Aspen Aerogels, Inc. Q4 FY2025 earnings call

Organizational Adjustments

• Streamlined organization, lowered fixed cost base, strengthened liquidity in 2025-2026 to operate in resetting EV market.

EV Market

• U.S. EV sales dropped in Q4 2025, GM ramped down EV production, expect EV growth to resume at measured pace. Europe has stronger structural drivers for Thermal Barrier with Volvo award and engagement with other OEMs supporting diversified battery cell supply.

Energy Industrial Segment

• 2025 revenue $102 million from baseload maintenance, limited LNG work. 2026 growth expected 20% from subsea projects pipeline, LNG growth, and maintenance demand. Investing in customer-facing sales and technical service teams to scale into $200 million high-margin segment.

Strategic Review

• Undertaking strategic review to explore opportunities to maximize shareholder value from position of financial strength and operational progress.

In Q4 2025, revenue was $41.3 million, with $25.3 million in Energy Industrial and $16.1 million in Thermal Barrier. Full year 2025 revenue was $271.1 million, $102.2 million from Energy Industrial and $168.9 million from Thermal Barrier. For Q1 2026, total revenue is expected between $35 million and $40 million. Energy Industrial is poised to grow 20% in 2026 with subsea projects, LNG growth, and maintenance demand. European Thermal Barrier is expected to be an important contributor to growth in 2027 and beyond with a strong pipeline.

Q1 2026 Outlook

• Total revenue expected between $35 million and $40 million, lowest revenue quarter of the year.

2026 Growth Drivers

• Increasing GM production as EV volumes normalize, continued ramp of European OEM programs contributing $10 million - $15 million in revenue, 20% revenue growth in Energy Industrial with more project activity in second half.

EBITDA Breakeven

• Adjusted EBITDA breakeven level expected to decline from $330 million in 2024 to $175 million in 2027.

Capital Expenditures and Debt

• 2026 capital expenditures expected $10 million, scheduled debt payments including $24 million term loan principal amortization, expect to expand net cash position to over $70 million by end of 2026.

Q: Good morning, everyone. Maybe just starting with the full value of what is being provided by your customers, or is that discounted, as I know when you have done this in the past, you have given it a pretty healthy discount? And then, curious as you think about these numbers, I know a lot of these programs are in ramp mode, but when you compare that to GM, and I know there is uncertainty as to what GM looks like as well, what do you think the mix looks like when you get out into 2027 and 2028 between your primary OEM today and a lot of these programs that are coming on in Europe, and, as we have discussed a little bit in the past, battery storage? So you mentioned, and if you can provide any clarity, you mentioned that you are actively involved in some quoting and some potential opportunities, maybe clarity there and, if you are able to, any estimate of what you think that means in terms of fitting into that 20% growth for Energy Industrial in 2026?

A: Good questions, Eric. To answer your first, it is fully the full customer volumes in 2027 and 2028. So that blue-shaded portion of the chart, the $120 million and the $150 million, that is what they have provided to us. And when we look forward at 2027 and 2028, there is a lot of activity. You can see how much quoted activity we have with programs that start in 2027 and really ramp in 2028, combined with our awarded programs today. As we think about North America versus Europe and the shifts in mix in 2027 and 2028, it is probably fair to assume that GM will continue to be at least half in 2027. In 2028, we are opportunistically looking at the quote/bid pipeline and current awards that will ramp faster, and so that mix could change. It is worth noting that these are all at similar margins, so our 35% gross margin target remains intact. And on battery storage and the Energy Industrial outlook, we are focused on our core maintenance, LNG, and subsea-type work as the drivers of the approximately 20% growth we referenced for 2026. In parallel, we are deep in the qualification and bidding process for the new battery energy storage systems segment, and as I said in my remarks, we anticipate beginning revenue in this new segment in 2026.

Q: There is a lot of interest around rack-level storage and indoor applications, and I am just curious where you are seeing interest. Is it really for some of these larger systems that are outside some of the data centers looking at various duty cycles around voltage management and some of the heavy-duty recycling, or is it more tailored towards some of the larger-scale external systems?

A: We are working on large-scale external systems, but we are also doing rack-level modular-type systems as well. Again, as you point out, fire safety is most critical, and that is what we are bringing to the party in this particular case. We are working with large companies on these projects, and again, we are deep in the qualification and bidding process. Not only are we bringing important technology to it, but we have some policy advantages as well with our domestic capacity here in the U.S., which is creating benefit for those projects.

Q: And then, a market where it seems like there are some applications, and we have not heard a lot about it, is in and around the military. Certainly, if you are doing things out at sea and there is a buildup of incremental EVs or EV-related devices, I am curious about any initial conversations or potential for you to enter into the defense market in a more substantial way?

A: It is an interesting question, and we do have a team. As I have talked in the past, this idea of broadening our addressable market includes defense, and we have deep roots in the defense industry going back to our early first decade, really. We are focusing on certain applications within defense. Our first priority, though, in adding a segment is on the energy storage side most immediately, and that is where we are applying the majority of our resources.

Q: Good morning, and thank you for taking my question. I would like to focus on the Energy Industrial side and ask if you have tried to make an assessment as to what your market share trends have been over the last several quarters, and it is good to see it getting back to growth this year, but I am curious as to what you have discerned the lack of growth was due to last year.

A: Thank you, George. We have, of course, spent a good amount of time analyzing this, and I think we can point pretty clearly to the lack of project work that separates our 2023 and 2024 numbers from our 2025 number. Let us just say roughly a $30 million to $35 million dollar gap between the earlier years and last year, and you can go straight to subsea, for example, and that accounts for the vast majority of that gap. Our market share in that segment is extremely high. Yes, we occasionally lose a project, but not very often, and so the fact is in 2025 there just were not many projects to be had. When we look at the pipeline for 2026, 2027, and 2028, it is much more robust. The project that we won earlier this year gets us back. More typically, a year is a number in the mid-teens, and the project that we won earlier this year that we will deliver in Q3 gets us a long way towards getting back to that average level, and we have other projects that we are trying to tie down now for the second half of this year, and that is why, George, we believe that we will grow our Energy Industrial business throughout the year. We will build on it quarter in and quarter out through the year and do believe that we have that opportunity to grow that business by 20%.

Q: Thank you. And maybe as a follow-up, Slide 5 talks a lot about this growth potential for Europe, particularly in 2027–2028. I am curious how you juxtapose that with some of the news coming out of Europe that the ACC, they are still operating, but they appear to be winding down some of their growth projects. Are there other battery manufacturers that you are working with to support some of the OEMs that are involved in that joint venture?

A: Yes, George. We are. In fact, I think both Ricardo and I had referenced in our comments working with battery cell manufacturers who are European, Korean, Japanese, and a couple of the leading Chinese manufacturers as well. That has given us a more robust outlook on Europe and a little less dependent on any single cell manufacturer. You mentioned ACC. We had Northvolt as well. As just an example, in the Northvolt case, those battery cells were replaced by Asia-based cell manufacturers, and we are right in the middle of those programs. So that diversity is important to us, I think, and gives us confidence about the European market.

Q: Good morning. Thanks for taking the question. Don, maybe on adjacent growth opportunities beyond BESS, any more you can share on what you might be looking at? Obviously, building materials in the past has been something you targeted. Any update on some of those target markets?

A: We have a strong background on the B&C side, and we are working on a product today that we believe can be effective in a slice of that market. It is a very large market, and so a slice is additive for us and incremental for us, and as we pointed out, incremental revenue is extremely valuable to us. It is a product that we would most probably supply from our EMF supplier, and we want to make sure我们有just the right product that gets certified properly. Then we renew the relationships that we had in that space, and before we became tight on capacity in the late teens, we developed that segment into a multimillion-dollar effort on our part, and we think we can rekindle that with our fire safety and thermal performance characteristics.

Q: And with Europe in particular, would that be more of the target opportunity for that product?

A: Yes. The building type and more of the thermal efficiency regulation and the style of buildings in Europe suit our retrofit-type approach to the market and increasing thermal performance in existing buildings.

Q: And maybe for my follow-up question, on the strategic review, any more you can give us on the process and timeline and potential options that you might consider?

A: Look, for the strategic review, we have had a lot of change in our commercial markets. We have restructured the company significantly. We have strengthened our balance sheet significantly, and we feel that we are making operational progress that translates into quarter-over-quarter growth throughout this coming year. From a strategic review point of view, we just want to make sure that we have some external influences on our thinking and that we do not get too caught in our own thinking. Testing our assumptions externally, we think, is a prudent thing for us to do. We are able to do it, again, much more off of our front foot as opposed to our back foot. We are going to be very deliberate about it on the one hand, but this is important to us, and我们are going to do it with urgency. We have a broad view. We are in our early stages, so we do not want to take anything off the table, but we are not prepared quite yet to say what the logical outcome would be of that effort.

Q: To follow up on battery storage first, can you size the revenue opportunity, maybe if not this year, perhaps later in the decade as it matures, or is it still early to do that there?

A: It is still early, Ryan, to really get to exact numbers or exact projections, if you will, by the end of the decade. But what我would say is that we know it is a growing market, an important market, and we would not do it unless it could be impactful and also leverage our current technology and our current manufacturing capabilities. For us, this is a little bit of a tweener in the sense that it leverages our expertise around thermal barriers, but it is in more of an industrial setting. It is a natural extension of our existing markets and capabilities. But, again, what I would say over the course of the remaining part of this decade is we would not be doing it if it did not have impactful growth potential.

Q: Got it. Appreciate that. And then maybe one on the EV side and quoting activity. Don, I think你mentioned it in your prepared remarks, but how are you thinking about potential wins this year, and how would those wins compare to some of your current OEM partners in terms of scope?

A: We did indicate that we think we are in a strong position to add an additional opportunity in Europe and potentially here in the United States as well, and we do not exclude some of the work that we are doing in Asia as well. We think we have the opportunity to add one, two, possibly three additional awards. What I would say about the awards is that these OEMs are more experienced. Their technology has developed more significantly than even two years ago or three years ago, let alone five and six years ago when some of the platforms that are rolling off now were originally conceived. Our work is much faster and more technical and with a greater knowledge base not only for ourselves but for those OEMs as well. We see these programs proceeding much more effectively. As I said, we see the European market—just the structural aspects of that market with steadier policy and a more mature infrastructure—to be a great opportunity for us, as we showed in the opportunity base in one of our slides today.