Good afternoon, my name is Jesse and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Aspen Aerogels Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. ([Operator Instructions] Thank you. John Fairbanks, you may begin your conference.

Good afternoon. Thank you for joining us for the Aspen Aerogels Conference Call. I'm John Fairbanks, Aspen's Chief Financial Officer. A few housekeeping items I would like to address before turning the call over to Don Young, Aspen's President and CEO. Press release announcing Aspen's financial results and business developments as well as the reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures is available on the Investors section of Aspen's website www.aerogel.com. Included in the press release is a summary statement of operations, a summary balance sheet, and a summary of key financial and operating statistics for the quarter ended March 31st, 2019. In addition, the investors section of Aspen's website will contain an archived version of this webcast for approximately 1 year. Please note that our discussion today will include forward-looking statements including any statement regarding outlook, expectations, beliefs, projections, estimates, targets, prospects, business plans and any other statement that is not a historical fact. Such statements are subject to risks and uncertainties. Aspen Aerogels actual results may differ materially from those expressed in these forward-looking statements. A list of factors that could affect the Company's actual results can be found in Aspen's press release issued today and are discussed in more detail in the reports Aspen files with the SEC, particularly in the Company's most recent Annual Report on Form 10-K. The Company's press release issued today and filings with the SEC can also be found in the investors section of Aspen's website. Forward-looking statements made today represent the Company's views as of today, May 2nd, 2019. Aspen Aerogels disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. During this call, we will refer to non-GAAP financial measures including adjusted EBITDA. These financial measures are not prepared in accordance with US Generally Accepted Accounting Principles or 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. Definitions of and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present non-GAAP financial measures is also available in today's press release. I'll now turn the call over to Don Young, President and CEO of Aspen Aerogels.

Thank you, John. Good afternoon. Thank you for joining us for our Q1 2019 Earnings Call. I will start by providing comments about our performance and outlook. Next, John will review our Q1 financial performance and reaffirm our 2019 guidance. We will conclude the call with a Q&A session. It has been a busy start to the year for us at Aspen. I will begin with a brief summary of our progress. Two of our performance indicators for 2019 are to grow revenue by more than 20% and to have a growing percentage of revenue, at least 20% derived from project work. Our results for Q1 are in line with our revenue growth commitment with total revenue growth of 21% and we anticipate that we will exceed this performance in Q2. With respect to project revenue as a percentage of total revenue, we've decided to redefine project revenue to be consistent with industry practice. Project revenue is now defined as revenue stemming from a customer-specific scope of work exceeding $1 million in size. This project revenue is distinguishable from our day-in and day-out maintenance work, which tends to come in smaller, steadier increments. From 2008 through 2015 when we were growing at a revenue CAGR of 30%, project and maintenance revenue were largely imbalanced. Since that time period, we have grown our maintenance work each year, but project revenue has been less predictable and has decreased as a percentage of total revenue. Approximately 16 months ago, we built a team dedicated to re-establishing project work as a steady, consistent, and meaningful contributor to our overall revenue. We expect to see a return on our investment in the project team in 2019, 2020, 2021 and beyond. To reflect both subsea and LNG project wins earlier this year and this refined definition…

Thanks, Don. Let's just start by running through our reported financial results for the first quarter of 2019 at a summary level. First quarter total revenue grew 21% to $27.9 million from $23.1 million in the first quarter of 2018. First quarter net loss improved to $6 million or $0.25 per share from $6.8 million or $0.29 per share last year. First quarter adjusted EBITDA was negative $2.6 million compared to negative $2.4 million a year ago. We define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expense and other items that we do not believe are indicative of our core operating performance. I'll now provide additional details on the components of our results. First, I'll discuss revenue. First quarter total revenue of $27.9 million was comprised of product revenue of $26.8 million and research services revenue of $1.1 million and represents a growth of $4.8 million or 21% from last year's $23.1 million. This increase in first quarter total revenue was driven by strong growth in the subsea market during the quarter, solid growth in our core energy markets in the US and Europe, and the contribution from a significant research contract during the quarter. Total shipments during the quarter increased by 12% to 8.7 million square feet of aerogel blankets and our average selling price increased by 6% to $3.08 per square foot. As expected, the first quarter average selling price fell below our projection for the full year due to the impact of orders we carried from Q4 '18 into Q1 '19 both in subsea projects and in our core energy infrastructure business, which we booked with 2018 pricing. However, we expect to realize our full price increase over the remainder of the year and that our average selling price for…

Thank you. [Operator Instructions] Your first question comes from Eric Stine with Craig-Hallum. Your line is open.

Hi, Don, again.

Hi, Eric.

Hey, so obviously, given the LNG award and given the trends in your business, early in the year, you feel great about the guidance, confidence in upping the outlook for project work. But I do just want to confirm. I mean you're not implying anything about the maintenance work that, that has changed, I mean that's constant, that's steady. You feel the same about that. You are just upping the project outlook, is that right?

Yes, Eric. That's a good question. I wanted to talk a bit about that. As I said in my notes that day-in and day-out, maintenance business is growing every year since 2008 and it will grow again here in 2019. That's been a steady performer for us and the market is strong today. We were anticipating with respect to our guidance from a revenue point of view, we were anticipating winning the PTT order coming into the year. So, there is some PTT in that -- in our calculation if you will. We think this certainly brings us into the stronger end of guidance and also I would say that the PTT order ended up having more scope than we originally anticipated. I think you might remember, we anticipated kind of in the $20 million to $25 million kind of range and obviously, it came out closer to $40 million and also will span both 2019 and support revenue growth in 2020 as well. So again, we feel confident it's early in the year. If we feel that we get way out ahead of our guidance, we will certainly up the guidance at the right time, but we feel great about having a ton of confidence in our guidance coming into the year this early.

Yes, absolutely. Maybe sticking with that upped outlook for project work and I know a lot of your commentary was really focused on LNG, but obviously subsea part of that as well and you have had a strong start to the year. I think for 2019, on the last call you were targeting $12.5 million or so in subsea work and just maybe curious with 1Q in hand, how things are starting to shape up as far as your outlook for the rest of the year?

On the subsea side, Eric?

Yes, subsea.

So yes, we had that -- we had the $12.5 million in hand at the time of the last call, we have received some smaller projects since that time. So our current subsea projection is more in the range of about $14 million for this year and there is still a pipeline of projects, some that we could win this year, but more likely going into next year. So it will be a solid subsea year for us with some upside and with good solid momentum into 2020 as well.

Yes, okay, good. Maybe last one from me, I know that we're focused on this call given the recent award on the large projects, but just if you could talk about the pipeline of call it the $5 million plus projects, maybe what you're seeing, how that's changed versus last year and I would think or are you seeing the fact that you've now gotten some of those awards, you've gotten this large project, what that has meant for your pipeline?

Well, we have some nice breadth actually in our pipeline today on our project pipeline and breadth across the different segments that we cover obviously subsea and LNG. We're strong in there and as I said in my notes I think our value proposition after having delivered very successfully three smaller projects at the tail end of 2017 really led into this large win here for PTT and puts us in a -- I think people understand our value proposition, well, it's been well demonstrated now in these early, early project wins. So, the LNG side is strong as well and as I said there are several projects both on the export side and on the receiving side that we have our sights on and being sure that we are in the specifications early on and very competitive for these projects. So, look, as I said, we followed the same -- we've kind of originated that path of maintenance to small scope to large scope in the Reliance project back in 2013, '14, '15 that ended up being about a $72 million project. We see plenty of work that is measured in the $2 million, $3 million, $4 million, $5 million area in several geographies, I think principally focused right now on the US, on Asia and we've done a very nice job recently in the Middle East with some new qualifications of our material with some of the major players there including Saudi Aramco, which was a challenge for us for a period of time, but we've now received that. Again, positions us really well in those three regions in particular for some very, very interesting project work on the petrochemical and refinery side.

Got it, okay. I will take the rest of my questions offline. Thanks.

Thanks, Eric.

[Operator Instructions] Your next question comes from Chip Moore with Canaccord. Your line is open.

Hey, thanks, congrats on the good start to the year guys.

Thanks, Chip.

Maybe just follow up, you talked there maybe you can expand on sort of following this playbook like you did in petrochem and for refineries on LNG in particular where you stand in terms of maintenance work in some of the smaller scope stuff, in particular with this project team that you've built out, how that's helping you guys?

Sure, I think the project team -- their mission was to learn -- identify projects very early on, working with the EPCs, working with the asset owners, being sure that we were very close to the projects as they are in their earliest stages and they worked very close with our regional teams who are on the ground in all of these countries. And so getting into those specifications, having a nice track record here and winning some larger projects, no question, success breeds success here a little bit and we feel we've got some very good momentum. We've always been strong on the subsea side, but certainly in the LNG side, we feel very, very good. The maintenance business, it's -- I just can't emphasize it enough, it has been our bread and butter business, it has grown every year, virtually every quarter and we believe it will continue to do that. We are nowhere near tapping out our market penetration in this area. I believe that we're still really just getting started in this space and we are having our materials used more frequently, broader scope and more facilities around the world each and every year. So again with a shout out to the project work for sure. I don't want to lose sight of the maintenance work and what a good job we have done for a long time in that day-in and day-out business.

And if I look at PTT on this project, if I look back at Reliance, if I remember correctly, I think that project grew quite a bit, is there potential for this project to grow at all and I think there was an upfront payment, just walk me through that?

Sure, you're right. Going back to the Reliance project, we -- I mean through our work with them, I think we were anticipating that project being in the $40 million. It's been a little while now -- about a $40 million project I think originally...

It’s up around $70 million

Yes, it got a little over $70 million and that was because they decided during -- that was a project that lasted about almost 3 years that over the course of the project, they found additional uses for our product in the building out of that very, very large facility. That had petrochemical assets, it had refinery assets and it had power assets in that facility and they found more and more ways of using our products as they got more and more comfortable with it and so that did expand. With respect to PTT, it's a little early for us to tell right now, but I believe that PTT more broadly is playing a very important role for the country of Thailand in the importation of natural gas to fuel their development as a country, their growth as a country, they've made a commitment to move to natural gas from coal and they don't have nearly enough import capability today to keep up with the long-term growth of that country -- development of that country. So again, we feel, we're in a prize position with respect to PTT and whether it expand its scope for this particular project or continue to work with them, I do believe it will be possibly both, but certainly the latter.

And in terms of additional detail on the PTT order, there's confidentiality provisions in the contract and we don't really have the ability to provide details on the pricing or the delivery schedule, payment terms and similar types that information. So we're going to have to stick with essentially what's been disclosed in the press release when we announced the award and sort of the net impact of it all to our business that we delivered today as part of our guidance.

Got it. That makes sense. I understand. Maybe if we talk a little bit on building materials and BASF progress there. I know in the UK at least there's still after the Grenfell tragedy, right, there's still a lot of concern there and some regulations moving. So maybe you can speak to development BASF another prepayment. It seems like things are going pretty well.

Yes, it is a deep and important relationship for us. Our focus jointly with BASF and it kind of follows through the maintenance small scope, large scope. I mean what we're really focused on with them is making sure we've qualified all the materials, particularly across Europe but we're seeing opportunities here in the United States and in Asia as well. From there, we're trying to create what we're referring to as lighthouse projects. Great case studies, examples of using our new Spaceloft product, Spaceloft A2 product in these applications and from there, those case studies, those lighthouse projects become important sales tools for a broader BASF sales team to get busy across the region -- the region of Europe is their principal focus. So that's the way we see it playing out, we've got a handful of these lighthouse projects in sight here and it's important that we win those here over the remaining part of 2019. That would set us up very nicely for 2020.

Got it. Maybe one last one from me, that third goal of a new partnership and opening up a new market. You talked about any other [ph] material on the storage side. Are you hinting that that's kind of where you're leaning or we should think potentially could be any number of areas?

That's our first target and we've been working. This goes back, actually, quite a long ways and we've done government research and development work with [DOD] and DOE and for a long time, we've developed our expertise around these carbon aerogels as opposed to the silica aerogel. So we've been working on it for a good period of time. For the past year or year and a half, we have created a dedicated team. They're aligned with two university programs to support our work and in essence test our material and to help us characterize it, which has been important, but also we've during this second quarter here, we'll have our second wave of intellectual property put in place and so we're doing all the important ground work, but we do believe that the NOI side of the battery is a very smart first target for us, but we do believe that our materials have a role to play on the cathode side as well. So there's a lot of good work going on with a dedicated team and we are in the midst of discussions and meetings post NDA with a small handful of very large leading players in this space and so our commitment in our performance indicator is to codify one of those relationships at least one if not do something more broad than that with one or more of these companies during 2019. So we're excited about it, we've got a lot of hard work to still do for sure, but it's a very dynamic area and a very important area and so we're giving it everything we got.

That’s great to hear. Thanks, Don. Thanks. John.

Thank you.

There are no further questions. I turn it back to Don Young for any closing remarks.

Thank you, Jesse. We appreciate your interest in Aspen Aerogels. We look forward to reporting to you our second quarter results in early August 2019. Have a good evening. Thank you.

This concludes today's conference call. You may now disconnect.