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

Published: October 3, 2022

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

Shiny Health & Wellness Corp. reported financial results for its fiscal year 2023 second quarter for the three and six months ended July 31, 2022.

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.

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.

  • 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 mīhī 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.

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 mīhī 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. For more information, please visit www.shinyhealthandwellness.com.