AppHarvest’s Q1 earnings beat consensus

Indoor grower AppHarvest recently shared steady gains and higher sales in its operating and financial results for the first quarter of 2023.

This comes as the company works to increase production across its three new farms and implement a new strategic plan with new Chief Operating Officer Tony Martin, according to a news release.

“Under Tony’s leadership, we’re already seeing improved performance in the first quarter with net sales of $13 million,” AppHarvest founder and CEO Jonathan Webb said in the release. “Tony is focusing on a data-driven approach for optimizing production and driving more efficiency across the four-farm network. I believe Tony’s strong CEA experience will help accelerate our path to profitability.”

AppHarvest’s first-quarter net sales totaled $13 million versus net sales of $5.2 million in the first quarter of 2022 — a more than 250% increase that is nearly 90% of the company’s net sales for full-year 2022, according to the release.

This $7.8 million increase in net sales during the quarter was largely driven by tomato sales from the third harvest season at AppHarvest's facility in Morehead, Ky., along with the start of operations at other Kentucky locations in Berea, Richmond and Somerset, the company said.

Related news: Financial woes surface in investor report, but AppHarvest says it's ramping up

January 2023 marked the first time that all facilities in the AppHarvest's four-farm network were commercially shipping products from an increasingly diversified crop portfolio that included strawberries, salad greens, cucumbers and additional tomatoes, the company said.

According to the release, net sales by crop type included:

• Almost $11 million in tomatoes.

• More than $1 million in strawberries.

• Over $800,000 in salad greens.

• Nearly $200,000 in cucumbers.

In line with expectations, the company said it recorded a net loss of $33.6 million in the first quarter of 2023, compared to a prior year net loss of $30.6 million.

Making steady process on strategic plan

Martin, an AppHarvest board member and controlled environment agriculture industry veteran, was appointed COO in January 2023 to optimize production, sales and costs throughout the AppHarvest network.

This year the company has focused on profitability, implementing a strategic plan dubbed “Project New Leaf.”

Martin is working to implement the five-point strategy to focus efforts across all operations with objectives that, according to the release, include:  

• Further leveraging synergies with its marketing and distribution partner, Mastronardi Produce.

• Enabling labor efficiency.

• Improving enterprisewide feedback through clear key performance indicators and cross-organization information sharing.

• Initiating comprehensive spending reviews.

• Aligning team members to milestones outlined in the five-year strategic vision.

Expanding production

In its third season, AppHarvest’s Morehead facility is achieving significant production records in terms of key performance indicators, according to the release. The company said it is applying lessons learned at Morehead to accelerate its operational excellence at each of its new farms, especially at Richmond, where the team has made meaningful progress in labor efficiency, plant health and production.

The Morehead, Somerset and Richmond facilities have successfully completed their food safety audits and have increased the number of direct shipments from each farm, reducing transportation costs and the number of food miles travelled so AppHarvest fruits and vegetables arrive on store shelves fresher and with less waste, according to the release. The Berea farm is currently pursuing its food safety certification.

Operations continue to ramp up with both Berea and Richmond opening on a planned phased approach, and Richmond is expected to be fully planted in the third quarter and start harvesting later in the fourth quarter, the company said.

Financial Outlook

AppHarvest reiterated its full-year 2023 guidance of net sales to be in the range of $40 million to $50 million. The company believes in its ability to be self-sufficient and generate positive operating cash flow over the longer term with the four-farm network, according to the release.

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

With all four farms in the AppHarvest network shipping under a variety of brands for Mastronardi Produce, the company expects to see significant year-over-year net sales increases throughout 2023, and it expects that trend to continue in 2024 as the company leverages more of the farm acreage and works to optimize production.