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Neighbourly Announces Second Quarter 2022 Results

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Acquisitions Drive Revenue and Adjusted EBITDA Improvements of Over 50% for the Second Consecutive Quarter

Neighbourly Announces Agreement to Acquire Five Additional Pharmacies, Bringing the Total Locations Acquired During the First Six Months of Fiscal 2022 to 40

TORONTO, Oct. 26, 2021 /CNW/ - Neighbourly Pharmacy Inc. ("Neighbourly" or the "Company") (TSX: NBLY), Canada's largest and fastest growing network of independent pharmacies, today announced its financial results for the twelve-week period ended September 11, 2021 (the "second quarter 2022").

Neighbourly Pharmacy Inc. Logo (CNW Group/Neighbourly Pharmacy Inc.)
Neighbourly Pharmacy Inc. Logo (CNW Group/Neighbourly Pharmacy Inc.)

"Neighbourly's strong second quarter results once again demonstrate the effectiveness of our acquisition and integration strategy, as well as our pharmacy teams' commitment to patient care," stated Chris Gardner, the Company's Chief Executive Officer. "Approximately 95% of the Company's quarterly revenue growth was driven by pharmacies added to our network over the past four quarters. This momentum will continue as we complete the acquisition and integration of 21 pharmacies announced earlier this month, as well as an additional five pharmacies announced today, expanding our total network to 172 pharmacies."

"Neighbourly's ability to continue executing its growth strategy is dependent upon two factors: A robust acquisition pipeline and a strong capital foundation," concluded Mr. Gardner. "Acquisition opportunities in Canada remain abundant, with more than 3,600 independent pharmacies across the country that meet our criteria. At the same time, our recently completed $30 million treasury offering of common shares provides us with even greater financial flexibility to pursue opportunities within this pipeline. As a result, we have never been more confident in Neighbourly's future."

Second Quarter 2022 Highlights

  • Revenue for the second quarter 2022 increased by 54.0% to $90.7 million, driven by the addition of 51 pharmacies over the prior four quarters.

  • Adjusted EBITDA1 for the second quarter 2022 increased by 51.5% to $10.0 million, primarily due to the incremental profitability of pharmacies added to the Company's network.

  • Net Loss for the second quarter 2022 was $3.4 million, an improvement of $0.5 million, or 12.4%.

  • Same-store sales2 for the second quarter 2022 increased by 1.2%, primarily due to a normalization of business volumes following the impact of COVID-19 in the 24 weeks ended September 12, 2020 (the "year to date 2021").

  • Pro-Forma Revenue3 of $484.2 million.

  • Pro-Forma Adjusted EBITDA4 of $60.3 million.

  • The Company completed the previously announced acquisitions of 14 pharmacies.

  • Subsequent to the quarter, the Company announced agreements for the acquisition of 26 additional pharmacies, bringing the total locations acquired or to be acquired in fiscal 2022 to 40. See "Subsequent Events."

  • Also subsequent to the quarter, the Company closed an offering of 4,864,500 Common Shares at a price of $30.75 per Common Share, which included a treasury offering by the Company of 977,000 Common Shares, for gross proceeds to the Company of approximately $30.0 million. See "Subsequent Events."

_____________________________


1 Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

2 Same-store sales represents sales from stores that were owned and operated by the Company for the entirety of both periods and is a supplementary financial measure that is commonly used in the industry. Neighbourly calculates same-store sales using revenue determined in accordance with IFRS.

3 Pro-Forma Revenue is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

4 Pro-Forma Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

Second Quarter 2022 Financial Results

(in $ millions)

Second quarter



Year to date



2022

2021

Change


2022

2021

Change

Revenue

$90.7

$58.9

54.1%


$176.0

$113.9

54.6%

Same-Store Sales Growth (%)1

1.2%

6.0%



4.6%

3.1%










Corporate, General, and Administrative ("CG&A") Costs2

$3.6

$2.2

65.4%


$6.4

$4.2

51.3%

CGA Costs as a Percentage of Revenue (%)

4.0%

3.7%



3.6%

3.7%










Adjusted EBITDA3

$10.0

$6.6

51.5%


$20.1

$13.2

52.8%

Adjusted EBITDA Margin (%)

11.0%

11.2%



11.4%

11.6%










Net Income (Loss)

($3.4)

($3.9)

12.4%


($80.3)

($8.8)

(809.5%)









Pro-Forma Revenue for the 52 weeks ended4

$484.2







Pro-Forma Adjusted EBITDA for the 52 weeks ended5

$60.3















1Same-store sales represents sales from stores that were owned and operated by the Company for the entirety of both periods and is a supplementary financial measure that is commonly used in the industry. Neighbourly calculates same-store sales using revenue determined in accordance with IFRS.

2Corporate, general & administrative costs represents costs incurred at the corporate level (as opposed to costs incurred at the store level) and is a component of Operating, general and administrative expenses.

3Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

4Pro-Forma Revenue is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

5Pro-Forma Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure at the conclusion of this news release.

Impact of COVID-19

In March 2020, Neighbourly experienced a temporary and significant change in consumer buying patterns for both prescriptions and essential products due to consumer uncertainty in the early days of the pandemic. These buying patterns were also impacted by the 30-day fill policy implemented by most provincial governments, which temporarily increased prescription counts and decreased average prescription value during the year to date 2021.

As a result of this policy and the subsequent normalization of both prescription counts and average prescription value, the Company's same-store sales for the second quarter 2022 increased by 1.2%, compared to an increase of 6.0% for the second quarter 2021, while same-store prescription count increased by 2.9% for the second quarter 2022, compared to an increase of 5.6% for the second quarter 2021.

While the future impact of the pandemic is unknown, the variability in same-store sales has largely normalized. While new prescription volumes remain below pre-pandemic levels, they have been growing quarter over quarter as the economy reopens.

Subsequent Events

Today, Neighbourly announced that it entered into a share purchase agreement to acquire five pharmacies located in Western Canada for a purchase price of approximately $21.0 million. The Company estimates these locations will generate total annualized Adjusted EBITDA of approximately $3.0 million, based upon their most recently completed fiscal years and the implementation of synergies upon integration The acquisition of these pharmacies is expected to close during the Company's fourth quarter of fiscal 2022, pending customary regulatory approvals.

On October 25, 2021, the Company successfully completed a treasury and secondary bought deal public offering of common shares (the "Offering"). A total of 4,864,500 of Neighbourly's common shares were sold, including 634,500 common shares following the full exercise by the underwriters of their over-allotment option, at a price of $30.75 per common share. The Offering consisted of a treasury offering by the Company of 977,000 common shares for gross proceeds to the Company of approximately $30.0 million and a secondary offering by certain entities affiliated with Persistence Capital Partners of 3,887,500 common shares for gross proceeds to the selling shareholders of approximately $120.0 million. The net proceeds of the treasury offering will be used to strengthen Neighbourly's financial position and allow the Company to continue to make accretive acquisitions at a similar pace to historical levels. The Company did not receive any of the proceeds of the secondary offering.

On October 7, 2021, Neighbourly announced that it entered into a share purchase agreement to acquire 20 pharmacies located in Alberta for a purchase price of approximately $41.0 million. The Company estimates these locations, together with an additional acquisition of a single independent pharmacy, will generate total annualized Adjusted EBITDA of approximately $7.0 million, based upon their most recently completed fiscal years and the implementation of synergies upon integration. The acquisition of the 20 pharmacies is expected to close within the third quarter of fiscal 2022, pending customary regulatory approvals, while the acquisition of the single independent pharmacy closed as of October 26, 2021.

Declaration of Dividend

Neighbourly announced today that a quarterly dividend will be paid on December 21, 2021, to the Company's common shareholders of record as of November 23, 2021. The amount of the dividend will be $0.045 for each common share. This dividend is an "eligible dividend" for Canadian income tax purposes.

Conference Call and Webcast Information

A conference call will be held at 8:30AM Eastern on October 26, 2021 to discuss Neighbourly's financial results for the second quarter 2022. Participants may join the Company's conference call by dialing 416-764-8650 or 1-888-664-6383 (ID: 72533398). For those unable to participate, playback will be made available an hour after the event at 416-764-8677 or 1-888-390-0541, utilizing passcode 533398#. The webcast of the call will also be archived and available on the Company's website.

The conference call will also be available via webcast on the Investor section of Neighbourly's website at https://investors.neighbourlypharmacy.ca/events-and-presentations.

Neighbourly's unaudited consolidated financial statements and accompanying notes, and Management's Discussion and Analysis for the twelve week period ended September 11, 2021 are available on the Company's website at www.neighbourlypharmacy.ca and on SEDAR at www.sedar.com.

About Neighbourly Pharmacy Inc.

Neighbourly is Canada's largest and fastest growing network of community pharmacies. United by their patient first focus and their role as essential and trusted healthcare hubs within their communities, Neighbourly's pharmacies strive to provide accessible healthcare with a personal touch. Since 2015, Neighbourly has expanded its diversified national footprint to include 172 locations (on a pro forma basis, after giving effect to recently announced proposed acquisitions), reinforcing the Company's reputation as the industry's acquirer of choice.

Non-IFRS Measures

This press release makes reference to certain non-IFRS measures, such as Adjusted EBITDA, Pro-Forma Adjusted EBITDA, and Pro-Forma Revenue. Refer to the Company's Management's Discussion and Analysis dated October 26, 2021 for the twelve-weeks ended September 11, 2021, which is available under the Company's profile on SEDAR at www.sedar.com, for an explanation of the composition of those non-IFRS measures, an explanation of how these non-IFRS measures provide useful information to investors and the additional purposes for which management uses these non-IFRS financial measures. These measures are not recognized under International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide readers with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that market participants frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. See the financial table at the conclusion of this press release for a reconciliation of Adjusted EBITDA, Pro-Forma Adjusted EBITDA, and Pro-Forma Revenue to the most directly comparable IFRS measures.

Key-Performance Indicators

This press release makes reference to certain key performance indicators, such as Same-store sales and corporate, general & administrative costs. We monitor key performance indicators to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These key performance indicators are also used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use industry metrics in the evaluation of issuers. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

Forward-Looking Statements

This press release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to our future financial results and may include information regarding our financial position, business strategy, growth strategies, financial results, taxes, dividend policy, plans and objectives. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "estimates", "outlook", "forecasts", "projection", "prospects", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.

Forward-looking information in this news release includes, among other things, statements relating to the expected completion of probable acquisitions and timing thereof, the expected impact of probable acquisitions on the Company's financial results and expected accretion, statements relating to the acceleration of our growth, the pursuit of accretive acquisitions at a similar pace to historical levels, the payment of dividends, same-store sales improvements and the expected impacts of the ongoing COVID-19 pandemic on our results of operation.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that the Company considered appropriate and reasonable as of the date such statements are made in light of its experience and perception of historical trends, current conditions and expected future developments. Such estimates and assumptions include the satisfaction of all conditions of closing and the successful completion of probable acquisitions within the anticipated timeframe, including receipt of regulatory approvals. Further, forward-looking information is subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks and uncertainties related to probable acquisitions, including the failure to receive or delay in receiving regulatory approvals or otherwise satisfy the conditions to the completion such acquisitions, in a timely manner, or at all, and the reliance on information provided by the relevant sellers, as well as other factors discussed or referred to in the Company's Management's Discussion and Analysis for the twelve-weeks ended September 11, 2021 and under the heading "Risk Factors" in the final long form prospectus dated May 17, 2021 filed in connection with the IPO. If any of these risks or uncertainties materialize, or if the opinions, estimates, or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The pro forma information set forth in this press release should not be considered to be what the actual financial position or other results of operations would have necessarily been had the probable acquisitions discussed herein been completed as, at, or for the periods stated.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this press release represents the Company's expectations as of the date of this press release (or as the date they are otherwise stated to be made) and are subject to change after such date. However, the Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)


Second quarter ended


Year to date

in 000's

September 11, 2021

September 12, 2020


September 11, 2021

September 12, 2020







Revenue

$90,668

$58,856


$176,012

$113,850

Cost of sales

$57,029

$37,068


$110,166

$70,836

Gross profit

$33,639

$21,788


$65,846

$43,014







Operating, general and administrative expenses

$25,252

$15,252


$47,923

$29,942

Acquisition, transaction and integration costs

$3,567

$1,244


$21,919

$1,602

Depreciation and amortization

$5,414

$3,795


$10,159

$7,605

Impairment loss

$23

$0


$23

$0

Operating (loss) income

($617)

$1,497


($14,178)

$3,865







Finance costs (income), net

$2,003

$1,611


($5,104)

$5,153

Change in fair value of financial liabilities

$0

$3,698


$67,228

$7,484

Loss before income taxes

($2,620)

($3,812)


($76,302)

($8,772)







Income taxes expense

$774

$60


$4,027

$60

Net loss for the period

($3,394)

($3,872)


($80,329)

($8,832)







Attributable to:






Shareholders of the Company

($3,651)

($3,872)


($80,778)

($8,832)

Non-controlling Interest

$257

$0


$449

$0


($3,394)

($3,872)


($80,329)

($8,832)







Loss per share

($0.11)

($8.43)


($3.69)

($19.23)

Condensed Consolidated Statements of Financial Position

in 000's


September 11, 2021

March 27, 2021





Assets




Current




Cash


$71,546

$45,914

Trade and other receivables


$19,649

$17,202

Inventory


$49,453

$44,886

Prepaid expenses and deposits


$4,107

$1,611

Assets held for sale


$1,665

$2,715

Total current assets


$146,420

$112,328

Property and equipment, net


$8,958

$8,296

Right-of-use assets


$40,025

$31,703

Intangible assets, net


$113,489

$105,425

Goodwill


$204,423

$180,853

Deferred tax assets


$666

$1,717

Other assets


$209

$297

Total non-current assets


$367,770

$328,291





Total assets


$514,190

$440,619





Liabilities and shareholders' equity




Current




Accounts payable and accrued liabilities


$46,913

$49,191

Promissory notes payable


$62

$802

Current portion of long term borrowings


$1,250

$5,575

Current portion of mortgages payable


$146

$146

Current portion of lease liabilities


$13,223

$9,972

Preferred shares liability


$0

$295,844

Total current liabilities


$61,594

$361,530





Long-term borrowings


$84,182

$190,920

Mortgages payable


$1,091

$1,159

Lease liabilities


$30,762

$26,155

Deferred tax liabilities


$18,499

$15,295

Warrant liability


$0

$4,358





Total non-current liabilities


$134,534

$237,887





Total liabilities


$196,128

$599,417





Shareholders' equity




Share capital


$555,359

$23

Contributed Surplus


$2,544

$348

Deficit


($248,350)

($165,632)

Non-controlling interest


$8,509

$6,463

Total shareholders' equity


$318,062

($158,798)

Total liabilities and shareholders' equity


$514,190

$440,619

Condensed Consolidated Statements of Cash Flows


Second quarter ended


Year to date

in 000's

September 11, 2021

September 12, 2020


September 11, 2021

September 12, 2020







Operating






Net loss for the year

($3,393)

($3,872)


($80,329)

($8,832)

Adjustments to net income for non-cash items






Depreciation and amortization

$5,414

$3,795


$10,159

$7,605

Impairment loss

$23

$0


$23

$0

Share based compensation

$1,586

$46


$2,196

$94

Gain on disposal of property and equipment

($3)

$0


($11)

$0

Finance (income) costs, net

$2,003

$1,611


($5,104)

$5,153

Change in fair value of financial liabilities

$0

$3,698


$67,228

$7,484

Income tax expense

$774

$60


$4,027

$60

Lease renewals and modifications

($11)

$348


($32)

$203

Expected credit loss expense

$0

$0


$11

$0

Income taxes recovered (paid)

($229)

($1,783)


($10,304)

($135)

Change in non-cash operating working capital

($5,523)

($25)


($766)

$0

Net cash from operating activities

$641

$3,878


($12,902)

$11,632







Financing






Proceeds from issuance of common shares, net of issuance costs

($178)

$0


$187,897

$0

Repayment of promissory notes payable

$0

$0


($740)

$0

Proceeds from long-term borrowings

$0

$6,683


$0

$6,683

Repayment of long-term borrowings

$0

($1,391)


($100,168)

($4,614)

Transaction costs related to long-term borrowings

$0

($216)


($1,915)

($286)

Repayment of mortgage payable

($31)

$0


($67)

$0

Interest paid

($963)

($3,000)


($2,641)

($5,682)

Dividends and distributions paid

($963)

$0


($1,503)

$0

Payment of lease liabilities

($3,074)

($1,995)


($5,790)

($3,796)

Proceeds from exercise of warrants

$0

$0


$9

$0

Net cash from financing activities

($5,209)

$81


$75,082

($7,695)







Investing






Acquisition of property and equipment

($740)

($332)


($928)

($456)

Acquisition of intangible assets

($91)

($98)


($203)

($72)

Business combinations, net of cash acquired

($35,558)

($6,020)


($35,558)

($6,020)

Restricted cash, net

$0

$0


$0

$893

Interest received

$98

$7


$141

$7

Net cash from investing activities

($36,291)

($6,443)


($36,548)

($5,648)







Net change in cash

($40,859)

($2,484)


$25,632

($1,711)

Cash, beginning of period

$112,405

$4,680


$45,914

$3,907

Cash, end of period

$71,546

$2,196


$71,546

$2,196

Reconciliation from IFRS to Non-IFRS Measures

The following table provides a reconciliation of loss and comprehensive loss to Adjusted EBITDA and Pro-Forma Adjusted EBITDA, and of Revenue to Pro-Forma Revenue, for the periods indicated:



12 weeks ended


24 weeks ended


28 weeks ended

in 000's


2022

2021


2022

2021


2021










Loss and comprehensive loss for the period


-$3,394

-$3,872


-$80,329

-$8,832


-$81,685

Income tax expense (recovery)


$774

$60


$4,027

$60


$2,531

Finance (income) costs, net


$2,003

$1,611


-$5,104

$5,153


$10,851

Fair value changes of financial liabilities


-

$3,698


$67,228

$7,484


$72,921

Depreciation and amortization


$5,414

$3,795


$10,159

$7,605


$11,513

Impairment loss


$23

-


$23

-


$116

Acquisition, transaction and integration costs


$3,567

$1,244


$21,919

$1,602


$5,579

Share-based compensation


$1,585

$46


$2,196

$94


$92










Adjusted EBITDA


$9,972

$6,582


$20,119

$13,166


$21,918










Revenue


$90,668

$58,856


$176,012

$113,850


$192,644

Adjusted EBITDA margin


11.0%

11.2%


11.4%

11.6%


11.4%










Pro-Forma Adjusted EBITDA


















Adjusted EBITDA for the 24 weeks ended September 11, 2021


$20,119

Adjusted EBITDA for the 28 weeks ended March 27, 2021








$21,918

Incremental Adjusted EBITDA for new stores acquired after September 12, 2020 as if owned on September 12, 2020


$6,796

Incremental Adjusted EBITDA for stores acquired, or to be acquired on or after September 11, 2021 to date as if owned on September 12, 2020


$10,173

Adjustment for professional, other fees and COVID-related for the 28 weeks ended March 27, 2021


$1,283










Pro-forma Adjusted EBITDA for the 52 weeks ended September 11, 2021


$60,289










Pro-Forma Revenue


















Revenue for the 24 weeks ended September 11, 2021


$176,012

Revenue for the 28 weeks ended March 27, 2021








$192,644

Incremental Revenue for new stores acquired after September 12, 2020 as if owned on September 12, 2020


$51,858

Incremental Revenue for stores acquired, or to be acquired on or after September 11, 2021 to date as if owned on September 12, 2020


$63,695

Pro-forma Revenue for the 52 weeks ended September 11, 2021


$484,210

SOURCE Neighbourly Pharmacy Inc.

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