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, Neal Baranosky, Aspen's Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You may proceed, Mr. Baranosky.

Thank you, Ezra. Good morning, and thank you for joining us for Aspen Aerogels 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 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 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 1 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 an investor discussions in New York at the Craig-Hallum 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 1:00 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 Janney Clean Energy Investment Symposium in New Orleans. I'll now turn the call over to Don. Don?

Thanks, Neal. 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. Ricardo 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 PyroThin 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 Cryogel products serving the LNG industry.…

Thank you, Don and good morning, everyone. I'm happy to report another productive quarter on behalf of our team, starting on Slide 4. We delivered $117.3 million of revenue in Q3, which translates into 93% growth year-over-year. This reflects an annual revenue run rate of approximately $470 million. Sustaining a comparable level quarter-over-quarter is great but this could have been even higher. Our Energy Industrial segment’s revenue was $26.8 million, a decrease of 4% year-over-year and a 27% decrease quarter-over-quarter. At this point, most of the segment's product was supplied by our external manufacturing facility. As Don mentioned in his remarks, we went through a five-week operational improvement turnaround at this facility to enable a higher throughput rate in Q4 and into 2025. We remain sold out in this segment, and there's no doubt that without the operational improvement shutdown, our revenues here could have been at least $10 million higher for the quarter. EV Thermal Barrier revenue of $90.6 million was up over 176% year-over-year and 12% quarter-over-quarter, reflecting a high level of demand from our main customers in this segment. In Q3, company-level gross profit margins were 42% and our gross profit of $49 million, is a $35.2 million improvement over our gross profit of $13.8 million during the same quarter last year. Our Energy Industrial segment delivered $10.8 million of gross profit or an 84% year-over-year increase on comparable revenues. In EV Thermal Barriers, we delivered $38.3 million of gross profit in Q3. The resulting gross profit margins during the quarter were 40% and 42% for our Energy Industrial and EV Thermal Barrier segment, respectively. Without any material onetime charges in Q3 it was encouraging to see our gross margins increase by 90 basis points over our overall gross margin of 41% during the first half of…

Thank you, Ricardo. Before we move to Q&A, we want to comment briefly on the recent elections. The answer to most related questions we expect to receive from you today, the answer is we are not sure. As the nation transitions from campaign rhetoric to policy shifts, we will remain agile. Over the past decade, climate policy has become inextricably intertwined with energy policy, economic policy, and foreign policy. And at the same time, hundreds of billions of dollars of capital have been invested in the United States and around the world. We believe change will come, but that it will be constrained by these complexities, and that will take time. We will continue to focus on profitable growth for both our Energy Industrial and PyroThin Thermal Barrier businesses. Our Energy Industrial business is well positioned, especially with strong value propositions in Subsea and LNG. And it is important to note that we launched our successful PyroThin Thermal Barrier business during President-elect Trump's first term and that we intend to continue to grow the business during his second term. We are executing our profitable growth strategy at a high level and furthermore, we are well capitalized with a strong balance sheet. We believe we are positioned to thrive and to win. Ezra, let's turn to Q&A.

Thank you very much Don. [Operator Instructions]. Our first question comes from Eric Stine with Craig-Hallum. Eric, your line is now open. Please go ahead.

Good morning everyone. Thanks for taking the question. So I can definitely appreciate some nature being not clear on what the election means and a lot of moving parts. But could you maybe just go through the DoE loan, the steps that are needed from today through first quarter when you were expecting a close? And then maybe just talk about your thoughts on funding once it is closed in a new administration where there's obviously been a rhetoric and pushback against EVs and that sort of thing? Again, I mean, I know this is a really difficult question to answer, but I do know that's top of mind for investors.

Thanks Eric. Yes, I mean, I'm not sure how informative any speculation around how things could develop over the next several months would be. All we know today is that the conditional commitment milestone is a meaningful one. At that point, the funds are earmarked for this purpose. And so let's not lose sight of that, right. Then at the same time, I mean, I think we're all for team America winning here as we try to leverage our platform into supplying OEMs around the world and we're confident that we can drive alignment around that. Our goal is to produce this in America with our plant in Georgia and I'm pretty sure that we can drive alignment around that over the next several months. And I think other than that, we'll -- as Don mentioned in his remarks, right, we'll be agile, we'll work with whoever we need to work with to make this project a successful possibility and to deliver it.

I would just add, Eric -- sorry, Eric, I was just going to add that this project is a significant benefit to Georgia. It's important to remember that it is a loan. We're a debt worthy company that will pay back the loan. And so it has a category, I think, of its own relative to again, some of the campaign rhetoric that was so prevalent over the course of the past six months.

Yes. And that's a key point, and it's it is a loan and also that -- I mean the funds are already set aside, right, I mean this is there, you just need to close it to get that. Okay, thank you.

And then the other point on EVs, just to add one thing, Eric. I mean once you drive one, it's tough to go back to one, if you can live within the range limitations and the infrastructure evolves. So we just don't -- I mean, even in this world of uncertain geopolitics, it's tough to see a world in which China has already made the leap to EVs and Chinese consumers are loving their EVs, right. So for us to imagine a world in which the U.S. goes backwards on this, I just don't see how that's progressed for consumers. And we do believe that consumers will -- after they drive an EV and EVs make their share here, like they're not going back to burning diesel. And then we also have Europe to work with as well and Europe has been pretty steadfast on some of the mandates that are driving vehicle development towards electrification.

Our next question is from Colin Rusch with Oppenheimer. Colin, your line is now open. Please go ahead.

Thanks so much guys. And thanks for the detail around some of the customer dynamics and the opportunity set on geometries. Could you guys talk a little bit about how quickly and how dynamic some of the platforms are adjusting to the macro environment, we're seeing any number of OEMs change platform time frames and some of the design elements and potentially bringing some products forward faster, pushing ramps out. But just want to get a sense of those customer engagement dynamics and how it might translate into timing for these launches and your content in some in these vehicles?

Yes. So we see within the current awards, we see the OEMs pretty steadfast focused on launching those vehicles. But where they are struggling is on execution, right. As we mentioned, I think everybody is realizing that launching cell manufacturing at scale and then EV manufacturing at scale is easier said than done. Each of these OEMs is going through their version of production health. Then when we're looking at programs that will launch in 2027 and beyond, I do think that there we are seeing the OEMs just be more thoughtful around how to more leverage the investments that they'll make then to be more efficient. And so we do see quite a bit of opportunities for them to adopt sell to pack designs and that are a logical fit for what we supply. We see them all very focused on safety, way more than they were two years ago, and that is not changing. But I do think that once the noise around policy here settles down one way or another, we're going to get a lot more clarity around how steadfast they will be with the investments for 2027 and beyond. And you see that in our case as well, right. If you look at how we are managing Plant 2, we're -- we've done a lot of work to bring the breakeven point on that so that it's accretive to be as low as possible. And then we're taking it step by step. And I think that same agility is the way a lot of the OEMs are going to manage their EV investments over the next three years.

That's super helpful. And then just on the CAPEX number for the Statesboro plant, it's a pretty big delta with that $160 million. I just want to understand what the variables are there that we can track, is that just a construction contingency that you guys have in place or are there some other elements in that, that we should be thinking about for the delta in those numbers?

Yes. I think the contingency is one, the main element is probably speed to summarize it, right. If you -- if we want it fast, it'd be more expensive, if we want it sooner it would be on the lower end of that range. And so for us, that really depends on just really when we make the decision, when we close the loan, and when we need that supply buy, right. So I think that's what will determine where on that range we land through this speed.

Okay, awesome guys. Thanks.

Our next question is from George Gianarikas with Canaccord Genuity. George, your line is now open. Please go ahead.

Hi, good morning and thank you for taking my question. Somewhat related to the change in administration but if you could give us an early glimpse potentially to 2025, there's a lot of puts and takes, obviously, with the GM ramp and also the potential for a pushback and EV mandates. How should we be thinking about the bridge from 2024 to 2026 and beyond? Thank you.

Yes. I think we commented on 2026 during the last call, if the current regulation mandates and incentives stayed in place, right. So it's definitely up and to the right. And we under that scenario, we do see OEMs having to increase their EV mix and in many cases, more than double it. Now as we plan for 2025, I mean, we do see steel production rates holding up closer to our expectations but it is a bit early to guide for 2025. So I would say stay tuned here for -- definitely before the end of the year, we'll have a firmer view on what our outlook for next year and how that walk to 2026 will look like.

I also think, George, as I commented in my closing remark, it's complex, and it will take time to change policy, to unwind policy, to create new policy, to implement policy. And so I think it will be something that plays out over the course of 2025 before we can really get clarity, not just our situation, but the situation more broadly.

Our next question is from Alex Potter with Piper Sandler. Alex, your line is now open. Please go ahead.

Great, thanks a lot guys. A lot of good color in the call today. I was hoping you could talk maybe first on the STLA medium platform, I guess, also related to that, this Mercedes announcement. I know all of that relies on ACC, this battery joint venture sort of ramping up. Any color you can provide on how that ramp is going, you mentioned production hell for these big battery plants, I know that both the Stellantis and the Mercedes platforms are going to require that plant to come on. So is it -- do you anticipate something similar to what happened with Ultium, right, where they had multiple quarters potentially of delays or scrap issues or I don't know, I know it's maybe difficult to put words in the mouth of your customer, but any color you can shed on the ramp there would be helpful?

Yes. I mean we're in the middle of that, right. When we won some of these awards, the start of production expectations were in 2024, but then when we were translating that into our revenue planning and some of the investments that we have to make in Mexico to ramp up these programs, we were betting on more of a second half of 2025 start of production. It's what we've been saying all along here for the past couple of quarters since we won those awards, since the Stellantis award. And we believe that, that pretty much hedges away some of the risk here that we see in terms of being able to ramp up. And so we do still see line of sight to these awards being able to ramp up in the second half of next year. And I think that captures any of the operational risk that we're seeing today.

Okay, great. That's good to hear. And then just from a revenue recognition standpoint, from Aspen's perspective and I know the timing of product shipments and things like this all come into play here. But let's say that you're correct that I don't know, late 2025 is when that platform launches. Does that mean you start shipping product and recognizing revenue in early 2025, mid-2025, or when you say late 2025 is that when you expect to start shipping product and the vehicles will be in showrooms in 2026?

Correct. We're basically saying that we don't expect revenues from these programs until the second half of 2025.

Okay, perfect. That's good clarity. And then maybe one last one, if I can sneak it in. Content per vehicle roughly on this Mercedes platform, how does it compare versus GM and some of the other programs that you've been aligned with?

Right along the lines of all of our other prismatic programs, so in that $300 per vehicle range.

Excellent, thank you guys. Appreciate it.

Our next question is from Ryan Pfingst with B. Riley. Ryan, your line is now open. Please go ahead.

Hey, guys. I'll ask about the legacy business here. Could you just size what annual revenue capacity for Energy Industrial looks like today after the expansion and how should we think about the potential timeline for doubling revenue for the segment?

I think we have -- as you know, we've been operating well, last quarter in the high 20s with the turnaround, we've made it into the 30s. We've made it into the 40s onetime and indicated this current quarter, it's likely to be in the $40 million plus range. Capacity today, it's really a combination, Ryan, of making the lines fully -- more fully efficient and productive, if you will. And second, qualifying the full range of our products in that facility. We delivered -- I believe it was approximately 85% of our revenue last quarter from that facility. That's really, in part, a function of not only throughput which we've improved upon, but also product qualification, which we've also made progress on here recently. So to answer your question, we believe that we can make our way into the $50 million per quarter range as we work our way through 2025 from a capacity point of view. And in terms of doubling the size of that business, we think our team is geared to doing that within a five-year period of time. So again, at the current margins that we're operating at, which were plus 40% this past quarter and the quarter before.

Yes. I mean on the supply side, if you look at our implied guidance for Q4 in this segment, we would need to be running at $168 million annual run rate to deliver $42 million in Q4. And so that will be a judgment day here for us in terms of our ability to get to that point and beyond.

As I said in my comments, Ryan, demand remains strong. We continue to see LNG activities at robust levels, and we're engaged with many, many, many of those projects and we talk about policy shifts and what have you, one can make the argument that the policy shifts that are likely to come from energy policy are in our favor.

Excellent, makes sense. Thank you Don.

Our next question is from Tom Curran with Seaport Research Partners. Tom, your line is now open. Please go ahead.

Thank you. Good morning guys. Assuming there is no attempt to negatively intervene or somehow disrupt the DoE LPOs process for advancing your loan towards a financial close, and what sounds like the accelerated timeline you expect to be on relative to most of the other loan recipients, it sounds like you think you'll be able to get to a financial close pretty quickly and that in turn means you're not only going to be in the driver's seat with regards to right timing, Plant 2, but also going to be able to enhance and sort of maximize your visibility on rightsizing it and determining where you should come in at between that $1.2 billion to $1.6 billion of annual production capacity? As part of that, Ricardo, given how state-of-the-art the facility is going to be, the fact that it's going to be able to produce aerogels at 25% lower than the operating cost of any of the existing aerogel manufacturing capacity out there, are there any key gating items equipment-wise, technology-wise that are going to determine how fast you'll be able to move. Obviously, it sounds as if closing for the DoE LPO loan isn't so much the issue anymore, I'm just wondering if there's anything related to this facility being state-of-the-art that could be?

Yes. So the funny thing is that a lot of this equipment was procured back in 2021, and it's been there on site for at least a year at this point. So the project today and we have -- we actually have a picture of it in the appendix of the deck is it's really more around finishing the building, finishing the piping, the electrical than sourcing equipment. A lot of the equipment is actually being stored there on site already.

Got it. So there's no key pieces of technology or automation or anything that you have in order to get and could become a supply chain pain point?

Correct, that's correct. Yes. So we have flexibility there. And as we mentioned, we can bring up the plant anywhere between 12 to 18 months from when we decide to restart it at full steam.

Great. And then just as a follow-up, I'll give legacy business some love as well along with Ryan there. Don, could you update us just on sizing how the LNG business is growing, quantify it somehow for us in terms of its contribution this year versus last, or maybe expected next year versus this year, just on the demand side, when you talk about how you're essentially trying to grow your capacity to meet the demand, how big of a driver is LNG becoming as you ramp here?

You don't have to go back very many years when Cryogel was roughly 10% of our product mix. And today, we're roughly 30% of our product mix coming out of that product line, driven principally by LNG and other gas processing activities. I can see that continuing to grow and perhaps into the 40% range. But I think that would be a very logical spot for it. I would just say, Tom, that -- the -- when we started on the LNG side, we were doing maintenance work, demonstrating our capabilities, participating in turnarounds, working our way into specifications. And we continue to do a fair amount of maintenance work, but we're also competing for the big projects as well. And when you see big Cryogel orders, they can be pretty lumpy and consume a lot of a manufacturing plant for a period of time. So part of our turnaround that we talked about at EMF was geared to higher productivity levels of Cryogel materials. So I just raised that point just consistent with your question, it is becoming an increasingly important part of our mix, now a third, and it could very well be 40% of our business. And in any given quarter, it can obviously spike up from there. But I think that's a good way of thinking about it.

Yes. That's exactly what I was looking for in line with what I expected. Thanks for taking my questions.

Our next question is from Jeff Osborne with TD Cowen. Jeff, your line is now open. Please go ahead.

Just two quick ones. Just a clarification. Is the 25% lower production comment in Georgia, is that -- you mentioned relative to other facilities. Does that include your Rhode Island facility or is the cost structure comparable to that facility?

Yes. So that includes Rhode Island, EMF and several other facilities that we've benchmarked.

Got it. And then another quick one here, Ricardo. The Audi platform, I think their battery suppliers had some struggles. How should we think about the launch cadence there, which I think was originally scheduled for the second half of next year?

Yes, same thing. I mean I do -- I think that I'm not expecting those revenues until the second half of next year. I think that's our hedge. If you go back to the announcements when that vehicle was announced, they were expecting it to start production this year. And that could very well still happen. I mean our prototype volumes to them have increased here over the past couple of months, but we don't expect full volume production until the second half of next year.

Got it. The last one is just and I recognize, as Don said in his prepared remarks, there's a lot of uncertainty with President Trump. But have you started exploring alternative or backup plan, so to speak, in the event that the LPO office ceases to exist after the 20th of January in terms of like reengaging with GM on the debt facility that you once had or other alternatives that might be non-dilutive capital?

No, we're really engaged here, sprinting ahead to get this done in Q1.

Got it, thank you.

Thank you very much, everyone. That marks the end of the question-and-answer session. I will now hand back over to Don for any closing remarks.

Thank you, Ezra. We appreciate your interest in Aspen Aerogels, and we look forward to reporting to you our fourth quarter and full year 2024 results. Be well, and have a good day. Thanks again.

Thank you very much, Don, and thank you everyone for joining. This concludes today's call. You may now disconnect your lines.