Aspen Aerogels, Inc.

Q1 2024 financial results call. All lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. I'd now like to turn the conference over to your host, Neil Baranowski, Aspen Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You now may proceed, Mr. Baranowski.

Thank you, Chach. Good morning, and thank you for joining us for Aspen Aerogel's first quarter 2024 financial results conference call. With us today are Don Young, President and CEO, and Ricardo Rodriguez, Chief Financial Officer and Treasurer. 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 recent 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 one and two of the slide deck as the content of our call will be governed by this language. During this call, we 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. 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, we expect that our Section 16 officers will file Forms 4 to report the sale and or withholding of shares in order to cover the payment of taxes and or the exercise price of options. Please note that immediately after the filing of our Form 10-Q for the first quarter, we will also be filing a resale registration statement on Form S-3 to cover the Aspen securities held by Wood River Capital LLC, an affiliate of Koch Industries Inc., and our largest shareholder. The purpose of this is to consolidate shares covered by prior resale registration statements filed for affiliates of Coke and other Aspen securities previously purchased by affiliates of Coke. It does not represent a change in the amount or form of the Coke affiliate's current equity interest in Aspen. As is typical with any resale S3, we do not know when, if, or in what amounts Coke may offer securities for sale in the future. Lastly, I want to call out a few near-term IR engagements. Next Thursday, May 9th, Don Ricardo and I will be hosting one-on-one investor discussions at the Oppenheimer 9th Annual Emerging Growth Conference being held virtually. Additionally, on May 21st, Don Riccardo and I will host one-on-one investor discussions at TD Cowen's virtual second annual Sustainability Week. This event will also include a fireside chat with Don and Riccardo on May 21st from 945 to 1015 a.m. EST. On May 22nd through May 23rd, Don Riccardo and I will host one-on-one investor discussions in Los Angeles, California at the B. Reilly 24th Annual Institutional Investor Conference. And lastly, on June 25th through June 27th, Ricardo and Don will host one-on-one investor discussions in London at the 10th Annual Roth London Conference. I'll now turn the call over to Don. Don?

Thanks, Neil. Good morning, everyone. Thank you for joining us for our Q1 2024 earnings call. My comments will focus on our Q1 performance, our 2024 full-year outlook, and provide the status and expected impact of several critical elements of our strategy. Riccardo will dig deeper into our financial performance and outlook and our business strategy. We will conclude with a Q&A session. We operated very well in Q1. The strong execution leveraged and extended the momentum that we built throughout 2023. The performance is reflected in the Q1 financial results and in the raised 2024 revenue and adjusted EBITDA outlook. In fact, we now anticipate net income will be positive for the year. Overall, revenue grew from $61 million in Q3 2023 to $84 million in Q4 2023 and now to nearly $95 million in Q1. thermal barrier revenue grew from $7 million in 2021 to $56 million in 2022 to $110 million in 2023, and we are now poised to more than double pyro-thin thermal barrier revenue in 2024. The year-long capacity constraint that hampered our energy industrial business is being successfully addressed through our supplemental supply. Our external manufacturing facility supplied 10% of our energy industrial revenue in Q4 2023 and 50% in Q1 2024. We anticipate that the percentage will grow to approximately 80% in Q2 and be near 100% for the second half of 2024. The transition to the external manufacturing facility supports strong gross margin expansion. We believe we have the demand and the supply to reach at least $150 million of energy industrial revenue with gross margins exceeding our 35% target. While we drove strong top line growth in Q1, We believe the profitability metrics for the company overall are even more impressive. The gross margin over the past five quarters has expanded from 11% to 17% to 23% to 35% and now to 37%. Comparing Q1 2024 to Q1 2023, revenue increased by approximately $49 million. and adjusted EBITDA improved by nearly $27 million, dropping 55% of incremental revenue to the adjusted EBITDA line. These results leveraged growth through efficient operations and OPEX cost controls, and we believe demonstrate the power of our business model. The results and momentum have also given us the confidence to boost our 2024 revenue outlook by $30 million to at least $380 million, and our 2024 adjusted EBITDA outlook by $25 million to at least $55 million. These outlook numbers are baseline numbers, and we believe we have an opportunity to exceed them. Our strong start to 2024 bodes well for additional outstanding results, including for here in Q2. We also believe that we are on a direct path to utilizing our current capacity and supply arrangements to realize our interim target of $650 million in revenue, $230 million in gross profit, and $160 million in adjusted EBITDA. We are executing three key elements of our strategy that are important to our top line and profitability goals. First, the full conversion of Plant 1 in East Providence, Rhode Island to support the growth of the Pyrethin thermal barrier business. Second, the transition to our external manufacturing facility to support the growth of the energy industrial business. And third, the operating performance that reinforces the financial flexibility and strength necessary to achieve our interim and long-term targets. The full conversion of Plant 1 to pyrethin thermal barrier production is proceeding well. Based on current productivity and yields from Plant 1 and from our Mexico-based assembly plants, we believe annual revenue capacity for pyrethin thermal barriers to be at least $500 million. The commercial development activity for pyrethin thermal barriers remains robust. During Q1, we invoice specific prototype parts to nearly 20 different OEM programs signaling deep engagement with these potential customers. We believe we will add additional design awards to our roster during 2024 as OEMs finalize their respective battery platforms. As described earlier, we believe the external manufacturing facility will supply nearly 100% of our product for the energy industrial business for the second half of 2024. Energy industrial activity remains strong across all regions and segments, including significant growth of cryogel products serving the LNG industry. We believe our energy industrial team will drive steady, long-term, and highly profitable growth for the company. Again, by utilizing existing assets and supply arrangements, we anticipate having an overall business that can achieve at least $650 million in revenue, which we believe can generate 35% gross margins, 25% adjusted EBITDA margins, or over $160 million in adjusted EBITDA. Given that we have recorded gross margins at or above 35% in recent quarters, we believe this level of performance is well within reach. In terms of financial strength and flexibility, we finished Q1 with over $100 million in cash, and with the momentum from the recent operating performance, we now anticipate for the full year 2024, at least $55 million of adjusted EBITDA and positive net income. As we plan for revenue beyond $650 million, we are focused on our second ARAGEL manufacturing facility in Georgia, which will add approximately $1.2 billion of revenue capacity by 2027. Several months ago, we announced that the US 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 one of the key drivers for restarting the construction of Plant 2. While the DOE's invitation to the formal due diligence stage is not an assurance that the DOE will issue a conditional commitment, we remain deeply engaged with the LPL and its advisors and continue to believe that we are a strong candidate to partner in this program. We anticipate providing the next update on this subject no later than our Q2 2024 earnings call. Ricardo, over to you.