Route1 Announces Q2 2023 Financial Results

TORONTO, ON / ACCESSWIRE / August 25, 2023 / Route1 Inc. (OTCQB:ROIUF)(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 six month period ended June 30, 2023.

Statement of operations In 000s of CAD dollars

Q22023 Q12023 Q42022 Q32022 Q22022 Q12022

Revenue

Subscription and services

1,159 1,086 1,103 1,326 1,854 1,911

Devices and appliances

3,026 3,486 2,279 5,519 5,251 2,781

Other

(1) 3 6 2 9 3

Total revenue

4,184 4,575 3,388 6,847 7,114 4,695

Cost of revenue

3,011 2,897 2,032 4,842 5,015 2,572

Gross profit

1,173 1,678 1,356 2,005 2,099 2,123

Operating expenses

1,533 1,805 1,859 1,802 1,972 2,012

Operating profit ¹

(360) (128) (503) 203 127 111

Total other expenses ^{2, 3}

280 177 1,223 139 183 112

Net income (loss)

(640) (305) (1,726) 64 (56) (1)

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		Q22023			Q12023			Q42022			Q32022			Q22022			Q12022
Application software		343			456			475			804			1,402			1,483
Other services		816			630			628			522			452			428
Total		1,159			1,086			1,103			1,326			1,854			1,911

Other services revenue in 000s of CAD dollars		Q22023			Q12023			Q42022			Q32022			Q22022			Q12022
Technology life-cycle maintenance and support		310			285			300			275			214			209
Professional services		506			345			328			246			238			219
Total		816			630			628			521			452			428

Adjusted EBITDA in 000s of CAD dollars		Q22023			Q12023			Q42022			Q32022			Q22022			Q12022
Adjusted EBITDA 3		(27)			219			(142)			543			459			446
Amortization		332			346			361			340			332			335
Operating profit		(360)			(128)			(503)			203			127			111

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	Jun 30 2023			Mar 31 2023			Dec 31 2022			Sep 30 2022			Jun 30 2022			Mar 31 2022
Cash		27			80			79			103			299			481
Total current assets		3,563			3,691			4,901			5,445			4,593			3,618
Total current liabilities		8,484			8,001			8,825			9,629			9,012			8,147
Net working capital		(4,921)			(4,329)			(3,924)			(4,184)			(4,419)			(4,529)
Total assets		10,571			11,016			12,355			14,826			13,909			12,574
Net bank debt and seller notes		3,350			3,344			3,042			3,018			2,515			2,297
Total shareholders' equity		936			1,499			1,765			3,209			2,883			2,774

As of August 25, 2023, there are a total of 2,275,000 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		Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Quarter Value	$	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.

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

in US 000s		Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Quarter Value	$	228		$	212		$	222		$	213		$	168		$	165
Annualized Value	$	912		$	848		$	888		$	852		$	672		$	660

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

In 000s of CAD dollars		Q2-23			Q1-23			Q4-22			Q3-22			Q2-22			Q1-22
Cost of revenue		1,533			1,805			1,859			1,802			1,972			2,012

Operating Results Commentary

• Route1's second quarter operating performance was negatively impacted by reduced levels of transactional revenue generated by device and appliance sales, and a continued reduction in MobiKEY software application revenue.
• The MobiKEY application software and Route1's next generation cloud-based secure remote access and user authentication offering, MobiKEY X, will continue to see a revenue reduction throughout the 2023 year.
• The MobiKEY technology's successful path forward is being significantly challenged by stiff competition from cloud based enterprise offering providers, specifically Microsoft 365, to secure the U.S. Department of Defense's user mobility and remote access requirements.
• Route1 is having success in growing its turnkey engineering services business model that leverages video capture technologies.
• 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.
• Route1's second half of 2023 will see an increase in activity and associated gross profit related to the new business model. The company expects that each of the third and fourth quarter's gross profit, as described in Benchmark A ,should be in excess of USD $1.0 million.

Business Update Conference Call and Webcast

Route1 will not hold a shareholder conference call and web cast to discuss second quarter 2023 results but will after the release of its third quarter 2023 results in late October 2023.

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
[phone]
[e-mail]

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.

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SOURCE: Route1 Inc.

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The Route1 Stock at the time of publication of the news with a raise of 0,00 % to 0,045CAD on TSX Venture stock exchange (25. August 2023, 16:30 Uhr).