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

Cannabis business maintains positive adjusted EBITDA for second consecutive quarter
(All amounts are in Canadian dollars unless otherwise stated)
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:
Cash balance of $1.1 million as at October 31, 2022
Net working capital deficit of $2.2 million (current assets minus current liabilities)
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.

Three Months Ended October 31,
Nine Months Ended October 31,

2022
2021
Change
2022
2021
Change

$
$

$
$

Revenue
7,463,267
5,714,579
30.6 %
22,776,467
15,453,771
47.4 %
Gross profit
2,819,045
2,157,247
30.6 %
8,449,164
5,820,965
45.2 %
Gross profit margin
37.8 %
37.8 %
0.1 %
37.1 %
37.7 %
(0.6 %)
Total operating expenses
3,704,155
1,968,818
88.1 %
11,961,160
4,740,118
152.3 %
Income (loss) from operations
(885,110)
190,429
(464.8 %)
(3,511,996)
1,080,847
(324.9 %)
Total other income (expenses)
(870,445)
(407,952)
(113,3 %)
(318,848)
(685,295)
53.5 %
Net comprehensive income (loss)
(1,755,555)
(192,523)
(811.9 %)
(3,830,844)
270,552
(1515.9 %)
EBITDA(3)
(626,835)
421,773
(248.6 %)
(171,355)
1,246,347
(113.7 %)
Adjusted EBITDA(3)
265,270
557,278
51.0 %
193,839
1,381,852
86.0 %
"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

2023

Q3
Q2
Q1
Total sales ($)
7,463,267
7,738,680
7,574,520
Gross profit ($)
2,819,045
2,794,439
2,835,680
Profit (loss) from operations ($)
(885,110)
(1,291,382)
(1,335,504)
Weighted average number of stores (#)
28
31
29
Adjusted EBITDA ($)
265,270
(117,776)
46,345
Consolidated PerformanceThree 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:
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 mīhī Health & Wellness ("mīhī"), 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 URL and on SEDAR under the Company's issuer profile at URL.
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:
Date & Time:
Friday, December 23, 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:
680441
Webcast:
Accessible on Shiny Health's website at URL.
Note:
The slide presentation will be available for download at URL
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.
(1)
The Company refers to its unaudited consolidated interim financial statements for the quarter ended October 31, 2022, which contains a going concern qualification in Note 2 entitled Basis of Operation and Going Concern.

(2)
System-wide revenue includes revenue generated from Shiny Health's corporate-owned stores, 14 licensee 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.

(3)
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 October 31
Nine months ended October 31

2022
2021
Change
2022
2021
Change

$
$

$
$

Total Comprehensive loss (income)
1,641,284
192,523
725.5 %
3,670,826
(270,552)
1456.8 %
Income tax (recovery) expense

25,000
(100.0 %)

125,000
(100.0 %)
Finance costs
317,394
275,053
36.5 %
1,056,158
554,921
90.32 %
Depreciation & amortization
817,055
314,243
160.0 %
2,443,313
836,978
191.9 %
EBITDA
(626,835)
421,773
(248.6 %)
(171,355)
1,246,347
(113.7 %)
Impairment
433,654
135,505
220.0 %
981,615
135,505
624.4 %
One-time strategic costs
244,769

100.0 %
998,353

100.0 %
Revaluation loss (gain) on derivative liability
111,951

100.0 %
(2,920,999)

(100.0 %)
Loss on extinguishment of loan

1,267,726

100.0 %
Share-Based compensation
89,710

100.0 %
265,055

100.0 %
Gain on change in fair value
12,021

100.0 %
(226,556)

100.0 %
Total Adjusted EBITDA
265,270
557,278
(52.4 %)
193,839
1,381,852
(86.0 %)
Footnotes to table above:
Cash outflow for the lease liabilities for the three-month period ended October 31, 2022 were $468,728 and $1,388,584 for the nine-month period ended October 31, 2022.
Cash outflow for the lease liabilities for the three-month period ended October 31, 2021 were $