Le Lézard
Classified in: Business
Subjects: ERN, MAT

Shiny Health & Wellness Reports Record Revenue, Increased Gross Profit and Strong Gross Margins for Fiscal Year 2023 Second Quarter Results


Cannabis line of business reports positive adjusted EBITDA

(All amounts are in Canadian dollars unless otherwise stated)

TORONTO, Sept. 29, 2022 /CNW/ - Shiny Health & Wellness Corp. ("Shiny Health" or the "Company") (TSXV: SNYB) today reported financial results for its fiscal year 2023 second quarter for the three and six months ended July 31, 2022 (the "second quarter").

Second Quarter Highlights
Three months ended July 31, 2022 compared to the three months ended July 31, 2021.

"We're pleased with the solid performance from our cannabis line of business as we continue to demonstrate year-over-year revenue growth, strong gross margins, rising loyalty program enrollment, strengthened industry partnerships through our Data Program, and positive EBITDA only mid-way through our first fiscal year," said Kevin Reed, Chairman & Chief Executive Officer. "Concurrently, we made headway establishing an active pipeline of pharmacy targets to deliver on our expanded retail strategy into health and wellness with our first pharmacy location expected to close next week. We're determined to set our company apart and execute against our vision of becoming a trusted source for health and wellness solutions and services across Ontario."

Financial Highlights

Summary of consolidated financial information for the second fiscal quarter of 2023 for the three and six months ended July 31, 2022 compared to the three and six months ended July 31, 2021.


Three Months Ended July 31,

Six Months Ended July 31,


2022

2021

Change

2022

2021

Change


$

$


$

$


Revenue

7,738,680

5,397,000

43.4 %

15,313,200

9,739,192

57.2 %

Gross profit

2,794,439

2,017,180

38.5 %

5,630,119

3,661,718

53.8 %

Gross profit margin

36.1 %

37.4 %

(3.5 %)

36.8 %

37.6 %

(2.1 %)

Total operating expenses

4,085,821

1,681,151

143.0 %

8,257,005

2,771,300

197.9 %

Income (loss) from operations

(1,291,382)

336,029

(484.3 %)

(2,626,886)

890,418

(395.0 %)

Total other income (expenses) 

974,568

(217,464)

548.2 %

551,597

(310,079)

277.9 %

Net comprehensive income (loss)

(151,067)

66,565

(326.9 %)

(1,909,542)

430,339

(543.7 %)

EBITDA(2)

1,023,791

622,892

64.4 %

455,480

1,412,411

(67.8 %)

Adjusted EBITDA(2)

(117,776)

622,892

(119.0 %)

(71,431)

1,412,411

(105.1 %)

Basic and diluted (loss) income per share

(0.03)

0.01

(400 %)

(0.19)

0.06

(417 %)

"Shiny Health & Wellness' second quarter results comprise of the second full quarter of operations following consolidated cannabis acquisitions and demonstrate a positive cash flow consistent with plan and our simultaneous investments in our strategic pharmacy initiative," said Jude Pinto, Chief Financial Officer and Chief Information Officer.  

Consolidated Performance
Three months ended July 31, 2022 compared to the three months ended July 31, 2021.

Retail Operations

Adult-use Cannabis Business

Key areas of focus for the Company's cannabis line of business include steadily enhancing EBITDA(2), tailoring competitive positioning within each community where it operates, and optimizing network capital and real estate utilization.

At July 31, 2022, management assessed that there were indicators of impairment at one of its retail store locations as the economic performance of this location was underperforming expectations. An impairment charge of $0.06 million was recognized for the quarter based on the net recoverable value of property and equipment at this location. During the previous quarter, management assessed that there were indicators of impairment at two of its retail store locations. Subsequent to the quarter, the Company has since closed these three locations and currently operates 28 corporate stores across Ontario.

Through its subsidiary Shiny Bud Inc, Shiny Health is planning to have a cannabis store portfolio in the range of 25 to 35 corporate stores by the end of its fiscal year ending January 31, 2023. The Company is also targeting a total of 5 to 15 franchise and/or licensed cannabis stores by fiscal year -end. Shiny Health does not currently expect to develop new greenfield locations until the macro competitive factors in Ontario's retail cannabis industry stabilize and will continue to assess potential tuck-in acquisition opportunities on a case-by-case basis .

Developing Pharmacy Business

In May, the Company announced its broadened retail growth strategy with a focus on health and wellness, intending to establish a new line of business with the aim of building a network of community pharmacies across Ontario, differentiating itself from other cannabis retailers. Under its subsidiary m?h? Health & Wellness, the Company is targeting to acquire between 5 to 10 retail pharmacies in Ontario by the end of its fiscal year ending January 31, 2023(3). 

Subsequent to the quarter, the Company entered into a definitive Asset Purchase Agreement to complete its previously announced acquisition of Cotton Mill Pharmacy ("Cotton Mill") and is currently scheduled to close on October 3, 2022, subject to regulatory approvals and other customary closing conditions. Closing of Cotton Mill will be the first pharmacy acquisition in furtherance of the Company's plans to expand into health and wellness. In addition to Cotton Mill, the Company has five additional acquisition candidates with active due diligence ongoing.

Key areas of focus for the Company's pharmacy strategic initiative will include steadily enhancing EBITDA(2) through scale, leveraging the pharmacy retail experience upon acquisition of each new location, building brand presence, and optimal competitive positioning within each community where it operates.

Consolidated Financial Statements

For further information, refer to Shiny Health's interim condensed consolidated financial statements and related management's discussion & analysis for the three and six months ended July 31, 2022 and 2021, which are available on the Company's corporate website at www.shinyhealthandwellness.com and on SEDAR under the Company's issuer profile at www.sedar.com.

Conference Call & Webcast

Management is hosting a live conference call and audio webcast to review highlights and host a question-and-answer session for the three months ended July 31, 2022 as follows:

Date & Time:

Friday, September 30, 2022 at 8:30 a.m. ET

Telephone:

Toll-free + 1-833-950-0062


Local or International +1-226-828-7575 


Please allow a few minutes to be connected to the conference call.

Access Code:

474679

Webcast:

Accessible on Shiny Health's website at www.shinyhealthandwellness.com/Q22023 

Note:

The slide presentation will be available for download at www.shinyhealthandwellness.com 

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Endnotes

(1)

System-wide revenue includes revenue generated from Shiny Health's corporate-owned stores, 12 licensed stores, and the ShinyBuddy Data Program. The Company does not record licensee sales as revenues, however, licensee fees are calculated based on 1% of licensee store sales.



(2)

The Company defines EBITDA and Adjusted EBITDA as per the table below. EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have standardized meanings prescribed under IFRS and may not be comparable to similar measures disclosed by other issuers. Management calculates "EBITDA" for a financial period as the Company's income (loss) for the period, as determined in accordance with IFRS, before accretion and interest, tax, and depreciation and amortization, and calculates "Adjusted EBITDA" for a financial period as the EBITDA for the period after adjusting to remove impairment, loss on settlement of loan, gain on revaluation of derivative liability, gain on change in fair value, share-based compensation and strategic one-time cost.




Management uses EBITDA and Adjusted EBITDA to assess the Company's ability to generate cash from operations, and the Company believes them to be useful measures for this purpose. They are, however, supplementary information only and should not be relied upon for comparative or investment purposes. Readers must not consider non-IFRS measures in isolation or as a substitute for analysis of the Company's financial results as reported under IFRS. EBITDA and Adjusted EBITDA are not, and must not be construed as alternatives to, net income (loss) or cash flow from operating activities as determined under IFRS. The following table reconciles net (loss) income for the periods indicated to EBITDA and Adjusted EBITDA, respectively:

 


Three months ended July 31

Six months ended July 31


2022

2021

Change

2022

2021

Change


$

$


$

$


 Other Comprehensive loss (income)

(151,067)

66,565

(226.9 %)

(1,909,542)

430,339

(443.7 %)

Income tax (recovery) expense

-

52,000

-

-

150,000

-

Finance costs

335,168

219,989

52.4 %

738,764

312,604

136.3 %

Depreciation & amortization

839,690

284,338

195.3 %

1,626,258

519,468

213.1 %

EBITDA

1,023,791

622,892

64.4 %

455,480

1,412,411

(67.8 %)

Impairment

63,255

-

-

547,961

-

-

One-time strategic costs

244,242

-

-

753,584

-

-

Revaluation gain on derivative liability

(1,436,418)

-

-

(3,032,950)

-

-

Loss on settlement of loan

-

-

-

1,267,726

-

-

Share-Based compensation

89,710

-

-

175,345

-

-

Gain on change in fair value

(102,356)

-

-

(238,577)

-

-

Adjusted EBITDA

(117,776)

622,892

(118.9 %)

(71,431)

1,412,411

(105.1 %)

Adjusted EBITDA ? Cannabis

253,869

622,892

(59.2 %)

639,494

1,412,411

(54.7 %)

Adjusted EBITDA - Pharmacy

(371,645)

-

-

(710,925)

-

-

Notes to the Table Above:


Cash outflow for the lease liabilities for the three-month period ended July 31, 2022 were $460,405 and $919,856 for the six-month period ended July 31, 2022.


Cash outflow for the lease liabilities for the three-month period ended July 31, 2021 were $175,776 and $328,599 for the six-month period ended July 31, 2021.


For the three-month period ended July 31, 2022, adjusted EBITDA was negative $0.1 million, comprised of $0.3 million from the cannabis operations and negative $0.4 million from the Company's strategic pharmacy initiative. The $0.3 million from cannabis operations includes $1.06 million from store-level operations and negative $0.8 million from line of business and corporate overhead expenses.

 

For the six-month period ended July 31, 2022, adjusted EBITDA was negative $0.1 million, comprised of $0.6 million from cannabis operations and negative $0.7 million from the Company's strategic pharmacy initiative. The $0.6 million from cannabis operations includes $2.2 million from store-level operations and negative $1.6 million from line of business and corporate overhead expenses.


(3)  Shiny Health's ability to achieve this target range by 2023 fiscal year-end is based on the Company's ability to secure financing on reasonable terms.

 

About Shiny Health & Wellness

Shiny Health & Wellness Corp. is on a mission to help people never settle, live fully by being a trusted source for health and wellness solutions and services. The Company recently broadened its retail growth strategy beyond adult-use cannabis by establishing m?h? Health & Wellness, a new line of business focused on building a network of community pharmacies across Ontario. Striving to provide a more diverse and accessible cannabis experience for adult consumers, the Company also operates ShinyBud Cannabis Co., a well-established brand in Ontario strategically located in markets less saturated with cannabis retailers. The Company's board and management team hold extensive retail operating experience, a key competitive differentiator in leading its growth strategy. Shiny Health trades on the TSX Venture Exchange (TSXV) under the ticker symbol SNYB. For more information, please visit www.shinyhealthandwellness.com.

Cautionary Statement Regarding Forward-Looking Information 

This news release contains statements ("forward-looking statements") that constitute forward-looking information within the meaning of applicable Canadian securities laws. Forward looking statements relate to future performance, events, outcomes or circumstances or are otherwise prospective in nature, are based upon internal assumptions, opinions, estimates, plans, beliefs and expectations about future conditions, developments and courses of action.  They are inherently uncertain as they depend on the accuracy of such assumptions, opinions, estimates, plans, beliefs and expectations, which cannot be assured, and are subject to known and unknown risks and uncertainties that will cause actual results to differ from those indicated, suggested or anticipated in the forward-looking statements. The differences may be material and adverse to the Company.

All statements other than statements of current or historical fact constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "intend", "seek", "plan", "aim", "budget", "forecast", "target", "estimate", "objective", "propose", "predict", "potential", "project", "continue", "pursue", "may", "will", "might", "should", "could" or similar words suggesting future outcomes or events or statements regarding an outlook.

Without limiting the foregoing, this news release contains forward-looking statements pertaining to: closing of the Cotton Mill acquisition and the expected timing thereof; and Shiny Health's growth strategy and expansion into the pharmacy sector. Forward-looking statements, and the underlying assumptions, opinions, estimates, plans, beliefs and expectations on which they are based, are inherently uncertain as they depend on future conditions, developments and courses of action that may or not occur or come to be. There can be no assurance that the underlying assumptions, opinions, estimates, plans, beliefs and expectations will prove to be correct and, accordingly, no assurance that the future performance, events, outcomes or circumstances expressed or implied in the forward-looking statements herein will occur or be realized. Actual results will differ, and the differences may be material and adverse to the Company.

In addition to the other factors and assumptions that may be identified herein, material factors and assumptions used to develop the forward-looking statements contained in this news release include, among other things, assumptions, opinions, estimates, plans, beliefs and expectations regarding: the effectiveness of our retail cannabis and pharmacy strategy; our ability to identify and consummate accretive acquisitions, expand our store network within budgeted costs and timelines, drive same-store sales growth, improve margins and generate new revenue streams; our ability to obtain additional licenses, authorizations and regulatory approvals (including any required approvals of the TSX Venture Exchange) as and when required to fit our growth and business plan; the size of the cannabis retail market and estimated portion currently unserved, and the migration of customers from the illicit market to legal market; our ability to capture additional market share; our ability to attract franchisees to the Shiny Health's brand and model, and the terms of franchise arrangements; the number, type and locations of new stores; the applicability and relevance of our experience in existing centers and locations to new centers and locations; our ability to influence our customer purchase decisions; our ability to maintain, enhance, and grow our appeal within our addressable market, and to customize products and inventory for the market that resonate with our target customer base; our ability to source product that is key to our menu offerings; our ability to leverage our landlord network and build a flexible lease portfolio; our ability to manage costs and drive operating efficiencies; our ability to retain key management and non-management personnel, and to hire, train and motivate staff; the availability of capital, and our ability to obtain any required external financing on acceptable terms; our competitive strengths and the impact of competition; the accuracy of our financial models; trends in the retail cannabis and pharmacy sectors; the regulatory framework applicable to the retail cannabis and pharmacy industries in Canada, and the direction of any changes in that framework and underlying laws; and general economic, political and social conditions affecting the retail cannabis and pharmacy businesses.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that will cause actual results to differ from those indicated, suggested or anticipated in the forward-looking statements, and the differences may be material. Readers must therefore exercise caution and not rely on forward-looking statements, which rest on assumptions, opinions, estimates, plans, beliefs and expectations as of the date made that may change, and are in any event not a guarantee of future performance or a promise of any future outcomes. We believe such risks, uncertainties and other factors to include, without limitation, the following: risks associated with the retail cannabis and pharmacy industries generally; adverse changes in the general economic or market conditions, and to customer spending in the centers where we operate; unforeseen obstacles that prevent, delay or otherwise compromise the execution of our growth plan; inability to obtain additional licenses and authorizations (and other needed regulatory approvals) as and when required to fit our growth and business plan; ineffectively managing our growth; failure to secure desirable store locations; inability to secure leasehold premises for new stores on acceptable terms, risks associated with leasing retail space; adverse changes to the regulatory framework applicable to the retail cannabis and pharmacy industries in Canada, or to other laws and regulations affecting our business (including taxes); unanticipated diminishment of the Shiny Health or m?h? brands or any trademark protections; negative publicity for us or our business; marketing strategies that are less successful than expected; our highly competitive industry and the relative size and resources of some of our competitors; being unable to successfully open and operate new stores; profitability erosion from unexpected cost increases; slower profitability of new stores; failure to identify, recruit and contract with a sufficient number of qualified franchise partners; lack of access to capital to fund expansion, or more costly financing terms than expected; a data security breach that results in improper use or disclosure of confidential customer or employee information; risks associated with industry consolidation; loss of key management or other key personnel, or unexpected difficulty in attracting, training and/or motivating staff as necessary to execute our business plan; unexpected challenges in growing sales or connecting with our customer base; inability to meet other financial targets; any material claims made against us, which could result in litigation; insolvency risks with parties with whom we do business; increased expenses of being a public company; the forward-looking statements contained in this presentation proving to be inaccurate and incorrect despite there being a reasonable basis therefor at the time they were made; and such other risks, uncertainties and other factors as may be discussed or set out from time-to-time in Shiny Health's public disclosure documents (including, without limitation, those risks identified in the Company's management's discussion and analysis filed by the Company with applicable securities regulatory authorities in Canada and available under its issuer profile on SEDAR at www.sedar.com).

The foregoing lists of material assumptions and risks, uncertainties and other factors are not exhaustive. The forward-looking statements contained herein speak only as of the date of this news release. The Company disclaims any intention, obligation or undertaking to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, or to explain any difference between actual results and those indicated, suggested or anticipated in any forward looking statements, except as may be required under applicable securities laws.

All forward-looking statements contained in this news release and in any related reports or disclosures filed or issued by the Company, or made by the Company's directors, officers and other persons authorized to speak on its behalf regarding the subject matter hereof, are expressly qualified by this cautionary statement.

SOURCE Shiny Health & Wellness Corp.


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