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 months and year ended December 31, 2021 (“Q4-2021” 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 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 non-core credit facility, and public company costs.

Financial Highlights

• DLC Group achieved strong funded volumes of $20.6 billion in Q4-2021 and record funded volumes for the year ended December 31, 2021, of $78.5 billion, representing a 17% and 52% increase compared to 2020, respectively;
• DLC Group had revenues of $21.3 million for Q4-2021 and record revenues of $78.8 million for the year ended December 31, 2021, representing a 22% and 50% increase compared to 2020, respectively;
• DLC Group had Adjusted EBITDA of $11.8 million for Q4-2021 and record Adjusted EBITDA of $46.9 million for the year ended December 31, 2021, an increase of 37% and 71% compared to 2020 respectively;
• Subsequent to the year end, on January 11, 2022, DLC announced the final results of its substantial issuer bid where the Corporation purchased 1,781,790 class “A” common shares that were validly tendered to the bid for an aggregate cost of $6.7 million (which shares were cancelled and returned to treasury);
• On February 3, 2022, the Corporation’s class “A” common shares were listed for trading on the Toronto Stock Exchange (“TSX”); and
• On February 28, 2022, DLC acquired the remaining 30% of Newton that DLC did not already own.

Gary Mauris, Executive Chairman and CEO, commented, “We are pleased to announce annual funded volume growth of over 50% year over year to $78.5 billion, which helped drive record annual Adjusted EBITDA to $46.9 million. Our dedicated mortgage professionals and management teams at Dominion Lending Centres, MA, MCC and Newton demonstrated the DLC Group’s resilience during a global pandemic. Further, we are proud of the various corporate initiatives that have been recently achieved, including refinancing our credit facilities with TD Bank, returning capital to shareholders via the substantial issuer bid, graduation to the Toronto Stock Exchange and the acquisition of the remaining 30% of Newton.”

Selected Consolidated Financial Highlights:Below are the financial results highlights for the three months and year ended December 31, 2021. The results for the comparative periods reflect the segregation of the Non-Core Assets as discontinued operations (refer to the Discontinued Operations section of this document). The current period results for the three months and year ended December 31, 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 (loss) income and diluted (loss) earnings per Common Share.

Three months ended December 31,										Year ended December 31,
(in thousands, except per share)		2021			2020		Change			2021			2020	Change
Revenues	$	21,266		$	17,477		22%		$	78,816		$	52,413	50%
Income from operations		9,127			5,152		77%			37,387			18,248	105%
Adjusted EBITDA (1)		10,538			7,917		33%			43,882			25,214	74%
Free cash flow attributable to common shareholders (1)		3,528			2,401		47%			17,137			4,929	248%
Net (loss) income		(5,463)			22,643		NMF (2)			(3,943)			25,559	NMF (2)
Net (loss) income from continuing operations		(5,463)			18,690		NMF (2)			(3,943)			23,871	NMF (2)
Net income from discontinued operations		-			3,953		NMF (2)			-			1,688	NMF (2)
Net (loss) income attributable to:
Common shareholders		(5,721)			20,851		NMF (2)			(5,508)			20,037	NMF (2)
Non-controlling interests		258			1,792		(86%)			1,565			5,522	(72%)
Adjusted net income (1)		1,771			2,034		(13%)			9,973			7,544	32%
Diluted (loss) earnings per Common Share		(0.12)			0.54		NMF (2)			(0.12)			0.53	NMF (2)
Adjusted earnings (loss) per Common Share (1)	$	0.03		$	(0.01	)	NMF (2)		$	0.18		$	0.01	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 December 31,										Year ended December 31,
(in thousands)		2021			2020		Change			2021			2020		Change
Adjusted EBITDA(1)
Core Business Operations	$	11,823		$	8,653		37%		$	46,868		$	27,376		71%
Non-Core Business Asset Management		(1,285)			(736)		(75%)			(2,986)			(2,162)		(38%)
Total Adjusted EBITDA(1)	$	10,538		$	7,917		33%		$	43,882		$	25,214		74%

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

Q4-2021 Highlights

The Corporation had a net loss for the three months and year ended December 31, 2021, compared to net income in 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 due to the recognition of the deferred tax asset during 2020, partly offset by higher DLC Group revenues from an increase in funded mortgage volumes. The Corporation did not have discontinued operations during the year ended December 31, 2021, compared to income from discontinued operations during the year ended December 31, 2020.

Adjusted net income decreased during the three months ended December 31, 2021 compared to the same period in the prior year, primarily from higher general administrative expenses and higher direct costs, partly offset by increased DLC Group revenues from higher funded mortgage volumes. During the year ended December 31, 2021, adjusted net income increased compared to the previous year, primarily from increased DLC Group revenues from higher funded mortgage volumes.

Adjusted EBITDA increased for the three months and year ended December 31, 2021 from increased revenues from higher funded mortgage volumes. The increase in adjusted EBITDA contributed to increased free cash flow attributable to common shareholders during the three months and year ended December 31, 2021, when compared to 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 months and year ended December 31, 2020 exclude discontinued operations results from the Non-Core Assets. The current period results for the three months and year ended December 31, 2021 include the Non-Core Assets as an equity accounted investment within the Non-Core Business Asset Management segment.

Three months ended December 31,									Year ended December 31,
(in thousands)		2021			2020		Change		2021			2020		Change
Revenues
Core Business Operations	$	21,266		$	17,477		22%	$	78,816		$	52,413		50%
Consolidated revenues		21,266			17,477		22%		78,816			52,413		50%
Operating expenses(1)
Core Business Operations		10,862			10,397		4%		37,940			30,418		25%
Non-Core Business Asset Management		1,277			1,928		(34%)		3,489			3,747		(7%)
Consolidated operating expenses		12,139			12,325		(2%)		41,429			34,165		21%
Income (loss) from operations
Core Business Operations		10,404			7,080		47%		40,876			21,995		86%
Non-Core Business Asset Management		(1,277)			(1,928)		34%		(3,489)			(3,747)		7%
Consolidated income from operations		9,127			5,152		77%		37,387			18,248		105%
Adjusted EBITDA(2)
Core Business Operations		11,823			8,653		37%		46,868			27,376		71%
Non-Core Business Asset Management		(1,285)			(736)		(75%)		(2,986)			(2,162)		(38%)
Consolidated Adjusted EBITDA(2)		10,538			7,917		33%		43,882			25,214		74%

(1)  Operating expenses comprise of direct costs, general and administrative expenses, share-based payments, and depreciation and amortization expense.

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

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 March 29, 2022, for the three months and year ended December 31, 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 (loss) income before income tax, for continuing operations which is the most directly comparable measure calculated in accordance with IFRS:

	Three months ended December 31,						Year ended December 31,
(in thousands)	2021			2020					2021			2020
(Loss) income before income tax	$	(3,672)		$	4,238		$	4,845			$	13,062
Add back:
Depreciation and amortization		979			1,062			4,130				4,312
Finance expense		2,999			1,299			6,808				5,700
Finance expense on the Preferred Share liability		9,675			-			26,543				-
		9,981			6,599			42,326				23,074
Adjustments to remove:
Share-based payments		526			1,256			1,107				1,655
Foreign exchange gain		(210)			(246)			(247)				(59)
Loss (gain) on contract settlement		28			(119)			559				137
Other expense (income)(1)		109			367			(135)				75
Acquisition, integration and restructuring costs(2)		104			60			272				332
Adjusted EBITDA(3)	$	10,538		$	7,917		$	43,882			$	25,214

(1)   Other income in the year ended December 31, 2021 relates to the derecognition of sales tax receivables and payables on initial acquisition of the Core Business Operations in 2016 and litigation settlements in the Core Business Operations, partly offset by a loss on disposal of intangible assets. Other expense in the year ended December 31, 2020 primarily related to the write down of the Non-Core Business Asset Management segment’s non-equity-accounted investment, partly offset by litigation settlements in the Core Business Operations.

(2)   Acquisition, integration and restructuring costs for the years ended December 31, 2021 and 2020 relate to the restructuring and amalgamation of the Corporation from Founders Advantage Capital Corp. to Dominion Lending Centres Inc. Also included in the year ended December 31, 2021 are restructuring costs related to the Corporation’s graduation to the TSX, the SIB, and debt restructuring.

(3)   The amortization of franchise rights and relationships within the Core Business Operations of $0.7 million and $2.7 million for the three months and year ended December 31, 2021, respectively, (December 31, 2020 - $0.6 million and $2.0 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 December 31,							Year Ended December 31,
(in thousands)	2021			2020				2021			2020
Cash flow from operating activities	$	9,468		$		8,921		$	39,061		$	33,190
Discontinued Operations – cash flows from operating activities		-			(1,815)				-			(9,992)
Continuing Operations – changes in non-cash working capital and other non-cash items		(1,992)				(2,231)			(4,745)			(8,235)
Cash provided from continuing operations excluding changes in non-cash working capital and other non-cash items		7,476				4,875			34,316			14,963
Adjustments:
Distributions from equity accounted investees (1)		420				120			1,449			360
Maintenance CAPEX (1) (2)		(181)				524			(1,523)			(1,026)
NCI portion of cash provided from continuing operations		(228)				(2,979)			(1,530)			(9,242)
Lease payments (1)		(135)				(109)			(544)			(408)
Acquisition, integration and restructuring costs (1)		104				42			272			314
Loss (gain) on contract settlement (1)		28				(72)			559			82
Other items (1)		109				-			(135)			(114)
		7,593				2,401			32,864			4,929
Free cash flow attributable to Preferred Shareholders		(4,065)				-			(15,727)			-
Free cash flow attributable to common shareholders	$	3,528		$		2,401		$	17,137		$	4,929

(1)   Amounts presented reflect the Corporation’s common shareholders’ proportion and have excluded amounts attributed to NCI holders.

(2)   Includes amount 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 (loss) income, which is the most directly comparable measure calculated in accordance with IFRS:

Three months ended December 31,								Year Ended December 31,
(in thousands)	2021			2020				2021			2020
Net (loss) income	$	(5,463)		$		22,643		$	(3,943)		$	25,559
Add back:
Discontinued operations		-				(3,953)			-			(1,688)
Interest penalty – Sagard credit facility repayment		1,101				-			1,101			-
Recognition of non-capital losses		-				(16,718)			-			(16,718)
Foreign exchange gain		(210)				(246)			(247)			(59)
Finance expense on the Preferred Share liability		9,675				-			26,543			-
Loss (gain) on contract settlement		28				(119)			559			137
Other expense (income)		109				367			(135)			75
Acquisition, integration and restructuring costs		104				60			272			332
Income tax effects of adjusting items		113				-			42			(94)
		5,457				2,034			24,192			7,544
Core Business Operations’ adjusted net income attributable to Preferred Shareholders		(3,686)				-			(14,219)			-
Adjusted net income	$	1,771		$		2,034		$	9,973		$	7,544
Adjusted net income (loss) attributable to common shareholders		1,513				(290)			8,408			520
Adjusted net income attributable to non-controlling interest		258				2,324			1,565			7,024
Diluted adjusted earnings (loss) per Common Share	$	0.03		$		(0.01)		$	0.18		$	0.01

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 ~7,750 agents and ~530 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 BellCo-President403-560-0821jbell@dlcg.ca

Robin BurpeeCo-Chief Financial Officer403-455-9670rburpee@dlcg.ca

Amar LeekhaSr. Vice-President, Capital Markets403-455-6671aleekha@dlcg.ca

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.