LanzaTech Global, Inc. Q3 FY2024 earnings call

Key Points - Revenue Shortfall: Third quarter revenue was $9.9 million, about $7 million below target. Primarily due to missing a LanzaTech sublicense event expected to generate ~$8 million in revenue and lower than expected CarbonSmart revenue despite more than doubling quarter-over-quarter. - Business Model Evolution: Evolving to develop own commercial projects to have more control over timing and performance. Announced projects in Norway, joint venture with Olayan Group in the Middle East, and Project Drake reaching a major milestone. - CarbonSmart Business: Announced a two-stage ethanol off-take agreement with ArcelorMittal, including a short-term contract with $6 million annual revenue potential and a five-year contract with annual commitments of 5,000 to 10,000 tons generating $10 million to $20 million per year. - Sustainable Aviation Fuel and Other Projects: Progress in sustainable aviation fuel projects like Project Drake and collaborations with various partners. Development of single-cell protein (LanzaTech Nutritional Protein) and expansion of biorefining capabilities. - Cost Control: Actively evaluating material cost reduction opportunities and reallocating resources to focus on commercial activities.

In the third quarter of 2024, LanzaTech Global Inc. had total revenue of $9.9 million. Biorefining revenues were $5.9 million, accounting for approximately 59.6% of total revenue. Revenue from joint development agreements and contract research was $1.8 million, making up about 18.2% of total revenue. CarbonSmart product sales revenue was $2.2 million, representing roughly 22.2% of total revenue. Compared to the prior year, biorefining revenues were down due to lower engineering services revenue in Q3 2023, while CarbonSmart revenue more than doubled quarter-over-quarter to $2.2 million but was still below expectations.

Fourth Quarter Outlook - Revenue drivers include: current base business generating ~$10 million per quarter, Norway project potentially bringing ~$20 million in revenue upon positive FID, Project Drake with potential cash flow and income, Project SECURE forecasted to record ~$4 million in revenue before year-end, and potential revenue from LanzaJet sublicensing agreements. There is a wide range of potential fourth quarter financial outcomes due to timing uncertainty of several large initiatives.

Risks - Uncertainty in project development timelines and financing for development stage projects. Revenue expectations are subject to timing uncertainties of key initiatives like Project Drake, Norway project, and LanzaJet sublicensing events. Market dynamics such as ethanol pricing affecting CarbonSmart revenue.

Q: Asks about Project Drake revenue and whether it's part of the $10 million base revenue.

A: $5 million from Project Drake is expected to be recognized as revenue and is incremental to the $10 million base.

Q: Inquires about cost savings initiatives and cost evolution.

A: Costs related to getting projects to FID (like Project Drake and Norwegian project) are being expensed now, and these costs will be recouped when projects are transferred.

Q: Questions about the Norwegian project's benefits to emitters, template for future projects, and cash flow structure.

A: LanzaTech retains 50% of off-take, can control timelines, and has interest from infrastructure partners.

Q: Follows up on changed business plan and future projects.

A: Projects like Norway and Drake are replicable, and LanzaTech is learning to transfer projects while retaining revenue streams.

Q: Asks about ethanol off-take agreement and revenue range.

A: The range is based on off-take volumes and ethanol trading values.

Q: Inquires about nutritional protein composition, nitrogen source, and lifecycle analysis.

A: Nutritional protein has 20 amino acids, nitrogen and sulfur are added, and lifecycle analysis shows low carbon intensity.

Q: Asks about Project SECURE interest and site identification.

A: There is interest, a primary site is identified but not disclosed, and the project can be replicated globally.

Q: Asks about Freedom Pines facility and policy impact.

A: Freedom Pines has started FEED, and the election removing uncertainty is positive for moving forward with climate-related technologies