NORTHBOROUGH, Mass., Aug. 2, 2018 /PRNewswire/ -- Aspen Aerogels, Inc. ASPN ("Aspen Aerogels") today announced financial results for the second quarter and first half of 2018, which ended June 30, 2018, and discussed recent business developments.

Total revenue for the second quarter was $21.7 million compared to $25.1 million in the second quarter last year. Second quarter net loss was $7.0 million compared to $5.5 million in the second quarter of 2017. Net loss per share for the second quarter was $0.29 compared to $0.23 in the second quarter last year.

Total revenue for the first half was $44.7 million compared to $48.1 million in the first half last year. First half net loss was $13.8 million compared to $14.6 million in the first half of 2017. Net loss per share for the first half was $0.58 compared to $0.62 in the first half last year.

Adjusted EBITDA for the second quarter was $(3.2) million compared to $(1.4) million in the second quarter of 2017. Adjusted EBITDA for the first half was $(5.6) million compared to $(6.6) million in the first half of 2017. A reconciliation of non-GAAP Adjusted EBITDA to net loss is provided in the financial schedules that are part of this press release. An explanation of this non-GAAP financial measure is also included below under the heading "Non-GAAP Financial Measures."

Net loss and Adjusted EBITDA included legal and related expenses associated with Aspen Aerogels' ongoing patent enforcement actions of $0.1 million for the second quarter compared to $0.2 million in the second quarter of 2017 and $0.2 million for the first half compared to $2.9 million in the first half of 2017.

Recent Business Developments

"During the first half of 2018, we experienced growth in our core petrochemical and refinery markets, most notably in North America. However, total revenue decreased as a result of a decline in project work in the subsea market and due to the successful conclusion of the South Asia petrochemical project and several key LNG projects. We also faced a sharp increase in raw material costs during the period due to a recent supply imbalance in the silanes market," said Don Young, President and CEO of Aspen Aerogels.

"On a positive note, we benefitted from solid manufacturing yields and strong operational productivity in our East Providence, Rhode Island manufacturing facility during the first half of the year. In addition, we experienced a significant decline in legal and related expenses associated with our patent enforcement efforts due to the successful results of our actions against two China-based companies at the International Trade Commission in February. As a result, we delivered year-over-year improvement in Adjusted EBITDA during the first half of 2018," continued Mr. Young.

"We've made solid advances this year with our EP20 initiative to increase the capacity and profit potential of our existing manufacturing assets and our strategic initiative to leverage our aerogel technology platform to develop breakout opportunities in new markets. We initiated $3.0 million of EP20 projects during the first half of 2018 that we estimate will increase the annual capacity of our East Providence manufacturing facility by more than 10 percent by the end of this year," said Mr. Young.

"We also made continued progress in our multi-faceted partnership with BASF. In May, BASF introduced a line of non-combustible building products under the SLENTEX brand leveraging our Spaceloft A2 technology. In addition, we are increasingly confident about the potential of our joint development initiative with BASF targeting next generation aerogel products for the building materials market. We also received advance payments of $5.0 million from BASF during the first half of the year, which we have used to support our capacity expansion plans and our new business development efforts," concluded Mr. Young.

2018 Financial Outlook

Aspen Aerogels updates its 2018 full year outlook as follows:

• Total revenue is expected to range between $102 million and $112 million, revised from prior guidance of between $106 million and $116 million
• Net loss is expected to range between $20.6 million and $22.6 million, revised from prior guidance of between $17.6 million and $20.6 million
• Adjusted EBITDA is expected to range between $(5.0) million and $(7.0) million, revised from prior guidance of between $(2.0) million and (5.0) million
• Net loss per share is expected to range between $(0.87) and $(0.95), revised from prior guidance of between $(0.74) and $(0.87)

Our 2018 outlook assumes depreciation and amortization of $10.8 million, stock-based compensation expense of $4.3 million, interest and other expense of $0.5 million, and weighted average shares outstanding of 23.7 million for the full year. In addition, our 2018 outlook reflects an expected $1.0 million of costs and expenses associated with our ongoing patent enforcement efforts during the year.

"Looking forward to the second half of 2018, we anticipate a substantial increase in revenue and profitability from first half levels. This projected second half increase reflects our expectation of continued growth in our core petrochemical and refinery markets and the scheduled delivery of nearly $7 million of subsea work. We remain committed to our strategy of leveraging our aerogel technology platform in our core and adjacent markets and of creating new businesses supported by innovative products and strategic partnerships. We believe our approach will position us for a return to double-digit revenue growth in 2019 and consistent growth in revenue and profitability over the long term," concluded Mr. Young.

A reconciliation of non-GAAP Adjusted EBITDA to net loss for this 2018 financial outlook is provided in the financial schedules that are part of this press release. An explanation of this non-GAAP financial measure is also included below under the heading "Non-GAAP Financial Measures."

Aspen Aerogels may incur charges, realize gains or losses, incur financing costs or interest expense, or experience other events in 2018 that could cause actual results to vary materially from this outlook. In addition, the timing of projects may have a significant impact on quarterly and annual revenue and profitability and can be difficult to predict.

Conference Call Notification

A conference call with Aspen Aerogels management to discuss second quarter and first half results and business developments will be held at 5:00 pm EDT on August 2, 2018. During the call, management will respond to questions concerning, but not limited to, Aspen Aerogels' financial performance, business conditions and industry outlook. Management's discussion and responses could contain information that has not been previously disclosed. The conference call will be available live as a listen-only webcast and will be hosted at the Investors section of the Aspen Aerogels website, www.aerogel.com. In addition, shareholders and other interested parties may call 833-287-0799 (toll free, U.S. & Canada only) or +1 647-689-4458 (international) conference ID "4385139" to participate in the conference call.

Following the live event, an archived version of the webcast will be available on the Aspen Aerogels website for convenient on-demand replay for at least a year.

A copy of this press release is posted in the Investors section on the Aspen Aerogels website.

Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States of America ("GAAP"), Aspen Aerogels provides additional financial metrics that are not prepared in accordance with GAAP ("non-GAAP"). The non-GAAP financial measure included in this press release is Adjusted EBITDA. Management uses non-GAAP financial measures, in addition to GAAP financial measures, as a measure of operating performance because the non-GAAP financial measures do not include the impact of items that management does not consider indicative of Aspen Aerogels' core operating performance. In addition, management uses Adjusted EBITDA (i) for planning purposes, including the preparation of Aspen Aerogels' annual operating budget, (ii) to allocate resources to enhance the financial performance of its business, and (iii) as a performance measure under its bonus plan.

Management believes that these non-GAAP financial measures reflect Aspen Aerogels' ongoing business in a manner that allows for meaningful comparisons and analysis of trends in its business, as they exclude expenses and gains not reflective of Aspen Aerogels' ongoing operating results or that may be infrequent and/or unusual in nature. Management also believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating Aspen Aerogels' operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. These non-GAAP measures may not be comparable to similarly titled measures presented by other companies.

The non-GAAP financial measures do not replace the presentation of Aspen Aerogels' GAAP financial results and should only be used as a supplement to, not as a substitute for, Aspen Aerogels' financial results presented in accordance with GAAP. In this press release, Aspen Aerogels has provided a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. Management strongly encourages investors to review Aspen Aerogels' financial statements and publicly-filed reports in their entirety and not rely on any single financial measure.

About Aspen Aerogels, Inc.

Aspen Aerogels is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy infrastructure and building materials markets where thermal energy efficiency is at a premium and Aspen's products offer unique value. Headquartered in Northborough, Mass., Aspen Aerogels manufactures its Cryogel®, Pyrogel® and Spaceloft® products at its East Providence, R.I. facility.

Special Note Regarding Forward-Looking and Cautionary Statements

This press release and any related discussion contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements, including statements relating to Aspen Aerogels' 2018 Financial Outlook. These statements are not historical facts but rather are based on Aspen Aerogels' current expectations, estimates and projections regarding Aspen Aerogels' business, operations and other factors relating thereto, including with respect to the 2018 Financial Outlook. Words such as "may," "will," "could," "would," "should," "anticipate," "predict," "potential," "continue," "expects," "intends," "plans," "projects," "believes," "estimates," "outlook," "assumes," and similar expressions are used to identify these forward-looking statements. Such forward-looking statements include statements regarding, among other things, Aspen Aerogels' expectations about revenue, expenses, Adjusted EBITDA, GAAP EPS, cash balances and related variations or trends; beliefs about the general strength or health of Aspen Aerogels' business; beliefs about current or future trends in the energy, energy infrastructure, petrochemical, refinery, building materials, core, adjacent, North American, subsea, South Asian or other markets and the impact of these trends on Aspen Aerogels' business; beliefs about the conclusion of the South Asian petrochemical project and its impact on Aspen Aerogels' business; beliefs about volume, timing or trends of subsea projects and their impact on Aspen Aerogels' business; beliefs about Aspen Aerogels' strategic initiatives and implementation; beliefs about Aspen Aerogels' strategic partnership with BASF, including the potential for the joint development agreement to create new product and market opportunities; beliefs about the advance payments from BASF; beliefs about the potential to develop new market opportunities from Aspen Aerogel's aerogel technology platform; beliefs about Aspen Aerogels' investment in new initiatives and personnel; beliefs about the potential of new aerogel products, technologies and businesses; beliefs about Aspen Aerogels' intellectual property strategy and its implementation; expectations about the cost, timing or likelihood of success of Aspen Aerogels' patent enforcement actions and defense of challenges to the validity of its patents; beliefs about Aspen Aerogels' ability to continue to fund patent enforcement or defense actions; beliefs about the productivity or efficiency of Aspen Aerogels' manufacturing operations; beliefs about the silanes market and raw materials costs; beliefs about the cost, likelihood of success, benefits and timing of Aspen Aerogels' project to expand the capacity and profit potential of the East Providence manufacturing facility; beliefs about the Aspen Aerogel's ability to fund its capacity expansion plans including in the East Providence manufacturing facility; future operating performance on an annual or other basis; and accounting and other assumptions involved in arriving at the expectations. All such forward-looking statements are based on management's present expectations and are subject to certain factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, the following: an inability to create new product and market opportunities; any sustained downturn in the energy industry or energy prices; any sustained downturn in the petrochemical, refinery, building materials, core, adjacent, North American, subsea, South Asian or other markets; any disruption or inability to achieve expected capacity levels in any of our three production lines or the manufacturing facility in which they are located; the failure to receive all regulatory or other approvals required to maintain or expand our operations; any failure of demand for Aspen Aerogels' products; any failure to achieve expected average selling prices for Aspen Aerogels' products; any significant increase in the cost of raw materials, utilities or any other manufacturing consumable; the failure to generate sufficient operating cash flow or to obtain significant additional capital to pursue Aspen Aerogels' strategy; the failure of our products to become widely adopted; the competition Aspen Aerogels faces in its business; any failure to enforce any of Aspen Aerogels' patents; any failure to protect or expand Aspen Aerogels' aerogel technology platform; any future finding of invalidity of any patent in any jurisdiction; any failure to generate sufficient operating cash flow or to obtain sufficient additional capital to continue to pursue Aspen Aerogels' new business, capacity expansion, technology, patent enforcement, or patent defense strategy; any failure of Aspen Aerogels' products to meet applicable specifications and other performance, safety, technical and delivery requirements; the general economic conditions and cyclical demands in the markets that Aspen Aerogels serves; the economic, operational and political risks associated with sales and expansion of operations in foreign countries; the loss of any direct customer, including distributors, contractors and OEMs; compliance with health and safety laws and regulations; shortages of raw materials, utilities or any other manufacturing consumable; the maintenance and development of distribution channels; and the other risk factors discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017 and filed with the Securities and Exchange Commission ("SEC") on March 1, 2018, as well as any updates to those risk factors filed from time to time in our subsequent periodic and current reports filed with the SEC. All statements contained in this press release are made only as of the date of this press release, and Aspen Aerogels does not intend to update this information unless required by law.

 

 

Square Foot Operating Metric

We price our product and measure our product shipments in square feet.

Reconciliation of Non-GAAP Financial Measures

The following tables presents a reconciliation of the non-GAAP financial measure included in the Aspen Aerogels, Inc. press release dated August 2, 2018 to the most directly comparable GAAP measure:

Reconciliation of Adjusted EBITDA to Net Income (Loss)

We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, which occur from time to time and which we do not believe are indicative of our core operating performance.

For the three and six months ended June 30, 2018 and 2017:

For the 2018 full year financial outlook:

 

 

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SOURCE Aspen Aerogels, Inc.