Good morning. Thank you for attending the Aspen Aerogels, Inc. Q1 2023 Financial Results Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. I would now like to turn the conference over to your host, Neal Baranosky, Aspen's Senior Director, Corporate of Strategy and Finance. Thank you. You may proceed, Mr. Baranosky.

Thank you, Alexis. Good morning, and thank you for joining us for the Aspen Aerogels fiscal year 2023 first quarter financial results conference call. With us today are Don Young, President and CEO; and Ricardo Rodriguez, Chief Financial Officer. There are a few housekeeping items I would like to address before turning the call over to Don. The press release announcing Aspen's financial results and business developments as well as a reconciliation of management's use of non-GAAP financial measures compared to the most applicable U.S. generally accepted accounting principles or GAAP measures is available on the Investors section of Aspen's website, www.aerogel.com. Included in the press release is a summary statement of operations, a summary balance sheet, and a summary of key financial and operating statistics for the 2023 first quarter ended March 31, 2023. In addition, I'd like to highlight that we've uploaded to our website a slide deck that will accompany our conversation today. You can find the deck at the Investors section of our website. An archive of today's webcast will be on our website for approximately one year. Please note that any discussion today will include forward-looking statements, including any statement regarding outlook, expectations, beliefs, projections, estimates, targets, prospects, business plans and any other statement that is not a historical fact. These forward-looking statements are subject to risks and uncertainties. Aspen's actual results may differ materially from those expressed in these forward-looking statements. A list of factors that could affect the company's actual results can be found in Aspen's press release issued yesterday, Page 1 of the presentation, and I'll discuss in more detail on the reports Aspen files with the SEC, particularly in the company's most recent annual report on Form 10-Q. The company's press release issued yesterday and filed with the SEC can also be found in the Investors section of Aspen's website. Forward-looking statements made today reference the company's views as of today, May 4, 2023. Aspen Aerogels disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA. These financial measures are not prepared in accordance with GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures are included in yesterday's press release. And one final note, during the Q&A session, in the interest of time, we ask that you limit your questions to two questions at a time. If you have additional questions beyond the initial two, please get back into the queue, and we will get to all questions. I'll now turn the call over to Don.

Thanks, Neal, and welcome to Aspen. Good morning, everyone. Thank you for joining us for our Q1 2023 earnings call. My initial comments will focus on our Q1 performance, our highlights from our EV OEM development work, and our strategy for balancing demand, supply, and financing. Ricardo will dig deeper into our financial results, our EV business, and our strategy. We will conclude with a Q&A session. The performance in the first quarter sets us on a path to reach our 2023 outlook of revenue between $200 million and $250 million and positive EBITDA in Q4. We anticipate sequential revenue growth as we work through the year. This growth outlook is a function of a very strong energy industrial backlog and the expected ramping of our EV customers, especially General Motors. This anticipated EV PyroThin ramp is the key factor impacting whether we are at the low or high end of our 2023 revenue outlook. During Q1, we saw continued improvements in operating efficiencies, which resulted in an 11% gross margin, which with continued revenue growth, we believe keeps us on track for longer-term gross margins at or above 35%. We also maintained careful control of OpEx. During our last call, we announced that we received both a letter of intent from the luxury brand of a major German OEM group and an order for approximately 1.5 million prototype parts from the commercial truck brand within the same German OEM group. Recently, we converted the prototype parts order into a multiyear award with the start of vehicle production in early 2024. We expect to announce the name of the commercial truck brand during the latter part of 2023, as we commenced delivery of production parts. With respect to the LOI for the sister company within the German OEM group, we believe we will convert it into an award in the very near term. These volumes commence in 2024 and ramp in 2025. We believe the awarded business and the advanced stage of the letter of intent position us well to earn broad adoption by other brands of this important German OEM. In other EV news, we continue to have a deep technical and commercial engagement with General Motors and, of course, a financial relationship through the $100 million term loan, which we have yet to draw upon. In addition, we believe that we are on the cusp of winning more awards with other EV OEMs. We are confident that we will complete 2023 with awards from a broad and interesting array of EV customers. As we look out over 2023, in addition to adding OEM awards, we expect PyroThin thermal barrier revenue to build over the year as automotive OEMs scale their operations. At the same time, we expect our energy industrial business, with purchase orders received for 2023 of approximately $180 million, to remain strong throughout the year and to provide a steady base load of revenue. Even with our large backlog in energy industrial and our growing list of EV customers, we have carefully considered our near-term strategy, especially as it pertains to manufacturing capacity and financing. The current macroenvironment, the unfavorable financing market, and the potential for a more drawn-out industry-wide EV ramp have caused us to reevaluate our current plan. There are several parts to this thought process. During this potential recession scenario, we are taking a conservative approach to the preservation of our capital, which equals $205 million at the end of Q1 2023. During this period of time, we plan to reduce our OpEx and CapEx to grow our revenue significantly and to focus on our profitability. The key pivot is to right-time the final stages of the construction of Plant 2 in Statesboro, Georgia and, in the meantime, to largely dedicate our Plant 1 aerogel manufacturing capacity in East Providence to PyroThin thermal barriers in order to serve our EV OEM customers. We estimate that we have the ability to generate approximately $400 million of PyroThin thermal barrier revenue from an EV-dedicated Plant 1. Our goal is to time the startup of Plant 2 to match the revenue ramp of our EV OEMs beyond the approximately $400 million of revenue capacity available for Plant 1. To put the approximately $400 million revenue number in context, we anticipate thermal barrier revenue of between $70 million and $100 million for the year 2023 and between $250 million and $300 million for 2024. To be clear, we plan to slow our capital investments during 2023 and 2024, but not our growth. At the same time, we will remain poised to take full advantage of our opportunities. With respect to supplying our valuable energy industrial business, after one year of development and negotiations, we have reached a manufacturing agreement with a Chinese aerogel manufacturer to supply energy industrial product to us beginning no later than January 2024. The product will be produced to our quality specifications and shipped by us under our labeling through our distribution and to our customers. We believe that the manufacturing agreement enables us to maintain and grow our energy industrial business while largely dedicating Plant 1 to our EV PyroThin thermal barrier business. In this scenario, from our current manufacturing assets and supply arrangements, we could have annual revenue capacity of $500 million to $600 million, gross margins at or above 35%, and EBITDA meaningfully positive. The strategy enables us to reduce OpEx and CapEx to generate positive EBITDA and to preserve our existing capital while successfully serving both our EV and energy industrial businesses. Again, we would right-time the remaining construction of Plant 2 to coincide with the ramp of our EV OEMs beyond the approximately $400 million of revenue capacity of Plant 1. We anticipate that it would take approximately four quarters after the restart of full construction to complete Plant 2. We believe that we continue to have our full upside opportunity, but during a potential period of economic uncertainty and while our EV OEMs ramp, we optimize the use of our existing assets to create a cash-generating business and to avoid unnecessary dilution. Our strategy is to leverage our aerogel technology platform into large dynamic markets. Central to that strategy is our investment in research, development, commercialization, and the protection of our proprietary technologies. Our patent portfolio has been consistently validated in courts across the United States, Europe, and Asia. Chinese-made aerogel products have previously been found to infringe our patents in multiple jurisdictions globally. As we announced in April, we filed patent enforcement actions in Korea against Berenberg, a Norwegian reseller and associated entities, including their Chinese aerogel manufacturer, related to the unlawful import and sale of infringing aerogel products. The actions alleged infringement of patents covering our high-performance reinforced aerogel compositions and our process technology, including the Korean counterparts of patents previously enforced successfully by us against Chinese aerogel manufacturers in Germany and the United States. With these actions against Berenberg, we again send a clear message to the markets that we will continue to aggressively enforce our intellectual property rights against any manufacturer, distributor, or end user of aerogel products that infringe our patents. These actions coincide with our entering a supply agreement with a Chinese manufacturing company. Essentially, we have created an extension of our aerogel supply capabilities controlled by us to meet the demand of our energy industrial customers, again, under our label and to our quality specifications while also taking any necessary actions to prevent infringing products from entering the market. Aspen continues to be the innovation leader in aerogel technology, and we have the IP portfolio to back it up. Before I turn the call over to Ricardo, I want to mention a couple of ongoing activities in public policy. Aspen is actively in dialogue with lawmakers on Capitol Hill as well as the Department of Energy and the Department of Transportation, including the National Highway Traffic Safety Administration around strengthening United States regulations surrounding safety in battery electric vehicles. International harmonization around safety regulation has taken place in China, India, Korea, and Japan, but not formally yet in the United States. We believe stronger safety regulations and, most importantly, safer electric vehicles enhance consumer confidence in electric vehicles, protect lives, protect property, and help our first responders. We expect that as battery electric vehicles become more prevalent, communities, insurers, and the federal government will advocate for enhanced safety measures and requirements. We intend to be an important part of that conversation. The U.S. Department of Energy's loan program office was created to grant loans for large-scale energy infrastructure projects with the goal of supporting the development of more fuel-efficient products, including the expansion of domestic manufacturing of electric vehicles. Our team, including our external advisers, has been in consultation with the loan program office related to a proposed application for a significant loan as part of its advanced technology vehicle manufacturing program, which offers loans to support U.S. manufacturing of fuel-efficient advanced technology vehicles and qualifying components. The LPO process is uncertain and can be drawn out over time, and there's no guarantee that our proposed application would be looked upon favorably. In fact, our first application for a U.S. Department of Energy grant for advanced battery materials as part of the Bipartisan Infrastructure Act was not funded in 2022. Since that time, we have put considerable effort into the LPO process, and we believe we are a very good candidate for a direct loan as part of the advanced technology vehicle manufacturing based on the importance of battery performance and safety. Again, timing can be drawn out. But in our case, it may match well with the right timing strategy for our Plant 2. Ricardo, over to you.

Thank you, Don. I'll start by providing an update on Plant 2, its construction progress, the latest on timing, and our previously projected expense plans towards it. As you can see on the left side of Slide 4, the site work and foundations have been completed, while the building construction, along with the electrical distribution, are on schedule. Our team is on track to power the site at the end of June of this year. The team is on track for commissioning the plant at the end of the first half of 2024. We believe that our near-term EV thermal barrier demand is on track to ramp up in 2023 and that this ramp will fluctuate within the range of our revenue expectations thanks to the development of contract manufacturing supply from China in 2024, and with the investments in our Aerogel Plant in Rhode Island, we now have the flexibility to be able to right-time and align the startup of Plant 2 for when it is ultimately needed to ensure alignment between supply and demand. This retiming allows us to reduce our total 2023 CapEx guidance to less than $150 million, including the $40 million that have already been spent towards Plant 2. In discussions with our current and prospective EV thermal barrier customers, we are reassuring them that our Aerogel Plant in Rhode Island, combined with our assembly operations in Mexico, can more than meet their demand in 2023, 2024, and the portion of 2025 depending on their volumes. As Don mentioned in his remarks, our Aerogel Plant in Rhode Island can support multiple customers and deliver over $400 million of annual revenue capacity, and we estimate that the contract manufacturing capacity can add another $150 million in revenue from energy industrial customers, resulting in total revenue capacity of at least $550 million per year, all available in 2024. Turning over to Slide 5. As we move the startup of Plant 2 to a different timeline, our capital needs over the next 18 months are more than met as we manage the business towards generating positive cash flow, which we believe will in turn enable a lower cost of capital for Aspen. We continue having several discussions with different parties to raise capital that minimizes dilution to ensure that when we decide to reaccelerate our investment in Plant 2, we would be funding it with a mix of operating cash flow and funds already on the balance sheet at that point in time. Before the end of May, we will also be applying for a loan from the DOE's ATVM program, which is exactly focused on situations like ours that can satisfy a broad and long-term set of sustainability and American competitiveness objectives. A potential positive decision towards the end of this year and the reacceleration of our investments in Plant 2 could coincide. Our cash balance at the end of the quarter of $208 million, combined with $100 million of prospective equipment-backed financing, would provide us with $308 million of total liquidity to manage the company towards generating positive cash flows without investing in Plant 2. As a reminder, we currently have an open loan commitment of $100 million from General Motors that is limited to being used for Plant 2. We intend to work with General Motors to extend the availability of these funds for when we decide to resume investing in Plant 2. We estimate that we need to spend $150 million to drive the company towards generating positive cash flows, and the expected liquidity of $308 million without considering the GM loan provides us enough flexibility to do that. Before moving on to the next slide, I'd like to outline our ATM or at-the-market stock sale volume and price over the last 12 months. As one can see, we have restrained ourselves from using ATM sales to fund our plans since August of last year and raised net proceeds of $72.7 million at an average net share price of $13.88 per share. At the recent range of Aspen's share price, we've refrained from selling shares and do not intend to sell equity below the share price of our most recent equity offering of $9.50 per share in December of 2022. To recap, with the right timing of Plant 2, we have more than enough capital to fund our near-term growth and get to generating positive cash flows. Our revised execution plan is a retiming of our investments, not a delay in our growth and is aimed at accelerating our path to profitability. Although we are managing our capital strategy for at least eight quarters ahead, we remain focused on short-term execution. I'll now step back to cover the main highlights of the last quarter on Slide 6. Starting with revenues, we delivered $45.6 million of revenue in Q1, which translates into 19% growth year-over-year. Energy industrial demand remained strong. As Don mentioned during his opening remarks, purchase orders for the remainder of the year are up over approximately 125% when compared to the same time last year. Our Q1 energy industrial revenues of $33.9 million were 2% lower than the prior quarters and 10% higher year-over-year. The quarter-over-quarter growth, however, doesn't totally do justice to our ability to produce Aerogel in Q1 as we front-loaded the manufacturing of aerogel for subsea projects that will translate into revenue in Q3 of this year. EV thermal barrier revenues of $11.7 million put us slightly below the revenue run rate that we had in Q3 of 2022 of $12 million, which reflects a delay in GM's ramp-up of Ultium battery platform vehicle production. While revenues in this segment were up 53% year-over-year, they are down 54% quarter-over-quarter, as we fulfilled a supplemental order from General Motors of approximately $30 million during Q4 of last year and the early part of Q1 of this year. We are in close consultation with GM as they ramp up during the remainder of the year and expect their volumes to increase. Next, I'll provide a summary of our main expenses. Material expenses of $18.7 million for the quarter made up 41 percentage points of sales, which was within single-digit percentage points of where we want to be long-term. Conversion costs, which we describe as all production costs required to convert raw materials into finished products, were $21.8 million and made up 48 percentage points of sales in Q1. These include all elements of direct labor, manufacturing overhead, factory supplies, rent, insurance, utilities, process logistics, quality, and inspection. These compare with costs of 50 percentage points of sales in Q1 of 2022. It is worth highlighting that these costs reflect the lower absorption of fixed costs caused by making aerogel for subsea projects that were not recognized as revenue in Q1. In Q1, our gross profit margins were up 11%, an increase of nearly $7 million in gross profit when compared to Q1 a year ago. Our gross profit of $5.1 million was composed of $8.9 million from our Energy & Industrial segments and a negative $3.8 million from our EV thermal barrier segment. These represent gross profit margins of positive 26% and negative 32%, respectively, for the quarter. For EV thermal barriers, we need a quarterly revenue run rate of $20 million to have positive gross profit, but it is encouraging to see that our gross loss was less than half of what it was in Q3 of last year on a very similar revenue run rate of approximately $12 million per quarter. Operating expenses, which are enabling our growth, were $24 million. These remained flat quarter-over-quarter versus an increase of $2 million in Q4 over Q3 of last year and an increase of $4.6 million in Q2 over Q1 in 2022. We've leveled off our OpEx increases and have focused any increases on delivering two things: one, tangible productivity benefits through our new process development and the implementation of systems that streamline our methods and drive productivity, such as our IT infrastructure and tool chain; and two, new OEM production awards through our EV thermal barrier technical sales efforts, delivering prototype parts and converting these pursuits into awards. At this point, any new investment that drives OpEx to deliver these two things needs to be offset by savings somewhere else in the business during the same time frame or in anticipation of any potential OpEx increases. Putting these elements together, our adjusted EBITDA was negative $13.9 million in Q1 compared to negative $14.6 million in Q1 of the prior year, resulting in a year-over-year reduction in our EBITDA loss of 5%. As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expenses and other items that we do not believe are indicative of our core operating performance. In Q1, these other items included $2.3 million of stock-based compensation and $2.1 million of net interest income. Optimizing our supply side to make the most accretive products in Q1 has yielded benefits and profitability that have put us $4 million ahead of where we expected to be in EBITDA at this point of the year. Our net loss in Q1 decreased to $16.8 million or $0.24 per share versus a net loss of $19.5 million or $0.59 per share in the same quarter of 2022. Our quarter-over-quarter net loss increased by $7.2 million from $9.6 million. It is worth clarifying that for all these earnings per share calculations, our number of fully diluted shares outstanding was $30.4 million at the end of 2021, a weighted average of 39.4 million shares in 2022 and our number of shares outstanding at the end of the quarter was 70 million shares. Next, I'll turn to cash flow and our balance sheet. Cash used in operations of $24.7 million reflected our adjusted EBITDA of negative $13.9 million, offset by an increase in cash needs of $10.7 million that reflects a quarterly decrease in accounts payable of $5.5 million, an increase in accounts receivable of $10 million, and a decrease of inventory of $5 million. These put our operating cash needs for the quarter at $74 million. Capital expenditures during the quarter of $49.4 million included the partial construction of the main buildings in Statesboro, Georgia for Plant 2, assembly equipment for automated thermal barrier operations in Mexico, and the finishes of our advanced thermal barrier development center in the Boston area. As progress on the construction of our second aerogel manufacturing Plant continued, we have incurred $204.2 million in capital expenses through the end of Q1 towards it. We ended the quarter with $207.5 million of cash and shareholders' equity of $432.5 million. Now I'll turn to Slide 7. Slide 7 has a lot of content, but we think it's worth covering it today as it provides a view on every macro input that we factor into our thinking as we develop our EV thermal barrier business and strategy to its full potential. There are eight different elements driving our content per vehicle opportunity and in turn its revenues. I won't bore you with every detail, and we've included some background materials in the appendix of this presentation to allow you to get into all the details at your own leisure. The top parameters that drive our PyroThin business are global light and heavy-duty vehicle sales. The penetration of battery electric and plug-in hybrid powertrains and the cell chemistry, form factor and size or capacity of the batteries powering these vehicles. PyroThin excels as a cell-to-cell barrier for OEMs that are investing in delaying or stopping thermal runaway and propagation in pouch or prismatic cells. Now that Aspen is two years into the journey of building this market, we are seeing a growing market in the heavy electric vehicle commercial truck space and in the LFP chemistry cell market across the board. As OEMs push the range limits of plug-in hybrids and increase the size of plug-in hybrid vehicle batteries, this also represents additional opportunity. Turning to Slide 8. We take a deep dive into our global EV battery form factor outlook since we've gotten several questions around this from investors. And there seems to be a lot of value placed and speculation around changes in direction or diversification here from some OEMs. We've been spending a lot of time with our customers and outside experts developing an informed view of our outlook, and we'd like to walk you through it. A sales form factor influences the cell's ability to dissipate and transmit heat to its neighboring cells. There are three dominant types of form factors today: pouch, prismatic, and cylindrical. Aerogel cell-to-cell thermal barriers are best suited for form factors requiring high thermal propagation protection as well as very specific mechanical needs regarding compression between each cell. Consequently, we see the highest CPV with pouch designs due to the increased probability of thermal propagation and stringent cell compression requirements to accommodate battery swelling. Prismatic designs also represent a significant opportunity for our PyroThin product, as they require thermal barriers that can compress to fit into very tight spaces. We have not focused on cylindrical form factors and to develop a specific product due to the complex geometric requirements, thus limiting the opportunity for self-cell variations in cylindrical form factors, but opportunities in the module and pack level could materialize down the road. The current global mix of battery form factors varies by region, which is driven by the market share and battery architecture of specific OEMs within each market. The market is expected to evolve as OEMs continue to experiment and diversify their form factor mix. In North America, we expect to shift away from cylindrical cells as OEMs gain market share from the current market leader. In Europe, the market is projected to experience growing demand for prismatic and cylindrical cells, but pouch cells will remain prevalent. Each form factor is projected to have roughly even share by the end of the decade due to the cost of form factor decisions on battery assembly investments. Finally, in China, prismatic form factors will remain dominant as local manufacturers seem to have an advantage over major Korean battery manufacturers who focus on power cells. Overall, prismatic and pouch designs will continue to represent a significant share of the market with over 70% of the global volume, providing a significant opportunity for our EV thermal barrier business. Moving over to Slide 9, we'll now take a closer look at our EV battery chemistry outlook. Cell chemistry dictates how easily a cell will enter thermal runaway and how much heat it will produce. Thermal propagation runaways are prevalent within all cell chemistries but have the highest probability of occurrence with nickel-based chemistries, which account for over 70% of global volume and thus have a higher PyroThin CPV. OEMs choose a particular chemistry depending on the vehicle's energy requirements, cost targets, and their procurement strategies. In North America, LFP chemistries will see significant growth in entry-level vehicles due to their cost advantages and as OEMs seek to diversify their chemistry. In Europe, base-level vehicles are expected to shift from low and medium nickel chemistries to LFP as well. In China, there is a strong LFP market due to local production, but the country is expected to shift more nickel-rich as vehicle range increases and as foreign OEMs enter that market. Globally, each cell chemistry will see roughly even share of demand as OEMs optimize for different metrics based on vehicle design and class. Semi-solid-state batteries are not projected to gain meaningful share in this decade, and it's hard to find experts who see solid-state coming out of the research phase within the next 10 years. After speaking with several industry experts and customers, we validated the feedback that our sales team is seeing every day that PyroThin plays a critical role in meeting the requirements of OEMs to mitigate or stop thermal runaway and propagation across all the currently available chemistries. Turning over to Slide 10, EV Chemistry and Form Factor forecasts are relatively reliable due to the significant development time lines and costs associated with making changes regarding battery packs. OEMs have been investing directly in both pack assembly and cell manufacturing capabilities for the past five years, significantly ramping up these investments over the last two years. These OEMs have incurred a large fixed cost base and are now focused on delivering volumes to meet their profitability goals and recoup these investments. Large changes such as new cell manufacturing plants can take three to four years with costs in the billions of dollars. We saw this with the newly announced GM and Samsung Plant, which will not be completed until 2026 and comes at an initial cost of $3 billion. It is important to note that once completed, this plant would only represent 20% of GM's overall battery production capacity. At Aspen, we are heavily engaged throughout every stage of the battery pack R&D process with every major OEM. This line of sight gives us confidence in our ability to sustain strong growth throughout the decade and get the sign into specific applications of the vehicle nameplate platform or battery platform level. Now I'll turn over to Slide 11. Over the past three years, as EV volumes have increased and more automakers started offering EVs, the risks of thermal runaway and propagation have become more apparent and prevalent. The cost of not managing the inherent issues of how unstable a battery can be is significant for an OEM that does not offer a comprehensive solution to thermal runaway and propagation. We've all read in the news of plants that have been shut down for weeks, the car carrier ship that caught fire due to an EV battery going into thermal runaway, or the damaged infrastructure costing OEMs billions of dollars and reputational damage that is hard to recover from. Over the past year, in particular, we've seen more OEMs starting to take a proactive approach to addressing thermal runaway by staffing teams to address not just the potential financial loss and reputational risk, but also because legislation is making this a requirement over the next few years. On Slide 12, we provided an overview of the regulatory landscape regarding thermal runaway and thermal propagation. Government agencies around the world continue to become increasingly aware of the dangers of thermal runaway and propagation, driving meaningful regulation initiatives. All major markets have participated in the enactment of the United Nations global transportation requirement, which requires a 5-minute delay before a danger to the passenger compartment for hazards such as those caused by thermal runaway. China remains one of the most advanced environments with a 2021 thermal propagation test mandate requiring flame transfer delay of 5 minutes after a warning. Europe and the U.S. have followed the lead of the United Nations by participating in the UN GTR Phase I enactment. This is likely only the beginning of regulatory mandates regarding thermal propagation and runaway. The UN GTR will continue to be a key driver of further regulation as Phase 2 of the GTR requirements continues to evolve and will likely be released over the next few years. Additionally, both Europe and the U.S. are looking into developing further standards. Increasing customer awareness of these safety issues will focus the lens on regulators, especially as EV penetration increases and thermal propagation and runaway events and videos continue to make headlines. In the long term, the possibility of regulations aimed at completely eliminating runaway or propagation may be explored. While many EV battery system components such as battery management systems can help deliver trigger warnings, there has not been an effective active management solution to date. The only current solution to truly mitigate the danger is a passive cell-to-cell thermal barrier. We believe that PyroThin is a solution that allows OEMs to not only provide a 5-minute delay but that can also play a key part in stopping thermal propagation altogether, turning what is currently a potentially catastrophic event into a serviceable one at a portion of the cost. Moving over to Slide 13, thanks to the increased focus from OEMs on addressing thermal runaway and our team's progress in working with them, 2023 will be an important year for us as we develop our commercial pipeline. We expect decisions from various OEMs on programs totaling over $3 billion of lifetime revenue. Our pipeline includes PyroThin quotes across a variety of cell form factors and chemistries. As Don outlined in his remarks, our new commercial truck award demonstrates the strong demand for cell-to-cell barriers such as PyroThin for large electric commercial vehicles. In this case, this is an award for cell-to-cell barriers for a pack with prismatic cells. While we are still unable to disclose the identity of the German OEM from which we obtained an LOI in Q4 of 2022, we're continuing to work with this OEM group to document this initial business award as part of a broader set of strategic discussions to expand within their product range. With that, I'm happy to hand the call back to Don.

Thank you, Ricardo. We have covered a significant amount of ground today in reviewing Q1 and our strategy. Before we move to Q&A, I'd like to emphasize four points. First, during Q1, we demonstrated continued improvements in operating efficiencies, which resulted in an 11% gross margin, and we believe keeps us on track for longer-term gross margins at or above 35%. We also maintained careful control of OpEx during the quarter. Second, the commercial truck brand within an important German OEM group chose us for a multiyear award to provide to them PyroThin thermal barriers. We believe that we are on the cusp of winning more awards with other EV OEMs and are confident we will complete 2023 with a strong roster of EV customers that have designed PyroThin thermal barriers into their respective battery platforms. Third, we have decided to right-time the final stages of the construction of Plant 2 in Statesboro, Georgia, and in the meantime, to largely dedicate our Plant 1 aerogel manufacturing capacity in East Providence to PyroThin thermal barriers. At the same time, we have reached a manufacturing agreement with a Chinese aerogel manufacturer to supply products to us for our energy industrial business. With this strategy, we believe that we continue to have our full upside opportunity, but during a potential period of economic uncertainty and while our EV OEMs ramp, we optimize the use of our existing assets to create a cash-generating business and to avoid unnecessary dilution. And fourth, in this scenario from our current manufacturing assets and supply arrangements, we could have annual revenue capacity of $500 million to $600 million, gross margins at or above 35%, and EBITDA meaningfully positive. The strategy enables us to reduce OpEx and CapEx to generate positive EBITDA to preserve our existing capital and to serve successfully both our EV and energy industrial businesses. Alexis, let's turn to Q&A. Thank you.

We will now begin the question-and-answer session. The first question comes from Eric Stine with Craig Hallum. You may proceed.

Hi, Don. Hi, Ricardo.

Hey, Eric. How are you?

Good morning. Well, thanks. So maybe just starting with, I guess, Slide 13 and the $3 billion plus that you're targeting here over the next three quarters. Just curious if you could maybe break that down, I would assume that the German OEM under LOI today is part of that. But I mean, is that a number that you expect to be made up by a handful of the opportunities you list on this slide, is it a couple or is it more widespread than that?

So I think a handful is the right way to describe it without getting into too much detail about what the size of each award is. The interesting thesis, this element of not just getting awards from the OEMs themselves, but these battery joint ventures are actually a very good opportunity to get into multiple OEMs with one award and have that opportunity grow as their vehicle rollout plans become clearer. So I mean, even though we're talking about the $3 billion figure of awards being added this year, the potential for next year and the following year could be even larger given that these $3 billion would just be kind of the really our initial award into each of these OEM groups.

Eric, as I mentioned, we are confident that we will have a strong roster of EV customers by the end of 2023. I appreciate your imagery of a handful, as it resonates with us while we progress through the year.

There's some pretty big fingers in this hand though.

All right. That's a great description. Thank you. It’s tough to limit myself to two questions, but regarding the contract manufacturer, could you explain if it’s an existing Aerogel manufacturer? Does that make it easier to bring that online? Is any capital expenditure needed for the equipment since they're already in the business? Please share some considerations for getting that online while also ensuring the protection of your intellectual property, which is crucial for Aspen, given that you’re working with an established Aerogel manufacturer.

Thank you, Eric. As I mentioned, we've been working on this for most of the year and we're very mindful that this product will meet our specifications and quality standards. It will be distributed with our labeling and so on. We've put in significant effort with the data book to ensure we can provide Aspen material to our energy industrial customers. The intellectual property aspect has been a key focus in our discussions, and we've consistently been proactive in defending our intellectual property globally. Recently, in April, we took enforcement action related to a contract manufacturing agreement, which we are very optimistic about and believe it could significantly benefit our company at this time. As I noted, between our current assets and Plant 1 dedicated to EV thermal barriers, along with this additional supply, we anticipate a revenue capacity of $500 million to $600 million, accompanied by substantial gross margins and positive cash flow implications. We believe this is a fantastic opportunity for us, and we will continue to pursue this strategy.

Sure. I can provide some commentary on the CapEx question, Eric. The team visited a couple of weeks ago and completed a solid assessment of the equipment and their capabilities. We do not anticipate this will lead to any capital expenses on our part. It's mainly just a small increase in operating expenses that we had already planned for.

Okay. Thank you.

Thank you.

Thank you for your question. The next question comes from the line of Alex Potter with Piper Sandler. You may proceed.

Hi, there. Ben Johnson on the line for Alex. First question, now you sit contract manufacturing, we've been modeling CapEx in 2024 and beyond.

I see two capital expenditure scenarios for 2024 and beyond. One is the primary focus until we decide to resume our plans. Our spending is heavily weighted toward the front end, and we believe that the capital expenditures we make this year in Mexico and Rhode Island will allow us to limit our investments to no more than $15 million in 2024 and $25 million in 2025, 2026, unless we restart Plant 2. However, given the demand we anticipate in 2025 and 2026, we will need to adjust our expectations for investing in Plant 2 until we decide to restart the plant. I’ll add that the main reason for this shift in strategy regarding the timing of Plant 2 is that with these lower capital expenditure figures, there’s a strong opportunity to create significant value as we begin to generate revenue later this year and into next year. This will allow us to start recouping all the investments we’ve made over the past two years as the business moves toward positive cash flow in the near term.

Got it. Thank you. And how much are you guys willing to disclose regarding the financial terms of your relationship with the contract manufacturing?

Well, let me say it this way. That through the negotiations, we're focused on having a profitable energy industrial business, and the terms of that enable us to do that. And of course, that was an important part. It wasn't just serving that market in this temporary period. It is serving that market profitably for us and being consistent with our gross margin goals, etc. So we're not going to get into the arrangement in deep detail, but it's attractive to us. And again, as part of that $500 million to $600 million revenue capacity, the combination of Plant 1 in that supplemental supply agreement, again, we have the ability to have these 35% gross margins that we've talked about in the past.

Thank you very much.

Thank you, Ben. Thanks.

Thank you for your question. The next question comes from the line of Colin Rusch with Oppenheimer. You may proceed.

Hi, Colin.

Hey, everyone. I apologize for any inconvenience. Can you discuss the current competitive landscape you’re observing with other management solutions? Clearly, as we aim for a global standard, there will be several new entrants. I'm interested in what you’ve noticed regarding the initial stages of competition.

We've been dedicating significant effort to this area and engaged in a thorough process with experts and our internal team to develop our market perspectives. As we highlighted a year ago, this is fundamentally a systems issue. There are various active and passive strategies we can adopt to address it, and we cannot simply choose one over the other. There is no single solution for dealing with thermal runaway in propagation; instead, we have multiple effective strategies. On the passive side, depending on an original equipment manufacturer’s goals, we believe we can be a solid solution. When we quote business, we are still encountering the same trends as last year and the year before, but they are becoming more intense. From a competitive standpoint, it is relatively straightforward for others to access our website, label their products as thermal barriers, and use stock images to gain market visibility. However, the technical discussions needed to secure contracts are on a completely different level. These manufacturers are not only reviewing the material’s capabilities but also evaluating our ability to consistently deliver precise thicknesses that, frankly, our team did not anticipate having to achieve two years ago. We are optimistic about our current position, and we don’t foresee any significant changes as we continue to strengthen our advantage.

That's helpful. And then just in terms of some of the financing options that you're going through, obviously, it's a pre-dynamic environment in the commercial engine space. I'm just curious what you're seeing in terms of not necessarily rates but around terms and limitations on loan-to-value, things like that in terms of some of these discussions and how that's evolving, obviously, in a pretty dynamic environment.

We have been focused on options that minimize dilution. If you examine our financing options, selling equity ranks low on the list, especially given our current trading prices compared to when we were at $60 a share. We see opportunities in equipment-backed loans or the capital lease market. While rates can be in the mid-teens, they require pledging specific assets and involve an administrative burden. However, we have a clear path to the $100 million we've mentioned. Without the GM loan, we could potentially take on more of this type of financing as we continue to fund our growth, especially with our reduced CapEx plans. There's a limit to what we can pledge since these facilities are tied to specific equipment. Additionally, we have received many pitches for convertible products, but we're not focusing on those right now. Instead, we see that the private market is still active, looking for equity upside with reasonable near-term coupons. The timing of those opportunities is crucial. When we pair them with the DOE loan program, it becomes even more attractive. Under the new plan, we can potentially expedite this process, aligning the timing of decisions with our need to resume investment in Plant 2. Overall, these are the three viable financing options we are considering, all of which have strong funding probabilities.

Colin, I would like to add that we are operating as a different kind of company now. We are a cash-generating business, which is central to our strategy as we progress with Plant 1 dedicated to electric vehicles and the supplementary supply agreement. We have the capability to generate cash, which is the most valuable type of funding, and we are intensely focused on that.

Thanks so much, guys.

Thank you, Colin.

Thank you for your question. The next question comes from the line of Jeff Osborne with TD Cowen. You may proceed.

Great. Thank you. Just two quick ones. Riccardo is, I was confused on the equipment-backed financing that you mentioned, the $100 million. Is that in place or what's your degree of comfort that it will be in place? And if you could be more specific as to what specific equipment you're back leasing there.

Yeah. So I mean, we feel pretty good about that. We mentioned during the previous quarter's call that we actually had, I mean, three different term sheets already. We've sent back a nonbinding commitment with two of them and are now basically going through the formalities of the underwriting process. And so we feel pretty good about getting those $100 million. And the type of equipment that can be put under those facilities is a lot of the equipment that we're using to upgrade the plant in Rhode Island is going to be put on those, as well as both our manual and our automated equipment that's going into our facility in Mexico, plus everything from some of our IT infrastructure investments that we'll be making. And there's a fairly large allowance for soft costs in that as well of approximately 30%. And so we're going to try to put a fair amount of our CapEx on that as we line that up here this quarter.

That's helpful. I just want to make sure it wasn't affiliated with the Georgia facility, given the pause there. And then how to think about the content per vehicle on the truck side, you've given helpful anecdotes or detail on the passenger car side historically, but haven't talked about the truck opportunity.

Yeah. I mean, so it's a fairly big opportunity because these packs are very large, right? So we're talking about 180, 200-plus kilowatt-hour batteries. And so, I mean, this is potentially a $1,200 to $1,500 content per vehicle opportunity for us, even though they're prismatic.

Got it. Is that mel-electric or PHEV? All of that PHEV?

These are all electric.

Okay. Great.

Yeah.

Thank you for your question. The next question comes from the line of George Gianarikas with Canaccord Genuity. You may proceed.

Good morning. Thank you for the questions. I would like to inquire about Toyota and any insights you can provide regarding their future plans for electric vehicles. There has been a considerable amount of discussion about this, and I hope you can help us understand the potential opportunities moving forward.

I was in Japan last week with the senior team at Toyota. They have discussed recent changes in their administration and a renewed focus on being more aggressive with their electric vehicle program. Toyota has historically held a dominant position with the Prius and have strategically explored fuel cells. They've recognized the importance of their previous platform and announced plans for 10 new EVs to be launched by 2026. We're maintaining a close relationship with the company and are working to be involved with their newly designed battery platform. There's still work to be done, but we are optimistic.

Thanks. Can you provide any timing or expectations regarding when a decision will be made on the DOE opportunity? Thank you.

I mean we expected before the end of this year.

Yes, George. We have been in consultation with the loan program office. And we have put together a strong internal team with very capable external resources. So we've really leaned into this and we're playing to win here, and we're putting the resources in place to do that. And as both Ricardo and I said it, the timing of it could align very neatly with this right timing strategy that we have for our Plant 2. But we expect to work through the process over the course of 2023.

Thanks.

Thank you.

Thank you for your question. The next question comes from the line of Chris Souther with B. Riley. You may proceed.

Hey, just following up on the DOE loan. Can you give us the size of that application to the loan you're applying for there? And then I know you weren't successful with the DOE grant last year, but you've talked about kind of a mix grant that. I just wanted to see if that was something that was potentially on the table for this year as well.

Yeah. I mean we've actually been advised and through our dialogue with the loan office and the DOE that size doesn't matter, which is kind of odd as we put together the application together. But we've actually framed out a size, but we're just not in a position to disclose it at this point in time.

Our current focus is on the loan program office and that process. We are aware that invitations for a new round of grants may be issued soon, as mentioned previously. Many awards in October last year were granted to notable companies mainly involved in cell technology. There is speculation that the upcoming grants could target manufacturing capabilities and related components outside of cell technology. We are monitoring this program, but our resources are primarily dedicated to the LPO.

Got it. Okay. And maybe just on the margin front and kind of the path to profitability. It seems like the gross margins in the first quarter essentially hit the way you can kind of back into with the guidance, assuming OpEx stays pretty flat, which seems to be the case. On the prior call, you've given expectations of the vast majority of gross margin being first half or second half loaded. And now we're talking about positive EBITDA for the fourth quarter. Can you just kind of give us a little bit of a walk on the gross margin and OpEx front for second and third quarters and then fourth quarter to get that kind of positive EBITDA here, I think, would be helpful for folks.

Yeah. I mean for us, really, the way we look at it is OpEx at this point, any increases that you see would be after having looked for savings somewhere else in the business, right? And so it's fair to expect that we're going to keep OpEx within this $100 million annual run rate at worst. And so then it's really all dependent on the revenues, right? And so as I mentioned in my remarks, I mean, we truly think that for the PyroThin business to be positive from a gross profit standpoint, our quarterly revenue run rate needs to be above $20 million. And as we get closer to that here, hopefully, in the second quarter and the remainder of the year, well above that, if GM can accelerate the ramp-up, then you're going to see the margins go back and start looking like what they look like in Q4 of last year. And then just really increase from there as we are able to absorb more of our fixed expenses. And on the energy industrial side, we actually think that the gross profit margin there is really limited by our ability to supply that business with product to sell. And so I think expecting it to continue around where we ended in this quarter is a fair expectation or maybe even lower as we take away some supply for it and give it to profit. So it's really hard to answer the question because the demand on the second half is truly what drives our profit engine for this year. And so far, we haven't seen any signals that would make us expect anything lower than what we were expecting three months ago. But I mean, we're ready to go here.

Got it. Maybe just following up, like squaring that with kind of the EBITDA guidance here, it would seem to suggest just gross margins were a lot better than we saw. There's reasons why they should kind of improve throughout the year with additional scale. Is that adjusted EBITDA guidance pretty conservative at this point? It's kind of a way to think about that?

I would agree. I mean, I think it's just more a reflection of our thoughts on the environment and not necessarily our own specific situation.

Okay. Thanks, guys.

Thank you, Chris.

Thank you for your question. There are currently no further questions in queue. So I'll now pass the line back to the management team for any additional or closing remarks.

Thank you, Alexis. We appreciate your interest in Aspen Aerogels, and we look forward to reporting to you our second quarter 2023 results in July. Be well. Have a good day. Thanks very much.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.