ASPEN AEROGELS, INC. The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theU.S. Securities and Exchange Commission (SEC) onMarch 12, 2021 , which we refer to as the Annual Report. Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as "may," "will," "anticipate," "estimate," "expects," "projects," "intends," "plans," "believes" and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q and under "Risk Factors" in Item 1A of the Annual Report.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of theSEC , to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1 "Financial Statements," which includes our financial statements and related notes, elsewhere in this Quarterly Report on Form 10-Q. Investors and others should note that we routinely use the Investors section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investors section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investors section of our website, https://www.aerogel.com.
Overview
We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy infrastructure and sustainable building materials markets. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-use customers select our products where thermal performance is critical and to save money, improve resource efficiency, enhance sustainability, preserve operating assets and protect workers.
Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas facilities, power generating assets and other energy infrastructure. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption.
We are also actively developing a number of promising aerogel products and
technologies for the electric vehicle market. We have developed and are
commercializing our proprietary line of PyroThin thermal barriers for use in
battery packs in electric vehicles. Our PyroThin product is an ultra-thin,
lightweight and flexible thermal barrier designed with other functional layers
to impede the propagation of thermal runaway across multiple lithium-ion battery
system architectures. Our thermal barrier technology is designed to offer a
unique combination of thermal management, mechanical performance and fire
protection properties that enable electric vehicle manufacturers to achieve
critical battery performance and safety goals. In addition, we are seeking to
leverage our patented carbon aerogel technology to develop industry-leading
battery materials for use in lithium-ion battery cells.
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--------------------------------------------------------------------------------These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of electric vehicles.
The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand manufacturing capacity, build an automated thermal barrier fabrication operation, enhance research and development resources and construct a battery materials facility, among other items. We also derive product revenue from a number of other end markets, including the sustainable building materials market. Customers in these markets use our products for applications as diverse as wall systems, military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. As we continue to enhance our aerogel technology platform, we believe we will have additional opportunities to address high-value applications in the global insulation market, the electric vehicle market and in a number of new, high-value markets. We generate product revenue through the sale of our line of aerogel blankets and thermal barriers. We market and sell our products primarily through a sales force based inNorth America ,Europe andAsia . The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service. Our salespeople work directly with end-use customers and engineering firms to promote the qualification, specification and acceptance of our products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our products and strong end-user support. We also perform research services under contracts with various agencies of theU.S. government, including theDepartment of Defense and theDepartment of Energy , and other institutions. We have decided to cease efforts to secure additional funded research contracts and to wind down our existing contract research activities. This decision reflected our desire to focus our research and development resources on initiatives to improve the profitability of our existing business and on efforts to develop new products and next-generation technologies with application in new, potentially high-value markets. We manufacture our products using our proprietary technology at our facility inEast Providence, Rhode Island . We have operated theEast Providence facility since 2008 and have increased our annual capacity in phases to approximately 55 million square feet of aerogel blankets. To meet expected growth in demand for our aerogel products in the energy, sustainable building and electric vehicle markets, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant at a site in the southeasternU.S. Subject to board approval, finalization of zoning approvals and other arrangements, we expect to have the second aerogel plant operational during the second half of 2023. In addition, we are planning to construct a state-of-the-art, automated thermal barrier fabrication operation and to hire dedicated thermal barrier fabrication employees inMexico in order to keep pace with the significant potential demand for our PyroThin thermal barriers. We have entered into production contracts with a majorU.S. automotive original equipment manufacturer to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. Pursuant to the contracts, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While the customer has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, the customer may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with the customer's standard purchase terms, including quality and warranty provisions customary in the automotive industry. We have been engaged in a strategic partnership with BASF to develop and commercialize products for the sustainable building materials and other markets. The strategic partnership includes a supply agreement governing the exclusive sale of specified products to BASF and a joint development agreement targeting innovative products and technologies. BASF has no obligation to purchase any products under the supply agreement. Pursuant to the supply agreement, BASF may, in its sole discretion, make prepayments to us in the aggregate amount of up to$22.0 million during the term of the agreement. We may repay the prepayments to BASF at any time in whole or in part for any reason. BASF made a prepayment to us of$5.0 million during 2018. As ofJanuary 1, 2019 , 25.3% of any amounts that we invoice for Spaceloft A2 sold to BASF will be credited against the outstanding balance of the 2018 prepayment. If any amount of the 2018 prepayment remains uncredited atDecember 31, 2021 , BASF may require that we repay the uncredited amount following a six-week notice period. InJanuary 2019 , BASF made an additional prepayment to us of$5.0 million . As ofJanuary 1, 2020 , 50% of any 19
-------------------------------------------------------------------------------- amounts that we invoice for a newly developed product sold to BASF will be credited against the outstanding balance of the 2019 prepayment. AfterDecember 31, 2022 , BASF may require that we credit 24.7% of any amounts we invoice for Spaceloft A2 sold to BASF against the outstanding balance of the 2019 prepayment or may require that we repay the uncredited amount following a six-week notice period. InOctober 2021 , we announced with BASF that BASF will discontinue further marketing of Spaceloft A2 effectiveNovember 15, 2021 . After this date, BASF customers will be able to purchase Spaceloft A2 directly from us. We are currently working with BASF to terminate certain provisions of the supply and joint development agreements other than those governing the prepayments. Subject to finalization, approval and execution of pertinent amendments to the agreements, we expect we will be solely responsible for future development and commercialization of the specified products in the sustainable building materials and other markets. In addition, we expect the uncredited prepayment balances at the time of the execution of the amendments would remain outstanding and subject to repayment upon BASF's request and following the requisite six-week notice periods afterDecember 31, 2021 andDecember 31, 2022 , respectively. OnMarch 12, 2021 , we entered into an Amended and Restated Loan and Security Agreement (Loan Agreement) withSilicon Valley Bank to extend the maturity date of the revolving credit facility toApril 28, 2022 . Pursuant to the Loan Agreement, we are permitted to borrow a maximum of$20.0 million , subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, as defined, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. The credit facility has also been amended to establish minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants, each as defined in the Loan Agreement. OnSeptember 29, 2021 , the Company entered into an amendment to the Loan Agreement to revise certain financial covenants, among other things. OnMay 1, 2020 , our wholly owned subsidiary,Aspen Aerogels Rhode Island, LLC (Borrower), executed a note for an unsecured loan of$3.7 million pursuant to the Paycheck Protection Program (PPP Loan) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended, and administered by theU.S. Small Business Administration (SBA). The Borrower conferred with representatives of the SBA prior to finalizing the PPP Loan. The loan was unsecured, contained customary events of default, carried an interest rate of 1% per year, and matured onMay 1, 2022 . The Borrower had the right to repay the loan at any time without penalty. In addition, the Borrower was permitted at any time to submit an application to extend the maturity of the loan toMay 1, 2025 . OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and less than$0.1 million in accrued interest after approving the Borrower's application for forgiveness of the PPP Loan under the provisions of the CARES Act. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the quarter endedSeptember 30, 2021 . OnFebruary 3, 2021 , we entered into a supply agreement (Supply Agreement) withSilbond Corporation (Silbond), for the purchase of certain silanes (Product). Pursuant to the Supply Agreement, we agreed to purchase, and Silbond agreed to supply, all of our requirements for the Product at ourEast Providence facility through the term of the Supply Agreement, which term ends onSeptember 30, 2023 , unless either party terminates the agreement early pursuant to the terms of the Supply Agreement. OnJune 29, 2021 , we entered into a securities purchase agreement (Purchase Agreement) with an affiliate of Koch Strategic Platforms (Purchaser). Pursuant to the terms of the Purchase Agreement, we sold to the Purchaser an aggregate of 3,462,124 shares of our common stock at a purchase price equal to$21.663 per share, for aggregate gross proceeds of approximately$75.0 million (the Private Placement). Our revenue for the nine months endedSeptember 30, 2021 was$90.1 million , which represented an increase of$12.8 million , or 17%, from$77.3 million for the nine months endedSeptember 30, 2020 . Net loss for the nine months endedSeptember 30, 2021 was$20.7 million and net loss per share was$0.70 . Net loss for the nine months endedSeptember 30, 2020 was$15.6 million and net loss per share was$0.60 . At present, we are not certain of the extent of the impact that the COVID-19 pandemic will continue to have on our business. Our manufacturing facility remains operational and we have not encountered any significant disruption to our supply chain or our ability to deliver to our customers. In response to the COVID-19 pandemic, we have implemented and are following safe practices recommended by public health authorities and other government entities. We continue to focus on the safety and health of our employees, customers and vendors. In addition, we have implemented various precautionary measures, including remote work arrangements, restricted business travel and procedures for social distancing, face coverings and safe hygiene. We continue to monitor public health guidance as it evolves and 20 --------------------------------------------------------------------------------
plan to adapt our practices as appropriate. Refer to "Risk Factors" in Item 1A of the Annual Report for more information concerning risks to our business associated with COVID-19.
Key Metrics and Non-GAAP Financial Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Square Foot Operating Metric
We price our product and measure our product shipments in square feet. We estimate our annual capacity was approximately 55 million square feet of aerogel blankets atSeptember 30, 2021 . We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and product shipments on a uniform and consistent basis. The following chart sets forth product shipments in square feet associated with recognized revenue, including revenue recognized over time utilizing the input method, for the periods presented: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (In thousands)
Product shipments in square feet 9,012 6,825 27,526
22,307 Adjusted EBITDA We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, from time to time, which we do not believe are indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance withU.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance withU.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. We use Adjusted EBITDA:
• as a measure of operating performance because it does not include the
impact of items that we do not consider indicative of our core operating
performance;
• for planning purposes, including the preparation of our annual operating
budget;
• to allocate resources to enhance the financial performance of our
business; and
• as a performance measure used under our bonus plan.
We also believe that the presentation of Adjusted EBITDA provides useful
information to investors with respect to our results of operations and in
assessing the performance and value of our business. Various measures of EBITDA
are widely used by investors to measure a company's operating performance
without regard to items that can vary substantially from company to company
depending upon financing and accounting methods, book values of assets, capital
structures and the methods by which assets were acquired.
Although measures similar to Adjusted EBITDA are frequently used by investors
and securities analysts in their evaluation of companies, we understand that
Adjusted EBITDA has limitations as an analytical tool, and you should not
consider it in isolation or as a substitute for net income (loss), income (loss)
from operations, net cash provided by (used in) operating activities or an
analysis of our results of operations as reported under U.S. GAAP. Some of these
limitations are:
• Adjusted EBITDA does not reflect our historical cash expenditures or
future requirements for capital expenditures or other contractual
commitments;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our
working capital needs;
• Adjusted EBITDA does not reflect stock-based compensation expense;
• Adjusted EBITDA does not reflect our income tax expense or cash
requirements to pay our income taxes;
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• Adjusted EBITDA does not reflect our interest expense, or the cash
requirements necessary to service interest or principal payments on our
debt;
• although depreciation, amortization and impairment charges are non-cash
charges, the assets being depreciated, amortized or impaired will often
have to be replaced in the future, and Adjusted EBITDA does not reflect
any cash requirements for these replacements; and
• other companies in our industry may calculate EBITDA or Adjusted EBITDA
differently than we do, limiting their usefulness as a comparative
measure.
Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations. To properly and prudently evaluate our business, we encourage you to review theU.S. GAAP financial statements included elsewhere in this Quarterly Report on Form 10-Q, and not to rely on any single financial measure to evaluate our business.
The following table presents a reconciliation of net loss, the most directly
comparable
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands)
Net loss $ (7,822 ) $ (6,753 ) $ (20,741 ) $ (15,620 )
Depreciation and amortization 2,114 2,545 6,856 7,670
Stock-based compensation(1) 1,554 991 3,600
2,990
Gain on extinguishment of debt (3,734 ) - (3,734 )
-
Interest expense 58 49 188 182
Adjusted EBITDA $ (7,830 ) $ (3,168 ) $ (13,831 ) $ (4,778 )
(1) Represents non-cash stock-based compensation related
to vesting and modifications of stock option grants,
vesting of restricted stock units and vesting of
restricted common stock.
Our financial performance, including such measures as net income (loss),
earnings per share and Adjusted EBITDA, are affected by a number of factors
including volume and mix of aerogel products sold, average selling prices, our
material costs and manufacturing expenses, the costs associated with capacity
expansions and start-up of additional production capacity, and the amount and
timing of operating expenses. Accordingly, we expect that our net income (loss),
earnings per share and Adjusted EBITDA will vary from period to period.
During 2021, we are projecting growth in total revenue principally due to an
anticipated increase in maintenance-based demand in the refinery and chemical
market, growth in the European sustainable building materials market and initial
thermal barrier revenue in the electric vehicle market. We have also increased
prices to offset an increase in raw material costs during 2021 that will
contribute to revenue growth.
However, we intend to increase our investment in the electric vehicle market and
our aerogel technology platform in 2021. We will use this investment to
accelerate thermal barrier business development, to establish industry-leading
thermal barrier fabrication capability, to progress from the development phase
to the commercialization phase of our silicon-rich carbon aerogel battery
materials, and to identify additional high-value markets for our aerogel
technology, among other items. As a result, we expect to experience a decrease
in Adjusted EBITDA and an increase in net loss in 2021 versus 2020.
Components of Our Results of Operations
Revenue
We recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of theU.S. government and other institutions. Product and research services revenue is recognized upon the satisfaction of contractual performance obligations. 22
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We record deferred revenue for product sales when (i) we have delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.
During 2021, we are projecting growth in total revenue principally due to an anticipated increase in maintenance-based demand in the refinery and chemical market, growth in the European sustainable building materials market and initial thermal barrier revenue in the electric vehicle market. We have also announced a price increase to offset an increase in raw material costs during 2021 that will contribute to revenue growth. Cost of Revenue
Cost of product revenue consists primarily of materials and manufacturing expense. Cost of product revenue is recorded when the related product revenue is recognized.
Material is our most significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, product thicknesses and manufacturing yields. In addition, we provide warranties for our products and record the estimated cost within cost of revenue in the period that the related revenue is recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated. As a result of these factors, material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold, the costs of our raw materials or the estimated cost of warranties. In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the cost of our raw materials, and other factors may significantly impact our material costs and have a material impact on our operations. We expect that material costs will increase both in absolute dollars and as a percentage of revenue during 2021 due to (i) projected growth in product shipments, (ii) the impact of projected growth in PyroThin thermal barrier revenue, and (iii) recent increases in the costs of our raw materials. Manufacturing expense is also a significant component of cost of revenue. Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing assets. Manufacturing expense also includes stock-based compensation for manufacturing employees and shipping costs. We expect that manufacturing expense will increase in absolute dollars and as a percentage of revenue during 2021, principally due to our plan to hire additional personnel and incur additional manufacturing expenses to establish fabrication operations in support of projected growth in PyroThin thermal barrier demand.
In total, we expect that cost of product revenue will increase in absolute dollars during 2021 versus 2020 and as a percentage of revenue versus 2020.
Cost of research services revenue consists of direct labor costs of research personnel engaged in the contract research, third-party consulting and subcontractor expense, and associated direct material costs. This cost of revenue also includes overhead expenses associated with project resources, development tools and supplies. Cost of research services revenue is recorded when the related research services revenue is recognized. In 2021, we expect cost of research services revenue will continue to decline as we wind down our existing contract research activities.
Gross Profit
Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of aerogel products produced and sold, the mix of aerogel products sold, average selling prices, our material and manufacturing costs, realized capacity utilization and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit in absolute dollars and as a percentage of revenue to vary significantly from period to period. During 2021, we project that gross profit will grow in absolute dollars versus 2020 due to projected growth in total revenue, offset, in part, by increases in manufacturing expense and material costs. We expect that gross profit as a percentage of revenue will decrease modestly during 2021 due to the projected increase in material costs and manufacturing expense in support of projected growth in PyroThin thermal barrier revenue
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and
general and administrative expenses. Operating expenses include personnel costs,
legal fees, professional fees, service fees, insurance premiums, travel expense,
facilities related costs and other costs, expenses and fees. The largest
component of our operating expenses is personnel costs, consisting of salaries,
benefits, incentive compensation and stock-based compensation. In any particular
period, the timing and extent of personnel
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additions or reductions, legal activities, including patent enforcement actions,
marketing programs, research efforts and a range of similar activities or
actions could materially affect our operating expenses, both in absolute dollars
and as a percentage of revenue.
During 2021, we are hiring additional personnel and incurring additional
operating expenses to support the anticipated multi-year growth in our PyroThin
thermal barrier business. In addition, we have recently encountered worker
shortages and experienced increased wages within the labor market for our
production personnel. Accordingly, (i) personnel-related expenses may exceed our
expectations and (ii) labor shortages may have a material impact on our
operations. As a result, we expect that operating expenses will continue to
increase in both absolute dollars and as a percentage of revenue during the
year. In the longer term, we expect that operating expenses will increase in
absolute dollars, but decrease as a percentage of revenue.
Research and Development Expenses
Research and development expenses consist primarily of expenses for personnel engaged in the development of next-generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. While we expect our research and development expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term, we expect these expenses will increase in both absolute dollars and as a percentage of revenue in 2021. Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs. We expect that sales and marketing expenses will increase in absolute dollars and as a percentage of revenue during 2021, principally due to an increase in compensation associated with the addition of personnel in support of our PyroThin thermal barrier business. In the longer term, we expect that sales and marketing expenses will increase in absolute dollars, but decrease as a percentage of revenue.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, legal, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs of compliance with securities, corporate governance and related laws and regulations, investor relations expenses, increased insurance premiums, including director and officer insurance, and increased audit and legal fees. We expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business. We also expect that the patent enforcement actions, described in more detail under "Legal Proceedings" in Part II, Item 1 of this Quarterly Report on Form 10-Q, if protracted, could result in significant legal expense over the medium to long-term. While we expect that our general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term, we expect such expenses will increase in both absolute dollars and as a percentage of revenue in 2021.
Gain on Extinguishment of Debt
OnMay 1, 2020 , our wholly-owned subsidiary,Aspen Aerogels Rhode Island, LLC , executed a note for an unsecured PPP loan of$3.7 million pursuant to the CARES Act. OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and accrued interest to the noteholder after approving the Borrower's application for forgiveness of the PPP Loan. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the three months endedSeptember 30, 2021 . 24
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Interest Expense, Net
Interest expense, net consists primarily of fees and interest expense related to our revolving credit facility.
Provision for Income Taxes
We have incurred net losses since inception and have not recorded benefit provisions forU.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards.
Results of Operations
Three months ended
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 30,263 100 % $ 23,939 99 % $ 6,324 26 %
Research services 117 0 % 256 1 % (139 ) (54 )%
Total revenue $ 30,380 100 % $ 24,195 100 % $ 6,185 26 %
The following chart sets forth product shipments in square feet associated with
recognized revenue, including revenue recognized over time utilizing the input
method, for the periods presented:
Three Months Ended September 30, Change
2021 2020 Amount Percentage
Product shipments in square feet (in
thousands) 9,012 6,825 2,187 32 %
Total revenue increased $6.2 million , or 26%, to $30.4 million for the three
months ended September 30, 2021 from $24.2 million in the comparable period in
2020. The increase in total revenue was the result of an increase in product
revenue.
Product revenue increased by $6.4 million , or 26%, to $30.3 million for the
three months ended September 30, 2021 from $23.9 million in the comparable
period in 2020. This increase was principally driven by growth in the refinery
and chemical markets, particularly in the United States and Europe , offset, in
part, by a decrease in project-based demand in the liquefied natural gas (LNG)
market.
Product revenue for the three months ended September 30, 2021 included $8.1
million to a North American distributor. Product revenue for the three months
ended September 30, 2020 included $5.2 million to an Asian LNG project
contractor, $4.2 million to a North American distributor and $3.0 million to a
subsea contractor.
The average selling price per square foot of our products decreased by $0.15 , or
4%, to $3.36 per square foot for the three months ended September 30, 2021 from
$3.51 per square foot for the three months ended September 30, 2020 . The
decrease in average selling price principally reflected the impact of a change
in the mix of products sold. This decrease in average selling price had the
effect of decreasing product revenue by $1.3 million for the three months ended
September 30, 2021 from the comparable period in 2020.
In volume terms, product shipments increased by 2.2 million square feet, or 32%,
to 9.0 million square feet of aerogel products for the three months ended
September 30, 2021 , as compared to 6.8 million square feet for the three months
ended September 30, 2020 . The increase in product volume had the effect of
increasing product revenue by $7.7 million for the three months ended
September 30, 2021 from the comparable period in 2020.
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Research services revenue was
Cost of Revenue
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage Percentage Percentage
of Related of Total of Related of Total
Amount Revenue Revenue Amount Revenue Revenue Amount Percentage
($ in thousands)
Cost of revenue:
Product $ 27,279 90 % 90 % $ 22,243 93 % 92 % $ 5,036 23 %
Research services 34 29 % 0 % 52 20 % 0 % (18 ) (35 )%
Total cost of revenue $ 27,313 90 % 90 % $ 22,295 92 % 92 % $ 5,018 23 %
Total cost of revenue increased
Product cost of revenue increased by$5.1 million , or 23%, to$27.3 million for the three months endedSeptember 30, 2021 from$22.2 million in the comparable period in 2020. The$5.1 million increase was the result of a$1.9 million increase in material costs and a$3.2 million increase in manufacturing expense. The increase in material costs was principally the result of the 2.2 million square feet, or 32%, increase in total product shipments. The increase in manufacturing expense was the result of increases in compensation and related expenses of$2.5 million , operating supplies of$0.4 million , professional services of$0.2 million and other manufacturing expenses of$0.1 million . Product cost of revenue as a percentage of product revenue decreased to 90% during the three months endedSeptember 30, 2021 from 93% during the three months endedSeptember 30, 2020 . This decrease was principally the result of the decrease in material costs as a percentage of revenue during the three months endedSeptember 30, 2021 .
Research services cost of revenue was less than
Gross Profit
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Gross profit $ 3,067 10 % $ 1,900 8 % $ 1,167 61 %
Gross profit increased by $1.2 million , or 61%, to $3.1 million for the three
months ended September 30, 2021 from $1.9 million in the comparable period in
2020. The increase in gross profit was the result of the $6.2 million increase
in total revenue, offset, in part, by the $5.0 million increase in total cost of
revenue. The increase in revenue was principally driven by growth in the
refinery and chemical markets, particularly in the United States and Europe ,
offset, in part, by a decrease in project-based demand in the LNG market. The
increase in total cost of revenue was the result of the $1.9 million increase in
material costs associated with the 2.2 million square feet, or 32%, increase in
total product shipments and the $3.2 million increase in manufacturing expense
during 2021.
Gross profit as a percentage of total revenue increased to 10% of total revenue
for the three months ended September 30, 2021 from 8% in the comparable period
in 2020.
26
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Research and Development Expenses
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 3,077 10 % $ 2,088 9 % $ 989 47 %
Research and development expenses increased by $1.0 million , or 47%, to $3.1
million for the three months ended September 30, 2021 from $2.1 million in the
comparable period in 2020. The $1.0 million increase reflects an increase in
compensation and related costs of $0.7 million and other research and
development expenses of $0.3 million .
Research and development expenses as a percentage of total revenue increased to
10% for the three months ended September 30, 2021 from 9% in the comparable
period in 2020 due principally to increases in personnel and expenditures to
support our carbon aerogel battery materials initiative.
Sales and Marketing Expenses
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Sales and marketing expenses $ 4,915 16 % $ 2,755 11 % $ 2,160 78 %
Sales and marketing expenses increased by $2.1 million , or 78%, to $4.9 million
for the three months ended September 30, 2021 from $2.8 million in the
comparable period in 2020. The $2.1 million increase was principally the result
of increases in compensation and related costs of $2.0 million and
travel-related and other expenditures of $0.3 million , offset, in part, by a
decrease in sales consultant expenses of $0.2 million .
Sales and marketing expenses as a percentage of total revenue increased to 16%
for the three months ended September 30, 2021 from 11% in the comparable period
in 2020, due principally to the increase in compensation and related expenses
associated with an increase in sales and business development personnel.
General and Administrative Expenses
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 6,573 22 % $ 3,761 16 % $ 2,812 75 %
General and administrative expenses increased by $2.8 million , or 75%, to $6.6
million for the three months ended September 30, 2021 from $3.8 million in the
comparable period in 2020. The $2.8 million increase was the result of increases
in compensation and related costs of $1.8 million , recruiting and professional
services of $0.6 million , and other general and administrative expenses of $0.6
million , offset, in part, by a decrease in the provision for uncollectible
accounts of $0.2 million .
General and administrative expenses as a percentage of total revenue increased
to 22% for the three months ended September 30, 2021 from 16% in the comparable
period in 2020.
Gain on Extinguishment of Debt
OnMay 1, 2020 , our wholly-owned subsidiary,Aspen Aerogels Rhode Island, LLC , executed a note for an unsecured PPP loan of$3.7 million pursuant to the CARES Act. OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and accrued interest to the noteholder after approving the Borrower's application for forgiveness of the PPP Loan. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the three months endedSeptember 30, 2021 . 27
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Interest Expense, net
Three Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Interest expense, net $ (58 ) (0 )% $ (49 ) (0 )% $ (9 ) 18 %
Interest expense, net, consists primarily of fees and interest expense
associated with our revolving credit agreement and was less than
Nine months ended
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue
Nine Months Ended September 30,
2021 2020 Change
Percentage of Percentage of
Amount Revenue Amount Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 89,809 100 % $ 76,772 99 % $ 13,037 17 %
Research services 338 0 % 483 1 % (145 ) (30 )%
Total revenue $ 90,147 100 % $ 77,255 100 % $ 12,892 17 %
The following chart sets forth product shipments in square feet for the periods
presented:
Nine Months Ended September 30, Change
2021 2020 Amount Percentage
Product shipments in square feet (in
thousands) 27,526 22,307 5,219 23 %
28
-------------------------------------------------------------------------------- Total revenue increased$12.8 million , or 17%, to$90.1 million for the nine months endedSeptember 30, 2021 from$77.3 million in the comparable period in 2020. The increase in total revenue was the result of an increase in product revenue. Product revenue increased by$13.0 million , or 17%, to$89.8 million for the nine months endedSeptember 30, 2021 from$76.8 million in the comparable period in 2020. This increase was principally driven by growth in the global refinery and chemical markets, particularly inthe United States andEurope , offset, in part, by decreases in project-based revenue in the LNG market. Product revenue for the nine months endedSeptember 30, 2021 included$25.0 million to a North American distributor and$9.2 million to a European LNG project contractor. Product revenue for the nine months endedSeptember 30, 2020 included$15.3 million to an Asian LNG project contractor and$13.6 million to a North American distributor. The average selling price per square foot of our products decreased by$0.18 , or 5%, to$3.26 per square foot for the nine months endedSeptember 30, 2021 from$3.44 per square foot for the nine months endedSeptember 30, 2020 . The decrease in average selling price principally reflected the impact of a change in the mix of products sold for the nine months endedSeptember 30, 2021 from the comparable period in 2020. This decrease in average selling price had the effect of decreasing product revenue by$5.0 million for the nine months endedSeptember 30, 2021 from the comparable period in 2020. In volume terms, product shipments increased by 5.2 million square feet, or 23%, to 27.5 million square feet of aerogel products for the nine months endedSeptember 30, 2021 , as compared to 22.3 million square feet for the nine months endedSeptember 30, 2020 . The increase in product volume had the effect of increasing product revenue by$18.0 million for the nine months endedSeptember 30, 2021 from the comparable period in 2020. Research services revenue was$0.3 million and$0.5 million for the nine months endedSeptember 30, 2021 andSeptember 30, 2020 , respectively. The decline in research services revenue reflected our decision to wind down our existing contract research activities. Cost of Revenue Nine Months Ended September 30, 2021 2020 Change Percentage Percentage Percentage Percentage of Related of Total of Related of Total Amount Revenue Revenue Amount Revenue Revenue Amount Percentage ($ in thousands) Cost of revenue: Product$ 78,459 87 % 87 %$ 66,403 86 % 86 %$ 12,056 18 % Research services 85 25 % 0 % 121 25 % 0 % (36 ) (30 )% Total cost of revenue$ 78,544 87 % 87 %$ 66,524 86 % 86 %$ 12,020 18 % Total cost of revenue increased$12.0 million , or 18%, to$78.5 million for the nine months endedSeptember 30, 2021 from$66.5 million in the comparable period in 2020. The increase in total cost of revenue was principally the result of an increase in product cost of revenue. Product cost of revenue increased$12.1 million , or 18%, to$78.5 million for the nine months endedSeptember 30, 2021 from$66.4 million in the comparable period in 2020. The$12.1 million increase was the result of a$6.3 million increase in material costs and a$5.8 million increase in manufacturing expense. The increase in material costs was driven principally by the 5.2 million square feet, or 23%, increase in product shipments. The increase in manufacturing expense was the result of increases in compensation and related expenses of$4.0 million , operating supplies of$1.0 million , maintenance costs of$0.5 million and other expenses of$0.3 million . Product cost of revenue as a percentage of product revenue increased to 87% during the nine months endedSeptember 30, 2021 from 86% during the nine months endedSeptember 30, 2020 . This increase was the result of the increase in both material costs and manufacturing expense as a percentage of revenue during the nine months endedSeptember 30, 2021 .
Research services cost of revenue was approximately
29
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Gross Profit
Nine Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Gross profit $ 11,603 13 % $ 10,731 14 % $ 872 8 %
Gross profit increased $0.8 million , or 8%, to $11.6 million for the nine months
ended September 30, 2021 from $10.7 million in the comparable period in 2020.
The increase in gross profit was the result of the $12.8 million increase in
total revenue, offset, in part, by the $12.0 million increase in total cost of
revenue. The increase in revenue was driven principally by the 23% increase in
product shipments. The increase in total cost of revenue was driven by the $6.3
million increase in material costs and the $5.8 million increase in
manufacturing expense.
Gross profit as a percentage of total revenue decreased to 13% of total revenue
for the nine months ended September 30, 2021 from 14% in the comparable period
in 2020.
Research and Development Expenses
Nine Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 8,128 9 % $ 6,436 8 % $ 1,692 26 %
Research and development expenses increased $1.7 million , or 26%, to $8.1
million for the nine months ended September 30, 2021 from $6.4 million in the
comparable period in 2020. The $1.7 million increase was the result of increases
in compensation and related costs of $1.3 million and other research and
development expenses of $0.4 million .
Research and development expenses as a percentage of total revenue was 9% for
the nine months ended September 30, 2021 from 8% in the comparable period in
2020.
Sales and Marketing Expenses
Nine Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Sales and marketing expenses $ 11,784 13 % $ 9,051 12 % $ 2,733 30 %
Sales and marketing expenses increased by $2.7 million , or 30%, to $11.8 million
for the nine months ended September 30, 2021 from $9.1 million in the comparable
period in 2020. The $2.7 million increase was the result of increases in
compensation and related expenses of $3.2 million and other sales related
expenses of $0.3 million , offset, in part, by decreases in sales consultant
costs of $0.7 million and travel related expenses of $0.1 million .
Sales and marketing expenses as a percentage of total revenue was 13% for the
nine months ended
General and Administrative Expenses
Nine Months Ended September 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 15,978 18 % $ 10,682 14 % $ 5,296 50 %
30
-------------------------------------------------------------------------------- General and administrative expenses increased by$5.3 million , or 50%, to$16.0 million during the nine months endedSeptember 30, 2021 from$10.7 million in the comparable period in 2020. The$5.3 million increase was the result of an increase in compensation and related expenses of$2.9 million , recruiting and professional services of$1.9 million , and other general and administrative expenses of$1.0 million , offset, in part, by a decrease in the provision for uncollectible accounts of$0.5 million . General and administrative expenses as a percentage of total revenue increased to 18% of total revenue for the nine months endedSeptember 30, 2021 from 14% during the comparable period in 2020.
Gain on Extinguishment of Debt
OnMay 1, 2020 , our wholly owned subsidiary,Aspen Aerogels Rhode Island, LLC , executed a note for an unsecured PPP loan of$3.7 million pursuant to the CARES Act. OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and accrued interest after approving the Borrower's application for forgiveness of the PPP Loan. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the nine months endedSeptember 30, 2021 . Interest Expense, net Nine Months Ended September 30, 2021 2020 Change Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Interest expense, net$ (188 ) (0 )%$ (182 ) (0 )%$ (6 ) 3 %
Interest expense, net, consists primarily of fees and interest expense
associated with our revolving credit agreement and was approximately
Liquidity and Capital Resources
Overview
We have experienced significant losses and invested substantial resources since our inception to develop, commercialize and protect our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures and investment in working capital balances.
Through 2015, we experienced revenue growth and gained share in our target
markets. Despite a decline in revenue in 2016, 2017 and 2018, our financial
projections anticipated long-term revenue growth, increasing levels of gross
profit and improved cash flow from operations. To support this growth, we
increased the capacity of our
To meet expected demand growth for our aerogel products in the energy, sustainable building and electric vehicle markets, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant at a site in the southeasternU.S. Subject to board approval, finalization of zoning approvals and other arrangements, we expect to have the second aerogel plant operational during the second half of 2023. In addition, we are planning to construct a state-of-the-art, automated thermal barrier fabrication operation and to hire dedicated thermal barrier fabrication employees at potential sites inMexico in order to keep pace with the significant potential demand for our PyroThin thermal barriers. We are also increasing our investment in the research and development of next-generation aerogel products and technologies. During 2021, we will continue to develop aerogel products and technologies for the electric vehicle market. We believe the commercial potential for our technology in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, and plan to construct a carbon aerogel battery materials facility, among other items. We took several actions during 2020 to increase the financial resources available to support current operating requirements and capital expenditures. InFebruary 2020 , we completed an underwritten public offering of our common stock and received net proceeds of$14.8 million . InMarch 2020 , we extended the maturity of our revolving credit facility withSilicon Valley Bank toApril 28, 2021 . InMay 2020 , our wholly owned subsidiary,Aspen Aerogels Rhode Island, LLC , received PPP Loan proceeds of$3.7 million under 31 --------------------------------------------------------------------------------
the CARES Act. During November and
During the nine months endedSeptember 30, 2021 , we sold shares of our common stock through our at-the-market offering program and received net proceeds of$19.4 million . InJune 2021 , we sold 3,462,124 shares to an affiliate of Koch Strategic Platforms in a private placement of our common stock and received net proceeds of$73.5 million . In addition, duringSeptember 2021 , the SBA remitted$3.7 million in principal and accrued interest after approvingAspen Aerogels Rhode Island, LLC's application for forgiveness of the PPP Loan under the provisions of the CARES Act.
We believe that our existing cash balance of
However, we plan to supplement our cash balance and available credit with equity financings, debt financings, customer prepayments or technology licensing fees to provide the additional capital necessary to purchase the capital equipment, construct the new facilities and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives. We also intend to extend or replace our revolving credit facility withSilicon Valley Bank prior to its maturity.
Primary Sources of Liquidity
Our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility withSilicon Valley Bank . Cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks. As ofSeptember 30, 2021 , we had$95.5 million of cash and cash equivalents. OnFebruary 18, 2020 , we completed an underwritten public offering of 1,955,000 shares of our common stock at an offering price of$8.25 per share. We received net proceeds of$14.8 million after deducting underwriting discounts and commissions of$1.1 million and offering expenses of approximately$0.3 million . OnNovember 5, 2020 , we entered into a sales agreement for an ATM offering program under which we could sell up to$33,871,250 of our common stock throughB. Riley Securities as our sales agent. We were not obligated to sell any stock under the sales agreement. We agreed to payB. Riley Securities a commission of 3.0% of the gross sales proceeds of shares sold under the agreement. During 2020, we sold 714,357 shares of our common stock through the ATM offering program and received net proceeds of$9.5 million . During the nine months endedSeptember 30, 2021 , we sold an additional 929,981 shares of our common stock through the ATM offering program and received net proceeds of$19.4 million . OnJune 29, 2021 , we sold 3,462,124 shares to an affiliate of Koch Strategic Platforms in a private placement of our common stock and received net proceeds of$73.5 million after deducting fees and offering expenses of$1.5 million . OnMay 1, 2020 , our wholly-owned subsidiary,Aspen Aerogels Rhode Island, LLC (Borrower) executed a note for a loan of$3.7 million pursuant to the PPP under the CARES Act, as amended, and administered by the SBA. OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and accrued interest pursuant to the Borrower's application for forgiveness of the PPP Loan under the provisions of the CARES Act.
We have a prepayment balance of
We have maintained our revolving credit facility, as amended from time to time, withSilicon Valley Bank sinceMarch 2011 . OnMarch 12, 2021 , we amended and restated our revolving credit facility withSilicon Valley Bank to extend the maturity date of the revolving credit facility toApril 28, 2022 and to establish certain minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants. We intend to extend or replace the facility prior to its maturity. Under our revolving credit facility, we may borrow a maximum of$20.0 million , subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, as defined, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. 32 -------------------------------------------------------------------------------- As ofSeptember 30, 2021 , we had no outstanding borrowings under our revolving credit facility and$1.3 million of outstanding letters of credit secured by the revolving credit facility.
Under the revolving credit facility, we are required to comply with both
non-financial and financial covenants, including minimum Adjusted EBITDA and
Adjusted Quick Ratio covenants, as defined in the loan agreement. As of
The amount available to us under the revolving credit facility as of
Analysis of Cash Flow
During the nine months endedSeptember 30, 2021 , we used$6.6 million in net cash in operating activities, as compared to the use of$4.8 million in net cash during the comparable period in 2020, an increase in the use of cash of$1.8 million . This increase in use of cash was the result of an increase in net loss adjusted for non-cash items of$9.0 million , offset, in part, by an increase in net cash provided by changes in operating assets and liabilities of$7.2 million .
Net cash used in investing activities is primarily related to capital expenditures to support our growth. Net cash used in investing activities for the nine months endedSeptember 30, 2021 and 2020 was$6.1 million and$2.6 million , respectively, for capital expenditures primarily for machinery and equipment to improve the capacity, throughput, efficiency and reliability of ourEast Providence manufacturing facility.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months endedSeptember 30, 2021 totaled$91.7 million and consisted of$73.5 million in net proceeds from the private placement of our common stock,$19.4 million in net proceeds from the ATM offering program, and$1.5 million in proceeds from employee stock option exercises, offset, in part, by$2.7 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units. Net cash provided by financing activities for the nine months endedSeptember 30, 2020 totaled$15.1 million and consisted of$19.4 million in borrowings under our line of credit,$14.8 million in net proceeds from an underwritten public offering of our common stock,$3.7 million in net proceeds from the issuance of long-term debt, and$1.0 million in proceeds from employee stock option exercises, offset, in part, by$22.6 million of repayments under our line of credit and$1.2 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units.
Off Balance Sheet Arrangements
Since inception, we have not engaged in any off balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments as reported in our Annual Report.
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.
33
--------------------------------------------------------------------------------Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance withU.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.
Certain Factors That May Affect Future Results of Operations
TheSEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, future profits, uses of cash, available credit, capital requirements, and the need for additional financing to operate our business, including to complete the planned capacity expansion of ourEast Providence manufacturing facility, and to fund our planned strategic business initiatives; the performance of our aerogel blankets; our expectation that we will be successful in obtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our belief that our products possess strong competitive advantages over traditional insulation materials, including the superior thermal performance and the thin, easy-to-use and durable blanket form of our products; our plans to expand capacity in ourEast Providence, Rhode Island manufacturing facility; our estimates of annual production capacity; our plans regarding the future capacity expansion, including the selection of a manufacturing site and the construction and operation of the facility; our ability to obtain approvals and terms that are acceptable to move forward with the construction of a facility in the southeasternU.S. on a timely basis, or at all; beliefs about the role of our technology and products in the electric vehicle market; beliefs about the commercial potential for our technology in the electric vehicle market; beliefs about our ability to produce and deliver products to electric vehicle customers; beliefs aboutAspen's contracts with the majorU.S. automotive manufacturer; beliefs about the potential for the majorU.S. automotive manufacturer to become a significant customer forAspen's products; beliefs about revenue, costs, expenses, profitability, investments or cash flow associated with the contracts with the majorU.S. automotive manufacturer; beliefs about the performance of our thermal barrier products in the battery systems of electric vehicles; beliefs about the potential commercial opportunity forAspen's thermal barrier products; our beliefs about the usefulness of the square foot operating metric; our beliefs about the financial metrics that are indicative of our core performance; our beliefs about the usefulness of our presentation of Adjusted EBITDA; our expectations about the effect of manufacturing capacity on financial metrics such as Adjusted EBITDA; our expectations about future revenues, expenses, gross profit, net loss, loss per share and Adjusted EBITDA, sources and uses of cash, capital requirements and the sufficiency of our existing cash balance and available credit; our beliefs about the outcome, effects or estimated costs of current or potential litigation or their respective timing, including expected legal expense in connection with our patent enforcement actions; our plans to devote substantial resources to the development of new aerogel technology; our expectations about product mix; our expectations about future material costs and manufacturing expenses as a percentage of revenue; our expectations of future gross profit and the effect of manufacturing expenses, manufacturing capacity and productivity on gross profit; our expectations about our resources and other investments in new technology and related research and development activities and associated expenses; our expectations about short and long term (a) research and development (b) general and administrative and (c) sales and marketing expenses; our expectations of revenue growth, increased gross profit, and improving cash flows over the long term; our intentions about managing capital expenditures and working capital balances; our expectations about incurring significant capital expenditures in the future; our expectations about the expansion of our workforce and resources and its effect on sales and marketing, general and administrative, and related expenses; our expectations about future product revenue and demand for our products; our expectations about the effect of stock based compensation on various costs and expenses; our expectations about potential sources of future financing; our beliefs about the impact of accounting policies on our financial statements; our beliefs about the effect of interest rates, inflation and foreign currency fluctuations on our results of operations and financial condition; our beliefs about the expansion of our international operations; our statements about the impact of major public health concerns, including the COVID-19 pandemic or other pandemics arising globally, and the future, and currently unknown extent of, the impact of the COVID-19 pandemic on our business and operations; and our statements about the sufficiency of our current and future actions to address the impact of the COVID-19 pandemic on our business and operations, including our future revenue, Adjusted EBITDA and other financial metrics. 34
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Words such as "may," "will," "anticipate," "estimate," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management's present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those set forth in this Quarterly Report on Form 10-Q and under the heading "Risk Factors" contained in Item 1A of our Annual Report. In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur. Stockholders and other readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable toAspen Aerogels, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
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