Neighbourly Announces Third Quarter 2022 Results

Accretive Acquisitions Continue to Drive Double-Digit Revenue and Adjusted EBITDA Growth

TORONTO, Feb. 15, 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 sixteen-week period ended January 1, 2022 (the "third quarter 2022").

"Neighbourly's third quarter results continue to demonstrate the effectiveness of our acquisition and integration strategy," stated Chris Gardner, the Company's Chief Executive Officer. "Approximately 74% of the Company's quarterly revenue growth was driven by pharmacies added to our network over the past four quarters. Although we have already exceeded our historical pace of acquisition, the Canadian pharmacy landscape continues to offer a robust pipeline of compelling opportunities, and we look forward to further execution of our growth strategy."

"The rise of the Omicron variant once again highlighted our pharmacy teams' devotion to their communities," concluded Mr. Gardner. "As front-line workers, our team members were particularly vulnerable, and suffered from an increase in infections and exposures during the third quarter. We are exceptionally proud of how our pharmacies overcame these staffing challenges, and continued to administer vaccinations and booster shots to their patients. Their tireless efforts are the embodiment of Neighbourly's core value, patient-focused care."

Third Quarter 2022 Highlights

• Revenue for the third quarter 2022 increased by 27.3% to $139.2 million, driven by the addition of 41 pharmacies over the prior four quarters.
• Adjusted EBITDA¹ for the third quarter 2022 increased by 11.6% to $14.5 million, primarily due to the incremental profitability of pharmacies added to the Company's network.
• Net Loss for the third quarter 2022 was $0.7 million, compared to $112.0 million for the third quarter 2021.
• Same-store sales² for the third quarter 2022 increased by 2.2%, primarily due to a normalization of business volumes following the impact of COVID-19.
• Pro-Forma Revenue³ of $488.3 million.
• Pro-Forma Adjusted EBITDA⁴ of $58.7 million.
• Acquired 26 pharmacies and signed an agreement to acquire one additional pharmacy, bringing the total locations acquired to date in Fiscal 2022 to 41.
• Implemented operational synergies through the consolidation of two properties in Alberta, including centralizing all compounding within the province.

______________________________

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.

⁴Pro-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.

Third Quarter 2022 Financial Results

	Third Quarter					Year to date
in 000's	2022		2021			2022		2021
Store count	170		131			170		95
Total Prescriptions	2,311		1,828			5,352		3,993
Same-store prescription growth (%)	2.7%		3.1%			1.4%		5.2%
Revenue	$	139,180	$	109,371		$	315,192	$	223,221
Same-store sales growth (%)^1	2.2%		5.5%			3.4%		4.1%
Pharmacy revenue as a % of revenue	78.4%		75.3%			77.9%		76.6%
Corporate, general & administrative ("CG&A") costs^2	$	5,456	$	3,886		$	11,835	$	8,103
CG&A as a % of revenue	3.9%		3.6%			3.8%		3.6%
Adjusted EBITDA^3	$	14,470	$	12,961		$	34,589	$	26,127
Adjusted EBITDA margin (%)	10.4%		11.9%			11.0%		11.7%
Pro-Forma Adjusted EBITDA for the 52 weeks ended^4	$	58,660
Pro-Forma Revenue for the 52 weeks ended^5	$	488,253

_____________

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 component of Operating, general and administrative expenses. See reconciliation in the "Results of Operations".

³Adjusted 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.

⁴Pro-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.

⁵Pro-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

In March 2020, Neighbourly experienced a temporary and significant change in consumer buying patterns for both prescriptions and essential products due to consumer uncertainty in the early days of the pandemic. These buying patterns were also impacted by the 30-day fill policy implemented by most provincial governments, which temporarily increased prescription counts and decreased average prescription value during the year to date 2021.

As a result of this policy and the subsequent normalization of both prescription counts and average prescription value, the Company's same-store sales for the third quarter 2022 increased by 2.2%, compared to an increase of 5.5% for the third quarter 2021, while same-store prescription count increased by 2.7% for the third quarter 2022, compared to an increase of 3.1% for the third quarter 2021. While the future impact of the pandemic is unknown, the variability in same-store sales has largely normalized.

More recently, with the onset of the more virulent Omicron variant during the third quarter, the spike in COVID infections and exposures created staffing shortages across our network. These shortages were exacerbated by the accelerated pace of vaccinations and booster shots, both of which are particularly labour-intensive. These shortages are expected to subside as Omicron cases subside, however are expected to persist through the conclusion of Fiscal 2022.

Declaration of Dividend

Neighbourly announced today that a quarterly dividend will be paid on April 12, 2022, to the Company's common shareholders of record as of March 15, 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 February 15, 2022 to discuss Neighbourly's financial results for the third quarter 2022. Participants may join the Company's conference call by dialing 416-764-8650 or 1-888-664-6383 (ID: 79048623). 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 048623#. 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 third quarter 2022 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 171 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. Refer to the Company's Management's Discussion and Analysis dated February 15, 2022 for the sixteen-weeks ended January 1, 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, Pro-Forma Adjusted EBITDA, and Pro-Forma Revenue 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 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". 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 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 the sixteen-weeks ended January 1, 2022 and under the heading "Risk Factors" in the final long form prospectus dated May 17, 2021 filed in connection with the IPO. 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 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) 

	Third quarter ended			Year to date
in 000's	January 1, 2022	January 2, 2021		January 1, 2022	January 2, 2021
Revenue	$139,180	$109,371		$315,192	$223,221
Cost of sales	$88,475	$68,882		$198,641	$139,718
Gross profit	$50,705	$40,489		$116,551	$83,503
Operating, general and administrative expenses	$37,702	$27,573		$85,625	$57,517
Acquisition, transaction and integration costs	$1,824	$2,466		$23,743	$4,066
Depreciation and amortization	$7,996	$5,730		$18,155	$13,335
Impairment loss	$320	$0		$343	$0
Operating (loss) income	$2,863	$4,720		($11,315)	$8,585
Finance costs (income), net	$2,652	$5,063		($2,452)	$10,216
Change in fair value of financial liabilities	$0	$110,855		$67,228	$118,339
Loss before income taxes	$211	($111,198)		($76,091)	($119,970)
Income taxes expense	$863	$756		$4,890	$816
Net loss for the period	($652)	($111,954)		($80,981)	($120,786)
Attributable to:
Shareholders of the Company	($889)	($112,426)		($81,666)	($121,258)
Non-controlling Interest	$237	$472		$685	$472
	($652)	($111,954)		($80,981)	($120,786)
Loss per share	($0.03)	($244.81)		($3.05)	($264.04)

Condensed Consolidated Statements of Financial Position

in 000's		January 1, 2022	March 27, 2021
Assets
Current
Cash		$40,093	$45,914
Trade and other receivables		$22,254	$17,202
Inventory		$56,603	$44,886
Prepaid expenses and deposits		$3,423	$1,611
Assets held for sale		$0	$2,715
Total current assets		$122,373	$112,328
Property and equipment, net		$11,928	$8,296
Right-of-use assets		$47,302	$31,703
Intangible assets, net		$140,888	$105,425
Goodwill		$234,402	$180,853
Deferred tax assets		$666	$1,717
Other assets		$651	$297
Total non-current assets		$435,837	$328,291
Total assets		$558,210	$440,619
Liabilities and shareholders' equity
Current
Accounts payable and accrued liabilities		$50,940	$49,191
Promissory notes payable		$62	$802
Current portion of long term borrowings		$1,875	$5,575
Current portion of mortgages payable		$0	$146
Current portion of lease liabilities		$15,985	$9,972
Preferred shares liability		$0	$295,844
Total current liabilities		$68,862	$361,530
Long-term borrowings		$84,343	$190,920
Mortgages payable		$0	$1,159
Lease liabilities		$36,376	$26,155
Deferred tax liabilities		$23,947	$15,295
Warrant liability		$0	$4,358
Total non-current liabilities		$144,666	$237,887
Total liabilities		$213,528	$599,417
Shareholders' equity
Share capital		$583,678	$23
Contibuted Surplus		$4,011	$348
Deficit		($250,787)	($165,632)
Non-controlling interest		$7,780	$6,463
Total shareholders' equity		$344,682	($158,798)
Total liabilities and shareholders' equity		$558,210	$440,619

Condensed Consolidated Statements of Cash Flows

	Third quarter ended			Year to date
in 000's	January 1, 2022	January 2, 2021		January 1, 2022	January 2, 2021
Operating
Net loss for the year	($652)	($111,954)		($80,981)	($120,786)
Adjustments to net income for non-cash items
Depreciation and amortization	$7,996	$5,730		$18,155	$13,335
Impairment loss	$320	$0		$343	$0
Share based compensation	$1,467	$45		$3,663	$139
Gain on disposal of property and equipment	$0	$0		($11)	$0
Finance (income) costs, net	$2,652	$5,063		($2,452)	$10,216
Change in fair value of financial liabilities	$0	$110,855		$67,228	$118,339
Income tax expense	$863	$756		$4,890	$816
Lease renewals and modifications	($32)	($3)		($64)	$200
Expected credit loss expense	$0	$0		$11	$0
Income taxes recovered (paid)	($2,328)	($289)		($3,094)	($289)
Change in non-cash operating working capital	$4,910	$8,618		($5,394)	$8,483
Net cash from operating activities	$15,196	$18,821		$2,294	$30,453
Financing
Proceeds from issuance of common shares, net of issuance costs	$28,194	$0		$216,091	$0
Proceeds from issuance of preferred shares, net of issuance costs	$0	$31,710		$0	$31,710
Repayment of promissory notes payable	$0	$0		($740)	$0
Proceeds from long-term borrowings	$0	$27,831		$0	$34,514
Proceeds from promissory notes payable	$0	$741		$0	$741
Repayment of long-term borrowings	$0	($1,394)		($100,168)	($6,008)
Transaction costs related to long-term borrowings	$0	($508)		($1,915)	($794)
Repayment of mortgage payable	($1,237)	($37)		($1,304)	($37)
Interest paid	($1,285)	($4,021)		($3,926)	($9,703)
Dividends and distributions paid	($2,514)	($76)		($4,017)	($76)
Payment of lease liabilities	($3,191)	($2,676)		($8,981)	($6,472)
Proceeds from exercise of stock options	$125	$0		$125	$0
Proceeds from exercise of warrants	$0	$0		$9	$0
Net cash from financing activities	$20,092	$51,570		$95,174	$43,875
Investing
Acquisition of property and equipment	($942)	($272)		($1,870)	($728)
Acquisition of intangible assets	($282)	($207)		($485)	($279)
Acquisition of other assets	($15)	$0		($15)	$0
Business combinations, net of cash acquired	($65,587)	($62,898)		($101,145)	($68,918)
Restricted cash, net	$0	($756)		$0	$137
Interest received	$85	$10		$226	$17
Net cash from investing activities	($66,741)	($64,123)		($103,289)	($69,771)
Net change in cash	($31,453)	$6,268		($5,821)	$4,557
Cash, beginning of period	$71,546	$2,196		$45,914	$3,907
Cash, end of period	$40,093	$8,464		$40,093	$8,464

Reconciliation from IFRS to Non-IFRS Measures

The following table provides a reconciliation of loss and comprehensive loss to Adjusted EBITDA and Pro-Forma Adjusted EBITDA, and of Revenue to Pro-Forma Revenue, for the periods indicated:

		16 weeks ended			40 weeks ended			12 weeks ended
in 000's		2022	2021		2022	2021		2021
Loss and comprehensive loss for the period		-$652	-$111,954		-$80,980	-$120,786		$30,269
Income tax expense (recovery)		$863	$756		$4,890	$816		$1,775
Finance (income) costs, net		$2,652	$5,063		-$2,452	$10,216		$5,788
Fair value changes of financial liabilities		-	$110,855		$67,228	$118,339		-$37,934
Depreciation and amortization		$7,996	$5,730		$18,155	$13,335		$5,783
Impairment loss		$320	-		$343	-		$116
Acquisition, transaction and integration costs		$1,824	$2,466		$23,743	$4,068		$3,113
Share-based compensation		$1,467	$45		$3,663	$139		$47
Adjusted EBITDA		$14,470	$12,961		$34,590	$26,127		$8,957
Revenue		$139,180	$109,371		$315,192	$223,221		$83,273
Adjusted EBITDA margin		10.4%	11.9%		11.0%	11.7%		10.8%
Pro-Forma Adjusted EBITDA
Adjusted EBITDA for the 40 weeks ended January 1, 2022								$34,590
Adjusted EBITDA for the 12 weeks ended March 27, 2021								$8,957
Incremental Adjusted EBITDA for new stores acquired after January 2, 2021 as if owned on January 2, 2021								$13,178
Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after January 1, 2022 to date as if owned on January 2, 2021								$400
Adjustment for professional, other fees and COVID-related for the 40 weeks ended January 1, 2022								$498
Adjustment for professional, other fees and COVID-related for the 12 weeks ended March 27, 2021								$1,037
Pro-forma Adjusted EBITDA for the 52 weeks ended January 1, 2022								$58,660
Pro-Forma Revenue
Revenue for the 40 weeks ended January 1, 2022								$315,192
Revenue for the 12 weeks ended March 27, 2021								$83,273
Incremental Revenue for new stores acquired after January 2, 2021 as if owned on January 2, 2021								$87,754
Incremental Revenue for stores acquired, or to be acquired on or after January 1, 2022 to date as if owned on January 2, 2021								$2,034
Pro-forma Revenue for the 52 weeks ended January 1, 2022								$488,253

SOURCE Neighbourly Pharmacy Inc.

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