Rubicon Technologies, Inc.

Good afternoon and welcome to the Rubicon Technologies third quarter 2023 earnings call. My name is Kayla 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star and one. Thank you, and it is now my pleasure to introduce Chris Spooner, Executive Vice President of Finance. You may begin.

Thank you. Hello, everyone, and welcome to Rubicon's third quarter 2023 earnings call. A few quick reminders before we begin. This call is being webcast and can be accessed on the Investors section of our website, which can be found at investors.rubicon.com. Today, we will present Rubicon's financial results for the third quarter of 2023, 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 and the Private Securities Litigation Reform Act of 1995. 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, and they should not be considered in isolation from the most directly comparable GAAP measures. A discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures, and reconciliation for the most directly comparable gap measure can be found in our earnings release and our filings with the SEC. Joining me on the call today are Phil Radone, Rubicon's Chief Executive Officer, and Kevin Schubert, Rubicon's President and Chief Financial Officer. With that, I would now like to turn the call over to Phil.

Thank you, Chris, and thank you to everyone for joining us today. To start, I am very proud to announce for the third quarter in a row, we have achieved record adjusted gross profit our key operating metric, with an increase of 41% year-over-year and 11% from the prior quarter. We also expanded AGP margin by 395 basis points year-over-year, despite slightly softer revenue due to commodity headwinds and the ongoing process of optimizing our portfolio. Adjusted EBITDA also improved by $12 million to a loss of $8.9 million year-over-year and improvement of 8% from the prior quarter. In addition, it is worth noting that the adjusted EBITDA figure includes approximately $5 million of non-cash operating expenses, including technology expenses strategically shifted earlier to accelerate growth initiatives. The macro and capital market environments in which we operate remain challenging, but waste and recycling is a mission-critical business service that is stable, growing, and finding new ways to create customer value. Rubicon is helping to drive our industry forward and I'm very pleased with the progress the team has made in the last 12 months. Our core business is stronger than ever, and we remain focused on our drive to profitability. Kevin will provide additional detail on our quarterly results, but before he does, I wanted to briefly remind everyone of who Rubicon is and how our products are helping to modernize our industry with an environmental proposition that improves our customers' bottom lines. Rubicon is a global technology company that provides cloud-based waste and recycling solutions to three key customer constituents, waste generators, waste haulers, and waste processors. For our waste generator customers, including businesses and local governments, the Rubicon software platform is a single solution to streamline the procurement and management of their waste and recycling services. Our platform helps to improve the performance of these services and provides much-needed data and analytics for ESG reporting purposes. For waste haulers, including both city and private fleets, our platform provides easy-to-use fleet management and route optimization tools to help our customers improve service delivery, streamline internal operations and processes, and save time and money. In addition, we provide AI-powered camera and computer vision technology that can detect contamination in recycling streams. For our city and municipal fleet customers, these tools have helped to deliver significant taxpayer savings. Our final customer segment is waste processors who rely on our technology and relationships with waste generator customers to receive high quality and consistent volumes of valuable commodities. We enable our customers to increase diversion rates and send greater volumes of materials to recycling processors. We also design programs for our customers that incorporate best practices for material handling and logistics that allow them to command premium commodity rates. Today, Rubicon has achieved significant scale surpassing 13 million unique service locations and 8,000 haulers and recycling partners, with the ability to manage more than 160 types of waste streams. As our network continues to grow, our customers benefit from better pricing, a broader service offering, increased diversion capabilities, and improved insights into waste operations, allowing for more data-driven decisions to enhance efficiency. In the third quarter of 2022, we outlined our strategic plan and committed to materially improving our operational performance and strengthening our financial position. We recognized the challenges ahead and laid out steps we would take to get the company to profitability and growth. We said we were going to push out debt maturities, and we pushed them out to 2025 from 2023. We said we were going to improve liquidity, and we closed a $75 million term loan and expanded our revolver capacity by $15 million. We said we were going to reduce expenses, and we reduced expenses by $55 million on an annualized basis. We said we were going to expand adjusted gross profit margin to double digits by the end of 2023. We surpassed 10% in the second quarter ahead of our goal. We secured an additional $24 million of equity financing from new and existing investors in Q2. To underscore our exceptional performance during an extremely turbulent time, While completing all this, we were able to drive 35% growth in adjusted gross profit year-to-date in 2023. All of this was accomplished while continuing to deliver for our customers and diverting over 800,000 tons from landfill equating to approximately 1.6 million metric tons of CO2 emissions avoided for the first half of 2023. Accomplishing all of this in less than a year was not an easy task. but our team worked tirelessly and successfully completed these strategic objectives, positioning the company for profitability and future growth.