Q4 2023 Aspen Aerogels Inc Earnings Call

February 13, 2024

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Operator: www.circlelineartschool.com Good morning, and thank you for attending the Aspen Aerogels Inc. fourth quarter and fiscal year 2023 financial results call. All lines have been placed on mute during the presentation portion of the call, with an opportunity for question and answer at the end.

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Good morning, and thank you for attending the Aspen, Our Gals, Inc, fourth quarter and fiscal year 2020 financial results call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer.

I would now like to turn this conference call I Botswana.

Operator: I would now like to turn this conference call over to our host, Neil Baranowski, Aspen Senior Director of Corporate Strategy and Finance. Thank you. You may proceed, Mr. Baroness.

Neil Barth Okay.

I've been senior director of corporate strategy and finance.

Keith.

You May proceed Mr Baranovsky.

Neil Baranowski: Thank you, Candice. Good morning and thank you for joining us for the Aspen Aerogels fourth quarter and fiscal year 2023 financial results conference call. 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.

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

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

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

Neil Baranowski: The press release announcing Aspen's 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 Aspen's website, www.aerogel.com. In addition, I'd like to highlight that we've uploaded to our website a You can find the deck in the investors section of our website.

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 in the investors section of Aspens website, Www Dot aerogel 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.

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

Neil Baranowski: 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.

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.

Neil Baranowski: Please review the disclaimer statements on pages 1 and 2 of the slide deck as the content of our call will be governed by that. During this call, we will refer to non-GAAP financial measures, including adjusted EBIT. These financial measures are not prepared in accordance with GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Please review the disclaimer statements 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 financial measures are not prepared in accordance with GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial financial measures to the most directly can.

Neil Baranowski: The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and discussion of why we present these non-GAAP financial measures are included in yesterday's press release. I'd also like to note that from time to time, in connection with the vesting or pending expiration of restricted stock units and or stock options issued under our long-term equity incentive program, that we expect our Section 16 officers will file Form 4s to report the withholding by the company or sale of shares related to tax withholdings or the covering of exercise prices in connection with the vesting or pending expiration of restricted stock units or stock options. Lastly, I want to call out a few near-term IR engagements. This Thursday, February 15th, Ricardo will participate in a fireside chat in New York at the Wolf Global Auto, Auto Tech, and Mobility Conference.

Payable GAAP financial measures and a discussion of why we present. These non-GAAP financial measures are included in yesterday's press release.

I'd also like to note that from time to time in connection with the vesting or pending exploration of restricted stock units and stock options issued under our long term equity incentive program that we expect our section 16 officers will file form fours to report the withholding by the company or sale of shares related to tax withholdings.

With the covering of exercise prices in connection with vesting or pending exploration of restricted stock units and stock options.

Lastly, I want to call out a few near term IR engagements.

Thursday February 15th Ricardo will participate in a fireside chat in New York at the Wolf Global Auto Auto Tech and mobility conference.

Neil Baranowski: Don Ricardo and I will also host one-on-one discussions at this event. On March 18th, Don will be hosting one-on-one investor discussions in Dana Point, California at the 36th Annual Roscoe. I'll now turn the call over to Don. Thank you, Neal. Good morning, everyone.

Don Ricardo and I will also host one on one discussions at this event.

On March 18th Dawn will be hosting one on one investor discussions in Dana point, California, 36th annual Roth Conference.

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

Thank you Neil good morning, everyone. Thank you for joining us for our Q4 2023 earnings call. My comments will recap recent announcements highlight our Q4 and 2023 full year performance and provide an early look at 2024, including the status and impact of <unk>.

Don Young: Thank you for joining us for our Q4 2023 earnings call. My comments will recap recent announcements, highlight our Q4 and 2023 full-year performance and provide an early look at 2024, including the status and impact of several critical elements of our strategy. Ricardo will dig deeper into our financial performance and outlook and our business strategy. We will conclude with a Q&A session.

Several critical elements of our strategy.

Ricardo will dig deeper into our financial performance and outlook and our business strategy, we will conclude with a Q&A session.

Before we do a quick fly over of our recent announcements I want to thank the Aspen team for producing excellent results in Q4 revenue of over $84 million gross margin of 35% and adjusted EBITDA of over $9 million.

Don Young: Before we do a quick flyover of our recent announcements... I want to thank the Aspen team for producing excellent results in Q4. Revenue of over $84 million, gross margin of 35%, and adjusted EBITDA of over $9 million. These numbers signify record performance, and we believe they are signs of good things.

These numbers signify record performance and we believe are signs of good things to come every person in the company contributed to this success.

Don Young: Every person in the company has contributed to this success since our last earnings call. We have provided several updates. In December, we announced the Pyrothin Thermal Barrier Design Award from the Automotive Cells Company, or ACC, a battery cell joint venture with Stellantis, Saab Total, and Mercedes-Benz to supply the Stellantis STLA medium vehicle platform designed to host multiple brands across the world and is aimed at the passenger SUV and crossover vehicle markets with an expected start of production in 2025. Stellantis is one of the world's leading automakers, with brands including Jeep, Ram, Fiat, Chrysler, Dodge, Peugeot, and several others.

Since our last earnings call.

We have provided several updates.

In December we announced the pirate than thermal barrier design award from the automotive sells company or ACC, a battery cell joint venture with still anticipate soft hotel and Mercedes Benz to supply the Atlantis S. T. L. A medium vehicle platform designed to host multiple brands across.

The world and is aimed at the passenger SUV and crossover vehicle markets with an expected startup production in 2025, the Atlantis as one of the world's leading automakers with brands, including Jeep Ram Fiat Chrysler Dodge who show at several others. According to.

Don Young: According to Stellantis, the medium vehicle platform has the potential for up to 2 million vehicles per year, built in several plants across the globe, starting in Europe. At the same time, we announced that the U.S. Department of Energy Loan Programs Office invited Aspen into the formal due diligence and term sheet negotiation stage of the process. This loan application is in connection with the construction of Aspen's planned second aerogel manufacturing facility in Georgia. While the DOE's invitation to the formal due diligence stage is not an assurance that the DOE will issue a loan, we remain deeply engaged with the DOE LPO and its advisors and continue to believe that we are a strong candidate to partner with the DOE LPO in this program.

Still <unk> the medium vehicle.

Platform has the potential for up to 2 million vehicles per year built in several plants across the globe starting in Europe.

At the same time, we announced that the U S Department of Energy loan program office invited Aspen into the formal due diligence in term sheet negotiation stage of the process. This loan application is in connection with the construction of Aspen's planned second aerogel manufacturing facility.

In Georgia.

While the Doe is invitation to the formal due diligence stage is not an assurance that the Doj will issue alone we remain deeply engaged with the OPO and its advisors and continue to believe that we are a strong candidate to partner with a L. P O in this program.

Don Young: We anticipate providing the next update on this subject during our Q1 2024 earnings. Later in December, we announced a $75 million registered direct common stock offering with Hood River Capital Management and certain other institutional investors. The financing enabled us to finish 2023 with approximately $140 million of cash on the balance sheet, and we believe it adequately supports the company for additional significant growth in our EV thermal barrier and energy industrial business sectors. On January 11th, we provided preliminary revenue levels for the full year 2023 and announced the expectation of positive adjusted EBITDA for the fourth quarter. We also announce the successful launch of our supplemental supply to serve our important energy industrial sector.

We anticipate providing the next update on this subject during our Q1 2024 earnings call.

Later in December we announced a $75 million registered direct common stock offering with Wood River capital management and certain other institutional investors the financing enabled us to finish 2023 with approximately $140 million of cash on the balance sheet and we believe.

Adequately supports the company for additional significant growth in our EV thermal barrier in energy industrial business segments.

On January 11th we provided preliminary revenue levels for the full year 2023, and announced the expectation of positive adjusted EBITDA for the fourth quarter.

We also announced the successful launch of our supplemental supply to serve our important energy industrial segment.

Don Young: This part of our business has been hamstrung by capacity constraints for over a year, and we are now in the position to restock the channel, and we believe that to support long-term highly profitable growth, energy industrial activity remains strong across all regions and segments of the business. With so much focus on the pyrothermal barrier business, it is important not to forget that we are an important supplier to our global energy industrial customers and partners with an installed base that we expect will surpass $1.5 billion in 2024. The energy industrial business is a key part of our multi-lever strategy to reach our growth and profitability goals, especially during the early phases of EV penetration. We have an excellent team serving this global market, and we anticipate that it will meet our growth and profitability expectations. The January announcement also hinted at a vastly improved profitability profile for the company overall.

This part of our business has been hamstrung by capacity constraints for over a year and we are now in the position to restock the channel and we believe to support long term highly profitable growth.

Energy industrial activity remained strong across all regions and segments of the business with so much focus on the pirates in thermal barrier business. It is important not to forget that we are an important supplier to our global energy industrial customers and partners with an installed base that we expect will surpass one five.

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In 2024.

The energy industrial business is a key part of our multi lever strategy to reach our growth and profitability goals, especially during the early phases of EP EV penetration.

We have an excellent team serving this global market and we anticipate that it will meet our growth and profitability expectations.

The January announcement also hinted at a vastly improved profitability profile for the company overall.

Don Young: With Q4 revenue of over $84 million, a gross margin of 35%, and adjusted EBITDA of over $9 million, we began to demonstrate the leverage of efficient operations, higher volumes, and fuller fixed cost absorption. While we have more work to do, we believe this strong tech trend will continue in 2020. As I noted earlier, Q4 revenue was over $84 million, and it substantially exceeded the record revenue of approximately $60 million that we posted just a quarter before. Q4 revenue also included $53 million of EB. Pyrothin Thermal Barriers

With Q4 revenue of over $84 million gross margin of 35% and adjusted EBITDA of over $9 million, we began to demonstrate the leverage of.

Of efficient operations higher volumes and fuller fixed cost absorption.

While we have more work to do we believe this strong trend will continue in 2024.

As I noted earlier Q4 revenue was over $84 million and it substantially exceeded the record revenue of approximately $60 million that we posted just the quarter before.

Q4 revenue included $53 million of EV.

Thermal barriers the pirates in thermal barrier business has grown on an annual basis from less than $7 million in 2021 to over $55 million in 2022, and now to over $110 million in 2023 over the past year, our deep engagement with the various <unk>.

Don Young: The Pyrothin Thermal Barrier business has grown on an annual basis from less than $7 million in 2021 to over $55 million in 2022 and now to over $110 million in 2023. Over the past year, our deep engagement with the various EV OEMs has helped us accurately calibrate the trajectory of the EV trend. While we recognize the challenges that EV OEMs face with launching and scaling new EV nameplates, we are confident that we will see continued substantial pyrothin thermal barrier growth in 2025. We are finalizing the terms of our sixth Automotive OEM Design Award and anticipate adding new OEMs to our roster throughout the year. In addition to the ramping up of the pyrothermal barrier business and the initiation of our supplemental supply to support the growth and profitability of the energy industrial, a highlight for 2023 was the continued progression of our gross margins through the year. 11% in Q1, 17% in Q2, 23% in Q3, and 35% in Q4.

Oems has helped us accurately calibrate the trajectory of the EV trend, while we recognize the challenges that EV Oems face with launching and scaling new EV nameplates. We are confident that we will see continued substantial pirate than thermal barrier growth in 2024.

We are finalizing the terms of our sixth automotive OEM design award and anticipate adding new Oems to our roster throughout the year.

In addition to the ramping of the pirate than thermal barrier business and the initiation of our supplemental supply to support the growth and profitability of the energy industrial business a highlight for 2023 with the continued progression of our gross margins through the year.

11% in Q1, 17% in Q2, 23% in Q3 and 35% in Q4.

Don Young: The strong gross margin expansion and a careful approach to OPEX translated into a similar quarterly progression for adjusted EBITDA, culminating in an adjusted EBITDA margin of positive 11% in Q4. We continue to believe that we can drive adjusted EBITDA margins to approximately 25%. In addition to our progress towards our top line and profitability goals, we continue to advance the three key elements of our strategy. First, the transition of plant one in East Providence, Rhode Island, to support the growth of the pyrothermal barrier.

The strong gross margin expansion.

And a careful approach to opex translated into a similar quarterly progression for adjusted EBITDA, culminating in adjusted EBITDA margin of positive 11% in Q4.

We continue to believe that we can drive adjusted EBITDA margins to approximately 25%.

In addition.

<unk> to our progress towards our topline and profitability goals. We continue to advance the three key elements of our strategy first the transition of plant one in East Providence, Rhode Island to support the growth of the paraffin thermal barrier business second the commencement of our supplemental supply.

Don Young: Second, the commencement of our supplemental supply dedicated to the growth of the energy industrial business, and third, the balancing of overall growth, profitability, and capitalization. On the transition of Plant 1 to pyrothene thermal barrier production, our initial estimates for revenue capacity were approximately $400 million. Based on current productivity and yields, we believe annual revenue capacity for pyrothermal barriers will now be approximately $500 million.

Dedicated to the growth of the energy and industrial business and third the balancing of overall growth.

Profitability and capitalization.

On the transition of plant one to paraffin thermal barrier production. Our initial estimates for revenue capacity were approximately $400 million.

Based on current productivity and yields we believe annual revenue capacity for pirate then thermo barriers to now be approximately $500 million when combined with our supplemental supply which supports our energy industrial business. We believe we have over $650 million of revenue.

Ricardo Rodriguez: When combined with our supplemental supply, which supports our energy industrial business, we believe we have over $650 million of revenue capacity from our existing assets and supply arrangements and can generate 25% adjusted EBITDA margins or over $160 million of adjusted EBITDA. We believe we are well-positioned to attain this level of performance. Ricardo, over to you.

New capacity from our existing assets and supply arrangements and can generate 25% adjusted EBITDA margins or over $160 million of adjusted EBITDA.

We believe we are well positioned to attain this level of performance.

Ricardo Rodriguez: Thank you, Don, and good morning, everyone. I'll start by covering our fourth quarter and full year results before walking you through the thought process behind our outlook for 2024. I'll also spend some time discussing our assessment of forecasts for global EV production and how some of the recent production increases aren't captured by most headlines or the current sentiment. Early last year, we highlighted ahead of the industry that things weren't as great as they seemed and quickly focused on right-timing all CapEx and gearing Aspen for near-term profitability. Today, we can confidently say that things are not as bad as the headlines suggest.

Ricardo over to you.

Yeah.

Thank you Don and good morning, everyone I'll start by covering our fourth quarter and full year results before walking you through the thought process behind our outlook for 2024.

I'll also spend some time discussing our assessment of forecasts for global EV production and how some of the recent production increases aren't captured by most headlines or the current sentiment.

Early last year, we highlighted ahead of the industry that things werent as great as they've seen and quickly focused on right timing, all capex and gearing Aspen for near term profitability.

Today, we can confidently say that things are not as bad as the headlines suggest.

Ricardo Rodriguez: Before handing the call back to Don, I'll also explain why our team will remain heads down, executing with conviction, what we believe is a clearly defined long-term plan to build value. In our awarded business and quote pipeline, we see a path that maximizes our capacity regardless of any potential near-term shifts in demand or delays in sourcing decisions. To cover our performance, I'll start on slide four, beginning with revenue. We delivered $84.2 million of revenue in Q4, which translates into 41% growth year-over-year and 39% growth quarter-over-quarter. This was an all-time company record and reflects an annual run rate of $336.8 million that demonstrates the company's ability to quickly flex up to meet an increase in demand at our sites in Rhode Island and Mexico, along with a bit of capacity for more supplemental supply for energy industrial products, which drove $3.1 million of our revenues in December.

Before handing the call back to Dawn I'll also explain why our team will remain heads down executing with conviction. What we believe is a clearly defined long term plans to build value.

And our awarded business and quote pipeline, we see a path that maximizes our capacity regardless of any potential near term shifts in demand or the license sourcing decisions.

To cover our performance I'll start on slide four beginning with revenue.

We delivered $84 $2 million of revenue in Q4.

Which translates into 41% growth year over year, and 39% growth quarter over quarter.

This was an all time company record and reflects an annual run rate of $336 8 million.

That demonstrates the companys ability to quickly flex up to meet an increase in demand that our sites in Rhode Island, and Mexico, along with a bit of capacity from our supplemental supply for energy industrial products, which drove $3 $1 million of our revenues in December.

Ricardo Rodriguez: For all of 2023, our revenue was $238.7 million, which reflects a 32% year-over-year increase. As expected, when we first communicated our outlook for the year, over 60% of our sales materialized in the second half of the year, and this was due to the nature of the growth ramp that we are on. For the full year, energy industrial revenue was $128.6 million, an increase of 3% year-over-year. However, revenue continued to be supply-concerned in Q4, even though we tested the system during the quarter with supplemental supply manufacturing delivering $3.1 million of product in December. Our quarterly sales of $31.3 million reflect a 9% year-over-year decrease and a 12% quarter-over-quarter increase.

For all of 2023, our revenue was $238 $7 million, which reflects a 32% year over year increase.

As expected when we first communicated our outlook for the year over 60% of our sales materialized in the second half of the year and this was due to the nature of the growth ramp that we are on.

For the full year energy industrial revenue was $128 $6 million, an increase of 3% year over year.

Revenue continues to be supply constrained in Q4, even though we tested the system during the quarter with supplemental supply manufacturing delivering $3 $1 million of product in December.

Our quarterly sales of $31 $3 million to reflect the 9% year over year decrease in the 12% quarter over quarter increase.

Ricardo Rodriguez: As we've previously mentioned, our energy business is sold out. To fulfill this excess demand, we now have our supplemental supply in place that will continue ramping up as we allocate more of our aerogel production capacity in Rhode Island to EV thermal barriers. EV thermal barrier revenue of $52.9 million was up 110% year-over-year and 61% quarter-over-quarter, reflecting the accelerating ramp in GM's production of Altium platform-based electric vehicles during the second half of the year and stable volumes on the Toyota-related nameplates that we supply, along with increasing prototype orders from additional customers. Our full-year EV thermal barrier revenue was $110.1 million, representing a 98% increase when compared This growth reflects the benefit of starting a business that supplies the EV market from zero, and realizing over 77% of our sales in this segment during the second half of the year did not surprise us. Next, I'll provide a summary of our main expenses. Material expenses of $28.7 million for the quarter made up 34 percentage points of sales, a two percentage point improvement quarter over quarter.

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

To fulfill this excess demand.

We now have our supplemental supply in place that will continue ramping up as we allocate more of our aerogel production capacity in Rhode Island to EV thermal barriers.

EV thermal barrier revenue of $52 $9 million was up 110% year over year and 61% quarter over quarter.

Collecting the accelerating ramping gm's production of all TM platform based electric vehicles during the second half of the year and stable volumes on the Toyota related nameplates that we supply along with increasing prototype orders from additional customers.

Our full year EV thermal barrier revenue was $110 $1 million, representing a 98% increase when compared to 2022.

This growth reflects the benefit of starting a business that supplies the EV market from zero and.

And realizing over 77% of our sales in this segment during the second half of the year that would not surprise us.

Next I'll provide a summary of our main expenses.

<unk> expenses of $28 $7 million for the quarter made up 34 percentage points of sales a two percentage point improvement quarter over quarter.

Ricardo Rodriguez: This continues to reflect the work that our supply chain and procurement groups have put into reducing the cost of some of our main raw materials in a more stable environment along with optimizing our inbound logistics costs. We remain vigilant with the goal of ensuring that we can keep these below 40 percent of sales and prefer to continue planning with this as our target here. The Q4 performance enabled our total year-to-date material cost to be $86.7 million for 36 percentage points of sale. This was 400 basis points favorable to a running target of 40 percentage points of sale. Conversion costs, which we describe as all production costs required to convert raw materials into finished products, were $25.9 million for 31 percentage points of sales in Q4. These include all elements of direct labor, manufacturing overhead, factory supplies, rent, insurance, utilities, process logistics, quality, and inspection.

This continues to reflect the work that our supply chain and procurement groups have put into reducing the cost of some of our main raw materials in a more stable environment, along with optimizing our inbound logistics costs.

We remain vigilant with the goal of ensuring that we can keep these below 40 percentage points of sales and preferred to continue conservatively planning with this is our target here.

The Q4 performance enabled our total year to date and material costs to be of $86 7 million or 36 percentage points of sales.

This was 400 basis points favorable to our running target of 40 percentage points of sales.

Conversion costs, which we describe as all production costs required to convert raw materials and finished products.

We're at $25 9 million or <unk> 31 percentage points of sales in Q4.

These include all elements of direct labor manufacturing overhead factory supplies rent insurance utilities process logistics quality and inspection.

Ricardo Rodriguez: These results compare favorably to conversion costs in Q3 of this year, which were 41 percentage points of sales. 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 20 to 25 percentage points of sales, so we are not done managing these costs. The recent work from our team increasing the uptime of our equipment in Mexico and driving an optimized production mix in Rhode Island, along with improving our production yields at every step of the process, is paying off, and we've still got more opportunity for improvement. For the full year, our conversion cost was $95.1 million to reflect 40 percentage points of sales, a 6 percentage point improvement year over year.

These results compare favorably to conversion cost in Q3 of this year, which were 41 percentage points of sales.

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 20% to 25 percentage points of sales. So we are not done managing these.

The recent work from our team increasing the uptime of our equipment in Mexico, and driving an optimized production mix in Rhode Island, along with improving our production yields at every step of the process is paying off and we still got more opportunity for improvement.

For the full year, our conversion cost of $95 $1 million to reflect 40 percentage points of sales a six percentage point improvement over year over year.

Ricardo Rodriguez: In Q4, company-level gross profit margins were 35%, and our gross profit of $29.6 million is a $15.3 million improvement over our gross profit of $14.3 million during the same quarter last year. Our energy industrial segment delivered $9.9 million of gross profit, or a 9% year-over-year increase. In EV thermal barriers, we delivered $19.7 million of gross profit in Q4. If we compare this quarter with Q3, our EV thermal barrier gross profit improved by $11.7 million on incremental revenue of $20.1 million. Our fourth quarter of 2023 gross profit in EV thermal barriers was $13.2 million higher than the gross profit of $6.5 million that we incurred during Q4 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 resulting gross profit margins during the quarter were 32 and 37 percent for the energy industrial and EV thermal barrier segments, respectively.

In Q4 company level gross profit margins were 35% and our gross profit of $29 $6 million, it's a $15 $3 million improvement.

Gross profit of $14 3 million during the same quarter last year.

Our energy industrial segment delivered $9 $9 million of gross profit or a 9% year over year increase.

In EV thermal barriers, we delivered $19 $7 million of gross profit in Q4.

If we compare this quarter with Q3, our EV throneberry gross profit improved by $11 7 million.

Mental revenue of $20 $1 million.

Our fourth quarter of 2023 gross profit and EV thermal barriers was $13 $2 million higher than the gross profit of $6 $5 million that we incurred during Q4 of last year in this segment.

Collecting the benefits are starting to operate on a revenue run rate that aligns with the size of our operation.

The resulting gross profit margins during the quarter were 32% and 37% for energy industrial and EV thermal barrier segments, respectively.

For the full year, our gross profit of $56 9 million reflects a $51 $9 million improvement versus our gross profit of $4 9 million last year.

Ricardo Rodriguez: For the full year, our gross profit of $56.9 million reflects a $51.9 million improvement versus our gross profit of $4.9 million last year. 2023's revenue level and our team's work at maximizing our asset base will enable a tipping point in our economics, with 89% of the incremental revenues falling to the gross profit line. Seeing $51.9 million of incremental gross profit while adding only $58.3 million of sales is, in my view, the ultimate near-term validation of our business model and the gearing of our operation. Operating expenses, which are large for our near-term, projected annual revenue capacity of now over $650 million, were at $28.2 million in Q4.

2023% revenue level and our teams work at maximizing our asset based enable a tipping point in our economics.

With 89% of the incremental revenues falling to the gross profit line.

<unk> $51 9 million of incremental gross profit.

Adding only $58 $3 million of sales.

In my view, the ultimate near term validation of our business model and the gearing of our operations.

Operating expenses, which are sized for our near term.

Projected annual revenue capacity of now over $650 million.

We're at $28 2 million in Q4.

These were down by about $200000 quarter over quarter and reflect the first quarterly decrease in Opex that we've had since Q2 of 2020.

Ricardo Rodriguez: These were down by about $200,000 quarter over quarter and reflect the first quarterly decrease in OPEX that we've had since Q2 of 2020. However, our work optimizing OPEX is not done, because although our annual OPEX was $106.1 million, our quarterly run rate of $28.2 million was still about $700,000 away from the quarterly run rate required to have $110 million of annual OPEC. Putting these elements together, our adjusted EBITDA was $9.1 million in Q4 compared to negative $4.5 million during the same period last year, resulting in a $13.6 million year-over-year reduction in our EBITDA margin.

Our work optimizing opex is not done because although our annual Opex was $106 1 million.

Our quarterly run rate of $28 $2 million was still about 700000 also away from the quarterly run rate required to have $110 million of annual Opex.

Putting these elements together, our adjusted EBIT that was $9 1 million in Q4 compared to negative $4 5 million during the same period last year.

Resulting in a $13 $6 million year over year reduction in our EBITDA loss.

The last time, our team delivered a positive EBITDA quarter of $500000 was in Q1 of 2020, so delivering over 9 million here in Q4 is a big milestone for us.

As a reminder, we define adjusted EBITDA as net income or loss before interest taxes depreciation amortization.

Ricardo Rodriguez: The last time our team delivered a positive EBITDA quarter of $500,000 was in Q1 of 2020, so delivering over $9 million here in Q4 is a big milestone for us. 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.

Stock based compensation expenses and other items that we do not believe are indicative of our core operating performance.

In Q4. These other items included $3 $2 million of stock based compensation of $1 million of interest income and $2 $9 million of interest expenses.

Our net loss in Q4 decreased to half a million dollars or <unk> <unk> per share versus a net loss of $9 6 million or.

Ricardo Rodriguez: In Q4, these other items included $3.2 million of stock-based compensation, $1 million of interest income, and $2.9 million of interest expenses. Was the net loss in Q4 decreased to half a million dollars or one cent per share versus a net loss of 9.6 million dollars or 20 cents per share in the same quarter of 2022? We were so close to breaking even for the quarter.

Or <unk> 20 per share in the same quarter of 2022.

So close to breakeven for the quarter.

Our full year net loss of $45 $8 million is $36 $9 million lower than our loss of $82 7 million during last year or down by 45%.

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

Cash used in operations of $2 8 million reflected our adjusted EBITDA of $9 1 million in cash used for working capital of $12 9 million offset by interest income of $1 million.

Ricardo Rodriguez: Our full year net loss of $45.8 million is $36.5 million, $1.9 million lower than our loss of $82.7 million during last year, or down by 45%. Next, I'll turn to cash flow and our balance sheet. Cash used in operations of $2.8 million reflected our adjusted EBITDA of $9.1 million and cash used for working capital of $12.9 million, offset by interest income of $1 million. The key items that resulted in the usage of working capital were an increase in accounts receivable and inventory offset by an increase in accounts payable and accrued expenses.

The key items that resulted in the usage of working capital where an increase in accounts receivable.

In inventory offset by an increase in accounts payable and accrued expenses are.

Our capex during the quarter was $27 $8 million. These.

We split our operating cash needs for the quarter at $36 million as.

As we work our way through Q1, we're focused on aggressively reducing our working capital needs and freeing up over $20 million of cash by reducing our raw material inventories in what is now more stable procurement environment and staying on top of accounts receivable.

Ricardo Rodriguez: Our CapEx during the quarter was $27.8 million, which put our operating cash needs for the quarter at $30.6 million. As we work our way through Q1, we're focused on aggressively reducing our working capital needs and freeing up over $20 million of cash by reducing our raw material inventories in what is now a more stable procurement environment and staying on top of accounts receivable. Our CapEx in 2023 was $175.5 million, closely in line with our latest guidance of $175 million. $115.2 million was spent on Plan 2, and the rest funded maintenance and various process improvements in our aerogel plant in Rhode Island, along with equipping our facilities in Mexico with the necessary automated thermal barrier assembly equipment for this year's expected rent.

Our capex in 2023 was $175 $5 million, which is closely in line with our latest guidance of $175 million.

$15 $2 million were spent towards plant two and the rest funded maintenance and various process improvements in our aerogel plant in Rhode Island.

Along with equipping our facilities in Mexico with the necessary automated thermal barrier assembly equipment for this year's expected ramp.

We have incurred $279 7 million in cumulative capital expenses through the end of the fourth quarter towards plant two in Georgia to position the project for a potential restart of construction in the second half of 2024.

And only spent $3 $3 million of the other capex as the team managed to deliver a Q4 EV thermal barrier volumes with existing assets.

On December 20th of last year, we completed a $75 million registered direct offering of common stock the Hood River capital and the handful of other institutional investors at a price of $12.37 per share.

Ricardo Rodriguez: We have incurred $279.7 million in cumulative capital expenses through the end of the fourth quarter towards Plan 2 in Georgia to position the project for a potential restart of construction in the second half of 2024, and only spent $3.3 million of the other CapEx as the team managed to deliver our Q4 EV thermal barrier volumes with existing assets. On December 20th of last year, we completed a $75 million registered direct offering of common stock to Hood River Capital and a handful of other institutional investors at a price of $12.37 per share. Hood River's interest in making an investment in Aspen before the holidays enabled us to efficiently pull this together and provided a straightforward path for us to continue executing without entertaining large near-term financing options outside of our application with the DOE for Plan 2.

Could reverse interest in making an investment in Aspen before the holidays enabled us to efficiently pull this together and provided a straightforward path for us to continue executing without entertaining large near term financing options outside of our application with the Doe for plant two.

I'll go into this later as we review our 2020 for Capex outlook.

With the support of this transaction, we ended the quarter with $139 $7 million of cash and shareholders equity of $488 $1 million.

Now I'll turn it over to slide five.

On January 11th of this year as we pre announced our revenue for last year. We also communicated that we expect our revenue to surpass $350 million in 2024.

Resulting in a 47% year over year increase.

We thought this communication was pertinent our stakeholders to assess some of the press around Evs, along with the earnings releases and the EV production outlooks of various automotive Oems.

Ricardo Rodriguez: I'll go into this later as we review our 2024 CAPEX Outlook. With the support of this transaction, we ended the quarter with $139.7 million of cash and shareholders' equity of $488.1 million. Now, I'll turn over to slide five.

Today I'd like to spend a minute here outlining our thinking behind the $350 million baseline revenue expectation, starting with our EV thermal barrier segment.

It's no surprise that the lion's share of our 39% quarter over quarter revenue ramp was driven by a meaningful increase in demand of EV thermal barrier parts for general Motors <unk> platform vehicles.

Ricardo Rodriguez: On January 11, this year, as we pre-announced our revenue for last year, we also communicated that we expect our revenue to surpass $350 million in 2024, resulting in a 47% year-over-year increase. We thought this communication was pertinent as stakeholders assessed some of the press around EVs, along with earnings releases and the EV production outlooks of various automotive OEMs. Today, I'd like to spend a minute here outlining our thinking behind this $350 million baseline revenue expectation, starting with our EV thermal barrier segment. It's no surprise that the lion's share of our 39% quarter-over-quarter revenue ramp was driven by a meaningful increase in demand for EV thermal barrier parts for General Motors Altium platform vehicles. And GM's production of these vehicles will drive the majority of 2024 demand in this segment for us. With this in mind, let's look at the chart on the left side of the slide. Our main EV thermal barrier customer expected to produce 150,000 EVs in 2023. For IHS, we estimate that they will produce almost 120,000.

And the Gm's production of these vehicles will drive the majority of 2020 for demand in this segment for us.

With this in mind, let's look at the chart on the left.

Side of the slide.

Our main EV thermal barrier customer expected to produce 150000 Evs in 2023.

For IHS, we estimate we estimate that they produced almost 120000.

So around 80, 880% of Gms target.

On January 30 of this year GM broadly communicated that it expects to make 200 to 300000 Evs in 2024.

And then it has discontinued production of non <unk> based evs.

That's a big range for us to plan, our operations, particularly our fixed costs.

And therefore, although we're excited and nearly ready for the prospects and potential of higher volumes. We are assuming 80% of Gm's 200000 unit estimate as we develop our 2020 for EV thermal barrier revenue outlook. So.

Approximately 160000 units.

For reference.

The latest IHS forecast expect 279000, LTM based evs to be produced in 2024.

Ricardo Rodriguez: So around 80% of GM's targets. On January 30th of this year, GM broadly communicated that it expects to make 200 to 300,000 EVs in 2024 and that it has discontinued production of non-Altium-based EVs. That's a big range for us to plan our operations on, particularly our fixed costs. And therefore, although we're excited and eagerly ready for the prospects and potential of higher volumes, we are assuming 80% of GM's 200,000 unit estimate as we develop our 2024 EV thermal barrier revenue outlook, so approximately 160,000 units, for reference. The latest IHS forecast expects 279,000 lithium-based EVs to be produced in 2024. So we're currently discounting IHS's estimate by 42% until we see volumes materialize as we work our way through the year. On the upper right side of slide five.

So we are currently discounting IHS is estimate by 42% until we see volumes materialize as we work our way through the year.

On the upper right side of slide five.

One can see that Gm's estimated production of all time vehicles has increased to around 20000 units in Q4.

And then in this 279000 unit IHS estimate the ramp is expected to increase significantly in Q2, and Q3 of this year potentially leading to a demand profile that will look similar to what we experienced last year with approximately 70% of the volume materializing in the second half.

For the year.

GM is launching several important high volume nameplates. This year that drive this production increase and we see that interest in them remains high on Google trends. So the onus is on all of us on the value chain to produce them. This year.

Ricardo Rodriguez: One can see that GM's estimated production of Altium vehicles increased to around 20,000 units in Q4 and that in this 279,000 unit IHS estimate, the ramp is expected to increase significantly in Q2 and Q3 of this year, potentially leading to a demand profile that will look similar to what we experienced last year with approximately 70% of the volume materializing in the second half of the year. GM is launching several important, high-volume nameplates this year that will drive this production increase. And we see that interest in them remains high on Google Trends.

Turning over to slide six and continuing with the topic of our 2020 for revenue outlook.

We take our 160000 units for all team based Tvs.

Apply our estimated content per vehicle levels from 2023.

And assume our traditional revenues from other customers from prototype sales, we land at a $200 million revenue baseline estimate for 2020 for thermal barriers.

Units produced in 2020 for beyond 160000 by General Motors, the potential launch of another accurate nameplate powered by <unk> cells.

Ricardo Rodriguez: So the onus is on all of us in the value chain to produce them this year. Turning over to slide six and continuing the topic of our 2024 Revenue Outlook, if we take our 160,000 units of Altium-based TVs...

Additional OEM prototype borders and the mix of larger battery pack vehicles that drives higher content per vehicle will drive upside, which we are ready to capture but would prefer to estimate more precisely as it materializes.

Ricardo Rodriguez: Apply our estimated content per vehicle levels from 2023 and assume our traditional revenues from other customers and prototype sales, and we land at a $200 million revenue baseline estimate for 2024 thermal barriers. Units produced in 2024 beyond 160,000 by General Motors, and the potential launch of another Acura nameplate powered by Altium cells. Additional OEM prototype borders and a mix of larger battery-packed vehicles that drives higher content per vehicle will drive upside, which we are ready to capture but would prefer to estimate more precisely as it materializes.

For our energy industrial business. The 2020 for revenue outlook is easier to size at $150 million, which is our expected capacity in this segment today.

Upside to the $150 million can be driven by a more favorable <unk>.

<unk> mix that requires less standard hours of our capacity.

Ramping up additional supplemental supply and utilizing some capacity in Rhode Island that has since taken up by thermal barrier aerogel production in the first half of the year.

Combining our two segments revenue outlooks for 2024 results in a total revenue baseline estimate of $350 million.

Which again would be a 47% year over year increase from our revenues in 2023.

Ricardo Rodriguez: For our energy industrial business, the 2024 Revenue Outlook is easier to size at $150 million, which is our expected capacity in this segment today. The upside to the $150 million can be driven by a more favorable product mix that requires less than their hours of our capacity, ramping up additional supplemental supply, and utilizing some capacity in Rhode Island that isn't taken up by thermal barrier aerogel production in the first half of the year. Combining our two segments' revenue outlooks for 2024 results in a total revenue baseline estimate of $350 million, which would again be a 47 percent year-over-year increase from our revenues in 2023. With this revenue baseline, we believe that we can deliver positive operating income in 2024, which, assuming our depreciation and amortization were around $30 million, would translate into over $30 million of EBITDA. Even though we delivered $9.1 million of EBITDA in Q4,

With this revenue baseline we believe that we can deliver positive operating income in 2024, which assuming our depreciation and amortization being of around $30 million would translate into over $30 million of EBITDA.

Even though we delivered $9 $1 million of EBITDA in Q4 to $30 million 2020 for EBIT outlook takes into account some potential headwinds to our near term profitability such as the cost of new launches higher bar prototype sales engineering changes that could lead to inventory obsolescence.

And expedited freight costs driven by the start stop nature of some of the nameplates and our thermal barrier demand.

We could also opportunistically decide to add opex to continue advancing our R&D in key areas and accelerate the development of our technical sales capabilities and fund new program launches.

On the flip side if it.

Additional demand is there we expect a disproportionate amount of it to flow to our bottom line and our team will continue applying a lot of the lessons learned in 2023 to keep reducing our fixed costs, increasing our production yields our uptime and driving the right energy industrial pricing and mix.

Ricardo Rodriguez: The $30 million 2020 For Evita Outlook takes into account some potential headwinds to our near-term profitability, such as the cost of new launches, higher part prototype sales, engineering changes that could lead to inventory obsolescence, and expedited freight costs driven by the start-stop nature of some of the nameplates in our thermal barrier demand. We could also opportunistically decide to add OPEX to continue advancing our R&D in key areas and accelerate the development of our technical sales capabilities and fund new program launches, on the flip side. If additional demand is there, we expect a disproportionate amount of it to flow to our bottom line, and our team will continue applying a lot of the lessons learned in 2023 to keep reducing our fixed costs, increasing our production yields, our uptime, and driving the right energy industrial pricing and mix.

The favorable trends are on raw material costs could also continue to help make up for some of the recent increases.

We're seeing on inbound freight costs, along some of the main sea freight routes in Europe, and the Middle East.

Continuing on slide seven with the rest of our 2024 outlook.

$30 million of positive EBITDA would translate into a net loss of $23 million.

Or <unk> 30 per share assuming a share count of 76 5 million shares.

Our capex without including planned too is expected to be $50 million for the year.

This is for equipment to fund additional productivity gains at our aerogel plant in Rhode Island, along with equipping our operations in Mexico with the tooling to ramp up our part production capacity in 2025.

We are not planning to spend more than $30 million.

Advancing the construction of plant two in Georgia during the first half of the year to ensure that the site is advanced enough to preserve all of our investments made to date and to enable the potential reacceleration of construction in the second half of the year.

Ricardo Rodriguez: The favorable trends around raw material costs could also continue to help make up for some of the recent increases the world is seeing on inbound freight costs along some of the main sea freight routes in Europe and the Middle East. Moving on to slide 7 with the rest of our 2024 outlook. $30 million of positive EBITDA would translate into a net loss of $23 million, or $0.30 per share, assuming a share count of 76.5 million.

If construction on plan to continue to being right time, we expect expenses of $15 million and expenses to be incurred in the second half of the year.

However, we continue to see an important need for the capacity of that plant to brings by 2027 at the latest and continue working our way through the due diligence in term sheet negotiation phase with the U S Department of energy loan program office as part of our application to fund the construction through our loan person.

Soon to the Doe advanced technology vehicles manufacturing or Atvs program.

Ricardo Rodriguez: Our CAPEX, without including Plan 2, is expected to be $50 million for the year. This is for equipment to fund additional productivity gains at our aerogel plant in Rhode Island, along with equipping our operations in Mexico with the tooling to ramp up our part production capacity in 2025. We are not planning to spend more than $30 million advancing the construction of Plant 2 in Georgia during the first half of the year to ensure that the site is advanced enough to preserve all of our investments made to date and to enable the potential re-acceleration of construction in the second half of the year. If construction on Plan 2 continues being right-timed, we expect $15 million in expenses to be incurred in the second half of the year.

On the left side of this slide one can see that we spent the last 12 months improving the profit potential of our business quarter over quarter, while also reducing our capex by over 50% from the same quarter last year.

This along with our current cash position enables us to manage the company with the right level of liquidity fund all of our Capex outside of plant two and continue driving profitable growth without having to raise outside funds.

The main balance sheet focus areas for us over the next four months or two.

Freeing up working capital by bringing down our raw material inventories and what is now a more stable sourcing environment.

And bringing our discussions with the Doe to hopefully positive outcome.

Ricardo Rodriguez: However, we continue to see an important need for the capacity that Plan 2 brings by 2027 at the latest and continue working our way through the due diligence and term sheet negotiation phase with the U.S. Department of Energy's Loan Programs Office, part of our application to fund the construction through a loan pursuant to the DOE's Advanced Technology Vehicles Manufacturing, or ATVM, program. On the left side of the slide, one can see that we spent the last 12 months improving the profit potential of our business quarter over quarter while also reducing our capex by over 50% from the same quarter last year. This, along with our current cash position, enables us to manage the company with the right level of liquidity, fund all of our CapEx outside of Plan 2, and continue driving profitable growth without having to raise outside funds.

In January we received $5 million in funding through a sale leaseback of some of our recently purchased hard assets in Rhode Island in the Boston area, and we will continue to Opportunistically rely on this form of financing to cover some of our capex in the near term preserved liquidity and lower our overall.

Cost of capital.

Next I'd like to step back a bit and spend some time driving a fact based discussion around the EV market and I'll be referring to slide eight as I do this.

As I mentioned earlier, a year ago, we were quick to assess that in a rising interest rate environment, our potential customers would be forced to reassess some of their EV investment commitments from 2020 and 2021.

At the same time, we foresaw that as soon as light vehicle light vehicle production ramped up to pre COVID-19 levels consumers wouldn't necessarily be able to pay COVID-19 era pricing for new vehicles and that either retail inventories would increase or the pricing for new mass market vehicles would need to decrease.

Ricardo Rodriguez: The main balance sheet focus areas for us over the next four months are two. Freeing up working capital by bringing down our raw material and inventories in what is now a more stable sourcing environment and bringing our discussions with the DOE to a hopefully positive outcome. In January, we received $5 million in funding through a sale-leaseback of some of our recently purchased hard assets in Rhode Island and the Boston area.

Being that things Werent as great as they seemed we decided the right time, our investments and accelerate our path to profitability.

Now we are encouraged to see that things aren't as bad as they seem we have all read the articles of the frozen Evs in Chicago that consumers forgot the charge or the articles of recent price decreases from.

For mass market Evs.

But comparing a reality and the new forecast for global EV production reveal some interesting facts.

If we compare ihs's forecast in October of 2021 for global EV production in 2022 with actual production the actuals outpaced expectations by 27% or $1 7 million vehicles.

Ricardo Rodriguez: And we will continue to opportunistically rely on this form of financing to cover some of our CAPEX in the near term, preserve liquidity, and lower our overall cost of capital. Next, I'd like to step back a bit and spend some time driving a fact-based discussion around the ED market, and I'll be referring to slide 8 as I do this. As I mentioned earlier, a year ago, we were quick to assess that in a rising interest rate environment, our potential customers would be forced to reassess some of their EV investment commitments from 2020 and 2021. At the same time, we foresaw that as soon as light vehicle production ramped up to pre-COVID levels, consumers wouldn't necessarily be able to pay COVID-era prices for new vehicles, and that Seeing that things weren't as great as they seemed, we decided to right-time our investments and accelerate our path to profitability. Now, we are encouraged to see that things aren't as bad as they seem.

In 2023 actual global EV production was 900000 units higher than the expectations from October of 2021.

Demonstrating not only that global EV production increased by 28%, but this market continued to grow at a high rate.

This is particularly important for a company like ours that started supplying the EV market in 2021 with no prior exposure to the global new vehicle market at all.

In North America <unk> production is still grew by 53% from 2022 to 2023 and actual 2023 production was only 200000 units short of the forecast from the peak TV sentiment days of October of 2021.

200000 units.

And our view is the capacity and supply problem not a demand one we believe that a single OEM could have more than covered this gap in North America last year.

Looking forward as some key Oems launched new nameplates, and North America IHS is expecting all the units lost of 2023, and 600000 units loss relative to the 2021 forecast in 2024 to be made up by 2027.

Ricardo Rodriguez: We have all read the articles about the frozen EVs in Chicago that consumers forgot to charge or the articles about recent price decreases for MathMarketEV. But comparing reality and a new forecast for global EV production reveals some interesting facts. If we compare IHS's forecast in October of 2021 for global EV production in 2022 with actual production, the actual cloud-based expectations are off by 27% or 1.7 million vehicles. In 2023, actual global EV production was 900,000 units higher than the expectations from October of 2021.

With $1 2 million additional units expected in 2028 over the forecast from 2021.

We don't believe that this forecast is unreasonable and again feel that the wind is on our sales in North America as we continue building our EV thermal barrier segment from no revenues in 2020.

Within the vehicle production market that is expected to compound at 38% per year over the next five years.

In Europe. The story is similar as EV production in that market is expected to grow at an average rate of 32% over the next five years.

Ricardo Rodriguez: This shows not only that global EV production increased by 28% but that this market continued to grow at a high rate. This is particularly important for a company like ours that started supplying the EV market in 2021 with no prior exposure to the global new vehicle market at all. In North America, EV production still grew by 53% from 2022 to 2023, and actual 2023 production was only 200,000 units short of the forecast from the peak EV sentiment dates of October of 2021. 200,000 units

We believe that the Cotr missions regulations that led to a $2 6 million production unit EV market in Europe in 2023 are not going away.

And as they get stricter it is not unreasonable to expect $8 9 million Evs to be produced in Europe in 2028.

I'll, let you spend some more time comparing the EV production forecast from 2021 with the latest expectations, but it is clear to us that production over the last two years shows that this is still a nascent market with more than enough energy and investment behind it the power the growth of a company like ours.

Ricardo Rodriguez: In our view, it's a capacity and supply problem, not a demand one. We believe that a single OEM could have more than covered this gap in North America last year. Looking forward, as some key OEMs launch new nameplates in North America, IHS is expecting all the units lost in 2023 and 600,000 units lost relative to the 2021 forecast in 2024 to be made up by 2027, with 1.2 million additional units expected in 2028 over the forecast from 2021. We don't believe that this forecast is unreasonable and again feel that the wind is on our sails in North America as we continue building our EV thermal In Europe, the story is similar as EV production in that market is expected to grow at an average rate of 32% over the next five years. However, we believe that the CO2 emissions regulations that led to a 2.6 million production unit EV market in Europe in 2023 are not going away.

That is starting without any exposure to it.

We are in the first inning of a very long game here.

To show you more specifically, how we forecast this growth and optimally plan our capacity, let's turn over to slide nine.

If we take the estimated value of our currently awarded in coated business, which assumes our customers' internal volume projections times the price that we've quoted for each part.

This demand is significantly higher than our plan thermal bird capacity from 2025 onwards.

For example for 2024, we are discounting our customers communicated demands by 56%.

The land that are 200 million thermal barrier baseline revenue outlook as well.

We stand ready to fulfill a $500 million.

For 2025 and 2026, although we continue working to secure additional demand through OEM awards that go well beyond this years, we'd need to discount the estimated demand on hand by 37% and 75% respectively to be able to fulfill it with our aerogel capacity in <unk>.

The island.

If we bring plants online with its estimated incremental $1 2 billion of thermal barrier revenue capacity in 2027, we will need to continue this accounting our estimated 2027 and 2028 demand by 41% and 46% to be able to fulfill it with both aerogel plants.

Ricardo Rodriguez: And as they get stricter, it is not unreasonable to expect 8.9 million EVs to be produced in Europe in 2028. I'll let you spend some more time comparing the EV production forecast from 2021 with the latest expectations, but it is clear to us that production over the last two years shows that this is still a nascent market with more than enough energy and investment behind it to power the growth of a company like ours that is starting without any exposure to it. We are in the first inning of a very long game here.

In summary over the next five years, we estimate that there are over $4 4 billion of excess demand.

Between our customers estimates of their demand on our latest capacity planning assessments.

We believe that this leaves room for plenty of program delays lower volume ramps long sourcing processes.

And multi stakeholder decisions that are customary in the automotive industry without affecting our ability to go to grow profitably and drive our business model.

This is precisely why our team is so motivated and.

Ricardo Rodriguez: To show you more specifically how we forecast this growth and optimally plan our capacity, let's turn to slide 9. If we take the estimated value of our currently awarded and quoted business, which assumes our customers' internal volume projections times the price that we've quoted for each part, this demand is significantly higher than our planned thermal barrier capacity from 2025 onward. For example, for 2024, we are discounting our customers' communicated demand by 56% to land at our $200 million Thermal Barrier Baseline Revenue Outlook, as we stand ready to fulfill $500 million for 2025 and 2026. However, although we continue working to secure additional demand through OEM awards that go well beyond these years, we need to discount the estimated demand on hand by 37% and 75%, respectively, to be able to fulfill it with our aerogel capacity in Rhode

While we continue to execute with conviction and our eyes wide open. Despite most of what we read in the media around electric vehicles.

Speaking of execution before handing the call back to dawn.

I'd like to spend a few minutes on slide 10.

Which we've now been updating for the past two quarters with our results alongside the main annual targets of our business model with our current capacity, which we believe can now deliver $650 million of revenue and 25% EBITDA margins.

On an annual run rate basis, it's obvious that we've continued to make progress towards our targets by bringing our cost of goods sold to the target of 65.

Percentage points of sales without relying on outsized revenue growth, while continuing to decrease our opex as a percentage of sales in Q4.

Accelerating this level of scalability was not an easy feat and I would like to thank everyone on our team for bringing us to this point.

I truly can't be more excited about our prospects happier or prouder of playing a small part of this team as we continue sharpening our acts in 2024.

Ricardo Rodriguez: If we bring Plan 2 online with its estimated incremental $1.2 billion of thermal barrier revenue capacity in 2027, we will need to continue discounting our estimated 2027 and 2028 demand by 41% and 46% to be able to fulfill it with both aerogel plans. In summary, over the next five years, we estimate that there will be over 4.4 billion dollars of excess demand between our customers' estimates of their demand and our latest capacity plan assessment. We believe that this leaves room for plenty of program delays, lower volume ramps, long sourcing processes, and multi-stakeholder decisions that are customary in the automotive industry without affecting our ability to grow profitably and drive our business model. This is precisely why our team is so motivated and why we continue to execute with conviction and our eyes wide open, despite most of what we read in the media around electric vehicles. Speaking of execution, before handing the call back to Don...

Again, everyone.

And with that over to you.

Thank you Ricardo.

We have covered a significant amount of ground today and reviewing Q4 full year 2023, our near term outlook and our longer term strategy.

Before we move to Q&A I would like to emphasize the focus on driving significant profitability from our existing resources and commercial opportunities while at the same time, maintaining our full longer term upside potential as we continue to win design awards from EV Oems grow our Baseload energy industrial.

<unk> revenue and leverage our aerogel technology platform into additional high value markets. We believe 2024 will be another significant step towards building this dynamic and highly profitable technology company.

Candace, let's turn to Q&A.

Thank you Tom if you'd like to ask a question. Please press star followed by one.

Hey, Pat to Australia question any time, you can do some quick question Tom.

Yes.

Thank you I'll use my speaker phone please pick up your handset before asking your question.

And as a reminder, in the interest of time, we ask you to limit your questions to two questions at a time.

If you have any additional questions beyond the initial team.

Ricardo Rodriguez: I'd like to spend a few minutes on slide 10, which we've now been updating for the past two quarters with our results alongside the main annual targets of our business model with our current capacity, which we believe can now deliver $650 million of revenue and a 25% EBITDA margin. On an annual run rate basis, it's obvious that we've continued to make progress towards our targets by bringing our cost of goods sold to the target of $65,000, percentage points of sales, without relying on outsized revenue growth while continuing to decrease our OPEX as a percentage of sales in Q4. Accelerating this level of scalability was not an easy feat. And I would like to thank everyone on our team for bringing us to this point. I truly can't be more excited about our prospects, happier, or prouder of playing a small part in this team as we continue sharpening our axes in 2024. Thanks again, everyone. And with that, over to you. Thank you, Riccardo.

Please get back into the queue and we will get the question.

Last question comes from George <unk>.

Canaccord. Your line is now open. Please go ahead.

Hi, Good morning, Thank you for taking my questions and I appreciate all the detail around your expectations for this year and for next year.

I'm wondering if you could just give us a little bit of comfort around <unk>.

<unk> sales into some of your larger OEM customers.

Can you just do the quick math around how much material you shipped into customers like GM versus how much their sell through has been there seems to be a little bit of a discrepancy there.

And they have some.

Large customer has indicated that they've had some issues with module production can we just chalk up some of that.

Shipments relative to sell through two issues with mall module production or we can or is there a worry that that might come back to bite Aspen in the in the future. Thank you.

Thanks George.

Yes, I mean I think.

Don Young: We have covered a significant amount of ground today in reviewing Q4, full year 2023, our near-term outlook, and our longer-term strategy. Before we move to Q&A, I would like to emphasize the focus on driving significant profitability from our existing resources and commercial opportunities while at the same time maintaining our full longer-term upside potential as we continue to win design awards from EVOEMs, grow our baseload energy industrial revenue, and leverage our aerogel technology platform into additional high-value markets. We believe 2024 will be another significant step towards building this dynamic and highly profitable technology. Candice, let's turn to Q&A. If you would like to ask a question, please press star followed by one on your telephone keypad. To withdraw your question at any time, you can do so by pressing the star followed by one.

Yes of course, if you run the math.

It's no secret that it is very likely that some of our parts did not end up in a completed module or a completed vehicle and quite a few of them.

So.

I mean for us when we look at the signals.

Around.

This customer's demand pool we.

We still feel pretty good about the fact that they don't have a ton of inventory of our parts. It hasn't made its way into vehicles.

And so we think that.

You may have some variability of around a month in the value chain waiting for a part to ultimately lend into a vehicle assuming 100% yields within their processes.

And we think that that variability so small that its pretty well captured within the discounting that we're doing off.

They're the low end of their production guideline for <unk> for this year.

Operator: If you are using a speakerphone, please remember to pick up your handset before asking your questions. And as a reminder, in the interest of time, we ask you to limit your questions to two at a time. If you have any additional questions beyond the initial two, please get back into the queue, and we will get to them all. So our first question comes from George Ginowakis of Canaccord. Your line is now open; please go ahead. Hi, good morning.

And then obviously a much higher level of discounting that we take to the IHS forecast.

So I mean, so far we still see a pull for.

For parts, we know that there isn't a ton of inventory in the value chain as the vehicles get built.

And as we showed here on some of the slides.

They are expected to continue.

George Ginowakis: Thank you for taking my questions and I appreciate all the detail around your expectations for this year and for next year. I'm wondering if you could just give us a little bit of comfort around previous sales to some of your larger OEM customers. Just do the quick math around how much material you've shipped to customers like GM versus how much their sell-through has been. There seems to be a little bit of a discrepancy there.

Continue to make some more vehicles, we actually are.

An important part of the solution of improving.

The yields around module assembly and ultimate vehicle integration and so we we know that that's also on on an improving pattern here.

Yeah.

Great and just as a follow up.

It seems to be a lot of momentum.

Don Young: And, you know, they have some – that large customer has indicated that they've had some issues with module production. Can we just chalk up some of that shipment relative to sell-through to issues with module production? Or is there a worry that that might come back to Bight-Aspen in the future? Thank you.

With Silicon anodes.

I was wondering if you can give us an update on your silicon battery materials segment and any traction you have there. Thank you.

Thank you George.

We continue to make progress in our Aerogel technology center on our silicone.

Activities and we are.

Very focused on.

Ricardo Rodriguez: Yeah, I mean, I think, yeah, of course, if you do the math. It's no secret that it is very likely that some of our parts did not end up in a completed module or a completed vehicle, and quite a few of them. So, I mean, for us, when we look at the signals around us.

Having a.

Cost advantaged.

<unk> and.

As we and I would expect that we will sample customers over the course of 2024 with those with those materials, we have some key internal milestones too.

To reach before we do that.

Ricardo Rodriguez: You know, this customer is the man for us. We still feel pretty good about the fact that they don't have a ton of inventory of our parts that haven't made their way into vehicles. And so, you know, we think that you may have some variability of around a month in the value chain, waiting for a part to ultimately land on a vehicle, assuming 100% yields within their processes. And we think that that variability is so small that it's pretty well captured within the discounting that we're doing.

And the team is very.

A very talented and very focused on doing that as you know Georgia.

It's a it's a challenging <unk>.

And to solve and that's why I'm doing so could be so valuable to us and to the industry. Overall, so we've got a great team working on it and I guess I would just say sort of standby, we're going to continue to make progress over 2024, and very likely talk more about it in subsequent earnings calls.

Thank you.

Ricardo Rodriguez: You know, they're the low end of the production guideline for Ultium for this year, and then obviously a much higher level of discounting that we take into the IHS forecast. So, I mean, so far, we still see a pull for parts. We know that there isn't a ton of inventory in the value chain as these vehicles get built.

Our next question comes from the line of Colin Bristow Manheimer. Your line is now open. Please go ahead.

Okay.

Thanks, So much guys can you talk a little bit about the cadence in the range of.

Customer sampling and how that's evolved over the last 12 to 15 months for the company.

Yes.

We've scaled our processes there so.

Ricardo Rodriguez: And as we showed here on some of the slides, you know, they're expected to continue making more vehicles. And we actually are an important part in the solution of improving the yields around module assembly and ultimate vehicle integration. And so we know that that's also on an improving pattern here. Right, and just as a follow-up, there seems to be a lot of momentum with silicon anodes. And I was wondering if you could give us an update on your silicon battery material segment and any traction you have there. Thank you. Thank you, George.

And if you talk to.

Our sales team.

And you came via our building here in Marlborough, where we build a prototype parts and we're getting prototype parts to new customers for new applications within two to three days of when they ask for them.

And.

And we're still seeing a lot of the.

The product Roadmaps that these Oems had.

Shaped up in 2020 in 2021 still hold some of these programs are getting into the sourcing phases.

And.

Don Young: We continue to make progress in our aerogel technology center with our silicon anode activities, and we are very focused on having a cost-advantaged product, and I would expect that we will sample customers over the course of 2024 with those materials. We have some key internal milestones to reach before we do that, and the team is very talented and very focused on doing that. As you know, George, it's a challenging problem to solve, and that's why doing so could be so valuable to us and to the industry overall. So we've got a great team working on it, and I guess I would just say, sir, stand by. We're going to continue to make progress over 2024 and will very likely talk more about it in subsequent earnings reports. Thanks. Our next question comes from the line of Colin Rusch of Oppenheimer. The line is now open; please go ahead.

And I think this is sort of reflected by the broader market itself right I mean.

A lot of these decisions.

And the Capex that was put to work towards launching nameplates in 2021, I mean those trains have.

Sort of left the station and are in the sourcing stage today, and so that will continue to move.

I think at the same pace that we saw last year. It's.

It's really the new product decisions for that will come into sourcing here in 2020.

5% in 2026, where there may be some re timing.

The Colombia the pace, we see it comparable to what it was last year and what's actually accelerated now is our ability to respond quickly we've got a larger sales team.

And our turnaround time is much faster.

Okay.

And then I guess from a pricing strategy perspective.

Obviously, you guys have been able to demonstrate a fair amount of value in terms of the safety side of things but.

Ricardo Rodriguez: Thanks so much, guys. Can you talk a little bit about the cadence and the rate of customer sampling and how that's evolved over the last 12 months? Yeah, I mean... We've scaled our processes there, so, you know, and if you talk to our sales team, I mean, if you come by our building here in Marlboro, where we build the prototype parts, we're getting prototype parts to new customers for new applications within two to three days of when they ask for them. And we're still seeing a lot of the product roadmaps that these OEMs had shaped up in 2020 and 2021 still hold that some of these programs are getting into the sourcing phase. And yeah, and I think... It's sort of reflected in the broader market itself, right?

The ability to monetize some of the other elements of cost reduction that you're facilitating corn or Oems at the pack level can you talk a little bit about your ability to press price and how that might impact margins or any assumptions around some of the commentary you made.

The margin profile for the company.

Yes, I mean the.

So the margin profile and what we've been laying out here for the past several quarters. So it's really more of a framework right.

And we think that a key tenant in enabling.

Enabling that framework is being sold out.

So if you are if you don't have more capacity than you need.

You are able to.

To have.

The right pricing discussion and and in many way stand your ground relative to the value that you're creating for the customer.

Ricardo Rodriguez: A lot of these decisions that were made and the CapEx that was put to work towards launching nameplates in 2021. I mean, those trains have sort of left the station and are in the sourcing stage today. And so that will continue to move. I think at the same pace that we saw it last year. It's really the new product decisions for that will come into sourcing here in 2020. 5, and 2026, where there may be some retiming. But the pace we see is comparable to what it was last year.

And our team.

Going back to your earlier question on the sales cycle. Our sales team is incredible it saying, yes to solving the customer's problem, but we're very good at saying no to bringing the price below a level that I think.

Compensates us for the capital that we're deploying in all of the resources that we have in the company to solve these customers' problems so being sold out is that.

A key tenet of the strategy and then of course.

The team continues to generate additional demand and we will continue to increasing our demand.

Over the next several years.

But again without giving up pricing, we really think that the pricing lever is the main one.

Ricardo Rodriguez: And what's actually accelerated now is our ability to respond quickly. We've got a larger sales team, and uh..., and our turnaround time is much faster. Okay, that's super helpful.

Driving our business model here.

I think Colin also just okay.

The wheel a little bit over to the energy industrial side.

Also I would anticipate.

As we continue to convert over to the supplemental supply that that will support the kind of gross margins that we and you expect here over the course of 2024 and in the years to come.

Ricardo Rodriguez: And then, from a pricing strategy perspective, obviously, you guys have been able to demonstrate a fair amount of value in terms of the safety side of things, but the ability to monetize some of the other elements of cost reduction that you're facilitating for your OEMs at the PAC level. Can you talk a little bit about your ability to press prices and how that might impact margins or any assumptions that are in some of the commentary you made on the margin profile? Yeah, I mean, the margin profile and what we've been laying out here for the past several quarters is really more of a framework, right? And we think that a key tenet in enabling that framework is being sold out.

Super helpful guys. Thanks, so much.

Thank you.

Our next question.

Comes from the line of Chris <unk>.

B Riley your line is now open. Please go ahead.

Hey, guys. Thanks for taking my questions and congrats on all the progress on the gross margin.

Maybe you can follow up there could you talk a bit about.

If you're already hitting your target model gross margins in the fourth quarter like what are the puts and takes between.

Over the past two $650 million roughly are there any reasons you shouldnt expect.

Continued improvement on the materials and conversion.

Ricardo Rodriguez: Right, so if you don't have more capacity than you need, you're able to have the right pricing discussion and, in many ways, stand your ground relative to the value that you're creating for the customer and our team. You know, going back to your earlier question about the sales cycle, our sales team is incredible at saying yes to solving the customer's problem. But we're very good at saying no to bringing the price below a level that I think, um.., you know, compensates for the capital that we're deploying and all of the resources that we have in the company to solve these customers' problems. So being sold out is a key tenet of the strategy.

Yeah.

Our price downs.

Scheduled within that kind of.

After that run rate.

What should we be thinking about what those puts and takes.

Yeah, no. Thanks, Chris.

Look I mean, if you look at the performance in Q4.

Don and I have been joking here, we almost feel like we ran a six minute mile on the treadmill.

And our knee sort of hurt.

And so so we just want to take it step by step here and.

And really look at.

The various elements of the cost structure that.

We're even though we're already there we still have to keep optimizing it to make it a recurring thing.

Ricardo Rodriguez: And then, of course, the team continues to generate additional demand, and we'll continue increasing our demand over the next several years. But again, without giving up pricing, we really think that... The Pricing Lever is the main one driving our business model. I think Colin also needs to turn the wheel a little bit over to the energy industrial side.

So on the materials side.

We again like we're still budgeting for the 40% as a percentage of sales and while the 36% as a percentage of sales was favorable.

You always want to have a little bit of buffer there for in our case for inbound freight costs for example, right.

Then on on conversion costs I mean, we're not there yet right we're still about.

Ricardo Rodriguez: Also, I would anticipate that as we continue to convert over to the supplemental supply, that that will support the kind of gross margins that we and you expect here over the course of 2024 and the years to come. Do bravo, guys. Thanks so much.

But the run rate of Q4.

I'd say, we're still about 10 percentage points away from where we need to be.

And Theres also a buffer in there actually for expedited freight.

Which as we launch new programs, I mean, where potentially starting programs with two Oems here this year.

Ricardo Rodriguez: Thank you, and Ethan. This question comes from the line of Christopher of B Reilly. Your line is now open, please go ahead. Hey guys, thanks for taking my questions and congrats on all that progress on the gross margins. Maybe to kind of follow up on that, could you talk a bit about, you know, if you're already hitting your target model gross margins in the fourth quarter, like, what are the puts and takes between, you know, on the path to, you know, $650 million run rate? Are there any reasons we shouldn't expect continued improvements on the materials and conversion side? And, you know, are price downs kind of scheduled within that kind of, you know, path to that run rate? Like, what should we be thinking about with those puts and takes? Yeah, no, thanks, Chris.

And if you go back to our cost structure in 2021.

We're almost adding P&L that had that.

<unk>.

Pretty bad profit profile as you get ramped up.

Here this year or two to come in alongside the business that we have.

So for us.

While it would be great to assume that and think that we can continue running a six minute mile here on the treadmill and wed like to slow it down a little bit as we launch some of these programs.

<unk> with.

The nature of expediting things and the cost of being reactive here. When you are still in the launch phase even on some of the nameplates, where we have been supplying parts here for a couple of quarters now.

And.

And those are really the main ones rate. Then there is also this element of.

Labor costs, and there's a point in which you.

Ricardo Rodriguez: Look, I mean, if you look at the performance in Q4... Don and I have been joking here, we almost feel like we ran a six minute mile on the treadmill, and our knees sort of hurt. And so we just want to take it step by step here and really look at... Yo! the various elements of the cost structure, where even though we're already there, we still have to keep optimizing it to make it a recurring thing. And so on the material side. You know, we're still budgeting for 40% as a percentage of sales, and while 36% as a percentage of sales is favorable, you always want to have a little bit of buffer there for, in our case, for inbound freight costs, for example, right? Then on conversion costs, I mean, we're not there yet, right? We're still about at the run rate of Q4.

You break into a point, where your labor costs actually start being pretty well absorbed but then building up that next level of capacity could actually have the eco finding different types of labor that has a different cost structure and so we want to protect for that here as we as we plan for the year, but those are really the main elements it's really.

The the.

The cost of being able to react quickly to change that we want to factor into the profitability outlook without going into the year, assuming that we can run a six minute mile consistently.

I would also just to say that we the team the teams really across Aspen did a lot of the small things really well over the course of the quarter and really over the course of the year you heard me.

Ricardo Rodriguez: I'd say we're still about 10 percentage points away from where we need to be, and there's also a buffer in there for expedited freight, which as we launch new programs, I mean, we're potentially starting programs with two OEMs here this year. And if you go back to our cost structure in 2021, we're almost adding P&Ls that have that same, you know, pretty bad profit profile as you get ramped up here this year to come in alongside the business that we have. And so for us, the... Well, it would be great to assume that and think that we can continue running a six-minute mile here on the treadmill. We'd like to slow it down a little bit as we launch some of these programs, deal with the nature of expediting things and the cost of being reactive here when you're still in the launch phase, even on some of the nameplates where we've been supplying parts here for a couple of quarters now. And those are really the main ones, right?

References the gross margin progression, starting with 11% in Q1, and making our way all the way to 35%. So we did a lot of things.

Well in Q4 I agree with Ricardo.

Cautionary comments I do think the 35%.

We're certainly a confidence builder for us that we're going to be able to do this over over any period of.

Period of time, but perhaps with some variability there.

It also I mean don't get us wrong right I mean, if if the revenue shows up we actually have a little.

That actually it looks like a like a set of stairs.

And the first $50 million.

A good amount of that flows to the bottom line the.

The $50 million on top of that I mean at least 20% of that flows down to the the EBITDA line. So so we are pretty excited about the prospects of additional revenues and.

And that would obviously have us.

Then update our profitability estimates of that revenue starts to materialize.

Understood.

And then maybe just on.

Ricardo Rodriguez: And there's also this element of... labor costs. And there's a point in which you break into a point where your labor costs actually start being pretty well absorbed, but then building up that next level of capacity could actually have you go finding different types of labor that has a different cost structure. And so we want to protect that here as we plan for the year. But those are really the main elements.

The 10 additional Oems and additional program you talked about as far as you know over the next couple of years here.

Heres, how many have 2025 launches.

Whether any vehicles or platforms, you've previously been highlighting that you were testing a quoting have moved forward without Pearson.

What extent.

Are the opportunities getting posted.

<unk>.

2026 27 towards <unk>.

Ricardo Rodriguez: It's really the cost of being able to react quickly to change that we want to factor into the profitability outlook without going into the year assuming that we can run a six minute mile consistently. I would also just say that the teams across Aspen did a lot of the small things really well over the course of the quarter and really over the course of the year. You heard me reference the gross margin progression, starting with 11% in Q1 and making our way all the way to 35%. So we did a lot of things well in Q4. I agree with Ricardo's cautionary comments. I do think the 35% was certainly a confidence builder for us that we're going to be able to do this over any period of time, any length of time, but perhaps with some variability. And also, I mean, don't get us wrong, right?

Potential programs that are.

Seem to be shifting rather than kind of the more near term, but if you could just provide colorado on that overall.

Pipeline. Thanks.

Sure.

I referenced in my comments.

The one that we've talked about for some time.

<unk>, where we're where we've.

Reached all the milestones and this is a matter of negotiating.

Negotiating.

Final final terms, if you will and that announcement in terms of additional ones.

We are heavily engaged with.

With <unk>.

Additional Oems as they work through.

The timing of the development of their own platforms and.

We.

We believe that we will be.

Part of those platforms.

Don Young: I mean, if the revenue shows up, we actually have a little chart that actually looks like a set of stairs. And, you know, the first $50 million... A good amount of that flows to the bottom line. The $50 million on top of that, I mean, at least 20% of that flows down to the EBITDA line. So we are pretty excited about the prospects of additional revenue, and that would obviously have us, then update our profitability estimates if that revenue starts to materialize, understood that's really helpful and then maybe just on you know the 10 additional OEMs and additional programs you talked about as far as you know over the next couple years I'm curious how many have 2025 launches and whether any you know vehicles or platforms you've previously been highlighting that you were testing or quoting have moved forward without pyrothin and you know to what extent are you know the opportunities getting posted down like it's you know more of the kind of 2026, 2027, 2028 kind of you know potential programs that are you know seem to be shifting rather than kind of the more near-term but you know if you could just provide color on on that overall you know pipeline. Sure.

In terms of timing I think it's fair to say that.

The startup production four additional Oems.

More likely to be.

<unk> 2026 and 2025.

Honestly I think we have our hands full from a revenue demand point of view in 2024, and 2025, so that probably suits us quite well, we are not aware of or.

Say, losing a process to other other materials or other solutions.

And we think we have a we have an excellent.

Solution that addresses both.

The thermal management and the mechanical challenges associated with these with these.

Thermal barriers so we feel like we're in we're in good shape.

Yeah.

Thank you.

Our next question comes from the line of Eric Stine of Craig Hallum Your line.

Please go ahead.

Hi, Dan Hi, Ricardo.

So maybe.

Doing well thanks.

So maybe if we could just talk about 24, a little bit obviously, you've laid out a pretty it sounds like conservative baseline in some scenarios that are upside for the second half I know previously you had talked about a kind.

Don Young: Well, I referenced in my comments the sixth one that we've talked about for some time. Technically, we've reached all the milestones, and this is a matter of negotiating final terms, if you will, in that announcement. In terms of additional ones, we are heavily engaged with additional OEMs as they work through the timing of the development of their own platforms, and we believe that we will be part of those platforms. In terms of timing, I think it's fair to say that the start of production for additional OEMs is probably more likely to be. SOP 2026 and 2025.

Kind of.

Our goal or a $550 million revenue run rate.

With the expectation that you could hit that as early as third quarter of 24. Just curious if you have updated thoughts on that is that still the type of timeline, which is possible.

I think it is still possible but.

It's not really up to us frankly, I mean, I think we're ready to capture it.

Don Young: Quite honestly, I think we have our hands full from a revenue demand point of view in 2024 and 2025. So that probably suits us quite well. We are not aware of our competitors'... other materials or other solutions.

But it really depends more on our main customer here and.

It's still it's still a possibility.

We have we have the capacity in place to be able to do that.

Eric as we I.

I think one important.

Don Young: We think we have an excellent solution that addresses both the health and the safety of the population. Thank you. The thermal management and the mechanical challenges associated with these thermal barriers, so we feel like we're in good shape. Thanks. Our next question comes from the line of Eric Stine of Craig Callum. The line is now open; please go ahead.

Thing that we have.

<unk> voice today was this was this additional capacity from our east Providence facility for thermal barriers from from originally 400 to 500.

And again based really empirically on our productivity and yields that we're that we're experiencing today and then of course on top of that.

Is our supplemental supply that we targeted $150 million so.

Eric Stine: Hedon and Ricardo, www.circlelineartschool.com Subs by www.zeoranger.co.uk So, maybe... Hey, doing well, thanks. So maybe if we could just talk about 24 for a little bit. Obviously, you've laid out a pretty, what sounds like a conservative baseline and some scenarios that are upside for the second half. I know previously you had talked about a kind of a goal or a $550 million revenue run rate, with the expectation that you could hit that as early as third quarter 24. You know, just curious if you have updated thoughts on that. Is that still the type of timeline which is possible?

That ability to get out to a run rate of the.

550 <unk> site.

Even with additional capacity from there so.

We feel like we've sort of done our part and now we're in now where we are.

Sure.

We're doing everything we can to make our OEM successful.

Yes, no that makes sense.

And maybe for my second one this is just a follow up on a previous question you talked about the pricing.

Strength, you have especially in well in energy industrial because it's capacity constrained.

Ricardo Rodriguez: I think it's still possible, but it's not really up to us, frankly. I mean, I think we're ready to capture it, but it really depends more on our main customer here. And. It's still a possibility.

Is there a scenario.

That you are able to increase that I mean, maybe this is a question a couple of quarters from now but.

When you're at $1 50, I think in the past you've talked about you see demand in excess of $200 million a year. So just maybe thoughts on.

Ricardo Rodriguez: We have the capacity in place to be able to do that, Eric, as we, you know, I think one important thing that we've, we, we voiced today was this additional capacity, as you cite, even with additional capacity from there. So we feel like we've sort of done our part, and now we're doing everything we can to make our OEM successful. Yes. No, that makes sense.

How you think about that longer term.

Our team has a has a strong track record of increasing.

Prices and associated with the value that we're bringing to those to those end users.

Eric Stine: And maybe for my second one, this is just a follow-up on a previous question. You talked about the pricing strength you have, especially in, well, energy industrial because it's capacity constrained. I mean, is there a scenario where you are able to increase that?

And so.

I think you will see us continue to test the market.

With.

With strong pricing.

I'm very pleased with with the arrangement that we that we have with our supplemental supply.

Don Young: I mean, maybe this is a question a couple quarters from now, but when you're at 150, I think in the past you've talked about, you know, you see demand in excess of 200 million per year. So just maybe thoughts on how you think about that longer term. Our team has a strong track record of increasing prices and associated with the value that we're bringing to those end users. And so.

Supporting our our cost structure, a pretty known cost structure, if you will and so.

As I said in my comments I think you will see.

Our energy industrial business.

Meet our expectations and I think it's got a lot of potential to continue to grow as well from that.

Don Young: I think you will see us continue to test the market with... with strong pricing. I'm very pleased with the arrangement that we have with our supplemental supply, supporting our cost structure, a pretty well-known cost structure, if you will. And so, as I said in my comments, I think you will see our energy industrial business meet our expectations, and I think it's got a lot of potential to continue to grow as well from that. You know, that sort of nominal $150 million baseline that we've created, both from a demand point of view and from a capacity point of view. Okay, that's great. Thank you. Our next question comes from the line of Alex Potter of Piper Sandler. Your line is now open; please go ahead.

That's sort of nominal $150 million baseline that we've that we've created.

Both from a demand point of view and from a capacity point of view.

Okay. That's great. Thank you.

Thank you. Thank you for your question comes from the line of Alex Potter Piper Sandler. Your line is now open. Please go ahead.

Excellent. Thanks.

Hi, guys.

One question on.

I guess incremental OEM to what extent.

Are they.

I guess, making orders contingent upon aspen opening additional capacity in Georgia or elsewhere, I know that historically some of these automotive suppliers get a little jittery when they have so.

So much reliance on a single plant.

Alexander Eugene Potter: Excellent, thanks. Hi guys, one question on incremental OEM. To what extent are they, I guess making orders contingent upon Aspen opening additional capacity in Georgia or elsewhere? I know that historically some of these automotive suppliers get a little jittery when they have so much reliance on a single plant. If a meteor strikes the Rhode Island facility, what happens to their supply chain? So to what extent is that factoring into conversations that you're having either with existing customers or additional ones? We don't see the same level of... sensitivity to the single supply sources, one would think. I mean, they are very concentrated on the cell and actually some of the raw materials throughout the rest of the battery value chain.

It's a meteor strikes the Rhode Island facility, what happens to their supply chain.

To what extent is that factoring into conversations that youre, having either with existing customers or additional ones.

I mean, we don't see the same level off.

Of sensitivity to the single supply sources, one would think I mean, they're very concentrated on.

On sales and actually some of the raw materials throughout.

The rest of the battery value chain.

But for Us I mean.

If and if an OEM is asking us about 2027.

<unk> percent that is being supplied out of Georgia and that gives customers a lot of comfort if you combine it with.

Rhode Island, and so right now in our selling efforts I think customers are just assuming that the Georgia plants will be there in 2027, and that's giving them the necessary comfort to commit.

Ricardo Rodriguez: But for us, I mean, We, if an OEM is asking us about 2027, we present that as being supplied out of Georgia. And that gives customers a lot of comfort if you combine it with Rhode Island.

I think Alex that sort of.

The area, where they are likely or I should say are pushing us a little bit is on the fabrication side, especially our European customers I think they would like us to shorten that.

Ricardo Rodriguez: And so right now, in our selling efforts, I think customers are just assuming that the Georgia plant will be there in 2027, and that's giving them the necessary comfort to come. I think, Alex, that sort of the area where they are likely or are, I should say, pushing us a little bit is on the fabrication side, especially our European customers. I think they would like us to shorten that part of the supply chain, if you will, and so as we win more and more European business. I think you may very well see us create a fabrication capability like the one we have in Mexico to serve that part of our that part of our market, or just build up more inventory in Europe, right? Exactly, yeah. For instance, the idea of setting up a storage and inspection facility.

Part of the supply chain, if you will and.

So as we as we win.

More and more European business.

Thank you may very well see us create a fabrication capability like the one we have in Mexico.

To serve that that part of our that part of our market.

Or just build up more inventory in Europe right exactly yes for instance, the idea of setting up a store.

Torridge and inspection facility.

At a neutral point.

Netherlands, Belgium.

In Europe.

Something that customers have been.

Okay with and it will probably take that step before looking at manufacturing in Europe.

Okay.

Ricardo Rodriguez: At a neutral point, you know, Netherlands, Belgium, in Europe is something that customers have been totally okay with, and we'll probably take that step before looking at manufacturing in Europe. OK. Good, that's helpful. And then maybe you mentioned talking about 2027 and beyond sourcing out of Georgia. Obviously, you're not going to be able to provide any incremental commentary on the DOE loan process.

That's helpful.

And then maybe.

You mentioned talking about 2027 and beyond sourcing out of Georgia.

Obviously, youre not going to be able to provide any incremental commentary on the deal you're born.

But one thing I am sort of interested in something thats come up in conversations with clients.

The election.

Again, maybe hard to predict but to what extent, let's say that alone isn't finalized and the capital is not deployed prior to November.

Alexander Eugene Potter: But one thing I am sort of interested in something that's come up in conversations with clients is, you know, the election. Again, maybe hard to predict, but to what extent, let's say that the loan isn't finalized and the capital is not deployed prior to November, and then who knows how things happen in November, but assuming you have a less, maybe DOE-friendly, administration coming in in November, to what extent does that affect things? Your, I guess, the DOE loan at risk.

And then who knows how things happen in November, but assuming you have a less maybe doa friendly administration coming in in November to what extent does that put.

I guess the daily long at risk.

We're working very hard to do it in a timeframe.

That.

Brings us and there are no assurances here, but brings us.

Two.

Conditional approval and and final terms and and at that point that money.

Don Young: We're working very hard to do it in a time frame that brings us, and there are no assurances here, but brings us to conditional approval and final terms, and at that point, the money is allocated from the DOE and wouldn't be reversed come a November election that might be less favorable toward these kinds of programs. So we're working hard and fast as possible on this, and I think again, as I said in my comments, the LPL Loan Programs Office is we're very engaged with them and their advisors, and again, it's no assurance of a final result, but we're in a really good position, we believe. Yeah, that that is worth highlighting. I mean, you know, once you get into this diligence phase and the term negotiation phase with the DOE. We've actually been very surprised at the speed at which the DOE moves. I mean, it's moving faster than a lot of the private investors that we encountered last year, right? Everybody is very actively engaged.

Is.

Is allocated.

From the.

From the Doe.

And wouldn't be reversed come November.

In November election that might be.

Less favorable towards these kinds of programs so.

So we're working hard and fast as possible on this one.

And I think again as I said in my in my comments.

The OPO.

Programs offices is we're very engaged with them and their advisors and again, it's no assurance.

<unk> of our final result, but but we're in really good position we believe.

Yes that is worth highlighting.

Once you get into this diligence.

And the term negotiation phase with the Doe.

We've actually been very surprised at the speed at which the dollar moves I mean, it's moving faster than a lot of the private investors that we were encountering last year right.

Everybody is very actively engaged we actually have to step up or a response to <unk> in many cases.

Ricardo Rodriguez: We actually have to step up our response speed to the DOE in many cases, and so we feel confident about the timing and where we are today. And Alex, you know, we're a good candidate. We have proven technology, we have customers, we have contracts. We're positive EBITDA as of the fourth quarter. Our projections are strong. We have two, two different businesses supporting the overall growth of our company, growth and profitability of our company.

And.

And so we feel confident about the timing.

Where we are today.

And Alex you were a good candidate.

We have proven technology, we have customers.

We.

We have contracts.

We're positive EBITDA as of fourth quarter.

Projections are strong we have to.

Two different businesses supporting the overall growth of our company growth and profitability of our company.

<unk>.

Don Young: We're a good candidate, I think, for this program. Perfect. Very helpful.

We're good we're a good candidate I think for this program.

Perfect very helpful. Thanks, guys.

Thomas Patrick Curran: Thanks, guys. Thanks. Our next question comes from the line of Tom Curran of Seaport Research Partners. Your line is now open, please go ahead.

Thanks, Rob.

Our next question comes from the line Tom Curran.

<unk> Research partners. Your line is now open. Please go ahead.

Ricardo Rodriguez: Good morning, guys. Um... At East Providence, you've just solved for what will unleash another... Good morning, good morning. So, you know, at East Providence, you've just solved for and will unleash another 20% of annual capacity. That's a considerable increase, and this is not the first time Aspen has unlocked significantly higher throughput and or yields there. Just theoretically, assuming Plant 1 remains dedicated to pyrithin, just how much more productive capacity could you potentially wring out of that facility?

Good morning, guys.

At East Providence, you just saw four will unleash another time.

Good morning, good morning.

So.

Providence, you just sell for and will unleash another 20% of annual capacity. That's a considerable increase and this is not the first time asking has unlocked significantly higher throughput and our yields there just theoretically assuming plant one remains dedicated to pirate than just how much more productive.

Capacity could you potentially bring out of that facility.

I think we're at the point, where it really depends more on the mix and who were producing parts for then.

Ricardo Rodriguez: I think we're at the point where it really depends more on the mix and who we're producing parts for than finding more... capacity through improving the yields, increasing the line speeds, introducing longer roll lengths, etc., which the team is still continuing to work on. But I think- Yeah, above that $500 million annual revenue capacity level. I think if we're producing some of the thinner material, for a broader set of customers, there's potential for additional capacity. But there, we need the mix to work in our favor.

And then finding more.

Capacity through improving the yields increasing the line speeds introducing longer roll lengths et cetera, which the team is still continuing to work on but I think.

Yes.

Above that $500 million.

Annual revenue capacity level, I think if we're producing some of the thinner material.

For a broader set of customers theres potential for.

Additional capacity, but there we sort of need the mix to work in our favor.

Don Young: But then again, I think our team has been really incredible at coming up with a couple of breakthroughs here, particularly in improving our yield, and we're still working on that so... So, it's a bit of a balance, but I do feel much less conservative around the latest capacity assessment than when we were calculating the $400 million a year ago. We've made some capital investments over the course of 2023 as we convert the three lines in East Providence one at a time from optimized around energy industrial to optimized around EV. And we still have a little bit more of that to do. But again, the team has done an excellent job on this.

But then again I mean I think.

Our team has been really incredible at coming up with a couple of breakthroughs here.

Particularly in improving our yields.

And.

And we're still.

Okay.

Working on that so.

So.

It's a bit of a balance, but I do feel much.

Much less conservative around the latest capacity assessment than when we were calculating the $400 million a year ago.

We made some capital investments over the course of 2023 as we as we convert the three lines in East Providence, one at a time from from <unk>.

<unk> optimized around energy industrial to optimized around EV, and we still have a little bit more of that.

To do but again the team has done in.

An excellent job.

Ricardo Rodriguez: And as Ricardo says, we feel confident in what we talked about today. And also, as Ricardo said, I think what you'll see from here is more incremental than the big 20% chunk that we talked about earlier. Got it. And I mistakenly said 20%. I think it's actually 25%, right? So it's even more impressive, and and and then, uh, yeah, you know. Right? Yeah, we don't. We don't want to undercut what your team has achieved again.

On this.

Ricardo says, we feel confident in what we talked about today.

And also as Ricardo said I think what Youll see from here.

As more incremental than than a big 2020% jump that you that we've talked about earlier today.

Got it.

I mistakenly say, 20% think it's actually 25% right so even even more impressive.

And and then.

Yes.

Right now we don't want to undercut what your team has achieved.

Again.

Thomas Patrick Curran: Very impressive. And then based on GM's current Ultium production guidance and sales targets for 2024, so not your internal discounted baseline, but their actual bounded plans. And then the resultant expected nameplate mix.

Very impressive and then based on Gm's current LTM production guidance and sales targets for 2024, so they're not your internal discounted baseline, but their actual bounded plans.

And then the resulting expected nameplate mix.

Ricardo Rodriguez: Ricardo, what is the weighted average range for CPV that you'd expect to realize for the ULTIUM sales this year? About $900, right? $902,000 a vehicle.

What is the weighted average range for for CPB that you'd expect to realize for <unk> sales this year.

About $900 right.

900 to $1000 a vehicle.

Ricardo Rodriguez: Right, and that would be like the weighted average midpoint of their range, or will not, do not expect it to really vary. I mean, it could vary more to the upside, frankly. It does seem like some of the larger battery pack models will probably be built first, but we kind of need to wait and see that. All right, thanks for taking my questions and all the helpful comments. Thanks so much, Anita. Our final question comes from Amit Dayal of HC Wainwright. Your line is now open, please go ahead. Hi guys, just one question on the CapEx plans. Is any of that dependent on the DOE loan coming through, or is that sort of baked into your cash flows, cash flow assumptions, etc.

Right.

It would be like the weighted average midpoint.

<unk>.

Our range.

We do.

Not really hearing it takes.

The IHS.

Okay.

I mean, it could vary more to the upside frankly, it does seem like some of the larger battery pack models will probably be built first.

But we kind of need to wait and see that.

Understood.

Alright, Thanks for taking my question, Ken all the helpful color.

Thanks, so much anytime.

Our final question comes from Amit fail.

H C. Wainwright. Your line is now open. Please go ahead.

Hey, guys just one question on the Capex bonds.

Any of that dependent on the daily loan coming through or is that sort of baked into your.

Cash flows or cash flow assumptions et cetera already.

Ricardo Rodriguez: Already? No, what we've communicated is what we would spend without the DOE's potential funding. If the DOE's funding materializes, then we would be basically plotting the..., the re-acceleration of the construction, and that has a different spend profile for the second half of the year. Okay, which we're assessing right now, but it would look a lot like the trajectory that we were on before we decided on the

No what we've communicated is what we would spend without the.

Potential funding.

If it's.

If the Doe funding materializes, then we would be basically plotting the.

The reacceleration of the construction and that has a different spend profile for the second half of the year.

Okay.

Which one are selling right now, but it would look.

Like the trajectory that we were on.

Before we decided to write down the plant.

Regarding our banking requirements.

Ricardo Rodriguez: Thank you, Ricardo. Thank you. As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Don Young for closing remarks. Thank you, Candice, for your help today. I'm. We appreciate your interest in Aspen Aerogels and look forward to reporting to you our first quarter 2024 results in early May.

Keith.

I'll start with no additional questions waiting at this time I'd like to hand, the conference call back over to Daniel for closing remarks.

Thank you Candice for your help today.

We.

Appreciate your interest in Aspen, Aerogels and look forward to reporting to you. Our first quarter 2024 results in early may be well have a good day. Thank you.

Don Young: Be well. Have a good day. Thank you. Ladies and gentlemen, thank you for joining us on today's conference call. Have a great rest of your day. You may now disconnect your line. Be sure to subscribe for more.

Ladies and gentlemen, thank you for joining us on today's conference call have a great rest of your day you may now disconnect your line.

Yeah.

[music].

Sure.

[music].

Your line.

Q4 2023 Aspen Aerogels Inc Earnings Call

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