Organto Foods Inc.

Okay, hello, everyone. We'll just give another couple seconds to make sure everyone's in.

And then we will begin.

Okay, hello everyone and thank you for joining Organto Foods Q2 2026 results review and business update. My name is Lauren Beck Hansen and I will be moderating today's session. We will begin with a brief presentation from Steve Bromley, CEO and co-chair of Organto Foods, and Darryl Bergman, president of Organto Foods, who will walk through the company's second quarter results and operational highlights. Following the presentation, we'll move into the Q&A. For those joining via Zoom, you can submit questions at any time using the Q&A function at the bottom of your screen. We'll aim to address as many questions as possible, including questions that were submitted in advance of today's session. Thank you for joining us. forward-looking statements are based on management's current expectations assumptions estimates and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied for discussion of these risks assumptions uncertainties please refer to organto's public disclosure documents including its mdna available under the company's profile on cdar 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 today should be considered investment, financial, legal, or tax advice. organto undertakes no obligation to update forward-looking statements except as required by applicable law. Thanks again for taking the time to join us today. I'll now hand things over to Steve Bromley, CEO and co-chair of Organto Foods. Steve, over to you.

Great. Thanks a lot, Lauren. And good morning or good afternoon, wherever you might be. It's wonderful to have a chance to talk to you and update you on our second quarter results and the record first half that we've had at Organto Foods. Today we'll cover operational highlights and high-level performance review. We'll dive into the financial statements a bit. Darryl, welcome in your role as president. Darryl will take us through our key priorities going forward, and then we'll open up the call to Q&A. So thanks again for joining. Really look forward to updating you on how things have gone. So a record second quarter for the company. We continue to realize record growth and we have a very solid financial position. So we're very pleased to be here today with a very positive outlook on our business and the performance that we've had. The first six months have been a very busy period for the company. as you'll see from the financial results that we'll go through. But we've added six new growing partners and key sourcing regions, which was very important. We've added eight new European retailers to our customer portfolio. We moved into three new geographic regions being Switzerland, Spain, and the Ukraine. We've added four new sea carriers, two new ports of origin, three destination ports. And some of that may sound really simple on the surface, but there's a lot of work that goes into making all of that happen. And so we're very pleased with the efforts of our team and our partners throughout our organization who have really helped set us up for a good start to the year. at the same time we've expanded our operating platform and resources so as the business continues to grow we're adding new team members and new processes and new systems and while we're adding that we're leveraging the platform that's in place so we've now opened up a center of excellence in Madrid, Spain, and we also have an expanded center of excellence in Munich, Germany to go along with our operations that are based in Breda in the Netherlands. So our European footprint continues to expand in hand with the expansion in the business. and we've really ramped up our implementation of a number of digital technologies including artificial intelligence technologies to really provide us with more business insights and also increase efficiency and efficiency is really important for us because one of the core platforms that we're operating on is to to drive efficiency through our overheads. And it's a key metric that we track. And so utilizing advanced digital technologies is really, really important to us. And quite frankly, we think we're on the start of a long digital journey in the company, which we'll be talking about in the coming quarters. So a really busy, busy start to the first half of the year and into the second quarter. Our leadership team, we continue to fortify for growth We were pleased to have Darryl join us on June 1st as president. And he's been a critical new resource to the organization to bring more depth given the growth efforts that we have underway. And we reorganized our management team. So a number of people were elevated, leaders in the organization were elevated to focus on the operations. and we freed up some other leadership to really help us with strategic growth. So that's been underway as well. And you'll hear the word growth a lot, but growth is important to us. And so positioning the team to be able to execute on that has been really important and we've made some great strides in that regard. Our strategic growth pipeline, our M&A pipeline, our strategic partnership pipeline, our new business opportunity pipeline, is continuing to grow and we don't have any news for you today but I would hope that before the end of the year we'll have more than a few opportunities to talk about our strategic growth pipeline and opportunities that we're working to bring to fruition. So a lot going on in the first half. So we peeled back the onion a little bit on the second quarter. We had record sales, and we'll dive into the numbers here a little bit in a minute. We had record sales of 27.7 million, largest sales quarter in the history of the company, up 61% versus the prior year. The really great news is that gross profit grew 65%. So gross profit grew faster than sales in the second quarter. A gross profit record of $2.1 million. And in that same time, up 204% when you factor in currency hedging, which which we'll talk about later. But again, largest sales quarter, largest gross profit quarter. Our cash operating costs continued to leverage down as a percentage of sales. They were down to 6.3% versus 6.8% in the prior year and 7.6% in all of fiscal 2025. So as we're growing the top portion of our business, we're also growing our overheads, but they're growing a lot slower. then our sales, which is exactly the target that we're after. And as I mentioned, digital technologies, et cetera, continue to also provide some great support there. And we have record positive EBITDA of 400,000 versus negative 500,000 in the prior year. So a real turnaround on our EBITDA. And really, you know, when we started this year, we said this was a year of positive EBITDA. We're now up to about 500,000 and so we're on the trend. We're on a journey. We're frankly, quite frankly, exactly where we thought we'd be at this stage of the game. and I think equally important is with those results, we are now running at an annualized sales rate of over a hundred million dollars. So, you know, real positives on the operating side of the business. And at the same time, we've maintained a nice strong balance sheet. So we ended up with a cash position of 5.4 million. On top of that, we had restricted cash of another million dollars. Our working capital increased to 15.3 million, so a very solid working capital position. We have no long-term debt. Our equity is up 87% since year end to 16.4 million. And at the same time, we expanded our Rabobank flexible funding facility to fund the growth in the business as well from 4 million Euro to 7 million. and we completed the early exercise warrant, early exercise program in Q1 for some growth proceeds as well. So overall, when we take a look at Q2 and we'll dive into it in a bit more detail, record growth and combined with a solid financial position and lots of exciting things in the pipeline. We always like to take a minute and talk about our guiding principles. These are the principles that shape how we grow. So we're focused on providing healthy organic food products. We're focused on driving value across our entire ecosystem. That's for our growers, for our suppliers, for our shareholders, for our team members. We wanna bring value throughout. And we're about sustainability. We're committed to responsible, transparent, and sustainable. operations and business practices. And those are the core principles that really guide us on a day to day basis. To step back and take a look, we're now serving 20 major retail accounts across Europe in 16 different countries. We serve the number one and two largest grocers in France, Austria, and Germany, and the number one and three largest growers in Denmark. So we have a vital role to play in servicing the customers and linking our customers with strategic growers and making sure that that product gets to market. Our core products remain bananas, ginger, mangoes, and blueberries, other seasonal products. And over time, you'll see us add to the portfolio. But our first and foremost goal was to stabilize the platform, drive growth, and get to EBITDA positive. So we are there. And so now the real fun begins. Also on our operating platform, as I mentioned, we go to market in 16 countries in Europe. We source from numerous places around the world. And as noted on here, we now have the three centers of excellence operating to support the European platform today. So if we dive a little bit more into the numbers for the quarter, we were up 61% in sales to 27.7 million and up to 53.3 year to date, so up 73%. That 53.3 leaves us tracking well over $100 million run rate and the 27.7 million in Q2 really puts you at about $110 million run rate. Our gross profit, as I mentioned, was 2.1 or 7.5% of sales in the quarter and 3.9 million or 7.3% of sales in the year to date for the six months. So up 65% in the quarter and 63% year to date. The growth when you factor in the impact of our currency hedging initiatives was up 204% over the prior year. So we had a very poor position last year. We have a stable position this year. And so that's really driven some nice growth, 204% and 108% year to date. Our cash overheads are 1.7 million in the quarter. So you see how our cash overheads grew from 1.2 million to 1.7 million in the quarter. But as a percentage of sales declined from 6.8 to 6.3, and we expect that continue to trend down. Our longer term goal is to have those cash overheads well under 5% and heading for four. And on a year to date basis, 6.2% of sales. So a little bit up in Q2 because we added more team members. Thank you for watching. Year to date, $500,000 versus negative $200,000 in the prior year. So heading in the direction we expected and feeling positive about how the financials shook out. When we take a look at the balance sheet, our current assets grew to $27.5 million versus $14.9 million at year end. When you think that the business doubled in size, the working capital doubled in size as well, going from $7.6 million to $15.3 million. but compare that to minus 14.6 in 2024. So a combination of the strengthening of our operations and the restructuring of our balance sheet leaves us in a really good position with strong working capital, no outstanding debt or short-term loans and an equity position of 16.4 million. So strong growth and profitability coming into the business combined with a strong balance sheet. Just taking a look, we have 190 million shares outstanding, about 20% is owned between management and the board. Our fully diluted shares are about 210 million and our market cap is sitting in and around $125 million. So with the earnings comes a stable positioning with our cap table. Oh, pardon me. Last before I turn it over to Darryl is I want to go back and talk about our focus on evolving our product mix from volume to value and with that driving increased margins. We readily focused when we repositioned, we focused the business on categories where we really felt we deserved to win. Thank you for joining us. to the 16 countries and the key customers that we have. So we wanna add new customers and geographies and also add new higher margin products. So over the course of this year, you should expect to hear from us on new products that we'd like to add to the portfolio. We wanna expand this portfolio into North America So we're looking at a number of options to do that, which is very exciting. And why do we want to be in North America? That would leave us as the only current organically focused business that we're aware of in the fresh side of the business with operations on both sides of the ocean. And we think that would bring some huge benefits to both our customers and our growers. We're actively working on that and it's a key focus for us. And then with the platform in place, we want to add non-fresh products. So think about oils, nuts and seeds and those sort of things. And then also value add. So think about further processing of a number of those raw materials and fresh products that we are non-fresh products that we have today into value added ingredients or right into consumer packaged products. So it's a long journey, but we're on the journey and it's where we're really focused and we're spending a lot of time in that area. And of course we want to support all of these developments with a digital technology platform and shared services platform as well. So we're in the early stages of what we expect to be a very exciting growth platform, growth curve for the business as we go forward. So with that, let me turn it over to Darryl to talk about our key priorities as we look to the back half of the year and beyond, and then we'll wrap it up with some Q&A. Darryl?

Sounds good. Thanks, Steve. Turning to key priorities, let me jump right in. Our primary focus for the balance of 2026 is going to be execution. We built significant momentum in the first half, and our priority is going to be converting that momentum into sustainable, profitable growth. We'll continue scaling our core European fresh platform as Steve noted. We already are operating at an annualized run rate at above $100 million and we see further opportunities through existing customers and a broader product portfolio. That said, I believe it's important to note that growth is not just about revenue. We're focused on managing gross margins through better supply chain leverage, product mix, pricing and risk management while continuing to drive operating cash flows towards that target that Steve mentioned of just below 5% of sales. We're continuing to focus on leveraging our platform, which means continuing to grow our core categories while selectively adding higher margin products and using technology and AI to improve efficiency, transparency, and waste reduction. Strengthening the organization to support the next phase of growth is always in focus. The additional resources and organizational changes we have made are intended to give us operating depth and execution capability. We deeply believe in talent, that talent drives growth, and we will continue to look to talent to accelerate our strategy. Strategic expansion remains an important part of our growth plan. We have dedicated resources to building our pipeline and evaluating strategic growth and M&A opportunities. The emphasis is on opportunities that complement our platform and support our longer-term growth objectives. Finally, we believe that there's an opportunity to increase market awareness of what Organto is building, particularly with investors focused on health and wellness and sustainability. So as we look to the balance of 2026, the message is straightforward. We continued growing the core business Thanks, Darrell. Appreciate it.

Yeah, so with that, that's the end of our opening remarks. Clearly, we're pleased with the progress that we've made. We've got lots of work to do. The job is just beginning. It's not over. And that's the fun and that's the opportunity. but clearly we're very excited about the future. And as we say, the future is bright, execution is key and the time is now. So with that, Lauren, I'll turn it back over to you and you can queue up the chat room if there's any questions, hopefully there are.

Yep.

We'll leave it with you for a sec.

Yep, yep, no, of course. So that brings us to the end of the formal presentation. We do have a couple questions in the queue already, but just a reminder to everybody, if you'd like to submit a question, you can do so using the Q&A function in Zoom. You may need to click more of the three dots in order to access it, but please do feel free to submit questions. and we will do our best to get through as many as possible with the time that we have today. So I'll just give it 30 seconds or so to let some questions come in and then we'll jump right into it.

Okay.

Okay, well, I think we're good to begin. Let's start with the first question here. How much of your growth this year was with new customers versus increases with existing customers? You have now reported two consecutive EBITDA positive quarters.

Yeah, so, yeah, so...

Sorry, ignore that lock right there, yeah.

Sorry, so the first question that you raised was how much comes from existing customers and how much came from new customers? Yes, that's correct. In really ballpark numbers, about 60% of our growth. So if you think about the 73% growth that we had this year, about 60% of that, give or take a few percentage points, comes from new customers that we've added to the portfolio. Keep in mind that we added Switzerland and Spain and Ukraine as new countries to serve. So about 60% from new customers and about 40% of our growth from existing customers. So I guess if you peel the onion back on the 70% growth, about 30 plus percent would be from existing customers year over year and then 40% from new customers.

Great to think, Steve. Our next question here. You have now reported two consecutive positive quarters. Do you expect this trend to continue and what are your longer term expectations?

I'll grab that one, Steve. I think the answer to the trending is yes. We don't give specific guidance, but as I addressed in my speaking to the key priorities. We are focusing on long-term and continuing to drive our top line with a focus on managing gross margins through our better supply management leverage, our product mix, our pricing, our risk management. Well, again, as we have mentioned a few times in the presentation, we continue to drive those operating costs towards our target of below 5%.

Great, thank you. Next question. How are the organic and sustainable foods markets faring with rising inflation?

Darryl, I can take this one. Look, it's a crazy time out there right now. There's super inflation, a lot of inflation is landing in food products. And so all of us go to the shopping, well, most of us go to the shopping center and you see the increases in prices. It's interesting, the organic and sustainable foods consumers, their lifestyle choices that are made. And so for the most part, we don't see demand fall off because of, What we're seeing at the moment, I mean, I guess there's a limit to everything. You know, how high can the prices go? Normally what's happening though, the organic and the conventional, they're both going up and down. And so, you know, we haven't seen a real erosion in the consumer. We're watching it all the time. I guess the good news for us is that consumers are continually focusing more and more on healthy and organic foods. which is great and you know connecting lifestyle and diet to health which is positive so there's growth in the category might the category slow down a little bit for a period of time we haven't seen it but you know can't predict the future but look we've realized continued growth and what we're not seeing is sort of a rapid change of Okay, thank you.

Next question. How sticky are, I think this is referring to the earlier question that we had answered, how sticky are these new customers? As long as you can provide quality supply, do they keep ordering?

Yeah, so most of our customers, depending on the product category, make, you know, commitments of sort of annual commitments or in some categories every three months. Look, they're sticky, but we have a job to do, and they won't be sticky if we don't do our job. So we've got to get them product. We've got to execute on all of the steps in the process that we're responsible for. And we've got to get them good quality product. That's what we have to do. And so long as we do it, we feel that they can be sticky customers. If you think about it and you take a look at our growth, we grew 194% last year and the year before, I think we grew 40 or 50%. A lot of that's with existing customers. And as I said in the numbers earlier, like 30% of our growth is from existing customers. So one is for them to be sticky and two is for them to be, I don't know what the right word is, sticky, sticky. We want not only to continue to do business, but we want to do more and more every year. and so far we've been lucky but look we're like everybody we're not perfect you know we'll end up with quality challenges at times and that'll impact our volumes you know with a particular customer for a period of time but if we do our job they're good partners and sticky to us.

okay our next question um opens up first uh by saying good progress on new regions and retailers is growth being driven by core products or do you see scope to expand into value-added products like juices etc would this require investment or could third-party manufacturing be enough to unlock additional value yeah no listen we a core part of our platform uh of our strategic growth of the platform is to move and add value so um

You know, an example that, you know, examples that I would give you is organic bananas. Well, 30% of organic bananas never end up in the marketplace because they're not of retail quality. So they go to all types of different things. One of the fastest growing food categories is organic baby food. And one of the biggest ingredients in organic baby food is organic banana puree. It's a value added product, you know, that's an example of something that we have consideration to do as we move forward so I think there are lots of opportunities first you have to have the core base operating then you can go and value add and so that's our intention and that's core to the strategy on trying to move the sorry that's core to this strategy and if you go to the to the far right of the chart, you know, that's all about the value added ingredients and consumer packaged products. So it's core to our strategy. We see it as a huge opportunity. It's an opportunity to grow the business. It's an opportunity to diversify the customer base of the business, and it's an opportunity to improve margins. So that's core to what we do. And then the second part of the question, Lauren, was had something to do with assets?

Yeah, I can re-ask it. Would this require investment or could third-party manufacturing be enough to unlock additional value?

Well, look, we have this sort of strategy called OMP or OPM, other people's money. So when we want to move into categories, if there's processing capacity around, we'd like to start there. and then when we get to a point where we can fill up our own facilities do that. So it could be a combination or it could be all third party packed or it could be all with our own platform. So we don't, we're open to all of those ideas and we don't, until we know which one we're doing, we don't know what the option is. But preferable to start with using somebody else's platform to prove out the model.

Okay, thank you, Steve. Our next question, what is the plan to diversify away from bananas?

Yeah, so very good question. And I think the plan to diversify away is really laid out on this chart again. We're going to selectively add new products to the platform where we deserve to win. and so you know we really like the berry category because in this new GLP-1 world blueberries and blackberries and strawberries and raspberries are becoming snacks and you know you see people eating them like they used to eat a bag of chips So we really like the berry categories. We like a number of other different categories. So we're going to selectively add those to the platform as we move forward. And then, you know, as we know, we're looking to acquire and I can assure you when we're looking to acquire, we would prefer to acquire businesses that don't do any of the products that we do. and that's where we can really drive you know drive a lot of value and synergy so and then on top of all of that it's value add it's non-fresh it's you know nuts seeds and oils so that's our strategy we're working on a A whole bunch of phases of that all at the same time. But I'd be pretty disappointed if a year from now, you know, we were focused on the three or four core products that we have. I think it'll be much more robust by that stage of the game. Keeping in mind that we did what we did entirely intentionally. If you went back three years ago, we had 25 different products. And today, you know, we're focused on a core number of products. and that's proving to be really successful and over time will expand which is really important and by the way when you talk about bananas and I don't know if I have the right number right but I don't want you to think that we just do a banana I believe we have 56 different SKUs of bananas just to put that in perspective you know it's organic it's fair trade it's size it's sugars it's it's everything so but it is it is it is a major category for us no doubt but I don't want you to leave the impression that all we do is sell one banana. There's 56 different ones. I think it's 56. I might have the number wrong, but it's a lot of different. There's a lot of complexity within that category on its own.

Thanks, Steve. Our next question. You have mentioned M&A as a key part of Organto's growth strategy. Where are you focused and do you have any updates on potential opportunities?

Darryl, do you want to grab this one?

Sure. With respects to M&A, again, going back, looking at the value step chart that Steve talked about, you know, we're looking into, you know, not only continuing to expand in our European platform, but as we look to go forward, looking to expand into a North American platform as well. Listen, the M&A pipeline in both geographic regions is strong and with respects to potential opportunities I'm pleasantly surprised with respects to like I said the strength of that M&A pipeline and you know there is definitely opportunities going forward with respects to us to execute on the strategy that we're looking at. There's nothing currently in place that we can we can talk robustly about, but hopefully by the end of the year that will change.

Okay, thank you, Darryl. How are you dealing with rising fuel costs?

Darryl, good question. yes and and and the costs change every day right it's it's an incredible time um look i think we've we're really using three different things that we're doing obviously we're working with our customers and passing price through wherever possible um and clearly you know from the stability of our margins from q1 to q2 we've had some good success there so i think that's you know that's really important uh it's also required us to work closely with the shipping lines and quite frankly, we've had to shift volumes between shipping lines based on how heavy they were on some of the BAF, which is the diesel fuel for the boats. So we've had to shift that around. so we've worked very closely with various shipping companies we've also had to work with our growers you know who are our key partners and so we've we've all had to flex bend and move in order to to maintain the margins and it's and look you know two weeks ago we were talking about the fact that oh geez I think all of these all these fuel surcharges will be starting to come off and we can go back and adjust some pricing and do some things and then you know 48 hours later and all they're all back on and they're going up and so you know I'm really proud of our team I think they've done an exceptional job in a really fast-moving environment and I think it's a credit to them you know I was looking at you know our sales are up 61% in the quarter and our gross margins up 65%. A large player in the fresh space would be known by most people but I don't want to call them out. Their sales went up 3% and their EBITDA went down 31%. And in reading the report, it was nothing more than Demand was there. Costs killed us. And so, you know, I think our team being smaller and more nimble, we're able to really manage well. And, you know, that makes us very encouraged for the future. It's not a perfect science by any stretch of the imagination, but I think the team's done well. And our guys can quote you the prices of fuel every day. And so, yeah, so we're managing. I think we've managed well and we'll continue to manage it. and by the way we're not the only company right like everybody's got the same problem so at different levels but everyone's dealing with the same issue so misery loves company and you know everybody's doing everybody's working hard all the way from the retailers who have to manage price to the growers who have to manage volumes manage margins to ourselves who have to handle all the logistics and the marketing and all of that sort of stuff so it takes everybody's involved.

Great. Thank you, Steve. We are getting close to time. By the way, I want to say one more thing.

And if you're talking to a food company that tells you they aren't impacted by it, they're not telling you the truth. Everybody's impacted. Sorry, Lauren, that was a side move.

No, no, that's all right, Steve. Okay, so we have time for one more question, and this one is for Darryl. Darryl, what are your observations now that you've been with the company for a few months? Any surprises?

Ah, okay. Let's start with observations. So, you know, after my first few months, I'm very encouraged by the growing strength of the underlying business. The team and the growth opportunity. There's strong board, leadership alignment, accountability, operating cadence, and financial discipline. With respects to surprises, in terms of surprises, I have to say the biggest surprise is the breadth of opportunity relative to the size of the organization. Like I said, there's a number of attractive growth initiatives in front of us. That just reinforces, though, the importance of prioritization, resource allocation, discipline execution. The opportunity is there. Our challenge is going to be making sure we remain focused and execute consistently.

Okay, great. Thank you, Darryl. So that is all the time that we have for questions today. Thank you for joining us for Organto Foods Q2 2026 results review and business update. A replay of today's webinar will be made available following the session. For additional information, we encourage you to visit Organto's website at organto.com as well as the company's public filings available on CDAR. If you have any follow-up questions, please feel free to reach out to Organto directly through the website or contact Steve or Darryl or any members on the team. Thank you again for joining us and have a great day.

Thank you. Take care.