Route1 Announces Q3 2023 Financial Results

TORONTO, ON / ACCESSWIRE / November 16, 2023 / Route1 Inc. (TSXV:ROI) (the "Company" or "Route1"), an advanced North American provider of data-centric business empowerment solutions, today reported its financial results for the three and nine month periods ended September 30, 2023.

Statement of operations In 000s of CAD dollars			Q32023				Q22023				Q12023				Q42022				Q32022				Q22022
Revenue
Subscription and services			1,148				1,159				1,086				1,103				1,326				1,854
Devices and appliances			3,370				3,026				3,486				2,279				5,519				5,251
Other			5				(1	)			3				6				2				9
Total revenue			4,523				4,184				4,575				3,388				6,847				7,114
Cost of revenue			2,998				3,011				2,897				2,032				4,842				5,015
Gross profit			1,525				1,173				1,678				1,356				2,005				2,099
Operating expenses			1,542				1,533				1,805				1,859				1,802				1,972
Operating profit 1			(17	)			(360	)			(128	)			(503	)			203				127
Total other expenses 2, 3			53				265				175				1,223				139				183
Net income (loss)			(70	)			(625	)			(303	)			(1,726	)			64				(56	)

¹ Before stock-based compensation

² Includes gain on litigation, gain or loss on asset disposal, stock-based compensation expense, interest expense, income tax recovery, foreign exchange loss or gain, other expenses and acquisition expense.

³ For Q4 2022, the Company wrote down its deferred tax asset and liabilities with a net impact of ($1,141).

Subscription and services revenue in 000s of CAD dollars			Q32023				Q22023				Q12023				Q42022				Q32022				Q22022
Application software			280				343				456				475				804				1,402
Other services			867				816				630				628				522				452
Total			1,148				1,159				1,086				1,103				1,326				1,854

Other services revenue in 000s of CAD dollars			Q32023				Q22023				Q12023				Q42022				Q32022				Q22022
Technology life-cycle maintenance and support			314				310				285				300				275				214
Professional services			553				506				345				328				246				238
Total			867				816				630				628				521				452

Adjusted EBITDA in 000s of CAD dollars			Q32023				Q22023				Q12023				Q42022				Q32022				Q22022
Adjusted EBITDA 3			297				(27	)			219				(142	)			543				459
Amortization			314				332				346				361				340				332
Operating profit			(17	)			(360	)			(128	)			(503	)			203				127

³ Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, stock-based compensation, patent litigation, restructuring and other costs. Adjusted EBITDA does not have any standardized meaning prescribed under IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. Adjusted EBITDA allows Route1 to compare its operating performance over time on a consistent basis.

Balance sheet extracts In 000s of CAD dollars		Sep 30 2023				Jun 30 2023				Mar 31 2023				Dec 31 2022				Sep 30 2022				Jun 30 2022
Cash			23				27				80				79				103				299
Total current assets			3,877				3,563				3,691				4,901				5,445				4,593
Total current liabilities			8,728				8,484				8,001				8,825				9,629				9,012
Net working capital			(4,851	)			(4,921	)			(4,329	)			(3,924	)			(4,184	)			(4,419	)
Total assets			10,678				10,571				11,016				12,355				14,826				13,909
Net bank debt and seller notes			3,248				3,378				3,425				3,118				3,018				2,515
Total shareholders' equity			838				936				1,499				1,765				3,209				2,883

As of November 15, 2023, there are a total of 2,075,000 options currently outstanding under the stock option plan.

Business and Operations Metrics

Further to the Company's prior news releases, shareholder calls and webcast presentations, Route1 has communicated operating metrics that it believes assist in establishing whether the Company's business model is generating shareholder value. The Company is adapting to an increasingly difficult competitive environment and is achieving success in the automatic license plate recognition technology component of its business. It is the Company's goal to demonstrate success through cash flow generation that provides for impactful debt reduction and improved returns on invested capital, and additionally justifies scaling the business model.

Further in In today's update, we have added a third metric, quarterly fixed costs.

A. Gross profit (GP) generated from non-MobiKEY and other Route1 software application sales on a quarterly basis needs to achieve and maintain a minimum value of US $1.15 million ("Benchmark A"). Gross profit is defined as revenue less devices and appliances direct costs but does not include other direct costs including salaries, wages and consulting fees, bad debts and travel expenses.

in US 000s			Q3-23			Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Quarter Value		$	1,124		$	794		$	1,163		$	862		$	1,231		$	896		$	876

B. Recurring ALPR support contracts need to grow to in excess of US $1.0 million in annualized revenue ("Benchmark B").

Route1 started the 2022 fiscal year at a base of US $595,000 per annum.

in US 000s			Q3-23			Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Quarter Value		$	235		$	228		$	212		$	222		$	213		$	168		$	165
Annualized Value		$	941		$	914		$	847		$	888		$	852		$	672		$	660

C. Fixed costs including amortization need to not exceed CAD $1.65 million per quarter ("Benchmark C").

In CAD 000s			Q3-23			Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Fixed Costs		$	1,542		$	1,533		$	1,805		$	1,859		$	1,802		$	1,972		$	2,012

Operating Results Commentary

• Route1's third quarter operating performance moved in the right direction even with the continued reduction in MobiKEY software application revenue, a reflection of the growth and improvement in the balance of the Company's revenue generating activities including:

  • ALPR new client and current client expansion of technology usage projects,

  • ALPR client life-cycle maintenance and support contract servicing and expansion,

  • Rugged device value added reseller sales, and

  • Sales derived from the Company's PocketVault P-3X data security and user authentication technology.

• Route1 is building a larger "book" of recurring revenue generated by technology life-cycle maintenance and support contracts / end users as shown in Benchmark B above.

• The MobiKEY application software and Route1's next generation cloud-based secure remote access and user authentication offering, MobiKEY X, will see a further revenue reduction in Q4 2023 as a result of the loss of the U.S. Department of the Navy account.

• As outlined in the Company's Q2 2023 update, the MobiKEY technology's successful path forward with U.S. Department of Defense clientele is significantly challenged by stiff competition from cloud based enterprise offering providers, specifically Microsoft 365.

• Route1's Q4 2023 should see business activity and associated gross profit related to its new business model, as described in Benchmark A, in excess of USD $1.0 million.

"The sales model pivot is creating operational stability and growth in business activity. There is meaningful further work to do to improve our working capital position, reduce third party debt levels and generate improved operating cash flow but, the announced third quarter was a step forward," said Tony Busseri.

Business Update Conference Call and Webcast

Route1 will not hold a shareholder conference call and web cast to discuss its third quarter 2023 results. Shareholder queries can be directed to the Company's President and CEO Tony Busseri by using the contact information provided below.

About Route1 Inc.

Route1 Inc. is an advanced North American technology company that empowers their clients with data-centric solutions necessary to drive greater profitability, improve operational efficiency and gain sustainable competitive advantages, while always emphasizing a strong cybersecurity and information assurance posture. Route1 delivers exceptional client outcomes through real-time secure delivery of actionable intelligence to decision makers. Route1 is listed in Canada on the TSX Venture Exchange under the symbol ROI. For more information, visit: www.route1.com.

For More Information, Contact:

Tony Busseri|
President and Chief Executive Officer
+1 480 500-7030
tony.busseri@route1.com

This news release, required by applicable Canadian laws, does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

© 2023 Route1 Inc. All rights reserved. No part of this document may be reproduced, transmitted or otherwise used in whole or in part or by any means without prior written consent of Route1 Inc. See https://www.route1.com/terms-of-use/ for notice of Route1's intellectual property.

This news release may contain statements that are not current or historical factual statements that may constitute forward-looking statements or future oriented financial information. These statements are based on certain factors and assumptions, including, expectations regarding the expected growth in the value of support contracts for the LPR business, price and liquidity of the common shares, competition for skilled personnel, expected financial performance and subscription-based revenue, business prospects, technological developments, development activities and like matters. While Route1 considers these factors and assumptions to be reasonable, based on information currently available, they may prove to be incorrect. These statements involve risks and uncertainties, including but not limited to the market demand for the Company's products and services and risk factors described in reporting documents filed by the Company. Actual results could differ materially from those projected as a result of these and other risks and should not be relied upon as a prediction of future events. The Company undertakes no obligation to update any forward-looking statement or future oriented financial information to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, except as required by law. Estimates used in this presentation are from Company sources. Past or forecasted performance is not a guarantee of future performance and readers should not rely on historical results or forward-looking statements or future oriented financial information as an assurance of future results.

SOURCE: Route1 Inc.

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