ASPN - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Jesse and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Aspen Aerogels Inc. Q2 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank

conference. may you Fairbanks, begin John your

John Fairbanks

Good for Chief and Thank I call Call. are afternoon. over you few would I’m Aerogels the a Young, before John Conference like Aspen to to Fairbanks, turning items Don CEO. Aspen’s housekeeping Financial address There joining Officer. that us the for President Aspen’s

compared financial as of of Aspen’s announcing the results the measures a non-GAAP of release developments, on well and GAAP Press as Aspen’s applicable use reconciliation management’s financial available measures to most business website is www.aerogel.com. section Investors

six Included balance ended XXXX. is sheet, release financial June a summary summary the of and of key operations, for in months the and statistics and XX, summary press operating statement quarter the

website section year. will an Investors approximately webcast archived this addition, of version for contain of In one Aspen’s

will our is uncertainties. forward-looking prospects, regarding subject projections, and expectations, that beliefs, discussion note to statements any Please statement forward-looking and today statement any fact. risks statements These outlook, a historical plans other targets, including estimates, are include business not that

on actual list Aerogels’ could in more factors may company’s Aspen Aspen’s in the expressed XX-K. particularly the from issued be in and Form press Report detail affect reports most can actual found of company’s results that with the SEC, statements. the forward-looking release differ in these in recent files those today results A materially discussed Annual Aspen

of be website. press in Company’s and today section with can release issued Aspen’s found SEC filings the Investors the also

views made today, today X, of XXXX. statements the company’s as Forward-looking represent August

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

intended financial EBITDA. GAAP. results accordance prepared Generally in Accounting for or with are financial not non-GAAP During to or financial this to not be will considered call, with isolation measures GAAP. measures substitute as non-GAAP in are in Principles a including prepared Accepted measures U.S. accordance adjusted These we These refer

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

turn the President Don Young, CEO Aerogels. now I’ll to of call Aspen over and

Donald Young

Thank Thank us our Call. outlook. by about for you providing our Good you, QX John. and performance comments XXXX start will afternoon. for I Earnings joining

Next, half our our XXXX and QX and review John financial performance will XXXX first guidance. update

We will conclude with session. Q&A the call a

The second for XX% XXXX to indicators by on EBITDA total we grow to significant year, accelerate, us, completed continued percentage initiatives revenue gross least more improvement specifically was quarter XXXX. at remainder of have the and margin important an for and revenue XXXX focused and over our of are revenue, from project growth because increasing X work. revenue derived important total than performance for XX% the that of will Two into to because provide benefits

grew objectives. on trend to We the growth these strong We’re and this pace XX% third by total to into revenue in quarter. expect QX meet we continue

day-out XXXX, since our Cryogel grown exceeds which revenue, stemming work, industry With project million project has our Pyrogel when This we revenue customer of increments, be introduced steadier maintenance respect day-in revenue percentage with and size. defined revenue, consistent revenue in is a scope distinguishable $X smaller, specific total tends and we and practice from in come from to have consistently as which project to first to work, products. of

a to in project position a reestablishing for balanced team teams deep local relationships us work. sales we and our to work into substantial tapping play order And project role dedicated revenue. built in addition, regional in more Our to are their overall

XXXX our significant the and XX% total revenue revenue half as revenue in first target was XX%, to for a our from increase set target. percentage Project XXXX performance performance indicator of We a for XXXX. exceeded of our project

June, Fab revenue million of project. order PTT to end the set project end million of $XX We will LNG Nong the of an purchase very $XX for shipments Terminal included the XXXX. initial as the the until of anticipate part to At for run project shipments

contributing significant percentage our our that Our we at XX% on XXXX, both we from Overall, revenue and XXXX is in revenue and high least our XX% are growth we in projects to on in and more a work a than of by expect again, project return for and work commitments are levels XXXX activity work. to derived have project to full-year confident will grow meet growing focus maintenance and project beyond. XXXX, investment continued in revenue

progress As the we capital by end capacity cost to initiative an EPXX low increase will technology XXXX, improvements process on in goal year. manufacturing our XXXX XX% of by significant we made a next complete reminder, to implement our

Our the for We by focus profitability, third anticipate optimizing focused the a that contributing third have on our two completing and margins. our drive initiatives quarter in to is materials during we initiative beyond. and second order end in quarter, and three to QX improve to expect XXXX initiatives major gross the completed of building all our

term, implementation operations margins various because QX. to impact initiatives and of negatively short these the manufacturing trials the in of interruptions, and gross our In disruptive was did modestly

from However, the of notably the initiatives we year. experience for these expect impact to a positive remainder

period. below-target QX margin for resulted in had in subsea overall mix margins component a lower product significant project work of the gross and addition, In

Moving our second and half more we product favorable expect gross considerably from XXXX, a benefit margin to mix. initiatives the of improvement to

margin year half expect result, second to XXXX remains we the of reach of a the low As mid-XX%s. XXXX XX%. the goal for to And our gross margins gross for full

profitability million to $XX EBITDA XXXX reach to drive the for year. year-over-year than improve and more by positive is adjusted commitment to adjusted EBITDA This our to central

will EBITDA meet objectives important significant goal these increase stage are in the confident for And XXXX. our that XXXX. set adjusted are we these to is We while in in broader milestones, another

of are growth. gross elements these key to continued The drive and initiatives improvement revenue our profitability margin

our more existing assets more thus making efficient, on more profitable. and focus utilized, intense an have fully We significantly

that company cover is $XX the as remarks like final enable second, additional initiative; are I would a program for these our XXXX. Our performance three First, to prepared on to our and in existing drive business There comment much quick as assets. of generate new creation to to topics indicators manufacturing million our EBITDA from adjusted two profitability designed

work creation important is thermal have the utilized business leverage variety many partnerships successfully the most has founding new element materials, commercialize in Aerogel in aerogel engaged Aspen to of platform. Our which our been silica of insulation an technology of Since strategy aerogel applications. in demanding a to XXXX, our

million To of products. date, over have we these $XXX installed

research on carbon ourselves positioning aerogels. development a than to decade and are more leverage We patented of proprietary and

we Over materials team in explore a market, to use the as our carbon year dedicated not ago, aerogels insulation. a but thermal of the battery

advantage to key energy ion of of core attributes centers on of improve in the batteries, morphology, aerogels, in electrical vehicles. density and conductivity, with range unique exploration take carbon lithium how electric and our the enabler Our strengths, full goal high high key drive a three we next-generation mechanical expanding

Our team and the establishing our IP we our is battery market. aerogels determine as our portfolio potential characterizing carbon actively value in

or in considerably aerogels, leaders systems. and of and could we are battery has battery the technical, as While commercialization and building materials, to production we of we BASF battery bring who global in have development, and attracting much battery mass technology in commercial Therefore, more the of one expert applications in materials. anticipate area the less done production support who materials our partners financial expertise endeavor, battery are

Our to goal aerogel our another attractive business aerogel-based is platform. from build stemming technology

project fourth one initiatives EBITDA; additional XX%s on revenue XXXX. And second, for second improvement our and of our make revenue a platform an will indicator delivery performance margin and first, materials, in are; our we will finally, leading and that the of the revenue recap, leveraging the confident year and on comprising are total aerogel think we formation battery with revenue; an Based indicators We worth outlook, monitoring, our partnership and into solidly successful XX% gross three XXXX to half positive is margin company growth third, for performance at our gross market. our initial new XXXX. adjusted that aimed of three for important indicators progress of meet XX% a XXXX technology a the

potential which can and battery full company. of in to significant material. in the the our breakout to realizing and The building to such in markets a believe growth unlock the to value, lead in XXXX, is the that The and generate as in invest markets, to strong key adjacent is We infrastructure drive EBITDA. XXXX. shareholder to maximizing profitability build adjusted to strong for revenue significant in profitability business will ourselves our to valuation position markets goal With invest additional core meaningfully returns business XXXX and is to potential we in imperative and energy cash improving long-term reset generates materials new of opportunities opportunities our

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

John Fairbanks

Don. our I’d financial the summary start results second quarter Thanks, a like of XXXX reported level. at through running to by for

quarter in Second to $XX.X of million second from grew million revenue the $XX.X XX% total XXXX. quarter

last Second million share from $X $X.X per or million improved $X.XX per $X.XX quarter net year. loss to or share

million negative not depreciation, items or as interest, our core We EBITDA net performance. EBITDA define do of loss Second are adjusted quarter income adjusted before other million compared operating was that amortization, negative and compensation taxes, expense to stock-based $X.X indicative $X.X believe year-ago. a we

our I’ll the components now results. provide of additional detail on

First, I’ll discuss revenue.

shipments services and second our solid comprised of $X.X product subsea of by $XX.X the markets the in of total Second This U.S. and quarter, of of the initial energy million million Terminal represented PTT $XX.X quarter the growth research million, quarter Fab in million. growth driven $X.X from revenue Nong market LNG strong in or project was revenue revenue core total in growth was during to and increase million year’s last XX% $XX.X

quarter XX% price $X.XX feet the per blankets by our aerogel during selling increased of X.X shipments to square Total by average million foot. and XX% increased square to

$X.XX first selling May in the we average XX% the outlook increase revenue in square of for in our subsea year growth of LNG minus projected from per price increasing or $X.XX an are prior quarter between project our foot of XXXX, our per foot. principally resulting At We $X.XX time and markets. XX% plus reiterated year, to our estimate of this square the from revenue investor call in full and

was May guidance. performance in revenue our quarter with second line Our

LNG PTT XXXX as Terminal projections. the a strong growth project addition, In for foundation our Fab revenue serves Nong

XXXX our again are revenue a we reaffirming today. As guidance result,

and increase was part in XX% Next, year. largely during of million material was gross by in in increase XX% quarter XX% volume profit. increase was in an increase profit last Gross revenue revenue selling average costs XXXX versus gross profit and the the $X.X million price, XX% second during or driven of second improvement the manufacturing I’ll quarter The in discuss by or an $X.X of offset the in expense.

revenue our gross increase in lower products in line decrease XXXX a our revenue, was exceeded capacity During cost rate. growth Pyrogel to year-over-year utilization products, the costs continue during and of in the the to our growth second our quarter, in gross rate the a the of quarter. growth derived during cost mix cost products. principally derived margin in outlook, during decrease profit from quarter to subsea from of combined material with This the with XXXX. sold the the proportion project In unfavorable of the due we higher of full in change This significant led proportion year remainder revenue increase our outsized material in revenue profit significant a

capacity our increase the As calls, increase and approximately both earning we will is disproportionate to during in variable the gross utilization margin the expect remainder Accordingly, of lead year discussed margins. a in XX%. profit contribution gross past and we revenue in

of margin offset increases of cost raw year to half second increasing We past the XXXX the also Pyrogel over our during XX products benefit we’ve And see projects to from higher initiatives a the importantly, increase the the mix in experienced our revenue the forecast over of material year. significant the remainder expect an months. our

margin XX% As XX% point expect a plus gross or XXXX final approach the percentage exceed minus year. the we X of full during our or result, will for quarters two

Next, I’ll expenses. discuss operating

development the sales the in last a versus materials increased year principally support expenses initiatives. in result expenses was battery decrease quarter $X.X drive discretionary and offset $XXX,XXX expense compensation, the expenses reduction revenue of million, by and in decreased research operating to of our investment increased to incentive by X% in marketing and Second decrease growth and in operating or part

range We range. of year operating revenue a $XX range million are at of guidance the our million a million of from expense full to revenue revising $XX.X XXXX guidance $XX low guidance end high to our flat end between at our the

in principally generated Cash adjusted sheet million the offset the East investment Capital operations facility $X.X during reflected of totaled from cash by negative balance were second a our in quarter the decrease our EBITDA improvements for $XXX,XXX. working discuss for I’ll quarter Next, flow and million. of quarter. in part Providence during $X.X $X.X second capital our expenditures million

we also owed $XXX,XXX. by under revolving Bank quarter, Valley the reduced During amount Silicon our credit the with facility

We shareholders’ cash, an of of And we ended had equity the net million second million. facility, with current $X.X additional million on importantly, $X.X access quarter million at $XX under revolving our $X.X million, credit our facility $XX.X to revolving outstanding of available quarter-end. credit assets

guidance Adjusted XXXX. $XX.X million. positive prior $X prior $XX.X our EBITDA expected to million, full and $XX.X loss between guidance. from breakeven Net $X.X even. and range million between is range unchanged Total and range million, million fine-tuning breakeven expected to are $XX.X and prior $XXX from expected for revenue between We guidance revised of is financial and revised from million year outlook to between of million between is million $XXX

EPS share. guidance between This loss and EPS XX.X loss $X.XX and shares loss weighted outstanding of for a the is of expected $X.XX assumes $X.XX per between of year. a loss million – per to of revised average of a a from a share, range $X.XX

and assumes In $XXX,XXX. addition, depreciation $XX.X $X.X of of million, amortization expense XXXX compensation outlook patent expense this revised $XXX,XXX million, stock-based of interest costs enforcement of and

square XX% This an margin $X.XX. percentage will $X.XX minus year X assumes full or foot, also our selling plus and gross minus price of outlook or approach per average point plus

expect will range out total year. line XXXX expenditures hand. our cash the the we to Valley Bank full to within Silicon set the $X.X of to Turning credit XXXX context on between with outlook, and net capital our expect of on year approximately million the and we the million for continue cash, million fully $X balance repay adjusted to And EBITDA outstanding full $X with in exit

now the I’ll call for Q&A. turn back to Jesse

Operator

Eric Instructions] Stine question first comes from [Operator Your you. Thank with Craig-Hallum.

is open. line Your

Eric Stine

John. Hi, Don. Hi,

Donald Young

Hey, Eric. are How you?

Eric Stine

fine. I’m

You?

Donald Young

Good.

Eric Stine

your months So, maybe with your number the space, you’ve battery maybe you’ve another. that I into potential but seems it a starting last material bit and it of commentary, the gotten area put misreading I little focus over as over be just into in partnership the like a maybe specific sharpened might guess

this at you of it still curious least by I is if you’ve played learned guess process And have So, you maybe is kind that what the one that out? But hoping case. is of the as partnership that this are also something end year?

Donald Young

I of Yes, this fact an I ours in did reiterate that that I remains and a What ours the a earnings our partnership time I that say with of of referred at the year XXXX. goal what expectation sort pre-NDA-discussions call, to learned? for players. think were battery last most have to of in of the some we we’ve I would think major in part a

and with one talked us post-NDA-discussions area. have of work us and encouraged the much information has to another, in as now, data, area certain have a technical a them just different into exchange few that’s deeper moved that – players They in focused or areas. in to we’ve those major we And of and

we And would become have smarter I more a and it. say focused guess, little in I

in, that that systems is and we because the have of I battery said we lot to us this And carbon in out we direction commentary, expertise to my that the want aerogel. partnerships area a the aim hopefully, of effort. a As our more in in really or as is know a our value as aerogels one critical heck create about right of reason

Eric Stine

Got it.

like your strong across about I capabilities sort mean hold? kind on crossover potentially some Technip, just project thinking helpful. you your I of your should some that of that team, is ExxonMobil, thinking is that within gears, of That’s Okay. now your we platform, applications? relationships mean, thing, about Maybe switching have start

award, that to Technip that you’re this big see awarded down I crossover project. award but is know a subsea. for Arctic the and think is that reason in guess, strong know I from something just with potential ways I the I we Is see a the a this them asking, LNG? that away you could LNG be I ask, road something might

Donald Young

to value proposition we begun think LNG I side. demonstrate the So have very on valuable a

in work, in course. LNG mostly world, now the maintenance of We’re XX around facilities

We including terminal of in built delivered have time terminals in of in now, last export LNG our frame, XXXX, XX large-scale Thailand. and been receiving Point, the used excuse which [Wheapstone] we – me. end XX same Cove on the the [ph]

think both value demonstrating I now. area. of pipeline right are work, we And have a project LNG in in So maintenance strong terms we very project that and our

with we subsea, across that relationship their And company to think you’re a have broadly good as yes, but well. right very Technip,

got project. down from through so our that do to work And myself are LNG working vitally project. our And organization on in we’ve and Arctic to that team right project participate

So we’re to got for compete targeting that project a very a it we’ve in and way. we effective think strong chance

Eric Stine

Okay. I’ll me, business, tuned and refinery took qualified Saudi petrochem heavy while, lifting that core, just know you’re in there. stay something the with last that for on I was that’s one your and Maybe that. Good. a getting finally Aramco,

Just when that to start should business? impact to curious the we expect

Donald Young

or have will past or with I we’ve the year we that you think done see of of that also three of or brought years. over the that course you broadly symbolic will Saudi course focus getting the more over two Aramco the I think the – what and if work and but important qualification so East, was in actually you Middle to region the the past

in Saudi part the Aramco and years see the would that. our Middle come. you playing more – be let’s certainly in and And a of role later more will will to mix that anticipate important I in year East so, this a And geographic the call, our,

revenue some would out East year. of coming I you’re good wins here noticing coming again, anticipate quarter and in the the Middle So

Eric Stine

Okay. Thanks a lot.

Donald Young

you, Eric. Thank

Operator

Amit question with next Your from H.C. comes Dayal Wainwright.

Your line open. is

Amit Dayal

afternoon, guys. Thank you. Good

You front, – the continuing referred lowering on product raw costs. the to focused material across lines? on subsea products or to all efforts this it is specifically Is

John Fairbanks

have it in a more subsea product on like across initiatives Amit, question. Z product but broadly the really very the on coal would an temperature It’s And products ambient our and are good areas. lines, our Cryogel that’s our three impact products. all products, outsized

supply low secondary qualifying value for raw sources cost of our We’re materials. highest

higher year. some volatile to hard of our the the optimizing product vendor volume lower on on working all increases we’re really And cost sort board formulations past with reliance are the across We over more of seen we’ve to materials, and the where prices negotiate reduce materials. base our discounts

just third this As two for a the in gross in host Don in as the mix implemented quarter. volume a to favorable well. the we under mentioned, in profit – they’ll more that expect And expect three principally initiatives have that half, And And our to second got addition of place very floor significant in of be third quarter. operative the had concluded targeted year. there and that, them. were We’ve those have increased we others margin. We’ve and really put to initiatives fourth a we then,

we quarters year. in third Don the each and expect gross this fourth As XX%-plus mentioned, margins have – be to of

Amit Dayal

Is some into XXXX limited continue beyond? this ASP Understood. you room or in increases these for also expanding to XXXX selling to mentioned you and a the prices, play. going average be to expect And do seeing coming

John Fairbanks

price if in just increases our each I would XXXX but practice. you and have we it’s place two – industry year is that’s things, that both since put practice, say also one

the price the in XXXX and put into again and of X%, of but our XXXX, XXXX as look XXXX, back increases anticipate the of increase that’s doing we’ll we – it if material typical to we be of to and in kind So year, to X%, in for well, we XXXX some will prices that the X% is outsized X%, selectively at look increases a range The it. into outsized raw place price in X%, you we increase been that late in industry look increases our is future more increase entering this we why so hard have here X%, about we was would well. any put as in history good an in past saw really XX% again, indication, level, place take we will smart approximately price – but match of

Amit Dayal

one. Thank you. And just one final

looking terms view. a pipeline, is your like of terms space is of in building sort from In attractive, of looks I it up LNG the of project more how guess, this point projects

had these You may similar there the in pipeline or year. working in you anything smaller earlier project win be the opportunities? on a size of a are that Is big

Donald Young

aerogels really project A example that a receiving strokes. we in use $XX LNG between million that’s perfectly in suited of that There of project of like They is terminal, $XX we to said, Thailand us. And $XX terminal kind and project, of broad again, and is rough certain PTT not in that the million available are just roughly million. receiving numbers, parts that. that that are our scope had installation but $XX of million as an that for,

$XX XX and we had look, I million, the for lots then correctly, fact range, of project end company big three to XXXX, in pretty remember at other wins they were type that’s a and X, X, in doing million any if pure for expansions, project There us X, that certainly of enables are in greenfield the maybe big X you that and remember ours. if to of projects $XX X, X, not opportunities projects and XXXX, are wins have beginning And John.

single-digit right the There that host are then projects time of in us. which are credentials pipeline to the And is And available consider our small-scale you project we have these in be solvers are we from for projects which scale. millions, maintenance you that problem being work so on really project time. business to big in I and project large maintenance them side, work, to get the a of small terrific say, us, doing now sort think to the to full spectrum

look makes to deliver next the project easier we’re little successfully bit that So every and a one about win. just on those we excited

Amit Dayal

Understood. Thank That’s you so all I much. have.

Donald Young

Thank you.

Operator

Chip next Your comes Moore from Canaccord. Instructions] with [Operator question

Your open. is line

Chip Moore

is How guys. Hey, it going?

Donald Young

Hey, Chip. How are you?

Chip Moore

build look so there? on able like you bit specifically of PTT support or or Hey, in going little Good. Is a inventory. of anything to what’s that were

John Fairbanks

end of in precisely, product in Yeah, Z and the shipments anticipation quarter. we had of additional we third increased Chip, Yeah. Cryogel at inventory month our

So specifically and we’ve it the goods approximately went was for confident strong that got backlog in that because inventory finished in project quarter. second million building we that of $X our inventory, by But felt up work.

Chip Moore

Absolutely.

So maybe switching efforts gears. over more the side Maybe progressing? you can the touch how a of you’ve outbound bit initiatives sales years, the some on are some made of on those

Donald Young

we Well, throughout our significant look, XXXX made XXXX. team investment a of marketing and pretty end in and sales

So still a and materials that and also our again, a and to a installation a more in those some – our Middle off which I sales anticipate believe in as paying make talked the so out that – that good we performance the sales that I reach technical And are geographic field team to in wins well. would fact. technical included about has East, and We’ve on one, make earlier. we region bit high that focus added substantially with including investments investment

this some activity – work I year. is have seen we some very, there potential remainder areas has were of that as the North would well, that we’ve U.S. say, been in has high America very expectations for in Canada – that the the Interestingly, strong,

look, and and make decisions that needed. good them monitor be adjustments we we make those – as investments sure So we

a very are work the sure they with pleased teams. teams the project project is that appropriately. again, the bid EPCs to working and close regional very it hard have how It’s with the our being the team who is materials with know tight and closely working really that regional teams our doing, We’re relationships

marketing to critical targets exceed and growth of and plus of the sales So year is meet project we’re view, total. the and performance our to that from point fact XX% the the revenue us indicators of XX% revenue a then for going

those we well hand. have in believe numbers We

doing and work in sales the about they’re marketing. excited we’re So that

Chip Moore

That’s helpful. sort we An one partnering for some where traction on one on building last me. BASF And update maybe guys, then potentially stuff. on and materials of new stand

Donald Young

both AX. for BASF so been called We’ve our really materials hard first the in building interesting has work the to on Yeah. us generation area, Spaceloft continued product here.

of Again, got working at team materials We’re believe closely. second generation it has our the high applicability people building initially We us also recently or principally area, well. targeting with performance but least BASF here non-combustible product a as from we helping broader as material well.

to an So BASF continues partner. be important

the earlier and developing, out and them of close be with coming We one they course, prepayment come of earlier relationships retired, mean, speed especially on team focused as well. $X very, this speed. materials senior the innovation and so has made to and the we one their are equally through BASF BASF with interesting It’s some gone leaders He was He really we of had CEO performance area. to want second relationships on which helpful. was innovation, Of former at and I I new a exciting poster-child for think, – in million year, has company, terms on. the another is the very CTO of

a multi-dimensional is very very, we it close to and with. relationship So remain have a that company

Chip Moore

Great. I’ll hop back lot, guys. Thanks in a queue.

Donald Young

Chip. you, Thank

Operator

further no I to With are There back call questions. turn for that, will Don the closing Young comments.

Donald Young

Thank in you our Thank to and Aspen forward appreciate XX. October quarter you. evening. good we reporting results a Jesse. third We on Aerogels your to look you, interest Have

Operator

This concludes call. today’s conference

disconnect. You may now

Aspen Aerogels (ASPN) 4 Aug 192019 Q2 Earnings call transcript