Shiny Health & Wellness Reports Fiscal Year 2023 Third Quarter Results with Increased Revenue, Positive Adjusted EBITDA, and a Strong Gross Margin

Canada NewsWire

Cannabis business maintains positive adjusted EBITDA for second consecutive quarter

TORONTO , Dec. 22, 2022 /CNW/ - Shiny Health & Wellness Corp. ("Shiny Health" or the "Company") (TSXV: SNYB) today reported financial results for its fiscal year 2023 third quarter for the three and nine months ended October 31, 2022 (the "third quarter").

Third Quarter Highlights ⁽¹⁾
Three months ended October 31, 2022 compared to the three months ended October 31, 2021 .

• Revenue increased by 31% to a $7.5 million with a system-wide revenue of $13.1 million ⁽²⁾
• Gross profit increased by 31% to $2.8 million
• Sustained strong company-wide gross profit margin of 37.8% unchanged year-over-year and compared to 36.1% quarter-over-quarter (33.7% at cannabis store level versus 34.3% prior year)
• Operating & other expenses of $4.6 million (versus $2.4 million prior year)
• Comprehensive net loss of $1.76 million
• Achieved positive enterprise Adjusted EBITDA ⁽³⁾ of $0.265 million which includes:
• cannabis Adjusted EBITDA of $0.558 million ;
• pharmacy Adjusted EBITDA of negative $0.193 million ; and
• corporate Adjusted EBITDA of negative $0.100 million .
• Cash balance of $1.1 million as at October 31, 2022
• Net working capital deficit of $2.2 million (current assets minus current liabilities)
• including contingent and non-cash derivative liabilities of approximately $1 million
• ShinyBuddy Club Customer Loyalty Program grew to over 20,000 members
• Closed first pharmacy acquisition to advance health and wellness retail strategy

"During the third quarter, our cannabis portfolio continued generating higher revenues, maintained peer-leading profit margins, and delivered positive adjusted EBITDA for the second consecutive quarter. Concurrently, we established our initial footing into health and wellness after closing our first pharmacy location to differentiate our company from other cannabis retailers," said Kevin Reed , Chairman and Chief Executive Officer. "Going forward we will continue to focus on leveraging our retail expertise and solid foundation in adult-use cannabis to strengthen customer loyalty through our growing membership program, growing sustainable profitability from our existing cannabis stores, and building new customer relationships through our pharmacy holdings."

Financial Highlights

Summary of consolidated financial information for the third fiscal quarter of 2023 for the three and nine months ended October 31, 2022 compared to the three and nine months ended October 31, 2021 .

"Shiny Health & Wellness' third quarter results demonstrate the continued strong performance of our adult-use retail cannabis platform, while carefully navigating our extension into pharmacies with the completion of our first acquisition," said Jude Pinto , Chief Financial Officer and Chief Information Officer. "Our growth strategy is directly tied to the buoyancy of debt and the equity capital market which dictates our pace and form of growth in the coming period."

Quarterly Results

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

• Quarterly revenue increased by 31% to $7.5 million compared to the prior year period primarily driven by the growth in Shiny Health's retail cannabis network through new store openings and acquisitions in connection with a business combination with Mihi Inc. completed January 2022 . The average sales per store decreased year over year consistent with province-wide trends recently reported by the Ontario Cannabis Store. The ShinyBuddy Data Program also contributed increased revenues with the onboarding of several new Data Partners which contributed $0.4 million in revenue for the quarter compared to $0.3 million in the prior year. $6.9 million of revenue was generated from our cannabis operations.
• Gross profit increased by 31% to $2.8 million primarily driven by a store portfolio that doubled and the addition of new Data Partners.
• Gross margin of 37.8% sustained year over year and slightly higher quarter over quarter. Shiny Health's retail cannabis line of business also sustained a strong store-level gross margin of 33.7%, which is above industry average as the Company continued to focus on a carefully curated product offering, adding higher margin cannabis products, and managing costs.
• Total operating expenses increased to $3.7 million , an 88% increase primarily due to the level of activity related to operating an expanded cannabis store portfolio which grew from 14 stores to 28 stores, while establishing scalable corporate and board functions to deliver against strategic growth plans. Notable increases include insurance and licensing fees related to directors and officers, marketing and promotion expenses related to the larger store network, and depreciation and amortization.
• Comprehensive net loss of $1.8 million , compared to a loss of $0.2 million in the prior year interim period, is segmented across Company operations as follows:
• Operating income of $0.03 million from the cannabis line of business due to higher revenues and gross profit as the store portfolio doubled year over year, which also contributed to an 83% decrease in income over the previous year alongside incremental costs of operating more stores as a public entity.
• Operating loss of $0.4 million from the approximately one month of pharmacy operations attributable to the start-up and acquisition costs to launch the new segment for the Company.
• Operating loss of $0.5 million in corporate costs includes expenses related to the management of a public company that are not allocated to other segments.
• Company-wide Adjusted EBITDA ⁽³⁾ decreased to $0.3 million , which is comprised of a positive Adjusted EBITDA ⁽³⁾ of $0.6 million recorded by Shiny Health's cannabis line of business, offset by negative Adjusted EBITDA of $0.2 million and $0.1 million recorded by the Company's newly established pharmacy initiative and corporate segment, respectively.

Liquidity & Capital Management

• Cash balance of $1.1 million as of October 31, 2022 compared to $1.9 million as of
  July 31, 2022 , a change primarily related to continued payments of one-time costs and repayment of the FirePower loan.
• Net working capital deficit of $2.2 million (includes contingent and non-cash derivative liabilities of approximately $1 million ).
• Apart from growth capital, the Company expects to seek additional capital (equity or debt) within the current period to improve its near-term working capital position.

Retail Operations

Adult-use Cannabis Business

During the third quarter, Shiny Health opened one new cannabis store in Stittsville, Ontario . At October 31, 2022 , management assessed that there were indicators of impairment at its Pickering location store as the economic performance of this location was underperforming expectations. Subsequent to the third quarter, the Company closed this location.  An impairment charge of $0.1 million was recognized for the quarter based on the net recoverable value of property and equipment. During the quarter, management also assessed that there were indicators of impairment on some of its retail leases for locations which are currently unused. An impairment charge of $0.3 million was recognized in the third quarter related to an ongoing annualized lease recovery of $0.15 million in the second quarter.

The Company currently has 27 corporate stores and 14 licensee stores across Ontario and is currently targeting to maintain a cannabis store portfolio of between 25 to 35 corporate stores, plus 10 to 15 licensee cannabis stores for its 2023 fiscal year-end.

Developing Pharmacy Business

Through its subsidiary m?h? Health & Wellness ("m?h?"), the Company completed its previously announced acquisition of Cotton Mill Pharmacy ("Cotton Mill"), on October 3, 2022 . Cotton Mill is the first pharmacy acquisition in furtherance of Shiny Health's plans to expand into health and wellness.

In addition, Shiny Health has five additional pharmacy candidates undergoing due diligence and continues to expand its pipeline of purchase opportunities. To execute against this pipeline, the Company has procured indicative proposals for debt financing to co-fund the future pharmacy purchases. No binding commitments have been entered into in relation to these proposals, which are subject to due diligence and definitive documentation and will also require that a proportionate share of any future purchase price be funded from cash on hand or new equity capital. The Company's ability to execute on any such acquisition opportunities will depend on obtaining definitive commitments for such debt financing and raising a corresponding amount of equity capital , which require that a portion of any future purchase price also be funded in combination with equity capital. Therefore, the timeline to acquiring the next location is largely subject to the availability ability to raise the required of capital on the open markets.

Corporate Update

Effective December 31, 2022 , Richard Espinos , co-founder and director, will be resigning from the Board of Directors to focus on his expanding professional commitments. Richard will remain available to the Board and management team for ongoing strategic guidance. On behalf of the directors, management team and shareholders, Shiny Health thanks Mr. Espinos for his founding contributions to the Company and wish him the best in his future endeavours.

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 nine months ended October 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 third quarter highlights with a question-and-answer session as follows:

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.

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: Shiny Health's business strategy and growth potential in respect of both its retail cannabis business and expansion into the pharmacy sector; target numbers of corporate and licensed cannabis stores for 2023 fiscal year-end; and the Company's designs on raising additional capital.

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 ShinyBud 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 ).

With respect to the Company's designs on raising capital, there can be no assurance that any such capital will be available.  If capital is available there can be no assurance regarding the cost and other terms that might be demanded by financing sources, or the effect thereof on the Company or existing stakeholders.

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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