Route1 Provides Third Quarter 2020 Business Update

Rhea-AI Summary

Route1 Inc (OTCQB:ROIUF) reported a record quarterly gross profit of 3,013 CAD thousands for Q3 2020, up from 2,781 CAD thousands in Q2 2020. Total revenue reached 9,147 CAD thousands, driven by increases in subscription services and devices. The gross margin decreased to 33% from 40% sequentially. The company expects a full quarter's revenue impact of approximately 375,000 USD from a new government contract. Route1's AGM is set for December 8, 2020, and Q3 financial results will be reported on November 25, 2020.

Positive

• Record quarterly gross profit of 3,013 CAD thousands for Q3 2020.
• Total revenue increased to 9,147 CAD thousands, supported by subscription services.
• Anticipated future revenue of approximately 375,000 USD from the DoD contract.

Negative

• Gross margin decreased to 33% from 40% in Q2 2020.
• Revenue recognition from the DoD contract did not fully impact Q3 results.

Posts Record Quarterly Gross Profit

TORONTO, ON / ACCESSWIRE / October 22, 2020 / Route1 Inc. (OTCQB:ROIUF)(TSXV:ROI) (the "Company" or "Route1"), an advanced North American provider of data-centric business empowerment solutions, today provided an operations update after the completion of its third quarter that ended September 30, 2020.

Revenue and Gross Profit

In 000s of CAD dollars	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019
Revenue
Subscription and services	2,599	2,489	1,958	2,511	2,136
Devices and appliances	6,523	4,477	4,401	5,891	6,576
Other	25	3	4	1	2
Total revenue	9,147	6,969	6,363	8,403	8,714
Cost of revenue	6,134	4,188	3,997	5,653	5,953
Gross profit	3,013	2,781	2,366	2,750	2,761
Gross margin	33%	40%	37%	33%	32%

The gross profit for the third quarter of 2020 is an all-time high for the company. The gross margin is directly related to the mix of the revenue for the quarter.

Gross Profit to Sales and Marketing Cost Ratio (the "Ratio")

Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019
3.31	3.14	2.94	2.66	2.78

As previously communicated, Route1's benchmark ratio for fiscal year 2020 is between 3 and 3.25. As the Company is able to grow its gross profit attributable to subscription-based revenue, it will result in an improved Ratio.

Business Development Update

DOD CONTRACT AWARD: Route1 announced on August 24, 2020 that it had been awarded a purchase order to provide a one-year license with three one-year renewal options to an agency of the U.S. Department of Defense for 4,000 MobiKEY subscriptions. The annual software license for the 4,000 users is valued at approximately US $1.5 million. The new client for Route1 has the ability to also increase their user base in increments of 1,000 subscriptions. To date, Route1 has onboarded more than 2,000 MobiKEY users and expects that 4,000 users will be onboarded prior to November 30, 2020.

The third quarter subscription revenue and gross profit depicted above does not reflect the impact of the DoD contract award across a full quarter. A full quarter's subscription revenue impact from this contract award is approximately US $375,000; the third quarter of 2020 included approximately US $150,000 of subscription revenue.

DEPARTMENT OF THE NAVY ATO: Based on the most recent information provided to Route1, the Company now expects the Navy Authorizing Official (NAO) to grant Route1 the Authority to Operate (ATO) the new Department of the Navy DEFIMNET by the middle of November 2020. The new DEFIMNET called DEFIMNET 3.0, will provide the Navy, for the first time, a private cloud infrastructure that is fully redundant, similar to all other DEFIMNET platforms Route1 has deployed with the DoD. Further, the deployment of DEFIMNET 3.0 comes with MobiKEY 7.1 which was commercially released on August 31^st. MobiKEY 7.1 features include enhanced video conferencing, optimized audio capture and playback and an improved experience using desktop applications.

ALPR REVENUE: As communities and businesses have reopened and started to adjust to their new operating reality with coronavirus, Route1 revenues and project opportunities derived from Automated License Plate Reader (ALPR) technology are building again. Further Route1 believes that as communities continue to invest in transparent, responsible law enforcement, there will be increased demand for ALPR and body-worn camera technology. Route1 has made an investment in its video team to support the expected growth in video-based project revenue.

Q3 2020 Financial Results Notification

Route1 will report its third quarter financial results for the three and nine-month periods ended September 30, 2020 before the markets open on Wednesday, November 25, 2020.

Annual General and Special Meeting Notification

Route1 will hold its annual general and special meeting ("AGM") at the offices of Route1 Inc., 7300 N. Via Paseo Del Sur, Suite 202, Scottsdale, Arizona on December 8, 2020 at 10 a.m. (Toronto time). There will not be a management presentation at the end of the AGM.

About Route1 Inc.

Route1 Inc. is an advanced North American technology company that empowers their clients with data-centric solutions necessary to drive greater profitability, improve operational efficiency and gain sustainable competitive advantages, while always emphasizing a strong cybersecurity and information assurance posture. Route1 delivers exceptional client outcomes through real-time secure delivery of actionable intelligence to decision makers, whether it be in a manufacturing plant, in-theater or in a university parking lot. 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.

For More Information, Contact:

Tony Busseri
President and Chief Executive Officer
+1 480 500-7030
tony.busseri@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.

© 2020 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.

This news release may contain statements that are not current or historical factual statements that may constitute forward-looking statements or future oriented financial information. These statements are based on certain factors and assumptions, including, price and liquidity of the common shares, expected financial performance, expected subscribers and subscription-based revenue, business prospects, technological developments, development activities, the ability of the Company to obtain the supersedeas bond in order to appeal the decision to the United States Court of Appeals for the Federal Circuit, 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 the Company. Actual results could differ materially from those projected as a result of these and other risks and should not be relied upon as a prediction of future events. The Company undertakes no obligation to update any forward-looking statement or future oriented financial information 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 Company sources. Past or forecasted performance is not a guarantee of future performance and readers should not rely on historical results or forward-looking statements or future oriented financial information as an assurance of future results.

SOURCE: Route1 Inc.

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FAQ

What is Route1 Inc's gross profit for Q3 2020?

Route1 Inc reported a gross profit of 3,013 CAD thousands for Q3 2020.

How much was Route1's total revenue in Q3 2020?

Route1's total revenue for Q3 2020 was 9,147 CAD thousands.

What caused the decrease in Route1's gross margin?

Route1's gross margin decreased to 33% due to a shift in revenue mix.

When will Route1 announce its Q3 2020 financial results?

Route1 will report its Q3 2020 financial results on November 25, 2020.

What is the expected revenue from Route1's DoD contract?

The expected future revenue from the DoD contract is approximately 375,000 USD.