Aspen Aerogels, Inc.

Good morning, thank you for attending the Aspen Aerogels Inc Q3 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 Investors Relations and Corporate Strategy. Thank you, you may proceed Mr. Baranowski.

Thank you, Ezra. Good morning and thank you for joining us for Aspen Aerogel's third 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 investor 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 slide 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 statement on page one of the slide deck as the content of our call will be governed by this language. On November 19th, Ricardo and I will be hosting one-on-one investor discussions in New York at the Craig Hallam Alpha Select Conference and the Bernstein Annual Industrials Forum. Also, on November 19th, we will be attending an investor dinner in Menlo Park for the Piper Sandler 2024 Bay Area EV and Batteries Bus Tour. On November 20th, Ricardo and I will host investor meetings at Barclays' annual Global Automotive and Mobility Tech Conference. This event will also include a fireside chat with Ricardo from 1 to 1.35 p.m. EST. On December 4th and 5th, our team will be presenting at the Deploy24 Conference in D.C., hosted by the Department of Energy. And finally, on December 5th, Ricardo and I will be hosting investor discussions at the Janie Clean Energy Investment Symposium in New Orleans. I'll now turn the call over to Don. Don?

Thanks, Neil. Good morning, everyone. Thank you for joining us for our Q3 2024 earnings call. My comments will focus on Q3 and year-to-date performance, our revised 2024 full-year outlook, and the status and expected impact of several key elements of our strategy. Riccardo will dig deeper into our financial performance, 2024 outlook, and recent financing activities. We will conclude with a Q&A session. We operated well in Q3. The strong execution leveraged and extended the momentum that we built throughout 2023 and during the first half of this year. The performance is reflected in the Q3 financial results and in the higher 2024 revenue and adjusted EBITDA outlook, our third beat and raise quarter of the year. Our year-to-date numbers and our Q4 momentum are the basis for raising our 2024 outlook to $450 million of revenue and $90 million of adjusted EBITDA. Since we first issued our 2024 outlook, we have increased guidance on revenue by $100 million and on adjusted EBITDA by $60 million, reflecting the good work of the Aspen team. Our quarterly revenue mix was comprised of $91 million of pyro-thin thermal barriers and a modest $27 million for energy industrial. With respect to energy industrial, this year has been dedicated to the transition to our supplemental supplier in support of the business. Our external manufacturing facility serving our energy industrial business performed a successful five-week planned turnaround during Q3 aimed at upgrading equipment to be more flexible and efficient, and importantly, to expand capacity. While the long duration of the turnaround dampened Q3 results for energy industrial, it positions our energy industrial team for a solid fourth quarter and, we believe, for a record 2025. Energy industrial activity remained strong across all regions and segments, including significant growth of Crowdgel products serving the LNG industry. We believe our energy industrial team will drive profitable growth with a medium-term goal of doubling the size of the business to provide a valuable base load of revenue and profit for the company. Our revenue for our Pyrethin thermal barrier business was driven by continued EV growth at GM. As we navigate this phase of EV adoption, we are benefiting greatly from a strong collaboration with GM, both commercial and technical. We were energized by GM's investor day and its Q3 earnings call, where they expressed their full-throated commitment to electrification, including the launching of a full lineup of profitable EVs. In addition to GM and our previously announced five other OEM awards, we are pleased to announce a new OEM award to supply pyrethin thermal barriers to Mercedes-Benz for its battery electric platform based on prismatic cells with production expected to begin in 2027. This additional OEM award is through ACC, a battery cell joint venture between Stellantis, Saftotel Energies, and Mercedes-Benz. Earlier awards from ACC were for Stellantis' STLA medium platforms, which we expect to begin to ramp in late 2025. The continued adoption of Pyrethrin thermal barriers is a testament to the strength and uniqueness of our portfolio. We are confident in our ability to serve this ever-evolving market with our innovative and agile technology platform. Our focus is on securing our eighth OEM design award, which would further diversify our customer base and support our long-term growth through the decade. While it's challenging to pinpoint the exact timing of nominations, even in cases with agreed upon technical and commercial terms, we believe this next OEM program award is on the near-term horizon. We will keep you informed about the progress. As we build our energy industrial and pyro-thin thermal barrier businesses, we are focused not only on growth, but on profitable growth. From 2021 to 2023, we nearly doubled revenue while driving gross profit margin from 8% to 24%. We are ahead of schedule for doubling revenue again from 2023 to 2025 with an expected revenue growth rate in 2024 alone approaching 90%. And again, with profitability in mind, our gross profit margin through three quarters this year has expanded to over 40%. With a revised outlook, we anticipate growing revenue in 2024 by $211 million and adjusted EBITDA by $113 million or 54% of incremental revenue. Our commercial and operating progress since 2021 demonstrates the financial power of leveraging scale and driving margins. Importantly, we anticipate additional profitable growth in 2025 and to continue a direct path to fully utilizing our current capacity and supply arrangements of at least $650 million of revenue capacity with at least 35% gross profit margins and 25% adjusted EBITDA margins. We believe our financial performance during the first three quarters of 2024 more than supports these profitability metrics. As a reminder, we are executing three key elements of our strategy that are in support of these revenue and profitability targets. First, the full conversion of the East Providence Aerogel Manufacturing Plant 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 financial stewardship to reinforce the strength and flexibility of the company necessary to achieve our interim and long-term goals and to take advantage of opportunities as they present themselves. In terms of financial strength and flexibility, during Q3, we generated $21 million in operating cash flow and finished the quarter with over $113 million in cash. In addition, we put in place a $100 million working capital revolver. Since Q3, we took the next major step towards efficiently financing our planned Statesboro Aerogel Manufacturing Plant by receiving the conditional commitment from the DOE LPO for a loan of up to $670 million. While we do not have assurance that the DOE will close the loan, we believe the remaining conditions for closing the loan are controllable. The Statesboro Aerogel Manufacturing Plant is expected to have revenue capacity at between $1.2 and $1.6 billion, and is designed to generate not only accretive margins but also positive cash flow at moderate capacity utilization levels. Also in October, we raised over $90 million in an equity offering to strengthen our balance sheet. Our overall financial strength and profitable operating performance provide us with the resources and flexibility to execute our strategy and to drive long-term profitable growth. As a reminder, our strategy is to leverage our aerogel technology platform into large dynamic markets, especially those with sustainability themes. In work unrelated to the loan programs office, the U.S. Department of Energy awarded Aspen Aerogels with a $7.3 million R&D grant dedicated to advancing our aerogel technology platform in the field of battery materials. Our R&D teams have advanced the development of our carbon aerogels in various battery chemistries, and this DOE R&D grant sponsors our team of scientists to further develop a proprietary carbon aerogel to enhance the performance of fast-charging, high-power LFP cathode materials. As part of this R&D grant, Aspen is partnering with the Oak Ridge National Laboratory to leverage its deep LFP battery expertise and to both advance and validate the technology. The DOE grant and the Oak Ridge partnership provide to us the resources and complementary expertise to demonstrate the fast charging LFP technology and to expand the scale from lab to pilot. If successful, Aspen's LFP cathode material may offer a domestically sourced, high-performance, and cost-effective solution to fast-charging LFP batteries. We will keep you informed about the progress. Ricardo, over to you.