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

Canada NewsWire

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 .

• Revenue increased by 43% to a record $7.7 million with a system-wide revenue of $13.1 million ⁽¹⁾
• Gross profit increased by 39% to $2.8 million
• Sustained strong company-wide gross margin of 36.1% compared to 37.4% year-over-year and 36.8% quarter-over-quarter, despite industry-wide price reduction and margin compression
• Comprehensive net loss of $0.2 million includes:
• cannabis operating income of $0.5 million ;
• one time cannabis LOB costs of $0.2 million ; and
• pharmacy strategic initiative costs of $0.4 million
• Adjusted EBITDA ⁽²⁾ of negative $0.1 million , which includes Adjusted EBITDA for the cannabis line of business of positive $0.3 million and negative $0.4 million for the strategic pharmacy initiative
• Cash balance of $1.9 million as at July 31, 2022
• Steadily grew ShinyBuddy Club Customer Loyalty Program to over 15,600 members to-date
• Announced expanded health & wellness retail strategy through pharmacy
• Amended debt structure for improved flexibility and lower ongoing debt carrying cost

"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 .

"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 .

• Record quarterly revenue of $7.7 million , 43% higher than 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 in January 2022 . The ShinyBuddy Data Program also grew with the onboarding of several new Data Partners which contributed $0.4 million in revenue for the quarter compared to $0.2 million in the prior year. $7.3 million of revenue was generated from retail operations.
• Gross profit increased by 39% to $2.8 million primarily driven by a portfolio that more than doubled.
• Gross margin of 36.1% compared to 37.4% as the Company continued to focus on a carefully curated product offering and adding higher margin cannabis products.
• Total operating expenses increased to $4.1 million , a 143% increase primarily due to the level of activity related to operating an expanded cannabis store portfolio which grew from 13 stores to 31 stores, while establishing scalable corporate functions to deliver against strategic growth plans. Notable increases include office and other expenses, insurance and licensing fees, and marketing and promotion expense related to operating more locations.
• Comprehensive net loss of $0.2 million compared to a net comprehensive income of $0.07 million in the prior year interim period. The comprehensive net loss of $0.2 million includes a cannabis operating income of $0.4 million , $0.4 million in corporate costs from the investment and activities related to Shiny Health's strategic pharmacy initiative, and $0.2 million strategic one-time cannabis costs from remaining acquisition, amalgamation, and listing activities.
• Excluding one-time professional fees, store-level net income for this quarter was $0.3 million including $1.0 million in corporate costs attributed to the Company's cannabis line of business.
• A total $1.4 million revaluation of derivative liabilities, recorded as non-cash accounting gains, related to outstanding share purchase warrants that include a cashless exercise feature.
• Company-wide Adjusted EBITDA ⁽²⁾ decreased to negative $0.1 million , which is comprised of a positive Adjusted EBITDA(2) of $0.3 million recorded by the Shiny Health's cannabis line of business, offset by negative $0.4 million in Adjusted EBITDA recorded by the Company's developing pharmacy initiative.
• Cash balance of $1.9 million as at July 31, 2022 compared to $2.6 million as of April 30, 2022 primarily due to the continued payments of one-time costs and payables related to the initiation of the corporate structure in the fiscal year 2022 fourth quarter, amalgamation costs, and professional fees.
• During the second quarter, Shiny Health opened one new cannabis store in Stittsville, Ontario , increasing its corporate store count from 30 to 31 stores. Subsequent to the quarter, the Company closed three underperforming locations bringing the current total to 28 corporate stores.

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:

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

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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