Neighbourly Announces Strong Second Quarter 2023 Results and Additional Acquisitions

Business almost doubles as revenue grows over 97% while same store sales¹ increase 3.6% in the quarter

Continued M&A momentum to add another 8 locations to Neighbourly's store network since the close of the second quarter

TORONTO, Oct. 25, 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 September 10, 2022 (the "second quarter 2023").

"Neighbourly's second quarter results reflect the strength and resilience of our underlying business and the continued focus on executing against our acquisition strategy. Since closing on Rubicon, we have once again accelerated our acquisition momentum, adding one new location in the second quarter and welcoming 8 additional locations to Neighbourly in November," stated Chris Gardner, the Company's Chief Executive Officer. "With our growing network we are well positioned as a leader in health care in communities across Canada for decades to come."

Second Quarter 2023 Highlights

• Same store sales¹ in the second quarter increased 3.6%.
• Revenue for the second quarter increased to $178.9 million, up $88.2 million or 97.3%.
• Net income and comprehensive income of $0.1 million, an improvement of $3.5 million, when compared to a loss of $3.4 million in the second quarter 2022
• Adjusted EBITDA² for the second quarter increased to $19.8 million, up $9.8 million or 98.3%, primarily from the incremental profitability of pharmacies added to the Company's network including Rubicon.
• Adjusted Earnings per Share³ of $0.12 for the second quarter 2023, up from $0.09 in the second quarter 2022.
• Pro-Forma Revenue³ of $828.5 million and Pro-Forma Adjusted EBITDA3 of $96.8 million.
• Network of pharmacies now at 284 locations, after giving effect to the recently announced acquisitions of 6 pharmacies in Atlantic Canada and another 2 in British Columbia, both transactions expected to be completed in November.

	_________________________
^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 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 Second Quarter 2023 Results

			Second quarter				Year to Date
in 000's			2023	2022			2023	2022
Store count			276	95			276	95
Total Prescriptions			3,058	1,571			4,962	3,040
Same-store prescription growth (%)			-1.9 %	2.9 %			-0.8 %	0.3 %
Revenue			$     178,875	$       90,668			$   293,251	$   176,012
Same-store sales growth (%)^1			3.6 %	1.2 %			2.7 %	4.6 %
Pharmacy revenue as a % of revenue			78.8 %	78.2 %			79.2 %	77.5 %
Corporate, general & administrative ("CG&A") costs^2			$         6,879	$         3,595			$     11,416	$       6,379
CG&A as a % of revenue			3.8 %	4.0 %			3.9 %	3.6 %
Adjusted EBITDA^3			$       19,776	$         9,972			$     31,037	$     20,118
Adjusted EBITDA margin (%)			11.1 %	11.0 %			10.6 %	11.4 %
Pro-Forma Adjusted EBITDA for the 52 weeks ended^4			$       96,771
Pro-Forma Revenue for the 52 weeks ended^5			$     828,539

____________

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 December 20, 2022, to the Company's common shareholders of record as of November 22, 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 October 25, 2022, to discuss Neighbourly's financial results for the second quarter 2023. Participants may join the Company's conference call by dialing 416-764-8650 or 1-888-664-6383 (ID: 66469370). 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 469370#. 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 second 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 284 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 October 24, 2022 for twelve weeks ended September 10, 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.

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 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 September 10, 2022 (the "MD&A") and under the heading "Risk Factors" in the Company's annual information form (the "AIF") filed on June 23, 2022, which are available on SEDAR at www.sedar.com under the Company's profile. 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 news release represents the Company's expectations as of the date of this news 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)

	12 Weeks Ended			24 weeks Ended
In 000's	Sept 10, 2022	Sept 11, 2021		Sept 10, 2022	Sept 11, 2021
Revenue	$              178,875	$                        90,668		$        293,251	$             176,012
Cost of sales	108,506	57,029		180,518	110,166
Gross profit	70,369	33,639		112,733	65,846
Operating, general and administrative expenses	51,758	25,252		83,837	47,923
Acquisition, transaction and integration costs	10,997	3,567		12,110	21,919
Depreciation and amortization	9,314	5,414		16,203	10,159
Impairment loss	—	23		—	23
Operating (loss) income	(1,700)	(617)		583	(14,178)
Finance (income) costs, net	(5,180)	2,003		(2,665)	(5,104)
Change in fair value of financial assets and liabilities	(37)	—		(37)	67,228
Loss before income taxes	3,517	(2,620)		3,285	(76,302)
Provision for income taxes	3,383	774		3,895	4,027
Net income (loss) and comprehensive income (loss) for the period	134	(3,394)		(610)	(80,329)
Attributable to:
Shareholders of the Company	$                     (216)	$                         (3,651)		$          (1,216)	$             (80,778)
Non-controlling interest	350	257		606	449
	134	(3,394)		(610)	(80,329)
Net loss per share attributable to shareholders of the Company
Basic and diluted	$                    (0.00)	$                            (0.11)		$             (0.03)	$                  (3.69)

Consolidated Statements of Financial Position

in 000's	September 10, 2022	March 26, 2022
Assets
Current
Cash	$                                      9,094	$                                   40,410
Trade and other receivables	34,323	24,616
Inventory	88,007	55,721
Prepaid expenses and other assets	6,456	2,009
Assets held for sale	16,697	—
Total Current Assets	154,577	122,756
Property and equipment, net	29,452	12,366
Right-of-use assets	67,002	47,163
Intangible assets, net	407,663	134,798
Goodwill	420,124	238,267
Deferred tax assets	24,157	13,288
Other assets	1,746	627
Total non-current assets	950,144	446,509
Total Assets	$                          1,104,721	$                              569,265
Liabilities and Shareholders' Equity
Current
Accounts payable and other liabilities	$                                   88,621	$                                   61,226
Promissory notes payable	62	62
Current portion of long-term borrowings	1,250	2,500
Current portion of lease liabilities	20,929	14,705
Total Current Liabilities	110,862	78,493
Long-term borrowings	225,935	83,656
Lease liabilities	51,445	37,177
Deferred tax liabilities	87,896	21,317
Total non-current liabilities	365,276	142,150
Total liabilities	476,138	220,643
Shareholders' equity
Share capital	862,686	585,764
Contributed surplus	8,170	5,131
Deficit	(249,226)	(249,956)
Total shareholders' equity	621,630	340,939
Non-controlling interest	6,953	7,683
Total shareholders' equity	628,583	348,622
Total liabilities and shareholders' equity	$                          1,104,721	$                              569,265

Condensed Consolidated Statements of Cash Flows

			12 Weeks Ended			24 Weeks Ended
in 000's			Sept 10, 2022	Sept 11, 2021		Sept 10, 2022	Sept 11, 2021
Operating Activities:
	Net income (los)s for the period		134	(3,394)		(610)	(80,329)
	Adjustments to net income for non-cash items:
	Depreciation and amortization		9,314	5,414		16,203	10,159
	Impairment loss		-	23		-	23
	Share based compensation		1,165	1,586		2,139	2,196
	(Loss) gain on disposal of property and equipment		(6)	(3)		11	(11)
	Finance (income) costs, net		(5,180)	2,003		(2,665)	(5,104)
	Fair value changes of financial assets and liabilities		(37)	-		(37)	67,228
	Provision for income taxes		3,383	774		3,895	4,027
	Lease renewals and modifications		(33)	(11)		(137)	(32)
	Expected credit loss expense		-	-		-	11
	Loss on remeasurement of held for sale assets		444	-		444	-
	Change in non-cash operating working capital		(16,241)	(5,523)		(15,118)	(10,304)
	Income taxes recovered (paid)		490	(229)		244	(766)
	Payment of contingent consideration		(12)	-		(12)	-
	Cash flows from (used for) operating activities		(6,579)	640		4,357	(12,902)
Financing Activities:
	Proceeds from issuance of common shares, net of issuance costs		282,926	(178)		282,784	187,897
	Proceeds from exercise of stock options		68	-		68	-
	Proceeds from exercise of warrants		-	-		-	9
	Repayment of promissory notes payable		-			-	(740)
	Proceeds from long-term borrowings		151,174	-		151,174	-
	Repayment of long-term borrowing		-	-		-	(100,168)
	Transaction costs related to long-term borrowings		(1,976)	-		(1,976)	(1,915)
	Repayment of mortgages payable		-	(31)		-	(67)
	Interest Paid		(4,149)	(963)		(5,196)	(2,641)
	Dividends and distributions paid		(4,484)	(963)		(4,812)	(1,503)
	Payment of lease liabilities		(5,824)	(3,074)		(9,718)	(5,790)
	Proceeds from cancellation of shares			-		900	-
	Cash flows from financing activities		417,735	(5,209)		413,224	75,082
Investing Activities:
	Acquisition of property and equipment		(2,698)	(739)		(5,041)	(928)
	Acquisition of intangible assets		(45)	(91)		(332)	(203)
	Acquisition of other assets		-	-		(3)	-
	Business combinations, net of cash acquired		(434,398)	(35,558)		(443,602)	(35,558)
	Interest received		39	98		81	141
			(437,102)	(36,290)		(448,897)	(36,548)
Net change in cash for the period			(25,946)	(40,859)		(31,316)	25,632
Cash, beginning of the period			35,040	112,405		40,410	45,914
Cash, end of period			9,094	71,546		9,094	71,546

Reconciliation from IFRS to Non-IFRS Measures

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

		12 weeks ended			24 weeks ended			28 weeks ended
in 000's		2023	2022		2023	2022		2022
Income (loss) and comprehensive income (loss) for the period		134	(3,394)		(610)	(80,329)		7,934
Income tax expense (recovery)		3,383	774		3,895	4,027		(10,071)
Finance costs, net		(5,180)	2,003		(2,665)	(5,104)		5,108
Fair value changes of financial assets and liabilities		(37)	-		(37)	67,228		-
Depreciation and amortization		9,314	5,414		16,203	10,159		15,195
Impairment loss		-	23		-	23		301
Acquisition, transaction and integration costs		10,997	3,567		12,110	21,919		4,718
Share-based compensation^1		1,165	1,585		2,140	2,195		2,587
Adjusted EBITDA		19,776	9,972		31,036	20,118		25,772
Revenue		178,875	90,668		293,251	176,012		251,497
Adjusted EBITDA margin		11.1 %	11.0 %		10.6 %	11.4 %		10.2 %
Pro-Forma Adjusted EBITDA
Adjusted EBITDA for the 24 weeks ended September 10, 2022								31,036
Adjusted EBITDA for the 28 weeks ended March 26, 2022								25,772
Incremental Adjusted EBITDA for new stores acquired after September 11, 2021 as if owned on September 11, 2021^2								36,732
Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after September 10, 2022 to date as if owned on September 11, 2021^3								2,733
Adjustment for professional, other fees and COVID-related for the 28 weeks ended March 26, 2022^4								498
Pro-forma Adjusted EBITDA for the 52 weeks ended September 10, 2022								96,771
Pro-Forma Revenue
Revenue for the 24  weeks ended September 10, 2022								293,251
Revenue for the 28 weeks ended March 26, 2022								251,497
Incremental Revenue for new stores acquired after Septebmer 11, 2021 as if owned on September 11, 2021^5								262,375
Incremental Revenue for stores acquired, or to be acquired on or after September 10, 2022 to date as if owned on September 11, 2021^6								21,416
Pro-forma Revenue for the 52 weeks ended September 10, 2022								828,539

_______________________________________________________
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 September 10, 2022 on  September 11, 2021, it would have recorded additional Adjusted EBITDA of $36,732 for the 52 weeks ended September 10, 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  September 11, 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 September 10, 2022 on September 11, 2021, it would have recorded additional Adjusted EBITDA of $2,733 for the 52 weeks ending September 10, 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 September 11, 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 during the third quarter 2022 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 September 10, 2022 on September 11, 2021, it would have recorded additional Revenue of $262,375 for the 52 weeks ended September 10, 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 September 11, 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 September 10, 2022 on September 11, 2021, it would have recorded additional Revenue of $21,416 for the 52 weeks ended September 10, 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 September 11, 2021, they would have actually generated such Revenue, nor is this estimate indicative of future results.

		12 weeks ended			24 week ended
in 000's		2023	2022		2023	2022
Income (loss) and comprehensive income (loss) for the period		134	(3,394)		(610)	(80,329)
Adjustments, pre-tax:
Fair value changes of financial assets and liabilities		(37)	-		(37)	67,228
Amortization on customer lists		3,041	2,543		6,166	4,983
Impairment loss		-	23		-	23
Acquisition, transaction and integration costs		10,997	3,567		12,110	21,919
Share-based compensation^1		1,165	1,585		2,140	2,195
Gain on Debt Modification^2		(8,703)	-		(8,703)	(10,356)
Income tax impact on non-GAAP adjustments		(3,438)	(1,531)		(4,374)	(6,700)
Deferred tax expense^3		1,956	84		1,967	2,797
Adjusted net income		5,116	2,877		8,658	1,760
Adjusted weighted average number of shares (000's)^4		43,216	33,443		38,762	29,232
Adjusted Earnings per share		0.12	0.09		0.22	0.06

_______________________________________
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 and further refinanced concurrent with the Rubicon acquisition with extended principal repayments.
^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.

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