Aspen Aerogels, Inc.

Good morning. Thank you for attending the Aspen Aerogels Inc. Q2 2024 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 Baranowski, Aspen's Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You may proceed, Mr. Baranowski.

Thank you, Alyssa. Good morning, and thank you for joining us for Aspen Aerogel's second quarter 2024 financial results conference call. With us today are Don Young, President and CEO, and Ricardo Rodriguez, Chief Financial Officer and Treasurer. The press release announcing Aspen's financial results and business developments and the slide deck that will accompany our conversation today are available on the Investors section of Aspen's website, www.aerogel.com. During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA. The reconciliations between GAAP and non-GAAP measures are included in the back of the presentation and earnings release. 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 the content of our call will be governed by this language 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 for to report the sale and or withholding of shares in order to cover the payment of taxes and or the exercise price of options lastly i want to call out That next Tuesday and Wednesday August 13 and 14 Don Ricardo and I will be hosting one on one investor discussions at can accords 44th annual growth conference. This event will also include a fireside chat with Donna Ricardo on Tuesday August 13 from eight to 825 am est. On Wednesday September 4 the company will host one on one investor discussions at the barclays 30th annual CEO energy power conference in New York. And finally, on Tuesday, September 24th, the company will host one on one investor discussions at Oppenheimer's Innovating Sustainability Summit to be held virtually. I'll now turn the call over to Don. Don. Thanks, Neil. Good morning, everyone.

Thank you for joining us for our Q2 2024 earnings call. My comments will focus on Q2 and first half performance, 2024 full year outlook, and the status and expected impact of several key elements of our strategy. Ricardo will dig deeper into our financial performance and outlook and our business strategy. As Neil indicated, we will conclude with a Q&A session. We operated very well in Q2. The strong execution leveraged and extended the momentum that we built throughout 2023 and during Q1 of this year. The performance is reflected in the Q2 financial results and in the higher 2024 revenue and adjusted EBITDA outlook, our second beaten raise quarter of the year. Quarterly revenue grew to $118 million, which was accompanied by a 44% gross profit margin. Adjusted EBITDA grew to $29 million, resulting in an adjusted EBITDA margin of 25%. Quarterly revenue and gross profit were at record levels in both our energy industrial and EV pyrothin thermal barrier businesses. We are well positioned to be net income positive for 2024, an important milestone for the company. Our profitability metrics are driven by both leveraging our fixed assets and controlling expenses. Our operating facilities are placing an emphasis on important safety, operational, and financial objectives and are producing outsized value for Aspen and our customers. The gross profit margin over the past six quarters has expanded from 11% to 17% to 23% to 35% to 37% and now to 44%. Our adjusted EBITDA margin over this same six-quarter period has grown from negative 31% to positive 25%. Comparing the second quarter of 2024 to the second quarter of 2023, revenue increased by approximately $70 million and gross profit grew by approximately $43 million, dropping 62% of incremental revenue to the gross profit line. These results demonstrate the power of leveraging growth through our focus on unit economics and cost controls, both key elements of our business model. We believe we can continue to improve our performance. As demonstrated above, driving incremental revenue through existing capacity is extra valuable in terms of our profitability metrics, especially as we continue to improve yield throughout the manufacturing and parts assembly processes. The transition to the supplemental supply and support of our energy and industrial business is also strengthening our gross margin expansion. Our external manufacturing facility, or EMF, supplied 10% of our energy industrial revenue in Q4 2023, 50% in Q1 2024, and over 75% in Q2. Over these three quarters, our energy industrial Gross margin grew from 32% to 42%. We anticipate that the EMF supply percentage will continue to grow as we more fully dedicate our East Providence plant to the thermal barrier business. Energy industrial activity remains strong across all regions and segments, including significant growth of Crowdgel products serving the LNG industry. Since the launch of Crowdgel products in 2007, 29 facilities globally have been built or converted for LNG export. Aspen's Crowdgel is being used on 23 of these facilities. We have also won our first two carbon capture projects where our Crowdgel products deliver high performance thermal management. These important wins reinforce our role in sustainability and introduce an additional high potential segment to our energy industrial business. We believe our energy industrial team will drive steady, long-term, and highly profitable growth for the company, including a record year in 2024 of at least $150 million in revenue and with gross margins exceeding our original 35% target. In the medium term, the team is focused on doubling the size of the business and providing a valuable base load of revenue and profits. We started the year with an outlook for revenue of $350 million and for adjusted EBITDA of $35 million, which we raised to $380 million and $55 million, respectively, at the time of our Q1 earnings call. The mid-year results And momentum of both businesses have given us confidence again to boost our 2024 revenue outlook by $10 million to at least $390 million and our adjusted in our 2024 adjusted EBITDA outlook by $5 million to at least $60 million. Per usual, this outlook is comprised of baseline numbers and our objective is to exceed them. In fact, we believe that we have over $50 million of upside to our baseline revenue outlook, predominantly in our EV pirate thin thermal barrier business. During Q2, we announced our sixth design award from a large EU battery manufacturer to supply the next generation battery platform for Porsche, the EU luxury sports car brand under the VW umbrella. The EU battery manufacturer has delivered over 2 million battery systems since the year 2019. The battery platform is expected to underpin multiple nameplates for Porsche and has an expected start of production in 2025. Our EV commercial activity remains at peak levels. During Q3, we expect to deliver over 100,000 prototype or pre-production parts to over a dozen programs in our development pipeline. We are in final contract negotiations with a major European OEM, which we expect to become a formal design award during the third quarter. This award would be our seventh. We anticipate securing additional OEM EV serial programs this year, which will further solidify and diversify our position in the electric vehicle market. With respect to our commercial activity with General Motors, GEM reiterated during its Q2 earnings call that it is targeting to produce between 200,000 and 250,000 EVs in 2024. IHS cited 108,000 Ultium-based EVs produced in the first half of the year and that it anticipated an acceleration in the second half of the year with the launch of several new vehicle nameplates. For our cautious planning purposes and embedded in our 2024 outlook, we anticipate that GM will produce in 2024 180,000 Ultium-based EVs for GM nameplates, plus an additional 45,000 Ultium-based EVs for Honda and Acura. As Ricardo will discuss, the July sell-through levels were notable and support our expectations for the year. The potential upside to our revenue outlook that I cited earlier is largely based on GM maintaining its current ramp up and achieving its targeted production range. We are fully prepared to supply GM's pyrethin thermal barriers demand should they meet or exceed their targeted production range. We believe that our strategic accomplishments, both commercial and operational, keep us on a direct path to utilize our current capacity and supply arrangements and to realize our interim baseline target of at least $650 million in revenue, $230 million in gross profit, and $160 million in adjusted EBITDA. Our first half 2024 financial performance more than supports these profitability metrics. We are executing three elements of our strategy that are important to our revenue and profitability goals. First, the full conversion of Plant 1 in East Providence, Rhode Island to support the growth of the power-thin thermal barrier business. Second, the transition to our external manufacturing facility to support the growth of the energy industrial business. And third, the financial stewardship to reinforce the strength and flexibility of the company necessary to achieve our interim and long-term goals. In terms of financial strength and flexibility, we finished Q2 with over $90 million in cash, just $10 million lower compared to the end of Q1. And, as noted above, with the momentum from our recent operating performance, we now anticipate for the full year 2024 at least $60 million in adjusted EBITDA and positive net income. As we plan for revenue beyond $650 million, we are focused on our second Aerojo manufacturing facility in Georgia, which will add approximately $1.2 billion of revenue capacity by 2027. Several months ago, 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 one of the key drivers for restarting the construction of Plant 2. We have made steady progress with the Loan Programs Office. While we do not have assurance that the DOE will issue a conditional commitment, 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 believe that we are in the final stages of the due diligence process. If we are successful, the next step would be a letter of conditional commitment. We expect to be able to provide additional details prior to the time of our next quarterly earnings call. Ricardo, over to you.