LanzaTech Global, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Financial amounts below are in U.S. dollars unless stated otherwise.
Business context
LanzaTech develops gas-fermentation technology that converts waste carbon into chemicals and fuels. Its revenue comes from engineering and licensing, research and development services, and sales of CarbonSmart products. Licensees operated six commercial-scale waste-gas-to-ethanol plants at quarter-end, versus three in China a year earlier. Reported technology-linked capacity increased from 150,000 to 308,000 tonnes per annum.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $10.2 million | $9.6 million |
| Gross profit before depreciation, calculated as revenue less cost of revenue | $3.5 million; 33.9% margin | $1.9 million; 19.2% margin |
| Operating loss | $26.2 million | $32.5 million |
| Net loss | $25.5 million | $63.3 million |
| Adjusted EBITDA, non-GAAP | $(22.1) million | $(23.5) million |
| Operating cash flow | $(28.3) million | $(33.8) million |
Revenue rose 6%. Growth in CarbonSmart sales and joint development and research revenue was partly offset by lower engineering and other services revenue from existing and government customers. CarbonSmart sales were $0.9 million, with associated costs of $0.9 million. R&D expense increased 5% to $17.1 million, while SG&A fell 34% to $11.0 million, partly reflecting lower business-combination-related and transition costs. Net loss per share was $0.13, versus $0.58; weighted-average shares increased to 197.0 million from 116.5 million.
Cash, cash equivalents and restricted cash were $57.4 million at March 31, down $18.8 million from year-end. Short-term held-to-maturity investments were $34.8 million, bringing cash and those investments to about $91.6 million. Current assets were $146.9 million and current liabilities $21.3 million. Investing activities provided $9.2 million, primarily reflecting $10.7 million of investment maturities; financing activities provided $0.2 million.
The company reported no conventional outstanding debt, but its balance sheet includes a $15.5 million Brookfield SAFE liability and FPA-related liabilities of $50.2 million for the put option and $7.6 million for fixed maturity consideration. Lease liabilities totaled approximately $19.5 million. The company held a $5.5 million note receivable from LanzaJet, included among related-party balances.
Changes, outlook and risks
- Net loss improved substantially year over year, largely because Q1 2023 included $30.4 million of other expense, primarily fair-value losses on financial instruments. Q1 2024 other income was $0.2 million; these fair-value movements can be volatile and do not represent operating performance alone.
- Management expects engineering services, equipment packages for projects under construction, and CarbonSmart sales to support near-term revenue. It anticipates continued losses until technology is sufficiently commercialized; no specific revenue or earnings guidance is provided.
- Management stated that available liquidity was expected to cover the next 12 months, while cautioning that assumptions could prove incorrect and that additional financing may be needed. On May 9, 2024, the company entered into agreements allowing offers of up to $100 million of common stock, subject to effectiveness of a registration statement. Any sales could dilute existing shareholders.
- The FPA may require significant future payments. Its maturity may be accelerated if the share price remains below $3.00 for 50 trading days in a 60-day period or if the company is delisted; the filing cautions that funds or financing may not be available to meet obligations.
- Material weaknesses in internal control over financial reporting—related to complex transactions and estimates, and revenue recognition—remained unresolved at March 31. Management concluded disclosure controls were not effective, while stating the financial statements fairly present the company’s position.
- Key risks include dependence on a limited number of customers, China-related policy, trade and regulatory uncertainty, the need for future financing, and the possibility that lower fossil-fuel or conventional biofuel prices reduce demand for higher-cost CarbonSmart products. The filing reported no material probable or reasonably possible litigation losses.
- Lease components not yet commenced are expected to require $17.2 million of payments through 2036. The filing also corrected the prior-period classification of the FPA prepayment in cash flows from investing to financing; it said the original classification error was not material.
Important facts for investors to verify
- Whether operating cash burn and the stated 12-month liquidity outlook remain consistent with subsequent results, and whether the ATM is used and on what terms.
- The timing, potential cash cost and acceleration conditions of the FPA, as well as the Brookfield SAFE’s conversion or repayment outcome.
- Progress on remediation and testing of the two reported material weaknesses.
- Whether capacity additions, projects under development and CarbonSmart sales translate into recurring, profitable revenue; Q1 recurring revenue was $0.6 million versus $0.8 million a year earlier.
- Customer concentration and China exposure, including the effects of any policy, trade, licensing or operating changes.