Dominion Lending Centres (TSX:DLCG) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
View the webcast at https://www.gowebcasting.com/15190
Summary
Dominion Lending Centres reported a 14% year-over-year increase in revenue and a 26% increase in adjusted EBITDA for Q3 2026, with margins expanding to 59%.
The acquisition of Phylogix, completed at an attractive valuation, is expected to be accretive to earnings, although its initial EBITDA contribution is at the lower end of the $15-18 million range due to market conditions.
The company launched a new training program, Launch, Momentum, and Scale, to enhance broker productivity amid a challenging Canadian housing market.
Operational highlights include a 51% increase in free cash flow and a strong balance sheet with a debt to adjusted EBITDA ratio of 1.86 times.
Management remains optimistic about future growth, focusing on integrating Phylogix and supporting brokers despite current market softness.
Full Transcript
OPERATOR
Good afternoon and thank you for standing by. Welcome to Dominion Lending Centres’ third quarter 2026 results conference call. At this time, all participants will be in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer period. If you would like to ask a question, please press star one on your telephone keypad at any time to raise your hand and join the queue. If you would like to withdraw your question, again, press star one.
Please note that this call is also accessible via the 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 the quarter ending September 30, 2026, which can be found on SEDAR+ and on the Corporation’s website. In addition, during the call the Corporation may refer to specific non-IFRS measures.
These measures are also defined in the MD&A for the quarter ending September 30, 2026. 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 condition 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 standardized measures prescribed under IFRS, and may differ from similarly named measures reported by other issuers and accordingly may not be comparable.
These measures should also not be considered as a substitute for the related financial information prepared under IFRS. I would now like to turn the call over to Gary Mauris, Chairman and CEO of Dominion Lending Centres.
Gary Mauris (President and Co-Founder)
Good afternoon everyone and thank you for joining us today on our third quarter 2026 earnings conference call. On the call with me today is Geoff Hague, our Chief Financial Officer; Chris Kayat, Executive Vice Chair and Co‑Founder; Eddy Cocciollo, President; and James Bell, Executive Vice President and Chief Legal Officer. We’ve had a busy third quarter delivering solid financial results despite a challenging Canadian housing market and continued macroeconomic uncertainty. We also put our strong balance sheet to work with the acquisition of Phylogix, which we completed at an attractive valuation and is accretive to our adjusted earnings per share. Importantly, we maintained a strong balance sheet following the acquisition with total debt to adjusted EBITDA of 1.86 times as of September 30, 2026, providing us with the flexibility to continue executing on our capital allocation priorities and creating long-term shareholder value.
Turning to our third quarter financial results, revenue increased 14% year over year while adjusted EBITDA grew 26%, with adjusted EBITDA margins expanding to 59% from 54% in the third quarter of 2025. Adjusted diluted earnings per share also increased 18% year over year to $0.13. Funded mortgage volumes declined 1% as recruiting and improvements in broker productivity were more than offset by the weakness in the Canadian housing market. As I’ve mentioned in previous calls, over the past year we’ve been very focused on working with our broker community to help them build larger, more productive businesses and succeed across different market conditions. We continue that focus during the third quarter with Launch, Momentum and Scale, a new 12‑month training program designed to support brokers at every stage of their careers. We believe these initiatives and our brokers will help drive greater productivity and support our collective long‑term growth.
Turning to Phylogix. While we’re still in the early stages of integration, having closed the acquisition just three months ago, our initial focus has been on ensuring a smooth transition for brokers, lenders and other partners, at the same time working closely with the Phylogix team to further strengthen its market position, enhance customer service and improve its cost structure and operational efficiencies. Given the continued softness in the housing market and the greater visibility we now have into the Phylogix operations, we currently expect its annual adjusted EBITDA contribution to be at the low end of our previously communicated range of $15 to $18 million. We’re very pleased with the acquisition and the opportunities ahead. Phylogix is an important strategic addition to DLC Group, significantly expanding our connectivity platform across the Canadian mortgage ecosystem, enhancing the value we deliver to our partners and strengthening our competitive position.
With that, I’ll turn the call over to Geoff to walk through our third quarter financial results in more detail. Geoff, over to you.
Geoff Hague (Chief Financial Officer)
Thanks, Gary. Good afternoon everyone. Before I provide a review of our financial results, I wanted to briefly highlight a few changes to our financial reporting following the acquisition of Phylogix. Beginning this quarter, we are reporting two segments, DLCG Network and Phylogix. The DLCG Network segment includes our mortgage brokerage franchise business, the Velocity Platform and its related operations, while Phylogix is reported as a separate standalone segment.
Acquisition and related financing costs are included within the DLCG Network segment as these activities are managed at the corporate level. We have also made some changes to our key performance indicators. Funded mortgage volume and broker count specifically refer to our DLCG Mortgage Broker Network, while Velocity adoption and franchise count are no longer reported as key performance indicators. All right, turning to the third quarter, total revenue increased 14% year over year to $30 million, reflecting 4% growth in Newton revenue and a $3.9 million contribution from Phylogix while being partially offset by a 3% decline in franchise and brokering of mortgages revenue. The Phylogix acquisition closed on July 31, 2026, and as a result, our third quarter results include two months of contribution from the acquisition.
The growth in Newton revenue was driven by improved adoption across the DLCG Network’s broker platform, while franchise and brokering of mortgage revenue was impacted by a 1% decline in funded mortgage volume and a $0.4 million increase in amortization of franchise rights payments, which are recognized over time and do not directly correlate to funded mortgage volume. Turning to expenses, direct costs decreased 15% over the same period last year due to cost savings from the realignment of the DLCG Network’s sales team structure in Q4 2025 and timing of advertising initiatives, partially offset by the contribution of Phylogix. As a percentage of revenue, direct costs improved to 7.1% in Q3 2026 compared to 9.5% last year. General and administrative expenses increased 19% or $1.8 million compared to Q3 2025 due to $1.3 million of acquisition‑related costs from the Phylogix acquisition and $1.7 million of Phylogix’s actual general and administrative expenses.
The increases were partially offset by lower advertising and promotional event expenses due to the timing of events associated with the DLC Group National Sales Conference, which was held in September 2025 but did not occur in 2026. Adjusted EBITDA increased 26% to $17.8 million and adjusted EBITDA margins expanded to 59% from 54% in the third quarter of 2025 due to improved profitability within the DLCG Network and a $1.8 million contribution from the Phylogix acquisition. Included in adjusted EBITDA is a $0.1 million loss from our equity‑accounted investment in Hartwood, compared to a $0.3 million loss in the prior‑year period. DLCG Network adjusted EBITDA increased 13% from prior year as adjusted EBITDA margins for the segment expanded to 61% from 54% in Q3 2025 due to cost savings, lower advertising fund expenditures and timing of events.
Net income of $8.8 million was comparable to Q3 of 2025 levels of $9 million as higher revenue and lower direct costs were offset by higher depreciation and amortization expenses, finance costs and acquisition‑related costs associated with the Phylogix transaction. Adjusted diluted earnings per common share increased 18% to $0.13 for the quarter, driven primarily by the contribution of Phylogix, growth in Newton revenue and lower direct costs. Free cash flow increased 51% to $14.3 million in the third quarter, driven by higher operating cash flow and lower maintenance capital expenditures related to franchise renewal payments.
For the period ending September 30, 2026, our balance sheet remains strong with total debt to trailing twelve months adjusted EBITDA ratio of 1.86 times compared to 0.61 times a year earlier. The increase primarily reflects the funding of the Phylogix acquisition, which was completed for $61.3 million net of cash acquired. I will now pass it back to Gary for some concluding remarks.
Gary Mauris (President and Co-Founder)
Thanks, Geoff. While housing activity remains soft given the ongoing economic uncertainty, higher interest rates and geopolitical tensions, we’ve continued to deliver strong profitability through 2026. This reflects the hard work and dedication of our broker partners and employees and I want to thank them for their continued contribution to our success. Looking ahead, our priorities remain focused on supporting the success of our brokers, successfully integrating Phylogix and strengthening its market position and profitability. We will also remain disciplined in our approach to capital allocation while maintaining a strong balance sheet, positioning us to deliver long‑term value for our shareholders.
With that, I will now turn the call over to the operator to open the line for questions. Operator,
OPERATOR
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, again, press star one. Your first question comes from the line of Gary Ho with Desjardins. Please go ahead.
Gary Ho (Analyst at Desjardins)
Thanks. Good afternoon. Maybe just a bigger-picture question, Gary — I think you just alluded to parts of it. I was wondering if you can expand on it. So we see the CREA data being fairly soft and I think they’ve just revised their outlook. Rates have been all over the map. What are you hearing from your broker network? I imagine there’s quite a bit of uncertainty. Perhaps maybe just give us some feedback on what you’re hearing from the front lines.
Gary Mauris (President and Co-Founder)
Yeah, thanks very much, Gary. Appreciate you being on the call. We’re hearing exactly that. We’re hearing it’s a grinding market. It’s been more difficult than I think many brokers sort of expected. Resale numbers obviously in the housing market have been extremely soft, especially in the last couple of months. There was a little bit of optimism sort of in late spring. The last couple months have been more muted. Both the prime space and the alternative space, you know, we’re getting sort of similar feedback.
It’s just a tough market. There’s less purchases, there’s less opportunities coming to the market. You know, there has been some recent optimism, obviously with the change in government in British Columbia, but also with the midterm results. So, you know, we’ll see. But I think the sort of response from the market in general is that it’s been a difficult market and it’s been softer than expected.
Gary Ho (Analyst at Desjardins)
Okay, great, thanks. Thanks for that. Next, I want to touch base and maybe ask a little bit about the Phylogix integration. It’s been a few months since you’ve closed the acquisition. Just curious, on the integration side, what are you hearing from the brokers, third-party brokers there, any churn numbers that you can call out and any feedback from the other side? And then maybe just more quantitatively, you did mention you’re now getting the lower end of that 15 to 18 million of EBITDA.
What’s changed or is it just mostly the market outlook?
Gary Mauris (President and Co-Founder)
Yeah. Thanks, Gary. So the actual TSA, the transitional service agreement, and the integration has actually gone really well. The team’s very pleased with the process and the progress that we’ve made on that. We’re starting to really get both tech teams, both on the Phylogix and the Velocity team, working together. And we’re understanding where we have overlap and where there’s shared services that will help us going forward. So I think from a perspective of integration, we’re very happy with where it’s going at.
We are, as we get in there and roll up our sleeves, seeing more opportunity for some consolidation. We had originally anticipated to run them as two separate businesses, but there is some overlap in staffing and some of our stats that we think are going to produce savings for us going forward. So we’re looking forward to that. In terms of broker retention, I think broker retention is exactly where we anticipated. We’re not seeing any spikes either way, positively or negatively. We haven’t seen a whole bunch of brokers run off the system, so that’s been very encouraging. I think a lot of brokers were really happy once we took it over and they actually heard from us and heard through us, through national calls, that they were in a good place. They liked the Phylogix technology in the past.
They’re going to just like it more going forward because we’re going to be making some investments in IT and we’re going to have some shared services which should improve their efficiencies. The data piece, early days, we are very encouraged by the quality of the data that we can consume and how it helps us to be better partners to the market and to our lenders going forward. So, yeah, I think we’re feeling fairly good about things. In terms of restating EBITDA, listen, we just have been through two months only of reporting, August and September, since we took it over. We’ve had some expenses that were a little higher than what we thought with the acquisition.
And honestly, as I just said earlier, those two months have been just very soft overall months in the market. So we’re trying to be realistic and we’re trying to be very prudent in our expectations going forward.
Gary Ho (Analyst at Desjardins)
Okay, great. Thanks for those comments. And then maybe just if I can sneak one more in just on the Heartwood, seeing good trends there, maybe just give us some color on the progress, credit quality in terms of the underwriting and is it tracking to break-even now, I imagine. And sounds like you’ve opened that up to the Phylogix platform now.
Gary Mauris (President and Co-Founder)
Yeah, it’s got to take some time to obviously roll out and be available to all the other brokers. But yeah, that’s being integrated as we speak. Heartwood, I think, has been coming on track a little bit slower than we had anticipated, primarily by just being a soft market. And as I said, what’s universal about the market right now is that it’s soft both on the prime side and the non-prime side. I speak to a lot of other non-prime, non–B-20 lenders and they’re really feeling it this year as well.
Heartwood feels like it’s really turning the corner. I mean, we’ve managed to build a $300 million book inside of just over 12 months now with a very, very strong loan portfolio. I think I’ve said to you before, the quality of the customer is better than we had anticipated. And we just did a month where we finished at kind of $34, $35 million in originations. So we’re averaging about $30 million a month right now for new business. We’re excited about the business and we’re very optimistic—sorry, very optimistic about it going forward.
Gary Ho (Analyst at Desjardins)
Great. Great. That’s it for me. Thank you.
Gary Mauris (President and Co-Founder)
Thanks, Gary. Appreciate you.
OPERATOR
Your next question comes from the line of Stephen Boland with Raymond James. Please go ahead.
Stephen Boland (Analyst at Raymond James)
Thanks. And thanks very much for the segmented disclosure on Phylogix. It’s very helpful. I just wonder if I follow up with that on Phylogix. What’s the best metric that we can kind of judge? Like you’re not providing funded volume yet—maybe, I don’t know, at some point you may. So how do we judge how successful this business is going to be? Is it revenue growth, EBITDA growth? I’m just trying to get an idea about the metrics that we should be focusing on for that.
Gary Mauris (President and Co-Founder)
Yeah, I think it’s top-line EBITDA growth—sorry, top-line revenue growth—I think is probably the easiest driver to measure kind of quarter over quarter. Listen, we have contracts with partners on both sides, on the Phylogix side and the Velocity side, and there’s going to be some streamlining opportunities as we move forward on that. At this point we’re breaking them out and running them independently. That might change down the road as we get further.
But those two numbers that you just identified I think are a good starting point. Geoff Hague, is there anything you want to add to that for Stephen?
Geoff Hague (Chief Financial Officer)
No, I think you’re right. I think revenue is the one to watch. You know, Phylogix is very much like Newton, where notwithstanding the occasional kind of incremental change in G&A costs, once we got the thing up and running and we have a sort of run-rate, normal-course idea of what G&A looks like, it’s going to remain fairly steady. So G&A shouldn’t move too much. So I think, yeah, you want to watch revenues.
Stephen Boland (Analyst at Raymond James)
Okay, that’s great. And I guess my second question. Apologize, had a few companies report tonight. The EBITDA margin on the actual core network looks a lot of improvement. I know there’s a big focus on expense management. Is this kind of sustainable? I know there’s going to be some lumpiness, but EBITDA margins at 61, very, very strong. So I’m just curious about the run rate for direct costs and expenses.
Gary Mauris (President and Co-Founder)
Yeah, I think, Stephen, listen, the EBITDA margin can be a little bit lumpy if you sort of look at it over this last year. There are some factors that are transient, right? There’s the ad fund spend each month that isn’t consistently spread over 12 months. One month where we have less of a spend, the next month we have more of a spend. I mean, I think I can be really confident in saying sort of long-term EBITDA margin somewhere around mid-50s, 55, 56.
I know it was a little bit higher this month, but I think if you think about it at somewhere around 55, 56, I think that I’m fairly confident that that’s something that we can deliver. We are, as I said before, looking at our expenses every single month now, especially in a soft market. We have to, right. Everything we do, we have to look at with a fine-tooth comb. And I think the team has been doing a really good job around that.
Stephen Boland (Analyst at Raymond James)
Okay, I usually don’t say this, but I’m gonna say this is a pretty good quarter, basically what’s happening in the housing market. So congratulations on, you
Gary Mauris (President and Co-Founder)
You know what, Stephen, thank you for that. Honestly, I mean, I don’t wanna scare anybody, but listen, this is the worst real estate market that I’ve seen in a very long time. And anyone you speak to on the housing side, on the real estate side or on the mortgage side has just said it’s difficult out there right now. Now, here’s some positive: as I said, we seem to be having some wins in our favor with some government changes and it appears like there’s going to be some better days ahead.
I think we’ll eventually get this Iran war solved and we’ll eventually get the tariff drama behind us. So I look at it and just go like, I don’t know if it’s six months or I don’t know if it’s 12 months, but we are going to get a tailwind eventually here after a very, very tough housing market. So I appreciate the support. Thank you.
Stephen Boland (Analyst at Raymond James)
All right, thanks, guys.
OPERATOR
If you would like to ask a question, please press Star one on your telephone keypad. Your next question comes from the line of James Glenn with National Bank Capital Markets. Please go ahead.
James Glenn (Analyst at National Bank Capital Markets)
Yeah, thanks. Just wanted to dig into that Phylogix EBITDA margin a little bit more. You did say that costs came in maybe a little bit higher than what you were expecting. Is that run-rate costs or is that just more tied to some of the integration and just extra work in the early days? And a little bit, you can tie that into the outlook for what that margin looks like going forward?
Gary Mauris (President and Co-Founder)
Yeah, a little bit both. I mean, listen, we hope that the Phylogix EBITDA margin will mirror—be very similar to sort of the Phylogix EBITDA margin long term. Listen, we do think there’s going to be some synergies. We do think that there’s going to be some consolidation going forward. So we do expect that to improve going forward. But, as Jeff said, once we sort of have a better understanding of the overall net cost to operate, I think I’ll be able to give you a clearer indication of what we can expect going forward.
But give us a few more months to kind of get that behind us and finish the integration.
James Glenn (Analyst at National Bank Capital Markets)
Okay. Yeah. And then just wanted to go back to the comment around Steve’s question on EBITDA margin. At 61% you got into 55, 56 kind of longer term. Yeah, I guess like Phylogix running a little bit lower than that in the near term. So we should be expecting all-in consolidated EBITDA margins maybe in the low 50s sort of thing. Is that, that’s.
Gary Mauris (President and Co-Founder)
Yeah, I think you’re—I think 50, 55. I think you’re—yeah, I think you’re right in that range, 50 to 55. I mean, listen, we’re looking at EBITDA margins all the time, right, and what we can do to improve them. Obviously either James or Jeff, just to answer James, anything you guys want to—either one you want to add.
Geoff Hague (Chief Financial Officer)
Sure, James. The one thing for this quarter, why you’ll find we’re a little bit more hesitant on this quarter in saying that this is sustainable, is we did have a few one-time items. Last year we had the national sales convention, which was a spike. And then this quarter we had less advertising fund spend. So next quarter we do expect to have an increase in advertising fund spend. It’s just the natural way that the ad campaigns roll—they tend to roll harder so that we pick up all this October through December for sports and for cinema and things like that.
So it will be a higher spend in Q4, which will decrease that current sort of the Q3 EBITDA margin to something probably more closer to the mid-50s.
James Glenn (Analyst at National Bank Capital Markets)
Okay. And just staying on the expenses then. Has there been anything from a savings standpoint realized from the initiatives launched last quarter?
Gary Mauris (President and Co-Founder)
Yeah, the issue. Sorry, go ahead, James.
Geoff Hague (Chief Financial Officer)
James, we’ve taken a look at our staffing needs. We’ve repurposed a few people. We’ve had a few people that were approaching retirement that we accelerated that. So just sort of across the board in the way we do business. Some reduced travel. I know Gary’s looking at all of our events to rethink some of those — some of them to save cost and some of them just to make sure that we’re delivering fresh content to our agents. So, as Gary mentioned, in this type of market, everything’s under the microscope to just challenge ourselves: Do we need it, do we need to spend that money, and how can we do things cheaper?
Yeah, and there has been, James — there was the president that was in place at Finlogics. We did end up changing direction on that, and that gentleman is no longer with us. That’s a role that won’t need to be replaced. We are looking at the operations both in Canada and the Romanian operations and finding where there’s any duplication there. So, as I said, we got a couple more months behind us. We’re going to have a better perspective for you on where those savings will be meaningful.
James Glenn (Analyst at National Bank Capital Markets)
Okay, understood. And then just last one around the revenue rate as a percentage of funded volumes. It came in a little bit lighter this quarter than the past few quarters. Is there anything to call out, or is it just a different mix? What would be driving a little bit lower rate levels?
Geoff Hague (Chief Financial Officer)
Yeah, I mean, if you look at the revenue — the increase in the revenue of 14 is primarily the Finlogics acquisition. The market is just softer. Some of the things that we see is that in an uncertain market you get shorter-term mortgages. People don’t want to lock in for five years, and top-line revenue on the average mortgage pays more for a five-year term than it does for a three-year term. We’re seeing more of those three-year terms; that will bounce back and go back to primarily five-year terms once the market is settled a little bit and there’s a little bit more optimism and there’s a bit of a tailwind.
But primarily, honestly, we look at revenue being kind of flat year over year. And I’m never happy with anything ever being flat, but I have to tell you that no one’s super upset here being flat in this particular year because it has been one of the most difficult years that we can remember just from an overall market perspective.
James Glenn (Analyst at National Bank Capital Markets)
Yeah. Yeah. Okay. Thanks very much, guys. Thank you. Appreciate the time.
OPERATOR
And that does conclude our question and answer session. I will now turn it back over to Gary Mauris for closing comments.
Gary Mauris (President and Co-Founder)
Listen, to all of our shareholders, thank you very much. Appreciate the interest in the business. You know, everyone is working hard, rolling up their sleeves here. We are looking forward to this year, and we are positive for 2027. We think a lot of the work that we’ve done and the work that we’re doing is going to be recognized and we think that there’s going to be some better days ahead. We’re excited about the integration with Finlogics, we’re excited about the data piece, and we’re very excited about Heartwood — how Heartwood entered a market at a time that has been under intense scrutiny and very difficult, and yet it still managed to build that $300 million loan book. So there’s profitable days ahead.
So with that, on behalf of our team, I just want to thank all of you for your interest in the business. As always, please feel free to reach out for additional information and coverage.
OPERATOR
Ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation and you may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
Recent Comments