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Neighbourly Announces Strong Fourth Quarter and Fiscal Year 2021 Results

·17 min read

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).

Neighbourly Pharmacy Inc. Logo (CNW Group/Neighbourly Pharmacy Inc.)
Neighbourly Pharmacy Inc. Logo (CNW Group/Neighbourly Pharmacy Inc.)

"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") Costs2

$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 EBITDA3

$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 ended4

$414.6







Pro-Forma Adjusted EBITDA for the 52 weeks ended5

$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.

Cision
Cision

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