WEBVTT - AppHarvest CEO on Sustainable Food Future

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. You might

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<v Speaker 1>recall late last monsters of the high tech, greenhouse and

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<v Speaker 1>vertical farm company app Harvest under some pressure after the

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<v Speaker 1>company revised its preliminary fiscal year uh sales outlook. Well today,

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<v Speaker 1>stock rallying after the latest update and fourth quarter just

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<v Speaker 1>a dps bigger loss than forecast, but revenues were beat.

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<v Speaker 1>Stock was up more than seventeen percent. Mind you, the

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<v Speaker 1>stock closing at three dollars and fifty three cents to share.

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<v Speaker 1>So let's get a look at the business and the outlook.

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<v Speaker 1>Jonathan Webb is the founder and CEO of app Harvest.

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<v Speaker 1>Jonathan joins us on the phone from Morehead, Kentucky. Jonathan,

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<v Speaker 1>how are you doing well? How about yourself? Hey, we're

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<v Speaker 1>doing pretty well. We're glad to get some time with

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<v Speaker 1>you this afternoon. We appreciate, we certainly appreciate you taking

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<v Speaker 1>the time. UM. I want to start with earnings in

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<v Speaker 1>the most recent quarter, but think about it from the

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<v Speaker 1>perspective of what you have coming up, not what what

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<v Speaker 1>already happened. How are you thinking about two right now,

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<v Speaker 1>I would we're quadrupling our farm network, diversifying crops. So

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<v Speaker 1>we we we had a harvest, are growing uh, fruits

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<v Speaker 1>and vegetables in a controlled environment, focused on year round

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<v Speaker 1>production here in the US. Our first facility here and

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<v Speaker 1>more at Kentucky is is growing tomatoes, which we were

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<v Speaker 1>targeting a lot of a lot of the imports coming

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<v Speaker 1>in from south of the border. Uh. And then later

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<v Speaker 1>this year we'll be growing leafy greens, salad greens, strawberries

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<v Speaker 1>in more variety of tomatoes. So opening more farms, getting

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<v Speaker 1>more crops to market, uh, and focused on getting good

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<v Speaker 1>quality out to grocers all up and down the East

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<v Speaker 1>Coast and Midwest and southeast. Hey, what does it mean, Jonathan,

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<v Speaker 1>for your growth trajectory in terms of I'm pulling up

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<v Speaker 1>the f a function on the Bloomberg. Uh So looking

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<v Speaker 1>at you know, revenue growth, it looks pretty dynamic when

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<v Speaker 1>you look at two or three um like more than

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<v Speaker 1>three year over year growth or year over year growth.

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<v Speaker 1>But give us some idea of the ramp up with this. Yes, so,

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<v Speaker 1>we we've been under construction. UH really really proud of

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<v Speaker 1>our construction team building some of the largest c A

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<v Speaker 1>facilities in the world in the middle of a global pandemic.

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<v Speaker 1>What does that mean? What does that mean? That designation? Uh,

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<v Speaker 1>controlled environment agriculture. So you know, I try to say

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<v Speaker 1>the third wave of sustainability. Twenty years ago, it was

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<v Speaker 1>renewable energy, ten years ago, it was electric vehicles, and

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<v Speaker 1>today you know, you'll continue to hear the term c

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<v Speaker 1>E A controlled environment agriculture using technology to grow fruits

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<v Speaker 1>and vegetables a year round. Uh, not having to worry

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<v Speaker 1>about climate disruption, using far less land, far less water. Um.

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<v Speaker 1>But building those facilities in the middle of of of

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<v Speaker 1>a global pandemic and the supply chain issues is has

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<v Speaker 1>been something our team has been able to navigate. And

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<v Speaker 1>we'll be bringing those facilities online later this year, which

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<v Speaker 1>is which is gonna dramatically increase our our production across

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<v Speaker 1>multiple crop types. So when we see numbers like I

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<v Speaker 1>say on the on the Bloomberg that talks about you know,

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<v Speaker 1>more than revenue growth from that's pretty realistic. Yeah, you know,

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<v Speaker 1>certainly that more could be even more. Um look forward

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<v Speaker 1>to seeing what the back half the year hold. But uh, yeah,

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<v Speaker 1>we we we uh were pretty bullish and optimistic on

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<v Speaker 1>on where we're headed. And last year was our first

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<v Speaker 1>year of operations, so we had uh no, no, no,

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<v Speaker 1>no operating history. Prior we were in over a thousand

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<v Speaker 1>grocery stores from Kroger, Walmart, Costco, Publics. And the reality

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<v Speaker 1>is the grocer demand and the demand from the consumer side,

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<v Speaker 1>you know, well exceeds supply in the US. You have

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<v Speaker 1>this growing demand for control and environment. Product quality is

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<v Speaker 1>much better, you don't have the harsh chemicals, uh, much

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<v Speaker 1>better labor practices, you have reliability of crop that you

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<v Speaker 1>don't have to worry about in an open field, and

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<v Speaker 1>you don't have the import issues. Uh. And and you know,

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<v Speaker 1>we build the company with good E. S G principles

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<v Speaker 1>as our foundation. And and but ultimately the demand from

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<v Speaker 1>the grocers is what's going to drive this industry forward. Well,

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<v Speaker 1>what are shareholders missing here right now? What are investors

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<v Speaker 1>missing right now? Because we we we do have to

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<v Speaker 1>talk about the stock price down significantly from highs last

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<v Speaker 1>year in UH was trading around back in March of one.

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<v Speaker 1>Now it's at three dollars and fifty three cents roughly. Um,

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<v Speaker 1>what are they missing when it comes to the opp

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<v Speaker 1>harvest story? Yeah, I'm focused on building and growing the company.

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<v Speaker 1>I mean the stock I think when near to forty

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<v Speaker 1>five dollars last year and down to three bucks. I

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<v Speaker 1>mean you all learn the public markets and and probably

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<v Speaker 1>know that better than me. But uh, you know, we

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<v Speaker 1>certainly got caught up in the in the spack craze,

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<v Speaker 1>with the downward pressure on SPACs, downward pressure on innovation

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<v Speaker 1>and tech. But you know, I'm bullish on American innovation,

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<v Speaker 1>and those that want to bet against American innovation can uh,

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<v Speaker 1>you know, try to determine what type of world they

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<v Speaker 1>want to live in. But this company here's head down

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<v Speaker 1>on execution between now and the end of the year,

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<v Speaker 1>and um, we're self sufficient and we're we're you know,

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<v Speaker 1>continuing to raise and attract capital, uh from from good

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<v Speaker 1>institutions that that will allow us to grow this business.

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<v Speaker 1>That I think will set us apart from some of

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<v Speaker 1>other stories that have come to market. But uh, you know,

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<v Speaker 1>as far as the stock price itself, it's you know,

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<v Speaker 1>we're we're focused on getting you know, maximum shareholder value

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<v Speaker 1>by doing what we can do, and I'm hopeful that

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<v Speaker 1>the stock front price will reflect that here in the

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<v Speaker 1>years to come. Hey, Jonathan, we're gonna take a break

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<v Speaker 1>and come back and talk some more. But just forty

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<v Speaker 1>just about thirty five seconds, do you guys regret going

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<v Speaker 1>public through a Spack merger because of getting caught in

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<v Speaker 1>that down draft? Just quickly? You know, at this point

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<v Speaker 1>we're focused on the future and what we're doing here today. Um,

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<v Speaker 1>and you know we're focused on building the business. All right,

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<v Speaker 1>We're gonna come back and talk more about building that

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<v Speaker 1>business with Jonathan Webb. He is our guest here on

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<v Speaker 1>Bloomberg Business Week, founder and chief executive officer of app Harvest,

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<v Speaker 1>on the phone from Morehead, Kentucky. And as we mentioned

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<v Speaker 1>that stuck definitely getting a papuas one of my gainers

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<v Speaker 1>and beyond the beltic. I gotta talk about drought and

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<v Speaker 1>water conservation with him when we get to the other

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<v Speaker 1>side here. You and I were just in California. It's

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<v Speaker 1>my home stage started ravaged by drought, but it's where

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<v Speaker 1>we get so much of our agriculture from. I agree

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<v Speaker 1>and ramp up. Can you do it? Can you do it? Everywhere?

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<v Speaker 1>This is Bloomberg. I want to get back to our

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<v Speaker 1>guest with us right now is app Harvest founder and

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<v Speaker 1>CEO Jonathan Webb. Still with us on the phone from Morehead, Kentucky. Hey, So, Jonathan,

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<v Speaker 1>for those who are not familiar, um, because we've had

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<v Speaker 1>your team on before, to talk about what you guys

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<v Speaker 1>are doing, remind our audience how it all works. Yeah, so,

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<v Speaker 1>uh app Harvest is building some of the world's largest

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<v Speaker 1>controlled environment agriculture facilities, growing fruit and vegetables year round

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<v Speaker 1>in a controlled environment, using less water than open field agriculture,

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<v Speaker 1>getting roughly thirty times yield for acre um and and

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<v Speaker 1>and offering reliable quality product to large grocers like Kroger, Walmart, Costco,

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<v Speaker 1>Publix um And And this last year we were growing tomatoes.

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<v Speaker 1>This year we'll be growing salad, green strawberries, and tomatoes,

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<v Speaker 1>distributing all across the US. And Jonathan, and when it

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<v Speaker 1>comes from to a technology perspective, what is the technology

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<v Speaker 1>that you've developed at Harvest that is patented or not

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<v Speaker 1>necessarily you know, copyable. If somebody goes and sees how

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<v Speaker 1>you do things, they say, wait a second, I can

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<v Speaker 1>I can do this myself. Well, well, part of it's

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<v Speaker 1>just sheer execution at scale. And I'll talk about the

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<v Speaker 1>technology in a moment. But our first facility and more

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<v Speaker 1>head is nearly three million square feet in size. We're

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<v Speaker 1>bringing about five to six million square feet of additional

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<v Speaker 1>facilities online this year. To put that in perspective, the

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<v Speaker 1>one facility alone, you could put fifty football fields inside it.

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<v Speaker 1>So al. But we we acquired a robotics company that's

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<v Speaker 1>focused on robotic harvesting UH and in AI picking in

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<v Speaker 1>order to better optimize yield production. UH and then one

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<v Speaker 1>of the only facilities to run completely on recycled rainwater.

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<v Speaker 1>We you know you were mentioning we're going to break

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<v Speaker 1>about the droughts in California. We're we're in a water

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<v Speaker 1>rich region. That's why we're building in eastern Kentucky, an

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<v Speaker 1>area of the country that's getting wetter. People have actually joked, well,

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<v Speaker 1>Haliburton build water pipelines to the west, and while they

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<v Speaker 1>do it from Appalachia to the west, but we're taking

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<v Speaker 1>that rainwater, running completely on recycled rainwater here, so we're

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<v Speaker 1>not reliant on city water at all. And and that

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<v Speaker 1>is a fairly unique design and benefit to to what

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<v Speaker 1>we're doing UH here here in uh the eastern half

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<v Speaker 1>of the US. I have to say, whenever you guys

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<v Speaker 1>are coming on and I Google and look for some

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<v Speaker 1>of the images. I mean, it's massive your facilities. Can

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<v Speaker 1>you guys do this anywhere? Yeah, we've we've definitely, you know,

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<v Speaker 1>we're we're focused on building our headquarters in central Appalachia

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<v Speaker 1>where we can get to seventy of the US in

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<v Speaker 1>a one day drive. Amazon is building the largest prime

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<v Speaker 1>facility in the world in northern Kentucky right now, so

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<v Speaker 1>they're right up the road. But yeah, it's you know,

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<v Speaker 1>you look at the Middle East, who imports most all

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<v Speaker 1>their fruits and vegetables. We've we've been been in deep

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<v Speaker 1>discussions for several countries there. We we invested in a

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<v Speaker 1>technology red sea farms. UH. That's out of cows in

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<v Speaker 1>Saudi Arabia. UH. And then you look at Southeast Asia,

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<v Speaker 1>which is heavy demand, which which India and China have

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<v Speaker 1>ten of the world's fresh water and of the world's population.

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<v Speaker 1>We have to figure out how to grow a lot

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<v Speaker 1>more food with a lot less resources, and using technologies

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<v Speaker 1>is the only way to do it. Not to mention

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<v Speaker 1>tops so all getting a little tired exactly. We talk

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<v Speaker 1>about fossil fuel extraction is being the only extractive industry

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<v Speaker 1>and I'm sitting in coal country. We're mining nutrients out

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<v Speaker 1>of the soil. We're not replenishing those nutrients where you know,

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<v Speaker 1>Californias is tapping all their freshwater reservoirs to the point

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<v Speaker 1>to where you know they're they're running low. Uh. We

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<v Speaker 1>don't have a choice, and we're moving again. We're in

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<v Speaker 1>the infancy of controlled environment agriculture in the US. UM.

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<v Speaker 1>But but I think over the coming decade, you'll see

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<v Speaker 1>you know, just much like you saw EVS ten years

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<v Speaker 1>ago and renewal energy twenty years ago, you're gonna see

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<v Speaker 1>a lot of c A build all around the US.

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<v Speaker 1>How do you think about expansion not just in the

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<v Speaker 1>United States, but but globally as well to some of

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<v Speaker 1>those countries that you mentioned. Is that something that you

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<v Speaker 1>do at our harvest or do you license the technology

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<v Speaker 1>or let someone else take care of it. Yeah. Again,

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<v Speaker 1>we're focused on getting our national footprint here uh, and

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<v Speaker 1>and have have a couple of exciting opportunities we're working

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<v Speaker 1>on that we've talked about that we hope we'll we'll

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<v Speaker 1>get to fruition by the back half of this year

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<v Speaker 1>in the US. But we're very cognizant. I mean, we

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<v Speaker 1>we've had very uh, high level discussions in in both

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<v Speaker 1>Middle East and Southeast Asia with countries that that Frankly,

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<v Speaker 1>you know, you look at the chaos happening in our

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<v Speaker 1>world right now. I mean, everybody is trying to figure

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<v Speaker 1>out how do we become resource resilient and self sufficient

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<v Speaker 1>in some way, and part of that is growing food

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<v Speaker 1>at home. And you know, there's no reason we're shipping

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<v Speaker 1>food thousands of miles around the world when every country

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<v Speaker 1>has the opportunity to to build systems, use technology and

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<v Speaker 1>grow food right at home. And we definitely are gonna

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<v Speaker 1>explore how we can be a helpful player in that transition.

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<v Speaker 1>But right now we're focused on our core business Here

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<v Speaker 1>in the US, I gotta say, please right into something

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<v Speaker 1>are Mike McLane, who covers the commodity markets here for

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<v Speaker 1>US at Bloomber Intelligence, and he's got some research out,

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<v Speaker 1>but he talked to us yesterday Greater North American agriculture

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<v Speaker 1>commodity boom gaining momentum, and this whole idea of the

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<v Speaker 1>geo of political risks that everybody's looking at, how do

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<v Speaker 1>I produce at home so I can you know, save

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<v Speaker 1>myself against these kinds of stresses. Jonathan, thank you so much.

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<v Speaker 1>Stay in touch. Jonathan Webb, founder and CEO at app

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<v Speaker 1>Harvest on the phone from Warhead, Kentucky,