Q1 2022 Triumph Bancorp Inc Earnings Call
Hello, everyone and welcome to the Triumph Bancorp first quarter 2022 earnings call. My name is amarin and I'll be coordinating your call today.
If you would like to ask a question during the presentation. You may do so by pressing star followed by the number one on your telephone keypad. If you wish to withdraw your question. Please press star followed by the number two when preparing to ask your question. Please ensure that your line is muted locally I will now pass the call over to senior Vice President of Investor Relations, Luke Wyse to begin.
Please go ahead Blake.
Good morning, welcome to the Triumph Bancorp conference call to discuss our first quarter 2022 financial results before we get started I'd like to remind you that this presentation may include forward looking statements.
The 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 two for those joining by phone. Please note that the safe Harbor statement and presentation are available on our website at Www Triumph Bancorp Dot Com <unk>.
All comments made during today's call are subject to the safe Harbor statement.
I'm joined this morning by <unk>, Vice Chairman and CEO , Aaron graft, our Chief Financial Officer, Brad Boston, Todd Ritterbusch President of television Keybank, Geoff Brenner, our CEO of triumph business capital and more performance, our newly appointed President of trials.
The presentation, we will be happy to address any questions you may have.
At this time I would like to turn the call over to Eric.
Thank you Luke good morning.
For the first quarter, we earned net income to common stockholders of $23 5 million or <unk> 93 per diluted share.
This was a very good quarter for TV.
We saw the typical seasonality that accompanies the first quarter of every year. However in this case, despite a modest pullback in volume invoice prices remained elevated such that purchases at triumph business capital were flat with the fourth quarter of 2021.
Try and pay for the number of invoices declined only slightly while the dollar value of invoices paid continued decline.
Overall I am incredibly proud of this team we control the things we can control executing on those items with distinction and continued to make investments in the unique opportunity before us.
In the first quarter, we announced the first conforming transactions in our trial pay platform.
As a reminder, our conforming transaction as a payment from a fully enabled try on pay pay or either a freight broker or a shipper to a fully enabled try and pay pay E either a carrier where they're factoring company.
On both sides of the transaction are connected via API would try and pay which largely automates the process.
What began with a beta test of two brokers and five factors in mid January is now 39 brokers and 17 factors, including five of the 20 largest factors and two of the 30 largest brokers.
While volumes are not material from a financial perspective, the progress forward seems to validate our thesis that this is a solution in the market desires from January 11th through March 31, we processed 53000 conforming transactions totaling $132 million in freight spend.
Conforming payment volume continues to scale rapidly with February and March volumes up 43 million and $86 million respectively.
As of the end of the quarter, we were processing <unk> hundred invoices, a day or about $3 $8 million in payment volume as conforming transactions.
In total during the first quarter <unk> processed approximately 4 million invoices paying just under 127000 distinct carriers.
We have now paid 168000 distinct carriers in the last 12 months first quarter payments processed totaled approximately $5 7 billion and eight 8% increase over the prior quarter and a 147, 7% increase from Q1 2021.
Try it pays annual run rate payment volume exiting the quarter was over 24 billion.
We listed as one of our metrics that matter. The continued growth in both factors and brokers that makeup both sides of the network.
A reminder, the sales cycle for tier one brokers can be multiple years, we only announced tier one additions by name when they are integrated and we are providing services on their behalf.
In the first quarter, we added another three factoring companies is try and pay audit clients, bringing the total number to 72. We also continued to add brokers to the network, bringing our total count of freight brokers to 558, who are trying to pay customers try and pay audit customers or both.
This number is down for brokers since our announcement earlier in March because we made some minor system adjustments to consolidate customer entity reporting. This approach is more consistent with how we think about our customers and prevents a broker's subsidiary from being reported as a separate customer even if it operates as such.
We think this is a more accurate way to look at things as a result of this move 28 brokers were removed from the broker count, but they didn't actually leave the ecosystem. These.
These reductions were offset by 27, new broker additions those changes along with the removal of some brokers due to acquisitions and the consolidation also affected counts for the quarter.
Of the 27 brokers added in the corner, all where tier twos threes and fours.
Seven of the brokers, we're integrated on triad payments 14, audit and six on both payments and audit.
Overall, we have three factors 44 brokers currently in the integration Q, including one tier one factor and for tier one brokers with expected go lives over the next three quarters.
Every quarter, we discuss how many distinct carriers, we paid in the last quarter and trailing 12 months or since inception.
Another important carrier number is the number of registered carriers on the network. These are carriers that have claimed their profile and try and pay and are now fully integrated for payments paperwork and all the benefits of the network. We added 15000, new registered carriers in the first quarter, bringing the total number.
To just over 106000 carriers, who have claimed their profile on the try and pay network.
Triumph business count, but also had a very strong quarter average purchases per day exceeded $60 million again for the quarter and the dollar volume of invoices purchased was $4 4 billion, a 62, 2% increase over the first quarter of 2021.
That's an annualized run rate of approximately $16 1 billion in purchases.
Average transportation invoice sizes were 2400 $1 for the quarter up $110 from Q4 of 2021.
In business capital purchased approximately one 6 million invoices down just three 9% from the prior quarter and a 34, 9% increase over the first quarter of 2021.
Try and business capital ended the quarter with $1 $67 billion in accounts receivable and receivables held for sale of 48, 9% increase over the first quarter of 2021.
This team just continues to surpass expectations achieving results that even without the benefit of strong invoice prices continued to break previous internal records.
There has been a lot written and said over the last few weeks about an eminent freight recession.
Our outlook is not as negative as the prevailing narrative in the media. Indeed, the market has rationalized as anyone would expect but consider this fact, our April month to date average transportation invoice size is approximately $2300 that threshold of $2300 per invoice.
<unk> has only been exceeded and for individual months since 2007.
We're not economists, but we do closely followed several key market indicators in this sector. In addition to our own internal statistics.
What our data shows is a gradual drop off from historic rates per mile offset by rising fuel costs.
There has not been a significant drop off in freight tonnage at triumph business capital, we are seeing trucking clients adjust to small rate adjustments on a downward curve, but the carnage. Some are predicting typically only occurs when a recession dramatically and swiftly reduces tonnage, which leaves trucks parked we do.
Not seeing any sign of that in the near future in my opinion. The media has seized on one side of a narrative to drive clicks and the market has just followed along.
Regardless of the direction of freight our job is to serve our customers in good times and in recessionary times, we have to be nimble enough to keep the business when everyone once in and wise enough to structure, our deals to weather the inevitable headwinds.
Our history shows we know how to do this well and we plan to continue that trend our revenue may fluctuate, but the transportation market, but we are well prepared to handle a slowdown in trucking.
One benefit of a slowdown in the trucking market has a heightened focus on the bottom line among our prospects when margins are thin people have to look for every advantage the promise of try and pay us to save our customers more than they pay us to use it getting the market's attention is easier when the tide goes out a bit.
And it's not just a race to cover loads or by invoices.
I expect any market weakness to create opportunities for us our focus doesn't change with short term moves in our stock price or the transportation market. We are building something that will benefit everyone. It is our primary mission and we will accomplish it.
Last quarter I offered expectations, our Q1 expenses at about $80 million, excluding any strategic equity grant adjustments and we were just short of that estimate.
We currently expect Q2 expenses of about $85 million inclusive of expenses related to the disposal group as we continue to invest in the opportunity we see in front of us.
Finally, let's turn to some unusual items this quarter.
As we continue to focus our efforts on the opportunities in the transportation market. We are in discussions to sell 15 television K bank branches and rural Colorado, and Kansas, the $159 million of loans and $20 million of other assets. In these branches are now reflected in assets held for sale on our balance sheet and.
<unk> $367 million of branch deposits Likewise are reflected as deposits held for sale moving.
Moving to loans to held for sale status created a $970000 benefit to our credit loss expense in the first quarter and once closed we expect a reduction in quarterly revenue and expenses of about $2 $2 5 million for revenue and $2 million for expenses respectively.
Second.
And another focusing effort, we have moved approximately half of the non transportation portion of our factory business about $70 million in net funds employed to held for sale anticipating a divestiture in the second quarter. This.
This move created a $420 benefit to our credit loss expense in the first quarter and once closed we expect a reduction in quarterly revenue and expenses of about $2 7 million in revenue and 300000 in expenses respectively.
As evidenced by these moves we will continue to simplify our operating model focusing our strategy capital and energy on the opportunities, we see before us and our transportation related businesses.
Let me be clear.
For time, nothing is as important as establishing a ubiquitous payment's network for the trucking industry.
Everything we do begins with that end in mind, we will continue to maintain diversity of revenue and funding is appropriate but overall our business model is narrowing its focus onto our ultimate goal.
With that we will turn the call over for questions.
Thank you if you'd like to ask a question.
Got it.
Please press star followed by the number one on your telephone keypad now.
Our first question today comes from Steve Moss from B Riley Securities.
Steve. Please go ahead. Your line is now open.
Hey, good morning, guys.
Maybe just following up on the tax receivable business here and Aaron you mentioned the rising fuel costs. Just if you could break out kind of what percentage that represents of the invoice. These days.
Just to clarify Steve what percentage.
As fuel.
Yes people related costs and.
In the invoice.
Yes.
It's in the market it really doesn't break out that way, Steve If you think about.
Theres too.
Primary ways in which loads of price there is long term contractual pricing, which may or may not include fuel surcharges. That's generally what larger carriers have when they're engaged with shippers.
For the factoring industry most of our invoices are being purchased from smaller carriers, many of whom primarily rely on the spot market and of course the spot market re prices every day, just like the equities market.
And so there isn't a specific breakout for fuel in the spot market. It's encompassed in the spot rate and so a reason that rates have stayed where they are even though revenues per mile or the rate per mile. If you exclude fuel is falling is because.
Fuel prices have gone up brokers or having having to offer a spot rate that covers that additional fuel costs or the driver is not going to take the load. So we can't really break it out what we would say is directionally roughly 40% of the cost.
Of an invoice is associated with fuel and that applies.
That generally applies.
No matter, where fuel is moving.
Okay.
That's helpful and then Aaron in terms of the local payments being processed.
Fully automated conforming transactions here quite the ramp up is that February and March goes on.
Maybe just any color as to where things are in April and kind of if you can any idea where you think that will head over the next call. It three to six months.
Okay.
Steve. Thank you for that question. This is Melissa and we Havent seen daily average transaction count where we ended Q1 at around <unk> hundred per day moving towards the 2000 transactions per day that are conforming transactions.
And Steve on top of that.
I would say you heard us call out tier one factors in tier one freight brokers who are in the queue.
Each of those going live will create gaps upwards and the number of conforming transactions because one tier one freight broker is the size of 500 tier for freight brokers. So you can't draw a straight line. It will gap upwards as you continue to land large COO.
Clients.
And maybe maybe to that point Aaron.
Apologize if I missed it but did you say when they will become will be coming online is it this quarter or just over the next several quarters.
We did not give a specific timing because.
The sales cycle is long in and of itself. The integration cycle requires both parties us and our clients to do some sophisticated API integrations.
We I think what we are saying is over the next few quarters, we expect those four tier one freight brokers in the one tier one factor to come live and there are other people in the queue. Those are just those that are far enough along we felt like we could call them out as being in the queue.
Okay.
Great.
One last one for me on expenses here, just in terms of step up to $85 million.
You mentioned that some of that includes disposal costs as there maybe some implied maybe implying some one time items just kind of curious is there an underlying number if that does include some one time items.
There are always one time items that moved through our expenses.
Let's step back and talk about what we called out for you on last call on the last call. We said that we could see or foresee over the course of this year, 15% expense growth and that the majority of that expense growth was going to be tied to investing in technology and people to accelerate.
The trial pay.
Integration sales cycle development.
Build out and also for triumph business capital.
So we are capturing a significant amount of that gain in Q2.
We standby what we said for full year expense guidance, if that were to change because of inflation related items, we will call that out for now we stand by that number. So we're obviously capturing a significant portion of that planned annualized expense increase in Q2, we still think we'll finish roughly where we told you.
By the end of the year.
Okay, great. Thank you very much that's helpful.
Thank you Steve.
Next question today comes from Matt Olney from Stephens. Please go ahead. Your line is open.
Sure.
Hey, Thanks for taking the question wanted to dig more into the Tpa.
In this segment of data I think there was a loss of around $57 million just to help us appreciate how you see this trending over the next few quarters and I think last time, you said you were hopeful that could breakeven towards the end of 2023.
Any updated thoughts around around that.
I think that's still our goal.
But understand I hope, we made clear in the past 2022 is a year to expand the reach of the network and we are investing heavily to do that some of the things that are hitting our expense line item. In 2022 for example would be commissions paid to our producers those commissions don't laugh.
For forever.
Now the idea is once you add clients to the network. It is a very sticky ecosystem because of the value it creates for the parties involved.
So our goal is to push towards breakeven in 2023.
And we see the we see the revenue opportunity grow, especially as more conforming transactions come into the ecosystem, but the most important thing. The most important thing is to have tier one factors in freight brokers using our system.
Finding it to improve their operating economics, and if that is true, which it's been true so.
So far and it continues to be true then the expansion of the <unk> network and the ultimate monetization will follow naturally from that.
Got it Okay. That's helpful. And then I guess sticking on Tpa I know, there's some normal seasonal headwinds in the freight business and in the first quarter, but I guess I was still surprised.
A number of invoices was flat sequentially any any more color on kind of what would drove that being relatively flat.
Thank you Matt This is Melissa so we you know we've seen some more.
Mostly tier threes in tier four tier twos, threes and fours get onboard in the last quarter.
As we've mentioned in previous calls the tier one brokers tend to scale up their operation over time, we don't get 100% of their volume day, one and so we're starting to see that scale kind of offset with the seasonal dip that you would typically see in the first quarter and so it's evening out and I think that as you as you look.
Look at this.
Seasonal slow you'll start to feel those transaction volumes come back up in this next quarter.
Okay. Thanks for that and then just lastly.
And you mentioned lots of talking heads on the media about expectations of freight in and who knows what's going to happen and not asking you to opine more on this just more of a thought as far as if the environment does slow are there any strategic shifts the company would consider.
In that scenario.
That's a great question, Matt So number one.
Is the is.
Create a perfect storm from the way, we would see that would hurt the trucking industry is you have rising interest rates high fuel prices and softening spot market.
So now you've got small truckers, who just come into the ecosystem they borrowed heavily to buy a truck.
Their margins are getting compressed the fuel surcharges that exist for the freight brokerage community may not be getting passed along to the drivers if if if.
The demand is if the market is not as tight.
So what would that mean for us.
Well, we've owned triumph business capital since 2012.
And we have data on it going back to 2004 since we've owned it the worst.
ROA.
Triumph business capital segment has ever delivered.
On an after tax basis was three 2% like for four pre tax 232. After tax. So there is nothing we're going to do differently and try and business capital. We will continue to serve those customers. The best we can we will onboard customers as the opportunities come towards us.
If we're talking with respect to try and pay.
I would probably accelerate our investment and while that would be painful in the short term I go back to what I said in the opening line of this call.
For the last year. There has been if you were in transportation you were generally doing very well here.
Historically this is a thin margin business.
And the promise of trying to pay to save 15 to $20 of friction cost per invoice on hundreds of millions of transactions a year.
Is an incredible value proposition for our shareholders, but for the market at large.
And so we have the the retained earnings to do it we have the profitability to do it I can't foresee any thing that would slow down our spread to making trying to pay what we believe it will be for the market.
Those two items that the margins would we tightened things up of course, we would I mean, we want to we want to be good stewards in the short term, but we are way more focused on creating the value of the network for the long term.
Okay. That's helpful and thanks for taking my question.
Thank you Matt next question today comes from Gary Tenner from D. A Davidson. Please go ahead. Your line is now open.
Thanks, Good morning.
Aaron I wanted to just kind of.
Ask about the timing of the decision to exit the non transportation factor receivable part of the business. If I heard your numbers right you said revenue.
Decline of $2 7 million a quarter $300000 expense reduction so a pretty significant piece of pretax earnings if you look back to 2021.
Given the investment that you're making in trying to pay and what I assume this is a pretty.
It kind of steady business that doesn't take a lot of incremental attention from management why not keep that around to help fund the other investments, we're making in the rest of the business.
Yes, Great question, Gary and I will let Jeff speak to the operational.
Locations of having a non transportation portfolio inside of the transportation portfolio, but let me speak to it from a profitability standpoint.
Assuming the transportation market stays relatively flat, we will backfill that revenue.
In a quarter I mean, if you think about the growth of triumph business capital I'm not worried about back filling that revenue and of course, we're making investments in triumph business capital to improve its operational efficiency.
And then the other reason Gary that were that was a catalyst in doing this is we understand transportation.
I think as well as anyone in the world.
As far as what we do.
That's not true of every other.
Industry out there.
And as we narrow our focus we want to be the best in the world at providing.
Providing these services to transportation and understanding the nuances in the fraud mitigation that comes with that Jeff What would you add to that quick.
Your point, Aaron I would say in the transportation sector. When you're factoring. These invoices is a very repeatable process of underwriting and buying the invoice when you get outside transportation youre dealing with everything from apparel garments to staffing.
Each deal is so unique you don't get the same synergies in the same efficiencies from repeat ability so with a focus on our core business of transportation that made sense to focus on the core business.
Alright, I appreciate that.
Then just a follow up question on the.
In the quarter the fee income decline.
Versus where it was in the fourth quarter. It looks like primarily other income and primarily in the bank segment. So just wondering if you could kind of talk to what.
Maybe some of the noise was there.
Yes, Gary this is Brad there's always some noise in that line item.
Historically most of that noise has been on the positive side.
We had a handful of.
Six figure followed items in the fourth quarter.
Did not and we're not going to repeat at some negative items in the first quarter.
Couple of them.
Examples of that we had.
<unk>, our indemnification asset related to our some collections that we actually.
From some of those Mr. Eric from some of the over advances we had a bully claim in the fourth quarter that didn't repeat.
A handful of things.
Things that continue to pop up I think if you were to kind of normalize all of that that what looks like a $3 $2 million drop in the quarter was probably more like 800000.
Some small realized losses on loan sale, just things like that that pop up.
You look on an ongoing basis, our core non interest income was probably about $12 million and that was down just a touch from the previous quarter. One other thing to just to note and this is.
More for a go forward basis, we did just institute in April some more consumer friendly changes to our overdraft policies that probably take about six or $700000 a quarter out of TV income going forward.
Think that should really surprise anybody I think a lot of banks are doing that we are just trying to be better systems.
Thanks to their.
Thanks for taking my questions.
Thank you Gary next question comes from Brady Gailey from <unk>. Please go ahead. Your line is now open.
Yes, thanks, good morning, guys.
Good morning, I was just wondering.
If we were to head into a scenario, where we saw a great recession I mean, obviously the.
Boys price and volumes could come under pressure, but how do you think a recessionary scenario.
Impact T pays.
Change the yard.
I think last time, we talked about it you got that over time that could be rough.
Roughly 20 basis points.
What a recession have any negative or positive impact on that interchange fee.
I think in the short term a recession is going to be painful.
On short term earnings.
But no matter, whether youre dealing with 500 dollar invoices or 'twenty $400 invoices. The friction cost is still the same nuts. That's why try and pay is going to succeed because you have certain fixed costs in the present met audit and payment of invoices that exist in.
A recessionary environment and in a strong environment like we've seen.
So I don't think it changes the the.
The value proposition to the market in a recessionary environment. The change it would just be that every dollar of incremental value. We can deliver to shippers freight brokers factors and carriers by virtue of.
Taking out manual processes.
It comes more important in a recessionary environment because margins get squeezed as far as what we will earn going back to our shareholders. We said we are in.
Intend to.
The value proposition for our shareholders as we believe we will retain roughly half of the savings we deliver to our constituents. So.
Revenue volatility will move of course over time.
But it would be impossible to say an interchange fee is going to go from this point to this point and a certain recessionary environment. When we're still on the very front end of <unk>.
Even creating that that pricing concept.
Okay Alright.
And then my second question or yourself.
Some of your funding and some of your deposits here I know overtime, you guys continue to kind of narrow the focus.
On.
In the transportation industry kind of away from the bag.
To continue to kind of.
Wind down the bank from here could we see additional.
Divestitures overtime.
At this time.
There is nothing beyond what we just did I mean the moves we just made were made because as we've gotten more transportation centric and are aligned in what we do.
Those 15, the 15 branches that are part of the disposal group.
Our business model was moving away from agricultural lending and the things that need it is needed in those communities and so we werent serving those communities as well as we would like and nor where the assets they generated.
Moving towards our ultimate goal, we believe there is value in a diversity of revenue I mean, we have a singular focus of course on transportation, but there's a value in maintaining a diversity of funding and revenue at this point.
In our transition towards a financial technology company that is a bank.
No.
Youre not going to see us expand into anything new as far as additional dispositions. There is nothing in the queue at this time.
Okay. Then finally for me here and I know you're not interested in bank given a anymore.
Not interested there, but when you look at them.
Fintech M&A is there anything else there.
Do you think could make sense for you guys to purchase.
Yes, there are companies that are in and around what try and pay is setting out to do that we are always in various forms of dialogue with.
But any M&A for us has to be accretive.
Or has to move us to not accretive necessarily from a short term earnings perspective, but it has to advance the cause.
Of the triad pay network, becoming ubiquitous payments network for trucking if it doesn't fit that it's not on the table.
Okay, great. Thanks.
Thank you just as a reminder, if you'd like to ask a question you can do so by pressing star followed by the number one on your telephone keypad that stuff so that by the number one on your telephone keypad.
Our next question today comes from Joe Young Kenneth from Raymond James. Please go ahead, Sir your line is open.
Good morning.
Good morning, you had previously.
Hi, There you had previously stated that you believe triumph business capital can reach $240 million of revenue in 2022.
Given the current market and you still feel comfortable with that outlook.
At this moment, we do.
Perfect.
Then.
Earlier this month, you announced the formation of trying to ask.
Hoping you could discuss the expected benefits you hope to achieve from this initiative.
Sure.
<unk>.
The transformation that we have undergone as a company has required.
A lot of technical talent from.
Systems engineers to developers too.
People, who are user experience.
<unk> designers of the user and customer experience.
Data scientists.
It is not easy to recruit.
People from those backgrounds into a bank, it's impossible almost to recruit those people into a factoring company.
You can recruit some of those people into our payments network, but the fact of the matter is we need that talent.
Throughout our enterprise and so try and packs.
He is an effort to engage with.
People with skill sets that I, just mentioned and to give them a career path inside of our organization that doesn't just pigeon holed up to doing one thing, but allows them to work on some really exciting products and be on the bleeding edge of technology as it relates to the transportation space. That's why I try Opex was created.
That's the.
People, we're going after who will sit within that part of the organization and they will serve the entire organization.
Understood I appreciate it.
Is it for my questions.
Thank you J. Our next question today comes from Jared Shaw from Wells Fargo. Please go ahead. Your line is now open.
Hi, Good morning, this is team or Brazil or filling in for Jared.
Just wanted to.
Digging a little deeper on try and pay in and looking at when you're bringing on new relationships.
Whether it's the brokers are the factors.
Nonetheless, I had mentioned that you don't get all of their business at once and that volume kind of slowly comes on board.
I guess when you bring out a new relationship what's the typical percentage of their payments volumes that kind of goes through T pay and and how should we expect that to ramp in the future. What's the typical ramp for a company to start giving you more of their business.
That's a great question and I think it's really hard to answer because it tends to be all over the place.
In some cases, we would have a broker that has multiple divisions. They may bring on one division at a time and.
Just as a result of having multiple Tms is that we're integrating Lynn.
Some of them will bring on certain modes at a time and so as we've seen to date.
It's really hard to predict.
One might bring everything all at once and then next one it could take a year to year and a half to get all that volume on board.
Okay, and then maybe following up on Brady's question, if we do enter a recessionary environment and.
The expense side becomes a greater focus for everybody does that accelerate the adoption of Tpa in your view do you get more of that business coming through your platform. If it's able to alleviate some of the cost pressures.
That's our thesis that the value.
I said earlier the expense the fixed expense to present audit pay and do cash application of invoices is roughly the same whether invoices are $2300 a piece of <unk> thousand $500 a piece the market needs. This solution somebody is going to deliver this to the market. It makes no sense to spend billions.
$1 on friction around 'twenty 300, dollar highly repeatable invoices and it makes even less sense to do so when those invoices are $500 apiece. So right.
Would be rational to think that in a market where margins are getting compressed and try and pay is delivering you more cost savings than we're charging you and your incentive to do what you need to do on in your technology stack to integrate with ours, but that would be a heightened focus.
Okay, and then maybe Eric just tying it all together as you look towards that breakeven point I guess, what's the largest driver or is it getting larger utilization.
The system from existing clients as of bringing on additional tier one tier twos and threes and fours onto the platform is it the reduction or kind of.
I guess stability of the expense base is a combination of all three what's the largest driver as we get towards a breakeven next year.
Yeah, that's a great question and taking the third one first.
We acknowledge the expenses and try and payer real I mean, if you were to exclude trying to pay from our overall enterprise we'd be running it over a 2% ROA as an institution.
That is not lost on US this is an intentional investment.
And we're over investing in some areas at this time to make sure that the platform is stable that the platform accelerates.
And that the platform does everything that our customers need there will be a time will come whether it's 2023 or 2024, where you need to optimize the expense structure for trying to pay but that day is not today today, we need to make sure. The platform never goes down that the platform is available to anyone who wants to join.
And that we design the feature sets that are needed by our customers.
The most important thing towards moving towards profitability, which we called out $75 billion in payment volume generates $100 million in revenue. We believe we will be profitable at that time, probably well before that time.
And now we're a third of the way there.
$4 billion run rate, where a third of the way they are growing 10% quarter over quarter or eight 8% quarter over quarter in what historically has been the weakest quarter.
Of the year and going from Q4 to Q1.
The most important thing for the value proposition for the constituents of the network.
As it sits now is for tier one brokers, the 30 brokers, who control 40% of all brokered freight in the United States and the tier one factors to 'twenty factors, who control 75% of the factoring industry for both of those parties to see a level of adoption on either side of the network. So that they can begin.
To change their operating processes and procedures to realize the efficiencies that the network offers.
That is the thing.
And we're headed towards that and we've already we gave you the.
The the parties the number of the parties that are in the queue to do these integrations.
When you achieve that where parties on both sides of the network are able to make their processes of how they handled presentment audit payment in cash application.
They are able to change those because of the volume that's coming from the network then our opportunity to monetize that becomes real.
Think that release you start to see that at the end of 2023 and from there we expect it to continue to grow.
Great color. Thank you.
Yeah.
As a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Question is a follow up from Matt Olney from Stephens. Please go ahead ma'am. Your line is now open.
Thanks for taking the follow up just wanted to ask more about capital and M&A and capital is obviously strong today it looks like it's going to build even more from here with some of those pending sales that you mentioned.
How do you weigh M&A against repurchase.
You're seeing some of your own stock it looks like there was some loss activity in <unk>, how do you weigh those two things.
All things being equal if we can make an investment, especially if we can do it without it out of cash and not dilute our shareholders that moves try and paid towards its ultimate goal.
That is our first and foremost focus.
If none of those opportunities present themselves or if a recession comes which submitted continues to depress our share price.
We are long term incredibly optimistic on what we are building here and we will be happy to buyback our own shares.
We bought back a little bit as you noted last quarter.
We don't feel the need to rush to do either to deploy money into an M&A transaction. It has to be the right M&A transaction that helps the network to support our share price that matters, but we're going to be thoughtful about when we do it.
But overall.
Even though we trade at a high multiple relative to a bank peer group. We don't really think banks are our peer group and so we think our shares are underpriced the call option of what <unk> can be.
Is severely underpriced in our view so it is highly unlikely that you will see us use our stock in an M&A transaction or for a material part of an M&A transaction in any event until we believe the market more appropriately values the option value of what <unk> pay will be.
Okay. Thanks for taking the question.
Yes.
Sure.
Thanks, Matt we have no further questions. So I'd like to turn today's call back to CEO Aaron graft.
Thank you all for joining us have a great day.
This concludes triumph Bancorp first quarter 2022 earnings call. You May now disconnect your lines have a good day.
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