Neighbourly Announces Strong First Quarter 2023 Results

Acquisitions Drive Double-Digit Growth in Revenue and Adjusted EBITDA;

Completion of Rubicon Acquisition and an Active Acquisition Pipeline Add 104 Locations to Neighbourly’s National Footprint

TORONTO, Aug. 2, 2022 /CNW/ – Neighbourly Pharmacy Inc. (“Neighbourly” or the “Company“) (TSX: NBLY), Canada’s largest and fastest growing network of independent pharmacies, today announced its financial results for the twelve-week period ended June 18, 2022 (the “first quarter 2023“).

“Neighbourly’s first quarter results reflect our continued focus on executing against our strategy- adding 100 locations with the closing of the Rubicon Acquisition and the addition of another 4 locations. I would like to officially welcome the Rubicon team to Neighbourly,” stated Chris Gardner, the Company’s Chief Executive Officer. “I believe that our businesses are stronger together and with our shared vision, and approach to community care, our teams will be positioned to be a leader in health care for decades to come.”

“The strength and essential nature of Neighbourly’s business and our financial flexibility position us well to pursue our robust pipeline of acquisitions to continue to drive future growth,” concluded Mr. Gardner.

First Quarter 2023 Highlights
  • Same store sales1 in the first quarter increased 1.8%, while same store prescriptions increased 0.4% compared to the first quarter of 2022. Excluding clinic format pharmacies, same store sales were up 2.6% while same store prescriptions in the first quarter grew by 1.3%.
  • Revenue for the first quarter increased by $29.0 million or 34.0% to $114.4 million, driven by pharmacies acquired over the prior four quarters.
  • Adjusted EBITDA2 for the first quarter increased by 11.0% to $11.3 million, due to the incremental profitability of pharmacies added to the Company’s network.
  • Network of pharmacies now at 275 locations, with the completion of the acquisition of Rubicon Pharmacies on June 27, 2022, which added 100 pharmacy locations in key Western Canadian provinces and the acquisition of another 4 pharmacies since the end of Fiscal 2022.
  • Adjusted Earnings per Share3 of $0.09 for the first quarter 2023, up from $0.07 in the first quarter 2022.
  • Pro-Forma Revenue3 of $799.4 million and Pro-Forma Adjusted EBITDA3 of $95.5 million.

___________

1 Same store sales is a supplementary measure which represents sales from stores that were owned and operated by the Company for the entirety of both periods and is a supplementary financial measure that is commonly used in the industry.

2 Adjusted EBITDA is a non-IFRS measure. See “Non-IFRS Measures” and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

3 Adjusted Earnings (Loss) per share, Proforma Revenue and Proforma EBITDA are non-IFRS measures. See “Non-IFRS Measures” and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

Selected First Quarter 2023 Results

First quarter

in 000’s

2023

2022

Store count

175

132

Total Prescriptions 

1,904

1,469

Same-store prescription growth (%)

0.4 %

(2.1 %)

Revenue

$       114,376

$         85,345

Same-store sales growth (%)1

1.8 %

8.2 %

Pharmacy revenue as a % of revenue

80.0 %

76.7 %

Corporate, general & administrative (“CG&A”) costs2

$           4,537

$           2,784

CG&A as a % of revenue

4.0 %

3.3 %

Adjusted EBITDA3

$         11,260

$         10,146

Adjusted EBITDA margin (%)

9.8 %

11.9 %

Pro-Forma Adjusted EBITDA for the 52 weeks ended4

$         95,505

Pro-Forma Revenue for the 52 weeks ended5

$       799,388

___________

1 Same-store sales represents sales from stores that were owned and operated by the Company for the entirety of both periods and is a supplementary financial
measure that is commonly used in the industry.  Neighbourly calculates same-store sales using revenue determined in accordance with IFRS.

2 Corporate, general & administrative costs represents costs incurred at the corporate level (as opposed to costs incurred at the store level) and is a component of
Operating, general and administrative expenses. See reconciliation in the “Results of Operations”.

3 Adjusted EBITDA is a non-IFRS financial measure and does not have any standard meaning under IFRS. Refer to “Reconciliation of Non-IFRS Measures” of this
MD&A for additional information including a reconciliation to the most comparable IFRS measure.

4 Pro-Forma Adjusted EBITDA is a non-IFRS financial measure and does not have any standard meaning under IFRS. Refer to “Reconciliation of Non-IFRS Measures”
of this MD&A for additional information including a reconciliation to the most comparable IFRS measure.

5 Pro-Forma Revenue is a non-IFRS financial measure and does not have any standard meaning under IFRS. Refer to “Reconciliation of Non-IFRS Measures” of this
MD&A for additional information including a reconciliation to the most comparable IFRS measure.

Impact of COVID-19

The COVID-19 pandemic has had a lasting impact on non-urgent trips to doctors’ offices, resulting in lower than expected count of new prescriptions, particularly in clinic format pharmacies.

Declaration of Dividend

Neighbourly announced today that a quarterly dividend will be paid on September 27, 2022, to the Company’s common shareholders of record as of August 30, 2022. The amount of the dividend will be $0.045 for each common share. This dividend is an “eligible dividend” for Canadian income tax purposes.

Conference Call and Webcast Information

A conference call will be held at 8:30AM Eastern on Aug 2, 2022, to discuss Neighbourly’s financial results for the first quarter 2023. Participants may join the Company’s conference call by dialing 416-764-8650 or 1-888-664-6383 (ID: 11136131). For those unable to participate, playback will be made available an hour after the event at 416-764-8677 or 1-888-390-0541, utilizing passcode 136131#. The webcast of the call will also be archived and available on the Company’s website.

The conference call will also be available via webcast on the Investor section of Neighbourly’s website at https://investors.neighbourlypharmacy.ca/events-and-presentations.

Neighbourly’s unaudited consolidated financial statements and accompanying notes, and Management’s Discussion and Analysis for the first quarter 2023 are available on the Company’s website at www.neighbourlypharmacy.ca and on SEDAR at www.sedar.com.

About Neighbourly Pharmacy Inc.

Neighbourly is Canada’s largest and fastest growing network of community pharmacies. United by their patient first focus and their role as essential and trusted healthcare hubs within their communities, Neighbourly’s pharmacies strive to provide accessible healthcare with a personal touch. Since 2015, Neighbourly has expanded its diversified national footprint to include 275 locations, reinforcing the Company’s reputation as the industry’s acquirer of choice.

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures, such as “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Pro-Forma Adjusted EBITDA”, “Pro-Forma Revenue”, “Adjusted Net Income (Loss)” and “Adjusted Earnings (Loss) Per Share.” Refer to the Company’s Management’s Discussion and Analysis dated August 1, 2022 for twelve weeks ended June 18, 2022, which is available under the Company’s profile on SEDAR at www.sedar.com, for an explanation of the composition of those non-IFRS measures, an explanation of how these non-IFRS measures provide useful information to investors and the additional purposes for which management uses these non-IFRS financial measures. These measures are not recognized under International Financial Reporting Standards (“IFRS“) and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide readers with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that market participants frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. See the financial table at the conclusion of this press release for a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, Pro-Forma Adjusted EBITDA, Pro-Forma Revenue and Adjusted Net Income (Loss) to the most directly comparable IFRS measures.

Securities regulations require that companies caution readers that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings and are unlikely to be comparable to similar measures used by other companies. Accordingly, the following measures should not be considered in isolation.

Key-Performance Indicators

This press release makes reference to certain key performance indicators, such as Same-store sales and corporate, general & administrative costs. We monitor key performance indicators to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These key performance indicators are also used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use industry metrics in the evaluation of issuers. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

Forward-Looking Statements

Forward-looking information in this news release includes, among other things, statements relating to the expected completion of probable acquisitions and timing thereof, the expected impact of probable acquisitions on the Company’s financial results and expected accretion, statements relating to the acceleration of our growth, the pursuit of accretive acquisitions at a similar pace to historical levels, the payment of dividends, same-store sales improvements and the expected impacts of the ongoing COVID-19 pandemic on our results of operation.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that the Company considered appropriate and reasonable as of the date such statements are made in light of its experience and perception of historical trends, current conditions and expected future developments. Such estimates and assumptions include the satisfaction of all conditions of closing and the successful completion of probable acquisitions within the anticipated timeframe, including receipt of regulatory approvals. Further, forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks and uncertainties related to probable acquisitions, including the failure to receive or delay in receiving regulatory approvals or otherwise satisfy the conditions to the completion such acquisitions, in a timely manner, or at all, and the reliance on information provided by the relevant sellers, as well as other factors discussed or referred to in the Company’s Management’s Discussion and Analysis for twelve weeks ended June 18, 2022 (the “MD&A“) and under the heading “Risk Factors” in the Company’s annual information form (the “AIF“) filed on June 23, 2022. If any of these risks or uncertainties materialize, or if the opinions, estimates, or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail elsewhere in the MD&A as well as in the “Risk Factors” section of the AIF should be considered carefully by prospective investors. The pro forma information set forth in this press release should not be considered to be what the actual financial position or other results of operations would have necessarily been had the probable acquisitions discussed herein been completed as, at, or for the periods stated.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents the Company’s expectations as of the date of this press release (or as the date they are otherwise stated to be made) and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events, or otherwise, except as required under applicable securities laws in Canada. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss)

First Quarter Ended

In 000’s

June 18, 2022

June 19, 2021

Revenue 

$              114,376

$                      85,345

Cost of sales 

72,011

53,137

Gross profit

42,365

32,208

Operating, general and administrative expenses 

32,079

22,672

Acquisition, transaction and integration costs 

1,113

18,352

Depreciation and amortization

6,889

4,745

Impairment loss

Operating (loss) income

2,284

(13,561)

Finance costs, net

2,515

(7,107)

Change in fair value of financial liabilities 

67,228

Loss before income taxes

(231)

(73,682)

Provision for income taxes

512

3254

Net loss and comprehensive loss for the period

$                   (743)

$                     (76,936)

Attributable to:

Shareholders of the Company

$                   (999)

$                     (77,128)

Non-controlling interest

256

192

(743)

(76,936)

Net loss per share attributable to shareholders of the Company

Basic and diluted

$                  (0.03)

$                         (7.50)

Condensed Consolidated Statements of Financial Position   

in 000’s

June 18, 2022

March 26, 2022

Assets

Current

Cash

$                                 35,040

$                                 40,410

Trade and other receivables

21,123

24,616

Inventory

57,288

55,721

Prepaid expenses and other assets

2,358

2,009

Total Current Assets

115,809

122,756

Property and equipment, net

14,356

12,366

Right-of-use assets

47,853

47,163

Intangible assets, net

136,629

134,798

Goodwill

241,685

238,267

Deferred tax assets

13,277

13,288

Other assets

642

627

Total non-current assets

454,442

446,509

Total Assets

$                               570,251

$                              569,265

Liabilities and Shareholders’ Equity

Current 

Accounts payable and accrued liabilities

$                                 59,456

$                                61,226

Promissory notes payable

62

62

Current portion of long-term borrowings

2,500

Current portion of lease liabilities

15,825

14,705

Total Current Liabilities

75,343

78,493

Long-term borrowings

87,032

83,656

Lease liabilities

36,463

37,177

Deferred tax liabilities

22,135

21,317

Total non-current liabilities

145,630

142,150

Total liabilities

220,973

220,643

Shareholders’ equity

Share capital

585,622

585,764

Contributed Surplus

7,005

5,131

Deficit

(250,960)

(249,956)

Total shareholders’ equity

341,667

340,939

Non-controlling interest

7,611

7,683

Total shareholders’ equity

349,278

348,622

Total liabilities and shareholders’ equity

$                              570,251

$                              569,265

Condensed Consolidated Statements of Cash Flows

First Quarter Ended

in 000’s

June 18, 2022

June 19, 2021

Operating Activities:

Net loss for the period

(743)

(76,936)

Adjustments to net income for non-cash items

Depreciation and amortization

6,889

4,745

Share based compensation

974

610

Gain on disposal of property and equipment

17

(8)

Finance costs, net

2,515

(7,107)

Fair value changes of financial liabilities

67,228

Provision for income taxes

512

3,254

Lease renewals and modifications

(104)

(21)

Expected credit loss expense

11

Change in non-cash operating working capital

1,123

(4,781)

Income taxes recovered (paid)

(246)

(537)

Cash flows from (used for) operating activities

10,937

(13,542)

Financing Activities:

Proceeds from issuance of common shares, net of issuance costs

(142)

188,075

Proceeds from exercise of warrants

9

Repayment of promissory notes payable

(740)

Repayment of long-term borrowing

(100,168)

Transaction costs related to long-term borrowings

(1,915)

Repayment of mortgages payable

(36)

Interest Paid

(1,047)

(1,678)

Dividends and distributions paid

(328)

(540)

Payment of lease liabilities

(3,894)

(2,716)

Proceeds from cancellation of shares

900

Cash flows from financing activities

(4,511)

80,291

Investing Activities:

Acquisition of property and equipment

(2,344)

(189)

Acquisition of intangible assets

(287)

(112)

Acquisition of other assets

(3)

Business combinations, net of cash acquired

(9,204)

Interest received

42

43

(11,796)

(258)

Net change in cash for the period

(5,370)

66,491

Cash, beginning of the period

40,410

45,914

Cash, end of period

35,040

112,405

Reconciliation from IFRS to Non-IFRS Measures

The following tables provide a reconciliation of loss and comprehensive loss to Adjusted EBITDA, Adjusted Net Income and Pro-Forma Adjusted EBITDA, and of Revenue to Pro-Forma Revenue, for the periods indicated:

First quarter

40 weeks
ended

in 000’s

2023

2022

2022

Loss and comprehensive loss for the period 

(743)

(76,936)

4,541

Income tax expense (recovery)

512

3,254

(9,298)

Finance costs, net

2,515

(7,107)

7,111

Fair value changes of financial liabilities

67,228

Depreciation and amortization

6,889

4,745

20,609

Impairment loss

324

Acquisition, transaction and integration costs

1,113

18,352

8,285

Share-based compensation1

974

610

4,172

Adjusted EBITDA

11,260

10,146

35,744

Revenue

114,376

85,345

342,164

Adjusted EBITDA margin

9.8 %

11.9 %

10.4 %

Pro-Forma Adjusted EBITDA

Adjusted EBITDA for the 12 weeks ended June 18, 2022

11,260

Adjusted EBITDA for the 40 weeks ended March 26, 2022

35,744

Incremental Adjusted EBITDA for new stores acquired after June 19, 2021 as if owned on June 19, 20212

6,663

Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after June 18, 2022 to date as if owned on June 19, 20213

41,339

Adjustment for professional, other fees and COVID-related for the 40 weeks ended March 26, 20224

498

Pro-forma Adjusted EBITDA for the 52 weeks ended June 18, 2022

95,505

Pro-Forma Revenue

Revenue for the 12  weeks ended June 18, 2022

114,376

Revenue for the 40 weeks ended March 26, 2022

342,164

Incremental Revenue for new stores acquired after June 19, 2021 as if owned on June 19, 20215

40,042

   Incremental Revenue for stores acquired, or to be acquired on or after  June 18, 2022 to date as if owned on June
   18, 20216

302,806

Pro-forma Revenue for the 52 weeks ended June 18, 2022

799,388

Notes:

Represents non-cash expenses recognized in connection with share-based compensation in respect of our legacy stock option plan and omnibus long-term equity incentive compensation plans.

2  The Company regularly acquires pharmacies and estimates that if it had acquired each of the pharmacies that it acquired during the 52 weeks prior to June 18, 2022 on  June 19, 2021, it would have recorded additional Adjusted EBITDA of $6,663 for the 52 weeks ended June 18, 2022. This estimate is based on the amount of EBITDA budgeted by the Company for each of the acquired pharmacies to be earned at the time of their acquisition. There can be no assurance that if the Company had acquired these pharmacies on  June 19, 2021, they would have actually generated such budgeted EBITDA, nor is this estimate indicative of future results.

3  The Company regularly acquires pharmacies and estimates that if it had acquired each of the pharmacies that it acquired or has announced to be acquired after June 18, 2022 on June 19, 2021, it would have recorded additional Adjusted EBITDA of $41,339 for the 52 weeks ending June 18, 2022. This estimate is based on the amount of EBITDA budgeted by the Company for each of the acquired pharmacies to be earned at the time of their acquisition. There can be no assurance that if the Company had acquired these pharmacies on June 19, 2021, they would have actually generated such budgeted EBITDA, nor is this estimate indicative of future results.

Represents the acute incremental labour and releif costs incurred as a result of increased absenteeism related to the Omicron variant of the COVID-19 pandemic that are not expected to recur. These costs were estimated based upon incremental sick pay related to mandatory quarantine requirements and the corresponding higher cost to cover an absent employee shift including relief related travel and other costs.

5  The Company regularly acquires pharmacies and estimates that if it had acquired each of the pharmacies that it acquired during the 52 weeks prior to June 18, 2022 on June 19, 2021, it would have recorded additional Revenue of $40,042 for the thirteen periods ended June 18, 2022. This estimate is based on the amount of Revenue budgeted by the Company for each of the acquired pharmacies to be generated at the time of their acquisition. There can be no assurance that if the Company had acquired these pharmacies on June 19, 2021, they would have actually generated such budgeted Revenue, nor is this estimate indicative of future results.

6  The Company regularly acquires pharmacies and estimates that if it had acquired each of the pharmacies that it acquired or has announced to be acquired after June 18, 2022 on June 19, 2021, it would have recorded additional Revenue of $302,806 for the 52 weeks ended June 18, 2022. This estimate is based on the amount of Revenue budgeted by the Company for each of the acquired pharmacies to be generated at the time of their acquisition. There can be no assurance that if the Company had acquired these pharmacies on June 19, 2021, they would have actually generated such Revenue, nor is this estimate indicative of future results.

 

First quarter

in 000’s

2023

2022

Loss and comprehensive loss for the period 

(743)

(76,936)

Adjustments, pre-tax:

Fair value changes of financial liabilities

67,228

Amortization on customer lists

2,441

2,441

Impairment loss

Acquisition, transaction and integration costs

1,113

18,352

Share-based compensation1

974

610

Gain on Debt Modification2

(10,356)

Income tax impact on non-GAAP adjustments

(755)

(2,425)

Deferred tax expense (recovery)3

11

2,713

Adjusted net income (loss)

3,041

1,626

Adjusted weighted average number of shares (000’s)4

34,308

25,021

Adjusted Earnings (loss) per share

0.09

0.07

Notes:

Represents non-cash expenses recognized in connection with share-based compensation in respect of our legacy stock option plan and omnibus long-
term equity incentive compensation plans.

2  Represents the non-cash gain on debt modification related to the revaluation of the Company’s credit facility that was refinanced concurrent with the
IPO with an extended maturity and more favourable interest rate terms.

3  Represents the portion of the Company’s tax provision that is deferred as detailed in the notes to the Interim Financial Statements.

4  Adjusted weighted average number of shares outstanding adjusted to reflect all preferred shares and related accrued dividends outstanding as though
they were converted to common shares at the beginning of the respective period.

 

SOURCE Neighbourly Pharmacy Inc.

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