Aspen Aerogels, Inc. (NYSE:ASPN) Q4 2022 Earnings Conference Call February 16, 2023 8:30 AM ET Company Participants Laura Guerrant - VP, IR and Corporate Communications Don Young - President and CEO Ricardo Rodriguez - CFO Conference Call Participants Eric Stine - Craig-Hallum Colin Rusch - Oppenheimer Chris Souther - B. Riley Alex Potter - Piper Sandler George Gianarikas - Canaccord Genuity Jeff Osborne - Cowen Amit Dayal - H.C. Wainwright Operator Good morning. Thank you for attending Aspen Aerogels, Inc. ...

Financial Data and Key Metrics Changes - Q3 2022 revenue was $36.7 million, representing a 21% year-over-year growth [22] - Adjusted EBITDA was negative $23.2 million, compared to negative $7.8 million in Q3 2021 [29] - Net loss increased to $29.6 million or $0.75 per share, compared to a net loss of $7.8 million or $0.24 per share in the same quarter of 2021 [29] Business Line Data and Key Metrics Changes - EV thermal barrier revenues increased by 11% over the prior quarter to $11.9 million, and over 12-fold year-over-year [23] - Energy industrial revenues were $24.7 million, which was 16% lower than the same quarter last year and 29% lower than the previous quarter [24] - Material expenses for the quarter were $20.8 million, making up 57% of sales, which is over 10 percentage points higher than the long-term target [25] Market Data and Key Metrics Changes - Strong demand in LNG markets with several early wins in accelerated LNG projects [14] - Continued growth in North America and Latin America for LNG projects, with first shipments for the conversion of former drilling rigs to LNG assets [14] - High activity levels in the U.S., Europe, Asia, and Canada for refinery and petrochemical sectors [15] Company Strategy and Development Direction - The company aims to achieve a revenue target of $240 million in 2023 and $720 million in 2025 [11][17] - Focus on leveraging aerogel technology into diverse markets, including energy industrial and EV sectors [16] - Ongoing construction of Plant 2 in Georgia to support future revenue growth [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged supply chain challenges and inflationary pressures affecting operations [17] - Confidence in achieving 2023 revenue targets despite current market conditions [18] - Management emphasized the importance of strategic investors and government programs for financing growth [19][20] Other Important Information - The company published its inaugural ESG highlights report, emphasizing sustainability and corporate responsibility [21] - Capital expenditures for the year are expected to range between $200 million and $225 million [32] Q&A Session All Questions and Answers Question: Progress with European OEMs and potential awards - Management noted increased prototyping activity and clearer visibility on specific applications, expecting potential awards in 2023 [38][39] Question: Incremental revenue sources for the full year - Management indicated that Q4 revenue is expected to be around $20 million from EV thermal barriers, with the remainder coming from energy industrial products [44][45] Question: CO2 shortage impact and mitigation - Management confirmed ongoing CO2 shortages and described measures taken to increase storage capacity and manage supply [55][57] Question: Toyota's EV roadmap and potential volume increases - Management acknowledged ongoing engagement with Toyota and noted that current revenue plans only include awarded nameplates [66]

Financial Data and Key Metrics Changes - Aspen Aerogels reported revenues of $45.6 million for Q2 2022, representing a 19% increase from the previous quarter and a 44% increase year-over-year [23][24] - Year-to-date revenue grew by 40% year-over-year to $84 million [23] - The net loss increased to $24 million or $0.68 per share compared to a net loss of $6.7 million or $0.23 per share in Q2 2021 [29] - Adjusted EBITDA was negative $18.3 million in Q2 compared to negative $3.4 million in Q2 of last year [29] Business Line Data and Key Metrics Changes - Energy industrial revenues increased by 13% over the prior quarter to $34.9 million, driven by strong demand and backlog fulfillment [24] - EV thermal barrier revenues reached $10.8 million, a 42% quarterly increase [24] - PyroThin thermal barrier revenue was nearly $11 million in Q2 compared to $7.6 million in Q1 and less than $7 million for all of 2021 [17] Market Data and Key Metrics Changes - The automotive industry is projected to invest $0.5 trillion in the next five years for the transition to electric vehicles, positioning Aspen Aerogels favorably for battery performance and safety [19] - The EV market is expected to grow significantly, with forecasts indicating a 24.7 million unit market in 2025 [43] Company Strategy and Development Direction - The company aims to achieve $1.6 billion in revenue and $400 million in EBITDA by fully utilizing its second aerogel manufacturing plant [11][21] - Aspen Aerogels is exploring various sources of capital, including government grants and strategic investors, to support its growth plans [14][15] - The company is focused on leveraging its Aerogel technology platform into high-value markets with sustainability themes [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising necessary funds to become cash flow positive in 2024 despite challenging market conditions [16] - The company anticipates high year-over-year growth rates in 2022, supported by strong demand in the EV market and energy industrial sector [16] - Management highlighted the importance of operational improvements and productivity initiatives to enhance gross margins and profitability [36][41] Other Important Information - Aspen Aerogels is committed to ESG initiatives and plans to release its inaugural ESG highlights report [22] - The company is investing in technology and new business development, with over 60 new inventions captured in 33 patent families filed or in draft [20] Q&A Session Summary Question: How is scarcity value affecting discussions with OEMs? - Management indicated that demonstrating capacity build-out is crucial for meeting 2023 and 2025 targets, and OEMs are keen on being prioritized in the supply chain [51][52] Question: What is the significance of fire containment in product design? - Management noted that regulatory standards are becoming more stringent, and their products aim to isolate bad cells, transforming catastrophic events into serviceable ones [55] Question: How does localization of battery supply chains affect operations? - Management acknowledged the need for regional fabrication facilities to meet OEM demands and is committed to expanding operations accordingly [58] Question: What is the status of staffing and operational efficiency? - Management reported improvements in staffing at the aerogel manufacturing facility and plans to streamline operations between Rhode Island and Mexico [61][62] Question: How does quoting and testing relate to the award process? - Management clarified that quoting is a late-stage process, indicating significant testing and qualification have already been completed [64]