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 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
lithium-ion batteries 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 performance attributes that enable
electric vehicle manufacturers to achieve critical safety goals without
sacrificing driving range. In addition, we are seeking to leverage our patented
carbon aerogel technology to develop industry-leading battery materials for
lithium-ion battery systems. These battery materials have the potential to
enable an increase in the drive range of electric vehicles.
18
--------------------------------------------------------------------------------The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the electric vehicle market is significant. Accordingly, we are planning to hire additional personnel, incur additional operating expenses, and incur 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 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 technology 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 throughDecember 31, 2020 to approximately 55 million square feet of aerogel blankets. We are currently engaged in an initiative, which we refer to as EP20, designed to increase the capacity of theEast Providence facility to approximately 60 million square feet of aerogel blankets by the end of 2021. In addition, we anticipate that we will need to construct a state-of-the-art thermal barrier fabrication operation, hire dedicated thermal barrier fabrication employees, and increase our aerogel blanket manufacturing capacity to keep pace with the significant potential demand for our PyroThin thermal barriers. Accordingly, we are planning a significant expansion of our aerogel capacity prior to the end of 2023. The expected elements of the expansion plan will include the size of the required capacity expansion, the selection of an optimal manufacturing site for the expansion, and a detailed timeline for the construction and operation of the facility. We have entered into three 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 respective term of the agreements, one of which expires in 2026 and two of which expire in 2034. While the customer has agreed to purchase from us its requirement for the barriers 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 are engaged in a strategic partnership with BASF to develop and commercialize products for the 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 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 19 --------------------------------------------------------------------------------
BASF against the outstanding balance of the 2019 prepayment or may require that we repay the uncredited amount following a six-week notice period.
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 certain minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants, each as defined in the Loan Agreement. 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 is unsecured, contains customary events of default, carries an interest rate of 1% per year, and matures onMay 1, 2022 . The Borrower may repay the loan at any time without penalty. In addition, the Borrower is permitted at any time to submit an application to extend the maturity of loan toMay 1, 2025 . The Borrower may also choose to apply to have the PPP Loan forgiven in whole or in part subject to SBA guidelines. The potential amount of forgiveness is based on the Borrower's use of loan proceeds for payroll costs, mortgage interest payments, rent and utility costs over either an eight-week or 24-week period following receipt of the loan proceeds. The SBA may deny the loan forgiveness application if the agency determines that the Borrower was ineligible for the PPP Loan or any forgiveness criteria. As ofJune 30, 2021 , the Borrower had not applied for forgiveness. Upon application, the Borrower may receive loan forgiveness in whole or in part. In addition, the amount of potential loan forgiveness will be reduced if the Borrower failed to maintain employee and salary levels during the applicable eight-week or 24-week period following receipt of the loan proceeds. If the Borrower applies for forgiveness, and the PPP Loan is not forgiven in whole or in part, the Borrower will be required to begin to make payments of the principal and accrued interest of the post-forgiveness balance outstanding in equal monthly installments over the remaining term of the loan. If the Borrower does not apply for forgiveness byAugust 19, 2021 , the Borrower will be required to make payments of principal and accrued interest in equal monthly installments over the remaining term of the loan. The Borrower used the proceeds of the PPP Loan to support ongoing operations and to sustain staffing levels in theEast Providence, Rhode Island manufacturing facility despite the unfavorable impact the COVID-19 pandemic and volatile energy markets had on its business. 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 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 six months endedJune 30, 2021 was$59.8 million , which represented an increase of$6.7 million , or 13%, from$53.1 million for the six months endedJune 30, 2020 . Net loss for the six months endedJune 30, 2021 was$12.9 million and net loss per share was$0.46 . Net loss for the six months endedJune 30, 2020 was$8.9 million and net loss per share was$0.34 . 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 20 -------------------------------------------------------------------------------- procedures for social distancing, face coverings and safe hygiene. We continue to monitor public health guidance as it evolves and 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 atJune 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 (In thousands)
Product shipments in square feet 9,870 7,317 18,514
15,482 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;
21
--------------------------------------------------------------------------------
• Adjusted EBITDA does not reflect our income tax expense or cash
requirements to pay our income taxes;
• 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 Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(In thousands)
Net loss $ (6,669 ) $ (5,698 ) $ (12,919 ) $ (8,867 )
Depreciation and amortization 2,104 2,562 4,742 5,125
Stock-based compensation(1) 1,070 1,007 2,046
1,999 Interest expense 55 50 130 133 Adjusted EBITDA$ (3,440 ) $ (2,079 ) $ (6,001 ) $ (1,610 ) (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 petrochemical and refinery market and growth in the European building materials market. We have also announced a price increase 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 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
-------------------------------------------------------------------------------- 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 petrochemical and refinery market and growth in the European building materials 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. We expect that material costs will increase in absolute dollars due to projected growth in product shipments, but decrease as a percentage of revenue during 2021 due to the impact of our 2021 price increase, a projected favorable product mix and the impact of our bill of material cost initiatives. 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, but may increase or decrease modestly as a percentage of revenue versus 2020 depending on the level of revenue achieved during 2021.
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 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 and a decrease in projected material costs as a percentage of revenue, offset, in part, by an increase in manufacturing expense. However, we expect that gross profit as a percentage of revenue may increase or decrease modestly versus 2020 depending on the level of revenue achieved during 2021.
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 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.
23
--------------------------------------------------------------------------------
During 2021, we expect to hire additional personnel and incur additional
operating expenses to support the anticipated multi-year growth in our PyroThin
thermal barrier business. As a result, we expect that operating expenses will
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, in 2021 we expect these expenses will increase in both absolute dollars and as a percentage of revenue. 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 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, in 2021 we expect such expenses will increase in both absolute dollars and as a percentage of revenue.
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. 24 --------------------------------------------------------------------------------
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 June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 31,490 99 % $ 24,526 100 % $ 6,964 28 %
Research services 180 1 % 115 0 % 65 57 %
Total revenue $ 31,670 100 % $ 24,641 100 % $ 7,029 29 %
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 June 30, Change
2021 2020 Amount Percentage
Product shipments in square feet (in
thousands) 9,870 7,317 2,553 35 %
Total revenue increased $7.1 million , or 29%, to $31.7 million for the three
months ended June 30, 2021 from $24.6 million in the comparable period in 2020.
The increase in total revenue was principally the result of an increase in
product revenue.
Product revenue increased by $7.0 million , or 28%, to $31.5 million for the
three months ended June 30, 2021 from $24.5 million in the comparable period in
2020. This increase was principally driven by growth in the petrochemical and
refinery markets, particularly in the United States , and growth in the European
building materials market, offset, in part, by a decrease in project-based
demand in the subsea and LNG markets.
Product revenue for the three months ended June 30, 2021 included $9.6 million
to a North American distributor and $3.7 million to a European LNG project
contractor. Product revenue for the three months ended June 30, 2020 included
$5.5 million to an Asian LNG project contractor, $3.1 million to a subsea
contractor and $2.4 million to a North American distributor.
The average selling price per square foot of our products decreased by $0.16 , or
5%, to $3.19 per square foot for the three months ended June 30, 2021 from $3.35
per square foot for the three months ended June 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 $1.6 million for the three months ended June 30,
2021 from the comparable period in 2020.
In volume terms, product shipments increased by 2.6 million square feet, or 35%,
to 9.9 million square feet of aerogel products for the three months ended
June 30, 2021 , as compared to 7.3 million square feet for the three months ended
June 30, 2020 . The increase in product volume had the effect of increasing
product revenue by $8.6 million for the three months ended June 30, 2021 from
the comparable period in 2020.
Research services revenue increased $0.1 million , or 57%, to $0.2 million for
the three months ended June 30, 2021 from $0.1 million in the comparable period
in 2020. The increase was due to the timing of research work performed.
Product revenue was 99% of total revenue for the three months ended June 30,
2021 and greater than 99% of total revenue for the three months ended June 30,
2020 . Research services revenue was 1% of total revenue for the three months
ended June 30, 2021 and less than 1% of total revenue for the three months ended
June 30, 2020 .
25
--------------------------------------------------------------------------------
Cost of Revenue
Three Months Ended June 30,
2021 2020 Change
Percentage Percentage Percentage Percentage
of Related of Total of Related of Total
Amount Revenue Revenue Amount Revenue Revenue Amount Percentage
($ in thousands)
Cost of revenue:
Product $ 27,051 86 % 85 % $ 21,761 89 % 88 % $ 5,290 24 %
Research services 39 22 % 0 % 29 25 % 0 % 10 34 %
Total cost of revenue $ 27,090 86 % 86 % $ 21,790 88 % 88 % $ 5,300 24 %
Total cost of revenue increased $5.3 million , or 24%, to $27.1 million for the
three months ended June 30, 2021 from $21.8 million in the comparable period in
2020. The increase in total cost of revenue was primarily the result of an
increase in product cost of revenue.
Product cost of revenue increased by $5.3 million , or 24%, to $27.1 million for
the three months ended June 30, 2021 from $21.8 million in the comparable period
in 2020. The $5.3 million increase was the result of a $2.5 million increase in
material costs and a $2.8 million increase in manufacturing expense. The
increase in material costs was principally the result of the 2.6 million square
feet, or 35%, increase in total product shipments. The increase in manufacturing
expense was the result of increases in compensation and related expenses of $1.8
million , operating supplies of $0.4 million , maintenance costs of $0.3 million ,
waste disposal costs of $0.2 million , utilities cost of $0.2 million and
professional services of $0.1 million , offset, in part, by a decrease in other
manufacturing expenses of $0.2 million .
Product cost of revenue as a percentage of product revenue decreased to 86%
during the three months ended June 30, 2021 from 89% during the three months
ended June 30, 2020 . This decrease was principally the result of the decrease in
material costs as a percentage of revenue during the three months ended June 30,
2021 .
Research services cost of revenue was less than
Gross Profit
Three Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Gross profit $ 4,580 14 % $ 2,851 12 % $ 1,729 61 %
Gross profit increased $1.7 million , or 61%, to $4.6 million for the three
months ended June 30, 2021 from $2.9 million in the comparable period in 2020.
The increase in gross profit was the result of the $7.1 million increase in
total revenue, offset, in part, by the $5.3 million increase in total cost of
revenue. The increase in revenue was principally driven by growth in the
petrochemical and refinery markets, particularly in the United States , and
growth in the European building materials market, offset, in part, by a decrease
in project-based demand in the subsea and LNG markets. The increase in total
cost of revenue was the result of the $2.5 million increase in material costs
associated with 2.6 million square feet, or 35%, increase in total product
shipments and the $2.8 million increase in manufacturing expense during 2021.
Gross profit as a percentage of total revenue increased to 14% of total revenue
for the three months ended June 30, 2021 from 12% in the comparable period in
2020.
Research and Development Expenses
Three Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 2,609 8 % $ 2,121 9 % $ 488 23 %
26
-------------------------------------------------------------------------------- Research and development expenses increased$0.5 million , or 23%, to$2.6 million for the three months endedJune 30, 2021 from$2.1 million in the comparable period in 2020. The$0.5 million increase reflects an increase in compensation expense associated with the hiring of new employees to facilitate our efforts to optimize our carbon aerogel battery materials and develop next-generation aerogel compositions, form factors and manufacturing technologies. Research and development expenses as a percentage of total revenue decreased to 8% for the three months endedJune 30, 2021 from 9% in the comparable period in 2020 as a result of revenue growth in the three months endedJune 30, 2021 . Sales and Marketing Expenses Three Months Ended June 30, 2021 2020 Change Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Sales and marketing expenses$ 3,568 11 %$ 2,972 12 %$ 596 20 % Sales and marketing expenses increased by$0.6 million , or 20%, to$3.6 million for the three months endedJune 30, 2021 from$3.0 million in the comparable period in 2020. The$0.6 million increase was the result of increases in compensation and related costs of$0.7 million and other sales related costs of$0.2 , offset, in part, by a decrease in sales consultant expenses of$0.3 million . Sales and marketing expenses as a percentage of total revenue decreased to 11% for the three months endedJune 30, 2021 from 12% in the comparable period in 2020 as a result of revenue growth in the three months endedJune 30, 2021 .
General and Administrative Expenses
Three Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 5,017 16 % $ 3,406 14 % $ 1,611 47 %
General and administrative expenses increased by $1.6 million , or 47%, to $5.0
million for the three months ended June 30, 2021 from $3.4 million in the
comparable period in 2020. The $1.6 million increase was the result of increases
in professional services expenses of $0.9 million , compensation and related
costs of $0.5 million , patent enforcement costs of $0.1 million and other
general and administrative expenses of $0.2 million , offset, in part, by a
decrease in the provision for uncollectible accounts of $0.1 million .
General and administrative expenses as a percentage of total revenue increased
to 16% for the three months ended June 30, 2021 from 14% in the comparable
period in 2020.
Interest Expense, net
Three Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Interest expense, net $ (55 ) 0 % $ (50 ) 0 % $ (5 ) 10 %
Interest expense, net, consists primarily of fees and interest expense
associated with our revolving credit agreement and was less than
27
--------------------------------------------------------------------------------
Six months ended
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue
Six Months Ended June 30,
2021 2020 Change
Percentage of Percentage of
Amount Revenue Amount Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 59,546 100 % $ 52,833 100 % $ 6,713 13 %
Research services 221 0 % 227 0 % (6 ) (3 )%
Total revenue $ 59,767 100 % $ 53,060 100 % $ 6,707 13 %
The following chart sets forth product shipments in square feet for the periods
presented:
Six Months Ended June 30, Change
2021 2020 Amount Percentage
Product shipments in square feet (in
thousands) 18,514 15,482 3,032 20 %
28
--------------------------------------------------------------------------------
Total revenue increased
Product revenue increased by$6.7 million , or 13%, to$59.5 million for the six months endedJune 30, 2021 from$52.8 million in the comparable period in 2020. This increase was principally driven by growth in the petrochemical and refinery markets, particularly inthe United States , growth in the European building materials market and an increase in project-based demand in the LNG market, offset, in part, by a decrease in project-based revenue in the subsea market. Product revenue for the six months endedJune 30, 2021 included$17.0 million to a North American distributor and$8.8 million to a European LNG project contractor. Product revenue for the six months endedJune 30, 2020 included$10.1 million to an Asian LNG project contractor and$9.4 million to a North American distributor. The average selling price per square foot of our products decreased by$0.19 , or 6%, to$3.22 per square foot for the six months endedJune 30, 2021 from$3.41 per square foot for the six months endedJune 30, 2020 . The decrease in average selling price principally reflected the impact of a change in the mix of products sold for the six months endedJune 30, 2021 from the comparable period in 2020. This decrease in average selling price had the effect of decreasing product revenue by$3.6 million for the six months endedJune 30, 2021 from the comparable period in 2020. In volume terms, product shipments increased by 3.0 million square feet, or 20%, to 18.5 million square feet of aerogel products for the six months endedJune 30, 2021 , as compared to 15.5 million square feet for the six months endedJune 30, 2020 . The increase in product volume had the effect of increasing product revenue by$10.3 million for the six months endedJune 30, 2021 from the comparable period in 2020.
Research services revenue was
Product revenue was nearly 100% of total revenue for the six months endedJune 30, 2021 andJune 30, 2020 . Research services revenue was less than 1% of total revenue for the six months endedJune 30, 2021 andJune 30, 2020 . Cost of Revenue Six Months Ended June 30, 2021 2020 Change Percentage Percentage Percentage Percentage of Related of Total of Related of Total Amount Revenue Revenue Amount Revenue Revenue Amount Percentage ($ in thousands) Cost of revenue: Product$ 51,180 86 % 86 %$ 44,160 84 % 83 %$ 7,020 16 % Research services 51 23 % 0 % 69 30 % 0 % (18 ) (26 )% Total cost of revenue$ 51,231 86 % 86 %$ 44,229 83 % 83 %$ 7,002 16 % Total cost of revenue increased$7.0 million , or 16%, to$51.2 million for the six months endedJune 30, 2021 from$44.2 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$7.0 million , or 16%, to$51.2 million for the six months endedJune 30, 2021 from$44.2 million in the comparable period in 2020. The$7.0 million increase was the result of a$4.3 million increase in material costs and a$2.7 million increase in manufacturing expense. The increase in material costs was driven principally by the 3.0 million square feet, or 20%, increase in product shipments. The increase in manufacturing expense was the result of increases in compensation and related expenses of$1.6 million , operating supplies of$0.6 million , maintenance costs of$0.4 million and other manufacturing expenses of$0.2 million , partially offset by a decrease in professional services expenses of$0.1 million . Product cost of revenue as a percentage of product revenue increased to 86% during the six months endedJune 30, 2021 from 84% during the six months endedJune 30, 2020 . This increase was the result of the increase in material costs as a percentage of revenue during the six months endedJune 30, 2021 .
Research services cost of revenue, consists primarily of costs associated with
our fulfillment of our research services contracts and was less than
29
--------------------------------------------------------------------------------
Gross Profit
Six Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Gross profit $ 8,536 14 % $ 8,831 17 % $ (295 ) (3 )%
Gross profit decreased $0.3 million , or 3%, to $8.5 million for the six months
ended June 30, 2021 from $8.8 million in the comparable period in 2020. The
decrease in gross profit was the result of the $7.0 increase in total cost of
revenue, offset, in part, by the $6.7 million increase in total revenue. The
increase in revenue was driven principally by the 20% increase in product
shipments. The increase in total cost of revenue was driven by the $4.3 million
increase in material costs and the $2.7 million increase in manufacturing
expense.
Gross profit as a percentage of total revenue decreased to 14% of total revenue
for the six months ended
Research and Development Expenses
Six Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 5,051 8 % $ 4,348 8 % $ 703 16 %
Research and development expenses increased
Research and development expenses as a percentage of total revenue was 8% for
both the six months ended
Sales and Marketing Expenses
Six Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Sales and marketing expenses $ 6,869 11 % $ 6,296 12 % $ 573 9 %
Sales and marketing expenses increased by
Sales and marketing expenses as a percentage of total revenue decreased to 11% for the six months endedJune 30, 2021 from 12% for the six months endedJune 30, 2020 .
General and Administrative Expenses
Six Months Ended June 30,
2021 2020 Change
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 9,405 16 % $ 6,921 13 % $ 2,484 36 %
30
-------------------------------------------------------------------------------- General and administrative expenses increased by$2.5 million , or 36%, to$9.4 million during the six months endedJune 30, 2021 from$6.9 million in the comparable period in 2020. The$2.5 million increase was the result of an increase in compensation and related expenses of$1.2 million , professional fees of$1.2 million , and other general and administrative expenses of$0.5 million , offset, in part, by decreases in the provision for uncollectible accounts of$0.3 million and patent enforcement costs of$0.1 million . General and administrative expenses as a percentage of total revenue increased to 16% of total revenue for the six months endedJune 30, 2021 from 13% during the comparable period in 2020. Interest Expense, net Six Months Ended June 30, 2021 2020 Change Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Interest expense, net$ (130 ) (0 )%$ (133 ) (0 )%$ 3 (2 )%
Interest expense, net, consists primarily of fees and interest expense
associated with outstanding balances under our revolving credit agreement and
was
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 initiated a plan in 2018 to increase the capacity of ourEast Providence, Rhode Island manufacturing facility to approximately 60 million square feet of aerogel blankets and currently expect to achieve this goal by the end of 2021. We may incur additional capital expenditures to complete this plan in 2021. 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 planning to hire additional personnel, incur additional operating expenses, build an automated thermal barrier fabrication operation, and construct a carbon aerogel battery materials facility, among other items. In addition, we anticipate that we will need to increase our silica aerogel blanket manufacturing capacity to keep pace with the significant potential demand for our PyroThin thermal barriers. Accordingly, we are planning a significant expansion of our aerogel capacity prior to the end of 2023. The expected elements of the completed expansion plan will include the size of the required capacity expansion, the selection of an optimal manufacturing site for the expansion and a detailed timeline for the construction and operation of the facility. We expect that we will incur a significant increase in capital expenditures to build out the additional capacity and in operating expenses associated with the start-up of the facility. 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 the CARES Act. During November andDecember 2020 , we also completed the sale of 714,357 shares of our common stock at an average price of$13.96 per share through our at-the-market (ATM) offering program withB. Riley Securities, Inc. as our sales agent and received net proceeds of$9.5 million after deducting commissions$0.3 million and offering expenses of approximately$0.2 million . 31 -------------------------------------------------------------------------------- During the six months endedJune 30, 2021 , we sold an additional 899,981 shares of our common stock at an average price of$21.32 through the ATM offering program and received net proceeds of$18.6 million . In addition, onJune 29, 2021 , we completed the Private Placement. We received net proceeds of$73.6 million from the Private Placement after deducting fees and offering expenses of$1.4 million .
We believe that our existing cash balance and funds available under our revolving credit facility will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business opportunities.
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 complete future capacity expansions or to support evolving 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 ofJune 30, 2021 , we had$102.3 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 may sell up to$33,871,250 of our common stock throughB. Riley Securities as our sales agent. We are not obligated to sell any stock under the sales agreement. We will 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 six months endedJune 30, 2021 , we sold an additional 899,981 shares of our common stock through the ATM offering program and received net proceeds of$18.6 million .
On
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. The loan is unsecured, contains customary terms, including events of default, carries an interest rate of 1% per year, and matures onMay 1, 2022 . The Borrower may repay the loan in full at any time without penalty. In addition, the Borrower may apply to have the maturity of loan extended toMay 1, 2025 . The Borrower may apply to have the PPP Loan indebtedness forgiven in whole or in part subject to SBA guidelines and based on the use of loan proceeds for payroll costs, mortgage interest payments, rent and utility costs over either an eight-week or 24-week period, at the Borrower's option, following its receipt of the loan proceeds. The SBA may deny the Borrower's loan forgiveness application if the agency determines that the Borrower was ineligible for the PPP Loan. As ofJune 30, 2021 , the Borrower had not applied for forgiveness. If the Borrower applies for, but SBA denies forgiveness of the PPP Loan in whole or in part, the Borrower will be required to make payments of the remaining principal and accrued interest in equal monthly installments over the remaining term of the loan. If the Borrower does not apply for forgiveness byAugust 19, 2021 , the Borrower will be required to make payments of principal and accrued interest in equal monthly installments over the remaining term of the loan. 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, 32
-------------------------------------------------------------------------------- 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. AtJune 30, 2021 , we had no outstanding borrowings under our revolving credit facility,$1.5 million of outstanding letters of credit secured by the revolving credit facility,$3.7 million outstanding on the PPP Loan, and an obligation of$9.7 million associated with prepayments received pursuant to our supply agreement with BASF. 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. AtJune 30, 2021 , we were in compliance with all such covenants. The amount available to us under the revolving credit facility atJune 30, 2021 was$7.9 million after giving effect to the$1.5 million of letters of credit outstanding. Analysis of Cash Flow
During the six months endedJune 30, 2021 , we used$0.5 million in net cash in operating activities, as compared to the use of$3.2 million in net cash during the comparable period in 2020, a decrease in the use of cash of$2.7 million . This decrease in use of cash was the result of a decrease in net cash used by changes in operating assets and liabilities of$7.1 million , offset, in part, by an increase in net loss adjusted for non-cash items of$4.4 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 six months endedJune 30, 2021 and 2020 was$3.9 million and$2.0 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 six months endedJune 30, 2021 totaled$90.2 million and consisted of$73.6 million in net proceeds from the Private Placement,$18.6 million in net proceeds from the ATM offering program, and$0.7 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 six months endedJune 30, 2020 totaled$14.9 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$0.9 million in proceeds from employee stock option exercises, offset, in part, by$22.6 million of repayments under our line of credit and$1.3 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.
33
--------------------------------------------------------------------------------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.
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, PPP Loan Proceeds, 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 expectation to achieve our EP20 goals by the end of 2021; our plans regarding the future capacity expansion, including the selection of a manufacturing site and the construction and operation of the facility; 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 the commercial opportunity forAspen's thermal barrier products; our strategic partnership with BASF and the potential benefits of such a relationship, including the potential for it to create new product and market opportunities; our supply agreement with BASF, our supply to BASF of its Spaceloft A2 product and newly developed product, the potential for future cash advances from BASF under our supply agreement with BASF (payment of which are subject to certain conditions) to provide a source of financing and the potential for BASF to become a significant customer for our products; our joint development agreement with BASF, and the potential for it to support the development of new aerogel products and technologies; 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 34
--------------------------------------------------------------------------------
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; 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; our belief that we qualify for partial or complete forgiveness of the PPP Loan; and changes by governmental authorities regarding the CARES Act or related administrative matters and the Company's and its subsidiary's abilities to comply with the terms of the PPP Loan and the CARES Act, including to use the proceeds of the PPP Loan as described herein. 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.
© Edgar Online, source
