The complex lengthy letter from CEO and founder Aaron Graft to the shareholders of Triumph Financial this quarter touted the benefits from a stronger freight market, but not too much.
Graft’s letter, which tries to both explain and defend the performance and strategy at a company that operates a bank but is ultimately like no other in the logistics field, acknowledged in one of his first paragraphs that “market conditions have become more favorable for Triumph’s earnings.”
But he quickly added that “over 30% of the revenue growth we have experienced in transportation year-to-date has come from organic growth.”
More of the focus in the letter was on a concept Triumph first introduced last quarter: the North Star Metrics.
It is a set of long-term targets, and Triumph (NASDAQ: TFIN) did well in meeting them in the second quarter.
The four key points in Triumph’s growth strategy are:
- Transportation revenue growth, with a long-term target to grow 15% annually across all the transportation businesses. That grew 30.9% in the second quarter year on year.
- Factoring operating marginwith a 40% target. Actual performance in the second quarter just fell short.
- Payments EBITDA excluding (for now) its LoadPay digital wallet offering, with a 50% target. It came up well short with 34% in the quarter.
- The fledgling Intelligence unit, with a target of 85% and a second quarter year-on-year performance that was just shy of that.
He referred to the metrics as constituting Triumph’s “value chain”: audit, payments (both activities are in the company’s Payments segment), liquidity (provided mostly by Factoring), digital banking (LoadPay) and Intelligence.
“Triumph’s value chain moves money and data along the line of supply from shippers to carriers and injects liquidity as needed along the way,” Graft wrote.
In the letter, Graft came back to the point that financial performance at Triumph is not 100% correlated with the strength of the freight market.
But the Factoring business’ performance clearly benefited from a stronger freight market, which Graft acknowledged.
“Not all our transportation-related revenue is tied directly to freight invoice size,” Graft wrote. “Portions of our business – particularly Payments, Intelligence, and Audit – generate revenue through transaction fees and subscriptions. That said, our Factoring business remains a significant contributor to earnings, and it benefits meaningfully when invoice sizes increase. The operating cost structure of Factoring is directionally fixed, which means increases in invoice size tend to flow through to revenue with little corresponding increase in expense beyond funding costs.”
Triumph’s average transportation factored invoice in the quarter was $2,160, up 23.4% from the fourth quarter. (The first 17 days of July saw that rise further to $2,210.)
Diesel during the month was up about 30% on average. And while diesel prices are embedded in a factored invoice, Graft did not mention them in his letter. (Diesel is up significantly from July 1, which presumably contributed to the higher invoice price in the first 17 days of the month).
Graft said a $100 shift in invoice prices “moves our annual pretax income by approximately $7 million.”
Factoring’s operating margin was 39.39%, up from 34.72% in the prior quarter and 32.61% in the fourth quarter. A year ago, it was 48.46% but that was positively impacted by a one-time settlement of a dispute.
Graft used the letter to disclose several other statistics about Triumph’s factoring business.
In the quarter, larger carriers, which the company defines as more than seven trucks, were 75% of invoice volume but 15% of client count. The remaining 85% were carriers of less than seven trucks.
Year-on-year, smaller carriers in the quarter submitted 2.49% fewer invoices, “even as client count increased in this cohort,” Graft wrote.
The letter also revealed that the split between spot and contract invoices in the factoring segment is about 65% from the spot market.
Brokers are about 72% of accounts receivable, as the 3PLs are the entities that would pay Triumph to reimburse it for what it paid the carriers.
Not a short-term view
If there is a theme that has run through Graft’s letters for several years, it is that Triumph Financial is playing the long game, as best evidenced by the targets in the North Star.
He returned to that theme in this letter, going back to old numbers about where the company was five years ago before it plunged into Payments with the acquisition of HubTran.
“At the time, there were investors who thought our efforts to create a payments network were smart and others who thought it was foolish,” Graft writes in this quarter’s letter. “We plowed on.”
He used that recap to argue in favor of investments in LoadPay and Intelligence.
Short-term earnings could be boosted if investments in those businesses were slowed, Graft said. But, he added, “our choice is to invest and let the results of those investments speak for themselves over time. We believe LoadPay and Intelligence are important to our value chain and capable of producing high margin and durable revenue.”
Reduced headcount
Graft said the company has been producing “meaningful efficiency gains from our technology investments in Factoring.” A chart showed that in the first quarter of 2025, invoice volume was 1.5 million invoices processed with a full-time employee staff of 266. In the most recent quarter, that ratio was 1.87 million invoices processed with a staff of 225.
In declaring the freight market strength to be a result in large part of a reduction in capacity that is “unlikely to reverse in the near term,” Graft addressed the fallout from the case of Montgomery vs. Caribe Transport II, opening up the brokerage industry to liability and negligence claims, as well as fraud issues that have climbed up the ladder in importance.
“Compliance, fraud prevention, liability management and operational transparency increasingly determine who can profitably participate in the market,” Graft wrote. “The cost of doing things the right way has increased, but so has the penalty for not doing so.”
He described as “simplistic” the view that those changes only help larger fleets. “The benefit belongs to those who can demonstrate their ability to operate in a compliant manner,” Graft wrote, adding that Triumph is preparing for a “different freight market.”
More articles by John Kingston
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Factoring companies squeezed by slowing shipper payments: Alsobrooks
Small carrier’s bankruptcy spells out need for factoring
