Organto Foods Inc. ($OGO)

So hello, everyone. Thank you for joining Organto Foods Fiscal 2025 Review and Business Update Webinar. My name is [indiscernible] and I will be monitoring today's session. We'll begin with a brief presentation from Steve Bromley, CEO and Co-Chair of Organto Foods, who will walk through the company's fiscal 2025 operational highlights, financial results and outlook for 2026. Following the presentation, we'll move into a live Q&A session. [Operator Instructions] Before we begin, I'll note that today's discussion may include forward-looking information and forward-looking statements within the meaning of applicable Canadian securities law. These statements may relate to Organto's expectations, plans, objectives, strategies, financial outlook, anticipated growth, operating performance, market opportunities, expansion plans and other future developments. Forward-looking statements are based on management's current expectations, assumptions, estimates and beliefs and are subject to risks, uncertainties that could cause actual results to differ materially from those expressed or implied. For a discussion of these risks, assumptions and uncertainties, please refer to Organto's public disclosure documents, including its MD&A available under the company's profile on SEDAR. Today's discussion may also reference certain non-IFRS financial measures, including EBITDA or adjusted EBITDA. These measures do not have standardized meanings under IFRS and may not be comparable to similar measures used by other companies. Please refer to Organto's public disclosure documents for additional information, including reconciliations where applicable. Nothing discussed in today's session to be considered investment financial, legal or tax advice. Organto undertakes no obligation to update forward-looking statements, except as required by applicable law. With that, thank you, everyone, for joining us today. I'm pleased to turn the call over to Steve, CEO and Co-Chair of Organto Foods. Steve, over to you.

Great. Thanks, Lauren, and thanks, everyone, for joining today. I appreciate you taking the time Today, I want to jump into an overview of 2025, the highlights what happened during the year. It was an extremely busy year for the company, and we're really proud of our progress. We'll then dive into our fiscal 2025 financial results, take a look at what's ahead in 2026, and then turn it over to Q&A. I'll try and keep my comments to 15 minutes or so. So when we look back at 2025, it was an incredible year for the organization. We have record growth in our operations. We had sales of $60.8 million, up 194% versus 2024 and the largest year in our company's history. Gross profit followed with dollars at $5.2 million, up 197% versus the prior year, also the largest in our history. And while the top line and gross margins were improving, our operating costs were being leveraged. So they came down from 15% of sales to 7.7% of sales. So we're seeing that leverage that we expect in the business. We had our first positive EBITDA quarter in history, and EBITDA continued to trend in a positive direction at minus 1.9% of sales in 2025 versus minus 6.5% in the prior year. So certainly, trending in the direction that we're working on and expecting. And so we'll dive into those numbers in a bit more detail here in a minute. At the same time, as our operations were making excellent progress. We were busy restructuring our balance sheet. We eliminated $16.2 million of liabilities. And at the same time, we entered into an operating line with Rabobank, one of the largest ag lenders in the world to provide us with an operating line to continue to finance our operational growth. So a really good job on that side. And as well, we completed 3 financings during the year for proceeds of around $14 million in order to position the company for continued growth. So if the operations performing and the balance sheet in line, we've turned our attention to strategic expansion opportunities, we've developed a nice pipeline of potential opportunities that we see going forward, and we'll talk about that in a minute. And while that wasn't enough, we completed a corporate rebranding of the company, so our logo, our positioning, our website. All of our presentations have been revamped. We've reestablished our presence on social media, which is so important in today's age. So all in all, a busy year with a lot of progress. I just want to talk about the rebrand a little bit in those 3 leaves that you see. Those leaves really link ourselves to our guiding principles, right? So we're in healthy food products, that's a key guiding principle for us and where we want to remain. We're looking to drive value across our ecosystem and that includes strengthening outcomes for growers, suppliers, shareholders and our team and we're about sustainability. We're about responsible, transparent business practices. And those are the guiding principles that guide us every day. So when you see the leaves on the new logo, I remind everyone that, that really does mean something to us and is part of our DNA. When we look back at fiscal 2025 and just do a deep dive on Q4, we ended up with revenues or sales of $14.9 million in Q4 versus $6.5 million in the prior year, up 132%. Our gross margins were $1.6 million versus $0.6 million in the prior year, up 167%. Our cash overheads declined from 18.7% to 8.6%, so we're seeing the leverage that we're looking for in the business. And our EBITDA in the fourth quarter was minus $270,000. So very, very close to breakeven, which is where we expected to be 1.9% of sales negative versus 7.9% in the prior year. So we continue to see that financial evolution and continued momentum that we're expecting. When we take a look at the year, our sales were $60.8 million, up from $20.7 million in '24 and $14 million in '23. So 194% growth with our margins increasing 197% to $5.2 million. Our cash overhead similar to the quarter, down from 15% to 7.7%. And Our EBITDA for the year was minus $1.15 million or 1.9% of sales. So we're seeing that trending in leverage that we expect across the organization that sets us up to be very excited about what '26 has to bring. At the same time, our balance sheet underwent a significant transformation. We ended the year with working capital of $7.6 million versus negative $14.6 million in the prior year. So that's an improvement of $23 million. We have no debt on the balance sheet, and we have positive equity of $8.8 million. So while the financial aspects and the operating assets of the business were improving. The balance sheet underwent a dramatic improvement. We have a strong cash position, and we're well positioned as we move forward. Our market cap also moved along, up about -- our share price is up about 1,000% since we relisted in March of 2025. Our market cap is in the range of $145 million. We have 190 million shares outstanding. Stock is trading in the $0.76, $0.77 range, that traded as high as $1.15 or so during the year, so off a little bit from the highs, but that's the opportunity that lies ahead. 20% of the company is owned at the Board and management level. 50% is free float and 33% of the shares outstanding are restricted. So diving into the business a little bit, our core products. Recall that we rationalized our product lineup in '23 and '24. So our core products now are organic and fair trade bananas, ginger, mangoes, blueberries and other seasonal products if we have the opportunity. We deal with about 20 major retail accounts across Europe, and these are significant players. We're dealing with the #1 and #2 largest grocers in France, Germany and Austria and the #1 and #3 largest grocers in Denmark. So we're dealing with the big players in the European market, which is very encouraging, and you have to earn your stripes in order to deal with those retailers. We're in 16 countries across Europe today. France, Germany, Denmark and Austria are some of the largest countries that we're serving, but we do serve across 16, we source products from 20 origination parts into 6 destination parts in Europe. We have 6 sea carriers. So there isn't a day goes by where there aren't boats on the water transiting with the core products that we're bringing to market. And we have an extensive lineup of service providers and growing partners as well. And last year, we served about 60 customers. So we've announced this year that we added 8 new customers. We added new sea carriers with the expansion of our business comes to the extension of the platform, and we're excited by what's happening. When we think about where we're moving going forward, our business today is anchored in fresh, high-volume, lower-margin products. Think about bananas and mango. We're looking to move into the higher margin product mix. So think ginger and blueberries. And there's more that we would like to add. We'd like to expand the fresh platform into North America. And then from there, also expand into non-fresh. So just a different product grouping, think seeds, nuts, oils, those sort of things. And then we like to continue to move into value-added products, converting some of those raw materials into value-added ingredients and then also into consumer packaged products. So we have an active pipeline that we're working on, and we're very excited about hopefully being able to add some further expertise and capabilities to our product mix into our portfolio as we go forward. So as we look to 2026, our theme is our future is bright, and our time is now. We're in fast-growing healthy foods markets, healthy living markets. So the opportunity is there. Consumers are in for healthier sustainable products. So we think we're in the right place at the right time and really want to continue to build. As we look to 2026, we're looking to continually grow the European fresh platform that we have today. We recently announced that our sales have increased to about $2 million a week. So that puts us on a $100 million run rate early in the year here. So hopefully, that will continue to play out for us over time. We're focused on gross margin improvement and that supply chain leverage as we get larger, shifting the product mix to higher-margin products. And of course, risk management is really, really essential, especially in the geopolitical world that we're living in today. And we want to continue to leverage our cash operating costs to get those down below 5% over time. And so we're making progress on all those fronts, as you've seen. We also want to continue to scale the platform, adding new product categories where margins are better and then also using technologies to drive efficiencies, improve transparency and reduce waste. And so we're active in all of those areas and see them as very, very important for 2026. We want to continue to build organization depth. It's all about the team, right? And if we don't have the right people in the right chairs, we won't be able to continue to grow as we have been. And so we did do a reorganization in March of this year, which we announced really dedicating resources to business growth and strategic expansion while refocusing the operating team. and we'll continue to look to add to that team. And then we really want to leverage those resources that are focused on other growth opportunities to execute on our strategic growth and pipeline that we have in place. And so a lot of effort is going into that. And hopefully, we'll see some of the benefits as the year goes on. And then lastly, really, we want to drive better market awareness and visibility. We really believe we're uniquely positioned and our growth profile is quite interesting at the moment. And so we've got to get our story out there to a lot more people other than folks like yourself who are on the phone. And so that will be a key initiative as we go forward through 2026 as well. So to wrap up, our future is bright. Our time is now. The heavy lifting over the last couple of years is paying its benefits, and we're quite excited about the future. So with that, I'll take a pause and turn it back to Lauren, let people load up the chat room and happy to take some questions.

Thanks, Steve. [Operator Instructions] So we do have a couple of questions to start off. So Steve, I will read these out to you now. Our first question, with regards to the growth in sales, how much came from new customers secured and how much came from existing? And how do you see this moving forward?

Yes. Okay. So Lauren, I'm assuming that that's in 2025. So in 2025, our growth from $21 million to $61 million came about 35% from existing customers and then 65% from new customers that we brought to the platform. And as we look going forward, if you think about the fact that we've announced it, we're currently running at about $2 million a week, so $100 million plus. The growth is pretty similar in 2026. We did announce that we brought on 8 new customers. A couple of them are pretty significant. So again, this year, in that 35%, maybe 40% internal and about 60% via new customers on the platform. As we look forward, it's very, very important to us that we maintain solid internal growth. And the true statement on how we're doing is when we can grow our business with our existing customers, which we've been able to do in that 35% range year-over-year, and then we're adding new customers on. So that's sort of a profile that we'd like to maintain going forward before we do any sort of strategic work. But the growth is, we've been very blessed in that the longer you're dealing with a larger retailer, the more confidence they have in your capabilities and the bigger the opportunity for you to grow

Okay. Great. Thanks, Steve. Our next question. You previously alluded to significant sales growth run rate for 2026. What level of visibility do you have today on 2026 revenues and what needs to go right operationally to achieve or exceed that level?

Okay. So first off, the way -- if you take a look at the products that we have, bananas are an annual contracting proposition, ginger is more quarterly, Mango is more quarterly and blueberries, as an example, we're almost week by week. So Bananas are a large part of our portfolio. And in the case of bananas, we entered into annual commitments with our customers and also with our growers, right? So we back those back to back. So we have pretty much annual visibility into bananas and on mango and ginger, for example, that's visibility that we're provided every quarter. I think it's fair to say that 80% to 85% of our sales, we have good visibility through the course of the year. So we're really comfortable that so long as we can execute and supply is available. In other words, there's not a huge weather issue or something else crazy that comes along. We have good visibility and are comfortable that the $100 million run rate is certainly achievable and hopefully beyond that. And that just comes from the way we contract, both with our growers and then with our customers as well. So solid visibility versus being on the spot market and hoping it can sell a week over week. We have commitments that we have to deliver on, which also gives us some visibility into our sales.

Okay. Our next question. Can you provide some color on how operations have trended so far this year, particularly around volumes, customer onboarding and supply chain performance?

Yes, there's a lot to unravel in that question. So first off, how have things gone so far. A lot of the new contracts started in February. And so we've seen the uptick commencing in February as we bring on the new customers. We bring on most new business between week 4 and week 9. So it ramps up throughout the first quarter. I think we'll see solid results in the first quarter. And as we get further into the year. So we'll see some very good growth. So that has gone well. From an operational perspective, things have gone fairly well. It's been a big undertaking to bring all this new business on, and it hasn't been perfect. But we're serving all the customers that we made commitments to. The first quarter has been a little -- well, as we entered the back half of the first quarter, we ended up seeing some of the impacts of the craziness that's going on in the Middle East, which has caused for some significant increases in the costs of freight and logistics, and we've seen some container dislocation and that often product is shipped from Latin America goes to Europe and then those can -- those ships proceed through the Middle East with loads of dropping off and then they end up back in Latin America. They obviously haven't been able to make that transit, so it's for some shipping lanes to change around. We've managed quite well, and we're in the process of passing the logistics increases along, but it's never a dull moment in this world anymore, Lauren. And the team has had been very adaptable and very flexible in order to keep things going. So all in all, it's -- I think we'll see a very solid first quarter.

Great. Thank you. Our next question comes from Nicholas Cortellucci. Is the solution to profitability doing more volume of bananas or branching into new products or both?

Yes. Nick, it's really both. When we repositioned the business, we really took the platform down from over 20 products to the 4 or 5 core products that we have. And our position was some of the core products are lower margin but higher volume and more predictability. And so our goal was to go and pay the bills. And have a platform that is standing on its own operating on its own. And then from there, look to add more products. With the benefit of hindsight looking back, pre-restructuring, we tried to do a number of things, and some of them cost you money, and we weren't really ready for that. So we certainly want to move up the value chain. We want to add more products, but we want to be very disciplined about it. add products where we deserve to win, i.e., we do something that others can't do as well as we do. And I think all the products that we're handling now, that's the case. And then from there, we'll continue to end. We'd like to add more fresh products to the portfolio. We'd like to have nonfresh to the portfolio, want to value add on that portfolio, but we want to do it in a very disciplined and methodical approach to getting at them. So it's both.

We'll just move into another question that was submitted by Nicholas. I think some of it was addressed in your previous answer. But what are the plans for M&A in 2026, specific geographies or products you would acquire to enter?

I'm just going to go back to this slide. As I indicated, we're intently focused now on looking for growth opportunities beyond the existing platform that we have. We like the fresh category. We would like to be in North America, if at all possible. We think we would be probably one of the only publicly traded companies with operations on both sides of the ocean. So we would like to move to North America. We are assessing a number of different opportunities to potentially move into the North American market, leveraging the platform and the portfolio that we already have in place. We'd also like to expand further in Europe and expansion in Europe could be new geographies, new products and new customers. So we're very focused on that. And then we also have a number of opportunities to move into nonfresh and then add value to the products that we have in place. And so we're really focused on all of those. We've got a nice pipeline of potential opportunities and folks that are having discussions with. It's super critical though that anything that we add to our platform is the proper fit. We're a small team. We don't have a great big team to go in and run people's businesses. So we need solid operators looking for partnership opportunities that would like to join the portfolio, join our platform, leverage what we have and be part of a fast-growing public entity. So lots of work there all -- frankly, we have discussions going on, on all of these on, all of these various platforms. But we're being very careful. We're being very diligent and we're not -- look, we have to be realistic with ourselves. There's only so much we can do. But I think as we showed last year, we may have a small team that we can get a lot done. So that's what we're focused on doing.

Thank you, Steve. Our next question When I reviewed your audited financial statements that are posted on your website, I noticed that you had a large loss on settlement of debt that appeared to have an offsetting positive impact on equity. Could you please provide some further insight into this?

Yes. Yes, I can. Interesting question. So we eliminated $16 million in debt last year via a number of debt settlement arrangements in order to do that and also through just paying down some debt. When we did each of the arrangements, in other words, shares for debt settlements, we agreed on a price per share. And I can tell you that every one of those deals was concluded at a premium to what the trading price was the day that we concluded those deals. The way the process works is once you have an agreement, you have to announce that agreement publicly and then you wait for the regulators, 2, 4, 6, 8 weeks to approve that transaction. And during that period of time, once those transactions have been announced, the stock price goes up. And so what we ended up with was noncash losses. We had $12.9 million of noncash -- of losses on settlement of debt, of which $13 million was noncash. And so the offset to the loss that we're booking is increased capital. So there's no change to the equity in the company. And as a financial guy myself, I don't know how to describe it other than that you follow the accounting rules, and that's what comes out. The bottom line is all of the debt restructuring was done at a premium to the market price at the time. I do it again 100 times over, you just end up with this loss. But at the same time as you book a loss, you book more capital being raised into the company. So it's got 0 effect on retained earnings. So we kind of look at it and say, well, that's the way the accounting rules treat it, but the bottom line is, is that we dramatically improved the balance sheet, and that loss did not have an impact on retained earnings because we added more working -- more share capital. I'd love it not to be there. But as I told somebody Bromley's accounting principles don't fly, we have to follow IFRS. But we're very happy with the debt restructuring. It was a major win for our company.

Great. Thanks, Steve. Our next question. After 2 years of very strong growth, what gives you confidence that this pace is sustainable?

Well, look, we've been winning. We have a supportive grower base. We have a supportive customer base. We're earning our stripes with our customers. But at the same time, healthy eating and healthy living is not going away, and so consumers are looking for healthier foods options, and we're playing in that space. So are we going to grow 200% every year? No, we're not because our base is growing. But we've already indicated that we were at $60.8 million this year we're going to be 100 -- hopefully, 100 plus next year. So you can do the math. That's a lot of growth. And then, of course, we'll look for some strategic opportunities on top of that. So we're really comfortable that we can continue to grow here for the foreseeable future, and that's a combination of the markets are growing, our growers want to grow and our customers have given us the privilege of growing with them. So that leaves us pretty confident.

Thanks, Steve. Next question, does your business have an opportunity to leverage artificial intelligence?

Yes. Yes, it does have the opportunity to leverage artificial intelligence. We're starting to use artificial intelligence right now with a focus on improving our internal processes and our efficiencies because we think that's the shortest term opportunity. Longer term, though, we think AI can provide huge insight into our supply chains into waste reduction and in providing transparency. If you -- depending on whose numbers you want to believe, anywhere from 40% to 60% of fresh foods that are grown never get consumed and it's through waste, et cetera. And we're firm believers that technology can help us understand a lot better the root causes of waste and how to avoid waste. And in doing that, improve margins to our growers, improve margins for ourselves and more importantly, make more food available, make more good food available around the globe. So we do see AI as a AI and various technical applications really being important, and it's a key focus for us now as we move forward. One of the things that we're doing is you can see where our cash operating costs declined to 7.7% from 15%. And the way to continue to drive that is to apply technology where it can really help. And so we're really intently focused on doing that this year.

Great. Thank you, Steve. Well, no further questions, that brings us to the end of today's webinar. On behalf of Organto Foods, thank you everyone who joined us for the fiscal 2025 results review and business update. A replay of today's webinar will be made available and shared with attendees following the call. For anyone who has additional questions or would like to learn more, we encourage you to visit Organto's website at organtofoods.com. You are also welcome to reach out to the Organo team directly through the contact information available on the website, or feel free to reach out to Steve directly with any follow-up questions. Again, thank you all for joining. We appreciate your time and interest in Organto Foods, and we look forward to keeping you updated as the company continues to execute on its growth strategy. Thank you again.

Thanks very much.