ASPN earnings call transcript, November 5, 2026

Officers will file forms for to report the sale and or withholding of shares in order to cover the payment of taxes and or the exercise price of options. I'll now turn the call over to Don. Don.

Several current projects scheduled for 2026 and 2027 deliveries. We see a substantial multi-year opportunity in LNG, particularly in the United States, the Middle East, Asia and. Africa. Looking ahead to 2027, we believe our energy industrial business is well positioned for another solid growth year. We have momentum from a strong second half of. 2026, a 2027 subsea project in hand and market dynamics driven by a multi-year investment cycle in energy infrastructure to support the global need. For energy security, supply diversification, and reliable power. On the topic of new and adjacent markets, growing investment in energy storage and data center infrastructure is creating new opportunities. For Aspen, in BSS, we generated initial revenue during the third quarter from parts supplied to multiple leading market participants for advanced design and evaluation. As safety requirements evolve, manufacturers and developers are seeking higher performance, cost-effective, made-in-America thermal protection solutions and our proven pyrofen. Technology positions us well to address these needs. We are pleased to capture first revenue and believe this opportunity will expand to contribute to our 2027 growth and profitability. In a new adjacent market, we are pleased to have captured our first data center infrastructure order for delivery in Q4 2026. A large data center campus is utilizing

our products as part of its technical approach to manage the extreme resource demands associated with these mega sites and to reduce the impact on the surrounding community. We believe resource efficiency will be a key factor. in data center growth. This opportunity is a natural extension of our thermal management expertise, drawing on our aerogel technology, manufacturing capabilities, and technical experience. We believe we are well positioned to support. the growing power generation and resource efficiency needs of AI data centers. We will share more detail on future calls after completing our initial installations and further defining the opportunity. We believe this market could contribute significantly to scaling energy industrial into a durable high margin business without the need for incremental capital investment. Turning to. To our pyrofin thermal barrier business, revenue grew 81% sequentially in Q2 and another 54% in Q3. In North America, U.S. EV demand has stabilized at approximately. 6-7% of new vehicle sales. We see GM production aligning more closely with current sales rates while modestly rebuilding inventory, consistent with its stated demand-driven approach. In Europe, battery-elected vehicles are approaching 30% of new vehicle registrations. During Q3, our European thermal barrier business achieved record revenue, supplying 7% of new vehicle registrations. European OEMs across eight programs. At our last earnings call, we projected 2026 revenue from European OEMs to be between $20 and $30 million, up from the $10 to $15 million projected.

earlier in the year. With momentum continuing in Q4, we are confident that we will be at the high end of that range. This expanding opportunity from a diverse group of European OEMs. is an important contributor to our strong Q4 outlook. And we believe we can double our European thermal barrier revenue in 2027. At East Providence, we are progressing toward completing our staged restart, which we expect to accomplish in the first half of 2027. I want to recognize the Aspen team for its tire. Our efforts to achieve a safe and disciplined restart in the plant and for its unwavering commitment to our customers. These actions strengthen our short and long-term supply flexibility, operational resilience, and ability to serve. customers reliably. Grant, over to you.

From Energy Industrial and $45.3 million from Thermal Barrier, which included a $4.9 million of previously deferred revenue recognized in connection with the GM settlement received in Q1. Energy Industrial revenue increased 96% quarter-over-quarter, in line with our expectation of approximately $40 million as subsea project revenue landed in the quarter. Compared with the third quarter of the year, last year, Energy Industrial revenue increased 64%. Thermal barrier revenue increased 54% quarter-over-quarter, driven by two factors. First, revenue from GM increased to 37.3%. From 23.7 million in Q2, as production rates aligned closer to sales. Second, European thermal barrier revenue grew 38% quarter-over-quarter, from 5.8 million to 8 million. Marking the highest revenue generated from our European customers in a single quarter. Gross profit was 20.6 million, or 24% gross margin, up from 3.3 million, or 7% gross margin. In Q2, as higher volumes absorbed more of our fixed manufacturing costs. This includes 14.7 million of incremental costs from the April incident at East Providence, which are not indicative of normal operations. While these costs are added back to adjusted EBITDA, they burdened gross margin. Excluding these incident-related costs, non-GAAP adjusted gross profit was $35.3 million, or 41% gross margin. Operating expenses... ...were $27.7 million in Q3, including a $4.6 million loss on disposal of PPE related to Plant 2. We also incurred approximately $400,000 in incident-related charges.

...within OPEX. Excluding these items, adjusted non-GAAP operating expenses were $22.7 million compared with $23.1 million in Q2. GAP net loss narrowed... ...to $10.4 million in Q3 from $23.3 million in Q2. Adjusted EBITDA landed at $19.8 million, above our guidance range of $7 to $15 million. To put this profitability into... ...perspective, on $35 million additional revenues from Q2 to Q3, we generated $26 million incremental EBITDA. That's roughly 75% of additional revenue falling to the bottom line, which is impressive, but significantly higher than typically... ...levels, primarily due to product mix and cost absorption. For planning purposes, we continue to expect 50% to 60% of incremental revenue to fall to the bottom line. As a reminder, we add back incident-related charges to adjusted... ...in the quarter incurred and submit claims for these costs under our insurance policies. In Q3, these charges totaled $15.1 million. They consisted of expedited freight, professional fees, and the incremental cost of temporarily... ...reforcing certain products from our external manufacturing facility. With higher volumes similar to Q3, these charges scale with increased activity. We are actively engaged in the claims... ...under our insurance policies and expect to continue incurring incident-related charges until the facility is restored, which we expect to complete in the first half of 2027.

Turning to liquidity. We ended the third quarter with 146... ...$6.5 million in cash, cash equivalents and restricted cash, down $6.9 million from $153.4 million in Q2. Our net cash position remained consistent with prior quarter at just above $60 million. Let's break down key cash flow items in Q3. During the quarter, we received $15 million of insurance proceeds related to property damage from the EP incident. $8.9 million flowed through investing activities once cash was received. Which settled the property damage receivable we recorded in Q2. The remaining $6.1 million was recorded within accrued expenses and flowed through operating activities. Operating activities. Use $3.8 million of cash. Keep in mind this is burdened by $15.1 million of incident-related charges that will be submitted under our insurance policies. So we'd see higher cash generation under normalized operations. Investing in. Financing activities use $3.2 million, driven by $4.7 million of CapEx, $8.9 million of insurance proceeds, and $6.5 million of scheduled term loan amortization, leaving our term loan balance at $73 million to end the quarter. Two final points on liquidity. First, I want to point out that our $146.5 million of cash does not include any potential insurance reimbursement for approximately $20 million of incident-related charges incurred year-to-date. Second, if we exclude incident-related charges, insurance proceeds, and debt payments, we would have delivered approximately $10 million of cash on $85 million of revenues. We have more work to do to drive incremental cash flow, but these...

...results are encouraging. Turning to slide 7. In its simplest form, Q4 could look similar to Q3 when excluding sub-C project activity. As a reminder... ...we typically generate between 10 to 20 million sub-C revenue annually. We have momentum in both businesses going into the final quarter of the year. We are excited to see new opportunities landing for us with strong European thermal barrier activity, increased L&M... ...and executing on our first data center infrastructure project. I'm excited to see the business becoming more sustainable as our full-year assumptions around demand and supply have held up. We've seen... GM production recover as inventory levels normalize. Our European thermal barrier programs are delivering increasing revenues. And the energy industrial business has strong underlying drivers with approximately 20% year-over-year. Growth in our crosshairs. For the fourth quarter of 2026, we expect total revenue to be between $60 and $75 million. The low end reflects a conservative view, including... GM production assumptions below the current IHS forecast. Continued strength in European thermal barrier and energy industrial, building on Q3, gives us line of sight to the high end of that range. Breaking down our guide, we anticipate energy industrial revenues of approximately $35 million for the quarter. Our Q4 guide for the thermal barrier business has two primary drivers. We've assumed GM production.

At an annualized rate of approximately 70,000 to 90,000 vehicles in the quarter, GM sourced approximately 170,000 vehicles annualized in Q3. And the current IHS forecast has GM producing approximately 100. And 10,000 vehicles annualized in Q4. We know Q4 has a component of seasonality and thus our guide is conservatively below IHS. Our European thermal barrier customers generated 18. million of revenue through the third quarter. This is the ramp we've been waiting for. With one quarter to go, we've already generated the most European thermal barrier revenue in any year since we got into the EV business. For the full year of 2026, we expect European programs to reach approximately $30 million of revenue. As a reminder, these European programs have not reached serial production, but most of them will SOP in 2027. In fact, customer diversification is one of the most promising factors here, as seven different OEMs across eight different programs drive growth in 2027. We continue to target meaningful growth. Over our 2026 outlook to approximately 50 to 60 million of European thermal barrier revenues in 2027. Given the product mix included in our revenue range, we expect Q4 adjusted EBITDA. To be between 5 and 13 million, which includes adding back incident-related costs of approximately 5 to 10 million. Turning to our liquidity outlook, CapEx and scheduled debt payments should total around 10 million.

In Q4, when excluding East Providence restoration CapEx. Working capital will remain more variable, driven by where we produce and sell finished goods. Safety stock builds tied to East Providence's recovery pace. And the timing of insurance proceeds, which are paid in arrears relative to the cost they cover. Regardless of that timing, we remain confident we'll at least maintain our net cash position by year-end. When it comes to the sale of... We continue to actively market both the building and equipment. We have buyer interest in the building and continue to drive towards liquidity as we evaluate each option. On the equipment, we plan to begin a structured sale process. to sell remaining assets over the coming months. The majority of the proceeds from the sale of Plant 2 assets are most likely a 2027 event, and as a reminder, would be applied directly to reduce our term debt on a dollar-for-dollar basis. With ample levels of liquidity today, we still see flexibility to further delever the business, while staying nimble to opportunistically invest in strategic growth initiatives. Pulling this all together, three things are important. Define where Aspen stands today. A more profitable and less capital intensive operating model. Commercial traction in both segments with new market opportunities and best and data center infrastructure projects. And a strong balance sheet with net cash just above 60 million. Our implied fiscal year 2026 outlook ranges from 233 to 248 million revenue and 5.5 to 13.5 million adjusted.

EBITDA. We've demonstrated how powerful our financial framework can be at 85 million in quarterly revenue and 19.8 million adjusted EBITDA, and we'll carry that momentum going forward. Don, back to you.

Okay, and your first question comes from the line of Colin Roche of Oppenheimer.

Please go ahead.

This concludes today's call.