investor presentation august...
TRANSCRIPT
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Investor Presentation August 2014
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Disclaimer This presentation contains statements that constitute “forward looking statements” under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding our short-term and long-term growth strategies, efforts to develop and commercialize our products, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
These forward looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, so you should not rely on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results.
The information in this presentation is current as of August 2014 and speaks only as of such date. We expressly disclaim any obligation to release any updates or revisions to any information presented herein, including any forward-looking statements, to reflect any change in our expectations or projections or any changes in events, conditions or circumstances on which any such information or statements are based for any reason, except as required by law, even as new information becomes available. All information and forward-looking statements in this presentation are qualified in their entirety by this cautionary statement.
In addition to results presented in accordance with U.S. GAAP, this presentation and related tables include Adjusted EBIDTA, a non-GAAP financial measure. We have provided a reconciliation of this measure to the most directly comparable GAAP measure, which is available in “Reconciliations” on slide 28. We use Adjusted EBITDA as a measure of operating performance, because it does not include the impact of items that we do not consider indicative of our core operating performance, for planning purposes, including the preparation of our annual operating budget, to allocate resources to enhance the financial performance of our business and as a performance measure under our bonus plan. We also believe that the presentation of Adjusted EBITDA provides useful information to investors with respect to our results of operations and in assessing the performance and value of our business. Although we believe this non-GAAP financial measure enhances investors’ understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to or substitute for accompanying GAAP financial measures.
The risk factors set forth in our prospectus dated June 12, 2014 and filed with the SEC on June 16, 2014 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, are incorporated by reference into this presentation and should be read in their entirety alongside this presentation.
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Disclaimer
This presentation contains market data and industry forecasts that were obtained from industry publications, third party market research and publicly available information. These publications generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth, size of insulation opportunity at various types of energy infrastructure facilities and other data about our industry. We obtained the industry and market data in this presentation from our own research as well as from industry and general publications, surveys and studies conducted by third parties, some of which may not be publicly available. For example, this presentation includes statistical data extracted from an off-the-shelf market research report (World Insulation - #2956) by The Freedonia Group, an independent international market research firm, and a separate custom market research report by Freedonia Custom Research, Inc., a wholly-owned subsidiary of The Freedonia Group, or Freedonia, which was commissioned by us and was issued in February 2014. Such data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates. The Freedonia Custom Research, Inc. Report, or the Freedonia Report, represents data, research opinion or viewpoints developed independently on our behalf and does not constitute a specific guide to action. In preparing the Freedonia Report, Freedonia used various sources, including publicly available third party financial statements; government statistical reports; press releases; industry magazines; and interviews with manufacturers of related products (including us), manufacturers of competitive products, distributors of related products and government and trade associations. The Freedonia Report speaks as of its final publication date (and not as of the date of this presentation).
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Experienced Leadership Team
Don Young President & CEO
John F. Fairbanks Vice President, CFO &
Treasurer
President, CEO and member of Board of Aspen Aerogels since 2001
Prior to 2001, worked in the U.S. and abroad in a range of senior operating roles for Cabot Corporation
Graduate of Harvard College and earned an MBA from Harvard Business School
Has served as CFO since 2006
More than 10 years of service as a SVP at New England Business Service, in senior financial and operating roles
Earned a B.A. in Economics from Middlebury College and an MBA from the Wharton School of the University of Pennsylvania
Susan White Vice President, Finance and Corporate Strategy
Has served as VP of Finance and Corporate strategy since joining Aspen Aerogels in 2011
Previously served as Americas CFO and Director of IR for Novell; senior equity analyst at J.P. Morgan
Holds a BA in Applied Mathematics and Economics from University of California at Berkeley and an MBA in Finance from the Wharton School at University of Pennsylvania
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Designs, develops and manufactures innovative, high-performance aerogel insulation primarily used in large-scale energy infrastructure process facilities Offers a superior combination of performance and long-term value End users save money, reduce energy use, preserve operating assets and protect workers Global network of energy-focused distributors, contractors and engineering firms
Proven market adoption Used by 24 of the world’s 25 largest refining companies; 19 of 20 largest petrochemical companies Initial installations in approximately 30% of the world’s 640 refineries Installed base of >100MM sqft, >$250 million of product sales since 2008 Initial success leading to future growth and market share gain
Aspen Aerogels: An Energy Technology Company
Targeted Energy End Markets
USA 32%
Canada 10% Latin
America 8%
Asia Pacific 32%
Europe 18%
Geography 2013 Product Revenue by Region
REFINERIES PETROCHEMICAL
PLANTS
POWER GENERATION
LNG & GAS PRODUCTION
OFFSHORE OIL SANDS
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Key Investment Highlights
1) Disruptive insulation products offering superior value and performance
2) Attractive and growing energy infrastructure end markets
3) Substantial installed base with industry-leading end users
4) Significant growth opportunities: expanded market penetration and new projects
5) Protected technology platform and proprietary manufacturing capability
6) Proven, scalable business model with attractive returns
7) Experienced management team with a demonstrated track record
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Unique Technological Advantages
What are Aerogels?
Aerogels are an amorphous silica solid
Characterized by impressive material properties
Lowest density solid -- ~97% air
Lowest thermal conductivity
Best thermal performance of any widely used insulation product
Reduced corrosion under insulation
Compact design and faster installation
High durability and fire protection
Advantages vs. Traditional Insulation Our Breakthrough Technology
Industrially robust
Unique product form
Proprietary manufacturing process
Patent-protected – 51 issued and 19 pending patents worldwide
Proven Manufacturing Process
Pyrogel XT / XT-E / XTF (hot insulat ion)
Cryogel Z (cold insulat ion)
Our Aerogel Products
Step 1: Fill fibrous batting with a liquid-solid solution
Step 2: Extract solvents with supercritical carbon dioxide
Step 3: Resulting dry,fiber-reinforced aerogel blanket
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Disruptive Products with Compelling Value Proposition
Best Thermal Performance
Two to five times better thermal performance Broad range of applications from -200°C to 650°C
Compact Design & Faster
Installation
High Durability and Fire
Protection
Reduced Corrosion Under
Insulation
Ther
mal
C
ondu
ctiv
ity
Temperature Range
Pyrogel XT
Traditional Insulation
Enhances plant safety Improves reliability Reduces a major maintenance expense
50% to 80% reduced volume Space savings Faster installation time with improved safety
and logistics
Excellent compression resistance, tensile strength, and vibration resiliency
Fire protection
Traditional Insulation
Vapor Permeable
Traditional Insulation; Installed on site
Transport-ready; Supports modular construction
Hydrophobic
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Case Study – Compact Design
End User: Technip
Product: Spaceloft Subsea
Project: Dalia Field Offshore Angola
Problem: Low reservoir temperatures caused oil to cool and fall below a required minimum temperature as it was transported via pipeline from the wellhead to the production facility
Solution: Spaceloft Subsea blankets provided the required thermal performance and were thin enough to fit in the narrow gap between the inner 12” flowline and the outer 17” steel casing. Aspen has since worked with Technip on more than 20 subsea projects
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Case Study – Durability and Faster Installation
End User: Major oil and gas company operating in the Alberta oil sands
Product: Pyrogel XT-E
Project: Phase II oil sands piping
Problem: High cost of piping insulation installation on-site in harsh weather conditions
Solution: Pyrogel XT-E’s durability allowed the customer to pre-insulate its pipelines in an environmentally controlled fabrication facility, then transport the insulated pipe to the field, which significantly lowered labor costs and reduced installation time
Field Installation Shop Installation Stacked Pipes
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Case Study – Corrosion Under Insulation
End User: Formosa Petrochemical
Product: Pyrogel XT
Project: Formosa industrial piping
Problem: Following severe corrosion under insulation (CUI) challenges at a petrochemical complex, Formosa embarked on a facility-wide renewal project with a commitment to corrosion control
Solution: Pyrogel’s hydrophobic and vapor permeable characteristics, and thin form factor allowed Formosa to pack its piping more tightly, reduce the number of decks, and free additional space for future expansion work
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Energy Infrastructure – Favorable Trends
Projected Global Energy Consumption Projected Global LNG Demand
354.8 406.0
523.9 629.8
729.2 819.6
0
200
400
600
800
1,000
1990 2000 2010 2020 2030 2040
Quadrillion BTU
31 31 32 33 36 39 43 45 45 46
50 53 57 60
010203040506070
2012 2014 2016 2018 2020 2022 2024
Bcf/d
Source: Energy Information Administration, 2013. Source: Wood Mackenzie.
Spending in Global Chemicals Industry
$414 $439 $468 $504
$543 $580
$618
$0$100$200$300$400$500$600$700
2012 2013 2014 2015 2016 2017 2018
$Billions
Source: American Chemistry Council, December 2013.
Growth in Offshore Oil & Gas Spending
Source: Spears & Associates.
$97 $108
$119 $129 $138 $148 $159
$170
$0
$50
$100
$150
$200
2012 2013 2014 2015 2016 2017 2018 2019
$Billions
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415 470 553 73 86 104 198 226
278 512
541 603
903 1,089
1,485 342
402
523
$2,443
$2,814
$3,546
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2010 2013 2018
$ Millions
USA CanadaLatin America EuropeAsia Pacific Middle East Africa
Overview of The Energy Insulation Market
1,087 1,248 1,600
418 484
619
176 199
239
69
81
102
366
418
494
327
384
492
$2,443
$2,814
$3,546
$0
$1,000
$2,000
$3,000
$4,000
2010 2013 2018
$ Millions
Power Generation PetrochemicalOnshore Oil Production Offshore Oil ProductionGas Production Refinery
Energy Insulation End Markets – by Sector Energy Insulation End Markets – by Region
Source: Freedonia Custom Research Report 2014.
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Global Distribution Network and Installed Base
Source: Company Management.
Distributor
Contractor
OEM
Installed Base
Installed in more than 40 countries worldwide 27 direct sales employees and 43 distributors
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Industry-Leading End Users
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$20.1
$28.6
$43.2 $46.0
$63.5
$86.1
2008 2009 2010 2011 2012 2013
Revenue Growth
Revenue Growth 2008 to 2013 ($ in millions)
Current Capacity
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Significant Project Opportunities
~6 MMbbl/d(1) ~100 Mmtpa(2) ~10 Mmtpa(3)
100,000 BBl/d 5.5 Mmtpa 1.6 Mmtpa
$2.5B(4) $3.1B(5) $2.8B(6)
$10mm $37mm $11mm
Refinery Liquefaction Plant
Illustrative Project Size
Illustrative Single Project Cost
Illustrative Insulation Material Revenue Opportunity per Project (7)
Estimated Projected Market Capacity Coming Online
1. Projected global refinery capacity additions from 2014 – 2017. Source: Valero (November 2013). 2. Estimated incremental global LNG demand 2014 – 2019. Source: Wood Mackenzie (February 2014). 3. Forecasted new ethylene capacity to come online by 2017. Source: ICIS report (July 2013). 4. Average construction cost of $25,000 per barrel of capacity. Source Oil & Gas Journal (April 2013 – February 2014). 5. Average construction cost of $561/tpa. Source: International Gas Union (2013). 6. Average construction cost of $1,769/tpa. Source: Oil & Gas Journal (August 2013 – February 2014), Bloomberg (December 2012). 7. Based on management’s estimate of (i) total insulation installed cost and (ii) cost of insulation material used in each project as a percentage of total insulation installed cost. These revenue opportunity
estimates are generally consistent with the Company’s historical experience, other than new-build and large-capacity expansion projects for the liquefaction plants, from which we have not previously derived revenue.
Ethylene Plant
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Financial Overview
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Financial Highlights
History of top-line growth
Sufficient scale for positive cash flow
Project significant margin expansion Expansions expected to offer attractive return on capital Minimal ongoing maintenance capital expenditure requirements
Technology company with significant market adoption
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First Half Adjusted EBITDA
Strong top and bottom line growth
Six Months Ended
2013 2014
See Reconciliation on slide 28 herein for a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA for the periods presented.
($ in thousands) June 30 June 30Revenue
37,971$ 47,386$ 2,012 1,592
39,983 48,978 Cost of Revenue
35,487 41,391 Research 926 816
3,570 6,771 Operating Expenses
2,413 3,203 4,479 5,658 5,340 8,928
(8,662) (11,018) Adjusted EBITDA Add-backs:
4,948 5,194 Stock-based compensation 1,005 6,344
(2,709)$ 520$
Gross Profit
ProductResearch
Total Revenue
Product
Adjusted EBITDA
Research and DevelopmentSales and MarketingGeneral and Administrative
Operating Loss
Depreciation & Amortization
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Quarterly Adjusted EBITDA
Positive Adjusted EBITDA for the last five quarters
Three Months Ended
2013 2014
See Reconciliation on slide 28 herein for a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA for the periods presented.
($ in thousands) March 31 June 30 Sept. 30 Dec. 31 March 31 June 30Revenue
16,170$ 21,801$ 20,833$ 23,253$ 21,493$ 25,893$ 835 1,177 1,047 978 870 722
17,005 22,978 21,880 24,231 22,363 26,615 Cost of Revenue
16,611 18,876 17,769 20,143 18,541 22,850 Research 356 571 531 506 476 340
38 3,531 3,580 3,582 3,346 3,425 Operating Expenses
1,235 1,178 1,387 1,359 1,284 1,920 2,040 2,439 2,505 2,287 2,238 3,420 2,788 2,552 4,353 3,140 2,722 6,206
Write off of CIP - - - 3,440 - - (6,025) (2,638) (4,665) (6,644) (2,898) (8,121)
Adjusted EBITDA Add-backs:2,469 2,479 2,483 2,860 2,647 2,547
- - - 3,440 - - Stock-based compensation 495 510 2,916 505 338 6,006
(3,061)$ 351$ 734$ 160$ 87$ 432$
General and Administrative
Operating Loss
Gross Profit
Research and DevelopmentSales and Marketing
ProductResearch
Total Revenue
Product
Depreciation & AmortizationWrite off of CIP
Adjusted EBITDA
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0
20
40
60
80
100
2008A 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Annual Capacity (MMft2 / year)
Capacity Expansion Plan
East Providence Line 1
Line 2
Line 3
Line 1 Expansion
Plant 2 - Line 1
Nameplate Capacity(1), Year-End Effective Capacity(2), Annual Actual Production, Annual
Historical Projected
1. Nameplate capacity represents our projected maximum sustainable annual output 2. Effective capacity is the capacity at which we can operate while maintaining the quality of our products and efficiency of our operations in a given period. Actual effective capacity is also impacted
by the date within a given year on which we add the capacity. The projected nameplate and effective capacity for the years 2014 through 2018 are based on certain assumptions that the Company’s management believes are reasonable, but these assumptions could prove to be incorrect, which could result in actual capacity differing materially from the projections above.
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Key Investment Highlights
1) Disruptive insulation products offering superior value and performance
2) Attractive and growing energy infrastructure end markets
3) Substantial installed base with industry-leading end users
4) Significant growth opportunities: expanded market penetration and new projects
5) Protected technology platform and proprietary manufacturing capability
6) Proven, scalable business model with attractive returns
7) Experienced management team with a demonstrated track record
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Appendices
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Experienced Leadership Team
John Williams Vice President, Marketing
and Technical Services
Has served in marketing, technical services, R&D, engineering and support roles since 2004
Prior to joining Aspen Aerogels, worked in R&D, developing technologies for energy, thermal, structural and fluid systems
Holds a Bachelor and Master of Science degrees in Aeronautics and Astronautics from the University of Washington
Kevin Schmidt Vice President,
Operations
Joined Aspen Aerogels in 2004 with responsibilities for manufacturing, plant engineering, supply chain and EHS
Prior work includes plant and site leader on global business and operational teams for Dow Chemical
Holds a BS in Chemical Engineering from Pennsylvania State University
Corby Whitaker Senior Vice President, Sales and Marketing
Joined Aspen Aerogels in 2012
Global experience in sales, marketing, and business development leadership roles in the energy, industrial equipment, renewable energy and building materials industries
Earned a B.S. in Mechanical Engineering from Texas A&M University
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Experienced Leadership Team
George Gould Vice President, Research
& Development
Jeffrey Ball Vice President,
Engineering
Has been with Aspen Aerogels since its inception in 2001
Previously at Aspen Systems, predecessor company
Holds BA in Chemistry from College of Wooster, PhD in Inorganic Chemistry from Yale University and post-doctoral training at Brookhaven National Laboratory
Joined Aspen Aerogels in 2013
Previously VP of Global Capital Project Management at Genzyme; leadership roles in manufacturing, engineering, and capital management in the chemical, pharmaceutical, and biological industries
Holds B.S. and M.S. in Chemical Engineering from Bucknell University and Villanova University, respectively
Gerry Simpson Director of Manufacturing
Joined Aspen Aerogels in 2012
More than 20 years experience in manufacturing and engineering at Evergreen Solar, Intel and Digital Equipment Corporation
Holds B.S. in Electrical Engineering Technology University of Massachusetts Dartmouth
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Key Elements of Our Technology
Unique process integrates Fiber Aerogel structure Additives Coatings
Flexible, hydrophobic aerogels with custom properties
Extreme heat durability versus other hydrophobic materials
Large scale gel casting and aerogel supercritical fluids extraction processing
Step 1: Fill fibrous batting with a liquid-solid solution
Step 2: Extract solvents with supercritical carbon dioxide
Step 3: Resulting dry, fiber-reinforced aerogel blanket
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Reconciliation
Note: The table above presents a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA for the periods presented.
Three Months Ended
2013 2014
($ in thousands) March 31 June 30 Sept. 30 Dec. 31 March 31 June 30Net Income (Loss) 1,027$ (18,984)$ (12,704)$ (16,950)$ (19,049)$ (42,148)$
Interest Expense (3,366) 15,620 8,039 10,306 16,151 34,027 Depreciation and Amortization 2,469 2,479 2,483 2,630 2,631 2,547 Loss on Disposal of Assets - - - 230 15 - Stock-Based Compensation 495 510 2,916 505 339 6,006 Gain on Extinguishment of Convertible Notes (8,898) - - - - - Loss on Exchange of Convertible Notes 5,212 485 - - - - Debt Extinguishment Costs - - - - - - Write-off of Costs Associated with Postponed Public Offering - 241 - - - - Write-off of Construction in Progress - - - 3,440 - -
Adjusted EBITDA (3,061)$ 351$ 734$ 161$ 87$ 432$