Mr. Sean Morrison reports

DIVERSIFIED ROYALTY CORP. ANNOUNCES PRELIMINARY Q4 2021 RESULTS FOR ITS ROYALTY PARTNERS

Diversified Royalty Corp. has released the preliminary results for its royalty partners for the three months ended Dec. 31, 2021 (Q4 2021).

Mr. Lube fourth quarter results

Mr. Lube Canada LP generated same-store sales growth (SSSG) of 20.7 per cent for the Mr. Lube stores in the royalty pool for Q4 2021, compared with SSSG of 1.1 per cent for the three months ended Dec. 31, 2020 (Q4 2020). Mr. Lube generated SSSG of 15.8 per cent for the Mr. Lube stores in the royalty pool for the 12 months ended Dec. 31, 2021, compared with SSSG of minus 4.4 per cent for the 12 months ended Dec. 31, 2020. Mr. Lube generated SSSG of 21.5 per cent and 10.4 per cent for the Mr. Lube stores in the royalty pool for the three months and year ended Dec. 31, 2021, respectively, compared with the same periods in 2019. As government restrictions put in place to fight the COVID-19 pandemic relaxed in 2021 compared with 2020 and Canadians drove more, Mr. Lube experienced favourable trends in its business.

Diversified Royalty expects to report that aggregate royalty income and management fees of $5.8-million were generated from Mr. Lube in Q4 2021, an increase of 38 per cent compared with Q4 2020. The increase in royalty income and management fees was primarily due to the increase in SSSG for Q4 2021, the addition of 13 new stores to the Mr. Lube royalty pool and the 0.5-per-cent increase to the Mr. Lube royalty rate on May 1, 2021.

SSSG is a non-IFRS (international financial reporting standards) measure.

Air Miles fourth quarter results

Loyalty Ventures Inc., the parent company of LoyaltyOne Co., issued a news release earlier today regarding the Q4 2021 and year ended Dec. 31, 2021, performance of the Air Miles reward program, announcing that: (i) Air Miles reward miles issued decreased by 6.7 per cent in Q4 2021 and 5.9 per cent for the year ended Dec. 31, 2021, due to the non-renewal of two sponsors and their exit from the program in the first quarter of 2021; (ii) Air Miles reward miles redeemed increased by 27.8 per cent in Q4 2021 and 12.1 per cent for the year ended Dec. 31, 2021, reflecting continued strength in the merchandise category and positive momentum early in the quarter for travel bookings, before the emergence of the Omicron variant in November, 2021.

Diversified Royalty expects to report that royalty income of $1.8-million was generated from the Air Miles licences in Q4 2021, a decrease of $200,000 (8.7 per cent) compared with Q4 2020. For the year ended Dec. 31, 2021, Diversified Royalty expects to report royalty income of $6.6-million, a decrease of $500,000 (6.5 per cent) compared with the year ended Dec. 31, 2020. Diversified Royalty's royalty payment is derived from several Air Miles metrics, with Air Miles reward miles issued being the primary metric, and other metrics including Air Miles reward miles redeemed, service revenue, commissions and promotional items, all of which affect quarterly variability.

Sutton fourth quarter results

Diversified Royalty expects to report royalty income and management fees of $1.1-million were generated from Sutton Group Realty Services Ltd. in Q4 2021, compared with $1.0-million in Q4 2020. Since June, 2020, Diversified Royalty has been collecting 100 per cent of the fixed royalty and management fee payments from Sutton. The fixed royalty payable by Sutton increases at a rate of 2.0 per cent per year, with the most recent increase effective July 1, 2021.

Oxford Learning Centres fourth quarter results

Diversified Royalty expects to report that royalty income and management fees of $1.0-million were generated from Oxford Learning Centres Inc. in Q4 2021, compared with $900,000 in Q4 2020.

Oxford locations in the Oxford royalty pool generated SSSG (on a constant-currency basis) of 14.0 per cent in Q4 2021, compared with SSSG of minus 23 per cent in Q4 2020. Oxford's SSSG for the year ended Dec. 31, 2021, was 9.5 per cent, compared with minus 26 per cent for the period from Feb. 20, 2020, the acquisition date of the Oxford rights, to Dec. 31, 2020. Oxford locations in the Oxford royalty pool generated SSSG (on a constant-currency basis) of minus 11.7 per cent and minus 13.4 per cent for the three months and year ended Dec. 31, 2021, compared with the same periods in 2019 (on a pro forma basis, had the Oxford transaction closed on Jan. 1, 2019). In 2020, Oxford's SSSG was negatively impacted by the COVID-19 pandemic, which resulted in the temporary suspension of in-centre services at a majority of its locations predominantly in Ontario, its largest market. In 2021, government-mandated COVID-19 restrictions began to relax and Oxford saw a transition back to in-person tutoring for many locations. However continuing capacity constraints, predominantly in Ontario, continue to limit in-person services.

Mr. Mikes fourth quarter results

The majority of Mr. Mikes Restaurants Corp. restaurants have been open for in-restaurant dining at a reduced capacity since mid-June, 2021. Over all, SSSG in Q4 2021 for the Mr. Mikes restaurants in the royalty pool, including stores that were temporarily closed due to the COVID-19 pandemic, was 9.3 per cent, compared with Q4 2020, and minus 26.4 per cent, compared with Q4 2019. SSSG for the year ended Dec. 31, 2021, for the Mr. Mikes restaurants in the royalty pool was 6.2 per cent, compared with the year ended Dec. 31, 2020, and minus 28.4 per cent, compared with the year ended Dec. 31, 2019.

Diversified Royalty expects to report that royalty income and management fees of $1.0-million were generated from Mr. Mikes in Q4 2021, compared with $800,000 in Q4 2020. Diversified Royalty granted royalty and management fee relief to Mr. Mikes in connection with the COVID-19 pandemic, collecting 81 per cent of the contractual royalty amount for the year ended Dec. 31, 2021, and 46 per cent for the year ended Dec. 31, 2020. The management team at Mr. Mikes continues to expect a protracted recovery.

Diversified Royalty is in discussions with Mr. Mikes and its lender regarding additional royalty and management fee relief for Mr. Mikes, which Diversified Royalty expects may be required until such time as all government restrictions impacting the operation of Mr. Mikes restaurants are lifted and the business stabilizes.

Nurse Next Door fourth quarter results

Diversified Royalty expects to report that the royalty entitlement to Diversified Royalty from Nurse Next Door Professional Homecare Services Inc. was $1.2-million in Q4 2021. The royalty entitlement from Nurse Next Door grows at a fixed rate of 2.0 per cent per annum during the term of the licence, with the most recent increase effective Oct. 1, 2021. During the year ended Dec. 31, 2021, Nurse Next Door signed 113 (2020 -- 28) new franchises primarily in major metropolitan markets (34 in Canada, 60 in the United States and 19 in Australia). Nurse Next Door continues to make its fixed royalty payment to Diversified Royalty in full, which Diversified Royalty expects will continue.

The royalty entitlement is a non-IFRS measure.

Fourth quarter commentary

Sean Morrison, president and chief executive officer of Diversified Royalty, stated: "Over all, we are happy with the performance of our royalty partners as they work their way through the ongoing impacts of COVID-19. As with any portfolio, there is variability of financial performance within the group. Fortunately for DIV, our largest royalty partner, Mr. Lube, is thriving, having reported 20.7-per-cent SSSG for the fourth quarter without customer traffic having recovered to pre-COVID levels. Our other variable royalty partners, Air Miles and Oxford Learning, continue to be challenged by the impacts of COVID-19, however, we believe Oxford is poised for a strong recovery when COVID-19 related restrictions, primarily in Ontario, are loosened. With respect to our fixed royalty partners, Sutton and Nurse Next Door's businesses continue to support their fixed growth royalties, while Mr. Mike's business, which had previously returned to virtually pre-COVID levels in the summer, has been negatively impacted by ongoing capacity and other COVID-19 restrictions, such as vaccine passport mandates, and therefore will continue to require royalty relief."

About Diversified Royalty Corp.

Diversified Royalty is a multiroyalty corporation, engaged in the business of acquiring top-line royalties from well-managed multilocation businesses and franchisors in North America. Diversified Royalty's objective is to acquire predictable, growing royalty streams from a diverse group of multilocation businesses and franchisors. Diversified Royalty currently owns the Mr. Lube, Air Miles, Sutton, Mr. Mikes, Nurse Next Door and Oxford Learning Centres trademarks. Mr. Lube is the leading quick-lube service business in Canada, with locations across Canada. Air Miles is Canada's largest coalition loyalty program with approximately two-thirds of Canadian households actively participating in the Air Miles program. Sutton is among the leading residential real estate brokerage franchisor businesses in Canada. Mr. Mikes currently operates casual steakhouse restaurants, primarily in Western Canadian communities. Nurse Next Door is one of North America's fastest-growing 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 franchised supplemental education services in Canada and the U.S.

Diversified Royalty intends to increase cash flow per share by making accretive royalty purchases and through the growth of purchased royalties. Diversified Royalty expects to pay a predictable and stable dividend to shareholders and increase the dividend as cash-flow-per-share increases allow.

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