BC Business
Going public on the TSX Venture exchange through a reverse takeover in 2020 and graduating to the big board this year, Vancouver-based Leaf Mobile (TSX:LEAF) wades into this space with its own plan to be a contender.
Leaf Mobile develops games including Trailer Park Boys: Grea$y Money
The stock: If console developers like Electronic Arts (Nasdaq:EA) and Activision Blizzard (NASDAQ:ATVI) are the stodgy major studios of the electronic gaming world, mobile developers are the low-budget independents, seeking to give the people what they want: cheap and cheerful time-wasters you can play on your phone.
The challenge is building a scalable and sustainable business in this fast-growing but evanescent market, as Rovio Entertainment (HEL:ROVIO) and Zynga (Nasdaq:ZNGA) have found. Going public on the TSX Venture Exchange through a reverse takeover in 2020 and graduating to the big board this year, Vancouver-based Leaf Mobile (TSX:LEAF) wades into this space with its own plan to be a contender.
The drivers: Through acquisitions including the $159-million takeover of East Side Games, Leaf now has 150 employees and a suite of licensed IP mobile games such as Archer: Danger Phone, Cheech & Chong Bud Farm and Trailer Park Boys: Grea$y Money. The company generates revenue from in-app purchases of virtual items that enhance the gaming experience, as well as from advertising. It strives for player loyalty, which should drive recurring revenue. Leaf also licenses its proprietary platform, called IdleKit, to other game developers, enabling them to accelerate their game rollouts.
Second-quarter results announced this week showed progress, if not exactly the spectacular kind: revenue of $22.5 million, a 28-percent increase over the same period in 2020, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $5.6 million. Changes to Apple’s iOS operating system forced developers like Leaf Mobile to alter their marketing practices, with some disruption to the revenue stream. The second half of this year could see faster growth as the company launches new games including RuPaul’s Drag Race Superstar.
After trading sideways and down for most of the year, Leaf stock is now on a bit of an upswing, closing Tuesday at $3.60.
Word on the street: “We have modestly tempered our estimates based on near-term headwinds, with a slight carry forward into 2022,” wrote analyst Neal Gilmer of Haywood Securities following the earnings release. “As a result, we are maintaining our Buy recommendation but lowering our target price to $6.50 from $7.50 previously,”
Coming and going: Investor services provider Computershare Trust Company of Canada reports that the volume of warrants issued in Canada soared 141 percent year-over-year in the 12 months ended this June, and that B.C. companies accounted for 60 percent of the issues. Warrants enable their holders to purchase a stock at a preset price at a point in the future.
“There has been a far greater appetite among Canadian companies to raise capital by issuing warrants over the last year, especially small to medium-sized companies that are focused on growth, whether via acquisitions, the development of their products or entry into a new market,” said Computershare senior vice-president Toni De Luca in a release.