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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SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE
TSX EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY
OF THIS RELEASE.
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