Vancouver - Diversified Royalty Corp. (TSX: DIV and DIV.DB.A) (the 'Corporation' or 'DIV') is pleased to announce its financial results for the three months ('Q4 2023') and year ended December 31, 2023.
Highlights The weighted average organic royalty growth1 of DIV's diversified royalty portfolio was 6.8% in Q4 2023 and 8.4% for the year ended December 31, 2023, compared to 8.6% in Q4 2022 and 11.6% for the year ended December 31, 2022. Revenue was $16.4 million in Q4 2023 and $56.5 million for the year ended December 31, 2023, up 28.9% and 25.0%, respectively, compared to $12.7 million in Q4 2022 and $45.2 million for the year ended December 31, 2022. Adjusted revenue1 of $17.7 million in Q4 2023 and $61.6 million for the year ended December 31, 2023, up 26.4% and 22.7%, respectively, compared to $14.0 million in Q4 2022 and $50.2 million for the year ended December 31, 2022. Distributable cash1 of $10.4 million in Q4 2023 and $38.1 million for the year ended December 31, 2023, up 11.5% and 18.0%, respectively, compared to $9.3 million in Q4 2022 and $32.3 million for the year ended December 31, 2022. Payout ratio1 of 84.2% in Q4 2023 on dividends of $0.0609 per share and 90.2% for the year ended December 31, 2023, on dividends of $0.241 per share, compared to 82.2% in Q4 2022 on dividends of $0.0582 per share and 86.8% for the year ended December 31, 2022, on dividends of $0.2233 per share. Effective May 1, 2023, 5 new locations were added to the Mr. Lube + Tires royalty pool. On October 4, 2023, DIV closed a trademark acquisition and royalty agreement with BarBurrito Restaurants Inc. ('BarBurrito') in Canada, adding an eighth royalty stream to DIV's portfolio (the 'BarBurrito Acquisition'). In addition, subsequent to the year ended December 31, 2023, on February 23, 2024, DIV closed its bought deal public offering of 20,320,500 common shares for gross proceeds of $54.0 million, including 2,650,500 common shares issued pursuant to the full exercise of the over-allotment option, at a price of $2.66 per common share. The net proceeds were primarily used for the full repayment of outstanding amounts under DIV's acquisition credit facility, which funds were drawn by DIV to partially finance the BarBurrito Acquisition
In Q4 2023, DIV generated $16.4 million of revenue compared to $12.7 million in Q4 2022. After taking into account the DIV Royalty Entitlement1 (defined below) related to DIV's royalty arrangements with Nurse Next Door Professional Homecare Services Inc. ('Nurse Next Door'), DIV's adjusted revenue was $17.7 million in Q4 2023, compared to $14.0 million in Q4 2022. Adjusted revenue increased primarily due to positive trends at Mr. Lube + Tires, Mr. Mikes and Oxford, as well as the annual contractual increases at Stratus, Nurse Next Door and Sutton as discussed in further detail below. In addition, incremental revenue was generated from the addition of four net new locations to the Mr. Lube Canada Limited Partnership ('Mr. Lube + Tires') royalty pool on May 1, 2022, the addition of five new locations to the Mr. Lube + Tires royalty pool on May 1, 2023, the incremental royalty income generated from Stratus (defined below) beginning on November 15, 2022, plus the incremental royalty income generated from BarBurrito (defined below) beginning on October 4, 2023.
Fourth Quarter Commentary and Outlook Sean Morrison, President and Chief Executive Officer of DIV stated, 'We are pleased to announce that Q4 2023 was another record quarter for DIV, our best ever quarter in terms of adjusted revenues. The year ended December 31, 2023, was also a record year for DIV. The fourth quarter of 2023 once again saw strong performances across most of our royalty partners. Mr. Lube + Tires, our largest royalty partner, continues to produce strong double-digit growth, generating SSSG6 of 14.0%, Mr. Mikes generated positive SSSG6 results of 7.3%, while Oxford was flat. Royalty partners Nurse Next Door, Sutton and Stratus made their fixed royalty payments. DIV continued to see a decrease in royalty income from AIR MILES; however, the quarter-over-quarter trend indicates the business is stabilizing. DIV's Q4 2023 weighted average organic royalty growth6 was 6.8%, once again demonstrating the overall strength of DIV's diversified portfolio. DIV produced record results in fiscal 2023 and Mr. Lube + Tires, Oxford and Mr. Mikes are positioned for continued growth in fiscal 2024 with DIV's largest royalty partner, Mr. Lube + Tires, once again leading the way. The addition of BarBurrito as our eighth royalty partner was another highlight as DIV continues to build further diversification into its portfolio. In 2024, DIV continues to seek out potential transactions in the Canadian and US markets with a focus on educating potential US royalty partners about DIV's unique trademark and royalty structure.'
Distributable Cash and Dividends Declared In Q4 2023 and for the year ended December 31, 2023, distributable cash7 increased to $10.4 million ($0.0723 per share) and $38.1 million ($0.2671 per share), respectively, compared to $9.3 million ($0.0707 per share) and $32.3 million ($0.2571 per share) respectively for the same respective periods in 2022. The increase in distributable cash7 for the quarter was primarily due to higher adjusted revenue7 (including payments from Mr. Mikes representing partial payment of deferred contractual royalty fees and deferred contractual management fees described above) and lower professional fees, offset by higher interest and general and administrative expenses. The increase in distributable cash7 for the year was primarily due to higher adjusted revenue, partially offset by higher interest expense, general and administrative expenses and professional fees. The increase in distributable cash per share7 for the quarter and year ended December 31, 2023, were primarily due to the increases in distributable cash7 , partially offset by a higher weighted average number of common shares outstanding. In Q4 2023 and for the year ended December 31, 2023, the payout ratio7 was 84.2% and 90.2%, respectively, compared to the payout ratios of 82.2% and 86.8%, for the same respective periods in 2022. The increase was primarily due to higher dividends declared per share, partially offset by higher distributable cash per share8 . 7. Adjusted revenue and distributable cash are non-IFRS financial measures and distributable cash per share and payout ratio are non-IFRS ratios - see 'Non-IFRS Measures' below.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in the business of acquiring top-line royalties from well-managed multilocation businesses and franchisors in North America. DIV's objective is to acquire predictable, growing royalty streams from a diverse group of multi-location businesses and franchisors. DIV currently owns the Mr. Lube + Tires, AIR MILES, Sutton, Mr. Mikes, Nurse Next Door, Oxford Learning Centres, Stratus Building Solutions and BarBurrito trademarks. Mr. Lube + Tires is the leading quick lube service business in Canada, with locations across Canada. AIR MILES is Canada's largest coalition loyalty program. Sutton is among the leading residential real estate brokerage franchisor businesses in Canada. Mr. Mikes operates casual steakhouse restaurants primarily in western Canadian communities. Nurse Next Door is a home care providers with locations across Canada and the United States as well as in Australia. Oxford Learning Centres is one of Canada's leading franchisee supplemental education services. Stratus Building Solutions is a leading commercial cleaning service franchise company providing comprehensive environmentally friendly janitorial, building cleaning, and office cleaning services primarily in the United States. BarBurrito is the largest quick service Mexican restaurant food chain in Canada. DIV's objective is to increase cash flow per share by making accretive royalty purchases and through the growth of purchased royalties. DIV intends to continue to pay a predictable and stable monthly dividend to shareholders and increase the dividend over time, in each case as cash flow per share allows.
Forward-Looking Statements
Certain statements contained in this news release may constitute 'forward-looking information' within the meaning of applicable securities laws that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. The use of any of the words 'anticipate', 'continue', 'estimate', 'expect', 'intend', 'may', 'will', 'project', 'should', 'believe', 'confident', 'plan' and 'intend' and similar expressions are intended to identify forward-looking information, although not all forward-looking information contains these identifying words. Specifically, forward-looking information in this news release includes, but is not limited to, statements made in relation to: DIV's belief that Mr. Lube + Tires, Oxford and Mr. Mikes are positioned for continued growth in fiscal 2024; DIV continuing in 2024 to seek out potential transactions in Canadian and US markets with a focus on educating potential US royalty partners about DIV's unique trademark and royalty structure; DIV's intention to pay monthly dividends to shareholders and DIV's corporate objectives. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events, performance, or achievements of DIV to differ materially from those anticipated or implied by such forwardlooking information. DIV believes that the expectations reflected in the forward-looking information included in this news release are reasonable but no assurance can be given that these expectations will prove to be correct. In particular, risks and uncertainties include: DIV's royalty partners may not make their respective royalty payments to DIV, in whole or in part; the decline in royalties received under the AIR MILES licenses could cause AM LP to be required to make partial or full repayment of the outstanding principal amount under its credit agreement, or cause AM LP to be in default under its credit agreement; current positive trends being experienced by certain of DIV's royalty partners (and their respective franchisees) may not continue and may regress; DIV and its Royalty Partners performance in 2024 may not meet management's expectations; DIV may not be successful in completing any further royalty transactions in Canada or the U.S.; DIV may not be able to make monthly dividend payments to the holders of its common shares; dividends are not guaranteed and may be reduced, suspended or terminated at any time; or DIV may not achieve any of its corporate objectives. Given these uncertainties, readers are cautioned that forward-looking information included in this news release is not a guarantee of future performance, and such forward-looking information should not be unduly relied upon. More information about the risks and uncertainties affecting DIV's business and the businesses of its royalty partners can be found in the 'Risk Factors' section of its Annual Information Form dated March 21, 2024 and in DIV's management's discussion and analysis for the three months and year ended December 31, 2023, copies of which are available under DIV's profile on SEDAR+ at www.sedarplus.com. In formulating the forward-looking information contained herein, management has assumed that DIV will generate sufficient cash flows from its royalties to service its debt and pay dividends to shareholders; lenders will provide any necessary waivers required in order to allow DIV to continue to pay dividends; lenders will provide any other necessary covenant waivers to DIV and its royalty partners; the performance of DIV's royalty partners will be consistent with DIV's and its royalty partners' respective expectations; recent positive trends for certain of DIV's royalty partners (including their respective franchisees) will continue and not regress; AIR MILES will be successful in attracting more new loyalty partners going forward; the businesses of DIV's respective Royalty Partners will not suffer any material adverse effect and the business and economic conditions affecting DIV and its royalty partners will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, general levels of economic activity and regulations. These assumptions, although considered reasonable by management at the time of preparation, may prove to be incorrect.
Contact:
Sean Morrison
President and Chief Executive Officer Diversified Royalty Corp.
Tel: (236) 521-8470
DIVERSIFIED ROYALTY CORP. 
