LanzaTech Global Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 7 speakers on the call.

Operator

Good day, and welcome to LanzaTech Global Incorporated Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr.

Operator

Omar El Zirkawi, Vice President of Corporate Development at LanzaTech. Please go ahead.

Speaker 1

Good morning, and thank you for joining us for LanzaTech Global Inc. Q3 2023 earnings conference call. On the call today, I'm joined by our Board Chair and CEO, Doctor. Jennifer Holmgren and our CFO, Jeff Trukenbrut. Earlier this morning, we issued a press release with our Q3 2023 financial and operating results, as well as an investor presentation summarizing the company's performance and key operational highlights for the quarter.

Speaker 1

We intend to file with the SEC our quarterly report on Form 10 Q for the quarter ending September 30, 2023 after market close today. Both our press release and results summary investor presentation can be found in the Investor Relations of our website at www.lanzatek.com. Before we begin, I'd like to direct you to the disclaimers in Strategies, expectations, projections, forecasts and assumptions are forward looking statements. Please note that the company's actual results may differ from those anticipated 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 We assume no obligation to update publicly any forward looking statements.

Speaker 1

We would also like to remind you that our previously provided 2023 guidance As or if updated on this call constitutes the entirety of the company's financial and operational guidance and no other prior projections or forecast from the company should be relied upon. 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 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. Jeff will then review in greater detail our financial results from the Q3 and Jennifer will conclude with a few closing remarks.

Speaker 1

At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Jennifer.

Speaker 2

Thank you, Omar, and thanks to everybody for joining us today. We had an exceptional 3rd quarter. Commercially, we grew quarterly revenue to $19,600,000 DAG represents a 52% sequential increase and 143% year on year improvement. This performance was fueled by robust growth across all three of our business lines, our core biorefining business, our Carbon Smart Business and our Joint Development and Contract Business. In addition, we reduced our Quarterly cash earned to $24,200,000 in the 3rd quarter from $33,800,000 in the 2nd quarter.

Speaker 2

Operationally, our team has kept us on track to start up 3 new commercial plants in 2023 As outlined on Slide 5 of the presentation, our joint venture partner, Shougang Steel, started up its 4th plant, a 60,000 ton per year facility at a ferroalloy mill. Also during the quarter, our partner Indian Oil We started up its 33,500 tonne facility at the Panipat refinery. This is our first commercial scale project in India and the 1st commercial facility that will convert carbon dioxide rich refinery off gas into ethanol. Both bioreactors have demonstrated ethanol production and we're now focused on ramping up the full production capacity. Our partner, ArcelorMittal, just started the 1st bioreactor at its 64,000 ton per year facility at its steel mill in Ghent, Belgium.

Speaker 2

The steel mill is scheduled for a routine maintenance in mid November And following completion of that maintenance, we will restart with ramp up the full production in early 2024. Recurring revenue from these 2023 plant startups will contribute to the top line in 2024 through the payment of royalties and sales of Microbes Media and Software Services. It's important to recall that the 4 plants operating in China Our help through our joint venture and that the royalties for these plants are structured differently than with the other licensees as some of Our royalty value manifests itself through our equity ownership in the JV and to date the profits have been reinvested in building Additional commercial plants. The addition of these 2023 plant startups will bring our total installed nameplate capacity To more than 300,000 tons, that's approximately 100,000,000 gallons of annual ethanol production. This increased production will enable us to secure more offtake volumes to supply our growing CarbonSmart business.

Speaker 2

While these 6 commercial plants represent 500,000 tons of annual carbon dioxide abatement, We need to get to Gigaton. This requires us to deploy at an increasingly accelerated rate. To that end, in addition to continuously developing our core licensing project pipeline, we're actively partnering with We have talked previously about our partnership with Brookfield Renewable, which is focused on the U. S, EU and UK markets, and we recently announced a joint venture with Olean Financing Company, a subsidiary of the Olean Group to develop projects in the Kingdom of Saudi Arabia. We are extremely excited about this partnership and through it the leaders can get more steel in the ground and more plants online to capture and recycle waste carbon.

Speaker 2

This joint venture will develop project opportunities and source outside investment partners, ensuring that the projects are more akin to capital efficient high return licensing deal. With Partner Brookfield, we continue to progress 2 co development projects, these Europe based industrial LAF gas projects are progressing through early engineering phases, And we anticipate that one of these projects will move into the advanced engineering early next year, setting us up to transfer the project to Critical project milestone in the development lifecycle, signifying the project is ready for construction after the completion of major engineering work, Site selection and procurement, permitting, offtake contracts and financing packages. But also enables us to condemn certain aspects of the project development timeline, which in turn accelerates our growth and pace of deployment. We have a high degree of confidence around our global commercial project pipeline and we continue to advance projects through the various stages of the project and engineering development cycle as shown on Slide 8 of the presentation. The growth and momentum across our business is visible and tangible.

Speaker 2

3rd quarter, we delivered the 1st basic engineering package or BEP for Project Dragon, an integrated gas fermentation to sustainable aviation Fuel plant in the U. K. We anticipate that the front end engineering design or FEED of this alcohol to check portion of the project will be completed this month, driving continued engineering services revenue through the Q4 and into next year. Globally, new material circularity policies and corporate commitments are driving customers to seek recycling solutions such as LandSatX that keep materials in use and out of landfill with an estimated 450,000,000 tons of carbon embedded in chemicals and materials annually, we have an urgent need to deploy our scalable recycling technology globally To enable a circular carbon economy, the apparel industry, which generates 92,000,000 tons of global textile in the EU and beyond, such as extended producer responsibility and public disclosure of unsold products discarded, is putting pressure on producers to pursue material recovery technology. It remains evident that our early mover advantage and our Demonstrable experience in processing solid waste for conversion to chemicals have led to additional partnerships beyond Our long standing partnership with Sekisui in Japan and continue to bolster our project pipeline.

Speaker 2

While we are advancing early stage engineering work on several commercial scale municipal solid waste projects with Sekisui in Japan, We are developing additional commercial scale solid waste projects across the diverse geography base, including Europe, the Middle East and North America. We have recently hit major development milestones across all of these projects that serve as an important component of our go forward Financial momentum. For the next CHEM Roma project, we completed basic engineering and are commencing the Feed stage for a 64,000 ton per year waste to ethanol facility, a second NeXcan waste to ethanol project in Italy is now moving through the early stages of engineering. In the United Arab Emirates, our work with Dadweir, The Abu Dhabi Waste Management Company is progressing with an ongoing feasibility study for an integrated solid waste to sustainable aviation fuel project. In the United States, the commercial project basic engineering package is under execution with Multinational Tire Company To utilize waste products such as end of life tires and municipal solid waste, providing an innovative solution for a market where there are approximately 1,000,000,000 end of life hires generated per year.

Speaker 2

All these projects will continue to contribute to the In parallel, we advanced several projects utilizing industrial off gas feedstocks. We completed a feasibility study for Integration into a steel facility with JSW, one of India's largest business conglomerates and the largest steel manufacturer. We are also working with Jindo Steel and Power Limited or JSPL, An Indian steel company under the Jindal Group and the 3rd largest private steel producer in India. JSPL has received around $20,000,000 available in India for commercial projects for the deployment of our technology in one of their steel mills. Turning now to CarbonSmart and the various applications for ethanol within the transportation sector from road to aviation to marine fuels.

Speaker 2

These fuel opportunities unlock significant markets commensurate with the volumes of commercial ethanol we have available. We have been following closely the policy developments on recycled carbon fuels. And as we assess the fuel markets in Europe, we have been slower than expected progress On the policy and fuel certification front, technical specification of fuel requirements are yet to be clarified Approvals by the European Commission to accredited certification bodies for the certification of recycled carbon fuels for sales within for sales in Europe, where the increasing numbers of EU member states have included this new fuel category in their national Regulation certification and approvals will support significant new markets for carbon smart ethanol. We see enormous opportunities for ethanol to be utilized to help the shipping industry achieve its goal of reducing the Greenhouse gas emissions by at least 50% by 2,050 and are developing a go to market strategy with potential customers For the use of ethanol in the marine sector, where global demand for marine fuels is expected to reach 15,800,000 tons in 2030. We're encouraged by recent announcements by Wartsila, a leading maritime transportation propulsion Currently being produced at scale on a global basis, ethanol has the potential to supplement methanol as a 2nd generation fuel to help meet the industry's emission reduction goals.

Speaker 2

Turning now to sustainable aviation fuel. The Landseget Freedom Pines facility is expected to begin As you can see on Slide 6 of the presentation, once operational, this plant will be the world's first Alcohol to Jet SAF facility and will produce approximately 10,000,000 gallons of sustainable fuels per year, 9,000,000 gallons of SAF and 1,000,000 gallons of renewable diesel. Together with Project Dragon in the UK, This represents significant progress in the production of SAF. We're encouraged by the incredible demand pull that the marine Recently, our EU entity completed EU REACH registration for ethanol, which allows us to produce and import ethanol or finished products containing ethanol. Additionally, we do believe that having 3rd party sustainability audits and certification is critical to doing business and allows us to become a reliable supplier of sustainable carbon smart products to Brent.

Speaker 2

To this end, we continue to work with the Roundtable and Sustainable Biomaterials, a robust and credible sustainability framework for 3rd party certification at our commercial facilities. In addition, this quarter, 2 of our commercial facilities in China has This ISCC Plus certification is well recognized in the chemicals market as voluntary Sustainability certification and the ISCC CORSIA certification has been approved by the International Civil Aviation organization and positions our existing Chinese facilities as potential suppliers of ethanol feedstock into the regulated SAF market. Transparency on sustainability and working with credible third parties is important as we continuously improve our technology and scale. Thanks to feedback from various market touch points over the last several months, I'm pleased to share that you can now find details of our lifecycle for some of our products on our website. Let's transition now to Carbon Smart Materials, which you can see outlined on Slide 9 of the presentation.

Speaker 2

Crab Hoppers, A British Performance Wear brand released a collection of performance leases made from polyester fibers derived from CarbonSmart Ethanol and remain in active discussions for additional commercial product launches with our CarbonSmart Ethanol. We've also recently announced our partnership with Dow to sell surfactants made from carbon emissions. Surfactants are an important chemical compound found in everyday products like shampoos, detergents and soaps. Through this partnership, we have an entry to a wide market of many end users who already work with DAO as part of their supply. LANSA TEP continues to sell to other interesting customers in the Surfactants business, including long term partner, Nivelle.

Speaker 2

In 2024, we estimate Detergent sales in the CarbonSmart business of around $1,000,000 a number we expect to With Carbon Smart as an enabler and trusted third party certifiers as validators, We are giving consumers a choice about which products they use in their everyday life. We are seeing Garmin Smart Brand Partners planning Multiple corrections rather than pursuing a one time demonstration collections with materials made from recycled carbon. Not simply a marketing ploy, these first CarbonSmart products are the first step towards validating supply chains that do not require virgin fossil carbon. Building on these successes to date as well as the recent certifications at Key, We continue to anticipate planned commercial campaigns from existing and new brand partners across various consumer product verticals in the Q4 and through 2024. We are proud of CarbonSmart's growing position as a decarbonization enabler across industries and economies, and we're looking forward to continuing growth and expansion of the business.

Speaker 2

In addition to the successes We've achieved this quarter, we advanced a number of initiatives to ensure our process competitive. We continued our work at the Suncor demonstration facility in Canada to produce a key new product strain making isopropyl alcohol or IPA at scale. This high value chemical is commonly used as solvent as a chemical intermediate or in sanitizers. IPA commands a large market of approximately $3,000,000,000 annually, a market which today is almost exclusively met by $123,000,000,000 and that is also nearly exclusively produced with virgin phosphol inputs. Polypropylene is key polymer use for medical devices, including syringes and IV bags, as well as for large scale applications in automotive, furniture, We're currently negotiating our first commercial IPA production license, so we can move quickly into the commercialization of our first non ethanol producing microbe.

Speaker 2

Additionally, we surpassed our critical intermediate We have now produced MET directly from real world syngas derived from non recycled solid waste. Lanfoteq has partnered with Mentek Waste Management and Lululemon, Receiving financial support from the U. S. Department of Energy for upscaling of non recyclable solid waste In the race to become cost competitive with conventional fossil, the direct production of M and G turns a 4 step process into 1 step, further decreasing energy consumption and eliminate substantial water and chemical use associated with that 4 step conversion. Our cross team collaboration demonstrates the ability to turn waste plastics or Circular M and G for production of plastics or polyester fibers is gaining interest from many consumer brands such as the known with whom we have collaborated on this new microbial bio catalog.

Speaker 2

Overall, Our science team's goal is to develop new commercial strains for the direct production of different industrially relevant molecules. To that end, the Synthetic Biology team has recently decreased the time it takes us to produce new strains, which has traditionally been a bottleneck in our new product development pipeline. This process improvement is enabling the acceleration of the prototyping and from our gas segmentation platform. Lastly and most importantly in the Q3, we are proud to have 0 loss time injuries and 0 recordable injuries once again. This important achievement reflects safe execution across Our operations, including our offices, laboratories, as well as global commercial scale plants.

Speaker 2

This high standard of safety remains at the forefront of everything we do. With that, I'll turn the call over to Jeff to provide details on our financial performance. Jeff, please go ahead.

Speaker 3

Thank you, Jennifer. Good morning and thank you to everyone joining us today. As seen on Slide 11 of the presentation, Total revenue for the Q3 of $19,600,000 grew by 52% sequentially and 143 percent year over year. Revenue from our biorefining, carbon capture and utilization category grew 256 percent year on year reaching $12,400,000 driven mainly by ongoing and recently initiated engineering services work on several projects as well as from growth in licensing. We achieved approximately 23% quarter on quarter growth in engineering services revenue, reflecting the ongoing work Project Dragon as well as work on several of our solid waste to value projects.

Speaker 3

Research and development revenue, which includes our joint development and contract research work grew 70% year on year and 122 percent quarter on quarter to $5,000,000 reflective of ongoing as well as meaningful contribution from new customer projects. CarbonSmart revenue grew 34% year on year and 124% quarter on quarter to $2,300,000 in the 3rd quarter consistent with our second half weighted plan. CarbonSmart sales in the 3rd quarter came from a diverse set of products sold to customers including Cody and Mabel. Total consolidated revenue for the 1st 9 months of Looking at revenue for the remainder of 2023, we expect another quarter of robust quarterly growth. While our growth targets remain consistent with our views when we established our full year outlook For 2023, when considering our results to date and certain opportunities that have slipped into next year from a timing standpoint, we target full year 2023 revenue fall at the low end of our guidance range of $80,000,000 to $100,000,000 We anticipate the 4th quarter revenue performance will be driven by contributions from multiple sources, Included continued engineering services revenue from our Project Dragon in the U.

Speaker 3

K. And our waste of value project focused on end of life tires in the United States as well as from engineering services on new projects with partners like JSPL for steel off gas project in India. We also anticipate contribution from our project with for a prospective carbon dioxide plus hydrogen project in Abu Dhabi, which has recently commenced analysis work. On the CarbonSmart side, we expect to run additional campaigns for existing customers like Cody and Mabel as well as for several new customers. We expect our JDM Contract Research business to benefit from contributions from several existing projects as well as from projects with partners L'Oreal and SHV that have completed the phases of their initial scopes and are now moving into their next phases.

Speaker 3

In the Q3, gross margin sequentially increased to 27% from 16%, which in conjunction with strong revenue growth resulted in gross profit increasing 150% quarter over quarter to $5,200,000 This quarter on quarter improvement reflects the increased contribution Higher Margin Recurring and Engineering Services Revenues as well as from strong margins from several JDA projects. We continue to the engineering development work on our Project Dragon in the UK, for which we have a 20% cost share obligation associated with a grant awarded by the UK government. Gross margin on this project in the quarter improved as we increased our internal labor utilization on its product development. Again, while the project Dragon is a current Dragon gross margin percentage, we are advancing the project toward FID with the support of the grant funding with the goal of selling the rights to the project in Operating expenses in the 3rd quarter increased 31% year on year, reflecting our growing operational base. It's important to note, however, that operating expenses declined 9% compared to the 2nd quarter, predominantly as a result of lower R and D expenses quarter on quarter from better labor contributing to COGS and from lower SG and A.

Speaker 3

As we mentioned on our last earnings call, our ongoing investment in innovation and process improvement in our gas fermentation platform and microbe commercialization activities beyond ethanol producing microbes was pulled forward into the first half of the year and the lower R and D expenses in the Q3 reflect a normalization in this expense. Overall, we continue to expect operating expenses for the second half of twenty twenty three to be less than those reported in the first half. Net loss in the quarter was negative $25,300,000 and adjusted EBITDA was negative $19,100,000 Adjusted EBITDA loss improved by 20% quarter on quarter, thanks to higher gross profit and sequentially lower operating expenses. As we've discussed previously, the key to turning adjusted EBITDA positive is to continue growing gross profit to exceed our operating expenses. This quarter, we significantly increased gross profit without increasing operating expenses, demonstrating our continued progress towards profitability.

Speaker 3

We're proud of the significant growth we've delivered in 2023 and expect our robust commercial pipeline to continue the strong growth momentum into 2024 and beyond. Turning now to the balance sheet, we want to highlight that in our latest 10 Q to be filed later today, due to a change in our interpretation of the applicable accounting rules, We've revised the accounting treatment for certain elements of our forward purchase agreement or FPA. Specifically, this change involved the reclassifying the prepayment amount of $60,500,000 which was previously recorded as part of a net non current derivative asset to equity. Remaining liabilities of $38,100,000 previously netted against the prepayment amount are reflected as long term liabilities. This updated accounting treatment was reflected in the financial statements in the 10 Q we filed today, which are subject to quarterly review by our independent author.

Speaker 3

As a result of this specific non cash accounting treatment change, we filed an 8 ks this morning stating that our first and second quarter 2023 financials can no longer be relied upon and we expect to restate them to reflect this change. This expected restatement is a result of and exclusively for the same isolated FPA accounting item I just described. Importantly, such a restatement for the 1st and second quarters of 2023 is not anticipated to impact any other balance sheet or income statement accounts nor our earnings, cash flows or ongoing operations in any way. Also, this revised accounting treatment is already reflected in the Q3 financial results as they were reported to and discussed with you today. We appreciate your patience as we complete this process and are focused on completing these filings as soon as possible.

Speaker 3

Finally, we exited the quarter with cash on hand of $136,900,000 which includes cash, cash equivalents, restricted cash and investments in U. S. Treasuries and high grade corporate bonds. Cash burn in the quarter reduced to $24,200,000 nearly $9,600,000 lower than the $33,800,000 cash burn in the 2nd quarter. We expect to see ongoing improvements in cash flow from operations, net of working capital swings, quarter over quarter as we advance and grow the business to positive cash flow.

Speaker 3

At this time, we see no need to pursue any dilutive financing. I will now turn the call back over to Jennifer for some closing remarks before we open the call for Q and A. Jennifer?

Speaker 2

Thank you, Jeff. In summary, we had another strong quarter with continued growth across our business. We continue to focus on executing our business plan and this is reflective of our 64% year on year revenue growth for the 1st 9 months of 2023. We are in the midst of what the UN calls The triple planetary crisis, the climate crisis, the biodiversity crisis and the pollution crisis, each Compounding one another in complex ways. The Intergovernmental Panel on Climate Change estimates that in order to meet our climate targets, we must achieve nearly an 8% year over year reduction in greenhouse gas emissions by 2,030.

Speaker 2

Experts are skeptical that this can be done in the 6th remaining years, Yet I remain optimistic. I participated in New York Climate Week and one of the clear focus areas throughout the week was how to We will not bend the carbon curve by continuing to operate in the status quo. We were honored to receive the Decarbonization of Scale Award at ATAPAC last month in recognition of our commercial progress and steadfast commitment and efforts towards delivering to our planet a gigaton scale solution. At LanzaTech, we're no strangers to the challenges of doing something different. We're challenging a status quo that is driving society toward an unlivable planet for future generations in the absence of immediate change.

Speaker 2

That is not for the faint hearted. We have been tirelessly working with partners, NGOs, policymakers and media to show how carbon recycling can be part of a more sustainable future for all. And to do that, We have had to help create new policy framework, be the first of our kind to get certification and create new markets. This all takes time and patience and we're proud of where we stand today, but we're still on a journey to change things. We believe that our technology has the potential to change the trajectory of our climate crisis.

Speaker 2

We are not just nibbling away at the edges. For the sake of our planet and society's future, we must be successful. This is why we continue to passionately focused on deploying our carbon recycling solutions at scale around the world. And I look forward to continuing to deliver positive results. Thank you again for joining us and to so many of you for your support as we realize our vision

Operator

Thank you. We'll now begin the question and answer session. This time, we'll pause momentarily to assemble the roster. First question will be from Leo Mariani Ross, MKM, please go ahead.

Speaker 4

I just wanted to follow-up on kind of your comments Just around guidance for the year, it sounds like you'd expect to be kind of at the low end of revenue guide here in 2023. If my math is right here, it looks like you have to roughly double revenue in 4Q versus 3Q to get there. So just can you provide maybe a little bit of additional color? I know you cited some of the sources where that comes from, but that's obviously A pretty big increase, so maybe just a little bit more clarity around that and your confidence you're going to be able to do that.

Speaker 2

Absolutely. Thank you for the question, Leo, and thank you for continuing to support and follow us. First of all, yes, Your math is absolutely impeccable. We do have to double, pretty close to double the 3rd quarter. We believe that we are on track to do that.

Speaker 2

We will get those revenues from all three business lines. All of them will contribute. So licensing As you know, the biorefining Carbon Smart as well as the joint development projects. So it's all three of our business lines together that will help

Speaker 4

Okay. And I guess do you feel like a lot of that is sort of Kind of under contract or kind of coming on the books, you feel like a lot of that is sort of secure revenue as you sort of see it today Or is there any potential for any slippage on that?

Speaker 2

I would say that it is mostly under contract. So yes, we're on a glide path to most of that.

Speaker 4

Okay. That's helpful. And I was hoping you guys one thing I didn't hear on the call was any kind of Discussion of your short EBITDA guidance, I know you've got a guide out there that you About negative $65,000,000 to negative $75,000,000 here this year. Can you just comment on that? Do you guys still expect to be within that range?

Speaker 2

Yes, we do expect to be in that range. We'll be on the high end of that range. And I think our focus You've seen it in the Q3, right? We almost doubled the prior quarter as well, right? So you see the improvements across Everything we do not just on the revenue side, we increase our profits and we also reduce our costs.

Speaker 2

It's all it comes down to margins and What we can command, but we are making progress on every financial dimension of our business.

Speaker 4

Okay. And then just on margins, obviously you had a very strong increase here in 3Q, 10.5% up versus 2Q. Can you just kind of talk about trends in the 4Q? Should we be expecting A similar margin this quarter and if we get the big revenue increase, obviously that can significantly improve the EBITDA loss as well. So maybe just Any kind of comments on margin trajectory in the 4Q?

Speaker 2

Absolutely. Let me pass that one over to Jeff to give you some details.

Speaker 3

Hi, Leo. Yes, thanks. And yes, you should continue to expect that our margin improvement should be consistent More consistent in the Q4 with Q3 than it was in the first half of the year as we've talked about before, a large impact is Our revenue mix on that and so as we brought in additional customers and additional revenues in the back half of the year is expected, many of those are higher Margin revenue sources has been a lot of the work that we had earlier in the year. We also talked about how Dragon was a bit of a drain on our gross margin. And as we kind of Diversify that revenue base with other new customers and new revenue sources that have come out in the back half of the year, that margin Improvement should perpetuate.

Speaker 3

Okay.

Speaker 4

That's helpful. And then just last one for me, just in terms of the plants that you have, you guys show this really nice Kind of inverted pyramid in your presentation. You've got 2 plants that you cited under construction. Can you maybe just provide a little bit more color on Kind of what those are and any other sort of updates you might be able to share? Then I guess you've also got 11 plants in advanced engineering.

Speaker 4

I see kind of one new plant Kind of moved into that category, could you kind of help us all out a little bit with some of the companies that are kind of working on those 11 plants?

Speaker 2

Yes, absolutely. So the plants that are you know the plants that are starting up, right? We're talking about the landscape plant at Freedom Pines And next year and this year, our Solar Middle and the additional plant at Shogang and the plant at Indian Oil. To go over to the rest of the 11 in the more detailed pipeline, I'll hand it over to Jeff as well to talk a little bit about that.

Speaker 3

Yes. So Lee, as you saw, the pipeline has continued to progress and we've added additional Projects into the pipeline in terms of kind of the lower end of the funnel. We've got a variety of the waste to value, so solid waste to value We talked about here in that advanced engineering examples like Bridgestone, Ted Weer, others that we've talked about earlier in the call. And again, the 2 that's still remaining in construction, our Landsaje and Arslan Middle, the rest have gone into the operating stages.

Speaker 4

Okay. Thank you.

Speaker 2

Thank you.

Operator

Thank you. Our next question will come from John Heinz Al Stifel, please go ahead.

Speaker 5

Good morning all and thanks for taking my questions. For my first one, can you provide background on how the joint venture in Saudi Arabia came together and frame how large you see the opportunity set being? And then the extent that you can share, what would be the timeline in which you'd expect to see these opportunities move into your project pipeline?

Speaker 2

Thank you for the question. The Ollion, the JV that we have with them is really to source Projects and to develop those projects, the financing for those projects will come partially from them, But also from others. And so the idea is that it allows us not to put projects on our balance sheet. And therefore, what we will do is, as always, just have it a licensing model that supports our work. How quickly?

Speaker 2

I would say, During the development of the engineering agreement I'm sorry, of the JV agreement, we've been developing projects in Saudi Arabia With them, so there's actually quite a few projects and opportunities in the pipeline. So we expect it to impact our pipeline Very soon, including as early as next year.

Speaker 5

Terrific. For my follow-up, Referencing Slide 11, you had a nice increase in the joint development and contract business quarter over quarter. Could you speak to the drivers of that increase and how you see revenues in the segment's trending going forward?

Speaker 2

Yes. The projects in the joint development pipeline are of 2 types. One of them is the example of the Project Dragon. That is a Contract Research Project. The joint development projects and I'll turn this over Jeff, in a second.

Speaker 2

The joint development projects, a lot of them are the chemical projects that we do with partners. You have projects with L'Oreal, with Sumitomo Rico and Givaudan and others and those The pipeline, we are developing a lot of new molecules with partners that we intend to put into commercial in the next few years and that work is typically done with partners. The reason by the way that we use partners in that is not just Because they provide some of the funding, because they also provide a channel to market. So when the molecules are ready, We have somebody who's going to immediately pick them up and we can go to commercial. So that is really what The contract research and joint development pipeline is all about.

Speaker 2

And I will turn it over to Jeff in case he wants to add something.

Speaker 4

No, I guess the only

Speaker 3

thing I would mention is, just as a reminder, we think about the joint development business as also a driver of our core licensing business. Once our partners are who have helped prioritize our roadmap of these next molecules have the molecule in addition to being potential off takers In many cases, we expect them to actually license the technology and build plans as well. So we consider the Joint development work to be integrated and complementary to our core business.

Speaker 5

Perfect. I appreciate all the detail and thanks for taking my questions.

Speaker 2

Thank you.

Operator

Next question will be from Ryan Fink of B. Riley FBR. Please go ahead.

Speaker 6

Hey, good morning guys. Before reaching your target of EBITDA breakeven by the end of next year, you talked about it a little Is it just a matter of ramping revenue or are there some costs that you're looking out looking to drive out as well? And If we're hitting breakeven EBITDA on a quarterly basis late next year, is it fair to say we should be thinking about positive EBITDA for the year in 2025.

Speaker 2

Thank you for the question. Let me transfer that over to Jeff.

Speaker 3

Yes. Ryan, hey, thanks for joining and thanks for the question. We as we think about EBITDA, as I mentioned a little bit earlier, the key is continue to grow the business and get gross profit up above our operating costs. And we continue to be excited about what we expect to be a really strong 2024. And our path to profitability is as we described it.

Speaker 3

And you've seen progress associated with that this quarter As we did improve our gross profit significantly while holding or reducing OpEx. With that said, we'll provide More detailed guidance on 2024 in February. And while we continue to focus on finishing strong in 20 3 in advancing projects in the pipeline, which will help drive that strong growth in 2020.

Operator

Excellent. Thanks, guys. Thank you. This concludes our question and answer session. I'll turn the call back over to Ms.

Operator

Jennifer Olgrom for closing remarks. Please go ahead.

Speaker 2

Thank you very much for joining. We really appreciate it and we appreciate also your feedback. This is why the LCA got posted because we received feedback That was an important element. So thank you for being part of this. And I would also say, I hope you appreciate that we're really growing as a business

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Key Takeaways

  • In Q3 2023, LanzaTech achieved $19.6 million in revenue (up 52% sequentially, 143% year-on-year) and reduced cash burn to $24.2 million, aiming to hit the low end of its $80–100 million full-year revenue guidance.
  • Three new commercial plants came online in Q3—Shougang Steel JV (60 kt/yr), Indian Oil (33.5 kt/yr) and ArcelorMittal Ghent (64 kt/yr)—boosting total installed capacity to over 300 kt (~100 million gallons) and enabling ~500 kt annual CO₂ abatement.
  • LanzaTech is accelerating its project pipeline through joint ventures with Brookfield Renewable (US/EU/UK) and Olayan Financing (Saudi Arabia), milestones like the Project Dragon basic engineering package in the UK, and multiple solid-waste-to-ethanol projects globally.
  • The CarbonSmart business grew 34% year-on-year to $2.3 million in Q3, with brand collaborations (Craghoppers, Dow, Nivea), marine and sustainable aviation fuel developments (Freedom Pines SAF plant, REACH/ISCC/CORSIA certifications) and ~$1 million of 2024 detergent sales expected.
  • R&D momentum continues with new microbial strains for high-value chemicals (IPA, direct M&G from waste syngas), streamlined strain development timelines and zero lost-time injuries across all operations.
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Earnings Conference Call
LanzaTech Global Q3 2023
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