Dive Brief:
- OnTrac has reached a deal with lenders that gives the parcel carrier additional liquidity to continue its expansion plans, according to a Nov. 15 news release.
- The transaction includes new debt financing, extended debt maturities and other liquidity enhancements to advance operational and growth initiatives, per the announcement. OnTrac said there are "additional near-term service launches on the horizon," but it didn't specify what those launches will entail.
- "We will continue identifying new opportunities for growth, expanding our geographic reach, investing in technology and automation to improve the customer experience, and completing the transition from a super-regional to a national carrier," OnTrac CEO Mike Duffy said in the release.
Dive Insight:
OnTrac’s aggressive expansion following a 2021 merger has put pressure on its bottom line.
The last-mile delivery provider has spent more than $125 million on growth initiatives since the LaserShip-OnTrac combination took place, according to a September report from S&P Global Ratings. Initiatives since 2023 include expanding coverage to major Texas cities, launching in Chicago and other top Midwest markets and debuting seven-day delivery for the majority of its network.
That expanded network — now reaching 35 states and Washington, D.C. — has meant increased operating costs for OnTrac. More deliveries can help cover those costs, but OnTrac's package volume fell about 9.3% year over year in Q2, the S&P report said.
"We now expect the company will report a low- to mid-single digit percent decline in its volumes in 2024 amid tougher comparisons with the previous year, when it reported strong volume gains as it endeavored to fill its expanded capacities," according to the report.
The parcel shipping market has been challenging for carriers in 2024, even for fast-growing ones like OnTrac. Tepid delivery demand and a variety of options has led to steep pricing competition, with FedEx and UPS offering hefty discounts to shippers in a bid to secure more volume.
Smaller competitors are trying to keep pace on pricing while also managing their bottom lines, but some have stumbled in the process. For OnTrac, the financing deal could help it navigate the difficult market.
"This transaction will strengthen our balance sheet and enhance our ability to help current and future customers to provide excellent service to their consumers," Duffy said.
