Q1 2024 Rubicon Technologies Inc Earnings Call

John: Good afternoon, and welcome to Rubicon Technologies' first quarter 2024 earnings call. My name is John, and I will be your operator for today's call. As a reminder, this conference call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to introduce Chris Booner, Executive Vice President of Finance. You may begin.

Good afternoon, and welcome to Rubicon technologies first quarter 'twenty 'twenty four earnings call. My name is John and I'll be your operator for today's call. As a reminder, this conference call is being recorded at this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session.

Speaker Change: I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one. Thank you. It is now my pleasure to introduce Chris Spooner Executive Vice President of Finance you may begin.

Chris Booner: Thank you. Hello, everyone, and welcome to Rubicon's first quarter 2024 earnings call. A few quick reminders before we begin. This call is being webcast and can be accessed in the investors section of our website, which can be found at investors.rubicon.com. Today we will present Rubicon's financial results for the first quarter of 2024, which will be followed by a question and answer session. During the call, management will be making forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Chris Spooner: Thank you Hello, everyone and welcome to <unk> first quarter 2024 earnings call.

Chris Spooner: A few quick reminders before we begin.

Chris Spooner: This call is being webcast and can be accessed on the investors section of our website, which can be found at investors stop Rubicon Dot com.

Speaker Change: They will present the financial results for the first quarter 2024, which will be followed by a question and answer session.

Speaker Change: During the call management will be making forward looking statements that are subject to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

Chris Booner: These statements are not guarantees of future performance, and our actual results may differ materially due to known and unknown risks and uncertainties, as discussed in greater detail in our earnings release and our SEC filings. We assume no obligation to update forward-looking statements except as required by law. Additionally, we will refer to non-GAAP financial measures during our call today, including but not limited to adjusted gross profit and adjusted EBITDA. We provide these non-GAAP results for informational purposes only, and they should not be considered in isolation from the most directly comparable GAAP measures.

Speaker Change: These statements are not guarantees of future performance and our actual results may differ materially due to known and unknown risks and uncertainties as discussed in greater detail in our earnings release, and our SEC filings.

Speaker Change: We assume no obligation to update forward looking statements, except as required by law.

Speaker Change: Additionally, we will refer to non-GAAP financial measures during our call today, including but not limited to adjusted gross profit and adjusted EBITDA.

Speaker Change: We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures.

Speaker Change: A discussion of why we believe these non-GAAP measures are useful to investors certain limitations of using these measures and reconciliations to the most directly comparable GAAP measure can be found in our earnings release and in our filings with the SEC for the.

Chris Booner: A discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures, and reconciliations to the most directly comparable gap measure can be found in our earnings release and in our filings with the SEC. For the purposes of this call, please note that all financials discussed are inclusive of discontinued operations as defined by the recently announced Transact. Please refer to our 10-Q filings for more information and disclosures regarding this transaction and its implications on finance. Joining me on the call today are Phil Rodoni, Rubicon's Chief Executive Officer, and Kevin Schubert, Rubicon's President and Chief Financial Officer. With that said, I would now like to turn the call over to Phil.

The purposes of this call. Please note that all financials discussed are inclusive of discontinued operations as defined by the recently announced transaction.

Speaker Change: Please refer to our 10-Q filings for more information and disclosures regarding transaction and its implications on the financials.

Speaker Change: Joining me on the call today are silver, Tony <unk>, Chief Executive Officer, and Kevin Schumer for the concert President and Chief Financial Officer.

Speaker Change: With that I would now like to turn the call over to Phil.

Phil Rodoni: Thank you, Chris, and thank you to everyone for joining us today. We kicked off the year with an eventful first quarter.

Phil: Thank you, Chris and thank you to everyone for joining us today.

Phil: We kicked off the year with an eventful first quarter. Despite the headwinds we had another quarter of year over year adjusted gross profit growth with an increase of five 9% and adjusted gross profit margin expansion of 138 basis points.

Phil Rodoni: Despite headwinds, we had another quarter of year-over-year adjusted gross profit growth with an increase of 5.9% and an adjusted gross profit margin expansion of 138 basis points. We continue to push forward with the efforts to reduce expenses, which drove a decrease in SG&A of 9.3% in the first quarter compared to the prior year. As many of you may have seen, we announced that the company completed a $94.2 million transaction with Rodina Capital that included the sale of Rubicon's fleet technology business.

Phil: We continue to push forward with the efforts to reduce expenses, which drove a decrease in SG&A of nine 3% in the first quarter compared to the prior year.

Phil: As many of you may have seen we announced that the company completed a $94 $2 million transaction with Regina capital that included the sale of Rubicon Fleet technology business unit.

Phil Rodoni: This sale is happening at an opportune time with both the Fleet Technology business and the ongoing Rubicon Connect business at inflection points of growth, and this transaction provides the resources for each unit to accelerate their growth. This transaction is transformational for Rubicon. Improving its balance sheet by reducing debt and providing additional liquidity to enable the company to quickly achieve its business objectives, accelerate its journey to profitability, and continue growing its core business.

Phil: This sale is happening at an opportune time with both the fleet technology business and the ongoing Rubicon connect business at inflection points of growth and this transaction provides the resources for each unit to accelerate their growth.

Phil: This transaction is transformational for Rubicon.

Phil: Its balance sheet by reducing debt and providing additional liquidity to enable the company to quickly achieve its objectives.

Jeff: It's Jeff.

Jeff: Turning to profitability and continue growing its core business.

Phil Rodoni: Importantly, it marks a return to Rubicon's core principles, a business centered on a customer-focused approach that has been instrumental in the company's growth from the outset. This strategic move underscores Rubicon's dedication to the Rubicon Connect product, which serves commercial waste generators from small to medium-sized businesses to Fortune 500 companies. Many of the company's commercial customers are looking to Rubicon to help them achieve sustainability goals with tailored zero waste and circular economy solutions, including through the company's recently launched technical advisories.

Jeff: Importantly, it marks a return to a group of <unk> core principles a business centered on a customer focused approach that has been instrumental in the company's growth from the outset.

Speaker Change: This strategic move underscores rybak on his dedication to the Rubicon connect product, which serves commercial waste generators from small to medium sized businesses to fortune 500 companies.

Speaker Change: Many of the company's commercial customers are looking to have gone to help them achieve sustainability goals with tailored zero waste and circular economy solutions, including through the company's recently launched technical Advisory services.

Phil Rodoni: This new capital will be dedicated to improving services and strengthening Rubicon's long-standing relationship with more than 8,000 vendor and holler partners, 90% of which are small independent. I'd like to take a moment to highlight a recent customer win in Rubicon's pursuit of delivering efficiency and sustainability solutions to our customers while prioritizing innovative technology. Rubicon participated in a competitive evaluation and won a significant contract with a new customer in the grocery sector at the beginning of the second quarter, providing waste and recycling services to over 500 stores across the United States and Canada.

This new capital will be dedicated to improving services and strengthening rubicon and long standing relationship with more than 8000 vendor in all of our partners, 90% of which are small independent businesses.

Speaker Change: I'd like to take a moment to highlight a recent customer win and rubicon pursuit of delivering efficiency and sustainability solutions to our customers while prioritizing innovative technology.

Speaker Change: <unk> participated in a competitive evaluation and won a significant contract with a new customer in the grocery sector at the beginning of the second quarter.

Speaker Change: Providing waste and recycling services to over 500 stores across the United States and Canada. This is a valuable contract for <unk> with strong potential for incremental growth opportunities along the way.

Phil Rodoni: This is a valuable contract for Rubicon, with strong potential for incremental growth opportunities along the way. This customer is already experiencing the full benefits of Rubicon's platform for scalable waste and recycling services, which supports their efforts to reduce environmental impacts while providing exceptional value and service to their own customers. As a leader in sustainability with multiple waste streams, this customer's needs and values align with what Rubicon does best, reducing costs and increasing diversion rates.

Speaker Change: This customer is already experiencing the full benefits of Rubicon platform for scalable waste and recycling services, which supports their efforts to reduce environmental impacts, while providing exceptional value and service to their own customers.

Speaker Change: As a leader in sustainability with multiple waste streams, this customer's needs and values align with what Rubicon does best reducing costs and increasing diversion rates.

Phil Rodoni: Rubicon has achieved both with other grocery customers, and we look forward to driving similar results with this new relationship. This new customer is just a glimpse into what the future holds for this new phase of Rubicon. We look forward to adding more large customers and continuing to strengthen and expand relationships with our current customers. I will now turn the call over to Kevin to provide a review of the first quarter 2024 financials.

Speaker Change: <unk> has achieved both with other grocery customers and we look forward to driving similar results with this new relationship.

Speaker Change: This new customer is just a glimpse into what the future holds for this new phase of Rubicon, we look forward to adding more large customers and continuing to strengthen and expand relationships with our current customers.

Speaker Change: I'll now turn the call over to Kevin to provide a review of the first quarter 2020 for financials.

Kevin Schumer: Thanks, Phil I'll now take a few minutes to review our first quarter 2024 results.

Kevin Schubert: Phil. I will now take a few minutes to review our first quarter 2024 results. Revenue was $166.1 million, a decrease of $15 million, or 8.3%, compared to $181.1 million in the first quarter of 2020. This decrease is a result of our efforts last year to drive profitability by ending relationships that were not as profitable, which negatively impacted top-line revenue, but benefits profitability overall. Adjusted gross profit was $17.1 million, an increase of $1 million, or 5.9%, compared to $16.1 million in the first quarter of 2020, and the AGP margin expanded 138 basis points to 10.3% from 8.9%.

Kevin Schumer: Revenue was $166 1 million, a decrease of $15 million or eight 3% compared to $181 1 million in the first quarter of 2023.

Kevin Schumer: This decrease is a result of our efforts last year to drive profitability by enduring relationships that were not as profitable, which negatively impacted top line revenue, but benefits profitability overall.

Kevin Schumer: Adjusted gross profit was $17 one.

Kevin Schumer: An increase of $1 million or five 9% compared to $16 1 million in the first quarter of 2023, and AGP margin expanded 138 basis points to 10, 3% from eight 9%.

Kevin Schubert: Adjusted EBITDA was negative $11 million, an improvement of $2.9 million or 20.9% compared to the negative $14 million in the first quarter of 2020. Please note, this includes 3.9 million of non-cash operating expenses. I would now like to take a minute to provide further details on the economics of our recent transaction. As Phil mentioned, the transaction has a total value of $94.2 million. This includes $61.7 million of cash for the sale, along with an earn-out consideration of $12.5 million that would be payable by the end of 2025, and an additional $20 million in cash for the issuance of convertible preferred. The proceeds from this transaction will be used to pay down high-interest debt, as well as for working capital and general corporate profit. I will now turn the call back over to Phil before we take questions. Thank you.

Kevin Schumer: Adjusted EBITDA was negative $11 million, an improvement of $2 9 million or 29% compared to the negative $14 million in the first quarter of 2023. Please.

Kevin Schumer: Please note. This includes $3 9 million of noncash operating expenses.

Speaker Change: I would now like to take a minute to provide further details on the economics of our recent transactions as Phil mentioned the transaction has a total value of $94 2 million.

Speaker Change: This includes $61 7 million of cash for the sale along with an earn out consideration of $12 5 million that would be payable by the end of 2024 and an additional $20 million in cash for the issuance of convertible preferred stock.

Speaker Change: Proceeds from this transaction will be used to pay down high interest debt as well as for working capital and general corporate purposes.

I will now turn the call back over to Phil before we take questions. Thank.

Phil Rodoni: Thank you for continuing this journey with us. We look forward to updating you on our progress in the coming quarter. With that, I will turn the call over to the operator, who can open the line for questions.

Phil: Thank you for continuing this journey with US we look forward to updating you on our progress in the coming quarters with that I will turn the call over to the operator, who can open the line for questions.

John: Thank you. We will now begin our question and answer session. At this time, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: Thank you we will now begin our question and answer session. At this time, if you look back to ask a question press star followed by the number one on your telephone keypad. If you would like to withdraw your question simply press Star One again as a reminder, please limit yourself to one question and one follow up only.

Operator: As a reminder, please limit yourself to one question and one follow-up only. We'll pause for a moment to compile the Q&A roster. Thank you. The first question comes from the line of Brett Knoblo from Cantor Fitzgerald. Please go ahead. Hi guys.

Speaker Change: For a moment to compile the Q&A roster. Thank you.

Speaker Change: The first question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Please go ahead.

Brett Knoblo: Hi guys. Thanks for taking my question. On, I guess, the money that you guys received from the transaction, could you maybe help illustrate what the plans are for that? How much are you expecting to put that towards paying down debt? And then, more broadly speaking, on, you know, maybe just revenue trends throughout the year. How should we be thinking about that, especially given the divestiture?

Brett Knoblauch: Hi, guys. Thanks for taking my question on I guess, the the money that you guys received from the transaction could you maybe help.

Illustrate what the plans are for that how much are you expecting to.

Brett Knoblauch: Put that towards paying down debt and then more broadly speaking on maybe just revenue trends throughout the year, how should we be thinking about that especially given the divestiture. Thank you.

Brett Knoblo: Thank you.

Speaker Change: Hey, How're you doing.

Kevin Schumer: This is Kevin I appreciate the question and yes, I mean, the money that we took and I think sort of you can think of it as.

Kevin Schubert: Hey, how are you doing? This is Kevin.

Kevin Schumer: We paid down sort of in the.

Kevin Schumer: $50 million range of high interest debt and at closing, we had a north of $30 million for working capital operating purposes.

Kevin Schubert: I appreciate the question. And yeah, I mean, the money that we took in, I think, you know, sort of, you can think of it as We paid down sort of in the $50 million range of high-interest debt, and at closing, we had north of $30 million for working capital and operating purposes. So, obviously, we feel good about our liquidity position going forward and our ability to fund the business as we move towards profitability.

Kevin Schumer: So obviously we.

Kevin Schumer: We feel good about our liquidity position going forward and our ability to fund the business as we move towards our towards.

Kevin Schubert: Yeah, and then as we look at revenue going forward, obviously, the Smart City business was fast-growing but wasn't significant from a revenue or AGP perspective compared to the rest of the business. So, we expect to kind of be on a similar cadence as you saw before, and sort of returning to that path to profitability and getting to adjusted gross profit and cash flow positive as we progress through the year.

Kevin Schumer: Towards profitability.

Kevin Schumer: Yes.

Kevin Schumer: As we look at revenue going forward obviously the.

Kevin Schumer: Smart city business was fast growing but wasn't wasn't.

Kevin Schumer: Significant from a from a revenue or AGP perspective, compared to the rest of the business. So we expect to kind of be at a similar cadence as as you saw before.

Kevin Schumer: And sort of returning to that step.

Kevin Schumer: Profitability in getting too.

Kevin Schumer: Adjusted gross profit and cash flow positive as we progress through the year.

Kevin Schumer: Yeah.

Kevin Schubert: And are those targets to be adjusted, even positive, is that for this year, am I hearing you correctly? And then maybe just an update on current liquidity. I just noticed in the press release that there was no kind of balance sheet or cash balance in that. I'm just wondering if you could give us that update. Thank you. Uh, yeah, no, as is the close of a, like I said, more, I mean.

Speaker Change: And are those targets to be adjusted EBITDA positive.

Speaker Change: For this year am I hearing you correctly.

Speaker Change: Correct.

Speaker Change: Okay, and then maybe just an update on current liquidity.

Speaker Change: I noticed in the press release or is that kind of balance sheet, our cash balance and I'm just wondering if you'd give us that update thank you.

Kevin Schubert: Yeah, no, as in the close of, like I said, more. I mean, obviously, as the close of the transaction, like I said, we had about a little over north of 30 million dollars that remained on the balance sheet. So, about 30.

Speaker Change: Oh, Yeah, no ads as of close of a like I said more I mean, obviously at the close of the transaction like I said, we had about.

Speaker Change: A little over north of $30 million that remain on the balance sheet, so about $33 million.

Speaker Change: Thank you.

Operator: As there are no further questions at this time, this concludes our Q&A session. I would like to turn the call over to Fyodor Rodonyi for closing remarks. Again, thank you.

Speaker Change: There are no further questions at this time. This concludes our Q&A session I would now.

Speaker Change: I would like to turn the call over back to <unk> for closing remarks.

Phil Rodoni: Again, thank you everyone for joining us today, and we look forward to providing you with updates in the future. Thanks again. Ladies and gentlemen, this now concludes today's conference call. Thank you for your participation. You may now disconnect. Thanks for watching!

Speaker Change: Thank you everyone for joining us today, and we look forward to providing you updates in the future. Thanks again.

Operator: Ladies and gentlemen, this now concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you for watching!

Speaker Change: Ladies and gentlemen, this now concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].