MITI: Solid progress at clinics; expansion slows until financing completed.

By Beth Senko, CFA

OTC:MITI

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Mitesco, Inc. MITI is building a better model for primary care. Headed by veteran physician practice clinical and business leaders, Mitesco's "The Good Clinic" seeks to improve health disparities through a nurse-practitioner driven model emphasizing patient engagement and activation, frequent communication, continuity of care, and emphasis on wellness and convenience. The Company opened its first clinic in February 2021, and by the end of the year had six clinics operating around Minneapolis. In 2022, the Company expects to open an additional 12 clinics in three states – Minnesota, Colorado and Arizona. By 2023, Mitesco plans to have 50 clinics in operation.

Mitesco's management has a lot on its plate. Business is progressing to plan at its six clinics. Its seventh clinic is schedule to open this summer, two more are under construction, with more clinics in the works. Mitesco is also finalizing a capital raise in conjunction with a planned uplisting this year.

In Q122, Mitesco, Inc. posted revenues of $120,376, up ~$20k sequentially from Q421. Q122 revenues include $92,461 in service revenues and $27,915 in product sales. With six clinics, two of which were opened at the end of December, operating costs reflect forecast revenue. Cost of services totaled $577,576 in Q122, up ~$100k sequentially. Cost of products was $10,767. General and administrative expense in the quarter of $2.6 million, reflect new clinics construction costs of $0.9 million, as well as professional expenses related to Mitesco's planned uplisting. Including preferred dividends of ~$80k, Mitesco reported a loss of $3.7 million, or $(0.02) per share.

To reflect what we see as limited clinic expansion, until the Company completes its fundraising, we are cutting our FY22 revenue estimate from $17.8 million to $15.9 million. We are increasing our corporate G&A estimate from $4.9 million to $8.0 million to better reflect new clinic development and financing costs. Our FY22 EPS forecast is $(0.02), down slightly from $(0.01). However, we remind investors that Mitesco is very much at the start of its rollout, and small changes in timing and costs can have an oversized effect on reported results.

We are reducing our valuation for Mitesco from $0.53 to $0.44, based on a slightly slower timeline for new clinic rollouts in 2022. Out valuation is based on ten-year DCF for 300 clinics by 2031. Our model builds to $408 million in sales by 2031, with a terminal revenue growth rate of 2%. We model a terminal EBIT margin of 22%, 25% tax rate, and a 12% discount rate. Several factors provide upside to our valuation including: more modest working investment needs at the clinic level, faster time to cash flow breakeven at new clinics, reimbursement from insurers with risk-sharing upside for keeping patients healthy, and robust sales of ancillary products and services.

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