Q1 2024 Aspen Aerogels Inc Earnings Call

Operator: Good morning, and thank you for attending the Aspen Aerogels Inc. Q1 2024 financial results. All lines will be muted during the presentation portion of the call, with the opportunity for questions and answers at the end.

Good morning, and thank you for attending the Aspen Aerogels, Inc. Q1, once each when people will find out the results call all lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end I'd now like to turn the conference over to your host nail bar enough speed.

Operator: I'd now like to turn the conference over to your host, Neal Baranosky, Aspen Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You may now proceed, Mr. Baranosky. Thank you, Chach.

Speaker Change: Been seniors alright, so head of Investor Relations and corporate trustee. Thank you even now May proceed Mr. Baranovsky.

Neal Baranosky: Good morning, and thank you for joining us for Aspen Aerogel's first quarter 2024 financial results conference call. With us today are Don Young, President and CEO, and Ricardo Rodriguez, Chief Financial Officer and Treasurer. There are a few housekeeping items that I would like to address before turning the call over to Don.

Neal Baranosky: Thank you Chad.

Neal Baranosky: Morning, and thank you for joining us for Aspen Aerogels first quarter 2024 financial results Conference call.

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

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

Neal Baranosky: The press release announcing Aspen's financial results and recent 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 slide deck that will You can find the deck in the investors section of our website.

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

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

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

Neal Baranosky: On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the disclaimer statements on pages 1 and 2 of the slide deck, as 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.

Speaker Change: 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.

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

Speaker Change: 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.

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

Speaker Change: 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.

Neal Baranosky: These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures are included in yesterday's press release. 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, we expect that our Section 16 officers will file Forms 4 to report the sale and or withholding of shares in order to cover the payment of taxes and or the exercise price of options.

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

Speaker Change: I'd also like to note that from time to time in connection with the vesting or pending exploration of restricted stock units <unk> stock options issued under our long term equity incentive program. We expect that our section 16 officers will file a form four to report the sale Andrew withholding of shares in order to cover the payment of taxes Andrew.

Speaker Change: The exercise price of options.

Neal Baranosky: Please note that immediately after the filing of our Form 10-Q for the first quarter, we will also be filing a resale registration statement on Form S-3 to cover the Aspen securities held by Wood River Capital, LLC, an affiliate of Koch Industries Inc., and our largest shareholder. The purpose of this is to consolidate shares covered by prior resale registration statements filed for affiliates of Koch and other Aspen securities previously purchased by affiliates of Koch. This does not represent a change in the amount or form of the Koch Affiliate's current equity interest in Aspen.

Speaker Change: Please note that immediately after the filing of our Form 10-Q for the first quarter. We will also be filing a resale registration statement on form S. Three to cover the Aspen Securities held by Wood River capital LLC, an affiliate of Koch Industries, Inc, and our largest shareholder the.

Speaker Change: The purpose of this is to consolidate shares covered by prior resale registration statements filed for affiliates of Coke and other Aspen Securities previously purchased by affiliates of Coke.

Speaker Change: It does not represent a change in the amount or form.

Speaker Change: Coke affiliates current equity interest in Aspen.

Neal Baranosky: As is typical with any resale S3, we do not know when, if, or in what amounts Coke may offer securities for sale in the future. Lastly, I want to call out a few near-term IR engagements. Next Thursday, May 9th, Don Ricardo and I will be hosting one-on-one investor discussions at the Oppenheimer 9th Annual Emerging Growth Conference being held virtually. Additionally, on May 21st, Don Ricardo and I will host one-on-one investor discussions at T.D. Cowan's Virtual Second Annual Sustainability Week. This event will also include a fireside chat with Don Ricardo on May 21st from 945 to 1015 a.m. EST.

Speaker Change: As is typical with any resale S. Three we do not know when if we're in what amounts Coke may offer securities for sale in the future.

Speaker Change: Lastly, I want to call out a few near term IR engagements next Thursday may 9th Don Ricardo and I will be hosting one on one investor discussions at the Oppenheimer Oppenheimer ninth annual emerging growth conference being held virtually.

Speaker Change: Additionally, on May 21st Don Ricardo and I will host one on one investor discussions at TD <unk> virtual second annual sustainability week. This.

Speaker Change: This event will also include a fireside chat with Don and Ricardo on May 20, <unk> from $9 45 to 10 15, a M E S T.

Neal Baranosky: On May 22nd through May 23rd, Don, Ricardo, and I will host one-on-one investor discussions in Los Angeles, California at the B. Reilly 24th Annual Institutional Investor Conference. And lastly, on June 25th through June 27th, Ricardo and Don will host one-on-one investor discussions in London at the 10th Annual Roth London Conference. I'll now turn the call over to Don. Thanks, Neal.

Speaker Change: On may 22nd through May 23rd Don Ricardo I will host one on one investor discussions in Los Angeles, California at the B Riley 24th annual institutional Investor Conference and lastly on June 25th through June 27th Ricardo and Don will host one on one investor discussions in London at the 10th annual Roth, London Conference I will now.

Speaker Change: Turn the call over to Don Don.

Donald R. Young: Thank you for joining us for our Q1 2024 earnings call. My comments will focus on our Q1 performance, our 2024 full-year outlook, and provide the status and expected impact of several critical elements of our strategy. Ricardo will dive deeper into our financial performance and outlook and our business strategy. We will conclude with a Q&A session.

Don: Thanks, Neil good morning, everyone. Thank.

Don: Thank you for joining us for our Q1 2024 earnings call Bye.

Don: My comments will focus on our Q1 performance our 2020 for full year outlook and provide the status and expected impact of several critical elements of our strategy.

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

Don: We operated very well in Q1, the strong execution leveraged and extended the momentum that we built throughout 2023.

Donald R. Young: The strong execution leveraged and extended the momentum that we built throughout 2023. The performance is reflected in the Q1 financial results and in the raised 2024 revenue and adjusted EBITDA outlook. In fact, we now anticipate net income will be positive for the year.

Don: The performance is reflected in the Q1 financial results and in the raised 2020 for revenue and adjusted EBITDA outlook.

Don: In fact, we now anticipate net income will be positive for the year.

Donald R. Young: Overall, revenue grew from $61 million in Q3 2023 to $84 million in Q4 2023 and now to nearly $95 million in Q1. EV Pyrothin thermal barrier revenue grew from $7 million in 2021 to $56 million in 2022 to $110 million in 2023, and we are now poised to more than double pyrothin thermal barrier revenue in 2024. The year-long capacity constraint that hampered our energy industrial business is being successfully addressed through our supplemental supply.

Don: Overall revenue grew from $61 million in Q3 2023.

Don: To $84 million in Q4, 2023, and now to nearly $95 million in Q1.

Don: EV paraffin thermal barrier revenue grew from $7 million in 2000 $21 million to $56 million.

Don: In 2022.

Don: To $110 million in 2023, and we are now poised to more than double pirate than thermal barrier revenue in 2024.

Don: The year long capacity constraint that hampered our energy industrial business is being successfully addressed through our supplemental supply.

Donald R. Young: Our external manufacturing facilities supplied 10% of our energy industrial revenue in Q4 2023 and 50% in Q1 2024. We anticipate that the percentage will grow to approximately 80% in Q2 and be near 100% for the second half of 2024. The transition to the external manufacturing facility supports strong gross margin expansion. We believe we have the demand and the supply to reach at least $150 million of energy industrial revenue with gross margins exceeding our 35% target.

Don: Our external manufacturing facilities supply, 10% of our energy industrial revenue in Q4, 2023, and 50% in Q1 2024.

Don: We anticipate that the percentage will grow to approximately 80% in Q2 and be near 100% for the second half of 2024.

Don: The transition to the external manufacturing facility supports strong gross margin expansion.

Don: We believe we have the demand and the supply.

Don: To reach at least $150 million of energy industrial revenue with gross margins exceeding our 35% target.

Donald R. Young: While we drove strong top-line growth in Q1, we believe the profitability metrics for the company overall are even more impressive. The gross margin over the past five quarters has expanded from 11% to 17% to 23% to 35% and now to 37%.

Don: While we drove strong topline growth in Q1, we believe the profitability metrics for the company overall are even more impressive.

Don: The gross margin over the past five quarters has expanded from 11% to 17% to 23% to 35% and now to 37%.

Donald R. Young: Comparing Q1 2024 to Q1 2023, revenue increased by approximately $49 million, and adjusted EBITDA improved by nearly $27 million, dropping 55% of incremental revenue to the adjusted EBITDA line. These results leverage growth through efficient operations and OPEX cost controls, and we believe demonstrate the power of our business model. The results and momentum have also given us the confidence to boost our 2024 revenue outlook by $30 million to at least $380 million and our 2024 adjusted EBITDA outlook by $25 million to at least $55 million.

Don: Comparing Q1 2024 to Q1 2023 revenue increased by approximately $49 million and.

Don: <unk> EBITDA improved by nearly $27 million.

Don: Dropping 55% of incremental revenue to the adjusted EBITDA line.

Don: These these results leverage growth through efficient operations and Opex cost controls and we believe demonstrate the power of our business model.

Don: The results and momentum have also given us the confidence to boost our 2020 for revenue outlook by $30 million to at least $380 million and our 2024 adjusted EBITDA outlook by $25 million.

Don: To at least $55 million.

Donald R. Young: These outlook numbers are baseline numbers, and we believe we have an opportunity to exceed them. Our strong start to 2024 bodes well for additional outstanding results, including here in Q2. We also believe that we are on a direct path to utilizing our current capacity and supply arrangements to realize our interim target of $650 million in revenue, $230 million in gross profit, and $160 million in adjusted EBIT dollars. We are executing three key elements of our strategy that are important to our top line and profitability goals. First, the full conversion of Plant 1 in East Providence, Rhode Island, to support the growth of the Pyrethin Thermal Barrier Business.

Don: These outlook numbers, our baseline numbers and we believe we have an opportunity to exceed them.

Don: Our strong start to 2024 bodes well for additional outstanding results, including for here in Q2.

Don: We also believe that.

Don: That we are on a direct path to utilizing our current capacity and supply arrangements to realize our interim target of $650 million in revenue.

Don: $230 million in gross profit and $160 million in adjusted EBITDA.

Donald R. Young: Second, the transition to our external manufacturing facility to support the growth of the energy industrial business. And third, the operating performance that reinforces the financial flexibility and strength necessary to achieve our interim and long-term targets. The full conversion of Plant 1 to pyrithin thermal barrier production is proceeding well.

Don: We are executing three key elements of our strategy that are important to our top line and profitability goals.

Don: <unk>.

Don: The full conversion of plant one in East Providence, Rhode Island to support the growth of the pirates in thermal barrier business.

Don: The transition to our external manufacturing facility to support the growth of the energy industrial business.

Don: Third the operating performance that reinforces the financial flexibility and strength necessary to achieve our interim and long term targets.

Don: The full conversion of plant one to pirate than thermal barrier production is proceeding well base.

Donald R. Young: Based on current productivity and yields from Plant 1 and from our Mexico-based assembly plants, we believe annual revenue capacity for pyrothin thermal barriers to be at least $500 million. The Commercial Development Activity for Pyrothin Thermal Barriers remains robust. During Q1, we invoiced specific prototype parts to nearly 20 different OEM programs, signaling deep engagement with these potential customers. We believe we will add additional design awards to our roster during 2024 as OEMs finalize their respective battery plans.

Don: Based on current productivity and yields from plant one and from our Mexico based assembly plants, we believe annual revenue capacity for paraffin thermal barriers to be at least $500 million.

Don: The commercial development activity for pirate <unk> thermal barriers remains robust.

Don: During Q1, we invoiced specific prototype parts to nearly 20 different OEM programs signaling deep engagement with these potential customers.

Don: We believe we will add additional design awards to our roster during 2024 as Oems finalized their respective battery platforms.

Donald R. Young: As described earlier, we believe the external manufacturing facility will supply nearly 100% of our product for the energy industrial business for the second half of 2025. Energy industrial activity remains strong across all regions and segments, including significant growth of cryogel products serving the LNG industry.

Don: As described earlier, we believe the external manufacturing facility.

Don: We will supply nearly 100% of our product for the energy industrial business for the second half of 2024.

Don: Energy industrial activity remained strong across all regions and segments, including significant growth of cryo gel products, serving the LNG industry.

Donald R. Young: We believe our energy industrial team will drive steady, long-term, and highly profitable growth for the country. Again, by utilizing existing assets and supply arrangements, we anticipate having an overall business that can achieve at least $650 million in revenue, which we believe can generate 35% gross margins, 25% adjusted EBITDA margins, or over $160 million in adjusted EBITDA. Given that we have recorded gross margins at or above 35% in recent quarters, we believe this level of performance is well within reach.

Don: We believe our energy industrial team will drive steady long term and highly profitable growth for the company.

Don: Again by utilizing existing assets and supply arrangements, we anticipate having an overall business that can achieve at least $650 million in revenue, which we believe can generate 35% gross margins 25 percentage adjusted EBITDA margins or over 160.

Don: <unk>.

Don: And adjusted EBITDA.

Don: Given that we have recorded gross margins at or above 35% in recent quarters. We believe this level of performance is well within reach.

Donald R. Young: In terms of financial strength and flexibility, we finished Q1 with over $100 million in cash, and with the momentum from the recent operating performance, we now anticipate for the full year 2024 at least $55 million of adjusted EBITDA and positive net income. As we plan for revenue beyond $650 million, we are focused on our second aerogel manufacturing facility in Georgia, which will add approximately $1.2 billion of revenue capacity by 2027. Several months ago, 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 one of the key drivers for restarting the construction of Plant 2.

Don: In terms of financial strength and flexibility, we finished Q1 with over $100 million in cash and with the momentum from the recent operating performance. We now anticipate for the full year 2020 for at least $55 million of adjusted EBITDA and.

Don: Positive net income.

Don: As we plan for revenue beyond $650 million, we are focused on our second aerogel manufacturing facility in Georgia, which will add approximately $1 $2 billion of revenue capacity by 2027.

Don: Several months ago, we announced that the U S Department of energy loan programs office invited Aspen into the formal due diligence in term sheet negotiation stage of the process.

Don: This loan application is one of the key drivers for restarting the construction of plant two.

Ricardo C. Rodriguez: While the DOE's invitation to the formal due diligence stage is not an assurance that the DOE will issue a conditional commitment, we remain deeply engaged with the LPL and its advisors and continue to believe that we are a strong candidate to partner in this program. We anticipate providing the next update on this subject no later than our Q2 2024 earnings call. Ricardo, over to you.

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

Don: We anticipate providing the next update on this subject no later than our Q2 2024 earnings call.

Don: <unk> over to you.

Ricardo C. Rodriguez: Thank you, Don, and good morning, everyone. I'll start by covering our first quarter results before walking you through the rationale behind our updated outlook for the rest of 2024. I'll begin on slide four with our revenues. We delivered $94.5 million in revenue in Q1, which translates into 107% growth year over year and 12% growth quarter over quarter. This was an all-time company quarterly record and reflects an annual run rate of $378 million, which is already higher than our $350 million revenue guidance of 2024 called for, and it was achieved by prioritizing aerogel production in Rhode Island for thermal barrier production and operating our part assembly plants in Mexico on a schedule that enabled higher productivity. Our energy industrial revenue was $29.1 million, a decrease of 14% year-over-year and a 7% decrease

Don: Thank you Donna and good morning, everyone I'll start by covering our first quarter results before walking you through the rationale behind our updated outlook for the rest of 2024.

Ricardo C. Rodriguez: $14.6 million was delivered through our external manufacturing facility, which has ramped up meaningfully and is now qualified to produce 85% of our revenue mix. We are not concerned by this temporary squeeze in supply and still expect to deliver over $150 million of revenues in 2024 in this segment. As we previously mentioned, our energy business is sold out.

Speaker Change: I'll begin on slide four with our revenues, we delivered $94 $5 million of revenue in Q1, which translates into 107% growth year over year, and 12% growth quarter over quarter.

Ricardo C. Rodriguez: And even though the Q1 EV thermal barrier demand squeezed supply for this segment more than expected, our business is now geared in a way where revenue in either segment is just as accretive to gross profit. EV thermal barrier revenue of $65.4 million was up 459% year-over-year and 24% quarter-over-quarter, reflecting consistent volumes for Toyota, an accelerating volume in GM's production of Altium platform-based electric vehicles, along with the launch of production parts for Scania. Next, I'll provide a summary of our main expenses. Material expenses of $28.1 million for the quarter made up 30 percent of sales.

Speaker Change: This was an all time company quarterly record and reflects an annual run rate of $378 million.

Speaker Change: This is already higher than our $350 million revenue guidance of 2024 called for and.

Speaker Change: It was achieved by prioritizing aerogel production in Rhode Island for thermal barrier production and operating our part assembly plants in Mexico on a schedule that enabled higher productivity.

Speaker Change: Our energy industrial revenue was $29 1 million a.

Speaker Change: A decrease of 14% year over year, and a 7% decrease quarter over quarter.

Speaker Change: $14 $6 million was delivered through our external manufacturing facility, which has ramped up meaningfully and it's now qualified to produce 85% of our revenue mix.

Speaker Change: We are not concerned by this temporary squeeze in supply and still expect to deliver over $150 million of revenues in 2024 in this segment.

Speaker Change: As we previously mentioned our energy business is sold out.

Speaker Change: And even though the Q1 EV thermal barrier demand squeeze supply for this segment more than expected. Our business is now geared to Norway, where revenue in either segment, it's just as accretive to gross profit.

Speaker Change: EV thermal barrier revenue of $65 $4 million.

Speaker Change: Was up 459% year over year, and 24% quarter over quarter.

Speaker Change: <unk>, the consistent volumes for Toyota and accelerating volume in Gm's production of all <unk> platform based electric vehicles, along with the launch of production parts for Scania.

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

Speaker Change: Material expenses of $28 1 million for the quarter made up 30 percentage points of sales at.

Ricardo C. Rodriguez: A three percentage point improvement, quarter over quarter. We continue to be pleasantly surprised here as our team continues managing these costs in an environment where although the cost of some raw materials provides relief, the logistics of feeding our value chain continue to get more complicated. We remain vigilant with the goal of ensuring that we can keep these below 40 percentage points of sales reliably and prefer to continue planning with this as our target or long-term North Star.

Speaker Change: A three percentage point improvement quarter over quarter.

Speaker Change: We continue to be pleasantly surprised here as our team continues managing these costs in an environment, where although the cost of some raw materials provides relief the logistics of feeding our value chain continue getting more complicated.

Speaker Change: We remain vigilant with the goal of ensuring that we can keep these below 40 percentage points of sales reliably and preferred to continue conservatively planning with this is our target or long term North star.

Ricardo C. Rodriguez: Conversion costs, which we describe as all production costs required to convert raw materials into finished goods, were $31.2 million, or 33 percentage points of sales in Q1. These costs include all elements of direct labor, manufacturing overhead, factory supplies, rent, insurance, utilities, process logistics, quality, and inspection.

Speaker Change: Conversion costs, which we describe as all production costs required to convert raw materials into finished goods were up $31 2 million or <unk> 33 percentage points of sales in Q1.

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

Ricardo C. Rodriguez: These results reflect a slight increase compared to conversion costs in Q4 of last year, which were 31 percentage points of sale. This is mostly due to product mix, as the portion of these costs for EV thermal barriers is higher than it is for our energy industrial products. As previously mentioned, our long-term target for these costs at a meaningfully higher revenue run rate is 20 to 25 percentage points of sale. So we aren't done managing.

Speaker Change: These results reflect a slight increase compared to conversion costs in Q4 of last year, which were 31 percentage points of sales.

Speaker Change: This is mostly due to product mix as the portion of these costs and EV thermal barriers is higher than it is in our energy industrial products.

Speaker Change: As previously mentioned our long term target for these costs at a meaningfully higher revenue run rate of.

Speaker Change: 20% to 25 percentage points of sales. So we arent done managing these the continuation of our work increasing the uptime of our equipment in Mexico, introducing further automation at a faster pace along with some recent upgrades in aerogel production is paying off and we still got more opportunity for.

Ricardo C. Rodriguez: The continuation of our work increasing the uptime of our equipment in Mexico, introducing further automation at a faster pace, along with some recent upgrades in aerogel production, is paying off, and we've still got more opportunity for improvement. Our operations team is not done rightsizing our manufacturing fixed cost structure, so this is where we can continue scaling more efficiently. In Q1, company-level gross profit margins were 37%, and our gross profit was $35.1 million.

Speaker Change: Movement are.

Speaker Change: Our operations team has not done right sizing our manufacturing fixed cost structure. So this is where we can continue scaling more efficiently.

Speaker Change: In Q1 company level gross profit margins were 37% and our gross profit of $35 $1 million is the $31 million improvement over gross profit of $5 1 million during the same quarter last year.

Ricardo C. Rodriguez: It's a $30.1 million improvement over our gross profit of $5.1 million during the same quarter last year. Our energy industrial segment delivered $11.6 million of gross profit, or a 30% year-over-year increase on lower revenue, and EV Thermal Barriers delivered $23.6 million of gross profit in Q1. If we compare this quarter with Q4 of last year, our EV thermal barrier gross profit improved by $3.8 million on incremental revenue of $12.8 million. This incremental fall-through would have been better without a few one-time charges of obsolete inventory and equipment related to customer-driven engineering changes that we implemented in the corridor.

Speaker Change: Our energy industrial segment delivered $11 6 million of gross profit or 30% year over year increase on lower revenues and.

Speaker Change: And EV thermal barriers, we delivered $23 $6 million of gross profit in Q1.

Speaker Change: If we compare this quarter with Q4 of last year, our EV thermal very gross profit improved by $3 $8 million, an incremental revenue of $12 8 million.

Speaker Change: This incremental fall through would have been better without a few one time charges of obsolete inventory and equipment related to customer driven engineering changes that we implemented in the quarter.

Speaker Change: The benefit of those changes in the anticipated reimbursement from customers on that.

Speaker Change: A significant portion of these charges will.

Speaker Change: We will likely be reflected later in the year.

Ricardo C. Rodriguez: The benefit of those changes and the anticipated reimbursement from customers on a significant portion of these charges will likely be reflected later in the year. However, at this time last year, our EV thermal barrier segment still operated at a gross loss of $3.8 million on $11.7 million of revenue.

Speaker Change: At this time last year, our EV thermal various segments still operated at a gross loss of $3 8 million, an $11 $7 million of revenue.

Ricardo C. Rodriguez: Now that we ran it at a $65.4 million quarterly revenue run rate, the comparison to $23.6 million of gross profit in Q1 2024 doesn't even seem relevant. The resulting gross profit margins during the quarter were 40% and 36% for our energy industrial and EV thermal barrier segments, respectively. Operating expenses, which are sized for our near-term projected annual revenue capacity of over $650 million, were $32.7 million in Q1.

Speaker Change: Now that we ran it at a $65 $4 million quarterly revenue run rate the comparison to $23 6 million of gross profit in Q1.

Speaker Change: Of 2024 doesn't even seem relevant.

Speaker Change: The resulting gross profit margins during the quarter were 40% and 36% for our energy industrial and EV thermal barrier segments, respectively.

Speaker Change: Operating expenses, which are sized for our near term projected annual revenue capacity of over $650 million, we're at $32 7 million in Q1.

Ricardo C. Rodriguez: It would actually have been down quarter over quarter instead of up by about $4.9 million without a couple of meaningful one-time items. The first one is $2.7 million, driven by our team developing the second generation of our automated encapsulation equipment for prismatic cells faster than we could install and launch the first generation, leading to a write-down of the first generation equipment. The second one is the $2.2 million cancellation of the Management's Restricted Performance Shares Award on March 6th of this year.

Speaker Change: These would have actually been down quarter over quarter instead of up by about $4 9 million without a couple of meaningful onetime items. The first one is $2 $7 million driven by our team developing the second generation of our automated encapsulation equipment for <unk> sales faster.

Speaker Change: We can install and launched the first generation leading to a write down of the first generation equipment.

Speaker Change: The second one is a $2 $2 million cancellation of the management's restricted performance shares award on March six of this year.

Ricardo C. Rodriguez: Without these two items, our OPEX would have been close to the $110 million annual OPEX run rate level that we've been communicating as our North Star and guideline for the gearing of our company. And we'll continue managing around this level opportunistically, increasing it as needed for performance pay, R&D opportunities, and to drive incremental demand only. Our team continues revisiting every key company process and implementing new systems with the intent of bolstering our capabilities, reducing fixed costs, and maintaining our OPEX at around this level in order to continue driving scale and efficiency.

Speaker Change: Without these two items, our opex would have been close to the $110 million annual Opex run rate level that we've been communicating as our north star and guideline and the gearing of our company.

Speaker Change: And we will continue managing around this level opportunistically, increasing it as needed for performance Bang R&D opportunities and to drive incremental demand only.

Speaker Change: Our team continues to revisiting every key company process and implementing new systems with the intent of bolstering our capabilities, reducing fixed costs and maintaining our opex at around this level in order to continue driving scale and efficiency.

Ricardo C. Rodriguez: Putting these elements together, our adjusted EBITDA was $12.9 million in Q1, compared to negative $13.9 million during the same period last year, resulting in a $24.5 million year-over-year reduction in our EBITDA loss. 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 In Q1, these adjustments were limited to $4.7 million in stock-based compensation.

Speaker Change: Putting these elements together, our adjusted EBITDA was $12 9 million in Q1 compared to negative $13 9 million during the same period last year.

Speaker Change: <unk> at $24 $5 million year.

Speaker Change: Year over year reduction in our EBITDA loss.

Speaker Change: 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.

Speaker Change: In Q1. These adjustments were limited to $4 7 million of stock based compensation $1 4 million of interest income and $3 5 million of interest and financing related expenses.

Ricardo C. Rodriguez: $1.4 million of interest income and $3.5 million of Interest in Financing-Related Expenses. Our net loss in Q1 decreased to $1.8 million, or $0.02 per share, versus a net loss of $16.8 million, or $0.24 per share, in the same quarter of 2023. Alternative Cash Flow and Our Balance Sheet. Cash used in operations of $17.7 million, reflected or adjusted EBITDA of $12.9 million, other non-cash charges of $5.2 million, interest income of $1.4 million, offset by cash used for working capital of $37.2 million.

Speaker Change: Our net loss in Q1 decreased to $1 8 million or <unk> <unk> per share versus a net loss of $16 8 million or <unk> 24 per share in the same quarter of 2023.

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

Speaker Change: Cash used in operations of $17 7 million reflected our adjusted EBITDA of $12 9 million other noncash charges of $5 2 million interest income of $1 4 million offset by cash used for working capital of $37 2 million.

Ricardo C. Rodriguez: 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, prepaid, and accrued expenses. Our capital expenditures during the quarter were $25.9 million.

Speaker Change: The key items that resulted in the usage of working capital, where an increase in accounts receivable and inventory offset by an increase in accounts payable prepaid.

Speaker Change: In accrued expenses.

Speaker Change: Our capital expenditures during the quarter were $25 $9 million.

Ricardo C. Rodriguez: These put our operating cash needs for the quarter at $43.6 million. As we work our way through Q2, we're focused on reducing our working capital needs and freeing up cash by reducing our raw material inventories in what is now a more stable procurement environment and staying on top of our accounts receivable. We actually reduced our raw material inventories by $5 million during the quarter, and there's an element of seasonality to working capital in our business as we prepare for the year's insurance costs and pay down our accrued expenses related to performance pay for the previous year in Q1.

Speaker Change: <unk> put our operating cash needs for the quarter at $43 6 million.

Speaker Change: As we work our way through Q2, we're focused on reducing our working capital needs and freeing up cash by reducing our raw material inventories and what is now more stable procurement environment and staying on top of our accounts receivable.

Speaker Change: We actually reduced our raw material inventories by $5 million during the quarter and there is some element of seasonality to working capital in our business as we prepay for the years to insurance costs and pay down our accrued expenses related to performance fee for the previous year in Q1.

Ricardo C. Rodriguez: In Q1, we spent $8.1 million slowly advancing progress to fully enclose all the main structures at Plant 2 and temperature control the main production area. To date, we have incurred $287.9 million in cumulative capital expenses through the end of the first quarter towards Plan 2 in Georgia to position the project for a potential restart of construction in the fourth quarter of 2024, and only spent $17.8 million on other CapEx that will enable the ramp-up here in the second half of 2024 and potentially 2025.

Speaker Change: In Q1, we spent $8 $1 million slowly advancing progress to fully enclosed all the main structures have plan to and temperature control. The main production area today.

Speaker Change: To date, we have incurred $287 9 million.

Speaker Change: And cumulative capital expenses through the end of the first quarter thoughts plans two in Georgia to position the project for a potential restart of construction in the fourth quarter of 2024.

Speaker Change: And only spent $17 8 million on other capex that will enable the ramp here of the second half of 2024 and potentially 2025.

Ricardo C. Rodriguez: Our financing activities in the quarter included the $5.3 million sale and leaseback of a range of assets in Rhode Island and our labs in the Boston area. We believe that there are opportunities to continue funding our CapEx in the U.S. in this way and are currently exploring options to fund our investments in Mexico in a similar fashion at a relatively attractive cost of capital. We ended the quarter with $101.5 million of cash and shareholders' equity of $488.9 million.

Speaker Change: Our financing activities in the quarter included the $5 3 million sale leaseback of a range of assets in Rhode Island, and our labs in the Boston area.

Speaker Change: Believe that there are opportunities to continue funding our capex in the U S. In this way and are currently exploring options to fund our investments in Mexico in a similar fashion at a relatively attractive cost of capital.

Speaker Change: We ended the quarter with $101 5 million of cash and shareholders equity of $488 $9 million.

Ricardo C. Rodriguez: We continue meaningfully working our way through the due diligence and term sheet negotiation phase with the U.S. Department of Energy's Loan Programs Office as part of our application to fund the remaining construction costs of Plan 2 through a loan pursuant to the DOE's Advanced Technology Vehicle Manufacturing, or ATVM, loan program. In the appendix, we have a graphic of the different phases of the DOE's application steps and details on the work streams that make up the due diligence and term sheet negotiation phase.

Speaker Change: We continue meaningfully 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 remaining construction cost of plan to throw a loan pursuant to the advanced technology vehicle manufacturing or ATV.

Speaker Change: <unk> loan program.

Speaker Change: In the appendix, we have a graphic of the different phases of the das application steps and details on the work streams that make up the due diligence in terms sheet negotiation phase.

Ricardo C. Rodriguez: We believe that understanding the structure in terms of this financial enables us to continue working in parallel to ensure that we're capitalized to fund a potentially faster than expected but very profitable near-term ramp up in our business. Our top-of-mind options include increasing our usage of capital leases, asset-backed loans, a revolving line of credit akin to what we had in 2022, and other relatively inexpensive debt options that are now available to us given the recent and expected near-term performance.

Speaker Change: We believe that understanding the structure in terms of this financing enables us to continue working in parallel to ensure that were capitalized to fund a potentially faster than expected with very profitable near term ramp in our business.

Speaker Change: Our top of mind options include increasing our usage of capital leases asset backed loans, our revolving line of credit akin to what we had in 2022 and other relatively inexpensive debt options that are now available to us given the recent and expected near term performance.

Ricardo C. Rodriguez: Now, I'll turn over to slide 5 and walk you through our thinking behind the updated outlook for the year. When we framed out our revenue outlook for 2024, we were running on limited information and the historical track record of our customers' ability to ramp up production in the prior year. Now that we are seeing an initial ramp, we expect General Motors to produce at least 200,000 EVs in 2024 and enable our EV thermal barrier business to deliver over $230 million of revenue in combination with Toyota, some initial Scania volumes, and prototype sales.

Speaker Change: Now I'll turn it over to slide five and walk you through our thinking behind the updated outlook for the year.

Speaker Change: When we framed out our revenue outlook for 2024, we were running on limited information and the historical track record of our customers' ability to ramp up production in the prior year.

Speaker Change: Now as we are seeing an initial ramp we expect general motors to produce at least 200000 Evs in 2024, and then enable our EV thermal barrier business to deliver over $230 million of revenue and <unk>.

Speaker Change: Combination with Toyota some initial scania volumes and prototype sales.

Ricardo C. Rodriguez: This acceleration of GM's revenues is likely to continue into Q2 and Q3, but it can very well settle in Q4, as the initial sell-through of Altium-based vehicles informs GM's production schedule. We've seen some investors attempt to connect our customer's volume plan to our revenue expectations. And we strongly advise against this, as there is a significant delay of weeks or even months for a finished EV thermal barrier part that we invoice customers for to end up in a produced vehicle. This delay is even longer for a sold vehicle.

Speaker Change: This acceleration of Gm's revenues is likely to continue into Q2 and Q3, but can very well settled in Q4 as the initial sell through of all time based vehicles informs gm's production schedules.

Speaker Change: We've seen some investors attempt to connect our customers' volume plants to our revenue expectations and we strongly advice against that there's a significant delay of weeks or even months for a finished EV thermal barrier part that we invoice customers for to end up in a produced vehicle.

Speaker Change: This delay is even longer for a sold vehicle.

Ricardo C. Rodriguez: We've added slide 11 in the appendix of this presentation to illustrate this, and we recommend that you study it and reach out to Neal if you have any questions. There's plenty of evidence that General Motors' established brands, with long-running customer loyalty, combined with the size and scope of its distribution scale, and the appeal of their recently launched nameplates, can drive over 200,000 units of EV sales in 2024. This is well below what we believe is GM's fair share of the EV market.

Speaker Change: We've added slide 11 in the appendix of this presentation to illustrate this and we recommend that you study it and reach out to Neil if you have any questions.

Speaker Change: There is plenty of evidence that general motors to established brands with long running customer loyalty.

Speaker Change: Bind with the size and scope of its distribution scale and the appeal of the recently launched nameplates can drive over 200000.

Speaker Change: Units of EV sales in 2024.

Speaker Change: This is well below what we believe is gms fair share of the EV market.

Ricardo C. Rodriguez: But nonetheless, we'll be monitoring dealer inventory levels to better inform our next guidance update and further frame up our view of what Q3 and Q4 demand could look like. For reference, on slide five, we have a chart that shows IHS's expectations for what GM's all-team production ramp looks like in 2024 to achieve an expected 279,000 units. While time will tell whether 279,000 units is the right production expectation for 2024, the distribution of volume across the four quarters of 2024 more closely matches our expectations.

Speaker Change: But nonetheless, we will be monitoring dealer inventory levels to better inform our next guidance update and further frame up our view of what Q3 and Q4 demand could look like.

Speaker Change: For reference in the center of Slide five we have a chart that shows IHS expectations for what Gms Alteon production ramp looks like in 2024 to achieve an expected 270 979000 units.

Speaker Change: Well time will tell whether it's 279000 units as the right production expectation for 2020 for the distribution of volume across the four quarters of 2024.

Ricardo C. Rodriguez: More closely matches our expectations.

Ricardo C. Rodriguez: Lastly, on the right side of slide 5, one can see how we expect the transition of supply from our external manufacturing facility within the energy industrial segment to occur. In the second half of 2024, we expect our aerogel plant in Rhode Island to mainly be focused on aerogel for EV thermal barriers. And with our external manufacturing facilities starting to deliver subsea products in Q2, we remain confident in our ability to deliver over $150 million of revenues in this segment. Turning over to slide 6.

Ricardo C. Rodriguez: Lastly on the right side of slide five one can see how we expect the transition of supply from our external manufacturing facility within the energy industrial segment to occur.

Ricardo C. Rodriguez: In the second half of 2024, we expect our aerogel plant in Rhode Island to mainly be focused on aerogel for EV thermal barriers and.

Ricardo C. Rodriguez: And with our external manufacturing facility is starting to deliver subsea products in Q2, we remain confident on our ability to deliver over $150 million of revenues in this segment.

Ricardo C. Rodriguez: Turning over to slide six.

Ricardo C. Rodriguez: Combining both segments results in a total revenue outlook of at least $380 million, which would again be a 59% year-over-year increase from our revenues in 2023 and then a 9% increase over our prior revenue baseline for 2024. In my mind, this translates into a 25% improvement in our year-over-year growth outlook. With this revenue baseline, we believe that we can deliver over $11 million of operating income in 2024, which, assuming DNA of around $30 million and stock-based compensation of $14 million, would translate into over $55 million of adjusted EBITDA.

Ricardo C. Rodriguez: Combining both segments results in the total revenue outlook of at least $380 million, which again would be a 59% year over year increase from our revenues in 2023, and the 9% increase over our prior revenue baseline for 2024.

Ricardo C. Rodriguez: In my mind this translates into a 25% improvement of our year over year growth outlook.

Ricardo C. Rodriguez: With this revenue baseline, we believe that we can deliver over $11 million of operating income in 2024, which assuming DNA of around $30 million in stock based compensation of $14 million, which translate into over $55 million of adjusted EBITDA. This is.

Ricardo C. Rodriguez: This is an 83% improvement over our prior baseline EBITDA outlook, demonstrating our ability to scale profitably without relying on outsized revenue growth. Our updated 2024 Evita Outlook continues considering 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.

Ricardo C. Rodriguez: And 83% improvement over our prior baseline EBIT outlook, demonstrating our ability to scale profitably without relying on outsized revenue growth.

Ricardo C. Rodriguez: Our updated 2020 for EBITDA outlook continues considering 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.

Ricardo C. Rodriguez: Cost freight costs, driven by the start stop nature of some of the nameplates and our thermal barrier demand.

Ricardo C. Rodriguez: 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. As we reintroduce the rest of our energy industrial products, a mix that includes these products will initially impact gross profit in this segment as well. On the flip side, if additional demand is truly there... We expect a disproportionate amount of it to flow to our bottom line, and our team will continue reducing our fixed costs, increasing our production yields, our uptime, and driving the right energy industrial pricing and mix.

Ricardo C. Rodriguez: We could also opportunistically decide that opex to continue advancing our R&D in key areas.

Ricardo C. Rodriguez: And accelerate the development of our technical sales capabilities and fund new program launches.

Ricardo C. Rodriguez: As we reintroduce the rest of our energy industrial products a mix that includes these products will initially impact gross profit in this segment as well.

Ricardo C. Rodriguez: On the flipside, if additional demand is truly there.

Ricardo C. Rodriguez: We expect a disproportionate amount of it to flow to our bottom line on our team will continue reducing our fixed costs, increasing our production yields our uptime and driving the right energy industrial pricing and mix.

Ricardo C. Rodriguez: Continuing with the rest of our 2024 outlook, $55 million of positive EBITDA would translate into net income of over $2 million, or $0.03 per share, assuming a share count of 76.5 million shares. Delivering positive net income is a meaningful milestone that motivates all of us at Aspen. Our CapEx, without including Plan 2, is expected to remain at $50 million for the year.

Ricardo C. Rodriguez: Continuing with the rest of our 2024 outlook $55 million of positive EBITDA would translate into net income of over $2 million or <unk> <unk> per share assuming a share count of $76 5 million shares.

Ricardo C. Rodriguez: Delivering positive net income is a meaningful milestone that motivates all of us at Aspen.

Ricardo C. Rodriguez: Our capex without including plant II is expected to remain at $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 a tooling to ramp up our production capacity in 2025.

Ricardo C. Rodriguez: 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. The team's ability to reduce the spend in Q1 reaffirms that the $30 million spend target here is still appropriate. On the right side of slide 6, before I hand the call back to Don...

Ricardo C. Rodriguez: 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 scientists 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 C. Rodriguez: The team's ability to reduce the spend in Q1 reaffirms that the $30 million spend target here is still appropriate.

Ricardo C. Rodriguez: On the right side of slide six before I hand, the call back to Don.

Ricardo C. Rodriguez: I think that it's worth pausing and taking stock of the operational and financial journey that our team has been on over the past 15 months. These basic metrics of revenue growth, gross margins, EBITDA, and operating income, which have to be up and to the right, are getting closer to where we need them to be. These results are driven by the consistent execution of a plan that was put in place at a fixed cost level in the fall of 2022 and at a capital investment level in the spring of last year.

Ricardo C. Rodriguez: I think that it's worth pausing and taking stock of the operational and financial journey that our team has been on over the past 15 months.

Ricardo C. Rodriguez: Basic metrics of revenue growth gross margins EBITDA and operating income that has to be up into the right or getting closer to where we need them to be these.

Ricardo C. Rodriguez: These results are driven by the consistent execution of our plan that was put in place at our fixed cost level in the fall of 2022 and at a capital investment level in the spring of last year.

Ricardo C. Rodriguez: Thanks to this, we are on a path where we can now scale revenues profitably, and the near-term outlook for 2024 is bright. Nonetheless, we remain cautious about the broader long-term industry dynamics while continuing to manage our costs and selectively optimizing our balance sheet. We remain highly motivated and energized by the idea of continuing to advance our level of sophistication as we make the most of the opportunity that we have in front of us. Without forgetting the most important of all things, our cost of capital.

Ricardo C. Rodriguez: Thanks to this we are on a path, where we can now scale revenues profitably and the near term outlook for 2024 is bright.

Ricardo C. Rodriguez: Nonetheless, we remain cautious about the broader long term industry dynamics, while continuing to manage our costs and selectively optimizing our balance sheet.

Ricardo C. Rodriguez: We remain highly motivated and energized by the idea of continuing to advance our level of sophistication as we make the most of the opportunity that we have in front of us.

Ricardo C. Rodriguez: We will do this.

Ricardo C. Rodriguez: Without forgetting the most important of all things are cost of capital.

Donald R. Young: And with that, I'm happy to hand the call back to Don. Thank you, everyone. Thank you, Ricardo. Before we move to Q&A, I would like to boast with modesty about two awards our team won earlier this week. We were presented the coveted Automotive News Pace Prize for our cell-to-cell thermal barrier products dedicated to battery safety and performance. Pyrothin is driving EV battery safety by combining thermal propagation protection and lifecycle mechanical performance.

Ricardo C. Rodriguez: And with that I'm happy to hand, the call back to dawn. Thank you everyone.

Don: Thank you Ricardo.

Donald R. Young: In addition, Aspen was honored with a Pace Innovation Partnership Award that recognizes our collaboration with General Motors in deploying our pyrothin cell-to-cell barriers as a thermal runaway solution for GM's Ultium battery platform. Automotive News' PACE program is recognized globally as the most prestigious innovation award for automotive suppliers, and we are deeply honored by this recognition. These awards highlight Aspen's rich history of customer collaboration and game-changing aerogel technology. All employees at Aspen had a hand in these achievements, and I want to salute the Aspen team here. Josh, let's turn to the Q&A. Thank you, Don. If you'd like to ask a question, please press star 431 on your telephone keypad. Change of Mind. Please press start.

Don: Before we move to Q&A I would like to boast with modest stay about two awards. Our team won earlier this week.

Operator: All right. In the interest of time, we ask that you limit your questions to two questions at a time. When preparing to ask your question, please ensure your device is unmuted locally.

Donald R. Young: We were presented the coveted automotive news pace price for our cell to cell thermal barrier products dedicated to battery safety and performance.

Josh: <unk> is driving EV battery safety by combining thermal propagation protection and lifecycle mechanical performance in.

Josh: In addition, Aspen was honored with a pace innovation partnership award that recognizes our collaboration with general Motors in deploying our pirate and cell to cell barriers as the thermal runaway solution for Gms OPM battery platform.

Operator: Automotive news pace program is recognized globally as the most prestigious innovation award for automotive suppliers and we are deeply honored by this recognition.

Operator: These awards highlight aspen's rich history of customer collaboration and game changing aerogel technology.

Operator: All employees at Aspen had a hand in these achievements and I want to salute the Aspen team here.

Josh: Let's turn to Q&A.

Josh: Thank you Dan.

Josh: If you'd like to ask a question. Please press star followed by one on your kind of thank you Pat now.

Josh: If you change your mind, Please press star one.

Operator: Yes.

Josh: In the interest of time, we ask that you limit your questions to your questions at this time.

Josh: Turning to ask a question. Please ensure your devices on muted lately.

Josh: If you have additional questions you're on the initial T. Please get back in the queue and we'll get to all questions.

Operator: If you have additional questions beyond the initial two, please get back in the queue, and we'll get to all questions. So the first question today comes from George Gianarikas from Canaccord. Please go ahead, George. Hey, good morning, everyone.

Josh: First question today comes from John <unk> from.

George Gianarikas: From Canaccord. Please go ahead George.

George Gianarikas: Thank you for taking my question. I'd like to ask about 2025, and when you expect to begin layering in new customers next year? What quarter?

George Gianarikas: Hey, good morning, everyone. Thank you for taking my question.

George Gianarikas: I'd like to ask about.

George Gianarikas: 2025, and when you expect to begin layering in.

George Gianarikas: New customers next year.

Donald R. Young: How should we expect that to kind of progress throughout the year? And also how have those discussions been going with your new wins? Thank you. Well, George, as I said in my comments, we're actively engaged and, in Q1 alone, provided and invoiced prototype parts for nearly 20 different OEM programs. So we're really active in the market today, and I think the gating item is the development of these OEM battery platforms themselves.

George Gianarikas: Or how should we expect that to kind of progress throughout the year and also how those discussions have been going with.

Donald R. Young: Your new wins thank you.

Donald R. Young: Georgia as I said in my.

Donald R. Young: My comments.

Donald R. Young: We are actively engaged in Q1 alone.

Donald R. Young: <unk>.

Donald R. Young: And Invoiced.

Donald R. Young: Prototype parts for.

Donald R. Young: Nearly 20 different OEM program. So we're really active in the market today and I think the gating item is that is the development of these Oems.

Donald R. Young: Battery platforms themselves.

Donald R. Young: <unk>.

Donald R. Young: And We're confident that we will continue to add to our roster of OEMs here through 2024. With respect to 2025, I think what you will see is that our focus will pay off on ramping up these awards that we have in hand today that we had in hand coming into 2024, and you'll see those beginning to scale in 2025. I think you know, anything that we are likely to win in 2024, additional awards, is more likely to begin scaling in the 2026 timeframe.

Donald R. Young: We are confident that we will continue to add to our our roster of of Oems here through 2024 with respect to 2025 I think what you will see is.

Donald R. Young: Our focus will pay off on ramping.

Donald R. Young: These.

Donald R. Young: Awards that we have in hand today that we have in hand coming into 2024 and that Youll see those beginning.

Donald R. Young: To scale in 2025.

Donald R. Young: So I think that sort of sequencing is a good way to think about how we continue to scale technology for multiple OEMs. Thank you. Maybe as a follow-up to focus on energy industrial, you talked a lot about how you're sold out, and you can accommodate $150 million in revenue. Do you have levers to increase that capacity?

Donald R. Young: I think you know anything that we are likely to win in 2024 additional awards.

Donald R. Young: Are more likely to begin scaling in the 2026 timeframe, so I think that.

Donald R. Young: Sort of sequencing is it is a good way to.

Speaker Change: To think about.

Speaker Change: How we.

Speaker Change: Continue to scale technology for multiple Oems.

Donald R. Young: Thank you and maybe as a follow up to focus on energy industrial you've talked a lot about how youre sold out you can accommodate a $150 million in revenue.

Speaker Change: Do you have levers to increase that capacity I mean, it seems to be.

George Gianarikas: I mean, it seems to be going well in China; you plan to increase the percentage of production there. Can you take that from 150 to 200, for example, over the next several quarters? Thank you. Thank you, George.

Donald R. Young: Going well in China.

George Gianarikas: The plan to increase the percentage of production there and could you take that from 150 to 200 for example over the next several quarters. Thank you.

Donald R. Young: I was just in China with our team there a couple of weeks ago and I'm impressed by the speed at which our external manufacturing facility has ramped up, and I would say that we do have the capability of growing that business through that supply beyond $150 million that we talked about earlier, and there is space and capability within the facility there to continue to expand that and, you know, reach that $200 million run rate level that you referenced out over the course of several quarters But we're sort of filling that supply chain now, and I can tell you our energy industrial team is really happy to have product flowing both on the hot side of our business, the pyrogel side, and now increasingly on the cryogel side, responding to significant demand from our LNG customers. Yeah, and maybe just to add, George, and connect both of your questions.

Speaker Change: Thank you Derek.

Speaker Change: Was just in China with our with our team there a couple of weeks ago.

Donald R. Young: I'm impressed by.

Donald R. Young: The speed in which.

Donald R. Young: Our external manufacturing facility has.

Donald R. Young: <unk> ramped up and and.

Donald R. Young: And I would say that.

Donald R. Young: We.

Donald R. Young: We do have the capability of growing that business through that supply.

Donald R. Young: And the $150 million.

Donald R. Young: That we talked about earlier.

Speaker Change: And there is.

Donald R. Young: Space and capability within the within the facility there.

Donald R. Young: To continue to expand that and.

Donald R. Young: To reach that 200 billion dollar run rate level that you.

Donald R. Young: That you referenced out over the course of.

Donald R. Young: Several quarters growing going forward, but where.

Donald R. Young: We're we're sort of filling that that supply chain.

Donald R. Young: Now and I can tell you our our energy industrial team is is really happy to have product flowing both on our on our.

Donald R. Young: On the hot side of our business the power gel side.

Donald R. Young: And now increasingly on the crowd gel side responding.

Donald R. Young: Two significant demand from our LNG customers.

Speaker Change: Yes, maybe just to add.

Speaker Change: Georgia and connecting both of your questions.

Ricardo C. Rodriguez: We're not providing 2025 guidance just yet. Figuring out 2024 is difficult enough, but it is worth emphasizing that if you look at the gross profit contribution of the energy segment, that really is our best hedge against any sort of... grumblings of EV uncertainty in 2025 and 2026. And so, as Don mentioned, there's a very clear incentive for us to continue building up the energy business with the cost position that it has today. Thank you. Thank you. The next question on the line is from Colin Rusch from Oppenheimer. Please go ahead.

Speaker Change: I mean, we're not providing 2025 guidance just yet figuring out 24 is difficult enough but.

Colin William Rusch: It is worth emphasizing that if you look at.

Ricardo C. Rodriguez: The gross profit contribution of the energy segment.

Ricardo C. Rodriguez: That really is our best hedge against any sort of.

Colin William Rusch: Grumblings of PV uncertainty.

Colin William Rusch: In 2025, and 2026 and so.

Ricardo C. Rodriguez: As Don mentioned.

Ricardo C. Rodriguez: There's a very clear incentive.

Ricardo C. Rodriguez: For us to continue building up the energy business with.

Ricardo C. Rodriguez: With the cost position that it has today.

Colin William Rusch: Thank you.

Ricardo C. Rodriguez: Thank you. The next question from the line is from Colin Rusch from Oppenheimer. Please go ahead.

Colin William Rusch: Thanks so much, guys. You know, I appreciate the incremental detail around some of the manufacturing changes. Can you talk a little bit about the cadence of how much process improvement you can see on that Rhode Island facility, the ability to reduce any sort of waste, drive yield higher or incremental throughput on that? Yeah, I mean, I think the big step function there actually happened when we updated the latest capacity estimate to $500 million. Colin and I, so that was it.

Colin William Rusch: Thanks, so much guys.

Colin William Rusch: I appreciate the incremental detail around some of the manufacturing changes can you talk a little bit about the cadence of how much process improvement.

Colin William Rusch: You can see on that Rhode Island facility.

Colin William Rusch: All of you to reduce.

Colin William Rusch: Any sort of way trying to yield higher incrementals.

Colin William Rusch: That facility.

Speaker Change: Yes, I mean, I think the big step function there.

Colin William Rusch: Actually happened when we updated the.

Colin William Rusch: The latest capacity estimate to $500 million.

Colin William Rusch: Colin so so that was.

Ricardo C. Rodriguez: A lot of work that the team did throughout last year and that was actually put in place in the second half of 2022 as the team got better at making pyrothin, which still had quite a bit of unknowns process-wise in terms of how we were going to get the productivity that we're experiencing today. Now it's harder to squeeze more juice out of the lemon here. But nonetheless, the team continues to work at it, and there's a smaller target of fixed costs that the team is continuing to pursue here this year that we're confident that we'll be able to. Go and get it.

Colin William Rusch: A lot of work that the team did throughout last year and that was actually put in place in the second half of 2022 as the team got better at making pyro thin, which still have quite a bit of.

Ricardo C. Rodriguez: Unknowns process wise in terms of how we were going to get the productivity that we're experiencing today.

Ricardo C. Rodriguez: Now it's.

Ricardo C. Rodriguez: It's harder to squeeze more juice out of the lemon here, but.

Ricardo C. Rodriguez: But nonetheless, the team continues to work at it.

Ricardo C. Rodriguez: This a smaller target of fixed cost of the team is continuing to pursue here. This year that we're confident that we'll be able to.

Ricardo C. Rodriguez: Going get but in terms of finding another large step function of productivity, we're pretty much land locked in.

Ricardo C. Rodriguez: But in terms of finding another large-step function of productivity, we're pretty much landlocked in terms of the footprint of the plant in Rhode Island. And so I think the latest capacity assessment of 500 million really shows what the team can get to today. I think Colin, I would just add that.

Ricardo C. Rodriguez: In terms of footprint at the plant in Rhode Island.

Ricardo C. Rodriguez: And so I think the latest capacity assessment of $500 million really.

Ricardo C. Rodriguez: Shows with the team.

Ricardo C. Rodriguez: We can get to today.

Ricardo C. Rodriguez: I think collyn I would just add that.

Donald R. Young: It's interesting that the area, the incremental area, that we still have to improve on in both Rhode Island and in our parts assembly facilities in Mexico is just increasing yields. And we know, and we can see it in the numbers, one, we have more room to improve incrementally. The profitability of incremental yield improvement is pretty dramatic.

Colin: It's interesting.

Donald R. Young: The area the incremental area that we still have to improve on in both Rhode Island and in our parts Assembly facilities in Mexico.

Donald R. Young: Or just increasing yields and we know and we can see it in the numbers when we have more room to improve incrementally and.

Donald R. Young: The profitability of incremental yield improvement is pretty dramatic I think you can see it in.

Ricardo C. Rodriguez: I think you can see it in the fall through from increased revenue down to increased EBITDA. So, we're very focused on those incremental improvements that just really add to our profitability. Super helpful.

Donald R. Young: In the fall through from increased revenue down to increased.

Ricardo C. Rodriguez: EBIT and EBIT.

Ricardo C. Rodriguez: EBITDA so.

Ricardo C. Rodriguez: We're very focused on those incremental improvements.

Ricardo C. Rodriguez: Just really add to our profitability.

Colin William Rusch: And then, I guess, can you talk a little bit about the customer conversations and the kind of nuance and quality of those conversations? Obviously, as we go from kind of Gen 2 to Gen 3 on vehicle design, you know, all of these OEMs have gone through and scoured the world for solutions around any element of the vehicle and are now coming back to best-in-class and optimized cost structure. Can you talk a little bit about the dynamics of the customer conversations now that there's a full education within the industry on what's available and what's really going to drive cost reduction and performance?

Speaker Change: That's super helpful. And then I guess can you talk a little bit about the customer conversations and the the kind of the nuance of quality of those conversations obviously as we go from kind of Gen. Two to Gen. Three on vehicle design.

Colin William Rusch: All of these Oems have gone through and scour the world for solutions around any element of the vehicle and are now coming back to best in class and optimized cost structure can you talk a little bit about.

Colin William Rusch: The dynamics with the customer conversations now.

Colin William Rusch: There is a.

Colin William Rusch: Paul education within the industry on what's available and what's really going to drive cost reduction and performance.

Colin William Rusch: Yeah, I mean, I think this is one that it's really interesting how the industry just works, right? You're not considered to be a technology that's really there on the shelf for an OEM to integrate until you're meaningfully producing for somebody else.

Speaker Change: Yes, I mean I think this is one that.

Colin William Rusch: It's really interesting how the industry just works right.

Colin William Rusch: You are not considered to be a <unk>.

Colin William Rusch: Acknowledging thats really there on the shelf.

Colin William Rusch: For an OEM to integrate until you meaningfully producing for somebody else.

Ricardo C. Rodriguez: And so now that we are getting at that point. The initial discussions that our team is having with customers are truly as... are truly as an established solutions provider, right? The PACE award that the team won this week is further validation of that.

Colin William Rusch: And so now that we are getting at that point.

Ricardo C. Rodriguez: The initial discussions.

Ricardo C. Rodriguez: Our team is having with customers is truly is.

Ricardo C. Rodriguez: Our truly is an established solutions provider rate the pace award that the team won this week is further validation of that.

Ricardo C. Rodriguez: And so, yeah, we're not proposing ideas anymore. We're selling a product that's already on the shelf ready to be integrated. And that makes the depth of discussions a lot easier. Now, just trend-wise, if you look at what some of these new battery-packed designs look like... As you alluded to, for this next generation of EVs... The OEMs are trying to take as much weight and cost out as possible, and one of the big trends that we're seeing is this whole notion of going straight from a CELTA-packed design without necessarily having modules that get stacked up and then, a bunch of metal in between that's not really helping store energy.

Ricardo C. Rodriguez: So.

Ricardo C. Rodriguez: Yes.

Speaker Change: We're not.

Ricardo C. Rodriguez: Proposing ideas anymore, we're selling a product thats there on the shelf ready to be integrated.

Ricardo C. Rodriguez: And that makes it depth of discussion a lot easier now just trend wise. If you look at what some of these new <unk>.

Ricardo C. Rodriguez: Battery pack designs look like.

Ricardo C. Rodriguez: As you alluded to for this next generation of Evs.

Ricardo C. Rodriguez: The Oems are trying to take.

Ricardo C. Rodriguez: As much weight and cost out.

Ricardo C. Rodriguez: And one of the big trends that we're seeing is this whole notion of going straight from celta from a sell to pack design.

Ricardo C. Rodriguez: Without necessarily having.

Ricardo C. Rodriguez: Modules that gets stacked up and then.

Ricardo C. Rodriguez: A bunch of metal in between that's not really helping store energy and so in that transition of.

Ricardo C. Rodriguez: And so in that transition of, you know, to a cell-to-pack design, we obviously play a critical role. Part of that is because if you take care of your thermal runaway and thermal propagation at the cell level, you're ultimately providing a safer design that could actually be lighter and more cost-effective.

Ricardo C. Rodriguez: To a sell to pack design, we obviously play a critical.

Ricardo C. Rodriguez: Part in that because if you take care of your thermal runaway in thermal propagation at the cell level.

Ricardo C. Rodriguez: Ultimately, providing a safer design that could actually be lighter.

Ricardo C. Rodriguez: And more cost effective.

Ricardo C. Rodriguez: And so that's a trend that I think is going to favor selling for us here over the next couple of years. I think Colin also, the difficulty of the problem that we're solving, I think becomes clearer and clearer as the OEMs come to understand their own battery platforms and the performance of those platforms, both from a thermal propagation point of view, but also, as you know, from the mechanical aspects of the role that we play there and the combination of those two. Value Creators are We believe we have a unique solution to accomplishing and solving that difficult problem. Thanks so much, guys.

Ricardo C. Rodriguez: So thats a trend that I think is going to favor the selling for us here over the next couple of years.

Ricardo C. Rodriguez: I think Collyn also.

Ricardo C. Rodriguez: The difficulty of the problem that we're solving.

Ricardo C. Rodriguez: I think becomes clearer and clearer as the Oems.

Ricardo C. Rodriguez: Come to understand their own battery platforms.

Ricardo C. Rodriguez: The performance of.

Ricardo C. Rodriguez: Those.

Ricardo C. Rodriguez: Of those platforms, both from a thermal propagation point of view, but also as you know from from the mechanical aspects of the role that we play there and the combination of those two.

Ricardo C. Rodriguez: Value creators.

Ricardo C. Rodriguez: Our.

Ricardo C. Rodriguez: We believe we have a unique solution to to accomplishing in solving that that difficult problem.

Speaker Change: Thanks, so much guys.

Ricardo C. Rodriguez: And.

Donald R. Young: Thank you. The next question is from Eric Stine on behalf of Craig Hallam. Please go ahead. Good morning, everyone.

Ricardo C. Rodriguez: Thank you. The next question is from Eric Stine from Craig Hallum. Please go ahead.

Eric Andrew Stine: Good morning, everyone.

Eric Andrew Stine: Hey Eric, how are you? Hey, so maybe just starting on energy industrial. I know when you went down this path, the thought was, I mean, it's common to think that you'd be giving up some margin and that might be detrimental, but yet, you're avoiding a lot of logistics costs. So the thinking was that it would be accretive to margin. So I know it's early, you know, just curious.

Eric Andrew Stine: Hey, Eric Haney.

Eric Andrew Stine: So maybe just starting on energy industrial I know when you went down this path.

Eric Andrew Stine: The thought was I mean, it is common to think that you'd be giving up some margin in.

Eric Andrew Stine: That might be detrimental, but yet you're avoiding a lot of logistics costs. So the thinking was that it would be accretive to margins. So I know it's early.

Ricardo C. Rodriguez: Is that how you're seeing things play out? And do you expect that to continue as you ramp that up to, I guess, virtually 100% of production here in the second half? Yeah, I mean, if you look at our old value chain on the energy side, right? Especially at the revenue levels that we're running at, a lot of our raw materials will be coming from China. And so we would put that on a boat for, you know, eight to 10 weeks and pay at least a 30% tariff.

Eric Andrew Stine: Just curious is that how you're seeing things play out and do you expect that to continue as you ramp that to what I guess virtually a 100% of production here in the second half.

Ricardo C. Rodriguez: Yeah, I mean, if you look at our old.

Ricardo C. Rodriguez: And then, in the case of our energy business, two-thirds of that would go back out, back outside of the US. And so there was some inherent slack in that chain for the taking care of it. As the team has worked to ramp up our external manufacturing facility, we are obviously able to just use the ROS within China that has tightened up our value chain and delivered some Incremental Savings here that, frankly, I think we needed to get the performance of all these products financially to where we've known they can be for quite some time.

Ricardo C. Rodriguez: Value chain on the energy side right.

Ricardo C. Rodriguez: Especially at the revenue levels that we're running at a lot of our raw materials will be coming from China.

Ricardo C. Rodriguez: And so we would put that on a boat for eight to 10 weeks at least payout, 30% tariff and then in the case of our energy business two thirds of that would go back out.

Ricardo C. Rodriguez: Back outside of the U S and so there was some inherent.

Ricardo C. Rodriguez: Lacking the chain further taking here.

Ricardo C. Rodriguez: And as the team has worked to ramp up our external manufacturing facility. We are obviously able to just use that Ross within China that has tightened up our value chain.

Ricardo C. Rodriguez: And delivered some.

Ricardo C. Rodriguez: Incremental savings here.

Ricardo C. Rodriguez: Frankly, I think we needed to get the performance of all of these products.

Ricardo C. Rodriguez: Naturally to where we've where we've known they can be for quite some time.

Ricardo C. Rodriguez: But that's really the big..., the biggest contributor to gross margins. Got it. Very helpful. And then maybe just turning to, well, I guess the overall business, but Pyrothin being the big driver, I know you mentioned kind of the expectation of IHS in terms of, Q2, Q3 ramp, step down potentially in Q4, curious how you see that, not IHS, but how you see that, you know, was there any kind of inventory build in Q1 that might have skewed it? Just maybe how we should think about linearity of results here throughout 24.

Ricardo C. Rodriguez: So, but that's really the big.

Ricardo C. Rodriguez: The biggest contributor to gross margins here.

Speaker Change: Got it.

Ricardo C. Rodriguez: Very helpful. And then maybe just turning to well I guess, the overall business, but pirates and being the big driver I know you mentioned kind of the expectation of IHS in terms of <unk>.

Ricardo C. Rodriguez: Q2 Q3 ramp.

Ricardo C. Rodriguez: Step down potentially in Q4 curious how you see that not IHS, but how you see that.

Ricardo C. Rodriguez: Was there any kind of inventory build in Q1 that might have skewed. It just maybe how we should think about linearity of results here throughout 'twenty four.

Ricardo C. Rodriguez: Yeah, I mean, I think we're all seeing this from a very similar vantage point. There's an obvious commitment from our customers to ramp up production and go capture their fair share of the EV market, right? At the same time, even though the EV market continues to grow, its penetration of the overall vehicle market is still very low. We are in a relatively uncertain environment, right? And so for us, as we look at that volume level and also know that, I mean, we're making these parts two to three months before they're put in a car.

Ricardo C. Rodriguez: Yes, I mean, I think we're all seeing this.

Ricardo C. Rodriguez: From a very similar vantage point, there is an obvious commitment from our customers to ramp up production and go capture their fair share of the EV market right.

Ricardo C. Rodriguez: At the same time.

Ricardo C. Rodriguez: Even though the EV market continues to grow its penetration of the overall vehicle market.

Ricardo C. Rodriguez: In a relatively uncertain environment right and so for us as we.

Ricardo C. Rodriguez: Look at that volume level, and and also knowing that.

Ricardo C. Rodriguez: I mean, we're making these parts two to three months before they are put in a car.

Ricardo C. Rodriguez: I think it's very important for us to monitor the inventory levels of our customers and the sell-through of this initial ramp in order to be able to develop a firmer view of what Q3 and Q4 will look like, particularly Q4, and really the 2025 ramp as well, which I think IHS is still expecting a 27% ramp in GM's production in 2025 relative to 2024. But all of these things, I think really time will tell, and we just want to make sure that we have the right cost structure for any sort of.

Ricardo C. Rodriguez: I think it's very important for us to monitor the inventory levels of our customers at this in the sell through of these of this initial ramp in order to be able to develop a firmer view.

Ricardo C. Rodriguez: Of what Q3, and Q4 will look like particularly Q4.

Ricardo C. Rodriguez: And really the 2025 ramp as well, which.

Ricardo C. Rodriguez: I think IHS is still expecting a 27% and ramp in.

Ricardo C. Rodriguez: In Gm's production in 2025 relative to.

Ricardo C. Rodriguez: The 2024.

Ricardo C. Rodriguez: All of these things I think.

Ricardo C. Rodriguez: Really time will tell and we just want to make sure that.

Ricardo C. Rodriguez: That we have the right cost structure.

Ricardo C. Rodriguez: For any sort of.

Ricardo C. Rodriguez: I wouldn't say a slowdown in the ramp, but really just, I think, a pause is a better term because there's no doubt here, and we relayed this during the last quarterly call that the demand is going to continue increasing to the point that we will need Plan 2 in 2027. And so, whether the line looks straight up and to the right, with a few pauses in between. I think that's something that we'll see here as the rest of the year materializes. But we're pretty vigilant.

Ricardo C. Rodriguez: I wouldn't say a slowdown in the ramp but really just I think a pause.

Ricardo C. Rodriguez: <unk> is a better term because there is no.

Ricardo C. Rodriguez: Doubt here and we relate this during the last quarterly call that the demand is going to continue increasing to the point that we will need plant two in 2027.

Ricardo C. Rodriguez: So.

Ricardo C. Rodriguez: Whether whether the aligned look straight up into the right.

Ricardo C. Rodriguez: With a few pauses in between I think thats something that will we will see here as the rest of the year materializes, but were pretty vigilant.

Ricardo C. Rodriguez: On just what the sell through of these initial models are.

Ricardo C. Rodriguez: And I truly meant what I said in my remarks that.

Ricardo C. Rodriguez: Our customers really are capturing their their fair share of the market.

Ricardo C. Rodriguez: Given the distribution scale that they have.

Ricardo C. Rodriguez: And the brands.

Ricardo C. Rodriguez: And the loyalty that's there for them as they launch these vehicles.

Ricardo C. Rodriguez: And the loyalty that's there for them as they launch these vehicles. Got it. And so it sounds like you don't really view Q1 as necessarily something out of the ordinary; it was kind of the normal course of business, not an inventory build. This was a, you know, pretty, pretty standard quarter.

Speaker Change: Got it and so it sounds like you don't really view Q1 as necessarily.

Ricardo C. Rodriguez: Something out of the ordinary I was kind of normal course of business not a not an inventory build this was.

Ricardo C. Rodriguez: Pretty pretty standard quarter.

Ricardo C. Rodriguez: Yes, and we also have visibility to our customers' inventory levels, and they're not necessarily building up inventories; they're really ramping up the manufacturing of these vehicles, and I think their remarks confirm that for everybody as well. Okay, thank you. The next question is from Chris Souther from B Riley. Please go ahead.

Speaker Change: Yes, and then we also have visibility to our customers' inventory levels.

Christopher Curran Souther: And theyre not necessarily building up inventories there, they're really ramping up the manufacturing of these vehicles and I think their remarks.

Christopher Curran Souther: Infirm that for everybody as well.

Christopher Curran Souther: Okay. Thank you.

Ricardo C. Rodriguez: Anytime.

Christopher Curran Souther: The next question is from Chris <unk> from B Riley. Please go ahead.

Christopher Curran Souther: Hey, thanks for taking my questions here. Just to kind of follow up on that, you know, if we're looking at kind of the implied, you know, 2Q through 4Q run rate, if we're doing $150 million in piracy, and that would be in energy infrastructure, they'd look at, you know, $230 million for the thermal barrier. That would imply that the run rate for 2Q to 4Q is actually below what we saw in 1Q.

Ricardo C. Rodriguez: Hey.

Christopher Curran Souther: Thanks for taking my questions here, just to kind of follow up on that.

Christopher Curran Souther: We're looking at kind of the implied.

Christopher Curran Souther: <unk> run rate it will be with $150 million in piracy and that would be.

Christopher Curran Souther: In energy infrastructure.

Christopher Curran Souther: At $230 million for portable barrier.

Christopher Curran Souther: It would imply like a run rate for <unk> is actually below what we saw in <unk>.

Christopher Curran Souther: It's not kind of inventory builds.

Christopher Curran Souther: They're elevating prototyping part that wouldnt be repeated throughout the rest of the year.

Ricardo C. Rodriguez: So, if it's not kind of inventory builds, it was their elevated prototyping parts that wouldn't be repeated throughout the rest of the year. Scratch my head why we wouldn't at least see 65 million in 1Q as the run rate for thermal barrier beyond, you know, GM's rep slogan, "the tier." Yeah, no, that's a good question, Chris.

Christopher Curran Souther: Scratch my head why wouldn't.

Christopher Curran Souther: At least <unk>.

Speaker Change: The $65 million.

Ricardo C. Rodriguez: <unk> run rate for thermal barrier beyond.

Ricardo C. Rodriguez: Gm's ramp slowed materially.

Christopher Curran Souther: And I mean, really, it's no secret that there is a ramp expected here for Q2 and potentially Q3. It's really the Q4 ramp that we need more confidence around before we raise the guidance further. Right, so I think we're more than ready to capture the additional upside. But I'd love to have more information to really make a call on what Q3 and Q4 look like, which would put us at an effective run rate that is higher than what we did here in Q1. So I think it could be lumpy.

Speaker Change: Yes, no thats a good question Chris.

Ricardo C. Rodriguez: I mean really it's no secret that there is a ramp expected here for Q2 and potentially Q3, it's really the Q4 ramp that that we need more confidence around before we raise the guidance further right.

Christopher Curran Souther: So I think we're more than ready to capture the additional upside.

Christopher Curran Souther: But I'd love to have more information to really make a call on what Q3 and Q4 look like.

Christopher Curran Souther: That would put us in an effective run rate that is higher than what we did here in Q1 for the remainder of the year.

Christopher Curran Souther: So I think it could be lumpy.

Ricardo C. Rodriguez: Initially, here, but again, we'll come back to everybody here as we close out Q2, with a much better informed view of what the second half of the year will look like. Okay, that's fair. So if we were to take kind of your, you know, 200 and I just, 279 that you know, almost all that discount is coming in the third and fourth quarter. Yeah, yeah, I think so. I think that'd be a fair way to look at it.

Christopher Curran Souther: <unk>.

Christopher Curran Souther: Initially here.

Christopher Curran Souther: But again, we will.

Ricardo C. Rodriguez: We'll come back to everybody here as we close out Q2.

Ricardo C. Rodriguez: With with a much better informed view of what the second half of the year will look like.

Ricardo C. Rodriguez: Okay. That's fair. So if we were to stay as Kevin <unk> 200 in IHS.

Ricardo C. Rodriguez: $2 79.

Ricardo C. Rodriguez: Almost all of that discount is coming in third and fourth quarter then.

Ricardo C. Rodriguez: Yes, yes, I think so I think that would be a fair way to look at it.

Christopher Curran Souther: Okay, great. And then Nick, just on the overall gross margin trajectory, last call you seemed to be describing a fair bit of stars aligning to hit 35%, and now we've improved again, but you're keeping your gross margin target model at 35% when we're looking at 650 million in revenue. Is there any reason why we wouldn't continue to have good incremental margins as utilization and revenue continue to grow and conversion costs decline here?

Speaker Change: Okay great.

Ricardo C. Rodriguez: And then maybe just on the overall gross margin trajectory last call you seem to be describing a fair bidding stars aligning to hit 35% now.

Christopher Curran Souther: Improved again.

Christopher Curran Souther: Youre keeping your gross margins margin target model at 35% and we're looking at 615 revenue.

Christopher Curran Souther: Is there any reason why we wouldn't continue to have good incremental margins and utilization and revenue continues to grow and conversion cost decline here.

Ricardo C. Rodriguez: Yeah, I mean, I think this one goes back to my remarks, right? A lot of these launches that, in our conservative estimates, we had planned for 2025 could actually start picking up in terms of activity in 2024 without necessarily showing us much revenue for that. And so the expenses of those, plus, I mean, we are seeing some pressure on inbound freight that is worth putting into the guidance as well. And yeah, I think this is an area where she should connect the dots between two quarters and put yourself in a position where you're ahead of your skis, and so we'd rather be conservative here, and again, with better information on how we're performing, on the timing of the impact of these launches and any engineering changes that the team is working on, I think we can have a much firmer view of this as we get through Q2.

Nick: Yes, I mean, I think this one goes back.

Christopher Curran Souther: My remarks, right a lot of these launches that.

Ricardo C. Rodriguez: In our Conservative estimates, we had planned for 2025 could actually start picking up in terms of activity in 2024 without necessarily showing us much revenue for that and so the expenses of those plus.

Ricardo C. Rodriguez: Plus I mean, we are seeing some pressure on inbound freight that is worth.

Ricardo C. Rodriguez: Putting into the guidance as well.

Ricardo C. Rodriguez: And.

Ricardo C. Rodriguez: And yes, I think this is an area where it <unk>.

Ricardo C. Rodriguez: To connect the dots of two quarters in.

Ricardo C. Rodriguez: And put yourself in a position where you're ahead of your skis and so we'd rather be conservative here and again with better information on how we're performing on the timing of the impact of these launches and any.

Ricardo C. Rodriguez: Engineering changes that the team are working on that team is working on.

Ricardo C. Rodriguez: I think we can have a much firmer view of this as we get through Q2.

Ricardo C. Rodriguez: Chris, as your questions sort of imply, I would say. I think we are being careful about our ramp for the rest of the year and with our increase to 380 and to 55 million dollars of adjusted EBITDA and being net income positive for the year. We feel very good about those numbers, and we have used the baseline, we've used at least, we've used more to suggest that we do have an opportunity to do better. And I said that in my notes.

Speaker Change: Chris is here as your questions.

Ricardo C. Rodriguez: Sort of imply I would say.

Ricardo C. Rodriguez: I think we are being careful.

Ricardo C. Rodriguez: <unk>.

Ricardo C. Rodriguez: Our ramp for the rest of the the.

Ricardo C. Rodriguez: The rest of the year and.

Ricardo C. Rodriguez: With our increased to $3 80, and $2 55.

Ricardo C. Rodriguez: Adjusted EBITDA and.

Ricardo C. Rodriguez: Being net income positive for the year.

Ricardo C. Rodriguez: We feel very good about those numbers and we have used baseline we've used at least we've used over.

Ricardo C. Rodriguez: To suggest that we do have an opportunity to do better and I said that in my in my notes I think Ricardo was was accurate in saying, we'd love to just sort of see the second half of the year, just a little a little more clearly, especially the fourth quarter.

Donald R. Young: And I think Ricardo was accurate in saying, you know, we'd love to just sort of see the second half of the year just a little more clearly, especially the fourth quarter, before we do anything beyond that. But we feel very solid about the update or the increases that we did for our outlook. We appreciate that. Thanks.

Donald R. Young: Before we before we do anything beyond that but we feel very solid.

Donald R. Young: In the update or the increases that we did.

Donald R. Young: For our outlook.

Donald R. Young: I appreciate that thank.

Speaker Change: Thank you.

Donald R. Young: Okay.

Ricardo C. Rodriguez: Thank you. The next question on the line is from Chip Moore from Ross. Please go ahead. Did we lose Chip?

Donald R. Young: Thank you. The next question on the line is from Chip Moore from Ralph. Please go ahead.

Ricardo C. Rodriguez: Okay.

Chip Moore: The release chip chip either.

Operator: Chip, are you there? Your line is now open; please go ahead with your question. Morning, thanks, thanks. I wanted to, hey Ricardo, I wanted to ask about the pipeline, supplying prototype parts I think for close to 20 programs you said in the quarter and also, you know, the strong likelihood of announcing some additional OEM wins this year. Can you give a sense of maybe how many programs are far enough along to be potential wins this year?

Chip Moore: Tim Your line is now open. Please go ahead with your question.

Speaker Change: Good morning. Thanks.

Speaker Change: Hey, Jay.

Operator: I wanted to Hey, Ricardo I wanted to ask what the pipeline.

Operator: Supply and prototype parts I think for close to 20 programs you said in the quarter.

Operator: Also.

Operator: Spun likelihood of announcing some additional OEM wins. This year can you give a sense maybe.

Chip Moore: And then, in the past, you've talked about a customer that's been in the final stages of negotiations for a little while. Any updates there? Yeah, I think. You know, we're really trying to get away from this idea of having people with bingo boards of, you know, six squares or... 20 now to fill.

Operator: How many programs are far enough along to be potential wins this year and then.

Chip Moore: In the past you've talked about a customer that's been in the final stages of negotiations for.

Chip Moore: For a little while any any updates there.

Chip Moore: Yes, I mean I think.

Chip Moore: We're really trying to get away from this idea of having people with bingo board of.

Chip Moore: Sixth squares are.

Chip Moore: 20 now to Phil.

Ricardo C. Rodriguez: And I think Don's remark about the 20 programs was really just to give people a bit of confidence that, um.., that the progress here continues to accelerate, right? And, in fact, that the initial stages of selling are really no longer there. They pretty much take care of themselves as we establish ourselves with other OEMs and announce some of the other awards. I mean, it's worth remembering that we're not really selling timeshares or magazine subscriptions here, and these processes take quite a bit of time.

Chip Moore: And I think the answer Mark around the 'twenty program. So it's really just too.

Ricardo C. Rodriguez: To give people a bit of confidence that.

Ricardo C. Rodriguez: And that there is that the progress Youre continues to accelerate and in fact that the the initial stages of selling are really no longer there they pretty much take care of themselves as we.

Ricardo C. Rodriguez: Establish ourselves with other Oems and announce some of the other awards.

Ricardo C. Rodriguez: I mean, it's worth remembering.

Ricardo C. Rodriguez: Not really selling Timeshares or magazine subscriptions here and these processes take quite a bit of time.

Ricardo C. Rodriguez: A lot of it is actually dependent on the customer's timeline more than ours. And that is the case with the sixth OEM award that we have pending from last year's bingo board, in a way. They're actually running prototypes of vehicles with our parts in them. We're confident that we'll be able to bring that to a close here as we finish negotiating two critical commercial terms with that customer. And at the same time, I mean, with some of the European OEMs, I've been in situations before where you start shipping production parts to them, and you still don't have the contract. Basically, the POs are your contracts.

Ricardo C. Rodriguez: A lot of it is actually dependent on the customers' timeline more than ours and that is the case with the sixth OEM Award that we have pending from last year's Bingo board in a way.

Ricardo C. Rodriguez: There is actually running prototypes.

Ricardo C. Rodriguez: Vehicles with our parts in them.

Ricardo C. Rodriguez: We're confident that we'll be able to bring that to a close here as we finished negotiating.

Ricardo C. Rodriguez: Two critical commercial terms with that customer.

Ricardo C. Rodriguez: And at the same time I mean with the.

Ricardo C. Rodriguez: Some of the European OEM side been in situations before where you started shipping production parts of them are you still don't have the contract basically that are your contract.

Ricardo C. Rodriguez: And as long as you're technically designed in and you have the right terms in those POs, that's not a problem. And so I wouldn't necessarily take the lack of an update here on that sixth OEM as a negative sign. There's still a lot of engagement.

Ricardo C. Rodriguez: And as long as Youre technically designed in and you have the right terms in those <unk>, that's not a problem.

Ricardo C. Rodriguez: So I wouldn't necessarily take the lack of an update here on that six Oems.

Ricardo C. Rodriguez: A negative sign there is still a lot of engagement, we continue selling them more prototype parts.

Ricardo C. Rodriguez: We continue selling them more prototype parts, and we'll launch them here as soon as they're ready. Got it. Yeah, no, I think you've got a lot of bingo bingos left. Maybe my follow-up on plan two, I thought I heard you say potential restart by Q4. I don't know if we've heard that language before.

Ricardo C. Rodriguez: And we will launch them here as soon as there as soon as they're ready.

Ricardo C. Rodriguez: Got it yes, no I think you've got a lot of pingo Bingo's left.

Speaker Change: Maybe my follow up.

Ricardo C. Rodriguez: Plant two I thought I heard you say potential restart by Q4 I don't know if we've heard that language before is that.

Chip Moore: Is that, you know, more of you've got a better handle on demand visibility or, you know, more DOE-related or any more color there? Thanks, guys. Yeah, for that one, I was going back to my remarks from the previous quarter's call. Right now, if you go and ask the construction team in Georgia, everybody's geared up to come back on site in November.

Ricardo C. Rodriguez: <unk>.

Ricardo C. Rodriguez: You've got a better handle on demand visibility or.

Chip Moore: More dose related or any more color there thanks guys.

Speaker Change: Yes for that one that was going back to my remarks from the from the previous quarter's call.

Chip Moore: Right now if you go and ask the construction team in Georgia everybody's geared up to come back on site in November.

Ricardo C. Rodriguez: But obviously, that will be determined by us being able to pay for all of that and getting the financing lined up here in the first half, hopefully with DOE support. And yeah, so November is when we are looking to restart it. And going back to my remarks from the previous quarter's call, if you look at, I believe it was slide nine of the Q4 earnings deck. I mean, really, no matter how we slice the demand and discount it, the plant is needed in 2027.

Chip Moore: But obviously that is determined by us being able to pay for all of that and getting the financing lined up here.

Ricardo C. Rodriguez: In the first half with hopefully with the Dod's support.

Ricardo C. Rodriguez: And.

Ricardo C. Rodriguez: Yes. So in November is when we are looking to restart it and going back to my remarks from the previous quarter's call. If you look at I believe it was slide nine of the Q4 earnings deck, I mean really no matter, how we slice that demand and discount that the plant is needed in 2027.

Ricardo C. Rodriguez: So we'll, Chip, we'll definitely keep... As I said in my comments, you know, it's a sort of a multi-pronged decision process for us when we started. We've talked about the DOE, we've talked about demand, we've talked about the productivity of our existing assets, all of these things, you know, we're working hard on and keeping a careful eye on, and that will, as those I think that the answer will become pretty obvious to us, you know, at the right time. I appreciate all the detail.

Ricardo C. Rodriguez: So we'll chip we will definitely keep.

Ricardo C. Rodriguez: As I said in my comments.

Ricardo C. Rodriguez: It's sort of a multi pronged decision process for us when we started.

Ricardo C. Rodriguez: <unk> talked about the Doa we've talked about.

Ricardo C. Rodriguez: <unk>, we've talked about the productivity of our existing assets.

Ricardo C. Rodriguez: All of these things.

Ricardo C. Rodriguez: We're working hard on and keeping a careful eye on it.

Ricardo C. Rodriguez: That will.

Ricardo C. Rodriguez: As those as those.

Ricardo C. Rodriguez: Things.

Ricardo C. Rodriguez: Kind of merge together I think the answer will become pretty obvious to us.

Ricardo C. Rodriguez: At the right time.

Chip Moore: Understood I appreciate all the detail thanks.

Speaker Change: Thank you.

Donald R. Young: Thanks. Thank you. Thank you. The next question on the line is from Tom Curran from Seaport Research Partners. Please go ahead, Tom. Good morning, guys.

Ricardo C. Rodriguez: Thank you. The next question on the line is from Tom Curran from Seaport Research Partners. Please go ahead Tom.

Thomas Patrick Curran: Thanks for squeezing me in here. [inaudible] So, under your design award from Toyota for the VZ4X, my understanding is that the contract scope extends to the Subaru Solterra and the Lexus RZ lineups. Could you confirm or clarify which models the contract does extend to and then, for all of them combined, whichever are included? Just give us some rough idea of the expected production volume under that Toyota Design Award for this year, you know, similar to what you've been able to do for us at GM. Yeah, no, that's a good question, Tom.

Thomas Patrick Curran: Good morning, guys. Thanks for squeezing me in here.

Thomas Patrick Curran: Thanks, Tom.

Thomas Patrick Curran: So under your design award from Toyota for the BZ <unk> My understanding is that the contract scope extends to the Subarus Altera and Lexus are Z lineups could you confirm or clarify which models the contract does extend too and then.

Thomas Patrick Curran: For all of them combined whichever are included.

Thomas Patrick Curran: Just give us some rough idea of the expected production volume.

Thomas Patrick Curran: Sure that Toyota Design award for this year similar to what <unk> been able to do for us for GM.

Ricardo C. Rodriguez: So yeah, I mean, our parts are in the Subaru and the Lexus variant of the BC4X as well. We don't quite have the IHS numbers here near us, but we'll be sure to incorporate that here as we can in the next quarterly update. Great, that would be helpful.

Thomas Patrick Curran: Yes, that's a good question.

Thomas Patrick Curran: Tom So yes, I mean, our parts are in the Subaru in the Lexus variant.

Ricardo C. Rodriguez: The.

Ricardo C. Rodriguez: Of the BC Forex as well, we don't quite have the IHS numbers here.

Ricardo C. Rodriguez: But we'll be sure to incorporate that here as we can in the next quarterly update.

Thomas Patrick Curran: Thanks, Ricardo. And then a follow up on the business development funnel, you know, when it comes to the, call it roughly 20 OEMs that you're in discussions with. Are any of those conversations touching on or are they, you know, explicitly focused on plug-in hybrid programs? And, If not, just in general, could you give us an idea of where you think Pyrocyn's role for plug-in hybrids might be? Yeah, so maybe just to clarify Don's remarks. Don meant the 20 programs, and that could be with, you know, 8 to 12 OEMs, not necessarily the. It's not necessarily Some of those are actually for cell modules that are scoped to be potentially in a plug-in hybrid vehicle.

Speaker Change: Great that would be helpful. Thanks, Chicago and then.

Thomas Patrick Curran: Follow up on the business development funnel.

Thomas Patrick Curran: When it comes to that.

Thomas Patrick Curran: Call. It roughly 20 Oems that you are in discussions with.

Thomas Patrick Curran: Do any of those conversations.

Thomas Patrick Curran: Are they touching on or are they.

Thomas Patrick Curran: <unk> focused on plug in hybrid programs and.

Thomas Patrick Curran: If not just in general could you could.

Thomas Patrick Curran: Could you give us an idea of.

Thomas Patrick Curran: Where you think of <unk>.

Thomas Patrick Curran: Piracy role for plug in hybrids might be.

Thomas Patrick Curran: Yes, so maybe just to clarify Dan to remark so Don meant the 'twenty program and that could be with.

Thomas Patrick Curran: <unk> 12 Oems unnecessarily.

Thomas Patrick Curran: It's not necessarily 20 different customers that those programs would be in <unk>.

Thomas Patrick Curran: Some of those are actually for cell modules that.

Thomas Patrick Curran: Our scope to be potentially in a plug in hybrid vehicle.

Ricardo C. Rodriguez: For us, the plug-in hybrid vehicles really, if you look at the content per vehicle opportunity, it's not the same as a full EV platform or vehicle. And so we obviously are a lot more focused on pure EV. The plug-in hybrid volume blips that we've seen recently, we believe that... We just enabled.

Thomas Patrick Curran: But for us the plug in hybrid vehicles really if you look at the content per vehicle opportunity is not the same as a full EV platform or vehicle. So we obviously are a lot more focused on pure evs.

Ricardo C. Rodriguez: The plug in hybrid volumes blips that we've seen recently, we believe that.

Ricardo C. Rodriguez: They just enabled.

Ricardo C. Rodriguez: Sustained ice volumes and arent necessarily taking volume away from Evs.

Ricardo C. Rodriguez: In 2026, 2027, and 2028, which is when we would be launching these programs. So even though we're quoting them. They are not really the main priority.

Speaker Change: For the team.

Speaker Change: Got it makes sense.

Speaker Change: I appreciate the thoughtful answers as always.

Ricardo C. Rodriguez: Anytime next time.

Thomas Patrick Curran: Sustained Ice Volumes and aren't necessarily taking volumes away from EVs in 2026, 2027, and 2028, which is when we would be launching these programs. So even though we're quoting them, they're not really the main priority for the team. Got it. I appreciate the thoughtful answers, as always. Anytime. Thanks, Tom. The next question on the line is from Jeff Osborne from TD Cowan. Please go ahead. Good morning. Two quick ones.

Speaker Change: The next question on the line.

Ricardo C. Rodriguez: Jeff Osborne from Cowen. Please go ahead.

Jeffrey David Osborne: I think, Ricardo, you have mentioned in prior calls that it would take roughly a year and close to 500 million to complete plant two. Is that still the rough timeline if you were to get started in November? Yeah. Yeah, I don't think we have an update there. A year would be a stretch, but I think 12 to 18 months, max, would be a better estimate.

Jeffrey David Osborne: Hey, good morning, two quick ones I think Ricardo you had mentioned in prior calls, but it would take roughly a year and close to $500 million Theyre complete.

Jeffrey David Osborne: 0.2 is that still the rough timeline. If you were to get started in November.

Speaker Change: Yeah Yeah.

Speaker Change: I don't think we have an update there.

Jeffrey David Osborne: The year would be a stretch, but I think 12 to 18 months Max would be a better estimate.

Speaker Change: Got it.

Ricardo C. Rodriguez: And then maybe just following up on Toyota. I think on prior calls, you had mentioned that there was some discussion about Toyota moving to more of a common platform across all their electric vehicles instead of just the BZ. Did Don perhaps visit them on his way back from China or give any updates as to a broader scope expansion there at Toyota? I think we have to wait until you hear something from them. I don't think you stopped by Japan, right?

Jeffrey David Osborne: Then may.

Jeffrey David Osborne: Just following up on Toyota I think on prior calls you had mentioned that there was some discussion about Toyota moving to more of a common platform across all of their electric vehicles instead of just the BZ <unk>.

Ricardo C. Rodriguez: Don perhaps visit them on his way back from China, or any update as to a broader scope.

Ricardo C. Rodriguez: Expansion there at Toyota.

Ricardo C. Rodriguez: I think we'd have to wait until you hear something from them I don't think <unk> stopped by Japan guidance Yeah.

Jeffrey David Osborne: No, I didn't. Yeah, that makes sense. Thanks much. Thank you. The next question on the line is from Alex Potter from Piper Sandler. Please go ahead, Alex. Hi there, this is Ben Johnson on behalf of Allen.

Ricardo C. Rodriguez: Yes.

Ben Johnson: Excellent. Thanks, so much.

Ben Johnson: Andy Thank you.

Jeffrey David Osborne: The next question on the line is from Alex Potter from Piper Sandler. Please go ahead Alex.

Jeffrey David Osborne: Hi, This is Ben Johnson on for Alex and I guess My first question was what terms are you guys in close dialogue with general motors and as well as other automotive customers to kind of determine the level of demand from these newly launched vehicles.

Alexander Eugene Potter: And I guess my first question is in terms of, are you guys in close dialogue with General Motors and other automotive customers to kind of determine the level of demand for these newly launched vehicles? And can you kind of elaborate on how those discussions are going? Well, demand is determined by our customers, right? I'm not sure there's a ton that we could say to adjust their production levels. They're better at this than us, frankly. And I mean, we get a demand feed from customers, and we supply to that. That's the extent of it, and sometimes there isn't a ton of dialogue.

Alexander Eugene Potter: And can you kind of elaborate on how those discussions are going.

Alexander Eugene Potter: Well the demand is determined by our customers and I'm not sure. There's a ton that we could say to adjust their production levels.

Alexander Eugene Potter: They are better at this than us frankly.

Alexander Eugene Potter: And.

Alexander Eugene Potter: I mean, we get a demand feed from customers.

Alexander Eugene Potter: And we supply to that.

Alexander Eugene Potter: That's the extent and sometimes there isn't a ton of dialogue I mean, we basically just get a demand feed every weekend.

Ricardo C. Rodriguez: I mean, we basically just get a demand feed every week, and we work hard to deliver that. Yeah, there's a lot. There's a lot.

Ricardo C. Rodriguez: We work hard to deliver that.

Speaker Change: Yes, there is not.

Donald R. Young: Yeah, Ben, I would just say, as Ricardo says, we do get a weekly update that looks out over the course of the next four weeks and beyond. And we do get a pretty good signal from that from that weekly communication. And so, in part, we won the Pace Award for our collaboration and partnership with General Motors.

Speaker Change: Yes, Ben I would just say.

Ricardo C. Rodriguez: As part of this is Ricardo says we do get.

Donald R. Young: A weekly update.

Donald R. Young: That looks out over the course of the next four weeks.

Donald R. Young: And beyond.

Donald R. Young: <unk>.

Donald R. Young: And we do get a pretty good signal from from that.

Donald R. Young: From that weekly communication.

Donald R. Young: So.

Donald R. Young: In part we won the pace award.

Donald R. Young: For our collaboration and partnership with General Motors.

Ricardo C. Rodriguez: We're pretty close to that company and really many of our OEMs. You know, we have colleagues who are walking the halls of GM on a very regular basis, and others as well. So we have close relationships with them.

Donald R. Young: We're pretty close to that.

Ricardo C. Rodriguez: To that company.

Ricardo C. Rodriguez: Many of our our Oems and so.

Ricardo C. Rodriguez: We have colleagues who are.

Ricardo C. Rodriguez: Walking the halls of GM.

Ricardo C. Rodriguez: On a very regular basis.

Ricardo C. Rodriguez: And others as well so we have close relationships with them.

Ricardo C. Rodriguez: But there is still an element of arm's length when it comes to some of these communications. Thanks. And then just following up on a previous question, as a result of companies advertising hybrids, nowadays, are you seeing any indications from OEMs that there's less urgency to move forward with full BUVs? Yeah, I mean, frankly, we see the emphasis on hybrids in investor communications, not necessarily in development roadmaps and the industrialization plans for these companies.

Ricardo C. Rodriguez: But there is still an element of arm's length. When it comes to some of these some of these communications.

Ricardo C. Rodriguez: Yeah.

Speaker Change: Got it thanks, and then just following up on a previous question.

Ricardo C. Rodriguez: As a result of companies emphasizing hybrids.

Ricardo C. Rodriguez: Nowadays are you seeing any indications from Oems that there's less urgency to.

Ricardo C. Rodriguez: To move forward with full bvs.

Ricardo C. Rodriguez: Okay.

Ricardo C. Rodriguez: Yes, I mean, frankly, we see.

Ricardo C. Rodriguez: The emphasizing of hybrids in Investor communications, not necessarily in development Roadmaps and the.

Ricardo C. Rodriguez: Industrialization plans for these companies. So so time will tell on how many hybrids will really be out there.

Ricardo C. Rodriguez: So time will tell how many hybrids will really be out there in two or three years' time. A lot of OEMs that we've seen are very vocal about hybrids, but we just don't see people internally working on those hybrids. In some cases, the...

Ricardo C. Rodriguez: In two or three years' time.

Ricardo C. Rodriguez: A lot of Oems that we've seen being very vocal about hybrids.

Ricardo C. Rodriguez: We just don't see people internally working on those hybrids in some cases.

Ricardo C. Rodriguez: The folks that would have been working on the modified ice portion of the powertrain have actually been laid off from those OEMs. I think people are still with their, Unknown Executive, George Gianarikas, Neal Baranosky, Aspen Aerogels, Unknown Executive. That's what we're seeing inside of several of these customers, right? Got it.

Ricardo C. Rodriguez: The folks that would have been working on the <unk>.

Ricardo C. Rodriguez: A modified ice ice.

Ricardo C. Rodriguez: Portion of the powertrain and I've actually been laid off from those OEM. So.

Ricardo C. Rodriguez: I think people are still with there.

Ricardo C. Rodriguez: Put on the on the accelerator around the EV transition, but obviously one probe if they have.

Ricardo C. Rodriguez: Some alternate hybrids that they could sell in between the I'll just say, yes, we could do that without providing a specific plan and I think.

Ricardo C. Rodriguez: That's what we're seeing inside of several of these customers right.

Speaker Change: Got it thank you very much.

Ricardo C. Rodriguez: Anytime.

Alexander Eugene Potter: Thank you very much. Thank you for your time. And our next question is from Amit Dayal from HC Wainwright. Thank you. Good morning, everyone. With respect to the thermal barrier pump, hey, Ricardo. With the thermal barrier contracts, Ricardo, with these large OEMs, is there a cap on pricing over the next 12 to 18 months that could, you know, prevent margin upside?

Ricardo C. Rodriguez: And our next question is from Amit style from H C. Wainwright. Please go ahead.

Amit Dayal: I guess I'm just trying to see if, you know, if your costs move higher, could you pass those on to the customers? No, the contracts are very simple in terms of pricing; you basically have a part number and a price that is basically set unless there's a significant redesign of what that part entails. We don't have any sort of commodity pass-through with our customers just yet. And I think that that was by design, just to keep things simple.

Speaker Change: Thank you good morning, everyone.

Amit Dayal: With respect to Amazon the variable pay.

Speaker Change: With regard and good morning.

Amit Dayal: Over 100 contracts regarding with this module is there a cap on pricing so over the next 12 to 18 months.

Amit Dayal: Go ahead margin upside I guess I'm, just trying to see if you feel costs move higher could you pass those on to these customers.

Amit Dayal: No I mean, the contracts are very simple in terms of pricing you basically have a part number and the price that is basically set unless theres a significant.

Amit Dayal: The redesign on what that part entails.

Amit Dayal: We don't have any sort of commodity pass through with our customers just yet.

Amit Dayal: And I think that that was by design just to keep things simple.

Ricardo C. Rodriguez: And as you are aware, right? I mean, these tier one auto supplier contracts have evolved to the point that they're as vague and non-committal as possible. But again, it's really the fact that you were designed in and the fact that you've built up the capacity to support the customer that gives you staying power within them, within the program. And then on the Plan 2 financing, right, I mean, I mean, Looks like the DOE should award a company like you with this grant or loan.

Amit Dayal: And as you are aware right I mean, these tier one auto supplier contracts have evolved to the point that there.

Ricardo C. Rodriguez: As vague and noncommittal as possible.

Ricardo C. Rodriguez: But again, it's really.

Ricardo C. Rodriguez: The fact that you are designed in and the fact that.

Ricardo C. Rodriguez: That you built up the capacity to support the customer that gives you a staying power within.

Ricardo C. Rodriguez: Within the program.

Speaker Change: Okay understood. Thank you.

Ricardo C. Rodriguez: On the on the plant.

Ricardo C. Rodriguez: Financing rates.

Ricardo C. Rodriguez: It looks like the deal should a company.

Speaker Change: Thank you.

Ricardo C. Rodriguez: With this.

Ricardo C. Rodriguez: This Greg or alone.

Ricardo C. Rodriguez: But in case that doesn't come through, are there plans in place to move quickly to other financing options, given the sort of sense of urgency I'm getting from this call about, you know, moving forward with Plan 2? Yeah, I mean, all I can say is that we're moving with the same sense of urgency within the DOE, and the DOE has actually moved with extreme urgency since we got to this final phase, of Due Diligence and Term Sheet Negotiation. That's what we added on slide 14, literally straight from the DOE's website about what the work entails. And if you look at what those workstreams entail, it's pretty intense I mean, they've really given us some of their best resources.

Ricardo C. Rodriguez: But in case that doesn't come through other plans in place to move quickly to other financing options given sort of the sense of urgency I'm getting from this growing the book.

Ricardo C. Rodriguez: Moving forward we plan to.

Ricardo C. Rodriguez: Yes, I mean, all I can say is that we're moving with the same sense of urgency within the Dod and the Doe has actually moved with extreme urgency since we got to this final phase of due diligence in term sheet negotiation. This way we added there on slide 14 literally straight from the east.

Ricardo C. Rodriguez: Website.

Ricardo C. Rodriguez: But the work entails.

Ricardo C. Rodriguez: And if you look at what those work stream entails hits its pretty intense work I mean, they've really given us some of their best resources.

Ricardo C. Rodriguez: They're extremely dedicated to getting this done, and we're all together playing to win in this. So plan A is to win. Thank you guys, that's all I have. Any time. We have no further questions, so I'd like to hand it back to Don Young for closing remarks. Thank you. Thank you, everyone. We appreciate your interest in Aspen Aerogels, and we look forward to reporting to you our second quarter 2024 results in early August.

Ricardo C. Rodriguez: They are extremely dedicated to getting this done and we're all together playing to win in this.

Donald R. Young: So plan a is to win.

Speaker Change: Got it understood. Thank you guys Thats on this.

Donald R. Young: Anytime again.

Ricardo C. Rodriguez: We have no further questions I'd like to hand back to Don Young for closing remarks.

Donald R. Young: Thank you.

Donald R. Young: Thank you everyone. We appreciate your interest in Aspen Aerogels and we look forward to reporting to you. Our second quarter 2024 results in early August be well have a good day. Thank you.

Donald R. Young: Be well. Have a good day. Thank you. Thank you, everyone. This does conclude today's call; you may now disconnect from your line and enjoy the rest of your day. Results will be announced in early August. Be well.

Donald R. Young: Yeah.

Donald R. Young: Thank you everyone. This does conclude today's call you may now disconnect your line and enjoy that.

Donald R. Young: So.

Donald R. Young: In early August B well.