ASPEN AEROGELS INC Q3 FY2024 earnings call

• Strategy Execution: The company is executing three key elements of its strategy: full conversion of the East Providence plant for PyroThin Thermal Barriers, transition to an external facility for Energy Industrial growth, and financial stewardship to maintain strength and flexibility. • Financial Performance: In Q3, the company generated $21 million in operating cash flow, ended the quarter with over $113 million in cash, and established a $100 million working capital revolver. • GM Collaboration: Secured a new OEM award with Mercedes-Benz for a battery electric platform based on prismatic cells, with production set to begin in 2027. • Energy Industrial Update: Underwent a five-week operational turnaround at the external manufacturing facility to enhance capacity, with strong growth in Cryogel products serving the LNG industry. • DoE Loan: Received a conditional commitment from the DoE LPO for a loan of up to $670 million for the Statesboro aerogel manufacturing plant, with remaining closure conditions considered controllable.

In Q3 2024, Aspen Aerogels had two main product segments. The PyroThin Thermal Barriers segment generated $91 million in revenue, representing a significant portion of the quarter's earnings. The Energy Industrial segment contributed $27 million. Year-to-date, from 2021 to 2023, revenue nearly doubled while gross profit margin increased from 8% to 24%. For 2024, the EV Thermal Barrier segment is expected to deliver $315 million in revenue, a 31% increase from the prior outlook, primarily driven by increased vehicle throughput and forward-looking demand invoicing. The Energy Industrial segment is expected to supply $135 million in 2024, with at least $42 million in Q4, with a Q3 turnaround at the external manufacturing facility aimed at expanding capacity.

• 2024 Revenue: Revised to $450 million, a significant increase from prior outlooks. • Adjusted EBITDA: Expected to be $90 million, up from previous projections. • EV Thermal Barrier Segment: Now expects $315 million in revenue in 2024, a $75 million increase from prior, driven by increased vehicle throughput and forward invoicing. • Energy Industrial Segment: Anticipates supplying $135 million in 2024, with at least $42 million in Q4, with a Q3 turnaround enabling increased output. • Net Income: Anticipates $9 million in net income in 2024, up from prior outlooks, and CAPEX without Plant 2 reduced to $40 million from $45 million.

• Policy Uncertainties: Potential impact of elections on EV-related policies and DoE loan funding, including rhetoric and pushback against EVs. • Operational Risks: Supply chain challenges and production turnarounds in the Energy Industrial segment, as well as uncertainties around DoE loan closure and administration changes affecting EV initiatives. • Demand Volatility: Uncertainty in vehicle program timelines and OEM production health affecting revenue recognition and demand projections.

Q: Eric Stine asked about the DoE loan steps from today to first quarter closure and thoughts on funding in a new administration.

A: Ricardo noted the conditional commitment is a milestone and they'll be agile; Don added the project is a benefit to Georgia and the company is well capitalized.

Q: Colin Rusch inquired about customer platform adjustments and timing.

A: Ricardo said OEMs are focused on launching but facing production challenges, and they see opportunities for sell to pack designs.

Q: George Gianarikas asked about the bridge from 2024 to 2026 and beyond.

A: Ricardo said to stay tuned for 2025 outlook; Don mentioned policy changes take time.

Q: Alex Potter asked about STLA medium platform and Mercedes ramp.

A: Ricardo said they see line of sight to ramp up the STLA medium platform in the second half of 2025.

Q: Ryan Pfingst asked about Energy Industrial revenue capacity.

A: Don stated capacity can reach $50 million per quarter and they aim to double the Energy Industrial business in five years.

Q: Tom Curran asked about DoE loan details and LNG business.

A: Ricardo said equipment for the Statesboro plant is mostly in place; Don mentioned LNG is a growing driver, now 30% of product mix and likely to increase.

Q: Jeff Osborne asked about production cost comparison and Audi platform.

A: Ricardo said the Rhode Island facility is included in the 25% lower cost estimate; Audi platform launch is expected in the second half of 2025.

Q: Jeffrey Osborne asked about election impact and LNG growth.

A: Don and Ricardo discussed policy uncertainties and LNG's growth as a key driver for the Energy Industrial segment