Route1 : Reports 2014 Third Quarter Financial Results

TORONTO, ONTARIO--(Marketwired - Nov 12, 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 third quarter (Q3) and year-to-date (YTD) financial results for the period ended September 30, 2014.

For Q3 of 2014, total revenue was $1.43 million compared with $1.48 million in Q3 2013.

Route1 realized a decrease in total revenue in the third quarter of 2014 as a result of a purchase of 7,000 MobiKEY Fusion devices by a component of the U.S. Department of Homeland Security in the third quarter of 2013. Route1 shipped and recognized revenue on 1,000 MobiKEY Fusion devices in Q3 2013, 2,000 MobiKEY Fusion devices in Q4 2013, and 4,000 MobiKEY Fusion devices in Q1 2014.

Importantly, during the third quarter of 2014, Route1 also realized further growth in revenue from subscribers (recurring revenue), both in the number of subscribers and the revenue per subscriber, for the third consecutive quarter.

The net increase in MobiKEY application software users (subscription revenue being the largest component of Route1's service revenue) is largely a result of continued growth from accounts within the U.S. Department of Defense.

Gross profit increased during the third quarter of 2014 to $1.110 million or 77% of revenue, compared to gross profit of $1.106 million or 75% of revenue in Q3 2013. Gross profit in 2014 and 2013 were both impacted by a write-down of the Classic version of the MobiKEY device. In the third quarter of 2014 and 2013, Route1 booked an expense of $56,983 and $81,640 respectively to write-down MobiKEY Classic device inventory.

Route1's Q3 2014 total comprehensive net income was $0.2 million compared to a comprehensive net loss of $0.1 million during the same period in 2013. Route1's YTD 2014 total comprehensive net income was $0.6 million compared to a comprehensive net loss of $0.3 million during the same period in 2013.

Adjusted earnings before interest, tax, depreciation, and amortization (Adjusted EBITDA) during the third quarter of 2014 amounted to approximately $110,000 as compared to $22,000 in Q3 2013.

Tony Busseri, CEO of Route1, stated, "The third quarter showcased our continually improving operating results. As we work towards our stated goal of a sizable order from one or more of our large enterprise clients, we anticipate continued growth in services revenue and cash flow. Route1 is aggressively targeting a further sales increase. Adjusting for the MobiKEY Classic device write-down, Route1 generated $166,000 of EBITDA in the third quarter of 2014, the Company's best quarterly operating result realized to date without the benefit of a one-time device sale order."

During the third quarter of 2014, Route1 had net cash used in operating activities of $0.88 million. Route1's cash position is at its highest level during the second quarter of the fiscal year as a direct result of the timing of annual enterprise user subscription renewal payments. As at September 30, 2014, the Company had no bank debt and a cash balance of $2,601,328.

Paid, Active Subscribers

As at September 30, 2014, Route1 had 14,645 paying, active subscribers, an increase of 184 users from June 30, 2014. The net increase in MobiKEY application software users is a result of organic growth from accounts within the U.S. Department of Defense. Route1 expects further organic growth from these same accounts in the fourth quarter of 2014.

Business Development Update

Route1 has continued to leverage U.S. government reciprocity rules and the installed accredited infrastructure to grow the number of proof of concepts within the U.S. Department of Defense (DOD). As a result, Route1 expects that as it continues to works towards closing large, enterprise deals, there will also be smaller account purchases from DOD components that will drive increased subscription revenue.

In addition, during the third quarter of 2014, Route1 received and fulfilled device orders from a component of the DOD for approximately 720 MobiKEY Fusion devices. The reported closing number of subscribers does not account for the expected user count growth attached to the device orders. The delay in "lighting up the users" is a result of a contracting issue related to the customer's transition to a next generation program. Route1 expects that in late Q4 2014 or early Q1 2015, the contracting issue will be resolved.

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.