# Blue Agave Functional Medicine PLLC
# Q1 2026 CFO Report

**Prepared for:** Blue Agave Functional Medicine PLLC
**Period:** January 1 - March 31, 2026
**Basis:** Accrual
**Prepared by:** J2 Bookkeeping

---

## Executive Summary

Q1 2026 was a record quarter for Blue Agave Functional Medicine. The clinic generated **$1.27 million in revenue** -- a **121% increase** over Q1 2025 ($574K). Net income reached **$496K**, up **50% year-over-year**, with a **39.1% operating margin**.

Revenue growth is accelerating, but expenses are growing faster. The margin compressed from 57.5% (Q1 2025) to 39.1% (Q1 2026) as the clinic absorbed the full cost of its 2025 scaling investments -- larger facility, bigger team, and expanded services. At $496K in quarterly net income, this is still an extremely profitable practice.

**Key highlights:**
- Revenue: $1.27M (+121% YoY) -- insurance payments up 126%, office collections up 107%
- Net Income: $496K (+50% YoY)
- Payroll scaled to $328K (up 278% YoY) reflecting full staffing
- Medical supplies at $183K (up 156% YoY) -- volume-driven
- Cash position: $353K (down from $540K at year-end)

**Notable item:**
- **Intercompany receivable increased from $50 to $565,050** -- this reflects planned transfers to the holding company. Cash is flowing upstream as designed in the multi-entity structure. The clinic's operating cash should be monitored to ensure sufficient liquidity is retained for operations.

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## Profit & Loss -- Q1 2026 vs Q1 2025

### Revenue

| Category | Q1 2026 | Q1 2025 | $ Change | % Change |
|----------|---------|---------|----------|----------|
| Insurance Payments | $946,134 | $418,675 | +$527,459 | +126% |
| Office Collections | $321,073 | $154,782 | +$166,291 | +107% |
| Supplement Sales | $251 | $136 | +$115 | +84% |
| Other Services | $0 | $0 | -- | -- |
| **Total Revenue** | **$1,267,458** | **$573,594** | **+$693,865** | **+121%** |

**Insight:** Insurance payments grew faster than office collections (126% vs 107%), pushing the insurance mix slightly higher (74.6% to 74.6% -- roughly flat). Both revenue streams are scaling in lockstep, which is healthy.

### Expenses -- Year-over-Year Variance

| Category | Q1 2026 | Q1 2025 | $ Change | % Change |
|----------|---------|---------|----------|----------|
| Payroll | $327,820 | $86,790 | +$241,030 | +278% |
| Medical Supplies & Pharma | $183,377 | $71,669 | +$111,707 | +156% |
| Billing Fees | $55,585 | $29,553 | +$26,032 | +88% |
| Employee Benefits | $41,522 | $8,600 | +$32,922 | +383% |
| Office Expenses | $41,900 | $16,238 | +$25,663 | +158% |
| Rent | $40,425 | $5,207 | +$35,218 | +676% |
| Advertising & Marketing | $20,899 | $13,821 | +$7,079 | +51% |
| IT | $16,366 | $0 | +$16,366 | New |
| Legal & Accounting | $15,025 | $1,100 | +$13,925 | +1266% |
| Medical Services | $8,459 | $6,111 | +$2,348 | +38% |
| Supplement Inventory | $8,767 | $0 | +$8,767 | New |
| Utilities | $4,838 | $408 | +$4,430 | +1086% |
| Meals | $2,915 | $2,964 | -$49 | -2% |
| Other (licenses, repairs, reimb, etc.) | $2,391 | $1,201 | +$1,189 | +99% |
| **Total Expenses** | **$771,288** | **$243,662** | **+$527,627** | **+217%** |

| **Net Operating Income** | **$496,170** | **$329,932** | **+$166,238** | **+50%** |
|--------------------------|-------------|-------------|-------------|---------|

### Expense Analysis -- Top Drivers

**1. Payroll -- $327,820 (25.9% of revenue)**
The single largest expense and the biggest YoY increase (+$241K). Wages alone were $290K vs $67K in Q1 2025. The clinic has clearly built out a full clinical and administrative team. Payroll taxes ($26K) and retirement contributions ($8.6K) are now material. This is up from 15.1% of revenue in Q1 2025 to 25.9% -- the cost of a scaled team.

**2. Medical Supplies -- $183,377 (14.5% of revenue)**
Includes pharmaceuticals ($72K), tirzepatide ($31K), skin grafts ($5.8K), Vibrant testing ($3.8K), and general supplies ($71K). This is largely variable cost that scales with patient volume. At 14.5% of revenue, this is in a healthy range for a functional medicine practice.

**3. Billing Fees -- $55,585 (4.4% of revenue)**
Third-party billing fees grew 88% vs Q1 2025, slightly below revenue growth (121%). This suggests some economies of scale in the billing arrangement. At 4.4%, this is within the normal 3-7% range for outsourced medical billing.

**4. Rent -- $40,425 (3.2% of revenue)**
Rent is 8x higher than Q1 2025, reflecting the move to a larger facility. At 3.2% of revenue, this is very manageable. The facility investment is paying off through higher volume.

### Margin Analysis

| Metric | Q1 2026 | Q1 2025 | Change |
|--------|---------|---------|--------|
| Gross/Operating Margin | 39.1% | 57.5% | -18.4 pts |
| Payroll % of Revenue | 25.9% | 15.1% | +10.7 pts |
| Medical Supplies % of Revenue | 14.5% | 12.5% | +2.0 pts |
| Billing % of Revenue | 4.4% | 5.2% | -0.8 pts |
| Rent % of Revenue | 3.2% | 0.9% | +2.3 pts |

**Insight:** The margin compression is almost entirely explained by payroll (+10.7 pts) and rent (+2.3 pts). These are fixed/semi-fixed costs that were added for capacity. As revenue continues to grow, these percentages should stabilize or improve. Billing fees actually improved as a percentage -- a positive sign.

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## Balance Sheet -- Q1 2026 vs Q1 2025

### Assets

| Category | 3/31/2026 | 3/31/2025 | $ Change | % Change |
|----------|-----------|-----------|----------|----------|
| Cash & Bank Accounts | $353,125 | $251,629 | +$101,496 | +40% |
| Intercompany Receivable (holding co.) | $565,050 | $0 | +$565,050 | Planned transfers |
| Inventory | $20,964 | $17,929 | +$3,035 | +17% |
| QB Tax Holding | $13,911 | $0 | +$13,911 | New |
| Loans to Officers | $563 | $563 | $0 | 0% |
| Fixed Assets | $43,684 | $7,800 | +$35,884 | +460% |
| Other Assets | $496 | $248 | +$248 | +100% |
| **Total Assets** | **$997,793** | **$278,168** | **+$719,624** | **+259%** |

### Liabilities

| Category | 3/31/2026 | 3/31/2025 | $ Change | % Change |
|----------|-----------|-----------|----------|----------|
| Accounts Payable | $9,902 | $4,365 | +$5,537 | +127% |
| Credit Cards | $7,177 | $64,971 | -$57,794 | -89% |
| Payroll Liabilities | $85,366 | $3,963 | +$81,404 | +2054% |
| Direct Deposit Payable | $8,334 | $0 | +$8,334 | New |
| **Total Liabilities** | **$110,778** | **$73,299** | **+$37,480** | **+51%** |

### Equity

| Category | 3/31/2026 | 3/31/2025 | $ Change |
|----------|-----------|-----------|----------|
| Partner Equity (Draws) | ($1,180,105) | ($180,000) | -$1,000,105 |
| Retained Earnings | $1,571,573 | $55,250 | +$1,516,323 |
| Net Income (YTD) | $496,170 | $329,932 | +$166,238 |
| **Total Equity** | **$887,014** | **$204,870** | **+$682,145** |

### Key Balance Sheet Metrics

| Metric | 3/31/2026 | 3/31/2025 | 12/31/2025 |
|--------|-----------|-----------|------------|
| Current Ratio | 8.61x | 3.68x | 2.43x |
| Working Capital | $842,834 | $196,822 | $350,164 |
| Total Cash | $353,125 | $251,629 | $539,836 |
| Total Liabilities | $110,778 | $73,299 | $244,578 |
| Debt-to-Equity | 0.12x | 0.36x | 0.63x |

---

## Cash Flow Analysis

| Item | Amount |
|------|--------|
| Cash at 12/31/2025 | $539,836 |
| Q1 2026 Net Income | +$496,170 |
| **Expected cash if retained** | **$1,036,006** |
| **Actual cash at 3/31/2026** | **$353,125** |
| **Cash gap** | **-$682,881** |

**Where did $683K go?**

| Outflow | Amount | Notes |
|---------|--------|-------|
| Intercompany Transfers (to holding co.) | ~$565,000 | Planned upstream transfers |
| AP Paydown | ~$105,600 | AP went from $116K to $10K |
| Credit Card Paydown | ~$45,039 | CCs went from $52K to $7K |
| QB Tax Holding reduction | ~$19,419 | From $33K to $14K |
| Payroll Liabilities increase | +$8,506 | Partially offsets outflows |
| **Approximate net outflows** | **~$726,552** | Exceeds gap -- offset by timing items |

**The intercompany transfer is the dominant factor.** The clinic generated strong cash from operations and transferred ~$565K upstream to the holding company as planned. This is consistent with the multi-entity cash management structure. The clinic's remaining $353K in operating cash should be monitored to ensure it stays above a minimum threshold for day-to-day operations.

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## Q1 2026 vs 2025 Full-Year Run Rate

| Metric | Q1 2026 (Annualized) | 2025 Actual | Trend |
|--------|----------------------|-------------|-------|
| Revenue | $5,069,833 | $3,657,298 | +39% |
| Expenses | $3,085,154 | $2,141,080 | +44% |
| Net Income | $1,984,679 | $1,516,012 | +31% |
| Operating Margin | 39.1% | 41.5% | -2.4 pts |

**Insight:** If Q1 2026 performance holds, the clinic is tracking toward a **$5M+ revenue year** with nearly **$2M in net income**. Even with margin compression, the absolute dollar profitability is increasing significantly.

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## Observations & Recommendations

### 1. Intercompany Receivable -- $565,050
The clinic transferred $565K to the holding company in Q1, consistent with the planned intercompany cash flow structure. This is operating as intended. **Recommendation:** Track the intercompany balance quarterly and ensure the clinic retains enough operating cash to cover 2-3 months of expenses (~$500K-$770K at current run rate).

### 2. Cash Position Declining Despite Record Earnings
Cash dropped from $540K to $353K even though the clinic earned $496K. The intercompany transfers and liability paydowns explain this, but the trend needs monitoring. **Recommendation:** Target maintaining at least $500K in cash (approximately 2 months of operating expenses at the current run rate).

### 3. Payroll -- Now the Dominant Expense
At 25.9% of revenue ($328K/quarter), payroll has become the clinic's largest cost center. This is appropriate for a scaled medical practice but should be tracked against revenue to ensure staffing levels remain efficient. **Recommendation:** Track revenue per employee and revenue per provider as quarterly KPIs.

### 4. Margin Stabilization Needed
Operating margin has settled around 39% -- down from the early-stage 57%. This is still a very strong margin for a medical practice (industry average is 15-25%). **Recommendation:** Use 38-40% as the baseline target going forward. If margins drop below 35%, investigate whether it is a revenue shortfall or expense creep.

### 5. AP Cleanup -- Well Done
AP was reduced from $116K to $10K in Q1 -- a significant improvement. Credit cards were also cleaned up from $52K to $7K.* The liability side of the balance sheet is much healthier. **Recommendation:** Maintain this discipline. Target keeping AP under 30 days.

### 6. On Track for a $5M Year
Annualized Q1 revenue projects to $5.07M. If the clinic can maintain this pace, 2026 will represent 39% revenue growth over 2025. **Recommendation:** Consider whether additional capacity (providers, treatment rooms, hours) is needed to sustain this growth rate, or whether Q1 benefited from any one-time items.

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*\* Note: The closed credit card account (BAFM LLC 9245) showing $663 at 3/31/2026 has since been paid to $0.*

*Report prepared by Finn (FP&A) -- J2 Bookkeeping*
*Data source: QuickBooks Online -- Blue Agave Functional Medicine PLLC*
*Accrual basis -- April 27, 2026*