Good day, ladies and gentlemen, and welcome to Route1 Business Update conference call and webcast. At this time, all participants are in a listen-only mode. Shortly, we will begin with the formal presentation. As a reminder, ladies and gentlemen, this call is being recorded. Tuesday, February 28th, 2023. I would now like to turn the call over to Tony Busseri, Route1's President and Chief Executive Officer.
Good afternoon, everyone, and thank you for attending the call today. Before I get into the legal notices I need to go through, I apologize about having to cancel, I think it was Thursday's call and make it today. Like a lot of other people, I got hit with a pretty good bug on Wednesday and just couldn't get myself up for it. I was in bed for most of the weekend, grinding it out right now and doing better and hopefully today will be a productive call. Let's go through the legal preamble, and then we'll get into today's presentation. As described on the accompanying slides, I'd like to inform listeners that this presentation 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 as filed by the company from time to time. 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 presentation are from company sources.
I also need to point out that on today's call we use names that are either registered trademarks or trademarks of Route1 Inc. in the United States and/or Canada. Let me flip ahead. We've been silent for a little bit, obviously, with our Q3 results, and then Q4 is coming up, call it about six weeks from now. It shouldn't be, I guess, in some ways a surprise. The 2022 year for us was one of much change and a sales-focused pivot and streamlining the company to better meet the organization we wanna be as we move into 2023 and beyond. Today, my hope is to share with you again a little bit about where we are as a company, what we're...
how we did over the last 100 days against predetermined metrics I'd shared with the marketplace, and what we see coming down for the rest of 2024. It's not a ton of information. It's not heavy on financial metrics, but it is strategy and direction and sets the table for when we produce full year audited financials, and then shortly after that, the first quarter of this year. Let's jump into it by, again, reminding ourselves of who we are today. I hate being repetitive, but there's been change. Again, I think it's important to understand where we feel the business opportunity is. We are using data in a usable format that's captured or that's produced by video capture-based technologies.
In doing so, we're working with clients that we have strong and longer-term relationships with to help them with their outcome, and in certain cases, help them understand with the data that they're collecting, what type of outcomes they can expect. The technology focus has moved from principally being MobiKEY to now our focus is centered around ALPR or license plate recognition technology and growing around video surveillance and access control. All technologies or IP that our partner, Genetec, brings to the table that we can add value with in working with the end user. It's worth noting that we are a Genetec Unified Elite partner, which is the highest standing.
No longer do they look at us just as an ALPR partner, but we're a full partner with Genetec, a technology partner and an outcomes-based partner for the end users deploying one or more of Genetec's technologies. When we think about what's unique about us versus other turnkey engineering services company is the fact that we've been a software manufacturer. We still do software development and design work. We also have expertise in system and network engineering. When we say to our clients, "Not only do we scope out the use of a technology, install it and train you, we truly understand how to use that technology to create the outcome, whether it's in public safety or for commercial reasons." We think that's a major differentiator.
There's no client that we're aware of that buys a technology, wants it installed, and then doesn't wanna see you again. Configurations, training, turnover within the organization, leveraging the data towards different outcomes, towards different abilities to be on a real-time basis, create actionable intelligence. It's a key part to who we are and why we think we're quite unique as a technology partner of Genetec's. How are we gonna know if the business model, if we go to the punchline here, as I like to say. The change or the pivot or the adjustment was successful. As or more importantly, is it scalable? No one wants to invest in or run their career in something that's a CAD 20 million-CAD 25 million company that grinds out 2%-5% profitability improvements each year.
Our 2022 year was one of, unfortunately, losing some MobiKEY accounts, seeing the marketplace evolve in that area, understanding what today's supply chain now looks like for rugged devices, and building a services model that could, with time, create new recurring revenue streams and build out a book of business that was scalable. Our definition that we'll share with you here of two metrics to follow with us through the 2023 year is how quickly do we get our quarterly non-MobiKEY activities generating more than CAD 1.15 million a quarter in gross profit? That's an important metric for us because when we sustainably do that, it tells us that we're beyond, you know, our cost structure being covered, and we're starting to move between CAD 1 million, CAD 1.5 million, CAD 1.75 million annually of EBITDA in Canadian dollars.
That's an important metric, and when we share with you our results going forward, we'll unpackage them in a way that you can track to that. The second one is not a new metric necessarily for the last couple of quarters, but it's getting ourselves to CAD 1 million a year in annualized support contracts coming out of our video capture or LPR-based clients. We're getting very close to that, and we're excited when we get above that, what that means to us. We think that's a key part of generating CAD 1.15 million quarterly in GP from MobiKEY sources. These metrics will obviously evolve and change based off of where we are in our lifecycle of development. As we move into the second half of this year, I'm sure we'll share additional ones with you.
In saying all that, meeting these metrics is not success as in we have a CAD 1 or a CAD 2 stock again. What it does is validate the business model and say to us, we believe that this model is scalable, and we can go from CAD 25 million a year back to looking to grow organically and through acquisition to CAD 40 million, CAD 50 million, CAD 100 million a year. Really important for us, the first half of this year in some ways is the validation statement. Our numbers are cleaner from the perspective of good, bad, or otherwise. There's less MobiKEY with them, so you can really see what the video capture turnkey engineering services business can generate for us. Let's talk about the last 120 days.
We hung some metrics out there after we delivered third quarter results, talking about the next 120 days. Specifically, working capital management. When a business no longer has those lumpy, productive, annually recurring contracts that get renewed MobiKEY, there is generally one in March and one in August, each of them being around $1.5 million-$2 million U.S. a year. Those are big nuggets that come out of your cash flow. Important for us to have success in that area, to pivot the business away from being reliant upon singularly MobiKEY renewals. Where are we right now? Well, growing the ALPR business and the recurring support contracts is somewhat offsetting our losses.
We believe as we continue that success, providing a high-end service to our clients, CAD 1 million will be a number we look back on in the not-too-distant future. The second part I would say is that Q4 around cash flow management was lighter than Q3 and not the type of robust quarter that we had hoped, partly because the PocketVault devices we acquired from Spyrus didn't get into manufacturing until recently, and that had impact on sales orders that went unfulfilled in the fourth quarter, but will be fulfilled in this quarter.
It's a movement between periods, but it means Q4 is a little thinner than we want it to be, and we did have a large rugged device transaction with a community in the South of southern U.S. that got bumped into the sales order being delivered to us in January from December. It's really hard to look at a business or a revenue model pivot in the context of one quarter. Our third quarter was very strong or stronger than we expected it to be. We shared that with you. We said, "Hold on now, just careful here because Q4 is not gonna be quite as strong." That's accurate. Q1, on the other hand, has the benefit of some of those things sliding into it.
You know, you'll need to look at us over four, five, six quarters to understand how the business model adjustment's working out for us. We've made it through Q4, we're almost through Q1, and we're excited about the second quarter as we move towards it. Note in debt repayment, I've made this comment when people say, "Well, what are you doing with your cash flow that you are making?" Yes, we're cash flow positive. We're addressing working capital imbalances. We're addressing paying down notes. In other obligations. Net net is by the time we get into the second quarter of this year, and definitely into the third, we should see our overall debt levels come down quite a bit.
We're excited about that because when debt levels come down, that frees up cash flow in our lines to acquire, or to support the stock or however we think is best to create shareholder value. The second update here should be the fact, again, what I highlighted, that Q1 is gonna be stronger than Q4, and therefore, we'll see the debt levels come down from the fourth quarter. I should talk about the cost-cutting measures that we took in Q3 and Q4 last year. The large additional measure was wrapped up in November, December. You know, it's always a important thing to consider. You cannot cut your costs to growth.
You can you definitely cut your costs to balance or right-size the fixed cost structure or semi-fixed cost structure to the new revenue model, and we've done that. We've also hired a salesperson in January named Ann Cooper in Colorado and is on the ground supporting that state as well as other ones on the LPR side. We have reduced overall workforce or the talent level here down to about 31. From time to time, there will be growth and adjustments, but we're at that level that I think we've been successful in cutting costs to a level that we can support. The other part to this, we shared this in communication the second half of the year. Our board of directors has gone from five independent directors to three. The overall compensation per director is down two.
I recognize, and I tip the cap to those professionals that understood that the business had adjusted, and there only can be a certain level of investment in independent directorship. That's happened too. Moving forward away from debt repayment and wanting to talk about pipeline of sales or the more attractive things, a few updates to go through, if I may. We were recently the low bidder responding to a state of New Mexico RFP for the use of fixed and mobile LPR technology by state public safety agencies. To be specific here, it wasn't a quote, $1 million or $10 million or a $1 award.
What it means is we are the low-priced proponent or provider for the state, and their first move if they wanna buy fixed or mobile LPR is to contact us to see if we can support them. We think there are state agencies because we're in dialogues with them now that'll be buying under this contract vehicle, and we'll have a strong positive impact for us through the course of 2023. Wanna acknowledge the work here that Genetec did with us. We came up with a very creative approach to supporting the state government and local governments so that they can invest in progressive technology that improves safety in their communities. I'm excited to talk more about this as we move through 2023 and the results associated with this contract win. I'm just grabbing a drink here.
Again, I mentioned early on, the relationship with Genetec. I don't wanna overstate it. They have many, many other strong partners that have different backgrounds. Some of them are more, you know, access control-oriented or video surveillance on the cast, Stratocast-based technologies. We fit into the mix. If I trust the words of our partner, they've been thrilled with the work we've done over the last year as we've become a stronger service provider and a partner to the end users. There's a lot of positive days going forward here. It's important to stress, we are building more than a LPR business. We are building a video capture-based technology business. We are now accredited. A number of our technologists and salespeople can sell from Genetec more than LPR.
We've done campaigns here in the 1st quarter of this year to create awareness with certain agencies, around our competencies, our capabilities. We will not ever move away from LPR because we're pretty darn good in that area with mobile LPR in particular. There are technologies that Genetec brings to the table that we are going to sell and build deeper and more robust pipelines. When talking about, lastly, relationships with clients, it's often too many cliches, and it sounds like textbook stuff. The truth with this in today's world, and I was just talking with a rugged device manufacturer who came to visit me today and their CEO, that to me, the most profound implication on a business level that's come out of the COVID is we forgot how to service people. They don't buy hardware. They don't buy technology.
Our clients, again, public safety through to commercial entities, procure and acquire technology for an outcome. There's something they're looking to accomplish with it. Too often, we'll get on the phone or send an email or a video call and think that's helping our client create the best outcome, and it isn't. We've made a decision, we'll see if I'm right with this, about getting out on our feet and meeting with the clients frequently, whether it's sales, whether it's the field service team, whether it's our head of operations, Elton Crawford. There's a lot of people meeting with our clients and talking with them. Continuing to understand where they think they need to go, sharing with them what we've experienced and how we can help them with that, but more importantly, create better outcomes.
We've had a lot of success, particularly on the West Coast. I want to highlight three market areas, Northern California, the whole State of Washington as well as Milwaukee, Wisconsin, where we've had growing relationships with public safety and parking operators. We ventured into what you call the most robust type of support plan. So we're very active in Seattle and Milwaukee and Berkeley with our clients on a daily, if not weekly basis, around meeting their needs as it pertains to using LPR technology. We think it's a great return for the client. The feedback's been good. We're almost a year through starting the new support plan push, and we're seeing more parties interested today than even six months ago around our middle program called COMPREHENSIVE.
More people are looking at the select plans because they understand that ultimately they, on their own teams, will have turnover. They'll need regular training, regular support, and what they want today will change for tomorrow based off of understanding the technology and about what they can do with it. We're excited about how we're building our pipeline. It's new opportunities, it's deeper, stronger partnerships, and bringing better services to the table and outcomes for our client. Want to talk about PocketVault a little bit. I gave a bit of a disappointing update that the manufacturing of the next batch, let's call it, of the PocketVault P-3X devices, won't be done until. It starts tomorrow, them coming off of the line or maybe it's Friday. We start delivering against sales orders.
We have a large sales order with an arm of the Ontario provincial government for PocketVault's devices with the State Department and a number of other clients. This round of manufacturing new PocketVault devices, almost 1,000 units, well, it's almost all called for. Once this is done in March, we'll start in April manufacturing the next batch. We've started to create a cadence. Our manufacturing partner is PNY in Jersey, and we...
You know, you say, "Well, what does that really mean, Tony?" There's different components you have to source, whether it's flash memory or whether it's controllers, whether it's other subcomponents, and then you need a manufacturing partner that knows how to use the design and put it all together in a professional and secure way, and that secure device for people to be, you know, putting data onto it. Look for us to continue to be successful with PocketVault P-3X sales through the course of 2023. Touching on R&D, and I still get these questions, I'm thrilled to have the discussion. You know, MobiKEY, and I'm not being redundant here, never became the big pot.
We had some nice wins during COVID, and we just weren't as well capitalized as Microsoft or certain other cloud providers that are working with the DoD on more integrated solutions. Now, in saying that, there continues to be a small niche-y role for us, and we are looking at a new cloud-based technology. I've hinted at that before. We hope to announce shortly a demo client with the U.S. Department of Defense. In doing so, I'll better explain the way that our new MobiKEY different, but same, but cloud-based technology works. This could be an interesting pivot for us. We have very low expectations. We've had some interest under our new CTO, Alex Shapurov, we've designed another solution that's unnamed right now.
Based off of market feedback, as we've said before, this could lead to a rejuvenation around our cybersecurity and our secure remote access fit in the broader industry. That's as far as I'll go today on that subject. It's not lost. We've been investing development cycles, and we're real close to be able to talk about that in more concrete terms. Do wanna touch on a couple of things. One is, you know, I get asked, "Well, do you have enough cash to go forward?" Yes, we do. All that being with all the proper caveats that go with it.
We did increase the size of our RBC facility in the month of February. You'll note that, when you read the Q4 results, that we had a note payable that on the books the last couple of years for around CAD 600,000, and that we've agreed, when we refinanced it, on a payment plan over roughly 18 months. That will get paid off and by April 2024. Aside from that, not a lot to talk around funding. Working capital up and down, and we continue to address the imbalances. That's where we're at relative to the funding side of it. Today's update was to really let you know we're still here. We are building with success the new business model. It's hard for me just to give you platitudes.
You'll wanna see the numbers. Q1 is gonna be interesting after Q4. Q2 and Q3 really should make a statement about, again, the factors that we consider important, when you think about how you define success and is this model gonna be scalable. At this time I'm gonna leave the call here. If you wanna have a private one-on-one, glad to do it. We'll do another call, or you know, another call with the Q1 results. I wanna get Q4 and Q1 out. Mid, late May, we'll have a discussion that's only a couple of months out. To those that stuck around with us as shareholders or deep in their positions, I'm appreciative. Because we're not buying back our stock, it's not because we don't believe in it. The cash is being used to pay down debt.
In light of the broader global macro economic conditions, the board and I think that's the right thing to do. You know, in the middle of last year, a number of us took our salaries or our board fees and stock compensation, stock consideration, excuse me, instead. That reflects the fact that we are willing to write checks. That's our money. Double down on that stock. That stock at that time for me was, I think, about CAD 0.12, so I'm underwater even on that a little bit. Do I believe in this company? Yes. Do I believe in this business model? Yes. The team that we have here, I'm excited by. I'm not gonna get ahead of myself.
I think some of the darkest nights on a, what you call a sales model turnaround, we've gotten through, but we're not at that point yet. That's because we just haven't gotten there. We will get there, where the Q1 and Q2 shows up and you say, "I get it. I get what Tony's been talking about. This is how it's gonna work." That's my update for today. Operator, there will be no Q&A today. Let me just say that, again, thank you for joining us for today's call. If you're joining late and you want to listen to the full replay, please do so at 1-877-481-4010, passcode 47752. That can be heard until 4:30 on March 2nd. Today's slide deck will go up on our website here fairly shortly.
Again, thank you, folks. Operator, thank you. Have a great day. Cheers.
Thank you. That will conclude today's conference call.