Q3 2023 Aspen Aerogels Inc Earnings Call

November 2, 2023

Questions and answers at the end.

I would now like to turn the conference I wish you a host.

Neal by Robinson.

Aspen Senior director of corporate strategy and finance. Thank you you May proceed Mr. Kerensky.

Yeah.

Thank you Elliot and good morning, and thank you for joining us for the Aspen Aerogels fiscal year 2023 third quarter financial results conference call with US today are Don Young President and CEO, and Ricardo Rodriguez Chief Financial Officer.

Few housekeeping items that I would like to address before turning the call over to Don.

The press release announcing aspens financial results and business developments as well as a reconciliation of management's use of non-GAAP financial measures compared to most applicable U S. Generally accepted accounting principles or GAAP measures is available on the Investor section of Aspens website, Www Dot <unk> dot com.

In addition, I'd like to highlight that we have uploaded to our website a slide deck that will accompany our conversation today.

You can find the deck in the investors section of our website.

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.

Yeah.

Good morning, Thank you for attending Aspen Aerogels, Inc, Q3, 2023 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.

These risks and uncertainties include the factors identified in our filings with the SEC.

Please review the disclaimer statement on pages, one and two of the slide deck is the content of our call will be governed by this language.

I would now like to turn the conference I wish you all host Neil by Robinson.

That's been senior director of corporate strategy and finance. Thank you you May proceed Mr. Kerensky.

During this call we will refer to non-GAAP financial measures, including adjusted EBITDA. These.

These financial measures are not prepared in accordance with GAAP. These.

Yeah.

Thank you Elliot and good morning, and thank you for joining us for the Aspen Aerogels fiscal year 2023 third quarter financial results Conference call.

These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present. These non-GAAP financial measures are included in yesterday's press release.

With us today are Don young President and CEO, and Ricardo Rodriguez Chief Financial Officer.

There are a few housekeeping items that I would like to address before turning the call over to Don.

And one final note during the Q&A session in the interest of time, we ask that you limit your questions to two questions at a time you have additional questions beyond the initial two please get back into the queue and we will get to all questions.

The press release announcing aspens financial results and business developments as well as a reconciliation of management's use of non-GAAP financial measures compared to most applicable U S. Generally accepted accounting principles or GAAP measures is available on the investors section of Aspens website, Www dot Aero gel dot com.

I'll now turn the call over to Don Don.

Yes.

Thanks, Neil Good morning, everyone. Thank you for joining us for our Q3 2023 earnings call My.

In addition, I'd like to highlight that we have uploaded to our website a slide deck that will accompany our conversation today.

My initial comments will highlight our Q3 performance and Q4 outlook.

Can find the deck in the investors section of our website.

That's an impact of several critical elements of our strategy and our EV OEM development pipeline.

Yes.

Ricardo will dig deeper into our financial performance and our business strategy Ricardo and I will expand upon last week's announcement related to our upgraded revenue and adjusted EBITDA outlook for 2023, and the addition of Audi and Scania to our list of OEM Design Awards, we will conclude with a Q&A session.

These risks and uncertainties include the factors identified in our filings with the SEC.

Please review the disclaimer statement on pages, one and two of the slide deck is the content of our call will be governed by this language.

During this call we will refer to non-GAAP financial measures, including adjusted EBITDA. These.

These financial measures are not prepared in accordance with GAAP. These.

Q3 revenue was a record at over $60 million.

These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Pirates in thermal barrier revenue was $33 million, surpassing that of energy industrial of our energy industrial business for the first time.

We believe paraffin thermal barrier revenue for the second half of 2023 will be three or four times larger than it was for the first half of the year.

Gross profit for the second half of 2023 will be two or three times larger than for the first half of the year.

Now I'll turn the call over to Don Don.

Energy industrial activity remained strong while the team manages through a supply constrained period as we shift one to produce piracy and thermal barriers and quote test the system of our planned supplemental supply for energy industrial we are making good progress on both initiatives.

Yeah.

Thanks, Neil good morning, everyone.

Thank you for joining us for our Q3 2023 earnings call.

My initial comments will highlight our Q3 performance and Q4 outlook the status and impact of several critical elements of our strategy and our EV OEM development pipeline.

In addition to the ramping of the pirates in thermal barrier business. A highlight for Q3 is the continued progression of our gross margins through 2023.

11% in Q1, 17% in Q2, 23% in Q3.

We anticipate continued gross margin expansion in Q4, as we progress on the path to achieving our targeted 35% gross margin.

Q3 revenue was a record at over $60 million.

Pirates in thermal barrier revenue was $33 million, surpassing that of energy industrial of our energy industrial business for the first time.

Based on our Q3 performance and current momentum on October 24th we announced a revenue outlook of at least $225 million favorably modified from an earlier outlook of a range between 200 and $250 million.

We believe paraffin thermal barrier revenue for the second half of 2023 will be three or four times larger than it was for the first half of the year.

Gross profit for the second half of 2023 will be two or three times larger than for the first half of the year.

The UAW strike has not impacted our revenue, but we will remain cautious until the tentative agreements have been ratified and the auto workers are fully back to work.

We also announced an improvement to our 2023 adjusted EBITDA outlook from a midpoint of negative $50 million to a midpoint of negative $35 million, our second enhanced adjusted EBITDA outlook in as many quarters.

In addition to the ramping of the paraffin thermal barrier business a highlight for Q3 is the continued progression of our gross margins through 2023.

The improved outlook for adjusted EBITDA is driven by higher volumes, leading to a fuller fixed cost absorption.

We expect this trend to continue in Q4.

11% in Q1, 17% in Q2, 23% in Q3.

Also on October 24th we announced the additions of Scania and Audi both part of the Volkswagen Group to our list of design Awards. We expect revenue from these two awards to commence during 2020 for scale in 2025.

We anticipate continued gross margin expansion in Q4, as we progress on the path to achieving our targeted 35% gross margin.

<unk> be significant contributors in 2026 and beyond.

We anticipate the opportunity to serve other European Oems as well and continue to believe that we remain on track to reach our target of six OEM design awards by year end.

The UAW strike has not impacted our revenue, but we will remain cautious until the tentative agreements have been ratified and the auto workers are fully back to work.

Two key elements of the implementation of our strategy are first the full conversion of plant one in east Providence to piracy and thermal barrier supply and second the commencement of our supplemental supply dedicated to our energy industrial segment, we believe that both.

Initiatives will be functional in early 2024.

A third key element of our strategy is the balancing of growth scale and profitability, which includes the right timing of plant two in Georgia.

The improved outlook for adjusted EBITDA is driven by higher volumes, leading to a fuller fixed cost absorption.

We expect this trend to continue in Q4.

Our focus prior to the restart of full construction of plant two is to utilize our existing assets supplier arrangements and current commercial opportunities to build a business that has the potential to produce annually approximately $550 million of revenue.

Approximately $200 million.

<unk> be significant contributors in 2026 and beyond.

Gross profit and approximately $140 million of EBITDA. We believe we are well positioned to attain this level of performance.

We anticipate the opportunity to serve other European Oems as well and continue to believe that we remain on track to reach our target of six OEM design awards by year end.

Current industry headlines, citing uncertainty related to EV capacity investments by Oems and to the ramp for EV demand are consistent with the underlying assumptions. We have used since early 2023, informing our operating and investment plans.

Given the challenging capital environment, we are working to avoid unnecessary dilution for our shareholders by seeking to operate from a position of operational and financial strength and potentially by partnering with the Doe loan programs office with whom we remain in close contact regarding.

Initiatives will be functional in early 2024.

A third key element of our strategy is the balancing of growth scale and profitability, which includes the right timing of plant two in Georgia.

Our advanced technology vehicle manufacturing loan application.

We believe a more measured ramp.

In OEM EV production may enable us to have a capital efficient growth path utilizing our current assets that leads to leads to profitability in the near term and without sacrificing our full growth opportunities in the longer term.

Approximately $200 million.

Of gross profit and approximately $140 million of EBITDA. We believe we are well positioned to attain this level of performance.

Ricardo over to you.

Thank you Donna and good morning, everyone.

I'll start by covering our third quarter and year to date results before moving onto the 2023 outlook and then handing the call back to dawn.

For this quarterly call I don't have any meaningful strategic updates to cover and I'm happy to simply focus on reporting our results with the third quarter, representing an important transition period towards higher revenue run rate levels that enable a meaningful reductions in our operating losses.

Our strategy is also yielding positive developments in our commercial pipeline such.

Such as the recent conversion of the LOI for mouthing into an award.

And our gearing up of production to begin supplying scan yet higher volumes next year.

Our advanced technology vehicle manufacturing loan application.

As Don mentioned, we feel confident in our ability to receive additional OEM awards as we focus on delivering results with our existing assets.

We believe a more measured ramp.

To cover our performance I'll start on slide four beginning with revenues, we delivered $68 million of revenue in Q3, which translates into 66% growth year over year, and 26% growth quarter over quarter.

As Don mentioned this was an all time company record.

Ricardo over to you.

We didn't suffer any supply disruptions. Thanks to the team's efforts over the past 12 months in Rhode Island in Mexico to preemptively manage our supply chain.

Thank you Tom and good morning, everyone.

I'll start by covering our third quarter and year to date results before moving on to the 2023 outlook and then handing the call back to dawn.

Year to date, we have delivered $154 $5 million of revenue, which reflects a 28% year over year increase.

For this quarterly call I don't have any meaningful strategic updates to cover and Im happy to simply focus on reporting our results with the third quarter, representing an important transition period towards higher revenue run rate levels that enable a meaningful reductions in our operating losses.

Year to date energy industrial revenues were $97 $3 million, an 8% year over year increase.

Given our limited aerogel production capacity in Q3, we continued to focus on optimizing our energy industrial product mix.

Our strategy is also yielding positive developments in our commercial pipeline.

The load on our operations by making those products that require the lease standard hours of processing and delivered $27 9 million in sales.

Such as the recent conversion of the LOI for mouthing into an award.

We're gearing up of production to begin supplying scan yet higher volumes next year.

Reflecting a 21% quarterly decrease.

As Don mentioned, we feel confident in our ability to receive additional OEM awards as we focus on delivering results with our existing assets.

On a 13% year over year increase.

As we've previously mentioned our energy business is sold out.

We have a clear line of sight to about $216 million of annual demand and currently have approximately $118 million of backlog in orders to fulfilled over the next few quarters.

To cover our performance I'll start on slide four beginning with revenues, we delivered $68 million of revenue in Q3, which translates into <unk>, 66% growth year over year, and 26% growth quarter over quarter.

To fulfill this excess demand we are focused on continuing to optimize our mix for steady supply during the remainder of the year.

As Don mentioned this was an all time company record.

And bringing in supplemental supply as soon as possible.

We didn't suffer any supply disruptions. Thanks to the team's efforts over the past 12 months in Rhode Island in Mexico to preemptively manage our supply chain.

EV thermal barrier revenues of $32 $8 million were up 175% year over year and 160% quarter over quarter.

Year to date, we have delivered $154 $5 million of revenue, which reflects a 28% year over year increase.

Reflecting the accelerating ramp in Gms production of all TM platform based electric vehicles and steady volumes in the Toyota nameplate that we supply the BC Forex.

Year to date energy industrial revenues were $97 3 million and 8% year over year increase.

General Motors has more than doubled the production of models that we supply them on quarter over quarter.

Given our limited aerogel production capacity in Q3, we continued to focus on optimizing our energy industrial product mix to lighten the load on our operations by making those products that require the lease standard hours of processing and delivered $27 $9 million in sales.

Our year to date EBIT thermal barrier revenues were $57 2 million reps.

Representing an 88% increase when compared to the same period in 2022.

Next I'll provide a summary of our main expenses material expenses of $22 million for the quarter.

Reflecting a 21% quarterly decrease.

On a 13% year over year increase.

Up 36 percentage points of sales continuing to reflect the work that our supply chain and procurement groups have put into reducing the cost of some of our main raw materials.

As we've previously mentioned our energy business is sold out.

We have a clear line of sight to about $216 million of annual demand and currently have approximately $118 million of backlog in orders are fulfilled over the next few quarters.

We see this as temporary relief and the result of Conservative planning as well. So we will remain vigilant with the goal of ensuring that we can keep these below 40 percentage points of sales.

To fulfill this excess demand we are focused on continuing to optimize our mix for steady supply during the remainder of the year.

The Q3 performance.

And bringing in supplemental supply as soon as possible.

Enabled our total year to date material cost to be a 58 million or <unk> 38 percentage points of sales or 200 basis points favorable to our target of 40 percentage points of sales.

EV thermal barrier revenues of $32 $8 million were up 175% year over year, and 160% quarter over quarter, reflecting the accelerating ramp in Gms production of all TM platform based electric vehicles and steady volumes in the Toyota nameplate that we.

Conversion costs, which we describe as all production costs required to convert raw materials into finished products were up $25 million or <unk> 41 percentage points of sales in Q3.

Supply the BC Forex.

These costs include all elements of the direct labor manufacturing overhead factory supplies, Brent insurance processes logistics quality and inspection.

General Motors has more than doubled the production of models that we supply them on quarter over quarter.

Our year to date EBIT thermal barrier revenues were $57 2 million representing.

These results compare favorably to conversion costs in Q2 of this year, which were 46 percentage points of sales. This.

Representing an 88% increase when compared to the same period in 2022.

Next I'll provide a summary of our main expenses material expenses of $22 million for the quarter.

This is the result of much better fixed cost absorption on our aerogel production costs driven by the higher sales run rate level of this quarter.

36 percentage points of sales continuing to reflect the work that our supply chain and procurement groups have put into reducing the cost of some of our main raw materials.

As previously mentioned our long term target for these costs at a roughly double revenue run rate is up 20% to 25 percentage points of sales. So we arent done managing these while we've made improvements primarily thanks to the efficiency of our operations in Mexico.

We see this as temporary relief and the result of Conservative planning as well. So we will remain vigilant with the goal of ensuring that we can keep these below 40 percentage points of sales.

We need to continue capturing additional opportunities to reduce these costs.

The Q3 performance.

Looking ahead.

Our teams start running all lines of our aerogel sent in Rhode Island to make paraffin without any switchover and find their flow. We're sure that we'll see some efficiencies and.

Enabled our total year to date material cost to be a 58 million or <unk> 38 percentage points of sales or 200 basis points favorable to our target of 40 percentage points of sales.

In Mexico.

Conversion costs, which we describe as all production costs required to convert raw materials into finished products were up $25 million or <unk> 41 percentage points of sales in Q3.

For EV thermal barrier parts Assembly. This week, we have a focused team with all hands on deck on increasing the uptime and throughput of our encapsulation and assembly equipment to drive efficiency and enable the next potential step up in demand.

These costs include all elements of the direct labor manufacturing overhead factory supplies brands insurance process logistics quality and inspection.

The launch next year of simpler designs for prismatic cells on a new set of encapsulation equipment that can be shared across programs will drive additional efficiency.

These results compare favorably to conversion costs in Q2 of this year, which were 46 percentage points of sales. This.

Year to date, our conversion costs of $69 2 million reflect 45 percentage points of sales on our performance improvement year over year here has been primarily driven by fabricating $9 $9 million of subsea products within our energy industrial segment in Mexico versus in Rhode Island.

This is the result of much better fixed cost absorption on our aerogel production costs driven by the higher sales run rate level of this quarter.

As previously mentioned our long term target for these costs at a roughly double revenue run rate is up 20% to 25 percentage points of sales. So we arent done managing these well we've made improvements primarily thanks to the efficiency of our operations in Mexico.

In Q3 company level gross profit margins were up 23% on a gross profit of $13 $8 million is a $22 million improvement over our gross loss of $6 4 million.

We need to continue capturing additional opportunities to reduce these costs.

Looking ahead as our teams start running all lines of our aerogel plant in Rhode Island to make paraffin without any switchover and find their flow. We're sure that we will see some efficiencies and.

During the same quarter last year.

Our energy industrial segment delivered $5 $8 million of gross profit or 182% year over year increase.

And EV thermal barriers, we delivered $8 million of gross profit in Q3, if we compare this quarter with Q2, our <unk> gross profit improved by $9 1 million, an incremental revenue of $28 million.

In Mexico.

Our third quarter of 2023 gross profit and EV thermal barriers was $16 $4 million higher than the gross loss of $8 $4 million that we incurred during Q3 of last year in this segment, reflecting the benefits of starting to operate at a revenue run rate that aligns with the size of our operation.

The launch next year, a simpler designs for prismatic cells on a new set of encapsulation equipment that can be shared across programs will drive additional efficiency.

The resulting gross profit margins during the quarter were 21% and 24%.

Energy industrial and EV thermal barrier segments, respectively.

Year to date, our gross profit of $27 3 million reflects a $36 $7 million improvement in gross profit versus our gross loss of $9 $4 million during the same period last year.

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In Q3 company level gross profit margins were up 23% on a gross profit of $13 $8 million is a $22 million improvement over our gross loss of $6 4 million during the same quarter last year.

Operating expenses, which are sized for near term projected annual revenue capacity of over $550 million or $28 4 million. These ran up in the quarter above our target range as we had several one time expenses related to the reallocation of our resources from support.

Our energy industrial segment delivered $5 $8 million of gross profit or 182% year over year increase.

And EV thermal barriers for delivered $8 million of gross profit in Q3, if we compare this quarter with Q2, our <unk> gross profit improved by $9 $1 million, an incremental revenue of $28 million.

<unk> and overhead to further building our technical capabilities.

Approximately one third of our quarter over quarter Opex increase of $3 million was driven by strategic investments and resources tied specifically to accelerating EBIT thermal barrier product development and commercial launch activity with specific customers tied to unannounced OEM Awards.

Putting these elements together, our adjusted EBITDA was negative $7 3 million in Q3 compared to negative $23 2 million during.

The resulting gross profit margins during the quarter were 21% and 24%.

During the same period last year.

Resulting in a $16 million year over year reduction in our EBITDA loss or a reduction of 65%.

For energy industrial and EV thermal barrier segments, respectively.

Year to date, our gross profit of $27 3 million reflects a $36 $7 million improvement in gross profit versus a gross loss of $9 4 million during the same periods last year.

As a reminder, we define adjusted EBITDA as net income or loss before interest taxes depreciation amortization stock based compensation expenses and other items that we do not believe are indicative of our core operating performance.

In Q3. These other items included $2 $8 million of stock based compensation $1 3 million of interest income and $2 $2 million of employee retention credits from the government.

Our net loss in Q3 decreased to $13 1 million or <unk> 19 per share versus a net loss of $29 6 million or <unk> 75 per share in the same quarter of 2022.

Functions and overhead to further building our technical capabilities.

Our quarter over quarter net loss decreased by $2 3 million from $15 4 million.

Our year to date net loss of $45 $3 million is $27 $8 million lower than our loss of $73 1 million during the first three quarters of last year or down by 38%.

Putting these elements together.

Adjusted EBITDA was negative $7 3 million in Q3 compared to negative $23 2 million during the same period last year.

Next I'll turn to cash flow and our balance sheet.

<unk> and a $16 million year over year reduction in our EBITDA loss or a reduction of 68, 5%.

Cash used in operations of $7 5 million.

Reflect that our adjusted EBITDA of negative $7 3 million in cash used for working capital of $1 5 million.

As a reminder, we define adjusted EBIT that is net income or loss before interest taxes depreciation amortization stock based compensation expenses and other items that we do not believe are indicative of our core operating performance.

Offset by interest income of $1 $3 million.

The key items that resulted in a usage of working capital where an increase in accounts receivable of $10 $9 $10 $2 million.

In Q3. These other items included $2 $8 million of stock based compensation.

And inventory of $1 1 million offset by an increase in accounts payable of $1 million.

$1 3 million of interest income and $2 $2 million of employee retention credits from the government.

And the crude expenses of $6 million and a decrease in prepaid expenses of $1 9 million.

Our net loss in Q3 decreased to $13 1 million or <unk> 19 per share versus a net loss of $29 6 million or <unk> 75 per share in the same quarter of 2022.

Our capital expenditures during the quarter were $32 3 million.

<unk> put our operating cash needs for the quarter of $39 $8 million.

$10 million of our Capex was spent in closing the main buildings of plant two in Georgia and in helping bring the plant to a healthy resting spot while securing the site.

Our quarter over quarter net loss decreased by $2 3 million from $15 4 million.

Our year to date net loss of $45 $3 million is $27 $8 million lower than our loss of $73 1 million during the first three quarters of last year or down by 38%.

While the remaining $22 million was spent on continuing to tool up our facilities in Mexico to support the EV thermal barrier capacity ramp of 2024 and 2025, while covering the last 10 voices of the construction of a recently opened advanced thermal barrier center.

Next I'll turn to cash flow and our balance sheet.

Cash used in operations of $7 5 million reflected.

The conversion of our remaining lines in Rhode Island to making power within its also covered by these $22 million.

It reflected our adjusted EBITDA was negative $7 3 million in cash used for working capital of $1 5 million offset by interest income of $1 $3 million.

We have incurred $255 million and capital expenses due to the end of the first quarter.

At the end of the third quarter towards plant two in Georgia.

The key items that resulted in a usage of working capital where an increase in accounts receivable of $10 $9 $10 $2 million.

We ended the quarter with $94 6 million of cash and shareholders equity of $409 $8 million.

And inventory of $1 1 million offset by an increase in accounts payable of $1 million.

This balances over $20 million higher than our expectations going into the quarter as.

And the crude expenses of $6 million and a decrease in prepaid expenses of $1 9 million.

As we have managed to reduce the quarter over quarter cash burn of the company by $33 9 million or 46% to $39 8 million versus $73 7 million in the prior quarter.

Our capital expenditures during the quarter were $32 3 million.

These put our operating cash needs for the quarter of $39 $8 million.

Turning over to slide five.

$10 million of our Capex was spent in closing the main buildings of plant two in Georgia, and helping bring the plant to a healthy resting spot while securing the site.

I'd like to spend some time recapping the last 15 months and cover where we've been before going into our updated financial outlook for the remainder of 2023.

On the left side you can see how we've improved the company's gross profit margins from 11% in Q1 of this year to 17% in Q2 and 23% during the most recent quarter.

Our adjusted EBITDA loss has also shrunk from a loss of $23 million in Q3 of 2022 to an adjusted EBITDA loss of $7 million in the most recent quarter.

The conversion of our remaining lines in Rhode Island to making pirates and it's also covered by these $22 million.

In Q3, it's no surprise that the lion's share of our 26% quarter over quarter revenue ramp was driven by a 160% increase in demand for payer than EV thermal barriers for general Motors Altium platform vehicles.

We have incurred $255 million and capital expenses due to the end of the first quarter.

At the end of the third quarter towards plant two in Georgia.

We ended the quarter with $94 6 million of cash and shareholders equity of $409 8 million.

GM has more than doubled its production run rates for Altium powered vehicles.

This balances over $20 million higher than our expectations going into the quarter.

From Q2 into Q3 and barring any interruptions, we expect this ramp to continue.

Yes.

This ramp in demand from general Motors drives our revenue guidance.

Range to above $225 million for 2023.

Running at an implied $70 million or above quarterly revenue run rate for Q4 enables us to lower our EBITDA range to a loss of $30 million to $40 million.

Our loss reduction of $15 million versus our prior range of negative 40 to negative $55 million of adjusted EBITDA for the year.

As we factor in the effect of meaningful interest income and a different amortization schedule as we operate with less deployed capital. We're also lowering our net loss guidance for the year from a loss of <unk> $75 million to $85 million to a loss of $52 million to $62 million.

This improvement of $17 million represents an 18% and 17% reduction on the lower and upper end of our prior guidance range respectively.

This also brings our earnings per share guidance to an updated loss range of $76 76 per share to <unk> 90 per share.

With $147 $7 million of Capex spent year to date, we realize that we're very close to our previously stated capex guidance of $150 million for the year.

Last quarter, we mentioned that we would only increase this amount if we saw a very clear picture of what 2020 for EV thermal barrier demand increase as the second half of 2023 materialize.

Now that we've experienced this ramp we think that it is prudent to spend up to an additional $25 million in Q4 of 2023 to.

To enable additional capacity improvements for thermal barrier Assembly in Mexico, and improvements to our aerogel plant in Rhode Island, as well as preserving the value of our assets in Georgia.

For plant two in Georgia October was really the first month at which the spend level.

<unk> below our target level to preserve this site now that it has arrived at a healthy resting spot with all of the equipment that is onsite secured in a temperature controlled environment.

These $25 million would bring our capex spend for 2000 $23 million to $175 million and enable us to flex up to supply a plan that isn't as constrained as our original expectations for 2024.

In the near term, we continue focused on managing the company with at least $75 million of cash on the balance sheet and are pursuing non dilutive sources of financing such as working capital lines of credit asset backed loans equipment leases and other instruments that leverage our current asset base.

You may remember that on June 15th we terminated our ATM program and that we have not sold any equity in 2023.

Turning over to slide six.

At this point, you've heard Dan and I outlined for several quarters and in every meeting.

Our team is focused on making the most of our existing assets and leveraging our partner in China to have approximately $550 million of revenue capacity.

And deliver 35% gross margins as we get close to maximizing this capacity.

Well I'll, let you digest this slide on your own showing how our quarterly results of 2023 compared with this north star, It's easy to see how on a run rate basis, the profitability of our business has been positively evolving.

During the first three quarters progressive increase in gross profit from 11% in Q1, 17% in Q2, and most recently, 23% in Q3 at a $244 million annual revenue run rate that is still only 44% of our potential capacity.

When we compare the last 12 months for the prior 12 months, our revenue run rate has increased by 41%, while our material cost have decreased by 17 percentage points of sales and our mat manufacturing costs have decreased by 10 percentage points of sales.

Our Opex is basically remained flat as a percentage of sales and these have enabled us to shrink our EBITDA loss by 47%.

These results.

The benefit of right sizing and right timing our capacity ramp and.

And as we look ahead to 'twenty four and 2025.

We will continue adopting the same approach to posting results on the board without being influenced by headlines of a slowing demand for evs and re timed OEM investments.

We believe that we may have been very conservative and cautious in our plans and are encouraged to see the updated reality continues to be above our expectations.

The OEM ramp delays over the past eight to 18 months and rising cost of capital have taught us a lot and we are confident that these learnings will enable us to continue playing offense by posting results and then making investments versus the treadmill of constantly playing defense by working the other way around.

With that I'm happy to turn the call back to dawn.

Sure.

Thank you Ricardo.

We have covered a significant amount of ground today, and reviewing Q3, and our near term outlook before we move to Q&A.

I'd like to emphasize our focus on driving significant profitability from our existing resources and opportunities.

We believe the near term business profile as we have a constructed and again consistent with our current assets and commercial opportunities has the potential to produce on an annual basis approximately $550 million of revenue approximately $200 million of gross profit and approximately $140 million of EBITDA.

We believe Q4 will be the next significant step towards this level of business performance.

At the same time, we believe that we maintain our full longer turn up longer term upside potential as we continue to win design awards from Oems.

Oems to expand our profitable baseload of energy industrial revenue and to leverage our aerogel technology platform into additional high value markets, including our ongoing work in battery materials.

The key point is that we are seeking to avoid unnecessary dilution for our shareholders by optimizing the use of our existing assets and opportunities to create a dynamic and cash generating business.

With that we welcome the Q&A session.

Thank you if you would like to ask a question. Please press star followed by one on the telephone keypad. If you would like to withdraw your question. Please press star followed by Terry.

One for <unk> ask you a question. Please ensure your devices on mute locally.

Yes.

Our first question comes from Colin Rusch with Oppenheimer. Your line is open.

Thanks, so much guys.

With the cadence of these incremental wins.

And the start of production can you talk a little bit about the dynamics around sell in to just fill the channel and get these guys.

Applied to start production and how much.

Sell through you are seeing on the vehicles at this point.

Okay.

Sorry, Glenn maybe just to clarify so sell through on the on the end of General Motors, specifically or is this more related to additional Oems.

Yes.

We're trying to get after is how much of the growth is really coming from selling into the Oems and as you.

Have an incremental.

Program wins, theres going to be growth to support that the production, but there's a lot of concern around how these vehicles are selling.

And potential stagnation in terms of growth at some point. So that's the dynamic we're trying to get after.

Yes, I mean, I think there's sort of two parts to thinking about this one right I mean, we've known that some of these evs have been sitting in lots for.

For over a year at this point right.

And we factor that into our conservativism as we as we.

Factor in the volume plans not only when we are making our own plans, but also when we're quoting these opportunities.

And.

When it comes to all team specifically, it's a little tough to assess how close.

General Motors is to hitting the the demand limit when they only produce we estimated around 14000 vehicles in Q3.

And there is roughly three to 4000.

Chevy dealers in North America and.

That doesn't even come close to getting up to the the limits of the consumer demand for these vehicles. So we do think that.

GM has ways to go in terms of ramping up production before they start to see any.

And the limit on consumer demand now.

Now as we look at additional opportunities kind of going to the second part of the question.

I mean, we.

In the same way as we as we plan to ramp from GM and we truly have learned a lot.

Through the delays with Gm's ramp on how to deploy capital in these opportunities how to design the processes to execute them.

And.

We apply a very similar level of discounting to some of these opportunities in 2025 and 2026 debt.

That were being awarded here in the near term.

And it's worth noting that once.

Once an OEM.

Together, our sourcing package for a vehicle that is two to three years away.

A lot of work has already been done and a lot of investment has already been made and so we do feel pretty good about our ability to get more wins for this 2025 and 2026 timeframe.

Now additional programs I think for that 2007, 2027 and 2028 timeframe.

We do expect that to continue.

Being re timed and frankly see the recent news.

Of some <unk> investments is something that was kind of inevitable just given everyone's cost of capital.

And we were surprised that it actually took this long to ratchet back.

Some of these investment expectations, but we still feel very good about the opportunities that we have in the horizon for 2025 2026 and.

With them.

Even if we go back to our plans in 2021, we have not had to adjust those downward based on what we're seeing.

And.

We apply a very similar level of discounting to some of these opportunities in 2025 and 2026 that.

Colin I would just add.

That were being awarded here in the near term.

<unk>.

The momentum that we've.

And it's worth noting that once a week.

We've had moving from Q2 to Q3.

Once an OEM puts together a sourcing package for a vehicle that is two to three years away.

I think youll see that momentum continue for us here as we move into Q4 and into the into the new year.

A lot of work has already been done and a lot of investment has already been made and so we do feel pretty good about our ability to get more wins for this 2025 and 2026 timeframe.

That's super helpful. Thanks, So much guys and then as you were taking over contracting new product wins with these new customers.

The value of both mechanical and thermal performance material is becoming really well understood I guess I'm curious about any potential for price leverage on your part or at least price preservation, even as you get into higher volumes with some of these customers given that mechanical performance.

Now additional programs I think for that 2007, 2027 and 2028 timeframe.

We do expect that to continue.

Being re timed and frankly see the recent news.

Of some <unk> investments is something that was kind of inevitable just given everyone's cost of capital and we were surprised that it actually took this long to ratchet back some of these investment expectations, but we still feel very good about the opportunities that we have in the horizon for 2025.

Yes, I mean for us, it's really not just about.

The underlying merits of the material and the critical problems that it solves but also the amount of capital that we've deployed in that and that we will continue to cautiously deploy here.

26 and <unk>.

And then emphasis on paying it back right. So so we will manage pricing in a way that.

Even if we go back to our plans in 2021, we have not had to adjust those downward based on what we're seeing.

That kind of come Hell or high water, we really.

Collyn I would just add I think the.

Aligned with with the gearing that we presented here.

The momentum that we've.

We've had moving from Q2 to Q3.

On slide six for example, right I mean, we want.

I think youll see that momentum continue for us here as we move into Q4 and into the into the new year.

All programs and all sales that we execute here to not pull us away from this path of getting 35% gross profit margins.

That's super helpful. Thanks, So much guys and then as you were talking of a contracting new product wins with these new customers.

We'll manage pricing to do that.

Thanks, so much guys.

Thanks Scott.

You may now tend to Eric Stine with Craig Hallum on line is open.

Hi, Dan Hi, Ricardo.

Hey, Eric.

Hey, good morning, So maybe for me I know in the past you had talked about that $550 million run rate, 25% EBITDA margin and very good slide I appreciate that.

Yes, I mean for us, it's really not just about.

The underlying merits of the materials and the critical problems that it solves but also the amount of capital that we've deployed in that and that we will continue to cautiously deploy here.

This morning, I think previously you'd said thought that was possible in the next four to six quarters and I know you are managing the contract manufacturer and ramping things up and you are constrained nei and all of that is that still something that you see as possible on a run rate basis by I guess.

And then emphasis on paying it back right. So so we will manage pricing in a way that.

That kind of come Hell or high water, we really.

Your expectation had been <unk> 24.

Aligned with with the gearing that we presented here.

On slide six for example, right I mean, we want.

It's not unlikely I mean.

All programs and all sales that we execute here to not pull us away from this path of getting 35% gross profit margins.

<unk>.

And we actually included a slide in the back for everyone's benefit on <unk>.

If you just look at GM alone and the ramps that they are in right. So kind of in spite of the headlines.

We'll manage pricing to do that.

If you just look at the IHS ramp and if you see gm's intended ramp it's even higher than this but there is a potential for them to just continuing doubling production.

Thanks, so much guys.

Thanks Scott.

You may now tend to Eric Stine with Craig Hallum on line is open.

Hi, Dan Hi, Ricardo.

Every quarter for at least two more quarters right.

Okay Eric.

And the implications of that on our revenue run rate.

Hey, good morning, So maybe for me I know in the past you had talked about that $550 million run rate, 25% EBITDA margin and very good slide I appreciate that.

<unk> Bye bye.

The supply from China for our energy industrial business put us on this path.

To be able to get there.

Now whether it happens in.

Q2, Q3 Q4, we were.

We're just cautiously managing it but we do see it as something that is still possible.

Okay.

Understood, Yes, just making sure that's still kind of the expectation that is helpful.

Your expectation had been <unk> 24.

And then maybe for my follow up.

Maybe just an update on the Doe.

It's not unlikely.

Loan that you are in the mix for I know previously you had talked about potentially hearing kind of next steps by year end and the expectation that if you're invited for further diligence.

<unk>.

And we actually included a slide in the back for everyone's benefit on <unk>.

If you just look at GM alone and the ramp that they're in right. So kind of in spite of the headlines.

That's a great sign towards the eventual award or possible Award just curious if that's still the still the view.

If you just look at the IHS ramp and if you see Gms intended ramp it's even higher than this but there is the potential for them to just continuing doubling production.

Thank you Eric Yes.

<unk>.

The <unk> process we.

Continued to be.

Every quarter for at least two more quarters right.

Closely engaged with the OPO office and.

And the implications of that on our revenue run rate.

The team if you will on that side of the table and working very very closely with them. Our team is doing a great great job I think we're putting our best foot forward and of course, it's always an unpredictable process, but we do believe that were on that that timeline that we that we outlined.

<unk> Bye bye.

The supply from China for our energy industrial business put us on this path.

To be able to get there.

Now whether it happens in.

Q2, Q3 Q4, we were.

We're just cautiously managing it but we do see it as something that is still possible.

Earlier, and we hope to be able.

To keep you posted on that here in the.

Okay.

As we as we work our way through Q4.

Understood, Yes, just making sure that's that's still kind of the expectation that is helpful.

Okay. Thank you.

And then maybe for my follow up.

Thank you.

Maybe just an update on the deal.

We now turn to Alex Potter with Piper Sandler Your line is open.

Loan that you are in the mix for I know previously you had talked about potentially hearing kind of next steps by year end and the expectation that if you're invited for further diligence that thats.

Yeah.

Great. Thanks, guys. So I was wondering just maybe obviously youre working on the contract manufacturing.

Avenue with your partner in China.

That's a great sign towards the eventual award or possible Award just curious if that's still the still the view.

Update you can give on how that's progressing what gives you confidence that everything is on track and on time.

Well, we again.

Thank you Eric Yes.

We're impressed by by them, we're working very closely.

<unk>.

The appeal process we.

Continued to be.

It's a matter of qualifying our products setting up the supply chain and logistics working with our with our energy and industrial customers.

Closely engaged with the OPO office and that.

And it's going very well and we have said that we will test the system here over the course of over the course of 2023 and we're doing just that.

Now and that it should be up and contributing.

Earlier, and we hope to be able.

The early part of 2024.

To keep you posted on that here.

Alex we are we're right on that right on that path. So we're confident we're impressed by the by the work that we're doing together with our supplemental supplier and.

As we as we work our way through Q4.

Okay. Thank you.

Thank you.

We now turn to Alex Potter with Piper Sandler Your line is open.

Again right on track.

Okay.

Okay, that's great to hear.

Great. Thanks, guys. So I was wondering just maybe obviously youre working on the contract manufacturing.

And then the second question I had was on the pirate then.

Volume that youre selling into GM for the LTM products.

With your partner in China.

Any update you can give on how that's progressing what gives you confidence that everything is on track and on time.

Just kind of curious are they putting pirate than sell.

In their own inventory or are they taking it from you putting it directly into a vehicle and pushing that vehicle out I'm just trying to understand.

Well, we again.

We're impressed by by them, we're working very closely.

You are producing you sell to them, but I don't know.

It's a matter of qualifying our products setting up the supply chain and logistics working with our with our energy industrial customers.

Just trying to gauge whether there is the potential for inventory buildup or shortages at any point between <unk> GM and then downstream with GM.

And it's going very well and we have said that we will test the system here over the course of over the course of 2023 and we're doing just that.

Yes, I mean, I think the best way to think about it is that it's fair to say that a part that we're making in Mexico right now.

Probably won't find its way into our finished vehicle for about a month.

Now and that it should be up and contributing.

And so when the ramp it's a significant as what we're seeing right looking at the 14000 vehicles Alteon base vehicles that we believe <unk> built in Q3 isn't totally enough to explain our revenues right you would.

The early part of 2024.

Alex we are we're right on that right on that path. So we're confident we're impressed by the by the work that we're doing together with our supplemental supplier and.

Again right on track.

If you take our revenues divided by 14000 in up with the CPD, that's way higher than what's actually there and so gms building up a decent amount of inventory here to enable their ramp.

Okay, that's great to hear.

Then the second question I had was on the pirate then.

Volume that youre selling into GM for the LTM products, just kind of curious are they putting pirate than themselves.

And in and from what we understand I mean, they've been hand to mouth here during Q3.

In their own inventory or are they taking it from you putting it directly into a vehicle and pushing that vehicle out I'm just trying to understand.

And we will have to see really.

Kind of going back to Collyns question on <unk>.

Youre, producing you sell to them, but I don't know.

We'll see how long. These vehicles then spend on the lot to translate that into ultimate sales for GM, but.

Just trying to gauge whether there is the potential for inventory buildup or shortages at any point between <unk> <unk> and then downstream with GM.

But we do see about a one month delay, which kind of gives us the chance to.

Yes, I mean, I think the best way to think about it is that it's fair to say that a part that we're making in Mexico right now.

Recognized revenues and build revenues of a month ahead of the end of the quarter right.

Probably won't find its way into our finished vehicle for about a month.

Okay.

Okay got it. Thanks, that's very helpful I'll pass it on.

Thank you thanks guys.

Our next question comes from Jeff Osborne with Cowen Your line is open.

Thank you and good morning, two quick ones on my side I was curious on the Audi win Thats great to see.

Is that part of a broader program as part of the VW family, maybe just starting with one vehicle in 'twenty four.

If you take our revenues divided by 14000 unit with the CPD, that's way higher than what's actually there and so gms building up a decent amount of inventory here to enable their ramp.

Any help there would be helpful. Because I thought you were targeting more <unk>.

<unk> designs across multiple vehicles as opposed to a one off.

And.

And from what we understand I mean, they've been hand to mouth here during Q3.

So understanding that would be helpful and then.

Any other updates that you could share on the battery materials side of the business, we haven't talked about that in a few quarters, but I'm just curious how that's progressing would be also helpful to understand.

And we will have to see really.

Kind of going back to Collyns question on <unk>.

We'll see how long. These vehicles then spend on the lot to translate that into ultimate sales for GM, but.

Yes, so ill happy to jump in on the first one.

Jeff Yes.

The Audi program is an electric vehicle platform, which means that multiple different Audi nameplates could.

But we do see about a one month delay, which kind of gives us the chance to.

Recognize revenues and build revenues of a month ahead of the end of the quarter right.

Could be based on on this platform.

And then on the on the.

Okay.

Battery materials side.

Okay got it. Thanks, that's very helpful I'll pass it on.

We continue to.

Thank you thanks guys.

To work.

On advancing the technology and we are we are endeavoring to solve a.

Our next question comes from Jeff Osborne with Cowen Your line is open.

Thank you and good morning, two quick ones on my side I was curious on the Audi win Thats great to see.

Hard problem, and we're making I think steady and interesting progress on that.

Is that part of a broader program as part of the VW family maybe.

We've kept quiet on it.

Maybe just starting with one vehicle in 'twenty four.

To a great degree an on purpose as we've continued to advance that.

Any any help there would be helpful. Because I thought you were targeting more.

I think it will be.

Pack designs across multiple vehicles as opposed to a one off.

An opportunity for us to talk about it.

In the coming earnings call or two.

So understanding that would be helpful and then.

Any other updates that you could share on the battery materials side of the business, we haven't talked about that in a few quarters, but I'm just curious how thats progressing would be also helpful to understand.

And I would I would really like for that to not only talk about the status of the technology.

And perhaps also the <unk>.

Yes.

Status of Av.

Yes, so I'll happy to jump in on the first one there Jeff.

One or two.

Working relationships, we have with third parties at that point, helping us advance the technology and taking that next step, but it's a very exciting program for us we've got an excellent team of people.

Yes, so the Audi program is an electric vehicle platform, which means that multiple different Audi nameplates could could be based on on this platform.

Working on it and it's it's it's it's we're careful in our expenditures, but it's adequately and well resourced to.

And then on the on the.

<unk>.

Battery materials side.

We continue to to work.

To continue to advance that technology.

On on advancing the technology and we are we are endeavoring to solve a.

Excellent I appreciate it that's all I have.

Thanks, Jeff.

Hard problem.

We are making I think steady.

We now turn to George <unk> with Canaccord. Your line is open.

Interesting progress on that.

We've kept quiet on it.

Hey, good morning, and thanks for taking my question maybe just.

To a great degree an on purpose as we've continued to advance that.

To focus on the some of the potential.

OEM Awards that you haven't announced yet that could get announced by the end of the year curious can you just shed a little light on when you expect potential volumes to start there just so we can understand when we look to 2024 how.

I think it will be.

An opportunity for us to talk about it.

The coming earnings call or two.

And I would I would really like for that to not only talk about the status of the technology.

Diversified will your apparel business be away from GM. Thank you.

<unk> also.

The status of Av.

One or two.

Yes, Thanks, George So I mean, those those awards would really kick in in 2025.

Working relationships, we have with third parties at that point, helping us advance the technology.

Meaningful volumes in the ramp what happened in 2025 so.

And taking that next step, but it's a very exciting program for us we've got an excellent team of people.

For 2024, it's fair to say that we will still be fairly concentrated on GM, which.

It is proving out to not be a bad thing.

Working on it and it's it's it's it's we're careful in our expenditures, but it's adequately and well resourced.

Now and and then Toyota and Scania will also ramp up in the second half of next year.

To continue to advance that technology.

Excellent I appreciate it that's all I have.

Thank you and maybe to the extent you could share any details on Toyota I mean, they seem to be in at least in their public pronouncements going back and forth with their commitment to evs.

Thanks, Jeff.

We now turn to George <unk> with Canaccord. Your line is open.

Hey, good morning, and thanks for taking my question maybe.

What sort of momentum do you see with that account. Thank you.

Just to focus on the some of the potential.

Yes, I mean, I think we would put them.

Similar bucket is.

The other Oems I mean, they still haven't announced.

Abroad.

Battery platform strategy instead, it's more of a nameplate by nameplate approach.

Diversified will your apparel business be away from GM. Thank you.

And.

And let's go can increase but we don't we don't see anything here in the near term for 2004.

Yes, Thanks, George So I mean, those those awards would really kick in in 2025.

Thank you George.

The meaningful volumes in the ramp would happen in 2025 so.

We now plan to Chris <unk> with B Riley Your line is open.

For 2024, it's fair to say that we will still be fairly concentrated on GM, which.

Hey, guys.

Thanks for taking my questions here.

It is proving out to not be a bad thing.

Talk through the moving pieces on the revenue and EBITDA guidance for the fourth quarter.

Now and and then Toyota and Scania will also ramp up in the second half of next year.

You said revenue is expected to grow gross margins are.

Expected to increase.

And you have a $7 million.

EBITDA loss in the third quarter, so like what are the moving pieces.

Thank you and maybe to the extent you can share any details on Toyota I mean, they seem to be in at least in their public pronouncements going back and forth with their commitment to evs.

Around the low end EBITDA guidance.

Loss.

Yes.

Can you talk through what you would need.

What sort of momentum do you see with that account.

From a revenue perspective, the positive EBITDA in the fourth quarter.

Some specific output out of China or other factors that would.

Yes, I mean, I think we would put them similar bucket is.

Kind of be in play there.

The other Oems I mean, they still haven't announced.

Yes, no thats a good question, we knew you'd kind of go there.

Abroad.

And we really are protecting for the doomsday scenario here.

Battery platform strategy instead, it's more of a nameplate by nameplate approach.

If you look at the negative 40.

And.

And let's hope can increase but we don't we don't see anything here in the near term for 2004.

Of EBIT right of potential EBITDA.

I think we will be forthcoming tightening that up as November materializes here.

Thank you George.

But for US really when we looked at the UAW agreement not being ratified some of the big certification work streams with the contract manufacturer is still in full swing and and the potential cost of an additional turnover certification on those products.

Yeah.

We know them, Chris Shawcor with B Riley your line is open.

Hey, guys.

Thanks for taking my questions here.

Talk through the moving pieces on the revenue and EBITDA guidance for the fourth quarter.

You said revenue is expected to grow gross margins there.

It really if you combine all of those negative things that could happen, albeit with low probabilities. That's how you end up at the negative.

Expected increase.

$7 million EBITDA loss in the third quarter, so like what are the moving pieces.

A negative 40 of EBITDA and.

Around the low end of EBITDA guidance.

Yes.

Loss.

I do think that given the ramp that we expect for Q4.

Can you talk to what you would need from a revenue perspective.

We will have an opportunity to potentially tightened that range.

Positive EBITDA in the fourth quarter.

Some specific output out of China or other factors that would.

Understood. Okay, that's very helpful.

Kind of be in play there.

Yes, Chris I would say that.

Yes, no thats a good question, we knew you would kind of go there.

That there's a reasonable chance that will will provide one more update before year end.

And we really are protecting for the doomsday scenario here.

On some of these topics that you in Europe.

If you look at the negative 40.

My colleagues have asked about.

Of EBIT right of potential EBITDA.

Revenue and EBITDA.

I think we will be forthcoming tightening that up as November materializes here.

Additional OEM awards.

Our commentary on the <unk>.

L. P O those sorts of those sorts of things I think it could very well be appropriate for us to again to update you on one more time before yearend.

Got it Okay. That's really helpful. And then just you kind of talk through your sales not matching up kind of as a leading.

It really if you combine all of those negative things that could happen, albeit with low probabilities. That's how you end up at the negative 40 of EBIT.

Indicators.

<unk> production.

Obviously, the implied otherwise would've been very high here, where are the asps kind of shaken out.

And.

Yes.

If we exclude the Scania stuff.

I do think that given the ramp that we expect for Q4.

Just for kind of general.

Cars Suvs that are in your.

We will have an opportunity to potentially tightened that range.

OEM Awards.

No.

How much revenue are you guys getting from.

Understood Okay.

Helpful.

No.

The warrants that you haven't yet received as far as kind of component sales that are related to testing like I. Just wanted to see if you can kind of provide a bit more clarity around that.

Yes, Chris I would say that.

There's a reasonable chance that will will provide one more update before.

Year end.

On some of these topics that you and your colleagues have have asked about.

Yes, I mean, the prototype revenues right now will make up less than 10% of our prior than revenues.

Revenue and EBITDA.

Additional OEM awards.

Our commentary on the <unk>.

And then I'm, assuming you mean more around in when it comes to the rest of the pirate than revenues you mean more around our content per vehicle right. How that is tracking exactly yes exactly.

Those sorts of those sorts of things I think it could very well be appropriate for us to again to update you on one more time before yearend.

Sure.

Got it Okay. That's really helpful. And then just you kind of talk through your sales not matching up.

Yes, and so I mean, we're still pretty consistently seeing our content per vehicle in that 700 to $1000 per vehicle range given that the bulk of what we are supplying is vehicles would pretty large packs.

As a leading indicator.

Indicator of.

Production.

Because obviously the implied AFP otherwise would've been very high here, where are the asps kind of shaken out.

Pouch cells right and.

When we add one of these.

We exclude the Scania stuff.

<unk> programs. So I think the content there is more in the 350 to $400 per car.

Just for kind of general.

Cars Suvs that are in your <unk>.

Range in.

But nonetheless, I mean, it's a much simpler part to produce it requires a lot less capital and so we're.

OEM awarded.

How much revenue are you guys getting from.

<unk>.

We're happy with the economics of those awards as well.

Awards that you haven't yet received as far as kind of component sales that are related to testing like I. Just wanted to see if you could kind of provide a bit more clarity around that.

But right now I mean, if youre looking at what we're producing here we produced in Q3, what we will do in Q4 and and most of 'twenty four its still going to be this.

Yes, I mean, the prototype revenues right now will make up.

A large pouch configuration with the <unk> debt.

Less than 10% of our pirate than revenues.

$700 range.

Got it okay, that's really helpful. Thanks.

And then I'm, assuming you mean more around in when it comes to the rest of the pirate than revenues you mean more around our content per vehicle right. How that is tracking exactly yes exactly.

Thanks, so much.

Our next question comes from Tom Curran with Shreveport Research Partners. Your line is open.

Good morning, guys.

And so I mean, we're still pretty consistently seeing our content per vehicle in that 700 to $1000 per vehicle range given that the bulk of what we're supplying is vehicles with pretty large packs.

Item.

When it comes to the <unk>.

The supplemental supply that you are in the process of testing with your Chinese.

Chinese contract manufacturing partner.

Is the expectation still that once that's fully ramped.

And pouch cells right.

When we add one of these.

The maximum expected capacity.

That you're available quarterly revenue capacity for energy industrial would be around $37 5 million.

Prismatic programs. So I think the content there is more in the 350 to $400 per car range.

Range in.

And then when it comes to that.

But nonetheless, I mean, it's a much simpler part to produce it requires a lot less capital and so we're.

118 million backlog of unfilled orders.

How much time do you feel you have.

We're happy with the economics of those awards as well.

To catch up with with those orders and do you have any risk or liability related to.

But right now I mean, if youre looking at what we're producing here. We produced in Q3, we will do in Q4 and most of 'twenty four its still going to be this.

Letting them remain unfilled past a certain point in time.

A large pouch configuration with the <unk> debt.

Well, it's a good it's a good question, we are very close to our energy industrial customers in the distribution channels and the engineering firms.

$700 range.

Got it okay, that's really helpful. Thanks.

Thanks, so much.

Our next question comes from Tom Curran with Seaport Research Partners. Your line is open.

And we actively communicate with them to be sure that we're meeting their expectations.

Good morning, guys.

But we are.

When it comes to the <unk>.

In a position to.

The supplemental supply that you are in the process of testing with your.

Switch over to the supplemental supply again early early next early next year and we feel that we will we will fulfill our obligations or responsibilities to to those customers and quite frankly.

Chinese contract manufacturing partner.

Is the expectation still that once that's fully ramped.

The maximum expected capacity.

Let your available quarterly revenue capacity for energy industrial would be around $37 5 million.

That business is.

Is is strong our sales team on the energy industrial side is very active.

And then when it comes to that.

On both.

118 million backlog of unfilled orders.

The pirate gel side of the business and the crowds outside at the LNG part of the business and so.

How much time do you feel you have.

To catch up with with those orders and do you have any risk or liability related to.

That business is going to continue to grow and be an important baseload of revenue and gross profit for our for our company and so.

Letting them remain unfilled past a certain point in time.

Again, we feel we're in a good position with those customers communicating well.

Well, it's a good it's a good question, we are very close to our energy industrial customers in the distribution channels and the engineering firms.

Yes.

Backlog and you might remember if you go back to the last time, we were short of capacity.

The backlog is substantial and but we're in good shape. So long as we communicate well I think we're good yeah.

And we actively communicate with them to be sure that we're meeting their expectations.

Yeah, and if I may add I mean.

The team is pretty good at assessing what gets into that $118 million backlog in which orders they accept.

But we are.

In a position to.

Switch over to the supplemental supply again early early next early next year.

An order there makes it into that 118, if the theme is line of sight to fulfilling within a reasonable timeframe.

And we feel that we will we will fulfill our obligations or responsibilities to to those customers and quite frankly.

Alright, good to hear that that's reassuring and just.

That business.

Just to follow up and kind of clarify.

Is is strong our sales team on the energy industrial side is very active.

Within the $550 million would you would you think of.

Sure.

Fully eventual fully available.

On both.

Pirate gel side of the business and the crowd you outside the LNG part of the business and so.

Annual revenue capacity for AI being around $150 million.

That business is going to continue to grow and be an important baseload of revenue and gross profit for our for our company and so.

Yes.

Yes, we would okay.

When we think about <unk> $5 50, we do we do think about.

Paraffin part of that being 400 in the remaining part.

Again, we feel we're in a good position with those customers communicating well.

<unk> that the energy industrial side of our of our business.

Yes.

Backlog and you might remember if you go back to the last time, we were short of capacity.

Got it thanks for that clarification, Don and then.

Turning to ETB.

The backlog is substantial and but we're in good shape. So long as we communicate well I think we're good yeah, and if I may add I mean.

When it comes to these next two potential awards that you remain very optimistic about.

Landing before year end would you still expect at least one of those two results and our new customer essentially what would be customer number four.

The team is pretty good at assessing what gets into that $118 million backlog in which orders they accept and nor there makes it into that 118.

Yes, that's correct, yes, I mean, we kind of put your bingo board there on slide three.

<unk> has line of sight to fulfilling within a reasonable timeframe.

And.

Alright, good to hear that that's reassuring and just.

And we would expect different logos on there.

Just to follow up and try to clarify.

For the pain.

Within the $550 million would you would you think of fully eventual fully available.

I think almost 50.

[laughter].

Thanks, guys I'll turn it back.

Annual revenue capacity for <unk> being around $150 million.

Thank you Chuck.

This concludes our Q&A I'll now hand back to Don Young G closing remarks.

Yes.

Yes, we would okay.

Thank you Elliot.

I mean, when we think about <unk> $5 50.

We appreciate your interest in Aspen Aerogels, we look forward to.

We do we do think about that.

The paraffin part of that being 400 in the remaining part.

Staying in close touch with you and reporting our fourth quarter.

Being that the energy industrial side of our of our business.

2023 results to you early early next year well have a good day. Thanks, so much.

Got it thanks for that clarification, Don and then.

Turning to <unk>.

Ladies and gentlemen, today's call is now concluded thank you for your.

When it comes to these next two potential awards that you remain very optimistic about.

Participation you may now disconnect your lines.

Lending before year end would you still expect at least one of those two results and our new customer essentially what would be customer number four.

Yes, that's correct, yes, I mean, we kind of put your bingo board there on slide three.

And.

And we would expect different logos on there.

For the Sarnia.

I think almost 50.

[laughter].

Thanks, guys I'll turn it back.

Thank you Chuck.

This concludes our Q&A I'll now hand back to Tom Young C closing remarks.

Thank you Elliot.

We appreciate your interest in Aspen Aerogels, we look forward to.

Staying in close touch with you and reporting our fourth quarter.

2023 results to you early early next year be well and have a good day. Thanks, so much.

Ladies and gentlemen, today's call is now concluded thank you for your call.

You may now disconnect your lines.

Still early early next year be well and have a good day.

Q3 2023 Aspen Aerogels Inc Earnings Call

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