Route1 Inc.
TSX VENTURE : ROI

Route1 Inc.

August 24, 2010 12:56 ET

Route1 Reports Second Quarter Financial Results

Cashflow Breakeven Point Reduced to 17,500 Users

TORONTO, ONTARIO--(Marketwire - Aug. 24, 2010) - Route1 Inc. (TSX VENTURE:ROI) ("Route1" or the "Company"), a security and identity management company, today announced its financial results for the three and six month periods ended June 30, 2010.

For the three-month period ended June 30, 2010, revenues amounted to $1.2 million versus $1.6 million during the corresponding period in 2009. During the same period, subscription revenue increased by 76 percent from $566,079 to $995,065. Gross margin for the second quarter of 2010 amounted to $1.1 million or 89 percent of revenues, versus $686,774 or 43 percent of revenues during the same period in 2009. Net loss for the period amounted to $509,971 or nil per share, compared to a net loss of $619,650 or nil per share during the second quarter of 2009. Excluding the impact of stock based compensation amounting to $223,380, net loss amounted to $286,591. EBITDA for the second quarter was a negative $199k versus a negative $432k for the second quarter of 2009.

As at June 30, 2010, Route1 had cash and cash equivalents amounting to $936,640, and the Company had no bank indebtedness subsequent to fully repaying its debt obligations to its lender during the second quarter of 2010. 

"We continue to make great progress with our key government clients and remain committed to demonstrating a much improved and growing user base for our technology throughout the remainder of 2010," said Tony Busseri, President and CEO of Route1. "A lot has been accomplished; however, we believe substantive value creation is still to come. I thank our patient shareholders for their ongoing support and understanding of the evolutionary stages of a high growth, one of a kind patented solution being embraced by one of the largest, most complex customers in the world – the US government."

The Company had previously estimated its cash flow breakeven point to be achievable with approximately 22,500 to 25,000 active TruOFFICE subscribers in the third or fourth quarter of 2010. The Company is revising this estimate favorably and is adjusting the required number of active subscribers to 17,500 to 20,000 TruOFFICE subscribers, with the expected timing remaining unchanged for the second half of 2010. This estimate is based on current operating expense levels, pricing model, revenue mix, and current foreign currency exchange rates.

As at June 30, 2010, Route1 had 16,799 TruOFFICE subscribers, including 13,451 "paying" and 3,348 "non-paying" or "severely discounted" TruOFFICE subscribers. Effective June 30, 2010, management has cancelled all "non-paying" and "discounted" devices distributed by previous management. As a result, the average revenue per subscriber has increased from $208 as at March 31, 2010 to $271 at June 30, 2010. Following the breakeven threshold, the Company estimates that for every incremental 25,000 new users, Route1 can generate $0.01 per share in net earnings.

As a further reference point, the Company had 14,129 paying, active TruOFFICE subscribers as at August 20, 2010. The earlier announced sale of 400 MobiKEY Fusion devices and TruOFFICE subscriptions to US Navy Reserve Forces is reflected in the paying, active subscriber count as of late July 2010, when the devices were received by the client.

"Route1 is at a point in its evolution where there is no requirement for giving away our service and solution. We are working on large rollouts with paying customers who appreciate and require our technology which in turn will deliver long overdue value to all shareholders," added Tony Busseri.

Second Quarter 2010 Conference Call

Route1 will hold a conference call at 4:00 p.m. Eastern Standard Time (EST) to discuss the financial results for the second quarter, and the Company's business and growth plan. Scheduled speakers for the call include Tony Busseri, President and CEO, and Ali Mahdavi, Capital Markets Advisor of Route1.

Participants should dial 416-340-8527 or 1-877-440-9795 at least 10 minutes prior to the conference time. For those unable to attend the call, a replay will be available after 6:00 p.m. at 416-695-5800 or 1-800-408-3053, passcode 1760530, until midnight on June 3, 2010.

ABOUT ROUTE1 INC.

Route1 delivers award-winning security and identity management solutions to customers world-wide. These solutions provide universal, secure access to all digital resources and sensitive data. At the heart of Route1's solutions is the MobiNET®, a communications and service delivery platform focused on identity management and entitlement-based access to resources. Route1's patented solution is based on FIPS-140-2 cryptographic modules, and simplifies the process of meeting increasingly stringent regulatory requirements around privacy and security. Headquartered in Toronto, Route1 is listed on the TSX Venture Exchange. For more information, visit www.route1.com.

This news release, required by applicable Canadian laws, and 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.

Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates", "targets", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Route1's current expectations, estimates, forecasts and projections about the operating environment, legal environment, economies and markets in which Route1 operates. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different from those contemplated in forward-looking statements. Unless otherwise required by applicable securities laws, Route1 disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

©2010 All rights reserved. Route1, the Route1 Logo, Mobi, Route1 MobiKEY, Route1 TruOFFICE, Route1 PurLINK, Route1 EnterpriseLIVE, and Route1 MobiNET are either registered Trademarks or Trademarks of Route1 Inc. in the United States and or Canada. All other trademarks and trade names are the property of their respective owners.

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.

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