AppHarvest, Inc. (APPH) on Q4 2021 Results - Earnings Call Transcript
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Operator: 00:06 Good day, and thank you for standing by. Welcome to the AppHarvest Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. 00:30 Now, it is my pleasure to hand the conference over to your host today, Kaveh Bakhtiari. Thank you. Please go ahead.
Kaveh Bakhtiari: 00:45 Thank you for joining us on the AppHarvest fourth quarter and full-year 2021 earnings call. I'm Kaveh Bakhtiari, VP Finance and Investor Relations for AppHarvest. 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; Julie Nelson, Chief Operating Officer; and Loren Eggleton, Chief Financial Officer. 01:09 A copy of our earnings release and slide presentation is available on our investor 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. 01:22 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. 01:39 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. 01:49 And now, I like to turn the call over to Jonathan.
Jonathan Webb: 01:52 Thanks, Kaveh. I'm proud of the progress our teams made in our first full-year of operations and as a public company. From our initial farm in Morehead, Kentucky, we produced over 18 million pounds of tomatoes, achieving over 9 million in net revenue and distributing product to thousands of top grocery stores and restaurants last year. And we expect to more than double that in total company sales in 2022. 02:16 By end of this year, we're on track to quadruple our number of farms, opening three new farms in addition to Morehead. We expect these farms to accelerate our sales growth, enable us to be financially self-sufficient, and attract a new investment that will allow us to continue to grow our high-tech farm network in Central Appalachia and beyond. 02:36 We're only in the first inning when it comes to the growth of the controlled environment agriculture industry in the United States. And AppHarvest is extremely well positioned to grow within CEA. We're partnered with the top players in the industry and we see growing demand for our large national customers. 02:52 These customers are looking to significantly increase their local U.S. supply of fresh fruits and vegetables, especially from at scale, full product line providers like AppHarvest, who also operate in a more sustainable way, while carrying out a mission that includes supporting good jobs and agriculture. Our plan to meet this growing demand puts nature first, boosted by world-class technology inside a network of high-tech indoor farms. 03:22 We believe our high-tech farms are advantaged over the long-term versus other small scale approaches as the benefits of passive solar and rain water recapture helped to make our facilities less natural resource intensive. We recognize that a leading approach must be backed by a world-class operation and that's why we took the step last week to reduce primarily non-operations headcount and open positions in our corporate office by approximately 50%. 03:52 We structured the business to better align around farm operations, a process that impacted nearly every department across the company. We expect this action will generate around 16 million in annualized run rate savings for us to reinvest in the business, which David and Loren will discuss in greater detail. 04:11 Turning to the fourth quarter. We continue to deliver on our top priority of efficient harvesting at Morehead while remaining on track with the timeline on our three new farms. We accomplished this, while achieving net sales results that were a little better than expected as we finished the year. 04:28 With a solid performance on shipping premium tomatoes and a slight tailwind from higher tomato pricing, we delivered on the 2021 annual outlook that we shared in August, and we're confident in our ability to achieve the 2022 outlook that we introduced today. 04:44 To sum up, we're making progress toward a long term goal of building 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 robotics and software solutions. Though we've had some challenges as we have ramped up over our first two growing seasons, we've applied those lessons learned, and we remain on track to complete one of the biggest CEA build-outs in the world in 2022. 05:13 With a steadily improving operation at Morehead, a more streamlined corporate center and a more robust operating playbook for three new farms opening this year, our teams are focused on core business improvement and positive operating cash flow generation. And let me be clear, these actions are taken with the intention of enabling us to secure the additional funding needed to keep pursuing our goal to get to 12 farms by the end of 2025. 05:40 Finally, as one of a handful of traded public benefit corporations that is also B Corp certified, we're spearheading the move to a sustainable future for agriculture with ESG principles as our foundation. 05:54 I will now ask our President, David Lee to give more details on our year-end results and the year ahead. David?
David Lee: 06:00 Thanks, Jonathan. I'm also pleased with our strong finish to our first year. We focused on the fundamentals of our business and delivered our top priorities continuing to improve operational performance at Morehead and remaining on track to quadruple our number of farms this year, all while successfully navigating a challenging supply chain environment. 06:25 We also completed a significant reduction in force and issued a 2022 outlook that we expect will more than double our top line and keep adjusted EBITDA in-line with last year, despite rising cost pressures and a much larger farm network, compared to last year. We believe that completing our current development phase puts us in a prime position to deliver positive operating cash flow with our four farm network. 06:55 Beyond the four farms, we plan to develop additional facilities only after securing the required capital, and we remain confident in our ability to do that, and be self-sufficient. The fundamental improvement we are driving in our business has been key to our success in this area. 07:14 We have seen strong early results from appointing Julie Nelson as our Head of Operations over the summer. That's why I'm especially pleased to announce her promotion to Chief Operating Officer, leading both farm development and operations. With her deep operations experience from PepsiCo, Julie’s data driven approach has been instrumental in leveraging performance management to drive accountability, to enhance our training programs to improve productivity and to implement a new supply chain process. 07:49 The operational rigor that Julie and her team are implementing is a critical part of our profitable growth plans as we continue to scale operations across four farms and diversify with new crops. 08:01 Now, I like to ask Julie to review operational highlights. Julie?
Julie Nelson: 08:07 Thank you, David. In the fourth quarter, the harvest from our second growing season at Morehead began to ramp up and we sold nearly 4.4 million pounds of tomatoes for over $3 million. This resulted in net sales price of $0.69 per pound, almost double the price we achieved in the third quarter. The team drove these results with a more favorable ratio of premium tomatoes and better gross market prices for tomatoes. 08:32 We continue to expect the main driver of our financial results to be delivery on our operational KPIs, which as Jonathan noted is the focus of the organization. Encouragingly, through the first few weeks of Q1 2022 when compared to our Q4 results, we are tracking to salable yield of 3 million plus more pounds of tomatoes in Q1 than Q4, quality levels and tomato gross market prices in-line with Q4, and distribution fee expenses in-line with our internal projections, despite increases in the cost of freight. 09:07 The inflation impacting other industries has affected our business as well, and we've been executing an aggressive plan to attack it. First, by planning for it within our financial outlook, then by significantly reducing our own cost structure and by supporting our partners as they work with end customers to pass along price increases. 09:28 Now, let me hand it back over to David Lee.
David Lee: 09:31 As a pioneer in the industry, AppHarvest harvest also is seeing potential benefits as the controlled environment agriculture sector or CEA sector continues to mature. Working closely with our distributor, Mastronardi Produce, we are reaching the Top 25 national grocery store chains and restaurants. 09:52 In fact, we've been sold in more than 1,000 stores and Mastronardi confirms that buyers are appreciating the reliable quality and consistent volume that CEA farms can deliver as compared to open field agriculture. We expect this to result in our ability to continue to take additional shelf space in the produce aisle. 10:14 You, no doubt, have noticed the increasing investments in CEA coming from some of these top retail customers, private equity, and other ESG focused investors in addition to the general market. This recognition of the quality and sustainability benefits of CEA stands to benefit the entire sector. 10:36 In summary, our focus on the fundamentals is paying off. Our premium volumes have increased, and our quality is steadily improving. We've implemented robust cost containment measures and believe these actions will lead to more consistent and improved operating and financial performance. 10:54 We remain confident in the fundamentals of our core business, the continued growth of our industry, and in our ability to drive positive operating cash flow, as we soon transition from heavy building to scaling network operations. 11:10 Before I turn it over to our CFO, Loren Eggleton, I like to acknowledge the appointment of Kevin Willis, to AppHarvest Board of Directors that was announced earlier this month. Kevin is Senior Vice President and CFO of Ashland, a global public specialty materials company and joins the Board as Chairman of the Audit Committee. Kevin is a seasoned leader who brings expertise, talent, and independence to the board, and we expect his appointment will accelerate our efforts to create long-term value for all shareholders. 11:43 Now, over to Loren, who will review our financial performance and outlook in greater detail. Loren?
Loren Eggleton: 11:50 Thanks, David. I'll start by briefly reviewing our fourth quarter and full-year results, give an update on our development progress, and then move to the 2022 outlook. We achieved fourth quarter net sales of $3.1 million as compared to no sales in the fourth quarter of 2020 before our Morehead Farm was operational. 12:10 Fourth quarter net loss of $88.4 million was driven by $59.9 million impairment of goodwill and intangible assets, which we discussed in our preliminary results release on January 31. Our fourth quarter adjusted EBITDA loss was $18.3 million. In terms of yield, we generated approximately 4.4 million pounds of tomatoes or sale or nearly 3 million pounds above our third quarter production levels. 12:37 For the full-year 2021, we achieved net sales at $9.1 million versus our previously announced outlook of $7 million $9 million. Improving quality and higher than projected tomato market prices in Q4, enabled us to deliver sales results above the high-end of our 2021 net sales guidance. 12:57 We recorded a net loss of $166.2 million and adjusted EBITDA loss was $69.9 million. That performance is slightly better than our previous outlook of an adjusted EBITDA loss of $70 million to $75 million, primarily driven by higher sales, improved operating performance, and better cost containment. 13:19 We turn next to our progress on farm development and financing. Work continues on our previously announced CEA facilities under construction. The three farms remain on schedule and we expect them to begin operating by the end of the year. The fifteen acre Berea, Kentucky salad greens facility is about 68% complete. The 60 acre Richmond, Kentucky tomato facility is approximately 65% complete. And a 30-acre Somerset, Kentucky berry facility is approximately 55% complete. 13:49 We expect to ramp up each facility with a phased approach that brings on additional acreage over time. Similar to the opening of the full 60 acres at Morehead. We expect that the first phased opening of this kind will be at the Berea facility starting this summer. As David mentioned, we believe the completion of our current development phase with our four farm network to be an important milestone. It enables us to be financially self-reliant and use only the funding we have secured so far to generate positive operating cash flow over time. 14:21 Turning to the balance sheet, we ended the year with cash and cash equivalents of $151 million and we have approximately $59 million and availability remaining on our credit facility with Equilibrium Capital. As we announced in December, we also established a $100 million committed equity facility with B. Riley Principal Capital that we have yet to draw upon. 14:43 Lastly, there remain two of our facilities Berea and Somerset, which we have yet to announce permanent financing for, but we believe can become additional sources of liquidity through asset backed loan structures. We are currently negotiating these types of financing arrangements with interested parties and are highly confident that these two farms can raise incremental capital in a similar fashion to Morehead and Richmond. 15:09 In terms of capital expenditures for the full-year 2022, we expect to invest approximately $140 million to $150 million, which accounts for the completion of the three construction projects underway and their related equipment needed to run them. 15:24 Importantly, of this total, we anticipate only $40 million or so will need to be funded with balance sheet cash as we expect our existing credit line arrangements with equilibrium in JPMorgan to satisfy the majority of our 2022 CapEx needs. 15:43 Now, let me turn to our full-year 2022 net sales and adjusted EBITDA outlook. For now, we are limiting guidance to full-year 2022 only. We expect to deliver total company net sales in the range of $24 million to $32 million this year, driven by production from Morehead. 16:01 We expect a contribution in the mid-single-digit million range from the three new farms, based on their estimated completion dates towards the end of the year. Additionally, our outlook for Morehead also accounts for steps we recently took to mitigate the impacts of a disease affecting some of our tomato plants there, which we estimate could reduce yields by between 10% and 15% on 2022. 16:26 As mentioned, however, these effects are already reflected in our 2022 outlook and the proactive steps we took to mitigate the issue appear to have been well-timed and effective. Regarding adjusted EBITDA, our full-year 2022 loss expectation is in the range from $70 million to $80 million, or just modestly higher than the $69.9 million in 2021, despite the expected quadrupling of the size of our farm network and significant year-over-year inflation. 16:57 Similar to others, we have observed in a number of important areas of our business such as a 20% plus increase year-over-year in the cost of freight, a 16% increase in healthcare, as well as significant increases in cost electricity, natural gas, and the paper products that we use in our packaging. 17:18 The good news is, our outlook reflects the anticipated negative impacts from inflation, which we have moved aggressively to mitigate. We're also cautiously optimistic, such increases will continue at these levels throughout the year. 17:32 If inflationary pressures continue, we are prepared to take additional steps to reduce our cost structure similar to the action we just completed, which resulted in approximately $16 million in annualized savings. I remain confident in our team's continued ability to operate efficiently, and I'm proud of the progress we've made to streamline the organization, to position the company, and our shareholders for future profitable growth. 17:54 With that, I'll turn it back over to our VP of Finance and Investor Relations, Kaveh Bakhtiari.
Kaveh Bakhtiari: 18:01 Thank you, Loren. With that, operator, we’ll now begin to take questions.
Operator: 18:06 Thank you, sir. Your first question comes from the line of Brian Holland with Cowen and Company. Your line is open.
Brian Holland: 18:32 Yeah, thanks and appreciate all the color around the update. I'm curious, and forgive me, if you’ve made any reference to this, but just some update on your Root AI, robotics acquisition and the harvesting tools, how they've been deployed and the progress they're making?
David Lee: 18:55 Thanks, Brian. This is David Lee. The good news is, we're very pleased with the progress of how we've been using our technology from Root AI. One the metric we track is that our picking speed actually from our robots are 2x faster already, than when we initially made our acquisition. And importantly, we've already deployed the initial version of the labor management software solution that goes well beyond robotics. 19:19 It's about managing the information flow in these controlled environment ag facilities. So, we're very excited about the technology. And we remain confident as we mentioned in previous calls that there's sufficient appetite from new external investors to spin-out what we're now calling our TechCo business, but we're not providing material update on that initiative in this quarterly release.
Brian Holland: 19:46 Understood. Thank you. And then, you've made reference to kind of the retail landscape, obviously encouraging to hear about the increased distribution. I'm wondering if you could just kind of talk about that retail landscape and given this broader supply chain issues and product shortages, including the produce space, obviously, you're limited by your capacity and I'll presume that the interest in your product exceeds your capacity today, but I'm wondering if that delta has widened at all in recent months for the exact reason that you referenced earlier that retailers are seeing the product and beginning to appreciate the relative supply security, as compared to conventional techniques?
Jonathan Webb: 20:39 Yes, Brian, the demand for CEA production in the U.S. continues to strengthen and grow, I would say across all the grocery network, we mentioned that through Mastronardi reached over 25 of the Top 20 grocers in the U.S. The grocer demand, as well as food service demand continues to strengthen across products and that's for us why we're focused on getting these three additional farms online and we're focused on being able to have a diversity crop by the end of the year to service that demand and we don't see that slowing down anytime soon. 21:21 And then for us, it's about quality and reliability and consistency on a year round basis. So, the demand side is there, and for us, it's simple head down execution between now and the end of the year.
Brian Holland: 21:38 Appreciate the color. I’m mindful there are others in the line. I'll ask one more and then get back in the queue, but just thinking about the construct of the fiscal 2022 revenue guide, I'm wondering what's being assumed to the extent you can discuss from the yield side and from the price side, so how those two factors come together? Just thinking about, kind of level of conservatism that's being built-in, because obviously, that's going to be a question that gets asked as you think about the, kind of growth that you're projecting, hey, how are they going to get there? Are they getting there from yield or is there an assumption of getting price through? So, just wondering if you can help us segment those two factors into the revenue number? Thank you.
Jonathan Webb: 22:25 Sure. It's a great question. First, Brian, it's important since we're a new public company to reiterate our overall philosophy on guidance. You recall that in the summer, we changed our guidance for 2021 because we wanted to have a balanced view and guide to numbers we believe we could achieve and hit. And that has not changed in the guidance that we've offered today. 22:47 I would say, while we are not breaking out today, the components for example of net price per pound, you will note that in our results in Q4, we were extremely pleased with what we saw in the marketplace, one of those factors you and I have discussed can be viewed as outside our control. And in fact, in previous quarters, we talked about how over a 10-year period, tomato prices in general revert back to the even if they enter a trough relatively quickly. 23:15 While we can't predict the would be. The Q4 results are encouraging. I'm going to turn it to Julie in a moment because in the first two weeks of this quarter, while it's very early, there are some interesting signs for our progress against our achievement in 2022. Julie, can you offer some perspective in that first two-week period?
Julie Nelson: 23:37 Sure. Yes. As mentioned earlier, we are on track to sell over 3 million more pounds in Q1 versus Q4. There are two key drivers of this increase in yield. In the first part of Q4, we were ramping up production following our summer refresh. And the harvest actually began at the end of October. In Q1, we expect to have a full three months of production. 24:08 In addition, as our plants mature, we increased their density. So, we should have higher output per square meter as we get further into the season.
Jonathan Webb: 24:19 And that's really the primary driver as Loren mentioned in his comments as we think about our composition of farms, Morehead is very important for those operational factors. Loren can provide any additional commentary and how to think about the remainder of the guidance, but we're really focused on Morehead and standing up these three facilities. 24:41 Did that answer your Brian?
Brian Holland: 24:43 Yes, I appreciate it David. Thank you.
Operator: 24:49 Your next question comes from the line of Ben Theurer with Barclays. Your line is open.
Ben Theurer: 24:56 Perfect. Thank you very much and congrats on the results. So, first question is just following up a little bit on what you’re seeing within your facilities and on the yield and I mean, obviously, you hit the guidance on the higher-end, slightly exceeded, but if you look into some of the operational issues and the yield that’s coming out, how sequentially improvement and you just mentioned that you're trailing about 3 million pounds better on a quarterly basis, but just to understand what would be like an optimal level in terms of volume in the quarter? And what does it need to get to that level? That will be my first question.
David Lee: 25:44 Well, first, it's important to remind – this is David Lee by the way, thank you for the questions. We have the benefit within our Morehead facility to be now enjoying essentially the third season in harvest. And the lessons learned from the first two, which include a planned refresh this year means that you will see similar quarterly variation in our annual results. It's one of the reasons why we're guiding to the full-year, but as I mentioned in the previous question by Brian, the impact of yields and the impact on market pricing from our guidance perspective is based on what we think we deliver, having now experienced two full seasons and a refresh. 26:26 If you recall, when we were first going public, I thought year ago, we had not even fully stood up or received any empirical data on what can we produce. We now have the benefit of better management with Julie Nelson, but we also had history and data. Beyond that, I don't think I can break out for you the components, I can tell you we do look at yield for Number 1 quality USDA, non-Number 1 USDA, but we're not breaking that detail out for you as you look at Morehead as it contributes to our overall annual guidance.
Ben Theurer: 27:04 Okay. Perfect. And then, I mean, you obviously have the CapEx number out there and let's call it about $140 million, $150 million, that's very much the cash as probably you currently have. So, financing on construction financing right? I think I missed that on the prepared remarks just to be sure, like how you are going to plan on the financing and how we should think about the cash flow in 2022? How much of CapEx is actually going to be funded out of your cash balance and how much is coming from project finance fee, could you clarify that?
Loren Eggleton: 27:42 Hey, Ben, it’s Loren Eggleton. So, we've got 151 million in cash, 59 million in availability on our equilibrium facility, and we still have the JPMorgan Credit Facility and we estimate that with our 2022 CapEx plans, that we're only going to be using approximately 40 million of cash on the balance sheet, assets to credit facilities, and that's not including the CEA Facility.
Ben Theurer: 28:15 Okay. Perfect. Thank you very much.
Operator: 28:20 Your next question is from the line of Kristen Owen with Oppenheimer. Your line is open.
Kristen Owen: 28:28 Great. Thank you so much for taking the question. The pricing, I want to come back to this question about pricing, and not so much to understand what the assumptions are in 2022, but to really understand how the changes that you are making on the operational side are influencing your net pricing? Is this that you're reporting in the quarter. That's obviously a function of the yield of Number 1 tomatoes, but also the market pricing that you're receiving. So, I'm wondering if you could just help us parse out how much of that incremental pricing you're achieving as a result of that improved yield? And then I'll have a follow-up. Thank you.
Jonathan Webb: 29:12 Yeah. Just, before I turn to Julie who really runs the business for us, just a reminder, Kristen, there are three components of net pricing for us that we drove in our Q4 performance. The first obviously is the absolute amount of high quality number one tomatoes, which as you know yields significantly higher pricing market, that's obviously most important. But the second is, the extent to which we can leverage direct shipped customers and not spend against the distribution expense associated with it, for those high quality tomatoes, and we've identified examples of those customers from previous quarters, but they're very large foodservice service and retail customers. 29:53 We eliminate another take-out of our gross sales to net sales. And then the third piece is, beyond those two, we have actually more varieties and we look forward to 2022 where we will have three additional facilities with berries and green leafy and another tomato facility. But even within what we have at Morehead, there are different varieties that come in different prices that all contribute to our realized benefit on net sales per pound. 30:21 Julie, is there any other color you want to offer?
Julie Nelson: 30:24 Thanks, David. One of the key drivers of our ability to deliver premium product is the quality of our labor. And our investments in hands on training and performance management have been paying off. Our labor productivity and importantly, our labor quality has been steadily improving since the beginning of Season 2. 30:46 I'd also have some additional commentary on our distribution expense. We have both freight and handling charges that make up our distribution expense. To manage freight, we work closely with our distributor, Mastronardi Produce, to ensure our truck utilization, meaning the amount of products we have on the trailer is as high as possible. 31:11 We're also working as David mentioned with Mastronardi to maximize the number of shipments that we make, that go directly to customers and this reduces miles in terms of reducing freight expense and also importantly reduces handling charges that we might otherwise incur in their distribution facilities.
Kristen Owen: 31:34 I appreciate that color. It actually dovetails into my next question, which is really about as you start to layer in these additional products, talking about leafy greens towards the end of next year. And I understand that these will not contribute to the 2022 performance, but as we're thinking about, sort of the long-term business model here, can you just update us on how you're thinking about that mix of incremental product on the overall impact on the P&L, sort of exiting 2022 and how we think about just the seasonality of the business at a full run rate in 2023?
Loren Eggleton: 32:16 Hi, Kristen it is Loren. I think we try to mention on the call of the net sales outlook for the year, the 24 to 32. We expect the new farms, so the 15-acre leafy at Berea, the 30-acre berry at Somerset, as well as the new 60-acre tomato in Richmond to contribute approximately mid-single-digit millions of that outlook. 32:46 And so again, all three of those we expect to be online and producing by the end of this calendar year. One thing that I would add is, with the addition of three new farms, we have a great opportunity to realize SG&A leverage. For our a management team across the three farms and we have purchasing leverage as well. So, we'll see some cost improvement associated with the entry of the new farms.
Jonathan Webb: 33:19 Kristen, one note, that you're hearing on this call that may seem different, although it's not different operationally is, as you heard me say, we're really focused on the rigor and the basics of operating what we can control. So, as a result, we're guiding to only 2022 because we have line of sight to 2022 and we're really focused on what we can achieve in the range of guidance, but that range of guidance does include a contribution from these three new farms because as you've heard, on all three of them we’re greater well over 50% complete, which is why we're comfortable including it in our guidance.
Kristen Owen: 33:57 Thank you. I appreciate all the color.
Operator: 34:03 Your last question is from the line of Raj Sharma with B Riley. Your line is open.
Raj Sharma: 34:10 Hello, good afternoon guys. I just wanted to ask about the farm economics from what you've indicated earlier just a question really trying to understand, have unit economics revenues and EBITDA, long-term sort of run rate fully loaded have those unit economics changed at all given recent challenges and learnings? I mean, should we assume any changes long-term due to supply chain costs at all? Could you comment on that, please?
Jonathan Webb: 34:46 Sure. Well, Raj, thank you for the question. Our unit economics since we are just now coming into our own in our third season and our first farm, is really about our long-term guidance. And as you've noted, we are not providing any update or changing our long-term guidance. 35:04 When you think about our business with regard to your question on the recent environment, we have the privilege of serving primarily a U.S. driven business for which there is excess demand today. And as you heard us say for our new farms, we purchased the number of the materials in advance. And so, relative to the news of today versus other investments that some of our investors have made, we feel very good about our ability to deliver against unit economics for our business. But more than that, we really are not offering any change in perspective today on our long-term guidance.
Raj Sharma: 35:43 Got it. Got it. And then this is a question on, just could you give more color on the competitive dynamics, you know, Mexican imports just the recent suspension of avocado imports, I know, you are not growing avocados, but any sort of impacts that you foresee, any competitive changes that you foresee going forward?
Jonathan Webb: 36:09 The tailwinds are back Raj, I mean, what you just saw with the avocado import restriction coming out of Mexico into the U.S., it's very real and you've got Fortune 100 and Fortune 500 grocers that are holding that liability that's going on their shelf. And people are very aware of it. So, you again, you could look at the L.A. Times article that came out a month or two months ago with tomato imports that we're being restricted from Mexico into the U.S. 36:43 This again, we'll continue to escalate over time, and I think is something that will ultimately benefit the CEA industry in the U.S. as we clean up our agriculture system in North America.
Raj Sharma: 36:58 Got it. Got it. Great. Thank you for answering my questions. I'll take it offline from here.
Operator: 37:06 As there are no more questions in the queue that ends our question-and-answer session, as well as our call for today. Everyone, thank you for participating. You may now disconnect. Stay safe and well. Have a good day.
