LanzaTech Global, Inc. Q2 FY2024 earnings call

• Delivered solid Q2 financial results with revenue growth and improved adjusted EBITDA loss.
• Executed on biorefining projects, including NTPC India project with equipment revenue from long lead items, moving new projects to early stage engineering.
• CarbonSmart business active with customers like Lululemon, REI, and completed first pure play CarbonSmart fuel sales; IKEA collaboration on polypropylene from industry emissions.
• Increased ownership in LanzaJet to 37% without capital contribution.
• Announced $40 million investment from Carbon Direct Capital to support profitability and working capital.
• Reaffirmed 2024 revenue guidance of $90M-$105M with Q4 heavily weighted.
• Project SECURE update: $200M DOE award for gas fermentation facility integration with Technip's tech.
• Work with IKEA on polypropylene resulted in isopropanol production for food containers, with isopropanol process ready to license.

For the second quarter of 2024, revenue was $17.4 million, representing 35% growth year-over-year. The biorefining business contributed $13.7 million in revenue, up 41% YOY, including engineering services and LanzaJet-related revenue. Joint development and contract research revenue was $2.8 million, a 25% increase YOY. CarbonSmart revenue was $0.9 million for Q2, with H1 2024 at $1.8 million, a 79% YOY increase.

• Reaffirmed 2024 revenue between $90 million to $105 million.
• Adjusted EBITDA loss expected to be between negative $65 million to negative $55 million.
• Revenue heavily weighted to the fourth quarter; expecting several projects to reach final investment decision (FID) in the back half of the year, which could impact guidance if timing slips.
• Quarterly impact of project timing is expected to lessen as recurring revenue scales.

• Ongoing litigation related to a Forward Purchase Agreement (FPA) where LanzaTech is suing a shareholder for breach, and the shareholder claims LanzaTech owes them money.
• Project timing risks; delays in FID for projects could negatively impact revenue guidance.

Q: Are other entities showing interest in your polypropylene effort? Does the incipient work with IKEA limit Lanza’s ability to work with other interested parties?

A: Hi, Jeff. There is no limitation on who we can work with. The work with IKEA was to develop capability, and there is tremendous interest from partners in off-take and licensing the technology.

Q: Could you add a little bit of color to the specific ethanol licensing that you've now achieved for CarbonSmart. And with that in mind, which markets do you feel are now more open to Lanza as a result?

A: From the first ethanol sales with new licenses went into the China market. Looking at other markets in Southeast Asia. The ISCC certification for trading into Europe is still being worked on, so current fuel sales are focused on China.

Q: Is it possible to arrive at an acceptable carbon intensity score for Lanza CO2 hydrogen project without green hydrogen?

A: Gray hydrogen will make it difficult. Blue hydrogen works and green hydrogen works. NTPC is accelerating transition to renewable power and green hydrogen, but blue hydrogen is also an option.

Q: Can you expand on what the promotional advantages or the cost savings are in the CirculAir joint or partnership?

A: CirculAir is a coordinated commercial offering using LanzaTech’s Gas Fermentation platform and LanzaJet’s ATJ platform to produce sustainable aviation fuel and renewable diesel from waste feedstocks. It allows a single face to the customer for faster project development, better integration, mass balance, heat integration, and cost effectiveness.

Q: On the second generation bioreactor, is there anything about that second generation reactor that helped make this project pencil out?

A: The second generation reactor makes it more efficient and effective, helping to maximize profits and reduce costs, and will be implemented where it makes sense.

Q: Can you characterize project delays? Is it supply chain, labor, or financial?

A: Geoff will detail, but expecting Q3 to look like Q2, with weight on Q4. Half dozen significant projects in Q4, timing of FID transactions could impact quarter, but no significant risk, just timing aspects.

Q: On the financing you announced, key terms of the $40 million convertible note?

A: 8% coupon, paid in kind. Basic conversion price is $1.52, with adjustments. Direct to 8-K for full terms.

Q: Path to break even EBITDA and cash position?

A: $40M liquidity provides sufficient funding through 2025; expect to raise additional capital, but no specific guidance beyond 2024 on profitability.

Q: On Project SECURE, could you use hydrogen from the cracker and reduce cost?

A: Carbon intensity and availability of hydrogen will dictate what's used. Plants can start with available sources and transition to greener options over time.

Q: Any meaningful differences or challenges between producing ethanol/ethylene versus propanol/propylene?

A: Ethanol is using existing commercialized microbes (first commercial plant 2018). Propanol is a genetically modified organism, more challenging as it's a first of a kind, but processes are piloted and confident in capabilities.