For the second time in its history, TriumphPay, the payments and processing division of Triumph Financial, reported a positive EBITDA for the third quarter.
Achieving positive EBITDA has been a key objective for Triumph Financial (NASDAQ: TFIN) over the past several quarters. While TriumphPay recorded a slightly positive EBITDA margin in the fourth quarter of 2023, the figure was so minimal—$36,000—that it appears in the earnings history with a dash instead of an actual number. However, in the third quarter, TriumphPay posted a positive EBITDA of $70,000, with a 5% margin.
In a letter to shareholders, Triumph Financial CEO Aaron Graft highlighted the return to positive EBITDA but warned that future performance may not improve steadily.
“The freight recession is closer to ending than when it began, but that does not necessarily mean it will end soon,” he noted. “We are 33 months into a freight recession. That makes it the longest since deregulation in 1980.”
Graft’s letter also provided insights into the growth of the TriumphPay Network, which processes invoices through an open-loop system.
Increased Activity With C.H. Robinson
In June, TriumphPay partnered with the largest broker, C.H. Robinson (NASDAQ: CHRW), to utilize the TriumphPay Network. Graft indicated that the network’s financial performance partially reflects C.H. Robinson’s activity, although the 3PL only started utilizing the network toward the end of the quarter.
“That volume will begin to scale in Q4,” Graft said.
The letter included a graphic showing the “estimated payment volume” for the top 25 brokers as ranked by Transport Topics. However, these rankings have already changed due to the acquisition of Coyote Logistics by RXO (NYSE: RXO), which closed in September.
While RXO may now rank third, Total Quality Logistics (TQL) remains the second-largest broker, though TQL is not a TriumphPay client. If TQL joins, TriumphPay could achieve its goal of processing over 50% of broker invoices across its services. Currently, Triumph estimates the brokered truckload market at $110 billion, with TriumphPay handling an annualized $52.5 billion in the third quarter—48% of the market, including auditing services.
“To add density quickly, it makes sense to focus on the largest brokers,” Graft said. C.H. Robinson is expected to contribute additional revenue in the fourth quarter.
Additional highlights from Graft’s letter included:
The average size of factored invoices fell, partly due to lower diesel prices, which influenced total invoice amounts. Diesel prices declined more than the size of the average invoice, indicating some stability in freight markets.
Despite achieving positive EBITDA, total volume on the TriumphPay Network declined by 5.7% from Q2, primarily due to the loss of one “tier 1” factor, which Graft did not identify. He noted the ongoing struggles within the transportation industry due to the freight recession have significantly affected factoring companies, leading them to make tough choices.
However, the number of invoices factored rose by 3.3% sequentially and 3.6% year-over-year, reaching 1.48 million.
Triumph Financial managed to keep quarterly expenses below the $97 million target.
TriumphPay plans to launch an audit and payment product for the less-than-truckload sector in the fourth quarter.
The LoadPay offering, a digital wallet aimed primarily at small carriers, will also launch in the fourth quarter. Announced in January, this product includes Triumph’s estimate of active independent owner-operators in the U.S., suggesting there are around 200,000, despite the Owner-Operator Independent Drivers Association estimating 350,000. Graft commented that not all of those operators are active in the current market environment.
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