Neighbourly Pharmacy Inc T.NBLY

RBC

[retiredcf]

June 23, 2022

Neighbourly Pharmacy Inc.
The doctors are not quite in - NBLY Q4/F22 results solid and as forecast

TSX: NBLY | CAD 23.00 | Outperform | Price Target CAD 42.00

Sentiment: Neutral Bottom line: Neutral.

NBLY Q4/F22 results solid and exactly as forecast, results very much backward looking at Q ended March 26. Heading into the quarter there was some discussion around expectations, in part related to incorrect forecasts as aggregated by Bloomberg, so we are pleased to report that actual results are consistent with our forecasts despite the impact of Omicron wave of COVID and heightened vaccination levels that drive higher labour costs. NBLY continues to execute effectively on the M&A driven growth strategy articulated during and post-IPO, with key event the imminent closing of the Rubicon acquisition.

Financial highlights: Revenue +35% as forecast to $112.3 MM, adjusted EBITDA $11.3 MM vs $11.2 MM. EBITDA impacted by: i) Omicron and related costs associated with elevated absenteeism, ii) heightened vaccinations and booster shots that drove elevated labour costs, iii) depressed Rx volumes as Omicron negatively impacted non-COVID related health care visits/procedures, iv) year- end cost adjustments. Details on following page.

Outlook: With Rubicon set to close on June 27, NBLY is on the threshold of a step-change in the company's scale and scope of operations. In our view, Rubicon is a key "de-risking" event that: i) folds in a notable M&A competitor, ii) adds significant scale in under-penetrated markets, and iii) brings NBLY closer to the critical mass at which strategic opportunities emerge. Further details on the transaction and its strategic merits here.

Conference call 8:30 am: 416-764-8650 or 1-888-664-6383 (ID: 19369406#).)

Expect conference call to focus on: i) updated thoughts on Rubicon and potential upside to prior disclosed synergies, ii) outlook for M&A in the wake of Rubicon, iii) current Rx volumes and trends, iv) Pharmacare discussions and potential extension of Rx coverage, v) FQ1 trends given Q closed on June 18.