Two executives at Morehead, Kentucky-based AppHarvest (Nasdaq: APPH) have recently stepped down from the company, according to two recent filings from the U.S. Securities and Exchange Commission.
AppHarvest and its now former president David Lee “mutually agreed” that he would leave the company, effective Nov. 18. In a separate SEC filing, the company disclosed COO Julie Nelson left the company on Nov. 7. Lee will continue to serve as a member of the company's board of directors.
Lee became AppHarvest's president on Jan. 25, 2021, after spending four years as the chief financial officer at plant-based meat giant Impossible Foods. Nelson joined the AppHarvest team in August 2021 as its executive vice president of operations, having served at McKinsey and Co. and PepsiCo in supply chain and global operations roles.
Travis Parman, AppHarvest's chief communications officer, said via email that the company “is moving from a startup focused on construction and development of a massive farm network to an operating company working to optimize production and revenue.”
Within the last two months, AppHarvest — one of the finalists for our inaugural Fire Awards — announced the opening of a 15-acre facility for salad greens in Berea, Kentucky, and a 30-acre indoor farm for strawberries and cucumbers in Somerset, Kentucky.
Construction continues for a 60-acre indoor farm in Richmond, Kentucky, which will allow the company to double its production capacity of tomatoes. When completed, the four-farm network of Morehead, Berea, Somerset and Richmond will total approximately 165 acres and eight million square feet.
Lee had announced during the company’s third quarter earnings call on Nov. 7 that he would be stepping down to “model the cost containment and streamlining that's critical for the organization to deliver shareholder value,” according to a transcript of the call.
“David helped our team lay the groundwork and strategy for our four-farm network to put the enterprise on a path to profitability,” AppHarvest CEO and founder Jonathan Webb said in the call. “We're fortunate that our mission-based work has brought us such great talent like David Lee to help us get firmly established.”
Parman said that the move of Lee stepping down as president, but remaining on the company's board of directors, was “a natural one as we enter a new phase of the business.”
AppHarvest continues to find talent who have expertise in the controlled environment agriculture (CEA) space, Parman added.
This includes the recent addition of Tony Martin, who served for 12 years as the CFO at Windset Farms, a large Canadian CEA producer with operations in British Columbia and California. Martin is an independent director of AppHarvest and a member of the audit committee.
“With Tony's guidance, our general managers at each farm will keep working to increase the level of rigor and discipline in the operation as we endeavor to make fruit and vegetable production more consistent and reliable, similar to consumer packaged goods manufacturing,” Lee said during the November earnings call.
Parman added that Martin would be able to provide input for the company’s four farm general managers, thus providing the opportunity to streamline the business with Nelson’s departure.
Going forward, Parman said that the board of directors would continue to reflect that growing presence of “CEA and operational knowledge.”
In the earnings call, CFO Loren Eggleston announced that AppHarvest had net sales of $524,000, as compared to $543,000 in the same quarter in 2021, but did note the price per pound of its produce was higher this year than a year ago.
Eggleston also reported that the company had a third quarter loss of $24 million, compared to a loss of $17.3 million in 2021, largely attributed to the the change in fair value of the private warrants from last year, which was somewhat offset by lower selling, general and administrative costs this year. He added the company improved its adjusted EBITDA loss in the third quarter to $12 million, compared to $16.5 million in 2021.
In the call, Webb said historically, the third quarter has been a low revenue period for the company based on its "annual refresh and replanting of our Morehead farm to prepare for the next growing season."
Furthermore, the company’s adjusted EBITDA loss outlook for the year now stands in the range of $67 to $72 million, Eggleston said, leading to several cost-saving measures that were implemented in the second half of 2022 — including reducing the size of corporate staff.
Eggleston did note that since the beginning of 2022, the company grew from approximately 500 employees to currently around 700, with the expectation of being close to 800 by year’s end. As the Richmond farm nears completion in 2023, the company expects to hire even more people in Eastern Kentucky.
