Route1 Announces Q2 2017 Financial Results

TORONTO, ONTARIO--(Marketwired - Aug. 23, 2017) - Route1 Inc. (TSX VENTURE:ROI)(OTCQB:ROIUF) (the Company or Route1), a world-leader in secure data protection technologies and user authentication for government and enterprise, today announced its second quarter (Q2) financial results for the three and six months ended June 30, 2017.

In 000s of CAD dollars		Q2 2017		Q1 2017	Q4 2016	Q3 2016	Q2 2016
Revenue
	Recurring revenue and services	1,347		1,911	1,865	1,808	1,760
	Devices and appliances	24		30	21	221	51
	Other	0		0	0	2	1
Total revenue		1,371		1,941	1,886	2,031	1,812
Cost of revenue		298		335	338	448	341
Gross profit		1,073		1,606	1,548	1,583	1,471
Operating expenses		1,151		1,289	1,356	1,243	1,299
Operating (loss) profit 1		(78	)	317	192	340	172
Total other expenses 2		157		109	101	34	(27	)
Comprehensive net (loss) gain		(235	)	208	91	306	199

1	Before stock based compensation
2	Includes AirWatch litigation expenses

Revenue from the recurring revenue and services segment for the three months ended June 30, 2017 decreased $413,000 from the same period in 2016. The decrease is largely a result of a reduction in the number of paid, active MobiKEY application software users with U.S. Customs and Border Protection, an agency of the U.S. Department of Homeland Security.

Recurring revenue and services In CAD dollars	Jun 30 2017	Mar 31 2017	Dec 31 2016	Sep 30 2016	Jun 30 2016
Closing number of MobiKEY subscribers	11,649	18,270	17,883	17,344	16,800
Revenue per MobiKEY subscriber	$391	$389	$388	$383	$383
MobiKEY subscription revenue 1	$1,347	$1,759	$1,702	$1,639	$1,591
Other recurring revenue and services 1	$0	$152	$163	$169	$169
Total recurring revenue and services 1	$1,347	$1,911	$1,865	$1,808	$1,760

1	Figures are in thousands

Earnings before interest, taxes, depreciation amortization, and stock-based compensation (Adjusted EBITDA) during the first quarter of 2017 amounted to approximately $16,000 compared to $278,000 in Q2 2016.

in 000s of CAD dollars	Q2 2017		Q1 2017	Q4 2016	Q3 2016	Q2 2016
Gross Profit	1,073		1,606	1,548	1,583	1,471
Adjusted EBITDA	16		406	307	447	278
Amortization	94		89	115	107	106
Operating (loss)profit before stock based compensation	(78	)	317	192	340	172

Route1 generated cash from operating activities of approximately $1.6 million during Q2 2017 compared with cash generated from operating activities of $3.7 million in Q2 2016. As at June 30, 2017, the Company had no bank debt and a cash balance of $2.1 million.

Balance Sheet Extracts In 000s of CAD dollars	Jun 30 2017	Mar 31 2017	Dec 31 2016	Sep 30 2016	Jun 30 2016
Cash	2,080	704	1,946	2,898	3,735
Total current assets	2,924	1,890	2,910	3,938	4,765
Total current liabilities	2,396	1,113	2,500	3,555	4,719
Net working capital	528	777	410	383	46
Total assets	4,213	3,114	4,190	5,230	6,116
Bank debt	0	0	0	0	0
Total shareholders' equity	1,720	1,904	1,600	1,574	1,296

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 certain annual enterprise user subscription renewal payments.

Spotlight, Powered by MobiNET Business Development Update

On July 27, 2017 Route1, and its partner HTM Sensors, announced that they had entered into a trial for Spotlight, Powered by MobiNET with a tier 1 automotive parts manufacturer which has one of its plants located in North York, Ontario, Canada (the First Client). Last week, the First Client became Spotlight's first commercial client with an order for the Spotlight technology to be deployed on one of the First Client's four lines. HTM expects Spotlight's presence to grow within the next 45 days with the First Client where Spotlight will be deployed on all four lines at the plant.

Further, the First Client has 27 related plants around the world and all of these plants could become candidates for Spotlight, Powered by MobiNET.

HTM Sensors currently has sensor based kiosks in more than 175 plants around the world, each of which is a primary target for the Spotlight technology.

Spotlight, Powered by MobiNET

Spotlight is a secure technology that delivers real-time industrial data analytics on data collected from Programmable Logic Controllers (PLCs) and other automation devices (including IIoT). The technology provides quantitatively-based actionable information to drive industrial process efficiency and maximize productivity while minimizing unplanned downtime and cost, and has been architected to ensure security, ease of deployment and scalability.

Spotlight, Powered by MobiNET is a unique offering to the manufacturing and processing industries. It provides continuous analysis of the stream of data collected from the plant floor as well as specific recommendations to minimize downtime, increase productivity and schedule maintenance at the appropriate times in the manufacturing cycle. In addition, the data to be analyzed is transmitted securely to the MobiNET platform with no vulnerability to external interference.

Since whiteboards are wiped away daily, the data captured by simple manual methods are not stored, sorted or analyzed for best practice improvements over longer periods. Without Spotlight, the volume of data is overwhelming and is not being analyzed to provide managers with actionable information so they can apply resources to the most important locations.

Spotlight shows plant personnel where to look. With Spotlight, anecdotal information is removed and data analytics are applied to show exactly which one of the thousands of inputs in the plant requires intervention for a newly applied solution to the input application. Until HTM Sensors and Route1 stepped into this arena, it was very difficult to be able to capture these data, move the data securely to a robust database, and deliver the data back to the customer in the form of actionable lists of spots that require intervention. Spotlight, Powered by MobiNET addresses all of these challenges and issues.

MobiKEY Business Development Update

United States Marine Corps (USMC): On August 10, 2017, the MobiKEY technology was approved by the USMC Change Control Board and is now a fully approved technology listed in the USMC DADMS database of approved software. Route1 is working with USMC HQ leadership on an official message to be communicated to USMC Commands regarding the approved status of MobiKEY. This latest approval was the final technical approval necessary. USMC Commands that are interested in the MobiKEY technology can now proceed with procurement without requiring additional technology approvals to deploy the technology.

United States Army update (Army): On August 2, 2017, Route1 received the signed Authority to Connect (ATC) document, leveraging the JSP RMF Authority to Operate to accelerate the issuance of the ATC. This document is valid until February 2, 2018. The issuance of the ATC is a significant milestone for Route1 and enables us to work directly with Army Commands interested in the MobiKEY technology. The ATC also allows us to work with prime contractors on the Army CHESS-ITES-2S to have the MobiKEY technology added as an available contract line item number (CLIN), as this is the Army's contract vehicle of choice.

United States Fish and Wildlife Service (FWS) update: On July 25, 2017, Route1 was awarded the renewal for FWS' 1,000 user MobiKEY subscription, extending their subscription until September 3, 2018.

Route1 expects to increase MobiKEY subscribers in Q3 2017 beyond the growth realized in the first and second quarters of the current year largely being driven by initiatives with various Department of Defense accounts and pilots that have been ongoing for the past several months. In Q4 2017, we expect to increase MobiKEY subscribers further by being in a position to capitalize on the above-noted USMC and US Army approvals and closing on opportunities that have been ongoing for the past several months.

DerivID Business Development Update

On August 1, 2017, Route1 announced that its wholly-owned subsidiary Route1 Security Corporation has started working with the National Cybersecurity Center of Excellence (NCCoE) in the National Cybersecurity Center of Excellence Derived Personal Identity Verification Credentials Building Block to develop practical, interoperable cybersecurity approaches that address the real-world needs of complex Information Technology (IT) systems. By accelerating dissemination and use of these integrated tools and technologies for protecting IT assets, the NCCoE will:

• enhance trust in U.S. IT communications, data and storage systems;
• reduce risk for companies and individuals using IT systems; and
• encourage development of innovative, job-creating cybersecurity products and services.

NIST does not evaluate commercial products under this Consortium and does not endorse any product or service used. Additional information on this Consortium can be found at http://nccoe.nist.gov/projects/building-blocks/piv-credentials.

DerivID is Route1's implementation of Derived Personal Identity Verification (PIV) Credentials. PIV credentialing initially focused on authentication through traditional computing devices, such as desktops and laptops, where a PIV card would provide a common authentication through integrated smart card readers. Today, the proliferation of mobile devices that do not have integrated smart card readers complicates PIV credentials and authentication. DerivID leverages patent-pending technology for securing cryptographic credentials; more specifically, the critically sensitive Private Key Material.

DerivID

DerivID is a derived credentials solution for PIV and CAC that validates the identity of mobile users seamlessly, simply and securely.

DerivID is the ideal solution for validating the identity of mobile users: government employees and contractors who need to access networks and applications or to digitally sign documents and more, in a secure manner. Part of the Route1 suite of patented security solutions, DerivID leverages deployed and fully accredited infrastructures (DEFIMNETs) that are available to DOD and civilian government, making DerivID seamless and simple to deploy and scale.

Unlike other derived credentials solutions, DerivID eliminates vulnerabilities associated with brute force attacks, including dictionary attacks. It also enables the detection and prevention of multiple sign-in attempts. DerivID is designed to integrate and actively function with multiple Certificate Authorities on the Federal Bridge. It integrates seamlessly with leading MDM and EMM providers and supports the following Apps: native, MDM/EMM, and custom. APIs are available for custom mobile App development.

Route1 believes its current technologies, as well as its research and development work, can drive innovation and progress and the collaboration with NCCoE gives us the opportunity to make a contribution to enhanced cybersecurity.

Investor Conference Call and Webcast

The Company will also hold a conference call and web cast to discuss the financial results on Wednesday, August 23, 2017 at 4:15 p.m. eastern.

Participants should dial 1-888-554-1429 or 1-719-325-2262 at least 10 minutes prior to the conference time of 4:15 p.m. eastern, pass code 4781325. For those unable to attend the call, a replay will be available after 7:15 p.m. at 1-844-512-2921 or 1-412-317-6671, pass code 4781325 until midnight on September 6, 2017.

The webcast will be presented live at http://public.viavid.com/index.php?id=125985.

Advance Notice By-Law

The Board of Directors of the Company has approved the adoption of an advance notice by-law, which includes advance notice requirements for director elections in connection with any annual or special meeting of the shareholders. Such advance notice requirements have been adopted to ensure that all shareholders receive adequate notice of director nominations and sufficient time and information with respect to all nominees so shareholders can exercise their voting rights in an informed manner. Such advance notice requirements are similar to the advance notice by-laws adopted by several other Canadian public companies The by-law is in effect as of August 22, 2017 and will be submitted to shareholders of the Company for approval at the Company's Annual Meeting to be held on November 27, 2017.

About Route1 Inc.

Route1 Inc. is a world-leader in secure data protection technologies and user authentication for government and enterprise. Route1 solutions enable the workforce to be more productive and more flexible without compromising system access, data-at-rest, or data-in-use. The Company's suite of patented enterprise security solutions combines best-in-class authentication, data security and secure communications with streamlined administration tools, running on a proven, trusted infrastructure. From mobile access to business continuity to best-in-class full system encryption, Route1 offers the most effective, affordable methods to secure the digital fortress, while meeting or exceeding the highest standards for government and industry. Route1 has Full Authority to Operate from the U.S. Department of Defense, the U.S. Department of the Navy, the U.S. Department of the Interior, and other government agencies. The Company is also trusted by enterprise security teams in the banking, healthcare, legal and education sectors, among others. With offices in Washington, D.C., Boca Raton, FL and Toronto, Canada, Route1 serves public and private sector clients around the world. Route1 is listed on the OTCQB in the United States under the symbol ROIUF and in Canada on the TSX Venture Exchange under the symbol ROI. For more information, visit: 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.

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 Inc. 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 the Company. 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. The Company 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 news release are from Company sources.

© 2017 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.