Rubicon Technologies, Inc.

Chris Pooner, Executive Vice President of Finance, you may begin.

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 on the investor section of our website, which can be found at investors.rubicon.com. Today, we will present Rubicon's financial results for the first quarter 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 provision of 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 reconciliations to the most directly comparable GAAP 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 transaction. Please refer to our 10-Q filings for more information and disclosures regarding transaction and its implications on the financials. Joining me on the call today are Phil Radone, Rubicon's Chief Executive Officer, and Kevin Schuber, 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. We kicked off the year with an eventful first quarter. Despite headwinds, we had another quarter of year-over-year adjusted gross profit growth with an increase of 5.9% and 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 a 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 unit. 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 objectives, accelerate its journey to profitability, and continue growing its core business. 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 advisory services. This new capital will be dedicated to improving services and strengthening Rubicon's longstanding relationship with more than 8,000 vendor and dollar partners 90% of which are small independent businesses. 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 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. 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. Thanks, 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 2023. 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 2023. And AGP margin expanded 138 basis points to 10.3% from 8.9%. 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 2023. Please note, this includes 3.9 million 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 2024, and an additional $20 million in cash for the issuance of convertible preferred stocks. The 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 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.

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 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. 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. 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 maybe just revenue trends throughout the year, how should we be thinking about that, especially given the divestiture? Thank you.

Hey, Brad. How you doing? This is Kevin. 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, you know, we feel good about our liquidity position going forward and our ability to fund the business as we move towards profitability. Yeah, I mean, and then as we look at revenue going forward, obviously the smart city business was fast growing but wasn't, you know, significant from a revenue or AGP perspective compared to the rest of the business. So, you know, we expect to kind of be on a similar cadence as you saw before. and sort of returning to that passive profitability and getting to adjust to gross profit and cash flow positive as we progress through the year.

And are those targets to be adjusted even to positive? Is that for this year? Am I hearing you correctly? Correct. Awesome. And then maybe just an update on current liquidity. I just noticed in the press release there's no kind of balance sheet or cash balance in that. I'm just wondering if you could give us that update. Thank you.

Yeah, no, as is 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 that remained on the balance sheet, so about $33 million.

Thank you.

As there are no further questions at this time, this concludes our Q&A session. I would like to turn the call over back to Phil Rodoni for closing remarks.

Again, thank you, everyone, for joining us today, and we look forward to providing you 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.