Neighbourly Announces Strong Fourth Quarter and Fiscal Year 2021 Results

Efficient integration of acquisitions drives 115% increase in Fourth Quarter Adjusted EBITDA

Successful IPO raised total gross proceeds of $175 million, providing capital to accelerate acquisition strategy

TORONTO, June 24, 2021 /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 fiscal year and twelve-week period ended March 27, 2021 ("Fiscal 2021" and the "fourth quarter 2021," respectively).

"Since being founded in 2015, Neighbourly has rapidly expanded across Canada, developing a foundation of nearly 150 independent pharmacies," stated Chris Gardner, the Company's Chief Executive Officer. "Over that time, our strategy has not changed: We acquire community pharmacies that share our values, then seamlessly integrate their operations, protecting their legacies and relationships while leveraging the benefits of the Neighbourly network. Our ability to successfully execute upon this strategy is reflected in our strong financial performance for the fourth quarter, when acquisitions completed since the beginning of the fiscal year contributed $24.4 million of revenue.

"Neighbourly's purpose is to provide our patients with 'a community pharmacy that cares,' and the past year provided our Company with an unprecedented opportunity to demonstrate our dedication to that purpose. Throughout the pandemic, our pharmacies have acted as essential businesses, offering our patients the best possible care and service. At its onset, we satisfied a surging demand for both prescriptions and essential products. At its height, we delivered a record number of influenza vaccines, alleviating the burden upon our healthcare system. More recently, we have begun to provide COVID-19 testing and vaccine administration, with approximately 50,000 vaccines delivered to date. I am humbled by the commitment and compassion of our team.

"Executing against our growth strategy, in combination with our team's tireless efforts, has established Neighbourly as Canada's largest and fastest growing network of community pharmacies," concluded Mr. Gardner. "Our recent IPO provided the resources to accelerate this growth and pursue additional acquisition opportunities within a highly fragmented market. I look forward to sharing our progress." 

Fourth Quarter and Fiscal 2021 Highlights

• Revenue for the fourth quarter 2021 increased by 57.8% to $83.3 million (64.2% to $306.5 million for Fiscal 2021), driven by the addition of 40 pharmacies throughout Fiscal 2021.
• Adjusted EBITDA¹ for the fourth quarter 2021 increased by 114.8% to $9.0 million (65.7% to $35.1 million for Fiscal 2021), primarily due to the incremental profitability of acquired pharmacies.
• Net Income for the fourth quarter 2021 increased by 467.7% to $30.3 million. Net loss for Fiscal 2021 was $90.5 million.
• Same-store sales² for the fourth quarter 2021 increased by 0.4% (3.1% for Fiscal 2021). This modest increase relative to Neighbourly's historical trend was primarily due to the onset of the COVID-19 pandemic during the fourth quarter of 2020.
• During the fourth quarter 2021, the Company acquired one pharmacy. In total, the Company completed five transactions during Fiscal 2021, acquiring a total of 39 pharmacies, and opened one greenfield location.
• Pro-Forma Revenue³ of $414.6 million.
• Pro-Forma Adjusted EBITDA⁴  of $51.5 million.

_______________________________

¹ 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.

² 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.

³ Pro-Forma Revenue 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.

⁴ Pro-Forma 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.

Highlights Subsequent to the Fourth Quarter 2021

• On May 5, 2021, Neighbourly was recognized as one of Canada's Best Managed Companies, a designation that recognizes the Company's achievement of sustainable growth and demonstration of leadership in the areas of strategy, capabilities and innovation, culture and commitment, and financial performance.
• On May 25, 2021, the Company successfully completed its initial public offering of 10,295,000 million common shares for total gross proceeds of approximately $175 million, and a concurrent private placement of 1,058,823 common shares for total gross proceeds of approximately $18 million. The Company also entered into an amendment to its amended and restated credit agreement, which is comprised of a $150 million revolving credit facility and a $100 million term credit facility. These resources position the Company for further growth, and will help to accelerate its continued consolidation of a highly fragmented market.
• On April 30, 2021 and June 22, 2021, the Company entered into agreements to acquire thirteen pharmacies and one pharmacy, respectively.

(in $ millions)	Fourth Quarter				Fiscal
	2021	2020	Change		2021	2020	Change
Revenue	$83.3	$52.8	57.8%		$306.5	$186.6	64.2%
Same-Store Sales Growth (%)^1	0.4%	6.4%			3.1%	3.6%
Corporate, General, and Administrative ("CG&A") Costs^2	$3.5	$2.4	50.6%		$11.8	$8.0	47.9%
CGA Costs as a Percentage of Revenue (%)	4.3%	4.5%			3.8%	4.3%
Adjusted EBITDA^3	$9.0	$4.2	114.8%		$35.1	$13.9	65.7%
Adjusted EBITDA Margin (%)	10.8%	7.9%			11.4%	11.3%
Net Income (Loss)	$30.3	($8.2)	467.7%		($90.5)	($23.3)	(287.8%)
Pro-Forma Revenue for the 52 weeks ended^4	$414.6
Pro-Forma Adjusted EBITDA for the 52 weeks ended^5	$51.5

^1Same-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.
^2Corporate, 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.
^3Adjusted 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.
^4Pro-Forma Revenue 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.
^5Pro-Forma 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.

Impact of COVID-19

In March 2020, Neighbourly experienced a temporary and significant increase in demand for both prescriptions and essential products due to consumer uncertainty in the early days of the pandemic. This led to a meaningful and temporary increase of 14.7% in same-store sales during the final month of the fourth quarter 2020. Due to this increase, the Company experienced more modest same-store sales growth of 0.4% for the fourth quarter 2021, compared to 6.4% for fourth quarter 2020. This temporary increase in same-store sales was followed by the implementation of measures intended to prevent both the spread of COVID-19 and prescription drug shortages, which in combination resulted in a similarly meaningful and temporary decrease in same-store sales during the first quarter of 2021. While the future impact of the pandemic is unknown, this variability in same-store sales has begun to normalize, and the Company anticipates returning to its historical core competency of efficiently generating same-store sales improvement.

Declaration of Dividend

Neighbourly announced today that a quarterly dividend will be paid on September 7, 2021, to the Company's common shareholders of record on August 17, 2021. The amount of the dividend will be approximately $0.01 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 June 24, 2021 to discuss Neighbourly's financial results for the fourth quarter and Fiscal 2021. Participants may join the Company's conference call by dialing 416-764-8650 or 1-888-664-6383 (ID: 15141018). 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 141018#. 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 audited consolidated financial statements and accompanying notes, and Management's Discussion and Analysis for the twelve-weeks and fiscal year ended March 27, 2021 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 146 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, Pro-Forma Adjusted EBITDA, and Pro-Forma Revenue. 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, Pro-Forma Adjusted EBITDA, and Pro-Forma Revenue to the most directly comparable IFRS measures.

Forward-Looking Statements

This press 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".

This forward-looking information includes, among other things, statements relating to the acceleration of our growth, the pursuit of additional acquisition opportunities, the payment of dividends, and same-store sales improvements.

This forward-looking information and other forward-looking information are based on the Company's opinions, estimates and assumptions in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company currently believes are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct.

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, are 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 the risk factors set forth in the Company's Management's Discussion and Analysis for the twelve-weeks and fiscal year ended March 27, 2021. 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 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.

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

	Fiscal Year Ended			Fourth Quarter Ended
in 000's	March 27, 2021	March 28, 2020		March 27, 2021	March 28, 2020
Revenue	$306,494	$186,627		$83,273	$52,771
Cost of sales	$191,778	$114,334		$52,060	$33,649
Gross profit	$114,716	$72,293		$31,213	$19,122
Operating, general and administrative expenses	$79,820	$51,273		$22,303	$15,099
Acquisition, transaction and integration costs	$7,179	$4,071		$3,113	$1,220
Depreciation and amortization	$19,118	$13,781		$5,783	$3,926
Impairment loss	$116	$52		$116	$52
Operating income (loss)	$8,483	$3,116		($102)	($1,174)
Finance cost, net	$16,004	$12,460		$5,788	$2,238
Fair value changes of financial liabilities	$80,405	$13,578		($37,934)	$4,671
Loss before income taxes	($87,926)	($22,922)		$32,044	($8,083)
Income taxes expense (recovery)	$2,591	$422		$1,775	$148
Net loss for the period	($90,517)	($23,344)		$30,269	($8,231)
Attributable to:
Shareholders of the Company	($91,332)	($23,344)		$29,926	($8,231)
Non-controlling Interest	$815	$0		$343	$0
	($90,517)	($23,344)		$30,269	($8,231)
Loss per share	($19.88)	($5.08)		$6.51	($1.79)

Condensed Consolidated Statements of Financial Position

		Fiscal Year Ended
in 000's		March 27, 2021	March 28, 2020
Assets
Current
Cash		$45,914	$3,907
Restricted cash		$0	$893
Trade and other receivables		$17,202	$14,395
Inventory		$44,886	$31,001
Prepaid expenses and deposits		$1,611	$1,071
Assets held for sale		$2,715	$0
Total current assets		$112,328	$51,267
Property and equipment, net		$8,296	$7,674
Right-of-use assets		$31,703	$23,443
Intangible assets, net		$105,425	$92,089
Goodwill		$180,853	$142,059
Deferred tax assets		$1,717	$303
Other assets		$297	$227
Total non-current assets		$328,291	$265,795
Total assets		$440,619	$317,062
Liabilities and shareholders' equity
Current
Accounts payable and accrued liabilities		$49,191	$35,659
Promissory notes payable		$802	$62
Current portion of credit facilities		$5,575	$7,408
Current portion of mortgage payable		$146	$0
Current portion of lease liabilities		$9,972	$7,582
Preference shares		$295,844	$147,622
Total current liabilities		$361,530	$198,333
Long-term borrowings		$190,920	$160,636
Mortgage payable		$1,159	$0
Lease liability		$26,155	$20,220
Deferred tax liabilities		$15,295	$8,831
Warrant liability		$4,358	$1,407
Total non-current liabilities		$237,887	$191,094
Total liabilities		$599,417	$389,427
Shareholders' equity
Share capital		$23	$0
Contibuted Surplus		$348	$163
Deficit		($165,632)	($72,528)
Non-controlling interest		$6,463	$0
Total shareholders' equity		($158,798)	($72,365)
Total liabilities and shareholders' equity		$440,619	$317,062

Condensed Consolidated Statements of Cash Flows

	Fiscal Year Ended			Fourth Quarter Ended
in 000's	March 27, 2021	March 28, 2020		March 27, 2021	March 28, 2020
Operating
Net loss for the year	($90,517)	($23,344)		$30,269	($8,231)
Adjustments to net income for non-cash items
Depreciation and amortization	$19,118	$13,781		$5,783	$3,926
Impairment loss	$116	$52		$116	$52
Share based compensation	$185	$148		$46	$145
Loss on disposal of property and equipment	$2	$0		$2	$0
Finance costs, net	$16,004	$12,460		$5,788	$2,238
Fair value changes of financial liabilities	$80,405	$13,578		($37,934)	$4,671
Income taxes (recovery)	$2,591	$422		$1,775	$148
Lease renewals and modifications	$166	$172		($34)	($93)
Income taxes recovered (paid)	($521)	$44		($232)	$0
Change in non-cash operating working capital	$9,427	$10,573		$944	$13,934
Net cash from operating activities	$36,976	$27,886		$6,523	$16,790
Financing
Proceeds from issuance of preferred shares	$70,768	$44,229		$38,602	$14,985
Proceeds from exercise of stock options	$23	$0		$23	$0
Transaction costs related to preferred shares	($150)	($621)		$306	$0
Deferred share issuance costs	($869)	$0		($869)	$0
Proceeds from promissory notes payable	$740	$0		($1)	$0
Repayment of promissory notes payable	$0	($4,228)		$0	$0
Proceeds from long-term borrowings	$34,514	$44,390		$0	$20,394
Repayment of long-term borrowings	($6,008)	($8,953)		$0	($1,393)
Transaction costs related to long-term borrowings	($888)	($3,291)		($94)	($79)
Repayment of mortgage payable	($73)	$0		($36)	$0
Interest paid	($12,567)	($11,909)		($2,864)	($2,192)
Dividends paid	($903)	$0		($827)	$0
Payment of lease liabilities	($9,185)	($5,950)		($2,713)	($1,677)
Net cash from financing activities	$75,402	$53,667		$31,527	$30,038
Investing
Acquisition of property and equipment	($982)	($916)		($254)	($306)
Acquisition of intangible assets	($327)	($205)		($48)	($88)
Business acquisitions, net of cash acquired	($69,985)	($78,217)		($1,067)	($45,254)
Restricted cash, net	$893	($893)		$756	($893)
Interest received	$30	$11		$13	$2
Net cash from investing activities	($70,371)	($80,220)		($600)	($46,539)
Net change in cash	$42,007	$1,333		$37,450	$289
Cash, beginning of period	$3,907	$2,574		$8,464	$3,618
Cash, end of period	$45,914	$3,907		$45,914	$3,907

Reconciliation from IFRS to Non-IFRS Measures

The following table provides a reconciliation of loss and comprehensive loss to EBITDA and to Adjusted EBITDA for the periods indicated:

		Fourth Quarter			Fiscal
in 000's		2021	2020		2021	2020
Income (Loss) and comprehensive income (loss) for the period		$30,269	($8,231)		($90,517)	($23,344)
Income tax expense (recovery)		$1,775	$148		$2,591	$422
Finance costs, net		$5,788	$2,238		$16,004	$12,460
Fair value changes of financial liabilities		($37,934)	$4,671		$80,405	$13,578
Depreciation and amortization		$5,783	$3,926		$19,118	$13,781
Impairment loss		$116	$52		$116	$52
Acquisition, transaction and integration costs		$3,113	$1,220		$7,179	$4,071
Share-based compensation		$47	$145		$186	$148
Adjusted EBITDA		$8,957	$4,169		$35,082	$21,168
Revenue		$83,273	$52,771		$306,494	$186,627
Adjusted EBITDA Margin		10.8%	7.9%		11.4%	11.3%
Pro-Forma Adjusted EBITDA
Adjusted EBITDA for the 52 weeks ended March 27, 2021					$35,082
Incremental Adjusted EBITDA for new stores acquired after March 28, 2020 as if owned on March 28, 2020					$7,313
Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after March 27, 2021 to date as if owned on March 28, 2020					$6,462
Adjustment for professional, other fees and COVID-related expenses for the 52 weeks ended March 27, 2021					$2,639
Pro-forma Adjusted EBITDA for the 52 weeks ended March 27, 2021					$51,496
Pro-Forma Revenue
Revenue for the 52 weeks ended March 27, 2021					$306,494
Incremental revenue for new stores acquired after March 28, 2020 as if owned on March 28, 2020					$55,927
Incremental revenue for stores acquired, or to be acquired on or after March 27, 2021 to date as if owned on March 28, 2020					$52,208
Pro-forma Revenue for the 52 weeks ended March 27, 2021					$414,629

SOURCE Neighbourly Pharmacy Inc.

please contact [email protected] or visit www.neighbourlypharmacy.ca

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