AppHarvest, Inc.

Good day and welcome to the call.

I would like to turn the conference over to your speaker, Kaveh Bakhtiari. Please go ahead. Thank you for having us on the App Harvest second quarter 2021 earnings call. I'm Kaveh Bakhtiari, VP Investor Relations for App Harvest, and joining me in Kentucky today are several members of the senior management team, including Jonathan Webb, founder and CEO, David Lee, board member and president, and Lauren Eggleton, chief financial officer. A copy of our earnings release and slide presentation is available on our website at investors.appharvest.com. On today's call, we will begin with prepared remarks from Jonathan and the rest of the team. Then we'll open the call to questions. Before we start, I'd like to remind you that comments today regarding the company's future business plans, prospects, and financial performance are forward-looking statements that we make pursuant to the safe harbor provisions of the securities laws. These statements are made based on management's current knowledge and assumptions about future events, and they involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our most recent SEC filings. And with that, I'd like to turn the call over to Jonathan.

When I got on our first public call three months ago, I talked about how COVID had started to expose the cracks in our food system. When food stopped crossing borders and grocery stores had food shortages. Today, we see droughts that continue to devastate Mexico, California, and other traditional agricultural regions. Floods that have decimated agricultural harvest around the world and impacted society at large. And still, despite surging interest from investors and policymakers in sustainable agricultural solutions, no part of the United States today can be considered self-sufficient in terms of having access to a safe and domestic food supply at scale. The problems we face today are the result of a path we decided to walk down long ago. The industrialization of agriculture and relentless pursuit of low-cost production combined with a policy of cheap energy made it possible to move food across great distances to sell for low prices and much of it at very low quality with a great deal of production outsourced to other countries. At the same time, places that have little to no local resources to produce food have burst forth as America's fastest-growing cities, placing additional strain and risk on our existing food supply chains. The good news is folks are starting to pay attention to the environmental and societal costs associated with the massive increase of imported fruits and vegetables. The status quo has negatively impacted the freshness, quality, and security of our nation's food supply for far too long, and we are overdue for an overhaul. The reality is climate change is going to continue to affect the growing conditions for outdoor agriculture. from severe temperatures to the amount of water available for crops. In some parts of the western U.S., over 70% of the water supplied today is used for agriculture, and California last week announced new restrictions on its usage. Lake Mead, which supplies parts of Arizona, Southern California, Nevada, and Mexico, has a water level at its lowest since it was built in 1935. In Central Appalachia, we're fortunate because climate change is making our region wetter. In fact, the past decade has seen the most rainfall in Kentucky history, with three of those years being the wettest on record. For those of you new to the App Harvest story who are joining us today on our second conference call as a public company, we're an applied technology company with a solution to disrupt agriculture and solve for some of our most pressing food and social challenges. We're building and upgrading to a resilient new food system for a world that we believe needs controlled environment agriculture now more than ever. Our approach incorporates the highest ESG principles, as we are about one of five publicly traded benefit corporations who are also a B Corp certified company. We leverage the best nature has to offer, like the free sunlight and rainwater we capture from our large glass roofs, and boost it with tech just where needed. That's what we're doing from the heart of Appalachia, where we can reach about 70% of the U.S. population in a day's drive. Our technology and approach can enable us to get up to 30 times the yield per acre than that of traditional agriculture in a way that uses up to 90% less water and without runoff, soil erosion, or harsh chemical pesticides. We are improving the freshness and quality of our produce and backing it up with our best-in-class CEA systems, technology, and strong brand. Now let me turn to our second quarter performance. While true that prices for TOV and beefsteak tomatoes hit a 10-year low in May, our realized price was also impacted by quality. Our percent of store shelf-ready produce, what we call number ones, came in lower than we expected. While disappointing, we launched a set of actions to improve our performance immediately, and we're using these key lessons for our operators going forward with the App Harvest 2.0 initiative, which David will discuss in greater detail. Despite some growing pains, in the second quarter we delivered net sales of $3.1 million, an increase of nearly 40% from our first quarter as a public company. 8.6 million pounds of tomatoes sold, which more than doubled production from the first quarter. Groundbreakings on two new farms in Kentucky to grow berries and leafy greens, which in addition to our Richmond and Berea sites currently under construction, means we expect to have five farms fully operational by the end of next year. New sources of non-dilutive financing, including $91 million from Equilibrium Capital in July and $75 million from Rabo Agrofinance earlier in June, which, along with cash on hand, leaves us with ample room to fund the five farms I just mentioned. And finally, we're announcing our plan today to transition to a more decentralized setup to facilitate our growth within the global CEA industry. David and Lauren will provide more detail on our outlook and the planned changes to our organizational structure. But let me just say now that in addition to ramping up our initial farm and moorhead to full production capacity, our team has been busy laying the groundwork for our long-term growth by executing our strategy. We're cutting a path to grow our presence within CEA more broadly, and we expect the long-term benefits of this move to significantly outweigh the near-term investment costs. Our long-term goal is to build AppHarvest into one of the most trusted sustainable food companies in the world and into a leading applied technology company serving the global CEA industry. With five farms fully operational by the end of next year, we expect the benefit of the actions we are taking to capture long-term value to become more visible. We've already announced our plan to introduce new crop types, including berries and leafy greens, and we're now preparing to launch into value-added products. With that, I'll ask our president and board member, David Lee, to explain how we're executing on our plan the App Harvest 2.0 initiative. David?