DLC Releases Annual 2022 Results; Achieves Annual Funded Volumes of $70.6 Billion

Vancouver, British Columbia – Dominion Lending Centres Inc. (TSX:DLCG) (“DLCG” or the “Corporation”) is pleased to report its financial results for the three months and year ended December 31, 2022 (“Q4-2022” and “annual”, respectively). For complete information, readers should refer to the annual audited consolidated financial statements, management discussion and analysis (“MD&A”) and annual information form (“AIF”) which are dated March 28, 2023 and available on SEDAR at www.sedar.com and on the Corporation’s website at www.dlcg.ca. All amounts are presented in Canadian dollars unless otherwise stated. 

Reference herein to the Dominion Lending Centres Group of Companies (the “DLC Group” or “Core Business Operations”) 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), and excludes the Non-Core Business Asset Management segment and their corresponding historical financial and operating results. The “Non-Core Business Asset Management” segment represents the Corporation’s share of income in its equity-accounted investment in Cape Communications International Inc. (“Impact”), the expenses, assets and liabilities associated with managing Impact, the non-core credit facility, and public company costs. 

Financial Highlights 

• Q4-2022 funded volumes of $13.8 billion and annual funded volumes of $70.6, representing a 33% and 10% decrease as compared to 2021, respectively; 
• Q4-2022 DLC Group revenue of $13.9 million and annual revenues of $70.7, representing a 34% and 10% decrease as compared to 2021, respectively; 
• Q4-2022 and annual DLC Group Adjusted EBITDA were $3.7 million and $34.3 million as compared to $11.8 million and $46.9 million in Q4-2021 and annual 2021, respectively; 
• The Corporation’s net income for annual 2022 increased to $12.3 million from a net loss of $3.9 million in 2021, primarily due to a lower non-cash finance expense on the Preferred Share Liability; 
• The Corporation declared a quarterly dividend of $0.03 per class A common share, resulting in a dividend payment of $1.5 million for Q4-2022 ($4.4 million for the full fiscal year); 
• During 2022, the Corporation made repurchases under the normal-course issuer bid (“NCIB”) of 230,135 Common Shares at an average price of $2.90 per share; and 
• The Corporation’s balance sheet remained strong with a leverage to EBITDA ratio of 0.85:1.00 as at December 31, 2022. 

Gary Mauris, Executive Chairman and CEO, commented, “We are pleased to announce our financial and operating results for Q4-2022 and the year ended December 31, 2022. In assessing fiscal 2022, it’s important to note that the business experienced record results in fiscal 2021, achieving over 50% growth in funded volumes compared to fiscal 2020. The Canadian real estate market faced headwinds in fiscal 2022 as the Bank of Canada raised the overnight rate seven times. We believe that the rising interest rate environment, coupled with low housing inventory levels, negatively impacted funded volumes in fiscal 2022, resulting in a 10% reduction in funded volumes year over year. To further put fiscal 2022 funded volumes into perspective, 2022 funded volumes were 37% higher than fiscal 2020 funded volumes. And while interest rates are much higher than they were in fiscal 2021, they remain consistent with historical average interest rates. As such, we expect that the Canadian housing market will revert to normal transaction levels over the next 12-18 months once consumers adjust to the higher rate environment. Further, with respect to operating margins, we note that the Corporation experienced various one-time expenses in Q4-2022 and we expect future annual adjusted EBITDA margins to fall in line with prior years. We remain optimistic for fiscal 2023 and beyond as we remain committed to recruiting mortgage professionals to expand our network and we continue to onboard more of our brokers onto our proprietary connectivity platform Velocity.” 

Selected Consolidated Financial Summary: 

Below is the summary of our financial results for the three months and year ended December 31, 2022 and December 31, 2021. The Non-Core Business Asset Management segment also includes the Corporation’s share of income in Club16 Limited Partnership (“Club16”) up to the date of its sale on August 31, 2022. 

Highlights 

The Corporation’s net loss decreased during the three months ended December 31, 2022 when compared to the previous year period, primarily due to non-cash finance expense on the Preferred Share liability of $1.9 million compared to $9.7 million expense during the three months ended December 31, 2021. In addition, finance expense decreased $2.4 million primarily from the interest penalty fees of $1.1 million and accelerated amortization of debt-issuance costs recognized in 2021 from the early extinguishment of the previous Sagard credit facility, and lower interest rates under the Junior Credit Facility when compared to the previous Sagard credit facility. The decrease in finance expense was partly offset by a decrease in revenues. The non-cash finance expense represents the change in our Preferred Share liability, which reflects current housing market headwinds and our outlook of the anticipated negative impact on housing market activity from rising interest rates throughout the 2022 fiscal year. 

For the year ended December 31, 2022 the Corporation’s net income increased when compared to the previous year, primarily due to lower non-cash finance expense on the Preferred Share liability, partially offset by lower revenues, the non-cash impairment on Impact and higher general and administrative expenses from increased legal costs and expenses, advertising expense and personnel costs. The Corporation recognized a $2.4 million non-cash finance expense on the Preferred Share liability during the year ended December 31, 2022 compared to a $26.5 million non-cash finance expense in the prior year. The non-cash finance expense represents the change in our Preferred Share liability, which reflects current housing market headwinds and our outlook of the anticipated negative impact on housing market activity from rising interest rates throughout the 2022 fiscal year. The Corporation recognized a non-cash impairment on Impact of $4.8 million to reflect the recoverable value of Impact. The increase in expenses was 

partly offset by lower interest expense from the interest penalty fees of $1.1 million and accelerated amortization of debt-issuance costs recognized in 2021 from the early extinguishment of the previous Sagard credit facility and lower interest rates under the Junior Credit Facility when compared to the previous Sagard credit facility, and a recovery on share-based compensation. 

Adjusted net income for the three months and year ended December 31, 2022 decreased from the same periods in the previous year, due to lower income from operations from decreased revenues, partly offset by lower finance expense, lower income tax expense, and lower adjusted net income allocated to the Preferred Shareholders. 

Adjusted EBITDA was lower for the three months and year ended December 31, 2022 when compared to the same periods in the previous year. The decrease in adjusted EBITDA is primarily from lower revenues from lower funded mortgage volumes and higher operating expenses. 

The decrease in free cash flow attributable to common shareholders during the three months and year ended December 31, 2022 when compared to the same periods in the prior year was due to the decrease in adjusted EBITDA, partly offset by lower cash interest paid and lower income tax expense. 

Selected Segmented Financial Summary: 

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 (loss) income, adjusted (loss) earnings per share, and free cash flow. Please see the Non-IFRS Financial Performance Measures section of the Corporation’s MD&A dated March 28, 2023, for the three months and year ended December 31, 2022, for further information on these measures. The Corporation’s MD&A is available on SEDAR at www.sedar.com. 

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

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

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

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 an outlook. Forward-looking information in this document includes, but is not limited to: our expectation that the housing transaction levels will stabilize over the next 12-18 months; and our expectation that future operating margins will be consistent with prior years. 

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 MD&A 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 (i.e. such as immigration); 
• Changes in overall supply for Canadian real estate (i.e. 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; 
• Material decreases in the aggregate Canadian mortgage lending marketplace; 
• Changes in the fees paid for mortgage brokerage services in Canada; 
• Changes in the regulatory framework for the Canadian housing and lending sectors; 
• 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. 

The DLC Group is Canada’s leading network of mortgage professionals. The DLC Group operates through Dominion Lending Centres and its three main subsidiaries, MCC Mortgage Centre Canada Inc., MA Mortgage Architects Inc. and Newton Connectivity Systems Inc., and has operations across Canada. The DLC Group’s extensive network includes ~8,000 agents and ~544 locations. Headquartered in British Columbia, the DLC Group was founded in 2006 by Gary Mauris and Chris Kayat. 

Contact information for the Corporation is as follows: