Dominion Lending Centres Inc.

Good afternoon, and thank you for standing by. Welcome to Dominion Lending Center's fourth quarter and year-end 2025 results conference call. At this time, all participants will be in listen-only mode. After the speaker's presentation, there will be a question and answer period. To ask a question, simply press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please note, this call is... also accessible via webcast and a replay of the webcast will be available on the corporation's website at www.dlcg.ca. During the call, management's remarks may contain forward-looking information that is based on certain assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. please refer to our forward-looking information disclosure in the MD&A for quarter-ended December 31, 2025, which can be found on CDERplus and on the Corporation's website. In addition, during the call, the Corporation may refer to specific non-IFRS measures. These measures, as also defined in the MD&A, for the quarter ended December 31, 2025. The corporation's MD&A includes reconciliations of non-IFRS measures to the most directly comparable IFRS measures. Management believes that these non-IFRS measures provide useful information to investors regarding the corporation's financial conditions and results of operations as they provide additional critical metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meaning prescribed under IFRS, and may differ from similarly named measures reported by other issuers, and accordingly, may not be comparable. These measures should not be considered as a substitute for the related financial information prepared by IFRS. I would now like to turn the call over to Gary Morris, Chairman and CEO of Dominion Lending Centers.

Good afternoon, everyone, and thanks for joining us on today's 2025 Fiscal Earnings Conference call. On the call with me today are Chris Kayet, our Executive Vice Chair and Co-Founder, Jeff Haag, our Financial Officer, Eddie Cotiolo, our President, and James Bell, Executive Vice President and CLO. 2025 was a record year for the DLCD Group, highlighted by a strong growth, margin expansion, and the continued expansion of our broker network. While the slowdown in activity levels in the Canadian housing market created some headwinds for the broader market, we benefited from strength in the mortgage renewal market, and more importantly, from continued execution of our key strategic priorities. I'm pleased to report that both funded mortgage volume and revenue grew 25% in 2025, with annual funded mortgage volume increasing to a record of $84.5 billion, up from $67.4 billion in 2024. At the same time, we continue to generate strong profitability with EBITDA margins increasing to 51% compared to 47% in 2024, driving a 36% increase in adjusted EBITDA in 2025 to $48.8 million. Our adjusted earnings per share increased to $0.41 from $0.21 last year. Beyond the financial results, we also made important progress across our key strategic priorities. We founded a broker network of over 9,000 mortgage professionals, continuing to strengthen our leadership position within the Canadian mortgage broker channel. We accelerated the adoption of our leading edge velocity platform, reaching 85% penetration across our broker network, exiting 2025. We also took a meaningful strategic step in the alternative lending market through our investment in hardwood. And finally, we remained active in executing our capital allocation priorities. During the year, we invested in the growth of our business, increased our quarterly dividend, and we purchased approximately 1% of our common shares, all while maintaining a strong balance sheet. Looking ahead, 2026 will be an exciting year for the DLCG Group as we celebrate our 20th anniversary. While we are proud of the growth and success we've achieved since our founding, our market share of overall Canadian residential mortgage originations remain modest at approximately 10%. That gives us a significant runway for long-term growth. Following the realignment of our sales team structure in the fourth quarter of 2025, we expect to see an active recruiting environment in 2026. At the same time, we expect continued market share gains as we further leverage the strong adoption of Velocity to drive increased productivity across our network. Velocity adoption reached 85% exiting 2025, and the platform is now well embedded across our broker network. This gives us a powerful opportunity to implement tools such as Gold Rush, to help our brokers broaden and deepen relationships with clients, improve engagement throughout the mortgage lifecycle, and ultimately grow their businesses. As a leading participant in the Canadian residential mortgage broker market, we remain committed to educating Canadian consumers on the benefits of working with a mortgage broker and increasing the overall market share of the broker channel. During 2025, we launched several new marketing initiatives including increased investment in social media to better engage younger demographics and first-time homebuyers. We expect to build on these initiatives in 2026. Our strong balance sheet continues to provide us with flexibility to pursue strategic acquisitions and targeted investments, and we have been busy on this front in 2025 and early 2026. Our investment is Heartwood, a non-B20 lender, had a strong first year in 2025 with loan book growth in line with our expectations and a clear path towards profitability in 2026. Since the beginning of Q4 2025, we have invested approximately $17 million into several strategic investments and acquisitions. We acquired an equity stake in two of our franchise partners, including purchasing the remaining 30% of Broker Financial Group Inc. We acquired a 50% equity interest in a mortgage investment corporation, Dunderay's Management Ltd., to complement our Heartwood investment, and we revised our agreement with our independent sales consultants, which we expect will lower commission costs while supporting margin expansion and improving alignment with our long-term growth objectives. With a strong foundation in place, I'm excited for the year ahead. I will now pass it over to Jeff to go over our financial results in more detail. Jeff?

Thanks, Gary. Good afternoon, everyone. I will provide an overview of the fourth quarter results, followed by a brief review of the full year 2025 results. For the fourth quarter of 2025, revenue increased 19% year-over-year, driven by 20% growth in funded volumes, and an increase in the adoption of velocity to 85%, compared to 76% in Q4 of 2024. Revenue from franchise and brokering of mortgages increased 18%, while mutant revenue increased 23%. Beginning in the second quarter, revenue generated from a third-party supplier was reclassified from franchise revenue to mutant revenue. The fourth quarter impact of this was a $0.3 million increase in mutant revenue and a corresponding $0.3 million decrease in franchise revenue. Turning to expenses, general administrative expenses increased 1% compared to the same quarter last year, and this increase would be primarily to higher personnel and IT-related costs, largely offset by the timing of marketing events. On a percentage of revenue basis, general and administrative expenses declined to 34% from 40.1%. Direct costs decreased 8% over Q4 of 2024 from lower advertising fund expenditures and lower cost of royalty revenues. On a percentage of revenue basis, direct costs declined to 12.3% in Q4 2025, from 15.9% in Q4 2024. Adjusted EBITDA increased 36% to $14 million compared to Q4 2024, while adjusted EBITDA margins expanded to 53%, up from 46% last year. The margin improvement was driven by strong Newton revenues, higher franchise revenue, and revenue growth outpacing expense growth. Adjusted EBITDA for Q4 2025 also included a $0.4 million loss from our equity account investment in Hartwood, which began operations in the second quarter of 2025. Consistent with our initial expectation, we do expect Hartwood to reach profitability in 2026. As Gary mentioned, during the fourth quarter, the DLC group revised agreements with four of our independent sales consultants to simplify the corporation's compensation structure and better align recruiting incentives with our long-term growth goals. As part of this transition, certain legacy trailing commission arrangements were eliminated in exchange for one-time payments, resulting in a loss on contract settlements totaling $8.7 million for the quarter. And this loss was recorded in our other expense line. These revised agreements are expected to lower future commission costs, supporting margin expansion. Net income of $1.9 million increased from a loss of $138.8 million in Q4 of 2024. The increase was driven by decreased finance expense related to the preferred share liability and higher revenue, partly offset by the $8.7 million loss on contract settlements. The prior year included $144.5 million expense related to the preferred shares that were acquired and canceled in Q4 of 2024. Adjusted diluted earnings per common share increased to 13 cents in Q4 of 2025 from 5 cents last year. Cash flow from operations Adjusted for the loss in contract settlements, coupled with the full retention of free cash flow, following the conclusion of preferred shareholder allocations, resulted in $11.9 million in free cash flow attributable to common shareholders, compared to $4.4 million in Q4 2024, driven by increased revenue and strong profitability. At quarter end, adjusted total debt to EBITDA on a trailing 12-month basis was 0.73 times compared to 0.79 times at the same period last year. And moving on to annual results, the DLC Group delivered strong results for 2025. Alongside this revenue growth, our continued focus on profitability and financial discipline drove strong earnings growth, meaningful free cash flow generation, and a strong balance sheet. Revenue for the year ended December 31st, 2025, increased 25% to $96.3 million, And this growth was driven by a 25% increase in funded mortgage volume compared to 2024, as well as higher adoption of velocity, which reached 83% for the full year in 2025, up from 73% in 2024. General and administrative expenses increased 14%, or $4.4 million over 2024 levels, with the increase extending from two brokerage acquisitions completed in Q2 of 2024, higher personnel and IT costs, and higher advertising expense due to the timing of certain of our events. On a percentage of revenue basis, general and administrative expense declined to 37.3% from 41.1% in 2024. Adopted EBITDA increased 36% to $48.8 million compared to 2024, with margins expanding to 51% from 47% last year. Margin improvement was driven by strong Newton and franchise revenue, and lower operating expenses as a percentage of revenue. Adjusted EBITDA for 2025 includes a $1.4 million loss from our equity-accounted investment in Hartwood, which began operations in Q2 of 2025. Net income was $24.8 million, compared to a loss of $126.8 million in 2024. The improvement was driven by lower finance expenses following the preferred share cancellation in Q4 of 2024, higher revenue, and a gain on the sale of an equity-accounted investment, partly offset, by an $8.7 million loss on contract settlements. The prior year also included a $149 million expense related to the preferred share acquisition. Adjusted net income increased to $32.2 million from $10.8 million in 2024, an increase of approximately 200% due to higher revenue, strong margins, and the absence of preferred shareholder related income allocations in 2025. The strong cash flow from operations coupled with full retention of free cash flow following the completion of preferred shareholder allocations resulted in $38.8 million in free cash flow attributed to common shareholders compared to $14.9 million in 2024. I will now pass it back to Gary for some concluding remarks.