MOREHEAD, Ky., March 09, 2023 (GLOBE NEWSWIRE) — AppHarvest, Inc., a sustainable food company, public benefit corporation and Certified B Corp building some of the world’s largest high-tech indoor farms to grow affordable, nutritious fruits and vegetables at scale while providing good jobs in Appalachia, today announced its fourth quarter and full-year 2022 operating and financial results, achieving its previous revised guidance, quadrupling the AppHarvest farm network in 2022 and diversifying its crop portfolio.
With significant infrastructure now in place to deliver fresh fruits and vegetables to top grocery chains and restaurants, the company expects to nearly triple its net sales year-over-year in 2023.
“Even with headwinds from the pandemic and supply chain disruption, AppHarvest met its commitment in 2022 to open three new farms and is now shipping commercially from each of the four farms,” said AppHarvest Founder & CEO Jonathan Webb. “We are now at an inflection point in our business transitioning from construction to an intense focus on operations with our new Chief Operating Officer (COO) Tony Martin, leveraging his deep experience in the sector to help accelerate our path to profitability through the consistent delivery of high-quality produce.”
CEA demand
According to USDA reports, the value of U.S. fruit and vegetable imports rose to a record level in 2021 and has been projected to keep increasing. Changing weather patterns—ranging from mega-drought in the Southwest of the U.S. to more frequent flooding to catastrophic wind events—are making it harder than ever for open-field farmers to predict the duration of their growing seasons and to have conditions that result in a quality harvest. AppHarvest benefits from turning first to sunshine for its growing and from being water-independent, leveraging rainwater for its farms that use up to 90% less water and a fraction of the required nutrients compared to open-field agriculture. Major food retailers have demonstrated increasing interest in high-tech indoor farms for their ability to de-risk fruit and vegetable production with a more climate-resilient, more sustainable year-round growing solution that uses far fewer resources. Europe, a pioneer in the industry, is estimated to have nearly 520,000 acres of Controlled Environment Agriculture (CEA) production compared to an estimated 6,000 acres in the United States.
Fourth quarter 2022 results
Fourth quarter net sales were $4.5 million compared to net sales of $3.1 million in the fourth quarter 2021. For net sales reporting purposes, the company plans to move from a metric of pounds sold to overall net sales by produce type. This anticipated change in reporting is driven by the new diversified crop portfolio that is expected to include tomatoes, salad greens, strawberries and cucumbers.
The company recorded a net loss of $93.3 million and non-GAAP Adjusted EBITDA loss of $24.1 million in the fourth quarter as the company was working to rapidly expand its farm network, compared to a prior year net loss of $88.4 million and non-GAAP Adjusted EBITDA loss of $18.3 million. See reconciliation of the non-GAAP measure at the end of this news release. Following a third-party recoverability assessment, the company recorded a non-cash impairment charge of $50.1 million which reduced the carrying value of certain long-lived assets.
Full-year 2022 results
AppHarvest achieved our revised guidance range for full-year 2022 as previously announced in the third quarter of 2022. The company delivered net sales of $14.6 million compared to $9.1 million for the prior year, an increase of 60% year-over-year. This increase in net sales was driven by a combination of higher market prices for tomatoes and the addition of new sales of higher-priced tomato varietals, strawberries and salad greens in the fourth quarter. Supply-chain related construction delays at both AppHarvest Berea and AppHarvest Somerset affected the timing of commercial shipments from these farms and affected net sales which were at the lower end of the previously forecasted range of $14.0 to $17.0 million.
The company reported a net loss of $176.6 million compared to a net loss of $166.2 million for the prior year. This increase in net loss was driven by production ramp up at the three new farms.
AppHarvest achieved non-GAAP Adjusted EBITDA loss within its revised guidance range for full year 2022 as previously announced in the third quarter of 2022 with non-GAAP Adjusted EBITDA loss of $72.0 million versus a prior outlook of non-GAAP Adjusted EBITDA loss in the range of $67.0 million to $72.0 million. See reconciliation of the non-GAAP measure at the end of this news release.
AppHarvest Farm Network
AppHarvest delivered on its commitment to quadruple its farm network in 2022 by bringing three new high-tech indoor farms online by year-end and diversifying its crop portfolio to include strawberries, cucumbers, salad greens and more tomatoes.
AppHarvest Berea supplies the “Queen of Greens®” washed-and-ready-to-eat salad mixes. At 15-acres, Berea is believed to be the world’s largest high-tech indoor farm for autonomously harvested salad greens featuring a “touchless growing system.”
AppHarvest Somerset is a 30-acre high-tech indoor farm growing strawberries under multiple brands including the “WOW® Berries” brand for Mastronardi Produce.
AppHarvest Richmond planted its first 30-acres in late 2022 and began its first harvest in the first quarter of 2023. The second 30-acres of tomatoes in Richmond are expected to be planted later in 2023. With AppHarvest Morehead, the company expects to grow nearly 1.5 million tomato plants across the combined 120 acres.
AppHarvest Morehead, the 60-acre flagship farm, kicked off its third season of harvesting and has seen vast improvements in quality and execution. Morehead farm has further diversified its crop set adding new varietals of premium snacking tomatoes sold under the Sunset brand as “Flavor Bombs®” and “Sugar Bombs®.”
At 165 acres under glass, the company believes this is the largest simultaneous build out of controlled environment agriculture (CEA) infrastructure in U.S. history putting AppHarvest in the top three CEA operators in the U.S. With this milestone, the company is moving to the next phase of the business focused on operations.
Operations
In January of 2023, CEA industry veteran and AppHarvest board member Tony Martin was named chief operating officer. Martin is working to optimize production, revenue and costs across the AppHarvest four-farm network under Project New Leaf, the company’s strategic program focused on profitability. Martin is implementing a five-point strategy that will focus efforts across all operations: 1) further leveraging synergies with its marketing and distribution partner, Mastronardi Produce 2) enabling labor efficiency 3) improving enterprise-wide feedback through clear key performance indicators and cross-organization information sharing 4) initiating comprehensive spending reviews and 5) aligning the company to milestones for a 5-year strategic vision.
Operations in the first quarter of 2023 continue to ramp up as expected. As previously announced, AppHarvest Berea is opening on a phased approach and the company anticipates the third five-acre salad greens growing area to be planted late first quarter of 2023. AppHarvest Somerset, which will grow both strawberries and cucumbers, has already planted about 45,000 long English cucumber plants to calibrate packaging equipment and assess harvesting capabilities in advance of the full seasonal summer refresh for the facility. Harvesting of the cucumbers is anticipated in the second quarter of 2023.
Financial Outlook
AppHarvest remains confident in its ability to be self-sufficient and to generate positive operating cash flow over the longer term with its four-farm network. The company still plans to expand capacity only after securing the required capital.
With the first quarter of 2023 marking the first time that all four facilities in the AppHarvest farm network will be shipping commercially to top national grocery store chains, restaurants and food service outlets under a variety of brands for Mastronardi Produce, the company expects to see significant year-over-year sales increases throughout 2023 and even more so in 2024. AppHarvest anticipates full-year 2023 guidance of net sales to be in the range of $40 million to $50 million, and non-GAAP Adjusted EBITDA loss to be in the range of $67 million to $76 million.
With the benefit of experience from three harvesting seasons now at its flagship farm in Morehead, Ky., the company is applying lessons learned in an effort to accelerate its journey to operational excellence at each of the three farms added to its network in 2022 with the potential to see the enterprise achieve positive Adjusted gross profit in 2024. In 2025, the company expects to achieve positive Adjusted EBITDA status for farm operations. With this trajectory, AppHarvest believes it may be able to achieve positive Adjusted EBITDA status on a consolidated basis in 2026.
About AppHarvest?
AppHarvest is a sustainable food company in Appalachia developing and operating some of the world’s largest high-tech indoor farms with robotics and artificial intelligence to build a reliable, climate-resilient food system. AppHarvest’s farms are designed to grow produce using sunshine, rainwater and up to 90% less water than open-field growing, all while producing yields up to 30 times that of traditional agriculture and preventing pollution from agricultural runoff. AppHarvest currently operates its 60-acre flagship farm in Morehead, Ky., producing tomatoes, a 15-acre indoor farm for salad greens in Berea, Ky., a 30-acre farm for strawberries and cucumbers in Somerset, Ky., and a 60-acre farm in Richmond, Ky., for tomatoes. The four-farm network consists of 165 acres under glass. For more information, visit https://www.appharvest.com.
