LanzaTech Global, Inc.

And welcome to Lanza Tech Global Inc. second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later in the call, there will be a question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two. Also, today's call is being recorded, and I will be standing by if you should need any assistance. And now, at this time, I'll turn things over to Kate Walsh, Vice President of Investor Relations and Tax. Please go ahead.

Good morning, and thank you for joining us for the Lancetec Global, Inc.' 's second quarter of 2024 earnings conference call. On the call today, I am joined by our Board Chair and CEO, Dr. Jennifer Holmgren, and our CFO, Jeff Truckenbrook. Earlier this morning, we issued a press release with our second quarter of 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 10Q for the quarter ended June 30, 2024, filed today. Both our press release and investor presentation can be found in the Investor Relations section of our website at www.lanzatex.com. Before we begin, I'd like to direct you to the disclaimers in the front of our investor presentation and remind you that today's call may include forward-looking statements. Any statement 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 current recent filings with the Securities and Exchange Commission which identify the principal risks and uncertainties that could affect our business, prospects, and future results. Unless required by law, 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 financial measures to their most directly comparable GAAP measures. Today's call will begin with remarks from Jennifer, providing an overview of our operations, our recent financial results, and our business outlook. Jeff will then review in greater detail our financial results and financial outlook. Jennifer will then conclude with a few closing remarks before we open up the line for questions. With that, I'd like to turn the call over to Jennifer.

Thank you, Kate, and thanks to everybody joining us today. We appreciate your ongoing interest in and support of Lancetec. I'd like to begin today by sharing several highlights from the second quarter, as well as an update on our key projects and future outlook. I will then pass it over to Jeff to give a more detailed view of our financial performance and position. On slide four of our latest investor presentation, we have outlined the key takeaways from this quarter, and I'll summarize it all with one word, progress. We're making progress on several fronts, and I'm proud of what our team has accomplished. First, we delivered solid financial results for the second quarter, which were ahead of expectations. Revenue was $17.4 million for the quarter, representing 35% growth year over year. Adjusted EBITDA loss was $17.8 million for the quarter, a significant improvement relative to the prior year and to last quarter. These strong results were driven by our core biorefining licensing revenue, and in particular, revenue from engineering services and our arrangement with Landsat Jet, which allows them to exclusively sub-license our alcohol to jet technology. Second, we continue to execute on all key aspects of our business, including biorefining projects, joint development and contract research engagements, and carbon smart initiatives. Let me give you a few examples. One, our carbon dioxide conversion project with NTPC in India resulted in equipment revenue associated with the order of long wheel items, enhancing our confidence that this power to ethanol project will enter the construction phase during the second half of this year. Additionally, we moved several new projects to early stage engineering across multiple feedstocks and geographies, showing the flexibility of our technology. Adding to that, our carbon smart business continued to be active with existing customers such as Lululemon, REI, and Cody bringing new products online and our commercially available carbon smart yarns becoming part of brand supply chains rather than only being used in limited one-off collections. IKEA recently disclosed a long-standing collaboration with us to develop new manufacturing routes to the products from industry emissions, specifically focusing on polypropylene materials. And we also completed our first pure play carbon smart fuel sales. Putting the right licensing structure, partners and supply chain infrastructure in place required significant effort. So we're very happy to have reached this milestone. These direct fuel sales build on our existing carbon smart business that requires our ethanol to undergo further processing or purification before being supplied to our textile, chemical, and plastics customers. Overall, we're pleased to see such tremendous progress this quarter in our base business. Moving to the third highlight of this quarter is We increase our ownership in Landsat Jet by nearly two-thirds to 37%, up from 23% without the need for any capital contribution for Landsat Tech. Landsat Jet and the exciting work it is doing to advance the sustainable aviation fuel market continues to show substantial progress on multiple fronts while benefiting from continued significant macro tailwinds. Fourth, we're excited to announce a $40 million investment from a new investor, Carbon Direct Capital. This strategic capital raise will support our path to profitability and support our working capital needs as we further scale our business. And fifth, we continue to expect revenue for the year to be between $90 to $105 million, with second-half revenue being heavily weighted to the fourth quarter. Jeff will provide more details on our latest financial outlook, including greater detail on the breakdown between the third and fourth quarter in his remarks. Now, for a few more details on these highlights, I mentioned the new project with NTPC, which is India's largest power generation utility company. NTPC and Jackson Green, their engineering procurement and construction partner, planning to use our second-generation bioreactor to biorefine carbon dioxide with green hydrogen to produce valuable fuels, chemicals, and raw materials. Having proven we can use carbon dioxide in a refinery setting within the NREL Corporation, we're expanding that ability within TPC to a feedstock stream where CO2 is the only carbon source available. In fact, Lansatec can convert CO2 with the addition of hydrogen, ideally made from green energy, in our carbon capture and utilization platform. NTPC's carbon recycling facility is designed to showcase the readiness of Lansatec's technology for regions that are transforming the power sector and, in turn, enabling the widespread production of sustainable fuels, chemicals, and raw materials from CO2. This is an inspiring example of the elusive power to X made real. As mentioned earlier, we continue to realize the value of our LanzaJet shareholding through our increased ownership in and continued collaboration with LanzaJet. By way of background, this increase in LanzaJet ownership was always part of the plan that we put in place for the commercialization of the alcohol to jet or APJ process when we spun LandsaJet off into a standalone business four years ago. Our agreement with LandsaJet allowed them to develop the world's first commercial APJ plant and allows them to further sub-license the APJ technology that was originally developed by LandsaTech in collaboration with the Pacific Northwest National Lab and the U.S. Department of Energy. With LanzaJet's success in licensing the ATJ technology, in June, we received the first of what is anticipated to be a total of three additional tranches of LanzaJet common stock. The first tranche received in June increased our LanzaJet ownership to 37%, up from 23%, and was related to a sub-license issued to Jet Zero Australia. Jet Zero Australia is developing Australia's first ethanol-to-sustainable aviation fuel plant, and Landsat Freedom Pines Fuels Facility, located in South Brooklyn, Georgia, is the reference plant for the project. We expect to receive the other two tranches of shares as Landsat Jet further commercially sub-licenses our technology, which is projected to result in an ownership stake in Landsat Jet above 50%, subject to dilution from potential Landsat equity financing events. Given the projects and opportunities Landsat is working on, we have a line of sight to upcoming sub-licensing events and expect an additional equity tranche within the next six months, with the third expected during 2025. Adding to the benefit of our increased ownership percentage is that we believe Landsat continues to grow its own enterprise value. This is due to the upcoming production of the first ever commercial quantities of SAF from an APJ process at Landsat Jets Freedom Pines fuel facility. From the development of an execution on a robust pipeline of APJ sub-licensing opportunities, and from the recent additions of multiple world-class co-investors, including Airbus, Group ADP, Microsoft Climate Innovation Fund, MUSG, Southwest Airlines, LanzaJet is growing quickly. Commercially, LanzaTech and LanzaJet are actively collaborating on several projects whereby commercial partners are expected to deploy both the LanzaTech and LanzaJet platforms in order to convert local waste resources to drop in sustainable aviation fuel. The sustainable aviation fuel produced through the combined processes is capable of reducing aviation emissions by at least 85%. depending in part on the waste-based feedstock selection. Let's be clear that every carbon-rich waste feedstock from solid carbon, including carbon locked in municipal solid waste or biomass, industrial off-gases, including those rich in CO2, to carbon and biogas, can all be converted to SAF in this way. The robust pipeline of opportunities that exist for this type of collaborative waste-based fuel solution is expected to be a significant demand driver for our biorefining business and a key pathway for Lansatec to license its technology. To facilitate delivering these projects, Lansatec and Lansatec launched our joint offering called Circulair. Circulair is a coordinated commercial offering and powerful end-to-end solution utilizing Lansatec's gas fermentation platform in conjunction with Lansatec's APJET platform to produce sustainable aviation fuel and renewable diesel from a wide range of waste seed stocks. Scaling SAF for urgency is critically important for aviation, a hard-to-abate sector representing 3% of today's global CO2 footprint. In 2023, a mere 0.2% of global aviation fuel volumes was SAF, but this is expected to jump to 1% in 2026, and to 10%, or approximately 10 billion gallons in 2030. The enormous scale-up of the SAF industry necessary to meet this demand is also benefiting from recent regulatory tailwinds around the world that support the use of a variety of waste feedstocks to meet that end. This supports rapid build-out of technologies like Lansatec that can flexibly use locally available feedstocks to suit regional conditions. Circulaire builds on the undeniable momentum behind scaling SAF production globally and the large opportunity set available to our two companies. You'll hear more about Circulaire in the coming months as we expect to announce some important current projects with LancetJet. I also want to take a few moments to give an update on Project Secure, a major initiative which we announced in March of this year. By way of background, Lanzatec and our partner, Technique Energies, were selected to receive a $200 million award from the U.S. Department of Energy's Office of Clean Energy Demonstrations. The award is for the construction of a new Lanzatec gas fermentation facility, which will be integrated with Technique Energies' Hummingbird ethanol to ethylene technology and an existing steam cracker in the U.S. Gulf Coast. Importantly, this is not an R&D project. The R&D and related investments are complete. The funds from this award will aid in reducing the capital expense for this first-of-a-kind commercial facility. Project Secure represents a highly replicable project opportunity set for Lanzatec, as there are more than 370 Eflin steam crackers across the world, and our decarbonizing solution efficiently bolts onto that existing infrastructure. On the feedstock front, no new fossil feedstock is being brought in to produce more ethylene. Rather, we're generating more ethylene for the producer from what would have been their CO2 waste emissions. Ethylene is often referred to as the world's most important chemical, given its use as a key building block in countless products we use every day, from clothing to packaging to foam and jet fuel, and is expected to be a $200 billion market by 2030. 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 solutions like what Landsat provides. With our combined solution, we take those emissions and convert them into valuable product. This maximizes the use of the carbon molecules going into that facility, enabling our customer to increase their profits by being more resource efficient. We're currently working collaboratively with the DOE on the agreement for the project and anticipate completing the award contracting process in the coming months with the goal of receiving initial award funds by the end of 2024. I'll touch now on a highlight I mentioned at the start, and that's the work we're doing with IKEA related to polypropylene. We're working with IKEA to convert waste carbon-rich gases to isopropyl alcohol and then to propylene. Polypropylene is a very versatile and durable plastic with many different uses, and customers like IKEA are interested in applications where mechanically recycled plastic cannot be used today. For example, transparent products, products requiring food contact, or other products with very strict requirements, including medical applications. Today, 100% of new propylene in use worldwide is made from petrochemicals. Replacing all of the world's fossil propylene production with carbon capture and utilization made polypropylene would reduce carbon emissions by an estimated 700 million tons per year or more. The global propylene market size was a little over $120 billion in 2022 and is expected to expand at a compound annual growth rate or CAGR, of close to 5% from 2023 to 2030. We talk a lot about the anticipated growth I had for Lanzapag related to SAF, and it's my belief that our work with chemicals could grow in tandem with SAF and be just as big. This is not just an idea. In fact, we produced sufficient isopropanol for IKEA to make food storage containers as a proof of concept. We also completed the development work on our isopropanol process, which means we should be ready to license that technology this year. Our progress is not only driven by growing revenue. It is also underpinned by our commitment to manage costs across the organization. And the cost savings we expect from our reorganization and from our reprioritization earlier this year are starting to show up in our results. Stepping back from the specifics of the many important projects and developments I have discussed, I want to address a question that I'm frequently asked by customers, partners, investors, thought leaders, and stakeholders. And the question is, what is Lancetec's competitive advantage? Or stated differently, what gives you confidence that Lancetec will be successful over the long term? And while there are many reasons to stand out, Number one, we have a commercially proven and diverse technology with six commercially operating facilities. We're not only ramping up production volumes and generating licensing revenues, but we also have over half a decade of operational experience at commercial scale. This extensive know-how allows us to partner with an impressive roster of customers, innovate continuously, and build more commercial scale facilities. Later this year, we expect to see announcements regarding repeat licensees and customers as we continue to move from first of a kind in a region to a series of plans with existing partners. Number two, the flexibility of our technology. Our ability to utilize a diverse range of waste feedstocks such as municipal and industrial waste, agriculture and forestry residues and industrial off-gases ensures a commercial scale low-cost supply of inputs globally, allowing us to benefit from regional variations in feedstocks and produce valuable ethanol for major markets in sustainable fuels, textiles, plastics, and chemicals. We are a business built on a platform which has led to sufficient interest to enable a licensing model and we are building a strong recurring revenue foundation brick by brick with each license that we deploy. As I said at the start, we are making undeniable progress and that to me and to all of us here at Landsat Tech is very satisfying. With that, I'll turn it over to Jeff.