I wouldn't call them a friend exactly, but we're acquainted.
Literal
Friend [quotative-と] say [extent-ほど] is-not [but-が] acquaintance is.
~というほどではない hedges the preceding label — 'not to the extent one would say X.' It is a useful distancing construction for softening claims or correcting overstatements. The contrastive が then pivots to what the relationship actually is.