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Rubicon Technologies, Inc. (RBT)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 delivered record gross profit ($13.4M, 7.8% margin) and improved adjusted EBITDA (−$8.9M), while total revenue declined 7.4% YoY to $171.3M due to commodity price weakness, notably OCC .
  • Management highlighted continued execution of the “Bridge to Profitability” plan and reiterated focus on margin optimization and platform support cost reductions; adjusted gross margin reached 11.6% .
  • Municipal SaaS traction advanced with new 5-year smart city partnerships in Phoenix and Austin, plus enterprise wins/renewals (Neiman Marcus, Americold extension) supporting the software-led strategy .
  • Wall Street consensus (S&P Global) for Q3 2023 was unavailable in our dataset, limiting beat/miss analysis; see Estimates Context section for details [SpgiEstimatesError].
  • Key near-term stock narrative drivers: sustained margin expansion, municipal SaaS wins, and execution toward positive adjusted EBITDA in Q4 2023 previously guided; offset by commodity price headwinds and elevated interest expense .

What Went Well and What Went Wrong

What Went Well

  • Third consecutive record gross profit ($13.4M) and adjusted gross margin expansion to 11.6%, driven by portfolio optimization and reduced platform support costs: “third consecutive quarter of record Adjusted Gross Profit” and progress against the Bridge to Profitability plan .
  • Strategic wins in SmartCity: 5-year partnerships with Phoenix and Austin expand municipal footprint and digitize operations across ~590 vehicles serving >628K locations weekly .
  • Enterprise customer momentum: additions to RUBICONConnect (Neiman Marcus, Atlantis) and a 2-year Americold extension through 2025 across >150 locations . CEO: “focused on execution and driving even greater results” .

What Went Wrong

  • Revenue fell 7.4% YoY to $171.3M, primarily due to commodity softness (OCC), with recyclable commodity revenue down to $12.1M from $22.2M YoY .
  • Net loss widened QoQ to $(30.2)M, reflecting higher interest expense and other non-operating items, despite significant YoY improvement from Q3 2022 .
  • Working capital remains tight with cash at $13.4M and line of credit at $65.5M as of quarter-end; leverage and derivative/warrant liabilities continue to be a headwind .

Financial Results

MetricQ1 2023Q2 2023Q3 2023
Revenue ($USD Millions)$181.1 $174.6 $171.3
Gross Profit ($USD Millions)$9.3 $11.8 $13.4
Gross Profit Margin %5.2% 6.8% 7.8%
Adjusted Gross Profit ($USD Millions)$16.1 $17.9 $19.8
Adjusted Gross Margin %8.9% 10.3% 11.6%
Net Loss ($USD Millions)$(9.5) $(22.8) $(30.2)
Adjusted EBITDA ($USD Millions)$(14.0) $(9.7) $(8.9)
Diluted EPS ($USD)$(0.05) $(0.12) $(0.85)

Segment revenue breakdown:

SegmentQ1 2023Q2 2023Q3 2023
Service Revenue ($USD Millions)$166.4 $160.6 $159.1
Recyclable Commodity Revenue ($USD Millions)$14.7 $13.9 $12.1
Total Revenue ($USD Millions)$181.1 $174.6 $171.3

KPIs and cost drivers:

KPI / CostQ1 2023Q2 2023Q3 2023
Platform Support Costs ($USD Millions)$6.236 $5.541 $5.883
Marketplace Vendor Costs ($USD Millions)$164.952 $156.621 $151.407

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ4 2023“On track to achieve positive Adjusted EBITDA for Q4 2023” (Q1/Q2 PR) Focus on execution; progress on Bridge to Profitability; Q3 PR did not explicitly restate positive Q4 target Maintained (implicitly; not restated in Q3 PR)
Adjusted Gross Profit MarginFY 2023Expand to double digits by end of 2023 Achieved ahead of schedule in Q2 (10.3%); sustained Q3 at 11.6% Achieved/Raised (executed earlier than plan)

Note: No explicit revenue, OpEx, OI&E, tax rate or dividend guidance ranges were provided in Q3 PR .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2023)Trend
Bridge to ProfitabilityManagement targeted positive Q4’23 Adj. EBITDA; margin initiatives in RUBICONConnect and SaaS growth Emphasis on continued execution; third consecutive record adjusted GP; platform support cost reductions Improving execution; margin trajectory up
Municipal SmartCity adoptionQ1: Miami & Atlanta partnerships; Q2: Denver fleet deployment and >100 cities milestone New 5-year deals with Phoenix and Austin, expanding fleet digitization Expanding footprint
Commodity exposure (OCC)Noted commodity revenue contribution; no explicit OCC commentary Revenue decline “mainly driven by softness in commodities, in particular prices of old corrugated cardboard” Headwind intensified
Liquidity/financingEquity financing ~$23.5M (Q1); debt closed/raised; improved flexibility Debt maturities extended to 2025; $75M term loan; $15M revolver expansion; expenses reduced by $55M annualized Strengthened balance/liquidity
Portfolio optimization/marginsActions to enhance margins and high-grade customer portfolio Continued optimization driving adjusted GP and margin expansion Positive margin mix

Management Commentary

  • “We are excited to announce our third quarter 2023 results, which include a third consecutive quarter of record Adjusted Gross Profit… continued progress against our Bridge to Profitability plan… focused on execution and driving even greater results” — CEO Phil Rodoni .
  • Q2: “Second consecutive quarter of record Adjusted Gross Profit… remain on target to achieve positive Adjusted EBITDA for the fourth quarter of this year” — CEO .
  • Q1: “Remain on target… positive Adjusted EBITDA for the fourth quarter of this year… focused on accelerating the Company’s progress to profitability while driving next phase of growth” — CEO .

Q&A Highlights

  • Based on the public transcript, analysts focused on the path to positive Q4 2023 adjusted EBITDA and sustainability of margin expansion; management emphasized portfolio optimization and platform support cost reductions under the Bridge to Profitability plan .
  • Questions addressed commodity price exposure (OCC) and its impact on top-line; management cited commodity softness as a revenue headwind outweighed by margin improvements .
  • Discussion included municipal pipeline and SaaS-led differentiation with recent Phoenix and Austin wins, supporting visibility in SmartCity adoption .

Estimates Context

  • S&P Global consensus for RBT Q3 2023 (EPS, revenue, EBITDA) was unavailable in our mapping, preventing a formal beat/miss comparison. We attempted retrieval and received a mapping error (“Missing CIQ mapping for ticker ‘RBT’”) [SpgiEstimatesError].
  • Given the lack of consensus, investors should anchor on sequential and YoY trends: revenue down 7.4% YoY due to commodities, but gross margin and adjusted gross margin improved materially and adjusted EBITDA loss narrowed sequentially .

Key Takeaways for Investors

  • Margin story is intact: gross margin rose from 5.2% (Q1) to 7.8% (Q3); adjusted gross margin from 8.9% to 11.6%, driven by portfolio optimization and platform support cost reductions .
  • Municipal SaaS momentum (Phoenix, Austin) strengthens the software-led thesis and could improve mix/visibility over time .
  • Commodity exposure remains a top-line headwind; monitor OCC pricing and recyclable commodity revenue trajectory into Q4 .
  • Liquidity actions (term loan, revolver expansion, expense reductions) extend runway; watch interest expense and leverage impacts on net loss and cash flow .
  • With consensus unavailable, trading setups may focus on continued sequential margin progress and confirmation of Q4 adjusted EBITDA inflection (previously targeted) .
  • Execution risk remains in achieving profitability amid macro/commodity volatility; sustained municipal wins and enterprise renewals are positive offsets .
  • Near term: stock likely pivots on proof of Q4 adjusted EBITDA positivity and further margin expansion; medium term: mix shift toward SaaS/SmartCity and continued portfolio optimization underpin the path to sustainable profitability .

References:

  • Q3 2023 Form 8-K and press release exhibit, including financial statements and non-GAAP reconciliations .
  • Q2 2023 Form 8-K press release and statements .
  • Q1 2023 Form 8-K press release and statements .
  • Rubicon website press release for Q3 2023 .
  • Q3 2023 earnings call transcript (public source) .