LanzaTech Global, Inc.

Greetings and welcome to the Lanza Tech Global Inc. first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Omar El-Shikarwey. Vice President, Corporate Development for Lanza Tech Global, Inc. Thank you. You may begin.

Good morning, and thank you for joining us for Lanza Tech Global, Inc.' 's first quarter 2023 earnings conference call. On the call today, I'm joined by our Chairman and CEO, Dr. Jennifer Holmgren, and our CFO, Jeff Truckenbrun. Earlier this morning, we issued a press release with our first quarter 2023 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 10Q for the quarter ending March 31, 2023, filed today. Both our press release and results summary investor presentation can be found in the Investors section of our website at www.lanzatex.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. We 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 measures. Today's call will begin with remarks from Jennifer providing an overview of Lamsa Tech and our recent financial results. She will also highlight some key accomplishments and review our strategic objectives. Jeff will then review in greater detail our financial results from the first quarter. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Jennifer.

Thank you, Omar, and thanks to all of you for joining us today. I'm honored to represent Lamsa Tech's approximately 400 employees around the globe. on our inaugural earnings conference call. While Lancetec has a rich history going back nearly two decades, we have a relatively short tenure as a public company. So we thought it would be helpful to begin today by providing an overview of our company and our progress towards our strategic and commercial goals. I will provide context about our mission, how we got here, an overview of our financial and operational results for the first quarter of 2023, and share an outline of our strategic priorities. Jeff will then follow with a more detailed discussion of our first quarter financial results and our outlook for the remainder of the year. Today, we're faced with a seemingly impossible challenge. We need to disrupt and completely overhaul our current carbon economy. That's easy to say, but it's quite difficult to do when you consider that fossil carbon is not just found in gasoline and power, Fossil carbon is in everything we use in our daily lives. Unfortunately, in 2023, this carbon economy is not fit for purpose because we now understand the negative impact of wasted carbon, of putting carbon on a one-way street into our atmosphere, into our landfills, and into our oceans. To avoid potentially catastrophic consequences, we absolutely must stop adding carbon into our atmosphere. To do that, we must transition to a circular carbon economy. And that is what Landsat does. As you'll see in slide four of the presentation, we have developed and commercialized a technology platform that utilizes waste carbon resources to produce the fuels and chemicals we need in our daily lives. This is the very definition of a circular carbon economy. While many companies talk about sustainability goals in terms of their plans for the future, I'm proud to say that 100% of Landsat Tech revenues are generated by providing sustainable solutions today. We are focused on the goal of reducing the need for humans to constantly mine fossil carbon, while at the same time maintaining production of the goods that define modern life. What Lancetec does is nothing less than miraculous. Over the last 18 years, we have built this company out from little more than a benchtop biology experiment in a New Zealand lab to a global technology company that allows its customers, the partners for whom we design facilities and to whom we supply microbes, equipment, and services to turn decarbonization from a cost center into a profit center. We have been able to do this while creating a new platform technology that redefines where the carbon in everything we use comes from. In fact, we use carbon pollution as our carbon resource. Our vision has been so compelling that now we must continue to grow to satisfy expanding demand. Demand for engineering services, demand for contract research services, and demand for the carbon negative chemicals building blocks that constitute the products that we call carbon smart. Carbon smart products are those that are made from recycled carbon, carbon that would otherwise pollute our planet. We foresee that someday consumers will have an obvious choice of where the carbon in their products comes from, recycled carbon instead of fresh fossil carbons. This choice will be no different than opting for fair trade coffee or organic milk. And we are already making such products available with laundry detergents and apparel made from steel mill emissions available today on store shelves. Slide five is a simple illustration of this point, highlighting the items in our home that are currently derived from fossil carbon today. including our clothes, our cosmetics, our toys, our packaging, and an endless list of home goods. Creating a new paradigm is not easy. It has taken Lancetec nearly two decades to prove the risk and commercialize its core carbon transformation technology, which enables carbon to be reused rather than be wasted. We leverage the power of biology, chemistry, and cutting-edge engineering to transform greenhouse gases into the chemical building blocks of the products we use in our daily lives. At the core of our technology is a specialized microbe that consumes diverse carbon resources from hard-to-decarbonize processes and metabolizes them into the critical building blocks upon which so many consumer products are based. Similar to the process by which yeast consumes sugar to make alcohol, our microbe consumes carbon in the form of either carbon dioxide or carbon monoxide and produces ethanol can be used as a chemical intermediate for a wide variety of applications. In addition to our commercial microbe, we've engineered and optimized the design of a proprietary bioreactor in which the process takes place on a continuous basis. very much like a refinery unit. We've built our business around the mission of deploying this technology through licensing partnerships across the globe with key players in a wide variety of industries. As of today, Lanza Pet Technology is deployed at three commercial facilities. To date, these facilities have produced over 160,000 tons or 54 million gallons of ethanol, resulting in the mitigation of over 275 thousand tons of carbon dioxide from the atmosphere. The equivalent of CO2 emissions from over 28 million gallons of gasoline consumed. Our designs and engineering expertise have been so well received across many hard to decarbonize industries that we are seeing tremendous demand from asset owners and growth in our commercial pipeline. As a response, we expect more than double our installed main plate production capacity by the end of this year with an additional three licensed commercial scale plants coming online in new geographies, including in India and the European Union. These projects include a facility utilizing oil refinery off-gas in India with partner Indian Oil, a facility using steel mill off-gas in Belgium with partner ArcelorMittal, and a facility utilizing ferroalloy off-gas in China with partner Shogang Steel. Once all are operational, the cumulative installed capacity of our partner's licensed facilities will be approximately 300,000 tons per year of ethanol production, approximately double of where we ended last year. This is the equivalent of removing over 500,000 tons of CO2 from the atmosphere every per year, or comparable to removing approximately 100,000 passenger cars from the road each year. This is the start of our journey to realize our potential to evade gigatons of carbon through our technology. In 2022, we generated over $37 million in revenue, representing a 1.5x increase over 2021. As outlined on slide 9 of the presentation, We have had significant growth over the last few years, as seen in the approximate 27% compounded annual growth rate of our revenue from 2020 to 2022. We expect continued growth in the quarters and years ahead. Recent commercial operations position as well to accelerate deployment of our technology over the near and medium term. In the first quarter of 2023, we saw growth across our business, as our revenue continue to expand year on year to reach 9.6 million, which is consistent with our 2023 plan and 2023 revenue guidance. As we look ahead over the rest of the year, we are focused on execution and commercial project development and deployment. As you'll see on slide 10, we have the right executive leadership in place to deliver on our commercial growth objectives. Our commercial team is led by our chief commercial officer, Dr. Stephen Steinle, who joined us in May 2022, following more than a 30-year career as a leader in the global petrochemicals industry. Most recently, Stephen served as the president of Univation Technologies, a joint version between Dow and ExxonMobil Chemical. Stephen brings a wealth of experience scaling and licensing technologies across broad global portfolios and the technical knowledge to help take the chemicals portfolio in new direction. Over the course of last year, we saw great demand for our decarbonization solutions from several strategic infrastructure investors. We believe that infrastructure investment partners attracted to our diverse technology and profitable carbon abatement offer could provide Landsat Tech with sophisticated and flexible project financing capabilities that will allow us to deploy our technology more rapidly and more broadly. In October of 2022, we announced a strategic partnership with Brookfield Renewable, whereby Brookfield committed up to $500 million in commercial project equity with the ability to add more capital, up to $1 billion to fund commercial deployments. As outlined on slide seven, our partnership with Brookfield will enable us to take a more active role in commercial development for select opportunities, allowing those facilities to advance more quickly and catalyze our deployment. Lansatec will have access to up to 50% of the production volumes from any facility built through our partnership with Brookfield to place into our Convern Smart supply chains or use as feedstock for the production of sustainable aviation fuel through the Landsat jet alcohol to jet process. Landsat will also participate in the economic upside, capturing additional value from the performance of the commercial facilities when Brookfield has achieved certain return hurdles. In addition to being an investor in Landsat, Brookfield is an invaluable commercial partner for us, and we look forward to unlocking significant value in bringing strategic commercial facilities online together. To help facilitate this, we were excited to recently announce the addition of Ms. Aura Cuellar as our new Executive Vice President of Growth and Strategic Projects to lead and accelerate commercial and capital deployment in partnership with Brookfield. Ms. Cuellar joins us from Shell, where she has spent nearly her entire career most recently as the Vice President of Energy Transition and Head of Capital Projects and Turnarounds for Shell U.S. Ms. Cuellar has a record of running and implementing large-scale capital projects for the refining and chemical sector. We look forward to her leadership as she stewards this important partnership and business unit for Lancetec. With Aura and Stephen's leadership, Lancetec is strongly positioned to deploy our technology rapidly and globally through our capital licensing model. Our commercial and engineering teams are focused on advancing the more than 80 identified potential licensing projects in our pipeline through the various development stages into commercial operation. Our business model for the biorefining project produces revenues for Landsat Tech throughout the project's life cycle, very similar to other technology licensing businesses. Our approach enables us to capture both one-time and recurring revenues. First, we realize one-time revenues during the development stage through engineering services and sales of equipment. During the operational stage, we realize long-tail recurring revenues through licensing priorities, sales of microbes and media, as well as through sales of software and analytical services. we are constantly working to improve and drive efficiencies in our process. As a result, we are pleased to have scaled and further validated the performance of Landsat Tech's second-generation bioreactor technology at a demonstration scale in partnership with Emissions Reduction Alberta and Suncor. The second-generation bioreactor design operates at greater efficiency and at a lower operating cost allowing us to utilize more waste streams, expanding our pipeline. Core to our process is biology. We have been able to leverage biology's innate ability to capture and transform the carbon and diverse waste gases into products. On a commercial scale, our licensing partners are producing ethanol while profitably abating and decarbonizing their production processes. This ethanol can be converted into multiple building blocks such as ethylene, one of the most widely used petrochemicals in the world, with a market value of approximately $125 billion in 2022. Ethanol can also be converted into monoethylene glycol, MEG, an ingredient in the manufacture of PET, with a total addressable market of approximately $30 billion in 2022. As such, the ethanol is the basis for all the consumer products our partners have manufactured to date. Through paid, contracted work, our world-class synthetic and computation biology teams are working on commercializing the portfolio of next-generation microbes that will enable the production of a wide variety of chemicals directly using our platform. For your reference, direct production of chemicals means we are producing these chemicals directly from waste and not indirectly through ethanol. At demonstration scale, we have been able to directly produce carbon negative acetone, a key ingredient for solvents, lacquers, and textiles, as well as carbon negative isopropanol, the building block used to make polypropylene, a key material in multiple sectors, including automotive and for medical devices. with a market of over $120 billion in 2022. The ability to go beyond the production of ethanol will increase our total addressable market and allow us to access new markets. In addition, we recently announced the ability to transform waste carbon gas directly into ethylene and energy, rather than through the conversion of ethanol. By going from waste directly to these products, we should be able to achieve significant cost reductions in the production of these widely used commodity chemicals. We are not pursuing niche specialty chemical markets. The ethylene market is anticipated to surpass $287 billion by 2030, while MEG is expected to reach nearly $40 billion by 2030. In leveraging advanced manufacturing technologies such as synthetic biology, We are targeting direct production of these bulk chemical commodities to bring consumer everyday goods into the circular economy. We believe this commodities focus will have a significant impact in the lives of billions of people daily, and by reducing costs, enable access to sustainable solutions. no matter how much you earn or where you live. Landsatac therefore represents an exceptional opportunity to implement meaningful carbon removal in a distributed and decentralized fashion from waste resources and to create sustainable synthetic chemicals that we believe can replace fossil carbon. Fundamental to our mission is the belief that the world has enough carbon above ground to make everything we need. And we are delivering on that mission. The ethanol from our licensed plants has been converted into the chemical building blocks to make polyester yarn, PET packaging, surfactants, and many other products representing a potential market of over $335 billion per year. In 2022, we announced the expansion of our core business model to include CarbonSmart. In our CarbonSmart business, we partner with brands to provide sustainable materials alternatives to materials in their existing supply chains. As an example, we have partnered with consumer brands such as Zara, H&M Move, Nobel, and Unilever, and have seen these products sold in global markets. The demand pool we are seeing for sustainable products and materials creates an enormous demand for further licensing of our technology and engineering services. In addition to products and materials, we believe that sustainable aviation fuel, or SAF, as it's often referred to, produced through the Landsat jet alcohol digest process will create a massive demand pool for waste-based ethanol. In 2020, we formed and spun out Landsat jet following over a decade of process technology development in partnership with the U.S. Department of Energy and the Pacific Northwest National Laboratories to convert alcohol to a sustainable aviation fuel. We retain an approximate 25% ownership in LandsatJet, supported by co-investors and partners, including Omicron Airways, Breakthrough Energy, International Aviation Group, the Microsoft Climate Fund, Missourian Company, Shell, and Suncorn Energy. Together, we are pleased to see the progress LandsatJet is making towards the completion of the construction of the world's first a funnel-based alcohol-to-jet sustainable aviation fuel plant at the 10-million-gallon-per-year Lansing Jet Freedom Pines fuel facility in the state of Georgia, which is slated to be completed in 2023. Once operational, this facility will account for almost 10% of global SAF production and will increase production of SAF in the United States by 60%. Sustainable fuel offtake agreements are in place to cover 100% of the fuels produced at this site for the next 10 years, including agreements in place with Suncor, British Airways, ANA, and others. It has been a tremendous journey over the past 18 years, but one of the most monumental achievements in the company's history occurred just a few months ago in February as we closed our business combination with AMCI Acquisition Corp 2 and became publicly listed on the NASDAQ as Landsat Tech Global Inc., Through the business combination, which is summarized on slide 12 of the presentation, Lanza Tech raised $242 million in gross proceeds. In addition to the cash left in the SPAC trust account, following redentions, net of the forward purchase agreement, this amount includes $185 million from the common equity pipe anchored by accredited investors, institutional buyers, and strategic partners, including ArcelorMittal, BASF, K1W1, Coastal Ventures, Mitsui, New Zealand Superannuation Fund, Oxy Low Carbon Ventures, Plyne Metals, SHV Energy, Trafigura, as well as a $15 million investment from our strategic infrastructure investment partner, Brookfield. We expect that the proceeds raised from the transaction will fully fund the business through to positive adjusted EBITDA by the end of 2024. And we are heads down as a company working to execute on our plan I would like to thank all of our partners and investors for believing in us and helping us get to this point. Since going public in February, we have made several exciting announcements regarding our carbon smart business, some of which you can see summarized on slide 13. Notably, Cody, one of the world's largest beauty companies with an iconic portfolio of brands, released a new Gucci fragrance that contains 100% carbon-captured ethanol. Separately, H&M Moved partnered with Lands Effect to launch a capsule collection using ethanol produced through our process as the building block for the polyester in their garments. Adidas recently introduced collections including the Melbourne Tennis Collection at a serial over Summit 4 and Adidas by Stella McCartney, True Nature Collection, all utilizing raw materials that started as industrial emissions before being carbon and transformed by the Lancetec process. This broader acceptance of the value of using recycled carbon as a feedstock has the potential to significantly accelerate the growth of our business. Turning to portfolio expansion, we were recently awarded and initiated new R&D projects in partnership with multiple government agencies including the U.S. Department of Energy and the U.S. Department of Defense, highlighting our continued focus on expanding and improving our capabilities. The team has also expanded Landsat's experimentation portfolio, recently demonstrating a 400-fold increase in the direct production of energy at lab scale. We remain focused on continuing to optimize the direct production of other commodity chemicals, including acetone, ethylene, isopropanol, and MEG. Indeed, in 2023, one of our strategic priorities, as outlined on slide 16, is to operate at least one non-ethanol-producing micro at the demonstration scale outside of our development facility. To truly change the current system by which everyday items are produced, we are targeting the supply chains that underpin our material economy. By pursuing these massive commodity chemical markets and using waste carbon as a resource, we believe we can create a new carbon economy whereby cost-competitive supply chains provide access to sustainable goods for everybody, not just the first movers nor the wealthy. By increasing access to these sorts of sustainable products, we believe much more carbon will be evaded. We have grown to approximately 400 full-time employees with offices across the world. Throughout this tremendous growth, safety has remained our central operating focus. We are proud that 2022 marked our fourth consecutive year without a lost time injury. This trend carried over into the first quarter of 2023, as we not only had zero lost time injuries, but also zero recordable injuries across our global operations. Diversity and inclusion are core to our values as a company, and we have not lost sight of this as we've grown. I'm proud that our board of directors is comprised of greater than 40% women, and that with the addition of Ms. Araquea earlier this month, our executive team is now majority women. Additionally, we're proud that over 60% of our technical leadership team is comprised of women. Approximately 48% of our global work is ethically diverse, and approximately 35% of our U.S.-based workforce is comprised of underrepresented minorities. Our commitment to diversity is one of our strengths. We're committed to fostering a diverse, equitable, and inclusive workplace where people of all cultures and backgrounds can succeed. Our people are our greatest asset. Diversity matters for advancing innovation, and we will continue to prioritize growing a global team that is representative of those our technology serves. Before turning it over to Jeff to walk through our financial results in greater detail, I want to go back to our five strategic priorities for 2023, which are outlined on slide 16 of the presentation. First, And as I mentioned earlier in my remarks, safety is a critical operational focus, and we are focused on having zero lost time injuries across our global sites. I am proud to say that this focus has thus far resulted in four consecutive years we had a lost time injury. We have a global team and global sites, including commercial scale facilities, and have implemented several training, tutorials, and audits across our organization to to ensure we continue to prioritize a safety-first mindset. Second, we are focused on our path toward profitability. We expect that through our anticipated top-line growth and disciplined cost management, we will achieve this goal. We will continue to focus on accretive opportunities and accelerate the deployment of our technology platform, significantly improving margins as our revenue mix shifts towards recurring bio-refining revenues over the long term. Through focused execution on our plan, we anticipate that the company will turn adjusted EBITDA positive by the end of 2024. Third, we are committed to growing our total installed main plate production capacity by 100% to approximately 300,000 tons of waste-based ethanol per year. As mentioned previously, there are three commercial scale plants that are expected to start up in 2023, and with those startups, we will further expand the commercial reach of our technology. Fourth, we are focused on moving the more advanced project through our current pipeline backlog and anticipate that sales of engineering services, key equipment packages, and expansion of our carbon smart business will contribute meaningfully to revenue throughout the remainder of the year. This is evidenced in our 2023 revenue guidance of $80 to $120 million dollars. which we introduced earlier this year and reflects year-over-year growth of approximately 2.7x at the midpoint. We are also focused on further developing and advancing the project pipeline for earlier stage projects to move those through to key revenue generation milestones in 2024, which supports our goal of doubling annual revenue in 2024 relative to our already strong 2023 growth expectations. Finally, We continue to prioritize process optimization, focusing on driver greater profit per ton of carbon dioxide abatement facilities and accelerating deployment of our technology, maximizing carbon abatement potential. The Lancet solution shifts our partners' focus to assess the profit per ton of carbon abated in their operations rather than the cost per ton associated with most other carbon abatement solutions. We provide this profitable decarbonization solution for our partners today, but we are working collectively across all teams to drive further efficiencies and profitability for our customers in the future. Additionally, as previously mentioned, we are focused on demonstrating at scale the application of non-ethanol producing microbes. With that, I'll turn the call over to Jeff to provide details on our financial performance and outlook, and then I'll come back with a few closing remarks. Jeff, Please go ahead.