Mr. Sean Morrison reports

DIVERSIFIED ROYALTY CORP. ANNOUNCES Q3 2023 RESULTS

Diversified Royalty Corp. has released its financial results for the three months ended Sept. 30, 2023, and nine months ended Sept. 30, 2023.

Highlights

• Revenue of $13.6 million in Q3 2023 and $40.1 million for the nine months ended September 30, 2023, up 16.9% and 23.5%, respectively, compared to the same periods in 2022.
• Adjusted revenue1 of $14.9 million in Q3 2023 and $43.9 million for the nine months ended September 30, 2023, up 15.5% and 21.3%, respectively, compared to the same periods in 2022.
• Weighted average organic royalty growth1 was 6.8% and 9.1%, for the three and nine months ended September 30, 2023, respectively, compared to 9.9% and 13.8%, for the three and nine months ended September 30, 2022, respectively.
• Distributable cash1 of $9.1 million in Q3 2023 and $27.7 million for the nine months ended September 30, 2023, up 14.8% and 20.7%, respectively, compared to the same periods in 2022.
• Payout ratio1 of 94.4% in Q3 2023 based on dividends of $0.060 per share for the quarter, compared to 86.1% in Q3 2022 based on dividends of $0.055 per share for the comparable quarter and 92.5% for the nine months ended September 30, 2023 based on dividends of $0.180 per share for the period, compared to 88.7% based on dividends of $0.165 per share for the comparable period.
• 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.
• On October 27, 2023, DIV amended the terms of the Acquisition Facility, increasing the interest-only period before amortization begins after each draw from six months to twelve months.

In Q3 2023, DIV generated $13.6 million of revenue compared to $11.6 million in Q3 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 $14.9 million in Q3 2023, compared to $12.9 million in Q3 2022. Adjusted revenue increased primarily due to positive trends experienced by most of DIV's royalty partners, 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, plus incremental royalty income generated from Stratus (defined below) beginning on November 15, 2022.

1. Adjusted revenue, distributable cash and DIV Royalty Entitlement are non-IFRS financial measures, payout ratio is a non-IFRS ratio, and weighted average organic royalty growth is a supplementary financial measure - see "Non-IFRS Measures" below.

Royalty Partner Business Updates

Mr. Lube + Tires: Mr. Lube + Tires generated same-store-sales-growth ("SSSG")2 of 16.4% for the Mr. Lube + Tires locations in the royalty pool for Q3 2023 and 18.4% for the nine months ended September 30, 2023, compared to SSSG of 14.8% and 18.3% for the same respective periods in 2022. SSSG in the current periods are primarily due to the sustained growth across all of Mr. Lube + Tires' offerings including oil change services, tire sales and services, and maintenance services offerings.

2. Same-store-sales growth or SSSG is a supplementary financial measure - see "Non-IFRS Measures" below.

Stratus: Royalty income from SBS Franchising LLC ("Stratus") was $2.0 million (US$1.5 million translated at an average foreign exchange rate of $1.3413 to US$1.00) for Q3 2023. The fixed royalty paid by Stratus of US$6.0 million increases each November at a rate of 5% in 2023, 2024, 2025 and 2026 and 4% per year thereafter.

Nurse Next Door: The royalty entitlement to DIV (the "DIV Royalty Entitlement3") from Nurse Next Door was $1.3 million in Q3 2023. The DIV Royalty Entitlement from Nurse Next Door grows at a fixed rate of 2.0% per annum during the term of the license, with the most recent increase reflected in the financials results for Q3 2023 being effective October 1, 2022.

3. DIV Royalty Entitlement is a non-IFRS measure - see "Non-IFRS Measures" below.

Oxford: The Oxford Learning Centres, Inc. ("Oxford") locations in the Oxford royalty pool generated SSSG4 (on a constant currency basis) of -0.9% in Q3 2023 and 8.2% for the nine months ended September 30, 2023, compared to SSSG of 8.9% and 15.0%, for the same respective periods in 2022. In 2022, Oxford saw a transition back to in-person tutoring for many locations, a trend that continued through the remainder of 2022 with system sales returning to pre-pandemic levels in the fourth quarter of 2022 and continued to grow in the first two quarters of 2023 and was flat in Q3 2023.

4. Same-store-sales growth or SSSG is a supplementary financial measure - see "Non-IFRS Measures" below.

Mr. Mikes: SSSG5 for the Mr. Mikes Restaurants Corporation ("Mr. Mikes") restaurants in the Mr. Mikes royalty pool was 3.6% in Q3 2023 and 11.0% for the nine months ended September 30, 2023, compared to SSSG of 8.7% and 29.7% for the same respective periods in 2022, which 2022 SSSG figures include measurement against certain stores that were temporarily closed due to the COVID-19 pandemic in 2021.

Royalty income and management fees of $1.2 million were generated from Mr. Mikes in Q3 2023, which excludes approximately $0.05 million from the partial payment of deferred contractual royalty fees and accrued management fees, compared to $1.7 million in Q3 2022 (excluding approximately $0.58 million of deferred fees collected in the comparable quarter). The performance of the Mr. Mikes restaurants in the Mr. Mikes royalty pool were significantly negatively impacted by vaccine and mask mandates and other government restrictions related to the COVID-19 pandemic in 2021 than 2022, resulting in significantly higher SSSG in the comparable prior period.

5. Same-store-sales growth or SSSG is a supplementary financial measure - see "Non-IFRS Measures" below.

AIR MILES(TM): In Q3 2023, royalty income of $1.1 million was generated from the AIR MILES(TM) Licenses compared to $1.7 million generated in Q3 2022, a decrease of 38% from the comparable quarter. The results in the period continue to be impacted by the completion of the AIR MILES Acquisition by BMO's affiliate Loyalty Inc. and the winddown of the Sobey's exit from the AIR MILES(TM) Rewards Program in the second quarter of 2023. During the third quarter of 2023, DIV's subsidiary, AM Royalties Limited Partnership repaid $0.43 million of the principal amount of its term loan in accordance with its terms and expects to make a further partial repayment in the fourth quarter of 2023.

Sutton: During Q3 2023, 100% of the fixed royalty was collected from Sutton. The fixed royalty payable by Sutton increases at a rate of 2% per year, with the most recent increase effective July 1, 2023.

Third Quarter Commentary

Sean Morrison, President and Chief Executive Officer of DIV stated, "We are pleased with how our royalty partners performed in the third quarter of 2023. Mr. Lube + Tires, our largest royalty partner, continues to produce strong double-digit growth, generating SSSG6 of 16.4% for the three-month period ended September 30, 2023. Mr. Mikes generated positive SSSG6 results of 3.6%, while Oxford was flat after two quarters of strong growth. 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 compared to the prior year; however, the quarter over quarter percentage decrease was flat indicating the business has stabilized. DIV believes the change of ownership to BMO brings stability and significant credibility to AIR MILES and its ability to attract more new loyalty partners going forward. DIV's Q3 2023 weighted average organic royalty growth6 was 6.8% (excluding the collection of $0.05 million in Mr. Mikes deferred contractual royalty fees and accrued management fees) again demonstrating the overall strength of DIV's diversified portfolio. In addition, the completion of the BarBurrito transaction, our eighth royalty partner, was another positive development as DIV continues to build further diversification into its portfolio. Finally, by amending our Acquisition Facility to extend the interest-only period from six months to twelve months gives us significantly more financial flexibility."

6. Same-store-sales growth or SSSG and weighted average organic royalty growth are supplementary financial measures - see "Non-IFRS Measures" below.

Distributable Cash and Dividends Declared

In Q3 2023 and for the nine months ended September 30, 2023, distributable cash7 increased to $9.1 million ($0.0638 per share) and $27.7 million ($0.1948 per share), respectively, compared to $8.0 million ($0.0639 per share) and $23.0 million ($0.1860 per share) for the same respective periods in 2022. The increase in distributable cash7 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), partially offset by higher current tax expense, higher interest expense and professional fees. The decrease in distributable cash per share7 in Q3 was primarily due to a higher weighted average number of common shares outstanding, partially offset by an increase in distributable cash7. The increase in distributable cash per share7 for the nine months ended September 30, 2023, was primarily due to the increase in distributable cash7, partially offset by a higher weighted average number of common shares outstanding.

7. Adjusted revenue and distributable cash are a non-IFRS financial measures and distributable cash per share is a non-IFRS ratio - see "Non-IFRS Measures" below.

In Q3 2023 and for the nine months ended September 30, 2023, the payout ratio8 was 94.4% and 92.5%, respectively, an increase when compared to the payout ratios of 86.1% and 88.7% 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.

8. Payout ratio and distributable cash per share are non-IFRS ratios - see "Non-IFRS Measures" below.

Net Income

Net income for Q3 2023 and the nine months ended September 30, 2023, was $6.8 million and $22.6 million, respectively, compared to net income of $6.7 million and $20.1 million for the same respective periods of 2022. The increase in net income was primarily due to higher adjusted revenues9, partially offset by a lower fair value gains on financial instruments, an increase in income tax expenses and interest expenses on credit facilities.

9. Adjusted revenue is a non-IFRS financial measure - 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 multi-location 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(TM), 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(TM) 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 provider 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.

We seek Safe Harbor.