Core Insights - Rubicon Organics Inc. reported its Q1 2024 financial results, highlighting a net revenue of $8.9 million, a slight increase of 1% from Q1 2023, despite facing challenges in the market [6][7] - The company is launching a full spectrum extract vape line, aiming to tap into a high-growth segment in the Canadian cannabis market, which is expected to drive revenue growth and solidify its market leadership [2][10] Financial Performance - For Q1 2024, Rubicon achieved a net revenue of $8.9 million, with a gross profit before fair value adjustments of $2.2 million, reflecting a 28% decrease from Q1 2023 [6][7] - The Adjusted EBITDA loss for Q1 2024 was $0.4 million, a decline from a profit of $1.7 million in Q1 2023, indicating a challenging quarter [6][7] - Operating cash flow was negative at $0.9 million, compared to a positive cash flow of $0.2 million in Q1 2023 [7] Market Position - Rubicon holds the number one premium licensed producer position across all categories in Canada, with a 2.0% national market share of flower and pre-rolls and a 7.1% market share of premium flower and pre-rolls [6][7] - The company's Wildflower brand is the leading topical brand in Canada, commanding a market share of 30.6% [6][7] Strategic Initiatives - The launch of the vape category under the 1964 Supply Co. brand is part of Rubicon's strategy to expand its market presence and leverage additional biomass from its contract grow strategy [10][11] - The company is investing in an Enterprise Resource Planning (ERP) system to enhance operational efficiency, with anticipated costs of $1 million for 2024, including $0.3 million incurred in Q1 2024 [16][17] Future Outlook - Rubicon anticipates year-over-year growth in net revenue, supported by a focus on premium branded products and strategic brand positioning [17] - The company plans to refinance its debt to a longer-term mortgage facility in the second half of 2024, aiming to strengthen its financial foundation [5][17]

Financial Performance - Total revenue increased by $22.2 million, or 3.3%, for the year ended December 31, 2023, compared to 2022 [316]. - Service revenue increased by $54.8 million, or 9.3%, driven by increased service levels and volumes for existing customers [317]. - Revenues from sales of recyclable commodities decreased by $32.6 million, or 38.1%, primarily due to lower prices and customer cancellations [318]. - Total costs and expenses decreased by $200.6 million, or 21.6%, for the year ended December 31, 2023 [315]. - General and administrative expenses decreased by $168.5 million, primarily due to reduced payroll-related costs and lower stock-based compensation [325]. - Adjusted gross profit increased to $72.2 million, with an adjusted gross profit margin of 10.4% for the year ended December 31, 2023 [334]. - Revenue net retention rate improved to 100.7% as of December 31, 2023, compared to 96.9% in 2022 [331]. - Loss from operations improved by $222.8 million, or 88.0%, for the year ended December 31, 2023 [315]. - Net loss attributable to Class A common stockholders increased to $56.9 million, compared to $30.2 million in 2022 [315]. - Net loss for the year ended December 31, 2023, was $(77.6) million, significantly improved from $(281.8) million in 2022 [337]. - Adjusted EBITDA for 2023 was $(33.0) million, compared to $(74.3) million in 2022, representing an improvement of 55.6% [337]. Cash Flow and Liquidity - Net cash used in operating activities decreased by $64.1 million to $(66.9) million in 2023 from $(131.0) million in 2022 [350]. - Net cash provided by financing activities was $76.3 million in 2023, down from $206.6 million in 2022 [351]. - As of December 31, 2023, cash and cash equivalents totaled $18.7 million, with total current liabilities at $257.5 million [342]. - The company projects insufficient cash on hand to meet liquidity needs for the next 12 months, raising substantial doubt about its ability to continue as a going concern [344]. - The June 2023 Revolving Credit Facility allows borrowing up to $90.0 million, with only $1.4 million available as of December 31, 2023 [343]. - The company has incurred losses from operations and generated negative cash flows since inception, with negative working capital as of December 31, 2023 [342]. Debt and Financing - Rubicon fully prepaid $48.6 million under its Revolving Credit Facility on June 7, 2023, resulting in a loss of $2.6 million on extinguishment of debt obligations [359]. - The Term Loan of $60.0 million was fully prepaid on June 7, 2023, with a loss of $2.5 million on extinguishment of debt obligations [360]. - The Subordinated Term Loan has a total principal of $20.7 million as of December 31, 2023, with an interest rate of 15% [362]. - The First YA Convertible Debenture was issued for $7.0 million, with $4.2 million converted to Class A Common Stock during the year ended December 31, 2023 [363]. - The First Closing Insider Convertible Debentures had a total principal amount of $11.9 million, with no conversions reported through December 31, 2023 [364]. - The Second Closing Insider Convertible Debentures totaled $6.5 million, with no conversions reported through December 31, 2023 [366]. - The Rodina Note had a principal of $3.0 million and was settled by issuing Class A Common Stock on June 20, 2023 [368]. - The company issued the Second YA Convertible Debenture in the principal amount of $10.0 million, with a maturity date of May 30, 2024, bearing an interest rate of 4.0% per annum [369]. - During the year ended December 31, 2023, the Yorkville Investor converted $7.2 million of the principal and $0.2 million of accrued interest of the Second YA Convertible Debenture into Class A Common Stock [369]. - The June 2023 Revolving Credit Facility provides a line of credit up to $90.0 million, with $71.1 million of borrowings as of December 31, 2023, and an interest rate of SOFR plus 4.25% [370]. - The June 2023 Term Loan agreement amounts to $75.0 million, with an applicable interest rate of 16.8% as of December 31, 2023 [371]. - The company has a Minimum Excess Availability Reserve of $19.0 million as of December 31, 2023, which could be decreased by up to $9.0 million upon achieving certain financial conditions [373]. Operational Efficiency and Cost Management - General and administrative expenses are expected to decrease as a percentage of total revenues due to a focus on operational efficiencies and cost reduction measures [308]. - The company expects to rationalize redundancies across the organization as part of its operational efficiency initiatives [299]. - The company is actively investing in its cloud-based digital marketplace to enhance customer experience and platform functionality [299]. - The company anticipates certain incremental costs due to operating as a public company, including compliance with SEC regulations [308]. Tax and Compliance - Rubicon has entered into a Tax Receivable Agreement obligating it to pay TRA Holders 85% of certain realized tax savings, with Rubicon retaining 15% [353]. - Future payments under the Tax Receivable Agreement are expected to be substantial, dependent on various factors including Class A Common Stock price and taxable income [356]. - A significant portion of potential future payments under the Tax Receivable Agreement is anticipated to be payable over 15 years, contingent on Holdings LLC generating sufficient income [355]. - The provision for income taxes includes reserve provisions and is subject to continuous examination by tax authorities [402]. - The company regularly reviews deferred tax assets for recoverability based on historical and projected future taxable income [399]. - No uncertain tax positions were recognized as of December 31, 2023, indicating a lack of tax positions meeting the threshold for recognition [401]. - The company assesses the likelihood of adverse outcomes from tax examinations to determine the adequacy of its tax provision [402]. Revenue Recognition and Accounting Policies - The company generates revenue from waste removal, waste management, consultation services, platform subscriptions, and the sale of recyclable commodities [300]. - Service revenues include waste removal and consultation services, which provide insights into customers' waste streams [301]. - The cost of service revenues primarily consists of expenses related to delivering services, including third-party hauler costs and employee-related costs [303]. - Revenue is primarily derived from waste removal, waste management, consultation services, platform subscriptions, and the purchase and sale of recyclable commodities [389]. - Revenue from service is recognized over time, while recyclable commodity revenue is recognized at the point of ownership transfer [389]. - Customer acquisition costs are capitalized and amortized over the expected future revenue, typically resulting in straight-line amortization [391]. - Stock-based compensation is measured at fair value on the grant date and recognized over the requisite service period [392]. - The company has both liability-classified and equity-classified warrants outstanding following the mergers on August 15, 2022 [395]. - The company utilizes derivative financial instruments recorded at fair value, with gains and losses recognized in earnings [396].

Financial Data and Key Metrics Changes - Adjusted gross profit for Q4 2023 was $18.3 million, a 36.5% increase from $13.4 million in Q4 2022, with adjusted gross profit margin expanding by over 260 basis points to 10.7% from 8.1% [21] - Adjusted EBITDA improved by $17.1 million year-over-year, resulting in a loss of $437,000 compared to a loss of $17.6 million in Q4 2022 [21] - For the full year 2023, adjusted gross profit was $72.2 million, a 35.5% increase from $53.3 million in 2022, with adjusted gross profit margin expanding by over 245 basis points to 10.4% from 7.9% [22] - Full year adjusted EBITDA was negative $33 million, an improvement of $41.3 million compared to negative $74.3 million in 2022 [22] Business Line Data and Key Metrics Changes - The growth in adjusted gross profit was driven by additional higher-margin business with existing customers, contributing to the overall financial performance [21][22] - The company achieved a $55 million annualized expense reduction, which was a key focus in 2023 [10] Market Data and Key Metrics Changes - Revenue for Q4 2023 was $170.7 million, a 2.8% increase from $166 million in Q4 2022, primarily driven by business expansion with existing customers [26] - For the full year 2023, revenue was $697.6 million, a 3.3% increase from $675.4 million in 2022 [27] Company Strategy and Development Direction - The company focused on operational performance improvement and financial position strengthening, achieving record financial performance while enhancing environmental outcomes for customers [7] - There is a commitment to sustainability, with over 1.6 million tons of materials diverted from landfills, equating to approximately 2.1 million metric tons of CO2 emissions avoided in 2023 [12] - The company aims to accelerate growth in high-margin SaaS offerings and optimize workforce through strategic measures [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges but expressed confidence in continuing growth and strategic optimization efforts [13] - The company remains dedicated to evolving with customer needs and delivering strong environmental and economic outcomes [13] Other Important Information - The company secured additional financing and improved liquidity through recapitalization and closing a new term loan [9] - Significant customer agreements were highlighted, including multiyear contracts with Neiman Marcus and Vail Properties, as well as extensions with Gap, Inc., Goodyear Tires, and Americold [15] Q&A Session Summary - The call concluded without a detailed Q&A session, indicating a focus on presenting the financial results and strategic direction rather than engaging in extensive dialogue with participants [24][25]

Financial Performance - Revenue for Q4 2023 was $170.7 million, an increase of $4.7 million or 2.8% compared to Q4 2022[5] - Gross Profit for Q4 2023 was $13.2 million, an increase of $6.5 million or 95.4% compared to Q4 2022[5] - Adjusted Gross Profit for Q4 2023 was $18.3 million, an increase of $4.9 million or 36.5% compared to Q4 2022[7] - Full Year 2023 Revenue was $697.6 million, an increase of $22.2 million or 3.3% compared to 2022[9] - Full Year 2023 Gross Profit was $47.7 million, an increase of $22.7 million or 90.6% compared to 2022[9] - Total revenue for the three months ended December 31, 2023, was $170.663 million, a 2% increase from $165.992 million in the same period of 2022[20] - Total revenue for the year ended December 31, 2023, was $697,582, an increase from $675,388 in 2022, representing a growth of 1.8%[32] - Adjusted gross profit for the year ended December 31, 2023, was $72,232, compared to $53,321 in 2022, reflecting a year-over-year increase of 35.5%[32] - Adjusted gross profit margin improved to 10.4% for the year ended December 31, 2023, up from 7.9% in 2022[32] - Gross profit for the year ended December 31, 2023, was $47,705 compared to $25,035 in 2022, marking an increase of 90.5%[32] Net Loss and Adjusted EBITDA - Net Loss for Q4 2023 was $(15.1) million, an improvement of $2.9 million or 16.1% compared to Q4 2022[8] - Adjusted EBITDA for Q4 2023 was $(0.4) million, an improvement of $17.1 million or 97.5% compared to Q4 2022[8] - Adjusted EBITDA for Full Year 2023 was $(33.0) million, an improvement of $41.3 million or 55.6% compared to 2022[12] - Net loss for the year ended December 31, 2023, was $(77,579), a significant reduction from $(281,771) in 2022[35] - Adjusted EBITDA for the year ended December 31, 2023, was $(33,001), an improvement from $(74,329) in 2022[35] Assets and Liabilities - Total current assets increased to $179.388 million in 2023 from $150.781 million in 2022, reflecting a growth of approximately 19%[22] - Total liabilities rose to $362.259 million in 2023, up from $358.481 million in 2022, showing a slight increase[22] - The company’s total stockholders' deficit decreased to $138.972 million in 2023 from $154.452 million in 2022, showing improvement in equity position[22] Cash Flow and Operations - Cash and cash equivalents increased to $18.695 million in 2023 from $10.079 million in 2022, representing an 85% increase[22] - Operating cash flows for the year were negative at $(66.889) million, an improvement from $(131.036) million in 2022[24] - The company reported a loss from operations of $30.517 million for the year ended December 31, 2023, compared to a loss of $253.288 million in 2022[20] - Cash at the end of the year increased to $18,695 from $10,079 at the beginning of the year[26] Client and Service Development - RUBICONConnect™ added clients such as Neiman Marcus and Vail Properties, focusing on enhancing customer relationships in 2024[5] - The company launched Technical Advisory Services to help customers achieve sustainability goals[5] Other Financial Metrics - The weighted average shares outstanding for the year ended December 31, 2023, was 22,797,555, compared to 6,235,675 in 2022, indicating a significant increase in shares[20] - The company reported a gain on change in fair value of earn-out liabilities of $5.458 million for the year ended December 31, 2023, compared to a loss of $68.500 million in 2022[20] - Total cost of revenue for the year ended December 31, 2023, was $647,631, slightly down from $647,833 in 2022[32] - Interest expense for the year ended December 31, 2023, was $34,232, compared to $16,863 in 2022, indicating a rise of 103.5%[35] - The company incurred equity-based compensation of $15,023 for the year ended December 31, 2023, down from $94,204 in 2022[35]

Customer and Market Presence - Rubicon Technologies serves over 8,000 customers, including major clients like Apple and Walmart, and has over 8,000 hauling and recycling partners across North America[208]. Revenue Performance - For the three months ended September 30, 2023, recyclable commodity revenue was $12.1 million, down from $22.2 million in the same period of 2022, representing a decline of 45.4%[219]. - For the nine months ended September 30, 2023, recyclable commodity revenue was $40.8 million, compared to $71.6 million in the same period of 2022, reflecting a decrease of 43.1%[219]. - Total revenue decreased by $13.7 million, or 7.4%, for the three months ended September 30, 2023, compared to the same period in 2022[236]. - Total revenue increased by $17.5 million, or 3.4%, for the nine months ended September 30, 2023, compared to the same period in 2022[252]. - Revenue from sales of recyclable commodities decreased by $10.1 million, or 45.3%, driven by lower sales prices and canceled customer contracts[238]. - Service revenue decreased by $3.7 million, or 2.3%, primarily due to canceled customer contracts amounting to $23.3 million, partially offset by increased services and volume with existing customers[237]. - Service revenue increased by $48.4 million, or 11.0%, primarily due to increased volumes and higher prices charged to existing customers[253]. - Revenue net retention rate decreased to 91.1% as of September 30, 2023, down from 118.3% in the same quarter of 2022[271]. Cost Management - Product development costs for the three months ended September 30, 2023, were $8.3 million, down from $9.8 million in the same period of 2022, a reduction of 15.3%[221]. - For the nine months ended September 30, 2023, product development costs were $23.6 million, compared to $28.3 million in the same period of 2022, a decrease of 16.6%[221]. - Total cost of revenue decreased by $20.4 million, or 11.5%, for the three months ended September 30, 2023, compared to the same period in 2022[239]. - Cost of service revenue decreased by $10.5 million, or 6.7%, primarily due to a decrease in hauling-related costs and lower workforce costs[240]. - Total cost of revenue increased by $1.4 million, or 0.3%, for the nine months ended September 30, 2023[255]. - Cost of service revenue increased by $31.8 million, or 7.5%, driven by increased hauling volume and higher vendor prices[256]. - General and administrative expenses decreased by $172.8 million, or 92.6%, primarily due to lower payroll and compensation costs related to prior mergers[246]. - General and administrative expenses decreased by $166.6 million, or 78.4%, primarily due to lower payroll and compensation costs related to prior year bonuses[262]. - Sales and marketing expenses decreased by $1.9 million, or 40.0%, due to reduced demand generation activities and lower workforce costs[242]. - Sales and marketing expenses decreased by $4.4 million, or 33.1%, due to lower costs for sales and marketing activities[258]. Financial Position and Losses - Net loss for the three months ended September 30, 2023, was $30.2 million, a decrease of $180.9 million, or 85.7%, compared to the same period in 2022[236]. - Net loss decreased by $201.3 million, or 76.3%, for the nine months ended September 30, 2023, compared to the same period in 2022[268]. - Net cash used in operating activities decreased by $46.3 million to $66.6 million for the nine months ended September 30, 2023, compared to $112.9 million for the same period in 2022[293]. - Net cash used in investing activities decreased by $69.1 million to $0.8 million for the nine months ended September 30, 2023, compared to $69.9 million for the same period in 2022[293]. - Net cash provided by financing activities was $70.7 million for the nine months ended September 30, 2023, down from $176.7 million for the same period in 2022[294]. - The company has negative working capital and stockholders' deficit as of September 30, 2023[287]. Financing and Agreements - A reverse stock split was executed on September 26, 2023, at a ratio of 1-for-8, affecting the outstanding shares of common stock[210]. - The company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald for potential gross proceeds of up to $50.0 million[214]. - The NYSE notified Rubicon of the intention to delist the Public Warrants due to "abnormally low" trading price levels, effective November 13, 2023[216]. - The company entered into multiple financing arrangements, including a Revolving Credit Facility and Term Loan, to address liquidity needs during the nine months ended September 30, 2023[288]. - The company expects that financing arrangements and cost reduction initiatives will provide sufficient liquidity for the next 12 months[289]. - The company issued convertible debentures totaling $11.9 million to management and board members, with a maturity date extended to December 1, 2026[308]. - The company converted $4.2 million of principal and $0.1 million of accrued interest from the First YA Convertible Debenture into Class A Common Stock during the nine months ended September 30, 2023[306]. - The company has a Subordinated Term Loan of $20.0 million with an interest rate of 15%, which was amended on June 7, 2023, to modify its terms[305]. - The company entered into security purchase agreements for the issuance of $6.5 million in convertible debentures, with a purchase price of $5.7 million, maturing on August 1, 2024, and accruing interest at 6.0% per annum[309]. - The company issued the Rodina Note with a principal of $3.0 million, accruing interest at 16.0% per annum, which was converted to Class A Common Stock on June 20, 2023[311]. - The Second YA Convertible Debenture was issued for $10.0 million, with a maturity date of May 30, 2024, and an interest rate of 4.0% per annum; $7.2 million of the principal was converted to Class A Common Stock during the nine months ended September 30, 2023[312]. - As of September 30, 2023, the company had $65.5 million in borrowings under the June 2023 Revolving Credit Facility, with an interest rate of 9.7%[313]. - The June 2023 Term Loan agreement was for $75.0 million, with an interest rate of 16.8% as of September 30, 2023, and an option for the lender to convert the outstanding principal into Class A Common Stock[315]. - The company entered into a Tax Receivable Agreement obligating it to pay 85% of certain realized tax savings to TRA Holders, with the remaining 15% benefiting the company[296]. - Future payments under the Tax Receivable Agreement are expected to be substantial and will depend on various factors, including the price of Class A Common Stock and the timing of future exchanges[299]. - The company anticipates that payments under the Tax Receivable Agreement could negatively impact its financial condition and liquidity if significant costs arise[300]. - The company has a software services subscription agreement requiring payments of $23.5 million through October 2024, with $19.8 million due by September 30, 2024[326]. - The company entered into amendments to the software services subscription agreement, allowing it to settle $16.0 million in fees due between October 2023 and June 2024 either in cash or Class A Common Stock[327]. - The company settled $3.8 million of the software services subscription fee for the three months ended September 30, 2023, by issuing Class A Common Stock on October 2, 2023[328]. - The company did not sell any shares under the SEPA during its term, which allowed for the sale of up to $200.0 million in shares[320]. Operational Efficiency - Adjusted gross profit for the three months ended September 30, 2023, was $19.9 million, compared to $14.1 million in the same period of 2022, resulting in an adjusted gross profit margin of 11.6%[275]. - The adjusted gross profit margin improved from 7.6% in Q3 2022 to 11.6% in Q3 2023, indicating better operational efficiency[275]. - The company expects product development costs to remain consistent as a percentage of total revenues over the next 12 months, focusing on software services subscription costs[244]. - The company expects product development costs to remain consistent as a percentage of total revenues over the next 12 months[260]. Risks and Forward-Looking Statements - The financial statements are prepared in accordance with generally accepted accounting principles, requiring estimates and assumptions that may differ from actual results[330]. - The company has disclosed forward-looking statements regarding its business and financial prospects, which are subject to various risks and uncertainties[334]. Industry Trends - The waste and recycling industry is increasingly focused on reducing emissions, which presents growth opportunities for Rubicon's business[218]. - The company has been awarded more than 60 patents and 15 trademarks, indicating a strong intellectual property portfolio[208].

Financial Data and Key Metrics Changes - The company achieved record adjusted gross profit for the third consecutive quarter, with a 41% year-over-year increase and an 11% increase from the prior quarter [36] - Adjusted EBITDA improved by $12 million to a loss of $8.9 million year-over-year, marking an 8% improvement from the prior quarter [45][53] - Revenue for the third quarter was approximately $171 million, a decrease of $14 million or 7% compared to the third quarter of 2022, primarily due to softness in commodity prices [65] Business Line Data and Key Metrics Changes - The RUBICONSmartCity business has doubled year-over-year, with significant partnerships established, including a five-year agreement with the City of Phoenix [4][12] - The RUBICONConnect business saw an increase in adjusted gross profit driven by portfolio optimization and margin improvement activities [66] Market Data and Key Metrics Changes - The company reported a 35% growth in adjusted gross profit year-to-date in 2023, while diverting over 800,000 tons from landfills, equating to approximately 1.6 million metric tons of CO2 emissions avoided [39] - The company has surpassed 13 million unique service locations and 8,000 haulers and recycling partners, managing over 160 types of waste streams [49] Company Strategy and Development Direction - The company is focused on improving operational performance and strengthening its financial position, with a commitment to achieving profitability and growth [3] - Investments are being made in AI and software sales teams to enhance operational efficiency and attract new customers [23][68] - The company aims to achieve positive adjusted EBITDA in the fourth quarter of this year and for the full year of 2024 [9][59] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the challenging macro and capital market environments but emphasized the stability and growth potential of the waste and recycling industry [46] - The company is optimistic about its core business strength and is focused on organic growth while remaining opportunistic regarding M&A opportunities [81] Other Important Information - The company reduced expenses by $55 million on an annualized basis and expanded adjusted gross profit margin to over 10% ahead of its goal [50] - The company has $15 million in cash and undrawn availability under its credit facility as of the end of the third quarter [67] Q&A Session Summary Question: What are the drivers of the slowdown in service revenue this quarter? - The significant drop in cardboard commodity prices was a major contributing factor, along with adjustments related to portfolio optimization [72] Question: Any intention of reaccelerating M&A plans? - The company is focused on organic growth but will evaluate M&A opportunities as they arise, depending on available capital [75] Question: How much available debt capacity do you have to draw down? - Specific details on available debt capacity were not broken out, but the company is working towards improving its financial position [78]

Financial Data and Key Metrics Changes - The company achieved a record adjusted gross profit of approximately $18 million, representing a 41% increase compared to the second quarter of 2022 [7] - Revenue for the second quarter was approximately $175 million, an increase of $10 million or 6% year-over-year [17] - Adjusted EBITDA for the second quarter was negative $9.7 million, an improvement of $9.2 million compared to the $19 million loss in the same quarter of 2022 [17] - The adjusted gross profit margin expanded by 260 basis points to 10.3% as of the end of the second quarter of 2023 [12] Business Line Data and Key Metrics Changes - The company has made significant progress in its higher-margin SaaS business, which is a key focus for growth [34] - The Rubicon Smart City product has been deployed in more than 100 cities, including eight of the top 20 U.S. cities by population, indicating strong market penetration [36] - The Rubicon Connect platform has been deployed at over 2,000 GAAP retail stores and more than 800 Goodyear locations, showcasing successful customer renewals and expansions [38] Market Data and Key Metrics Changes - The company serves over 8,000 haulers and processors, managing more than 13 million unique service locations [11] - The company has analyzed 1 million images daily for insights on waste streams, enhancing operational efficiency [22] - Revenue from recyclable commodities saw an $11 million decrease year-over-year due to declines in commodity pricing, although a modest rebound has been observed [68] Company Strategy and Development Direction - The company is focused on achieving profitable growth through customer wallet share expansion, new product offerings, and improved operational efficiency [41] - Plans to offer products a la carte to attract smaller prospects and build relationships over time [20] - The company is deploying AI-based systems to optimize operations, including automating invoice processing and enhancing fleet management [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating positive adjusted EBITDA for the fourth quarter of 2023 and the full year 2024 [18] - The company has completed all high-priority tasks in its bridge to profitability plan, positioning itself for profitable growth [19] - Management noted that retention rates remain strong, with a net revenue retention rate of 105% for the quarter [75] Other Important Information - The company secured a comprehensive financial package, including a $75 million term loan and a new revolving credit line of up to $90 million, improving liquidity [34] - The company has reduced expenses by an estimated $45 million on an annualized basis as of July 2023 [35] Q&A Session Summary Question: Update on onboarding new logos and sales cycle length - The company has over 8,000 haulers and processors on its platform, with robust onboarding capabilities [46] Question: Relationship with Palantir and product deployment - The company has a strong relationship with Palantir, which is helping to build AI functionalities for optimization [66] Question: Performance on net revenue margin and future expectations - The company achieved a net revenue margin above 10% earlier than expected, driven by expense optimization and portfolio high-grading [51] Question: Expectations for recyclable commodities segment - The company expects revenues from commodities to remain roughly flat, absent underlying volume growth [68] Question: Customer optimization and retention rates - Customer optimization efforts are expected to continue, with strong retention rates of 105% net revenue retention for the quarter [75]

Customer Base and Partnerships - Rubicon Technologies serves over 8,000 customers, including major clients like Apple and Walmart, and has over 8,000 hauling and recycling partners across North America[182]. Financial Performance - For the three months ended June 30, 2023, recyclable commodity revenue was $13.9 million, down from $24.3 million in the same period of 2022, reflecting a decline of approximately 42%[192]. - Total revenue increased by $10.0 million, or 6.0%, for the three months ended June 30, 2023, compared to the same period in 2022[211]. - Service revenue increased by $20.4 million, or 14.5%, primarily due to higher prices charged to existing customers[211]. - Revenues from sales of recyclable commodities decreased by $10.4 million, or 42.8%, primarily due to a significant decrease in sales prices[212]. - Net loss for the three months ended June 30, 2023, was $22.8 million, a decrease of 17.9% compared to the same period in 2022[221]. - Total revenue for the six months ended June 30, 2023, increased by $31.3 million, or 9.6%, compared to the same period in 2022[224]. - The revenue net retention rate was 104.9% as of June 30, 2023, compared to 113.4% in the prior year[241]. - The company incurred a net loss of $(32.3) million for the six months ended June 30, 2023, compared to $(52.6) million for the same period in 2022[249]. Cost and Expenses - Total cost of revenue increased by $3.6 million, or 2.3%, for the three months ended June 30, 2023[213]. - Cost of service revenue increased by $14.0 million, or 10.3%, mainly due to increased hauling-related costs[214]. - Sales and marketing expenses decreased by $1.8 million, or 39.6%, compared to the same period in 2022[216]. - Product development expenses decreased by $2.1 million, or 22.4%, primarily due to lower payroll and support costs[217]. - General and administrative expenses increased by $6.2 million, or 24.0%, primarily due to severance pay and increased insurance expenses[234]. - Cost of service revenue increased by $42.3 million, or 15.9%, driven by increased hauling volume and service expansion with existing customers[228]. - Cost of recyclable commodity revenue decreased by $20.5 million, or 44.9%, primarily due to a $23.2 million decrease in sales prices for recyclable commodities[229]. - Sales and marketing expenses decreased by $2.5 million, or 29.1%, attributed to lower costs for workforce and other marketing activities[230]. - Product development expenses decreased by $3.2 million, or 17.4%, mainly due to lower payroll and support costs[231]. Liquidity and Financing - Rubicon entered into a $90 million revolving credit facility and a $75 million term loan in June 2023, enhancing its liquidity position[184]. - The company expects sufficient liquidity to meet known needs for the next 12 months, contingent on successful execution of cost reduction initiatives[255]. - Net cash used in operating activities increased to $(37.3) million for the six months ended June 30, 2023, compared to $(16.3) million for the same period in 2022, driven by a $32.9 million unfavorable impact from changes in operating assets and liabilities[259]. - Net cash provided by financing activities was $51.4 million for the six months ended June 30, 2023, significantly higher than $13.2 million for the same period in 2022, primarily from new third-party debt and common stock issuance[261]. - The company has negative working capital and stockholders' deficit as of June 30, 2023, but plans to settle warrant and derivative liabilities in Class A Common Stock[253]. Product Development and Innovation - The company invested $7.2 million in product development for the three months ended June 30, 2023, compared to $9.3 million in the same period of 2022, indicating a reduction of about 23%[194]. - The company anticipates that product development costs will decrease as a percentage of total revenues in the next 12 months[194]. - The company has been awarded over 60 patents and 15 trademarks, strengthening its intellectual property portfolio[182]. Market Trends and Opportunities - The waste and recycling industry is increasingly focused on reducing emissions, which presents growth opportunities for Rubicon[191]. Other Financial Metrics - Adjusted gross profit for the six months ended June 30, 2023, was $34.1 million, with an adjusted gross profit margin of 9.6%[244]. - Adjusted EBITDA is defined as GAAP net loss adjusted for various non-operational items, providing insights into operating performance[246]. - Adjusted EBITDA for the three months ended June 30, 2023, was $(9.7) million, improving from $(18.9) million in the same period of 2022, with adjusted EBITDA as a percentage of total revenue at (5.6)%[249]. Debt and Obligations - The company settled $7.1 million of transaction fees related to mergers by issuing Class A Common Stock[189]. - The company fully prepaid $48.6 million under the Revolving Credit Facility on June 7, 2023, resulting in a loss of $2.6 million on extinguishment of debt obligations[268]. - The company fully prepaid $40.5 million under the Term Loan on June 7, 2023, incurring a loss of $2.5 million on extinguishment of debt obligations[269]. - The Subordinated Term Loan was amended on June 7, 2023, increasing the interest rate to 15.0%, with 11.0% paid in cash and 4.0% capitalized[270]. - The company entered into a $75.0 million Term Loan agreement with a maturity date of June 7, 2025, which can be extended to June 7, 2026 under certain conditions[279]. - The interest rate on the Term Loan is the prime rate plus a margin of 8.75%, increasing to 18.5% as of June 30, 2023 due to interest capitalization[279]. - The Minimum Liquidity Threshold under the credit agreements was $19.0 million as of June 30, 2023, with potential reductions based on financial conditions[280]. Stock and Equity Transactions - The company issued Class A Common Stock for a total purchase price of $23.7 million under the May 2023 Equity Agreements[285]. - The company received approximately $6.0 million from the issuance of the YA Warrant, exercisable for shares of Class A Common Stock valued at $20.0 million[284]. - The company has not sold any shares under the SEPA agreement, which allows for the sale of up to $200.0 million of Class A Common Stock[283]. - As of June 30, 2023, no June 2023 Term Loan Warrants were exercised[279]. Operational Changes - The company terminated an operating lease for an office facility in Lexington, Kentucky[291].

Financial Data and Key Metrics Changes - The company generated approximately $181 million in revenue for Q1 2023, an increase of $21 million or 13% compared to Q1 2022, driven primarily by the RubiconConnect product and SaaS business growth [51] - Adjusted gross profit for Q1 2023 was approximately $16 million, an increase of $3 million or 23% year-over-year, marking the highest quarterly adjusted gross profit ever [52] - Adjusted EBITDA for Q1 2023 was negative $14 million, including $2.5 million of non-recurring items related to business combination and strategic shift [53] Business Line Data and Key Metrics Changes - The RubiconConnect product and SaaS business were significant contributors to revenue growth, with the SaaS business continuing to expand [51][52] - The company experienced a 63% decrease in the average price of recyclable commodities, but maintained underlying volume growth in the commodities business [84] Market Data and Key Metrics Changes - The company has surpassed 13 million unique service locations and 8000 haulers and recyclers, managing over 160 types of waste streams [36] - The Smart City product has doubled in size year-over-year, with significant partnerships established with cities like Miami and Atlanta [46][49] Company Strategy and Development Direction - The company is focused on executing a bridge to profitability plan, increasing financial flexibility through equity financing, and curtailing lower return investments [57] - The strategy includes enhancing margins through higher-margin SaaS products and optimizing service offerings to waste generator customers [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive adjusted EBITDA for Q4 2023 and the full year 2024, while also targeting low double-digit adjusted gross profit margins [56][62] - The company is optimistic about future growth opportunities, leveraging existing relationships and expanding service offerings [63][66] Other Important Information - The company has identified over $28 million in annualized cost savings through various efficiency measures, including the use of AI systems to streamline operations [60][62] - The company is maintaining a pipeline for potential M&A opportunities but remains focused on organic growth [18][20] Q&A Session Summary Question: Can you help bridge the gap to a double-digit adjusted gross profit margin? - Management indicated that contributions to margin improvement are coming from price increases, growth in high-margin smart city business, and increased commodity service revenues [5][6] Question: What type of growth are you seeing in the number of haulers and recyclers on the platform? - Management noted that the focus is not on increasing the number of haulers but on deepening relationships and engagement within the existing network [2][3] Question: Can you talk about the M&A environment and your appetite for M&A? - Management stated that while they are focused on organic growth, they remain opportunistic regarding M&A if suitable deals arise [18][20]

Business Overview - The digital marketplace serves over 8,000 customers, including major clients like Apple and Walmart, and has over 8,000 hauling and recycling partners across North America[175]. - The waste and recycling industry is increasingly influenced by public policy aimed at reducing emissions and improving landfill diversion, presenting growth opportunities for the company[195]. Financial Performance - Total revenue increased by $21.3 million, or 13.3%, for the three months ended March 31, 2023, compared to the same period in 2022[214]. - Service revenue increased by $31.7 million, or 23.5%, driven by $14.6 million from new customers and $24.4 million from higher prices, partially offset by a $7.1 million decrease in volume with existing customers[214]. - Revenues from recyclable commodities decreased by $10.4 million, or 41.3%, primarily due to a $11.3 million decrease in sales prices, particularly in old corrugated cardboard (OCC), which saw a price drop of 63.4%[215]. - Total cost of revenue increased by $18.3 million, or 11.9%, for the three months ended March 31, 2023[216]. - Cost of service revenue increased by $28.3 million, or 21.8%, mainly due to higher hauling-related costs from new customer sales and increased service costs for existing customers[217]. - General and administrative expenses increased by $5.5 million, primarily due to $4.6 million in severance pay related to executive departures[222]. - The company reported an $18.6 million gain on settlement of incentive compensation, replacing $26.8 million of accrued management rollover consideration with RSU awards valued at $8.2 million[223]. - The net loss for the three months ended March 31, 2023, was $9.5 million, representing a net loss margin of (5.2)%, improved from (15.5)% in the same period of 2022[236]. - Adjusted EBITDA for the same period was $(13.9) million, compared to $(16.3) million in the prior year, with an adjusted EBITDA margin of (7.7)%[236]. Cash Flow and Liquidity - As of March 31, 2023, cash and cash equivalents totaled $10.5 million, with accounts receivable at $67.2 million and unbilled accounts receivable at $52.9 million[241]. - The company has total current liabilities of $243.2 million as of March 31, 2023, indicating negative working capital and stockholders' deficit[240]. - The company projects insufficient cash on hand to meet liquidity needs for the next 12 months, raising substantial doubt about its ability to continue as a going concern[242]. - Net cash used in operating activities increased by $11.1 million to $12.4 million for the three months ended March 31, 2023, compared to $1.3 million for the same period in 2022[251]. - Net cash provided by financing activities was $13.2 million for the three months ended March 31, 2023, compared to $0.7 million for the same period in 2022, primarily from new related party debt of $14.5 million and third-party debt of $11.2 million[252]. Debt and Financing - A security purchase agreement with Yorkville Investor involved issuing convertible debentures totaling up to $17.0 million, with $7.0 million already issued[177][178]. - The Revolving Credit Facility was amended to increase the maximum borrowing amount from $60.0 million to $75.0 million[181]. - The company has upsized its Revolving Credit Facility to $75.0 million and extended its maturity date to December 14, 2025[244]. - The company plans to refinance all term loan facilities with new, longer-term debt facilities to improve liquidity in the long term[245]. - The Term Loan had a total carrying value of $38.7 million as of March 31, 2023, with an amended interest rate of SOFR plus 9.6%[262]. - The Subordinated Term Loan had a total carrying value of $16.9 million as of March 31, 2023, bearing interest at 14%[263]. Product Development and Intellectual Property - Product development costs for the three months ended March 31, 2023, were $8.1 million, compared to $9.2 million in the same period of 2022, with expectations for a decrease as a percentage of total revenues in the next 12 months[198]. - The company has secured over 60 patents and 20 trademarks, enhancing its intellectual property portfolio[175]. - The company expects product development costs to decrease as a percentage of total revenues over the next 12 months, focusing on software services subscription costs for enhanced data analytics capabilities[221]. Tax and Regulatory Matters - Rubicon Technologies, Inc. is subject to U.S. federal and state income taxes, with certain subsidiaries considered taxable corporations[290]. - The company uses the asset and liability method for income tax accounting, recognizing deferred tax assets and liabilities for future tax consequences[291]. - Valuation allowances are established to reduce deferred tax assets based on the likelihood of realization, influenced by historical and projected taxable income[292]. - As of March 31, 2023, Rubicon has no tax positions that meet the threshold for recognition, indicating no recognized tax benefits[293]. - The provision for income taxes includes reserve provisions and is subject to examination by tax authorities, which may assert assessments against the company[294]. Forward-Looking Statements and Risks - Forward-looking statements in the quarterly report highlight risks including legal proceedings, market conditions, and operational efficiency initiatives[296]. - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[298].