Aspen Aerogels, Inc.

to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures are included in yesterday's press release. And one final note, during the Q&A session, in the interest of time, we ask that you limit your questions to two questions at a time. If you have additional questions beyond the initial two, please get back into the queue and we will get to all questions. And I'll now turn the call over to Don. Don?

Thanks, Laura. Good morning, everyone. Thank you for joining us for our Q3 2022 earnings call. I will kick things off with a progress report on our recent business developments and financing activities, and Ricardo will discuss business results and outlook. We will conclude with a Q&A session. Our first revenue guidance for 2022 had a center point of $150 million. At the time, we reiterated our 2023 target to double revenue from 2021 to 2023 to $240 million and to triple revenue from 2023 to 2025 to over $700 million. During the second quarter, we raised our revenue guidance to a center point of $190 million while maintaining our 2023 and 2025 revenue targets. At our last earnings call, we anticipated that automotive OEMs would be impacted from time to time by supply chain challenges that could influence their growth ramps in any given period. We saw this in the third quarter, and while we had record thermal barrier revenue, it was less than we expected at the outset of the quarter. Q3 revenue was also impacted by some of our own supply chain issues, which Ricardo will cover in his presentation. We are experiencing during the second half of this year the fluctuations inherent in the startup nature of the EV market as our OEMs ramp their EV production. We believe that our Q4 thermal barrier revenue will be at a record level of approximately $20 million and will enable us to achieve overall revenue for the year of approximately $180 million, revenue growth for the year of nearly 50%. Our PyroThin thermal barrier commercial activity continues to gather pace as we deepen our engagement with additional customers. We continue to sell parts to support customer product development and our long-term revenue pipeline, most notably to the commercial vehicle division of an important German OEM and one of its luxury light vehicle brands. Increasing the number of vehicle nameplates to which we supply production parts is key. While we will continue to anticipate variability from one quarter to the next during the ramping period, overall, we believe that the long-term EV momentum is powerful. We remain confident that we have ample opportunity to reach our 2023 revenue target of $240 million and our 2025 revenue target of $720 million. We have a deep order book on the energy and industrial side of our business. And while it can mitigate some of the variability of the EV OEM ramp, it is not a one for one replacement at the revenue level. There are several highlights from the energy industrial business. We continue to see strong growth in LNG markets. During Q3, we had several early wins and accelerated LNG projects that will unfold in the coming quarters and years. In North America, We had first shipments of product for the conversion of former drilling rigs to rapid deployment LNG assets. We received additional orders in Latin America for Peru LNG and expect continued growth in Latin America as projects on the Pacific take shape. We are expanding our presence in the Middle East and are proud to partner with ADNOC LNG, where we received our first Crowdgel award in Q3. In the US, we saw strong demand and serviced large turnarounds through the quarter on the refinery and petrochemical side of the business. We completed major construction and material support for Shell's Penn Chemical Facility. We also continued during Q3 to execute on the largest propylene oxide plant in the world for Lyondell. The value drivers for these wins are long-term asset protection and simplified logistics We are seeing similarly high activity levels in Europe, Asia, and in Canada. One last note on energy industrial. Our space loft subsea pipe and pipe segment is strong with five recent awards from Subsea 7, Technip FMC, and All Seas. These five projects represent approximately $12.7 million in revenue, and our backlog in this space continues to grow. The strong outlook for energy industrial is fueled by our value drivers of efficiency, resiliency, and safety. We are building in optionality to manage our overall revenue growth during this early stage of the EV megatrend. This flexibility is a good example of the benefit of our strategy to leverage the aerogel technology platform into a diverse set of large and dynamic markets. With an active energy industrial business and with a strong position to grow with the EV megatrend, we are committed to our $240 million 2023 revenue target and our $720 million 2025 revenue target. We continue to make progress on Plant 2, our aerogel manufacturing facility under construction in Georgia. At a macro level, The past 12 months have been marked by supply chain inflationary and cost of capital challenges for all projects and our plan to project has not been immune. We are proactively managing the project in order to mitigate cost and schedule pressures and doing so without losing sight of our goal to build the initial phase of the first class. aerogel manufacturing facility that enables us to hit our 2025 revenue target of 720 million dollars. We have also designed Plant 2 to allow us to bring online incremental capacity as our current OEM scale and as we are able to convert a robust development and prototyping pipeline into design awards with new OEMs. We believe Plant 2 positions us to play a significant and important role in battery performance and safety. As we have said in the past and as is especially true in the current financial markets, we are taking an all of the above approach to financing our growth plan. As we explore prospective sources of capital, we have continued to focus on strategic investors who know our company and the markets we serve and who have the potential to make equity or debt investments in the business as Koch Strategic Platforms has done in the past and has indicated its interest in doing so again. We believe having a strategic investor as the centerpiece of an investor group will add validation to our business strategy and, of course, strengthen our balance sheet. While market conditions continue to be a challenge, we believe we will close a round of financing in the near term. In addition to potential strategic investors and the public equity and debt markets, We are engaged with government programs as potential 2023 sources of capital for Plant 2. Our first application for the U.S. Department of Energy grant for advanced battery materials as part of the Bipartisan Infrastructure Act was not funded, as we believe the awards were largely granted to companies that are, quote, inside the cell. We believe that the administration is likely to announce an additional $3 billion in grant funding opportunities before the end of second quarter 2023. We expect that a significant amount of that funding will be dedicated to U.S.-based manufacturers dedicated to the electrification economy. We are also exploring other DOE programs that are focused on battery performance and safety. The programs target American manufacturing in an effort to address the resiliency of supply chains in the U.S., especially for projects in critical areas of sustainability such as energy storage and related materials. While such DOE programs can take time and are unpredictable, we believe we are a very good candidate and that our pursuit is consistent with our all of the above approach to raising the necessary capital for us to execute our long-term strategy. And finally, I would like to continue the practice of highlighting our ESG work during quarterly earnings calls. For the past two decades, sustainability has been linked to the success of our business. It is a natural fit for us to explore new uses for our Aerogel technology platform with the goal of improving environmental performance and safety of our customers' products and processes. It is also at the core of our culture to respect and celebrate our employees by striving to create a diverse and inclusive environment. We believe we have a responsibility to make a positive impact on our communities, and we are committed to creating a corporate culture that pursues its mission with the highest standards of integrity. During the third quarter, Aspen published our inaugural ESG highlights report and launched our ESG webpage, which provide a comprehensive overview of our overall ESG strategy. We look forward to your feedback. I will now turn the call over to Ricardo Rodriguez. Ricardo Rodriguez Thank you, Don.

I'll start on slide four and our financial highlights for the third quarter, starting with revenues. We delivered $36.7 million of revenues in Q3, which translates into 21 percent growth year over year. Energy industrial demand remains very strong, and we're booking orders into the second half of next year. We see no demand risk in the medium to long term on our EV thermal barriers as the move to electrification accelerates. Our annual air plant shutdown to implement longer roll lengths and faster line speeds combined with CO2 shortages and near term volume ramp up delays in EV thermal barrier part demand prevented us from continuing the recent quarterly revenue growth rate that we've been driving for three quarters in a row. Absent these disruptions, we believe revenue would have increased by $7 million. Our EV thermal barrier revenues increased by 11% over the prior quarter to $11.9 million and over 12-fold year over year. Our Q3 energy industrial revenues of $24.7 million were 16% lower than those in the same quarter last year and 29% lower than in the previous quarter. This segment was most affected by our pre-scheduled annual plant shutdown and the national CO2 shortage. To illustrate this impact, it's worth remembering that our aerogel plant in Rhode Island operates 24-7. We effectively shut down this operation for seven days, from July 16th to July 22nd, and implemented various process changes that are already yielding benefits with faster line speeds and longer road production lengths. The national CO2 shortage prevented us from realizing these benefits in the third quarter by limiting our aerogel production for at least 17 days. We've implemented various measures to ensure that we reduce the frequency and impact of further interruptions by increasing our CO2 storage capacity on site and starting to manage the transportation of supply with our own trailers. These investments have already contributed to a stable production schedule this month. Next, I'll provide a summary of our main expenses. Material expenses of $20.8 million for the quarter made up 57 percentage points of sales, which continue to be over 10 percentage points higher than where we want these to be in the long term. This delta is driven by the fact that most of our EV thermal barrier production in July will still deliver from Rhode Island with higher scrap levels and a more complex part design that has been phased out as we transition to higher volumes. In Q3, we effectively transferred our EV thermal barrier assembly from Rhode Island to a larger site in Monterrey, Mexico, with higher volume processes that will enable our profitable growth in the future. As we completed this initiative at the beginning of August, Demand on the three automotive nameplates that we're currently supplying temporarily slowed as customers are addressing their own issues, increasing vehicle production volumes. This slowdown prevented our thermal barrier gross margins from improving quarter over quarter, ending at negative 70% versus negative 67% in the prior quarter by affecting our ability to absorb fixed costs. We are confident, however, that as soon as demand accelerates next year, we will be able to capitalize on the transition to optimize processes. Conversion costs, which we consistently describe as all production costs required to convert raw materials into finished goods, were of $22.8 million and made up 61 percentage points of sales. These costs include all elements of direct labor, manufacturing overhead, factory supplies, rent, insurance, utilities, overhead, and inspection. With less revenue than expected during the quarter and approximately $12.9 million of these expenses being fixed, it was challenging to continue our path towards reducing the percentage of sales through improved fixed cost absorption. However, we remain confident in our ability to leverage the higher throughput rates enabled by faster line speeds and longer aerogel roll lengths to manage these costs. Operating expenses, which are key to delivering our revenue and profitability goals of 2023 and beyond, were of $22 million. These increased by half a million dollars quarter over quarter versus an increase of $4.6 million in Q2 over the prior quarter. This modest increase aligns with my remarks from Q2 around making sure that our OPEX increases become more modest and focus precisely on delivering three things. Tangible productivity benefits through new process development and the implementation of systems that streamline our methods and drive overall productivity. Two, new business awards through our EV thermal barrier technical sales efforts. And lastly, clear milestones in our R&D efforts. These include our silicon anode carbon aerogel development efforts, along with R&D efforts in our silica aerogel-based insulation formulations. These are the developments that drive lower chemical waste expenses through reformulation and enable further productivity improvements. Accordingly, our net loss increased to $29.6 million, or 75 cents per share, versus a net loss of $7.8 million, or 24 cents per share in the same quarter of 2021. Adjusted EBITDA was negative $23.2 million in Q3, compared to negative $7.8 million in Q3 of last year. As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expenses, and other items that we do not believe are indicative of our core operating performance. In Q3, these other items included $2.6 million of stock-based compensation, and $1.3 million of interest expense. Next, alter the cash flow and our balance sheet. Cash used in operations of $37.4 million reflected our adjusted EBITDA of negative $28.3 million and an increase in operational cash needs of $14.3 million that reflects a quarterly decrease in accounts payable of $15.5 million. Capital expenditures during the quarter of $67 million included the site work, extractor pit formation as part of Plan 2's construction, assembly equipment for a higher volume thermal barrier operations, the R&D lab upgrades for our carbon aerogel battery material efforts, and the initial construction of our advanced thermal barrier center. As progress remains on track for Plan 2 to enable a revenue growth in 2024, we have incurred $129.4 million in capital expenses through the end of Q3 towards it. Cash provided by financing activities of $44.7 million during Q3 included $44.9 million of net proceeds from our ATM offering transactions at a gross average price of $10.63 per share. We ended the quarter with $102.4 million of cash no borrowings under our revolving credit facility, and shareholders' equity of $182.4 million. We remain geared to deliver revenues of $180 million in 2022, a net loss in the range of $82.3 million and $86.8 million, and adjusted EBITDA in the range of negative $57.5 million and $62 million. Our capital expenditures for the year are expected to range between $200 and $255 million, as we work to further optimize our commitments and investments across the board. Delivering over $59 million of revenues during the fourth quarter is subject to various external factors, such as our thermal barriers customers' abilities to maintain their stated vehicle production volumes, and the supply chain of our main raw materials such as silanes, batting, CO2, and the local labor market, particularly for our aerogel facility in Rhode Island. We are proactively managing our supply chain risks and have ensured that we supply silanes and batting to execute our production plans. Recent nationwide CO2 shortages in the tight labor market continue to pose the highest near-term risks to our revenue ramp. Before turning the call back to Don, I'd like to provide a brief commercial activities update on slide six. In this chart, to remind everyone, the size of the circle is the vehicle volume in millions that Piper Sandler is forecasting for these OEMs in 2025, and their placement on the map is their approximate headquarters location. The color of the circle then determines whether we have been awarded business by that OEM, are actively quoting business, undergoing testing, or not active with that OEM. We presented an earlier version of this slide during our Q2 earnings call. You can see that our team has successfully entered the quoting stages with the largest customers in Europe and Asia that will be relevant on a global basis in 2025. The volume of prototyping activity in Europe has also advanced into deep technical development that reinforces our strategy and continues to demonstrate customers' eagerness to invest in the right thermal runaway and thermal propagation solution. In Q3, we also started discussions with an additional American OEM and have provided them with pyro-thin materials to test its capabilities. With that, I'm happy to turn the call back to Don.