The cannabis industry has taken its share of body blows over the last few years as investors realized that fundamentals like controlling costs and competent management and making money were actually more important than a good story and fulfilling a dream of selling legal cannabis. Some of the dust has settled from the sector’s fall from grace, and there are definitely good companies doing a lot of things right that should be considered by growth investors.
LEEF Brands Inc. (CSE: LEEF) (OTCQB: LEEEF) is a good example of the type of value that can be found among public cannabis companies. LEEF is a leading provider of cannabis extracts in California, the world’s largest legal market. Extracts form the foundation of nearly half of the products sold there, and LEEF works with many of the state’s top brands to make products like edibles, pens, and concentrates.
The company has reported three straight quarters of positive EBITDA on about $30 million of annual revenue, but some strategic investments and growth strategies that could supercharge LEEF’s growth are poised to kick in over the next few months.
New York Expansion
LEEF recently closed its acquisition of a Type 1 Cannabis Processor License in New York. The move to expand into the state in just its third year was spurred in part by the desire of its California brand partners to replicate the successful relationship on the East Coast.
Watch LEEF Investor Relations Officer Jesse Redmond discuss the New York cannabis market and LEEF’s opportunity there with industry experts Jeff Schultz and Morgan Paxhia.
New York’s cannabis market is growing rapidly. According to New York State’s Office of Cannabis Management, sales have surged from $160 million in 2023 to about $1 billion in 2024, with projections of $1.5 billion in 2025. Concentrates play a significant role in this growth, as they are used in over 55% of all products sold in the state.
LEEF has a runway in place with its current brand partners which should allow a straightforward path to generating meaningful revenue. LEEF is moving into a 7,000-square-foot facility with its extraction equipment ready in New York. The launch should be painless with the assets in place. Additionally, should the company decide to expand production there in the future, it will not require much capital to do so.
Planting the World’s Largest Legal Cannabis Farm
After years of significant investment in the company’s wholly owned Salisbury Canyon Ranch, located in Santa Barbara county, LEEF is preparing to harvest the first 65 acres of what will become 187 acres of prime cannabis production. This first harvest is imminent and involves around 700,000 plants that were seeded this spring. LEEF will be able to harvest another batch this fall as well.
Watch IRO Jesse Redmond discuss the significance of the new farm operation onsite with CEO Micah Anderson.
LEEF estimates that providing its own cannabis feedstock for its extraction operation will cut costs by about 50%, a huge number for a company that has been teetering on the edge of turning a profit. Beside the large increase in margins, the Ranch will ensure consistent feedstock quality throughout LEEF’s operations. Importantly, the crop has tested free of any contaminants and the isolated location should help ensure that it stays that way. Currently, LEEF contracts with over 200 growers to provide its raw materials, so the move to keep everything in house will greatly streamline the operation and limit the variables.
The property itself recently appraised for about $40 million, providing a good backstop for LEEF and its investors and indicating that the true value of the company probably lies north of its current $30 million market cap.
Read about the growth potential and inflection points for LEEF in this article by investor Penny Queen.
Where It’s Headed
Between the new revenue potential from the New York expansion and the major improvement in California margins expected from the Salisbury Canyon Ranch, this year is a pivotal one for LEEF Brands and its investors. Look for the impacts to be seen and felt over the coming months as New York gets up and running and the first harvest makes its way into the production lines in California. The growth plan is in place, the company is executing, and investors looking for value should have LEEF firmly in their sights. Stay tuned.
