Aspen Aerogels, Inc.

Good morning and thank you for attending the Aspen Aerials Inc fourth quarter and fiscal year 2023 financial results call. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. I would now like to turn this conference call over to our host Neil Baranowski, Aspen Senior Director of Corporate Strategy and Finance. Thank you. You may proceed, Mr. Baranoski.

Thank you, Candace. Good morning, and thank you for joining us for the Aspen Aerojo's fourth quarter and fiscal year 2023 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 most applicable U.S. generally accepted accounting principles or GAAP measures is available on the investor 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 investor 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 statements 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 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 discussion of why we present these non-GAAP financial measures are included in yesterday's press release. I'd also like to note that from time to time, in connection with the vesting or pending expiration of restricted stock units and or stock options issued under our long-term equity incentive program that we expect our Section 16 officers will file Form 4s to report the withholding by the company or sale of shares related to tax withholdings or the covering of exercise prices in connection with vesting or pending expiration of restricted stock units and or stock options. Lastly, I want to call out a few near-term IR engagements. This Thursday, February 15th, Ricardo will participate in a fireside chat in New York at the Wolf Global Auto, Auto Tech, and Mobility Conference. Don, Ricardo, and I will also host one-on-one discussions at this event. On March 18th, Don will be hosting one-on-one investor discussions in Dana Point, California at the 36th Annual Roth Conference. I'll now turn the call over to Don. Don?

Thank you, Neil. Good morning, everyone. Thank you for joining us for our Q4 2023 earnings call. My comments will recap recent announcements, highlight our Q4 and 2023 full-year performance, and provide an early look at 2024, including the status and impact of several critical elements of our strategy. Ricardo will dig deeper into our financial performance and outlook and our business strategy. We will conclude with a Q&A session. Before we do a quick flyover of our recent announcements, I want to thank the Aspen team for producing excellent results in Q4. Revenue of over $84 million, gross margin of 35%, and adjusted EBITDA of over $9 million. These numbers signify record performance and we believe are signs of good things to come. Every person in the company contributed to this success. Since our last earnings call, we have provided several updates. In December, we announced the Pyrethin Thermal Barrier Design Award from the Automotive Cells Company, or ACC, a battery cell joint venture with Stellantis, Saab Total, and Mercedes-Benz to supply the Stellantis STLA medium vehicle platform designed to host multiple brands across the world and is aimed at the passenger SUV and crossover vehicle markets with an expected start of production in 2025. Stellantis is one of the world's leading automakers with brands including Jeep, Ram, Fiat, Chrysler, Dodge, Peugeot, and several others. According to Stellantis, the medium vehicle platform has the potential for up to 2 million vehicles per year built in several plants across the globe, starting in Europe. At the same time, we announced that the U.S. Department of Energy Loan Programs Office invited Aspen into the formal due diligence and term sheet negotiation stage of the process. This loan application is in connection with the construction of Aspen's planned second aerogel manufacturing facility in Georgia. While the DOE's invitation to the formal due diligence stage is not an assurance that the DOE will issue a loan, we remain deeply engaged with the LPO and its advisors and continue to believe that we are a strong candidate to partner with the DOE LPO in this program. We anticipate providing the next update on this subject during our Q1 2024 earnings call. Later in December, we announced the $75 million registered direct common stock offering with Hood River Capital Management and certain other institutional investors. The financing enabled us to finish 2023 with approximately $140 million of cash on the balance sheet, and we believe it adequately supports the company for additional significant growth in our EV thermal barrier and energy industrial business segments. On January 11th, we provided preliminary revenue levels for the full year 2023 and announced the expectation of positive adjusted EBITDA for the fourth quarter. We also announced the successful launch of our supplemental supply to serve our important energy industrial segment. This part of our business has been hamstrung by capacity constraints for over a year, and we are now in the position to restock the channel and we believe to support long-term, highly profitable growth. Energy industrial activity remains strong across all regions and segments of the business. With so much focus on the pyro-thin thermal barrier business, it is important not to forget that we are an important supplier to our global energy industrial customers and partners with an installed base that we expect will surpass $1.5 billion in 2024. The energy industrial business is a key part of our multi-level strategy to reach our growth and profitability goals, especially during the early phases of EV penetration. We have an excellent team serving this global market, and we anticipate that it will meet our growth and profitability expectations. The January announcement also hinted at a vastly improved profitability profile for the company overall. With Q4 revenue of over $84 million, gross margin of 35%, and adjusted EBITDA of over $9 million, we began to demonstrate the leverage of efficient operations, higher volumes, and fuller fixed cost absorption. While we have more work to do, we believe this strong trend will continue in 2024. As I noted earlier, Q4 revenue was over $84 million, and it substantially exceeded the record revenue of approximately $60 million that we posted just a quarter before. Q4 revenue included $53 million of EV pyrethin thermal barriers. The pyrethin thermal barrier business has grown on an annual basis from less than $7 million in 2021 to over $55 million in 2022. and now to over $110 million in 2023. Over the past year, our deep engagement with the various EV OEMs has helped us accurately calibrate the trajectory of the EV trend. While we recognize the challenges that EV OEMs face with launching and scaling new EV nameplates, we are confident that we will see continued substantial pyrethin thermal barrier growth in 2024. We are finalizing the terms of our sixth automotive OEM design award and anticipate adding new OEMs to our roster throughout the year. In addition to the ramping of the Pyrethin thermal barrier business and the initiation of our supplemental supply to support the growth and profitability of the energy industrial business, a highlight for 2023 was the continued progression of our gross margins through the year. 11% in Q1, 17% in Q2, 23% in Q3, and 35% in Q4. The strong gross margin expansion and a careful approach to OPEX translated into a similar quarterly progression for adjusted EBITDA culminating in adjusted EBITDA margin of positive 11% in Q4. we continue to believe that we can drive adjusted EBITDA margins to approximately 25%. In addition to our progress towards our top line and profitability goals, we continue to advance the three key elements of our strategy. First, the transition of Plant 1 in East Providence, Rhode Island to support the growth of the Pyrethin thermal barrier business. Second, the commencement of our supplemental supply dedicated to the growth of the energy industrial business. And third, the balancing of overall growth, profitability, and capitalization. On the transition of Plant 1 to pyro-thin thermal barrier production, our initial estimates for revenue capacity were approximately $400 million. Based on current productivity and yields, we believe annual revenue capacity for pyro-thin thermal barriers to now be approximately $500 million. When combined with our supplemental supply, which supports our energy industrial business, we believe we have over $650 million of revenue capacity from our existing assets and supply arrangements and can generate 25% adjusted EBITDA margins or over $160 million of adjusted EBITDA. we believe we are well positioned to attain this level of performance. Ricardo, over to you.