Aspen Aerogels Q2 2025 Earnings Report

Aspen Aerogels EPS Results

• Actual EPS: -$0.04
• Consensus EPS: -$0.12
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: $0.21

Aspen Aerogels Revenue Results

• Actual Revenue: $78.02 million
• Expected Revenue: $72.53 million
• Beat/Miss: Beat by +$5.50 million
• YoY Revenue Growth: -33.80%

Aspen Aerogels Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 8:30AM ET

Aspen Aerogels (NYSE:ASPN) designs, develops, manufactures, and sells aerogel insulation products primarily for use in the energy infrastructure and sustainable insulation materials markets in the United States, Asia, Canada, Europe, and Latin America. It operates in two segments, Energy Industrial and Thermal Barrier. The company offers PyroThin thermal barriers for use in lithium-ion batteries in electric vehicles and energy storage industries; Pyrogel XTE that reduces the risk of corrosion under insulation in energy infrastructure operating systems; and Pyrogel HPS for applications within the power generation market. It also offers Pyrogel XTF to provide protection against fire; Cryogel Z for sub-ambient and cryogenic applications in the energy infrastructure market; Spaceloft Subsea for use in pipe-in-pipe applications in offshore oil production; and Cryogel X201, which is used in designing cold systems, such as refrigerated appliances, cold storage equipment, and aerospace systems. The company was founded in 2001 and is headquartered in Northborough, Massachusetts.

Aspen Aerogels Q2 2025 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: CFO Transition: Ricardo Rodriguez will step down as CFO at the end of Q3, with Grant Thaley returning from leave to ensure a smooth handover and continuity in financial leadership.
• Positive Sentiment: Cost Optimization: Aspen removed approximately $65 million in fixed costs and returned OpEx to 2022 levels, positioning the company to drive profitability even at lower revenues.
• Negative Sentiment: Energy Industrial Slowdown: Q2 revenues in the segment declined 38% year-over-year due largely to distributor destocking and weak Subsea project activity.
• Positive Sentiment: Thermal Barrier Strength: EV thermal barrier revenues of $55.2 million in Q2 beat expectations, with gross margins rising 8 percentage points quarter-over-quarter to 31%.
• Positive Sentiment: H2 Outlook and Leverage: Aspen projects $140 million–$160 million in H2 revenue and $20 million–$30 million of adjusted EBITDA, driving full-year EBITDA to $35 million–$45 million on a leaner cost base.

Presentation

[Operator]

Good morning. Thank you for attending the Aspen Aerogels, Inc. Q2 twenty twenty five Financial Results Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to turn the conference over to your host, Neil Baranowski, Aspen's Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You may proceed, Mr. Baranowski.

[Neal Baranosky, Senior Director, Head - IR & Corporate Strategy at Aspen Aerogels]

Thank you, Megan. Good morning, and thank you for joining us for the Aspen Aerogel's second quarter twenty twenty five financial results conference call. With us today are Don Young, President and CEO and Ricardo Rodriguez, Chief Financial Officer and Treasurer. The press release announcing Aspen's financial results and business developments and the slide deck that will accompany our conversation today are available on the Investors section of Aspen's website, www.aerogel.com. During this call, we will refer to non GAAP financial measures, including adjusted EBITDA and adjusted net income.

[Neal Baranosky, Senior Director, Head - IR & Corporate Strategy at Aspen Aerogels]

The reconciliations between GAAP and non GAAP measures are included in the back of the slide presentation and earnings release. On today's call, management will make forward looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the disclaimer statements on Page one of the slide deck as the content of our call will be governed by this language.

[Neal Baranosky, Senior Director, Head - IR & Corporate Strategy at Aspen Aerogels]

I'd also like to note that from time to time, in connection with the vesting of restricted stock units and or stock options issued under our long term equity incentive program, we expect that our Section sixteen officers will file forms four to report the sale and or withholding of shares in order to cover the payment of taxes and or the exercise price of options. I also want to highlight a few near term IR engagements. On Monday, August 11, Ricardo and I will be hosting one on one virtual meetings at the Oppenheimer twenty eighth Annual Technology, Internet and Communications Conference on Tuesday, August 12 and Wednesday, August 13. Don and Ricardo will be hosting one on one meetings at Canaccord Genuity's forty fifth Annual Growth Conference at the InterContinental Boston Hotel. Both conferences will also feature fireside chats.

[Neal Baranosky, Senior Director, Head - IR & Corporate Strategy at Aspen Aerogels]

The live webcast of these presentations can be found on the Investors section of Aspen's website. I'll now turn the call over to Don. Don?

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thanks, Neil. Good morning, everyone. Thank you for joining us for our Q2 twenty twenty five earnings call. My comments will cover our CFO transition, the expected impact of simplifying and streamlining our organization, our operating performance and our view of the current environment and second half outlook. Ricardo will amplify these points with his comments.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We look forward to your questions. As we announced in our Q2 earnings press release, Ricardo plans to step down from his position as Chief Financial Officer at the end of the third quarter. Riccardo joined the company in November 2021 as the Chief Strategy Officer and assumed the role of CFO in April 2022. He has been an invaluable partner to me these past years. He has elevated our game in many ways, which has directly resulted in our strong balance sheet and overall financial position.

[Donald Young, President, CEO & Director at Aspen Aerogels]

I'm deeply grateful for Ricardo's many contributions to Aspen and have no doubt that he has great things ahead in his career. We are pleased to announce that Grant Thaley will become Aspen's Chief Financial Officer at the end of the third quarter. Grant currently serves as our Chief of Staff to the CEO and our VP of Corporate Strategy and Finance. He has been with Aspen since 2021 and has played a pivotal role in shaping our financial strategy, including our mid cap financing and our recent cost optimization efforts. Grant will be returning from parental leave later in August and will continue to work closely with Ricardo and the senior executive team to ensure a seamless transition.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Our core objective is to build a strong, profitable, capital efficient business. The focus during the first half of the year was to streamline and simplify the organization to optimize our cost structure, drive profitability and build resilience. We have made significant progress. As shown in Slide two by the red, blue and green lines, we have shifted our fixed cost structure to drive profitability at lower revenue levels. We have removed approximately $65,000,000 in cost, including lowering OpEx back to twenty twenty two levels on a run rate basis.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We have also structured the company to require minimum capital expenditures. The aerogel manufacturing facility in Rhode Island and our EMF supplemental supply are positioned to provide the capacity to meet significant revenue growth in the future and to support a flexible sourcing strategy aimed at mitigating risk associated with the potential for fluctuating tariff scenarios. It is clear that US based OEMs value domestic supply and we are well positioned to serve them. In an environment where the growth rate in the EV market is facing regulatory headwinds, especially in The US and The energy sector overall is in flux with a turbulent global economy, we have structured our teams and operating resources to build a resilient, growth oriented and profitable business. In Q2, we delivered revenue, gross profit and adjusted EBITDA at the high end of expectations.

[Donald Young, President, CEO & Director at Aspen Aerogels]

The performance was led by our pyrithin thermal barrier business, which has been holding steady here in Q3. Our Energy Industrial segment is currently experiencing a slowdown in project activity, which traditionally contributes around 40% of the segment's total revenue. This has been particularly evident in our Subsea market. Dating back more than ten years, Subsea revenue cycled between $5,000,000 and $15,000,000 per year. In 2023 and 2024, it averaged approximately $30,000,000 per year.

[Donald Young, President, CEO & Director at Aspen Aerogels]

While the whole of the energy industrial business is behind expectation, weak subsea is the main reason we are having trouble keeping pace with last year. If there's a bright spot in an otherwise unsettled energy environment, we are seeing key customers such as TechnipFMC winning subsea projects in 2025 that we believe will translate into attractive project revenue for us in 2026. Similarly, after strong LNG revenues in 2024, we are seeing a dip in LNG revenues in 2025. But like the Subsea segment, we are seeing opportunities for attractive LNG project work in 2026. Overall, we believe our Energy Industrial segment is well positioned for a policy approach in The United States that promotes an intensified focus on energy and power generation.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We anticipate that we will grow revenue and produce high gross profit margins in 2026 and beyond. Looking ahead to the 2025, our revenue outlook is roughly on par with that of the first half. The major distinction is that we anticipate generating approximately two times the adjusted EBITDA. This leverage reflects the progress we made during the first half of the year to streamline our organization and optimize our fixed cost structure. We are operating with discipline to build a business with strength and resilience and enhance profitability. Ricardo, over to you.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Thank you, Don, and good morning, everyone. I'm happy to report another quarter on behalf of our team starting on Slide three. We delivered $78,000,000 of revenue in Q2, which translates into a 34 percent year over year decline and a nearly flat trend quarter over quarter. The annual run rate of approximately $312,000,000 came in on the higher end of our expectations for the quarter. You may recall that we were expecting between 70,000,000 and $80,000,000 of revenues for Q2.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Our Energy Industrial segment's revenue saw a significant decrease in quarterly revenues to $22,800,000 or 38% year over year. This reflects the dynamics that Don mentioned in his remarks regarding inventory rebalancing of distributors and contractors along with the near term absence of new projects from end users. Don also mentioned the absence of subsea demand in the quarter. Live input from the field from our team along with oil prices that are over 20% lower year over year, along with refining capacity being fully utilized in the summer months lead us to believe that turnarounds and new projects are being retimed for the fall of this year and next year. EV thermal barrier demand of $55,200,000 represents a 32% decrease year over year as demand aligned with a lower vehicle production schedule at our key customers.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

General Motors continues gaining U. S. Market share and it is encouraging to see their production volumes not just stabilize, but increase meaningfully quarter over quarter. This led our revenues in this segment to increase by 14% quarter over quarter. In Q2, company level gross profit margins were 32% and our gross profit of $25,300,000 represented a 51% decline over the same quarter last year.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Our Energy Industrial business was still able to maintain gross margins of 36%, thanks to our flexible supply strategy on lower revenues. And our EV thermal barrier business had gross margins of 31%, which was still below our target of 35%, but a full eight percentage points higher quarter over quarter, thanks to higher part production volumes and various productivity improvements in Rhode Island and Mexico. Our net loss of $5,200,000 was driven by an adjusted OpEx run rate of $24,600,000 and our adjusted EBITDA was of $9,700,000 in Q2, highlighting one of Don's earlier points. As we've worked to lower our fixed cost structure, it was encouraging to see adjusted EBITDA nearly doubled quarter over quarter by $4,800,000 on revenues that were $700,000 lower. If you recall, the high end of our EBITDA guidance for the quarter was of $7,000,000 so we exceeded that by 38%.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock based compensation expenses and other items that we do not believe are indicative of our core operating performance. In Q2, these adjustments were meaningful and included $1,000,000 in impairments linked to some oven related equipment at our plant in Rhode Island, dollars 3,000,000 of restructuring costs linked to our recent OpEx and manufacturing overhead reductions, dollars 1,900,000.0 related to the mobilizing plan two, dollars 3,200,000.0 of stock based compensation, 5,800,000.0 of depreciation and amortization along with $3,900,000 of net interest expenses. Our net loss in Q2 was of $9,100,000 or $0.11 per diluted share, assuming 82,200,000.0 shares. Next, I'll turn to cash flow and our balance sheet. Our operations consumed $16,800,000 of cash in Q2 by requiring $3,900,000 in operating cash flow and investing $12,900,000 of CapEx.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Operating cash flow benefited from a 4,600,000 reduction in inventories as we continue to free up cash from the operations by focusing on every element of working capital. In Q2, to continue reducing our interest expenses, we paid down $6,500,000 of our term loan with MidCap, bringing our total debt on this loan and the revolver to $135,300,000 at the end of the quarter. Within our $12,900,000 of CapEx, only $3,600,000 went towards remaining obligations at plan two, which was meaningfully lower than last year last quarter's plan two expenses of $7,700,000 The rest is linked to equipment in Mexico and Rhode Island for EV thermal barrier launches in the second half of this year in 2026. As we finish closing out remaining obligations in Georgia for Plan two, we expect to recoup meaningful value from these assets over the next several quarters. The equipment is expected to bring in approximately $25,000,000 over the next three quarters and the plant is available to purchase through our broker, and we expect that to be sold for over $25,000,000 The proceeds from the sale of these assets will bolster our balance sheet as they'll be used to prepay the term loan and reduce the company's interest expenses further.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

We ended the quarter with $168,000,000 of cash and equivalents and shareholders' equity of $308,800,000 We believe that a strong positive net cash position in combination with meaningful enhancements and profitability, thanks to a lower fixed cost structure and tight controls around networking capital position the company to keep executing without needing any additional capital. As we work our way towards the end of the year, higher EBITDA levels in combination with lower restructuring charges, freeing up additional working capital, no more expenses linked to Plan two and our contained CapEx plans would enable the company's cash position to remain around the current levels even after paying down another $13,000,000 of debt. The asset sales that I mentioned earlier linked to plan two would further improve the net cash position by at least $50,000,000 and give the company added strategic flexibility in the future to refine the capital structure. Next, let's turn to Slide four to review our outlook for the second half of the year. With what we know today, we expect to deliver a range of 140,000,000 to 160,000,000 of revenue in the second half of the year.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Added to the actuals of the first half of the year, this translates into $297,000,000 to $317,000,000 of revenue for the year. This would translate into $20,000,000 to $30,000,000 of adjusted EBITDA in the second half of the year, so potentially double what we delivered in the first half. Echoing some of Don's earlier remarks, this highlights the benefits of the lower fixed cost structure that our team has been working on implementing. Adding the $15,000,000 of adjusted EBITDA that we delivered in the first half would position the company to deliver 35,000,000 to $45,000,000 of adjusted EBITDA for the year. Net income for the second half of the year is expected to range from a loss of $7,000,000 or negative $08 per share to positive net income of $3,000,000 or $04 per share.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

CapEx to fund our operations in Rhode Island and Mexico will continue being managed to less than $25,000,000 for the year without including the remaining costs to the Mobilize Plan two. This guidance for the second half of the year implies a potentially higher level of revenues than what we were expecting earlier this year and it is driven by stable EV production volumes at GM. We believe that even after the $7,500 tax credit to consumers ends on September 30 in The U. S, the market share gains of vehicles like the Chevy Equinox and various Cadillac EVs cannot be ignored. If there is a near term surge in sales as we get closer to the September, Q4 and early twenty twenty six could very well be times to rebuild inventory levels and that would drive stable demand for our EV thermal barrier parts during the entire second half of the year. With this being my last earnings call at Aspen, I would like to sincerely thank Don, our Board of Directors and the rest of the Aspen team. I'm also grateful to the broader investment community for making my nearly four year tour of duty at Aspen such an active, fulfilling, productive and rewarding time. I leave the team convinced that Aspen is well capitalized and positioned to deliver on its strategy and take with me many fond memories of ideas and discussions with you that shaped our thinking around the company and how to make the most of our resources. Grant joined the team at Aspen shortly before I did.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

He has been more than a right hand man to me as we led the finance function together with Santosh, Neil and Jack. He along with some great recruits like Zach Reed and Matt Overham and others have built an FP and A team that punches well above its weight. In all, we have a productive team that includes some of the best finance talent that I have worked with. And I am sure that Grant will transition into the role seamlessly as he returns from parental leave to pick up the baton at the end of the quarter. And I'm very excited for all of you to get to meet him over the next several weeks.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Now I'm happy to hand the call back to Don for his closing remarks.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thank you, Ricardo. Before we move to Q and A, I would like to reiterate that we believe that electrification through this decade will be a major driver for both our Thermal Barrier and Energy Industrial businesses. With a strong foundation in place, we are confident in our ability to adapt, innovate and deliver both critical solutions to our customers and durable value to our shareholders. Our decisive actions this year reflect our commitment to building a resilient, growth oriented and profitable business. Megan, let's turn to Q and A, please.

[Operator]

Thank If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. Our first question will go to the line of Eric Stine with Craig Hallum. Eric, your line is open.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Don. Hi, Ricardo.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Hi, Eric.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Hey, Eric.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Good morning. Hey, maybe gosh, a lot of things here. Maybe just start with Energy Industrial. I know that in Q1, you did call out distributor destocking. But it did seem like at least the thought then was that, that was relatively a short term dynamic.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

And then this quarter, I mean, it seems pretty clear that that's ongoing. Any updated thoughts? I mean, doesn't sound like you believe that this segment grows this year and that'd be pretty tough given the start. Just maybe where do you think distributors stand on this?

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thanks, Eric. We've made a dent in those inventories in our distributors, but we have still ways to go. We our project revenue is just lower than we anticipated. I think we could have done a better job coming into the year seeing that pipeline, frankly. And but we are as I said in my comments, we see good activity in some of our partner companies and customers.

[Donald Young, President, CEO & Director at Aspen Aerogels]

I've mentioned TechniqueFMC, for example, who are winning projects here in 2025 that we do think will translate into revenue for us in 2026. And Eric, I I would also just add, we have seen this sort of cycle before, of course, where we we have a surge in in project revenue and then and then a dip. And and again, we could have done a better job anticipating this, I think. But having said that, we're we're confident that we'll we'll work our way out of it, work through those distributor inventories, and win our fair share of projects and and get this thing growing again again at at gross margins that have been consistent with our recent performance.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Yes. And I would think this go around that was made worse by the fact that it is supply constrained, right? I mean, distributors not used very long lead times that all of a sudden no longer the case.

[Donald Young, President, CEO & Director at Aspen Aerogels]

It's a it's a it's a great point. Let's face it. We were we we were capacity constrained, inconsistent capacity for, what, five five or six quarters. And just turning the corner on that, we again, we we might have been able to anticipate that a little bit differently. But, again, I I I think our our our EI revenue in the in the second half will be somewhat on par with what it was in in the first half as we work through these issues.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. Okay. That is helpful. Maybe then just turning to Pyrothin. I know GM put out their July sales and they were quite strong and I would think that that's got a positive read through to just working through any excess inventory that they may have.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

As you think about the tax credit expiring, where do you see things as you stand today? I mean, do you believe that third quarter sales there means pretty steady volumes for you over the back half of the year? Or maybe how do you think that the third quarter, fourth quarter might be weighted in that segment?

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yes. I mean, think just going back to my remarks there on this one, Eric, I do see more optimistic view in Q4 than one would think just based on the tax credit going away. But if you look at how much market share GM has gained mostly at Tesla's expense within the EV market. We got a we have a couple of slides in the appendix of the deck that show, you know, just how much of a gain GM has made. And I don't think they're going to let go of that market share.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Right? I mean, it's been pretty clear the GM's longer term North Star is to have a high EV mix and they'll be driving that with or without the the $7,500 credit. And if you look at how much market share they've gained on the coastal markets here in The US, yeah, I just don't think that that's something that they're ready to walk away from given that the demand is clearly there.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Yes. Okay. Maybe just sneak in one last one in just to clarify. So Ricardo, did you unclear whether or how much is left to spend for Plant two, if it's largely wrapped up or if there's more to go to get it in a position to monetize it?

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yes. At this point, it's pretty much wrapped up. I mean, we have less than $10,000,000 to spend. But then as I mentioned, we believe that we can recoup over $50,000,000 here over the next several quarters. So I think we've rounded the bend.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

We actually paid out the the last large invoice towards plan two here in July. And it was booked in June, and and we're well past it and looking to move on from that.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. Thank you.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Anytime.

[Operator]

Thank you, Eric. Our next question comes from the line of Colin Rusch with Oppenheimer. Colin, your line is open.

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

Thanks so much. Thanks so much, guys. Can you talk about design in activity with new OEMs and how that's trending here over the last quarter or two and when we might start to see some real meaningful incremental revenue from EV OEMs, you know, either later this year or next year.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yeah. Colin, I mean, you read in the press every day, there's quite a bit of flux around the the product plans at these automakers as they're all reacting to, you know, some pretty drastic policy changes over the past several weeks. But we do see when you look at the pipeline, we do see a couple of anchor OEMs that are going to drive incremental revenues within the thermal barrier segment over the next six quarters. The main ones are Stellantis, like that's not changing. The policy in Europe is not changing.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

The volumes there are expected to ramp up here in the fourth quarter of this year and next year. And then we have Daimler in 2027. The other OEMs are going through either a process of assessing their timeline or switching cells from mostly away from Northvolt over to a different cell supplier. And we're still very well in the mix, but that's obviously pushing the timing of those launches to the 2026 and some of them potentially even later. When it comes to new quoting activity, I mean, the team is as busy as ever.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

We the trend that we had here in q one of record level prototyping and quoting activity here in this building that Don and I are in right now is still holding up. But you obviously need to be realistic and look at what the longer term product pipeline of these OEMs is. They're all just reacting to the recent policy changes in The U. S. And while at the same time coming up with a way to compete in China, which has an over 50% EV mix and then Europe where we're seeing a resurgence of EVs as well.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

So as we supply some of these European OEMs, we do see that we're very well positioned in Europe to continue adding wins definitely next year. And you're going to see the result of a lot of this prototyping and development work and technical sales work that the team is doing today.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Colin, I would just add, I was with the senior leadership of ACC in Europe at the end of end of q two and and they are making strides with their productivity and quality of making sales for the European market, which is encouraging for us.

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

Thanks so much, guys. And then from an R and D perspective, obviously, you guys have made some pretty meaningful innovations in and around product development for the various battery applications. I'm just curious about how much there can shift in terms of what you're offering or how much you can change or improve the offering out to OEMs as we see kind of optimizing optimize you know, vehicle designs as well as some evolution on the battery, geometries, and chemistries, you know. I guess, how should we think about the product cycle for you guys and and when we might start seeing some some meaningful shifts in that?

[Donald Young, President, CEO & Director at Aspen Aerogels]

We've done we've done work with our existing OEMs and and with prospective OEMs as they work through their their chemistry expansions, if if you will. And, I mean, General Motors is a good a good example of that. And our r and d group and and our design group are engaged with Asia based companies, European based companies, and and The US OEMs as well, trying to stay current and ahead and really being thought leaders with with these companies. Know, Colin, I would just just tangential to that. You know, we are it is interesting.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We are the the the emphasis on having US based supply of these materials has been a positive for us. I think the OEMs, and I said this in my prepared remarks, view this favorably and as an important element of our ability to to supply domestic product here in The US as well.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yeah. Maybe just to add, Colin

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

Thanks so much, guys.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

You know, the the requirements are no longer a moving target at all, and that makes r and d and all the development and the technical sales work way more efficient. And and so I think the company is gonna benefit from that greatly here, given that we know what the requirements are pretty clearly and and how we can meet them relative to any potential option that the OEMs could be looking at.

[Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.]

Incredibly helpful, guys. Thanks so much.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thanks, Colin.

[Operator]

Thank you, Colin. Our next question will go to the line of Ryan Pfingst with B. Riley. Ryan, your line is open.

[Ryan Pfingst, Senior Research Analyst at B. Riley Securities]

Hey, guys. Thanks for taking my questions. I'll ask one follow-up on Energy Industrial. You've talked about the potential 27,000,000 revenue buildup of $175,000,000 or even higher with potential expansion areas. Just curious, given your comments earlier, Don, if you still feel confident in the path to get there?

[Ryan Pfingst, Senior Research Analyst at B. Riley Securities]

And maybe if you could give us a sneak preview of how you're thinking about growth in 2026, given the activity you talked about with subsea and LNG projects starting to show again.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Yes. Look, our goal right now, Ryan, is to be sure that we're well positioned to participate in the project side of our business. And I said it in my comments, historically, it's been about 40% of our of our revenue. And it and it it represents typically, it represents almost all of our variability from from year to year. And so our project teams are are focused to be sure that we get back on track and participate in any and all subsidy projects and and LNG projects.

[Donald Young, President, CEO & Director at Aspen Aerogels]

And we believe that we will we will do that. With respect to 2026, we firmly believe that we will begin a new growth pattern high at gross gross profit margins. And and we we it's you know, we we've increased those profit margins significantly, combination of productivity, efficiency, and yields on our end and and our and our EMF transition that we made and also some price increases along the way. So so again, we believe we're in a in a strong position to reignite growth in that segment in 2026, both revenue and and profitability.

[Ryan Pfingst, Senior Research Analyst at B. Riley Securities]

Appreciate that, Don. And and then, Ricardo, you touched on it, but curious what conversations have been like with your non GM customers that you've already signed up and have been awarded and maybe when we could expect to see some of those shipments start to show up in a meaningful way for Aspen.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yes. As mentioned earlier, I think you're going to see in Q4 some for ACC and definitely next year that'll ramp up. And then Daimler will become a meaningful one in 2027. And there are several with other OEMs that we haven't yet announced that could contribute in 2027 as well.

[Ryan Pfingst, Senior Research Analyst at B. Riley Securities]

Got it. Appreciate it, guys. I'll turn it back.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Thank you, Ryan.

[Operator]

Our next question will go to the line of David Anderson with Barclays. David, your line is open.

[J. David Anderson, Managing Director at Barclays]

Thanks. Good morning. So when you were in your remarks, you were talking about lowering your fixed cost by $65,000,000 this quarter. I was just kind of curious going forward in the thermal barrier revenue in thermal barrier business, how quickly you can adjust costs kind of going forward? I'm just looking at the IHS forecast, which are essentially calling for GMZV production to stay relatively flat.

[J. David Anderson, Managing Director at Barclays]

I'm just wondering what happens if that is materially lower? How quickly can you adjust those costs? Is it are you at a point now where you can kind of move things around and within a quarter you can kind of get back to those same kind of 35% operating margins?

[Donald Young, President, CEO & Director at Aspen Aerogels]

Just one one thing, Dave. Taking the 65,000,000, that was an endeavor that took place both in q one and and in q two. And so so but to your point, look, there's no question that for us to be able to achieve 35% gross margins on the thermal barrier business, we do need some volume to to to absorb those those fixed costs. We think we're a in a good position today from a cost structure point of view to be able with what we see in front of us to maintain those targets of 35%. We're pretty close to that here in in q two reporting here in q two.

[Donald Young, President, CEO & Director at Aspen Aerogels]

And we we think that that those are very realistic targets. Yes. We have room around the edges to continue Mhmm. To fine tune our our cost structure depending on what we see going forward. But at this moment, we feel like we've we've we've done a we've done a lot of hard work.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We've made a lot of tough decisions and but we're in a good good position right now.

[J. David Anderson, Managing Director at Barclays]

And you're looking at this IHS forecast that they're putting out there. You feel confident those are pretty close to kind of what you're hearing from GM? So I'm just a little surprised they're not more severe in terms of the declines they're expecting over the next four quarters.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yeah. The customers are always higher than IHS. So we've had to make our own calls here. But yeah. No.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

I mean, I think when we look at IHS today, we do see that as a realistic scenario. And then the team is really knocked on with various cost improvement projects at the plant in Rhode Island to increase our efficiency. And I think these are things that have been in the works for well over three years that would enable us to increase the roll lengths even further and therefore gave us more productivity. Because remember, a year ago we were on a path to $650,000,000 plus of revenues and trying to increase the capacity of the plant in Rhode Island as much as possible to be able to push out the plant to decision further and further, right? And so now as the team has had a chance to take a breather here on lower volumes, the all of these projects for continuous improvement have been accelerated.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

And that will give the company the necessary cost structure to improve our gross margin profile next year on comparable volumes, which to your question, Dave, I mean, even if the volumes were to go down further, I think the company will be even more resilient quarter over quarter here as these projects take hold.

[J. David Anderson, Managing Director at Barclays]

Okay. Thank you, Ricardo. So Don, you were talking in the energy industrial side, you're talking about subsea and TechnipFMC. I was a little surprised by the comments that that's so slow considering what we've been seeing on FTI's backlog. Mean, they're going to be after this, you'll be $30,000,000,000 over three years.

[J. David Anderson, Managing Director at Barclays]

They think there's additional going forward $10,000,000,000 annually. Is this just a timing question? Because there is an enormous amount of subsea trees that are about to be installed over the next three or four years. So I guess I'm just kinda curious, your product, maybe I and I'm just maybe helping you understand kinda when your product is kinda ordered, I guess. Like, how close to delivery or how close to when the sub seed trees are installed?

[J. David Anderson, Managing Director at Barclays]

Are they ordering Aspen Aerogels? Because to me, it's just like which quarter is it of when it starts. Could you just provide a little bit of help? I'm trying to how that works out. Thanks.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Yeah. No. That's great. Look, we just came off of two years where we had approximately on average about $30,000,000 per year, which are strong years for us. And we do we we just feel we're in a little a little bit of low because we see the same thing that you do and our activity levels are are high.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Typically for us, when we win a we we come late in projects that applies both to subsea and and and to LNG terminals, frankly. And when we do receive an order, we typically deliver it within a quarter or maybe a quarter or two. And so so so you can kinda piece that together. We see those same backlogs and activity levels that that you're seeing, Dave, in your work. And and, again, I I we we not every project, I I should I should say, requires pipe and pipe insulation now.

[Donald Young, President, CEO & Director at Aspen Aerogels]

And and so while while that backlog is robust, it is a subset set sub segment of that that are pipe and pipe, typically the most challenging project projects. Plenty of them are are gonna require pipe and pipe, but not every single one.

[J. David Anderson, Managing Director at Barclays]

Don, you said it was 30 I I I think I might have misunderstood you. Did you say that the revenue was down about $30,000,000 because of Subsea? I I wasn't sure what that $30,000,000 was in reference to.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Yeah. Let let me let me say it again. In in 2023 and 2024, we averaged approximately $30,000,000 of subsea revenue. And our historic numbers, if you go back, you know, ten years through the cycles, we have typically been in the range of 5 to $15,000,000. And and so much of our, you know, much of our decrease for energy industrial overall has been because of the subsea law.

[Donald Young, President, CEO & Director at Aspen Aerogels]

And again, we believe we're seeing the same thing that you are that we have the opportunity to get back on a growth track as we as we win our our fair share of these of these projects. And and it's why I answered Ryan's question that we believe in 2026, you will see both growth and and and and solid profitability.

[J. David Anderson, Managing Director at Barclays]

It makes a lot of sense. Ricardo, it's a pleasure working with you. Best of luck on your future endeavors.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Thanks so much, Dave. I'll see you.

[Operator]

Thank you, David. Our next question goes to the line of Itay Michaeli with TD Cowen. Itay, your line is open.

[Itay Michaeli, Equity Analyst at TD Cowen]

Great. Thanks. Good morning, everybody. Just two follow ups for me. First, could we just kind of revisit the 2027 potential revenue buildup for Thermal?

[Itay Michaeli, Equity Analyst at TD Cowen]

And just if you can call out if anything has sort of significantly moved around versus, I think, the 700 plus we talked about last quarter from a launch or other volume perspectives from what you know currently?

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

We see that unchanged still, Itay. I mean, the team does have a path to getting there both on the EI side and the the thermal barrier side. The the two launches that I mentioned, ACC and and Daimler along with GM continuing to gain share here can help us get the twenty twenty seven number that we mentioned during the last call for thermal barriers. And and to Don's point, I mean, even even if you take what we're expecting on the energy industrial side for this year, add back the project work and then look at some of the other applications and markets that the team is working to start to commercialize by then, we're still confident that the company can get there.

[Itay Michaeli, Equity Analyst at TD Cowen]

That's very helpful. Thank you. And then as a follow-up, think, Ricardo, you mentioned your team has still a healthy quoting activity. I'm curious, what you're seeing within that in terms of timing of future launches, the level of content, kind of maybe a bit of a regional mix of the quoting pipeline? Just kind curious, any interesting insights to kind of glean from that.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yes. So the content is definitely tilting towards the prismatic cells and and the requirements that come from that. And if you recall, that's a simpler, thinner part, mostly for the European OEMs and also here in in North America with the likes of GM, Ford, and, you know, Rivian and others. Right? We do see them taking their time more making these decisions because, you know, the OEMs are going from having a gun pointed to their hand to develop EVs and start having them make up a meaningful portion of their fleet to now potentially the total the polar opposite.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Right? And so I think OEMs right now are just really getting a read on what the consumer demand level for EVs is going to be. And as that becomes clear in the first half of next year, we expect to, you know, to hear on some final decisions around vehicles that have been in development for the past year or so where the OEMs have had a quote from us or a proposal for quite some time and they just need those projects approved once they have a good idea of where consumer demand is likely to be for EVs.

[Itay Michaeli, Equity Analyst at TD Cowen]

Perfect. That's very helpful. Thank you.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Thank you.

[Operator]

Thank you. Our next question will go to the line of Leanne Hayden with Canaccord Genuity. Leanne, your line is open.

[Leanne Hayden, VP - Equity Research & Sustainability at Canaccord Genuity - Global Capital Markets]

Good morning, everyone. Thanks so much for taking my questions. Just wanted to start by following up on some previous commentary. Mercedes recently announced plans to launch 15 new EVs, I believe, in the next two ish years. Do you expect any impact from this, especially considering the Mercedes ACC partnership? Thank you.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Yeah. No. Thanks, Leanne. That's actually a good point. I mean, there is potential for incremental volume within the ACC award, and, you know, Mercedes is a a meaningful stakeholder in ACC.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

So all of those units could drive incremental volumes for the cells that we are on and the packs that that we are on. Those vehicles are planned right now initially for Europe, and they'll from based on what we've read, there'll be Mercedes' kind of second attempt at cracking the EV market in The US.

[Leanne Hayden, VP - Equity Research & Sustainability at Canaccord Genuity - Global Capital Markets]

Appreciate it. Okay. That's very helpful. Just one more quick one from me. Have you seen any incremental traction in alternative battery form factors like prismatic or cylindrical or anything like that?

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

No. I mean, it's really just been prismatic and pouches primarily, mostly prismatics. And then, you know, we're seeing a lot of the hype around the innards of the cells dying down, which confirms the hypothesis that we've had for quite a while that the current form factors and the current chemistries are what the OEMs have to work with for the next fifteen plus years.

[Leanne Hayden, VP - Equity Research & Sustainability at Canaccord Genuity - Global Capital Markets]

Got it. That's very helpful. Thank you very much. Appreciate it.

[Ricardo Rodriguez, CFO & Treasurer at Aspen Aerogels]

Anytime. Thank you, Leigh Ann.

[Operator]

Thank you, Leigh Ann. Our last question will go to the line of Tom Curran with Seaport Research Partners. Tom, your line is open.

[Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC]

You. Ricardo, congratulations on an impressive transformative tenure and I'd echo Don and seeing great things ahead for you.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thank you. Thank you, Tom.

[Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC]

I wanted to follow-up on EI. Don, could you speak for both Subsea and LNG? What the mix was expected to be between new projects, turnaround and maintenance for each of the businesses? And to the extent any one of those three areas has negatively surprised What has the nature of it been? Has it been just a delay?

[Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC]

Have you actually seen any cancellations or other issues? Just curious for a bit more color there both on the mix and then where any aspects of how the demand has materialized might have disappointed relative to what you anticipated.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Yeah. So so on on the subsea, you you know, that is pure project work. No no maintenance associated with that. No maintenance opportunities associated with with that. Look, I think that has been, you know, the the the biggest surprise for us because as Dave Anderson cited and I know you know Tom, the the, you know, the project work subsea the the backlogs for the next one, two, three, four years are are really quite robust.

[Donald Young, President, CEO & Director at Aspen Aerogels]

So I we believe that we're we're in a little bit of a low moment after two very strong years and that we'll we'll we'll again, we'll get our fair share, especially of the pipe and pipe projects. L and G is a combination of maintenance work and and project work. The the, you know, the big the big headlines though, of course, are when we when we can win a when we can win a project. We know from history that project work can can be anywhere from $5,000,000 per project to our biggest project was $40,000,000. An unusually large project, but that that but it those are big ranges.

[Donald Young, President, CEO & Director at Aspen Aerogels]

We do a lot of maintenance work in facilities all around all around the world and and that that that maintenance work typically gives us an opportunity to to demonstrate our value proposition before those facilities go on to have an expansion. And it allows us to get ourselves in a in the specifications and in a a good position with the engineering companies and the and and the asset owners. So those are really the two those are the two areas. I mean, I think we all know that that, know, LNG forecasts are are are positive and and, North America is a strong location for exports. And again, we're in good positions both with export facilities and in receiving terminals.

[Donald Young, President, CEO & Director at Aspen Aerogels]

So those are the two areas that where we think we've got an opportunity to reignite growth and again maintain significant profitability in that segment.

[Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC]

And Don, could you just remind us on the lead time that you tend to have with orders for each the cryogel for LNG and the space loft for subsea? How far in advance do you tend to get the booking ahead of when you would expect to ship?

[Donald Young, President, CEO & Director at Aspen Aerogels]

Yes. For for subsea, we we we we tend to win a project and deliver it within a quarter or two. That that that has been that has been standard for for us for a long time. LNG has a little bit more of a lead time. And as we work our way in, we do come, as you know, late in these projects from a from a build point of view.

[Donald Young, President, CEO & Director at Aspen Aerogels]

And so sometimes projects can be well underway by the time we secure our secure our our position within that within that facility. So so these projects are not maybe one to two quarters, but maybe two, three and four quarters in advance.

[Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC]

Got it. I appreciate the time and answers.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thank you, Tom.

[Operator]

Thank you, Tom. There are no additional questions waiting at this time. So I would like to pass the conference back over to Mr. Young for closing remarks.

[Donald Young, President, CEO & Director at Aspen Aerogels]

Thank you. Thank you, Megan. We appreciate everyone's interest in Aspen Aerogels. We look forward to reporting our third quarter results to you in early November. Thank you so much. Be well.

[Operator]

That concludes today's conference call. Thank you for your participation and enjoy the rest of your day.

Participants

Executives

• Neal Baranosky, Senior Director, Head - IR & Corporate Strategy
• Donald Young, President, CEO & Director
• Ricardo Rodriguez, CFO & Treasurer

Analysts

• Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Colin Rusch, MD & Head - Sustainable Growth & Resource Optimization at Oppenheimer & Co. Inc.
• Ryan Pfingst, Senior Research Analyst at B. Riley Securities
• J. David Anderson, Managing Director at Barclays
• Itay Michaeli, Equity Analyst at TD Cowen
• Leanne Hayden, VP - Equity Research & Sustainability at Canaccord Genuity - Global Capital Markets
• Tom Curran, Senior Equity Analyst at Seaport Global Holdings LLC