Route1 Reports Third Quarter 2013 Financial Results

TORONTO, ONTARIO--(Marketwired - Nov. 26, 2013) - Route1 Inc. (TSX VENTURE:ROI), a digital security and identity management company 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 three and nine month period ended September 30, 2013.

Statement of Operations	For the Three Months Ended					For the Nine Months Ended
(in 000s of CAD dollars)	Sep 30 2013		Sep 30 2012	Sep 30 2012 before award		Sep 30 2013		Sep 30 2012	Sep 30 2012 before award
Revenue	1,485		1,933	1,342		3,907		6,773	3,928
Cost of revenue	379		236	235		793		1,108	547
Gross profit	1,106		1,696	1,107		3,114		5,665	3,381
Operating expenses	1,153		1,237	1,238		3,281		3,526	3,526
Stock based compensation expense	11		145	145		206		377	377
Operating profit (loss)	(58	)	315	(276	)	(373	)	1,762	(523	)
Net profit (loss)	(63	)	160	(431	)	(282	)	1,643	(642	)

Operating results for the three and nine month period ended September 30, 2012 were positively affected by the proceeds of an arbitration award which was received in January 2012. For additional information, please see Route1's September 30, 2013 Financial Statements and Management's Discussion & Analysis.

Q3 2013 Financial Results Summary

For the three month period ended September 30, 2013, total revenue decreased to $1.5 million from $1.9 million in the third quarter of 2012. The decrease was a result of recognizing $0.6 million of services revenue from the arbitration award during the third quarter of 2012.

Services revenue by quarter (in 000s of CAD dollars)	Sep 30 2013	Jun 30 2013	Mar 31 2013	Dec 31 2012	Sep 30 2012
MobiKEY application software revenue	1,139	1,158	853	964	954
Other services revenue	174	175	174	792	856
Total	1,313	1,333	1,027	1,756	1,810

Gross profit decreased during the third quarter to $1.1 million compared from $1.7 million during the same period in the prior year. The decrease in gross profit is attributable to $0.6 million recognized from the arbitration award in the prior year and a $0.1 million write down of MobiKEY Classic devices in the current quarter.

Operating expenses for the three months ended September 30, 2013 were $1.15 million compared to $1.24 million for the same period in 2012. The decrease was primarily a result of a decrease in general administration expense. Professional fees decreased by approximately $0.1 million for the three months ended September 30, 2013 as compared to the same period in 2012, as a result of reducing outsourced human resource and investor relations activities.

As a result, Route1's third quarter 2013 total comprehensive net loss was $0.06 million compared to total comprehensive net income of $0.16 million during the same period in the prior year. Adjusted earnings before interest, income taxes, depreciation and amortization, stock-based compensation, restructuring and other costs (Adjusted EBITDA) during the three-month period amounted to $22,000 compared to an Adjusted EBITDA of $0.5 million in the third quarter of 2012.

As at September 30, 2013, Route1 had no bank debt and a cash balance of $1.4 million.

in 000s of CAD dollars	Sep 30 2013		Jun 30 2013		Mar 31 2013		Dec 31 2012	Sep 30 2012
Revenue	1,485		1,366		1,057		2,277	1,933
Adjusted EBITDA	22		(7	)	9		645	514
Amortization	69		72		50		47	54
Operating profit (loss) before stock based compensation	(47	)	(79	)	(41	)	598	460

Year-to-date 2013 Financial Results Summary

For the nine month period ended September 30, 2013, total revenue decreased to $3.9 million from $6.8 million in the first nine months of 2012. Gross profit also decreased for the nine month period ended September 30, 2013 to $3.1 million from $5.7 million during the same period in the prior year. The decrease in total revenue and gross profit is primarily a result of the arbitration award.

Operating expenses for the nine month ended September 30, 2013 were $3.3 million compared to $3.5 million for the same period in 2012. The reduction in operating expenses was driven by lower professional fees, an increase in the SR&ED tax credit amount, and lower salaries and benefits costs.

As a result, Route1's year-to-date 2013 total comprehensive net loss was $0.3 million compared to total comprehensive net income of $1.6 million during the same period in the prior year.

Route1 Receives Order for 7,000 MobiKEY Fusion Devices

As announced on September 23, 2013, a component of the U.S. Department of Homeland Security ordered 7,000 MobiKEY Fusion devices through the U.S. Department of Homeland Security FirstSource II contract vehicle. This client will be replacing their allotment of MobiKEY Classic devices with Route1's MobiKEY Fusion devices. Route1 expects to ship the 7,000 devices between September 2013 and February 2014. The award has a sales value of approximately US $0.7 million.

During the quarter ended September 30, 2013, Route1 shipped 1,000 devices with sales value of approximately $0.1 million.

Paid, Active Subscribers

As at September 30, 2013, Route1 had 14,642 paying, active subscribers.

MobiKEY Subscribers (in 000s of CAD dollars for Revenue)	Sep 30 2013		Jun 30 2013		Mar 31 2013		Dec 31 2012		Sep 30 2012
Closing Number		14,642		14,784		13,989		15,913		14,615
Revenue per Subscriber	$	310	$	306	$	245	$	259	$	258
Revenue	$	1,139	$	1,158	$	853	$	964	$	954

Business Development Update

On April 11, 2013 during its fiscal year 2012 investor conference call and webcast, Route1 laid out to shareholders its business development plan. Route1 provided a further update to its plan on August 29, 2013.

Over the last 90 days the Canadian Government component of the business development plan has materially advanced, specifically Shared Services Canada (SSC), the program manager for Workplace Technology Devices (WTD), prior termed Workplace Technology Services program, issued a Letter of Interest on November 4, 2013. Route1 responded on November 20, 2013 per the document requirements. Specifics of the WTD program are as follows:

• The WTD initiative will standardize, consolidate and re-engineer the delivery of end user device hardware, software and associated support services in the Government of Canada to reduce costs and increase security for 95 organizations - http://www.ssc-spc.gc.ca/pages/devices-appareils-eng.html.

Product Development Progress

Recent Releases

• On October 15, 2013, the Company announced the unveiling of the MobiKEY Fusion A2T device. The MobiKEY Fusion A2T is an advanced tool for ID-1 smart card users (CAC, PIV and FRAC) who want to use an iPad, iPad mini, iPhone or iPod touch to access data remotely. With this announcement, Route1 has expanded the number of mobile devices that ID-1 smart card users can utilize to securely access data via the MobiKEY technology.

Upcoming Releases (over the next 60 days):

• MobiKEY for iOS - Integrate third party smart card reader technology with MobiKEY technology to offer unique hardware based multifactor authentication for tablets.
• MAP 2.0 - Integrate administration and provisioning tool with reports module, feature enhancements and bug fixes.

2014 Target Releases:

• MobiKEY technology feature addition - Audio support.
• MobiKEY for Android.
• Derived Credentials as per FIPS 201-2 - Level 2 to 4 credentials for mobile devices. Leveraging TPM or SIM enabled devices. Credential lifecycle management. Policies and authentication/authorization assertions.
• MAP 3.0 (Enhanced policy management) - Allow organizations to establish and implement MobiKEY policy management with real-time implementation of changes and group policy support.
• EnterpriseLIVE Virtualization Orchestrator (ELVO) 3.0. Enhanced functionality and improved integration with features available from the virtualization provider.
• MobiLINK 2 (TCP Protocol Suite Support) - Support for native mobile applications.

There are also a number of additional product development projects being considered.

Product development plans are subject to change without notice, based on market factors and/or client demands.

Forward Looking Statements

This news release contains statements that are not current or historical factual statements that may constitute forward-looking statements. These statements are based on certain factors and assumptions, including, expected financial performance, business prospects, technological developments, and 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 risk factors described in reporting documents filed by Route1. Actual results could differ materially from those projected as a result of these risks and should not be relied upon as a prediction of future events. Route1 undertakes no obligation to update any forward-looking statement 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 Route1 sources.

About Route1 Inc.

Route1 delivers industry-leading security and identity management technologies to corporations and government agencies that require universal, secure access to digital resources and sensitive data. These customers depend on The Power of MobiNET - Route1's universal identity management and service delivery platform. MobiNET provides identity assurance and individualized access to applications, data and networks. 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., 2013. 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, the MobiKEY, MobiKEY Classic, MobiKEY Classic 2 and MobiKEY Fusion devices, and MobiLINK are protected by U.S. Patents 7,814,216 and 7,739,726, Canadian Patent 2,578,053, and other patents pending.

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