Q2 2026 Dominion Lending Centres Inc Earnings Call

August 6, 2026

Speaker #1: Good afternoon, and thank you for standing by. Welcome to Dominion Lending Centres' second quarter 2026 results conference call. At this time, participants will be in a listen-only mode.

Operator 2: Good afternoon. Thank you for standing by. Welcome to Dominion Lending Centres' Q2 2026 results conference call. At this time, participants will be in a listen-only mode. After the speaker's presentation, there will be a question and answer period. If you would like to ask a question during that time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, press star one 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.

Operator: Good afternoon. Thank you for standing by. Welcome to Dominion Lending Centres' Q2 2026 results conference call. At this time, participants will be in a listen-only mode. After the speaker's presentation, there will be a question and answer period. If you would like to ask a question during that time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, press star one 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.

Speaker #1: After the speakers' presentation, there will be a question-and-answer period. If you would like to ask a question during that time, simply press star followed by the number 1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, press star one 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.

Speaker #1: 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.

Speaker #1: Please refer to our forward-looking information disclosure in the MGNA for the quarter ended March 31, 2026, which can be found on CedarPlus and on the corporation's website.

Operator 2: Please refer to our forward-looking information disclosure in the MD&A for the quarter ended 31 March 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 ended 31 March 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 any standardized meaning prescribed under IFRS, and may differ from similarly named measures reported by other issuers and accordingly may not be comparable.

Operator: Please refer to our forward-looking information disclosure in the MD&A for the quarter ended 31 March 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 ended 31 March 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 any standardized meaning prescribed under IFRS, and may differ from similarly named measures reported by other issuers and accordingly may not be comparable.

Speaker #1: 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 ended March 31, 2026.

Speaker #1: 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.

Speaker #1: 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. Accordingly, they may not be comparable.

Speaker #1: 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.

Operator 2: 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 Mauris, Chairman and CEO of Dominion Lending Centres.

Operator: 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 Mauris, Chairman and CEO of Dominion Lending Centres.

Speaker #1: Chairman and CEO of Dominion Lending Centres.

Speaker #2: Good afternoon, everyone, and thank you for joining us today on our second quarter 2026 earnings conference call. On the call today with me is Jeff Haig, our Chief Financial Officer.

Gary Mauris: Good afternoon, everyone, and thank you for joining us today on our Q2 2026 earnings conference call. On the call today with me 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. I will provide an overview of our Q2 results, followed by a few comments on our announcement earlier this week regarding our acquisition of Filogix, which marks an important milestone for our company. During the Q2, we grew funded volume by 5% despite a soft housing market, reflecting the increased productivity of our brokers. This improvement is the result of our continued investment in helping our broker channel succeed.

Speaker #2: Chris Kade, Executive Vice Chair and Co-Founder; Eddie Cociolo, President; and James Bell, Executive Vice President and Chief Legal Officer. I will provide an overview of our second quarter results, followed by a few comments on our announcement earlier this week regarding our acquisition of Filogix, which marks an important milestone for our company.

Speaker #2: During the second quarter, we grew funded volume by 5%, despite a soft housing market, reflecting the increased productivity of our brokers. This improvement is the result of our continued investment in helping our broker channel succeed.

Speaker #2: While recruiting remains a cornerstone of our strategy, in recent years we have placed greater emphasis on helping our existing brokers and franchise partners grow their business through initiatives such as Gold Rush, Gold Center training series, and, most recently, the Broker Performance Cloud.

Gary Mauris: While recruiting remains a cornerstone of our strategy, in recent years, we have placed greater emphasis on helping our existing brokers and franchise partners grow their business through initiatives such as Gold Rush, Goal Getter training series, and most recently, the Broker Performance Lab. It's encouraging to see our brokers embrace these programs and deliver strong results. Revenues increased 1% in the quarter as growth in funded mortgage volume was partially offset by revenue streams that did not move in line with funded volume, as well as quarter-to-quarter variability in partner mix. Adjusted EBITDA margins remained strong at 50%, resulting in adjusted EBITDA of CAD 12.6 million in the quarter. While our profitability remains strong, we have launched an expense review program to identify additional cost-saving opportunities. This reflects our disciplined approach to managing the business while the housing market remains soft.

Speaker #2: It's encouraging to see our brokers embrace these programs and deliver strong results. Revenues increased 1% in the quarter, as growth in funded mortgage volume was partially offset by revenue streams that do not move in line with funded volume, as well as quarter-to-quarter variability in partner mix.

Speaker #2: Adjusted EBITDA margins remained strong at 50%, resulting in adjusted EBITDA of $12.6 million in the quarter. While our profitability remained strong, we have launched an expense review program to identify additional cost savings opportunities.

Speaker #2: This reflects our disciplined approach to managing the business while the housing market remains soft. Our strong profitability and cash flow also contributed to continued strength in our balance sheet.

Gary Mauris: Our strong profitability and cash flow also contributed to continued strength in our balance sheet, with debt to adjusted EBITDA of 0.9 at the end of the Q2. It was the strength of our balance sheet that enabled us to fund and complete the highly strategic and immediately accretive acquisition of Filogix, which has closed as of 31 July. The acquisition marks an important milestone in the DLCG evolution. Filogix is one of Canada's leading mortgage technology and connectivity platforms, and its addition strengthens our position in the Canadian mortgage industry. It also provides important redundancy across our critical connectivity platforms and significantly expands our access to real-time data and insights into the Canadian residential housing market. Filogix will operate as a standalone, wholly-owned subsidiary, maintaining its operational independence from Velocity and ensuring continuity for its customers and industry partners.

Speaker #2: With debt-to-adjusted EBITDA of 0.9 at the end of the second quarter, it was the strength of our balance sheet that enabled us to fund and complete the highly strategic and immediately accretive acquisition of Philogix, which has closed as of July 31.

Speaker #2: The acquisition marks an important milestone in the DLCG evolution. Filogix is one of Canada's leading mortgage technology and connectivity platforms, and its addition strengthens our position in the Canadian mortgage industry.

Speaker #2: It also provides important redundancy across our critical connectivity platforms, and significantly expands our access to real-time data and insights into the Canadian residential housing market.

Speaker #2: Philogix will operate as a standalone, wholly-owned subsidiary, maintaining its operational independence from Velocity and ensuring continuity for its customers and industry partners. We intend to build on Philogix's strong foundation through continued investments in its technology, customer service, and data security.

Gary Mauris: We intend to build on Filogix's strong foundation through continued investments in its technology, customer service, and data security. Beyond the strategic importance, Filogix adds a highly profitable and cash-generative business that is immediately accretive to adjusted earnings per share while allowing us to maintain a strong balance sheet. For the trailing 12 months ending 31 May 2026, Filogix processed approximately CAD 60 billion in funded mortgage volume. We expect the acquisition to contribute approximately CAD 15 to 18 million in adjusted EBITDA in its first full year post-closing. With that, I'll turn the call over to Jeff to walk through our Q2 financial results in more detail. Jeff, over to you.

Speaker #2: Beyond the strategic importance, Philogix adds a highly profitable and cash-generative business that is immediately accretive to adjusted earnings per share, while allowing us to maintain a strong balance sheet.

Speaker #2: For the trailing 12 months ending May 31, 2026, Philogix processed approximately $60 billion in funded mortgage volume. We expect the acquisition to contribute approximately $15 to $18 million in adjusted EBITDA in its first full year post-closing.

Speaker #2: With that, I'll turn the call over to Jeff to walk through our second quarter financial results in more detail. Jeff, over to you.

Speaker #3: Thanks, Gary. Good afternoon, everyone. For the second quarter of 2026, funded mortgage volumes increased 5% year over year to $22.1 billion, driven by higher broker productivity.

Geoff Hague: Thanks, Gary. Good afternoon, everyone. For Q2 2026, funded mortgage volumes increased 5% year-over-year to CAD 22.1 billion, driven by higher broker productivity. Total revenue increased 1% to CAD 24.9 million, reflecting 4% growth in franchise and brokering of mortgages revenue, partially offset by a 4% decline in Newton revenue. This decline in Newton revenue was due primarily to a revenue reclassification recorded in Q2 2025, which included CAD 0.3 million in revenue related to Q1 2025. Growth in franchise revenue was also impacted by CAD 0.3 million in higher amortization of franchise rights payments, which are recorded over time and do not necessarily move in line with funded mortgage volumes. Turning to expenses, direct costs decreased 8% compared to the same period last year due to cost savings from the realignment of our sales team structure in Q4 2025.

Speaker #3: Total revenue increased 1% to $24.9 million, reflecting 4% growth in franchise and brokering of mortgages revenue, partially offset by a 4% decline in Newton revenue. This decline in Newton revenue was due primarily to a revenue reclassification recorded in Q2 2025, which included $0.3 million in revenue related to Q1 2025.

Speaker #3: Growth in franchise revenue was also impacted by $0.3 million in higher amortization of franchise rights payments, which are recorded over time and do not necessarily move in line with funded mortgage volumes.

Speaker #3: Turning to expenses, direct costs decreased 8% compared to the same period last year due to cost savings from the realignment of our sales team structure in Q4 of 2025.

Speaker #3: As a percentage of revenue, direct costs decreased to 11.9% versus 13.1% in Q2 2025. General and administrative expenses increased by $0.4 million compared to Q2 2025. This increase was primarily due to $0.3 million in higher personnel and IT-related costs, and was partially offset by a $0.2 million reduction in advertising expenses due to the timing of certain events.

Geoff Hague: As a percentage of revenue, direct costs decreased to 11.9% versus 13.1% in Q2 2025. General and administrative expenses increased to CAD 0.4 million compared to Q2 2025. This increase was primarily due to CAD 0.3 million in higher personnel costs and IT-related costs and was partially offset by a CAD 0.2 million reduction in advertising expenses due to the timing of certain events. Adjusted EBITDA of CAD 12.6 million was consistent with Q2 2025, while adjusted EBITDA margins remained strong at 50% compared to 51% in Q2 2025. Included in adjusted EBITDA is a CAD 0.5 million loss from our equity accounted investment in Heartwood, compared to a CAD 0.6 million loss in Q2 2025. We do expect Heartwood to reach profitability in late 2026.

Speaker #3: Adjusted EBITDA of $12.6 million was consistent with Q2 of 2025, while adjusted EBITDA margins remained strong at 50%, compared to 51% in the second quarter of 2025.

Speaker #3: Included in adjusted EBITDA is a $0.5 million loss from our equity-accounted investment in Hartwood, compared to a $0.6 million loss in Q2 of 2025. We do expect Hartwood to reach profitability in late 2026.

Speaker #3: Net income of $7.1 million decreased by $0.6 million compared to Q2 2025, primarily due to a $0.6 million increase in share-based payment expense and higher general and administrative expenses.

Geoff Hague: Net income of CAD 7.1 million decreased by CAD 0.6 million compared to Q2 2025, primarily due to a CAD 0.6 million increase in share-based payment expense and higher general and administrative expenses. The increase in share-based payments expense reflects additional RSU grants under the RSU plan and the impact of grade investing on previously issued awards. Adjusted diluted earnings per common share were CAD 0.09 for the quarter compared to CAD 0.10 in Q2 2025. Adjusted net income was CAD 7.1 million, down CAD 0.6 million year-over-year. Revenue growth was more than offset by the increase in share-based compensation expense. Cash flow from operations was CAD 12.2 million, a 13% increase compared to CAD 10.8 million in Q2 2025, largely driven by favorable changes in non-cash working capital due to timing of accounts receivable collections.

Speaker #3: The increase in share-based payment expense reflects additional RSU grants under the RSU plan, and the impact of grant vesting on previously issued awards. Adjusted diluted earnings per common share were $0.09 for the quarter, compared to $0.10 in Q2 of 2025.

Speaker #3: Adjusted net income was $7.1 million, down $0.6 million year-over-year, as revenue growth was more than offset by the increase in share-based compensation expense.

Speaker #3: Cash flow from operations was $12.2 million, a 13% increase compared to $10.8 million in Q2 2025, largely driven by favorable changes in non-cash working capital due to the timing of accounts receivable collections.

Speaker #3: For the period ended June 30, 2026, our total debt-to-trailing 12 months adjusted EBITDA ratio was 0.9 times, compared to 0.5 times a year earlier.

Geoff Hague: For the period ended 30 June 2026, our total debt to trailing 12-month adjusted EBITDA ratio was 0.9 times compared to 0.5 times a year earlier. As Gary mentioned, we utilized our strong balance sheet to fund the Filogix acquisition at a purchase price of CAD 58.5 million subject to closing adjustments. The acquisition was financed using a new CAD 62.3 million term facility as part of an amended and restated credit agreement entered into with TD Bank commensurate with the acquisition. Pro forma the acquisition, our total debt to adjusted pro forma trailing 12-month EBITDA is expected to be approximately 1.65 times. I will now pass it back to Gary for some concluding remarks.

Speaker #3: And as Gary mentioned, we utilized our strong balance sheet to fund the Philogix acquisition at a purchase price of $58.5 million, subject to closing adjustments.

Speaker #3: The acquisition was financed using a new $62.3 million term facility as part of an amended and restated credit agreement entered into with TD Bank, commensurate with the acquisition.

Speaker #3: Pro forma the acquisition, our total debt-to-adjusted pro forma trailing 12-month EBITDA is expected to be approximately 1.65 times. I will now pass it back to Gary for some concluding remarks.

Speaker #2: Thanks, Jeff. Overall, activity levels across our markets have been softer than we initially expected due to macroeconomic uncertainty and geopolitical tensions. We have successfully offset these headwinds by growing funded mortgage volume, while maintaining our strong profitability and a strong balance sheet.

Gary Mauris: Thanks, Geoff. While overall activity levels across our markets have been softer than we initially expected due to macroeconomic uncertainty and the geopolitical tensions, we have successfully offset these headwinds growing funded mortgage volume while maintaining our strong profitability and a strong balance sheet. As we move to H2 2026, recent indicators point to a gradual improvement in housing activity. We will continue working closely with our brokers and franchise partners to grow their businesses while remaining disciplined on expenses and maintaining our focus on profitability. I would also like to take a moment to welcome the Filogix team to the DLCG group of companies. As I mentioned previously, this is a very important milestone for our company and we look forward to working with the Filogix team to strengthen their market position, deliver even greater value to its partners, and create long-term value for our shareholders.

Speaker #2: As we move into the second half of 2026, recent indicators point to a gradual improvement in housing activity. We will continue working closely with our brokers and franchise partners to grow their businesses, while remaining disciplined on expenses and maintaining our focus on profitability.

Speaker #2: I would also like to take a moment to welcome the Philogix team to the DLCG Group of Companies. As I mentioned previously, this is a very important milestone for our company, and we look forward to working with the Philogix team to strengthen their market position, deliver even greater value to its partners, and create long-term value for our shareholders.

Speaker #2: With that, I will now turn the call over to the operator to open the lines for questions. Operator?

Gary Mauris: With that, I will now turn the call over to the operator to open the lines for questions. Operator?

Speaker #4: As a reminder, if you would like to ask a question at this time, simply press star, followed by the number 1, on your telephone keypad.

Operator 2: As a reminder, if you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question is from Matthew Lee with Canaccord Genuity.

Operator: As a reminder, if you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question is from Matthew Lee with Canaccord Genuity.

Speaker #4: We'll pause for just a moment to compile the Q&A roster. Your first question is from Matthew Lee with Canaccord Genuity.

Speaker #5: Hey, thanks for taking my question. Good evening. Maybe we can talk a little bit about that Newton revenue. Penetration was up 5% year over year, but revenue is flattish after adjusting for that one-time item last year.

Matthew Lee: Hey, thanks for taking my question. Good evening. Maybe we can talk a little bit about that Newton revenue. Penetration was up 5% year over year, but revenue was flattish after adjusting for that one-time item last year. I would have sort of thought the increase in penetration would have been enough to offset and drive some growth in that business, particularly because of the increase in FMV, but I think you mentioned that there's some nuances there. Can you just help us understand the moving parts of it?

Speaker #5: I would have sort of thought that the increase in penetration would have been enough to offset and drive some growth in that business, particularly because of the increase in FMV.

Speaker #5: But I think you mentioned that there's some nuances there. Can you just help us understand the moving parts of it?

Speaker #2: Sure, yeah. Thanks very much for the question. I'll jump in on the back side of this. Just so everyone on the call knows, I'm unfortunately in an area with intermittent service, so I'm going to have James Ball and Jeff Haig help me out today.

Gary Mauris: Sure. Yeah. Thanks very much for the question. I'll jump in on the backside of this. Just so everyone knows on the call, I'm unfortunately in an area with intermittent service, so I'm going to have James Bell and Geoff Hague help me out today. James, do you want to take the first crack at that, please?

Speaker #2: James, do you want to take the first crack at that, please?

Speaker #5: Sure.

James Bell: Sure. Matt, as we mentioned in Q2 of 2025, we had a revenue adjustment. Q2 2026 compared to Q2 2025. 2025 has a significant amount from that readjustment. Jeff, can you touch on Matt's other part of his question?

Speaker #1: And Matt, as we mentioned, in Q2 2025, we had a revenue adjustment. So Q2 2026, compared to Q2 2025—2025 has a significant amount from that readjustment.

Speaker #1: Jeff, can you touch on the other part of Matt's question?

Speaker #3: Yeah, and that was in relation to sort of normalizing for that adjustment, the movement in revenue. And, yeah, you're correct that adjusting for that, it is relatively flat.

Geoff Hague: Yeah. That was in relation to sort of normalizing for that adjustment, the movement in revenue. Yeah, you're correct that adjusting for that, it is relatively flat. That is the nature of that bucket of revenue, that it is impacted to some degree each quarter based on sort of where the volume goes, where our brokers do their deals or negotiations and changes to contracts with our lender partners. We're not entirely surprised to see some occasional flat quarters. Yeah, it's all dependent upon where our volume goes in any given quarter.

Speaker #3: That is the nature of that bucket of revenue, that it is impacted to some degree each quarter, based on where the volume goes, where our brokers do their deals, or negotiations and changes to contracts with our lender partners.

Speaker #3: So we're not entirely surprised to see some occasional flat quarters. But, yeah, it's all dependent upon where our volume goes in any given quarter.

Speaker #5: So, I mean, I guess I'll ask it another way. If utilization or pantration remains at this level next quarter, we should see growth year over year because assuming the funding volumes are kind of growing as well.

Matthew Lee: I guess I'll ask another way, if utilization or penetration remains at this level next quarter, we should see growth year-over-year, assuming funded mortgage volume are kind of growing as well.

Speaker #3: That is our expectation.

Geoff Hague: That is our expectation.

Speaker #5: Okay, and then maybe just a housekeeping one on Philogix. I think you guys mentioned $15 million to $18 million of EBITDA. Just for our model's sake, how should we think about that on a revenue basis or a margin basis?

Matthew Lee: Okay. Then maybe just a housekeeping one on Filogix. I think you guys mentioned CAD 15 to CAD 18 million of EBITDA. Just for our model's sake, how should we think about that on a revenue basis or a margin basis?

Speaker #1: Yeah, I can take that one. So, Matt, we're probably looking at this—and again, keep in mind that this is about day three with this acquisition, right?

James Bell: Yeah, I can take that one. Matt, probably, we're looking at this, and again, keep in mind that this is about day three with this acquisition, right?

Speaker #1: So, we would—and we don't give guidance—but on that, just to help you with your models, I think what would be fair is we've told the market that they're currently doing $60 billion in funded volume.

Matthew Lee: Sure.

James Bell: We don't give guidance, but on that, just to help you with your models, I think what would be fair is we've told the market that they're currently doing CAD 60 billion in funded volume. To get to 15 to 18, I would think targeting sort of that CAD 55 to 60 billion in funded volume and using a four-and-a-half basis points of revenue per dollar of funded volume, very similar to the Newton Velocity framework.

Speaker #1: So to get to 15 to 18, I would think targeting sort of that $55 to $60 billion in funded volume and using 4.5 basis points of revenue.

Speaker #1: Per dollar of funded volume. Very similar to the Newton velocity framework.

Speaker #5: Okay, that's super helpful, guys. I'll pass the line. Thanks.

Matthew Lee: Okay. That's super helpful, guys. I'll pass the line. Thanks.

Speaker #1: Okay, thank you.

James Bell: Okay. Thank you.

Speaker #4: Your next question is from Gary Ho with Day Jordan's Capital.

Operator 2: Your next question is from Gary Ho with Desjardins Capital.

Operator: Your next question is from Gary Ho with Desjardins Capital.

Speaker #6: Thanks, good afternoon. I think in prior calls you've talked about Gold Rush and Gold Getter. Can you maybe elaborate on Broker Performance Lab? How is this different from the other programs?

Gary Ho: Thanks. Good afternoon. I think in prior calls you've talked about Gold Rush and Goal Getter. Can you maybe elaborate on Broker Performance Lab? How is this different than the other programs, and what does it hope to achieve?

Speaker #6: And what does it hope to achieve?

Speaker #2: Yeah, Gary, thanks for the question. Broker Performance Lab is a new concept where we've really devoted resources and human capital to help with our ongoing training.

Gary Mauris: Yeah, Gary, thanks for the question. Broker Performance Lab is a new concept where we've really devoted resources and human capital to really help with our ongoing training. We saw the results of Goal Getter last year. The feedback in the market was incredible. We expect to continue to see sort of the fruits of those labors. What we've done is put together a more robust, long-term extended training program, number one. Number two, in that same bucket with the Broker Performance Lab, we are building a part technology where we are allowing other smart technologies that connect and integrate well to Velocity that improve the workflows and the efficiencies of brokers. Think about it as a sort of almost an Amazon type or Apple type app store. It's a program that really focuses on the efficiency and ongoing training of the distribution platform.

Speaker #2: So, we saw the results of Gold Getter last year. The feedback in the market was incredible. We expect to continue to see the fruits of those labors.

Speaker #2: So, what we've done is put together a more robust, long-term extended training program—number one—and, number two, in that same bucket, with the broker performance lab.

Speaker #2: We are building a part of the technology where we are allowing other smart technologies that connect and integrate well with Velocity to improve the workflows and the efficiencies of brokers.

Speaker #2: So sort of think about it as a sort of a almost a Amazon-type or Apple-type app store. It's just it's a program that really focuses on the efficiency and ongoing training of the distribution platform.

Speaker #6: Okay, great. That's helpful here. My second question is just on maybe the PhiloLogix acquisition—what assumptions underpin that $15 to $18 million EBITDA outlook?

Gary Ho: Okay, great. That's helpful, Gary. My second question, just on maybe the Filogix acquisition. What assumptions underpins that CAD 15 to 18 million EBITDA outlook? Maybe can you talk about the investment that's required, whether that's expense or capitalized, any expected churn that's in there, and the key KPIs we should use to kind of gauge the success of that acquisition?

Speaker #6: Maybe can you talk about the investment that's required, whether that's expensed or capitalized? Any expected churn that's in there? And the key KPIs we should use to kind of gauge the success of that acquisition?

Speaker #5: Yeah.

James Bell: Yeah. Before we get much further into it, Gary, we probably can't provide much more than saying sort of top line funded volume in that CAD 55 to 60 billion revenue targets at about 4.5 to 5 basis points of revenue per dollar of funded volume, and then similar margins to Velocity. In terms of capital expenditures, we really need to get in and better understand the technology and make some decisions on our long-term goals before we start sort of making conclusions on CapEx. Well, the short of it is it should have a very similar economic profile to Velocity.

Speaker #3: James, I'll only

Speaker #1: We probably can't provide much more than saying sort of top-line funded volume in that $55 to $60 billion range, Gary. We can't get much further into it.

Speaker #1: Revenue targets are at about 4.5 to 5 basis points of revenue per dollar of funded volume, and then similar margins to Velocity.

Speaker #1: In terms of capital expenditures, we really need to get in and better understand the technology and make some decisions on our long-term goals before we start sort of making conclusions on capex.

Speaker #5: Well, the short of it is that it should have a very similar economic profile to Velocity.

Speaker #6: Okay, great. No, thanks for that. And then if I can sneak one more in—hardwood, the $0.5 million EBITDA loss, I think it was bigger than the $0.3 million in Q1.

Gary Ho: Okay, great. No, thanks for that. If I can sneak one more in. Heartwood, the CAD 0.5 million EBITDA loss, I think that was bigger than the CAD 0.3 in Q1. I was expecting that loss to narrow sequentially. Any insight into that, and do you still expect— It sounded like from Geoff’s comment, break even on profitable in the H2. Maybe give us an update on how Heartwood has progressed and maybe just total mortgages under administration currently.

Speaker #6: I was expecting that loss to narrow sequentially. So, any insight into that? And do you still expect— it sounded like, from Jeff's comment— breakeven or profitable in the second half? Maybe give us an update on how hardwood has progressed, and maybe just total mortgages under administration currently?

Speaker #5: Sure, sure. Yeah, Hardwood really is going as planned. In terms of loan size, it's just a little slower in terms of our initial rollout, but you'll see they're doing between $25 million and $40 million a month in loans, Gary.

James Bell: Sure. Yeah. Heartwood really is going as planned. In terms of loan size, it is just a little slower in terms of our initial rollout. You will see they are doing between CAD 25 and CAD 40 million a month in loans, Gary, and break even on the P&L should be at about CAD 350 million of loans. We are at, call it CAD 250, CAD 260 today, right? By sometime in Q4, we should be break-even on a P&L basis. It is

Speaker #5: And breakeven on the P&L should be at about $350 million of loans. And we're at, call it, $250–$260 million today. Right? So by sometime in Q4, we should be breakeven.

Speaker #5: On a P&L basis, so it's...

Speaker #2: Yeah, James. And James, I'll just sort of add to that, guys, provided you guys can hear me okay. The other thing with hardwood, I think, James, you just mentioned it.

Gary Mauris: Yeah, James.

James Bell: Yeah, go ahead.

Gary Mauris: James, I'll just sort of add to that, guys, provided you guys can hear me okay.

James Bell: Yeah.

Gary Mauris: The other thing with Heartwood, I think, James, you just mentioned it. The rollout in British Columbia has been a little slower than anticipated, but hopefully that's starting to ramp up. The other thing that we've done is we've always kept Heartwood as a DLCG exclusive product, so we haven't offered any of those loan services to any of the competitors or the rest of the market. We are going to start doing that. I've just given them the okay. We've had some chats about it recently. Inside of the next 60 days, we will make it available to all other mortgage brokers in Canada, which I think will bode really well for us. The fact that we have Filogix, obviously we can reach a lot of those now by allowing that interface into Filogix so that we can offer a product to the entire market.

Speaker #2: The rollout in British Columbia has been a little slower than anticipated, but hopefully that's starting to ramp up. The other thing that we've done is we've always kept hardwood as a DOCG-exclusive product.

Speaker #2: So, we haven't offered any of those loan services to any of the competitors or the rest of the market. We are going to start doing that.

Speaker #2: I just gave them the okay. We've had some chats about it recently. So, inside of the next 60 days, we will make it available to all other mortgage brokers in Canada, which I think will bode really well for us.

Speaker #2: The fact that we have Filogix, obviously, we can reach a lot of those now by allowing that interface into Filogix, so that we can offer a product to the entire market.

Speaker #2: So we're excited about that and think that will really give us some horsepower.

Gary Mauris: We're excited about that and think that will really give us more star.

Speaker #6: Okay, great. That's exciting. Okay, thanks for taking my questions.

James Bell: Okay, great. That's exciting. Okay, thanks for taking my questions.

Speaker #2: Great. Thanks, Gary.

Gary Mauris: Great. Thanks, Gary.

Speaker #4: Your next question is from Of Fenwick with ATB Cornmark.

Operator 2: Your next question is from Jeff Fenwick with ATB Cormark.

Operator: Your next question is from Jeff Fenwick with ATB Cormark.

Speaker #6: Good afternoon, guys. Maybe another one on Philogix here. You referenced that it's plugged into about 8,000 brokers currently. Now, I know that a bunch of the DLC network uses it as well.

Jeff Fenwick: Good afternoon, guys. Maybe another one on Filogix here. You referenced that it is plugged into about 8,000 brokers currently. Now, I know that a bunch of the DLC network uses it as well. Can you give us a sense of the overlap on that 8,000 between your existing broker base and that total?

Speaker #6: So, can you give us a sense of the overlap on that 8,000 between your existing broker base and that total?

Speaker #2: Yeah, it's actually—I mean, if you look at DLC, just under 90% of all DLC brokers are on Velocity. And, quite frankly, just via that sort of early response, we don't think many of them will go back to Filogix, only because Velocity is a more robust program, right?

Gary Mauris: Yeah, if you look at DLC, just under 90% of all DLC brokers are on Velocity. Quite frankly, just via that sort of early response, we do not think many of them will go back to Filogix only because Velocity is a more robust program, right? It has got things integrated like CRM and AML compliance, things that we will eventually bring to Filogix. The overlap is probably less than 20%. That really is a broad number in terms of a net new to us from a broker overall number count.

Speaker #2: It's got things integrated like CRM and AML compliance—things that we will eventually bring to Philogix. The overlap is probably less than 20%, so that really is a broad number in terms of a net new to us from a broker overall number count.

Speaker #5: Yeah, okay, thanks. That's helpful. And then any thoughts on—I know you're going to run the business separately and allow that user base to continue to run, but are there some technology capabilities tucked inside of Filogix that you might be able to use that knowledge inside of Newton, or vice versa?

Jeff Fenwick: Yeah. Okay, thanks. That's helpful. Any thoughts on, I know you're going to run the business separately and allow that user base to continue to run, are there some technology capabilities tucked inside of Filogix that you might be able to use that knowledge inside of Newton or vice versa? I mean, you did mention the value, Gary, up front of some of the redundancy of the systems, which makes a lot of sense. Are there some other things in there that you might be able to sort of harvest from one or the other?

Speaker #5: You did mention the value, Gary, up front of some of the redundancy of the systems, which makes a lot of sense. But are there some other things in there that you might be able to sort of harvest from one or the other?

Speaker #2: Yeah, no question. Actually, you know what? That's one of the most exciting things about this acquisition. If there's one thing that PhiloLogix has done well for a very long time, I mean, first and foremost, PhiloLogix has got the most robust lender pipe access in Canada.

Gary Mauris: Yeah, no question. Actually, you know what? That's one of the most exciting things about this acquisition. If there's things that Filogix has done well for a very long time, I mean, first and foremost, Filogix has got the most robust lender pipe access in Canada. Velocity is very good, when you're around 34 years, you've built integration to everyone. We think that's going to offset us and give us access to some small lenders in some remote markets that maybe even Velocity doesn't have. Just things on products available through the Filogix network that we didn't have available through our network. There's going to be a lot of opportunity to look at the best protocols and the best offerings from each company, and then roll them out or integrate them with the other one. I mean, there's obviously all the standard back-office synergies.

Speaker #2: Velocity is very, very good, but when you're around 34 years, you've built integration with everyone. So we think that that's going to offset us and give us access to some small lenders and some remote markets that maybe even Velocity—sorry, that Velocity doesn't have.

Speaker #2: But just things on products available through the Philogix network that we didn't have available through our network—there's going to be a lot of opportunity to look at the best protocols and the best offerings from each company, and then roll them out or integrate them with the other ones.

Speaker #2: So, I mean, there's obviously all the standard back office synergies. We're not going to need two sets of payroll and compliance, and two sets of HR, so there's going to be a lot of cost savings, we think.

Gary Mauris: We're not going to need two sets of payroll and compliance and two sets of HR. There's going to be a lot of cost savings, we think. Like anything else, it'll take a little bit of time to realize those, but we're very optimistic about it and very excited. We think actually the purchase of Filogix was extraordinarily accretive long-term for us, and gives us some real positioning in terms of lender and partner relationships.

Speaker #2: But like anything else, it'll take a little bit of time to realize those. But we're very optimistic about it and very excited. We think actually the purchase of Philogix was extraordinarily accretive long-term for us and gives us some real positioning in terms of lender and partner relationships.

Speaker #5: Okay, that's very helpful. And then maybe just one comment here on the state of your existing broker base today—what you're seeing in terms of the recruitment pipeline. The market's been pretty quiet.

Jeff Fenwick: Okay. That's very helpful. Maybe just one comment here, just on the state of your existing broker base today, what you're seeing in terms of the recruitment pipeline. The market's been pretty quiet. Are you seeing just some of the smaller guys sort of just maybe leaving the market, and if they weren't really doing it on a full-time basis? What are the dynamics there, and maybe what are the opportunities in terms of your recruitment pipeline?

Speaker #5: Are you seeing some of the smaller guys maybe just leaving the market, especially if they weren't really doing it on a full-time basis?

Speaker #5: Or what are the dynamics there? And maybe, what are the opportunities in terms of your recruitment pipeline?

Speaker #2: Yeah, I mean, I think the recruitment pipeline is still pretty good. It might have slowed down a little bit. I mean, this time of year, it typically slows down anyway, obviously.

Gary Mauris: Yeah, I mean, I think the recruitment pipeline is still pretty good. It might have slowed down a little bit. I mean, time of year right now, it typically slows down anyway, obviously. Listen, this has been a longer-than-expected, slower housing market. Chris Kay was just saying to me the other day, he's been in this business 35 years, and this is about as deep as it's been in terms of longevity and just a soft housing market. I look at sort of us as a group, and the fact that we're up on a funded volume by 5%, we actually think we're doing great. We're actually really happy about what we're doing. I think that we're cautiously optimistic. As I said before, H2 is usually always a little bit busier than H1.

Speaker #2: But listen, this has been a longer-than-expected, slower housing market. Chris Kay was just saying to me the other day, he's been in this business 35 years, and this is about as deep as it's been in terms of longevity and just a soft housing market.

Speaker #2: So, I look at us as a group and the fact that we're up on our funded volume by 5%—we actually think we're doing great.

Speaker #2: We're actually really happy about what we're doing. So, I mean, I think that we're going to— we're cautiously optimistic. As I said before, the back half of the year is usually always a little bit busier than the front half of the year.

Speaker #2: And I think that we're going to see some broker movement come the fall. I mean, I think there's an opportunity for us. There's a lot of brokers who maybe didn't come over to our company in the past because the major friction point was they had the chain systems.

Gary Mauris: I think that we're going to see some broker movement come the fall. I think there's an opportunity for us. There's a lot of brokers who maybe didn't come over to our company in the past because the major friction point was they had to change systems. If they wanted to be with us, they had to be on Velocity. Now the fact that they're going to be able to come over and choose a system, so if they're on Filogix, they can continue to remain on Filogix, is going to make the ability to transfer that much easier and actually reduce the biggest pain point for most of them.

Speaker #2: If they wanted to be with us, they had to be on Velocity. And now, the fact that they're going to be able to come over and choose a system—so if they're on Filogix, they can continue to remain on Filogix—is going to make the ability to transfer that much easier, and actually reduce the biggest pain point for most of them.

Speaker #5: Yeah, that's great. Okay, I appreciate that.

Jeff Fenwick: Yeah. That's great. Okay, appreciate that color. That's all I had.

Speaker #1: That color . That's all I had . Thanks so much , Jeff

Gary Mauris: Thanks so much, Jeff.

Speaker #2: Your next question is from Stephen Boland with Raymond James.

Operator 2: Your next question is from Stephen Boland with Raymond James.

Operator: Your next question is from Stephen Boland with Raymond James.

Speaker #1: Hey , Stephen . Thanks

Gary Mauris: Hey, Stephen.

Stephen Boland: Thanks. Good evening. Gary, in Q1, you were pretty forthright about you weren't too happy with the expense number. A couple of things that you'd mentioned, I won't go into that.

Speaker #3: Good evening . Gary . In the first quarter , you were pretty forthright about you weren't too happy with the expense . Expense number .

Speaker #3: A couple things that you mentioned . I won't go into that . But yeah , like and now Q2 comes in , you're doing a formal expense review , wondering if there's any targets or , or areas and why formalize it .

Gary Mauris: Yeah

Stephen Boland: Now Q2 comes in, you're doing a formal expense review. Wondering if there's any targets or areas, and why formalize it? I'm just curious. If it's material enough, I guess you formalize it if that's what you want with the results. I'm just curious, what your thoughts are on the expenses.

Speaker #3: I'm just curious , you know , if it's material enough , I guess you formalize it . If you're that's what you want with the results .

Speaker #3: So, I'm just curious what your thoughts are on the expenses.

Speaker #1: Yeah . I mean , I'll give you my comments on it and then I'll turn it over to Jeff . Our James , if they want to make a comment on it .

Gary Mauris: Yeah. I'll give you my comments on it, then I'll turn it over to Geoff or James if they want to make a comment on it. When I would formalize it, we're very hands-on in the business, and quite frankly, in Q1, you remember that I spoke to sort of getting behind or slow to respond on some events that ended up being executed sort of in multiple cities to celebrate our 20th anniversary, which quite frankly, we probably shouldn't have been done. We caught it late, the money was spent. It really gave me pause to just really make sure that every department in all of our business units are talking and that we are looking. When I say formal, we're looking at every area of our business.

Speaker #1: You know , so when I went formalize it , like , you know , I'm , you know , we're very hands on in the business and quite frankly , in Q1 , you remember that , you know , I spoke to , you know , sort of getting behind or slow to respond on some , you know , events that ended up , you know , being executed sort of in multiple cities to celebrate our 20th anniversary , which , quite frankly , you know , we probably shouldn't have been done .

Speaker #1: And we , we caught it late in the money was spent . So , you know , it just , it really gave me pause to , you know , just really make sure that every department and all of our business units are talking and that we are looking .

Speaker #1: And when I say formal , we're looking at every area of our business , we're looking at our HR expenses , we're looking at our technology expense , we're looking at our data expense , we're looking at our credit card expense .

Gary Mauris: We're looking at our HR expenses, we're looking at our technology expense, we're looking at our data expense, we're looking at our credit card expense, we're looking at our compensation expense. I just think it's a really good habit to get into to review it. I've been in business for a very long time, and I also know that early indications when expenses start to show up to a greater degree than what you anticipated or budgeted for, it's very important to jump on it quickly. I took that very serious. I didn't like it. We're focused on improving that and making sure that I have an old saying, we've all heard, a fool and his money soon part. James or Geoff, anybody want to comment on it?

Speaker #1: We're looking at our, you know, compensation expense. I just think it's a really good habit to get into to review it.

Speaker #1: You know , I've been in business for a very , very long time . And , you know , I also know that early indications when expenses start to , you know , you know , show up to a greater degree than what you anticipated or budgeted for .

Speaker #1: You know , it's very important to jump on it quickly . So , you know , I took that very serious . I didn't like it .

Speaker #1: And , you know , we're focused on improving that and making sure that , you know , I have an old saying , right ?

Speaker #1: We've all heard of a fullness of money soon part. James or Jeff, anybody want to comment on that?

Speaker #4: And only, Stephen, the messaging that we wanted to see the shareholders is, we get it—that we're very careful with people's capital, and we don't have a target for how much we want to save, because I think what we really want to do is, we're going through it line by line.

James Bell: Yeah. Only, Stephen, the messaging, what we wanted to say to shareholders is we get it, that we're very careful with people's capital. We don't have a target for how much we want to save, because I think what we really want to do is we're going through our line item. We had a long period of growth, and now this is sort of a reset to say, okay, let's open up every line in the GL and go through and see where we can save money. It's more of a messaging to shareholders that.

Speaker #4: We had a long period of growth, and now this is sort of a reset to say, okay, let's open up every line in the GL and go through and see where we can save money.

Speaker #4: So it's more of a messaging to shareholders that in when , when revenues are harder to come by and harder , tougher housing market that we're paying attention to the little stuff in terms of some of the smaller G&A dollars .

Gary Mauris: Yeah

James Bell: When revenues are harder to come by in a harder, tougher housing market, that we're paying attention to the little stuff in terms of some of the smaller G&A dollars. No, we don't have a formal projection of how much we're trying to save. This is really just saying to shareholders, we respect your capital and we'll do everything it takes in order to better manage our G&A expense.

Speaker #4: So no , we don't have a formal projection of how much we're trying to save . This is really just saying to shareholders , we respect your capital and we'll do everything it takes in order to to better manage our G and a expense .

Speaker #1: And Stephen , let me just add one more point on top of that . Thank you . James , you got to understand that when markets are soft and they're harder , expense becomes that much more .

Gary Mauris: Stephen, let me just add one more point on top of that. Thank you, James. You got to understand that when markets are soft and they're harder, expenses become that much more important. You got to look at it right now. The housing market is down, obviously, so it's slower, number one. The average home price is lower, so the average funded mortgage volume in total is lower, which brings down revenues. There's a lot of uncertainty sort of in the global macroeconomics. We're seeing a lot more people take 3-year mortgage terms than 5-year mortgage terms, so that impacts our top-line revenue. Look at all those things and all those factors and partner that with just an overall soft market and slower market sentiment. We got to be on top of expenses.

Speaker #1: Sorry guys . I'm sorry . Expenses , expenses become you know , that much more important . So you got to look at it right now .

Speaker #1: So you know the housing market is down obviously . So it's slower . Number one the average home price is lower . So the average mortgage volume and total is lower , which brings down revenues .

Speaker #1: There's a lot of uncertainty , you know , sort of in the global macro economics . So we're seeing a lot more people take three year mortgage terms than five year mortgage terms .

Speaker #1: So that impacts , you know , our top line revenue . So , you know , look at all those things and all those factors and , and , you know , partner that with just an overall soft market and slower market sentiment , we got to be on top of expenses .

Speaker #3: Okay .

Stephen Boland: Okay. That's good.

Speaker #5: Yeah . And I'll add , I think the , the formalization of this project is , as James mentioned , really getting all of us , especially the decision makers , presidents , that kind of thing , really kind of pouring through the general ledger level of detail , which isn't something we haven't done , which is something we haven't done a lot of recently .

Geoff Hague: Yeah, I'll add, I think the formalization of this project is, as James mentioned, really getting all of us, especially the decision-makers, presidents, VPs, that kind of thing, really kind of poring through the general ledger level of detail, which is something we haven't done a lot of recently. That's where the formal aspect of making this kind of a real initiative with measurements and outcomes is coming from.

Speaker #5: So that's where the formal aspect of making this kind of a real initiative, with measurements and outcomes, is coming from. Okay.

Gary Mauris: Yeah.

Stephen Boland: Okay. Sorry, go ahead.

Speaker #3: And sorry, go ahead.

Speaker #1: No , that's good .

Gary Mauris: No, that's good.

Speaker #3: Okay . So second question is , I mean , it's only been a few days . But you all obviously know the big brokers that exclusively , whether they're individuals or whether they're part of a team or a regional , that use biologic exclusively , what's the reaction been from those brokers ?

Stephen Boland: Okay. Second question is, it's only been a few days, but you all obviously know the big brokers that exclusively, whether they're individuals or whether they're part of a team or a regional that use Filogix exclusively. What's the reaction been from those brokers? Again, I know it's early days.

Speaker #3: And again, I know it's early days.

Speaker #1: So for most of the brokers , reaction has been very positive . You know , most brokers look at it and they go , hey , if I go to my office in the morning and I can submit my deal to Scotiabank or TD , and I don't have to change my system .

Gary Mauris: For most of the brokers, reaction's been very positive. Most brokers look at it and they go, "Hey, if I go to my office in the morning and I can submit my deal to Scotiabank or TD, and I don't have to change my system, and if you're giving me absolute certainty that my data is my data and my customers are my customers," they've been very positive. Right? It's kind of like I turn on my light in my house, and as long as the light goes on and it works fine, I'm happy. I turn on my tap and hot water comes out, and I'm satisfied. Doesn't matter necessarily who owns the infrastructure. There will be some pushback, and there has been some pushback from some of our major competitors that have let their brokers operate in any platform they want under the guise of choice.

Speaker #1: And if you're giving me absolute certainty that my data is my data and my customer is my customer, they've been very positive, right?

Speaker #1: And , you know , it's kind of like , you know , I turn on my light before I go , you know , in my house .

Speaker #1: And as long as the light goes on and it works fine , I'm , I'm happy . I turn on my tap and hot water comes out and I'm satisfied .

Speaker #1: Doesn't matter necessarily who owns the the infrastructure , you know , there will be some pushback . And there has been some pushback from some some of our major competitors that , you know , have let their brokers operate in any platform they want under the guise of choice .

Speaker #1: And now all of a sudden they're looking at this and they're going , okay , this is owned by , you know , a major competitor .

Gary Mauris: Now all of a sudden, they're looking at this and they're going, "Okay, this is owned by a major competitor." At the end of the day, here's what we know. We know changing mortgage brokers' habits, number one, is very hard. It took us, while owning Velocity, 9 years to get up to 90%. Why? Because brokers don't like change. It's just like coming off your BlackBerry many years ago. It took a very long time to migrate people to other systems. Overall, we've been very happy with the response to it. The other thing that I'll mention, and I'm not going to go in too much detail, there's not a company out there in Canada, any broker, any network, that doesn't have reliance on Filogix.

Speaker #1: But at the end of the day, here's what we know. We know changing mortgage broker habits, number one, is very hard.

Speaker #1: It took us well , owning velocity nine years to get up to 90% . Why ? Because brokers don't like change . It's just like , you know , coming off your BlackBerry many years ago , it took a very long time to migrate people to , you know , other systems .

Speaker #1: So , you know , overall , we've been very happy with the response to it . You know , the other thing that I'll mention , I'm not going to go into too much detail .

Speaker #1: There's not a company out there in Canada , any broker or any network that doesn't have reliance on Fi logics , right ? Not only for the pipes right now , but also for the connection so that they can retrieve the data to actually do their own compliance and do payroll .

Gary Mauris: Not only for the pipes right now, but also for the connection so that they can retrieve the data to actually do their own compliance and do payroll. It's not as easy as some people would think to migrate on and off. Second thing that's really important is that we'll take this and our job is to make it a world-class platform. If we can get people to say, "Hey, I'm using this already. It's been very good. I've been using it for 25 years. I'm a top broker in Canada," and we can promise them the only thing that's going to happen is this technology is going to get better, we think we're going to do a very good job on retention.

Speaker #1: So, it's not as easy as some people would think to migrate on and off. Second thing that's really important is that we'll take this, and our job is to make it a world-class platform.

Speaker #1: So if we can get people to say , hey , I'm using this already , it's been very good . I've been using it for 25 years .

Speaker #1: I'm a top broker in Canada, and we can promise them the only thing that's going to happen is this technology is going to get better.

Speaker #1: We think we're going to do a very good job in retention.

Speaker #3: Okay. That's all I have. Thanks very much.

Stephen Boland: Okay. That's all I had. Thanks very much.

Speaker #2: Again, if you would like to ask a question, press star-one on your telephone keypad. Your next question comes from Jamie Golan with National Bank Capital Markets.

Operator 2: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Jaime Gornail with National Bank Capital Markets.

Operator: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Jaime Gornail with National Bank Capital Markets.

Speaker #3: Yeah , thanks .

Jaime Gornail: Yeah, thanks. Just wanted to quickly follow up on a couple items. The cost savings initiative, this is an end-of-year initiative, we expect to potentially hear some of the savings that you have found in going line by line through the business sort of with Q4 results. Would that be about the right timing to sort of think about an update on that front?

[Analyst] (National Bank Capital Markets): Yeah, thanks. Just wanted to quickly follow up on a couple items. The cost savings initiative, this is an end-of-year initiative, we expect to potentially hear some of the savings that you have found in going line by line through the business sort of with Q4 results. Would that be about the right timing to sort of think about an update on that front?

Speaker #6: I just wanted to quickly follow up on a couple of items . The the cost savings initiative . This is a end of year initiative .

Speaker #6: So we expect to potentially hear some of the , I guess the savings that you have found in , in going line by line through the business , sort of with with Q4 results , would that be about the right timing to sort of think about an update on that front ?

Speaker #4: Yeah . And I'll take that one . It's probably we won't have any far . You'll just see it in the results , right ?

James Bell: Yeah, James, I'll take that one. Probably we won't have any. You'll just see it in the results, right? You'll just see that as general improvements in our G&A, but I'm not sure we're committing to sort of come out with specifically how much we saved. This is sort of broad stroke savings, like everything from how do we approach reimbursing employees for cell phone use to better, tighter protocols on things like dining out, marketing, and things. Again, the formalization part of this is just making everyone in our company aware of every dollar we spend has to be benefiting our shareholders.

Speaker #4: Like we're not , we're not going to come back with , you know , you'll just see that as general improvements in our G&A .

Speaker #4: But I'm not sure we're committing to sort of come out with specifically how much we saved . This is sort of broad strokes savings , like everything from , you know , how do we approach reimbursing employees for cell phone use to better , tighter protocols on things like dining out and marketing and things .

Speaker #4: So again, the formalization part of this is just making everyone in our company aware that every dollar we spend has to be benefiting our shareholders.

Speaker #6: Yeah . Okay . Got it . And then if I just go back to the revenue side of the business , you know , you know , franchise revenues and brokerage revenues , percentage of funded volumes , you know , a little bit down sequentially .

Jaime Gornail: Yeah. Okay. Got it. If I just go back to the revenue side of the business. Franchise revenues and brokering revenues, percentage of funded volumes a little bit down sequentially, but kind of in line with what we saw at Q2. Is it a seasonal thing or was there something else that was just flowing through there from a mix standpoint that we should think about this quarter that might revert in Q3, Q4?

[Analyst] (National Bank Capital Markets): Yeah. Okay. Got it. If I just go back to the revenue side of the business. Franchise revenues and brokering revenues, percentage of funded volumes a little bit down sequentially, but kind of in line with what we saw at Q2. Is it a seasonal thing or was there something else that was just flowing through there from a mix standpoint that we should think about this quarter that might revert in Q3, Q4?

Speaker #6: But , you know , kind of in line with what we saw at Q2 , is it a seasonal thing or was there something else that was just flowing through there from a mix standpoint that we should think about this quarter that might revert in , in Q3 , Q4 .

Speaker #4: Sorry, on a funded volume or on a revenue?

James Bell: Sorry, on a funded volume or on a revenue?

Speaker #6: Revenues, like on a rate basis.

Jaime Gornail: Revenues, like on a rate basis.

[Analyst] (National Bank Capital Markets): Revenues, like on a rate basis.

Speaker #4: Yeah . And revenues and Jeff , feel free to tag in this one , but the revenues , it's really a collection of multiple different , like how we generate revenue is based on where's the volume going to internally and which brokerages , because sometimes we'll have a very large brokerage doing a lot of volume , but they may not have the same deal as another brokerage .

James Bell: Yeah. Revenues, and Geoff, feel free to tag in on this one, the revenues, it is really a collection of multiple different. How we generate revenue is based on where the volume is going internally in which brokerages. Sometimes we will have a very large brokerage doing a lot of volume, but they may not have the same deal as another brokerage in terms of their royalty structure. That creates different revenue for us. The same with lenders. That not all contracts are the same. Where the volume is going and who it is being done by creates different changes in revenue for us. Somewhat it is a function of where did the volume go this quarter.

Speaker #4: Right . In terms of their royalty structure . And so that creates different revenue for us . The same with lenders , right ?

Speaker #4: Not all contracts are the same, so where the volume is going and who it's being done by creates different changes in revenue for us.

Speaker #4: So somewhat , it's a function of where did the volume go this quarter ? And this quarter was a few events happening all at the same time in terms of where did that volume go , which resulted in compression on our revenue line as , as it relates to the funded volume line , does that make sense ?

James Bell: This quarter was a few events happening all at the same time in terms of where did that volume go, which resulted in compression on our revenue line as it relates to the funded volume line. Does that make sense?

Speaker #4: Yep . So going forward , you may not see the same level of compression . If the volume was to go to different lenders , which may have different deals with us .

Jaime Gornail: Yep. Yeah.

[Analyst] (National Bank Capital Markets): Yep. Yeah.

James Bell: Going forward, you might not see the same level of compression if the volume was to go to different lenders, which may have different deals with us.

Speaker #6: Okay , great . And then what can you add about , you know , sort of broker acquisition standpoint terms of those incentives , any flow through in , in this quarter Larger than what we've seen in previous quarters ?

Jaime Gornail: Okay, great. What can you add about broker acquisition standpoint in terms of those incentives? Any flow through in this quarter larger than what we've seen in previous quarters? Maybe tie that into the Filogix transaction. Is there a potential to see more of that cash incentive strategy play out to bring those Filogix brokers over? Or maybe you penetrate that part of the market a little bit more on the non-Newton side of the business?

[Analyst] (National Bank Capital Markets): Okay, great. What can you add about broker acquisition standpoint in terms of those incentives? Any flow through in this quarter larger than what we've seen in previous quarters? Maybe tie that into the Filogix transaction. Is there a potential to see more of that cash incentive strategy play out to bring those Filogix brokers over? Or maybe you penetrate that part of the market a little bit more on the non-Newton side of the business?

Speaker #6: And then maybe tie that into the mix transaction . Is there , is there a potential to see more of that cash incentive Strategy play out to bring those biologics brokers over , or maybe penetrate that that part of the market a little bit more on the , on the , on the , the non Newton side of the business .

Speaker #1: I can take that one, James.

Gary Mauris: I can take that one, James.

Speaker #6: Yeah , yeah .

Jaime Gornail: Yeah.

[Analyst] (National Bank Capital Markets): Yeah.

Gary Mauris: Yeah. It's just sort of like on my last comment that I made. Listen, we're always in recruitment mode. It's the nature of our business. We're always talking to people. With the Filogix part of the market, as I said a minute ago, it makes it much easier for a broker who's using that platform to come join one of our teams right now. I wasn't exaggerating when I said it's really hard to change broker habits, and there's a lot of people that are just dug in, and it doesn't matter how much they'd like to come to one of our brands, won't come because they'd have to change the technology. I think it's going to absolutely help us. We're in the middle of summer, so when you talk about the next quarter, are we going to see massive movement next quarter?

Speaker #1: It's just sort of like on my last comment that I made , you know , listen , we're always in , you know , recruitment mode .

Speaker #1: It's , it's the nature of our business . So we're always talking to people and , you know , with the largest part of the market , as I said a minute ago , it makes it much easier for a broker who's using that platform to come join one of our teams right now .

Speaker #1: And, you know, I wasn't exaggerating when I said it's really hard to change broker habits. There are a lot of people that are just dug in, and it doesn't matter how much they'd like to come to one of our brands—they won't come because they'd have to change the technology.

Speaker #1: So , you know , I think it's going to absolutely help us . You know , we're in the middle of summer . So when we talk about , you know , the next quarter , are we going to see , you know , massive , you know , movement in next quarter ?

Speaker #1: The answer would be no . Probably because when we do bring these teams over and they do it normally takes sort of , you know , six months to start to see that volume coming on board because they're running previous volume through their old pipes , you know , before they can transfer , you know , any of that new business onto onto our books .

Gary Mauris: The answer would be no, probably. When we do bring these teams over and they do, it normally takes sort of six months to start to see that volume coming on board because they're running previous volume through their old pipes before they can transfer any of that new business onto our books. Do I think it's going to help us long term? Absolutely, it's going to help us in terms of recruiting.

Speaker #1: But do I think it's going to help us long term? Absolutely. It's going to help us in terms of recruiting.

Speaker #6: Okay, great. Thank you.

Jaime Gornail: Great. Thank you.

[Analyst] (National Bank Capital Markets): Great. Thank you.

Speaker #1: Awesome. Thanks very much, guys.

Gary Mauris: Awesome. Thanks very much, guys.

Speaker #2: Your next question is a follow-up from Matthew Lee with Canaccord Genuity.

Operator 2: Your next question is a follow-up from Matthew Lee with Canaccord Genuity.

Operator: Your next question is a follow-up from Matthew Lee with Canaccord Genuity.

Speaker #4: Hey, I just have a follow-up question on the revenue rates. You sort of mentioned that it depends on which broker it—brokerage—it goes to in terms of the volume.

Matthew Lee: Yeah. Just a follow-up question on the revenue rates. You sort of mentioned that it depends on which brokerage it goes to in terms of the volume. Would it be fair to say larger brokerages generally have better negotiated rates, or is there some way for us to think about the long-term trend as we look into the back half of the year in 2027?

Speaker #4: Would it be fair to say larger brokers , brokerages generally have , you know , negotiated rates , or is there some way for us to think about the long term trend ?

Speaker #4: And as we look into the back half of the year in 27 ? Yeah , I think it's just different brands have different they're different structures , right ?

James Bell: Yeah, Matthew, it's just different brands have different structures, right? Each brand has a different royalty structure. They're similar, but they're not exactly the same. Each of those brands comes with a different level of support as well, right? Where the volume falls internally drives some of those variances in revenue. On any quarter, you may have the volume fall at, say, DLC, which may be a higher royalty revenue rate than maybe at MCC. It makes it very difficult to predict the rest of the year because we don't know which lenders and which brokerages are going to step up and do that volume. We would expect more of a reversion to what we were doing in the previous quarters going forward in Q3 and Q4.

Speaker #4: So different . Each brand has a different royalty structure . They're similar , but they're not exactly the same . And each of those brands comes with a different level of support as well .

Speaker #4: Right ? So where the volume falls internally drives some of those variances in revenue . So in any quarter , you may have the volume , volume , fall at , say , DLC , which may be a higher royalty revenue rate than maybe at MCC .

Speaker #4: So it makes it very difficult to predict the rest of the year because we don't know which lenders and which brokers, which brokerages, are going to step up and do that volume.

Speaker #4: We would expect more of a reversion to what we were doing in the previous quarters going forward in Q3 and Q4.

Speaker #6: Yeah .

Speaker #1: And the other thing I'd add , the other thing I'd add to that , you know , just really quickly is that on some of our , you know , lenders , there is stretch stark targets or stretch goals , whether it's , you know , additional , you know , incentives .

Gary Mauris: Yeah, the other thing I'd add to that just really quickly is that on some of our lenders, there is stretch targets or stretch goals where there's additional incentives. If you have a softer market and you're not hitting some of those stretch goals, sometimes expected revenue could come in a little bit short than what we anticipated. It's a moving target. It's never a perfect science.

Speaker #1: And if you have a softer market , you're not hitting some of those stretch goals . Sometimes , you know , expected revenue could come in a little bit shorter than what we anticipated .

Speaker #1: So , you know , it's a moving target . It's never a perfect science . Okay .

Matthew Lee: Okay, fair enough. Thanks.

Speaker #4: Fair enough .

Speaker #6: Thanks

Speaker #2: At this time, there are no further questions. I'll now turn the call back over to Mr. Morris for any closing remarks.

Operator 2: At this time, there are no further questions. I'll now turn the call back over to Mr. Mauris for any closing remarks.

Operator: At this time, there are no further questions. I'll now turn the call back over to Mr. Mauris for any closing remarks.

Speaker #3: Yeah .

Speaker #1: I would just say thanks to thanks to all of you . And thanks for all the questions here . We really are excited about this .

Gary Mauris: Yeah, I would just say thanks to all of you, and thanks for all the questions here. We really are excited about Filogix. We think it's a very strategic business. For how we got here and got through this process and ended up with this business, we are very excited about the multiple that we paid for it. We think that it's going to be very accretive long-term, and it's going to give us some great insight. There's this whole data piece that we haven't spoken about, which we think is going to be very instrumental and helpful to our business going forward, not only from a strategic standpoint, but also from a revenue standpoint. I'd leave it at that, and thank you guys very much for your calls, your questions.

Speaker #1: We think it's a very strategic business . And , you know , and for , you know , how we got here and got to this process and ended up with , you know , this business , we are very excited about , you know , the multiple that we paid for it .

Speaker #1: We think that it's going to be very accretive long term , and it's going to give us some great insight . There's this whole , you know , data piece that we haven't spoken about , which , you know , we think is going to be very instrumental and helpful to our business .

Speaker #1: You know , going forward , not only from a strategic standpoint , but also from a revenue standpoint . So I'd leave it at that .

Speaker #1: And thank you guys very much for your calls, your questions.

Operator 2: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect.

Q2 2026 Dominion Lending Centres Inc Earnings Call

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