Aspen Aerogels, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
Aspen designs and manufactures aerogel insulation for energy infrastructure and building markets, and thermal barriers for electric-vehicle battery packs. It is investing in EV products and manufacturing capacity, including a planned aerogel plant in Georgia and an automated thermal-barrier operation in Mexico.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $45.6 | $31.7 | $84.0 | $59.8 |
| Gross profit (loss) | $(1.2) | $4.6 | $(3.0) | $8.5 |
| Gross margin | (2.7)% | 14.5% | (3.6)% | 14.3% |
| Operating expenses | $21.4 | $11.2 | $38.3 | $21.3 |
| Operating loss | $(22.6) | $(6.6) | $(41.3) | $(12.8) |
| Net loss | $(24.1) | $(6.7) | $(43.5) | $(12.9) |
| Basic and diluted loss per share | $(0.68) | $(0.23) | $(1.27) | $(0.46) |
| Adjusted EBITDA (non-GAAP) | $(18.3) | $(3.4) | $(33.0) | $(6.0) |
- Q2 revenue rose 44%; first-half revenue rose 41%. Thermal-barrier revenue reached $10.8 million in Q2 and $18.4 million in the first half, compared with $0.2 million and $0.3 million, respectively, a year earlier.
- Energy-industrial revenue increased 11% in Q2 and 10% in the first half, but reported shipment area declined 6% in both periods. Higher average selling prices, largely reflecting product mix, supported revenue.
- Thermal-barrier segment losses widened: $7.2 million in Q2 and $12.0 million in the first half. Segment costs, including manufacturing and staffing, grew faster than sales. Energy-industrial segment profit was $6.0 million in Q2 and $9.0 million in the first half.
- Operating cash use was $32.9 million in the first half, versus $0.5 million a year earlier; investing cash use was $52.4 million versus $3.9 million, principally reflecting expansion spending. Capital expenditures accrued but unpaid at period-end were $17.7 million.
Financial position, debt and liquidity
- Cash and cash equivalents were $162.2 million at June 30, 2022, versus $76.6 million at year-end 2021. Current assets were $213.3 million and current liabilities $71.2 million.
- A $100 million related-party convertible note issued to a Koch affiliate had a $102.7 million carrying amount, including accrued interest and net of issuance costs. It matures in February 2027 and bears interest at SOFR plus 5.50% if paid in cash or SOFR plus 6.50% if paid in kind, subject to a 1% floor and 3% cap.
- Aspen had no revolver borrowings; $18.0 million was available after letters of credit. The $20 million facility matured August 26, 2022, and the company said it intended to extend or replace it. The company reported covenant compliance at June 30.
- First-half financing included approximately $49.9 million net from a private stock placement, $28.1 million net from ATM sales, and approximately $99.8 million net from the convertible note. After quarter-end, Aspen reported $39.5 million net proceeds from selling 3.96 million ATM shares through August 4.
Outlook, commentary and risks
- Management expected 2022 revenue growth from recovery in energy markets, EV demand and building-material market gains. It also expected higher net losses and lower Adjusted EBITDA during 2022 as staffing, operating costs and capacity investments rise. The filing gives no specific numerical revenue or earnings guidance.
- The Georgia project is planned in two phases, with estimated investment of $575 million and $125 million. Management expected the first phase to be operational late in the second half of 2023. The company also described plans for a carbon-aerogel battery-materials facility. These plans require substantial additional funding; management said current cash and available credit would support current needs and initial investment, while further financing, customer prepayments or licensing fees may be needed for the broader build-out.
- Thermal-barrier contracts with a major U.S. automotive OEM specify fixed annual prices and volumes up to daily limits, but impose no minimum purchase quantity and may be terminated by the OEM at any time, for any or no reason.
- A silane supplier notified Aspen in May that transportation difficulties could curtail near-term supply. Aspen was seeking alternate supply and transport options; it warned that a shortage could materially harm operations and financial condition.
- Other disclosed uncertainties include COVID-19 effects, supply-chain and input-cost pressures, execution and funding risks for expansion, potential dilution and limits on use of tax loss carryforwards, and the newly highlighted U.S. restrictions on goods connected to China’s Xinjiang region. The company reported no material change to previously disclosed legal proceedings and no litigation loss it considered probable and requiring accrual.
Important facts for investors to verify
- Whether thermal-barrier revenue growth can translate into improved segment margins as fabrication capacity and staffing expand.
- Progress, total funding requirements and schedule for the Georgia plant and Mexico fabrication operation, including the sources and terms of any additional financing.
- Renewal or replacement of the revolver that was due to mature August 26, 2022, and the effect of subsequent ATM share issuance on liquidity and dilution.
- Whether silane supply constraints, broader supply-chain costs, and customer production plans affect shipments and forecast demand.
- The volume and profitability ultimately generated under automotive contracts, given the absence of minimum purchase commitments and customer termination rights.