LNZA - NASDAQ

Good morning, everyone, and welcome to today's LanzaTech Global First Quarter 2024 Earnings Conference Call. [Operator Instructions]. Also today's call is being recorded, and I will be standing by if anyone should need any assistance. And now at this time, I'll turn things over to Omar El-Sharkawy, Vice President of Corporate Development. Please go ahead, sir.

Good morning, and thank you for joining us for LanzaTech Global Inc.'s First Quarter 2024 Earnings Conference Call. On the call today, I'm joined by our Board Chair and CEO, Dr. Jennifer Holmgren, and our CFO, Geoffrey Trukenbrod. Earlier this morning, we issued a press release with our first quarter 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 10-Q for the quarter ending March 31, 2024, filed today. Both our press release and results summary investor presentation can be found in the Investor Relations section of our website at www.lanzatech.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 a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. Today's call will begin with remarks from Jennifer providing an overview of our performance and our recent financial results. Geoff will then review in greater detail our financial results, and Jennifer will conclude with a few closing remarks. 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 everybody joining us today. We appreciate your ongoing interest in and support of LanzaTech. I'd like to begin by sharing 5 key things from the past several months that I'd like for you to take away from this call. These are all outlined on Slide 5. First, we delivered financial results for the first quarter right in line with our internal forecast and guidance provided last quarter. Revenue of approximately $10 million, gross margin of 34% and gross profit of $3.5 million, all increased year-on-year as we continue to scale and optimize the business while closely managing costs across the organization. Second, we announced in March the Project SECURE where our partner Technip Energy has been selected by the U.S. Department of Energy to receive a $200 million grant. This commercial project would leverage land detection Technip Energy's transformational technologies to produce sustainable ethylene from capture carbon dioxide emissions, further validating the transformative nature of our carbon recycling technology and laying the groundwork for a highly replicable project opportunity set for launch of [indiscernible] more than 370 ethylene steam crackers across the globe. Third, it was an extraordinary quarter for sustainable aviation fuel, our investment in LanzaTech and our role in the broader SAF sector, which continues to gain significant momentum globally. In January, LanzaJet which we continue to hold an approximate 25% ownership interest inaugurated the world's first ethanol-to-SAF facility in Soperton, Georgia. The achievement marks the strategic and historic milestone not just for LanzaJet, but for the growing SAP economy at large as the 10 million gallon per facility brings in new production route to commercial scale, the alcohol to jet or ATJ pathway. Separately, LanzaTech is in the process of completing an approximate $100 million investment round to accelerate its growth from some of the largest and noting influential companies and investors in the world with commitments already from Microsoft Climate Innovation Fund and Southwest Airlines. Fourth, we continue to advance our growing pipeline of commercial scale projects while expanding the scale and diversity of the feedstocks and represented geographies. This includes growing the base of fraud extending to the top of our development pipeline as well as advancing projects through the various development stages. And finally, we are reiterating our 2024 financial and operating guidance introduced earlier this year. This includes expected revenue of $90 million to $105 million, which at the midpoint reflects top line growth of approximately 55% over last year's performance. From this, you can see that we continue to execute on our growth plan while maximizing operational financial flexibility across all parts of our business. As we mentioned in our previous quarterly calls, we are committed to our culture and safety. I am proud to report that we concluded the quarter without any safety incidents at our facilities in the field or in the laboratory. Regrettably, we did, however, have one recordable lost time injury due to an office space incident during the quarter. I would like to now review the key highlights from the first quarter of 2024, starting with Project SECURE, a sustainable ethylene from carbon dioxide project in partnership with Technip Energies. As shown on Slide 6, Project SECURE is a commercial demonstration of carbon capture and utilization. The grant funding of up to $200 million from the U.S. Department of Energy will support the design, engineering and construction of Project SECURE at a U.S. [ Equity Practice ] facility. We expect to work on this project to commence in the fall when we finalize the contracting details associated with this project. By combining the lens of the cash fermentation technology with Technip Energy's ethanol to ethylene technology, this transformational project is expected to produce 30,000 tonnes per year of sustainable ethylene from capture carbon dioxide emissions at an ethylene cracker operating at a merger petrochemical facility in the U.S. In turn, this sustainable production will reduce the carbon intensity of the existing open production of the shale. Ethylene has a massive global market projected to reach $200 billion annually by 2030 and is often referred to as quote, "The world's most important chemical given its use as a key building block in countless products we use every day, from closing to packaging to foams to jet fuel." However, ethylene production is also major sourcing 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 with LanzaTech. Project SECURE offers an immediate and highly replicable solution to decarbonize ethylene production using existing infrastructure. Technip Energies is the global leader in providing steam cracker technology to the chemical industry with 40% to 50% of the global licensing market share by ethylene production. The modular design of Project SECURE is intended to be easily deploy ethylene crackers around the world for which there are more than 370. This provides an enormous commercial opportunity for LanzaTech and Technip to rapidly penetrate the ethylene value chain with its curing technology offering and capture a significant portion of this market given our established licensing models. Looking now at sustainable aviation fuel on Slide 7, we remain bullish on the SAF market. As I noted earlier, it was an increasingly exciting few months for LanzaJet in the SAF market more broadly. And we believe we are well positioned to play a significant role in the proliferation of SAF production through the alcohol to jet process. LanzaJet ethanol will be a critical feedstock for SAF and when coupled with LanzaJet technology, enables production of SAF from a variety of [indiscernible], including municipal cloud waste and [ East field ]. The inauguration and start-up of LanzaJet in lines field facility, the world's first biorefinery that transforms ethanol into sustainable radiation fuel is a game changer. We expect that the facility will begin producing SAF by the end of the second quarter and ramp up to full production over the course of the year. This facility will focus on maximum production of SAF at 90% of the product output with the remainder 10% as renewable diesel, which is a unique capability of the LanzaJet technology and unmatched [ biomethane ]. We've made good progress on the opportunities in our commercial pipeline that focus on integrated solutions sticking for waste gas and residents through the SAF by pairing LanzaTech gas fermentation technology with the LanzaTech alcohol-to-jet process or particular that we are in Abu Dhabi to take quantified solids through the SAF and our project in New

Thank you, Jennifer. Good morning, and thank you to everyone for joining us on the call. As seen on Slide 10, total revenue for the first quarter of 2024 of $10.2 million grew by 6% year-over-year and was right in line with our forecast and the guidance we've laid out last quarter. CarbonSmart revenue of approximately $1 million in JDA & Contract research revenue of $4.3 million, both through year-on-year in the first quarter. The CarbonSmart side, sales from our recurring chemicals customers supported this growth. And on the JDA & Contract research side, the performance was driven by several customers and government grants, which are typically multiyear in duration. Biorefining revenue declined year-over-year in the first quarter to $5 million but saw strong contributions from engineering services revenue across projects in both early and advanced stage engineering as well as from start-up services associated with the ArcelorMittal facility in Belgium. Importantly, the decline year-on-year in Biorefining revenue was anticipated and is attributed to the uneven nature of revenues earned in the early development stages of each project, which currently dominates our Biorefining revenue mix. Notably, we expect the composition of our revenue mix will become increasingly smooth and consistent as we continue to add project opportunities and more projects come online, building recurring revenue as a larger percentage of our overall revenue mix. With respect to margins during the quarter, our focus on revenue quality continued during the first quarter, driving gross profit improvement of 87% year-on-year to $3.5 million. This improvement reflects a higher mix of high-margin engineering services work and JDA & Contracts resulting in first quarter gross margins of 34%, up approximately 570 basis points over the full year 2023 gross margin. As mentioned previously, we continue to expect gross margin to be in the mid- to high 20s for the full year 2024. On the expense side, operating expenses declined 14% year-on-year in the first quarter, coming in at $29.6 million, largely reflective of the onetime expenses in the first quarter of 2023 associated with our Go Public transaction. Sequentially, operating expenses increased due to slightly higher personnel expense and research and development and SG&A from reduced bonuses in Q4 2023 and Q1 2024 severance costs associated with the previously announced reorganization. As Jennifer noted, the executive reorganization that we announced last quarter is complete at the newly reorganized functions are exploring and implementing efficiency and accountability improvements throughout the organization. The associated cost savings initiatives are also well underway and on track to deliver the previously estimated full year cost reductions. CapEx spent during the first quarter of 2024 totaled $1.3 million, and we continue to project CapEx for the full year 2024 to be consistent with or below our CapEx for the prior couple of years. Turning to adjusted EBITDA and cash burn for the quarter. As expected, our adjusted EBITDA loss increased quarter-on-quarter in the first quarter to $22.1 million, largely as a result of the lower Q1 revenue and gross profit as compared to the fourth quarter of 2023. Our total cash burn in the quarter was $29.2 million, which was up quarter-over-quarter as a result of the lower revenue and larger adjusted EBITDA loss was also materially impacted by a number of large annual payments, including 2023 incentive compensation, 2024 insurance premiums and others that are expensed throughout the year were paid in Q1. Importantly, we also expected to invoice and receive a multimillion-dollar payment in the quarter associated with one of our non-contracts, but some administrative contracting issues stand the end of the quarter, resulting in a simple delay in this payment. As a result, we do not believe that this burn rate is indicative of our average quarterly burn rate for the full year 2024. Turning to the balance sheet. As of March 31, 2024, we had $92.3 million of cash on hand, including cash, restricted cash and investments. And in the quarter with more than $92 million of cash on hand, we remain confident that we have the financial flexibility to execute our plan and deliver on our primary objectives outlined for the full year 2024. With that said, we're also announcing today the filing with the SEC of a registration statement on Form S-3 that includes a prospectus offering or an at-the-market or ATM issuance of $100 million of the company's common shares. We recently passed the 1-year anniversary of the completion of our business combination and became eligible to do so, we believe that having a universal shelf as on filings good corporate housekeeping, and the ATM provides us with a tool to opportunistically access additional capital, even though we have no plans at present to utilize it. While we believe we have sufficient liquidity to execute on our near-term objectives and obligations. We will also continue to opportunistically and patiently explore other strategic financing alternatives to ensure we are best positioned to achieve our longer-term growth objectives. Pursuing these additional financing options enables us to maximize potential opportunities to computer supplement our financial flexibility as we continue to explore strategic opportunities to accelerate our growth and path to profitability. Looking ahead to the second quarter and the rest of the year, we continue to anticipate a strong quarter-over-quarter revenue ramp with an expected 20% to 40% quarter-over-quarter growth in Q2 and a very strong back half of the year, underscored by the expectation of moving multiple projects into later stages of development and into construction. As Jennifer mentioned earlier, and as outlined on Slide 11, we are reiterating our full year 2024 guidance of $90 million to $105 million in total revenue, with full year growth across all components of the business. And an obviously significant back-end weighted shift to the year as well as negative $65 million to $80 million to $55 million of adjusted EBITDA. We anticipate the Biorefining revenue growth will come from ongoing and new engineering services revenue as well as the sales of equipment packages related to several projects, and we expect to achieve final investment decision and proceed to the construction phase in 2024. Biorefining will also be bolstered in 2024 by the anticipated kickoff of Project SECURE, our DOE-funded project with Technip for the decarbonization of ethylene production and the multiple opportunities that we are working on to address the growing demand for SAF, including the projects we are codeveloping with LanzaJet and the broader need for waste space ethanol as an enabler of alcohol to jet growth globally. Finally, we continue to anticipate moderate year-on-year growth in our CarbonSmart business and our JDA & Contract research business. With that, I will turn the call back over to Jennifer for some closing remarks before we open the call for Q&A. Jennifer?

Thank you, Geoff. Our performance is not just a set of numbers. It's a tangible media station of progress in a field where every small victory has a significant impact. We are at the vanguard of an industry that is as challenging as it is essential. The opportunities before us are not only progressing but are the cornerstone in creating a new part in economy. This quarter was to-date quarter, and I want to close with coming back to the 5 key takeaways I outlined at the outset of the call. First, we delivered financial results for the first quarter, right in line with our guidance provided last quarter. Second, Project SECURE was a huge win, and we're excited about the project and the replicability of this technology integration. Third, SAF continues to be an enormous demand fulfill-based ethanol, and we are well positioned in this massive sector. Fourth, our commercial project pipeline is growing and progressing and finally, a reiteration of our full year 2024 financial and operating guidance. Thank you for your continued trust and support. Together, we're not simply participants in this economy. We are the architects and builders laying down the foundations for a sustainable future. Operator, we can now open the line for Q&A, please.

[Operator Instructions]. We go first this morning to Leo Mariani at ROTH MKM.

Wanted to just start off on the revenue side here. So if I heard you guys right, you're expecting roughly 20% revenue growth in 2Q versus 1Q here. If I do the math, that gives you about 23% of your revenues in the first half relative to your midpoint of your full year revenue guidance. Given that, can you just elaborate a little bit on what you expect to hit in the second half of '24, which obviously has to be a pretty big significant ramp to hit that guidance this year?

Yes. Leo, and thanks for being on as always. So yes, we put a little bit of a range for Q2, so 20% to 40% growth over the first quarter, just to reiterate that. So there's a little bit of variability there in [ finding ] projects as well. But yes, that does certainly suggest that we expect a large ramp in the back half of the year. We did reiterate our guidance. So we do expect to be in those revenues in the back half. It's a function of a combination of things, including a variety of projects moving into the construction stage as well as ongoing projects that has already moved into as well as the other components of our revenue.

Okay. And just on the cost side, hoping you could help me out a little bit here. So I'm looking at it just on the key cash costs, if I take R&D plus cash G&A, it looks like that was up about $3.2 million in the first quarter versus the fourth quarter. I got the sense that there were some onetime costs in there, some severance and maybe some others. Could you quantify what the onetime costs are? And then is your expectation for those key costs to start dropping here in the second quarter?

Yes, Leo. There's 2 aspects of it. One was the in the SG&A and R&D costs. These are largely cut personnel costs. These are head count costs largely. And so in Q4, they were slightly down. As you recall, we cut back our bonuses in associated with 2023. So that resulted in a reduction in cost in Q4 of last year. Normalized for Q1, it's slightly up as well as there were, as you noted, some onetime costs, some severance costs associated with the reorganization that we announced in [ Q4 ]. I'm not going to get into the specifics of the severance costs, but we do expect those to be onetime and that will trail off for the rest of the year.

Okay. So you're saying that your cash costs are going to start going down here in the second quarter? We expect the cash cost for those line items to reduce quarter on quarter.

We'll go next now to Jason Gabelman of TD Cowen.

I wanted to ask about the project pipeline and some growth that you mentioned, 9 projects added to that pipeline. I was wondering if you could give us some flavor for what those projects were and if you expect to maintain that pace in terms of projects being added to the pipeline or that will be lumpy again as well, I should say, quarter-to-quarter.

Let me address that. [ Deposit ] pipeline just because it's early stage for us, will be a little lumpy and silly. However, we are adding projects both to the top of the funnel and getting projects through to FID. So we do expect to see construction this year. The projects that are being added to the front of the funnel, however, are tough for me to discuss the specific partners because of the fact that a lot of those are still not named partners. However, we are starting to also see interest from companies to start replicating projects. We've done that in China, we have 4 projects with the same partner, and we're starting to see filling up the funnel with partnerships related to companies that are overly building plans.

Got it. And my second question is just on the earnings outlook. I think you have previously mentioned breakeven EBITDA in 2025. Is that still your expectations? And any other color around that in terms of growth from 24% to 25%?

Jason, thanks for the question and for being on. As you know, we haven't provided any guidance beyond 2024, specifically at this point in time. We do think our path to profitability is a function of growth. And our expectation is that the company will continue to grow significantly year-over-year. And as we grow the top line and the associated gross profit, that will drive our ability to get to profitability. But again, just we haven't been specific about our guidance for anything beyond 2024.

We'll go now to Thomas Meric with Janney Montgomery.

A couple for me on the SAF market. Firstly, what's your assessment of the current SAF feedstocks in terms of supply, demand and really cost to use it? And then how do you expect that to change in the coming quarters? And then second one on SAF, just curious your thoughts and reactions to the recent great model, if anything stood out to you there? And then one follow-up on Brookfield after that.

Sure. Let me start, and thank you for the question, Thomas. On the SAF market, we continue to see demand for waste-based feedstocks as a key priority. I think you saw the U.K. government incentives and targets and they really grow in terms of SAF demand, but also they disproportionately grow the non-HEFA in other words, the non-oil stats and greases demand factors. So you're really starting to see people talk about shifting to waste demand with feedstocks. The fact is that we're very well positioned in that since all we use our waste feedstocks. However, I would also say that generally, these types of feedstocks can be more expensive. And so what's happening is that the mandates are slowly increasing the waste inputs so that they are creating a market without unduly pushing towards waste. So we're really excited about how that's happening, and it's happening globally. We're also excited about the fact that e-fuels, CO2 plus hydrogen are also being incentivized disproportionally in favor of trying to create that industry. And as you know, with coupling lens to take advantage using CO2 feedstock is something we can do because if use is a path for us to make ethanol, that ethanol then can be converted to SAF by LanzaJet. So we're seeing more and more incentives, but we also find them to be quite measured in that governments have been realistic and saying when are these things going to be ready. And they're not in the market today, but they will be in the next few years or at least that's our intention, and that's what our project portfolio would say. The second thing I would say to your question, the second question you asked was the GREET model. And as you know, what the GREET model use has done, the White House has sent out a direction around that. And bottom line is it enables corn ethanol if certain measures are utilized to reduce the carbon intensity of corn ethanol to qualify and to be used for the production of sustainable aviation fuel. So we think it's a big win, both for corn producers here in the United States, corn ethanol producers here in the United States because it shows in the path which they can also participate in a market that was difficult for them to participate because there was no clear picture on how they could reduce their carbon emissions. And so the White House basically has shown a path that enables them to participate. Hopefully, that addresses your question. I think you also wanted to ask about Brookfield, I'll pass it back to you.

Yes. Thank you. on Brookfield, specifically just thinking about the unlock of future projects. And I'm wondering if you could comment on the potential for additional project FIDs in after the first one gets transferred.

Right. So that, we do have a very robust pipeline of projects that can go into our Brookfield pipeline, if you will. What we are doing is focusing on the very first one for a reason. This would be our first project and defining all the parameters that we need to define to transfer the project is something we're doing lockstep in them. We work very closely with them, and we're understanding each other on what makes a good project and what is it that they need to see for them to pick it up. So while we have a robust pipeline that we are moving along on certain parameters like getting gas agreements and other types of things, we have focused on only one project so that we are clear on how to transfer. The other thing that I think is quite important is that with the Brookfield pipeline, we are able to look at projects in North America more and more and as well as Europe and the U.K., but we're starting to see a lot of interest in North America. So we're super excited about using the Brookfield approach and partnership to enable those projects to move forward.

We go next now to Jeffrey Campbell of Seaport Research Partners.

Congratulations on all the positive developments. I wanted to ask a few questions for Project SECURE. First of all, I think you gave us an ethylene output number for the project, but I was wondering what would be the likely ethanol output from the plant costing $400 million to construct?

So the output of the plant decides to that ethylene production number, this is meant to be an ethylene producer. So all the ethanol will go straight into the ethanol to ethylene plant. The yield losses are less than 15%. So basically, the ethanol number is very close to the ethylene output number.

Maybe I should rephrase the question. What I'm trying to understand is how does the LanzaTech plant for this project compared to our typical 50,000?

Yes. Thank you for the question. It's 50,000 tonnes per year. This is an ethanol plant of the site, 50,000 tonnes per year, and all of the ethanol will go straight to ethylene.

And are you and Technip looking to construct projects of approximately that size going forward? Or can smaller units be profitable?

So we can go both smaller and larger. And what we're starting to do is we're going to have standard sizes. So the 50,000 is one of our standard sizes, as you know, Jeff, because we use that in multiple of our projects. We also have one that is approximately half of that size that we're now using as a standard, and then we can also go bigger. So what we are trying to do now, especially in this partnership with Technip and more and more as a company is create standard units rather than bespoke units because that will allow us to do the engineering package and work with the disease in a way that goes much, much faster than trying to customize size for every opportunity. So if that is your question, that is exactly what we're doing and that $50,000 is there for that reason.

No, that's a great answer, and I appreciate the color I'm moving away from bespoke. Geoff's remarks if I heard them correctly. It sounded like there might actually be some revenues from Project SECURE at some point in 2024. Was that correct? And if so, is that included in current guidance? Or would this be in addition to guidance?

Thanks for the question, Jeff. Yes, we do anticipate currently that we will be in seeing revenues associated with Project SECURE in the back half of the year. The timing associated with finalizing the administrative contracting associated with that is the pace that's the time uncertainty. We're working hand in hand with the DOE to accelerate that, but we do expect to start work in the back half of the year. That is included in our guidance. As again, as I mentioned earlier, we do probability adjust our forecast. And so we expect that to leave us in the range. So we're not adjusting our range at this point in time, but we do feel good about having additional committed revenues in that.

And let me ask one SAF question and then I'll get off. I was just wondering how are you going to manage the allocations of the LanzaJet production once it starts coming to market in the second quarter '24 and beyond.

Actually, we have 10-year offtakes. LanzaJet has 10 elastics for all of that fuel. So the production is spoken for and it'll be managed in a way that's fair to each of the offtakers so that they can intact their share without one of them being first in line all the way through the year. But that is one important element of that plan is that the offtake is 100% spoken for.

[Operator Instructions]. We go next now to Steve Byrne of Bank of America.

I was just curious about the choice of an ethylene cracker for this Project SECURE. Have you already done some pilot testing on the furnace flue gas at a cracker. I'm curious about that CO to CO2 ratio and perhaps having it at a cracker, you got the hydrogen coming off of the cracker that could also help. But I guess, ultimately, do you have a view of where the variable costs could be for the production of this ethylene.

Let me start with that. Thank you for the question, Steve, and very well noted these points. So first of all, that's right. Often petrochemical complexes are a little bit long on hydrogen. So there is some hydrogen co-production off of the cracker that we could utilize in that integration. The second thing that's worth noting in terms of variable cost is the fact that at the end of the day, if we are to bring in hydrogen, which we intend to do green hydrogen into this, that will be the biggest driver of cost. And so the amount of green hydrogen will impact the cost of production. Why integrate into a cracker? First of all, we know we can use that CO2 from that plant. We have looked at that gas very carefully the contaminants as well. So that is a very nice integration opportunity for us. But what's even more important is the cracker itself is an integration opportunity. And the reason I say that is, as you know, we've done quite a bit of work with Technip on ethanol to ethylene Technip actually made the ethylene from our ethanol for the EVA foam for the work that we did with on shoes. So we've already partnered with them on making ethylene for materials production, if you recall, the [indiscernible] ethylene and made the EVA. But if you take a step even further back, of course, you know the Hummingbird the ethanol to ethylene from Technip is also the first step in their sustainable aviation fuel production. So not only do we know that we can use the gas from the cracker, we note that our ethanol output integrates very nicely with Technip. One of the gaps that we have had is that we have been producing the ethylene at a different location than the ethanol, transporting ethanol can add cost. And so our materials that are produced, there is a supply chain cost. By integrating directly into a cracker, there is no additional supply chain or movement of the ethanol cost. And so we believe this is how we can drive the cost of making materials from our CO2 derived ethanol, drive those costs down. And of course, the other beauty of integrating into a cracker is that most crackers in the petrochemical complex also are integrated with further downstream production, whether it be polyethylene, MEG for polyester or EDA or even PDC. And so for us, that integration means that immediately our ethylene can be used in a mass balanced way with the rest of the ethylene produced in the cracker. And as you can see, it's a beautiful way to start to both reduce the CO2 emissions with a cracker, but also integrate into the back end into the ethylene production. So we think this is just a beautiful, replicable way to get ourselves to a point where we produce materials from CO2.

Yes, makes sense. I'd like to take a similar question on the off gas from an ethanol plant. You mentioned a few minutes ago about the ethanol industry is trying to move down to more decarbonizing the ethanol and lowering the CI score. I'm just wondering, conceptually, could the other approach to decarbonize an ethanol plan is to use your technology on the ethanol flue gas. I guess I'm wondering whether or not there's very little CO, and it's CO2 and thus may be more challenging, but you could build that at an ethanol plant and convert that into SAF.

Absolutely, absolutely. And so to begin with, right, you are correct that we can use that CO2. 45% of the carbon that goes into an ethanol production facility sugar, sugar-based production facility comes off of CO2. You said it might be harder than feel for us to convert it and the difficulties just making sure we have hydrogen available. But a lot of corn ethanol production or other ethanol production in the United States and the Midwest is surrounded literally by windows, wind farms. And so there is access to renewable power. There is access, therefore, to the production of hydrogen. And so converting that CO2 to ethanol is actually not any harder than converting [ feel ]. The second thing I would say is, as there is more and more resistance and concern about pipeline, to take CO2 and sequester it, that means that there is an awful lot of CO2 on the back end of ethanol plants that could be reutilized to make more ethanol, reducing the carbon intensity of the original ethanol and also enabling more ethanol to be produced that we can make SAF. So you hit it right on the head. The beauty of that CO2 as well, by the way, is that it's biogenic. And so globally, there are a lot of drivers to reusing biogenic CO2 versus necessarily fossil derived CO2. So it's a massive win. We are really excited about working with the industry to increase yield from the same input by utilizing CO2. And I hope that you see that as a theme to everything LanzaTech does, it's all about making more products from the same raw materials, whether it's CO2 in the back end of the corn ethanol plant, whether it's CO2 from a cracker. At the end of the day, our goal is to use every last bit of carbon to make products to reduce both carbon intensity but also to reduce raw material inputs.

[Operator Instructions]. And ladies and gentlemen, it appears we have no further questions today. Dr. Holmgren, I'd like to turn things back to you ma'am for any closing comments.

It cannot be overstated that pioneering a new path in the energy sector is rife with complexities. We're altering the very paradigm of energy production and utilization, a task that is as formidable as it is inspiring. Infrastructure perceptions MES legislation are yet to be fully aligned with the innovative process that we are championing. It's important to remember that movement creates friction. And as the first of the kind in this space, we've chosen to lean into that. into that friction because we believe that is where true progress is made. Thank you again for joining us. Thank you again for supporting us. Thank you again for giving us the opportunity to show what we can do with carbon that's already above ground with waste carbon.