Mr. Sean Morrison reports

DIVERSIFIED ROYALTY CORP. ANNOUNCES STRONGEST ADJUSTED REVENUE(1) QUARTER IN ITS HISTORY

Diversified Royalty Corp. has released its financial results for the three months ended June 30, 2022, and six months ended June 30, 2022.

Second quarter 2022 highlights:

• Revenue of $11.1-million in Q2 2022 (Diversified's strongest revenue quarter since adopting its multiroyalty strategy in 2013) and $20.8-million for the six months ended June 30, 2022, up 20.8 per cent compared with the three months ended June 30, 2021, and 24.1 per cent compared with the six months ended June 30, 2021;
• Adjusted revenue of $12.3-million in Q2 2022 and $23.3-million for the six months ended June 30, 2022, up 18.6 per cent and 21.3 per cent, respectively, compared with the same periods in 2021;
• Distributable cash of $7.9-million in Q2 2022 and $15.1-million for the six months ended June 30, 2022, up 16.7 per cent and 19.3 per cent, respectively, compared with the same periods in 2021;
• Payout ratio of 86.1 per cent in Q2 2022 and 89.7 per cent for the six months ended June 30, 2022, based on dividends of 22 cents per share on an annualized basis, an improvement compared with 89.9 per cent and 96.0 per cent, respectively, compared with the same periods in 2021, based on dividends of 20 cents per share on an annualized basis.

Second quarter commentary

Sean Morrison, president and chief executive officer of Diversified, stated: "We are excited to announce record royalty revenues in Q2 2022, with strong performances across all of our royalty partners. Mr. Lube, our largest royalty partner, produced record results, generating [same-store-sales growth] of 23.5 per cent for the three-month period ended June 30, 2022, and SSSG of 20.3 per cent for the six months then ended. Oxford Learning also produced record results, with May and June, 2022, being the best May and June in its history (based on system sales), reflecting a strong demand for tutoring services and a return to in-person services. Mr. Mikes bounced back to pre-COVID levels after the removal of COVID-19 vaccine mandates in early 2022, and the Air Miles royalty had double-digit growth compared to Q2 2021. In addition, Sutton and Nurse Next Door continue to make their fixed-growth royalty payments. Coupled with our record results, the company saw weighted-average organic growth in its royalty partners of 16.4 per cent in Q2 2022."

Distributable cash and dividends declared

In Q2 2022 and for the six months ended June 30, 2022, distributable cash increased to $7.9-million (6.39 cents per share) and $15.1-million (12.26 cents per share), respectively, compared with $6.8-million (5.56 cents per share) and $12.7-million (10.42 cents per share) for the same respective periods in 2021. The increase in distributable cash was primarily due to higher adjusted revenue, partially offset by higher current tax expense, salaries and benefits, and interest expense. The increase in distributable cash per share was primarily due to the increase in distributable cash, partially offset by a higher weighted-average number of common shares outstanding.

In Q2 2022 and for the six months ended June 30, 2022, the payout ratios were 86.1 per cent and 89.7 per cent, respectively, an improvement when compared with the payout ratios of 89.9 per cent and 96.0 per cent for the same respective periods in 2021. The decrease was primarily due to higher distributable cash, partially offset by higher dividends declared per share.

Net income

Net income for Q2 2022 and the six months ended June 30, 2022, was $7.1-million and $13.3-million, respectively, compared with net income of $5.2-million and $9.3-million for the same respective periods of 2021. The increase in net income was primarily due to higher adjusted revenues and higher fair value gains on financial instruments partially offset by an increase in income tax expenses, interest expenses on credit facilities, and salaries and benefits.

About Diversified Royalty Corp.

Diversified is a multiroyalty corporation, engaged in the business of acquiring top-line royalties from well-managed multilocation businesses and franchisors in North America. Diversified's objective is to acquire predictable, growing royalty streams from a diverse group of multilocation businesses and franchisors.

Diversified 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. Sutton is among the leading residential real estate brokerage franchisor businesses in Canada. Mr. Mikes currently operates casual steak house 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.

Diversified's objective is to increase cash flow per share by making accretive royalty purchases and through the growth of purchased royalties. Diversified 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.

We seek Safe Harbor.