DLCG Dominion Lending Centres Inc

Dominion Lending Centres Inc. (TSX:DLCG) (“DLCG” or the “Corporation”) is pleased to report its financial results for the three (“Q2-2024”) and six months ended June 30, 2024. For complete information, readers should refer to the interim financial statements and management discussion and analysis which are dated August 7, 2024 and are available on SEDAR+ at www.sedarplus.ca and on the Corporation’s website at www.dlcg.ca. All amounts are presented in Canadian dollars unless otherwise stated.

DLCG includes the Corporation and its three main subsidiaries: MCC Mortgage Centres Canada Inc. (“MCC”), MA Mortgage Architects Inc. (“MA”), and Newton Connectivity Systems Inc. (“Newton”).

Gary Mauris, Executive Chairman and CEO, commented, “We were pleased to report another consecutive growth quarter, with a 14% increase in funded volumes and a 21% increase in revenues for Q2-2024 compared to Q2-2023. We would like to thank our franchisees and mortgage professionals for their continued hard work during the first half of the year. Our "Gold Rush” campaign which makes it easier for brokers to stay connected with their clients has been a huge success, with a surge of mortgage professionals registering for the program. As we enter the second half of the year, we continue to focus on recruitment and retention of franchises and brokers, and onboarding of brokers onto our connectivity platform ‘Velocity’. With the proven success of these programs and initiatives, we feel well positioned for the future as interest rates decrease.” 

Q2-2024 Summary:

• Q2-2024 funded volumes of $16.9 billion, representing a 14% increase as compared to Q2-2023;
• Q2-2024 revenue of $18.8 million, representing a 21% increase compared to Q2-2023;
• Q2-2024 adjusted EBITDA of $8.5 million as compared to $5.2 million in Q2-2023;
• The Corporation’s Q2-2024 net income increased to $4.1 million from net loss of $3.2 million in Q2-2023, primarily from higher income from operations from increased funded volumes, and increased revenues and lower non-cash finance expense on the Preferred Share liability;
• The Corporation declared a quarterly dividend of $0.03 per class A common share (“Common Share”), resulting in a dividend payment of $1.4 million in Q2-2024; and
• On April 25, 2024, the Corporation disposed of its interest in Cape Communications International Inc. (“Impact”) for proceeds of $3.7 million. The proceeds from sale were used to fully pay down the Junior Credit Facility.

Selected Consolidated Financial Summary:Below is a summary of our financial results for the three and six months ended June 30, 2024 and June 30, 2023.

	Three months ended June 30,								Six months ended June 30,
(in thousands, except per share and KPIs)		2024			2023		Change			2024			2023		Change
Revenues	$	18,788		$	15,543		21%		$	32,424		$	27,181		19%
Income from operations		7,380			4,188		76%			10,848			5,518		97%
Adjusted EBITDA(1)		8,532			5,158		65%			13,528			7,797		74%
Adjusted EBITDA margin		45%			33%		12%			42%			29%		13%
Free cash flow attributable to common shareholders(1)		4,270			2,186		95%			4,920			817		502%
Net income (loss)(2)		4,085			(3,157)		NMF(3)			6,716			(3,204)		NMF(3
Adjusted net income(1)		2,599			1,660		57%			4,038			1,858		117%
Diluted (loss) earnings per Common Share(2)		0.08			(0.07)		NMF(3)			0.14			(0.07)		NMF(3
Adjusted diluted earnings per Common Share(1)		0.05			0.03		67%			0.08			0.04		100%
Dividends declared per share	$	0.03		$	0.03		-		$	0.06		$	0.06		-
Funded mortgage volumes(4)		16.9			14.8		14%			28.1			24.6		14%
Number of franchises(5)		526			541		(3%)			526			541		(3%)
Number of brokers(5)		8,668			7,981		9%			8,668			7,981		9%
% of funded mortgage volumes submitted through Velocity(6)		72%			63%		9%			71%			62%		9%

(1)   Please see the Non-IFRS Financial Performance Measures section of the accompanying MD&A for additional information.(2)   Net income for the three and six months ended June 30, 2024 includes $2.7 million and $2.5 million of non-cash finance expense on the Preferred Share liability (June 30, 2023 – $6.2 million and $7.1 million expense). The Preferred Share liability is revalued at the end of each reporting period to reflect our most recent outlook and forecast. Refer to the Preferred Shares section of the accompanying MD&A.(3)   The percentage change is not a meaningful figure.(4)   Funded mortgage volumes are presented in billions.(5)   The number of franchises and brokers are as at the respective period end date (not in thousands).(6)   Representing the percentage of the DLC Group’s funded mortgage volumes that were submitted through Velocity.

During the three and six months ended June 30, 2024, the Corporation saw an increase in revenues over the three and six months ended June 30, 2023 from higher Newton revenues, primarily due to an increase in Velocity adoption and lender contract renewals. Further, our funded mortgage volumes increased during the three and six month periods when compared to 2023’s equivalent periods, which contributed to increased revenues during those periods.

As the Corporation’s operating expenses are largely fixed in nature and are not necessarily proportionate to changes in revenues, changes in the Corporation’s revenues have a more pronounced impact on adjusted net income, adjusted EBITDA, and adjusted EBITDA margins. As such, these metrics have increased, with higher revenues during the three and six months ended June 30, 2024 when compared to the three and six months ended June 30, 2023.

Income from operations increased from higher revenues and consistent operating expenses during the three and six months ended June 30, 2024 when compared to the three and six months ended June 30, 2023.

Net income increased during the three and six months ended June 30, 2024, compared to the prior year periods, due primarily to higher revenues and lower other expenses. Other expenses decreased during the three and six months ended June 30, 2024, primarily from period-over-period variances in finance expense on the Preferred Share liability (refer to the Preferred Shares section of the accompanying MD&A), finance expense, gain on disposal of an equity-accounted investment, and other income.

On April 25, 2024, the Corporation disposed of its 52% interest in Cape Communications International Inc. (operating as “Impact”) for cash proceeds of $3.7 million. The proceeds from sale were used to fully repay the Junior Credit Facility. The $0.7 million gain on disposal of an equity-accounted investment relates to cumulative amounts arising from foreign exchange translations of Impact’s financial statements, that were previously recognized in other comprehensive income (loss) and were reclassified to income on the sale of Impact. Other income includes $1.0 million related to reversal of the liquidation rights liability on the sale of Impact (refer to the Related Party Transactions section of the accompanying MD&A).

Free cash flow increased during the three and six months ended June 30, 2024, from higher adjusted cash flows from operations from higher income from operations, and from lower maintenance CAPEX.

Non-IFRS Financial Performance Measures Management presents certain non-IFRS financial performance measures which we use as supplemental indicators of our operating performance. These non-IFRS measures do not have any standardized meaning, and therefore are unlikely to be comparable to the calculation of similar measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Non-IFRS measures are defined and reconciled to the most directly-comparable IFRS measure. Non-IFRS financial performance measures include adjusted EBITDA, adjusted net income, adjusted earnings per share, and free cash flow. Please see the Non-IFRS Financial Performance Measures section of the Corporation’s MD&A dated August 7, 2024 for further information on key performance indicators. The Corporation’s MD&A is available on SEDAR+ at www.sedarplus.ca.

The following table reconciles adjusted EBITDA from income before income tax, which is the most directly-comparable measure calculated in accordance with IFRS:

			Three months ended June 30,						Six months ended June 30,
(in thousands)				2024			2023			2024			2023
Income (loss) before income tax			$	5,873		$	(2,598)		$	9,087		$	(2,412)
Add back:
Depreciation and amortization				938			945			1,877			1,909
Finance expense				703			819			1,467			1,497
Finance expense on the Preferred Share liability				2,668			6,221			2,514			7,111
				10,182			5,387			14,945			8,105
Adjustments:
Share-based payments expense (recovery)				78			(225)			78			(321)
Promissory note income				(26)			(39)			(57)			(76)
Foreign exchange loss				7			7			23			20
Loss on contract settlement				10			24			20			68
Gain on disposal of equity-accounted investment				(681)			-			(681)			-
Non-cash impairment of equity-accounted investments				(38)			-			198			-
Other (income) expense(1)				(1,000)			4			(998)			1
Adjusted EBITDA(2)			$	8,532		$	5,158		$	13,528		$	7,797

(1)   Other (income) expense for the three and six months ended June 30, 2024 relates to the reversal of the liquidation rights liability on the sale of Impact (see the Related Party Transactions section of the accompanying MD&A). Other (income) expense for the three and six months ended June 30, 2023 relates to a loss on the disposal of intangible asset.(2)   Amortization of franchise rights and relationships of $1.3 million and $2.6 million for the three and six months ended June 30, 2024, respectively (June 30, 2023 – $1.6 million and $2.6 million) is classified as a charge against revenue and has not been added back for adjusted EBITDA.

The following table reconciles free cash flow from cash flow from operating activities, which is the most directly-comparable measure calculated in accordance with IFRS:

			Three months ended June 30,						Six months ended June 30,
(in thousands)				2024			2023			2024			2023
Cash flow from operating activities			$	10,553		$	5,345		$	15,640		$	4,410
Changes in non-cash working capital and other non-cash items				(1,740)			(75)			(2,309)			3,334
Cash provided from operations excluding changes in non-cash working capital and other non-cash items				8,813			5,270			13,331			7,744
Adjustments:
Distributions from equity-accounted investees				100			150			285			150
Maintenance CAPEX				(330)			(1,253)			(3,463)			(5,409)
Lease payments				(114)			(158)			(226)			(316)
Loss on contract settlement				10			24			20			68
NCI portion of cash provided from operations excluding changes in non-cash working capital				(69)			-			(69)			-
Other non-cash items (1)				(1,019)			4			(1,032)			1
				7,391			4,037			8,846			2,238
Free cash flow attributable to Preferred Shareholders (2)				(3,121)			(1,851)			(3,926)			(1,421)
Free cash flow attributable to common shareholders			$	4,270		$	2,186		$	4,920		$	817

(1)   Other non-cash items for the three and six months ended June 30, 2024 represent foreign exchange losses and promissory note income. The three and six months ended June 30, 2023 includes a loss on disposal of an intangible asset.(2)   Free cash flow attributable to the Preferred Shareholders is determined based on free cash flow of the Core Business Operations (as defined in the Preferred Shares section of the accompanying MD&A).

The following table reconciles adjusted net income from net income, which is the most directly-comparable measure calculated in accordance with IFRS:

			Three months ended June 30,						Six months ended June 30,
(in thousands)				2024			2023			2024			2023
Net (loss) income			$	4,085		$	(3,157)		$	6,716		$	(3,204)
Adjustments:
Gain on sale of an equity-accounted investment				(681)			-			(681)			-
Non-cash impairment of equity-accounted investments				(38)			-			198			-
Foreign exchange loss				7			7			23			20
Finance expense on the Preferred Share liability(1)				2,668			6,221			2,514			7,111
Loss on contract settlement				10			24			20			68
Promissory note interest income				(26)			(39)			(57)			(76)
Other expense (income)(2)				(1,000)			4			(998)			1
Income tax effects of adjusting items				(1)			(2)			(4)			(3)
				5,024			3,058			7,731			3,917
Income attributable to Preferred Shareholders(3)				(2,425)			(1,398)			(3,693)			(2,059)
Adjusted net income (loss)				2,599			1,660			4,038			1,858
Adjusted net income (loss) attributable to common shareholders				2,547			1,656			3,982			1,844
Adjusted net income attributable to non-controlling interest				52			4			56			14
Diluted adjusted earnings per Common Share			$	0.05		$	0.03		$	0.08		$	0.04

(1)   The Preferred Share liability is revalued at the end of each reporting period to reflect our most recent outlook and forecast. Refer to the Preferred Shares section of the accompanying MD&A.(2)   Other expense (income) for the three and six months ended June 30, 2024 relates to the reversal of the liquidation rights liability on the sale of Impact (see the Related Party Transactions section of the accompanying MD&A). Other expense for the three and six months ended June 30, 2023 relates to a loss on the disposal of intangible assets.(3)   Adjusted net income attributable to the Preferred Shareholders is determined based on adjusted net income of the Core Business Operations (as defined in the Preferred Shares section of the accompanying MD&A).

Forward-Looking Information Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate,” “believe,” “estimate,” “will,” “expect,” “plan,” or similar words suggesting future outcomes or outlooks. Forward-looking information in this document includes, but is not limited to, our anticipation of further interest rate reductions.

Such forward-looking information is based on many estimates and assumptions, including material estimates and assumptions, related to the following factors below that, while considered reasonable by the Corporation as at the date of this press release considering management’s experience and perception of current conditions and expected developments, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to:

• Changes in interest rates;
• The DLC Group’s ability to maintain its existing number of franchisees and add additional franchisees;
• Changes in overall demand for Canadian real estate (via factors such as immigration);
• Changes in overall supply for Canadian real estate (via factors such as new housing-start levels);
• At what period in time the Canadian real estate market stabilizes;
• Changes in Canadian mortgage lending and mortgage brokerage laws and regulations;
• Changes in the Canadian mortgage lending marketplace;
• Changes in the fees paid for mortgage brokerage services in Canada; and
• Demand for the Corporation’s products remaining consistent with historical demand.

Many of these uncertainties and contingencies may affect our actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, us. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made in this document are qualified by these cautionary statements. The foregoing list of risks is not exhaustive. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities laws, we undertake no obligation to update publicly or revise any forward-looking statements or information, whether because of new information, future events or otherwise.

About Dominion Lending Centres Inc.Dominion Lending Centres Inc. is Canada’s leading network of mortgage professionals. DLCG operates through Dominion Lending Centres Inc. and its three main subsidiaries, MCC Mortgage Centre Canada Inc., MA Mortgage Architects Inc. and Newton Connectivity Systems Inc., and has operations across Canada. DLCG extensive network includes over 8,500 agents and over 500 locations. Headquartered in British Columbia, DLC was founded in 2006 by Gary Mauris and Chris Kayat.

DLCG can be found on X (Twitter), Facebook and Instagram and LinkedIn @DLCGmortgage and on the web at www.dlcg.ca. 

Contact information for the Corporation is as follows:

Eddy CocciolloPresident647-403-7320eddy@dlc.ca		James BellEVP, Corporate and Chief Legal Officer403-560-0821jbell@dlcg.ca

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