ASPN - Earnings call transcript Q3 2018

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Operator

Good afternoon. My name is Jesse, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Aspen Aerogels Third Quarter 2018 Earnings Call. All lines are placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. Instructions]. [Operator may you your begin Fairbanks, conference. John

John Fairbanks

as compared I Thank Aerogels Aspen's to of of results most of conference afternoon. Officer. call XXXX. nine are items and Included over developments, you turning Young, statistics management's a and financial measures sheet a on September address Aspen's CEO. a for Aspen section ended the use measures months There summary Press that a housekeeping GAAP reconciliation Investors in few President for to is and us operating a like available call. the for operations, financial summary as Aspen's the well the is statement Financial release non-GAAP XX, applicable to before joining www.aerogel.com. of of Chief quarter Good would Aspen's summary I'm and Don Fairbanks, balance and the John announcing key release the business press website, financial

Investors plans our of uncertainties. statement that this regarding beliefs, targets, In addition, approximately any version an include to statements, note for is Please historical business and other including projections, risks section contain Such will the a statements expectations, forward-looking year. prospects, fact. statement one today webcast and archived will discussion any outlook, website Aspen's that estimates, of not are subject

press Company's the Form most with and the files on particularly also release factors affect materially of recent today more differ could in Company's may found website. statements. expressed of SEC be the issued press can found issued in report annual list those with in can release Investors discussed today Aspen's results reports and the from actual in filings Aerogels' Aspen in XX-K. Company's that the Aspen Aspen's actual be detail forward-looking A are section the results in these SEC,

made Company's X, today views the of today statements XXXX. November Forward-looking represent as

future to events update to these or disclaims forward-looking reflect statements any Aspen obligation Aerogels circumstances.

of definitions financial non-GAAP directly prepared we President available the with These comparable the During Generally The measures, also accordance and these and press reconciliations measures GAAP. in measures measures These Accounting present non-GAAP discussion substitute intended Aerogels. the Aspen considered adjusted to Accepted is call, in financial prepared Don non-GAAP these release. financial be to accordance refer will to GAAP. financial including in financial why of call or results a Young, not for U.S. with as GAAP non-GAAP or we CEO in not are EBITDA. this to are most measures over financial now of isolation turn I'll today's measures, of Principles

Don Young

you, for by John. start us afternoon. XXXX and providing earnings for our I business performance. Good joining you call. comments Thank will the QX about our Thank

XXXX for and review our Next, update year. our the year-to-date QX guidance John will and financials

We with will my in Q&A prepared I the remarks. conclude cover session. topics call a three plan to

First, including I remainder will see XXXX against performance playing the describe we commercial how the also outlook our on indicators. comment current for out environment QX, market of and review the three XXXX the

XXXX summary significantly QX and which level, strategy, targets our early and have made years. the stronger million each projects to in the commercial for of than are noted and higher adjacent handful I second call. time result technology At historically million markets. QX decisions outlook view that across and of for core, was I of million $X XXXX of was has execution back a of the the quarter of captured platform capital is third, our orders At our the my on that comprised fourth year. new share in by our our that of virtually $XX.X XX% quarter. maintenance we key a work last entirely of update quarter project revenue usual an XXXX and $X the in lacked delayed revenue many And provide lack of the earnings will asset the was leverage I'll We Second, aerogel investments. million, believe we owners $X QX and projecting

revenue in more We While in QX only slightly project in near-term. was pipeline project than becoming higher our see considerably QX. active

are to this of will of size time our and our the expansion and our XXXX that to strong in our are project success the strategy growth essential of and period. We during over significant key capacity believe manufacturing increase our revenue sales QX expand mark the a building projecting We two in project and force work prove on to XXXX. blocks of based

delivered to we QX million. with work when This XX% hitting CAGR revenue the levels point $XX day-in low in day-out $XX growth from function of a levels roughly and XXXX project significantly work between by in expect to more between sequential referring Since maintenance revenue. represented and combined I'm or a QX our work, million time, and and increase I normalized steady to work project that grown a project When refer consistently of but of We and decreased levels is period has fourth maintenance normalized a of of XX% work QX quarters. more strong our has project revenue XXXX. to increase XX% XXXX history work

will anticipate petrochemical to for in remainder of project QX Asia In projects LNG, and U.S., be our more the orders represent In alone, to received earlier. XX% set active purchase recently we first the have see Africa. XX% million active more revenue. XXXX. we the $X million delivered stated in near-term. becoming XXXX in our specified pipeline are $XX of We I work half subsea over and of and and project with We As

reach not strong to historical levels This market could or change, for work signals projects revenue in the we to for do in recent total a expect we expect of While more XXXX, do trends project improvement XX% account year. years. compared

new expanded marketing enhanced are programs. growth work in in increased our In revenue addition, we sales trends and forecasting in the base by driven favorable to products personnel, project investment

We our projections. price a for implemented price XX% increase will action our revenue XXXX selling that average XXXX have and by approximately also support

we of return of are year. to performance all factors positive growth of now XXXX revenue in excess these result and I our XXXX full three to the a will indicators. As for adjusted turn a EBITDA XX% projecting

revenue of As Base a base project and recurring our for growing our XX%. in good stream. of of our day-out are was revenue reminder, expanding they and million. three $XX the of in quarters and small and between Base consistent We've growth million million version in of revenue, was day-in goal year-to-date with through annual growth revenue of scope and base first work, initiative. a XX% revenue maintenance revenue, targeted driving indicator XXXX a EBITDA $XXX adjusted level both EPXX in XXXX capacity base from $XX our for XXXX long-term revenue

it from million For and the fall target. while the full-year we levels mid-XXs between grow base and XX% XXXX be record expect into our will number, X% revenue it a will to $XXX of short

indicator relates EBITDA measured revenue in each The and at year-to-date second performance the growth as adjusted to XXXX for of quarter. end

significant double-digit in Our EBITDA. revenue goal is to adjusted return growth improvement and to to deliver

wins and a base the set of continued growth expect do XXXX or strong to believe Although, to we project will and our do adjusted stage create return performance, revenue XX% our growth for additional XXXX, in adjusted near-term not positive QX solid in subsea that and revenue in finishing EBITDA backlog, XXXX, excess EBITDA. revenue anticipated total grow we momentum

The third performance relates the metric initiative. XXXX to EPXX

price feet aerogel our XX from approximately XX EPXX material blankets increase, goal for XXXX in end of of by XX% implemented impact million offset square EPXX including of to to our feet capacity square the capacity Rhode which goal The the raw Providence is year the manufacturing XXXX. Our per increase million current to expanding translates we Island East our facility price increases. of by to

technology post EPXX the per $XXX million, capacity will that million EPXX EPXX in the EBITDA capacity Our continue generate approximately range million potential to to will EPXX $XXX by revenue $XXX square our capacity million project of our productivity revenue $XXX target. The of of of capacity capital Providence end terms this to well to primarily or the capacity feet million driven facility. to $XX square to from improve million. we East on our XX to million revenue approximately designed is XX We're million efficiency. advancements, progress. increase approximately to capacity year expansion By $XX post in Aspen of manufacturing have process expect we adjusted our At making of significant and manufacturing XXXX, represent way feet

$X million is and for XXXX the our by from prepayment supported capital partner Our previously million BASF. received is EPXX $X budget

we need our When why full outlook, asked we of XXXX. math our total leads to are in comment capacity invested the hard that believe near shape. costly two to and will initiative answer. XXXX has achieve you grow quarters With two XX% operated parts progress we XXXX, to it project improvements There grow practicality base that we other commercial technology or EPXX will than future. string to for on work, physical is we our $XX we've with XX% of general recent initially believe the to using capital And operational good us to XX% are Given near outlook. sufficient when of initiative believe the capacity respect the additional goals in we the each process with is and our to work million make increasing in more capacity below believe multiple next by to do assets. commercial One and the revenue will One respect I've years. anticipated. EPXX. together approximating capacity This comprise been important with less in to our our revenue we've That the or years. to running at in

would we meaningful project, EPXX to us Something a improvement growth The and unable profitability without deliver prepares for EPXX. profiles. be our to

an of update topic execution the on strategy. second is today The our

Our strategy to technology adjacent and are elements new platform aerogel our core There the markets. is across our leverage strategy. key two to

The capacity And these of first from revenue EPXX the capacity initiative million with facility element between annual $XX to year. core EBITDA a adjusted potential to our generate order per and is extended manufacturing adjacent the and $XXX to fill $XX create total business markets including to million. of in Providence million grow

of platform businesses. technology element creating leverage to strategy our is aerogel the second by The additional

on by to now insulation we ban commercial driven begin the and as first earnings and penetrate insurance building modified have started our call, XX above industry outside response meters new and all the to last the tragedy our regulations initiative in process Since infrastructure. major our both part in We Grenfell Tower jump market of UK with combustible the the energy exterior commonsense. largely promising with of have BASF materials buildings renovated

to a with goal core BASF joint with the business focus our The Along we to generates activities a product in we around non-combustible, opportunities high cash to potential performance to partnership the aerogel want have which value. generation of continued fast BASF. believe evaluation products to key have new maximizing technology a markets. on in market development to intensify for is and leverage to and that infrastructure program potential returns partners, the build template BASF The new technical, commercial meaningfully and to the the working paced reinvest with that adjacent with safety we second markets, significant this We combination unlock Our relationship is and as new both with is in for are markets additional these substantial platform that energy and a can elite in other strong company. shareholder perfect replicate realizing breakout energy our a to efficiency. lead financial long-term business reset our and

and of XXXX third targets the commercial view year. outlook today The for topic for our our the is early key

of expectations XXXX our to comments While would like provide for year. level we to the in time guidance expect provide our February. the at earnings call our high XXXX I QX about

believe a We deepening EBITDA day a both financial materials the of of and our work, revenue such summary, and a with a revenue the percentage in in the opportunity, to of we grow a by XXXX. project as mark for increase positive This the full ours. view XXXX expectation norms we in believe further maintenance of during relative believe around expect net adjusted revenue significantly technology year. robust products elite as of In the pipeline. continued and of move for based will generate work new large grow the in and near-term our out represents day recent to will building historical total we aerogel on And project our also growth lack and that early revenue and similarly And the bottom will in adjusted platform. positive towards the XX% more emergence project energy excess cycle deliver quarters impact And in EBITDA is market. price our XXXX late and We downtime positive partner of business commercial XXXX BASF relationship leveraging XXXX.

for We the of are the laid confident XXXX company. that to increase groundwork the we value have significantly

I’ll over to a financial Now results. of John the review John? call for our

John Fairbanks

running to the Thanks by quarter results start through a the Don. level. I’d first for of like third and months reported our nine XXXX at summary financial

quarter revenue million to declined $XX.X Third total million XXXX. from $XX.X in

per loss loss was $X.XX of last share or net quarter per net $X.XX versus $X.X Third a million year. $X.X or share million

other amortization, taxes, million, We EBITDA was compared year operating define believe negative third costs, net compensation or of third adjusted last patent expense for EBITDA versus $XX,XXX depreciation, We the and income quarter interest adjusted positive ago. quarter $X.X XXXX that as Third a we to million, not of stock-based $X.X do our indicative XXX,XXX encourage the in of during year. of items core performance. are enforcement loss quarter

first $X.X $XX.X versus $X.XX or million a million first $X.XX per $XX.X net EBITDA negative the share adjusted of components months, revenue year. costs on months months I the $XXX,XXX was nine XXXX for last last XXXX $X.X nine additional results. the last to of declined our year. was $XX.X loss compared The loss months in first year. now Net million detail last the of or $X.X of quarter $XX.X will patent share XXXX per from million nine nine in to And negative total third provide of year. of first incurred We million, million enforcement million versus

First, I'll discuss revenue.

and product revenue revenue Third of of quarter $XX.X Research of total million revenue comprised was $XXX,XXX. Services

growth the partially by core offset third During notably South last during quarter, was and by was This work and million $X.X This revenue in project in in of the related subsea petrochemical quarter markets, a year's third most American revenue $XX.X U.S. and driven refinery decline products decreased million. continued versus decline XXXX. the America North the decrease markets in project in our in by

X.X year. shipments X.X last blankets quarter, the million decreased aerogel square square of million from During to feet feet

August, $X.XX high part million in sequential average second impact third achieved revenue in the products, XX% quarters in $XX.X growth quarter million enacted average per our in call decrease While price fourth decreased increases and increasing of selling This revenue price in At we year-over-year over early of half sea expectation the our both anticipated with in product product of decrease to price work the the foot year. This second by sequential project by of third the XXXX. in to during reflected the We levels increasing from mix we XXXX. earnings $XX.X in the a square outlook. prior selling X% of in but largely growth of quarter. price our time the line that offset of reflected quarter by second

product million our levels quarter the growth projected range will the of solid million. subsea Fourth reflects project continue base petrochemical to the both in $XX.X expect markets The in momentum in work. fourth and projected into quarter. $XX.X revenue refinery third versus sequential quarter We and outlook

Services the full projecting revenue I'll now For to revenue. our expectation in between our is XXXX Research we’re and range $XXX turn year, million. million $XXX included guidance. This will product

relative Research to Our of Services performed to This contract the timing versus quarter year. research Research Services due government research last value and revenue $XXX,XXX the quarter revenue the third $XXX,XXX is of increase XXXX. to principally related for to during was during agencies. contracts increased

Services our guidance. we XXXX is expectation approximately For also revenue million. of in $X the year, included This Research expect full

silanes. Next or $X.X the third a mix The profit to cost I'll growth, by decrease profit. $X.X decline in Gross gross the increased inventory in volume. X% products during in was Year-over-year gross of by of product materials or year. and unfavorable We million raw quarter of manage revenue of XXXX, increases instituted revenue profit last led versus was in an sold. production decline of the discuss million cost quarter driven XX% third

XXXX, capacity to the XXs, forward utilization in period. the to fourth quarter revenue, improvement expected the increases low margin in looking anticipate a the and in gross significant However, of we output

expect low reach mid-teens. margins to year also full the to We gross the for

Next, operating I’ll expenses. discuss our

last quarter research general in XXXX, and approximately $XXX,XXX essentially costs. third to at million. third and The in were fully of administrative flat and sales Increased of decreases were expenses offset year operating by expenses $X.X in the development, marketing quarter

high reducing the range operating million revenue guidance of are XXXX of the our full We $XX.X our expense at $XX.X end revenue at guidance end between and range. year projections our low million,

due our cash Capital $X.X nine Cash accrued working and first capital principally during investments totaled the in the months $XXX,XXX, operations in negative to of of year. from for million, investment accounts discuss months EBITDA our EPXX included nine million I'll first an and adjusted the months of $X.X payable flow in million, and and expenditures our Next used million in $X.X the balance reflected initiatives first sheet XXXX. of a last decrease nine during down expenses in during spending $X.X period. capital

end of $X $XX.X cash, prepayments the current our net million also nine At months, facility, million. the had of we revolving the credit borrowed under the BASF, $XX.X equity quarter, During assets third $X.X aggregate million, of received of shareholders we $X.X from million. of million

a $XX.X the to to outlook million, full from range range of expected million an the EBITDA between million. our total guidance In a revolving million, of to of of revised $X.XX of prior to $X.XX at range range of shares Adjusted $X of depreciation $XX.X outlook compensation loss to addition, $X $X per guidance $X million loss financial million million, expected expense interest loss million $XX.X and loss of of million. XXXX share. also stock-based of expected to revenues $X.X $XXX to million, between assumes a at available a share outstanding of revised to $X.XX revising $X.XX between from guidance a per for $XX.X Net loss between amortization of average year. assumes access $XXX of $XXX revised million $X prior is and weighted under We're the end $XXX prior prior to is loss our expected million million we and loss additional to had the from is from year a guidance and EPS facility period. million. million revised and million credit EPS $XXX,XXX. XXXX, for guidance $XX.X XX.X of

addition, In to financial per enforcement actions expect a low this a patent selling And average our price expenses or and for mid-teens with for of of the foot, plus $X.XX square $XXX,XXX margin cost the year. in and year. outlook includes the associated we $X.XX full gross minus

aggregate level XXXX an Turning our within to the adjusted of full year context range, cash at set in outlook. out the

exit expect million and balance million We to outstanding on $X.X $X.X million $X.X revolving XXXX of on hand of facility. credit and with our between cash

for We funds EPXX also million $X.X and for including approximately totaled our capital initiative expenditures projected year. the

million. expected our we loss continued our quarter $X.XX million. during our guidance Fourth like $X.XX our actuals months fourth between range the Although, is total $XX.X a includes loss million full that revenue The and quarterly range EPS indicates fourth Fourth between to XXXX $X.XX between expectations expected I'd quarter. to and strengthening range range for adjusted $X.X is per that year between emphasize XXXX is and provide updated to don't million And quarter is to and fourth guidance, normally full nine quarter year differential to expected outlook a and net positive of share. $XX.X $X.X quarter million expected million. $X.X between

expect margin XX% the As discussed we fourth during gross quarter. to earlier, our exceed

As Don XXXX. mentioned, looking to forward

projecting to are of our financial our strengthening projected in revenue to EBITDA. The expectation project to volume loss refinery We of deliver pipeline in our performance core designed continued our to business. LNG XX% opportunities, raw XXXX. fourth adjusted total maintain the positive improvement XXXX grow and of call the growth in in XXXX net the markets. recent to in particularly increase excess of our and petrochemical reduce reflects guidance XXXX costs to This and at issue and plan a increases quarter subsea economics We conference price offset in time February and detailed markets material of currently

back Eric Instructions] with you. Now [Operator call I’ll comes Your Jesse Thank the from first Thank turn to Craig-Hallum. Q&A. question for Stine you.

Your line open. is

Eric Stine

Hi, Don and John.

Don Young

you? Hi, are Eric, how

John Fairbanks

Eric. Hi,

Eric Stine

Fine.

million hit So I to were XXXX. to million I with about want you for half $X.X and just know quarter you last talked in the start $X subsea, second orders, in think then I expecting

wondering that million added numbers I'm updated gave Or that the XXXX? like have additive quarter. had just some is to $X you just looks million $X.X You you today. given numbers it with the second to to

Don Young

Yes, that's exactly right.

– it entire total, So number correct. are added that's we've exactly we by isn't isn’t up $X.X going to the the million, about added,

Eric Stine

Okay. you in when assume for year? Is something expect, of orders mean, is that you're looking maybe in how for one would subsea of you out terms that rest and year-over-year. the said all I playing And the see that number growth that's done, I

Don Young

We have an right projects had pipeline us. been good market subsea it's active for And of now. a

at well to projects this possible So lot XXXX we XXXX. XXXX deliverable in subsea will of them point, in again are anticipate for we that in specifications. but bid We ones some with additional quite we’ll that including we for have the we continue and where a win

Eric Stine

Right, right.

Okay.

John Fairbanks

XXXX. As Don we in project Eric, $X million Dip] significant subsea year this [Audio said, expect also and growth XXXX in we in work

Don Young

had plus much of And as million, had as we've You'll as we've and subsea Eric. remember, where had or revenue $XX or million or million where as years little million of years minus $X this. $X $X we've

but it's now moment. right in obviously at that's us get segment moving swing that's direction to for So the a the right

Eric Stine

maybe the increased not. from just just you tariff color chasing or like bit. Okay. ask project. was in are if maybe had one you've be impact you the that Maybe in China expanded LNG to like sounds going could the if proposed you've dig know confidence it a on like multiple projects LNG, that from on It That’d there optimism any I but negative just been to past turning to I given maybe and little more has it over now And confidence, think .I seen helpful. sounds sounds

Don Young

portion LNG not but portion. great. a our major That’s of outlook China is a

receiving We on interesting board. are suits by well several several you being because we with drawing working because the are terminals It's those that companies international though international hard that of what at point. as of this know us and there are participated engineered most those companies

product and cetera. So they product et they know et our well know how to cetera, are bid you right. our But

seeing any base, not we're So single project. broad

are Although, but there are Australia but are in rather that U.S., Africa broad including also seeing a well. in Asia, few in large, projects activities we in the as based

LNG of would of lot projects. case And portion well and three of become through our product, those and We projects extremely first right. XXXX. a happening really installation for we’re service our really these delivered certainly well products fortunate, perform So the in excellent their activity studies in year

confident meaningful we and in LNG about growth business to and in And a XXXX. are our going so role play the it’s XXXX

Eric Stine

step it the assume about Maybe well? as it. there to its say, $X those broad – in fourth takes butter, got large uptick one could there, based. puts some as swing but bread like big million, are last counting just $X wondering But Maybe you’re in projects up an in for there a work million on and the sounds that project Okay, obviously I’d I for mean, looking its quarter. me, the and just just talk you

Don Young

two not play, in that on significantly end some depending or suggested any There the of as And million orders have anything projects and of high of year. low part large range That’s meat not provided fourth quarter. one point. of could throughout a we the or are or at are kind this $X end hand John, you of roughly that is any There largely activities maintenance that the potatoes remaining don’t projects. a

John Fairbanks

in so again nearly mentioned, is once And of that hand, that base think work I we’ve million we in that’s subsea got And [Audio a that good projections Dip]. already fourth underlies quarter. project Eric, the $X a on solid

Eric Stine

lot. a thanks Okay,

Don Young

you, Thank Eric.

Operator

Chip Your Moore with next question from Canaccord. comes

open. Your line is

Chip Moore

Thanks. going? Hey is guys. How it

Don Young

Chip. Hey,

Chip Moore

you seeing, Are project thinking in bit the Wondering about pipeline, if you’re how rates visibility back with a you that some of the what see things maybe win talk the can to past. about more there? you compares

Don Young

It’s ways period we seven different we Even little the product now if have CAGR. million installed. in back It’s million XX% different that the where in than past revenue the you had go the past. or to $XXX sense back $XXX a of year approaching

about and have studies, We case we of and lot We're and specifications active feel reason a the of lot a think that not pipeline the of I guess this now are but in projects. including, is we strongly projects, XXXX XXXX. in active specifications

subsea one And us it It's and no petrochemical. so it include LNG also based. it's based projects is feels different to broad project, and broad number of across and geographies

segment So, our as across well.

in and different by say that record accident is in XXXX. sure marketing now our and specifications on as were and those teams we're by largely not happened more possible. track sales those mission We many specifications. project partly we're resource their really projects projects that and our be as the that as in later those specifications. that And dedicating three hasn't also to I group just we now have that on where focus, the towards but an did at allocation being you'll is specifications in happened effort of a would We the those on in many projects in beginning. feels it LNG We are it remember solvers there broke into So, projects problem life

Chip Moore

dynamics? I to Got get it. And are let those follow-up that, the price increase, we you think stronger about guess stay dollar your and ability here, competitive. comfort with that how

Don Young

It that value this be our but delivering Yeah. we putting place we're with increase. We price right confident. our we want a in not to that industry effect We're to in some of on materials alone felt of see how in raw tick-up offset now. that some it and believe, of lot in price increases X out. takes January We plays we're able will

event. it's an So, isolated not

Chip Moore

And maybe one more for me.

next suggesting having can relationship and is that that us like discussions and partnership, already, year for Thanks fair BASF at you you and if bought guys. it you maybe there. potential then update another some hinted within or not maybe sounded touch on You that

Don Young

that So, And BASF we efficiency which improved And product to a we've and this them area, with really [indiscernible] with so-called on revenue beginning energy working them them glove in really generation as to product. relationship on to had in a second but we dedicated – see portion are terrific them. with we're terrific technically flow have continue with some hand to as a a non-combustible well, work well.

look the and nearly a we to we have feel So and ago comments, XXXX. to my I opportunities continue into financially we put dedicated into commercially possibilities aerogel relationship. And With using markets. indifferent a partner probe do markets. that partner several and – platform technology that template with we I dimensions additional will they is in said as a technically areas rich take having to that additional opportunities in to a and there respect additional for a an year the as are place think lot to expand of to team with a no And doubt in us will as

again, feel that, partner segment would to love opportunity. a with something now A,B to picked C. year is go And than we I is able from in platform we or the fact after be less say have rich that So, yes, to

Chip Moore

Thanks guys.

Don Young

Chip. you Thank

Operator

have we that Don. questions time I'll call With the back pass all to for that's that, today. the And

Don Young

good reporting in to much. your fourth Aspen We very we results February evening. look Thank Have our to Jessie. quarter XXXX. and you XXXX in Aerogels you, appreciate interest a Thanks forward

Operator

today's concludes This call. conference

You may now disconnect.

Aspen Aerogels (ASPN) 1 Nov 182018 Q3 Earnings call transcript