What you need to know: • Organto reported Q3 financials that were weaker than expected due to weather and regulatory issues. However, Q3 revenue was still up 40% YoY and represented OGO’s 17th consecutive quarter of positive growth. • Gross margin came in at 8.6%, in line with our estimates. • While management guided for a stronger 2024, we are choosing to be more conservative with our estimates, leading to a reduction in our target price to $1.50/share (previously $2.00/share). Yesterday after market close, Organto Foods (OGO:TSXV) reported Q3 financial results that came in weaker than expected but guided for a stronger 2024. This came after OGO reported preliminary Q3 numbers on November 20th, where the market had no material reaction. While we commend management for turning around gross margins over the last year (3.7% to 8.6%), the weaker revenue growth has led us to decrease our target price (still 362% upside). We are maintaining our BUY rating and decreasing our target price to $1.50/share (previously $2.00). Key Highlights • OGO reported $6.4M in revenue compared to our estimate of $9.0M and the preliminary guidance of $6.2-$6.3M. This represented 40% YoY growth or 28% on a currency-adjusted basis. The quarter was OGO’s largest Q3 in its history and its 17th consecutive quarter of currency-adjusted YoY growth. The large miss was attributed to weather-related factors which impacted banana supply and regulatory changes that impacted organic asparagus and ginger markets. • Gross margin for the quarter came in at 8.6% compared to our estimate of 8.5% and 3.7% last year. After adjusting for hedging, gross margin was 7.3% compared to 6.0% last year. This was OGO’s largest Q3 gross profit in its history, highlighting the success of management’s improved internal processes. • Adj. EBITDA for the quarter came in at ($1.0M) vs. our estimate of ($0.9M) and ($1.4M) last year due to the continued focus on cost rationalization. SG&A expenses as a percentage of sales came in at 10% compared to 12% last year while labour costs represented 12% of sales compared to 18% last year. • Organto ended the quarter with $0.3M in cash and $9.1M in debt (not including its recent financing). During the quarter, OGO also expanded its debt financing facilities by $1.05M and completed a 10:1 stock consolidation, vastly reducing the stock’s volatility.