DLC Releases Q2-2022 Results; Achieves Funded Volumes of $21.4 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 ended June 30, 2022 (“Q2-2022”) and six months ended June 30, 2022. For complete information, readers should refer to the interim financial statements and management discussion and analysis which are 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 investments in Club16 Limited Partnership (“Club16”) and Cape Communications International Inc. (“Impact”) (collectively, the “Non-Core Assets”), the expenses, assets and liabilities associated with managing the Non-Core Assets, the non-core credit facility, and public company costs.
Q2-2022 Financial Highlights
- Q2-2022 funded volumes of $21.4 billion, representing a 2% decrease as compared to Q2-2021;
- Q2-2022 DLC Group revenue of $21.8 million representing a 2% increase as compared to Q2-2021;
- Q2-2022 DLC Group Adjusted EBITDA of $12.6 million as compared to $12.8 million during Q2-2021, representing a 2% decrease over the prior period;
- The Corporation declared a quarterly dividend of $0.03 per class A common share, resulting in a dividend payment of $1.5 million; and
- The Corporation implemented a normal-course issuer bid (“NCIB”) that allows the Corporation to purchase up to 1.2 million Common Shares (during Q2-22, the Corporation made repurchases under the NCIB of 31,925 Common Shares at an average price of $3.33 per share).
Gary Mauris, Executive Chairman and CEO, commented, “We are pleased to announce our second quarter financial and operating results for the period ended June 30, 2022. Looking back, the Corporation experienced significant growth in funded volumes in 2021 and we’re encouraged that we’ve maintained that pace in the first half of 2022. Funded volumes during Fiscal 2021 grew by over 50% while adjusted EBITDA grew by over 70%. Putting the foregoing into perspective, we are very proud of our team achieving funded volumes of $21.4 billion, which is the third highest in our history, after Q3-2021 and Q2-2021. Furthermore, we are delighted with our ongoing recruiting and reflagging efforts which resulted in over 10% growth in our overall broker count year-over-year. Our mortgage professionals are our most important asset and growing our mortgage professional base will enable us to better navigate housing market volatility. Looking forward, an increase in mortgage interest rates have softened overall housing market activity, however, from our perspective, in a rising interest rate environment, working with a mortgage broker is even more critical to ensure Canadians are receiving the best advice as well as most competitive mortgage rates. While we may see some short-term volatility in our business, we are not anticipating a long-term material negative impact on funded volumes.”
Selected Consolidated Financial Highlights:
Below are the highlights of our financial results for the three and six months ended June 30, 2022 and June 30, 2021.
The Corporation’s net income increased during the three months ended June 30, 2022 when compared to the same period in the previous year, primarily due to lower non-cash finance expense on the Preferred Share liability of $4.6 million, a decrease in interest expense of $0.8 million from lower interest rates under the Junior Credit Facility when compared to the previous Sagard credit facility, higher revenues, and a recovery on share-based compensation. The decrease in finance expense on the Preferred share liability was due to the Corporation’s outlook and forecast for the 2022 fiscal year softening from its previous outlook and forecast assessed during the first quarter of 2022.
For the six months ended June 30, 2022 the Corporation incurred a net loss compared to net income during the same period in the previous year, primarily due to higher non-cash finance expense on the Preferred Share liability of $18.0 million and higher general administrative expenses from increased legal costs and expenses and personnel costs. The Corporation’s outlook and forecast for the 2022 fiscal year strengthened since its budgeting period in the fourth quarter of 2021, significantly increasing the Corporation’s Preferred Share liability during the six months ended June 30, 2022, which was partly offset by a slight recovery during the three months ended June 30, 2022. The increase in expenses was partly offset by higher revenues from higher funded mortgage volumes, lower interest expense from 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 and six months ended June 30, 2022 increased compared to the same periods in the previous year primarily from higher income from operations driven by increased revenues.
Adjusted EBITDA was relatively consistent for the three months ended June 30, 2022 and decreased during the six months ended June 30, 2022 when compared to the same periods in the previous year. The decrease during the six months ended June 30, 2022 was due to higher general and administrative expenses, primarily due to elevated legal costs and expenses, and increased personnel costs; partly offset by higher revenues.
Free cash flow attributable to common shareholders increased during the three months ended June 30, 2022 when compared to the same period in the prior year primarily due to the full allocation of Newton cash flows to common shareholders compared to 70% in 2021. The decrease in adjusted EBITDA contributed to the decrease in free cash flow attributable to common shareholders during the six months ended June 30, 2022 when compared to the same period in 2021.
Selected Segmented Financial Highlights:
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 10, 2022, for the three and six months ended June 30, 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 income (loss) 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 from operating activities, which is the most directly-comparable measure calculated in accordance with IFRS:
The following table reconciles adjusted net income from net income (loss), which is the most directly-comparable measure calculated in accordance with IFRS:
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: the effect of changes in mortgage interest rates not materially negatively affecting long-term funded mortgage volumes.
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 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 ~8,100 agents and ~545 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:
|James Bell |
|Robin Burpee |
Co-Chief Financial Officer
|Amar Leekha |
Sr. Vice-President, Capital Markets