Positive 2023 Trends Accelerate in 1Q24
LEEF Brands is a scaled, vertically integrated operator in the world’s largest cannabis market. The company is vertically integrated, which enhances margins and provides greater control of the supply chain. Scale and vertical integration are key ingredients to winning in California and LEEF has both. The company’s FY23 and 1Q24 results show strong progress. For FY23, revenue of $30.5 million represents an increase of 13% Y/Y and gross profit of $9.9 million is a 4% increase from FY22. Adjusted EBITDA of $1.6 million is up 162%, compared with the prior year. LEEF reduced SG&A expenses by 36% from 2022 to 2023.Lowering expenses, growing revenue, and expanding adjusted EBITDA were key goals achieved in 2023. The positive trends in 2023 accelerated in 1Q24. Revenue of $7.9 million increased 35% sequentially. LEEF Labs produces an estimated 9.7 million grams of distillate per year and higher distillate prices contributed to the revenue increase. Hydrocarbon extraction sales also rose in 1Q24 and LEEF is seeing the benefits of its strategic decision in 2023 to diversify into other extraction methods and products. The company expects this trend to continue in 2024. Gross profit of $3.2 million in 1Q24 is a 26% sequential increase and represents a record gross margin of 41%. Adjusted EBITDA of $1.8 million is an improvement of 347% from 4Q23. Higher revenue from rising concentrate prices, coupled with lower expenses, drove the sharp jump in adjusted EBITDA. Importantly, LEEF Brands generated positive cash flow from operations in both FY23 and 1Q24. The company is beginning to see results from reducing redundancies after its merger with Icanic Brands, improving its supply chain management and partnering with the best brands in the state. The company has made meaningful progress on Salisbury Canyon Ranch, its 1,900-acre property in Santa Barbara Country with a 187-acre Land Use Permit for cannabis cultivation. LEEF is on schedule to plant the farm by late spring, with the first harvest this fall. Salisbury Canyon Ranch gives LEEF further control of the supply chain, should improve products, and enhance margins. The farm can fill the strong demand for LEEF Brands concentrates in California and gives the company a valuable call option on capacity for eventual interstate commerce.
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