AppHarvest announced its fourth quarter and full-year 2021 operating and financial results, exceeding its previous guidance with expectations to quadruple its farm network and more than double its net sales in 2022.
“From our first harvest in January 2021, to selling in more than 1,000 top grocery stores and restaurants to the acquisition of a robotics and AI company to expanding our farm network and diversifying into salad greens and berries by year-end, AppHarvest has made significant strides in our first year as a public company laying a solid foundation for scalable and sustainable growth,” said AppHarvest Founder & CEO Jonathan Webb.
“For year two, we are laser-focused on the core business, adjusting our strategy to better control costs and further optimize operational performance as we work to quadruple our number of farms and more than double net sales this year to build a resilient business that creates long-term shareholder value.”
Full-Year 2021 results
AppHarvest achieved the high end of its guidance range for full-year 2021 net sales and non-GAAP Adjusted EBITDA. The company delivered net sales of $9.1 million, versus a previously announced outlook of $7 to $9 million. AppHarvest reported a net loss of $166.2 million, with an Adjusted EBITDA loss of $69.9 million versus a prior outlook of an Adjusted EBITDA loss of $70 to $75 million.
Full-year 2021 results were driven by higher sales on better operating performance and gross market prices for tomatoes as well as cost containment. With the first year of operations completed and baselines set, the company is also able to more accurately forecast business results.
Fourth-quarter 2021 results
For the fourth quarter, net sales were $3.1 million on 4.4 million pounds sold with a net sales price of 69 cents per pound, almost double the price achieved in the third quarter. This improvement was driven by a more favorable ratio of premium-grade tomatoes and better gross market prices for tomatoes.
The company recorded a net loss of $88.4 million and non-GAAP Adjusted EBITDA loss of $18.3 million in the fourth quarter of 2021. (See reconciliation of the non-GAAP measure at the end of the news release.) In April 2021, AppHarvest acquired Root AI, Inc. (now AppHarvest Technology, Inc. (ATI)), an artificial intelligence and robotics company. ATI’s Virgo prototype universal harvesting robot has doubled in its picking capability with the advantage of being deployed in AppHarvest’s Morehead facility since the acquisition.
ATI also has developed a farm operations software platform with multiple applications. Both the robotics and software are expected to become revenue-generating in 2023. AppHarvest continues to believe in the strength of ATI to deliver robotics and software solutions to optimize its own high-tech farm network and to serve the broader CEA sector globally, and the company believes it will be able to secure the financing needed for investments required for ATI to reach its full commercial potential.
However, based on AppHarvest’s reduced market value and the need to align the value of these assets, as previously announced on January 31, the company recorded a non-cash charge of approximately $59.9 million in the fourth quarter to impair the carrying value of goodwill and definite lived intangible assets related to the acquisition of Root AI.
AppHarvest production is expected to increase in 2022 as the company is on track to quadruple its number of farms by the end of the year and to provide a diverse produce portfolio that includes salad greens and berries. The 15-acre Berea, Ky., salad green facility is approximately 68% complete. The 60-acre Richmond, Ky., tomato facility is approximately 65% complete. A 30-acre Somerset, Ky., berry facility is approximately 55% complete. We expect to ramp up each facility with a phased approach that brings on additional productive acreage over time, starting with the Berea facility this summer.
These three new farms are expected to accelerate sales growth, enable AppHarvest to be financially self-sufficient and attract new capital needed to continue to grow its network beyond the four farms. With the expansion of the three new farms and the additional acres of new production this year, AppHarvest remains on track to complete one of the biggest controlled environment agriculture (CEA) buildouts in the world in 2022.
“We believe that completing our current development phase puts us in the prime position to deliver positive operating cash flow with a four-farm network,” said AppHarvest President David Lee. “Beyond the four farms, we plan to develop additional facilities only after securing the required capital, and we remain confident in our ability to do that and to be self-sufficient.”
The leadership team at Morehead has stabilized operations using a data-driven approach to performance management. This action has been supported with the implementation of a new supply chain planning process and an enhanced training program for frontline associates. These measures have resulted in improved yield and quality versus Q3 2021. The team is now focused on increasing labor efficiency at the farm and on delivering cost savings.
Through the first few weeks of Q1 2022, compared to Q4 results, the company is tracking to a saleable yield of more than three million more pounds of tomatoes. Quality levels and gross market prices are in line with the previous quarter, and distribution fee expenses are aligned with internal projections despite significant cost increases for freight.
AppHarvest has been executing an aggressive plan to manage the impact of inflation to the business by planning for it within its financial outlook, significantly reducing its cost structure and supporting its partners as they work with end customers to pass along price increases.
Nelson promoted to Chief Operating Officer
To further improve operational performance the company has promoted Julie Nelson, previously AppHarvest Executive Vice President of Operations, to Chief Operating Officer. Reporting to AppHarvest President David Lee, Nelson will work to optimize profitable growth and drive productivity across the company’s planned network of farms. “Under Julie’s leadership at Morehead, we’ve seen significant improvements to productivity, volume and quality,” said Lee. “Leveraging her extensive experience from PepsiCo, Julie is implementing the operational rigor that is critical to profitable growth as we continue to scale operations and bring three new farms online by the end of 2022.”
Project new leaf update
Through the company’s cost containment program, Project New Leaf, AppHarvest is taking steps to best position itself for sustainable growth while also establishing a clear path to consistent profitability as the farm network expands and crop types are added. As part of this program, the company has realigned teams and reporting structures and created operational efficiencies—including through corporate workforce reductions, changes to direct-to-consumer outreach and more tightly controlled spend. These actions resulted in approximately $16 million in annualized savings.
“We have been in hyper-growth mode laying the foundation to grow AppHarvest into a broad sustainable foods business,” said Lee. “As we quadruple our number of operational farms this year, we are focusing concretely on progress in our core operations, which led us to streamline the organization with nearly a 50% cut to non-operations corporate headcount in February. We believe these changes will lead to improved and more consistent operating performance as we work to get to positive operating cash flow.”
Balance sheet and liquidity
The company ended the year with cash and cash equivalents of $151 million, approximately $59 million in total availability on its credit facilities. In December 2021, the company also established a $100 million committed equity facility with B. Riley Principal Capital, which has not yet been used.
The company’s Morehead, Ky., farm is its only facility currently in operation and will be the main driver for the full-year 2022 outlook of net sales of $24 to $32 million, more than double the net sales from last year. The company expects a contribution of mid-single digit millions of dollars from the three new farms given their estimated timing of completion toward the end of the year. The Adjusted EBITDA loss expectation is in the range of $70 to $80 million, modestly higher than the $69.9 million last year despite the expected quadrupling of the farm network and significant inflation.
AppHarvest expects to invest approximately $140 to $150 million in capital expenditure for full-year 2022, which accounts for the completion of the three farms under construction and the related equipment necessary to operate them.
By the end of this year, the company expects to have four farms in operation as it continues to work toward its long-term goal of up to a 12-farm network. As previously announced, any plans to develop additional facilities are predicated on securing the required capital in advance, and the company remains confident in its ability to be self-sufficient.
With a steadily improving operation at Morehead, a more streamlined corporate center and a more robust operating playbook for the three new farms opening this year based on insights from its first year of operations, the AppHarvest teams are focused on core business improvement and generating positive operating cash flow.
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