DLCG Dominion Lending Centres Inc

Dominion Lending Centres Inc. (TSXV:DLCG) (“DLCG” or the “Corporation”) is pleased to report its financial results for the three and nine months ended September 30, 2021 (“Q3-2021”). For complete information, readers should refer to the interim financial statements and management discussion and analysis (“MD&A”) 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 and Cape Communications International Inc. (“Impact”) (collectively, the “Non-Core Assets”), the expenses, assets and liabilities associated with managing the Non-Core Assets, the credit facility with Sagard Credit Partners, and public company costs.

Q3-2021 Financial Highlights

• The DLC Group achieved record quarterly funded mortgage volumes during Q3-2021 in the amount of $22.6 billion, representing a 61% increase as compared to Q3-2020; further, YTD 2021 funded mortgage volumes for the nine months ended September 30, 2021 were $57.9 billion, representing a 71% increase compared to the prior year;
• Record DLC Group revenue of $22.3 million generated over Q3-2021, representing a 59% increase as compared to Q3-2020;
• Record DLC Group Adjusted EBITDA of $13.8 million in Q3-2021, representing a 64% increase as compared to Q3-2020; and
• Subsequent to the end of the quarter, the Corporation further improved leverage by making a repayment on its Sagard credit facility of USD $2.6 million (CAD $3.2 million) from free cash flows, resulting in the facility having an outstanding principal balance of USD $22.1 million as at the date hereof.

Gary Mauris, Executive Chairman and CEO, commented, “We are very proud of our franchisees and mortgage professionals. Their tremendous hard work has directly contributed towards another record quarter for the DLC Group. Similar to Q2,2021, the Q3,2021 results for funded volumes, revenues and Adjusted EBITDA are the highest quarterly financial and operating results in the DLC Group’s 15-year history. We are so incredibly proud of our team for maintaining the strong momentum we’ve achieved thus far in 2021 to produce record results again for our shareholders.”

Selected Consolidated Financial Highlights:Below are the highlights of our financial results for the three and nine months ended September 30, 2021. The comparative results for the three and nine months ended September 30, 2020 reflect the segregation of the Non-Core Assets as discontinued operations (refer to the Discontinued Operations section of the MD&A). The current period results for the three and nine months ended September 30, 2021 include the Non-Core Assets as equity accounted investments within the Non-Core Business Asset Management segment. The discontinued operations are only included in net income and net earnings (loss) per Common Share.

Three months ended Sept. 30,						Nine months ended Sept. 30,
(in thousands, except per share)	2021		2020		Change	2021			2020	Change
Revenues	$	22,346	$	14,069	59%	$	57,550	$	34,936	65%
Income from operations		12,519		6,472	93%		28,260		13,096	116%
Adjusted EBITDA (1)		12,823		8,106	58%		33,344		17,297	93%
Free cash flow attributable to common shareholders (1)		5,783		2,212	161%		13,609		2,528	438%
Net income		1,012		5,045	(80%)		1,520		2,916	(48%)
Net income from continuing operations		1,012		3,505	(71%)		1,520		5,181	(71%)
Net income (loss) from discontinued operations		-		1,540	NMF (2)		-		(2,265)	NMF (2)
Net income (loss) attributable to:
Common shareholders		496		2,082	(76%)		213		(814)	NMF (2)
Non-controlling interests		516		2,963	(83%)		1,307		3,730	(65%)
Adjusted net income (1)		3,730		3,572	4%		8,201		5,510	49%
Diluted earnings (loss) per Common Share		0.01		0.05	(80%)		0.00		(0.02)	NMF (2)
Diluted adjusted earnings per Common Share (1)	$	0.07	$	0.03	133%	$	0.14	$	0.02	NMF (2)

(1)	Please see the Non-IFRS Financial Performance Measures section of this document for additional information.
(2)	The percentage change is Not a Meaningful Figure (“NMF”).

	Three months ended Sept. 30,						Nine months ended Sept. 30,
(in thousands)		2021		2020	Change			2021		2020	Change
Adjusted EBITDA (1)
Core Business Operations	$	13,836	$	8,458	64%		$	35,045	$	18,723	87%
Non-Core Business Asset Management		(1,013)		(352)	(188%)			(1,701)		(1,426)	(19%)
Total Adjusted EBITDA (1)	$	12,823	$	8,106	58%		$	33,344	$	17,297	93%

(1)	Please see the Non-IFRS Financial Performance Measures section of this document for additional information.

Q3-2021 HighlightsNet income for the three and nine months ended September 30, 2021, decreased compared to the same periods in the previous year primarily due to finance expense on the Preferred Share liability and an increased net loss in the Non-Core Business Asset Management segment, partly offset by higher DLC Group revenues from an increase in funded mortgage volumes. The Corporation did not have discontinued operations during the three months ended September 30, 2021, compared to income from discontinued operations during the three months ended September 30, 2020.

Adjusted net income and adjusted EBITDA for the three and nine months ended September 30, 2021, increased compared to the same periods in the previous year primarily from increased revenues from higher funded mortgage volumes, partly offset by higher operating expenses from higher personnel costs and advertising fund expenses.

The increase in adjusted net income and adjusted EBITDA contributed to the increase in free cash flow attributable to common shareholders during the three and nine months ended September 30, 2021, when compared to the three and nine months ended September 30, 2020.

Selected Segmented Financial Highlights:Our reportable segment results reconciled to our consolidated results are presented in the table below. The segmented information for the comparative three and nine months ended September 30, 2020 exclude discontinued operations results from the Non-Core Assets. The current period results for the three and nine months ended September 30, 2021 include the Non-Core Assets as an equity accounted investment within the Non-Core Business Asset Management segment.

Three months ended Sept. 30,						Nine months ended Sept. 30,
(in thousands)		2021		2020	Change		2021		2020	Change
Revenues
Core Business Operations	$	22,346	$	14,069	59%	$	57,550	$	34,936	65%
Consolidated revenues		22,346		14,069	59%		57,550		34,936	65%
Operating expenses (1)
Core Business Operations		9,754		6,862	42%		27,078		20,021	35%
Non-Core Business Asset Management		73		735	(90%)		2,212		1,819	22%
Consolidated operating expenses		9,827		7,597	29%		29,290		21,840	34%
Income (loss) from operations
Core Business Operations		12,592		7,207	75%		30,472		14,915	104%
Non-Core Business Asset Management		(73)		(735)	90%		(2,212)		(1,819)	(22%)
Consolidated income from operations		12,519		6,472	93%		28,260		13,096	116%
Adjusted EBITDA (2)
Core Business Operations		13,836		8,458	64%		35,045		18,723	87%
Non-Core Business Asset Management		(1,013)		(352)	(188%)		(1,701)		(1,426)	(19%)
Consolidated Adjusted EBITDA (2)		12,823		8,106	58%		33,344		17,297	93%

(1)	Operating expenses are comprised of direct costs, general and administrative expenses, share-based payments, and depreciation and amortization expense.
(2)	Please see the Non-IFRS Financial Performance.

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 16, 2021, for the three and nine months ended September 30, 2021, 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 before income tax, for continuing operations which is the most directly comparable measure calculated in accordance with IFRS:

Three months ended Sept. 30,					Nine months ended Sept. 30,
(in thousands)	2021		2020		2021		2020
Income before income tax	$	4,200	$	5,388	$	8,517	$	8,824
Add back:
Depreciation and amortization		1,041		1,079		3,151		3,250
Finance expense		1,212		1,381		3,809		4,401
Finance expense on the Preferred Share liability		6,576		-		16,868		-
		13,029		7,848		32,345		16,475
Adjustments to remove:
Share-based payments (recovery) expense		(542)		137		581		399
Foreign exchange loss (gain)		174		(168)		(37)		187
Loss on contract settlement		90		53		531		256
Other (income) expense		(6)		-		(244)		(292)
Acquisition, integration and restructuring costs		78		236		168		272
Adjusted EBITDA (1)	$	12,823	$	8,106	$	33,344	$	17,297

(1)	The amortization of franchise rights and relationships within the Core Business Operations of $0.7 million and $2.0 million for the three and nine months ended September 30, 2021, respectively (September 30, 2020 – $0.5 million and $1.5 million) are classified as a charge against revenue and have 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)		2021		2020				2021					2020
Cash flow from operating activities		$	10,940	$		11,802		$			29,593		$	24,269
Discontinued Operations – cash flows from operating activities			-		(5,530)					-					(8,177)
Continuing Operations – changes in non-cash working capital and other non-cash items			(52)			(1,235)					(2,753)			(6,004)
Cash provided from continuing operations excluding changes in non-cash working capital and other non-cash items			10,888			5,037					26,840			10,088
Adjustments:
Distributions from equity accounted investees (1)			308			240					1,029			240
Maintenance CAPEX (1) (2)			(262)			(449)					(1,342)			(1,550)
NCI portion of cash provided from continuing operations			(521)			(2,816)					(1,302)			(6,263)
Lease payments (1)			(133)			(97)					(409)			(299)
Acquisition, integration and restructuring costs (1)			78			236					168			272
Loss on contract settlement (1)			90			33					531			154
Other items (1)			(6)			28					(244)			(114)
			10,442			2,212					25,271			2,528
Free cash flow attributable to Preferred Shareholders			(4,659)		-						(11,662)			-
Free cash flow attributable to common shareholders		$	5,783	$	2,212			$			13,609		$	2,528

(1)	Amounts presented have excluded amounts attributed to NCI holders.
(2)	Includes amounts paid to maintain the current asset base and does not include amounts considered as growth CAPEX.

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

	Three months ended Sept. 30,				Nine months ended Sept. 30,
(in thousands)	2021		2020		2021		2020
Net income	$	1,012	$	5,045	$	1,520	$	2,916
Add back:
Discontinued operations		-		(1,540)		-		2,265
Foreign exchange loss (gain)		174		(168)		(37)		187
Finance expense on the Preferred Share liability		6,576		-		16,868		-
Loss on contract settlement		90		53		531		256
Other income		(6)		-		(244)		(292)
Acquisition, integration and restructuring costs		78		236		168		272
Income tax effects of adjusting items		(67)		(54)		(71)		(94)
		7,857		3,572		18,735		5,510
Core Business Operations’ adjusted net income attributable to Preferred Shareholders		(4,127)		-		(10,534)		-
Adjusted net income	$	3,730	$	3,572	$	8,201	$	5,510
Adjusted net income attributable to common shareholders		3,214		1,247		6,894		810
Adjusted net income attributable to non-controlling interest		516		2,325		1,307		4,700
Diluted adjusted earnings per Common Share	$	0.07	$	0.03	$	0.14	$	0.02

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 ~7,500 agents and 515 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	Amar Leekha
Co-President	Co-Chief Financial Officer	Sr. Vice-President, Capital Markets
403-560-0821	403-455-9670	403-455-6671
jbell@dlcg.ca	rburpee@dlcg.ca	aleekha@dlcg.ca

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