Rubicon(US:RBT)2023-11-13 21:31Customer 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].