Q4 2024 Triumph Financial Inc Earnings Call
To discuss our fourth quarter and full year 2024 results with that let's get to business.
In his letter last evening discuss the quarters results and introduced the new segment. We are excited about many things happening at triumph now, but probably most excited about the opportunities we see developing from the density established in our network. We are helping Americas truckers get paid with greater speed accuracy and transparency than was ever possible before.
And we're allowing our partners to benefit from our transportation technology investments.
That quarterly shareholder letter published last evening in our quarterly results will form the basis of our call. Today. However, before we get started I would like to remind you that this conversation may include forward looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ the company undertakes no obligation to publicly revise any forward looking statements.
For details please refer to the Safe Harbor statement in our shareholder letter published last evening. All comments made during today's call are subject to that safe Harbor statement with that I'd like to turn the call over to Erin for a welcome and to kick off our Q&A Erin.
Erin: Thank you Lou and thank you all for joining us today.
Erin: As always I hope that you found the shareholder letter valuable both in looking back at 'twenty 'twenty four and also looking ahead into the future.
Erin: I am sure some of our announcements in the letter will generate many questions. So we will get to those quickly.
Erin: But before I do I want to say just a couple of things.
Erin: Touching 50% of all brokered freight transactions in the United States is a big deal it's worth celebrating eclipsing over $100 billion in total payments since we created our payment segment is also a milestone worth celebrating.
Erin: And it's those milestones and all that went into doing those things that has paved the way for where we go from here. It puts us in a position to help the freight industry transact confidently that is our brand promise.
Erin: And then we know that if we do that.
Erin: With ever improving offerings that our investors are going to be rewarded our team members will share in the success because our customers will be delighted.
Erin: And that's the work we're excited to do.
Erin: With that we look forward to taking your questions.
Erin: We will now go to Q&A, if you have connected via zoom and we'd like to ask a question. Please use the raise hand feature at the bottom as you assume window or if you have dialed in press star nine one is called upon please feel free to on mute and ask a question. Please limit to one question and one related follow up.
Tim: Our first question will come from Tim.
But he switzer with K PW. Your line is open. Please go ahead.
Speaker Change: Star 620 <unk>.
Tim: Okay.
Speaker Change: Hey, good morning, Thank you guys for taking my questions.
Tim: Morning.
Tim:
Tim: Now that we have entered 2025 and had a line of sight into which partners will be online this year, how much volume they will bring.
Tim: Are you able to provide some kind of quantified ranges around what payment volume will look like towards the end of the year and the associated hold through to revenue on that or perhaps like a broad range on what the growth inflection looks like in the back half of the year, particularly with Chr Debbie coming online.
Tim: Or that area and I think that what is the most important metric to keep measuring and keep track of it for the payments volume growth success is that out of the market share and so as we said in the letter we've eclipsed the 50% market share and that goalpost and now we've moved that out for ourselves and our goals.
Tim: At the end of this year is to be at 60% to 65% of market share and we have a clear line of sight into that the other metric to look at is to continue to watch EBITDA performance and improvement as we will continue to improve those metrics and throughout the year as well certainly you know revenue associated with some newer deals will be in the second half of the year and new.
Tim: So, yes, I look for that to be weighted there, but again, even improvement and 60% to 65% market share anything you want to add to that Erinn. Yeah. I think it's a great question Melissa hit on the things that we would call knowable and I say these are things we have enough history to to predict.
Tim: And and.
Tim: And say with specificity, but I think what's embedded in your question and it's a question frankly I'm interested to see.
Tim: It was just yesterday that our partner C. H Robinson actually began the rollout of this marketing campaign of Robinson financial which we're tremendously excited to support behind the scenes because that's what we are as it as it relates to the market behind the scenes and so they're reaching out to thousands of carriers on Earth.
Tim: <unk> basis now.
Tim: Now what the pull through will look like from that in adding new factoring as a service customers to Robinson financial which we support behind the scenes and the pull through will look like on adding new load pay customers is impossible to tell you. What I can tell you. This morning is in the slack channels that we all monitor in real time with <unk>.
Tim: What went out yesterday, there's been an explosion of activity, but but you can't build a trend line off of that so.
Tim: As I've said and I've tried to make it clear the way we structured our deal with our partner we want Robinson to be exceptionally successful in this end and for them success means improving the carrier experience and of course that means monetizing it but the way.
Tim: The way our deal with them work, because we chose to to take our opportunity the financial incentive for what we're doing on the backend like we're going to see.
Tim: As we grow revenue through this density gain in faas and load paying and the things we're doing around it you'll start to see that in the back half of the year, but it is way too early to tell you what that's going to do to EBITDA margin.
Tim: Our revenue growth.
Tim: We just don't know what I would point out to you is despite the fact that we're making all the investments required to do those things right now our EBITDA margin is still improving.
Tim: So we're trying to be really thoughtful about this.
Tim: And we're really excited about the future and those two things have to live together, that's the tension between being profitable in the present and preparing for an exciting future. So that's how we think about it I hope that gives you the color you're looking for.
Tim: Yeah, No that was really helpful and I was.
Speaker Change: Also your comments in the shareholder letter, which has really helped those great.
Tim: How.
Tim: AI and machine learning models kind of reduce the value.
Tim: Network transactions for factors.
Speaker Change: Are you seeing any other areas, where AI or other technology advances are maybe impacting your value proposition elsewhere or like the moat you have in some of your products.
Speaker Change: Yeah, Matt Great question.
Speaker Change: And so just.
Speaker Change: Let me unpack that a little more Ah and Ah, yeah that and I know others will touch on this and so I don't I don't want to put it all out there now, but let me unpack that a little bit more just so you're clear.
Speaker Change: They're there.
Speaker Change: Two forces that are at work when we talk about the monetization and the adoption of network transactions.
Speaker Change: And those two forces where things I didn't fully understand in Q3 of 'twenty twenty-three or even beyond when we conceptualize. This idea that we need to connect payers in pace and that thesis is entirely right.
Speaker Change: But the specifics of how we're going to monetize this was.
Speaker Change: It was precisely wrong, but directionally correct right like the the value was there, but theres two ways in which the value.
Speaker Change:
Speaker Change: Is is migrating from where we thought we would realize it too to another area. So the first thing and just before we get into AI and ml.
Speaker Change: One of the things, we've learned and like May of Copa right. Like we want you to understand this is we built a pipe of structured data about this big.
Speaker Change: And when you look at the legacy software that most factors used they can ingest it in a pipe about that big.
Speaker Change: And that's just the technical debt that happens when you use an off the shelf product. That's several years old even if you've built technology around it.
Speaker Change: And dealing with technical debt, that's a problem all companies who.
Speaker Change: Such technology deal with an asking factors to modify their product a core operating system. They don't even totally control in a three year down market.
Speaker Change: A tall ask.
Speaker Change: If the pipe that they can ingest the data we give them is not as big then the value proposition to them is different. So that's one thing that's a learning that that's what we've learned from this that network transactions are valuable just not quite as valuable as we thought the second piece, which is more what we've lived on our side of the transaction.
Speaker Change: Is this concept of what can a model trained on all of our historical data do without a human.
And three year or in 2023, I did not see it it has been remarkable to see we are purchasing 75%.
Speaker Change: Of our invoices for our small carriers and that's going to move upstream to with what's coming without a human being ever touching it before funding.
Speaker Change: That did not exist in 2023, and certainly not before that.
Speaker Change: And what we learned is structured data is helpful. In that there's lots of ways. It's helpful. But that the model is so good that even when it doesn't have structured data it can.
Speaker Change: Make very accurate better than human accurate decisions.
Speaker Change: And so as we extrapolate broadly to what we're working on and we haven't talked about this a bunch with you all but what Melissa and her team are working on is what we call touch free processing. So.
Speaker Change: I know people don't live this every day, but if you just visualize it if on the broker side.
Speaker Change: And that's the pay or that's the person who owes the money if our audit product in our audit and pavement feature put together can process, an invoice and tell and decide for the broker based on rules that they set that that invoice is appropriate for payments without a human being touching it.
Speaker Change: The audit system.
Speaker Change: Is it you know the audit process goes from days to seconds.
Speaker Change: On the PE side, if the instant decision model with all of that we built into it.
Speaker Change: Dan.
Speaker Change: Make look at historical predictions for this carrier this account debtor in these things and in seconds decide this is probably a good invoice and then those two systems can touch each other and say if we present this invoice to you in this way would it be approved in the system on the other side says, yes. It would be approved like that's that's a quantum leap.
Speaker Change: Forward that is AI and ml changing how network transactions work, but it's still that very thing. It is a network, but the technology has moved so far so fast.
Speaker Change: But yeah. It is it's changing I don't know that.
Speaker Change: I don't know how to speak to our moat. So to speak of I think we have the most sophisticated product in the market on the factoring side I think we our.
Speaker Change: Our product on the broker side is highly sophisticated and we have the integrations. We have the customer trust to go do this so the world is changing right like it changed from what I thought a few years ago, and we tried to lay that out in the letter. So investors can understand and you can also understand how we're working to be part of the change and not discernible.
Speaker Change: <unk> bye.
Speaker Change: That was great really appreciate the in depth answer there.
Speaker Change: Got it.
Speaker Change: Our next question if I could get one.
Speaker Change: I'm sorry go ahead.
Tim: I think we need to go to the next person in the queue and we'll come back if we don't hit them all Tim.
Well, we'll certainly come back and answer it.
Speaker Change: Alright, our next question will come from not only with Stephens. Your line is open. Please go ahead.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: I want to dig more into the intelligence segment that you discussed in the letter I'm curious within this new segment kind of what's the go to market strategy for this initiative.
Speaker Change: Who are the clients you're going to be targeting or are they existing or new clients and how will you target. These customers and you try and get a better idea of kind of what the revenue ramp could look like for this segment over the next few years.
Matt: Yeah totally understand that question, Matt so.
Matt: The customers that we are going to start with our largely the 560 try up pay customers that we currently serve now it will expand beyond that but I.
Matt: I've said to you before the top 1000 freight brokers control, 90% of the 110 billion dollar broker truckload market.
Matt: So.
The people, we will be taking us out too well either already be a try and customer are they will certainly know arnie.
Matt: We we touch everybody in brokered.
Matt: Frankly in all of truckload.
Matt: Yeah.
Matt: The reason we're doing it is because some of our largest customers have said to US hey, there are some data things we would like to get from you and we would like to get it from you because number one you are not going to end up being a competitor you're a bank you are not a broker.
Matt: You don't move freight and some of the data providers in this industry have they don't have neutrality, but you have neutrality and so we trust you with our data we would like for you to give it back to us in a way that helps us run our business more efficient.
Matt: And the second thing is we would like to consume this data from you because you have more of it than anyone you pay more truckers than than anyone to everyone knows that they see that they see what we touch.
Matt: And then we would like to consume this data from you.
Matt: Because you have persist you know precision in your data you actually have what was paid.
Matt: What was asked not what was claimed not surveys like payments don't lie.
Matt: And so for those three reasons, which I put in the letter that is why the customers came to us so.
Matt: What do we do with that well we already have the data.
Matt: I mean, not all of the data, but we have a lot of data and what we ingest because of the services, we provide to our customers in order to be transmitting hundreds of millions of dollars. A day you need real actionable data and you better understand that data and we do that.
Matt: And so now we're layering on top of what that data set we have technology, such as the ISO acquisition, which takes the data. They have data we have and creates quantitative scorecards that we can give back to our customers and that they can give to their customers. So everyone can have clarity on.
Matt: How is the carrier performing.
Matt: For a broker that's a big thing they want to know how our carriers performing for their own benefit and I also want to know what is their scorecard for how are they doing for their shippers.
Matt: Again, it's the data we already have your just layering the technology and some of the Decisioning.
Matt: Things that have been built on top of it so our.
Matt: Our gross margin coming out of the gate in our intelligence segment is well over 90% because we're not buying that data from anyone like we it's our data we do a ton of work to get it because we have to in our factoring and payments segments.
So its taking what we already have.
Matt: Curating, it and Anonymize, it and positioning it in a way that our customers who already use us for other products.
Matt: Can make their businesses better that's why we did it.
Matt: It was an ask of an existing customer base surely this will allow us to expand in brokerage and eventually we may sell this to people who are not in transportation for other reasons, but today. Our focus is what can we do to make brokers better and give more transparency and get carriers paid more quickly.
Matt: That's who we're serving that's who this segment was built for.
Matt: And Eric just to follow up on that as far as the revenue kind of ramp within this segment is that something we should expect anything material in 2025 or is this something that may not ramp until the next few years.
Eric: Oh the million the multimillion dollar question I mean.
Matt: Yeah.
Matt: I'm always about it should happen now, but let's just look at things.
Matt: We have set out let's look at it like in a broader context.
Matt: What we are doing right now as a company.
Matt: As we have a core community bank that we are that we run that is is.
Matt: Is designed to be run and with stability and efficiency and we have a pretty mature factoring business and we take all of the revenue that we generate from those two businesses and increasingly from our payments business and our goal.
As for our transportation related businesses to generate over $1 billion in revenue by what time I can't tell you precisely.
Matt: Today, if you just use exit 2024 run rate metrics, we generate $210 million, so 21% of our way to our goal and.
$150 million of that on a run rate basis comes from factoring $60 million of it on a run rate basis comes from payments and almost none of it comes from intelligence.
Matt: And if you look at that $1 billion, you can kind of divided into thirds right, we could be more precise, but I'm not going to be more precise on that but factoring there's a $300 million to $400 million market opportunity payments is actually bigger than we thought when you add load pay in even though we were wrong on exactly what network transactions would be.
Matt: I still I think payments has grown because we figured out how to pay carriers and monetize that float in data and and I'm sorry in the exchange fees.
Matt: And then that leaves us with this intelligence segment, which is a whole lot of blue Ocean. There right that we only generate less than $1 million of revenue through some existing partnerships.
Matt: That needs to grow I think you will see revenue in 2025 grow but of course, the denominator over which it's growing is very small it won't be meaningful in 2025, and I would hope towards the back end of 2026 it will.
Matt: The key to understand is the building blocks are already here, we just have to make sure what we take to the market is built in a way.
Matt: Like our our customers have very high expectations of us and we're not going to roll out a product that's half built.
Matt: Because we don't think that's the right thing to do and even if it makes me get on earnings calls and explain why is this growth slow why is this growth not here today, you already have the customer that the answers because we're not going to do it until we can do it or we're not going to do it at scale until we can do it with excellence.
Matt: Thank you.
Joanna <unk>: Our next question will come from Joanna <unk> with Raymond James. Please go ahead.
Joanna <unk>: Good morning.
Matt: Amy.
Speaker Change: So in your shareholder letter you touched on how non aster.
Matt: Excuse me noninterest expenses are expected to increase.
Matt: How should we think about the pace of increase in 2025 and can you provide additional color on some of the internal investments are going to be making.
Speaker Change: So Joe the.
Joe: As you know, we evolve too fast to really provide explicit guidance beyond the next quarter, but my current expectation is that there.
Joe: There will be very modest growth from that $99 million a level that we called out for Q1, you know call. It low to mid single digits over the course of the year.
Joe: Barring investments and things that we're not we're not looking at just yet as far as what brings what comprises those investments.
Joe: Some of it is just natural resets, we've got compensation resets that happen every first quarter for the first for the last two quarters of 2024, we've been accruing bonuses at less than our full target because we didn't hit all of our financial metrics that we wanted to hit in 2024 and our bonus pool.
Joe: Flex that will reset that to 100% because we do intend to hit those numbers. This year. We've also got just general inflation in our health care costs and things like that so as.
Joe: As far as the what's driving the increased bulk of it is compensation. It does include layering in ISO for a full quarter, we close on that deal in in December and we do have some investments that we've made in both.
Joe: Our intelligence segment, we will continue to make investments there as well as just the operational resources that will be required to ramp up what we're doing in factoring as a service and in load pay to the extent that that volume comes on faster or slower, we'll adjust accordingly, but that's where those dollars are going.
Dennis: It's Dennis.
Joe:
Joe: 100% agree with Brad on that one thing that Joe just that you can watch for is with the incident decision model and the things like just for factoring for example, you should see.
Joe: Assuming the market does not.
Joe: Go down again.
Joe: You should see and we should be held accountable for growing factoring market share no questions. No excuses, we will do that organically through fast.
Joe: And what you really need to see and what I'm watching for and what I firmly believe will happen is the gearing ratio as we do that is going to be better because we can use.
Joe: All of this technology, we built.
To grow volumes without adding people expenses now there will always be some but our margin should expand that's why our operating margin should expand of course, it'll expand if we get a tailwind in the market, but those dollars were spent to build technology to allow us to grow volume without having to add people.
Joe: Every time, we grow that's something I would watch for and that's something I'm watching for and something I'll be reporting back to you on as we need to be demonstrate efficiency as we grow.
Joe: I appreciate that.
Joe: And then one more for me here, how should we think about you know increasing adoption of your factory as a service product then how about adoption translate to revenue just any sort of you know type unit economics, you can provide would be helpful.
Joe: Yeah, so factoring as a service.
Joe: It's starting with large brokers.
Joe: In the market with C. H Robinson I don't think you'll see another announcement for a few months, but after that I think you will see other large brokers follow in this space because they have the best marketing funnel no question and they care about the carrier relationship and payments touches the carrier relationships.
Joe: You may see other people who are not in the brokerage industry want to use our platform that will be later in the year.
Joe: In each of those scenarios, there's a negotiation about what the unit economics net to try and look like and it.
Joe: It depends on a variety of factors.
Joe: You know you can look at it a lot of different ways, but.
Joe: The average factoring invoice today on an average, let's just say for a small carrier $600.
Joe: Invoice is going to be roughly $35 of revenue and then from that you got to figure out how to pay your salespeople you got to fund. It you got to all the things you have to do that's what Youre dividing up now youre doing that hopefully thousands and tens of thousands and then hundreds of thousands and then millions of times.
Joe: But the the the thing about fast for us.
Joe: Is.
Joe: That.
Joe: And I wrote about this in the letter like we have built the factory and it has been built at no small costs.
Joe: A tremendous amount of investment and we have a tremendous amount of talented people.
Joe: I think about like Melissa free who even runs that specific business for her life known her in this business for 14 years and watching her career progression and all the people. She leads like those investments are made and the reason you build a factory and you build a big and you invest in all the ways that that things should move us because.
Joe: You expect that the opportunity is going to get Hum to push a lot of volume through it.
Joe: And.
Joe: As volume increases if we hold the head count steady, which.
Joe: Personnel expense is the largest expense in our factoring business at roughly 60% of it.
Joe: Youre going to see operating margin improve.
Joe: And you're going to see revenue grow and you're going to see volume grow and if the market gets back to normal whatever we wanted to find that to be but it needs to still move in favor of the carriers no question.
Joe: Then then that's exciting for us it may not show up until the back half of this year and we may suck wind in the first two quarters I don't know, but that's what we're doing C. H Robinson will not be the only fast customer there'll be the only one through the first half of the year and we're going to make sure. We do it amazingly well and we're going to learn from what we did and then when we when we do it.
Joe: We're just going to make sure we serve our customers needs in that regard and our customer is whoever the fas provider is that their products, they're taking to the market, we are invisible and behind the scenes and.
Joe: And entirely contend to be so so that's I don't I don't know if that gives you exactly whats youre looking for but that's directionally, how we're thinking.
Joe: I would add one thing to that area and that's when we have control of the factory right that the technology and we talk about the pipe leesville in the pipe that can receive the data with fab. We are in control of that so we are able to take network transactions and push them out to the SaaS clients and then it can be useful.
Joe: And in their models as well so it is serving multiple participants, but it's also serving that network to allow us to continue to grow density in those transactions as they can be leveraged across the triumph enterprise.
Joe: Thank you very much favorite questions I'll hop back in the queue.
Speaker Change: Thank you I said will come from Gary Tenner with D. A Davidson. Your line is open. Please go ahead.
Speaker Change: Thanks, Good morning, everybody.
Speaker Change: First I had a follow up on your comments Aaron on the intelligence segment.
Speaker Change: From the prior question.
In the past you've talked about finding ways to monetize data.
Speaker Change: It sounds like though from what you were saying this was more of a pull from clients and maybe a departure from what you had thought.
Speaker Change: Thought about in the past is that accurate so kind of a first step in monetization of the data.
Speaker Change: Yeah, I I think we had ideas and if I go back to the acquisition of hub trend in 2021 and art when we stepped into this space. We also had ideas then we had the ideas about the network one of the learnings from that and I think the network in open loop and all of that is true and right and good well.
Speaker Change: The things we learned is figure out exactly what your customers' pain points or not.
Speaker Change: Not what do you think sitting you know are far I mean, hopefully we don't sit in an Ivory tower, that's not our goal, but we don't move freight we have ideas on how to create efficiencies that the way to do this is tell us what you need what would be valuable to you because our job is to provide your service and so we.
Speaker Change: We started with ideas, but that was very wet cement and then our customers shape that for US and said no. This is what we care about this is what I would like to know this is a problem for me that I'm struggling to figure out how to solve and so great. Then let us see what we can do to be specifically responsive.
Speaker Change: To what it is that you would like.
Speaker Change: But what it is you would want from us.
Speaker Change: And then follow up just in terms of load pay.
Speaker Change: You talked about.
Speaker Change: Batteries are service no announcements near term, obviously CAH R. W. The big focus right now will low PE will that broader rollout follow a similar pace as what you're doing with battery as a service.
Speaker Change: Paul do you want to take the first sure Yeah of course, we're using the same channels to try to sell load pay as we are to sell battery as a service and the most the greatest value for the client comes from when you put those two things together. So the best use case here is to have a client that accepts factoring as a service and.
Speaker Change: Then it has all of their carriers using load peg. So you need to think about that is our strategy first and foremost, but we do have a lot of other channels that we can use to sell load pay as well and we're going to explore them in parallel.
Speaker Change: Yeah, that's the to give you specifics Gerry I mean, we have 8000 plus customers inside of our factoring business.
Speaker Change: And that represents more than 8000 trucks that cause some of those customers have 510, 15 trucks and eventually an enterprise product is in the works it won't be rolled out in the short term and so we hope to be able to serve customers, who have 200 care you know 200 trucks and parent child accounts, there's a lot of things that have gone in.
Speaker Change: Our thinking about our long term roadmap and we had a great team working on that so you've got that I wouldn't call them, a captive audience and audience, we touch three times a week then.
Speaker Change: And then you have our select carriers, which on the active select carrier basis in trying to pay.
Speaker Change: These are non factored carriers, who take quick pace from all try and pay enabled brokers is over what 20000 20000. So.
Speaker Change: So that's between those two right there you have more than 10% of all active carriers.
Speaker Change: Then you take.
Speaker Change: C H Robinson, who touches thousands and thousands and thousands of carriers and pays them in their own quick pay program and and all the things. They do is the market's leading broker that's a another huge pond efficient and theres crossover.
Speaker Change: So the ability to reach out and get this in People's hands.
Speaker Change: I don't know that I see.
Speaker Change: Think I can say I do not think any virtual wallet that has ever existed in transportation has a better chance of success in low day I, just don't think so and it sits on the rails of a bank. So we don't need we don't have to use banking as a service like it lives in our accounts, we control the entire experience.
Speaker Change: To make sure it's excellent and then lastly, we built it not as a fuel card.
Speaker Change: It's not that it's so much bigger than that and we built it in a way that it is friendly towards the cards that are out there, we let our customers move the money to where they want to move it to when they want to move it to it.
Speaker Change: And so you add all that together and that makes me very excited about what we're gonna go do with loan pay and the ability to instantly fund 24 by seven because we use sub ledger accounts inside of try them for me.
Speaker Change: That's really hard for someone else to imitate.
Speaker Change: That's really really hard and there's features enhancements and all the things we're going to add to it.
Speaker Change: And so this is not something we're doing as a hobby like this is a core part of going from moving the money from the broker.
Speaker Change: To the carrier the broker to the factor to the carrier. This is how we make sure carriers can receive that money instantly.
Speaker Change: And use it instantly and we get to expand our market and that that for us is really exciting.
Speaker Change: Great. Thank you.
Speaker Change: Oh I see.
Speaker Change: As a reminder, if you have a question. Please use the raise hand feature which can be found at the bottom of your human interface.
Speaker Change: Our next question will come from and how go which basically Riley. Please go ahead.
Speaker Change: Hey, good morning, everybody.
Speaker Change: Good morning, a question on maybe keep your eyes on unload day.
Speaker Change: If you had to guess would be good better best spend levels.
Speaker Change: Sure someone on this over the long run.
Speaker Change: Yes.
Speaker Change: When would you guesstimate because.
Speaker Change: We can look at other public company would have.
Speaker Change: It's like this but it looks like the dollar youre going to be could be a lot bigger than on a little bit bigger dollars involved.
Speaker Change: And some of those up they're taken spin on a debit card is like 60 Bucks when the truckers build of a tank it has a lot more.
Speaker Change: There's a lot more dollars in the trucking business and there is maybe their income they spend a lot more than they make probably.
Speaker Change: So.
Speaker Change: Great.
Speaker Change: Right absolutely. So when you think about the funds flowing into the load per count.
Speaker Change: One of the things that can happen is through the integration with fuel card you can end up having capturing all that fuel spend as part of the load pays spend you also have the debit card feature which is covering all the other spend of the trucker and then there is oftentimes a need for money to be transferred out of the load per account or other cash needs and so.
Speaker Change: That's part of the value proposition as well so basically you capture eventually 100% of the spend of that particular carrier through this process. If you do it right.
Speaker Change: And it's hard to speak to.
Speaker Change: But the what we've been talking about is how the spin like is the exchange rate change.
Speaker Change: Changes, depending upon where money's thing because I think investors should know that yeah. So you know are what we're finding so far and this is still early days is that these load per account holders are using their debit cards very actively and so when they use their act that they're active they're debit cards actively the question is how are they using it how does that translate into interchange.
Speaker Change: So when you think about debit card interchange.
Speaker Change: It tends to be very low for a consumer that's much higher for business transactions and among business transactions. You can have some that are more lucrative than others for us. So far this month in January the average interchange where rate is about 1.9%. So if they're using their debit card, let's say 50 times a month and the average.
Speaker Change: Per spend.
Speaker Change: Her items spend is $80 you multiply that by about 1.9% you can get a sense for what's happening already with very like new debit card accounts. These aren't even fully mature yet. So that's an example of a single a single debit card on a single load per count now imagine you take a load per account you could have multiple cards.
Speaker Change: And that account one for each truck you can see how that then multiplies further and become and can become very large.
Speaker Change: Okay.
Speaker Change: When you guys see accounts it could be multiple cards it could be.
A small firm could be on <unk>.
Speaker Change: Yes.
Speaker Change: Single.
Speaker Change: A single unit owner, operator could have one card.
Speaker Change: But its not unit would have 10 B one one company, but that have 10 active users at least 10, because once you get them all.
Speaker Change: Active users are you going to report active users or or or.
Speaker Change: Accounts.
Speaker Change: It's probably one of the thing that.
Speaker Change: That could be okay, not to say thank you yes.
Brad: Yeah. We can report both if you like yes, yes sure. We can report all of it Brad just have this one accordingly.
Speaker Change: Yes.
Speaker Change: Active users.
Speaker Change: Hello.
Speaker Change: We want investors to be treated the way, we would want to be treated if the roles will revert versus telling you that there's an account, but it's an inactive accounts that that doesn't help you.
Speaker Change: What we need to tell you is who the active users are so you can see really what are we monetizing it at per unit economics on active users. So I think that's the right thing to tell you.
Yeah.
Speaker Change: Great. Thank you.
Speaker Change: You.
Speaker Change: Sure.
Our next question will come from of Gigantean S. A fan and James. Please go ahead.
James: A couple of follow up questions I have.
James: Just to piggyback on some of the load take questions that have been asked you seem to have this large distribution channel.
James: Is there any way to handicap, what you would view as a success for either a counter active user adoption you know kind of exiting 2025, just trying to appreciate.
You know the opportunity over the near to intermediate term.
James: Yeah.
I would say between five and 10000, that's a broad band if I got more narrow people on peer would be tackling me, but are but I think that.
James: I would view that as a really good start.
James: Somewhere in that band.
James: And then just.
James: One more for me here.
James: When you discussed about increasing market share in your factoring business, which I believe it was probably around 15% how quickly do you think you'll be able to you know.
James: Raise your market share.
James: Something like 100 basis points of year achievable in your view.
James: Oh, I think you can get yeah, 1% for sure.
James: It's it's interesting Jill if you made me think of something because how we think about growing market share.
James: <unk>.
James: So as try and just stayed at its you said, we're going to stay at 15% market share with the open loop network, because we thought that was what people cared about we didn't realize the bigger problem was the technology integration in the early days. We just enabled one one company to grow at the expense of a bunch of others are not that's not going to happen anymore.
James:
James: So because it's not good for the industry, it's not good for everyone.
James: <unk>.
James: I firmly believe it has not been proven I mean, it's it's not the C. H Robinson is the first freight broker to get in the factory.
James: For the top 10 factoring companies were started by freight brokers, but they are the first freight broker of their size with their carrier base to say, we want to be part of carrier payments and we want to do it at scale.
James: With cutting edge technology.
James: That their ability to drive adoption has yet to be proven of course were biased and rooting for them to win in a major way and I think because that helps them win on multiple fronts.
James: But you also have to think about like what is the market opportunity out there and so it pulled some metrics Kim pulled them for me.
James: The last normal year end.
James: And Frank let's call that 2019, although you know as we said I don't know if theres ever a normal year or.
James: Our factoring business had 4360 new client applications.
James: Those have been small clients from large clients et cetera.
James: In 2021.
James: We had 10766 applications.
James: The ability to take market share when you're seeing a lot of apps flow through people are moving new entrants are coming that's when you go get market share, whereas it's it's an easier time to do it in 2024 and this is why I would argue I'm not going to use the term freight recession as a crutch anymore, but they do need you to understand where the freight market is.
James: <unk> thousand 835 applications.
James: And I would even question of the 2835 applications I promise you. Some of those are fraudulent those are bad actors.
James: Buying M C numbers and trying to penetrate the system.
James: Just because we know that we see it that that fraud and that's again why our data is so valuable is to protect against that but it also tells you.
James: That the small like the animal spirits that leads a trucker to leave some other form of employment and start a new carrier.
It doesn't isn't yet here.
James: The value proposition relative to the risk is not here.
James: Will that change in 2025, we all hope so but as we sit here today it hasn't changed.
James: When that market starts to turn.
James: We're gonna be aggressively marketing in that market C. H Robinson is gonna be aggressively marketing in that market. There are other talented competitors.
James: And you'll start to see that.
James: I think pull through to our numbers.
James: Genuinely do so.
Speaker Change: Yeah, I'll pick up 1% market share in a year I'd be disappointed if that was all we did we're not going to double in a year.
James: But I, certainly think we'll do better than adding 1%.
James: And then just a point of clarity that C. H Robinson factoring volume that theyre going to generate that'll be additive to your invoice purchases as that'll flow through your factoring business is that the right way to think about it.
James: Right Yeah, that's the way, we think about it and all of the factoring is a service invoices will show up on the factoring division.
James: Now it sits on our balance sheet, so Kim and her team are responsible we are thinking about the credit exposures hours.
James: All the things we do for our regular factoring business.
James: We will do there and so yeah, we'll call it out for you right I think and that's the plan and we will show you.
James: What percentage of the volume is coming through a fast channel.
James: But it'll all go into that revenue.
James: That shows up in our factoring segment.
James: Understood I appreciate it.
James: Yeah.
James: And there are no further questions at this time thank you.
James: Thank you all for being with us have a great day.