Good neighbours: NBLY Q4/F23 results solid and in-line, Slide deck reiterates strategic priorities
TSX: NBLY | CAD 18.97 | Outperform | Price Target CAD 35.00
Sentiment: Neutral
Bottom line: Neutral on earnings, but a modest positive on investor sentiment as Q4 results broadly in line with expectations, priorities as outlined in Q4 release slide deck broadly aligned with IPO messaging.
NBLY Q4/F23 results solid and as forecast, with Q4 EBITDA $19.6 MM, +73.5% and as forecast, growth driven 99% by M&A, notably Rubicon. Results underscore solid, defensive nature of NBLY's business model. NBLY continues to execute effectively on the M&A-driven growth strategy with the recent announcements of three stores to be acquired in Ontario, and seven in Western Canada (2 in BC, 5 in SK), price paid within historical range of 6-8x. Four pharmacies closed/consolidated for total store count 291.
Outlook: Slide deck outlines five strategic priorities for 2024: 1) Talent and Culture, 2) Acquisitions, confirming target of 35-40 in F24 (our model has 40), 3) Patient experience, 4) Operational excellence, 5) Growing the core. Our assessment would be that bradly speaking, in line with IPO messaging with heightened focus on performance, efficiency, and adding value to existing network and patient experience.
Financial highlights of Q4: Revenue +70% to $190.6 MM vs forecast $189.6 MM, adjusted EBITDA +73.5% to $19.6 MM (RBC CM $19.5 MM). Although same-store Rx count continues to bounce around with lingering Y/Y COVID noise/COVID related services, SSS growth +1.6%. Documentation notes Q1 to date (11 weeks) SSS +2.7%-3%. Acquisitions drove 99% of total revenue growth. EBITDA margin 10.3% of sales, +20 bps Y/Y, and in line with forecast. Markets should breathe a sigh of relief as Q4 marks the 3nd consecutive quarter of in-line results. Leverage pro forma recent accusations 3.5x. Details on following page.
Conference call 8:30 am: 416-764-8650 or 1-888-664-6383 (ID: 22502525#).
Expect conference call to focus on: i) more detailed commentary from incoming CEO around NBLY outlook/strategy, and any costs associated with execution of the priorities outlined in the documentation, ii) current operating trends, including pharmacist availability/cost; iii) outlook for additional M&A and ability to fund given current leverage, iv) updated thoughts on Rubicon and potential upside to $2.5 MM disclosed and realized synergies; v) thoughts around potential operating efficiency gains now that NBLY is at 291 stores.