LEAF MOBILE (LEAF-TSXV) IS GROWING LIKE A WEED

April 2020 Revenue = All of 2018!

 

LEAF Mobile (LEAF:TSXV) is the newly listed mobile gaming operator that is on pace to more than triple their revenues this year.

They just announced this week that April revenue was $2.97 million. That’s a $35 million annualized run rate! All of 2018 revenue was just $2.23 million! In the first nine months of 2019 LEAF did $5.04 million.

The business did as much in its last month–April 2020–as it did all year in 2018. And April 2020 = more than HALF of 2019 revenue. That’s the kind of growth I LOVE to see in the juniors where I own stock.

And speaking with CEO Darcy Taylor, he says their lead game–Bud Farm Idle Tycoon (BFIT)–is already showing positive cash flow. BFIT is over 90% of company-wide revenue.

But the business model is set for this company to grow A LOT more—and quickly. Their brand new game, Cheech & Chong Bud Farm, launched April 20th and generated $10,000 per day average until the end of the month.

Folks, NOBODY knows this story. They just went public on April 21. My subscribers are the ONLY audience for this stock so far.

I explained yesterday how fast the mobile gaming industry is growing. Now let me tell you how fast Leaf Mobile is growing:

Industry gaming app installs are up 20% since Jan 1; Taylor says Leaf Mobile is up 56%. But just looking at March and April, install growth is up a whopping 155%.

This bodes VERY well for the next two quarterlies. And while this is a great, sexy and fun story, I’m all about the numbers. And it certainly sounds like this Taylor and his team are performing.

“Our April monthly result was what we projecting to achieve as a Dec. 2020 monthly run rate. So the games have been immensely well received. All of them scoring high marks across Android and mobile app stores.

There are THREE big tailwinds for Leaf Mobile right now. One is the overall growth in the mobile gaming sector. A second is the coronavirus, which has everyone stuck indoors a lot more and looking for things to do, and the third is the cannabis industry going mainstream. It’s a big counter-culture lifestyle that’s going mainstream.

This is part of what’s driving huge growth for Leaf Mobile. Taylor says what really means for his team and shareholders is this:

“Our original Pot Farm game was the only game in the space years ago, and it was a home run success. It did $20 million in lifetime revenue until we shut it down two years ago after a very strong ten year run.

“Our numbers are showing us that we have the potential to do that within a year or less if we execute well. So it’s just that the pie’s getting bigger and the opportunity’s getting bigger across the board.” 

That is incredible.

Let me throw some more stats at you.

One—management tells me these games cost them roughly CAD$1 million to develop and publish. The way the industry is trending now, they base their projections at $30 million in lifetime revenue for per game title.

Two—when they market their games online, they normally expect a 100% return over 90 days. Right now it’s as low as nine days. Now, fair enough that after coronavirus scare is over and everyone goes outside again, that’s likely to drop off again. And that doesn’t happen every day. But you can see how profitable this industry can be.

They figure that right now, for every $1 they put into marketing they get $4 back. I’m in the wrong business. We all are.

Three—Taylor says their ARPDAU—Average Revenue Per Daily Active User—is 48 cents per day, over 5x times the industry average of 9 cents per day. And their two newest games–Bud Farm Idle Tycoon and Cheech & Chong–are generating 86 cents per day, versus a Top Games peer group of only 18 cents.

But if this was easy we would all be doing it. Leaf Mobile has a very special sauce that is working for them right now—and will for years.
 
First off, their game engine is clearly a great platform. Users are drawn to it and it’s sticky, otherwise Leaf Mobile’s installs and revenue would not be growing the way they are.
 
Second, the Leaf Mobile team has built in celebrity as a way to make and keep a game popular—witness them landing Cheech & Chong for their latest game. They expect that to be a continuing and differentiating part of their strategy. 
 
Taylor says they are working on two new “IP” ideas in 2020—Intellectual Property being their lingo for a celebrity. 
 
 
Third is their “Live Ops” team. They have a dedicated staff who tweak the games constantly to maximize enjoyment, playing time and revenue. This happens every day in the games that are new, fresh and on their up-cycle. 
 
So the celebrity factor and game themes are the creativity, and Live Ops is the discipline in the strategy. Leaf Mobile clearly excels at this, as you can tell from their elevated ARPDAU.
 
These counterculture assets are the key — the users are much more passionate and are willing to spend more. These counter culture gamers have higher retention rates and higher ARPDAU than other more mainstream groups.
 

CONCLUSION– Right Time, Right Niche, Right Industry

 
I LOVE THIS COMPANY and their business model. It’s very rare to have a newly-listed junior come out of the gate with revenue on track to triple year-over-year.
 
Honestly, I have never written up a growth story where the story wrote itself more than Leaf Mobile does. Ever.
 
But I want to leave you with a couple ideas to think about.
 
The latest financials are for the first 9 months of 2019–which showed revenue of $5.04 million. This is not a capital intensive business and the company was cash flow break-even on that.
 
This year revenue is skyrocketing. The company just provided an update that showed that April 2020 revenue alone was $2.97 million……that is an annualized $35 million!
 
With the April 20th launch of Cheech & Chong Bud Farm it means that the new game contributed revenue for only 10 days to the $2.97 million April revenue figure. 
 
I suspect there is HUGE revenue growth happening here that management can’t talk about until their first quarterly comes out—but it is in the Top 10 trending downloads in the Google Play Store and Top 40 in US Android and Top 60 in US Apple.
 
Since it takes a year to maximize the revenue for a game Cheech & Chong Bud Farm likely won’t even hit full stride until this time 2021.
 
By that time LEAF management expects to have added two more similarly themed games to compliment Bud Idle Tycoon and Cheech & Chong. They are confident they have the secret sauce of game engine, celebrity and disciplined LIVE OPS to make those games as successful as Bud Idle Tycoon – by 2022 (only 18 months away).
 
That means that by 2022 LEAF could have four titles very close to or on their way to doing $20 M in revenue annually.
 
I haven’t even talked about the new upcoming revenue streams such as recurring subscription revenue. But I don’t want to complicate this story. There’s so much meat here right now, I’m not going to go all “blue-sky” on you.
 
As investors this is what we spend our lives sitting in front of a computer for–to find a stock like this, where everything comes together.
 
The timing of everything is perfect. COVID-19 has turbo-charged revenue growth rates for the mobile gaming industry. Bud Idle Tycoon is now going full steam and Cheech & Chong just launched and is already a major success.
 
The industry stats are telling us—highly profitable growth is in the bag for several quarters. 
 
The company is small and newly public. We are so lucky to see this first before any other analyst or newsletter writer gets on this.
 
They are coming, believe me.
 
DISCLOSURE: I’M VERY LONG LEAF MOBILE INC.
 

Leaf Mobile has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.

Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.