Leef Brands Inc.

Q2 net revenue was $7.3 million, down from $8.7 million in Q2 last year, a 16% decline. Gross profit increased 62% year over year to $2.4 million, and gross margin rose to 33% from 17%. Adjusted EBITDA was negative $631,000. Unit volumes were down about 20%, partly offset by roughly 5% higher average selling prices. Management said Q2 was softer by design as it waited for its own harvest and bought only third-party biomass that made economic sense. Looking ahead, the company expects distillate volumes and the margin benefit from running its own biomass to rebound in the second half of Q3 and into Q4, with gross margins targeted around 50% as self-grown material ramps back in. Management also said HIMALAYA contributed approximately $1 million in revenue in the partial quarter after acquisition and is expected to deliver strong growth in 2027.

Micah Anderson framed the quarter as validation of Leef’s vertical integration strategy, saying the company is in a stronger position after completing the harvest, expanding cultivation, acquiring HIMALAYA Vapor Company, and advancing DEA registration applications. He emphasized that the company’s clean biomass, quality-control advantages, and expanded processing capacity are central to future growth, margin improvement, and readiness for interstate or international opportunities. His tone was upbeat and highly confident, repeatedly saying the farm and platform are only getting bigger and that 2027 is a key inflection point.

Kevin Wilson emphasized the financial payoff from owning the input material, noting that gross margins climbed from around 20% to 50% when the business ran on Salisbury Canyon Ranch material from Q3 last year through Q1 this year, versus 33% in Q2 when it relied on purchased biomass. He said net revenue was $7.3 million versus $8.7 million a year ago, gross profit was $2.4 million versus $1.5 million a year ago, and first-half adjusted EBITDA was positive $1.7 million versus negative $2.1 million last year. He also highlighted liquidity improvement, with cash at $5 million versus $2.2 million at year-end, working capital moving to an $8.7 million surplus from a deficit, and inventory rising to $7.1 million from $3.4 million at year-end; he said roughly $9 million was raised in the first half and another $5.2 million in July, for about $14.2 million for the year.

Analysts focused on two main issues: how interstate commerce and international exports could open up new demand, and how margins should improve as the company’s own biomass returns in the second half of Q3. Management said larger MSOs are showing “unanimously positive” interest because Leef can do the difficult parts of the supply chain—growing and extraction—while partners focus on brands and retail. On margins, Micah said Q2 was a trade-off for Q3 and Q4, and that gross margin should move back toward about 50% as self-grown material re-enters production, with additional upside from hydrocarbon and solvent lines and from a new processing/storage facility.