Trucking lender 'cautiously optimistic' market won't get worse in 2022

Dallas-based Triumph Bancorp’s second-quarter earnings report reflected that the bank — a leading supplier of funds to the trucking industry through factoring — sees “a long runway of growth on the horizon” despite some uncertainties in the near term.

“While there is definitely softening on dry van lanes that are most closely associated with consumer demand, we are not seeing changes in tonnage or volumes on flatbed, refrigerated units or nonconsumer dry van lanes,” Aaron P. Graft, Triumph’s founder, vice chairman and CEO, said in a letter to shareholders published Wednesday ahead of an earnings call with analysts on Thursday.

“Thinly capitalized trucking companies may struggle or fail during the second half of this year, but we believe that supply is still tight and new equipment is still in short supply due to supply chain issues. Considering those facts, we are (very) cautiously optimistic for a relatively flat market through the end of the year.”

Graft said going forward, Triumph (NASDAQ: TBK) will begin each earnings release with a shareholder letter, in which he will share key takeaways from the quarter, while continuing to hold a conference call the next morning.

TriumphPay, the bank’s payment segment, processed about 4.3 million invoices in the second quarter, a 38% increase compared to the same quarter in 2021. The dollar figure in the payments processed in the quarter at TriumphPay was about $6 billion, up 76% from the same year-ago quarter. For the second quarter, the annual run rate was $24.1 billion.

Triumph Bancorp Inc.	Q2/22	Q2/21	Y/Y% Change
Triumph Business Capital segment
Invoice volume	1.7 million	1.4 million	21%
Purchased volume	$4 billion	$3.1 billion	29%
Average trucking invoice	$2,176	$2,090	4%

TriumphPay segment
Invoice volume	4.3 million	3.1 million	32%
Payment volume	$6 billion	$3.4 billion	76%
Number of freight brokers	566	482	17%
Number of factors	69	60	15%

Company officials said they see TriumphPay as more than just an outsourced payments provider.

“It’s on a trajectory to become the payments network for the trucking industry,” Graft said. “TriumphPay is, in my view, the golden ticket to drive future shareholder value creation.”

The bank’s factoring segment, Triumph Business Capital (TBC), purchased $4 billion during the second quarter, up 31% from a year earlier. The average trucking invoice size in the quarter was $2,176, up 4% year over year. The company also bought about 1.7 million invoices in the quarter, up 21% compared to the same period in 2021.

Company officials said they expect trucking invoice sizes to remain flat the rest of 2022.

“I think we’ve benefited from heightened diesel prices and that factors into the average invoice size,” Geoff Brenner, CEO of Triumph Business Capital, said during the Thursday earnings call.

“We think the imputed higher diesel prices in these invoices has held them up from what we had called for, which is a gradual return to normal. Looking into Q3, if diesel prices stay at or about their current levels and if utilization stays at or about its current level, which is about 96%, we would anticipate cautiously optimistic return or holding flat and then an eventual return back to what you’d seen several years ago.”

During the earnings call, Graft said he expects more clients to join the TriumphPay ecosystem this year. The bank currently has 566 freight brokers, 48 shippers and 69 factors using TriumphPay services.

“We have a steady drip every quarter of clients coming into the TriumphPay ecosystem. It’s just that the ones that really move the needle are the ones we describe as tier ones because they control such a large amount of business — each one of them individually and certainly collectively,” Graft said.

According to the earnings release, TriumphPay has over $15 billion in annualized volume to add to the network. Company officials have set a goal of processing $75 billion in freight market payment volume through TriumphPay by the end of 2024, creating $100 million in revenue.

“Given where we are in the year, where we are in the integration schedule, I would actually expect for Q3, the gross payment volume to be flat to perhaps down slightly just if invoice prices do moderate even more,” Graft said during the earnings call. “We expect there to be a big spike upwards in Q4 when we go live with the first part of this group of new clients who are in the pipeline. It’s going to be chunky from there or it will be a step function each time a new one comes on just because of their size.”