Surge Transportation, a digital freight brokerage based in Jacksonville, Florida, has filed for Chapter 11 bankruptcy protection in the Central District of Florida. The company was founded in 2016 and quickly grew to a workforce of over 100 people, generating approximately $150 million in gross revenues in 2022. However, the freight market downturn over the past year, caused by a cooling goods economy and an abundance of capacity, has significantly impacted the brokerage’s operations.
Sixteen of Surge Transportation’s top 20 creditors are factoring companies that pay small carriers. The company is now working with a financial sponsor and hopes to have its bankruptcy plan approved at a hearing on Thursday.
The challenging market dynamics, including lower contract and spot rates and very low tender rejection rates, have put a strain on the freight brokerage’s revenue and margins. Additionally, the soft market has led to a decrease in spot volume, further impacting the company’s financial situation.
Freight brokerages like Surge typically manage revenue volatility through flexible operating expenses and incentive-based compensation. Hiring sprees and layoffs are common in the industry, but outright failures are relatively rare. The bankruptcy filing will be closely scrutinized by industry observers to understand the factors that led to Surge Transportation’s current financial situation and the implications it may have for the broader freight brokerage sector.
