Route1 Inc.

TSX VENTURE : ROI


Route1 Inc.

May 29, 2014 13:00 ET

Route1 Reports 2014 First Quarter Financial Results

TORONTO, ONTARIO--(Marketwired - May 29, 2014) - Route1 Inc. (TSX VENTURE:ROI), a leading provider of secure access technologies for the mobile workspace that protects businesses and government agencies and whose customers include the U.S. Department of Defense, the Department of Homeland Security, the Department of Energy and the Government of Canada, today announced its financial results for the first quarter ended March 31, 2014.

For Q1 2014, total revenue increased to $1.8 million from $1.1 million in 2013. Gross profit also increased during the first quarter of 2014 to $1.4 million or 80% of revenue compared to gross profit of $0.9 million or 82% of revenue in Q1 2013.

Total Revenue
in 000s of CAD dollars
Mar 31
2014
Mar 31
2013
Devices 461 30
Services 1,281 1,027
Other 14 0
Total Revenue 1,756 1,057

The increase in revenue and gross profit year over year is attributable to the previously announced sale of 7,000 MobiKEY Fusion devices to a component of the U.S. Department of Homeland Security, 4,000 of which were delivered in the quarter and the purchase of the MobiKEY application software service by a second component of the United States Department of Defense.

Route1's Q1 2014 total comprehensive net income was $0.4 million compared to a net loss of $0.1 million during the same period of 2013.

Earnings before interest, tax, depreciation, and amortization (Adjusted EBITDA) during the first quarter of 2014 amounted to $564,000 compared to $9,000 in Q1 2013.

Adjusted EBITDA
in 000s of CAD dollars
Mar 31
2014
Dec 31
2013
Sept 30
2013
June 30
2013
Mar 31
2013
Revenue 1,756 1,525 1,485 1,366 1,057
Adjusted EBITDA 564 48 22 (7 ) 9
Amortization 95 70 69 72 50
Operating profit (loss) before stock based compensation 469 (22 ) (47 ) (79 ) (41 )

During the first quarter of 2014, Route1 used cash flow in operating activities of $0.4 million. As at March 31, 2014, the Company had no bank debt and a cash balance of $332,288.

Balance Sheet Extracts
in 000s of CAD dollars
Mar 31
2014
Dec 31
2013
Mar 31
2013
Cash 332 700 1,826
Total current assets 3,057 1,588 2,996
Total current liabilities 2,629 1,715 2,824
Net working capital 428 (127 ) 172
Total assets 3,778 2,387 3,567
Bank debt 0 0 0
Total liabilities 2,770 1,854 2,971

Paid, Active Subscribers

As at March 31, 2014, Route1 had 14,240 paying, active subscribers. During Q1 2014 Route1's average revenue per subscriber was $312, an increase of $67 per subscriber or 27%, from the same period in 2013.

Revenue from Subscribers
in 000s of CAD dollars
Mar 31
2014
Dec 31
2013
Sep 30
2013
Jun 30
2013
Mar 31
2013
Closing number of subscribers 14,240 14,602 14,642 14,784 13,989
Average number of subscribers 14,198 14,600 14,697 15,159 13,853
Revenue per subscriber $312 $301 $310 $306 $245
Subscriber Revenue $1,108 $1,100 $1,139 $1,158 $853

The decrease in MobiKEY subscribers, between Q1 2014 and Q4 2013, is primarily attributable to the loss of its European Government client's remaining users. The loss of the account was first announced by Route1 on November 20, 2012 and is due to budget cutbacks.

Business and Market Commentary

  • Route1 renewed its two largest accounts, both with the U.S. government, between March 15, 2014 and April 30, 2014.
  • Route1 will realize revenue growth in "Revenue from Subscribers" and per subscriber in Q2 2014 compared to Q1 2014 as a result of a stronger U.S. dollar exchange rate at the time of renewing U.S. based accounts in late Q1 and early Q2 2014.
  • Leveraging U.S. government reciprocity rules and the installed accredited infrastructure, Route1 has a growing number of pilots with new U.S. DoD prospect clients.
  • Route1 is actively working to have the MobiKEY technology added to the U.S. Defense Information Systems Agency (DISA) Approved Products List.
  • Continued business development focus on the Canadian Federal Government and selective commercial enterprise opportunities.
  • The macro digital security environment is changing in a way that should benefit Route1 as board and corporate executives of potential Enterprise clients now face increased scrutiny over the loss of client or employee data and their own intellectual property. We are in the midst of a sea change with respect corporate accountability, specifically the C-Suite, as evidenced by:
    • The departure of Target's CEO and CIO over the last 120 days after a very public data breach affecting over 70 million customers was announced in Q4 2013;
    • The U.S. District Court of New Jersey's affirmation on April 7, 2014 that the Federal Trade Commission could proceed with its USD $6.5 million lawsuit against Wyndham Worldwide Corp. after the company experienced a data breach stemming from inadequate security methodology, setting a precedent for federal litigation against major organizations that fail to protect sensitive information; and
    • More than 60% of Internet services were affected by the Heartbleed Bug that drew worldwide attention in April 2014. It is expected that organizations will search for alternatives to browser-based mobile access solutions and look to implement easy-to-use multifactor authentication technologies.
  • Route1 will be releasing MobiKEY 4.4 releasing - audio support - in early June 2014.

ABOUT ROUTE1, INC.

Route1 enables the mobile workspace without compromising on security. Its flagship technology MobiKEY uniquely combines secure mobile access, with high assurance identity validation and plug-and-play usability. Remote and mobile workers are able to securely and cost effectively access their workspace from any device without exposing the organization to the risk of data spillage or malware propagation. MobiKEY customers include Fortune 500 enterprises as well as the U.S. Department of Defense, the Department of Homeland Security, the Department of Energy and the Government of Canada. Headquartered in Toronto, Canada, Route1 is listed on the TSX Venture Exchange.

For more information, visit our website at: www.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.

© Route1 Inc., 2014. All rights reserved. Route1, the Route1 and shield design Logo, SECURING THE DIGITAL WORLD, Mobi, MobiSecure, MobiLINK, Route1 MobiKEY, Route1 MobiVDI, MobiKEY, MobiKEY IBAD, DEFIMNET, MobiNET, Route1 MobiNET, TruOFFICE, TruFLASH, TruOFFICE VDI, MobiKEY Fusion, MobiNET Aggregation Gateway, MobiNET Switching Array, MobiNET Secure Gateway, EnterpriseLIVE, EnterpriseLIVE Virtualization Orchestrator, MobiNET Agent, MobiKEY Classic and MobiKEY Classic 2, 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.

The DEFIMNET and MobiNET platforms, and the MobiKEY, MobiKEY Classic, MobiKEY Classic 2 and MobiKEY Fusion devices are protected by copyright, international treaties, and various patents, including Route1's U.S. Patents 7,814,216 and 7,739,726, Canadian Patent 2,578,053, and other patents pending. The MobiKEY Classic 2 is also protected by U.S. Patents 6,748,541 and 6,763,399, and European Patent 1001329 of Aladdin Knowledge Systems Ltd. and used under license. Other patents are registered or pending in various countries around the world.

Other product and company names mentioned herein may be trademarks of their respective companies.

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