NBLY Neighbourly Pharmacy Inc

Neighbourly Pharmacy Inc. ("Neighbourly" or the "Company"), Canada’s largest and fastest growing network of community pharmacies, today announced that the Company, along with certain entities affiliated with Persistence Capital Partners (collectively, the “Selling Shareholders”), have entered into an agreement with Scotiabank and RBC Capital Markets (the "Underwriters") pursuant to which the Underwriters have agreed to purchase an aggregate of 4,230,000 common shares (the "Common Shares") of Neighbourly, at a price of $30.75 per Common Share, on a bought deal basis, for aggregate gross proceeds of approximately $130 million to the Company and the Selling Shareholders.

Under the agreement, 977,000 Common Shares will be issued from treasury by Neighbourly for gross proceeds to the Company of approximately $30 million (the "Treasury Offering") and an aggregate of 3,253,000 Common Shares will be offered by the Selling Shareholders for aggregate gross proceeds to the Selling Shareholders of approximately $100 million (the "Secondary Offering," or together with the Treasury Offering, the “Offering”).

The Selling Shareholders have also granted the Underwriters an over-allotment option, exercisable for a period of 30 days from the date of the closing of the Offering, to purchase up to an additional 15% of the Common Shares to be sold pursuant to the Offering at the offering price to cover over-allotments, if any, and for market stabilization purposes.

The net proceeds of the Treasury Offering will be used to strengthen Neighbourly’s financial position and allow the Company to continue to make accretive acquisitions at a similar pace to historical levels. Net proceeds from the Secondary Offering will be paid directly to the Selling Shareholders. Neighbourly will not receive any of the proceeds of the sale of Common Shares by the Selling Shareholders.

The Common Shares distributed pursuant to the Offering and, if applicable, the over-allotment option, will be offered in all provinces and territories of Canada by way of a prospectus supplement (the “Prospectus Supplement”) to a short form base shelf prospectus (the “Final Base Shelf Prospectus”). The Common Shares distributed pursuant to the Offering will also be offered in the United States by way of private placement to “qualified institutional buyers” in reliance upon the exemption from registration provided by Rule 144A under the U.S. Securities Act of 1933, as amended (the “1933 Act”).

Neighbourly will file a preliminary short form base shelf prospectus (the “Preliminary Base Shelf Prospectus”) no later than October 12, 2021. Such Preliminary Base Shelf Prospectus, which remains subject to the review of the Canadian securities regulatory authorities, will qualify the distribution by way of prospectus in Canada of up to $500 million of common shares, debt securities, preferred shares, warrants, subscription receipts, units, or any combination thereof, during the 25-month period during which the Final Base Shelf Prospectus will be effective. Concurrent with the filing of the Preliminary Base Shelf Prospectus, the Company will also file a Preliminary Prospectus Supplement with Canadian securities regulatory authorities in order to qualify the Common Shares to be distributed pursuant to the Offering as described above. The Offering is expected to close on or about October 25, 2021 and is subject to certain customary conditions including, but not limited to, the receipt of all regulatory approvals including the approval of the Toronto Stock Exchange.

Prospective investors should read the Preliminary and Final Base Shelf Prospectus, Prospectus Supplement and the documents incorporated by reference therein before investing in the Common Shares. When available, these documents may be accessed for free on SEDAR at www.sedar.com.

Persistence Capital Partners currently owns or controls, directly or indirectly, 21,100,922 Common Shares representing approximately 63.1% of the currently issued and outstanding Common Shares. Following the closing of the Offering (assuming no exercise of the over-allotment option), Persistence Capital Partners will own or control, directly or indirectly, 17,847,922 Common Shares, representing approximately 51.9% of the issued and outstanding Common Shares.

As the Canadian pharmacy industry begins to recover from the impact of the pandemic, Neighbourly has continued to execute upon its strategy of growth by acquisition, and its acquisition pipeline remains robust. This strategy drove the Company's financial results for the second quarter of fiscal 2022, which will be reported in detail on October 26, 2021. Based on currently available preliminary information, the Company anticipates reporting Revenue of approximately $90.7 million, Net Loss of approximately $3.4 million and Adjusted EBITDA1 of approximately $10.0 million for the second quarter of fiscal 2022, which would represent improvements of 54%, 12.4% and 52%, respectively, when compared to the second quarter of fiscal 2021. Adjusted EBITDA for the second quarter of fiscal 2022 is expected to include corporate, general, and administrative costs of approximately $3.6 million, which reflect both the Company’s accelerated pace of acquisition and increased costs associated with becoming a public company. Neighbourly anticipates that its operating leverage will continue to improve as the Company continues to expand its network. As reported earlier today, Neighbourly announced the acquisition of 21 additional pharmacy locations which are expected to close within Neighbourly’s third fiscal quarter, pending customary regulatory approvals.

No securities regulatory authority has either approved or disapproved the contents of this news release. The securities offered pursuant to the Offering have not been, nor will they be, registered under the 1933 Act and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States or to, or for the account or benefit of, U.S. persons. This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful.

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 167 locations (on a pro forma basis, after giving effect to recently announced proposed acquisitions), reinforcing the Company’s reputation as the industry’s acquirer of choice.

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 proposed Offering, the terms of the Offering and use of proceeds from the Treasury Offering, the filing of the Preliminary Base Shelf Prospectus and the Prospectus Supplement qualifying the Common Shares under the Offering, and the closing of the Offering, statements relating to the expected completion of recently announced acquisitions and timing thereof, and statements relating to the pursuit of accretive acquisitions at a similar pace to historical levels and the Company’s anticipation of improving operating leverage as it continues to expand its network.

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 the Offering and recently announced acquisitions within the anticipated timeframe, including receipt of regulatory approvals (including stock exchange). 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 the Offering and recently announced acquisitions, including the failure to receive or delay in receiving regulatory approvals (including stock exchange) or otherwise satisfy the conditions to the completion of the Offering or such acquisitions, in a timely manner, or at all, which is subject to numerous factors, many of which are beyond the Company’s control, as well as other factors discussed or referred to in the Company’s Management's Discussion and Analysis for the twelve-weeks ended June 19, 2021 and under the heading “Risk Factors” in the final long form prospectus dated May 17, 2021 filed in connection with the initial public offering of Neighbourly, both of 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.

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.

Preliminary Estimated Results (unaudited)

All figures and information indicated herein with respect to the second quarter of the fiscal year ending March 26, 2022 are preliminary, have not been reviewed by our auditors and are subject to change as our financial results for the quarter are finalized. Such information reflects our preliminary estimates with respect to such results based on currently available information, is not a comprehensive statement of our financial results and is subject to completion of our financial closing procedures. Our financial closing procedures are not yet complete and, as a result, our actual results may change as a result of such financial closing procedures, final adjustments, management’s review of results, and other developments that may arise between now and the time the financial results are finalized, and results could be materially different than the estimates set forth herein. These estimates should not be viewed as a substitute for our consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) which will be filed with the Canadian securities regulatory authorities on October 26, 2021. Further, our preliminary estimated results are based on a number of assumptions, and are not necessarily indicative of the results to be expected for any future period as a result of various factors, including, but not limited to, those discussed or referred to in the Company’s Management's Discussion and Analysis for the 12-week period ended June 19, 2021 and under the heading “Risk Factors” in the final long form prospectus dated May 17, 2021 filed in connection with the initial public offering of Neighbourly, both of which are available on SEDAR at www.sedar.com under the Company’s profile.

Non-IFRS Measures

This news release makes reference to certain non-IFRS measures, such as Adjusted EBITDA. Please refer to the Company’s Management's Discussion and Analysis dated August 3, 2021 for the 12-week period ended June 19, 2021, 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, under “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures”, which sections are incorporated by reference in this news release. These measures are not recognized under 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.

Reconciliation from IFRS to Non-IFRS Measures

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

		Second Quarter
in 000's		2022 (1)		2021
Loss and comprehensive loss for the period		(3,394	)	(3,872	)
Income tax expense (recovery)		774		60
Finance (income) costs, net		2,003		1,611
Fair value changes of financial liabilities		-		3,698
Depreciation and amortization		5,414		3,795
Impairment loss		23		-
Acquisition, transaction and integration costs		3,567		1,242
Share-based compensation		1,585		46
Adjusted EBITDA		9,972		6,580
(1) Preliminary estimates

1 Adjusted EBITDA is a non-IFRS financial measure and does not have any standard meaning under IFRS. Refer to "Non-IFRS Measures" of this news release for additional information.