LanzaTech Global, Inc.

Good day and welcome to the Lancer Tech second quarter 2023 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw a question, please press star then two. Please note, this event is being recorded. I now hand the conference over to Omar El-Sharkavi, Vice President of Corporate Development. Please go ahead.

Good morning, and thank you for joining us for Lanzatec Global, Inc.' 's second quarter 2023 earnings conference call. On the call today, I'm joined by our Board Chair and CEO, Dr. Jennifer Holmgren, and our CFO, Jeff Treppenbrough. Earlier this morning, we filed with the SEC our quarterly report on Form 10-Q for the quarter ending June 30, 2023, and issued a press release with our second quarter 2023 financial and operating results, as well as an investor presentation summarizing the company's performance and key operational highlights for the quarter. Both our press release and results summary investor presentation can be found in the investor relations section of our website at www.landsoftech.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 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 and update on our 2023 execution priorities, including our recent financial results. Jeff will then review in greater detail our financial results from the second quarter and provide additional insight into our business model and growth of the business. 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 everyone for joining us today. As we continue our mission to recycle the world's waste carbon supply, the urgency of acting on climate change and creating a circular carbon economy is becoming increasingly evident. In the second quarter alone, the effects of climate change, exacerbated by the early return of El Nino, have impacted countless lives and caused vast commercial disruption globally. According to the U.S. National Oceanic and Atmospheric Administration, NOAA, the cost of climate and weather disasters in the United States alone last year totaled more than $165 billion. This data demonstrates how important it is to advance sustainable business models that align commercial, social, and environmental strategies. Our work is centered around reorienting how the world uses waste carbon and in a way that creates value. Lanzatec's performance this quarter demonstrates that we're continuing to make progress. Within this fiscal year, the annual installed production capacity enabled by Lanzatec's technology will capture roughly twice the amount of carbon as it did last year. We're doing this not by the old paradigm of scaling up, but by numbering up, which means local execution on a global scale. This approach translates into the utilization of locally sourced raw materials so that every country can secure and benefit from its own domestic supply chain. Turning now to our results and with the first half of the year completed, I'd like to share our second quarter results within the framework of our 2023 execution priorities as outlined on slide five of the presentation. First and foremost, safety. In the second quarter, we had zero lost stem injuries and zero recordable injuries across our global operations, from our offices and laboratories to our commercial scale plants. Second, global production. We are on target to grow our commutative installed main capacity by over 100% over 2022 capacity to more than 300,000 tons per year or approximately 100 million gallons per year by the end of 2023. You can see this on slide seven. Importantly, this capacity growth includes expansion of the geographic footprint to include India and the European Union. In India, alongside a partner, Indian Oil will continue to make progress towards full production of our 33,500 tons per year commercial facility that will convert carbon dioxide rich refinery off gases into ethanol. This is the first commercial deployment of our technology in a refinery using a refinery off gases. In Europe, with our partner, ArcelorMittal, initial samples of ethanol were produced at the 64,000-ton-per-year facility in late May. Commercial-scale ethanol production from the bioreactors is expected to follow in the fourth quarter. In China, a 60,000-ton-per-year facility at a ferroalloy mill successfully started up in the second quarter. This project marks our fourth facility where our joint venture partner, Shougang, and it is currently ramping up to full-scale commercial production. Once these three additional commercial plants are fully operational, the cumulative installed nameplate capacity of our existing and new commercial-scale facilities will equate to removing over 500,000 tons of carbon dioxide from the atmosphere every year. This is what gives me the confidence that Lansatec will be a gigaton-scale solution for carbon abatement. something that the planet urgently needs. Turning to Sustainable Aviation Fuel, or SAF, Landsat Jet continues to make progress towards the 2023 completion of the world's first ethanol-based alcohol-to-jet SAF plant at the Landsat Jet Freedom Pines Fuels Facility in Georgia, as you can see on slide 8. Once operational in 2024, this plant will produce 10 million gallons per year. In addition to the development that Freedom Pines fuels, Lanza Jet has made tremendous progress and continues to be extremely well positioned in the SAF market. Earlier this year, Lanza Jet entered a memorandum of understanding with Indian Oil to explore the development of SAF production in India. And in March, they announced a collaboration with Jet Zero Australia for the first alcohol to jet production plant in Australia. Most recently, LandsatJet entered an MOU with Airbus to advance the building of SAF facilities which will use the LandsatJet ATJ process. This agreement also represents a collaboration to accelerate the certification and adoption of 100% drop in SAF, which would ultimately eliminate the use of fossil fuels without necessitating any changes to existing aircraft or infrastructure. In addition, this would eliminate the need for aromatics in aviation fuel, which will bring in additional benefits, including the reduction of contrails and particulate emissions, as shown by our 2021 study with NRC Canada. We are proud of the work Landsat Jet is doing, and as a meaningful shareholder of the business, are excited about the position they're building as a leader in the SAF market. Together with LanzaJet, we're also making strong progress in advancing several other SAF projects that will utilize waste-based ethanol feedstock produced through the LanzaTech platform. These projects include our SAF project in the United Kingdom, which received a $30 million grant from the UK Department for Transport late last year. For this project, LanzaTech selected Technipe Energies as the technology provided and awarded Fluor Corporation the contract to provide front-end engineering and design for the project. In addition, Air New Zealand and the New Zealand Ministry for Business Innovation and Employment awarded Lanza Tech and Z-Energy, a wholly-owned subsidiary of Ample Group, and New Zealand's largest fuel retailer, a feasibility study to convert local New Zealand waste products into ethanol and then utilize that ethanol to produce SAF. SAF is a critical part of the global energy transition, and we're proud to be helping the aviation industry reduce its carbon footprint without impacting land, water, or food resources. Let's turn now to our third execution priority, commercial growth. The demand driving our capacity increases is also resulting in robust revenue growth for our business. we saw year-on-year revenue growth of 31% to $12.9 million for the second quarter. This revenue performance for the first half of the year was in line with our projections and is consistent with our previously provided revenue guidance of $80 to $120 million in 2023. However, with more than half of calendar 2023 behind us, we're tightening our 2023 revenue guidance to $80 to $100 million. The updated and narrowed range reflects greater visibility into the expected timing of projects that we're currently executing, and it continues to reflect the back-end weighing associated with our 2023 forecast. The revenue associated with the higher end of our original revenue guidance range now moves into 2024, further bolstering our 2024 growth outlook. Our commercial pipeline continues to grow as outlined on slide 10, setting the stage for a very strong 2024 and beyond. We continue to add projects to the pipeline funnel and are seeing steady progression of individual projects through the pipeline, moving through various stages of engineering. In fact, we saw two projects progress to the advanced engineering stage during the second quarter and anticipate several additional projects will move into advanced engineering through the second half of the year. Let's now look at our short, medium, and longer-term revenue growth pictures. We are creating a new industry as we work towards a vision of a circular carbon economy, and each business line, biorefining, joint development and contract research, and carbon smart contributes to that goal. We are assembling a global ecosystem of participants from deployment partners such as Prime Metals Technologies and Technique Energies and key supply chain players including Fastipak and BASF to product developers like On, Zara, Cody, Adidas, and H&M Move, which resulted in product lines in stores this year, including a new Gucci fragrance that contains 100% carbon-captured ethanol. This ecosystem also includes waste processors such as StudWear in the Middle East and Nexkem in Italy. We're making progress with both partners with the engineering now complete on our project with Nexkem in Rome. With these partners, we plug into existing value chains to have immediate impact while we build a new circular material system. We acknowledge that bridging different industries means we don't fit squarely into single categories. So I hope that as we next go through our business lines, we can effectively break down how these different work streams are contributing to our revenue growth. Starting with our biorefining business line, we expect engineering services and sales of equipment packages on several key committed and contracted projects to drive revenue most significantly in the second half of 2023. on the engineering services side to expect continued significant contributions from our integrated gas fermentation and alcohol-to-jet SAF project in Wales, which we call Project Dragon, as well as from other projects with Bridgestone, Woodside, and several others. Initial equipment package sales are expected to commence in the third and fourth quarters this year, including on projects with Woodside in Australia, Gale in India, as well as on two other projects in India. For our carbon smart business line, we expect 2023 revenues to be multiples of our 2022 performance, fueled by planned commercial campaigns from brand partners across many consumer product verticals in the second half of 2023. In our joint development and contract research business line, we continue to see revenues committed or under contract contributing to the top line in the second half of the year, showing customer demand for solutions that lower the carbon footprints of their supply chains. As recent evidence of this customer demand, we recently signed a joint collaboration agreement with Technique Energies to create a new pathway to sustainable ethylene, utilizing our combined technologies. Just like with prime metal technology, we expect Technique to also serve as a channel to market, helping us better access the chemical sector. Longer term, our project pipeline is laying the foundation for strong revenue progression. Over the next several quarters, we will continue to be in the deployment stage as we advance projects through the pipeline. While Jeff will provide additional insight into the workings of our pipeline in a few moments, I'd like to highlight that the bulk of the near-term biorefining revenue will come from the sales of engineering services and equipment packages as projects move from early-stage engineering to to advanced engineering, and then from advanced engineering into construction. This is our numbering up strategy in action. Moving to our fourth execution priority, adjusted EBITDA. Given the strong momentum we're seeing across our business, we are reiterating our forecast to achieve positive adjusted EBITDA by the end of 2024 as our commercial pipeline continues to extend. Turning back now to recent performance, Adjusted EBITDA for the second quarter totaled negative $23.8 million, bringing the adjusted EBITDA loss for the first half of 2023 to negative $47.3 million. There are several cost factors that have contributed to the adjusted EBITDA loss during the first half of the year. First is talent. We expedited the expansion of key teams to support strategic growth throughout 2023 and into 2024, including in our engineering and strategic project groups. The development and expansion of these teams will accelerate project development across the board, but especially within our pipeline of projects that we are co-developing with Brookfield, several of which will enter early-stage engineering in the coming months. We look forward to making our first announcements on these projects very soon. In addition, we pride ourselves on attracting and retaining top talent across the organization. Like other companies, we're facing an increasingly competitive job market. This macro dynamic combined with a continued investment in people and our focus on retention has led to upward pressure on our overall compensation expense. Finally, We saw increased costs associated with moving ahead of schedule for demonstrations of our isopropanol-producing microbe at scale. Isopropanol is a chemical intermediate that can be used in multiple supply chains. For example, isopropanol can be used to make polypropylene, which had a 2022 market size of around $120 billion and has applications in numerous industries. including medical, automotive, packaging, building, and construction. This is a big deal, as the flexibility of commercial microbes will allow our partners to potentially use the same Lansutec biorefining hardware to switch between products, taking advantage of market fluctuations and demand cycles. We anticipate sharing more progress on this in the second half of the year. Given the updates to our forecasted full year 2023 revenue guidance, as well as the factors I've just mentioned, we're updating our 2023 adjusted EBIT guidance to a range of negative $75 to negative $65 million versus negative $65 to negative $55 million previously. Once again, we remain confident that our growth initiatives, along with continued investment in our people and resources, will support project deployments and growth over the medium term, supporting our continued expectation to turn adjusted EBITDA positive by the end of 2024. Moving on to our fifth execution priority, process competitiveness. Since the third quarter last year, our second-generation bioreactor has been in operation at a demonstration-scale facility in Alberta, Canada, where our partner, Suncor, This improved design does several important things. First, it improves production yields by up to 15% to 20%, which means greater revenues for our partners and for Lamb's Attack through ethanol sales and royalty revenue. Second, the design optimization reduces the cost for our partners, improving their return on investment. And lastly, as mentioned previously, we are ahead of schedule on the demonstration of a our isopropanol production microbe in the second half of this year. With that, I'll turn the call over to Jeff to provide details on our financial performance and share further insights into how to think about forecasting the growth of our business. Jeff, please go ahead.