Rubicon(US:RBT)2023-05-22 21:06Business 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].