Aspen Aerogels, Inc.

Good morning. Thank you for attending Aspen Aerogel's Q3 2023 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, Neil Barowrinsky, Aspen Senior Director of Corporate Strategy and Finance. Thank you. You may proceed, Mr. Barowski.

Thank you, Elliot. Good morning and thank you for joining us for the Aspen Aerogels Fiscal Year 2023 Third 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. In addition, I'd like to highlight that we've uploaded to our website a slide deck that will accompany our conversation today. You can find the deck in the Investors section of our website. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the disclaimer statement on pages 1 and 2 of the slide deck as the content of our call will be governed by this language. 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 an 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, Neil. Good morning, everyone. Thank you for joining us for our Q3 2023 earnings call. My initial comments will highlight our Q3 performance and Q4 outlook, the status and impact of several critical elements of our strategy, and our EV OEM development pipeline. Riccardo will dig deeper into our financial performance and our business strategy. Ricardo and I will expand upon last week's announcement related to our upgraded revenue and adjusted EBITDA outlook for 2023 and the addition of Audi and Scania to our list of OEM design awards. We will conclude with a Q&A session. Q3 revenue was a record at over $60 million. Pyrethane thermal barrier revenue was $33 million, surpassing that of energy industrial of our energy industrial business for the first time. We believe PyroThin thermal barrier revenue for the second half of 2023 will be three or four times larger than it was for the first half of the year. Gross profit for the second half of 2023 will be two or three times larger than for the first half of the year. Energy industrial activity remains strong while the team manages through a supply-constrained period as we shift plant one to produce pyrethin thermal barriers and, quote, test the system of our planned supplemental supply for energy industrial. We are making good progress on both initiatives. In addition to the ramping of the pyrethin thermal barrier business, a highlight for Q3 is the continued progression of our gross margins through 2023. Eleven percent in Q1, 17% in Q2, 23% in Q3. We anticipate continued gross margin expansion in Q4 as we progress on the path to achieving our targeted 35% gross margin. Based on our Q3 performance and current momentum, on October 24th, we announced a revenue outlook of at least $225 million, favorably modified from an earlier outlook of a range between $200 and $250 million. The UAW strike has not impacted our revenue, but we will remain cautious until the tentative agreements have been ratified and the autoworkers are fully back to work. We also announced an improvement to our 2023 adjusted EBITDA outlook from a midpoint of negative $50 million to a midpoint of negative $35 million, our second enhanced adjusted EBITDA outlook in as many quarters. The improved outlook for adjusted EBITDA is driven by higher volumes leading to a fuller fixed cost absorption. We expect this trend to continue in Q4. Also on October 24th, we announced the additions of Scania and Audi, both part of the Volkswagen Group, to our list of design awards. We expect revenue from these two awards to commence during 2024, scale in 2025, and be significant contributors in 2026 and beyond. We anticipate the opportunity to serve other European OEMs as well and continue to believe that we remain on track to reach our target of six OEM design awards by year end. Two key elements of the implementation of our strategy are, first, the full conversion of Plant 1 in East Providence to pyro-thin thermal barrier supply, and second, the commencement of our supplemental supply dedicated to our energy industrial segment. We believe that both strategic initiatives will be functional in early 2024. A third key element of our strategy is the balancing of growth, scale, and profitability, which includes the right timing of Plant 2 in Georgia. Our focus prior to the restart of full construction of Plant 2 is to utilize our existing assets, supply arrangements, and current commercial opportunities to build a business that has the potential to produce annually approximately $550 million of revenue, approximately $200 million of gross profit, and approximately $140 million of EBITDA. We believe we are well positioned to attain this level of performance. Current industry headlines citing uncertainty related to EV capacity investments by OEMs and to the ramp for EV demand are consistent with the underlying assumptions we have used since early 2023 in forming our operating and investment plans. Given the challenging capital environment, we are working to avoid unnecessary dilution for our shareholders by seeking to operate from a position of operational and financial strength and potentially by partnering with the DOE Loan Programs Office with whom we remain in close contact regarding our advanced technology vehicle manufacturing loan application. We believe a more measured ramp in OEM EV production may enable us to have a capital efficient growth path utilizing our current assets that leads to profitability in the near term and without sacrificing our full growth opportunities in the longer term. Ricardo, over to you.