Aspen Aerogels, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 12, 2021. The filing also reports fourth-quarter results. Aspen designs and manufactures aerogel insulation, primarily for energy infrastructure, and is developing thermal barriers and battery materials for electric vehicles.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $100.3 million | $139.4 million |
| Gross profit / margin | $14.6 million / 14.6% | $26.3 million / 18.9% |
| Operating loss | $21.6 million | $14.2 million |
| Net loss / diluted loss per share | $21.8 million / $0.83 | $14.6 million / $0.60 |
| Adjusted EBITDA (non-GAAP) | $(6.4) million | $(0.2) million |
| Cash from operating activities | $(9.9) million | $(1.1) million |
| Cash and cash equivalents at year-end | $16.5 million | $3.6 million |
Product revenue was $99.8 million, down 27%; research-services revenue fell 82% to $0.4 million as the company wound down contract research. Product shipments declined 30% to 28.6 million square feet, while average selling price rose 4% to $3.49 per square foot. Product cost of revenue rose to 86% of product revenue from 82%, reflecting lower volume against largely fixed manufacturing costs. Capital expenditures were $3.4 million. Working capital was $33.2 million.
At year-end, total debt was $3.7 million, consisting of the PPP loan; there were no revolver borrowings. The $20 million revolving facility had $5.4 million available after $1.4 million of letters of credit and borrowing-base limitations. The facility was amended after year-end, on March 12, 2021, to extend maturity to April 28, 2022 and set financial covenants. A separate $9.6 million BASF prepayment liability remained outstanding. Cash increased mainly through public and at-the-market equity offerings and financing proceeds.
Fourth-quarter results and changes
Q4 2020 revenue was $23.0 million, compared with $46.5 million in Q4 2019. Gross profit was $3.9 million versus $11.3 million; net loss was $6.2 million, or $0.23 per share, versus $1.0 million, or $0.04 per share. For full-year 2020, the revenue decline principally reflected COVID-related disruption to energy-infrastructure maintenance and projects, including contractor-access restrictions. Building-materials growth and 2020 price increases partly offset the decline.
International revenue was $55.4 million, or 55% of total revenue, versus $81.0 million, or 58%, in 2019. The two largest customers represented 21% and 15% of 2020 revenue; the top ten accounted for 66%. One customer represented 26% of year-end accounts receivable.
Outlook, commentary and risks
- Management expected 2021 revenue to remain around 2020 levels while COVID-19 continued to constrain demand, with possible project-related upside. It anticipated revenue recovery as access restrictions eased and distributors restocked.
- Management expected 2021 gross profit and gross margin to improve through product mix and material-cost initiatives, but expected a larger net loss and lower Adjusted EBITDA than in 2020 as it increased investment in electric-vehicle initiatives by about $6 million.
- East Providence capacity was 55 million square feet annually at year-end; the company targeted 60 million by the end of 2021. It was also planning a significant capacity expansion before the end of 2023, plus dedicated thermal-barrier fabrication and battery-material capabilities. These plans require substantial additional financing.
- A September 2020 automotive supply contract runs to September 2026, but the customer has no minimum purchase obligation and may terminate at any time. Aspen must support specified demand up to a daily maximum at fixed annual prices.
- Key risks include persistent losses and negative operating cash flow, financing and covenant requirements, dependence on one manufacturing site, volatile energy-market and COVID-19 demand, raw-material cost and supply exposure, customer concentration, and execution, qualification and profitability risks in the automotive market. Silica precursors remained a significant cost and supply exposure.
- The $3.7 million PPP loan had not been submitted for forgiveness at year-end; forgiveness and the borrower’s eligibility were uncertain. BASF could seek repayment of portions of its prepayments under specified terms, and the prepayments are secured by assets at the Rhode Island facility.
- Patent enforcement proceedings continued; the filing reports favorable exclusion and infringement decisions as well as pending matters, and approximately $9.3 million of related costs since 2015. The company reported no litigation loss requiring accrual. An EPA notice concerning facility operations was closed with no violations identified.
- KPMG issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. Inventory valuation was identified as a critical audit matter. The company reported no material weakness.
Important facts for investors to verify
- Whether 2021 revenue stabilizes near 2020 levels and the expected gross-margin improvement materializes despite weak volumes and fixed manufacturing costs.
- Whether EV customer demand converts into meaningful purchases under a contract with no minimum volumes, and whether the required investment can earn acceptable returns.
- Actual financing needs and availability for planned capacity and fabrication expansions; monitor revolver availability, borrowing-base limits, covenants and the April 2022 maturity.
- PPP loan forgiveness outcome and any BASF prepayment repayment or credit obligations, including their security interests in facility assets.
- Trends in customer concentration and receivables collectability, raw-material pricing and supply, and the status and cost of patent litigation.