Good morning, and welcome to the Share Series Monday Management Update. I'm Dan Aldridge, founder of the Share Series, and I have the pleasure today of interviewing Chris Spooner, EVP of Finance from Rubicon. Before we jump into it, I wanna remind everybody to use the question submission button at the top of the video player to submit questions throughout the session. So with that being said, I'll turn it over to Chris. Chris, welcome.
Hey, Dan, thank you so much. Thanks for putting this together.
We're gonna start with a brief overview of the company for Rubicon, for those who don't know. Chris has a short deck he's gonna go through, and then we'll jump straight into questions. Olga, we're ready to share the deck.
Wonderful! So Rubicon is a digital platform for the waste and recycling industry. We don't own any trucks, we don't own any, any landfills. We just use our data and our software products to arrange and fulfill service for waste generators, our primary customer, optimize fleets and routes for collections operations, and then use our data to provide consistent environmental reporting back to the clients that helps drive the circular economy. We can go to the next slide. If you're unfamiliar with the waste industry, it's a massive market. This is a $2 trillion global TAM. It's stable, it's non-cyclical, and it's highly fragmented, which means it's a great industry for a digital approach and a reimagined 21st-century customer experience. We can go to the next slide.
You know, I've been here for about eight years at Rubicon, and over the course of those eight years, we've 10x'd the business by attracting some of the best brands in business: Walmart, Starbucks, FedEx, Apple. They've all come to Rubicon because of the differentiated environmental proposition that we can offer. We've deployed some incredible technology products, but what keeps me excited today is the same thing that got me attracted to Rubicon almost eight years ago. Is we have an opportunity to reimagine this entire $2 trillion market from the ground up, using data and using technology products to realign incentives, not only with the waste generator customer, who's been underserviced for decades, but with the environment. And so I think our receipts speak for themselves.
We've been able to drive recycling rates that are more than three times better than the industry average, and I get to work with a group of teammates who are incredibly motivated, day in and day out, to execute on our mission to end waste and improve the environmental programs for all of our waste generator and our collections operations customers. We can go to the next slide here. This is just a snapshot of Rubicon today. We're gonna do approximately $700 million of revenue in this year. This is a snapshot of our map. All the teal dots you see here are all the commercial waste generator customers that we service in the United States. All those blue dots you see are where we provide our technology to municipalities that own and operate their own fleets.
We've got a network of about 8,000 independent hauling and recycling partners. We drive incredible environmental performance for our waste generator customers and for our fleet customers. We now service over 13 million unique service locations, and we operate in 20 countries. Again, without owning a single truck, a single landfill, just stitching this industry together using our differentiated technology products.
Okay, so I think that's the end of the slide deck that we have. Olga, you can stop sharing at this point. So Chris, great overview. You know, obviously, a lot's going on with the company, you know, and a lot has changed over the last 12 months. And so you've been public now for about a year, right? Can you walk us through that journey? You know, what's changed? You know, what challenges still lie ahead? And then we'll get into more, some specifics around the business itself.
Sure. You know, we came out via de-SPAC in August of 2022, and it was a difficult time for that product. There's no buts about it. We came out, we had 99.7% redemptions, and it left the business initially undercapitalized in the public markets. But we've done incredible work both to bring in more capital. We've been able to refinance our senior debt and push out maturity substantially, bringing in additional capital through that process. We've had incredible support from our existing investors, who put in more equity capital into the business along the way. And we've done a tremendous job in terms of reducing Rubicon's cash burn, cutting now approximately $50 million of cost out of the business, optimizing our margins, and putting us on track to generate positive EBITDA for the Q4.
With that, you know, I think we've accomplished a lot of what we said we were gonna do in our first public earnings call, of simplifying the capital structure, bringing in more capital to improve our runway, and getting this business on a track to be profitable within short order here.
So thanks, thanks for that. Just one other quick thing, just more of a technical item. And so you guys also recently had a reverse stock split, and so could you walk us briefly through the mechanics of that?
We did. This was a compliance issue for the New York Stock Exchange. We ended up doing an 8-to-1 reverse stock split. This should solve any compliance challenges that we have there, and it's really more of a logistical exercise at this point.
All right, let's transition and get into the business itself. You know, let's start with the Connect product and the commodity side. So, why does a customer need Rubicon, right? Explain, you know, what would cause a customer to reach out to Rubicon, how you solve their problems.
Sure. So prior to Rubicon, you know, this industry is fragmented, it's disjointed. There's no standard around data or invoicing.... And so if you were to put together a waste and recycling program, especially for a large multi-location customer, you're gonna be working with a lot of local offices, you're gonna have different contracts, different invoicing terms. And what Rubicon can do is it can come in and standardize that whole process, make it super simple, provide a single point of contact, single bill, single throat to choke for any customer service issues.
And so where we really have strong product market fit is where we can provide that marriage of sustainability and technology for large corporate clients. If you're on a journey towards zero waste, you can't do that just by having landfill waste and single-stream recycling, those blue bins out at the back of your business.
You need to roll out all of these different commodity programs so that you're extracting valuable materials from the waste stream and finding a good home for those. We're talking cardboard, we're talking pallets, scrap metal, various grades of plastics. All of these can be done one-stop shop within the Rubicon platform, and today we manage about 165 different categories of these saleable commodities. You can schedule service, you can order new pickups, you can order new services, all on the same platform. Meanwhile, on the back end, Rubicon's standardizing all these data for approvals, for invoicing, and for environmental scoring.
So let's talk about the customer segmentation for a little bit. You know, you guys basically have two lines of business, and correct me if I'm wrong, but you've got the commercial side, and you have the smart city side. So on the commercial side, can you kinda talk through, like, how many customers are on the commercial side, right? What does that business look like? How does it differ from the other business segments?
Yeah. So we've got about 7,000 customers on the commercial waste side. This is our core product, what we call RubiconConnect, and it operates like a digital marketplace for waste. Rubicon comes into the middle. We sit in between the waste generator customer and all of the 8,000 now independent hauling partners that service on that platform, and we stitch the industry together using our technology and software products. These customers are the folks that I mentioned, like Walmart, like FedEx, like Starbucks, largely corporate clients who use Rubicon's products to create a more efficient waste and recycling program across all of their locations.
Our second line of business is our fleet subscription software offering, where we sell our software into commercial hauling operations, but also municipalities who own and operate their own fleets, to optimize their routes, even optimize their fleets, create connectivity with dispatch, and to help decontaminate the recycling streams by identifying instances of contamination in the recycling at the source.
And then when you look at that business, right, just sizing the two, right, how big is that business in a percentage standpoint, right, compared to the rest of the company?
Yeah, we haven't provided that, that revenue segmentation just yet.
Okay, perfect.
The software business is a significant portion of our business. It's growing rapidly, and it's really where we've been investing our product development dollars over the last few years. So I do think in short order, we're providing that revenue segmentation.
Okay, great. So let's transition a little bit to the other side of the business, the smart city piece, and can you talk a little bit about what the solution does, you know, for the municipalities that employ it?
Yeah. So the first and foremost is digitizing what traditionally have been largely paper-based routes. You'd be surprised the kind of impact that this can have for cities, especially, taking what was paper or even just in the head of a driver, and now creating a digital map for that. That then allows us to optimize routes, optimize entire fleets, and now we can start to create connectivity with dispatch, reduce instances of go- backs, and then for the folks who are using our computer vision-based technology, index information about urban infrastructure, index information about the waste stream, whether bins are overflowing, who's participating in recycling, and then even index information about the waste stream at the source. So are there contaminants coming into the recycling stream? And so on and so forth.
Does this product, I assume, have robust reporting on it as well, that the companies can use?
Absolutely, yeah. We'll report back to the clients on, you know, miles driven, carbon footprint for the fleet, things of that nature.
And so as you're looking at a new city or a municipality, what does that process look like? Is there an RFP process you go through? How do you onboard, right, a new city?
Yeah. So we actually have a novel approach to selling into city governments. What we'll typically do is donate our technology for a limited pilot. It's typically a subset of the full fleet for a short duration of time. If we're able to meet certain predefined criteria, KPIs, within the donation legislation, cities are often able to procure our technology directly without having to proffer an RFP. We also have a great collection of channel partners. I think the one that I'd like to mention first and foremost is Amazon Web Services.
We're featured on the Amazon Web Services municipal Marketplace, and thereby, cities who also have an existing AWS cloud account can then directly procure our software, and it's reflected just as a, an upsize to their existing cloud account. We've also been awarded placement on the Sourcewell consortium. This is gold standard for government buying, and cities who adhere to the Sourcewell protocol can also directly procure Rubicon software without having to go through a traditional RFP process.
And do you guys run up against any pushback about the technology resistance, right, to implement it, going from the old way we used to do things to this new technology?
You know, I think we address all the major constituent groups. It provides for a safer operation, so you've got the buy-in of the drivers. You're reducing in many instances, capital costs by taking entire vehicles off the road. You're certainly reducing OpEx and you're creating a more environmentally positive story for the city, which improves quality of life for all the citizens. So I think you've got buy-in across the board, and our KPIs there really speak for itself. We have a 100% pilot conversion rate since 2019, and we've never lost a customer in the life cycle of this product. So tremendous product market fit that I think transcends all the different stakeholders in waste and recycling.
Let's size it up a little bit. When we say cities, are we talking big cities, small cities? Do you have any examples that you can walk us through for what you've done?
Sure, yeah. I mean, we've been deployed now in over 100 municipalities. It does span the gamut from folks with just a few trucks to folks with hundreds of collection vehicles. We've got pretty large cities like City of Houston, City of Atlanta, Washington, D.C., San Antonio. So a lot of top 10 cities that have adopted Rubicon's technology. And in terms of operating KPIs, you know, one example I can give, a very large southeast city, within six months of operating with the city, we were able to offset about $1 million of operating costs, and at the same time, reduce about 83% of the recyclables that were previously going to the landfill. So huge environmental performance uplift, based on this quick work we had with the city.
And then once you get in with the customer, you're providing the hauling, the trash removal, the software piece of that. Are there other ways for you to gain more share of wallet for that customer, or is growth really having to add new customers?
Yeah. So we're able to expand both within the waste and recycling stream, as well as into now adjacent fleets. And what I mean by that is traditionally, we have deployed our basic telematics product, which is, you know, onboard diagnostic plugin, coupled with our software that runs on an iPhone or an iPad. We're now starting to deploy our computer vision technology that, again, takes pictures of the trash so you know who's participating in recycling, who has an overflowing container, when contaminants are entering the recycling stream, and that's a way that we're able to expand with the existing customers that we have.
We've also now started to deploy our technology in other fleets that cities own and operate. So we're talking snow plows, we're talking street sweepers, supervisory vehicles, things of this nature. And so the sky's really the limit in terms of how deeply we can deploy our technology into these different cities.
So we're gonna shift gears a little bit. We have a question coming in on competition, and so Rubicon seems like a very unique company, but obviously, there's competition everywhere. And so can you describe kind of what the competition looks like today? Who is it? You know, how do you differentiate?
Yeah. So, I'll break that down across the different products that we have. For Rubicon Connect, especially given that large enterprise segment of the market where we're really focused, we only really see two competitors, and that's Waste Management and Republic Services, the large incumbents in this category. They both have national footprints and can go out after these customers that we have. But we think we have a differentiated proposition, and I think it starts with the incentives. We don't own and operate landfills like the major incumbents in our category, so we don't have that inherent incentive to drive volumes into the landfill. We can think more creatively about where should these materials go. Let me give you a case study that I like, actually. This is a large retailer that you all are familiar with.
Rubicon won this away from the incumbents in about 2017, and we looked at their waste stream. We said, "What's in the can?" Right? They've got cardboard, they've got Styrofoam, they've got plastic film, pallets, things of this nature. You know, they take up a lot of space. They don't weigh a ton, and so what the result of that is, you've got a very inefficient compactor. It's getting pulled more frequently than it needs to. The other thing we noticed is all of these materials can be recycled, and in fact, many instances, these materials can be sold and turned into a revenue line in which Rubicon and our customers can benefit.
So what we did when we found this out was we implemented a reverse logistics program to bring these materials back to this customer's distribution centers, where they can be aggregated and then sold to mills and recyclers. The net effect of all this is you have much more efficient compactor pulls. That means waste costs are coming way down. That means truck miles are coming way down, and now you're turning what was a cost line into a revenue line by selling these recyclable commodities on behalf of our waste generator customer. So you turned net-net, what was a $multi-million-dollar cost line now into a $multi-million-dollar revenue line for the customer. They're actually generating net revenue from all of their recyclable commodities, all the while improving the environmental performance for this client. This isn't an isolated example.
This is true now for almost 100 different clients within Rubicon's portfolio. We've turned their entire waste expense line into a net source of revenue for them. So it's a very compelling proposition simply by realigning the incentives and providing a reimagined technology layer over the whole customer experience. For RubiconSmartCity, we do compete against other software players in this category. There's folks like Routeware out there, who have a good portfolio, particularly in the commercial waste-generating space. But we think our technology is differentiated in that it's truly cloud native. It's a much more seamless onboarding experience. We can get folks off the ground in less than 60 days, up and running, digitizing their routes, starting to see those OpEx and environmental benefits right away.
And then, of course, what we do on the camera, the computer vision side of things, is differentiated as well. We are not aware of anyone else out there who's indexing information about city infrastructure and about the, the waste stream itself.
... Okay, switching forward a little bit to avenues of growth. So thinking forward, you know, kind of the next 6, 18 months, right? What do you see that's going to drive growth for the company, you know, and really take it to the profitability that you guys are aiming to reach?
Yeah. We're really excited for the future here, especially as we, we look towards this milestone of achieving positive EBITDA and positive cash flow going into 2024. Now that we've taken this cost out of the business, really right-sized the unit economics of the company, as we grow and as we return to growth mode, it's gonna be very accretive to Rubicon's bottom line. Where we're really focused is on deepening penetration with existing accounts. We estimate today that we only have about 30% of our customers' total wallets. So folks like Walmart, FedEx, Starbucks that I mentioned, we can continue to expand into these existing accounts and nearly triple the business just through land expansion within the existing portfolio that we have today.
The other vector of growth that's really exciting for us is taking the success that we've had on the municipal side with our fleet software and starting to deploy that more aggressively within the commercial waste hauling market. Over the summer, we developed a key, key new feature in that technology, which is a billing component that will allow our software clients to directly bill their end user. And this is a differentiator that's gonna allow us to, we think, grow very rapidly with the technology we've had such success with on the municipal side, now on the commercial side of the market.
Okay. Another one coming in from the audience, kind of along the same lines on growth, but this one's not organic. It's really more on M&A and really looking at the licensing of software. You know, and the question is: "Is the company doing anything to partner with the largest waste management companies to license the software?
You know, we're not today here domestically in the US, we've partnered with large operations internationally. One of the folks that I'll mention is Odakyu. It's a large conglomerate in Japan. They didn't previously actually do waste. They're a large transportation, hospitality conglomerate, but they did a global canvassing of potential software solutions that would enable them to get into the waste category in an asset-light fashion. They identified Rubicon, and we've now been very successful with deploying our technology with them in Japan, not only to municipalities, which is where we started, but into commercial hauling operations as well. Here domestically... Look, I think the opportunity is still there.
You know, if we can get these folks to appreciate what we're doing on the environmental side, recognize the asset light, that a reimagined digital customer experience is kind of the way of the future, I think the sky's the limit in terms of what we could do partnering together.
Along those same lines, you know, are there any other avenues of M&A that you guys are looking at? Any way to think about what would be attractive, you know, for Rubicon, either from a tuck-in acquisition standpoint or a material transformative acquisition?
Yeah. Yeah, absolutely. You know, M&A is nothing new for Rubicon. It's played a large role in our growth historically. We've done five deals, and where we've been focused historically is on rolling up the asset-light portion of the commercial waste market. So again, we go back to that pie of waste that we showed on one of the slides, $2 trillion global industry, a little over $200 million here in North America. About $10 billion of that TAM today operates in an asset-light fashion. So folks similar to Rubicon, just absent the technology, absent the focus on sustainability that Rubicon brings to its clients. And so we've gone out, and we've done these acquisitions to bring these portfolios of customer contracts. Again, asset light, so you know, pretty light integration, dropping them into our platform.
What we've been able to do from a synergy perspective is pretty incredible. Across the deals that we've done, we've uplifted revenues by about 30%, and we've been able to shed about 50% of the acquired SG&A as we digitize their back-office operations. We're very excited to get back to doing M&A. That was really a core part of the thesis for us going public, was to bring in, you know, significant amount of capital from the de-SPAC that would allow us to continue to roll up this aspect of the industry. Obviously, that didn't happen, as we approach cash flow positive early next year, we're excited to get back to doing M&A, and I think it's gonna look very similar for us.
Again, it's going after targets who operate in this asset-light fashion, with maybe a little bit of a different flavor, focusing on folks who specialize in niche material types that we can then cross-sell into the existing Rubicon portfolio that we built.
All right. Got a couple more coming in from the audience that we want to get to before we run out of time. But this one, I think I know the answer to, because it's really on guidance, but the question, is, you know: "Have you given any guidance for sales or EPS growth through 2025?
We've not provided guidance yet for 2025. We will provide full guidance on our next earnings call for 2024. But this year, we're expecting to do about $700 million of revenue. And again, we've stressed that, we'll be entering the year with positive Adjusted EBITDA and positive cash flow early in 2024.
And so obviously, with that kind of hurdle rate being out there, you know, what gives you and the company confidence, right, that you'll be able to reach positive EBITDA as you head into the Q4 and into next year?
You know, we've really done all of the work necessary to get there. As I mentioned, we've shed about $50 million of costs, taking that out of the business, and some of these things have a tail on them, of course. You've got, you know, 60-day, 90-day termination. It takes a while for some of these things to burn off, but at this point, we've really done all of the heavy lifting that's necessary to take us to positive EBITDA, to positive cash flow. We've done an incredible amount of work in optimizing our margins on the adjusted gross profit side, so that as we continue to grow, more and more of that is falling straight through to the bottom line.
As we approach the bottom of the hour, Chris, I want to turn it over to you for any kind of closing comments. But obviously, wanted to thank you for your participation in Rubicon. You know, I think there's a lot of other interesting things to unpack, and we will definitely have you guys back, you know, for future sessions to drill down on a couple of the revenue streams and opportunities that we talked about today. So Chris, I'll turn it back over to you for any closing comments.
No, thank you so much for setting this up. We're really excited to hit these milestones, get to profitability, and really double down on the growth going forward for the business, because it's a differentiated proposition. You know, you see these case studies, you see what we're doing to bring better environmental performance to bear for our clients, and we're really excited about what the future has in store here.
Well, awesome. Chris, thank you again for the time. For the audience, thank you for participating. Up next, at 2:00, is going to be Dynex, so be sure to tune back in for that, and the next session that we have will be October 2nd. Thank you, and we'll see you next time.
Thank you so much, Dan.