Aspen Aerogels, Inc. — Q1 2021 Form 10-Q
Business context and period. Unaudited consolidated results for the three months ended March 31, 2021, compared with Q1 2020. Aspen designs and manufactures aerogel insulation, while developing thermal barriers and battery materials for electric vehicles (EVs). It operates as one segment and is winding down funded contract research activities.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $28.1 million | $28.4 million |
| Gross profit / margin | $4.0 million / 14% | $6.0 million / 21% |
| Operating loss | $6.2 million | $3.1 million |
| Net loss | $6.3 million; $0.22 per share | $3.2 million; $0.13 per share |
| Adjusted EBITDA (non-GAAP) | $(2.6) million | $0.5 million |
| Cash used in operations | $1.9 million | $1.4 million |
| Capital expenditures | $1.5 million | $0.9 million |
At March 31, 2021, cash and cash equivalents were $17.2 million. Debt principal was $3.7 million, consisting of the PPP loan; no revolving-credit borrowings were outstanding. Revolver availability was $13.1 million after $1.5 million of letters of credit. Current assets were $49.9 million and current liabilities $22.9 million, including a $4.6 million current BASF prepayment liability. Total liabilities were $33.2 million.
Changes versus Q1 2020
- Revenue fell 1%, while product shipments rose 6% to 8.6 million square feet. Average selling price declined 6% to $3.25 per square foot, reflecting product and geographic mix.
- Product cost of revenue rose 8% to $24.1 million; product cost was 86% of product revenue versus 79% a year earlier. Management cited material costs and fixed manufacturing costs amid lower manufacturing output.
- Gross margin declined seven percentage points. Operating expenses increased 12% to $10.1 million, including a 25% increase in general and administrative expenses.
- Net loss widened to $6.3 million from $3.2 million. Adjusted EBITDA shifted to a loss from positive $0.5 million.
- Operating cash use increased by $0.5 million. The company raised $6.2 million net through its at-the-market stock offering during the quarter.
Outlook, risks, and contingencies
- For 2021, management projected modest revenue growth, citing expected LNG project demand, North American refinery and petrochemical maintenance demand, and a price increase intended to offset higher raw-material costs. It expected lower Adjusted EBITDA and a larger net loss than in 2020 as investment and expenses rise.
- Planned investment includes expanding East Providence blanket capacity from 55 million to 60 million square feet by year-end 2021, building automated thermal-barrier fabrication capability, advancing carbon-aerogel battery materials, and planning a larger capacity expansion before the end of 2023. Management said current cash and available credit should support current operations and R&D, but not all planned expansion spending; it expects to seek additional financing, customer prepayments, or licensing fees.
- An EV-maker contract runs through September 2026 but has no minimum purchase commitment and may be terminated by the customer at any time. Actual demand and resulting revenue are therefore uncertain.
- BASF has no obligation to buy under its supply agreement. Of $10.0 million in BASF prepayments, approximately $9.8 million remained a liability at quarter-end; repayment or crediting requirements may apply under the agreement’s terms.
- The $3.7 million PPP loan had not been submitted for forgiveness as of March 31, 2021; forgiveness is not assured. The revolving facility matures April 28, 2022, and includes minimum Adjusted EBITDA and Adjusted Quick Ratio covenants. Aspen reported compliance at quarter-end and intends to extend or replace the facility.
- COVID-19 continued to weigh on demand, particularly because of contractor access restrictions at energy infrastructure sites. The company reported no significant supply-chain or delivery disruption, but said the pandemic’s duration and impact remained uncertain.
- Patent enforcement actions and related proceedings may be protracted and costly. Management reported no litigation loss it believed probable and requiring accrual at quarter-end. The filing also identifies possible environmental-regulatory exposure and other ordinary-course litigation.
Important facts for investors to verify
- Whether planned LNG and maintenance demand, pricing actions, and product mix deliver the projected revenue and gross-profit improvement.
- Actual customer orders and volumes under the EV thermal-barrier contract, which provides no minimum purchases.
- Capital spending, financing needs, and execution timing for EV-related facilities and planned capacity expansion.
- BASF prepayment crediting or repayment obligations, and the outcome of the PPP forgiveness application.
- Compliance with credit-facility covenants and timely extension or replacement of the facility before its April 2022 maturity.
- Progress and costs of patent proceedings, and the continuing effects of COVID-19 on demand.