AppHarvest Names Julie Nelson EVP, Operations to Build Industry-Leading Manufacturing and Supply Chain Capabilities and Drive Performance Across Network of Farms

August 5, 2021

AppHarvest to leverage Nelson’s proven experience at PepsiCo, McKinsey to drive productivity across the company’s network of high-tech indoor farms and optimize operations to support profitable growth

MOREHEAD, Ky., Aug. 05, 2021 (GLOBE NEWSWIRE) -- AgTech leader AppHarvest (NASDAQ: APPH, APPHW), a public benefit company and certified B Corporation focused on farming more sustainably using up to 90% less water than open-field agriculture and only recycled rainwater, has named Julie Nelson its executive vice president, operations. Nelson will lead efforts to scale AppHarvest’s network of farms and to build manufacturing and supply chain capability to ensure efficient delivery of consistent, high-quality products to major grocers and restaurants.

“Julie’s deep experience optimizing complex manufacturing and distribution networks for major consumer goods companies and her proven ability to drive productivity across the supply chain will help us to deliver improved profitability as we scale,” said AppHarvest President David Lee.

Nelson will play an integral role as an executive management committee member, reporting to President David Lee, and will aid in developing company strategy, establishing operations and driving efficiency to reach productivity and cost goals while ensuring quality and customer satisfaction.

“Julie has battleground-tested experience in scaling operations across sites,” said AppHarvest Founder & CEO Jonathan Webb. “Her recent focus on improving sustainability in the food and beverage supply chain by reducing food waste, energy consumption and greenhouse gas emissions makes her a natural fit at AppHarvest.”

Nelson joins AppHarvest most recently from McKinsey & Company, following a long tenure with PepsiCo, where she led supply chain teams in the North American beverage business and the global operations team. Her focus areas included network optimization, scaling new digital technologies and end-to-end value chain productivity.

“AppHarvest’s mission aligns with my personal values,” Nelson said. “AppHarvest’s vision of combining the best that nature offers boosted with world-class technology to sustainably and affordably grow nutritious fruits and vegetables is inspiring, and I look forward to building a best-in-class operational team in support of this mission to build a climate-resilient food supply.”

Nelson holds a bachelor of science in economics from the Wharton School of the University of Pennsylvania and an MBA from Harvard Business School. She is an advisory council member for the West Virginia University Global Supply Chain Management Program.

About AppHarvest

AppHarvest is an applied technology company in Appalachia developing and operating some of the world’s largest high-tech indoor farms, designed to grow non-GMO, chemical pesticide-free produce, using up to 90 percent 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 without agricultural runoff. The company combines the best that nature offers boosted with world-class technology including artificial intelligence and robotics to improve access for all to nutritious food, farming more sustainably, building a domestic food supply, and increasing investment in Appalachia. The company’s 60-acre Morehead, Ky. facility is among the largest indoor farms in the U.S. For more information, visit https://www.appharvest.com/.

MEDIA CONTACTS: Travis Parman, Travis.Parman@appharvest.com;
Blair Carpenter, Blair.Carpenter@appharvest.com
IMAGE/VIDEO GALLERY: Available here

Lead Photo: Julie Nelson will be joining AppHarvest as its executive vice president, operations.

AppHarvest: Management Estimates Vs. The Market

By Carleton Hanson

July 28, 2021

Summary

• AppHarvest is a vertical farming company that is ramping up its operations.

• AppHarvest's management has rosy projections for profitability and growth, but the market is skeptical about the company's future.

• If management's estimates are accurate, AppHarvest looks appealing on a future cash flow basis.

• AppHarvest has meaningful downside risk.

• I am considering starting a small, "coffee can" position in the company.

I look for companies that generate consistent free cash flow and that can reinvest cash at a high rate of return. AppHarvest (APPH) does not fit the bill in its current state. The company only started to generate revenue in 2021 and is years away from generating free cash flow. APPH's management projects appealing unit economics and a long runway for future growth. If management's projections are accurate, in five years APPH will be generating over $100mm in annual free cash flow and be able to reinvest 100% of that cash at a rate of return over 15%. APPH's business model is unproven but I would be excited to own shares in a company with their projected return profile.

What is AppHarvest?

APPH is an indoor farming company based in Appalachia. The company grows tomatoes in a 60-acre indoor farm located in Morehead, KY. By growing their produce indoors, APPH is able to avoid using pesticides, recycle water, and optimize the controlled environment for higher crop yields. APPH can grow 365 days a year and crops are protected from adverse weather events. The company reports that it can produce yields as high 30x those of conventional outdoor farms while using 90% less water and a fraction of the soil and fertilizer. APPH sells exclusively to Mastronardi Produce Limited, another indoor farming company that has an extensive distribution network across the United States.

APPH is a new company, and only began harvesting from their Morehead facility this year; there isn't much data yet on their operational metrics. As of Q1, the company had about $300mm in cash on their balance sheet, but APPH is investing heavily into building additional farms. There are two farms currently under construction in KY and six additional sites have been identified as future farm locations. APPH's goal is to have 12 farms completed or under construction by the end of 2025. A standard 60-acre facility costs about $120mm to build and APPH estimates that a fully functional farm can bring in annual revenues above $40mm with gross margins as high as 40% and EBITDA margins around 35%.

(Source: Analyst Presentation)

Management raised facility EBIDTA estimates to over $23mm on the Q1 conference call, with the excess coming from increases revenue and lower input costs. Some of this upward revision is also due to the acquisition of robotics company Root AI, which management expects to improve farm efficiency and automation in the future.

Putting together the farm unit economics and the target number of farms, five-year projections look like this:(Source: Analyst Presentation)

APPH has a market cap of $1.2 billion. If the projections above are accurate, APPH will be generating more than $100mm in free cash flow by 2026 and have a proven, profitable model that they can leverage to build more farms with an expected cash return above 15%. $1.2 billion is a cheap enough price to pay for a company with that return profile.

Let's Take Management's Projections at Face Value; How Much Should We Pay For APPH?

The big question is: Are management's estimates accurate? I will talk more about this risk later in the article, but for now let's say that the future plays out exactly as management projects. In this scenario, what would be a fair price to pay for APPH shares today? Using company estimates, we can put together a rough 5-year DCF. I am going to use a 15% discount rate in my equation. This might be controversial, but there are a number of other companies that I own that I expect to return at least 15% a year. If I am going to tie up capital in APPH while I wait for management to execute their plan, I am going to treat the opportunity cost as 15% a year. The results look like this:



The netted cash amount is inconsequential for just five years. In the scenario where management's estimates have been accurate, the company would be in a great position at the end of 2026. They have a proven business model, are generating ample free cash flow, and could continue to expand their operations by building more farms. I think a multiple of 25-30x FCF is reasonable in this scenario, resulting in a market cap of between $1.4-$1.6 billion and a share price between $14-$16. Due to a fairly steady decline in APPH's share price over the last month, a $14 price target is a 16% premium to the current price and $16 would be a 33% premium. For this scenario, I'll split the difference, slap a $15 price target on the stock, and estimate the company is undervalued by 25%.

The Market is Skeptical

Using management's estimates and my DCF assumptions, my "base case" price target for APPH is around $15/share. Despite some initial excitement about the company when it came public via a SPAC, the market is skeptical about this base case:(Source: Seeking Alpha)

APPH is trading more than 70% below its 52-week high and has significant short interest; why might the market be pessimistic about APPH's future? I think the market has two main concerns. First, APPH is only just beginning their operations; the unit economics and long-term growth plans presented by management are just projections at this point. Perhaps the farms will have higher maintenance costs than expected or produce a lower yield over a prolonged period. Interest rate changes could make future expansion projects more expensive. APPH might incur greater than expected SG&A costs. With no operating history, investors are forced to rely on management estimates or make their own projections with limited information. In this case, uncertainty about the future works against APPH's share price in the short term.

Secondly, despite their advanced indoor farm technology and investments in artificial intelligence software, at the end of the day APPH sells commodity products (tomatoes and eventually other produce). It is hard to find a convincing competitive advantage that is unique to APPH that will help them stand out in the market place. There are dozens of other indoor farming companies in various stages of development and production, so APPH's technology isn't unique. Companies like Plenty, AeroFarms, and Local Bounti come to mind, but there are many others as well. APPH's location (Kentucky), cited by the company as a large competitive advantage, will be diminished by the growth in indoor farming. Kentucky might be closer to New York than Mexico or California, but if other companies have the ability to start up small urban farms (like Plenty), then in not too many years I could see more farms popping up closer to major urban areas and reducing APPH's location advantage. SA author Jamie Louko recently did a deeper dive on APPH vs the competition in this article, and I think he brings up good points, especially around APPH's scale and progress in building their farms and securing funding for future work. I'm not sure the market is convinced these advantages will be enough, especially in today's market where traditional farming remains the primary competition.

Investment Thesis (and Risks)

Is the market right to be skeptical about APPH's future, or is the market being short-sighted and creating a favorable investment opportunity? I think the answer to both questions is yes. On the one hand, it is reasonable to remain cautious about APPH's unit economics until the company has been operating multiple farms for multiple years. Without a strong unit economic base, I see limited downside protection for investors. APPH still has a sizable cash position on their balance sheet and owns their one operating farm, but much of the cash is already allocated to completing their two in-progress farms, and their existing farm won't be of much value if the unit economics end up being a lot worse than anticipated. APPH needs to complete more than three farms to overcome their overhead costs, so their long-term success is going to be dependent on a successful progression of new farm construction. New farm construction will be impacted by the future availability of credit and/or the company's share price (if they decide to an equity raise). Finally, APPH would be negatively impacted by short-term drops in vegetable commodity pricing. Tomato pricing has been relatively stable over the last 15-20 years, but swings of 15-25% or more have happened regularly and will likely continue to happen. An APPH investment has real risks that the market is keenly aware of.

On the other hand, I see a lot to like about the company if management is able to execute on their plans. In this scenario, APPH is only a few years away from consistent cash flow generation and will have a long runway for reinvestment at high rates of return. It is rare to find a company today that can reinvest 100% of their free cash flow to grow their business; often companies resort to paying a dividend or buying back shares with excess cash. These outcomes are "fine" for investors, but aren't going to generate the same 15-20% ROI that APPH would be able to get from additional farm construction. The most optimistic outlook makes me think of investing in Walmart or McDonalds in their early stages, when they were building new stores or opening new franchises at a brisk pace and reaping solid returns on those investments.

I can also envision scenarios where APPH makes an unexpected leap forward and expands into an adjacent industry. Company president David Lee made a comment on the Q1 conference call that suggested he sees the potential of their in-house AI and robotic solutions to be licensed to other companies. This would provide another source of high-margin revenue. He even went as far as to say that APPH's solution could be what "AWS is to Amazon" (source). APPH's investment in Root AI shows their commitment to solving technological problems presented by indoor farming and to continuing to optimize their day-to-day operations. If APPH expands into a true tech-focused company that is able to build a platform of tools that other future companies will want to use, that would be a huge and unexpected win for the company. I would take this projection with a huge grain of salt and say it is unlikely to materialize, but I think APPH's technology has value and at least has the potential to be monetized in the future.

Conclusion

An APPH investment is a departure from my usual style; I tend to focus more heavily on protecting against the downside than shooting for home-run returns with a favorable risk/reward ratio. That being said, I see APPH as an intriguing opportunity. APPH's potential to invest 100% of ample free cash flow at high rates of return is the most appealing part of this equation, and after the slow fall of the company's share price I think today's market cap looks fairly reasonable. Even with a 15% discount rate APPH is trading slightly below "fair value", assuming management estimates are close to reality. If I were to invest in APPH, I would make it a small portfolio position and plan on holding it "forever" to let the long-term investment thesis play out.

Agtech Company AppHarvest Has Secured A $91m Financing Arrangement With Sustainably-Focused Investment Firm Equilibrium Capital To Fuel The Future Construction of 12 High-Tech Indoor Farms by 2025

By Mary Ellen Shoup

July 27, 2021

Agtech company AppHarvest has secured a $91m financing arrangement with sustainably-focused investment firm Equilibrium Capital to fuel the future construction of 12 high-tech indoor farms by 2025.

Read The Rest Here: HTTPS://WWW.FOODNAVIGATOR-USA.COM/ARTICLE/2021/07/27/APPHARVEST-SECURES-91M-FINANCING-TO-FUEL-2025-INDOOR-FARMING-AMBITIONS 

AppHarvest Taps Amazon Veteran Mark Keller To Operationalize AI-Informed Farm Operating System

July 26, 2021

Keller joins the AppHarvest technology group as SVP, Software Applications Platform, with a proven track record of building AWS services and high-performing teams

AgTech leader AppHarvest (NASDAQ: APPH, APPHW), a public benefit company and certified B Corporation focused on farming more sustainably using 90% less water than open-field agriculture and only recycled rainwater, has named Amazon veteran Mark Keller as its SVP, Software Applications Platform. Keller joins the AppHarvest technology group as it works to operationalize its Project TalOS platform to make fresh fruit and vegetable production as reliable as consumer goods manufacturing.

To create the Farm of the Future, AppHarvest is investing in robotics, artificial intelligence, tele-operation, and proprietary seed genetics. With robots roving through the facility alongside the company’s human labor force, interacting with and caring for the crops, the company will be collecting data continuously on plant production to feed into AI and then using software to align facility operations with sales and logistics.

“We are massively expanding our team to build out our digital operating model for farming, which has AI at its core that can manage a global network of facilities and effortlessly execute complex supply chain strategies intelligently and autonomously,” said Josh Lessing, AppHarvest chief technology officer. “Adding an industry veteran like Mark will be a true game-changer for this growth phase of our business, and his strong, people-centric leadership skills will be a key enabler for the AppHarvest technology group.”

Keller has a proven record spanning more than 25 years of turning ideas into full-featured technology solutions, such as launching Amazon’s first four large-scale Kiva robotics sortable warehouses and the PrimeNow Warehouse Management Software used to run the company’s one-hour fulfillment centers.

“The Holy Grail in agriculture is predicting and managing yield and quality,” said AppHarvest founder and CEO Jonathan Webb. “Having Mark join will accelerate our efforts as we train our intelligent robot, Virgo, to harvest multiple crops—ranging from tomatoes and cucumbers to more delicate fruits such as strawberries—as we move toward more AI-informed growing. These insights collected and analyzed, then fed into AI, will be the true game-changer for us since every piece of fruit is an outcome that resulted from the many variables in the growing process.”

“Two of the most pressing global concerns are water scarcity and creating resilient food supply, and AppHarvest is solving for both,” said Keller. “As a father of four, I want to leave a strong legacy for my children and leverage technology for good. The foundation AppHarvest is building will give controlled environment agriculture the opportunity to restructure the food landscape to mirror the hyper-efficient e-commerce landscape.”

Keller is a Hispanic Gulf-War veteran who brings a unique perspective to employee engagement programs being an early driver of the Amazon Warriors veterans employee group and having participated in the Latinos @ Amazon employee group. Keller also was an early adopter of the Military Apprentice Software Development Engineer program to improve diversity hiring in technology, which he expects to continue at AppHarvest.

About AppHarvest

AppHarvest is an applied technology company in Appalachia developing and operating some of the world’s largest high-tech indoor farms, designed to grow non-GMO, chemical pesticide-free produce, using up to 90 percent 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 without 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, farming more sustainably, building a domestic food supply, and increasing investment in Appalachia. The company’s 60-acre Morehead, Ky. facility is among the largest indoor farms in the U.S. For more information, visit https://www.appharvest.com/.

AppHarvest: Firing On All Cylinders

Written by Jamie Louko

July 12, 2021

AppHarvest, Inc. (APPH)

Summary

• AppHarvest is trying to reimagine how consumers see produce.

• With sustainability as one of their key focuses, AppHarvest separates itself from the pack of traditional farmers, and its size, scalability, and offering selection separate itself from other agtech players.

• In this article, I am going to examine some of the most recent news AppHarvest has shared with investors, as well as looking back at AppHarvest compared with other agtech players.

AnnaStills/iStock via Getty Images

Investment Thesis

The agtech and sustainable farming industry has proved to be more efficient and sustainable compared to traditional farming. However, the difference and competitive edge lie between each sustainable farming business. These agtech businesses achieve similar sustainability and efficiency goals, so the competitive advantage comes in other forms. AppHarvest's (APPH) competitive advantage comes in the form of the size and scale potential of their farms, as well as their broad expansion of product offerings. Because of this, AppHarvest is one of the stronger players in the agtech space, and investors who want to play in this industry should be considering AppHarvest before other competitors.

Where We Last Left Off, and What's New

In my last article about AppHarvest, a large-scale indoor farming business operating in central Appalachia, I focused on the competitive advantages over traditional farming operations. Since then, other indoor farming businesses similar to AppHarvest have come out of the woodwork and announced plans to trade as public companies. Some of these businesses include AeroFarms (SV, will become ARFM), a sustainable farmer focused on vertical farming, Local Bounti (LIII, will become LOCL), an indoor farming business located in the pacific northwest, and Infarm, a German-based distributor who has become the world-leader in indoor farming. Infarm has rumored to becoming public via SPAC with Kernel Group Holdings Inc. (KRNL), but nothing definitive has been reached.

As these businesses show their superiority, they all claim similar sustainability and efficiency metrics. Most businesses claim that their use of water is extremely efficient, as is their optimization for crop growth, and their LEDs allow for optimal sunlight. Simply, all of these businesses have very similar technology that makes them superior to traditional farming, but this does not mean success for any individual business within the agtech industry. They all show that the agtech industry is superior, but rather they should focus on what makes their business superior to other agtech players.

View fullsize

Source: Investor Presentation

In my opinion, traditional farming is a dying industry, and it is sensible that sustainable farming and greenhouses will be the future of farming. Therefore, it is sensible that the agtech business should be demonstrating its competitive advantages over other agtech competitors, rather than traditional farming.

AppHarvest, even in this sense, does stand out from the competition. They are slowly becoming a bigger player in this space, and one that is starting to run ahead of the pack. While other agtech businesses are busy constructing their first farm, AppHarvest has jumped ahead with the production of its next 4 farms. While its competitors are starting small with only 1-2-acre farms, AppHarvest has positioned itself well with 15-60-acre farms. AppHarvest's competitors are currently focusing on one product category, yet AppHarvest is rapidly expanding its product offerings.

In an industry that is growing rapidly, AppHarvest is executing everywhere it needs to, and it is allowing for AppHarvest to set itself apart from the competition.

Competitive Advantages Over Agtech Businesses

AppHarvest has three quality characteristics that show it is stronger than most of its agtech competitors. Due to the size and scalability of its farms, expansion in offerings, and consistent execution, AppHarvest is proving to investors that they are one of the stronger players in this industry.

Size and Scale of Farms

One of AppHarvest's strongest competitive advantages within the agtech space is the size of its facilities. These facilities are absolutely massive, with their first facility 60 acres in size. This allows for mass production of sustainable-grown produce at a scale that no other agtech business has. These facilities can often take longer to construct, but once constructed, there is a long runway for growth and full-scale operations for it. It would take substantially less time to fully scale a farm this size compared to building and scaling 60 1-acre greenhouses.

The second option is what Local Bounti is doing, for their facilities are only 1-2-acre facilities. They plan on constructing 9 facilities by 2025, 8 of which will be roughly 5 acres, which would only lead to a maximum growing capacity of 42 acres. This goal of 42 acres would be less than AppHarvest's currently operating growing capacity.

Clearly, the size of AppHarvest's farms is a massive advantage for them. The scalability of these farms gives them an even greater lead. AppHarvest expects production of their first facility in Morehead, Kentucky to be fully scaled by the end of 2021, whereas Local Bounti's 42 acres would not be fully operational and scaled until at least 2025. AppHarvest would then have 4 years of fully-scaled operations to build a brand, strengthen the balance sheet, and fuel more growth for AppHarvest.

The scalability shows itself through guidance estimates for FY 2021 as well. By the year's end, at full-production, AppHarvest expects to make $21 million in revenue, whereas Local Bounti only expects to make $13 million by the end of 2022. The size and scalability of AppHarvest's farms are simply unmatched by its competitors, and as they build more farms (I will dive into that shortly), these size and scale advantages will only become more prevalent.

Offering Expansion

Compared to its competitors, AppHarvest is planning to expand its product offerings at a faster rate. One of the keys to success for these agtech businesses is having a successful brand, and one way to grow a brand is to put it in the eyes of more customers. One way to do this is by expanding the products offered. That way, both salad enthusiasts can eat the leafy greens and tomatoes produced, while berry lovers (like myself) can also recognize the brand. If a business were to only focus on leafy greens, then they would not achieve brand recognition from people like me as much.

AppHarvest's offering expansion is happening fast, and it will only be a matter of time before AppHarvest can offer products in various categories, rather than simply tomatoes. Their primary facility in Morehead, KY, solely produces tomatoes, but they have 4 facilities under operation that will be producing a wide variety of offerings. Here are the 4 facilities being constructed, along with what they will be producing:

Facility LocationProduction CategoryAcreageExpected Construction Completion DateBerea KYLeafy Greens15Q3 2022Richmond KYVine Crops60Q4 2022Somerset KYBerries30Q4 2022Morehead KYLeafy Greens15Q4 2022

View fullsize

Source: Press Release

Considering that AppHarvest currently focuses solely on tomatoes, expansion into 3 other product categories is a wonderful step in growing its brand recognition. This is something that few of its competitors are doing. Local Bounti does not have any structural plans on expansion out of leafy greens, and AeroFarms has plans to expand into berries for its primary leafy greens production.

As previously mentioned, I believe that offering expansion is important to the brand growth for these agtech businesses. As they expand their offerings, they will be able to get their products and their name in front of more consumers. AppHarvest has started showing signs of doing this well, where its competitors have failed to do the same.

Signs of Execution

One of the risks I mentioned in my last article was about the ability of management to meet or exceed guidance they put out for themselves. This included construction guidance. In their investor presentation, they expected to have 4 facilities up and running by the end of 2022, including their main facility in Morehead. Recently, they announced plans to construct two additional facilities, meaning that they are now expecting to have 5 facilities up and running by the end of 2022.

This seems small on the surface, but this is the exact type of execution proof that I look for in small businesses like AppHarvest. The fact that management was able to start construction on more farms than expected and thus increase their timeline shows that they are executing and exceeding the guidance they set out for themselves.

For investors, this should demonstrate that AppHarvest management can be trusted, for their guidance was beaten. Management was able to beat their own guidance, and that should show investors that AppHarvest is not just a pipe dream, but it actually has something tangible to run with and build.

A Look at My Risks: What Risks are Still Present, and What Risks Have Grown

In my last article, I noted many risks that are potential with the business:

• AppHarvest is unable to grow its factories at or faster than projections.

• Their Mastronardi partnership goes awry.

• They are unable to educate the broader public on what makes them special.

• AppHarvest is unable to lower prices.

• Management leaves the company.

For the most part, all of these risks are still prevalent today, if not even more important. Although they have begun to prove they can beat their own guidance, they will still need to continue to prove this, both in quarterly and yearly financial estimates, but also through construction estimates.

Their Mastronardi partnership is still fragile, and if anything were to happen with that partnership AppHarvest would have no way of distributing its product to local grocers, which could potentially decimate this business.

Although the offering expansion will make it easier to gain brand recognition and thus educate the broader public about their business, this will likely always remain a risk as long as traditional farming produce dominates grocery store shelves. Gaining brand recognition will also go a long way in being able to lower prices. So, while their offering expansion has the potential to increase brand recognition for AppHarvest, risks still remain and likely will remain for a long time.

Even though management seems very happy at AppHarvest, and loss of a major figure, Jonathan Webb specifically, would greatly damage their business. Management is the face of the business until they are able to bring products to shelves at a very large scale, so management impressing investors is largely how they will gain capital to subsidize the financing of their farm construction. If the face of AppHarvest were to leave, it could hurt their ability to receive financing and thus their ability to develop their facilities.

After seeing many agtech businesses come to the market via SPAC, there has been more concern about competition in this space. Because of this, I would likely add competition as a risk to AppHarvest. While many of its competitors are pre-revenue and are not far along on facility construction, they do have a competitor that is much larger than AppHarvest. Infarm is a German-based sustainable food producer that sells its product internationally, with the U.S. being its most recent expansion area. They have expanded broadly in Europe, and they seem to have their eyes set on the United States. This could pose a tremendous risk for AppHarvest, for there is no agtech player that comes close to the size of Infarm. They have $19 million in sales across the world compared to AppHarvest's $2 million last quarter.

AppHarvest's competition is fierce, and there is no doubt that the competitive threats will slow as time goes on. Therefore, I am confident to say that AppHarvest will have to fight against fierce competition in order to gain market share in the U.S., but their competitive advantages listed above will be able to help them do so.

Recent Stock Decline: Buying Opportunity?

AppHarvest's stock price has plunged in recent months, falling roughly 58% since February 2021.

Data by YCharts

This has put AppHarvest's market cap roughly around $1.5 billion and dropped their valuation down from extremely high multiples to still high, but comparatively lower multiples. Currently, it is trading over 600x sales, but it is trading at 73x forward sales if investors are looking at FY 2021 revenue estimates.

A business that just got its first revenue in Q1 of 2020 is obviously going to have extremely high valuation multiples, but revenue is growing extremely fast, and it is expected to continue to do so. Considering that the stock price has had a tremendous fall from grace, and revenue is expected to grow rapidly, today could potentially be a wonderful time to invest in this business at a very low price.

Conclusion

As I have said before, an investment in AppHarvest is not for the faint of heart. It is valued at very high multiples, and the number of risks for this business is high. AppHarvest will need to continuously execute at a strong level, for there is little room for slip-ups. With plenty of competition in the agtech market, AppHarvest will need to hold onto its competitive advantages tight if it wants to be a market leader in this industry.

Despite all of this, AppHarvest is one of the better investments for investors who want to get in on the agtech industry. They are one of the few companies with strong competitive advantages, and there are very few companies that could construct what AppHarvest is constructing. Their valuation is high now, but as they grow revenue it is likely that it will rapidly decrease, and it will be much more reasonable in the future. The risks associated with this business are plenty, but management has begun to prove they can efficiently execute.

For risk-tolerant and volatility-tolerant investors who wish to capitalize on the sustainable produce transformation, AppHarvest is one of the best bets to make. Their competitive advantages are strong, and they are one of the only businesses that have proved they have the ability to accomplish what they say they can. Because of this, I am recommending that risk-tolerant and volatility-tolerant investors who wish to invest in agtech should consider AppHarvest before any other competitors.

Lead photo: Source: Investor Presentation

View fullsize

This article was written by

Jamie Louko

I am a college student who has found a deep thirst for learning and investing. Being very young, I have leaned toward very long-term investments and growth stocks, primarily in tech. I do, however, love consumer goods companies as well. Currently, I am studying International Business and Economics.

Long Only, Growth, Long-Term Horizon, Tech

Contributor Since 2021

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

[WEBINAR] Women In Agriculture Panel - Greenhouse Grower & Indoor Ag-Conversations

View fullsize

GREENHOUSE GROWER  &

INDOOR AG-CONVERSATIONS PRESENT

WOMEN IN AGRICULTURE PANEL

WEDNESDAY, SEPTEMBER 16, 2020

2-3 PM | EST

SAVE YOUR FREE SPOT!

Moderated by Janeen Wright, Editor, Greenhouse Grower

Our Panel Includes
 

Corinne Wilder, Vice President, Global Commercial Operations, Fluence By OSRAM

Amy Samples, Director of Community Outreach and

People Programs, AppHarvest

Erika Summers, Sales Engineer, LMS Building Systems

Charlotte Prud'Homme, Founder, Generation Permaculture Design

During this insightful AND inspiring 60-minute session, our panelists will discuss:

• How can we as women in agriculture be the change we want to see in our industry

• What challenges face women in the different sectors of the agriculture industry

• How can we empower other women and what can we do to inspire the next generation of women in agriculture

• And more!

Join us! And, if you can't make the live session, register anyway and you'll get the recording in an email after the webinar

LEARN MORE

SPECIAL THANKS TO OUR INDOOR AG-CON 2020

EXHIBITORS, SPONSORS, MEDIA ALLIES &
INDUSTRY PARTNERS

View fullsize

Indoor Ag-Con, 950 Scales Road, Building #200, Suwanee, GA 30024, United States

Is Hydroponic Farming Actually Sustainable?

View fullsize

September 4, 2020

According to the UN, the world is on the brink of its worst food crisis in 50 years.

The global food industry is searching for a more sustainable and accessible system for producing healthy food, particularly fresh fruit and vegetables. Techniques such as hydroponics and vertical farming may provide the solution by maximizing overall output and minimizing the use of space, soil, and other resources.

But what exactly is hydroponic farming? And is it actually sustainable?

View fullsize

Gotham Greens grows fresh produce such as leafy greens in urban greenhouses. | Image/Gotham Greens

What Is Hydroponic Farming?

There are a variety of different approaches to Hydroponic Farming. But they all involve growing plants and fresh produce minus the soil.

There are several main styles of hydroponic systems. One uses an absorbent wick to transfer nutrients from a water reservoir up to the roots of the crop. While others leave an air-gap, allowing part of the root system to absorb nutrients directly while the remainder is exposed to oxygen in the air.

Plants may also be positioned on a floating raft, or grown through a medium, into which water is regularly pumped. Top feeding also requires regular water circulation, while aeroponics involves leaving the roots completely exposed but frequently filling or misting the space with nutrient-enriched water.

Whatever the precise method used, hydroponics involves regular exposure to both air and nutrient-rich water. According to Vertical Roots, a South Carolina-based Indoor Hydroponic Container Farm, there are five core elements to hydroponic farming. These are freshwater, oxygen, root support, nutrients, and light.

By growing crops in water, vertically, and in climate-controlled greenhouses, Vertical Roots and other similar farms are able to produce nutrient-dense food anywhere in the world, at any time of year, and using fewer resources than traditional methods.

View fullsize

Hydroponic farming is more resource-efficient than traditional methods. | Image/Shawn Ang via Unsplash

Is Hydroponic Farming Sustainable?

Soil-less farming techniques, in general, are typically more resource-efficient long term than traditional methods. According to the National Parks Service (NPS), hydroponics can use up to 10 percent less water than field crop watering.

By operating a closed-loop system and recycling rainwater, high-tech greenhouse developer AppHarvest uses up to 90 percent less water than traditional methods.

Most hydroponic farms utilize closed-loop systems, like AppHarvest, that contain and preserve water. This control over the water system also allows for delicate adjustments to the environment. PH levels, amount and type of light, and quantity of nutrients can all be modified to enhance the growth of crops.

Emphasizing perennial agriculture—particularly in combination with vertical farming and hydroponics—can further maximize both production and nutritional content per-plant. Many perennials, which can be maintained all year round with no replanting, are extremely nutrient-dense.

Start-up costs for hydroponic systems are typically greater than for traditional farming. But overall, it produces far greater output with fewer resources. It also allows growers to produce food anywhere in the world. Thereby reducing the carbon emissions generated through transportation, and allowing for year-round production in even inhospitable environments or weather conditions.

In general, hydroponic systems can produce a greater yield of fruits and vegetables. This is in part due to the controlled environment, but also because plants can be housed much more densely than possible using traditional methods. This both increases the overall output and reduces the quantity of land required.

View fullsize

Vertical farming can decrease the amount of land used for fresh produce even further. | Image/Markus Spiske via Unsplash

What Is Vertical Farming?

Vertical farming involves the growing of vegetables in stacked layers, frequently in a controlled environment.

Vertical farming also requires much less land than traditional methods. Typically, it incorporates controlled-environment systems such as hydroponics to maximize output. The primary goal of vertical farming is to increase the crop yield while reducing the space required, much like hydroponics itself.

Vertical farming firm Infarm recently partnered with supermarket chain Marks & Spencer to grow fresh herbs in select stores. The company is also working with several retailers and chefs across Europe who aim to add small vertical farms to their restaurants and stores.

“Our vertical farms can be installed directly in any urban space,” said Emmanuel Evita, global communications director at Infarm. “Which is where the majority of the global population will live in the next few decades.”

It is particularly useful for growing produce in areas where there is a lack of arable land. In Abu Dhabi, where there are extremely high temperatures and increasing water scarcity, the government is investing $100 million in indoor farming.

Inner-city gardening, in general, also lends itself to vertical farming. While harder to create a controlled environment, guerilla gardening and other community-based projects have also made use of the vertical system. This enables greater access to fresh produce and reduced mileage overall, even with rudimentary systems in place.

View fullsize

Emphasizing perennial vegetables could also maximize nutrients, increase production, and reduce the consumption of resources.

Why Do We Need Alternative Farming Methods?

Studies indicate that the suburbanization of major supermarkets has led to food deserts within cities. This disproportionately impacts low-income people and those who live in urban areas. Traditional malnutrition affects around two billion people worldwide. But the Standard American Diet (SAD) and lack of access to fresh food is also responsible for chronic deficiencies.

Access to fresh fruit and vegetables is likely to become even more restrictive in the recession following the COVID-19 coronavirus pandemic. And even in countries with plenty of food, there will likely be further disruptions in the food supply chain.

In order to provide enough vegetables for the global population to maintain a healthy diet, food production would need to triple. Alternative methods such as vertical farming and hydroponics could provide a resource-efficient and accessible way of revolutionizing the global food industry.

Gotham Greens, a fresh food farming company, specifically choose to build sustainable greenhouses within cities. Local cultivation helps the company deliver products quickly and with minimal energy expenditure. This also allows those who live within urban areas access to fresh, nutrient-dense food, and to agricultural jobs.

AppHarvest is also creating jobs, minimizing its carbon footprint, and increasing its output with its choice of location. By opening a new facility in Morehead, Kentucky, the company is both tackling high local unemployment rates while placing itself less than one day’s drive from 70 percent of the U.S. population. This reduction in travel for delivery has dropped its overall diesel costs by 80 percent.

“It’s time for agriculture in America to change,” said Johnathan Webb, the founder, and CEO of AppHarvest. “The pandemic has demonstrated the need to establish more resilient food systems, and our work is on the forefront of that effort.”

Liam Pritchett

View fullsize

STAFF WRITER | BRISTOL, UNITED KINGDOM | CONTACTABLE VIA: LIAM@LIVEKINDLY.COM

Liam writes about environmental and social sustainability, and the protection of animals. He has a BA Hons in English Literature and Film and also writes for Sustainable Business Magazine. Liam is interested in intersectional politics and DIY music.

Lead photo: How sustainable is hydroponic farming? | Image/Gotham Greens

• TAGS vegan food vegetables gardening Sustainable Farming growing food

The World's Largest Indoor Farm Is Creating 300 Jobs In Kentucky

AppHarvest's new indoor farm in Kentucky is creating jobs and shows an alternative, sustainable form of agriculture and farming.

View fullsize

The world's largest indoor farm just created 300 jobs in Kentucky. | AppHarvest/Instagram

View fullsize

August 21, 2020

High-tech greenhouse developer AppHarvest just opened the world’s largest indoor farm in Kentucky, creating 300 full-time permanent jobs.

The 2.76-million square foot controlled environment agriculture facility is based in Morehead, Eastern Kentucky. A region where unemployment is 44 percent higher than the national average. AppHarvest aims to develop this area into an agricultural technology hub.

“Eastern Kentucky, with its central U.S. location, provides the perfect place to build AppHarvest’s indoor farms,” said Johnathan Webb, the founder, and CEO of AppHarvest. “While also providing much-needed jobs to a ready workforce.”

AppHarvest combines agriculture with cutting edge technology to promote sustainable change within the industry. The new indoor farm drastically reduces the land needed to increase food production. It uses no pesticides and no GMO products.

All water needs are met exclusively by a closed-loop, recycled rainwater system. This also minimizes the water runoff unavoidable with traditional agricultural methods. Overall, AppHarvest’s sustainable greenhouses use 90 percent less water than other farming.

“It’s time for agriculture in America to change,” continued Webb. “The pandemic has demonstrated the need to establish more resilient food systems, and our work is on the forefront of that effort.”

View fullsize

The transportation of fresh produce can have significant carbon emissions.

The Future Of Farming

In addition to job creation, the new farm’s location will also reduce production costs and carbon emissions.

Morehead is less than one day’s drive from 70 percent of the U.S. population. This means a reduction in diesel fuel costs by 80 percent and allows for more competitive pricing against low-cost foreign imports.

AppHarvest recently closed on its $28 million Series C round of fundraising, making a total of over $150 million in just two years. The company has also expanded its board to include investor and author J.D. Vance, Rise of the Rest Seed Fund partner Anna Mason, and AOL co-founder Steve Case.

Impossible Foods CEO and plant-based food proponent David Lee and lifestyle icon and keen vegetable gardener Martha Stewart also sit on the AppHarvest board. Stewart said: “The future of food will be, has to be, growing nutrient-rich and delicious produce closer to where we eat.”

“That means food that tastes better and food that we feel better about consuming,” she added. “AppHarvest is driving us towards that future and working from within Appalachia to elevate the region.” 

• TAGS sustainability Sustainable Farming vegan jobs Indoor Farm

View fullsize

Liam Pritchett

STAFF WRITER | BRISTOL, UNITED KINGDOM | CONTACTABLE VIA: LIAM@LIVEKINDLY.COM

Liam writes about environmental and social sustainability and the protection of animals. He has a BA Hons in English Literature and Film and also writes for Sustainable Business Magazine. Liam is interested in intersectional politics and DIY music.

Martha Stewart, J.D. Vance And Impossible Foods’ David Lee Join Board of AgTech Leader AppHarvest

The company adds executives from The Carlyle Group, Impossible Foods and raises new round from sustainability-focused investors such as Jeffrey Ubben and James Murdoch as COVID-19 heightens need for more resilient domestic supply chains

View fullsize

AUGUST 6, 2020 – MOREHEAD, KENTUCKY – AppHarvest announced today that food entrepreneur and icon Martha Stewart, Impossible Foods Chief Financial Officer David Lee, and best-selling author and investor J.D. Vance, have joined the company’s Board of Directors as it prepares to open one of the world’s largest indoor farms this fall in Morehead, KY. Starting with non-GMO tomatoes, AppHarvest’s farms will provide freshly grown American fruits and vegetables for national grocers, meeting the enormous and growing demand for locally grown produce amidst the supply chain challenges created by the current COVID-19 pandemic.

“The future of food will be, has to be, growing nutrient-rich and delicious produce closer to where we eat,” Stewart said. “That means food that tastes better and food that we feel better about consuming. AppHarvest is driving us towards that future and working from within Appalachia to elevate the region.”

Added Vance, “The last few months have taught us that our food system is a little more precarious than we realized. AppHarvest will change that, and it will do so by building a sustainable, durable business in Appalachia, and investing in the people who call it home.”

Added Lee, “AppHarvest’s innovative approach to agriculture has the potential to dramatically change the way we get our produce and the impact our food has on the natural environment. I’m excited to join their mission as they enter this next phase of growth.”

Anna Mason, Partner at Revolution’s Rise of the Rest Seed Fund, the fund led by AOL Co-founder Steve Case to back companies outside of Silicon Valley, will also join the Board. “AppHarvest’s rapid expansion and job creation is exactly what Rise of the Rest envisioned with its focus on helping companies in Middle America grow,” Mason said.

Inspired by the belief that the technology already exists today to grow dramatically more food, with far fewer resources, AppHarvest’s indoor farms reduce the need for acreage, use no harmful pesticides, lessen fuel used in shipping, and are the first of their size that will rely entirely on recycled rainwater for all water needs. AppHarvest’s closed-loop water system eliminates agricultural runoff common in open-field agriculture. This is critical as the U.S. ramps up efforts to secure food systems that can withstand health and climate disruptions.

“It’s time for agriculture in America to change,” said AppHarvest Founder & CEO Jonathan Webb. “The pandemic has demonstrated the need to establish more resilient food systems, and our work is on the forefront of that effort. Eastern Kentucky, with its central U.S. location, provides the perfect place to build AppHarvest’s indoor farms while also providing much-needed jobs to a ready workforce.”

AppHarvest’s 2.76-million-square-foot controlled environment agriculture facility has already created 100 construction jobs and will create more than 300 full-time permanent jobs for residents of Eastern Kentucky, where 44 percent more residents are unemployed than the national average.

With its vision to create America’s AgTech capital in Appalachia, AppHarvest has been recognized for its focus on social good. The company has been certified by the independent non-profit B Lab as a
B Corporation, passing a rigorous audit of its sustainability practices.

AppHarvest is also announcing the hires of Marcella Butler as the company’s first Chief People Officer, Jackie Roberts as its first Chief Sustainability Officer, and Geof Rochester as its first Chief Marketing Officer. Butler joins AppHarvest after serving as Impossible Foods' first Chief People Officer, where she led the tripling of employees to more than 650 individuals. Prior to joining Impossible Foods, she worked at Google, first in People Operations, followed by Corporate Development, where she led global acquisition due diligence and integration activities. Roberts joins AppHarvest from The Carlyle Group, where her roles included Chief Sustainability Officer. Prior to The Carlyle Group, she served in several senior roles at the Environmental Defense Fund. Rochester, who has decades of experience in marketing and corporate social responsibility, previously served as Managing Director and Chief Marketing Officer of The Nature Conservancy with prior work at WWE, Showtime, Comcast, and Procter & Gamble.

AppHarvest’s Board and staff additions come as the company closes its $28 million Series C funding round. Combined with the company’s prior funding rounds, including project financing, AppHarvest has attracted more than $150 million in investment in just over two years.

Narya, the new venture capital firm co-founded by Vance and Colin Greenspon as well as backed by leading entrepreneur and venture capitalist Peter Thiel, led the investment round with participation from existing investors ValueAct Capital’s Spring Fund, Revolution’s Rise of the Rest Seed Fund, and Equilibrium, which has provided nearly $100 million in project financing to date.

New investors include Lupa Systems, the private investment firm founded last year by James Murdoch (who along with the ValueAct Spring Fund and Equilibrium, are leading the way for venture’s expansion into sustainability-focused investments); Breyer Capital, founded by early Facebook investor Jim Breyer; food and agriculture fund S2G Ventures (Seed 2 Growth); Black Capital, led by NBA legend Kevin Johnson; and Endeavor Catalyst, the co-investment vehicle through which Endeavor invests into companies founded by its entrepreneurs. Endeavor selected Webb as an Endeavor Entrepreneur in 2019.

“AppHarvest is poised to be a leader of the modern agricultural transformation, and we’re enthused to be a part of its upcoming launch and growth phases both in the U.S. and internationally,” said Frederic Michel, Partner at Lupa Systems. “The team is developing a compelling model that can respond rapidly to the needs for efficiency, sustainability, quality, and resiliency in the food sector today.”

The Series C funding round will allow the company to continue to recruit top-tier talent from around the globe as it prepares to build additional farms throughout Central Appalachia.

About AppHarvest

AppHarvest is building some of the world’s largest indoor farms, combining conventional agricultural techniques with today’s technology to grow non-GMO, chemical-free fruits and vegetables to be sold to the top 25 U.S. grocers. The company has developed a unique system to reduce water usage by 90% compared to typical farms, as a 10-acre, on-site rainwater retention pond pairs with sophisticated circular irrigation systems. The system also eliminates agricultural runoff entirely. By locating within Appalachia, AppHarvest benefits from being less than a day’s drive to 70% of the U.S. population. That lowers diesel use in transportation costs by 80%, allowing the company's fresher produce to compete against low-cost foreign imports.

Why Locate In Appalachia?

Kentucky native Jonathan Webb is turning his dream of a high-tech farming hub in Appalachia into reality with AppHarvest.

The company is building some of the largest indoor farms in the world, combining conventional agricultural techniques with today’s technology to grow non- GMO, chemical-free produce. The company’s first greenhouse will span 60 acres and open in the second half of 2020 in Morehead, Ky.

Collaboration Overview - AGRICULTURAL TECHNOLOGY ECOSYSTEM IN KENTUCKY by Herb on Scribd

• Like many Kentuckians, Jonathan grew up knowing of the devastating job losses in the region. His grandmother was raised in Whitley County, where a coal mining accident killed his great-grandfather. Jonathan strives to work alongside the hard-working men and women of Eastern Kentucky and build a resilient economy for the future.

  Before founding AppHarvest, Jonathan worked with the U.S. Department of Defense on what was then the largest solar project in the Southeastern United States. The project aimed to help achieve a White House goal of ensuring the military receives 20% of their electricity from renewable sources by 2025.

• -  Kentucky native and University of Kentucky graduate

• -  Before starting AppHarvest, Jonathan helped build some of the largest solar projects in the Southeast, seeking to help the military generate 20% of their electricity from renewable sources.

• -  While working on renewable energy farms, Jonathan discovered the high-tech controlled environment agriculture farms of the Netherlands and returned home to Kentucky in 2017 with the dream of building AppHarvest and creating America’s AgTech capital in Eastern Kentucky.

• -  Named Emerging Entrepreneur by the Kentucky Entrepreneur Hall of Fame in 2019

• -  Selected to be a member by worldwide entrepreneurship network Endeavor.

• The organization seeks out the best high-impact entrepreneurs around the world, and, to date, has screened more than 60,000 individuals and selected around 2,000.

• Talking points for agreement

• -  17 organizations signed an agreement committing to create America’s AgTech capital in Eastern Kentucky

• -  Calls for opening a Dutch representative office in Kentucky, creation of a series of research programs at universities, construction of a center of excellence, and the building of additional controlled environment agriculture farms like AppHarvest’s, which is under construction in Morehead.

• -  Dutch are widely recognized as the world’s leaders in AgTech. Even with a landmass just roughly the size of Eastern Kentucky, the Netherlands has become the world’s second-largest agricultural exporter. How? They utilize controlled environment agriculture facilities to grow up to 30 times more fruits and vegetables on an indoor acre compared to a traditionally farmed outdoor acre. And they do it using 90% less water.

• -  Why Kentucky? Our central geographic location, which has attracted the likes of Amazon and UPS, allows fresh fruits and vegetables to reach nearly 70% of Americans in a day's drive. That means fresher food and far less food waste as grocers benefit from the extended shelf life. Eastern Kentucky is also home to a strong workforce that long powered the country and exhibits the faith and grit needed to build a more resilient economy.