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 (“Q3-2024”) and nine months ended September 30, 2024. For complete information, readers should refer to the interim financial statements and management discussion and analysis which are dated November 5, 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, “The DLC Group maintained its strong momentum from the first half of the year, achieving an 11% increase in funded volumes and a 13% increase in revenues for Q3-2024 compared to Q3-2023. We are pleased that the adoption of our technology connectivity platform ‘Velocity’ continues to grow, increasing to 73% of DLCG-submitted volumes in Q3-2024.  As we look ahead, we are focused on our core objectives of recruitment and retention of franchises and brokers, and onboarding of brokers onto Velocity. The DLC Group, its franchisees, and its mortgage professionals have worked hard to achieve the continued success, and we feel well positioned to capitalize on market conditions as interest rates decline.” 

Q3-2024 Summary:

• Q3-2024 funded volumes of $19.7 billion, representing an 11% increase as compared to Q3-2023;
• Q3-2024 revenue of $22.1 million, representing a 13% increase compared to Q3-2023;
• Q3-2024 adjusted EBITDA of $12.2 million as compared to $10.1 million in Q3-2023;
• The Corporation’s Q3-2024 net income of $5.3 million is consistent with Q3-2023, primarily from higher income from operations from increased funded volumes, and increased revenues offset by higher 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 Q3-2024; and
• On October 2, 2024, the Corporation entered into an acquisition agreement with KayMaur Holdings Ltd. and certain minority holders to acquire (“Proposed Acquisition”) all of the issued and outstanding Preferred Shares in exchange for $137 million payable as follows: 30,500,000 class “A” common shares (having a 20 day volume weighted average price of $4.00 per share on the date of announcement) and an aggregate cash payment of $15.0 million. The Proposed Acquisition is subject to a number of conditions, including approval by the Exchange.  If such conditions are met, the Corporation anticipates closing to occur at or near the end of 2024.       

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

	Three months ended Sept. 30,					Nine months ended Sept. 30,
(in thousands, except per share and KPIs)		2024		2023	Change		2024		2023	Change
Revenues	$	22,073	$	19,578	13%	$	54,497	$	46,759	17%
Income from operations		10,215		8,879	15%		21,063		14,397	46%
Adjusted EBITDA (1)		12,218		10,116	21%		25,746		17,913	44%
Adjusted EBITDA margin		55%		52%	3%		47%		38%	9%
Free cash flow attributable to common shareholders (1)		5,609		4,607	22%		10,529		5,424	94%
Net income (2)		5,271		5,271	-		11,987		2,067	480%
Adjusted net income (1)		3,754		3,115	21%		7,792		4,973	57%
Diluted earnings per Common Share (2)		0.11		0.11	-		0.25		0.04	525%
Adjusted diluted earnings  per Common Share (1)		0.08		0.06	33%		0.16		0.10	60%
Dividends declared per share	$	0.03	$	0.03	-	$	0.09	$	0.09	-
Funded mortgage volumes (3)		19.7		17.7	11%		47.8		42.3	13%
Number of franchises (4)		521		526	(1%)		521		526	(1%)
Number of brokers (4)		8,784		8,081	9%		8,784		8,081	9%
% of DLCG funded mortgage volumes submitted through Velocity		73%		64%	9%		72%		63%	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 nine months ended September 30, 2024 includes $2.0 million and $4.5 million of non-cash finance expense on the Preferred Share liability (September 30, 2023 – $0.9 million and $8.0 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 for additional information.
(3)	Funded mortgage volumes are presented in billions.
(4)	The number of franchises and brokers are as at the respective period end date (not in thousands).

During the three and nine months ended September 30, 2024, the Corporation saw an increase in revenues over the three and nine months ended September 30, 2023 from higher Newton revenues primarily due to an increase in Velocity adoption and lender contract renewals. In addition, revenue increased from an increase in mortgage brokers under a DLC Corporate franchise contributing to higher revenues from the brokering of mortgages. Further, our funded mortgage volumes increased during the three and nine 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 nine months ended September 30, 2024 when compared to the three and nine months ended September 30, 2023.

Income from operations increased from higher revenues but was partly offset by an increase in operating expenses during the three and nine months ended September 30, 2024 when compared to the three and nine months ended September 30, 2023. The increase in operating expenses is primarily from an increase in direct costs from higher franchise recruiting and support costs.

Net income increased during the nine months ended September 30, 2024, and was consistent for the three months ended September 30, 2024 compared to the prior year periods. The increase during the nine-month period is primarily from higher revenue and lower other expenses. Other expenses decreased during the nine months ended September 30, 2024, primarily from period-over-period variances in finance expense on the Preferred Share liability (refer to Preferred Shares section the accompanying MD&A for additional information), finance expense, gain on disposal of an equity-accounted investment, and other income. During the three months ended September 30, 2024, higher revenue was partly offset by higher operating expenses and higher other expenses. Other expenses increased during the three months ended September 30, 2024, primarily from period-over-period variances in finance expense on the Preferred Share liability (refer to Preferred Shares section of the accompanying MD&A for additional information).

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 which was used to fully repay the Junior Credit Facility. The $0.7 million gain on disposal of an equity-accounted investment for the nine months ended September 30, 2024 relates to cumulative amounts arising on foreign exchange translation of Impact that were previously recognized in other comprehensive income (loss) and were reclassified to income on the sale of Impact. Other income for the nine months ended September 30, 2024 includes $1.0 million related to reversal of the liquidation rights liability on the sale of Impact (refer to Related Party section of the accompanying MD&A for additional information).

Free cash flow increased during the three months ended September 30, 2024, primarily from higher adjusted cash flows from operations (in turn from higher income from operations), and partly offset by higher maintenance CAPEX. Free cash flow increased during the nine ended September 30, 2024, primarily from higher adjusted cash flows from operations (in turn from higher income from operations), and 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 November 5, 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 Sept. 30,				Nine months ended Sept. 30,
(in thousands)				2024		2023		2024		2023
Income before income tax			$	7,926	$	7,445	$	17,013	$	5,033
Add back:
Depreciation and amortization				1,117		939		2,994		2,848
Finance expense				605		832		2,072		2,329
Finance expense on the Preferred Share liability				2,025		880		4,539		7,991
				11,673		10,096		26,618		18,201
Adjustments:
Share-based payments expense (recovery)				453		(12)		531		(333)
Promissory note income				(21)		(40)		(78)		(116)
Foreign exchange loss				3		6		26		26
Loss on contract settlement				16		(10)		36		58
Gain on disposal of equity-accounted investment				-		-		(681)		-
Non-cash impairment of equity-accounted investments				-		-		198		-
Other expense (income) (1)				94		76		(904)		77
Adjusted EBITDA (2)			$	12,218	$	10,116	$	25,746	$	17,913

(1)	Other expense (income) for the three and nine months ended September 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) and costs associated with the Proposed Acquisition. Other expense (income) for the three and nine months ended September 30, 2023 relates to a loss on the disposal of an intangible asset.
(2)	Amortization of franchise rights and relationships of $1.3 million and $3.9 million for the three and nine months ended September 30, 2024, respectively (September 30, 2023 – $1.1 million and $3.7 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 Sept. 30,				Nine months ended Sept. 30,
(in thousands)				2024		2023		2024		2023
Cash flow from operating activities			$	11,289	$	9,243	$	26,929	$	13,653
Changes in non-cash working capital and other non-cash items				(620)		(382)		(2,929)		2,952
Cash provided from operations excluding changes in non-cash working capital and other non-cash items				10,669		8,861		24,000		16,605
Adjustments:
Distributions from equity-accounted investees				-		125		285		275
Maintenance CAPEX				(886)		(630)		(4,349)		(6,039)
Lease payments				(117)		(160)		(343)		(476)
Loss on contract settlement				16		(10)		36		58
Share-based payments				68		-		68		-
NCI portion of cash provided from operations excluding changes in non-cash working capital				(242)		-		(311)		-
Other non-cash items (1)				76		-		(956)		1
				9,584		8,186		18,430		10,424
Free cash flow attributable to Preferred Shareholders (2)				(3,975)		(3,579)		(7,901)		(5,000)
Free cash flow attributable to common shareholders			$	5,609	$	4,607	$	10,529	$	5,424

(1)	Other non-cash items for the three and nine months ended September 30, 2024 represents foreign exchange losses and promissory note income. The three and nine months ended September 30, 2023 includes losses 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 Sept. 30,				Nine months ended Sept. 30,
(in thousands)				2024		2023		2024		2023
Net income			$	5,271	$	5,271	$	11,987	$	2,067
Adjustments:
Gain on sale of an equity-accounted investment				-		-		(681)		-
Non-cash impairment of equity-accounted investments				-		-		198		-
Foreign exchange loss				3		6		26		26
Finance expense on the Preferred Share liability (1)				2,025		880		4,539		7,991
Loss on contract settlement				16		(10)		36		58
Promissory note interest income				(21)		(40)		(78)		(116)
Other expense (income) (2)				94		76		(904)		77
Income tax effects of adjusting items				(25)		(1)		(29)		(4)
				7,363		6,182		15,094		10,099
Income attributable to Preferred Shareholders (3)				(3,609)		(3,067)		(7,302)		(5,126)
Adjusted net income				3,754		3,115		7,792		4,973
Adjusted net income attributable to common shareholders				3,673		3,113		7,655		4,957
Adjusted net income attributable to non-controlling interest				81		2		137		16
Diluted adjusted earnings per Common Share			$	0.08	$	0.06	$	0.16	$	0.10

 

(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 nine months ended September 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) and costs associated with the Proposed Acquisition. Other expense (income) for the three and nine months ended September 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 Cocciollo President 647-403-7320eddy@dlc.ca		James Bell EVP, Corporate and Chief Legal Officer 403-560-0821jbell@dlcg.ca

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