Cash flow
Mitesco’s business model is cash intensive, as are most physician practice companies. On the front end are new clinic construction costs, as well as clinic overhead until each reaches normalized revenue levels. In addition, is the need to fund accounts receivable, as the Company seeks to be a key provider to insurers in its markets. We are taking a conservative approach to modeling clinic accounts receivable averaging 90 days (DSOs). A clinic generating $1.0 million in revenue, would have $0.25 million in AR. This amount would grow to $0.38 million for a clinic with $1.5 million in revenue. The level of DSOs for each clinic will vary by revenue mix; clinics with a high level of ancillary product and service sales, will likely have lower DSOs as these items will be cash payment at time of service.
Our model assumes six clinics at the end of 2021 (two clinics opened on December 30, 2021), growing to 98 by the end of 2026. Under these assumptions, we estimate that the Company will not generate positive free cash flows (after capex and working investment) until 2029. However, given our aggressive clinic roll-out and conservative working investment need assumptions, our timeline may be flawed. Mitesco’s management guides to new clinics being operating cash flow breakeven at 14 months; for clinics tied to narrow network insurers, management believes operating cash flow breakeven will occur in about half that time.
Balance Sheet
At December 31, 2021, Mitesco had $1.2 million in cash and equivalents on its balance sheet. The Company raised approximately $3.7 million in capital in the last three months of 2021. Management indicates a preference to finance clinic construction costs with short-term debt and a 12- to 18-month payoff, as a way of reducing dilution to existing shareholders compared to equity financing.
