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Date
Thursday, October 16, 2025 at 10:30 a.m. ET
Call participants
Chief Executive Officer — Aaron P. Graft
President, TriumphPay — Luke Wyse
Executive Vice President, Finance — William Bradley Voss
President, Triumph Intelligence — Dawn Favier
Chief Operating Officer — Todd N. Ritterbusch
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Takeaways
Expense base reduction -- Management implemented a 5% reduction in the expense base, with the majority of savings to be realized in the upcoming quarter.
Expense outlook -- Management expects total expenses to be approximately $96.5 million in both 2025 and 2026, with possible fluctuations due to seasonality.
Transportation revenue growth target -- The company reaffirmed a goal to achieve 20% annual growth in transportation revenue.
Factoring revenue growth target -- Management expects factoring revenue to grow by 20%.
Integrated product launch -- The intelligence segment’s fully integrated product is live and was achieved 160 days postacquisition, which management described as unprecedented in their experience.
Customer realignment -- The restructuring reorganized the go-to-market strategy around four key customer verticals: brokers, carriers, shippers, and factors.
TPay volume onboarding -- All payments business volume for C.H. Robinson and RXO is fully onboarded, but associated revenue is still ramping due to contract terms delaying full fee realization.
LoadPay metrics -- Approximately 70% of new LoadPay accounts become linked shortly after opening, contributing to elevated retention rates.
Instant decision penetration -- Instant decision penetration is attributable to different submission methods and was 58% for owner-operators and 15% for larger fleets.
Pilot program with shippers -- The intelligence segment’s shipper pilot aims for 10 to 15 shippers or $500 million in freight under management as a critical data sample.
Technology investment -- The company invested $110 million in technology this quarter, 3 to 4 times higher on a relative basis than large industry peers.
TreeColor credit update -- Management stated, "we believe we remain adequately secured in that credit" but disclosed that the matter is subject to ongoing legal proceedings with limited further detail at this time.
Noncore lending wind-down -- Management is actively winding down noncore lending, with the intent to focus the banking business on traditional community banking alongside transportation.
Share-repurchase program -- Management confirmed that share repurchases may be executed opportunistically but are not tied to immediate activity; use will align with earnings growth and capital strategy.
Summary
Triumph Financial (TFIN 7.10%) signaled a shift toward higher operational efficiency and margin expansion through a 5% expense base reduction, with most of those savings expected in Q4 2025 and flat expense guidance for both Q4 2025 and Q4 2026. The company’s strategic realignment around key transportation and financial customer segments is aimed at accelerating its annual transportation and factoring revenue growth targets of 20%. Leadership highlighted full onboarding of major industry clients onto the payments network, with contractual terms resulting in deferred revenue realization and a growing LoadPay user base benefiting from high account activation and retention. Management also updated stakeholders on exposure to the TreeColor credit, affirming perceived collateral security while noting material uncertainty due to court proceedings.
Executive commentary emphasized that full integration of the intelligence business was accomplished within 160 days, described as "unprecedented" relative to typical post-acquisition timelines.
Management reiterated that technology investment remains a core operational priority.
The company articulated that historical limitations on factoring growth have been lifted, with the business expected to contribute materially to the 20% segment growth objective.
During the call, plans to focus the community banking unit on core activities were reinforced, with a winding down of liquid credit initiatives outside the transportation strategy.
Management clarified that the new share repurchase authorization is intended as a flexible capital allocation tool and will be exercised in accordance with ongoing earnings performance and market conditions.
Industry glossary
Factoring: The sale of accounts receivable (invoices) to a third party at a discount for immediate cash flow; commonly used by trucking or logistics companies.
LoadPay: Triumph’s digital payment solution for the transportation sector, functioning as an integrated payout, banking, and financial management platform for carriers and drivers.
Instant decision: Triumph’s automated underwriting process, allowing for real-time credit decisions on invoice factoring requests, particularly used by small fleets or owner-operators.
TreeColor: Refers to a specific noncore credit exposure currently under legal proceedings, as discussed by the company.
Audit and payments network: Platforms that enable Triumph to process, verify, and facilitate payment on transportation invoices, connecting various industry stakeholders.
Full Conference Call Transcript
Aaron P. Graft: Thank you, Luke. Good morning, and welcome. This quarter's letter I think, is reflective of the evolution in our business that I've been talking about the last few quarters. A focus on revenue growth continues to be sure, but also demonstrating a commitment to operating margin expansion. I believe we made meaningful progress this quarter toward that end with our restructuring efforts, which will reduce our expense run rate and also in our revenue growth efforts as they continue to gain traction. Now one thing I'm happy to talk about on this call is the freight market, but I will not talk about it as an excuse. It is what it is.
Must play the cards we're dealt, not explain how things would be better for us if our cards were better. Irrespective of what the freight market does, we expect revenue to go up and expenses to be flat at this time next year. We can't always control the offense we can play, but we can certainly control our defense. Now through the tech investments we've made, we have created a unique value proposition to the transportation market. We've also been able to realize efficiency in operations that when you couple them with the announced restructuring, allowed us to cut 5% of our expense base with the majority of those savings in the fourth quarter. This restructuring does more than that.
It also organizes our go-to-market strategy around our customer verticals. Brokers, carriers, shippers, and factors. This realignment allows us to better serve our customers while creating operational leverage that supports margin expansion. We have called for 20% annual growth in transportation revenue and we intend to deliver. We also intend to drive margin expansion by becoming more efficient while growing revenue. Finally, I want to address TreeColor. We have included in our quarterly disclosures an update on our position in that credit that is based upon our review of the most up-to-date information available to us. At present, we believe we remain adequately secured in that credit.
We remind investors that this is a highly fluid and evolving situation subject to ongoing legal proceedings. As such, we're unable to provide further detail or comment at this time beyond the information we provided to you in the letter. We will, of course, have further updates for investors in future periods as this matter progresses. With that, I'll welcome everyone to the call, and we'll open it up for questions.
Operator: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. The first question is from Matthew Olney. Please unmute yourself and begin with your question.
Matthew Covington Olney: Hey, thanks for taking my question, guys. Good morning.
Luke Wyse: Morning, Matt.
Matthew Covington Olney: I wanted to start on the intelligence segment. You know, when do you expect to take the fully integrated product to market? Just trying to get some thoughts on what to expect from the intelligence segment in 2026. Thanks.
Aaron P. Graft: Thanks for the question. I appreciate it.
Dawn Favier: The fully integrated product is actually in March right now as we speak. So, look, we've been part of the Triumph Financial, Inc. family for 160 days. We've achieved quite a lot of things from integrating the legacy Triumph team, the green screens, and the ISO team. We've relaunched the brand. We've revamped our go-to-market strategy. And as your question, most importantly, we've integrated the products, which in my 30 years of experience in this industry is unprecedented. There's plenty of examples of companies that have grown through acquisition and still haven't integrated the business or the brands in years. Right? So I'm very proud of that achievement. I'm pleased that the company gave us the opportunity to do that.
And now we have that integrated product, and it's my job and the team's job to go out and win the market.
Matthew Covington Olney: Okay. Appreciate the details there. And then if I move over to the factoring segment, it looks like the revenue growth has been in that mid-single-digit to high-digit over the last year. And I know you're investing a lot in that business from, you know, factoring as a service the increased automation, Any more color on what that revenue growth could look like next year within factoring? And, obviously, the macro is the unknown there. So just assume no change to the macro.
Luke Wyse: Yeah, Matt. Thanks for that question. I target for growth is 20%, and we're looking in a variety of different ways. I mean, we're going to market right now with the most robust playbook that we ever have had. And I think it creates opportunities for us to drive revenue not only with our core factoring product, but with the bundled products that we have. So the opportunity not only in the large segment because we still see opportunities there through the fallen angels. People have come out of the banking environment. Into the factoring space, as well as continued consistent growth in our small carrier segment.
Matthew Covington Olney: Thank you, guys.
Luke Wyse: Thanks, Matt.
Operator: The next question is from Tim Switzer at KBW. Please unmute yourself and begin with your question.
Timothy Jeffrey Switzer: Hey, good morning.
Luke Wyse: Morning, Tim.
Timothy Jeffrey Switzer: Hey. Good morning. Can you hear me?
Dawn Favier: We can hear you fine.
Timothy Jeffrey Switzer: Hey. Sorry about that. So C.H. Robinson jumped on board TPay a quarter or two ago. RXO just joined pretty recently. Can you help give us an idea of how much of their expected total volume is onboarded? Are they fully onboarded at this point? Was it all in the Q3 run rate, or what should we expect in terms of that ramp?
Luke Wyse: Yes. In terms of their payments business, all of their payments volume is onboarded at this point.
Timothy Jeffrey Switzer: Okay. It was all that top of that, Tim, is just that the payments business is onboarded. I think the revenue growth opportunity in those partnerships, because it's not just a vendor relationship there. I mean, certainly, we're providing a vendor service in managing their payments, but in those instances, we're talking about a partnership. The revenue from those just beginning. That is not fully in the run rate.
Timothy Jeffrey Switzer: Got you. Okay. And were they fully in the run rate for Q3 in terms of TPay volume?
Dawn Favier: Well, the TPay volume was in but we have not charged them fully for the payment services yet. I think that's part of the arrangement. Payments volume. The payments volume is on ramping up the revenue associated with the payments volume.
Timothy Jeffrey Switzer: Okay. And is the contract organized in a way that eventually they will be paying 100% for every invoice?
Aaron P. Graft: We don't ever, Tim, for any customer. We're never gonna speak about the details of their contract. Right? I think we told you in the letter I even saw where you did the analysis of what we charge on audit and payment. And as with any business, when you're dealing with large customers, there are terms and contracts the timing difference between beginning the service and when they're paying their ultimate rates there's gonna be a lag in that, but we would never comment on a specific customer's contract.
Timothy Jeffrey Switzer: Do that.
Aaron P. Graft: In pay do, but I'm that's not that does not affect our analysis. What does affect our analysis is this will be the first full year in many years where growth in factoring has been a very high priority for us. You'll remember a couple years ago, we were limiting growth. That is no longer the case. Number two, the value proposition we are offering to the market. It's not just about and converting receivables into cash. It's about load pay and all the other things we do about instantly getting funded on weekends. No one else can do that.
So even with a slow growth market, even with all the headwinds, my expectation is that factoring is gonna grow 20%, and we have a plan to go do that. In payments, you've already laid that out. You can see what great leadership Todd has delivered. The opportunities, once again, we have the infill opportunity of growing revenue with customers who we have delivered value to for many years. Second, we have the go-to-market opportunity. We have a very full pipeline and you will hear us announce new customers joining the payments network. And just those two things alone on a fee income basis, I've our payments business will grow.
Inside of payments, you've got load pay, which doubled over last quarter, and we given you the number that a LinkedIn funded load pay account is $750. Of revenue. What I would tell you is that's what it is a seasoned account that's functioning primarily as a digital banking account. We have some accounts that are on an annualized basis closer to 4 and $5,000 because they're using the debit card significantly and the interchange fees, we've disclosed, are high. But more than that, as we alluded to here, using our intelligence product and the things in our value chain, we can turn load pay into more than just a digital banking account.
We will turn it into a business companion. And if you do that, and we will be doing that in 2026, that $750 number is very light. On the revenue opportunity that we will achieve as we continue to grow that business. And finally, you come to intelligence, and Don said it perfectly. We chose maybe it wasn't it's not popular, but I believe it's the right thing to do. We took four months to fully integrate that acquisition, the ISO acquisition, and our legacy the data we generate.
Again, the reinforcing power of the value chain, all of the data we touch in our audit and payments business, in order to give the market the most precise AI-driven analysis to help brokers run their business. And now that she's equipped with that and the team is equipped with that, and that we have relationships with almost every broker in the industry, and I believe a very strong brand reputation of people who do what we say we will do, I have very high expectations that $10,000,000 run rate is gonna grow in 2026. And so that's how I would put it all together for you is the value chain and all of these things reinforce one another.
We have invested in our brand. To be people who deliver value to our customers and we're ready to go. No matter what the freight market does, we're gonna go take market share this year. We're gonna do it at a time while expanding our margins.
Timothy Jeffrey Switzer: I appreciate that. I have a few more load pay questions, but I'll hop back in the queue for those. One thing I want to touch on now. So per the FMCSA, with proper enforcement, roughly 5% of drivers will exit the market over call it, the next year and a half. And in 2018, 5% of the drivers exited the market to an electronic logging device mandate. And spot rates skyrocket. I know we're in a different type of market and the capacity leaving the system through immigration reform won't be as sudden, but all else equal, how do you think immigration reform could impact average invoice prices?
Aaron P. Graft: I put this in the letter. You know, the FMCSA said that 3,800,000 they're 3,800,000 drivers. We would size the for hire market between one to 1,300,000 drivers. And know, interestingly, when you look at the breadth of our factoring business, we probably touch six to 7% of all trucks on the road. In the for hire market specifically. I have a firm conviction that the majority of people the nondomiciled CDLs, and people who did not go through the proper channels to be in a truck work in the for hire market.
So if this ends up being enforced, it is going to cause more distortions in the for hire market and the smaller end of that market, then it will with large fleets or, obviously, company-owned trucking enterprises just because the way the vetting criteria works. I just wanna say, like, I've been in transportation now for thirteen, fourteen years. I've seen a lot. It is an immigrant-driven business, and I think that's fantastic. Right? We've watched people build successful companies. We've somewhat vilified these drivers but I'm not sure that they should be the villain in the story.
Like, these people are also working very hard, but if you put those people in a truck and they are not trained, it's a danger to them, a danger to others. And if you have electronic logging devices that can be reset remotely from over and these drivers, you're just creating shadow capacity. And so if the government were to follow through on enforcing so that everyone has the opportunity to earn a fair living in trucking invoice prices would absolutely go up. And so we'll see. They've said they're you know, they've said a lot of things. We'll see what they deliver on, and what we want is every trucker to thrive. That's our goal.
I mean, spot market going up would be fantastic, but we run a long-term business here. We wanna see truckers be treated fairly and I mean, they're a huge part of our economy. They're driving 80,000-pound trucks on our highways. We wanna see every trucker thrive, and we wanna see well-trained, well-compensated, taking care of people driving those trucks. So you know, that's a little bit of a soapbox in the answer to your question, but repeat the answer I started with. I believe if that were to be enforced, you will see more distortion in the for hire market than you would in the overall market. So I hope that answers your question.
Timothy Jeffrey Switzer: Yes. It did. Thank you. I'll hop back in the queue.
Operator: The next question is from Gary Tenner at D. A. Davidson. Please unmute yourself.
Gary Peter Tenner: Good morning.
Luke Wyse: Morning, Gary.
Gary Peter Tenner: So I had a question about load pay. I know it's still fairly early on and then you added a lot of net new accounts this quarter. I'm curious about what you've seen so far in terms of retention or churn? I mean, the experience so far once an account is opened or a loan to the account is open has have they proven it to be fairly sticky in terms of ongoing utilization of the account and the product?
Aaron P. Graft: Yes, they have. So we recognized early on that the account opening is just the first step. And it was really critical to get those accounts linked and funded to be used the way that they should be used for the client. And so a lot of work has gone into making sure that we establish those linkages. We're up around 70% of accounts getting linked very quickly after account opening. And then the funding follows when they actually have a load for which they're paid. So that results in a very high retention rate. It's also the thing that, of course, drives the opportunity for monetization early on.
Gary Peter Tenner: I appreciate that. And then I do appreciate all the color you gave on the revenue side a few minutes ago. Just wanted to touch on the expense side. Obviously, with the reduction in force that you announced earlier in the quarter. Or earlier in the third quarter and your guide on fourth-quarter expenses. Obviously a much greater focus on that side or that part of the P and L. Just as we're looking out into 2026, and maybe it's premature for any thoughts around this, but as you think about managing the expense part of things, you talked about focus on improved efficiency, ongoing into 2026.
What kind of marker measuring sticks would you be thinking about for the expense side of the equation next year?
William Bradley Voss: If you look at the way that we've kinda framed our fourth quarter at ninety-six and a half, and I think Aaron mentioned during the first during his opening comments that, we're looking to be right at about that level of quarter or a year from now. So what does that imply? That implies that throughout the course of 2026, we're going to have to find more ways to be efficient. And the expense reduction initiative that we announced recently is really the first outwardly evident step in that direction. But we've got the same annual compensation and benefits resets that we always see in 2026.
So there could be a little bit of upward pressure early in the year, but we are looking to continue to find ways to get more efficient across our entire platform throughout the year. It's not an overnight process, but it's something that we are committed to.
Aaron P. Graft: And, Gary, just to look. You cover a lot of financial institutions and you know, in the banking world, obviously, managing and efficiency initiatives, mean, a lot of go through cycles of doing these things. I just wanna be clear on something. So first of all, just to reiterate what Brad said, 96 and a half million is what we expect 2025 to be. 96 and a half million and or better is what we expect 2026 to be, and there'll be gyration in between there just like there's gyrations in revenue tied to the seasonality of our business.
But as we're thinking about efficiencies, we wouldn't be sitting here telling you that we think we can drive 20% revenue growth if we were cutting off the very things that create value. I mean, for example, we this quarter, still invested a 110,000,000 in technology on our cost base. You know, a lot of people talk about JPMorgan is gonna spend 18,000,000,000. You know, if you were to do the math and compare it, like, a relative basis, we still spend three to four times what they spend on our expense base on technology. And technology will continue to lead us forward. We will continue to enhance the products.
The thing that's happened is that we have gotten to a level I mean, there's just been a tremendous amount of heavy lift to get us to where we are now. And we began that lift, frankly, in a market where we had such tailwinds that it was harder for people to see. And the conviction was to stay through that lift when those tailwinds turned into the longest set of headwinds anyone has seen since the deregulation of trucking in 1980.
We are largely there, and you can take this proprietary dataset that we've created and you can use advances in AI and all the things we do to start to automate tasks internally without taking away from your product roadmap or without taking away your sales functions. I mean, we are out in the market. All the time with people. And so it's this is not a cost-cutting exercise. This is an efficiency and getting lean exercise and, frankly, figuring out how the five pieces of our value chain can work better together so we're not duplicating product development work in silos, but instead doing it as a cohesive unit. And so that's how we intend to get there.
And we've been, hopefully, very explicit with you now on what our expectations of ourselves are to continue to grow revenue and hold expenses flat. So I hope that's helpful.
Gary Peter Tenner: It is. I missed your opening remarks, so I appreciate you flagging that.
Operator: The next question is from Hal Goetsch at B. Riley. Please unmute yourself and begin with your question.
Harold Lee Goetsch: Hey, good morning, everyone. Thank you for the detail. Aaron, I think you made a comment. You said we are not limiting growth in factoring anymore. And I was just curious to if you could explain a little bit more of that statement. And your target for 20% growth perhaps you guys could give us a color for like your feel for a bridge of the components of that or how much of that was just would just behave normal market lift if things got a little better? Maybe that's mid how much of it's really idiosyncratic to your strategies to gain share in that space?
That'd be helpful to help us understand how you go from basically where you're at now, which is back to growth you know, three quarters in a row but maybe a target of 20% help us bridge that kind of the math there. As best you can. Sure. Thank you.
Aaron P. Graft: So the first thing I'm not gonna talk about an improving freight market. I've talked about that three and a half years, and have no idea. This may be the new normal forever. Who knows? But we're focused on what's in front of us. But a couple things. And Tim and I have been in this business now, you know, for and seen a lot of things.
So when the payments network began, right, we felt there was a need at the beginning to really try to divide the world and so that you had our liquidity solutions, which is our factoring business you know, which is meeting the working capital needs of carriers, And then, yeah, the payments network, which was gonna serve all the parties, including other factoring companies. Companies. And we've done that. I think we have 50 to 60 factoring companies who use the payments network who continue to use the payments network.
And what we learned was there were gonna be people who were gonna use that functionality in the payments network whether we were growing factoring or whether we were holding factoring steady, and as we continue to focus on it's less about factoring I just wanna be super clear about this. It's about the customer. So you put the customer at the center of the universe and fact is one of several products. Equipment finance, insurance, load pay, that you wanna sell that customer to help their business. And so with a customer-centric viewpoint, we're gonna go where the customer leads us. We're not out there trying to reprice the fact industry or go after other factors.
We don't think we need to do that. Frankly, factoring is a percentage of all invoices. Over the last ten years has grown. Because factoring has gotten more sophisticated and as a result, more carriers use it and see it not just as a I need immediate liquidity, but literally as a business service, including the ability to lower their prices on fuel. I mean, in many cases, the fuel aggregation discount that a factor can provide more than offsets the revenue that customer pays in order to turn their invoice into cash. Right?
So it's actually a net positive to their bottom line when they use our fuel card and get instantly paid versus just having collected that invoice in thirty days later without financing. And that's you know, why the industry grows. So putting the customer at the center, delivering the customer more than just factory. I mean, if that's what they need, that's what they get. But we're delivering them a value chain of interlinked things that nobody else in the marketplace has all of those things. And we want truckers to thrive. We want owner operators to thrive. We want small fleets to thrive. We want large fleets to thrive, and we have a value proposition for each of them.
And so if you run to that value proposition, with our market position, we believe we're gonna grow 20%, and we believe the market will continue to grow. And so, I don't know that the market will grow 20%, but our expectation of ourselves is to grow 20%.
Harold Lee Goetsch: Thank you, Aaron.
Operator: The next question is from Tim Switzer at KBW. Please unmute yourself and begin with your question.
Timothy Jeffrey Switzer: Hey there. Thanks for taking my follow-ups. Mentioned there in your letter about some opportunities in the intelligence segment with shippers. And you mentioned about a pilot program to achieve a critical mass of shipper data. Can you provide some color on how exactly you're achieving I guess, obtaining the shipper data and, like, how many shippers are you partnered with or anything you can provide around that?
Aaron P. Graft: Yeah. I'm gonna start this off, and then Don's gonna give you the detailed answer. But I would say we already make about $4,000,000,000 of payments for shippers in our payments business. So, I mean, it's a pilot program that begins with a b, so that helps. This is not starting from ground zero. But, Don, what else would you say?
Dawn Favier: You know, I would add to that the ISO business has already been supporting several shippers, throughout their we have about a dozen or so shippers that are already on the performance intelligence products. But what we're really talking about in this product, the pilot project, is a combination of pricing and performance for shippers to help them benchmark themselves against the market. Our hypothesis is we need about 10 to 12 shippers or 10 sorry, 10 to 15 shippers or roughly $500,000,000 in freight under management as a data sample.
And we're getting that data the same way that we have built our broker data sample is through direct submissions, from the shippers themselves through TMS integration on their book loads or paid invoices. Whatever the case may be.
Timothy Jeffrey Switzer: Got it. Very helpful. And then real quick, are you guys able to provide an update at all on that nonperforming equipment finance loan you purchased last quarter? And your confidence being able to recover the $11,000,000 you charged off when you bought it?
Aaron P. Graft: We feel just as good about that today as we did when we announced it.
Timothy Jeffrey Switzer: Awesome. Good to hear. Thank you, guys.
Operator: The next question is from Joe at Raymond James. Please unmute yourself and begin with your question.
Joseph Peter Yanchunis: Hello again. Can you hear me?
Aaron P. Graft: We got you, Joe. Fire away.
Joseph Peter Yanchunis: Alright. So for starters, I understand LoadPay is a relatively new product. You have a massive distribution channel for this ever-evolving LoadPay. Are you firing at all cylinders right now trying to sign up new accounts? I know it looks like, you know, you're gonna hit your year-end account target. But given the vast number of owner-operator drivers on the road, you're barely scratching the surface on really penetrating this market. What's the biggest challenge right now in growing your LoadPay user base?
Aaron P. Graft: I would start to say by saying that we are firing on multiple fronts, and we feel really good about that. So the multiple fronts that I'm referring to are sales through our broker partners, our own organic sales efforts, and then sales efforts that are occurring through our factoring business. All those are all three of those are contributing meaningfully to the totals. All three of those have the opportunity to scale further. And so yeah, I'm very comfortable that we're gonna continue to accelerate the growth in account openings you've seen so far. And you may be just scratching the surface right now, but it's not too far out where it's gonna be much deeper than that.
Aaron P. Graft: And, Joe, here's what's don't miss this. I mean, to me, this is extremely important. So think of LoadPay as it now exists as something like Venmo with a debit card. Think of LoadPay where it will be in the first quarter of next year. As a full-service banking account that is built with a bunch of specific enhancements for truckers. And then finally, think about LoadPay where it will be towards the end of 2026 as a full-on business companion with an embedded intelligence offering. Like, those are that's a radically different product that our customers will be consuming, than the 4,500 customers that we've currently added.
So we do have a distribution network that I would argue is unrivaled. We touch almost every for-hire trucker in The United States between our own factoring business and our payments business, So and we have partnerships with some of the largest providers in freight. The product that people are consuming now, it's not a beta product. I mean, it's a real product, but it is getting better literally every quarter. And it's getting better because we have an embedded technology team that's doing great work. So yeah, I mean, firing on all cylinders, well, I mean, I think, again, you have to answer that question of am I more concerned now about going from 4,800 customers to 10,000 customers?
Sure. Like, that's important. But what's really important to me is completing that journey from Venmo to banking to banking beyond because I know that the per unit revenue from that is much higher, and my costs are not much higher because we already do these things inside of our value chain. So again, it's not just about distribution. It's also about product development. And we are well on our way.
Joseph Peter Yanchunis: I appreciate that answer. I wanted to shift gears here. So it seems like factoring as a service is starting to gain momentum. You know, what level of transaction volume through factory as a service would you need to see in 2026 to view this initiative as a success?
Aaron P. Graft: Look, for us doing factoring, whether it's for our first-party business, or for a third-party business, it's factoring. Like, what Tim and team do that the operational execution is the same. I'd really flip that question around to our partners and say, what do they seek to achieve? I mean, we are the platform that empowers them to grow. This is not our business in the sense that we control the marketing levers. And the growth engines. If I listen to what C. H. Robinson said has said publicly, if I think about what I believe RXO and our future FAS partners wanna do, they want to monetize the payment experience.
And more than that, genuinely more than that, they also wanna bind themselves closer with their carriers because they want carriers repeat business to thrive. And so it's their goals that are more important than mine. We have built a factory that can do factoring for ourselves and anyone else that needs it. And so it's a success to us if it's a success to them.
Joseph Peter Yanchunis: Okay. Appreciate that. Then just one last one for me. You guys have the new buyback in place. Just any commentary on how active you plan to be in the near term?
Aaron P. Graft: Yeah. I mean, not gonna speak to the timing of that. Look. What we will what we can say is our intent is to use the buyback with, you know, from earnings. Right? We are in the process of growing earnings. I can see that. And, you know, if the market gives us an opportunity and we can do it safely and soundly, we're you know, that's a not very nice tool to have in the toolkit. But we didn't announce this just because we intended to be out in the market tomorrow. We want that tool in our toolkit to, as just part of our overall capital planning strategy.
Joseph Peter Yanchunis: Alright. I appreciate it. Thanks for taking my questions.
Operator: The next question is from Matt Olney at Stephens. Please unmute yourself. Begin with your question.
Matthew Covington Olney: Yeah. Thanks for taking the follow-up, guys. There was some commentary in the letter that certain types of non-transportation lending is no longer part of the core lending strategy. You just kinda clarify what is and what is not part of the core business? I'm just trying to appreciate how big of an initiative this is to exit some of these non-transportation loans. And are you accelerating this after seeing the tricolor, or are you just reiterating what you've said previously?
Aaron P. Graft: I'm just reiterating what we said previously. Look. I think about there's two parts to the core business. There's the one we spend 90% of the time talking about, which is the transportation business. But there is also a very healthy underlying community bank. Right? If you look at our metrics, you look at the financial performance of that bank, you look at our deposit quality, that's core to our strategy, and the bank will always be core to our strategy. What we don't want to have happen is we don't need to be talking about community bank credits. Right? We need the community bank to be safe, sound, and by and large, it does that.
But, you know, in the past, as we sought to generate revenue to reinvest in the business, we've been in things like liquid credit where winding that business down. Right? And so I mean by that, Matt, is anything that's no long that's not core when we're talking about the community bank self itself, to traditional community banking, I think you're not gonna see expansion from us away from that. You're gonna see us retrench to that core as you see our transportation business continue to grow.
Matthew Covington Olney: Okay. Appreciate that. And then on Tricolor, it sounds like based off the letter you work to confirm the location of the collateral and feel good about that. And with the borrower in bankruptcy, what's the next data point you expect to hear on this topic? I'm just trying to appreciate this could drag on for a while and then if the collateral is a depreciating asset, at what point do you look to monetize the collateral and start selling the inventory?
Aaron P. Graft: Yeah. Based on the bankruptcy timeline, we're gonna know a lot more in three weeks. That's not to say we will necessarily be liquidating collateral that quickly. That you know, may take longer. But there are different segments of the collateral, and this is important to know. There may be portions of the collateral that we're able to liquidate right away because there's no question about the fact that's our collateral. We should be able to move forward with that. If there are others who think they have claims on that collateral, then that's a process for the court to figure out. We feel really good about our position in that.
And then, of course, we're gonna, you know, we're gonna let that let that happen. But the liquidation could start, you know, soon and could extend on for a period of time. I don't think we'll be in this credit year from now, but it's hard to say anything for sure when you're talking about a bankruptcy of this size.
Matthew Covington Olney: Okay. Thank you, guys.
Operator: The next question is from Adam Meade. Please unmute yourself and begin with your question.
Adam Meade: Hi. Good morning.
Aaron P. Graft: Morning, Adam.
Adam Meade: Question on maybe the medium to longer-term competitive landscape. Now that you've proven the model and the ecosystem, where do you anticipate challenges from competition and how would you compete with Triumph Financial, Inc. if you were on the other side?
Aaron P. Graft: Yeah. So if we think about the value chain, audit payments, liquidity solutions, digital banking plus, and intelligence, In some of those lines of business, we have almost no competitor. I mean, there's competition everywhere, but in other lines of business, like intelligence, there's three main providers. So look. If you're me, my LinkedIn feed my Twitter feed is filled with 400 factoring companies. We're the second largest. Like, just gotta figure out how to go to market. You gotta compete with us on cost of funds, you're gonna have to do more than just payday lending because that's not what we do. Right?
We truly help truckers thrive and grow and have seen people start with one truck and have a 100 trucks, and it's an American success story. So you wanna compete with us there? That's I mean, I guess, arguably straightforward. You're gonna need the balance sheet to do it. If you wanna compete with us in the network, where you know, we touched 47% of all invoices and from a payments perspective and 64% of all invoices, then you're you know, from a the depth of when you add both audit and payments together, I mean, you're gonna have to create an interlinked solution. I guess the person who comes after us can do it way better than I've done.
Right? It's taken six years and an amazing team to do this. Our compounded annual growth rate over six years is over a 100%, but it has been extremely hard. So if you wanna do that, you're gonna have to integrate. You know, it's one thing again to create cool technology. It's a whole another thing integrate into legacy tar technology systems upon which a plethora of vendors use because nobody has a huge appetite right now to completely redo their tech stack. So, again, it's change management as much as technology innovation. And then finally, on intelligence. I mean, look. There's a well-known leader in that industry, and they're a great company. Right?
And they've been in a market-dominant position for a long period of time. Our secret sauce in intelligence, if you wanna beat us, is you have to get more true transactional data than we have. And you can't it I don't see how you get there at the scale we have unless you have the payments network. Right? Because that automatically causes us to touch a significant portion of all transactions. So the veracity of our data I would already put against anyone in the world. Unquestionably, like, it's there. And the density of that data in both lanes and by actual movement type. It's not just a load. I mean, is it a hazmat load?
Is it a team load? Is it a drop trailer load? Like, there's so many nuances under the surface of these invoices that you need to know. So if you wanna do that, you gotta find a way to get to the source of truth to a massive scale of data, and then you have to build the artificial intelligence-driven models that we've built that speak back to the broker and help brokers manage their margin. That's what we're trying. We're trying to help truckers thrive, brokers manage their margin, the whole thing work more efficiently. So that's why you come at things from a value chain.
It's all interconnected together, and you can't really piecemeal into what we do because if you look at that chart we put in the letter, we took each customer segment, and we showed you the things that those customers consume from us. You wanna go do audit for broker? That's great. Can you do payments? Can you do intelligence? Can you do liquidity solutions if they want supply chain finance? So we're not gonna sit on our heels. We're gonna continue innovating. We are going to continue to manage our business in a way that delivers value to our customers because you treat people the way you would wanna be treated. That's how you create long-term success.
And then we benefit from six years of really hard work of building this network and integrating with almost every legacy provider out. So that's how we view our market position and we still got work to do.
Adam Meade: Great. Thank you. On the capital allocation side, do you think about I guess, paying down some of the expensive sub-debt or even the preferred stock versus share repurchases?
William Bradley Voss: If you think about the way that our balance sheet is structured from a, you know, from various pieces of capital, you know, we're pretty well in balance as we sit today with, you know, with tier one and two capital from a regulatory capital perspective. So I don't think that you're going to see us do things like retire sub-debt or the preferred stock in the near term. I think we're pretty well in balance.
Adam Meade: Okay. Just finally on the factoring side, in your letter you stated that the instant decisions for owner-operators was 58% versus 15% for the larger fleets. I guess, intuitively, I would have thought it would be the reverse. So maybe you can help me understand the dynamics there.
Todd N. Ritterbusch: Yeah. Adam, I can address that. When you look at how those different segments present information to us, it's done completely different. So the individual owner-operator submits it at an invoice by invoice basis through our portal. When you take into consideration the large fleets, they do it in large batches of data and images. And so it's natural that the large fleet submitting a batch is going to take is different than the owner-operator model or the small fleet the very small fleet model and so ingesting that is completely different. Our teams are working through it and we believe that we're gonna bring that number up.
But currently, 15% is a good number, it's just not where we're going to be. That's not where our target is long term. The true fact is that the people that utilize Instant Decision the most are that is that small fleet. And when you look at the small fleet and their need for capital, and our ability to provide that 24/7 using our LoadPay product, that is really where the rubber meets the road for us. Hopefully, that answers your question.
Adam Meade: It does. I really appreciate it. Thanks for your time.
Todd N. Ritterbusch: You're welcome.
Operator: Just a reminder, if you would like to ask a question, please use the raise hand icon, which can be found at the bottom of your screen. When you are called on, please unmute your line and ask your question. Turn the call back to Aaron for closing remarks.
Aaron P. Graft: Thank you for joining us this morning. We look forward to seeing you in about three months. Take care.