Mednow Achieves Record Q2 2023 Financial Results with Quarterly Revenue of $11.3 Million; 17% Q/Q Revenue Growth and 466% Y/Y Revenue Growth; Adjusted EBITDA Improved 32% Y/Y; and Cash Flow from Operations Improved by 7% Q/Q

• Q2’23 revenue increased approximately 17% quarter-over-quarter to $11.3 million, and approximately 466% year-over-year;
• Mednow patient count increased quarter over quarter, growing by more than 9% to ~38,000 in Q2’23 versus ~35,000 in Q1’23;
• Adjusted EBITDA improved 32% Y/Y;
• Cash flow from operations improved by 7% Q/Q; achieved additional cost savings post-Q2’23 to further reduce cash burn;
• New business partnerships signed, including Mednow’s partnership with DexCom Inc. (NASDAQ:DXCM)

Mednow Inc. (“Mednow'' or the “Company”) (TSXV:MNOW) (OTCQX:MDNWF), Canada’s on-demand virtual pharmacy, is pleased to announce it has released its financial results for the period ending January 31, 2023 (“Q2 2023”). Mednow’s Financial Statements and Management, Discussion & Analysis are available on sedar.com and on the Company’s website, https://investors.mednow.ca.

Key Milestones, M&A and Partnerships During and Subsequent to Q2 2023:

• Significant revenue growth. Q2/23 revenue increased approximately 17% Q/Q to $11.3 million, and approximately 466% year-over-year
• Patient growth. Mednow patient count increased quarter-over-quarter, growing by approximately 9% to ~38,000 in Q2’23 versus ~35,000 in Q1’23
• Mednow has implemented significant cost reductions and operational streamlining initiatives, aimed at achieving a cash flow positive status. The company has recently completed the "build & buy" phase, which has enabled it to establish the core infrastructure required for its national virtual pharmacy ambitions. Mednow has also leveraged the insights gained from its initial time in the market and has refined its strategy to focus on core business lines and adapting to changing macroeconomic conditions. These efforts are aimed at driving operational efficiency and ensuring sustainable growth.
  • Total cost base reduced. Total operating costs (excluding COGS, impairment, share-based compensation and depreciation) decreased by 6% Q/Q
  • People costs reduced. People costs were reduced by 11% Q/Q
  • Integration of acquisitions. Cost synergies have been achieved through the integration of acquisitions. This includes the consolidation of call centers, pharmacy operations and patient outreach programs. The resulting merged entities produce more revenue from cross-selling and have less overall costs for the Company.
  • Core business streamlining. Costs were reduced in respect of personnel, technology, CAPEX, marketing, and SG&A due to efficiencies.
• Mednow for Business (“MFB”) continues to drive growth with partner signings. MFB has demonstrated strong traction, with access to over 500,000 lives.
  • MFB also offers wellness and digital health programs to their employees, providing a broad spectrum of solutions, including digital pharmacy, nutritional services, personalized vitamins and supplements programs, and a wellness store that includes a broad array of health-related products.
  • To-date, MFB has formed strategic channel partner relationships with DexCom Inc. (NASDAQ: DXCM), PACE Consulting Benefits and Pensions Ltd., PACE Consulting MGA Services Inc. and Sterling Capital Brokers. MFB has launched and onboarded over 500 employers, including, but not limited to Tucows (TSX: TC), Consensus Cloud Solutions (NASDAQ: CCSI), and Arista Networks (NYSE: ANET). Furthermore, MFB has a healthy pipeline of groups which is expected to be launched in the coming months, and is working with multiple net new partners.
• Increased demand for Mednow for Doctors. An important area of demand for Mednow’s virtual pharmacy services is from physicians and medical clinics who are looking for administrative, data, clinical, and adherence support. Such collaborations result in revenues from clinical services such as medication reviews and dispensing of adherence medication solutions. Mednow drives growth by leaning into this demand and continues its mission to push forward innovation in collaborative care.
• Established product-market fit. Mednow has earned and maintains a perfect 5-star rating on Google. The reviews show that Mednow is solving real problems and changing what Canadians expect from their pharmacy. Customer service is our obsession and in a market as price-regulated as pharmacy, the patient experience makes the difference. Furthermore Mednow’s growing list of enterprise clients validates that the company is providing a differentiated pharmacy experience for users, payors and prescribers.

Key Financials

• Revenue increased by 17% quarter-over-quarter, to $11,346,829 during the three month period ended January 31, 2023, driven primarily by sales from the Company's Pharmacy operating segment.
  • Pharmacies based in British Columbia, Manitoba, Ontario and Nova Scotia collectively generated revenue of $10,839,642, as compared to $1,405,559 in the prior year’s comparative period.
  • Revenue generated by doctor services was $472,146 as compared to $536,266 in the prior year’s comparative period.
• Gross margin for the quarter increased approximately 253% year-over-year to $1,249,746, as compared to $354,297 in the prior year’s comparative period.
• EBITDA for the period was a loss of $3,404,704, as compared to a loss of $5,438,633 in the prior year’s comparative period, representing an increase in EBITDA of $2,033,929 compared to the prior comparative period.
  • The change is primarily due to the increase in gross profit, resulting from higher revenues during the period, and a decrease in share-based compensation expenses, partially offset against general and administrative expenses, which are corporate costs, such as increased headcount, technology and marketing expenses.
  • EBITDA is a non-IFRS financial measure and has been adjusted for certain items. Refer to the disclosure under the heading “Definitions of Certain Non-IFRS Financial Measures” for more information on this non-IFRS financial measure.
• Adjusted EBITDA for the quarter was a loss of $2,811,808, as compared to a loss of $4,162,058 in the prior year comparative period, representing a increase in adjusted EBITDA of $1,350,250.
  • Adjusted EBITDA is a non-IFRS financial measure and has been adjusted for certain items. Refer to the disclosure under the heading “Definitions of Certain Non-IFRS Financial Measures” for more information on this non-IFRS financial measure. The composition of Adjusted EBITDA has changed from the comparative period to the current period discussed herein, as explained further under the heading “Definitions of Certain Non-IFRS Financial Measures - Reconciliation of Non-IFRS Financial Measures.”

Summary of Financial Results

Below is a summary of each operating segment's performance for the three-month period ended January 31, 2023 and 2022.

 

 

For the three months ended January 31,

 

 

2023

 

 

Pharmacies

 

Doctor Services

 

Mednow Inc.

 

Total

Revenue

 

$

10,839,642

 

 

$

472,146

 

 

$

35,041

 

 

$

11,346,829

 

Cost of sales

 

 

9,747,421

 

 

 

349,662

 

 

 

—

 

 

 

10,097,083

 

General and administrative

 

 

1,894,716

 

 

 

330,485

 

 

 

1,803,949

 

 

 

4,029,150

 

Share based compensation

 

 

—

 

 

 

—

 

 

 

324,097

 

 

 

324,097

 

Marketing and sales

 

 

6,497

 

 

 

6,616

 

 

 

122,159

 

 

 

135,272

 

Depreciation

 

 

363,896

 

 

 

6,496

 

 

 

314,443

 

 

 

684,835

 

Income tax expense

 

 

26,685

 

 

 

—

 

 

 

—

 

 

 

26,685

 

Other amounts in loss

 

 

276,343

 

 

 

810

 

 

 

16,352

 

 

 

293,505

 

Net loss

 

$

(1,475,916

)

 

$

(221,923

)

 

$

(2,545,959

)

 

$

(4,243,798

)

 

 

For the three months ended January 31,

 

 

2022

 

 

Pharmacies

 

Doctor Services

 

Mednow Inc.

 

Total

Revenue

 

$

1,405,559

 

 

$

536,266

 

 

$

62,100

 

 

$

2,003,925

 

Cost of sales

 

 

1,250,018

 

 

 

399,610

 

 

 

—

 

 

 

1,649,628

 

General and administrative

 

 

464,140

 

 

 

242,001

 

 

 

3,478,296

 

 

 

4,184,437

 

Share based compensation

 

 

—

 

 

 

—

 

 

 

1,086,293

 

 

 

1,086,293

 

Marketing and sales

 

 

—

 

 

 

907

 

 

 

490,955

 

 

 

491,862

 

Depreciation

 

 

88,263

 

 

 

7,293

 

 

 

167,770

 

 

 

263,326

 

Income tax expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other amounts in loss

 

 

10,767

 

 

 

268

 

 

 

30,707

 

 

 

41,742

 

Net loss

 

$

(407,629

)

 

$

(113,813

)

 

$

(5,191,921

)

 

$

(5,713,363

)

Source: Mednow’s MD&A as of March 31, 2023

RECONCILIATIONS OF NON-IFRS MEASURES

 

Three months ended January 31,

 

Six months ended January 31,

 

2023

2022

 

2023

2022

Net loss and comprehensive loss for the period

$

(4,243,798

)

$

(5,713,363

)

 

$

(8,834,769

)

$

(10,514,372

)

Interest expense

 

127,574

 

 

11,404

 

 

 

226,886

 

 

14,683

 

Depreciation and amortization

 

684,835

 

 

263,326

 

 

 

1,386,513

 

 

398,383

 

Current income tax expense

 

26,685

 

 

—

 

 

 

87,385

 

 

—

 

EBITDA¹

$

(3,404,704

)

$

(5,438,633

)

 

$

(7,133,985

)

$

(10,101,306

)

Loss on investment in equity securities

 

—

 

 

60,442

 

 

 

—

 

 

89,166

 

Share-based compensation

 

324,097

 

 

1,086,293

 

 

 

679,117

 

 

2,565,822

 

Acquisition costs

 

11,400

 

 

129,840

 

 

 

11,400

 

 

217,492

 

Severance expenses

 

74,000

 

 

—

 

 

 

224,000

 

 

—

 

Loss on disposal of assets and leases

 

183,399

 

 

—

 

 

 

183,399

 

 

—

 

Adjusted EBITDA¹

$

(2,811,808

)

$

(4,162,058

)

 

$

(6,036,069

)

$

(7,228,826

)

¹ EBITDA and Adjusted EBITDA are non-IFRS financial measures and have been discussed in the section Definitions of Non-IFRS Financial Measures.

DEFINITIONS OF CERTAIN NON-IFRS FINANCIAL MEASURES

This press release discloses certain non-IFRS financial measures which are defined below (including non-IFRS financial measures for prior year comparative periods). Non-IFRS financial measures are not standardized financial measures under IFRS. As such, these measures may not be comparable to similar financial measures that are disclosed by other companies. These measures include “EBITDA” and “Adjusted EBITDA”. These measures are provided as additional information that is disclosed to provide further insight into the Company's results of operations from management's perspective. These measures should not be reviewed and assessed as a substitute for financial information reported under IFRS. A reconciliation of the non-IFRS measures to the IFRS measure is in the section "Selected Financial Information".

EBITDA and Adjusted EBITDA

EBITDA represents net loss and comprehensive loss for the period before interest expense, income taxes, and depreciation and amortization expenses. Adjusted EBITDA represents net loss and comprehensive loss for the period before interest expense, income taxes, depreciation and amortization expenses, loss on investment in equity securities, share-based compensation expense, acquisition costs incurred, asset impairment charges, the fair value remeasurement of the note receivable from Doko and severance expenses. These adjustments to calculate the non-IFRS measures of EBITDA and Adjusted EBITDA are for items that are not necessarily reflective of the Company’s underlying operating performance. As there is no generally accepted or standard method of calculating EBITDA, these measures are not necessarily comparable to similarly titled measures reported by other issuers. EBITDA and Adjusted EBITDA are presented as management believes it is a useful indicator of the Company’s relative financial performance. These measures should not be considered by an investor as an alternative to net income or other IFRS financial measures as determined in accordance with IFRS.

The Company presents EBITDA and Adjusted EBITDA to indicate ongoing financial performance from period to period, including comparative prior year periods.

Reconciliation of Non-IFRS Financial Measures

The most directly comparable financial measure to EBITDA and Adjusted EBITDA that is disclosed in the Company’s financial statements is net loss and comprehensive loss. The following are reconciliations of net loss and comprehensive loss to EBITDA. The adjustments include:

1. The amortization and depreciation expenses of intangible assets, fixed assets, and the right-of-use assets of the Company.
2. The net interest expenses, which primarily includes interest expense on the Company's credit facility and interest expense and interest income recorded in accordance with IFRS 16.
3. The underlying income taxes recorded.

The following are reconciliations of EBITDA to Adjusted EBITDA. The adjustments include:

1. The loss on investment in equity securities in connection with the Company's investment in Life Support.
2. The share-based compensation expense recorded by the Company in connection with the stock option plan.
3. The acquisition costs incurred by the Company.
4. The asset impairment charges recorded by the Company as part of its annual impairment test of goodwill and intangible assets.
5. The fair value remeasurement of the promissory note with Doko.
6. The severance expenses incurred by the Company.

The composition of Adjusted EBITDA has changed from prior comparative periods disclosed herein. Information on the reason for the change is incorporated by reference to the Company’s Management Discussion and Analysis (“MD&A”) for the three month period ended October 31, 2022. The information can be found in the MD&A under the heading “Definition of Certain Non-IFRS Financial Measures - Reconciliation of Non-IFRS Financial Measures.” The Company’s MD&A is available on SEDAR at www.sedar.com under the Company’s profile.

The exclusion of certain items in calculating the non-IFRS measures does not imply that they are non-recurring, infrequent, unusual or not useful to investors.

About Mednow Inc.

Mednow (TSXV: MNOW) (OTCQX:MDNWF) is a healthcare technology company offering virtual access with a high-standard of care. Designed with accessibility and quality of care in mind, Mednow provides virtual pharmacy and telemedicine services as well as doctor home visits through an interdisciplinary approach to healthcare that is focused on the patient experience. Mednow’s services include free at-home delivery of medications, doctor consultations, a user-friendly interface for easy upload, transfer, and refill of prescriptions, access to healthcare professionals through an intuitive chat experience and the specialized PillSmart™ system that packages prescriptions in easy-to-use daily dose packs, each labeled with the date and time of the next dose.

To learn more, follow Mednow on Facebook, Twitter, LinkedIn, and Instagram, or visit our website at www.mednow.ca/.

Neither 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.

Cautionary Note Regarding Forward-Looking Statements:

This release includes certain statements and information that may constitute forward-looking information within the meaning of applicable Canadian securities laws. All statements in this news release, other than statements of historical facts, including statements regarding future estimates, plans, objectives, timing, assumptions or expectations of future performance, including without limitation, that Mednow expects operate in regions in Canada other than BC and ON by way of Preferred Pharmacy Partners and franchisees; that Mednow expects to collect technology fees from participating pharmacies in its preferred pharmacy network, MFB has a pipeline of groups which are expected to be launched in the coming months and that Mednow Pharmacists are expected to perform an in-home medication review and medication cabinet cleanup for eligible housebound patients under the Ontario Drug benefits program are forward-looking statement and contains forward-looking information.

Generally, forward-looking statements and information can be identified by the use of forward-looking terminology such as “intends” or “anticipates”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would” or “occur”. Forward-looking statements are based on certain material assumptions and analysis made by the Company and the opinions and estimates of management as of the date of this press release, including that Mednow will operate in regions in Canada other than BC and ON by way of Preferred Pharmacy Partners and franchisees; Mednow will collect technology fees from participating pharmacies in its preferred pharmacy network, MFB has a pipeline of groups which will be launched in the coming months and Mednow Pharmacists will perform an in-home medication review and medication cabinet cleanup for eligible housebound patients under the Ontario Drug Benefits Program.

These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information. Important factors that may cause actual results to vary, include, without limitation that Mednow will not operate in regions in Canada other than BC and ON by ways of Preferred Pharmacy Partners and franchise or at all; Mednow will not be successful in collecting technology fees from participating pharmacies in its preferred pharmacy network, MFB’s pipeline of groups will not be successfully launched in the coming months or at all, Mednow Pharmacists will not perform an in-home medication review and medication cabinet cleanup under the Ontario Drug Benefits Program and the risk factors discussed or referred to in the Company’s disclosure documents under the Company’s profile at www.sedar.com

Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The Company does not undertake to update any forward-looking statement, forward-looking information or financial out-look that are incorporated by reference herein, except in accordance with applicable securities laws.

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Investor Relations: Lorraine Cardenas [e-mail] 1.855.686.6300