Aspen Aerogels, Inc.

Thank you for your patience. The Aspen Aerogels Inc fourth quarter 2021 earnings call will begin shortly. During the presentation you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. Good afternoon. Thank you for attending the Aspen Aerogels Inc. fourth quarter 2021 earnings call. All lines will be muted during the presentation portion of the call with an opportunity for question and answers at the end. I would now like to turn the conference over to your host, Laura Garant with Aspen Aerogels. Thank you. You may proceed, Ms. Garant.

Thank you, Lauren. Good evening, and thank you for joining us for the Aspen AeroGel Fiscal Year 2021 Financial Results Conference Call. I'm Laura Garant, Aspen's Vice President of Investor Relations and Corporate Communications. With us today are Don Young, President and CEO, John Fairbanks, our Chief Financial Officer, and Ricardo Rodriguez. Ricardo is Aspen's Chief Strategy Officer, and he will be assuming the role of CFO upon John's retirement April 1st. There are a few housekeeping items that I'd like to address before turning the call over to John. The press release announcing Aspen's financial results and business development, as well as a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures, is available on the indexer section of Aspen's website, www.barrogel.com. Included in the press release is a summary statement of operation, a summary balance sheet, and a summary of key financial and operating statistics for the fourth quarter and full year ended December 31st, 2021. In addition, I'd like to highlight that we have uploaded to our website a slide deck that will accompany our conversation today. You can find the deck at the investor section of our website. An archive of today's webcast will be on our website for approximately one year. Please note that our discussion today will include forward-looking statements, including any statement regarding outlook, expectations, beliefs, projections, estimates, targets, prospects, business plans, and any other statement that is not a historical fact. These forward-looking statements are subject to risks and uncertainty. As in aerogels, actual results may differ materially from those expressed in these forward-looking statements. A list of factors that could affect the company's actual results can be found in Aspen's press release issued today, page 1 of the presentation, and I've discussed in more detail on the reports Aspen files with the SEC, particularly in the company's most recent annual report on foreign 10-K. The company's press release issued today and filings with the SEC can also be found on the Investors section of Aspen's website. Forward-looking statements made today represent the company's views as of today, February 17, 2022. Aspen Aerogel has claimed any obligation to update these forward-looking statements to reflect future events or circumstances. During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA. These financial measures are not prepared in accordance with the U.S. generally accepted accounting principles, or GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures are included in today's press release. I'll now turn the call over to John. John?

Thanks, Laura. I'll provide a summary of our 2021 financial results and discuss our 2022 outlook before turning the call over to Don and Ricardo. At a high level, our 2021 results and our 2022 outlook share the same drivers. First, we're generating revenue growth in each of our principal markets. We're benefiting from the rapid adoption of our pyro-thin thermal barriers in the electric vehicle market. We're experiencing solid growth in the energy infrastructure market associated with the initial stages of a post-COVID recovery. And we're gaining share in the European sustainable building materials market with our Spaceloft line of products. a second we're investing in people resources and capital assets to support our rapidly growing e-mobility opportunities this investment includes increased spending to enhance our technical operational and commercial teams supporting our thermal barrier business the research and development team supporting our carbon aerogel battery material opportunity our legal resources to expand and defend our ip portfolio and our finance, information technology, and general management personnel to manage the anticipated strong growth in our business. This investment also includes planned capital expenditures to design and construct our second silica aerogel manufacturing plant, to build out our thermal barrier fabrication operations, and to expand our carbon aerogel battery materials production, fabrication, and testing facilities. We're confident that these investments are commensurate with the scale of our EV opportunity. Focusing in on 2021, total revenue increased by $21.3 million versus 2020 to $121.6 million. This $21.3 million increase in revenue was composed of a $12.6 million increase in energy infrastructure revenue, $6.7 million in initial revenue in the EV thermal barrier market, and $1.9 million of growth in the sustainable building materials market. Our revenue could have been higher. We estimate that our production output was depressed by between $6 million and $8 million during the fourth quarter due to COVID-related staffing issues and some raw material shortages. Without these issues, our 2021 revenue would have been in the upper end of our outlook range, which is a reminder we raised three times during the year. Importantly, we're experiencing an improvement in both staffing and raw material availability thus far during the first quarter of 2022. Turning to costs and expenses, during 2021, material costs increased by 33% of $14.5 million, Manufacturing expenses by 28% or $11.6 million, and operating expenses by 40% or $14.3 million versus 2020. The growth in cost and expenses were driven by both the increase in revenue and by our investment in people and resources to prepare for growth in 2022 and beyond. Accordingly, net loss increased to $37.1 million or $1.22 per share in 2021 versus a net loss of $21.8 million or 83 cents per share in 2020. And adjusted EBITDA was negative $26 million in 2021 compared to negative $6.4 million in 2020. As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expense, and any other items that we do not believe are indicative of our core operating performance. In 2021, these other items included a $3.7 million gain on the extinguishment of debt. Next, I'll turn to our balance sheet and cash flow for 2021. Cash use and operations of $18.6 million reflected our adjusted EBITDA of negative $26 million, offset in part by a $7.4 million decrease in working capital investment. Capital expenditures during the year of $13.8 million included engineering and designs for our second manufacturing facility and investments to expand our carbon aerogel capacity. Cash provided by financing activities of $92.5 million included $73.5 million of proceeds from our June 2021 private placement with Koch Strategic Partners and $19.4 million from sales of equity to our ATM facility. We ended the year with $76.6 million of cash, no borrowings under our revolving credit facility, and shareholders' equity of $128.4 million. We also had $12.6 million available under our revolving credit facility at year-end. And I'll turn to our full-year 2022 outlook. We expect continued revenue growth in 2022 associated with a tripling of our pilot thin thermal barrier revenue to $20 million for the year, a continuation of the post-COVID recovery in the global energy infrastructure market, and continued demand growth in the European sustainable building materials market. As a result, we're setting our 2022 revenue outlook to between $145 and $155 million for the year, equivalent to growth of between 19% and 27% compared to 2021. As discussed earlier, we plan to continue to increase investment in personnel and resources to capitalize on our rapidly growing e-mobility opportunities. Accordingly, our initial 2022 full-year outlook is as follows. We expect total revenue of between $145 and $155 million, net loss of between $66.7 and $70.7 million. Adjusted EBITDA of between negative $42 million and negative $46 million. EPS of between a loss of $1.95 and a loss of $2.07 per share. This EPS outlook assumes a weighted average of 34.2 million shares outstanding for the year. In addition, this 2022 outlook assumes depreciation of $9.7 million, stock-based compensation expense of $8.2 million, and interest expense of $6.8 million. We also expect to incur between $250 and $275 million of capital expenditures during the year, principally for the Plant 2 project. Before turning the call over to Don, I want to express that it's been a privilege to work with my fellow Aspen employees since 2006. The team at Aspen is talented, hardworking, and completely committed to the company's success. I particularly want to thank Don for his leadership over the years and our shared goal of building Aspen into a great company rich with opportunity. In addition, I want to stress how truly impressed I am with Ricardo. He's remarkably talented and has the right combination of automotive and financial experience to ensure Aspen will succeed in the coming years. With Don at the helm and Ricardo at CFO, I'm confident we will not skip a beat after my retirement. And finally, I want to thank our investors and analysts. It's been an honor to work with you all since our IPO in 2014. I'll turn it over now to Don.