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.

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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") costs^2		$           4,537	$           2,784
CG&A as a % of revenue		4.0 %	3.3 %
Adjusted EBITDA^3		$         11,260	$         10,146
Adjusted EBITDA margin (%)		9.8 %	11.9 %
Pro-Forma Adjusted EBITDA for the 52 weeks ended^4		$         95,505
Pro-Forma Revenue for the 52 weeks ended^5		$       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 compensation^1		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, 2021^2					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, 2021^3					41,339
Adjustment for professional, other fees and COVID-related for the 40 weeks ended March 26, 2022^4					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, 2021^5					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, 2021^6					302,806
Pro-forma Revenue for the 52 weeks ended June 18, 2022					799,388
Notes:
^1Represents 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.
^4Represents 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 compensation^1		974	610
Gain on Debt Modification^2		-	(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:
^1Represents 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.

Marina Davies, VP, Investor Relations at [email protected] or visit www.neighbourlypharmacy.ca