Rubicon’s decade-plus story has generated much attention in the waste industry as the tech company sought to grow fast and make a name for itself. Now, a new phase is unfolding as the company refocuses on profitability and after going public.
The company, founded in 2008, recently reported $675 million in revenue for 2022 and projected that various measures of profitability could grow later this year. Rubicon has been strained financially since going public last year through a protracted special acquisition purpose corporation process, leading it to cut costs and address liquidity concerns in recent months. During the company’s latest earnings call, executives put a particular emphasis on the profit potential of their growing software as a service (SaaS) business that offers products to local governments and other clients.
At the same time, Rubicon’s broker business — in which the company provides waste and recycling services via a network of 8,000 third-party haulers — remains its core element. It also derives revenue from the sale of recyclable commodities. Yet the company doesn’t view itself as a traditional waste player, given its growing software focus, and comparisons to competitors are hard to make.
Waste Dive recently spoke with CEO Phil Rodoni to learn more about the company’s recent efforts and where Rubicon is headed. Rodoni joined Rubicon in 2015 and previously served as chief technology officer before he took on the top job after last year’s departure of founder and CEO Nate Morris. Prior to Rubicon, Rodoni held technology-related roles at Esurance, Charles Schwab and Travelzoo.
The following interview has been edited for length and clarity.
WASTE DIVE: What may be different about how you're approaching the role of CEO versus how Nate did, and what is not different in terms of how people should think about Rubicon today?
It’s not so much in terms of difference between myself and Nate, I think it's just really about where the company is post-going public. Our goals now are certainly more about reaching profitability as soon as possible. I think the key thing there is we've built the company to scale already — that's what we've invested in over the many years prior to going public — and now it's about the opportunity. That transition point is really making sure that you can get the profitability along with the scale.
Foremost amongst anything else in the near term is ensuring that we get to address any liquidity issues, which we've gone a long way to doing already and made great progress on that front. Beyond that, it's just long-term profitability, which we're marching down that pathway.
I’d imagine you’d all be happier if the stock price was different and you hadn't encountered some challenges after going public. Did this go according to plan, and if not, what happened?
We were somewhat a victim of circumstance in just where the SPAC market was at the time of the de-SPAC itself. Those deals take a long time to consummate. We were working on that deal for quite some time before the market turned somewhat sour on that. We didn't net as much proceeds from the de-SPAC process as we anticipated. So then, when I took over in October, the near-term issue was to make sure that you addressed any liquidity issues. You play the hand that you're dealt, and that's the card you had.
Were some of the recent executive changes planned, or was that a result of how this process happened?
Going public is a momentous event in any company's trajectory, so I think it's a natural inflection point for many of our long-serving executives. Referring to [former CFO Jevan Anderson] specifically, he came on board to get us to the point where we could become public. We met that point, and then folks wanted to go off and pursue other opportunities. We wish them all well; they've contributed so greatly to us over the course of time, and we're appreciative of all the things they have done for us.
Same for Nate. He'd been [leading the company] for almost 10-plus years ... He's had amazing success, he brought a company public, and then he's gonna make his decision on what he wants to do with his life after that.
The software component of Rubicon was a big focus in the latest earnings call. I recall back in 2019 there was talk this could be 50% of the business in five years, though it seems like messaging has shifted at times. How big of a priority has this been in the past, and where does it stand now?
It's never that it hasn't been [a priority], but maybe we haven't been as clear in terms of communicating. When I look at the company, what Rubicon really is, it is the definitive platform for eliminating waste. At our very core, we are a software platform company. Now, on that platform we run the largest digital marketplace, and alongside with that we sell what we call our smart city products, and then our other SaaS-based products that we sell directly to fleets around the world and domestically.
But underlying all that is the software platform. It services all those lines of business. So how you count revenue and allocate revenue amongst those service lines is a little bit different. In our view, it's hard to tease out the software platform from any portion of our business — 100% of our business runs on our software platform.
Is there ever a future where the SaaS-based business is big enough that you are calling out revenues from that directly?
We mentioned on the [earnings] call that business is doing really well. It’s doubling [in revenue] every year, and I think it'll probably get to the point this year, at the end of the year, where it'll be material enough that we're gonna have to report it separately.
During the call you mentioned a variety of different software products. The company’s agreement with Palantir has come up as a larger ongoing product development cost. Are we seeing the results of that in terms of new products, or could that lead to further new products in the future?
It's a little bit of both. Palantir is a powerful tech platform in and of itself that helps us manage the data appropriately, helps us build additional products and services which we've already launched.
I made reference on the last earnings call about these million images a day that we're actually recording [via city vehicles and other sources]. As we're scaling that, we're utilizing that platform to mine for additional information, additional services that we then provide it back to those cities.
All the effort that we're doing on the data collection side is in advancement of the city's goals. That allows us to build new products, build new services, add additional value back to those those cities and those constituents that are interested in those products. So we're already working with them. And we'll be releasing and already have released stuff based on that relationship.
You also mentioned in the earnings call efforts to raise prices, which has been an industry trend. Are you still trying to compete on price versus some of the major haulers, especially in terms of national accounts, or is that not the leading conversation anymore?
Overall, when we actually go out to a customer, it's a number of different things. One is we talk about eliminating waste. That is our core mission and purpose: improving the sustainability options that we provide to our customers and making sure that we can divert as much material from landfill as possible.
There's a joint benefit there. Those are typically higher profit margin products that we can actually sell to those customers. So it helps us. But it's also diverting more material out of the landfill, which helps the environment. And to some extent it can lead to better economics, from a total cost perspective, for those clients as well. We have a number of clients where we've actually switched what was a cost item into a revenue-generating or a profit line [item] for them by increasing the diversion rates.
At the same time, we want to service them really well and provide great service on all of their waste needs.
How about for small and medium businesses (SMB) that don’t have the same economies of scale in terms of seeing sustainability results. Is it a different conversation with them?
SMB markets are a little bit different in terms of their waste needs. Initially, they may not be viewed as quite as complex. Today, we handle over 160 different kinds of material types, so a small- and medium-sized business may not have nearly as many of those. But we've already rolled out technology for the SMB markets to identify if ... there is a potential opportunity to get a different economic outcome by splitting out your waste a little bit differently than you're doing today.
But by and large, yes, absolutely, the SMB market is certainly more price-sensitive if they're only going to look at the one or two commodities they have in the back of the house. So you're a little bit more constrained on that side, but I don't think it really changes our approach to them.
Do you find yourself going up against different types of competitors based on the accounts? For example, others in the tech-oriented broker category might be more focused on the national accounts, and local haulers might be going after the SMB. Or is that not the case?
The waste market is a fairly dynamic marketplace. We don't compete with our haulers in general. That's not what we do. We certainly compete against the big three that are out there. Those are the markets that are more interesting to us. And again, we'll be opportunistic, certainly within the SMB market, if there's a share of the market that looks attractive to us in a particular locality that is predominated by one of our competitors. We'll go there more specifically than anything else.
So it sounds like you still view “the big three” as the main competition? I know that has been a key part of the company’s disruption messaging and was part of the pitch to investors while going public.
For me, it's less about who we're competing with. From my perspective, what we're really trying to do is just offer a good and compelling service to whoever that may be. If there's an incumbent there, great. Certainly we'll compete on their business. If there's not an incumbent, that's fine. So in a lot of the cases, with all these different material types that we handle, they may not be actually servicing these material needs that a customer may have, whether it be pallets or shrink wrap or what have you.
We find ourselves oftentimes in a somewhat unique position that we're not necessarily always competing with somebody other than ourselves. We want to make sure we can handle a lot of different waste streams out there so that we can offer a single solution for all of your waste needs, whatever they may be.
When Rubicon started, it felt like there were fewer companies trying to do similar things. Today, there are others in this tech-focused broker space that are raising money and gaining scale. Has it gotten more competitive, and if so, how do you differentiate the company?
If we were the leader that promoted the entrance in the category, I feel good about that. That's validation about the work that we've done. But ultimately, I go back to that singular vision about eliminating waste and about being a software platform.
I'm not worried about the smaller guys coming in. We just need to continue to scale our business and make sure that we service our customers appropriately and increase the number of products and services that are available to our customers. Whether it's the 160-plus material types [we handle], or whether that's the next newest feature on our fleet based technology, whatever it may be.
Rubicon also recently said that M&A is not a capital priority but could be down the line. Could we expect that to include companies in the waste broker community or more software-focused companies?
We've done a little bit of both in past. We've actually acquired software technology, most recently [Civix in early 2022]. Prior to that, we'd certainly done some broker acquisitions. So I think from an M&A perspective, we're concentrated on growing our business organically. That being said, we will be opportunistic when M&A opportunities arise, and we'll pursue them when it makes sense. But I'm not gonna say it's in one category or another. We've had success on both, and from an M&A perspective, you have to evaluate each one independently.
Rubicon has been working for years to expand its recycling services, but given the range of available infrastructure, there is, of course, still material from Rubicon and others going to the landfill. Are there other levers that the company wants to try to pull from a policy or investment standpoint to help change the equation?
What I'm very much heartened by is that when I started with Rubicon eight years ago, and we were talking to our waste generator customers at the time, by and large those conversations were with facility management or procurement teams. Fast forward eight years later, we're almost always talking to chief sustainability officers or sustainability folks in addition to those procurement officers and facility managers, which I think is a great evolution of the market in just the short time that I've been able to participate in it.
So the good news there is, I think the trend is our friend, so to speak, in terms of the additional opportunities to increase landfill diversion. More and more infrastructure is becoming available in the United States, and other folks are investing in that accordingly. And I think we're there to capitalize on those trends. All it does is increase the number of options we can provide back to our customers, and we're happy to see that investment growth.
Looking ahead, you’re projecting positive earnings trends for Q4 into next year. What do you hope Rubicon looks like in a year or two, in terms of your place in the industry and where the company is headed?
I think just advancing down the path with more products and solutions out in the marketplace for haulers, more products and solutions out in the marketplace for waste generators. The growth models that we've [released] indicate where we expect to be from a financial perspective. We expect to be a continued player in the market, and a larger one at that. So we just need to keep our focus on our growth and profitability, and good things will come from that.
I have nothing but respect for anybody in this marketplace. I've done plenty of ride-alongs with haulers. That is a very difficult and complex job. We understand the nuances of it. I want to make sure that folks understand that we respect the industry, and I have respect for everyone in it and the work they do. It's a large enough industry that there's room for lots of players, including ourselves, in that marketplace.