LanzaTech Global, Inc. (NASDAQ:LNZA) Q1 2024 Earnings Call Transcript May 10, 2024
LanzaTech Global, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, everyone, and welcome to today’s LanzaTech Global First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Also today’s call is being recorded and I will be standing by if anyone should any assistance. And now at this time, I’ll turn things over to Omar El-Sharkawy, Vice President of Corporate Development. Please go ahead, sir.
Omar El-Sharkawy: Good morning. And thank you for joining us for LanzaTech Global Inc First Quarter 2024 Earnings Conference Call. On the call today, I’m joined by our Board Chair and CEO, Dr. Jennifer Holmgren and our CFO, Geoff Trukenbrod. Earlier this morning, we issued a press release with our first quarter 2024 financial and operating results, as well as an investor presentation summarizing the company’s performance and key operational highlights for the quarter. Please also reference our quarterly report on Form 10-Q for the quarter-ending March 31, 2024, filed today. Both our press release and results summary investor presentation can be found in the Investor Relations section of our website at www.LanzaTech.com. Before we begin, I’d like to direct you to the disclaimers in the front of the company’s investor presentation and remind you that today’s call may include forward-looking statements.
Any statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company’s actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to update publicly any forward-looking statements. In addition, we will be discussing and providing certain non-GAAP financial measures today, including adjusted EBITDA. Please see our earnings release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure.
Today’s call will begin with remarks from Jennifer, providing an overview of our performance and our recent financial results. Jeff will then review in greater detail our financial results, and Jennifer will conclude with a few closing remarks. At the conclusion of these prepared remarks, we will open the line for questions. With that, I’ll turn the call over to Jennifer.
Jennifer Holmgren: Thank you, Omar, and thanks to everybody joining us today. We appreciate your ongoing interest in and support of LanzaTech. I’d like to begin by sharing five key things from the past several months that I’d like for you to take away from this call. These are all outlined on slide five. First, we delivered financial results for the first quarter right in line with our internal forecasts and guidance provided last quarter. Revenue of approximately $10 million, gross margin of 34%, and gross profit of $3.5 million all increased year-on-year as we continue to scale and optimize the business while closely managing costs across the organization. Second, we announced in March that Project SECURE, where a partner Technip Energies has been selected by the U.S. Department of Energy to receive a $200 million grant.
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Q&A Session
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This commercial project will leverage LanzaTech and Technip Energies transformational technologies to produce sustainable ethylene from captured carbon dioxide emissions, further validating the transformative nature of our carbon recycling technology, and laying the groundwork for highly reputable project opportunities for LanzaTech at the more than 370 ethylene steam crackers across the globe. Third, it was an extraordinary quarter for sustainable aviation fuel, our investment in LanzaTech, and our role in the broader SAF sector, which continues to gain significant momentum globally. In January, LanzaJet, in which we continue to hold an approximate 25% ownership interest, inaugurated the world’s first ethanol to SAF facility in Soperton, Georgia.
The achievement marks a strategic and historic milestone not just for LanzaJet, but for the growing SAF economy at large, as this 10 million gallon per year facility brings a new production route to commercial scale, the Alcohol-to-Jet or ATJ pathway. Separately, LanzaTech is in the process of completing an approximate $100 million investment round to accelerate its growth from some of the largest and most influential companies and investors in the world, with commitments already from Microsoft Climate Innovation Fund and Southwest Airlines. Fourth, we continue to advance our growing pipeline of commercial scale projects while expanding the scale and diversity of the feedstocks and represented geographies. This includes growing the base of projects extending to the top of our development pipeline, as well as advancing projects through the various development stages.
And finally, we are reiterating our 2024 financial and operating guidance introduced earlier this year. This includes expected revenue of $90 to $105 million, which at the midpoint reflects top line growth of approximately 55% over last year’s performance. From this, we continue to execute on our growth plan while maximizing operational financial flexibility across all parts of our business. As we mentioned in our previous quarterly calls, we are committed to a culture of safety and are proud to report that we concluded the quarter without any safety incidents at our facilities in the field or in the laboratory. Regrettably, we did however have one recordable loss and injury due to an office place incident during the quarter. I would like to now review the key highlights from the first quarter of 2024, starting with Project SECURE, our sustainable echoing from carbon dioxide projects in partnership with Technip Energies.
As shown on slide six, Project SECURE is a commercial demonstration of carbon capture and utilization. The grant funding of up to $200 million from the U.S. Department of Energy will support the design, engineering, and construction of Project SECURE at a U.S. Ethylene Cracker facility. We expect work on this project to commence in the fall when we finalize the contracting details associated with this project. By combining the LanzaTech gas fermentation technology with Technip Energies ethanol to ethylene technology, this transformational project is expected to produce 30,000 tons per year of sustainable ethylene from capture carbon dioxide emissions at an ethylene cracker operating at a major petrochemical facility in the U.S. In turn, the sustainable production will reduce the carbon intensity of the existing ethylene production of the facility.
Ethylene has a massive global market projected to reach $200 billion annually by 2030 and is often referred to as quote, the world’s most important chemical. It’s given its use as a key building block in countless products we use every day, from clothing to packaging to foam to jet fuel. However, ethylene production is also a major source of emissions globally, responsible for the release of over 500 million tons of carbon dioxide into the atmosphere per year and in need of carbon abatement solution like LanzaTech. Project SECURE offers an immediate and highly replicable solution to decarbonize ethylene production using existing infrastructure. Technip Energies is the global leader in providing steam cracker technology to the chemical industry with 40% to 50% of the global licensing market share by ethylene production.
The modular design of project SECURE is intended to be easily deployable at ethylene crackers around the world for which there are more than 370. This provides an enormous commercial opportunity for LanzaTech and Technip to rapidly penetrate the ethylene value chain with its joint technology offering and capture a significant portion of this market given our established licensing models. Looking now at sustainable aviation fuel on slide 7, we remain bullish on the SAF market. As I noted earlier, it was an increasingly exciting few months for LanzaJet and the SAF market more broadly and we believe we are well-positioned to play a significant role in the proliferation of SAF production through the Alcohol-to-Jet battery. LanzaTech’s ethanol will be a critical feedstock for SAF and when coupled with LanzaTech technology enables production of SAF from a variety of waste inputs and residues including municipal solid waste and e-fueled.
The inauguration and startup of LanzaJet’s freedom pines fuels facility, the world’s first biorefinery jet-transform to ethanol into sustainable radiation fuel, is again a changer. We expect that the facility will begin producing SAF by the end of the second quarter and ramp up the full production over the course of the year. This facility will focus on maximum production of SAF at 90% of the product output with the remainder 10% as renewable diesel, which is a unique capability of the LanzaTech technology and unmatched biorefineries [ph]. We’ve made good progress on the opportunities in our commercial pipeline that focus on integrated solutions to convert waste gas and residues through the SAF by pairing LanzaTech’s gas fermentation technology with the LanzaJet Alcohol-to-Jet process.
Our project with that we are in Abu Dhabi to take gasified solids through the saf and our project in New Zealand would earn New Zealand, the New Zealand government to take predominantly gasified forestry residues through the SAF both contributed to engineering services revenue during the first quarter. Our project Dragon in the UK taking industrial gas through the SAF is an advanced engineering with a front-end engineering and design completed and planning permission granted for the SAF unit. We continue to utilize the grant funding received by the UK Department for Transport to bring that project to FIT. We recently announced UK SAF mandate is positive for the overall UK SAF market and specifically supportive of our process and project Dragon.
The mandate stipulates that SAF must account for 2% of all fuel in the aviation sector with the threshold increasing to 10% in 2030 and 22% in 2040. Importantly the mandate provides a cap on SAF production via the hydro process esters and fatty acids or HEFA production pathway that becomes more stringent over time, which means there’s a protected market for advanced SAF in the UK such as SAF produced from waste based ethanol. Additionally the SAF buy-out price for the price of both airlines can pay to opt out of their obligations has been significantly increased that the results of the mandate further supporting SAF processes in this market. In addition to a role as feedstock provider of waste based ethanol to Alcohol-to-Jet SAF production, we are extremely proud of our strategic ownership taken LanzaJet and welcome new world class co-investors into LanzaJet.
