have a plan to go do that. In payments, you've already laid that out. You can see what great leadership Todd has delivered the opportunities, once again, we have the infill opportunity of growing revenue with customers who we have delivered value to for many years.

Second, we have the go-to-market opportunity. We have a very full pipeline, and you will hear us announce new customers joining the payments network. And just those 2 things alone on a fee income basis, our payments business will grow. Inside of payments, you've got load pay, which doubled over last quarter. And we've given you the number that a linked and funded load pay account is $750 of revenue. What I would tell you is that's what it is a seasoned account that's functioning primarily as a digital banking account. We have some accounts that are on an annualized basis closer to $4,000 and $5,000 because they're using the debit card significantly and the interchange fees, which we've disclosed are high. But more than that, as we alluded to here, using our intelligence product and the things in our value chain, we can turn load pay into more than just a digital banking account.

We will turn it into a business companion. And if you do that, -- and we will be doing that in 2026. That $750 number is very light on the revenue opportunity that we will achieve as we continue to grow that business. And finally, you come to intelligence. And Dan said it perfectly, we chose and maybe it wasn't -- it's not popular, but I believe it's the right thing to do. We took 4 months to fully integrate that acquisition, the ISO acquisition and our legacy the data we generate, again, the reinforcing power of the value chain, all of the data we touch in our audit and payments business in order to give the market the most precise AI-driven analysis to help brokers run their business. And now that she's equipped with that, and the team is equipped with that and that we have relationships with almost every broker in the industry, and I believe a very strong brand reputation of being people who do what we say we will do.

I have very high expectations that, that $10 million run rate is going to grow substantially in 2026. And so that's how I would put it all together for you is the value chain and all of these things reinforce one another. We have invested in our brand to be people who deliver value to our customers, and we're ready to go. No matter what the freight market does -- we're going to go take market share this year, and we're going to do it at a time while expanding our margins.

I appreciate that. I have a few more load pay questions, but I'll hop back in the queue for those. One thing I wanted to touch on now. So per the FMCSA with proper enforcement Roughly 5% of drivers will exit the market over, call it, the next 1.5 years. In 2018, 5% of the drivers exited the market due to an electronic logging device mandate in spot rates skyrocket. I know we're in a different type of market and the capacity leaving the system through immigration reform won't be a sudden, but all else equal, how do you think immigration reform could impact average invoice prices.

Yes. I put this in the letter, the FMCSA said that 3.8 million -- they're 3.8 million drivers. We would size the 4 higher market between 1 million to 1.3 million drivers. And Interestingly, when you look at the breadth of our factoring business, we probably touch 6% to 7% of all trucks on the road in the for-hire market, specifically. I have a firm conviction that the majority of people, the nondomiciled CDLs and people who did not go through the proper channels to be in a truck, work in the for-hire market. So if this ends up being enforced, it is going to cause more distortions in the for-hire market and the smaller end of that market, then it will with large fleets or obviously company-owned trucking enterprises just because the way the vetting criteria works.

I just want to say like, I've been in transportation now for '13, '14 and years, seen a lot. It is an immigrant driven business, and I think that's fantastic, right? We've watched people build successful companies. We've somewhat vilified these drivers, but I'm not sure that they should be the [indiscernible] in the story like these people are also working very hard. But if you put those people in a truck and they are not trained, it's a danger to them, a danger to others. And if you have electronic logging devices that can be reset remotely from overseas and these drivers, just creating shadow capacity. And so if the government were to follow through on enforcing so that everyone has the opportunity to earn a fair living in trucking, invoice prices would absolutely go up. And so we'll see. They said a lot of things.

We'll see what they deliver on. And what we want is every trucker to thrive. That's our goal. I mean spot market going up would be fantastic, but we run a long-term business here. We want to see truckers be treated fairly. And I mean they're a huge part of our economy -- they're driving 80,000-pound trucks on our highways. We want to see every trucker drive, and we want to see well trained, well compensated, taking care of people driving those trucks. So -- that's a little bit of a soapbox in the answer to your question, but I'll repeat the answer I started with. I believe if that were to be enforced, you will see more distortion in the floor higher market than you would in the overall market. So I hope that answers your question.

It did. Thank you all back in the queue.

The next question is from Gary Tenner at D.A. Davidson.

So I had a question about load pay. I know it's still fairly early on and then you added a lot of net new accounts this quarter. I'm curious about what you've seen so far in terms of retention or churn. I mean is the experience so far once an account is opened or look count is open, have they proven to be fairly sticky in terms of ongoing utilization of the extent and the product?

Yes, they have. So we recognized early on that the account opening is just the first step. And it was really critical to get those accounts linked and funded to be used the way that they should be used for the client. And so a lot of work has gone into making sure that we establish those linkages -- we're up around 70% of the accounts getting linked very quickly after account opening and then the funding follows when they actually have a load for which they're paid. So that results in a very high retention rate. It's also the thing that, of course, drives the opportunity for monetization early on.

I appreciate that. And then I do appreciate all the color you gave on the revenue side a few minutes ago. Just wanted to touch on the expense side. Obviously, with the reduction in force that you announced earlier in the quarter or earlier in the third quarter and your guide on fourth quarter expenses, obviously, a much greater focus on that side or that part of the P&L. Just as we're looking out into 2026 and maybe it's premature for any thoughts around this. But I actually think about managing the expense part of things, you talked about a focus on improved efficiency ongoing into 2026. What kind of marker measuring sticks would you be thinking about for the expense side of the equation next year?

Gary, if you look at the way that we kind of framed our fourth quarter at 96.5%. And I think Aaron mentioned during the first -- during his opening comments, that -- we're looking to be right at about that level a quarter or a year from now. So what does that imply? That implies that throughout the course of 2026, we're going to have to find more ways to be efficient. -- and the expense reduction initiative that we announced recently is really the first hourly evident step in that direction. But we we've got the same annual compensation and benefits resets that will -- that we always see in the first quarter of 2026. So there could be a little bit of upward pressure early in the year, but we are looking to continue to find ways to get more efficient across our entire platform throughout the year. It's not an overnight process, but it's something that we are committed to.

And Gary, just to look, you cover a lot of financial institutions. And in the banking world, obviously, managing margins and efficiency initiatives I mean a lot of people go through cycles of doing these things. I just -- I want to be clear on something. So first of all, just to reiterate what Brad said. -- million is what we expect Q4 of 2025 to be $96.5 million or better is what we expect Q4 of 2026 to be and the gyrations in between there, just like their gyrations and revenue tied to the seasonality of our business. But as we're thinking about efficiencies, we wouldn't be sitting here telling you that we think we can drive 20% revenue growth if we were cutting off the very things that create value. I mean, for example, we, this quarter, still invested $110 million in technology on our cost base.

A lot of people talk about JPMorgan is going to spend $18 billion if you were to do the math and compare it, like on a relative basis, we still spend 3 to 4x what they spend on our expense base on technology. And technology will continue to lead us forward. We will continue to enhance the products. The thing that's happened is that we have gotten to a level -- I mean, there's just been a tremendous amount of heavy lift to get us to where we are now. And we began that lift, frankly, in a market where we had such tailwinds that it was harder for people to see. And the conviction was to stay through that lift when those tailwinds turned into the longest set of headwinds anyone has seen since the deregulation of trucking in 1980.

We are largely there. And you can take this proprietary data set that we've created, and you can use advances in AI and all the things we do to start to automate tasks internally without taking away from your product road map or without taking away your sales functions, I mean we are out in the market all the time with people. And so -- it's -- this is not a cost-cutting exercise. This is an efficiency in getting lean exercise and frankly, figuring out how the 5 pieces of our value chain can work better together, so we're not duplicating product development work in silos, but instead doing it as a cohesive unit. And so that's how we intend to get there. And we've been, hopefully, very explicit with you now on what our expectations of ourselves are to continue to grow revenue and hold expenses flat. So I hope that's helpful.

It is, I missed your opening remarks. So I appreciate you flagging that. .

The next question is from Hal Gotcha B. Riley.

Good morning, everyone. Thank you for the detail. Ari, I think you made a comment where you said we are not limiting growth in factoring anymore. And I was just curious if you could explain a little bit more of that statement in your target for 20% growth perhaps you guys could give us a color for like your feel for a bridge of the components of that or how much of that would just be have normal market lift if things got a little better, maybe that's midsiand how much of it's really idiosyncratic to your strategies to gain share in that space? That would be helpful to help us understand how you go from basically where you're at now, which is back to growth 3 quarters in a row, but maybe a target of 20% help us bridge that kind of the math there...

So the first thing, I'm not going to talk about an improving freight market. I've talked about that 3.5 years, and I have no idea. This may be the new normal forever. Who knows? But we're focused on what's in front of us. But a couple of things. And Tim and I have been in this business now and seen a lot of things. So when the payments network began right? We felt there was a need at the beginning to really try to divide the world and so that you had our liquidity solutions, which is our factoring business, which is meeting the working capital needs of carriers. And then you had the payments network, which was going to serve all the parties, including other factoring companies. And we've done that. I think we have 50 to 60 factoring companies who use the payments network who continue to use the payments network.

And what we learned was there were going to be people who are going to use that functionality in the payments network, whether we were growing factoring or whether we were holding factoring study and -- as we continue to focus on, it's less about factoring, and I just want to be super clear about this, it's about the customer. So you put the customer at the center of the universe and factoring is 1 of several products equipment finance, insurance, load pay that you want to sell that customer to help their business. And so with a customer-centric viewpoint, we're going to go where the customer leads us. We're not out there trying to reprice the factoring industry or go after other factors. We don't think we need to do that. Frankly, factoring as a percentage of all invoices over the last 10 years has grown because factoring has gotten more sophisticated -- and as a result, more carriers and see it not just as a -- I need immediate liquidity, but literally as a business service, including the ability to lower their prices on fuel I mean, in many cases, the fuel aggregation discount that a factor can provide more than offsets the revenue that customer pays in order to turn their invoice into cash. right?

So it's actually a net positive to their bottom line when they use our fuel card and get instantly paid versus just having collected that invoice in 30 days later without financing. And that's why the industry grows. So putting the customer at the center, delivering the customer more than just factoring. I mean if that's what they need, that's what they get, but we're delivering them a value chain of interlinked things that nobody else in the marketplace has all of those things. And we want truckers to thrive. We want owner-operators to thrive. We want small fleets to thrive. We want large fleets to thrive. And we have a value proposition for each of them. And so if you run to that value proposition with our market position, we believe we're going to grow 20%, and we believe the market will continue to grow. And so I don't know that the market will grow 20%, but our expectation of ourselves is to grow 20%.

The next question is from Tim Switzer at KBW.

You mentioned earn in your letter about some opportunities in the Intelligence segment with shippers. And you mentioned about a pilot program to achieve a critical massive shipper data. Can you provide some color on how exactly you're achieving I guess, obtaining the shipper data? And like how many shippers are you partnering with? Or anything you can provide around that?

Yes, I'm going to start this off and then Don is going to give you the detailed answer, but I would say we already make about $4 billion of payments for shippers in our payments business. So I mean it's a pilot program that begins with a B. So that helps. This is not starting from ground zero. But Don, what else would you say?

I would add to that, that the ISO business has already been supporting several shippers throughout their history, we have about a dozen or so shippers that are already on the performance intelligence products. But what we're really talking about in this product, the pilot project is the combination of pricing and performance for shippers to help them benchmark themselves against the market. our hypothesis is we need about 10 to 12 shippers -- or sorry, 10 to 15 shippers or roughly $500 million in freight under management. as a data sample. And we're getting that data the same way that we have built our broker data sample is through direct submissions from the shippers themselves through TMS integration on their book loads or paid invoices, whatever the case may be. .

Got it. Very helpful. And then real quick, are you guys able to provide an update at all on that nonperforming equipment finance loan you purchased last quarter and your confidence in being able to recover the $11 million you charged off when you bought it?

We feel just as good about that today as we did when we announced it. .

The next question is from Joe Yannis at Raymond James.

All right. So for starters, I understand load Pay is a relatively new product. You have a massive distribution channel for this ever-evolving load pay. Are you firing on all sales right now trying to sign up new accounts? I know it looks like you're going to hit your year-end account target. But given the vast number of owner-operator drivers on the road, you're barely scratching the surface on really penetrating this market. What's the biggest challenge right now in growing your loan pay user base?

I would start to say by saying that we are firing on multiple fronts, and we feel really good about that. So the multiple fronts that I'm referring to are a to our broker partners, our own organic sales efforts and then sales efforts that are occurring through our factoring business. All those are -- all 3 of those are contributing meaningfully to the totals. All 3 of those have the opportunity to scale further. And so yes, I'm very comfortable that we're going to continue to accelerate the growth in account openings that you've seen so far. And we may be just scratching the surface right now, but -- it's not too far out where it's going to be much deeper than that.

And Joe, here's what -- don't miss this. I mean, to me, this is extremely important. So think of load pay as it now exists as something like Venmo with a debit card. Think of load pay where it will be in the first quarter of next year as a full-service banking account that is built with a bunch of specific enhancements of truckers. And then finally, think about load pay where it will be towards the end of 2026 as a full long business companion with an embedded intelligence offering, those are that's a radically different product that our customers will be consuming than the 4,500 customers that we've currently added. So -- we do have a distribution network that I would argue is unrivaled. We touch almost every for-hire trucker in the United States between our own factoring business and our payments business. So -- and we have partnerships with some of the largest providers in freight.

The product that people are consuming now, it's not a beta product. I mean it's a real product, but it is getting better literally every quarter. And it's getting better because we have an embedded technology team that's doing great work. So yes, I mean, firing on all cylinders. Well, I mean, I think, again, you have to answer that question of, am I more concerned now about going from 4,800 customers to 10,000 customers? Sure. That's important. But what's really important to me is completing that journey from Venmo to banking to banking beyond because I know that the unit revenue from that is much higher, and my costs are not much higher because we already do these things inside of our value chain.

So again, it's not just about distribution, it's also about product development. and we are well on our way.

I appreciate that answer. I want to shift gears here. So it seems like factoring as a service is starting to gain momentum. -- what level of transaction volume through Factory as a service, would you need to see in 2026 to view this initiative as a success?

Look, for us doing factoring, whether it's for our first-party business or for a third-party business, it's factoring. Like what Tim and team do that the operational execution is the same. I'd really split that question around to our partners and say, what do they seek to achieve? I mean we are the platform that empowers them to grow. This is not our business in the sense that we control the marketing levers and the growth engines. If I listen to what C.H. Robinson has said publicly, if I think about what I believe RXO and our future FAS partners want to do, they want to monetize the payment experience. And more than that, genuinely more than that, they also want to bind themselves closer with their carriers because they want carriers repeat business to thrive.

And so it's their goals that are more important than mine. We have built a factory that can do factor in for ourselves and anyone else that needs it. And so it's a success to us if it's a success to them.

Okay. I appreciate that. And then just one last one for me. You guys have the new buyback in place. Just any commentary on how active you plan to be in the near term?

Yes. I mean we're not going to speak to the timing of that. Look, what we can say is our intent is to use the buyback with -- from earnings. -- right? We are in the process of growing earnings. I can see that. And if the market gives us an opportunity and we can do it safely and soundly. We -- that's a very nice tool to have in the toolkit. But we didn't announce this just because we intended to be out in the market tomorrow. We want that tool in our toolkit to -- as just part of our overall capital planning strategy.

The next question is from Matt Olney at Stephens.

Yes, thanks for taking the follow-up guys. There was some commentary in the letter that certain types of nontransportation lending is no longer part of the core lending strategy. Can you just kind of clarify what is and what is not part of the core business? I'm just trying to appreciate how big initiative this is to exit some of these nontransportation loans? And are you accelerating this after seeing the tricolor -- or are you just reiterating what you've said previously?

I'm just reiterating what we said previously. Look, I think about -- there's 2 parts to the core business. There's the 1 we spend 90% of the time talking about which is the transportation business. But there is also a very healthy underlying community base, right? If you look at our metrics, you look at the financial performance of that bank, you look at our deposit quality -- that's core to our strategy, and the bank will always be core to our strategy. What we don't want to have happen is we don't need to be talking about community bank credits, right?

We need the community bank to be safe, sound and by and large, it does that. But in the past, as we sought to generate revenue to reinvest in the business, we've been in things like liquid credit. We're winding that business down. right? And so what I mean by that, Matt, is anything that's no long -- that's not core when we're talking about the community bank itself to traditional community banking, I think you're not going to see expansion from us away from that. You're going to see us retrench to that core as you see our transportation business continue to grow.

Okay. Appreciate that. And then on Tricolor, it sounds like based off the letter, you work to confirm the location of the collateral and feel good about that. And with the borrower and bankruptcy, what's the next data point you expect to hear on this topic. I'm just trying to appreciate that this could drag on for a while. And then if the collateral is a depreciating asset. At what point do you look to monetize the collateral and start selling the inventory?

Yes. Based on the bankruptcy time line, we're going to know a lot more in 3 weeks. That's not to say we will necessarily be liquidating collateral that quickly. That may take longer. But there are different segments of the collateral, and this is important to note. There may be portions of the collateral that we're able to liquidate right away because there's no question about the fact that that's our collateral, and we should be able to move forward with that. If there are others who think they have claims on that collateral, then that's a process for the court to figure out.

We feel really good about our position in that. And of course, we're going to let that happen. But the liquidation could start relatively soon and could extend on for a period of time. I don't think we'll be in this credit a year from now, but it's hard to say anything for sure when you're talking about a bankruptcy of this size.

The next question is from Adam Meade.

A question on maybe the medium- to longer-term competitive landscape. Now that you've proven the model and the ecosystem -- where do you anticipate challenges from competition? And how would you compete with Triumph, if you were on the other side?

Yes. So if we think about the value chain, audit payments, liquidity solutions, digital banking plus and intelligence. In some of those lines of business, we have almost no competitor. I mean there's -- there's competition everywhere. But in other lines of business like intelligence, there's the main providers. So look, if you're me, my LinkedIn feed, my Twitter feed is filled with freight tech. And it's like every week, someone is coming across with this game-changing announcement, right? This new technology they're going to disrupt a system that's desperately in need for disruption. And what I've seen is change management is really hard. You can build really cool technology, a really cool feature set.

You can tell a really cool anecdotal story looking at things in hindsight, but change management is hard. When we -- and so if somebody wants to come after factoring. Well, I mean, frankly, that already happens. There's 400 factoring companies. We're the second largest, like -- you just got to figure out how to go to market, you got to compete with us and cost of funds, and you're going to have to do more than just payday lending because that's not what we do. right? We truly help truckers thrive and grow and have seen people start with 1 truck and have 100 trucks and it's an American success story. So you want to compete with us there. It's I mean, I guess, arguably straightforward, you're going to need the balance sheet to do it.

If you want to compete with us in the network where we touched 47% and of all invoices and from a payments perspective and 64% of all invoices than from the depth of -- when you add both audit and payments together, I mean you're going to have to create an interlinked solution I guess the person who comes after us can do it way better than I've done, right? It's taken 6 years and an amazing team to do this, our compounded annual growth rate over 6 years is over 100%, but it has been extremely hard. So if you want to do that, you're going to have to integrate one thing, again, to create cool technology. It's a whole another thing to integrate into legacy technology systems upon which a plethora of vendors use because nobody has a huge appetite right now to completely redo their tech stack. So again, it's change management as much as technology innovation.

And then finally, on intelligence. I mean, look, there is a well-known leader in that industry, and they're a great company, right? And they've been in a market-dominant position for a long period of time. Our secret sauce and intelligence, if you want to beat us is you have to get more true transactional data than we have. And you can't -- I don't see how you get there at the scale we have unless you have the payments network, right, because that automatically causes us to touch a significant portion of all transactions. So the veracity of our data I would already put against anyone in the world unquestionably, like it's there. And the density of that data in both lanes and by actual movement type, it's not just a load. I mean, is it a hazmat load? Is it a team load? Is it a drop trailer load? Like there's so many nuances under the surface of these invoices that you need to know.

And so if you want to do that, you got to find a way to get to the source of truth to a massive scale of data, and then you have to build the artificial intelligence-driven models that we've built that speak back to the broker and help brokers manage their margin. Like that's what we're trying -- we're trying to help truckers drive, brokers manage their margin, the whole thing work more efficiently. So that's why you come at things from a value chain. It's all interconnected together and -- and you can't really piecemeal into what we do because if you look at that chart we put in the letter, we took each customer segment, and we showed you the things that those customers consume from us. You want to go do audit for broker, that's great. Can you do payments? Can you do intelligence? Can you do liquidity solutions if they want supply chain finance?

So we're not going to set on our heels. We're going to continue innovating. We are going to continue to manage our business in a way that delivers value to our customers because you treat people the way you would want to be treated, that's how you create long-term success. And then we benefit from Six years of really hard work of building this network and integrating with almost every legacy provider out there. So that's how we view our market position, and we got -- we still got work to do.

Great. On the capital allocation side, how do you think about, I guess, paying down some of the expensive sub debt or even the preferred stock versus share repurchases?

If you think about the way that our balance sheet is structured from various pieces of capital, we're pretty well in balance as we sit today with Tier 1 and 2 capital from a regulatory capital perspective. So I don't think that you're going to see us do things like retire sub debt or the preferred stock in the near term. I think we're pretty well in balance. .

Okay. Just finally, on the factoring side. In your letter, you stated that the instant decisions for owner operators, was 58% versus 15% for the larger fleet. I guess intuitively, I would have thought it would be the reverse. So maybe you can help me understand the dynamics there. .

Adam, I can address that. When you look at how those different segments present information to us, it's done completely different. So the individual owner operator submits it at an invoice-by-invoice basis through our portal. When you take into consideration the large fleets, they do it in large batches of data and images. And so it's natural that the large fleet submitting a batch is going to -- is a different model than the owner-operator model or the small fleet -- the very small fleet model. And so ingesting that is completely different.

Our teams are working through it, and we believe that we're going to bring that number up -- but currently, it's 15% is a good number. It's just not where we're going to be. That's not where our target is long term. The true fact is that the people that utilize Instant Decision the most are that -- is that small fleet. And when you look at the small fleet and their need for capital and our ability to provide that 24/7 using our load pay product, that is really where the rubber meets the road for us. So hopefully, that answers your question.

It does. I really appreciate it. Thanks for your time.

[Operator Instructions] There are no more questions at this time. I would now like to turn the call back to Aron for closing remarks.

Thank you for joining us this morning. We look forward to seeing you in about 3 months. Take care.