Q2 2021 Triumph Bancorp Inc Earnings Call
Good day and welcome to the Triumph Bancorp incorporated second quarter 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
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Please note. This event is being recorded I would now like to turn the conference over to Luke Wyse. Please go ahead.
Good morning, welcome to the Triumph Bancorp conference call to discuss our second quarter 2021 financial results before we get started I would like to remind you that this presentation 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.
If you're logged into our webcast. Please refer to the slide presentation available online, including our Safe Harbor statement on slide 2.
Those joining by phone. Please note that the safe Harbor statement and presentation are available on our website at www Dot triumph Bancorp Dot com.
All comments made during today's call are subject to that safe Harbor statement.
I'm joined this morning by Prime's, Vice Chairman and CEO, Aaron graft, our Chief Financial Officer, Bryce Fowler, Todd Ritterbusch, our chief lending officer, Geoff Brenner, our CEO of triumph business capital and Brad Mas our treasurer. After the presentation, we will be happy to answer any questions. You may have at this time I'd like to turn the call over to Aaron Aaron.
Thank you Luke good morning.
Second quarter, we earned net income to common stockholders of $27.2 million for $1.08 per diluted share adjusting for closing costs related to the hub Tran acquisition adjusted earnings per share for $1.17, such.
Before I go into specifics on the quarter I want to address 2 topics.
First on July 15th we announced the price valor will be retiring on September 1.
Price has been my steady companion since triumph became a bank. He is a great friend and teammate he's in the room with me today and will continue to be in the room and she serves on our bank board of directors. Following his retirement, we wish them nothing but the best in his well deserved retirement and all of US joined together and thank him for all he has done.
Our palm prices retirement, Brad boss will be promoted to Chief Financial Officer. Brad has also been part of our team since the early days and speaks to the depth of leadership, we have built over the last 10 years Brad's promotion is the culmination of prices mentoring within our succession planning process and investors and team members should win.
A seamless transition.
Brad has deep experience in broad areas of finance and banking and most importantly, he is steeped in our culture of transparency innovation and servant leadership.
The second topic I want to address is a change in the way we present our results beginning this quarter, we reconfigured our reporting to break the consolidated entity into 4 reportable segments, consisting of payments factoring banking and corporate.
The payments segment relates solely to the activities of triumph pay making it easier for investors to see and monitor our progress.
The factoring segment is unchanged from before and consists of all factoring both transportation and non transportation at triumph business capital.
The banking segment is unchanged from before with the exception of removing trying to pay and includes our traditional lending and deposit relationship banking activities as well as our mortgage warehouse lending ABL, the liquid credit portfolio and equipment lending.
The corporate segment also remains unchanged from before containing our holding company activities and certain expenses to support the overall operations of the company.
Now turning to the quarter. It was a strong and eventful quarter for TV <unk> with a number of positive things to call out.
Before covering those I think it's appropriate to address noninterest expenses as I'm sure investors have questions given that the number grew just under $10 million from last quarter to this 1.
If I were to break that increase into a few buckets. It goes like this $3 million were professional fees associated with the hub trend acquisition. This is not a recurring expense $1.3 million was for hub tram operations in amortization expense for the partial quarter.
This is recurring and we expect <unk> to add $3.6 million of expense per quarter going forward.
$1 million wasn't additional bonus accrual in the second quarter.
Operating metrics have improved significantly over the first quarter I would expect an elevated level of accrual through year end.
$2 million was for additional stock compensation expense. This is recurring and reflects grants made to our team largely at triumph business capital and try and pay including the new team members from hub trend for.
Finally, $2.6 million of additional compensation for new team members and commission expense on sales at triumph business capital and trying to pay both relate to the exceptional volume and growth I will discuss later in this call.
Going forward, we expect quarterly expenses of $71 million through year end.
Triumph business capital continues to grow and execute with excellence a few interesting facts about the results that speak to the current market conditions during the second quarter triumph business capital crossed over 10000 active clients.
Our client count is not the perfect proxy for growth because for triumph business capital a single client can be a 500 truck fleet or just a single owner operator. It is noteworthy given that we were at 8835 clients in the first quarter and 6302 clients in Q2 of 2020.
<unk>.
The client growth has continued into July with a very strong pipeline that is averaging more than 1000, new client applications per month.
This is a significant list lift versus any prior period in our history. During this quarter. We also saw several days in which purchases exceeded $50 million and we averaged nearly $48 million per business day for the entire quarter.
Triumph business capital purchased approximately 1.4 million invoices and increase of more than 200000 over the first quarter.
Second quarter Triumph business capital factoring revenue was $47.4 million and the dollar volume of invoices purchased was $3.1 billion. That's an annualized run rate of approximately $12.4 billion in purchases average transportation invoice sizes, where $2090 for the quarter.
Given the size of TBC relative to our balance sheet investors should understand that 100 dollar move up or down in average transportation invoice prices would impact annualized EPS by about 26 cents per share.
To that point, we often receive questions about our economic outlook and how long we expect this transportation cycle to continue.
Everything we're currently seeing and reading suggests strength in the spot market through the end of the year and some transportation experts are beginning to speculate it could continue well into the first half of 2022.
Given the multitude of variables that affect transportation, we're not comfortable making any projections for 2022.
Turning to try and pay on June 1st we closed the acquisition of hub Tran and made good progress in the integration of our teams and systems uptrend broad client relationships and integrations with over 225 freight brokers and 55 factors, we have not lost a single factor or broker following the <unk>.
<unk> in fact, we have added 5 more factors to hub Tran, including a couple who had not begun negotiations until after the acquisition announcement.
The acquisition resulted in $27.3 million of intangible assets and $73.7 million of goodwill additional detail on the acquired intangible assets will be in our 10-Q, but total amortization expense on all of our intangible assets will be $6.5 million over the last 2 quarters of this year.
While there are not a lot of quantitative items to discuss as we continue to integrate the teams and products. These additions are factors and freight brokers are a testament to how the industry views. What we're building. We now have 60 factors and 482 freight brokers, who were trying to pay customers hub train customers or.
Both our focus going forward is to create full product relationships with each of them as we build out the network you can see the metrics on slide 11, and 12 of our deck.
During the second quarter triumph pay processed $3.2 million invoices paying almost 93000 distinct carriers as of June 30th we have paid 135000 distinct carriers in the last 12 months, which is over 50% of all active carriers.
Second quarter payments processed totaled approximately $3.4 billion, a 49% increase over the prior quarter and a 413% increase from Q2.2020.
Try it pays annual run rate payment volume as a result was $13.7 billion. This was an exceptional growth quarter for trying to pay.
We've added a new section around try and pay beginning on slide 7 in our investor deck as we want to be clear about the metrics that matter. In addition to the $13.7 billion annualized run rate going through trying to pay currently hub Tran touches companies with an additional $13 billion in volume that volume is.
People, however, it would not be appropriate to count it as true payment volume.
To be specific we need to define the difference between the current hub SRAM product and the triumph paid product at least in the current state of affairs to our freight broker clients hub Trans serves an audit function, allowing these clients to validate that invoices as presented are correct paperwork is in order and the invoices.
For the broker to pay.
For our factor clients hub trend serves the same audit function, allowing them to determine whether or not to purchase a particular invoice and also provides a mechanism to present and process. The invoice by the factor for purchase.
Try and pay on the other hand specializes in the presentment of invoices and the payment of the invoice on behalf of the freight broker.
But prior to hub trend was missing the audit functionality that we now have combined these 2 technology platforms create seamless presentment audit and payment of transportation invoices.
We expect the merger of these technology platforms to be complete in Q1.2022 until that day, we will continue our practice of only reporting payment volumes on what triumph pay actually touches. We will also report additions of factors and brokers on both products in the near term as you see on <unk>.
12, and call out brokers are factors, who utilize both products.
We expect to finalize pricing for the combined technology in the third quarter as I said, we expect to deliver an integrated product in Q1 of 2022 with the ability to offer a fully conforming transaction solution at that point, meaning little to no human interaction in the full cycle for presentment through audit.
Payment.
To urge investor patience as these results come in even with an integrated product in 2022, a meaningful trend line for the revenue growth and profitability of this business is unlikely to emerge until 2023, creating a payments network is an exceedingly complex endeavor beyond the technology build it.
Our sophisticated integrations with thousands of market participants.
Following these integrations ultimate success requires participants to modify their operating procedures to take advantage of the efficiency data security and fraud mitigation. The network offers in other words try it pays customers need to see the value we're offering in their bottom line before we can meaningfully see.
In hours all of this is happening as we speak day by day, we moved the ball further down the field and revenue in volume is growing quarter over quarter.
We remain as excited and committed as ever to the future of try and pay impart because of the size of the market to this and I'd like to call your attention to slide 13, the addressable market for broker freight is not simple to define however, based on the best available sources of information, we can find and our own internal data we built.
Leave the for hire market to be 420 billion with about $170 billion of that in brokered freight and 250 billion in contract shipping.
Slides 14, and 15 break that addressable market out by volume and participants at $13.7 billion in annualized payment volume try and pay has a lot of runway in front of it.
As we stated last quarter, we are providing the metrics as we have in the past, but due to the shift in strategy towards the open loop these metrics and what we monitor for success will change going forward.
With that said I'd like to call your attention to the new triumph pay segment table in our earnings release. This table breaks out try and pay reporting elements. While also presenting the data in an EBITDA format. We believe this is appropriate and useful to investors given our direction towards fee income versus balance sheet growth for triumph.
Now I would like to turn the call over to Todd Ritterbusch, our chief lending officer.
Thanks Aaron.
First I'd like to provide a brief update on our pandemic relief efforts.
Loans on pandemic related deferrals are down to $54 million or 1.1% of total loans.
Over 80% of our 2020 originated PPE PPP loans have been forgiven and PPP loan forgiveness resulted in $1.8 million in fee recognition during the second quarter.
We have another $90 million in PPP loans that were originated earlier this year and all outstanding PPP loans represent another $5.2 million in fees that will be realized as they're forgiven.
Moving to our core lending activity, our equipment finance business represents a steady source of loan growth with $95 million in new originations in the second quarter, which was our second highest quarter ever.
As we've rebuilt our ABL leadership team and sales capacity, our ABL pipeline has grown and represents additional growth potential for the latter half of 2021 from the first half from 2022.
Our mortgage warehouse business balances declined 245 million through April and May and then partially rebounded in June.
And overall mortgage warehouse loan balances remain at elevated levels with deposits growing $111 million during the second quarter as we continued to deepen existing relationships.
Our community Bank loan balances continued to shrink due primarily to the repayment refinancing of credit only CRE loans, However, community bank deposits and fee income continued to increase as we acquired and expanded more deposit and treasury services clients.
For the second quarter, our weighted average interest rate on new non PPP originations was 6.1% led by equipment finance at 6.7% with ABL and general C&I lending at 6.2%.
Margins on commercial real estate remain compressed and we expect continued runoff from this portfolio until long term rates normalize.
Finally, our core lending credit quality remained solid our reported NPA ratio was 97 basis points in our reported past due ratio was 2.28% the U S. P. S misdirected payments and the over Formula advances both discussed in our earnings release contributed 34 basis points and 61 basis points too.
These ratios respectively.
I'll now turn the call back over to Aaron.
Thank you Todd with.
With all the talk about transportation and payments.
Investors appreciate the growth in our high quality deposit base non interest bearing deposits grew approximately $166 million and now represent about 38% of total deposits.
That is up 164% since we announced our plan to focus on this discipline.
It is gratifying to see the fruits of that effort.
Couple that with a net interest margin of almost 6.5% our return on assets of just under 2% and a return on tangible common equity of 21% all while incubating a fintech have considerable upside value and we are very pleased with how things are going with that we will turn.
The call over for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
Our first question today comes from Jared Shaw with Wells Fargo Securities. Please go ahead.
Hey, good morning, everybody.
Good morning.
Great Congratulations.
Wish you the best in retirement, it's been great working with you over the years since since drops from public.
Maybe just a.
Sticking with starting with expenses.
You called out.
On the Delta I guess this quarter 3 million of professional fees that are likely to not be there next quarter, but sticking with the 71 million a quarter, where where does that $3 million.
Difference going to end up is that just going be.
Is that the full quarter impact of hub trend.
$3.6 million Youre talking about or is the hub.
<unk> trend going up $3.6 million from where it is now.
Oh.
Youre right I mean, if you if you on the first part when we were.
Call. When we were bullet pointing this out that was only a partial period for hub trends. So I believe a full quarter of hub trend will add another $2.3 million to debt run rate. The other 700000 would just be in other investments, we're making and try and pay in PVC.
Okay.
And then just looking you know you called out for 100 dollar change in average invoice size equates to 26 cents per share on a full year basis is that 26 cents per share of of.
Revenue or is that of EPS, because I guess, you know average invoice sizes up 92.
This quarter and we didn't really see that that flow through due to the biggest equivalent delta in EPS I think.
Although that's earnings per share of Jared.
The way that the way that we look at that it. It has a lot to lot of moving parts in there because that has a lot to do with what the what the volumes are.
On a client basis as well, but you've got to remember we do just as much work on a 500 dollar invoices, we do on a 'twenty 100 dollar invoice. So those there's not a lot of difference between revenue and earnings when it comes to those.
Deltas.
Okay. So I guess, just this quarter, though when we look at some of the.
Higher comp expenses and incentive expenses that were called out.
Versus I guess, the $63.4 million run rate expectation last quarter of total expenses without it that's more of a onetime catch up to reflect where the businesses now and then additional invoice increases would flow through that's the way we should think about that.
Largely that is correct Jared part of the bonus accrual this quarter was catching up back to Q1, because performance has been so exceptional that the way our met internal metrics work, we needed to increase that allocation.
We're there to be a meaningful increase from here and invoice sizes, we're already running so far above plan I don't think you would see a meaningful bonus increase on top of that of course, there are the sales commissions and all of those things that are tied to certain metrics, but.
I think ultimately what we're just trying to help people understand is Directionally 100 dollar moving invoices when try and business capital is approaching 45% of our revenue is going to have an impact on revenue and and there will be other moving parts and there were just 1.
Investors to be able to understand how.
Correlated some of this outperformance is with where the market sits today.
Got it okay. Thanks, and then just finally for me I guess.
Can you give an update on.
The spot freight market continues to be really strong is it at a level, where you're actually seeing.
You know people start come off the sidelines and either via truck or drive their truck more you know in the past you've talked about that cycle of spot freight rate being higher or people coming in to the market and then the cycles. Thanks.
Getting saturated and going back the other way, but we actually started seeing that build yet in terms of an increase in the number of drivers out there on the road.
Yes. Jared. This is this is Geoff Brenner worsening added capacity in 2021 over the capacity we saw in 2020.
There continues to be supply chain and availability of tractors are an issue.
For example, we were talking with a very large client of ours last week, who is able to get new tractors, because they ordered in advance and did a lot of smart things during the downturn.
But the market right now just for used tractors for 250000 miles on them.
Almost he's able to sell those almost for the same price is what he pays for a new 1 so you're seeing a lack of availability in terms of the assets you need to move and that's.
42000, new tractors.
Entered the market is the best number I've seen and if that equates to about 3% capacity lift. The same reports suggested volumes are up 16%. So there is capacity coming in but the volumes continue to outstrip it.
And another thing that's happening is as you see the client growth at triumph business capital. Many of those truckers were already driving they were just working for someone else, but as the market conditions have gotten as strong as they are now they're leaving a larger company that they released dawn.
When and getting their own authority and when they do that they generally need a factoring company to provide liquidity and back office services. So that creates a bit of a perfect storm for us and all I think probably the entire factoring industry, you're driving more new carrier authorities, but because of a lack of them.
Availability of new equipment, you're not adding a bunch of equipment.
Which in past cycles trucking companies a lot like banks don't handle cycles, well right. They do they we.
It would be too much capacity would come into the system and it would struggle.
Market forces with switch and then you'd have a down cycle here that lack of availability of drivers and equipment is plus just elevated demand is help me just understand that new client growth at triumph business capital is capturing.
We don't have perfect numbers on this but I would suggest for you. The vast majority of those new clients were already driving trucks for someone else Theyre now just driving for themselves.
Great. Good color. Thanks, a lot guys.
Yeah.
The next question comes from Michael Rose with Raymond James. Please go ahead.
Hey, good morning, and thanks for taking my questions.
I thought slide 13 was was really interesting, especially as it relates to the Tam for the brokered freight market is a little bit larger than I thought it.
<unk> had been or was or at least according to our team.
Here do you think thats, a temporary number and will come down just because of the pandemic.
Work from home and things like that or do you think that is actually a sustainable and growing number. Thanks.
We think it's growing we've called brokered freight of 150 billion around here for the last 3 to 4 years, but as we dig deeper into the data as we get better data from try and pay integration and what we're seeing.
We believe that market is growing.
And it would be appropriate Michael to point out here some day.
We report numbers to you when it comes to try and pay especially.
A 40, almost 50% growth quarter over quarter in payment volume.
What I mean.
That's an outstanding <unk>.
Number.
When you would look at also the underlying amount of transactions because in a market in which invoice sizes are getting smaller because the market's contracting or pricing is getting weaker what we still measure for try and pay as adoption.
In a down market in freight it might you might say brokered freight could drop back to 150 billion for $160 million or.
Our overall thesis is that the brokered freight market brokers are taking more market share just because of the superior technology.
And the way they are able to be nimble hiring drivers.
And we don't see that trend changing.
Okay. That's helpful. And then I know you haven't talked a ton about the contract shipping market and I appreciate the color on slide 14.
Just given the upside potential can you talk about obviously that the flip to the open loop network is great focus on the brokered freight market, but can you talk about how.
And the role that triumph pay would play in the contract shipping market, which obviously, sorry slide 13 is a bigger Tam and.
And what the competitive dynamics are in that market relative to the to the brokered freight market, where you're much larger at this point. Thanks.
Sure. So first of all I would say, we're already processing payments in the shipping market for some very large names, including Medtronic and Johnson controls, we pay truckers on their behalf and we have more tier 1 names coming.
In that space in a couple of tier 2 names EBIT this coming quarter.
I think the way to think about it or the way at least I think about it is.
Try and pay has now paid over half of all truckers and those truckers don't just hauling brokered freight they hauling contract and brokered freight.
And at some point in the next 12 months I suspect we will have paid 90% of all active truckers at the pace we're going.
So eventually the payments network and how it operates and brokered freight.
We believe we'll operate in a similar manner in the shipper market you have to provide the audit functionality to brokers provide 2 contract shippers and certain other things you need to do the brokers are very good at doing for their customers but.
Eventually if you've got a payment profile on a trucking company.
And the user experience is so digital seamless frictionless. The truckers are in our opinion eventually going to asked anyone they haul for hey, we want to be paid by attracting because it gives us the freedom to choose them when we get paid how we get paid.
It gives our factor the fact, whichever factoring company they use the ability the tools to process things faster.
And so.
That's our belief that debt.
We think this technology I mean, we're already or more than a couple of billion dollars in the shipper market and we haven't talked about it as much but it is growing and as you move into that market more you're going to be seeing a higher proportion of the trucking companies you pay are going to be large trucking companies.
Well, we happen to think try and paint can provide value to them they don't need our financing solution.
For anyone financing solution in the actual payment process, we can streamline cash application and other functionality for them then and create labor savings. Then we think there is a value proposition for both.
Contract shippers and trucking companies that serve that market and the trucking companies that serve that market also serve the brokered freight market.
So we view the total addressable market is 420 billion. It doesn't mean all parts of the market will interact the same way with the payments network, but our intent is to move as much of all of that volume onto the network as we can because we think there's value for everyone who touches it.
That's very helpful and maybe just 1 more for me the annualized.
Payments volume at 13.7.
Obviously a big.
Big number.
At this point I know previously given some guidance there with hub trend in the mix at least through through year end do you have any.
And just what you can see from the clients that you've signed up I mean do you have any sense at least by year end, what a reasonable target.
For for payments volume could be thanks.
I don't know if you annualize the month of June we're running 16 billion.
And there is more volume coming from existing tier 1 integrations that we've already announced and there are more tier 1 integrations coming in the <unk>.
Third quarter so.
Honestly, Michael I don't know that I can hazard, a guess that it's there.
There is a whole lot of opportunity and there is a lot in the queue.
And part of that will depend upon what.
The spot market does an invoice prices, but it will go up.
And I think you'll see it go up significantly.
And 1 thing I would point out and we tried to make this very clear because we we don't want to mislead people that the upside the $13.7 million in payments is what trialpay actually paid hub.
Hum Tran has integrations with freight brokers that touch another $13 million of payments, but we are not making those payments and wouldn't count that to our benefit and lessen until that freight broker becomes a full triumph pay customer. So when you think about how to train at least between now and the first quarter of 2022.
What you ought to be thinking about is the integrations. It brings as the metric that matters, because those integrations give us a warm lead to build into a full triumph pay relationship both on the factoring side and the freight broker side.
So I can't point, you to specific volume payment volume that will come solely as a result of hub trend being part of our mix, but what I can point you to is 60.
Factoring integrations and 258 freight broker integrations that hub train already has that once we have the fully conforming product in first quarter of 2022, we'll be well situated to come in from the network.
Upon that prior hub trans relationship and that doesn't just include the integration the API integration, but also just knowing who theyre doing business with and getting to know try a pay as a result of that existing relationship.
I'll try to follow up on that with those coming integrations in the first quarter of 2022, what is the payment volume that hub trend is currently experiencing I'm just trying to get a ballpark of what that could look like once every country has no payment volume hub trend provides audit functionality.
<unk> to $13 billion of transactions of its customers. That's what it touches it does not have payment volume. It never made payments. It was an audit solution that was integrated into the operating processes and procedures of companies doing payments on their own.
So I can't promise anyone that every hub trend customer that currently exists is going to move all of that volume on to try and pay I think the value proposition makes it very likely that we will win a majority of that business, but there is hub trend has added zero payment volume to what try and pay.
<unk> has done to date when it did bring was audit functionality that allows us to finish the build out that we're going to be delivering to the market in the first quarter of 2022 of our network that can provide a fully conforming transaction with presentment audit and payment with minimal human interaction.
Understood. Thanks for all the color really appreciate it.
The next question comes from Brad Milsap with Piper Sandler. Please go ahead.
Hey, good morning.
Good morning.
Brian Congrats on your retirement I will definitely Miss talking to you.
Aaron.
Just kind of curious.
You guys have started to.
Talk about the payments network in the in the market I know you've discussed you know an interchange fee. It's anywhere from 20 basis points, maybe as high as 50, just kind of curious.
What you know maybe initially you've heard from from customers or if you're kind of testing you get out there and talked about it.
Company closer to kind of where that could potentially settle.
Yes, we have done a lot of work on that Brad and 1 thing I would say is it is unlikely we will be defining this fee as it applies to the market as an interchange fee just as we've gone out and sat and talked to people and understood what they need what they want where the value comes from.
It will more likely be a there'll be a subscription fee for people who use the network and then there will eventually be a network fee that's tied to the number of fully conforming transactions.
I mean, the general narrative, we're telling the factoring community is whatever we can demonstrate your cost savings to be.
We think that our ASP would be roughly half of that so half of the net value provided to them falls to their bottom line and that doesn't even count fraud mitigation.
So.
I believe in the future Brad that on a total fee basis. When you include those.
Both subscription fees and network fees and our share of the upside created by the network I still believe we will be within that range. We gave you but.
It won't start their day, 1 and we have demonstrated to the market like they have to tangibly see it and no debt. It will also likely be a lagging fee.
In other words, we have to show people in their bottom line. Okay. This is how much you saved this year when we price it for the future.
And we think thats the appropriate way to get the market to adopt what youre doing and make the investments and the operating procedural changes you can't ask them to pay the money upfront and hope the savings will come and that's why we were I made the point of urging patients revenue is going to keep growing.
And fee revenue will grow faster than balance sheet revenue in net in that space. That's our that's what we're targeting.
And so I think eventually we will get into that strike zone that debt.
You referenced I don't know that we'll call. It interchange fees like I said I think it's more of a subscription fee and a network transaction fee.
And so we will have my intent is.
We are meeting with.
Dozens and dozens of factoring companies in freight brokers this quarter to demonstrate the product demonstrate what it does.
And so my expectation is we will be able to give you clarity on exactly what we intend to do with pricing on the third quarter earnings call.
Sure.
Great very helpful.
From this point and I know you talked about $71 million expenses kind of near term I mean, what type of investments do you think you've continued to make the kind of.
Get the technology, where you want to be I mean.
There are a lot of comp related expenses in this quarter, but you're up 20% year over year obviously.
The pub train in there as well but.
Does that pace begin to slow down or do you think you've got more money to spend to get where you want to be for the huge revenue opportunity.
Yeah.
The majority of the senior team.
At at try and pay is in place and we have great leadership, Jordan graft leadership.
The vision that he casts its exceptional at Shire Melissa form in the people we've added underneath them and so what you saw in this quarter was them starting to realize the stock compensation that day, well deserved and it's also good for us because that connects them to our future and so that <unk>.
Non rate picks up a lot of those in the.
The technology staff in the hub Trans staff, who just started.
We have several people.
Who are just.
We needed to make sure we're incentivized to stay with us and see this to the end we still have senior people that we will need to hire along the way no doubt.
But I think the bulk I don't I cannot foresee Brad another quarter, where you see a jump like we had between these 2 quarters I think the $71 million run rate in Capsulate, a whole lot of talent that is warehouse in this organization.
Both technical talent financial talent otherwise.
As we have to keep a pretty large integrations team right now that is going now being.
I mean every time, we onboard a new customer we have to have technical resources available in real time to do that integration and so that all lifts here now I would expect any jumps going forward to be incremental not.
As significant as you saw this between the last 2 quarters.
Got it very helpful. And then just final question for me.
Can you add any color to the Jamba doctoring yield this quarter was up about 115 basis points is that just more seasonal because volume even stronger or.
A mix issue just kind of curious.
Kind of what drove that increase.
Yes.
Geoff Brenner I think like 1.1 important couple of important metrics on on the jump. If you look at Q2 and you compare it to Q1.
Average invoice amounts increased by about 5%, which is this tailwind that we talk about but our purchases increased by 25%. So youre seeing a lot of growth in purchases in client count that outstrips, the increase and the tailwind.
So.
And we're not adding proportionately more and more people to capture that volume. If you look back just on the growth from Q1 to Q2, it's mindboggling and the team is manage that incredibly efficiently. So.
Youre seeing.
Higher than ever revenues higher than ever purchases higher than ever client counts.
And it's a trailing.
Staffing and cost matrix, that's chasing that so that's producing better returns and to the specific question. He was asking is the yield difference quarter over quarter. I think some of that also Brad has to do with the TFS transaction winding down.
Those TFS receivables, where price low to begin with and they were a drag on a GAAP basis.
And so as you see that go away, we are returning to more normalized historical run rate for us.
Got it that makes sense.
Thanks for all the color.
Got it.
The next question comes from Gary Tenner with D. A Davidson. Please go ahead.
Thanks, Good morning, everybody.
Wanted to just ask about taking a step back from China, and how churn for a second to triumph business capital. Obviously the performance. There has been has been tremendous.
My understanding or at least from past commentary is that is that with the pivotal triumph.
That was maybe going to be some additional development of current business capital in terms of integration with the bank and are from products to its factoring customers can you talk a little bit about kind of plans for that side of the business, even as you run that kind of concurrently with growing.
Okay misnomer.
Yes. Good morning, this is Todd Ritterbusch.
Jeff and I and a number of the leaders in our respective teams have been working really hard on this and so there.
Called 2 main elements. This in the near term, we're working very hard to get our people to work together on specifically our salespeople. So that we understand 1 another and the value proposition that we can present together to have 2 of TBC client and so that work is going really well with net sales conferences, we've aligned incentive plans.
Working relationships develop and we're seeing good improvement in referral activity from TBC into the bank to create.
Manage broader relationships for longer term is the development of the my triumph portal to include all of this as well. So the <unk> portal is that factoring portal debt are factoring clients use today.
Very nice online system for looking at all of the factory related activity of the client imagine that being expanded to look more like a holistic online banking platform, where you see the factoring dashboard, but you also see key information related to the other products and services that the client uses or banner advertising.
2 to cross sell those products and services to the clients with specific offers and so that part of the process that technology development will take a bit longer and will.
Probably not be fully available for at least the low year or so.
Great. Thank you.
The next question comes from Brady Gailey with K B W. Please go ahead.
Hey, Thanks, Good morning, guys. Most of my questions have been answered, but I did just have 1 last 1 I mean it seems like.
Everything is going just great related to the growth in PE and the build out of that business and the acquisitions and it seems like you guys are clearly on the right path there.
To create something big and special.
Aaron and your opinion, what are the biggest risks to ultimately be successful with T. K.
Well I mean there.
Of course whenever.
Ever you handle the volume that T payers handling there is cyber risk to that I mean, that's just an omni present risk that we have to build around.
Beyond that from a strategic perspective, Brady I think the risk would be to try to monetize it too early.
The way we do this right as we demonstrate to each client the savings that they are experiencing the fraud mitigation that they are experiencing the data security for the first time ever in this network.
We can prevent people from U misusing unmasked data so protecting everyone's data and you show people that they need to think about it they need to see it and they need to plan for how that affects their business processes in the years to come.
And so as long as we stay committed and keep telling investors Hey, if you want to invest in US you need to understand this is a long term play that depends first and Paul first of all on getting a level of market adoption. So that a significant portion of transactions become conforming.
<unk>.
And so that takes time and so anything we do that jeopardizes. The trust that people have for us in the network from the factoring community. They have to trust that they get to compete heads up with our own factoring company debt.
Freight brokers have to trust that were protecting their data, which we are and so anything we do that doesn't allow them to experience that value before we try to get paid for it to me jeopardizes the vast amount of goodwill we have right now.
And Moreover, we have to make sure that payments go to the right people and that sounds really simple for those of you sitting on the other end of the phone, but I will tell you for the team. That's here when you onboard a new tier 1 broker and now you've got 60000, new clients that come with that truckers that need to get paid and you have to.
No, which truckers have factoring companies and who gets paid at what address in real time every day it's.
It's a significant.
<unk>, a significant amount of our $71 million of overhead goes into making sure. We can pay hundreds of thousands of people every day with precision and there have been times, where that has gotten overwhelming for us and we've had to pull it together and add more people to solve the problem.
Now getting better at.
Managing not projecting that that discipline, but if you start if we were to get if we were to sell more than we were able to service and therefore, we had misdirected payments.
Not end up where they where they should go then there would be a loss of confidence in the network and so the network has to inspire confidence and everyone who touches it and I am committed to doing whatever I have to do whatever resources, we have to have to make sure that never happens and that would be the most existential risk I think.
<unk> to this not working.
Alright, thats good color.
Don't think youre going to be able to answer. This next question Aaron but how many years do you think it'll take.
To get keep a where you want it to be.
Well I think about that in multiple phases right. So the first part of it is establishing for the entire trucking industry that <unk> is the preferred way to get paid.
Because of all the value it brings.
I don't think that is as far off as you may think.
There's not many of the top 1000 freight brokers, we haven't touched spoken to or already have integrations with.
We're already talking to tier 1 shipper clients and have significant amount of those that were engaged with.
So in 3 to 5 years.
I think we will have had all the at bats.
We need to become the ubiquitous Payment's network for this space.
For second and more interesting question is how long does it take for us to monetize this in a way debt investors and Fintech investors Bank investors whomever can look at operating margin that they're used to seeing in SaaS type companies.
And my guess is that that is going to lag the land grab if you will the adding the volume it is going to lag that by 2 to 3 years, because you have to give people time to.
We experienced the product change their processes to engage with the product and then you can get paid adequately for the product.
So this is a long term game I mean, it's a giant addressable market 400 billion plus in payments being made for 250000 different trucking companies and.
We're going to do whatever it takes to make sure that we deliver value to everyone involved and I'm willing to.
Invest in this for this to be a drag on earnings for Us and.
Until such point as everyone sees it adopts it and then then we'll start to price for it. So I gave you a lot of words without a specific timeline because I don't know I've not done this before and no one's done this before in trucking.
Perhaps the specific answer on number of years would be that what volume we have in the next 3 to 5 years would be the tell for how much of the market. It's going to give you a a sightline into how much of the market will ultimately come to use this tool.
Okay got it thanks, Aaron a high price good luck in retirement.
I look forward to working with you.
Thank you. Thank you.
As a reminder, if you have a question. Please press Star then 1.
The next question comes from Matt Olney with Stephens. Please go ahead.
Hey, good morning, everyone. This is Tom when they're on for Matt only for a couple of quick questions for me.
So hub shrimp payment fees last quarter were about $1 million for 1 month of being on the books is $3 million going to be a good way about thinking about that for the remainder of the year.
Yes.
Alright, Thank you and then.
Can you give me an idea of the mix between refi and new purchase in your mortgage warehouse and then can you give me any near term expectations you have for your warehouse balances.
Yeah. So I would say is that the sales mix is shifting pretty significantly.
We saw a lot of slowdown in refi activity and.
And for a while there the new purchase activity was.
Holding up but more recently, we've seen new purchase activity declining as well so I don't know the mix as of today, but.
Clearly, it's it's been shifting more towards new purchase for for a little while now.
And it's still it's still decelerating faster than refi than it is new purchase.
Alright. Thank you and then just 1 final 1 for me can you guys give me any early feedback you have from factors that were formerly competitors about adopting triumph.
Yes, there is no uniform.
Answer we know a lot of these people were respectful competitors to them.
The.
I guess, what I would point you to is none of the existing factoring companies who are on hub Trans technology left after the acquisition and we added 5 more so.
The idea that that everyone would just vacate the market because they thought we would use this data for our own. Good I think we've gotten out in front of that I mean, we still have work to do to convince factoring companies that this is in their best interest and we will help them win going forward, but early returns are we've added factor.
The company has not lost any.
Alright that sounds good thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Aaron graft for any closing remarks.
Thank you all for being with US today and again, we do all wish price well in his retirement and we look forward to talking to you all next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.