GlobeNewswire Inc | May 17, 2021 07:00AM EDT

May 17, 2021

Company delivered net sales of $2.3 million in line with guidance; reiterates net sales outlook for the year of $20 to $25 million

Companys initial harvesting from flagship Morehead, Ky. facility meeting operating and financial expectations

New project developments in Richmond and Berea, Ky. on schedule and budget

MOREHEAD, Ky., May 17, 2021 (GLOBE NEWSWIRE) -- AppHarvest, Inc. (NASDAQ: APPH, APPHW), a leading AgTech company, public benefit corporation and Certified B Corp focused on farming more sustainably using up to 90% less water than open-field agriculture and only recycled rainwater, today announced operating and financial results for its first completed quarter as a public company for the quarter ending on March 31, 2021.

First Quarter 2021 Highlights

-- $2.3 million net sales in first quarter harvesting, meeting expectations -- 3.8 million pounds of tomatoes sold -- $4.5million gross loss driven by launch of commercial operations, sales and training new labor force -- $28.5 million net loss compared to $0.8 million in the prior year period in 2020 -- $12.4 million adjusted EBITDA loss compared to initial expectation of loss of $14.0 million to $16.0 million amid rapid scaling of the business -- $297.7 million cash and cash equivalents at the end of Q1

Results

AppHarvest, which started trading on Nasdaq on February 1, generated $2.3 million in net sales in the first quarter 2021 as it began harvesting from its initial high-tech indoor farm in Morehead, Ky., representing 3.8 million pounds sold with the farm only partially planted as the facility ramped up.

At our flagship farm in Morehead, Ky., our expert growers have ramped up production of the full 60 acres as of the first week of May, said AppHarvest Founder and CEO Jonathan Webb. The team is putting in place the right infrastructure for growth, taking employment from around 20 a year ago to 500 by the end of the first quarter. We plan to move ahead on two more projects this summer which will put us at five operating farms by the end of 2022, and we are well on track for 12 farms by the end of 2025.

Development and Financing

AppHarvest is currently operating one high-tech indoor farm that is expected to produce more than 40 million pounds of tomatoes annually, with plans to build a network of 12 high-tech farms by the end of 2025. Two more high-tech farms are now under constructionone in Berea, Ky. designed to grow leafy greens, and another in Richmond, Ky. planned for tomatoes. Four more projects are slated for development, and two of those are scheduled to begin construction in the second quarter of this year.

AppHarvest purchased its flagship Morehead farm in March, giving it the ability to leverage the asset at attractive financing rates to fund more development. The company has finalized key terms for a 60% loan-to-value financing transaction for the Morehead facility at an expected interest rate of around 4 to 5%, which is expected to close in the second quarter. The company also is in negotiations for approximately $200 million of development financing for large-scale projects.

Technology

In April, the company acquired Root AI, an artificial intelligence and robotics company, and its workforce with experience in controlled environment agriculturecreating the AppHarvest technology group dedicated to making controlled environment agriculture more efficient. Chief Technology Officer Josh Lessing, Root AIs former CEO, is leading the effort to build a digital operating model for farming with AI at its core that can manage a global network of facilities to execute complex supply chain strategies autonomously with higher returns. Based on its modeling, the company expects its investment in technology to drive both top and bottom-line results at its Farm of the Future facilities, and the technology investments are expected to raise annual run-rate adjusted EBITDA for a future 60-acre vine crop facility by approximately $7 million.

Sales and Distribution

AppHarvest has a long-term distribution agreement with Mastronardi Produce to sell all USDA Grade No. 1 tomatoes in top retail grocery and food service outlets. Volume now has increased to allow for direct shipping of full truckloads to retail customers such as Kroger and Wendys, building on AppHarvests existing relationship with Mastronardi.

Grocers and consumers increasingly are requesting U.S.-grown and chemical pesticide-free produce from companies they trust. Despite that, in 2019, more than two-thirds of vine crops for the U.S. market were imported.

"We want every AppHarvest tomato they can grow, said Mastronardi Produce President and CEO Paul Mastronardi. We have high demand for U.S.-grown and pesticide-free produce already, and when you combine that with the taste, color and freshness of the AppHarvest model, on top of their social mission, its driving our customers to ask for more."

Financial Outlook

The company reiterated its full-year 2021 outlook of net sales of $20 to $25 million. The company updated its full-year outlook for adjusted EBITDA loss to $48.0 million to $52.0 million from a prior range of a loss of $43.0 million to $45.0 million, driven by the Root AI acquisition and other planned investment in growth.

In light of the technology investment combined with the latest view of operational performance, the company raised long-term illustrative performance on adjusted EBITDA for a 60-acre Farm of the Future producing tomatoes from $15.8 million per year, as previously presented during its Analyst Day event last December, to $23.3 million per year, resulting in a potential 17% to 23% ROIC on an unlevered basis. Further, with improved access to non-dilutive capital, the long-term illustrative performance on a leveraged basis, assuming a 60% loan-to-value, could result in 43% to 58% ROIC.

We are pleased by our fast start to the year, the encouraging operating and financial performance of our Morehead facility and our teams ability to scale the business. We are concentrating on executing our growth plan as we build additional facilities, funding our investments with non-dilutive capital and delivering long-term shareholder value, said AppHarvest President David Lee.

Conference Call and Webcast

Management of AppHarvest will host a webcast and conference call to discuss its first quarter 2021 financial results and operations today at 8:30 a.m. ET. The Company will post a supplemental slide presentation in the Investor Relations section of the AppHarvest website at investors.appharvest.com to accompany the conference call. Participation instructions for the live event and replay are as follows:

Live webcast and conference call

-- Webcast: Accessible at investors.appharvest.com -- Dial-in: 1-833-665-0607 (Domestic Toll Free) / 1-929-517-0397 (Toll/International) -- Participant Entry Number: 7618198

Conference Replay*

-- Webcast: Accessible at investors.appharvest.com -- Dial-in: 1-855-859-2056 (Domestic Toll Free) / 1-404-537-3406 (Toll/International) -- Conference Number: 7618198

*Available approximately two hours after the end of the conference call through May 24, 2021.

About AppHarvest

AppHarvest is an applied technology company in Appalachia building some of the worlds largest high-tech indoor farms that grow non-GMO, chemical pesticide-free produce using up to 90% less water than open-field agriculture and only recycled rainwater while producing yields up to 30 times that of traditional agriculture on the same amount of land with zero agricultural runoff. The company combines conventional agricultural techniques with cutting-edge technology including artificial intelligence and robotics to improve access for all to nutritious food, farm more sustainably, build a more reliable domestic food supply, and increase investment in Appalachia. The companys 60-acre Morehead, Ky. facility is among the largest indoor farms in the world. For more information, visit www.appharvest.com.

Non-GAAP Financial Measures

To supplement the Companys unaudited condensed consolidated financial statements, which are prepared and presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses certain non-GAAP measures, such as EBITDA or Adjusted EBITDA, to understand and evaluate its core operating performance. The Company defines and calculates Adjusted EBITDA as net loss before the impact of interest income or expense, income tax expense or benefit, depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, remeasurement of warrant liabilities and certain other non-recurring, non-cash and non-core items. The Company believes these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Companys financial condition and results of operations. The Companys management uses these non-GAAP measures for trend analyses and for budgeting and planning purposes.

The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating projected operating results and trends. Other similar companies may present different non-GAAP measures or calculate similar non-GAAP measures differently. The Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required to be presented in the Companys GAAP financial statements. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.

Adjusted EBITDA as used in connection with the Company's 2021 outlook is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile this forward-looking non-GAAP financial measure to net income, its most directly comparable forward-looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty its stock-based compensation expense for 2021. In addition, the company may incur additional expenses which may impact adjusted EBITDA. Such items may include costs and expenses related to the business combination activities, income taxes and other items. The unavailable information could have a significant impact on the Companys full year 2021 GAAP financial results.

Forward-Looking Statements

Certain statements included in this press release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as believe, may, will, estimate, continue, anticipate, intend, expect, should, would, plan, predict, potential, seem, seek, future, outlook, and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. All statements, other than statements of present or historical fact included in this press release, regarding AppHarvests future financial performance, the illustrative performance of a Farm of the Future, as well as AppHarvests growth plans and strategy, ability to capitalize on commercial opportunities, future operations, estimated financial position, estimated adjusted EBITDA, revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of AppHarvests management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on as, a guarantee, an assurance, a prediction, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of AppHarvest. These forward-looking statements are subject to a number of risks and uncertainties, including those discussed in the Registration Statement on Form S-1 (No. 333-252964) filed with the SEC by AppHarvest on February 10, 2021 under the heading Risk Factors, and other documents AppHarvest has filed, or that AppHarvest will file, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. In addition, forward-looking statements reflect AppHarvests expectations, plans, or forecasts of future events and views as of the date of this press release. AppHarvest anticipates that subsequent events and developments will cause its assessments to change. However, while AppHarvest may elect to update these forward-looking statements at some point in the future, AppHarvest specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing AppHarvests assessments of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

APPHARVEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)(in thousands except per share amounts)

March 31, December 2021 31, 2020Assets Current Assets: Cash and cash equivalents $ 297,660 $ 21,909 Accounts receivable, net 1,182 ? Inventories, net 4,903 3,387 Prepaid expenses and other current assets 3,531 481 Total current assets 307,276 25,777 Operating lease right-of-use assets, net 1,703 1,307 Property and equipment, net 190,962 152,645 Other assets, net 7,481 1,188 Total non-current assets 200,146 155,140 Total assets $ 507,422 $ 180,917 Liabilities and stockholders? equity Current Liabilities: Accounts payable $ 23,070 $ 1,342 Accrued expenses 8,204 5,184 Current portion of lease liabilities with a related ? 59,217 partyCurrent portion of lease liabilities 300 166 Current portion of financing obligation with a ? 58,795 related partyNote payable with related party ? 30,000 Other current liabilities 832 77 Total current liabilities 32,406 154,781 Lease liabilities net of current portion 1,850 1,370 Deferred income tax liabilities 1,769 ? Private Warrant liabilities 29,920 ? Other liabilities 227 ? Total non-current liabilities 33,766 1,370 Total liabilities 66,172 156,151 Commitments and contingencies (Note 12) Stockholders? equity: Preferred stock, par value $0.0001, 10,000 sharesauthorized, 0 issued and outstanding, as of March31, ? ? 2021 and December31, 2020, respectivelyCommon stock, par value $0.0001, 750,000 sharesauthorized, 97,925 and 44,461 shares issued and 10 4 outstanding as of March31, 2021 and December31,2020, respectivelyAdditional paid-in capital 491,552 45,890 Accumulated deficit (49,643 ) (21,128 )Accumulated other comprehensive loss (669 ) ? Total stockholders? equity 441,250 24,766 Total liabilities and stockholders? equity $ 507,422 $ 180,917

APPHARVEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)(In thousands except per share data)

Three Months Ended March 31, 2021 2020Net sales $ 2,299 $ ? Cost of goods sold 6,836 ? (4,537 ) ? Operating expenses: Selling, general and administrative expenses 31,489 980 Total operating expenses 31,489 980 Loss from operations (36,026 ) (980 )Other income (expense): Development fee income from a related party ? 134 Interest expense from related parties (658 ) (2 )Change in fair value of Private Warrants 9,826 ? Other 356 30 Loss before income taxes (26,502 ) (818 )Income tax expense (2,013 ) ? Net loss (28,515 ) (818 ) Other comprehensive loss: Net unrealized loss on cash flow hedges, net of tax (669 ) ? Comprehensive loss $ (29,184 ) $ (818 ) Net loss per common share: Basic and diluted $ (0.35 ) $ (0.02 )Weighted average common shares outstanding: Basic and diluted 80,729 32,858

APPHARVEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(In thousands)

Three Months Ended March 31, 2021 2020Operating Activities Net loss $ (28,515 ) $ (818 )Adjustments to reconcile net loss to net cash used in operating activities:Change in fair value of Private Warrants (9,826 ) ? Deferred income tax provision 2,013 ? Depreciation and amortization 1,802 21 Stock-based compensation expense 6,287 19 Rent payments less than rent expense, net 19 ? Amortization of development fee with a related party ? (134 )Changes in operating assets and liabilities Accounts receivable (1,182 ) ? Inventory (1,516 ) ? Prepaid expenses and other current assets (3,133 ) 2 Other assets (5,993 ) (20 )Accounts payable 8 (98 )Accrued expenses 3,694 52 Other current liabilities (42 ) 21 Other non-current liabilities 227 ? Net cash used in operating activities (36,157 ) (953 )Investing Activities Purchases of property and equipment (11,183 ) (83 )Purchases of property and equipment from a related (122,911 ) ? partyAdvances on equipment (444 ) ? Net cash used in investing activities (134,538 ) (83 )Financing Activities Proceeds from Business Combination and PIPE Shares, net 448,500 ? Payments on financing obligation to a related party (2,089 ) ? Proceeds from stock option exercise 35 ? Issuance of preferred stock, net ? 4,880 Net cash provided by financing activities 446,446 4,880 Change in cash and cash equivalents 275,751 3,844 Cash and Cash Equivalents Beginning of period 21,909 6,031 End of period $ 297,660 $ 9,875 Non-cash Activities: Fixed assets purchases in accounts payable $ 20,313 $ ? Fixed assets purchases in accrued liabilities $ 1,408 $ ? Operating lease right-of-use assets and liabilities $ 735 $ 30

APPHARVEST, INC. AND SUBSIDIARIES

Reconciliation of Selected GAAP Measures to Non-GAAP Measures(In millions)

Three Months Three Months(Dollars in millions) Ended March Ended March 31, 31, 2021 2020Net loss $ (28.5 ) $ (0.8 )Interest expense from related parties 0.7 ? Income tax expense 2.0 ? Depreciation and amortization expense 1.8 ? EBITDA (24.0 ) (0.8 )Change in fair value of Private Warrants (9.8 ) ? Stock-based compensation expense 6.3 ? Transaction success bonus on completion of Business 1.5 ? CombinationBusiness Combination transaction costs 13.2 ? Root AI acquisition costs 0.4 ? Adjusted EBITDA $ (12.4 ) $ (0.8 )

Media Contact: Travis Parman,Travis.Parman@appharvest.comInvestor Contact: Kaveh Bakhtiari, appharvestIR@appharvest.comImage/Video Gallery: Available here