Q4 2023 Lanzatech Global Inc Earnings Call
Participants
Omar El-Sharkawy; Vice President of Corporate Development; Lanzatech Global Inc
Jennifer Holmgren; Chairman of the Board, Chief Executive Officer; Lanzatech Global Inc
Geoff Trukenbrod; Chief Financial Officer; Lanzatech Global Inc
Leo Mariani; Analyst; Roth MKM
Presentation
Operator
And welcome to the LanzaTech Global Inc. fourth quarter 2003 earnings conference call. All participants will be in a listen only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Omar El-Sharkawy, Vice President, Corporate Development. Please go ahead, sir.
Omar El-Sharkawy
Good morning, and thank you for joining us for Lonza tech global Inc's fourth quarter 2023 earnings conference call. On the call today, I'm joined by our Board Chair and CEO, Dr. Jennifer Holmgren, and our CFO, Geoff Trukenbrod. Earlier this morning, we issued a press release with our fourth quarter and full year 2023 financial and operating results, as well as an investor presentation summarizing the company's performance and key operational highlights. Subsequent to this call, we intend to file with the SEC our annual report on Form 10-K for the fiscal year ending December 31st, 2023. Both our press release and results summary, investor presentation can be found in the Investor Relations section of our website at www.landec.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 uncertain 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 in today's call will begin with remarks from Jennifer providing an overview of our performance and outlining our 2024 objectives. Jeff 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 them.
I'll turn the call over to Jennifer.
Jennifer Holmgren
Thank you, Omar, and thanks to everybody joining us today. We appreciate your ongoing interest and support of Lenta tech as we host our first year-end earnings call and fourth call since becoming a public company just over a year ago.
Starting with slide 5, we had a strong year of growth overall and as compared to 2022 increase our revenue by 68%. As discussed in our third quarter earnings call, we had a very strong quarter over quarter growth through the first three quarters of 2023 and we're proceeding on track to achieve the low end of our guidance. However, while Q4 revenue increased significantly year over year by 77% to $20.5 million, this was meaningfully below our expectations.
As a result, our full year revenue of $62.6 million was well below the $80 million to $100 million full year guidance that we provided last year as several material opportunities identified as fourth quarter revenue drivers failed to materialize. Weaker than anticipated. Fourth-quarter results were primarily driven by carbon smart opportunities that did not materialize during the quarter. It is important to note that the issues were not demand-driven, which remains robust for first carbon smart product. Rather the challenges we faced late in the quarter were related to availability of off-spec supply of carbon smart ethanol from our various licensees for three main reasons.
One, there were some facilities that were somewhat delayed and coming online in 2023 compared to our early and mid-year expectations. Two policy requirements for fuel has still not finalized at the European level, leading to delays and how to certify our ethanol ex fuel for sale in the European Union and three without clear commitments, we did not inventory significant supply and were unable to satisfy several carbon smart orders that came in late in the quarter as our licensee had already committed those volumes to us, we are taking two steps to address each of these challenges head-on. First, we're supporting our partners through the certification process.
And second, we are negotiating committed offtake supply agreements with our partners in China and Europe to satisfy the growing carbon smart demand in 2024 and 2025, while adjusted EBITDA loss for 2023 was below our goal at $80.1 million, we showed quarter-over-quarter improvement throughout the year as a result of our increased focus on improving gross margin and controlling operating expenses. This cost control discipline will continue through 2024.
We ended 2023 with $121.4 million of cash on hand, including cash, restricted cash and investments, which we believe provides sufficient runway for more than 15 months. We are disappointed by the shortfall versus our guidance and accountability for performance my spend at that time, and therefore, we are addressing this underperformance head-on with several organizational changes and corrective actions we must deliver relative to our targets and we are taking actions to ensure we are demonstrating this core principles. I would highlight three specific actions we have taken, as you can see on slides 6 through 8 saves this morning were 19 a significant reorganization of our management team. The goal of this reorganization is to drive greater accountability as well as operational transparency and efficiency, ultimately, enhancing execution throughout the company.
Dr. Stephen standing LanzaTech's Chief Commercial Officer, has elected to retire, and Carl Wolf, LanzaTech's, Chief Operating Officer, will be departing the Company to pursue other opportunities. We would like to thank each of them for their many contributions to the Company and wish him well these departures together with some additional restructuring of the executive team, it reduced the size of the go-forward executive team by 33%.
Mr. Alvarez Square, our EVP of growth and strategic projects has been named President of LanzaTech in this new role. Our will be responsible for all revenue, generating business lines and engineering work. In addition to continuing to lead our Strategic Projects Group, bringing all revenue under our stewardship will create synergies and cure accountability across all three parts of our business. Having a single point of responsibility for all revenue sources as well as our engineering team will ensure focus and prioritization across all commercial activities.
Dr. Charles Summers, our Chief Science Officer, will be additionally responsible for our scale-up and product manufacturing team. Dr. rather Convera has been named Chief Technology Officer. In addition to continuing to lead technology development at the front-end engineering design. Rob will now have responsibility for all process infrastructure technology, consolidating on department content, genre and route perspective. Leadership will also drive efficiencies being in science and synthetic biology leadership and the same move with product manufacturing will improve commercial product viability. Our scientific computing capabilities create the ability to leverage the extensive generative AI and informatics infrastructure and machine learning capabilities built within Lancet that first synthetic biology works across the business just to increase efficiency and scale engineering, workforce and business processes.
Second, together with the management reorganization, we executed the plan, eliminating the variety of additional roles based and reprioritization of work and poor performance. Collectively, we expect these actions to reduce our annualized operating expenses, I have $5.3 million, which we expect to resolve approximately $4.2 million in annual cash savings. This will also reduce our headcount by approximately 5%. We intend to end the year with a global headcount of about 400 people as compared to the approximately 415 people at the end of 2023. We are also implementing a plan in the first half of the year to offset the $10 million in additional cash burn annually. And we will continuously review the organization and our strategic growth initiatives to ensure our team is balanced between our needs to drive sustainable, profitable growth and innovation. We believe these changes position the organization for long-term commercial success and to deliver on our target with KPIs and strategic priorities.
So we cut the target in 2023 cash bonus payouts for the executive and management team myself included by 80% which in the aggregate represented approximately $2 million cash savings. This component of compensation for the executive and management team is tied entirely to company performance and it accounts for a significant portion of leadership's total target cash compensation. This action reinforces our alignment between compensation and performance and evidences our pay for performance culture. Together, we expect these actions to improve and streamline our execution while also reducing our cost structure. Consistent with our sharp focus on balance sheet health, rightsizing the organization and the headcount optimization will ensure focus on commercial growth in our core businesses and the cash bonus decisions will turn the clear message to management that we are focused on delivering financial results.
Turning now to slide 9, I want to recap our other execution by our each from last year and highlights of 2023 was a milestone year for Lantronix, marking our 18th in operation. That's a testament to our diligent patient resilience and perseverance of our team as well as the difficulty associated with scaling and commercializing it takes you rapid process technology in 2023, together with our partners, we started at three commercial scale plants bringing the total number of operating and commercial land at that plant?
Yes, it's total installed nameplate production capacity of glass and licensees. Operating treat is approximately 310,000 tonnes per year of ethanol. With the ability to abate more than half a million tonnes per year of harvest, it would otherwise enter atmosphere, full commercial plants in China are operational, and we expect that Indian ore facility in India as well as onshore metals facility in Belgium will continue to ramp up to full capacity over the course of 2024.
The Indian oil facility started up in September 2023. And the team in India is working diligently to ramp up production as is normal with a new commercial feedstock refinery of gas. In this case, the start-up phase can be elongated. We are confident that successful full-scale operations will be achieved in the coming months. Our shallow metals plant started up in November 2023.
The steel mills shut down at the end of the year for planned routine maintenance and the mill is now back in operation and the team in Belgium has restarted operations with a ramp up of production. Expect that over the next two quarters in mid-January, LanzaTech is celebrating the opening of the world's first ethanol sustainable aviation fuel facility at its $10 million gallon per year plant.
And so put that in Georgia as seen on slide 10, the SEZ plant is expected to ramp up production over the first half of the year, having the ability to produce up to 90% sustainable aviation fuel and efficient renewable diesel from ethanol, Lantronix ethanol serves as a feedstock for SAP and when coupled with lens technology enables production of fat from a variety of listed residues, including municipal solid waste and carbon dioxide or hydrogen. The latter is commonly referred to as e-fuels of power two well, we currently have an approximate 25% ownership in Massachusetts.
Completion of this facility also represents a significant milestone for land ownership in land suggests and should we expect it to from our co-investment and others to take licenses to build their own alcohol to jet plants, which in turn triggers the issuance of additional land to get shares electric.
Looking now at KC, one of our core values, I do want to acknowledge that we experienced a singular recordable lost time injury during the fourth quarter first such incident since November 2018. This was the only recordable incident in all of 2023 across our global operations and was the result of a lab related incident that occurred while moving equipment. The employee made a complete recovery from the injury and returned to work quickly. We have addressed the root cause of the incident and remain vigilant in ensuring the safety of our employees and stakeholders.
Lastly, from a process competitiveness standpoint, at the Suncoast facility in Canada, we've demonstrated at scale the production of the key new proprietary bacterium production stream capable of making isopropyl alcohol or IPA. IPA commands a large market of approximately $3 billion annually and can be utilized for feedstock for the production of polypropylene, which has an ethanol market price of approximately $123 billion. This process is stand rate locations, and we expect to do so in 2024. Additionally, our streaming continuing and fermentation optimization work on the direct microbial production of mono ethylene glycol or MEG at Chemical with an annual market size of approximately $25 billion and a key ingredient in the production of PET fibers and bottles continued successfully as our science team's overall goal is to develop new commercial space. Fourthly, to add production of high value industrially relevant molecules.
Moving to slide 12, we outline our strategic priorities for 2024 with care safety, commercial growth and path to profitability. First and foremost, safety with safety, first, innovation and we'll continue to strive for excellence and Zero Safety interim second commercial growth. Even against somewhat difficult macro backdrop and challenging sales cycles. Our market opportunity remains outstanding, and we are committed to accelerating our growth by adding and advancing projects, US Our commercial pipeline as we progress projects and ultimately bring more plants online, we will further expand our base of long-lived, high-margin recurring revenues from royalties, the share of microbes and media and the services.
On slide 13, you will see our current project pipeline funnel. Since our last update, we added several opportunities to top of the funnel. And we saw five made additions to the early-stage engineering Phase I. This redemption from the TA St or from projects already in early engineering licensing is hard and dependent on the decision cycles of our licensees and many organizations around the growth have leaned away from next-generation work in this macroeconomic environment.
How ever we continue to add to our backlog, and I'm encouraged by the diversity of the pipeline, including the diversity of feedstocks in a variety of technical integration and the geographic spread.
With regard to diversity of feedstock in the pipeline. Industrial off cash and gasified solids make up approximately 42% and 38% of our opportunities. We expect it with other feedstocks, including carbon dioxide and hydrogen, representing the remaining 20%. Pete South center C shows the extensive reach of our technology as it distributed decarbonization solution. It is fit for purpose related to technical integration we have seen tremendous global interest and check decision unsurprising. Given the enormous market opportunity, approximately 100 billion gallons of staff is needed to meet the world's fuel needs. While the current annual production capacity of SaaS only stands at approximately 120 million gallons. We have several opportunities in the pipeline that focus on an integrated solution to take rich gas through to SaaS. I pairing lend to fix customizations technology with the land to get alcohol to jet passes. The ramifications of this are enormous shifts. It unlocks the use of locally advantage feedstocks to enable regional domestic production of SaaS at industrial scale without negatively impacting the food supply chain. Specifically, we have for integrated risk SaaS projects in early stage or advanced engineering agents, including a project in New Zealand with them is human and the New Zealand government to take predominantly gasified force through recipes through the SaaS.
Our project with the drilling Africa, happy to take densified solids through the shaft. It tried to flag it in the UK to take industrial off gas through the shaft and a particularly big gasified, solid success in Australia, Derrick, significant feedstock advantage into our architecture technology and our ability to produce ethanol from multiple sources. It's a clear differentiator strategy is supported by several sub mandates for power to ex fuel in regions like the European Union to create a distinct market, some fields producing CO2. Geographically, we are seeing regional bubbles projects forming with strong partners that are focused on decarbonization. This notion of leading the way in the respective regions like the Middle East with partners like at an account that we have and in Saudi Arabia through a partnership with only and as well and has been India with partner, secondary Oil Corporation and GAIL. Overall, the buy-in were securing amongst these two leading organizations, establish a strong regional protocols allowing us to focus and resources regionally and capture large local market. We expect that engineering services revenue will be bolstered by several projects this year, including our project that we are and we'll put an app now for perspective, carbon dioxide or hydrogen projects.
Also in Africa, our work across a couple of commercial gasified MSW projects will take issue in Japan as well as from several projects in India. Additionally, we anticipate revenues from sales of equipment packages to materialize from central projects beginning construction in the second half of the year. In addition, to the significant impact of our commercial licensing pipeline. We anticipate transitioning our first project to our infrastructure capital partner, Brookfield this year, well ramping up development of additional projects for them Additionally, we are actively developing a pipeline of project opportunities with our partner, Orion in Saudi Arabia and the broader Middle East. Overall, the health of our commercial project pipeline remains strong and we are progressing these opportunities to development plastics, setting us up for the next crop project to be placed into service in the near future.
In our carbon fiber business, we remained focused on sales into the global chemicals market for our chemicals customers. Third party sustainability certification is important, and we can provide ethanol for downstream applications that comes from round table that's sustainable biomaterials or international sustainability and carbon certification certified facilities. We are optimistic about selling carbon smart ethanol into the low-carbon fuels market, specifically in the EU. Once regulations, it settled at the European Commission and how these first of the pilot field it treats. As you know, the technical guidance continues to be provided by the commission, but is not yet final additionally approvals from the certification bodies who can officially certified recycled carbon shoots for the road air on marine market in the EU.
Understood. And then we are following this rulemaking closely and see significant upside potential by having smart business, actually regulatory environments, firm and certification of Pharma, a path to profitability. We are focused on developing high-quality revenue streams that will continue to expand our gross margin while maintaining a disciplined eye and operating costs. The recent reorganization of the business demonstrates our commitment to achieving the goal of sustained long-term profitability, and we've strengthened our focus, prioritization and execution of high-quality revenue opportunities and leadership team remains committed to smart growth and rightsizing the business to achieve success no matter the challenges we face. We are motivated by the importance of our work and the significant progress we have made to date. We're focusing on our core business and delivering upon the key strategic priorities I laid out for this year.
With that, I'll turn the call over to Geoff to provide details on our financial performance. And Jeff, please go ahead.
Geoff Trukenbrod
Thank you, Jennifer, and good morning and thank you to everyone for joining us on the call. As seen on slide 15, total revenue for the fourth quarter of 2023 of $20.5 million grew by 77% year over year, bringing 2023 annual revenue to $62.6 million, a 68% improvement over 2022. While we were disappointed by the performance of our carbon smart business during the quarter, revenue from our core Biorefining carbon capture and utilization business grew 103% year on year in the fourth quarter to $14.2 million, driven mainly by ongoing and recently initiated engineering services work across several projects.
The Biorefining business saw 101% growth year on year in 2023, reaching $42.6 million in contract research, revenue grew 21% year on year in 2023, reaching $14.6 billion. This performance was supported by several customers and government grants, which are typically multi-year in duration from the carbon SmartSide. While this part of the business significantly underperformed our expectations for the reasons we have discussed, especially in the fourth quarter. For the full year, our carbon Spark business achieved 33% growth year on year, reaching $5.3 million. Our focus on revenue quality continued in the fourth quarter as we saw gross profit improvement of 62% quarter-on-quarter to $8.5 million, bringing full year gross profit to $17.7 million, approximately doubling our gross profit from the prior year. This Q4 improvement was driven by high margin engineering services for continuing contracts resulting in quarter gross margins of 41% and full year 2023 gross margin of 28%, up approximately 400 basis points over 2022.
So Lucas engineering services work in the fourth quarter benefited from extraordinary pricing terms. We do expect gross margin to be in the mid to high 20s for 2024 based on our anticipated revenue mix and significant amount of lower margin equipment revenue in this particular year. We remain focused on improving gross margins while accelerating revenue growth in 2024. Operating expenses continued to decline quarter-on-quarter in the fourth quarter coming in at $27.1 million. This decline came as a result of lower quarterly research and development and SG&A expenses and greater billable utilization of our teams operating expense for 2023 was $124 million. And as a result of the executive reorganization, headcount reductions and other cost cutting initiatives, Jennifer laid out earlier we expect 2024 and operating expenses will be flat or lower as compared to 2023.
To recap, we expect that the earlier discussed reorganization initiatives will reduce annualized operating expenses by approximately $5.3 million. Although, of course, not all of that will be realized in 2024 and that there are other inefficiencies and cash burn reduction opportunities that we are actively pursuing.
CapEx spend during 2023 totaled $8.6 million, 20% lower compared to 2022. Turning to adjusted EBITDA and cash, we reduced our adjusted EBITDA loss quarter over quarter by 28%, the $13.7 million for the quarter, resulting in a full year adjusted EBITDA loss of $80.1 million in 2020. Free cash burn also declined by approximately 36% to $15.4 million for the quarter as we continue to focus on our path to profitability and getting cash flow positive. We ended the year with $121.4 million in cash on hand, including cash, restricted cash and investments today, as seen on slide 16, we're introducing our full year 2024 guidance, which includes total revenue of approximately $90 million to $105 million at the high end.
This reflects growth of approximately 68% in line with the annual growth we experienced last year. We anticipate the bio-refinery revenue growth will come from ongoing and new engineering services revenue as existing projects, continue engineering work in advance of the subsequent phases of the development cycle as well as from the sale of equipment from several projects that we expect to proceed to the construction phase in 2024, some of which were delayed from starting construction in 2023. We also expect incremental ongoing growth in recurring revenue with the additions of our supplemental and Indian oil facilities for the operating fleet in 2019, we have experienced some timing delays for a subset of projects in the middle of the funnel that we attribute to certain macroeconomic factors and elongated decision making processes at some of our licensee customers.
As a result, we have modified our forecasting to take into account these projects taking longer to move from early-stage engineering, new advanced engineering and from advanced engineering to FID and construction start in 2023. Such timing delays with projects anticipated to enter construction, push those construction starts and associated equipment revenues into 2024 and beyond. Important to reiterate that projects are not dropping out of the pipeline, rather, the tougher macroeconomic and higher inflationary environment leading to changes in steel prices and availability of equipment combined with a lack of uniform regulatory protocols that elongated the recent project development cycles, which were closely months. We anticipate JDA and contract research revenue to continue its modest growth. We'll selectively deploy our resources on high-margin opportunities and work that we believe will lead to future bio-refining licensing opportunities on the carbon smart side of the business, we anticipate moderate growth this year. I believe there is substantial upside potential for the business as we negotiate committed offtake supply with our partners in China and Europe into this current certification are underway, including a timely and favorable manner, unlocking additional access to supply from customers.
Looking for product, given the timing of the development cycles of our bio-refining business. We again anticipate our revenue will be back half weighted and the Q1 2020 for revenue for very much like Q1 2014. This suggests that we expect to see strong quarter-over-quarter growth throughout 2024. To reach our guidance range are highly confident in achieving our forecast like to highlight a couple of key drivers that can influence outcomes between the lower and upper end of our revenue guidance May first, as mentioned, significant upside potential and the carbon smart business certifications materialize quickly, second, more favorable timing on FID and construction starting for some projects in the pipeline would further benefit our performance in 2024. We believe this top line performance, coupled with the efficiency and cost focused actions we are taking will further benefit our margins and profitability over the near and long term.
Adjusted EBITDA loss for full year 2024 is expected to be $65 million to $55 million, reflecting the expected top line growth range, combined with our ongoing focus on high-quality margin opportunities and cost controls, importantly, resetting the timing expectation for when we will achieve positive adjusted EBITDA. We previously expected to occur in late 2024 with positive full year adjusted EBITDA in 2025. While we are encouraged by the strong growth, we continue to see across the business in 2024 the delay of our expected turn to profitability simply reflects our shift in view of specific project development timelines and not an erosion of our project plan.
We are keenly focused on execution to achieve and accelerate our planned path to profitability and remain excited for the future of Winstek ending last year. With more than $120 million in cash, restricted cash, cash equivalents and investments. We have significant financial flexibility and remain focused on maintaining this flexibility, ensure we're best positioned to achieve our growth objectives already believe we have sufficient liquidity to execute on our near-term objectives. We will remain opportunistic around potential ways to supplement our flexibility, especially if it can accelerate our path to profitability and our growth over the long term.
With that, I'll turn the call back over to Jennifer for some closing remarks.
Before we open the call for Q&A. Jennifer?
Jennifer Holmgren
Thank you, Geoff. 2023, like a milestone year with much tower. As we look ahead to 2024 and beyond, we appreciate that we must deliver relative to our financial targets. We have created a business model that we can scale in every region across the globe because we use distributed waste base feedstocks. Second use rates and are specific to each country. Working globally comes with challenges, not least from a regulatory perspective, especially if you are the first and a challenging the status quo and how goods are currently produced rather than give up. We persevere and my team and I continue to be excited about upcoming projects and our ability to deliver and new carbon materials and energy panels. By executing our business plan, we expect to reward our shareholders while we start solving our patent problem today, would you expect I will need to do. Thank you again, for joining us and to some many of you for your continued support as we realize our vision of circular carbon economy.
Operator, we can now open the lines for Q&A.
Question and Answer Session
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions)
Leo Mariani, Roth MKM.
Leo Mariani
Hi, guys. I was hoping you could provide a little bit more color on the revenue ramp here. I guess you're saying first quarter '24 is going to be around $10 million, which is about half of what you know, fourth quarter of '23 revenues are certainly kind of coming down in the near term. Can you maybe just talk about some of the specific kind of operational milestones that sort of drive that, Amit, sounds like you're not expecting much growth in carbon smart. So is it generally just kind of milestones around some of these engineering service packages that kind of drive things, you know here in 2024 and you kind of also referred to maybe changing the forecast methodology a little bit as well. So hopefully you guys you know missed numbers here in 2023. So maybe just talk a bit more about have you changed methodology to come up with the forecast you guys think is maybe a little more realistic here in '24.
Geoff Trukenbrod
Hey, Leo, it's Geoff. I could have serious here from you and happy to trying to address each of those. If I miss one, as I answer circle back to me on it. So first and foremost, I think the first question was around Q1 2024.
Yes, that is exactly what we were saying. It's really just a function of the timeline and progression of projects during in the course of the year. And so we happen to see a similarly aggressive ramp quarter over quarter through 2024. And it just so happens that Q1 of this year, we expect to be consistent with Q1 of the prior year. But yes, below Q4 of last year. Just based on the timing of those projects.
Yes, comments weren't. We do expect to only have a modest growth in there. As referring back to some of Jennifer's comments. We think that there's a lot of upside potential around carbon smart in the year, but we're taking a more conservative approach until there's more clarity on certifications and access to supply and then I guess finally, with regards to methodology on the forecast, yes, we are looking at, I mean, reflecting on 2023. And historically, we've been very good at tracking to the projects that are going to say, yes, and that are going to progress. But in 2023, we certainly saw some elongated timelines, and we've taken those into account and adopted a more kind of conservative method forecasting methodology around timelines of projects in 2024 and beyond.
Leo Mariani
Okay.
And obviously, you've got your cost cutting initiatives under way. If I'm looking at your kind of main cost to really, I guess, R&D and then sort of your cash G&A piece.
Certainly, both those numbers came down a little bit in Q4 versus Q3. How do you expect kind of R&D to progress in 2024? And are you through cash G&A, you know, progressing you mentioned those numbers kind of be similar to what Q4 '23 levels. We'd expect those numbers to kind of drop as a result of their cost-cutting initiatives as the year progresses.
And then could you also address this potential plan to cut another $10 million in cash burn. And it sounds like it's not that's only been implemented yet, but maybe is kind of on the drawing board is something you guys are giving strong consideration to.
Geoff Trukenbrod
Yes, I appreciate that. So I'll hit on the last first and then kind of circle back to your other question. So at least with regards to the plan that we're putting in place here over the next quarter, we're not really in a position to share additional details about the plan at this time, but we'll certainly provide them as they as they occur.
On your question about our OpEx, R&D SG&A., relative to where we ended the year, I think is your Jennifer mentioned on earlier in the call, we're very focused on cost controls this year. We think we have all of the resources that we need in R&D for at least the breadth of capabilities there for 2024, we don't expect to be growing SG&A during the course of the year. Our expectation is that we have the team in place. We have the size of the team in place that we need to get to achieve our goals. And so we expect to end the year either it's flat or down both on a headcount basis and on a cost basis relative to where we ended 2023.
Leo Mariani
Okay. Those numbers are clearly coming down. That's a that's nice to hear. All right, thanks.
Geoff Trukenbrod
Thank you.
Operator
Our next question comes from Pavel Molchanov from Raymond James.
Thanks for for taking the question. Given the recent opening of Vantage at Freedom Pines, I guess it's not producing.
Yes.
Can you talk about have the role of Freedom Pines in your guidance for 2024, if any, essentially the question further on.
We don't have revenues in inside our guidance for 2024 based on land suggests, however, they will start producing later this year and we are progressing joint projects. That's really the key as I mentioned that that first commercial plant anchors all of the feasibility work of the joint projects that I mentioned during the call. We've got projects that we are with them on in New Zealand and multiple others that are based on integrated LED chip tech land project technologies that actually take some type of waste residue or CO2 and converted all the way through SAP. So that's where you'll see our revenues in 2024. That will be based on feasibility and engineering work to develop that portfolio of joint waste stuff.
Okay.
Okay. Can we get an update on U.S. Steel and all just the kind of an operational status? And also same question I asked earlier, what is the role of steel and all in the guidance?
Yes. So that's a great question. And let me ask Rand that we started the plan in December, but they needed to shut down one of the blast furnaces surely couldn't supply gas to restart the operation sector showing that everything was working well, and we've just restarted it just now should be an alternator starting up in 2024 you will see two types of revenue from Celunol. One is some licensing revenues, microbe revenues, engineering support revenues, but what you also see is off peak revenues. We will start to also provide ethanol to carbon smart partners and out of steam. And now we will have actually, unlike China, we will have secured supplies, dedicated land attack to be sold into the carbon smart market. So you will see both types of revenues.
Okay, very clear. And then lastly, Section 45 on tax for biofuels will be now kicking in in 2025, right, SaaS being part of that. As you think about your business development in the US, will any projects would be direct beneficiaries of the new as Section 45 credits in 25 or 26.
That is equivalent to we expect, first of all on the Georgia facility to be a beneficiary because they will be able to leverage bang on and there will also with we won't have a second plant running by 2025 in the US, but we do have a planned one that includes the potential credit we will also see us benefit from other non-cash 45 credits. We are developing projects where the hydrogen on for the 5G comes into play. So where we're actually leveraging the 45 family, shall we say, to enable us to do more practice here in the US and you'll be hearing more about that in the next few months. The projects that we are now on taking through our feasibility stage here.
And then lastly, just kind of a quick housekeeping question. What do you expect in-house CapEx to be in 2024?
I'm going to turn that over to Jeff, this will to us good start of we expected our internal CapEx to be fairly consistent with 2023. We're not looking at any significant changes to CapEx, and we'll continue to keep a close eye on it to see if we can actually reduce it for that matter.
Thanks very much.
Jennifer Holmgren
Yes.
Operator
Your next question comes from Ryan things do with B. Riley.
We are and good morning.
Geoff Trukenbrod
So with 24 revenue weighted to the second half, could you just talk about how strong your visibility is and if you see potential risk to some of that slipping into 2025.
Hey, Ryan, to talk to you, as we look at the forecasting and just thinking through our forecasting methodology. Certainly we had time we had slippage in 2023. So I can't tell you that we certainly won't have any, but we do have good visibility into all the projects we've taken, you injected some additional conservative and timing into the pipeline at this point in time in our forecasting, in order to train take into account any of that all of our projects are identified projects named projects in the current forecast. So these are specific opportunities that we've been working through our pipeline through that funnel.
I'm over the last few years. So we've got strong relationships with these companies. We are close to them and we're tracking them on a on a daily and weekly basis. So yes, we feel confident about them. And we do feel that there's additional upside opportunities that could come into the pipeline and come into the funnel.
During the course of the year, we had a pretty good track record of that over the last couple of years as well.
But those aren't factored into the forecast.
Again, those would be upsides. But in terms of the forecast that we do have and the timing associated with it, it is still back half weighted or would you expect a strong quarter-over-quarter growth throughout the year, but we do have good insight and good visibility into all the opportunities there.
Got it.
That's helpful.
And then how are you thinking about potentially raising are tight capital ahead of reaching EBITDA and cash flow positive likely next year?
Yes.
No, thanks for the question on that on that, too, as I noted in my prepared remarks, we believe we've got sufficient liquidity to execute on our near-term objectives. And to reiterate that we ended the year with more than 120 million in cash and equivalents and even at our burn rate from last quarter that takes us well into 2025. And beyond that, we've got various levers in terms of both CapEx and OpEx that we can utilize in quick fashion. We want to extend that runway, including the cost reduction actions that we've taken over the last couple of months. So again, I think we have sufficient liquidity to execute our near-term objectives. But as always, we're going to remain opportunistic and flexible as we drive to accelerate growth and and reduce our time to profitability.
Jennifer Holmgren
Makes sense.
I'll turn it back.
Yes.
Operator
Our next question comes from Jeffrey Campbell with Seaboard partners.
Geoff Trukenbrod
Please proceed.
Good morning.
You've called out common smart as a specific Q4 23 shortfall line and what was the approximate $18 million guidance miss yes, the press release describes 2024 comments, my outlook as incremental growth for reasons that you've articulated in the call. How do we put these two ideas together as we think about 2024 that apparently was a big line item in Q4 23, but it's incremental to 22.
Yes. Yes.
Let me on let me start by addressing that.
Thank you for the question. Jack, on we have become Wheaton, we took a very conservative approach, as Jeff mentioned, to our forecasting and what happened in the fourth quarter where certification misses. And we're still waiting for guidance from exempt from the European Commission, for example, on how to handle these fields. So we decided not to put that upside into our forecast because of the fact that the regulatory environment is such that we can't guarantee when they'll come through. And that's that's essentially what happened in the fourth quarter. And we just are not prepared to put it all in. We are working with our partners to help them with certification. We are working with our third-party partners also in ensuring that we have ethanol available to us should the certifications come through. But we have taken a very, very conservative view as to whether the governments will come through with all of the appropriate guidance because these recycled carbon fuels taking assume, oh, gosh, I'm putting into fuel pool is not something anybody has done before carbon capture and reuse is not something that anybody doing commercially So we just want to make sure the government commit on trying to get ahead of government legislation.
I'm going to thank you.
And just further to that point when those favorable regulations come to pass on what the immediate effect is primarily the pricing or do you see it having some effect on demand as well?
It will be both because the gas fields will then be mandated. And that means that that will be required to be put into the pool and some countries. And so that will increase the price, but it will also increase demand on. And that is also why we're so focused on making sure we had reserved offtake from our various commercial plan by having reserved offtake. We will stay ahead of the demand and will be able to supply products.
Okay.
The US is broken through with Freedom Pines, but otherwise, the states don't seem to be an important region for Land's attack at this time based on your description of the regions that are and do you see anything on the horizon to create project interest in the U.S.? And I'm kind of thinking about your nascent agreement with Technip that want to ask this question?
Yes. No, that's a that's a great question. We have multiple projects in the pipeline in the U.S. And as I mentioned, the IRA really makes a big difference for us. And so it impacts both SaaS projects, integrated projects, Atlantica, it impacts hydrogen supply for a couple of projects that we're developing right now in the Gulf Coast, and I'm not at liberty to mention our partners' names, but I would say that over the next six months, you will see a number of projects working through the pipeline in the US on, and we look forward to discussing those with you, but they're great.
And for my final question, just kind of a higher level. At what extent do you think the project decision delays that you've talked about have been driven by current economics? And you mentioned interest rates still So 14 weeks versus some visible ESG fatigue that seems to be becoming more visible below cash?
Yes, we have had that trade. So I would say it's both, right, because it's key to take as you call it or what at what we call people leaning back and out of investing in new technologies, new approaches that are based on carbon reductions. We see a lot of weakening there and that does peak to make.
On the capital side, we talked about interest rates, but we also talk about the cost of steel. Cost of steel is still higher than it was pre-COVID rate. And even even though the prices are coming back down below 20% increase in the cost of steel was significant in a project like $100 million, right? So so I think that cost is actually an important driver and because we've got one of the things kind of tied together and both partnerships with suppliers. So that we can reduce the cost of our supply chain. But also we've worked very hard on on reducing the cost of some of our technology. So we devoted some time to that be sure, those are those are the things that have slowed down that we have are starting to see pickup. And there's a lot of interest in in in dealing with ETFs requirements in the future mandates around power to act here to price fix in Europe. So so as we're starting to see a little bit of a tailwind now coming out of it, but then yes, hopefully that addresses your question, Mario, that was very helpful color. I appreciate.
Jennifer Holmgren
Thank you.
Operator
Once again, if you have a question, please press our why this concludes our question and answer session. I would like to turn the conference back over to Jenny for any closing remarks.
Thanks to everybody for joining us. It's been our first theater in the market, and we are very excited about the progress we've made. And clearly, there's a lot more work to be done, but we really appreciate all of your support. We think 2024 will be an important year for us, and we look forward to reporting on our progress at the next quarterly meeting. And thank you for your time.
The conference has now concluded. Thank you for attending today's presentation.
You may now disconnect in the main. And Mike.
Yes, yes, this is Mike. Why?
Yes, yes.