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Rubicon Reports Third Quarter 2024 Financial Results

News provided by business wire2024-11-22

Rubicon Reports Third Quarter 2024 Financial Results

ATLANTA--(BUSINESS WIRE)-- Rubicon Technologies, Inc. (“Rubicon” or the “Company”) (OTC: RBTC), a leading provider of technology-based waste and recycling solutions, today reported financial and operational results for the third quarter of 2024.

“We’re thrilled with our Q3 performance, where Rubicon’s relentless focus on partner-centricity and strategic account management drove continued momentum,” said Osman Ahmed, Interim CEO of Rubicon. “Our financial results highlight material improvements in net loss and adjusted EBITDA, along with significant revenue growth. I would like to thank our amazing employees, customers, and vendor partners for their role in achieving these results.”

Third Quarter 2024 Financial Highlights

Revenue was $182.5 million, an increase of $14.0 million or 8.3% compared to $168.5 million in the third quarter of 2023.
Gross Profit was $8.6 million, a decrease of $3.1 million or 26.1% compared to $11.7 million in the third quarter of 2023.
Adjusted Gross Profit was $14.2 million, a decrease of $2.8 million or 16.6% compared to $17.0 million in the third quarter of 2023.
Net Loss was $(8.5) million, an increase of $21.7 million or 71.9% compared to the net loss of $(30.2) million in the third quarter of 2023.
Adjusted EBITDA was $(3.2) million, an increase of $5.6 million or 63.4% compared to $(8.8) million in the third quarter of 2023. Adjusted EBITDA for Q3 included $3.7 million in non-cash expenses related to Rubicon’s contract with Palantir.

Operational and Business Highlights

Select customer renewals this quarter included Papa John’s International, Inc. and Caleres, a global footwear company home to a diverse portfolio of loved and admired brands including Sam Edelman, Famous Footwear, and Vince.
In Q3, Rubicon experienced strong growth in its ancillary services for commercial customers including the expansion of newer service offerings such as power washing and a comprehensive grease trap maintenance program.
The Company saw increased interest from customers and prospects for its Technical Advisory Services (TAS), which provide tailored consulting on zero waste programs, waste audits and material characterizations, and extended producer responsibility (EPR) guidance.

For more information about Rubicon’s third quarter 2024 financial results, please see the Company’s shareholder letter dated November 22, 2024.

About Rubicon

Rubicon builds technology products and provides expert sustainability solutions to waste generators and material processors to help them understand, manage, and reduce waste. As a mission-driven company, Rubicon helps its customers improve operational efficiency, unlock economic value, and deliver better environmental outcomes. To learn more, visit rubicon.com.

RUBICON TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue:
Service	$	169,305		$	156,362		$	463,282		$	478,712
Recyclable commodity		13,228			12,138			45,460			40,794
Total revenue		182,533			168,500			508,742			519,506

Costs and Expenses:
Cost of revenue (exclusive of amortization and depreciation):
Service		161,011			146,178			444,933			452,999
Recyclable commodity		12,660			10,272			41,607			35,427
Total cost of revenue (exclusive of amortization and depreciation)		173,671			156,450			486,540			488,426
Sales and marketing		1,874			1,824			5,895			6,215
Product development		5,286			7,636			17,182			21,645
General and administrative		6,685			13,565			30,436			45,451
Gain on settlement of incentive compensation		-			-			-			(18,622	)
Amortization and depreciation		885			1,007			2,766			3,194
Total Costs and Expenses		188,401			180,482			542,819			546,309
Loss from continuing operations		(5,868	)		(11,982	)		(34,077	)		(26,803	)

Other Income (Expense):
Interest earned		32			5			91			11
Gain on change in fair value of warrant liabilities		528			3,354			13,997			2,885
Gain on change in fair value of earnout liabilities		-			150			133			5,440
Gain (loss) on change in fair value of derivatives		5,717			(1,245	)		3,697			(3,778	)
Gain on service fee settlements in connection with the Mergers		-			-			-			6,996
Loss on extinguishment of debt obligations		-			(9,348	)		(8,782	)		(18,234	)
Interest expense		(7,886	)		(9,179	)		(27,049	)		(24,474	)
Related party interest expense		(562	)		(453	)		(1,624	)		(1,707	)
Other expense, net		(538	)		(1,116	)		(2,154	)		(2,019	)
Total Other Expense, Net		(2,709	)		(17,832	)		(21,691	)		(34,880	)
Loss from continuing operations before income taxes		(8,577	)		(29,814	)		(55,768	)		(61,683	)

Income tax expense		102			16			222			49
Net loss from continuing operations, net of tax		(8,679	)		(29,830	)		(55,990	)		(61,732	)

Discontinued Operations:
Net loss from discontinued operations		-			(343	)		(1,125	)		(709	)
Net gain on sale of discontinued operations		-			-			59,674			-
Income tax benefit (expense)		226			-			(1,653	)		-
Net income (loss) from discontinued operations, net of tax		226			(343	)		56,896			(709	)
Net income (loss)		(8,453	)		(30,173	)		906			(62,441	)
Net loss from continuing operations attributable to noncontrolling interests		(89	)		(4,731	)		(2,005	)		(20,474	)
Net loss from continuing operations attributable to Class A common stockholders		(8,590	)		(25,099	)		(53,985	)		(41,258	)
Net income (loss) from discontinued operations attributable to noncontrolling interests		3			(54	)		917			(249	)
Net income (loss) from discontinued operations attributable to Class A common stockholders	$	223		$	(289	)	$	55,979		$	(460	)

Net loss from continuing operations per Class A Common share – basic and diluted		(0.12	)		(0.78	)		(0.46	)		(2.32	)
Net earnings (loss) from discontinued operations per Class A Common share – basic and diluted		-			(0.01	)		0.48			(0.03	)
Net earnings (loss) per Class A Common share – basic and diluted		(0.12	)		(0.93	)		0.01			(3.51	)
Weighted average shares outstanding – basic		68,946,948			32,381,649			57,996,823			17,786,466
Weighted average shares outstanding – diluted		68,946,948			32,381,649			57,996,823			17,786,466

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

Use of Non-GAAP Financial Measures

Adjusted Gross Profit and Adjusted Gross Profit Margin

Adjusted Gross Profit and Adjusted Gross Profit Margin are considered non-GAAP financial measures under the rules of the U.S. Securities and Exchange Commission (the “SEC”) because they exclude, respectively, certain amounts included in Gross Profit and Gross Profit Margin calculated in accordance with GAAP. Specifically, the Company calculates Adjusted Gross Profit by adding back amortization and depreciation for revenue generating activities and platform support costs to GAAP Gross Profit, the most comparable GAAP measure. Adjusted Gross Profit Margin is calculated as Adjusted Gross Profit divided by total GAAP revenue. Rubicon believes presenting Adjusted Gross Profit and Adjusted Gross Profit Margin is useful to investors because they show the progress in scaling Rubicon’s digital platform by quantifying the markup and margin Rubicon charges its customers that are incremental to its marketplace vendor costs. These measures demonstrate this progress because changes in these measures are driven primarily by Rubicon’s ability to optimize services for its customers, improve its hauling and recycling partners’ efficiency and achieve economies of scale on both sides of the marketplace. Rubicon’s management team uses these non-GAAP measures as one of the means to evaluate the profitability of Rubicon’s customer accounts, exclusive of certain costs that are generally fixed in nature, and to assess how successful Rubicon is in achieving its pricing strategies. However, it is important to note that other companies, including companies in our industry, may calculate and use these measures differently or not at all, which may reduce their usefulness as a comparative measure. Further, these measures should not be read in isolation from or without reference to our results prepared in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is considered a non-GAAP financial measure under the rules of the SEC because it excludes certain amounts included in net loss calculated in accordance with GAAP. Specifically, the Company calculates Adjusted EBITDA by GAAP net loss adjusted to exclude interest expense and income, income tax expense and benefit, amortization and depreciation, gain or loss on extinguishment of debt obligations, equity-based compensation, phantom unit expense, gain or loss on change in fair value of warrant liabilities, gain or loss on change in fair value of earn-out liabilities, gain or loss on change in fair value of derivatives, executive severance charges, gain or loss on settlement of the management rollover bonuses, excess fair value over the consideration received for SAFE, excess fair value over the consideration received for pre-funded warrant, gain or loss on service fee settlements in connection with the Mergers, other non-operating income and expenses, and unique non-recurring income and expenses.

The Company has included Adjusted EBITDA because it is a key measure used by Rubicon’s management team to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses. Further, the Company believes Adjusted EBITDA is helpful in highlighting trends in Rubicon’s operating results because it allows for more consistent comparisons of financial performance between periods by excluding gains and losses that are non-operational in nature or outside the control of management, as well as items that may differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which Rubicon operates and capital investments. Adjusted EBITDA is also often used by analysts, investors and other interested parties in evaluating and comparing Rubicon’s results to other companies within the industry. Accordingly, the Company believes that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating its operating results in the same manner as Rubicon’s management team and board of directors.

Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of net loss or other results as reported under GAAP. Some of these limitations are:

Adjusted EBITDA does not reflect the Company’s cash expenditures, future requirements for capital expenditures, or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs;
Adjusted EBITDA does not reflect the Company’s tax expense or the cash requirements to pay taxes;
although amortization and depreciation are non-cash charges, the assets being amortized and depreciated will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;
Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items for which the Company may make adjustments in historical periods; and
other companies in the industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of present or historical fact included in this press release, are forward-looking statements. When used in this press release, the words “could,” “should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon current expectations, estimates, projections, and assumptions that, while considered reasonable by Rubicon and its management, are inherently uncertain; factors that may cause actual results to differ materially from current expectations include, but are not limited to: 1) the outcome of any legal proceedings that may be instituted against Rubicon or others following the closing of the business combination; 2) changes in applicable laws or regulations; 3) the possibility that Rubicon may be adversely affected by other economic, business and/or competitive factors; 4) Rubicon’s execution of anticipated operational efficiency initiatives, cost reduction measures and financing arrangements; and 5) other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (filed March 28, 2024 with the Securities and Exchange Commission (the “SEC”)), Registration Statement on Form S-3, as amended, filed with the SEC, and other documents Rubicon has filed with the SEC. Although Rubicon believes the expectations reflected in the forward-looking statements are reasonable, nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward looking statements will be achieved. There may be additional risks that Rubicon presently does not know of or that Rubicon currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements, many of which are beyond Rubicon’s control. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Rubicon does not undertake, and expressly disclaims, any duty to update these forward-looking statements, except as otherwise required by applicable law.

Reconciliations of Non-GAAP Financial Measures

Adjusted Gross Profit and Adjusted Gross Profit Margin

The following table presents reconciliations of Adjusted Gross Profit and Adjusted Gross Margin to the most directly comparable GAAP financial measures for each of the periods indicated.

	Three Months Ended September 30,						Nine months Ended September 30,
	2024			2023			2024			2023
	(in thousands, except percentages)
Total revenue	$	182,533		$	168,500		$	508,742		$	519,506
Less: total cost of revenue (exclusive of amortization and depreciation)		173,671			156,450			486,540			488,426
Less: amortization and depreciation for revenue generating activities		179			299			877			1,006
Gross profit	$	8,683		$	11,751		$	21,325		$	30,074
Gross profit margin		4.8	%		7.0	%		4.2	%		5.8	%

Gross profit	$	8,683		$	11,751		$	21,325		$	30,074
Add: amortization and depreciation for revenue generating activities		179			299			877			1,006
Add: platform support costs⁽¹⁾		5,384			5,043			16,326			15,447
Adjusted gross profit	$	14,246		$	17,093		$	38,528		$	46,527
Adjusted gross profit margin		7.8	%		10.1	%		7.6	%		9.0	%

Amortization and depreciation for revenue generating activities	$	179		$	299		$	877		$	1,006
Amortization and depreciation for sales, marketing, general and administrative activities		706			708			1,889			2,188
Total amortization and depreciation	$	885		$	1,007		$	2,766		$	3,194

Platform support costs⁽¹⁾	$	5,384		$	5,043		$	16,326		$	15,447
Marketplace vendor costs⁽²⁾		168,287			151,407			470,214			472,979
Total cost of revenue (exclusive of amortization and depreciation)	$	173,671		$	156,450		$	486,540		$	488,426

(1)	We define platform support costs as costs to operate our revenue generating platforms that do not directly correlate with volume of sales transactions procured through our digital marketplace. Such costs include employee costs, data costs, platform hosting costs and other overhead costs.
(2)	We define marketplace vendor costs as direct costs charged by our hauling and recycling partners for services procured through our digital marketplace.

Adjusted EBITDA

The following table presents reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measure for each of the periods indicated.

	Three Months Ended September 30,						Nine months Ended September 30,
	2024			2023			2024			2023
	(in thousands, except percentages)
Total revenue	$	182,533		$	168,500		$	508,742		$	519,506

Net (loss) income	$	(8,453	)	$	(30,173	)	$	906		$	(62,441	)
Adjustments:
Interest expense		7,886			9,179			27,049			24,474
Related party interest expense		562			453			1,624			1,707
Interest earned		(32	)		(5	)		(91	)		(11	)
Income tax expense		102			16			222			49
Amortization and depreciation		885			1,007			2,766			3,194
Loss on extinguishment of debt obligations		-			9,348			8,782			18,234
Equity-based compensation		488			2,134			1,582			13,239
Gain on change in fair value of warrant liabilities		(528	)		(3,354	)		(13,997	)		(2,885	)
Gain on change in fair value of earn-out liabilities		-			(150	)		(133	)		(5,440	)
(Gain) loss on change in fair value of derivatives		(5,717	)		1,245			(3,697	)		3,778
Executive severance charges		1,262			-			4,000			4,553
Gain on settlement of Management Rollover Bonuses		-			-			-			(26,826	)
Gain on service fee settlements in connection with the Mergers		-			-			-			(6,996	)
Other expenses⁽¹⁾		538			1,116			2,154			2,019
Net loss (income) from discontinued operations		(226	)		343			(56,896	)		709
Adjusted EBITDA	$	(3,233	)	$	(8,841	)	$	(25,729	)	$	(32,643	)
Net (loss) income as a percentage of total revenue		(4.6	)%		(17.9	)%		0.2	%		(12.0	)%
Adjusted EBITDA as a percentage of total revenue		(1.5	)%		(5.2	)%		(5.1	)%		(6.3	)%

(1)	Other expenses primarily consist of foreign currency exchange gains and losses, taxes, penalties and gains and losses on sale of property and equipment.