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00:40 Good morning, everyone and thank you for the introduction there. Let's go through the performance up real quickly.

00:47 As described on the company slide, I would like to inform listeners that this presentation contain 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 the reporting documents filed by our company.

01:26 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.

01:51 Estimates used in this presentation are from company’s sources. I also need to point out that on today's call, we'll use names that are either registered trademarks or trademarks of Route1 Inc.

in the United States or Canada. 02:10 So today's update has a couple of key messages that ultimately go with it.

One is that, as we've described in a news release a couple of weeks ago, some of the broader market factors have had impact in the third quarter for us related to supply chain and microchip availability and we'll spend some time talking about that. But for us as a company, we feel at this juncture that both disruptions have impact on timing in Q3 and as we're moving through Q4, to date we are -- our pipeline, our backlog of the related inventory that's required has been able to meet customer contracts and expectation.

So we're expecting as a wholesome commentary that Q4 will be back on track to what we would expect our business to be able to generate from the classic pillars that we have as a business from our data security, data acquisition, data visualization and other services and technological offering. 03:15 So as we slide directly into the results for the quarter -- Sorry, the slide is just taking a little longer to update.

Let's go through the operating performance. So for the quarter, we actually had revenue that was better than the second quarter, better than the first quarter of this year.

Part of that was related to encouraging clients to make orders earlier than they may otherwise too, because of the concern around the supply chain. So back in Q1 and Q2, we were talking to our clients that we will be more transactional oriented about buying their Getac tablets or Panasonic TOUGHBOOK and put those orders in earlier because there is going be no guarantee around the timing for that hardware in the back half of this year.

So some of those things led to sales that we were able to pull forward in the quarter. And on the other side of that, as we've talked about pretty openly, we are in Chevy Bolt, a car is delayed for a Parking Enforcement Officer, we can't control that.

But where it does impact us is our inability to potentially install the Genentech Autoimmune technology to be able to -- due to install work, the training, the servicing, etcetera. 04:36 So we've had couple of things that are going on in this quarter.

One we were able to encourage one time transactional buying to happen a little quicker and that was pre-planned earlier this year. On the other hand, we're being impacted by availability of cars, of technology for ALPR and that's had an impact.

Overall, revenue is up, we'll talk about the recurring revenue line item, but mostly that deals with technology as a service and the ending of certain contracts as we move away from that. Gross margin went slightly down from the second quarter, had an impact on the EBITDA and we had a slight loss for the quarter.

05:20 Disappointing for sure, but we're no different than many other players that are impacted by the timing of hard goods and technology when it gets delivered. So, as we drill down into our numbers a little bit.

Obviously, we often talk about the four key metrics for us revenue, GP, gross margin and EBITDA. We would again expect third quarter to normalize fully or somewhat and we looked forward to be able to giving you indicators as we move towards the end of this quarter, how we're doing relative to some of these metrics.

05:58 So right now, the quarter we think it will look more like Q1 and Q2 than necessarily the third quarter because we’ve worked through the delays in the timing for certain projects. But there always could be further disruptions, but as we stand here in the seventh, eighth week of the fourth quarter, right now, we're not feeling that the quarter is going to look like the third quarter.

06:27 So as we slide into this further, some general notes, it’s important to keep in mind. We've talked about the delays in hardware and LPR hardware in particular We did have the Spyrus acquisition closes, we have a couple weeks for that.

And in some ways it's providing a hedge for us. The Spyrus had their own inventory for their authentication product and then a bunch of what they do is related to software offering.

So that’s a positive hedge as we close that deal. We'll talk a little bit more about it as we go through it.

07:03 We continue to have the Canadian dollar erosion this year versus last year. We're starting to see some good movement of the U.S.

dollar in the last couple of weeks. And again today it's strengthening and that ultimately will help us, but the timing of the two bigger orders and those renewals happened in March as well as August.

So assuming the U.S. dollar strengthens as we go into the first quarter of next year, that could be a very positive outcome for us related to the renewal with the joint service provider, the department of defense or as we like to call the pentagon.

07:43 We're going to talk a little bit about this that we’ve had -- we talked about in the second quarter there has been some pulling back of dollars that were put out there for the COVID or the pandemic, and then I have seen some of the uptick in MobiKEY subscriptions that were procured during twenty twenty, pulled back in twenty one as you're probably aware of the U.S. Federal government is spending money at a record pace here, but not a lot of that in technology or data security, the focus is obviously on other issues.

08:20 And for us, what we've -- we're still at a level that's much higher than where we were pre pandemic. But some of dollars that were put out there for one time are bridge work from home investments have been pulled back.

From a Navy perspective, we continue to be stuck, let's call it that, the new prime contractor for the Navy being Leidos is working through the early months in servicing the Navy. It mean a number of items in the catalog where Navy personal can procure including us hasn't been lit up yet.

So we're at a similar level in dawn users as we were about five six months ago. We're hoping during the fourth quarter that finally gets resolved.

Frustrating as it is, we are one of a couple of hundred different offerings for the Navy. So they have a bigger issue than just whether they can buy MobiKEY.

The broader issue is their ability to procure different technology through that Leidos relationship. 09:23 I should point out also that we had greater than traditional costs in the accounting and finance team as we went from -- through some turnover and change.

We don't believe those costs will happen again. But there was some investment in new people, head hunter fees and those type of things.

So when you look at our fixed costs, just note that. 09:53 Talking more about the services revenue or that recurring line, again, as we talked a little bit about the MobiKEY application software revenue eroded a little bit from the second quarter.

Again, that's primarily related to COVID dollars being pulled away. And again, why it looks so stuck from Q3 twenty twenty has everything to do about exchange rate.

So there is two impacts here again when application software revenue dropped from one point nine million dollars in Q3 twenty twenty to one point six million dollars in Q3 twenty one. It's primarily related to CapEx, it's also related to a lower number of MobiKEY subscribers.

10:38 Technology as a service. We talked about that, this was inherited when we did the Group Mobile acquisition back some three point five plus years ago.

We've continue to have that relationship with a couple of accounts in this area. As we move forward here, we're not going to be investing aggressively in technology as a service or effectively leasing hardware with some services to it under a longer term model.

We think there's a better way to connect with the client. 11:12 And one of those ways is our other services line item and that's twelve to sixty month contracts where we're providing extended services and training and other features to them, again, under the five contract where they're paying us monthly.

This number will continue to grow. And with a lot bigger same quarter year over year, again, it's not for FX.

But this is an area that we think we can do quite well in as we move forward. When we bought PCS Mobile it’s more of a transactional business and data stuff in the LPR space, we've pivoted it to being an outcomes or services based approach.

And we are taking a higher standard of service than what’s available on the industry. And today, we're seeing a really good uptick from clients about wanting to renew their support contracts at stated dollars for us, but there's greater things we're providing.

12:11 As we’ve talked about in the past, we've made a real investment in high quality talent that engineer like people design other people and in making that investment, you need to get a popular way to return for it, but once they're invested in these people, they're not a variable cost that are fixed cost for you. And so, we are just starting to see that revenue grow related to that initiative, and that's better packages, better bundles for wholesales support and training and then having our clients obviously locked in for one to five year.

12:52 As we continue on here, again, as we've talked a little bit, G&A costs were a little higher. We expect those to come back to the levels of prior quarters.

R&D has an uptick, that's primarily related to the Spyrus acquisition, two weeks of employees partnered from Spyrus and then selling and marketing is clearly under control and reflects the fact that Canadian Dollar that strengthened so that the U.S. dollar impact the sales and marketing initiatives.

We are not held our hand, but there worth a little less than one billion dollars again because of the strengthened Canadian dollars during Q3 twenty twenty one versus Q3 twenty twenty. 13:40 One of those metrics I often like talking about is the quality or the return we're getting from a sales and marketing expenditure dollar that we are investing.

As you can see from the slide in front of you, that continue to get better and better, which is really a simple equation, its gross profit over sales and marketing expense. We as a business continue to expect ourselves to get greater gross profit for every one dollar we're investing and further this will continue to improve as we move forward.

14:11 I should touch on it, I know I flipped slides here, but one of the ways you're able to do that is internal promotion. And what does that mean?

That means you're bringing people into your business at a reasonable rate of pay or career salary and as their learning and get better they they take on greater and greater responsibilities, and you're able to get a better return on one dollar that you are investing. So we're very strong about first promoting and giving people that are part of our family an opportunity to grow and take on bigger responsibility before we go into the marketplace and look to bring in new talent.

That will have an impact on that gross profit divided by sales and marketing expense metrics. 14:58 Adjusted EBITDA less foreign exchange cost dropped and -- that's clearly because that we've had a weaker third quarter EBITDA wise than we wanted it to be.

We know what our goal here is that, continue to grow that part to be bigger and bigger numbers, particularly bigger than Q2 twenty twenty one. 15:20 From a balance sheet perspective, it got healthy, it's got healthier.

I guess if you want to call it that way, we obviously spent some money buying a company at end of the quarter which means you have greater assets than we would have normalize without the same level fourth quarter of operating threshold from that investment. Not a whole lot directly to point out, except that at this particular point in time when you look at net working capital adjusted for non-cash items like deferred revenue or contract liability, it has gotten better and we think the balance sheet over time will continue to strengthen.

16:01 So to be very, very clear about this, we're not in the market right now looking to raise money for the business that we have. From time to time we explore acquisitions that could require some data or some form of quasi equity, and so that's my caveat, but at this juncture, there's no capital raise requirement to support the business as it currently constant.

16:27 The other metric we really look at and pride ourselves on is the return we're getting for a one dollar invested. Two things here, again, we jumped the denominator, assets invested by closing a deal right then at the third quarter and with the decreased EBITDA in the quarter that impacted this.

So still slightly better than a year ago at this time less than Q1 and Q2. Our goal -- in Q1 and Q2 this year, excuse me, our goal is to get that back and beyond where we were in the second quarter of this year and look forward to updating you as we move forward, obviously.

17:06 So let's talk a little bit then from what’s ahead. I'm going to be a little more specific.

I guess you might say some of this was already put out in the news release from a couple of weeks ago. But this can stress enough that over the last six to eight weeks, or particularly starting early in September of this year.

There is a change for us relative to accessing a hard good, microchips, storage memory as it relates to the items we need for our clients, we had done just everything that we could do. We could have build massive inventories because there is not one piece of something that's only needed by our client base.

So there were some selective pre buys where we felt the PO was coming. We did those type of things.

We encourage volumes as we talked about earlier to get ahead of the traditional procurement cycles, so that they could see the goods come in the third quarter or fourth quarter. But ultimately, right now, we are having a more difficult time forecasting.

18:13 Simply because there's never a guarantee at this juncture about when a good is going to arrive. And again that could be a client’s parking enforcement vehicle, it could be a cruiser for law enforcement.

It could a tablet, it could be a camera, but there's many different hard goods, let's call it, that do impact us. We are working to -- with our key OEMs to get, let’s call it, stronger and better timing when they're able to deliver.

We are an important dealer and partner with players like [Gentec and Vtec] (ph). And so we keep on working with those partnerships, so that collectively, we meet our clients expectations.

18:57 One of those that was a little disappointing was California highway patrol, the large order we announced at the end of the second quarter, we had hoped most of that would have been shipped during Q3, it wasn't. And I’m now at all criticizing our partner in this stage Genetec.

Some things are beyond their control too. But anyways, we've not seen anywhere near the full benefit of that larger LPR oriented order, and we do expect that fully or very close to fully show up during the fourth quarter.

19:34 So what can we do? How do we respond to the marketplace when there's variables where you have limited years that you can pull on?

One is an audio statement, you need to reduce your fixed costs that are always consider as mix of them. To ensure that you're getting the value you want and that could mean from time to time you adjust headcount and we have done some of that and that will be reflected in the fourth quarter.

We've looked for certain partners when we're on fixed price contracts to tweak those a little bit down for the next three to four months as we work through the macro global supply chain challenges. Partners have been good about this and as I've said to our Board of Directors recently, adjusting headcount is something you can do in a shorter window, but ultimately in the medium term is not a long term solution for us to grow EBITDA.

So we made some adjustments and we expect that as we move through twenty twenty two, we will grow again from a headcount perspective as the GP jumps. 20:44 The second thing you can do, and again, cost is one area that can pull levers on is to build out those activity that do not require additional human or third party costs investments.

We talked about our engineering and services revenue line item, we have five strategic markets or four really that should impact us during the fourth quarter of this year and Q1 of next year, Northern California, Seattle through the Portland, Oregon Corridor, Greater Denver and Milwaukee, Wisconsin where we have a number of key accounts that are in colleges or public safety oriented clients or commercial enterprise. I think in Northern California that where I can't necessarily talk of the [indiscernible] by area of sacramental and that Northern California, we have some important technology companies that use our technology for their campus parking.

21:44 And what this basically is, is a hub and spoke concept where we have a talent that's in a geography and that talent will be used to deal with three, four, five strategic accounts, whether that's going on-site, a fixed number of times a week or month and some very tailored services to that particular client. That will grow our revenue, our gross profit and EBITDA being much more rifle shot focused and as we deliver our services.

So we're looking forward to that. We think it's the right on model.

It's leveraging the investment you have may without generating really any new cost. 22:24 We continue to acquire businesses and assets that need our specific business model.

And so, it's funny when you say whether you want to grow when things are tougher, yes, we do. It is an opportunity, we think the area of services.

And I probably should step back earlier on. I think all us had experienced moments over the last twelve months where we're just shocked with the portfolio of service or timing or getting from whether it's a window manufacturer or maybe it's buying a new car.

Things are different than they were eighteen months ago. And if we can separate ourselves off a service, we think there's a chance to enhanced margins.

And that's an area we want to invest in. We have very strong engineering capabilities.

It would make sense as we go with this hub and spoke services model to expand upon that. If we buy an engineering services company, they will have to come with contracts and clients and talent.

And so we think that's an area we should invest in. 23:32 Here is a an interesting one and I'm not about to say we're going to close on a drone acquisition, and I'm not saying that we're going to go into the -- being an OEM for drones.

But that area of a dataset set that comes from a different source. And so you think of data sets around with public safety officers wearing a body worn camera, you think of fixed and mobile cameras, LPR activities in particular, lots of data set and number of larger urban communities used drones.

Above major arteries or highways way up, you want to hear the buzz or see them. And it's bringing those different datasets together so that you can make a more intelligent real time decision, if not have an artificially created the action deliver to you based off of those dataset.

24:22 So, we think this continues to be an area to invest in. We have seen ourselves with our client base starting to move beyond LPR and work with them on some of their cameras on campus in particular, where those cameras have nothing to do with LPR.

They are motion cameras, cameras in front of a bookstore and their software applications are used where the camera will react to environmental factor and trigger response. So that could be if they hear a loud thud at three AM in the morning within one hundred feet of the front door of book store that may trigger a warning signal to on campus police to do a drive by review, because that sounds shouldn't be happening.

25:13 More and more we're working with our clients to integrate again their datasets, it sounds like a sexy technical term, but simply put, we are trying to garner as much information on a real time basis react to that before the negative event happens or as quickly as the negative event happens, you're addressing it. So -- and then the third type of business we're looking to acquire is much like the Spyrus Solutions acquisition.

I guess nicely, I would call, unfinished business model, not a broken company. And we're able to go in because we have a little bit of capital, but more importantly, we have a sales and marketing team and we have a software engineering, network engineering capabilities.

We're able to add value to that company, help finish off the technology, deliver it to the prospective client base and hopefully make out normal returns as a result of bringing our capabilities to the table. 26:10 Once you can't buy five businesses like that at once or you will – I’m using that as an example, you'll swap our current talent.

But these are the areas that we're looking at. We think they're good fit for us and acquiring during periods of challenge is done properly, it’s a good thing to do.

The fourth response that we have is not related to acquisition, but it's related to what we bring to the table from our own software engineering capability. 26:41 And so we recently announced Mobi LPR, that's our own mobile license plate recognition technology app that works on Android OS based device, it is currently available on the Google Play Store.

What's unique about that is, now you're using your phone as the camera to be able to capture a plate image and respond to it using that same hot list or data database that you would use for the Genentech Autoimmune mobile fix technology. We think this is a great additional offering for our current client base.

It's a reason that new clients will look at switching from alternate technologies to the Genentech Autoimmune technology and ourselves, and it's a reason that people will start investing in LPR where they haven’t otherwise. 27:33 So this was a smart development, it was initiated by listening to our clients, particularly in the law enforcement arena.

But again, Mobi LPR isn’t just for public safety or law enforcement, it's also for parking. And we often think of parking just as a garage with automated boot that I enter.

Parking is a lot more, it’s generally on campus. And this type of technology is good for a manager or a party that's responsible for overseeing parking garages or parking, not necessarily in the garage, but it's on a space that's on a flattop.

28:16 You can see the case -- you can see the use cases with Saturday afternoon SEC football game and the importance where you have a one hundred thousand additional vehicles on campus and not everyone of them are going through a parking garage where you have your investment already made and cameras in place. So this extends or as we like to call it out, it's a forced multiplier whether it's again parking or whether it's the law enforcement.

28:47 A technology we're coming out with hopefully in Q4 but it couldn't run in the early Q1 is a technology called MobiKEY X. It will probably be one of the largest advancements, it's not the largest one in our MobiKEY technology over the last decade.

We are – so the line here is, everything we currently have with MobiKEY. But what it does is we're partnering up with a player where we're going to deliver desktop as a service on demand, it will be in the cloud and why this is important to us is, as the department of defense moves more and more to adopting Microsoft 365 and what that is, how is the applications a user would want to use, we now could deliver the virtualized desktop at the same time MobiKEY for the secured protocol and user authentication.

So we will be delivering a turnkey solution directly to the government, not having to leverage VM Ware or Microsoft Hyper V or Citrix, but with our partner we'll be delivering desktop as a service or certain DoD clients and then eventually roll that out the building wise. 30:05 This is an important movement for us as more and more things go to the cloud audio statement, our desktops being delivered on demand is really important from a government perspective.

So we're going to talk more about this, this is me teasing the marketplace a little bit early, but it goes to the creativity and the ingenuity of the talent we have that build our technology and think about the applications our users will require one, three, five years from now. 30:35 We also announced a couple weeks ago a shift in our Chief Technology Officer office or an the office of the CTO.

Yamian Quintero who has been a good partner, a good business leader for us has moved on and Alex Shpurov who used to be with us a number of years ago in a development role and then went on to great heights with his career in the banking and finance verticals has stepped in, stepped in a few weeks ago as our new CTO. And he brings is a fresh set of ideas.

And those fresh ideas were excited to adopt some or all of them. I won’t read what's on – fully read what’s on the page here.

But we are exploring where -- and I often get asked this, how we can play in the broader blockchain arena. We think about PKI our user authentication in particular when it comes to blockchain.

We think about securing information in the cloud for banking clients. We also think about AI as it relates to our manufacturing or IoT offering called action plan.

31:49 So eighteen tuned is the message here, but we respond to a change in marketplace by responding yourself. It's not a full company pivot, but what it is, is us evolving our technology to have come out with new technologies to meet the client needs.

So this is Alex, we think we have an organization that will support well and there's a lot that's going to come out of this over the coming quarters. So the five ways to respond to control the costs, you can use your current cost structure to generate better or more profitable revenue streams, invest in companies that meet your need that you can get up normal returns on based off of the volatility in the marketplace, invest in talent like Alex Shpurov, come up with new ideas.

That's the right way for us at least. We're going to be active in the market and we think we're going to be a winner here over the coming quarters.

32:48 So here it is again. So you say, what's the forecast for the four quarter.

Like historically, we’ve not put out forward looking numbers specifically. I have heard to that with you today very clearly.

Our goal is to get Q4 right sized again as a result of both COVID that hit us in late Q3. The work through them and then have a positive indicated or we understand timing and were able than to have appropriate revenue, GP and EBITDA for that.

I would expect that the change when it collects in our favor and reduces from a large number of weeks to delivery to back to two to three, we're going to see an uptick in a particular quarter for that. 33:39 Might that be the first quarter, I would be aggressive I know there is media reports, they say the docks in LA are starting to free up and things will get better.

I'm not a believer in that. I think with further supply chain disruptions to come as the vaccine roll out for the logistics and transportation shipping industry, both bottlenecks come in our way anytime soon.

We also know that usage in Asia have to get on stock let's call it up full first for the tools that will ultimately build the plants that deliver more ships get manufactured. I live here in the greater Phoenix area, as you're probably aware, Intel has did a massive investment in Denver and Arizona in a new plant to create new capacity or new supply but you need the component to be able to build the plant and build out the supply.

And that doesn't turn on, that's not going to happen in one or two quarters, it takes two to five years. 34:45 So I'm trying to be negative, but if you consider where we are, the greater investment in the green technology and the pivot in the way we move goods in the new economy that require a lot of microprocessors, but just keep in mind that there's smarter people than me that will forecast on the global supply of microprocessor will free up.

It's hard to do, that's not coming in the next couple quarters. And when I say that is, I'm not building a business off a host and just praying that something doesn't bite us in the bump.

35:26 Our approach here is expect best then we're all going to be massive winners. So we think at this juncture we take improvements steps to control cost and have a planned space that will deliver returns our reflective of Q1 and Q2 in the fourth quarter of this year and Q1 and so on next year.

35:48 So at this juncture expect to hear from us late December, early January, where we'll give you an idea of how the fourth quarter relative to revenue and gross margins. And we won't be able to communicate with you the EBITDA for obvious reasons [indiscernible] final quarter of our year, and there's a lot that will happen, etcetera.

But we do want to give guidance, and we want you to understand where we are with that future model. 36:17 So I think I would be happy to take questions?

Operator, I'll turn it back over to you.

37:11 Excellent. I’m going to take that I give the right amount of information to say, look, if there -- I know from time to time people prefer to email, glad to have that discussion.

I just wanted of thank you for those that continue to support us. I appreciate it.

If you joined midway through this call, there is a replay. Let me just give you those numbers.

I think will be available today after four pm Eastern, 1877-481-4010 or International 919-882-2331 passcode 43782 and that replay will be available until the end of this month November thirty nine AM. A copy of the slide presentation will roll up on our website.

And again, if you want to chat flat out do so to our American sisters and brothers, a very happy Thanksgiving during this holiday season and enjoy with family and friends. God bless.

Have a good day.