Hi, everyone. My name's Colin Rusch. I lead Oppenheimer's Sustainable Growth & Resource Optimization research practice. We are very pleased to have Don Young, CEO of Aspen, and Ricardo Rodriguez, the CFO, joining us today to talk about what we think is one of the important technology providers into the EV ecosystem. Don, you know, you bought some shares yesterday. Talk to us about that. You know, what are you seeing in the business that's given you the confidence to augment your position by almost 5%? Well, thank you, Colin, for having us. Yeah, th- let's see, well, we had. Yesterday was the first part of our first day of our, the end of our blackout period, I guess I would, I would say. So look, I, I'm excited about our, our, our business, and, so, quite apart from the interest, the financial interest, I, I, I thought it was an important signal as well. Look, we've got. We talked about our supplemental supply and what that sort of unleashes for our, for our, our company, and the, and the, and the key aspects of that. Those are really three things. One is it allows us to serve our Energy Industrial customers better and to continue to grow that business. Not only sustain it, but grow that business. We, we, we will do that. We've, we've set expectations that that would be a Q1 2024 event, but we've also, I think, been clear that we anticipate testing that system over the course of the remaining part of 2023. That is, is product that carries with it at least 35% gross margins, and so supports that part of our, of our mission as well. The second thing it allows us to do is dedicate Plant One to fully to our, our, our PyroThin thermal barrier business. It allows us to ramp up with General Motors here in the, in the near term and, with others in the, over the course of the next, Q4 and Q6 Finally, it allows us, you know, to right time the capital expenditures around Plant Two, and it allows us to keep that strong balance sheet that we have right now and through this, through this ramping period. So if you add those three things up, we believe that we are well-positioned to achieve that $550 million revenue run rate, $200 million gross profit, $140 million EBITDA, targeting here over the course of the next Q4 and Q6 which is not very far from now, to be quite honest with you, you know, as we. Right As we ramp these up. These are existing assets, existing agreements, existing opportunities, that, that we have to accomplish that part of our task, and we don't think that we're sacrificing any of our long-term, opportunities that are, you know, that are very robust, going forward. That's our focus, and that's why I was, in part, buying, buying shares and excited about our business. Excellent. Well, let's take a step back now that we've kind of got the table set in terms of where the company's going to how you get there, and what's, what's, what the foundational elements are of, of what you do. Can you talk a little bit about, you know, the, you know, what an aerogel is, just at, at a high level, and, and the PyroThin solution, and, and how that really fits into the EV battery pack and the EV ecosystem? Yeah. Well, I mean, I mean, an aerogel, structurally is, is a, is a open-porous, nanoporous, material. They've been in university laboratories for some period of time. We, over the course of the past 20 years, have been able to industrialized those, those materials and, and into what we refer to as a flexible aerogel blanket, and more broadly, covered by what we refer to as our, as our, Aerogel Technology Platform. We, we now, when I say industrialized, we've now... We're coming up on $1.5 billion of, of installed base. These are, these are materials that, that are being used, in, in more traditional energy settings. We've been able to take the properties of those aerogels that we've used in, in, in traditional energy, that is to say, thermal management, energy efficiency, asset protection, and then safety, and in particular, fire safety, the non-combustibility of these materials, we've been able to take those attributes and optimize them for PyroThin thermal barriers. Again, this, our focus has been on cell-to-cell protection in pouch and prismatic battery platforms, and, and, provide not only the thermal management and the fire protection, but also mechanical characteristics, in essence, acting like a spring between each cell. That has allowed us to solve an extremely difficult challenge, right? That, that amount of energy, but also to have the mechanical capabilities to provide the battery performance and safety that's required in these electric vehicles today. I'm, I'm glad you bring that up, because I was at a, an automotive battery conference in Germany in, in June, and that was a, that was a, a really key takeaway for me coming out of that show, was the, the mechanical performance of the, the PyroThin, and really understanding how it stabilizes the entire pack, for various levels of, you know, kind of rugged deployment. Yeah. Can you talk a little bit about, you know, both the geometric elements of that? Because obviously, the, the, you know, the, the form factor that you guys have, being thinner than competitors, is, is important, but also those mechanical properties. As you, as you go to market and talk with customers around, you know, a full solution for them and their battery pack, as they work towards reducing pack size and, and improving density of those, those battery packs, how important are all of these elements in getting through the full qualification process and getting designed into these packs? Let me re... Let me do part of that, and I'll, I'll ask Ricardo to do the second part of that. I, I just wanna emphasize one of the really interesting parts of, of providing that mechanical capability, is that in many cases, we're able to displace other materials that would be there. So when you think about, you know, the, the, the cost of our materials in these systems, y- y- you know, in many cases, especially those where we are called upon to do the full mechanical portion of this, we're displacing other materials, and in some cases, quite expensive other materials. If you think about that from, you know, a cost per vehicle, CPV, type of a calculation, it's not only the cost of our material, but we're also subtracting cost otherwise. That's been an interesting part of our, of our work with, with the various OEMs. Ricardo, why don't, why don't you talk a little bit about, you know, the value, if you will, of providing these materials, lightweight, small, small profile, et cetera? Yeah, I mean, when it comes to the requirements, Colin, to your point, right, I mean, it's you- the OEMs want you to have those 3 things and to deliver them in the, in the lightest and the smallest envelope possible, right? You know, I actually have a part here with me to kind of illustrate this. You know, our PyroThin, or the aerogel, is actually inside of this white layer. We actually encapsulate it. If you think of a battery pack made up of pouch cells, you would have, you know, on each side of the battery pack, roughly 30-60 of these large pouch discs all lined up right next to each other. If there's any loose space in between them as the vehicle corners, or even as it's subject to impact or anything, you know, these cells can't be rattling around and be exposed to unnecessary vibration. You actually need a material in between that absorbs all the, all the vibration that the vehicle is subject to and prevents that from getting to the cells. It's not just our material doing that, but, you know, almost every adhesive or everything that makes up the pack is contributing to reducing that impact of vibrations on the cells themselves. Then, where we play a critical part, is that we're able to act as that spring in between every cell, while still providing a very high level of thermal isolation, and you could basically have a cell going into thermal runaway at about 800 degrees Celsius, and have something pretty close to room temperature on the other side of this part itself. Then, of course, if there's a fire, triggered by one of these cells going to thermal runaway, you wanna keep that fire to, you know, prevent it from spreading to the cell right next to it, and that's the other key requirement that we have. There's some other materials that theoretically could get people the thermal isolation and the fire protection, but you would need then this part to be, you know, almost 3 times thicker than it is today. I mean, this is a part for pouch cells. Our parts for prismatic cells look a lot more like the aerogel itself, which is kind of what I have inside of this bag. That, I mean, the thickness of a part for prismatic cells is 1.5 millimeters. So with a 1.5 millimeter part, you need to provide this, you know, ability to compress it, and then decompress it back to pretty close to its original dimensions. That's something that a lot of these more brittle, ceramic-based or mica sheet materials can't do, even if you could theoretically fit them in, when you need, you know, 3 times more material to deliver the same level of thermal isolation. It's a pretty, unique combination of requirements that OEMs have steadily come to realize, that you can't have one without the other. Some of the initial discussions were all focused on the thermal isolation. And then it's really this mechanical attribute that's risen to the surface as the main differentiator for us, and, and why, the discussion has become a lot easier with OEMs as they start as we work on designing parts for them. You know, with some of those discussions, I, I mean, one, you know, real thrust in, in, in the industry around evolution is at the pack design level. So what we're, we're starting to see is more folks really working with LFP cells rather than nickel-based cells, and trying to shrink down the, the package and, and reduce costs by working with a, a, you know, lower cost, easier-to-manufacture cell chemistry, and then figuring out how to reduce pack weight and size because the, you know, just space in a vehicle is at a, a massive premium. So can you talk about, you know, the, the evolution of that, those discussions with your customers, you know, and when the, the shift around, pack design from, you know, cells into, you know, higher, higher cost, more advanced, you know, cell chemistries into lower cost cell chemistries really started to become a, a bigger deal for you guys with these customer conversations? Yeah, I mean, lower cost cell chemistries are really started being driven in China. You see more vehicles going to LFP cells, where the range requirements aren't as high. Here in the West, we still see that being pretty heavy on the NMC side. Again, it's all being fueled by the sort of race to provide customers with as much range as possible. We do see OEMs having a blend of chemistries within their portfolios. The common denominator here is that all of these tend to be on prismatic cells, right? You could have a very good LFP pack on prismatic cells, which can still go into thermal runaway, and, you know, you see news stories about this from China all the time. That's where our, our prismatic product for NMC cells works just as well on LFP cells or any other. I mean, whether it's, you know, our material or some other foam that doesn't provide any thermal isolation or fireproofing, the OEM is going to have something in between the cells because they can't be... you know, you can't have metal to metal just butting up against each other. These cells also tend to expand a little bit over time as they age, and you need to have a material in between that has some give to enable for that expansion, because otherwise you'd be triggering the thermal runaway that you're trying to prevent, right? If you remember the, those Samsung tablets that were catching fire on planes, all that was, was the cabin pressure within an airplane was compressing the tablet, which was basically pressuring a pouch cell, and there you're making the, the anode touch the cathode side of the cell and, and shorting the battery. That's, that's theoretically what could happen inside of a battery pack if you don't have a material in between the cells. That, that's super helpful. You know, in, in, in public, public forums, you've talked about, you know, the engagement that you have with all top 10 OEMs, on the, on the light duty side. What can you say about where those OEMs are in their price- their process around finalizing, you know, next generation pack designs, and your, your engagement with those folks as they go through that process? Yeah, so there's a blend, right? I mean, some of them have put vehicles out into the market, using some procured, pouch or prismatic cells, and then they, they, they quickly rushed to assembling those packs and, and are some of today's, volume players, behind Tesla. You're seeing them have a lot of these thermal runaway and thermal propagation issues that are just unmanaged, right? Mm-hmm. It was the F-150 that lit up at a parking lot, and that expanded to every truck that was parked around it. So developing a solution for those packs that have already been sort of designed and that were intended to be in the market for, you know, at least 10 years now, is one type of development that is being done. The other, which is frankly the easier one, are those OEMs that are looking at their next generation of battery packs and who are sort of starting with a clean slate. This was the case with General Motors for Ultium. It's the case with some of the Germans. Some of them are even setting up their own joint ventures to assemble these cells. So that's an easier discussion, right? Because those guys are designing the pack from scratch. They know they need something. They're very well aware of, of having to take care of, thermal- Mm-hmm Runaway concerns. For us to design a part for them, it's a pretty straightforward process, and and that's where we're farthest ahead, right? Then. Excellent. Yeah, I mean, but at the same time, we do see, more OEMs, even if they already have designs in flight, coming to us, looking for a way to put in a solution. In many ways, we're leveraging data from, vehicles where we're already in production to accelerate the, the selling process. I mean, that, that philosophical debate that we were having with folks a year ago on, on whether you needed to do something for thermal runaway is no longer being had. Now, it's really just, more of a development exercise. That's, that's incredibly helpful. From a revenue ramp perspective, as you guys work through, you know, finalizing some of these incremental deals, start ramping with GM, who you've announced, you know, how do you see the Ultium ramp playing out, you know, for the balance of this year into next year, and, and the cadence around that? Then the integration of incremental customer diversity, because I, I do, you know, think, you know, based on our, our checks, that you guys are gonna actually have substantial wins, and as these vehicle programs roll out, there's gonna be an awful lot of opportunity for, for Aspen here. Just wanna understand how you guys are thinking about, you know, kind of the puts and takes as some folks go through some production challenges, and then other folks are starting to ramp up more aggressively. Don, do you wanna take it, or I can- Sure. yeah, I'll be- Yeah, yeah, let's go- I'll be part of it, and I welcome. Yeah. Look, I, I'm, I'm really focused. You know, I'm really focused on, on demonstrating our, our, the, the, their ramps and our profitability. Look, I, I, I think we don't spend a lot of time on quarterly breakdowns, but, you know, I, I think we've done, in Q1 and Q2, you know, between $10 million-$15 million of work, PyroThin work, principally with General Motors. we're beginning to see a ramp now, and I think that number will increase, you know, let's call it $15 million-$20 million in this quarter. Again, just kind of rough, rough numbers here. we're anticipating that number to be more than double that in Q4. You know, this is the ramp that, that is, is occurring. Why is it occurring? It's because General Motors has now introduced the Silverado, they've brought Equinox, they're bringing Blazer nameplates into the marketplace. For them to, these are much higher volume vehicles than the Cadillac lyriq or the, or the, the, the Hummer and those kinds of vehicles. We're, we're confident that that ramp is occurring and will occur. There are degrees to that ramp. I mean, if, if you look at public numbers or GM's numbers, they're much greater than the, the numbers that I just, I just cited. We're ready to go. That's sort of what we're anticipating here in the, in the, in the nearer term. You know, the, the, the range for 2024, again, we're, we're, we're not in the creating outlooks right now for 2024, but those numbers could be substantially larger than that. We expect them to be substantially larger than that with, with General Motors. With respect to we, we have not announced the name of our third design award, but that will ramp over the course of 2024. We anticipate three additional wins, design awards, here in the near term. We believe that, those will begin to show revenue over the course of 2024, and ramp more significantly in 2025. And so our ability to get to that $550 million of run-rate revenue, $200 million of gross profit, $140 million of EBITDA, we think over the course of Q4 and Q6, yes, General Motors is important, but it will be supported by a handful, a half a dozen companies who will be contributing to that. By the way, you know, part of that 550, of course, is our Energy Industrial business, where we posted 27% gross margins last quarter, and we believe as we convert over to the supplemental supply, those margins will continue to expand in this new, in this new arrangement. That, that's the way we're- And That's the way we're thinking about it. Yeah, I think that's a great segue into the manufacturing capacity and how much flexibility you guys have given yourself with this contract manufacturer. So, you know, in making that decision, you know, you've been very, you know, committed to your own capacity for a long time, you know? So coming to this decision, you know, I'm sure was not taken lightly, but it certainly freed up the balance sheet a fair amount, gives you a lot of flexibility in terms of working with customers on the OEM side. Can you speak to, you know, to the motivation around that decision and the diligence you've done around- Mm-hmm That partner, and, and what you're expecting to learn, and get out of that, that arrangement here going forward? Yeah. We, we've been, we've been working on this for over a year now. I guess the way... What, what, we, we've worked, we explored this idea with a couple of other manufacturers in China as well, and found that the relationship just wasn't there for us. It could be a quality of product, it could be... Look, we, we've sued these companies very successfully, in several jurisdictions, so, you know, that's never a perfect starting point for a, you know, for building a relationship. The partner we, we did join is well-capitalized. They're very capable. There is a lot of mutual benefit for them, signing up for this, because. The only way to get, have product leave China is, is by through us. So, there's, again, there's significant mutual benefit for this company and, and, and ours. In terms of, you know, managing our, our, our balance sheet, and, this allows us, again, to support the ramps of these OEMs that we've talked about, and, and, and allow us to maintain a, a good balance sheet and go cash flow positive ourselves, be cash generators ourselves. We believe that it changes the profile of our company, you know, going forward, being a significantly EBITDA-positive, company. You know, it just sort of changes the potential financing opportunities that we have when we get there. That's why we're entirely focused on that $550, $200, $140 numbers. We've also engaged, as you know, Colin Rusch, with the DOE Loan Programs Office, where we did. We were invited to submit an application in May of this year, and we're engaged with them on a nearly daily basis, it feels like, certainly on a weekly basis as we work through that process to ultimately support the financing of Plant Two ultimately. We're very mindful of the fact that we want to build out Plant Two at the right time. We're managing that, I think, very carefully. We're super focused right now on becoming a demonstrating those margins, showing those margins that we've talked about, and the and the profitability of the business. That's, I think that's, that's super helpful. I wanted to talk about the decision to pause expansion in the US, and I think you alluded to some of the financing options around DOE and the flexibility that you have. As you, you know, look at, you know, what's going on with the, the ramp with customers, you know, your ability to meet some of that ramp, meet some of the financial metrics that, you know, support a long-term sustainable model, you know, can you talk about capital allocation priorities in the meantime as, as you work through, you know, the, the ramp on revenue, and, and how you guys think about making those decisions? Yeah, I mean, I think for us, the biggest decision was, if you look at, at the process, right, and what it takes to make the aerogel, the big bottleneck in it is the these extraction vessels, where you can only fit so much volume of aerogel in order to get a certain amount of, of output as you run the plant during the year. Our Energy Industrial products are anywhere between, you know, 7 to 15 times thicker than our, than PyroThin or our EV thermal barrier aerogel. Assuming that you're selling each square foot of aerogel at the same price, we have every incentive to make as much PyroThin during, you know, out of the plant in Rhode Island. That's really what pushed us here to find a, a partner for the energy business, 'cause the energy products do bog down the plant in comparison to PyroThin. For us now, as we allocate capital, we'll spend the capital where we can get the most amount of operating profit on the other end and, and in that order, right? That's why we're here, you know, very incentivized to push out the plant in Georgia as far out as possible, and to really pull all the levers that we can here in Rhode Island for the foreseeable future, to take capacity to, you know, the $400 million that we've outlined for folks, and even beyond that, as the, as the mix changes towards even thinner materials. So that's where a good amount of the capital will go. I think we've spent quite a bit over the past 12 months funding the assembly operations in Mexico, that'll already take us to the run rate that we expect to be at towards the middle of next year. Then, if GM continues accelerating the ramp beyond our expectations, we'll have a little bit more investment to make in assembly equipment in Mexico. At this point, a lot of the capital deployment has happened already here to enable what Don just mentioned around our ability to deliver $550 million of revenue capacity, and to do that at, you know, 25% EBITDA margins and what I expect to be 20% operating profit margins. Appreciate that, and knowing that the capital is largely spent at this point, and so now this is really around execution of the ramp and management of the supply chain and managing OpEx. I guess you guys have, you know, identified, you know, CO2 supply as an area of some cost savings recently. You know, curious, as you look at both the cost side and on the OpEx side, you know, how you think about cost management and levers going forward to get to those target margins here in the next couple of years? Yes, we laid this out on a slide, last week, but in essence, for us, the formula is fairly simple. If we can keep material costs below 40 percentage points of sales, we're in good shape there. We're actually at 36% when we look at Q2. Mm-hmm Benefited recently from slower demand and just less folks competing with us for the same raw materials, particularly silanes, you know, glass fiber batting. CO2 makes up a small portion of the cost, but it can definitely choke our ability to produce. you know, this summer there hasn't been a CO2 shortage as people try to make beer and other stuff. Then the other element for us is the manufacturing costs, right? If we are able to get our manufacturing costs to be anywhere between 20 and 25 percentage points of sales, I think we're golden, and that's what ultimately unlocks 35% plus gross profit margins. In Q2, we ran at 46 percentage points of sales for manufacturing costs, and that's expected, right? Just given the, the low revenue run rate that we ran at. If you annualize our Q2 revenues, we would be at about a $193 million annual revenue run rate. If you compare that to Q4 of last year, where we had an almost $60 million revenue quarter, we were able to bring manufacturing costs down to 35 percentage points of sale. Still 10 percentage points away from where we need to be, but you can see really how as, as the revenue starts increasing, our fixed cost absorption improves on that end, right? You can only imagine what that number then becomes at $300 million-$350 million of annual revenues. Then the OpEx, I mean, I think we had a, a pretty high OpEx ramp. If you just look at the, the sheer percentage in 2021 and the first half of 2022, we started slowing that down here in Q3 of last year meaningfully. Right now, we wanna work to keep it, you know, at around that $100 million annual range as we continue to service even more customers on the EV thermal barrier side, right? For us, the way we're managing OpEx, and that was literally Don and I sit every Monday, every new position that people try to add, has to find an offset somewhere else in the organization in order for that to be added. Cause a good chunk of this OpEx is people, and we're also investing quite a bit in mapping out all of our processes, streamlining how we work, and then backing up those upgraded processes with new systems. We feel pretty- And- Confident about being able to stay at, at around that $100 million range. So if I kind of put that in, in a small package, you're basically flat OpEx here for, you know, a, a stretch until you really need to expand geographically. Then at, at that point, you know, you're, you're just really dropping incremental cost savings on a% basis through the, the, you know, the, the P&L. All that operating leverage or the, the manufacturing leverage is really dropping all the way down to the operating line here. As you guys scale revenue and get better utilization, plus some scale purchasing, there's an awful lot of operating leverage on the, on the platform. Is that... You know, have you put some metrics around that? We think about every, you know, $50 million of annualized revenue, you know, leads to X number of incremental dollars. Is there a metric that you guys have put on that, or is that something that we should be doing on our side? Yeah, I mean, I think that's the plan, right? For us, just thinking at the operating profit level, which to me, is, like, the only way to measure profitability, right? Forget EBITDA in a way. I do think that we, we have a company that is generating positive EBIT, right at, right around that $300 million revenue level. Then from that point onwards, I think you, you could flow over to EBITDA at least 40 percentage points of... Over to EBIT, sorry, at least 40 percentage points of any incremental profit. Any incremental profit- I mean, it's. Yeah. I mean, I, I think that, that may be my, my punchline today, that, you know, $300 million of break even and then, you know, 40 points of incremental operating margin on revenue beyond that. Guys, we're, we're running out of time here, so just wanna ask if there are other things that we need to be addressing or should be addressing with this conversation, or if you have any closing thoughts, I'd love to hear those from you. Again, thank you so much for the, the time today. We're, we're thrilled to have you in the... As, as part of the conference and have this conversation. Thank, thank you, Colin. Look, I, I, I, I, maybe finish where, where, with, with, with, with where we started in, in, in many regards, it is really focused on the strength of our Energy Industrial business, creating a significant base load of revenue for us and gross profit. You're gonna see those, those margins continue to expand from that part of our, of, of our business. We have the opportunity here to move from, from, three OEMs with design awards to six in, in here in the near term. Again, I think that really broadens our base. Yes, we, we're, we're really engaged with General Motors here over the course of the coming Q2, Q3, Q4, for sure. As time plays out over the course of Q3, Q4, Q5, Q6 you're going to see significant contributions from some of their peer companies here in the U.S. and in Europe. Finally, just this laser focus on $550 million revenue, $200 million of gross profit, $140 million of EBITDA. We wanna get to that run rate just as quickly as we possibly can, and we feel that we have the existing assets, arrangements, and opportunities to do that. That's where you're gonna see us, see us focus on here and, and, and, and generate those kinds of, those kinds of numbers as we, as we work our way through the next, small number of quarters. Excellent. Well, let's leave it there. Don, Ricardo, thanks so much for joining us today, and congratulations on all the progress, and we'll look forward to seeing you guys execute against the plan here over the next several quarters. Thanks everybody for joining, and we'll look forward to talking to you all very soon. Take care. Thanks, Colin. Thanks, Colin. We'll do our best. Thank you.