Lanzatech Global, Inc. annual report, FY2023

LanzaTech Global, Inc. — FY2023 Form 10-K

Reporting period: Year ended December 31, 2023; comparisons are to FY2022 unless noted. Amounts are in U.S. dollars. The company develops and licenses gas-fermentation technology that converts waste carbon into ethanol and other products. Its business is partner-led: partners generally own and operate plants, while LanzaTech earns engineering, licensing, research, equipment and product revenue.

Financial performance and liquidity

Metric	FY2023	FY2022
Revenue	$62.6 million	$37.3 million
Net loss	$134.1 million	$76.4 million
Adjusted EBITDA, non-GAAP	$(80.1) million	$(69.2) million
Cash used in operating activities	$97.3 million	$84.7 million
Cash, cash equivalents and restricted cash at year-end	$76.3 million	$83.7 million

• Revenue rose 68%, principally from engineering and other services as projects advanced. Engineering and other services were $39.2 million, licensing $3.4 million, joint development and contract research together $14.6 million, and CarbonSmart product sales $5.3 million.
• Cost of revenue, excluding depreciation, was $45.0 million, implying gross profit of approximately $17.7 million and gross margin of approximately 28% (versus approximately $9.1 million and 24% in FY2022). These are calculated from reported figures.
• Operating expenses increased: R&D was $68.1 million, up 28%, and SG&A was $50.4 million, up 88%. SG&A included business-combination and other one-time professional and employee costs, as well as increased public-company and stock-compensation costs.
• Net loss widened 76%. Other expense included a $44.3 million non-cash fair-value loss on the Forward Purchase Agreement (FPA) liabilities; the company also reported $4.6 million in net interest income. Adjusted EBITDA is non-GAAP and should not be treated as a substitute for net loss.
• Year-end held-to-maturity investments were $45.2 million, all due within one year. Cash plus these investments totaled about $120.7 million. Current assets were $172.7 million and current liabilities $27.8 million.
• The company reported no conventional outstanding debt, but had significant financing-related liabilities: FPA put-option liability of $37.5 million, fixed maturity consideration of $7.2 million, and Brookfield SAFE liability of $25.2 million. Total liabilities were $127.2 million.
• Management said existing cash and cash equivalents were expected to fund operations for at least 12 months from the report date, while cautioning that actual cash use or financing needs could differ.

Material changes and operating developments

• Technology-enabled commercial capacity increased from 150,000 to 244,000 tonnes per year. Six partner-operated commercial plants were operating at year-end: four in China, one in India and one in Belgium. Three plants began commercial-scale operations during 2023.
• Thirteen additional facilities were in advanced engineering, with more in earlier development. Capacity and pipeline progress do not by themselves establish actual production, profitability or LanzaTech revenue.
• International revenue increased to $45.0 million, about 72% of total revenue, from $20.2 million in FY2022. The largest contracting entity represented 38% of FY2023 revenue, up from 22% for the largest entity in FY2022.
• Cash used in investing activities was $57.9 million, including $93.9 million of debt-security purchases partly offset by $50.0 million of maturities. Financing activities provided $148.2 million, including $213.4 million net proceeds from the business combination and PIPE, offset in part by the $60.1 million FPA prepayment and $7.7 million in equity-instrument repurchases.

Outlook, risks and unusual items

• No specific revenue, profit or cash-flow guidance is provided. Management expects near-term revenue growth to be driven by engineering services and equipment-package sales; recurring royalties and related services are intended to grow as more partner plants operate.
• The company has never achieved operating profitability and expects continuing losses. Its ability to scale projects, secure partners and financing, and convert its project pipeline into operating facilities remains uncertain. The filing identifies possible need for additional financing and potential dilution.
• The FPA has a three-year term and includes potential future cash or share obligations. Its fair-value accounting materially affected FY2023 reported loss. The Brookfield SAFE is also a material liability; its year-end valuation depended on management’s assumptions about future project presentations and conversion to equity.
• Revenue depends on a concentrated group of partners and customers, their execution and plant performance, project financing and construction, and the availability and economics of waste feedstocks. Changes in fossil-fuel prices, carbon incentives or regulation could affect competitiveness and demand.
• China-related regulatory, political, foreign-exchange and operating risks are significant given the company’s commercial relationships and revenue exposure there. Government support and fuel eligibility are not assured; the filing notes LanzaTech-derived industrial-emissions ethanol does not currently qualify for U.S. RFS RIN generation.
• The company restated its Q1 and Q2 2023 financial statements in connection with FPA accounting. It also corrected the classification of the FPA prepayment in the annual cash-flow presentation; management said that classification error was not material to the affected quarterly reports.
• Control and audit concern: Management and the auditor concluded internal control over financial reporting was ineffective at December 31, 2023 because of material weaknesses in accounting for complex transactions and estimates and in revenue recognition. The auditor issued an adverse opinion on ICFR, but an unqualified opinion on the financial statements.
• In January 2024, after year-end, LanzaJet opened its first ethanol-to-SAF facility in Georgia and expected production to ramp during 2024. This is a subsequent development, not FY2023 operating revenue.

Important facts for investors to verify

• Cash burn, unrestricted cash and short-term investment maturities against management’s stated 12-month liquidity expectation.
• The FPA’s remaining share-return, maturity and payment terms, and whether counterparties terminate or settle portions early.
• Progress in remediating the two material weaknesses, and whether revenue recognition or complex-transaction controls require further correction.
• Actual production, utilization, commissioning and revenue contribution from the six operating plants and the advanced project pipeline, including customer concentration.
• Whether LanzaJet’s facility ramps up as expected and whether future SAF projects reach financing and final investment decisions.