LEEF Brands Inc. (CSE: LEEF) (OTCQB: LEEEF) is one of California’s leading cannabis extraction companies, providing high quality extracts for most of the biggest brands in the world’s largest legal cannabis market. LEEF has been generating about $30 million in annual revenue for the past three years and is now implementing plans that should improve that revenue number while also significantly boosting the company’s margins.
Yesterday the company announced major steps toward realizing the growth of both its top and bottom lines. Investors responded and the stock price rose about 15% on above average volume, but the company is still valued at essentially its annual revenue number of $30 million. Peers in the industry often trade with values of 2x to 5x annual revenue so there is likely plenty of headroom for the stock.
Micro cap investor Penny Queen talks about LEEF Brands’ recent developments with the company’s Head of Investor Relations and Business Development Jesse Redmond.
The Revenue Growth Plan
Yesterday’s press release talked about increasing the capacity of all three of its revenue-generating cannabis extract product lines. LEEF has enacted a 66% increase in ethanol extraction capacity, a 50% increase in solventless extraction capacity, and a 38% increase in hydrocarbon extraction capacity. Just for back-of-the-napkin estimation purposes, this averages out to about a 50% increase in overall capacity.
It will probably take a while to hit full production levels in all three product lines, and the quarterly revenue reports will eventually tell the tale. Still, at full capacity it stands to reason that the company could soon hit revenues in the neighborhood of $45 million annually.
These capacity improvements were likely the result of a new harvesting/sorting technology the company developed to make all of the production lines more efficient. LEEF Brands CEO Micah Anderson discusses this technology in a recent podcast, around the 1 hour, 6 minute mark. LEEF also has the space to expand production at its current facility if demand increases as the company anticipates.
The Cost Cutting Plan
Yesterday’s press release also contained news about the company’s move to become a vertically integrated cannabis operator. LEEF owns the Salisbury Canyon Ranch in Santa Barbara County and will be planting the first 65 acres (out of 187 total plantable acres) this spring, with the final permits now secured.
LEEF currently buys raw cannabis stock from over 200 California growers to feed its extraction operations. The move to create its own supply should reduce material costs, improve margins, supplement and even replace current supply sources while ensuring the highest quality throughout the operation.
Anderson has previously discussed how LEEF is teetering on becoming cash flow positive. After years of purchasing and improving the ranch property at significant cost, the plan to create one of the world’s largest outdoor cannabis farms is becoming a reality. LEEF estimates that the move to vertically integrate its own supply of feedstock could cut material costs anywhere from 40% to 65% depending on the type of material. This would obviously have a tremendous impact on the company’s profitability moving forward.
Micro cap investor Mariusz Skonieczny discusses the investment opportunity with LEEF Brands and the significance of the company’s recent announcement.
The Upshot
In an industry that saw valuations fly sky high based on stories and promise only to come crashing down as economic realities overtook the narrative, there are still companies creating real value for investors. LEEF Brands looks to be one of them, and 2025 is a big year for the company. Already positioned as the leading extractor in California, the world’s largest legal cannabis market, LEEF is aggressively pursuing growth and efficiency measures that should catch the attention of the market. Stay tuned.
