Neighbourly Announces Strong First Quarter Results

Company delivers 4.1% same store sales growth and 77% improvement in Adjusted EBITDA

TORONTO, Aug. 1, 2023 /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 17, 2023 (the "first quarter 2024").

"Neighbourly's first quarter results reflect a strengthening topline momentum and our increasing focus on operational execution," stated Skip Bourdo, the Company's Chief Executive Officer. "The team continues to deliver against our full agenda of growth driving initiatives and a robust M&A pipeline, while maintaining a firm focus on providing high quality care to our patients," concluded Mr. Bourdo.

First Quarter 2024 Highlights

• Revenue for the first quarter increased to $196.8 million, up $82.5 million or 72.1%. 95% of the growth was driven by pharmacies acquired in the past 12 months.
• Same store sales¹ growth accelerated in the first quarter, increasing 4.1%.
• Adjusted EBITDA² for the fourth quarter increased to $19.9 million, up 76.5% primarily due to the incremental contributions from pharmacies added to the Company's network in the past 12 months.
• Successfully closed on 2 previously announced acquisitions, completed in late June 2023, bringing pharmacy network to 291 locations across Canada.
• Adjusted Earnings per Share³ for the first quarter of $0.11, up compared to $0.09 for the first quarter of 2023.
• Pro-Forma Revenue³ of $882.2 million and Pro-Forma Adjusted EBITDA³ of $97.1 million.

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¹ Same-store sales is a supplementary measure, which represents sales from comparable pharmacy locations that were owned and operated by the Company with more than 52 consecutive weeks of operations.

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 2024 Results 

		First quarter
in 000's		2024	2023
Store count		291	175
Total Prescriptions		3,299	1,904
Same-store prescription growth (%)		0.4 %	0.4 %
Revenue		$       196,842	$  114,376
Same-store sales growth (%)^1		4.1 %	1.8 %
Pharmacy revenue as a % of revenue		80.0 %	80.0 %
Corporate, general & administrative ("CG&A") costs^2		$           6,796	$      4,537
CG&A as a % of revenue		3.5 %	4.0 %
Adjusted EBITDA^3		$         19,875	$    11,260
Adjusted EBITDA margin (%)		10.1 %	9.8 %
Pro-Forma Adjusted EBITDA for the 52 weeks ended^4		$         97,084
Pro-Forma Revenue for the 52 weeks ended^5		$       882,203

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^1 Same-store sales is a supplmentary measure, which represents sales from comparable pharmacy locations that were owned and operated by the Company with more than 52 consecutive weeks of operations.
^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.

Declaration of Dividend

Neighbourly announced today that a quarterly dividend will be paid on September 26, 2023, to the Company's common shareholders of record as of August 29, 2023. 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 August 1, 2023, to discuss Neighbourly's financial results for the first quarter 2024. Participants may join the Company's conference call by dialing 416-764-8650 or 1-888-664-6383. 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 369825#. 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 2024 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 291 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, 2023 for the twelve weeks ended June 17, 2023, 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.

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

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to our future financial results and may include information regarding our financial position, business strategy, growth strategies, financial results, taxes, dividend policy, plans and objectives. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "estimates", "outlook", "forecasts", "projection", "prospects", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Forward-looking information in this news release includes, among other things, statements relating to the expected completion of acquisitions and timing thereof, the expected impact of acquisitions on the Company's financial results and expected accretion, the payment of dividends, and same store sales improvements.

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 the twelve weeks ended June 17, 2023 (the "MD&A") and under the heading "Risk Factors" in the Company's annual information form (the "AIF") filed on June 8, 2023. 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 Statements of Income (Loss) and Comprehensive Income (Loss)

			12 weeks ended
000's			June 17, 2023	June 18, 2022
Revenue			196,842	114,376
Cost of sales			120,343	72,011
Gross Profit			76,499	42,365
Operating, general and administrative expenses			59,410	32,079
Acquisition, transaction and integration costs			1,298	1,113
Depreciation and amortization			15,847	6,889
Impairment loss			580	-
Operating (loss) income			(636)	2,284
Finance costs, net			7,379	2,515
Change in fair value of financial assets and liabilities			6,728	-
Income (loss) before income taxes			(14,743)	(231)
Recovery of income taxes			(2,738)	512
Net income (loss) and comprehensive income (loss) for the period			(12,005)	(743)
Attributable to:
	Shareholders of the Company		(12,113)	(999)
	Non-controlling interest		108	256
			(12,005)	(743)
Net loss per share attributable to shareholders of the Company
	Basic and diluted		(0.27)	(0.03)

Condensed Consolidated Statements of Financial Position   

in 000's			June 17, 2023	March 25, 2023
Assets
Current assets:
	Cash		16,197	22,889
	Trade and other receivables		37,639	38,236
	Inventory		93,761	94,277
	Prepaid expenses and other assets		4,219	3,898
	Assets held for sale		1,194	2,099
			153,010	161,399
Property and equipment, net			26,645	27,986
Right-of-use assets, net			77,391	80,207
Intangible assets, net			344,348	353,219
Goodwill			456,311	456,311
Deferred tax assets			20,213	19,750
Other assets			1,945	3,129
			926,853	940,602
			1,079,863	1,102,001
Liabilities and Equity
Current liabilities:
	Accounts payable and other liabilities		105,861	105,759
	Current portion of long-term borrowings		5,000	3,750
	Current portion of lease liabilities		22,365	22,808
			133,226	132,317
Long-term borrowings			212,846	225,237
Lease liabilities			62,118	64,637
Deferred tax liabilities			61,973	64,322
Other liabilities			4,988	-
			341,925	354,196
			475,151	486,513
Equity:
	Share capital		867,536	867,052
	Contributed surplus		13,662	10,876
	Deficit		(281,637)	(267,513)
			599,561	610,415
	Non-controlling interest		5,151	5,073
			604,712	615,488
			1,079,863	1,102,001

Condensed Consolidated Statements of Cash Flows

				12 weeks ended
000's				June 17, 2023	June 18, 2022
Cash provided by (used in):
Operating Activities:
	Net loss for the period			(12,005)	(743)
	Adjustments for non-cash items:
	Depreciation and amortization			15,847	6,889
	Impairment loss			580	-
	Share-based compensation			2,786	974
	Loss on disposal of property and equipment			-	17
	Finance costs, net			7,379	2,515
	Change in fair value of financial assets and liabilities			6,728	-
	Income tax (recovery) expense			(2,738)	512
	Lease renewals and modifications			(26)	(104)
	Changes in non-cash operating working capital			3,800	1,123
	Income taxes paid			(1,741)	(246)
				20,610	10,937
Financing Activities:
	Proceeds from issuance of common shares, net of issuance costs			-	(142)
	Proceeds from cancellation of shares			-	900
	Proceeds from exercise of stock options			484	-
	Repayment of long-term borrowings			(12,000)	-
	Interest Paid			(5,319)	(1,047)
	Dividends and distributions paid			(2,036)	(328)
	Payment of lease liabilities			(6,056)	(3,894)
				(24,927)	(4,511)
Investing Activities:
	Acquisition of property and equipment			(902)	(2,344)
	Acquisition of intangible assets			(37)	(287)
	Acquisition of other assets			-	(3)
	Business combinations, net of cash acquired			(1,824)	(9,204)
	Proceeds from sale of assets held for sale			325	-
	Interest received			63	42
				(2,375)	(11,796)
Net change in cash for the period				(6,692)	(5,370)
Cash, beginning of the period				22,889	40,410
Cash, end of period				16,197	35,040

Reconciliation from IFRS to Non-IFRS Measures

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

		First quarter
in 000's (unless otherwise stated)		2024	2023
Loss and Comprehensive loss for the period		(12,005)	(743)
Income tax expense (recovery)		(2,738)	512
Finance Costs, net		7,379	2,515
Fair value changes of financial liabilities		6,728	-
Depreciation and amortization		15,847	6,889
Impairment loss		580	-
Acquisition, transaction and integration costs		1,298	1,113
Share-based compensation^1		2,786	974
Adjusted EBITDA		19,875	11,260
Revenue		196,842	114,376
Adjusted EBITDA margin		10.1 %	9.8 %
Pro-forma Adjusted EBITDA
Adjusted EBITDA for the 12 weeks ended June 17, 2023						19,875
Adjusted EBITDA for the 40 weeks ended March 25, 2023						67,929
Incremental Adjusted EBITDA for new stores acquired after June 18, 2022 as if owned on June 18, 2022^2						3,306
Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after June 17, 2023 as if owned on June 18, 2022^3						5,975
Pro-forma Adjusted EBITDA for the 52 weeks ended June 17, 2023						97,084
Pro-forma Revenue
Revenue for the 12 weeks ended June 17, 2023						196,842
Revenue for the 40 weeks ended March 25, 2023						634,773
Incremental Revenue for the new stores acquired after June 18, 2022 as if owned on June 18, 2022 ^4						17,054
Incremental Revenue for the stores acquired, or to be acquired on or after  June 17, 2023 as if owned on June 18, 2022 ^5						33,533
Pro-forma Revenue for the 52 weeks ended June 17, 2023						882,203

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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 17, 2023 on June 18, 2022, it would have recorded additional Adjusted EBITDA of $3,306 for the 52 weeks ended June 17, 2023. 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 18, 2022, 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 17, 2023 on June 18, 2022, it would have recorded additional Adjusted EBITDA of $5,975 for the 52 weeks ending June 17, 2023. 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 18, 2022, they would have actually generated such budgeted EBITDA, nor is this estimate indicative of future results.
^4 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 17, 2023 on June 18, 2022, it would have recorded additional Revenue of $17,054 for the 52 weeks ended June 17, 2023. 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 18, 2022, they would have actually generated such budgeted Revenue, nor is this estimate indicative of future results.
^5 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 17, 2023 on June 18, 2022, it would have recorded additional Revenue of $33,533 for the 52 weeks ended June 17, 2023. 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 18, 2022, they would have actually generated such Revenue, nor is this estimate indicative of future results.

		First quarter
in 000's		2024	2023
Loss and Comprehensive loss for the period		(12,005)	(743)
Adjustments, pre-tax:
Fair value changes of financial liabilities		6,728	-
Amortization on customer lists		8,776	2,441
Impairment loss		580	-
Acquisition, transaction and integration costs		1,298	1,113
Share-based compensation^1		2,786	974
Gain on Debt Modification^2		-	-
Income tax impact on non-GAAP adjustments		(548)	(755)
Deferred tax expense (recovery)^3		(2,811)	11
Adjusted net income		4,804	3,041
Adjusted weighted average number of shares (000's)^4		44,617	34,308
Adjusted Earnings per share		0.11	0.09

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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.

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