Surge Transportation, a digital freight brokerage founded in 2016 by Omar Singh and based in Jacksonville, Florida, has filed for Chapter 11 bankruptcy protection in the Central District of Florida, according to filings. Sixteen of its top 20 creditors are factoring companies that pay small carriers.
Officials at Surge told FreightWaves that the company is working with a financial sponsor and hopes to get its bankruptcy plan approved at a hearing on Thursday.
Over the past seven years, Surge grew to a workforce of more than 100 people and earned gross revenues of approximately $150 million in 2022. The bootstrapped 3PL built automated load-matching and pricing technology similar to its venture-funded competitors Uber Freight and Convoy and offered a suite of direct integrations into transportation management systems.
Since the beginning of last year, the freight market has experienced a significant downturn. The fading of pandemic-era stimulus programs cooled the goods economy, and when combined with the abundant capacity that had built up, sent transportation prices through the floor.
FreightWaves’ National Truckload Index, a truckload spot rate benchmark that includes the price of diesel, stood at $3.55 per mile on Dec. 26, 2021. By July 24, 2022, the NTI had fallen to $2.80, and today it’s at just $2.23 — again, inclusive of fuel.
At the same time, tender rejection rates dropped from 21% in the first quarter of 2022 to approximately 3% in recent months as capacity in the trucking industry exceeded demand.
These market dynamics have a powerful impact on freight brokerages: Lower contract and spot rates translate to fewer net revenue dollars per load, the lifeblood of any intermediary. And very low tender rejections can mean the end of the lucrative overflow freight that shippers send to brokers when their contracted asset-based providers don’t have a truck available.
When the market is soft for brokers, it’s very soft indeed: Not only are rates much lower and margin dollars harder to come by, but spot volume can dry up almost entirely. Freight brokers face other structural financial challenges, too: They normally pay their carriers much faster than their own customers pay them, putting a strain on working capital that is often mitigated through commercial lending instruments like receivables financing.
Typically, freight brokerages manage revenue volatility through flexible operating expenses: Computers and chairs don’t cost much, and incentive-based compensation grows and contracts with market cycles. That’s why hiring sprees and layoffs at freight brokerages are relatively common, but outright failures are relatively rare. It’s also why industry observers will scrutinize Surge’s bankruptcy filings for clues as to how the brokerage got into such a desperate situation.
This story is developing.
Trucking
Most cheapest broker it’s Surge
Kim Harris
I’m an independent truck driver and all I’m doing. Running for fuel money hard to pay house bills.
Sebi
Go and check their rating, it will help you to understand why they went bankrupt.
John Barth
How is it possible even if they have good sales in the market?
Freight Dude
Gerald u are full of sh1t. they are gonzo. I’m surprised they are still getting loads from the poor shippers who must not know they went chapter 11. no shipper that knows the law would give a load to a broker in chapter 11 who is prob about to go under as they’ll get stuck with the freight bill twice, they pay Surge once time and then the little carrier has to come to the shipper to pay them again when they don’t get paid.
chapter 11 brokers don’t reorg Gerald they die and vanish.
Omar will sadly appear again one day with another brokerage and a new MC number as there is nothing to stop these people from doing the same stuff over and over. the only question is when and where