Aspen Aerogels, Inc.

Good morning. Thank you for attending Aspen Aerogels Inc. 2022 Financial Results Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to turn the conference over to your host, Laura Garant, Aspen's Vice President of Investor Relations and Corporate Communications. Thank you. You may proceed, Ms. Garant.

Thank you, Elliot. Good morning, and thank you for joining us for the Aspen Aerogels Fiscal Year 2022 and fourth quarter financial results conference call. With us today are Don Young, President and CEO, and Ricardo Rodriguez, Chief Financial Officer. There are a few housekeeping items that I would like to address before turning the call over to Don. The press release announcing Aspen's financial results and business developments, as well as a reconciliation of management's use of non-GAAP financial measures compared to the most applicable U.S. generally accepted accounting principles or GAAP measures is available on the Investors section of Aspen's website, www.aerogel.com. Included in the press release is a summary statement of operations, a summary balance sheet, and a summary of key financial and operating statistics for the 2022 fourth quarter and full year ended December 31, 2022. 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. Aspen Aerogel's 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 yesterday, page one of the presentation, and are discussed in more detail on the reports Aspen files with the SEC, particularly in the company's most recent annual report on Form 10-Q. The company's press release issued yesterday and filings with the SEC can also be found in the investor section of Aspen's website. Forward-looking statements made today represent the company's views as of today, February 6, 2023. Aspen Aerogels disclaims 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 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 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. I'll now turn the call over to Don. Don?

Thanks, Lara. Good morning, everyone. Thank you for joining us for our Q4 2022 earnings call. I will start with comments on our performance, our Q4 financing, our outlook for 2023, and our highlights from our EV OEM development work. Ricardo will discuss business results and outlook in detail. We will conclude with a Q&A session. During the fourth quarter, We had record Pyrethin thermal barrier revenue slightly surpassing the $25 million mark and a robust energy industrial order book, which together enabled us to achieve our target of $180 million with growth for the year of nearly 50%. Pyrethin thermal barrier revenue for the year surpassed $55 million, up nearly nine times from the 2021 levels. As we look out over 2023, we expect Pyrethin thermal barrier revenue to build over the year as automotive OEMs scale their operations, which we believe will result in materially more Pyrethin thermal barrier revenue in the second half of the year compared with the first half. At the same time, we expect our energy industrial business to remain strong through the year and provide a steady base load of revenue. Our demonstrated capability, both supply and demand, to generate nearly $60 million of revenue in Q4 2022 supports our target of reaching approximately $240 million of revenue this year, consistent with our objective to double revenue from 2021 to 2023. The Q4 gross margin of 24%, demonstrates the value of higher capacity utilization and the progress we are making to eliminate redundant costs as we scale. Our teams did an outstanding job in Q4 and are now focused on continuing to make additional productivity gains in 2023. While our longer term gross margin target remains 35%, we are pleased with the progress we made in Q4. We continue to deepen our technical and commercial engagement with both current and prospective automotive customers. During Q4, we experienced a record number of OEMs ordering prototype parts. Several of the OEMs entered our thermal barrier development pipeline during 2022, driven at least in part, we believe, by their earlier non-pyrothen designs being unsuccessful at mitigating the risk of thermal runaway propagation. As we have described in the past, mitigating the dangers of thermal runaway presents a challenging and multifaceted problem. We believe our value to the automotive OEMs is based on our unique technical solutions and our deep subject matter expertise. and that we are well positioned to achieve our goal of deepening our technical and commercial relationships with existing customers at the same time that we add important new customers. There were several interesting developments since our last earnings call. We received a letter of intent from the luxury brand of a major German OEM group where the thermal barrier parts are targeted for a battery platform intended for use across several of their models. The LOI captures the advanced stage of the qualification process and related negotiations, and we believe puts us on a firm track for a full design award. We also received an order for approximately 1.5 million prototype parts for a commercial vehicle brand within the same German OEM group. We believe that this LOI and the advanced parallel work with other brands within the group position as well to earn broad adoption with this important German OEM. More broadly, we have been invited by existing and prospective new customers to quote approximately $15 billion of Pyrethin thermal barrier business. Again, we believe we're well positioned to succeed. On the energy industrial side of our business, we have a deep order book. We already have purchase orders for 2023 of over $100 million. We have robust commercial activity levels across our refining, petrochemical, LNG, and subsea segments and across all of our major regions. We have implemented price increases for all products across our energy industrial business, which should positively impact Q2 and beyond. Furthermore, we are competing successfully in both maintenance and project work. Even with the probability of a slowing global economic growth, we believe our strong outlook for energy industrial is fueled by our value drivers of efficiency, resiliency, and safety, by geopolitical pressures that promote LNG, and by the balance sheet strength of our end users. The energy industrial revenue stream is a valuable base load for us as we 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. During the fourth quarter, we executed a successful publicly marketed equity offering, raising approximately $265 million, including $100 million from Koch Industries. We intend to use the proceeds from the offering to partially fund the construction of phase one of our second aerogel manufacturing facility in Statesboro, Georgia, and for other general corporate purposes. At the same time, we entered into a definitive loan agreement with General Motors for a secured lending commitment of $100 million in connection with the equipment and construction of our plant too. The loan proceeds can be drawn on a periodic basis as construction milestones are met. The financial commitment from General Motors adds another dimension to our longstanding technical and commercial relationship. We are deeply involved with GM's current and next generation battery platforms and of course, our building Plant 2 in part to meet GM's demand in the coming years. We appreciate GM's commitment to our success. During our last two earnings calls, I said that Plant 2 would not be immune from the macro challenges marked by supply chain and inflationary challenges that are impacting virtually all major construction projects. We are proactively managing the project in order to try to minimize cost and schedule pressures, and doing so such that phase one has more than adequate manufacturing capacity to achieve our 2025 revenue target of $720 million. This level of manufacturing capacity will be critical as we serve General Motors, Toyota, and we believe other EV OEMs who are now deep in our business development pipeline as demonstrated by our recent LOI from the German OEM. With the successful financing completed in Q4, we will continue over the next couple of years to take an all of the above approach to financing our growth plan. As we explore prospective sources of equity and debt capital, we will continue to focus on strategic investors, on more fully utilizing our significant assets as collateral, and on government grant and loan programs to supplement private sector capital. We believe these avenues are most efficient, validate our business strategy, and of course, strengthen our balance sheet. We believe battery performance and safety and the resiliency of supply chains in the US, especially for critical areas of energy transformation and electrification, will continue to attract capital from a wide range of sources. We are confident that the all of the above approach to raising the necessary capital for us to execute our long-term strategy is correct. Before I turn the call over to Ricardo, I would like to express my appreciation to the employees of Aspen. The past year presented many macro challenges, but our team stayed focused on executing our plan to double revenue from 2021 to 2023 and on preparing to triple revenue from 2023 to 2025. We are guided by our desire to create a positive cycle of mutual benefit with our customers, suppliers, and communities. We have a very talented and dedicated group of people working here at Aspen, and I am happy to be part of the team. Ricardo, over to you.