Neighbourly Pharmacy Inc.: Neighbourly Announces Strong Third Quarter Results

Company delivers strong pharmacy same store sales performance as its retail footprint expands to 294 locations

TORONTO, Feb. 13, 2024 /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 December 30, 2023 (the "third quarter 2024").

"Neighbourly's third quarter results reflect the continuing strength of our pharmacy business, thanks to our pharmacies' unwavering focus on delivering exceptional patient care," stated Skip Bourdo, the Company's Chief Executive Officer. "The team continued to deliver on our M&A and growth initiatives, adding another two pharmacies to the Neighbourly family," concluded Mr. Bourdo.

Third Quarter 2024 Highlights

• Revenue for the third quarter increased to $284.0 million, up $18.7 million or 7.0% compared to prior year; 69% of the growth was driven by pharmacies acquired in the past 12 months.
• Same store sales¹ growth of 2.7% was driven by strong prescription and clinical services revenue, up 4.6% and 8.3% respectively; partially offset by softer front store sales, down 4.5% against the strong prior year performance of over the counter cold-and-flu medications.
• Adjusted EBITDA² for the third quarter increased to $31.2 million, up $2.6 million or 9.2% primarily due to the incremental contributions from pharmacies added to the Company's network in the past 12 months.
• The Company acquired two pharmacy locations subsequent to the second quarter's earnings release, bringing the pharmacy network to 294 locations across Canada.
• Adjusted Earnings per Share³ for the third quarter of $0.19, compared to $0.17 in the third quarter of 2023.
• Pro-Forma Revenue³ of $905.9 million and Pro-Forma Adjusted EBITDA³ of $98.0 million.

_______________________________________

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.

Neighbourly Privatization Highlights

• On January 15, 2024, the Company entered into a definitive agreement (the "Arrangement Agreement"), whereby T.I.D. Acquisition Corp., a newly-formed entity controlled by PCP, would acquire all of the common shares in the capital of the Company, other than those common shares already owned by PCP or its affiliates, at a purchase price of $18.50 per common share, payable in cash plus one contingent value right ("CVR") per common share.
• The CVR will entitle the holder to an additional cash payment of $0.61 per CVR if the Company's Pro-Forma Adjusted EBITDA target of $128.0 million for the fiscal year ending March 28, 2026 is achieved.
• A circular in respect of the transaction was filed and mailed to all shareholders of record as of January 29, 2024 for a special meeting to be held on March 8, 2024.
• The privatization transaction is expected to close by March 15, 2024, subject to shareholder approval and the satisfaction of customary closing conditions.

Selected Third Quarter 2024 Results

		Third quarter			Fiscal year
in 000's		2024	2023		2024	2023
Store count		294	284		294	284
Total Prescriptions		4,692	4,379		11,412	9,341
Same-store prescription growth (%)		1.7 %	(2.2 %)		1.7 %	(1.4 %)
Revenue		$ 283,958	$ 265,286		$ 684,000	$ 558,537
Same-store sales growth (%)1		2.7 %	4.1 %		3.4 %	3.3 %
Pharmacy revenue as a % of revenue		79.0 %	77.4 %		79.6 %	78.3 %
Corporate, general & administrative ("CG&A") costs2		$ 10,028	$ 9,853		$ 24,042	$ 21,269
CG&A as a % of revenue		3.5 %	3.7 %		3.5 %	3.8 %
Adjusted EBITDA3		$ 31,169	$ 28,539		$ 72,402	$ 59,575
Adjusted EBITDA margin (%)		11.0 %	10.8 %		10.6 %	10.7 %
Pro-Forma Adjusted EBITDA for the 52 weeks ended4		$ 98,007
Pro-Forma Revenue for the 52 weeks ended5		$ 905,873

_____________

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.

Dividend

Pursuant to the Arrangement Agreement, the Company will not pay any dividends (including the historical quarterly dividend of $0.045) to its shareholders until the closing of the Privatization transaction.

Third Quarter Financial Results

Neighbourly's unaudited consolidated financial statements and accompanying notes, and Management's Discussion and Analysis for the third 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 294 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 February 13, 2024 for the sixteen weeks ended December 30, 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 sixteen weeks ended December 30, 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)

			16 weeks ended			40 weeks ended
000's			Dec 30, 2023	Dec 31, 2022		Dec 30, 2023	Dec 31, 2022
Revenue			$ 283,958	$ 265,286		$ 684,000	558,537
Cost of sales			170,610	161,742		413,397	342,259
Gross Profit			113,348	103,544		270,603	216,278
Operating, general and administrative expenses			85,254	76,786		206,595	160,623
Acquisition, transaction and integration costs			3,619	3,437		6,402	15,547
Depreciation and amortization			21,515	27,398		53,333	43,601
Impairment loss			-	-		628	-
Operating (loss) income			2,960	(4,077)		3,645	(3,493)
Finance costs, net			11,211	9,016		26,779	6,350
Change in fair value of financial assets and liabilities			(3,227)	(2,568)		9,210	(2,605)
(Loss) income before income taxes			(5,024)	(10,525)		(32,344)	(7,238)
Income tax expense (recovery)			(482)	(1,911)		(5,581)	1,984
Net loss and comprehensive loss for the period			(4,542)	(8,614)		(26,763)	(9,222)
Attributable to:
	Shareholders of the Company		$ (4,827)	(8,975)		(27,391)	(10,189)
	Non-controlling interest		285	361		628	967
			(4,542)	(8,614)		(26,763)	(9,222)
Net loss per share attributable to shareholders of the Company
	basic and diluted		$ (0.11)	(0.20)		(0.61)	(0.25)

Condensed Consolidated Statements of Financial Position

in 000's			December 30, 2023	March 25, 2023
Assets
Current assets:
Cash			17,488	22,889
Trade and other receivables			38,479	38,236
Inventory			96,952	94,277
Prepaid expenses and other assets			4,598	3,898
Assets held for sale			2,593	2,099
			160,110	161,399
Property and equipment, net			26,329	27,986
Right-of-use assets, net			73,086	80,207
Intangible assets, net			343,242	353,219
Goodwill			487,786	456,311
Deferred tax assets			20,238	19,750
Other assets			1,688	3,129
			952,369	940,602
			1,112,479	1,102,001
Liabilities and Equity
Current liabilities:
Accounts payable and other liabilities			109,278	105,697
Promissory notes payable			-	62
Current portion of long-term borrowings			7,500	3,750
Current portion of lease liabilities			23,715	22,808
			140,493	132,317
Long-term borrowings			255,566	225,237
Lease liabilities			57,509	64,637
Deferred tax liabilities			61,838	64,322
Other liabilities			6,428	-
			381,341	354,196
			521,834	486,513
Equity:
Share capital			868,284	867,052
Contributed surplus			19,271	10,876
Deficit			(300,945)	(267,513)
			586,610	610,415
Non-controlling interest			4,035	5,073
			590,645	615,488
			1,112,479	1,102,001

Condensed Consolidated Statements of Cash Flows

				16 weeks ended			40 weeks ended
000's				December 30, 2023	December 31, 2022		December 30, 2023	December 31, 2022
Operating Activities:
	Net loss for the period			(4,542)	(8,614)		(26,763)	(9,223)
	Adjustments for non-cash items:
	Depreciation and amortization			21,515	27,398		53,333	43,601
	Impairment loss			-	-		628	-
	Share-based compensation			3,075	1,781		8,395	3,920
	Gain (loss) on disposal of property and equipment			-	16		-	27
	Finance costs (income), net			11,211	9,016		26,779	6,351
	Change in fair value of financial assets and liabilities			(3,227)	(2,568)		9,210	(2,605)
	Provision for income taxes			(482)	(1,911)		(5,581)	1,984
	Lease renewals and modifications			(55)	-		(13)	(137)
	Loss on remeasurement of held for sale assets			-	90		-	534
	Change in non-cash operating working capital			6,981	6,710		3,162	(8,408)
	Income taxes recovered (paid)			862	12		(595)	256
	Payment of contingent consideration			-	-		-	(12)
				35,338	31,930		68,555	36,288
Financing Activities:
	Proceeds from issuance of common shares, net of issuance costs			-	-		-	282,784
	Proceeds from exercise of stock options			-	1,382		1,232	1,450
	Proceeds from long-term borrowings			5,109	6,452		42,375	157,626
	Repayment of long-term borrowing			(1,250)	-		(14,500)	-
	Transaction costs related to long-term borrowings			(60)	(60)		(60)	(2,036)
	Interest Paid			(6,814)	(4,883)		(16,347)	(10,079)
	Dividends and distributions paid			(4,622)	(4,337)		(9,004)	(9,149)
	Payment of lease liabilities			(6,457)	(6,512)		(19,196)	(16,230)
	Proceeds from cancellation of shares			-	-		-	900
				(14,094)	(7,958)		(15,500)	405,266
Investing Activities:
	Acquisition of property and equipment			(1,936)	(2,020)		(4,415)	(7,062)
	Acquisition of intangible assets			(386)	(131)		(580)	(463)
	Acquisition of other assets			-	-		-	(3)
	Business combinations, net of cash acquired			(13,514)	(13,389)		(54,185)	(456,991)
	Proceeds from sale of assets held for sale			281	2,228		606	2,228
	Interest received			18	34		118	115
				(15,537)	(13,278)		(58,456)	(462,176)
Net change in cash for the period				5,707	10,694		(5,401)	(20,622)
Cash, beginning of the period				11,781	9,094		22,889	40,410
Cash, end of period				17,488	19,788		17,488	19,788

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:

		16 weeks ended			40 weeks ended			12 weeks ended
in 000's (unless otherwise stated)		2024	2023		2024	2023		2023
Income (Loss) and Comprehensive Income (loss) for the period		(4,542)	(8,614)		(26,763)	(9,222)		(5,577)
Income tax expense (recovery)		(482)	(1,911)		(5,581)	1,984		(6,546)
Finance Costs, net		11,211	9,016		26,779	6,350		8,356
Fair value changes of financial liabilities		(3,227)	(2,568)		9,210	(2,605)		2,157
Depreciation and amortization		21,515	27,398		53,333	43,601		16,235
Impairment loss		-	-		628	-		723
Acquisition, transaction and integration costs		3,619	3,437		6,402	15,547		3,341
Share-based compensation1		3,075	1,781		8,395	3,920		925
Adjusted EBITDA		31,169	28,539		72,403	59,575		19,614
Revenue		283,958	265,286		684,000	558,537		190,612
Adjusted EBITDA margin		11.0 %	10.8 %		10.6 %	10.7 %		10.3 %

Pro-forma Adjusted EBITDA
Adjusted EBITDA for the 40 weeks ended December 30, 2023								72,403
Adjusted EBITDA for the 12 weeks ended March 25, 2023								19,614
Incremental Adjusted EBITDA for new stores acquired after December 31, 2022 as if owned on December 31, 20222								5,302
Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after December 30, 2023 as if owned on December 31, 20223								688
Pro-forma Adjusted EBITDA for the 52 weeks ended December 30, 2023								98,007

Pro-forma Revenue
Revenue for the 40 weeks ended December 30, 2023								684,000
Adjusted EBITDA for the 12 weeks ended March 25, 2023								190,612
Incremental Revenue for the new stores acquired after December 31, 2022 as if owned on December 31, 20224								25,496
Incremental Revenue for the stores acquired, or to be acquired on or after December 30, 2023 as if owned on December 31, 20225								5,765
Pro-forma Revenue for the 52 weeks ended December 30, 2023								905,873

Notes:

¹ Represents 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 December 30, 2023 on December 31, 2022, it would have recorded additional Adjusted EBITDA of $5,302 for the 52 weeks ended December 30, 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 December 31, 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 December 30, 2023 on December 31, 2022, it would have recorded additional Adjusted EBITDA of $688 for the 52 weeks ending December 30, 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 December 31, 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 December 30, 2023 on December 31, 2022, it would have recorded additional Revenue of $25,496 for the 52 weeks ended December 30, 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 December 31, 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 December 30, 2023 on December 31, 2022, it would have recorded additional Revenue of $5,765 for the 52 weeks ended December 30, 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 December 31, 2022, they would have actually generated such Revenue, nor is this estimate indicative of future results.

			Third quarter				40 weeks ended
in 000's			2024	2023			2024	2023
Loss and Comprehensive loss for the period			(4,542)	(8,614)			(26,763)	(9,222)
Adjustments, pre-tax:
Fair value changes of financial liabilities			(3,227)	(2,568)			9,210	(2,605)
Amortization on customer lists			12,342	18,470			30,202	24,635
Impairment loss			-	-			628	-
Acquisition, transaction and integration costs			3,619	3,437			6,402	15,547
Share-based compensation1			3,075	1,781			8,395	3,920
Gain on Debt Modification2			-	-			-	(8,703)
Income tax impact on non-GAAP adjustments			(931)	(3,221)			(1,927)	(7,595)
Deferred tax expense (recovery)3			(1,856)	(1,616)			(7,141)	351
Adjusted net income			8,480	7,667			19,006	16,327
Adjusted weighted average number of shares (000's)4			44,808	44,350			44,725	40,997
Adjusted Earnings per share			0.19	0.17			0.42	0.40

__________________________________
Notes:
1 Represents 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.

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