ASPEN AEROGELS INC 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto included in this Annual Report on Form 10-K. In addition to historical information, some of the information contained in the following discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking information that involves risks, uncertainties and assumptions. You should read the Risk Factors set forth in Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our actual results and the timing of events could differ materially from those anticipated by these forward looking statements. Investors and others should note that we routinely use the Investors section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investors section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investors section of our website, https://www.aerogel.com/ . Products Our core businesses are organized into two reportable segments: Thermal Barrier and Energy Industrial. The following describes our key product offerings and new product innovations by reportable segment. Thermal Barrier We are actively developing a number of promising aerogel products and technologies for the electric vehicle (EV) market. We have developed and are commercializing our proprietary line of PyroThin® aerogel thermal barriers for use in battery packs in EVs. Our PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. Our thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties. These properties enable EV manufacturers to achieve critical battery performance and safety goals. In addition, the Company's carbon aerogel initiative seeks to increase the performance of lithium-ion battery cells to enable EV manufacturers to reduce charging time and the cost of EVs. The commercial potential for our PyroThin thermal barriers and our carbon aerogel initiative in the EV market is significant. We have entered into multi-year production contracts with a number of automotive EV original equipment manufacturer (OEM) customers to supply fabricated, multi-part thermal barriers for use in the battery systems of their EV models. These customers include General Motors LLC (GM), Toyota, Scania, Automotive Cells Company, which is a battery cell joint venture between Stellantis N.V, Saft-TotalEnergies and Mercedes-Benz (ACC), Audi, a luxury brand of the Volkswagen Group, Volvo Truck, and a large EU battery manufacturer to supply a next generation vehicle platform of a major EU luxury sports car brand. We are currently supplying thermal barrier production parts to both General Motors and Toyota, and thermal barrier prototype parts to a number of global manufacturers of EVs, grid storage and home battery systems. During 2024, 2023 and 2022, we sold $306.8 million, $110.1 million and $55.6 million, respectively, of our PyroThin thermal barriers. Energy Industrial We also design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy industrial market. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-user customers select our products where thermal performance is critical and to save money, improve resource efficiency, enhance sustainability, preserve operating assets and protect workers. Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas (LNG) facilities, power generating assets and other energy industrial sites. Our Pyrogel ® and Cryogel ® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. 63 We also derive revenue from a number of other end markets. Customers in these markets use our products for applications as diverse as military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. As we continue to enhance our Aerogel Technology Platform, we believe we will have additional opportunities to address high-value applications in the global insulation market, and in a number of new, high-value markets, including hydrogen energy, filtration, water purification, and gas sorption. We market and sell our products primarily through a sales force based in North America, Europe and Asia. The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service. Our salespeople work directly with end-user customers and engineering firms to promote the qualification, specification and acceptance of our aerogel and thermal barrier products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our aerogel products and strong end-user support. Manufacturing Operations We manufacture our products using our proprietary technology at our facility in East Providence, Rhode Island. We have operated the East Providence facility since 2008 and have increased our capacity in phases. During 2024, we converted our East Providence facility to support the growth of the thermal barrier program. To meet expected demand for our aerogel products, we plan to make additional productivity improvements in our existing East Providence facility and utilize a flexible supply strategy, including but not limited to use of our external manufacturing capabilities in China, which currently support Aspen’s Energy Industrial segment and are capable of delivering increased aerogel production capacity. We expect that the productivity improvements in our existing East Providence facility as well as the supply from our external manufacturing facility will permit us to achieve our target revenue capacity in 2025. Pursuant to our supply contract with this contract manufacturer, they are obligated to deliver products to us as we issue purchase orders on an as-needed basis through the term of the contract. The contract automatically renews year-to-year unless either party notifies the other of its intention not to renew the contract. While we have agreed to purchase our requirement for certain Energy Industrial products from the contract manufacturer, we have no obligation to purchase any minimum quantity under the contract and we may terminate the contract at any time and for any or no reason. Additionally, we have entered into a contract with Prodensa Servicios de Consultora (Prodensa) to establish OPE Manufacturer Mexico S de RL de CV, a maquiladora located in Mexico (OPE), which assembles thermal barrier PyroThin products and operates an automated fabrication facility for PyroThin. Pursuant to such contract, we pay Prodensa a management fee and have an option to purchase OPE from Prodensa after a period of 18 months. As of December 31, 2024, we have notified Prodensa of our intent to purchase OPE. We expect to meet our long-term Thermal Barrier program demand by maximizing capacity at our East Providence facility and utilizing a flexible supply strategy, including but not limited to using our external manufacturing capabilities, which currently support Aspen’s Energy Industrial segment and are capable of delivering increased aerogel production capacity. Accordingly, we have ceased construction at our previously planned second manufacturing plant in Statesboro, Georgia. We will be demobilizing the plant and are in the process of assessing options to derive value from the assets, including potentially relocating certain equipment to improve and expand our existing manufacturing facility in East Providence. Underwritten Offering In October 2024, we entered into an underwriting agreement (the Underwriting Agreement) with Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC (collectively, the Underwriters), pursuant to which we issued and sold an aggregate of 4,887,500 shares of our common stock, which included 637,500 shares pursuant to the Underwriters’ option to purchase additional shares of our common stock, to the Underwriters in a registered underwritten offering (the Offering). The price to the public in the Offering was $20.00 per share. The net proceeds to us from the Offering were approximately $93.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. MidCap Loan Facility On August 19, 2024, we and Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company (Aspen RI and, together with the Company, each, a Borrower and collectively, the Borrowers) entered into a Credit, Security and Guaranty Agreement (the Credit Agreement and the facilities provided thereunder, collectively, the MidCap Loan Facility), by and among the Borrowers, MidCap Funding IV Trust, as agent (the Agent), MidCap Financial Trust, as term loan servicer, the financial institutions or other entities from time to time party thereto as lenders (the Lenders), and the other parties party thereto as additional guarantors and/or borrowers from time to time. The proceeds of the MidCap Loan Facility have been used in connection with the transaction contemplated by the Note Repurchase Agreement (as defined below), the payment of related fees and expenses and for working capital of the Company and its subsidiaries. Loans borrowed under the MidCap Loan Facility mature on August 19, 2029. 64 The MidCap Loan Facility is comprised of (i) a term loan facility in an aggregate principal amount of $125.0 million (the Term Loan Facility) and (ii) an asset-based revolving credit facility in an aggregate principal amount not to exceed the lesser of (A) $100.0 million and (B) the value of the borrowing base (defined as the sum of (x) 85% of certain eligible accounts of the Borrowers and (y) the lesser of 85% of the NOLV (as defined in the Credit Agreement) or 85% of the cost of certain eligible inventory of the Borrowers) (the Revolving Facility). Loans borrowed under the Term Loan Facility will bear an interest rate equal to Term SOFR (as defined in the Credit Agreement) for a one-month interest period plus 4.50% per year, subject to a Term SOFR floor of 4.50% and a Term SOFR cap of 7.50%. Loans borrowed under the Revolving Facility will bear an interest rate equal to Term SOFR plus 4.60% per year, subject to a Term SOFR floor of 2.50%. The Term Loan Facility is subject to amortization of principal, payable quarterly on the last day of each quarter, commencing September 30, 2024, in an amount as set forth in the Credit Agreement with the remaining aggregate principal amount payable on the maturity date. The Revolving Facility has a required minimum balance set at 30% of the average borrowing base during the immediate preceding month. The Borrowers are required to pay the Lenders under the Revolving Facility an unused line fee of 0.30% of the average unused availability under the Revolving Facility, subject to the aforementioned minimum balance. The MidCap Loan Facility is guaranteed by Aspen Aerogels Mexico Holdings and is secured by a lien on substantially all existing and after-acquired assets of the Loan Parties, including the equity interest in Aspen RI, Aspen Aerogels Mexico Holdings and Aspen Aerogels Georgia owned by us, in each case, subject to customary exceptions. Aspen Aerogels Georgia is not a guarantor (thus not a Loan Party) and its assets are excluded from the collateral under the MidCap Loan Facility, subject to its entrance into the DOE Loan Documents (as defined in the Credit Agreement) within one year from the closing date of the MidCap Loan Facility. To the extent the DOE Loan Documents will not be entered into within such one-year period, Aspen Aerogels Georgia will be obligated to become a Loan Party under the MidCap Loan Facility and pledge substantially all of its assets as security for the obligations thereunder. Repurchase of Convertible Note On August 19, 2024, we entered into a note purchase and sale agreement (the Note Repurchase Agreement) with Wood River Capital, LLC (Wood River), an entity affiliated with Koch Disruptive Technologies, LLC, pursuant to which we repurchased from Wood River $123.9 million in aggregate capitalized principal amount (inclusive of PIK interest paid through June 30, 2024) of Convertible Senior PIK Toggle Notes due 2027, dated February 18, 2022, as amended by Amendment No. 1 to Convertible Senior PIK Toggle Notes due 2027, dated November 28, 2022 (the Convertible Note), such aggregate amount being the entire outstanding amount of the Convertible Note, for a total purchase price of $150.0 million in cash, which amount equals to the Redemption Price (as defined in the Convertible Note). Pursuant to the Note Repurchase Agreement, all rights and obligations, covenants and agreements under the Convertible Note and the underlying note purchase agreement were satisfied and discharged. Financial Summary On March 16, 2022, we entered into a sales agreement for an at-the-market offering program with Cowen and Company, LLC and Piper Sandler & Co., as our sales agents (the 2022 ATM offering program). During the year ended December 31, 2022, we sold 5,241,400 shares of our common stock through the 2022 ATM offering program and received net proceeds of $72.7 million. The 2022 ATM offering program was terminated on June 20, 2023. On March 28, 2022, we sold to an affiliate of Koch, 1,791,986 shares of our common stock for aggregate gross proceeds of $50.0 million, pursuant to a securities purchase agreement, dated as of February 15, 2022, by and between us and the affiliate of Koch. On November 29, 2022, we completed an underwritten public offering of 29,052,631 shares of our common stock at a public offering price of $9.50 per share. We received net proceeds of $267.5 million after deducting underwriting discounts and commissions of $8.1 million and offering expenses of approximately $0.5 million. In December 2023, we sold 6,060,607 shares of our common stock at an offering price of $12.38 per share in a registered direct offering for net proceeds of $74.4 million, after deducting offering expenses of approximately $0.6 million. In October 2024, we sold 4,887,500 shares of our common stock at an offering price of $20.00 per share in a registered direct offering for net proceeds of $93.2 million, after deducting offering expenses of approximately $0.7 million. Key Metrics and Non-GAAP Financial Measures We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. 65 Adjusted EBITDA We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, from time to time, which we do not believe are indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with U.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. 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 used 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. Various measures of EBITDA are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired. Although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, we understand that Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or an analysis of our results of operations as reported under U.S. GAAP. Some of these limitations are: • Adjusted EBITDA does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual commitments; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect stock-based compensation expense; • Adjusted EBITDA does not reflect our income tax expense or cash requirements to pay our income taxes; • Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt; • although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; and • other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting their usefulness as a comparative measure. Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations. To properly and prudently evaluate our business, we encourage you to review the U.S. GAAP financial statements included elsewhere in this Annual Report on Form 10-K, and not to rely on any single financial measure to evaluate our business. 66 The following table presents a reconciliation of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the years presented: Year Ended December 31, 2024 2023 2022 ($ in thousands) Net income (loss) $ 13,375 $ (45,811 ) $ (82,738 ) Depreciation and amortization 22,526 15,318 9,222 Stock-based compensation (1) 12,855 10,954 9,385 Other (income) expense 11,959 (3,392 ) 3,493 Loss on extinguishment of debt 27,487 — — Income tax expense 1,714 — — Adjusted EBITDA $ 89,916 $ (22,931 ) $ (60,638 ) (1) Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of restricted stock units and vesting and modification of restricted common stock. The following table presents a reconciliation of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the quarters presented: Three Months Ended Three Months Ended 2024 2023 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 ($ in thousands) Net income (loss) $ (1,835 ) $ 16,818 $ (12,970 ) $ 11,362 $ (16,796 ) $ (15,423 ) $ (13,073 ) $ (519 ) Depreciation and amortization 5,786 5,986 5,321 5,433 2,704 3,503 4,550 4,561 Stock-based compensation (1) 4,706 2,971 2,630 2,548 2,267 2,710 2,789 3,188 Other (income) expense 3,515 2,302 2,616 3,526 (2,112 ) (1,621 ) (1,561 ) 1,902 Loss on extinguishment of debt — — 27,487 — — — — — Income tax expense 756 866 267 (175 ) — — — — Adjusted EBITDA $ 12,928 $ 28,943 $ 25,351 $ 22,694 $ (13,937 ) $ (10,831 ) $ (7,295 ) $ 9,132 (1) Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of restricted stock units and vesting and modification of restricted common stock. Our financial performance, including such measures as net income (loss), earnings per share and Adjusted EBITDA, are affected by a number of factors including volume and mix of aerogel products sold, average selling prices, our material costs and manufacturing expenses, the costs associated with capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period. During 2024, we experienced strong volume growth in our thermal barrier products. As a result, we experienced total revenue growth of 90% during the year. Our expectation for 2025 revenue is based, in part, on our OEM customers’ production volume forecasts and targets. Our OEM customers operate in a cyclical industry that is sensitive to shifting consumer trends, political and regulatory uncertainty and economic conditions in the markets they operate. EV adoption rates in some of our customers’ markets are expected to be at a slower rate than originally expected and EV investment continues to be re-timed as demand expectations in North America and Europe are reset. However, some of our OEM customers have been gaining market share from a low base volume and expect to continue to gain market share in 2025. Furthermore, changes are being considered to government and economic policies, incentives, and tariffs that may impact our customers and our production, sales, cost structure and the competitive landscape. Additionally, our OEM customers continue to innovate which could result in engineering changes to the parts we supply primarily to reduce costs for our OEMs. Cost-cutting initiatives adopted by our customers may result in increased downward pressure on pricing. Accordingly, we expect thermal barrier revenues could range from a decline to moderately higher in 2025. However, we are expecting an increase in energy industrial revenues. We are projecting growth in energy industrial revenue due to expected volume growth in our core petrochemical and refinery markets, an anticipated increase in project-based demand and continued penetration of new markets. We will continue to adjust to these developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency, will continue to benefit us. As a result, we expect to experience a decline to no or minimal growth in net income and Adjusted EBITDA during 2025. We also expect to incur reduced capital expenditures during 2025. 67 Revenue We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers. Revenue is recognized upon the satisfaction of contractual performance obligations. We record deferred revenue for product sales when (i) we have delivered products but other revenue recognition criteria have not been satisfied or (ii) payments have been received in advance of the completion of required performance obligations. The following table sets forth the total revenue for the periods presented: Year Ended December 31, 2024 2023 2021 ($ in thousands) Revenue: Energy industrial $ 145,867 $ 128,639 $ 124,807 Thermal barrier 306,832 110,079 55,557 Total $ 452,699 $ 238,718 $ 180,364 Energy industrial revenue accounted for 32%, 54%, and 69% of total revenue for the years ended December 31, 2024, 2023 and 2022, respectively. We experienced a 90% increase in total revenue during 2024 driven by the increase in our energy industrial business, particularly in North America, and continued growth in the EV market. A substantial majority of our revenue is generated from a limited number of direct customers, including distributors, contractors, fabricators, OEMs, partners and end-user customers. Our ten largest customers accounted for approximately 84% of our total revenue during the year ended December 31, 2024, and we expect that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future. In 2024, sales to GM and Distribution International, Inc. (Distribution) represented 64% and 6% of our total revenue, respectively. In 2023, sales to GM and Distribution represented 41% and 14% of our total revenue, respectively. In 2022, sales to GM and Distribution represented 25% and 22% of our total revenue, respectively. For each of the noted periods, there were no other customers that represented 10% or more of our total revenues. We conduct business across the globe and a substantial portion of our revenue is generated outside of the United States. Total revenue from outside of the United States, based on shipment destination, amounted to $194.2 million, or 43% of our total revenue, $87.7 million, or 37% of our total revenue, and $66.4 million, or 37% of our total revenue, in the years ended December 31, 2024, 2023 and 2022, respectively. Cost of Revenue Cost of product revenue consists primarily of materials and manufacturing expense. Cost of product revenue is recorded when the related product revenue is recognized. Material is a significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue were 38%, 36% and 51% for the years ended December 31, 2024, 2023 and 2022, respectively. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, product thicknesses, and manufacturing yields. In addition, we provide warranties for our products and record the estimated cost within cost of revenue in the period that the related revenue is recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated. As a result of these factors, material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold, the costs of our raw materials or the estimated cost of warranties. In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the cost of our raw materials, engineering changes, higher prototype sales and other factors may significantly impact our material costs and have a material impact on our operations. We expect that material costs will increase in absolute dollars during 2025 due to projected growth in product shipments and contracts but remain stable as a percentage of revenue due to improved manufacturing, and fabrication yields and a favorable mix of products sold. Manufacturing expense is also a significant component of cost of revenue. Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing assets. Manufacturing expense also includes stock-based compensation of 68 manufacturing employees and shipping costs. Manufacturing expense as a percentage of product revenue was 22%, 46% and 44% for the years ended December 31, 2024, 2023 and 2022, respectively. We expect that manufacturing expense will remain relatively flat in absolute dollars, due to ongoing cost reduction efforts, and increase as a percentage of revenue during 2025 due to lower expected revenues from the thermal barrier business, including the operation of an automated fabrication facility in Monterrey, Mexico. We are also continuing to monitor the impact on our material costs, manufacturing expense, and cost of product revenue from engaging one or more external manufacturing facilities in China to supply our aerogel products. Gross Profit Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of products produced and sold, the mix of products sold, average selling prices, our material and manufacturing costs, realized capacity utilization and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit to vary significantly in absolute dollars and as a percentage of revenue from period to period. Gross profit as a percentage of total revenue was 40%, 24%, and 3% for the years ended December 31, 2024, 2023 and 2022, respectively. In the longer term, we expect gross profit to improve in absolute dollars and as a percentage of revenue due to expected increases in total revenue, production volumes and manufacturing productivity. In addition, we expect the gross profit improvement derived from the increases in revenue, volume and productivity will be supported by the continued implementation of lower cost product formulations and realization of material purchasing efficiencies. Operating Expenses Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Operating expenses include personnel costs, legal fees, professional fees, service fees, insurance premiums, travel expense, facilities related costs and other costs, expenses and fees. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits, incentive compensation and stock-based compensation. In any particular period, the timing and extent of personnel additions or reductions, legal activities, including patent enforcement actions, marketing programs, research efforts and a range of similar activities or actions could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue. Research and Development Expenses Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs. General and Administrative Expenses General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit fees, compliance with securities, corporate governance and related laws and regulations, investor relations and insurance premiums, including director and officer insurance. We expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K, if protracted, could result in significant legal expense over the medium to long-term. Interest Expense, Convertible Note - Related Party Interest expense, convertible note - related party is net of the capitalized interest related to the $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes. 69 Interest Income (Expense) Interest expense consists of interest expense and amortization or write-off of deferred financing costs related to our other financing arrangements including a failed sale and leaseback arrangement accounted as a financing transaction and interest earned on the cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government. Loss on Extinguishment of Debt On August 19, 2024, we entered into the Note Purchase Agreement, pursuant to which we repurchased from Wood River $123.9 million in aggregate capitalized principal amount (inclusive of PIK interest paid through June 30, 2024) of the 2022 Convertible Note, such aggregate amount being the entire outstanding amount of the 2022 Convertible Note, for a total purchase price of $150.0 million in cash, which amount equals to the Redemption Price (as defined in the 2022 Convertible Note). Pursuant to the Note Repurchase Agreement, all rights and obligations, covenants and agreements under the 2022 Convertible Note and the Note Purchase Agreement were satisfied and discharged. The Redemption Price less capitalized principal amount and accrued interest to redemption date, of $24.6 million along with unamortized deferred issuance costs was classified in the income statement as Loss on Extinguishment of Debt. Income from Employee Retention Credit Employee retention credit consists of other income related to our submitted filings for CARES Employee Retention Credits. Provision for Income Taxes We have incurred net losses since inception with the exception of the year ended December 31, 2024, and have not recorded benefit provisions for U.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards. We record tax expenses in connection with our Mexican maquiladora operations. At December 31, 2024, we had $315.3 million of net operating losses available to offset future federal income tax, if any, of which $156.3 million expire on various dates through December 31, 2037. Net operating losses of $159.0 million generated from 2018 through 2023 have an unlimited carryforward . 70 Results of Operations The following tables set forth our results of operations for the periods presented: Year Ended December 31, 2024 2023 2022 ($ in thousands) Revenue $ 452,699 $ 238,718 $ 180,364 Cost of revenue 269,802 181,797 175,388 Gross profit 182,897 56,921 4,976 Operating expenses Research and development 18,050 16,356 16,930 Sales and marketing 35,677 33,008 28,792 General and administrative 71,125 56,760 38,499 Impairment of equipment under development 3,510 — — Total operating expenses 128,362 106,124 84,221 Income (loss) from operations 54,535 (49,203 ) (79,245 ) Other income (expense) Interest expense, convertible note - related party (7,550 ) (5,328 ) (5,110 ) Interest income (expense), net (4,409 ) 6,534 1,617 Loss on extinguishment of debt (27,487 ) — — Income from Employee Retention Credits — 2,186 — Total other income (expense) (39,446 ) 3,392 (3,493 ) Income tax expense (1,714 ) — — Net income (loss) $ 13,375 $ (45,811 ) $ (82,738 ) Year ended December 31, 2024 compared to year ended December 31, 2023 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2024 2023 $ Change % Change 2024 2023 ($ in thousands) (Percentage of total revenue) Revenue $ 452,699 $ 238,718 $ 213,981 90 % 100 % 100 % Cost of revenue 269,802 181,797 88,005 48 % 60 % 76 % Gross profit 182,897 56,921 125,976 221 % 40 % 24 % Operating expenses Research and development 18,050 16,356 1,694 10 % 4 % 7 % Sales and marketing 35,677 33,008 2,669 8 % 8 % 14 % General and administrative 71,125 56,760 14,365 25 % 16 % 24 % Impairment of equipment under development 3,510 — 3,510 NM 1 % 0 % Total operating expenses 128,362 106,124 22,238 21 % 28 % 44 % Income (loss) from operations 54,535 (49,203 ) 103,738 (211 )% 12 % (21 )% Other income (expense) Interest expense, convertible note - related party (7,550 ) (5,328 ) (2,222 ) 42 % (2 )% (2 )% Interest income, net (4,409 ) 6,534 (10,943 ) (167 )% (1 )% 3 % Loss on extinguishment of debt (27,487 ) — (27,487 ) NM (6 )% 0 % Income from Employee Retention Credits — 2,186 (2,186 ) (100 )% — % 1 % Total other income (expense) (39,446 ) 3,392 (42,838 ) (1,263 )% (9 )% 1 % Income tax expense (1,714 ) — (1,714 ) NM (0 )% (— )% Net income (loss) $ 13,375 $ (45,811 ) $ 59,186 129 % 3 % (19 )% 71 Revenue Year Ended December 31, 2024 2023 Change Percentage of Percentage of Amount Revenue Amount Revenue Amount Percentage ($ in thousands) Revenue: Energy industrial $ 145,867 32% $ 128,639 54% $ 17,228 13% Thermal barrier 306,832 68% 110,079 46% 196,753 179% Total revenue $ 452,699 100% $ 238,718 100% $ 213,981 90% Total revenue increased $214.0 million, or 90%, to $452.7 million in 2024 from $238.7 million in 2023. The increase in total revenue was the result of increases in both energy industrial and thermal barrier revenue. Energy industrial revenue increased by $17.3 million, or 13%, to $145.9 million in 2024 from $128.6 million in 2023. This increase was driven by a more favorable mix of product shipments in the global petrochemical and refinery markets, particularly in North America, Latin America, and Europe, offset, in part, by a decrease in maintenance-based demand in the global petrochemical and refinery markets in Asia and project-based demand in the subsea market. Energy industrial revenue for the years ended December 31, 2024 and 2023, included $28.8 million and $33.6 million in sales to Distribution, respectively. The average selling price per square foot of our products increased by $0.58, or 13%, to $5.11 per square foot for the year ended December 31, 2024, from $4.53 per square foot for the year ended December 31, 2023. The increase in average selling price reflected the impact of price increases enacted in 2024 and a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by approximately $16.6 million for the year ended December 31, 2024. In volume terms, product shipments increased by 0.1 million square feet, or 1%, to 28.5 million square feet of aerogel products for the year ended December 31, 2024, as compared to 28.4 million square feet in the year ended December 31, 2023. The increase in product volume had the effect of increasing product revenue by approximately $0.7 million for the year ended December 31, 2024. Thermal barrier revenue was $306.8 million for the year ended December 31, 2024, as compared to $110.1 million for the year ended December 31, 2023. Thermal barrier revenue for the year ended December 31, 2024 included $291.2 million to a major U.S. automotive OEM and $5.9 million to a major Asian automotive OEM. Thermal barrier revenue for the year ended December 31, 2023 included $97.5 million to a major U.S. automotive OEM and $5.5 million to a major Asian automotive OEM. Energy industrial revenue as a percentage of total revenue was 32% and 54% of total revenue in 2024 and in 2023, respectively. Thermal barrier revenue was 68% and 46% of total revenue in 2024 and in 2023, respectively. Cost of Revenue Year Ended December 31, 2024 2023 Change % of Related % of Related Amount Revenue Amount Revenue Amount Percentage ($ in thousands) Cost of revenue: Energy industrial $ 87,425 60% $ 94,477 73% $ (7,052 ) (7)% Thermal barrier 182,377 59% 87,320 79% 95,057 109% Total cost of revenue $ 269,802 60% $ 181,797 76% $ 88,005 48% Total cost of revenue increased $88.0 million, or 48%, to $269.8 million in 2024 from $181.8 million in 2023. The increase in total cost of revenue was the result of an increase in thermal barrier, offset, in part, by a decrease in energy industrial cost of revenue. Energy industrial cost of revenue decreased $7.1 million, or 7%, to $87.4 million from $94.5 million in the comparable period in 2023. The $7.1 million decrease was the result of a $20.1 million decrease in manufacturing and other operating costs and a $13.0 million increase in material costs from the comparable period in 2023. The decrease in manufacturing and other operating costs and 72 increase in material costs was the result of lower volume of energy industrial products manufactured at our plant as we move manufacturing to the external manufacturing facility. Thermal barrier cost of revenue increased $95.1 million to $182.4 million as compared to $87.3 million in the comparable period in 2023. The $95.1 million increase was the result of a $23.6 million increase in manufacturing costs and a $71.5 million increase in material costs resulting from the increase in volume from the comparable period in 2023. Gross Profit Year Ended December 31, 2024 2023 Change Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Gross profit: Energy industrial $ 58,442 40% $ 34,162 27% $ 24,280 71% Thermal barrier 124,455 41% 22,759 21% 101,696 447% Total gross profit $ 182,897 40% $ 56,921 24% $ 125,976 221% Gross profit increased $126.0 million, or 221%, to $182.9 million in 2024 from $56.9 million in 2023. The increase in gross profit was the result of the $214.0 million increase in total revenue, partially offset by the $88.0 million increase in total cost of revenue. The increase in total cost of revenue was principally driven by the increase in material costs due to higher volume and overhead costs and additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products. Research and Development Expenses Year Ended December 31, Change 2024 2023 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Research and development expenses $ 18,050 4% $ 16,356 7% $ 1,694 10% Research and development expenses increased by $1.7 million, or 10%, to $18.1 million in 2024 from $16.4 million in 2023. The $1.7 million increase was the result of increases in compensation and related costs of $1.0 million, depreciation and facility related expenses of $0.3 million, utilities expenses of $0.2 million, and other expenses of $0.2 million. Research and development expenses as a percentage of total revenue decreased to 4% during the year ended December 31, 2024 from 7% in the comparable period in 2023 primarily due to the 90% increase in revenue from the comparable period in 2023. Sales and Marketing Expenses Year Ended December 31, Change 2024 2023 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Sales and marketing expenses $ 35,677 8% $ 33,008 14% $ 2,669 8% Sales and marketing expenses increased by $2.7 million, or 8%, to $35.7 million in 2024 from $33.0 million in 2023. The increase was the result of increases in depreciation and facility related expenses of $0.7 million, travel related expenses of $0.7 million, compensation and related costs of $0.6 million, utilities expenses of $0.4 million, and other expenses of $0.3 million. Sales and marketing expenses as a percentage of total revenue decreased to 8% in 2024 from 14% in 2023 primarily due to the 90% increase in revenue from the comparable period in 2023. 73 General and Administrative Expenses Year Ended December 31, Change 2024 2023 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) General and administrative expenses $ 71,125 16% $ 56,760 24% $ 14,365 25% General and administrative expenses increased by $14.3 million, or 25%, to $71.1 million in 2024 from $56.8 million in 2023. The $14.3 million increase was the result of additional staffing costs combined with increases in compensation and related costs of $5.6 million, foreign currency transaction losses of $3.4 million, insurance costs of $2.7 million, utilities expenditures of $2.3 million, and other costs of $0.3 million. Compensation and related costs include $2.0 million of charge from the cancellation of the unearned performance-based restricted shares. General and administrative expenses as a percentage of total revenue decreased to 16% in 2024 from 24% in 2023 primarily due to the 90% increase in revenue from the comparable period in 2023. Impairment of Equipment Under Development The $3.5 million impairment of equipment under development was the result of a charge for impairment of assets due to obsolescence following development of new and more efficient equipment. Other Income (Expense), net Year Ended December 31, Change 2024 2023 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Other income (expense): Interest expense, related party $ (7,550 ) (2)% $ (5,328 ) (2)% $ (2,222 ) 42% Interest income (expense), net (4,409 ) (1)% 6,534 3% (10,943 ) (167)% Loss on extinguishment of debt (27,487 ) (6)% — 0% (27,487 ) NM Income from Employee Retention Credits — 0% 2,186 1% (2,186 ) NM Total other income (expense), net $ (39,446 ) (9)% $ 3,392 1% $ (42,838 ) (1,263)% Other income (expense), net decreased by $42.8 million to $39.4 million in 2024 from $3.4 million in 2023. The $42.8 million increase was the result of a $27.5 million loss on extinguishment of debt, $6.1 million net impact of capitalized interest relating to our Convertible Note in the comparable period in 2023, $1.8 million of deferred financing costs related to the GM Loan Agreement (which was terminated on August 16, 2024), a $2.2 million income from Employee Retention Credits in the comparable period in 2023 not repeated in 2024, a $0.9 million decrease of interest income, and a $4.3 million increase of interest expense. Income Tax Expense The $1.7 million of income tax expense for the year ended December 31, 2024 is related to our maquiladora operations in Mexico. We did not incur income tax expense for the comparable period in 2023. 74 Year ended December 31, 2023 compared to year ended December 31, 2022 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2023 2022 $ Change % Change 2023 2022 ($ in thousands) (Percentage of total revenue) Revenue $ 238,718 $ 180,364 $ 58,354 32% 100% 100% Cost of revenue 181,797 175,388 6,409 4% 76% 97% Gross profit 56,921 4,976 51,945 1,044% 24% 3% Operating expenses Research and development 16,356 16,930 (574 ) (3)% 7% 9% Sales and marketing 33,008 28,792 4,216 15% 14% 16% General and administrative 56,760 38,499 18,261 47% 24% 21% Total operating expenses 106,124 84,221 21,903 26% 44% 47% Loss from operations (49,203 ) (79,245 ) 30,042 (38)% (21)% (44)% Other income (expense) Interest expense, convertible note - related party (5,328 ) (5,110 ) (218 ) 100% (2)% -3% Interest income (expense), net 6,534 1,617 4,917 304% 3% 1% Gain on extinguishment of debt 2,186 — 2,186 100% 1% —% Total other income (expense) 3,392 (3,493 ) 6,885 (197)% 1% (2)% Net loss $ (45,811 ) $ (82,738 ) $ 36,927 45% (19)% (46)% Revenue Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Revenue: Energy industrial $ 128,639 54% $ 124,807 69% $ 3,832 3% Thermal barrier 110,079 46% 55,557 31% 54,522 98% Total revenue $ 238,718 100% $ 180,364 100% $ 58,354 32% Total revenue increased $58.3 million, or 32%, to $238.7 million in 2023 from $180.4 million in 2022. The increase in total revenue was the result of increases in both energy industrial and thermal barrier revenue. Energy industrial revenue increased by $3.8 million, or 3%, to $128.6 million in 2023 from $124.8 million in 2022. This increase was driven by a more favorable mix of product shipments in the global petrochemical and refinery markets, particularly in Latin America, project-based demand in the subsea market, offset, in part, by a decrease in maintenance-based demand in the global petrochemical and refinery markets in North America, Europe, and Asia. Energy industrial revenue for the years ended December 31, 2023 and 2022, included $33.6 million and $39.3 million in sales to Distribution International, Inc., respectively. The average selling price per square foot of our products increased by $0.70, or 18%, to $4.53 per square foot for the year ended December 31, 2023, from $3.83 per square foot for the year ended December 31, 2022. The increase in average selling price reflected the impact of price increases enacted in 2023 and a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by approximately $19.9 million for the year ended December 31, 2023. In volume terms, product shipments decreased by 4.2 million square feet, or 13%, to 28.4 million square feet of aerogel products for the year ended December 31, 2023, as compared to 32.6 million square feet in the year ended December 31, 2022. The decrease in product volume had the effect of decreasing product revenue by approximately $16.1 million for the year ended December 31, 2023. Thermal barrier revenue was $110.1 million for the year ended December 31, 2023, as compared to $55.6 million for the year ended December 31, 2022. Thermal barrier revenue for the year ended December 31, 2023 included $97.5 million to a major U.S. 75 automotive OEM and $5.5 million to a major Asian automotive OEM. Thermal barrier revenue for the year ended December 31, 2022 included $45.8 million to a major U.S. automotive OEM and $5.1 million to a major Asian automotive OEM. Energy industrial revenue as a percentage of total revenue was 54% and 69% of total revenue in 2023 and in 2022, respectively. Thermal barrier revenue was 46% and 31% of total revenue in 2023 and in 2022, respectively. Cost of Revenue Year Ended December 31, Change 2023 2022 Amount Percentage of Related Revenue Amount Percentage of Related Revenue Amount Percentage ($ in thousands) Cost of revenue: Energy industrial $ 94,477 73% $ 105,963 85% $ (11,486 ) (11)% Thermal barrier 87,320 79% 69,425 125% 17,895 26% Total cost of revenue $ 181,797 76% $ 175,388 97% $ 6,409 4% Total cost of revenue increased $6.4 million, or 4%, to $181.8 million in 2023 from $175.4 million in 2022. The increase in total cost of revenue was the result of an increase in thermal barrier, offset, in part, by a decrease in energy industrial cost of revenue. Energy industrial cost of revenue decreased $11.5 million, or 11%, to $94.5 million from $106.0 million in the comparable period in 2022. The $11.5 million decrease was the result of a $11.4 million decrease in material costs and a $0.1 million decrease in manufacturing and other operating costs from the comparable period in 2022. The decrease in material costs was the result of the lower revenue volume from the comparable period in 2022, and lower raw material costs in 2023 compared to 2022. Thermal barrier cost of revenue increased $17.9 million to $87.3 million as compared to $69.4 million in the comparable period in 2022. The $17.9 million increase was the result of a $5.8 million increase in material costs and a $12.1 million increase in manufacturing costs. The increase in material costs was the result of the increase in revenue volume from the comparable period in 2022, offset by lower raw material prices in 2023 compared to 2022. The increase in manufacturing costs was driven by increases in depreciation and facility costs of $7.1 million and utilities expenses of $3.3 million and other manufacturing and operating costs of $1.7 million. Gross Profit Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage Gross profit: Energy industrial $ 34,162 27% $ 18,844 15% $ 15,318 81% Thermal barrier 22,759 21% (13,868 ) (25)% 36,627 (264)% Total gross profit $ 56,921 24% $ 4,976 3% $ 51,945 1044% Gross profit increased $51.9 million, or 1,044%, to $56.9 million in 2023 from $5.0 million in 2022. The increase in gross profit was the result of the $58.3 million increase in total revenue, partially offset by the $6.4 million increase in total cost of revenue. The increase in total cost of revenue was principally driven by the increase in overhead costs and additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products. Research and Development Expenses Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Research and development expenses $ 16,356 7% $ 16,930 9% $ (574 ) (3)% 76 Research and development expenses decreased by $0.5 million, or 3%, to $16.4 million in 2023 from $16.9 million in 2022. The $0.5 million decrease was the result of decreases in professional fees of $1.5 million, operating material and supplies costs of $0.7 million, compensation and related costs of $0.6 million, partially offset by an increase in depreciation and facility related expenses of $2.1 million and other research and development expenses of $0.2 million. Research and development expenses as a percentage of total revenue decreased to 7% during the year ended December 31, 2023 from 9% in the comparable period in 2022, primarily due to the decrease in professional fees. Sales and Marketing Expenses Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Sales and marketing expenses $ 33,008 14% $ 28,792 16% $ 4,216 15% Sales and marketing expenses increased by $4.2 million, or 15%, to $33.0 million in 2023 from $28.8 million in 2022. The increase was the result of increases in depreciation and facility related expenses of $2.9 million and compensation and related costs of $2.1 million, partially offset by a decrease in operating material and supplies costs of $0.8 million. Sales and marketing expenses as a percentage of total revenue decreased to 14% in 2023 from 16% in 2022 primarily due to the 32% increase in revenue from the comparable period in 2022. General and Administrative Expenses Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) General and administrative expenses $ 56,760 24% $ 38,499 21% $ 18,261 47% General and administrative expenses increased by $18.3 million, or 47%, to $56.8 million in 2023 from $38.5 million in 2022. The $18.3 million increase was the result of increases in compensation and related costs of $15.3 million and professional fees of $3.6 million, offset by a decrease in other costs of $0.6 million. General and administrative expenses as a percentage of total revenue increased to 24% in 2023 from 21% in 2022 primarily due to increased expenditures associated with the growth in our human resource, finance, information technology and general management organizations in preparation for the anticipated growth in our business. Other Income (Expense), net Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Other income (expense): Interest expense, related party $ (5,328 ) (2)% $ (5,110 ) (3)% $ (218 ) 4% Interest income, net 6,534 3% 1,617 1% 4,917 NM Income from Employee Retention Credits 2,186 1% — 0% 2,186 NM Total other income (expense), net $ 3,392 1% $ (3,493 ) (2)% $ 6,885 NM Other income (expense), net increased by $6.9 million to $3.4 million in 2023 from $(3.5) million in 2022. The $6.9 million increase was the result of $4.9 million of interest income, $2.2 million of Employee Retention Credits and a $(0.2) million net impact of capitalized interest relating to our Convertible Note in the comparable period in 2022. 77 Liquidity and Capital Resources Overview We have experienced significant losses and invested substantial resources since our inception to develop, commercialize and protect our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures, and investment in working capital balances. Our long-term financial projections anticipate revenue growth, increasing levels of gross profit, and improved cash flows from operations. To meet expected demand for our aerogel products, we plan to make additional productivity improvements in our existing East Providence facility and utilize a flexible supply strategy, including but not limited to use of our external manufacturing capabilities in China, which currently support Aspen’s Energy Industrial segment and are capable of delivering increased aerogel production capacity. We expect that the productivity improvements in our existing East Providence facility as well as the supply from our external manufacturing facility will permit us to achieve our target revenue capacity in 2025 and in the long-term. Accordingly, we have ceased construction at our previously planned second manufacturing plant in Statesboro, Georgia. We will be demobilizing the plant and are in the process of assessing options to derive value from the assets, including potentially relocating certain equipment to improve and expand our existing manufacturing facility in East Providence. On October 16, 2024, we announced that the U.S. Department of Energy (DOE) Loan Programs Office provided us a conditional commitment for a proposed loan of up to $670.6 million (the Loan) under the Advanced Technology Vehicles Manufacturing loan program within DOE’s Loan Programs Office (LPO) for financing the construction of our previously planned second aerogel manufacturing facility (the Statesboro Plant) in Statesboro, Georgia. On February 12, 2025, we announced that we had stopped construction on the Statesboro Plant and are demobilizing the project. In connection with the demobilization, we are no longer pursuing our application for the Loan from the DOE’s LPO and have withdrawn from the Loan application process. During the year ended December 31, 2022, we sold 5,241,400 shares of our common stock through the 2022 ATM offering program and received net proceeds of $72.7 million. On November 29, 2022, we completed an underwritten public offering of 29,052,631 shares of our common stock at a public offering price of $9.50 per share. We received net proceeds of $267.5 million after deducting underwriting discounts and commissions of $8.1 million and offering expenses of approximately $0.5 million. In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes. In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million. On December 19, 2023, we entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which we issued and sold, in a registered direct offering directly to the Investors an aggregate of 6,060,607 shares of our common stock at an offering price of $12.38 per share. We received net proceeds of $74.4 million, after deducting offering expenses of approximately $0.6 million. In November 2022, we entered into a loan agreement (the GM Loan Agreement) with General Motors Holdings LLC (GM), an entity affiliated with General Motors LLC, which provides for a multi-draw senior secured term loan (the GM Loan) in an aggregate principal amount of up to $100.0 million, available to the Company on a delayed draw basis beginning January 1, 2023 to September 30, 2023, subject to certain conditions precedent to funding. In September 2023, we amended the GM Loan Agreement to (i) extend the draw period for the delayed GM Loan to a period beginning on the date that is twelve months prior to the date agreed upon by the Company and GM for the start of production at the Statesboro Plant and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); (ii) extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and (iii) add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter. We did not draw on the GM Loan. On August 16, 2024, we and GM entered into a termination letter (the GM Termination Letter) to terminate and payoff in full all obligations outstanding under the GM Loan Agreement. On August 19, 2024, we entered into the Credit Agreement with the Agent and the Lenders. The MidCap Loan Facility under the Credit Agreement is comprised of (i) the Term Loan Facility in an aggregate principal amount of $125.0 million and (ii) the Revolving Facility in an aggregate principal amount not to exceed the lesser of $100.0 million and the value of the Borrowing Base (as defined in the Credit Agreement). At closing of the Credit Agreement, the Company drew $125.0 million from the Term Loan Facility and $43.0 million from the Revolving Facility. The proceeds of the borrowings at closing, net of fees and costs, were used for repurchasing the 2022 Convertible Notes for $150.0 million and for general corporate purposes. 78 In October 2024, we entered into the Underwriting Agreement with the Underwriters, pursuant to which we issued and sold an aggregate of 4,887,500 shares of our common stock, which included 637,500 shares pursuant to the Underwriters’ option to purchase additional shares of our common stock, to the Underwriters in the Offering. The price to the public in the Offering was $20.00 per share. The net proceeds to us from the Offering were approximately $93.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. In January 2024 and September 2024, we entered into sale and leaseback arrangements, pursuant to which we sold certain equipment to an equipment leasing company for one-time cash payments of $5.0 million and $10.0 million, respectively, and leased back such equipment from the leasing company. The associated monthly lease rents will be paid over the lease term of three years. We believe that our December 31, 2024 cash and cash equivalents balance of $220.9 million will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunities in the EV market and other strategic business opportunities for at least the next twelve months. However, we may supplement our cash balance and available credit with equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives. We believe that consummation of equity financings could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating loss carryforwards being restricted. Our inability to use a substantial portion of our net operating loss carryforwards would result in a higher effective tax rate and adversely affect our financial condition and results of operations. Primary Sources of Liquidity Our principal sources of liquidity are currently our cash and cash equivalents, availability under the Revolving Facility, and cash generated by ongoing operations. Cash and cash equivalents consist primarily of cash, money market accounts, and sweep accounts on deposit with banks. As of December 31, 2024, we had $220.9 million of cash and cash equivalents and $16.7 million of availability under the Revolving Facility. See “Risk Factors - Risks Related to Our Business and Strategy – We will require additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on acceptable terms or at all” in this Annual Report on Form 10-K for the year ended December 31, 2023. Analysis of Cash Flow The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2024 2023 2022 ($ in thousands) Net cash provided by (used in): Operating activities $ 45,549 $ (42,612 ) $ (94,399 ) Investing activities (86,262 ) (175,455 ) (177,974 ) Financing activities 122,018 75,477 478,370 Net increase (decrease) in cash 81,305 (142,590 ) 205,997 Cash and cash equivalents, beginning of period 139,971 282,561 76,564 Cash and cash equivalents, end of period $ 221,276 $ 139,971 $ 282,561 Operating Activities During 2024, we provided $45.5 million in net cash from operating activities, as compared to the use of $42.6 million in net cash during 2023, a decrease in the use of cash of $88.2 million. This decrease in the use of cash was the result of net income adjusted for non-cash items of $108.0 million, and a decrease in cash used by changes in working capital of $19.8 million. During 2023, we used $42.6 million in net cash in operating activities, as compared to the use of $94.4 million in net cash during 2022, a decrease in the use of cash of $51.8 million. This decrease in the use of cash was the result of the decrease in net loss adjusted for non-cash items of $44.8 million, and a decrease in cash used by changes in working capital of $7.0 million. 79 Investing Activities Net cash used in investing activities is for capital expenditures for machinery and equipment principally to improve the throughput, efficiency and capacity of our East Providence facility, our automated fabrication facility in Mexico and engineering designs for the planned aerogel manufacturing facility in Statesboro, Georgia. Net cash used in investing activities for 2024 and 2023 totaled $86.3 million and $175.5 million, respectively. Financing Activities Net cash provided by financing activities in 2024 totaled $122.0 million and consisted of $14.9 million in proceeds from a sales leaseback, $10.4 million in proceeds from employee stock option exercises, $120.1 million in proceeds from the term loan, net of issues costs, and $42.1 in proceeds from the revolver, net of issuance costs, $93.2 million in proceeds from the registered direct offering of common stock. net of issuance costs, offset by $150.0 million in cash used for the repayment of the convertible note, $6.5 million in cash used for repayments from the term loan, $1.3 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units, and $0.9 million in repayments of a sales leaseback. Net cash provided by financing activities in 2023 totaled $75.5 million and consisted of net proceeds from the registered direct offering of common stock of $74.2 million and $1.7 million in proceeds from employee stock option exercises, offset, in part, by $0.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units. Capital Spending and Future Capital Requirements We have made capital expenditures primarily to develop and expand our manufacturing capacity. Our capital expenditures totaled $86.3 million in 2024, $175.5 million in 2023 and $178.0 million in 2022. As of December 31, 2024, we had capital commitments of approximately $172.4 million, which included commitments for which we have entered into contracts as well as commitments authorized by our Board of Directors. These commitments relate to the enhancement of our existing production lines in our East Providence facility and our fabrication operation in Mexico, and the previously planned aerogel manufacturing facility in Statesboro, Georgia and consist primarily of costs for equipment and construction. As indicated in the overview of the liquidity and capital resources section, to meet expected demand for our aerogel products, we plan to make additional productivity improvements in our existing East Providence facility and utilize a flexible supply strategy, including but not limited to use of our external manufacturing capabilities in China, which currently support Aspen’s Energy Industrial segment and are capable of delivering increased aerogel production capacity. Accordingly, we have ceased construction at our previously planned second manufacturing plant in Statesboro, Georgia. We will be demobilizing the plant and are in the process of assessing options to derive value from the assets, including potentially relocating certain equipment to improve and expand our existing manufacturing facility in East Providence. In the meantime, we expect to be able to substantially reduce our planned capital expenditures for 2025. We intend to fund capital expenditures related to the expansion of capacity of our existing manufacturing facility with our existing cash balance and anticipated cash flows from operations. We plan to fund the capital expenditures required to build a carbon aerogel battery materials facility, with additional equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, government grant and loan programs or credit facilities. Contractual Obligations and Commitments Operating Leases We lease office space for our corporate offices in Northborough, Massachusetts, which expires in 2031. We also lease additional facilities in East Providence, Rhode Island; Marlborough, Massachusetts; Monterrey, Mexico; and Pawtucket, Rhode Island for research, administrative, fabrication, and warehousing purposes under leases expiring between March 31, 2025 and April 30, 2034. See “Item 2 — Properties.” We also lease vehicles and equipment under non-cancelable operating leases that expire at various dates. Thermal Barrier Contract We are party to production contracts with GM, to supply fabricated, multi-part thermal barriers, or Barriers, for use in the battery system of its next-generation EVs, or Contracts. Pursuant to the Contracts, we are obligated to supply Barriers at fixed annual prices and at volumes to be specified by the OEM up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034. While the OEM has agreed to purchase its requirement for Barriers for locations to be designated from time to time by the OEM, it has no obligation to purchase any minimum quantity of Barriers under the 80 Contracts. In addition, the OEM may terminate the Contracts any time and for any or no reason. All other terms of the Contracts are generally consistent with the OEM’s standard purchase terms, including quality and warranty provisions customary in the automotive industry. MidCap Loan Facility On August 19, 2024, we and Aspen RI entered into the Credit Agreement, by and among the Borrowers, the Agent, MidCap Financial Trust, as term loan servicer, the Lenders, and the other parties party thereto as additional guarantors and/or borrowers from time to time. The proceeds of the MidCap Loan Facility have been used in connection with the transaction contemplated by the Note Repurchase Agreement, the payment of related fees and expenses and for working capital of the Company and its subsidiaries. Loans borrowed under the MidCap Loan Facility mature on August 19, 2029. The MidCap Loan Facility is comprised of (i) the Term Loan Facility in an aggregate principal amount of $125.0 million and (ii) the Revolving Facility in an aggregate principal amount not to exceed the lesser of (A) $100.0 million and (B) the value of the borrowing base (defined as the sum of (x) 85% of certain eligible accounts of the Borrowers and (y) the lesser of 85% of the NOLV or 85% of the cost of certain eligible inventory of the Borrowers). Loans borrowed under the Term Loan Facility will bear an interest rate equal to Term SOFR (as defined in the Credit Agreement) for a one-month interest period plus 4.50% per year, subject to a Term SOFR floor of 4.50% and a Term SOFR cap of 7.50%. Loans borrowed under the Revolving Facility will bear an interest rate equal to Term SOFR plus 4.60% per year, subject to a Term SOFR floor of 2.50%. The Term Loan Facility is subject to amortization of principal, payable quarterly on the last day of each quarter, commencing September 30, 2024, in an amount as set forth in the Credit Agreement with the remaining aggregate principal amount payable on the maturity date. The Revolving Facility has a required minimum balance set at 30% of the average borrowing base during the immediate preceding month. The Borrowers are required to pay the Lenders under the Revolving Facility an unused line fee of 0.30% of the average unused availability under the Revolving Facility, subject to the aforementioned minimum balance. The Borrowers will have the right to prepay the loans outstanding under the MidCap Loan Facility (or, with respect to the Revolving Facility, terminate the commitments thereunder), subject to a premium equal to 3.0% of the amount prepaid or terminated, as applicable, during the first year after the closing date, which premium will be decreased to 2.0% during the second year after the closing date and to 1.0% thereafter. Convertible Note - Related Party On August 19, 2024, we entered into the Note Repurchase Agreement with Wood River, pursuant to which we repurchased from Wood River the Convertible Note), such aggregate amount being the entire outstanding amount of the Convertible Note, for a total purchase price of $150.0 million in cash, which amount equals to the Redemption Price (as defined in the Convertible Note). Pursuant to the Note Repurchase Agreement, all rights and obligations, covenants and agreements under the Convertible Note and the underlying note purchase agreement were satisfied and discharged. Purchase Commitments As of December 31, 2024, we had purchase commitments of approximately $243.3 million, which included capital commitments of $172.4 million. Purchase commitments related to capital expenditures are anticipated to be spent over the next three years, while our remaining purchase commitments are anticipated to be spent throughout 2025. Purchase obligations relate primarily to open purchase orders for capital expenditures, inventories, and goods and services. Purchase obligations are entered into with various vendors in the normal course of business and are consistent with our expected requirements. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption to its consolidated financial statements. Standards Implemented Since December 31, 2024 In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses. This ASU is effective for our fiscal year 2024 and interim periods in fiscal year 2025. 81 Standards to be Implemented In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures that requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for our fiscal year 2025. Early adoption is permitted. We are currently evaluating income tax disclosures related to our annual report for fiscal year 2025. Although there are several other new accounting pronouncements issued by the FASB, we do not believe any of these accounting pronouncements had or will have a material impact on our Consolidated Financial Statements. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements; and therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about these critical accounting policies, as well as a description of our other significant accounting policies. Revenue Recognition We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers. Revenue is recognized upon the satisfaction of contractual performance obligations. Products are typically delivered without significant post-sale obligations to customers other than standard warranty obligations for product defects. We provide warranties for our products and record the estimated cost within cost of sales in the period that the revenue is recorded. Our standard warranty period extends one to two years from the date of shipment, depending on the type of product purchased. Our warranties provide that our products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. We recorded warranty expense of $1.4 million during the year ended December 31, 2024. We recorded warranty expense of $0.5 million and $0.2 million during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2024, we had satisfied all outstanding warranty claims. Stock-based Compensation We maintain an equity incentive plan pursuant to which our Board of Directors may grant qualified and nonqualified stock options, restricted stock, restricted stock units and other stock-based awards to board members, officers, key employees and others who provide or have provided service to us. We measure the costs associated with stock-based awards based on their estimated fair value at date of grant. We recognize the cost of stock-based awards as service, performance or market conditions are met. Future expense amounts for any particular quarterly or annual period could be affected by changes in our assumptions or changes in market conditions. Stock Options We use the Black-Scholes option-pricing model to estimate the fair value of stock option awards. The determination of the estimated fair value of stock option awards is based on a number of complex and subjective assumptions. These assumptions include the determination of the estimated fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate, the expected term of the option, and the forfeiture rate for the award class. The following assumptions were used to estimate the fair value of the option awards: Year Ended December 31, 2024 2023 2022 Weighted-average assumptions: Expected term (in years) 5.99 6.12 5.97 Expected volatility 75.04 % 70.04 % 61.85 % Risk free rate 4.11 % 4.08 % 2.13 % Expected dividend yield — % — % — % 82 • The expected term represents the period that our stock-based awards are expected to be outstanding and is determined using the simplified method described in ASC Topic 718, Compensation — Stock Compensation , for all grants. We believe this is a better representation of the estimated life than our actual limited historical exercise behavior. • For the years ended December 31, 2024, 2023 and 2022, we used our historical volatility as a basis to estimate expected volatility in the valuation of stock options. • The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. • We use an expected dividend yield of zero, since we do not intend to pay cash dividends on our common stock in the foreseeable future, nor have we paid dividends on our common stock in the past. For stock options that contain a market condition, we use a Monte-Carlo Simulation model to estimate the grant date fair value of awards expected to vest. We based the simulation model on the Black Scholes option-pricing model and a number of other complex assumptions including (i) whether the vesting condition would be satisfied within the time-vesting periods, and (ii) the date the common stock price target would be achieved per the terms of the agreement. 83 Item 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure results primarily from fluctuations in interest rates as well as from inflation. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our line of credit under our revolving credit facility as well as cash flows. We may also face additional exchange rate risk in the future as we expand our business internationally. Interest Rate Risk We are exposed to changes in interest rates in the normal course of our business. At December 31, 2024, we had unrestricted cash and cash equivalents of $220.9 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts at major financial institutions in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material. As of December 31, 2024, we had $0.4 million of restricted cash to support our outstanding letters of credit. As of December 31, 2024, we had $114.7 million of term loan outstanding and $42.1 million of revolver loan outstanding. Loans borrowed under the Term Loan Facility will bear interest rate equal to Term SOFR (as defined in the Credit Agreement) for a one-month interest period plus 4.50% per year, subject to a Term SOFR floor of 4.50% and a Term SOFR cap of 7.50%. Loans borrowed under the Revolving Facility will bear an interest rate equal to Term SOFR plus 4.60% per year, subject to a Term SOFR floor of 2.50%. Therefore, fluctuations in interest rates will impact our consolidated financial statements. A rising interest rate environment will increase the amount of interest paid on these loans. A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on the results of our operations. Inflation Risk Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented in this report. However, our business may be affected by inflation in the future. Foreign Currency Exchange Risk We are subject to inherent risks attributed to operating in a global economy. The majority of our revenue, receivables, purchases and debts are denominated in U.S. dollars. As we expand our presence in international markets, to the extent we are required to enter into agreements denominated in a currency other than the US dollar, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. During the fiscal year ended December 31, 2024, our largest exposures to foreign exchange rates consisted primarily of the Mexican Peso against the U.S. dollar. For the fiscal years ended December 31, 2024 and 2022, we had foreign exchange losses of $2.8 million and $0.2 million. For the fiscal year ended December 31, 2023, we had foreign exchange gains of $0.5 million. 84 Item 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the To the Stockholders and Board of Directors Aspen Aerogels, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Aspen Aerogels, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedules II (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in 85 accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Net realizable value of certain inventories As discussed in Note 2 to the consolidated financial statements, inventories are stated at the lower of cost and net realizable value. As of December 31, 2024, the Company held inventories of $47.6 million. The excess, obsolete or damaged goods provision recorded for inventories is equal to the difference between the cost of inventory and the estimated net realizable value, which is based upon assumptions about future demand, selling prices, and market conditions. We identified the evaluation of the estimated net realizable value of certain inventories as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s assumption of future demand through future consumption, including whether past consumption is indicative of future consumption and the related effect on the net realizable value of certain inventories. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s inventory process. This included a control related to the Company’s process to estimate future consumption. We assessed the Company’s assumption related to future consumption and its correlation to past consumption by inquiring of relevant Company personnel regarding the impact of relevant changes to the overall business environment, including key customers and product lines. We compared the actual quantities of inventory on hand to actual consumption during the current year and subsequent to year-end to evaluate whether the historic and subsequent period consumption supported the Company’s assumption related to future consumption. We recalculated the Company’s estimate of the inventory provision based on the actual quantities of inventory on hand compared to the estimate of future consumption. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Boston, Massachusetts February 27, 2025 86 ASPEN AEROGELS, INC. Consolidated B alance Sheets December 31, 2024 2023 (In thousands, except share and per share data) Assets Current assets: Cash and cash equivalents $ 220,882 $ 139,723 Restricted cash 394 248 Accounts receivable, net of allowances of $ 1,265 and $ 230 109,104 69,995 Inventories 47,551 39,189 Prepaid expenses and other current assets 31,517 17,176 Total current assets 409,448 266,331 Property, plant and equipment, net 459,276 417,227 Operating lease right-of-use assets 20,854 17,212 Other long-term assets 5,566 2,278 Total assets $ 895,144 $ 703,048 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 44,361 $ 51,094 Accrued expenses 36,495 22,811 Deferred revenue 2,199 2,316 Finance obligation for sale and leaseback transactions 4,028 — Operating lease liabilities 3,279 1,874 Long term debt - current portion 19,750 — Total current liabilities 110,112 78,095 Revolving line of credit 42,131 — Long term debt 94,961 — Convertible note - related party — 114,992 Finance obligation for sale and leaseback transactions long-term 10,087 — Operating lease liabilities long-term 23,148 21,906 Total liabilities 280,439 214,993 Commitments and contingencies (Note 12) Stockholders' equity: Preferred stock, $ 0.00001 par value; 5,000,000 shares authorized, no shares issued or outstanding at December 31, 2024 and 2023 — — Common stock, $ 0.00001 par value; 250,000,000 shares authorized, 82,040,468 and 76,503,151 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively — — Additional paid-in capital 1,274,932 1,161,657 Accumulated deficit ( 660,227 ) ( 673,602 ) Total stockholders' equity 614,705 488,055 Total liabilities and stockholders' equity $ 895,144 $ 703,048 See accompanying notes to consolidated financial statements. 87 ASPEN AEROGELS, INC. Consolidated Statem ents of Operations Year Ended December 31, 2024 2023 2022 (In thousands, except share and per share data) Revenue $ 452,699 $ 238,718 $ 180,364 Cost of revenue 269,802 181,797 175,388 Gross profit 182,897 56,921 4,976 Operating expenses Research and development 18,050 16,356 16,930 Sales and marketing 35,677 33,008 28,792 General and administrative 71,125 56,760 38,499 Impairment of equipment under development 3,510 — — Total operating expenses 128,362 106,124 84,221 Income (loss) from operations 54,535 ( 49,203 ) ( 79,245 ) Other income (expense) Interest expense, convertible note - related party ( 7,550 ) ( 5,328 ) ( 5,110 ) Interest income (expense), net ( 4,409 ) 6,534 1,617 Income from Employee Retention Credits — 2,186 — Loss on extinguishment of debt ( 27,487 ) — — Total other income (expense) ( 39,446 ) 3,392 ( 3,493 ) Income (loss) before income tax expense 15,089 ( 45,811 ) ( 82,738 ) Income tax expense ( 1,714 ) — — Net income (loss) $ 13,375 $ ( 45,811 ) $ ( 82,738 ) Net income (loss) per share: Basic $ 0.17 $ ( 0.66 ) $ ( 2.10 ) Diluted $ 0.17 $ ( 0.66 ) $ ( 2.10 ) Weighted-average common shares outstanding: Basic 77,535,121 69,439,034 39,363,114 Diluted 80,306,690 69,439,034 39,363,114 See accompanying notes to consolidated financial statements. 88 ASPEN AEROGELS, INC. Consolidated Statements of St ockholders’ Equity (In thousands, except share and per share data) Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Value Shares Value Balance at December 31, 2021 — $ — 33,218,115 $ — $ 673,461 $ ( 545,053 ) $ 128,408 Net loss — — — — — ( 82,738 ) ( 82,738 ) Stock compensation expense — — — — 9,385 — 9,385 Issuance of restricted stock — — 399,016 — — — — Vesting of restricted stock units — — 173,263 — ( 2,362 ) — ( 2,362 ) Proceeds from employee stock option exercises — — 118,552 — 553 — 553 Proceeds from at-the-market offering, net of commissions and fees of $ 2,269 and issuance costs of $ 616 — — 5,241,400 — 72,733 — 72,733 Proceeds from private placement of common stock, net of fees and issuance costs of $ 137 — — 1,791,986 — 49,863 — 49,863 Proceeds from underwritten public offering, net of underwriting discounts and commissions of $ 8,052 and issuance costs of $ 452 — — 29,052,631 — 267,496 267,496 Increase in debt discount due to modification of convertible note – related party — — — — 4,097 — 4,097 Balance at December 31, 2022 — $ — 69,994,963 $ — $ 1,075,226 $ ( 627,791 ) $ 447,435 Net loss — — — — — ( 45,811 ) ( 45,811 ) Stock compensation expense — — — — 10,954 — 10,954 Issuance of restricted stock — — 44,928 — — — — Vesting of restricted stock units — — 79,151 — ( 420 ) — ( 420 ) Proceeds from employee stock option exercises — — 323,502 — 1,659 — 1,659 Proceeds from registered direct offering of common stock, net of fees and issuance costs of $ 623 — — 6,060,607 — 74,377 — 74,377 Issuance costs from underwritten public offering — — — — ( 139 ) ( 139 ) Balance at December 31, 2023 — $ — 76,503,151 $ — $ 1,161,657 $ ( 673,602 ) $ 488,055 Net income — — — — — 13,375 13,375 Stock compensation expense — — — — 10,681 — 10,681 Issuance of restricted stock — — 13,264 — — — — Vesting of restricted stock units — — 137,240 — ( 1,289 ) — ( 1,289 ) Proceeds from employee stock option exercises — — 1,254,994 — 10,364 — 10,364 Proceeds from registered direct offering of common stock, net of fees and issuance costs of $ 686 — — 4,887,500 — 93,154 — 93,154 Cancellation of restricted stock — — ( 679,796 ) — 2,174 — 2,174 Employee restricted stock awards withheld for tax — — ( 75,885 ) — ( 1,809 ) — ( 1,809 ) Balance at December 31, 2024 — $ — 82,040,468 $ — $ 1,274,932 $ ( 660,227 ) $ 614,705 See accompanying notes to consolidated financial statements. 89 ASPEN AEROGELS, INC. Consolidated Statem ents of Cash Flows Year Ended December 31, 2024 2023 2022 (In thousands) Cash flows from operating activities: Net income (loss) $ 13,375 $ ( 45,811 ) $ ( 82,738 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 22,526 15,318 9,222 Accretion of interest on convertible note - related party 7,083 4,403 5,110 Amortization of convertible note issuance costs 24 37 32 Amortization of debt issuance costs 1,139 — — Amortization of debt discount due to modification of convertible note – related party 443 888 — Loss on extinguishment of debt 27,487 — — Deferred financing costs written off 1,829 — — Provision for bad debt 247 ( 93 ) 115 Stock-based compensation expense 12,855 10,954 9,385 Impairment of property, plant and equipment 7,613 — — Reduction in the carrying amount of operating lease right-of-use assets 1,886 2,859 2,640 Changes in operating assets and liabilities: Accounts receivable ( 39,356 ) ( 12,552 ) ( 37,042 ) Inventories ( 8,362 ) ( 16,651 ) ( 10,551 ) Prepaid expenses and other assets ( 19,835 ) ( 7,401 ) ( 3,155 ) Accounts payable 7,341 4,583 5,318 Accrued expenses 11,855 6,808 5,184 Deferred revenue ( 117 ) ( 3,530 ) 4,525 Operating lease liabilities ( 2,484 ) ( 2,424 ) ( 2,444 ) Net cash provided by (used in) operating activities 45,549 ( 42,612 ) ( 94,399 ) Cash flows from investing activities: Capital expenditures ( 86,262 ) ( 175,455 ) ( 177,974 ) Net cash used in investing activities ( 86,262 ) ( 175,455 ) ( 177,974 ) Cash flows from financing activities: Proceeds from underwritten public offering, net of underwriting discounts, commissions and issuance costs — — 267,496 Proceeds from issuance of convertible note related party — — 100,000 Issuance costs from convertible note — — ( 185 ) Proceeds from employee stock option exercises 10,364 1,659 553 Payments made for employee restricted stock tax withholdings ( 1,289 ) ( 420 ) ( 2,362 ) Proceeds from at-the-market offering net of commissions, fees and issuance costs of $ 2,885 — — 72,733 Proceeds from registered direct offering of common stock 93,840 75,000 — Fees and issuance costs from registered direct offering of common stock ( 686 ) ( 623 ) — Proceeds from private placement of common stock — — 50,000 Fees and issuance costs from private placement of common stock — ( 139 ) ( 137 ) Repayment of convertible note ( 150,029 ) — — Repayment of term loan ( 6,500 ) — — Proceeds from term loan 125,000 — — Issuance costs from term loan and revolver ( 5,797 ) — — Proceeds from revolver 43,000 — — Proceeds from sale and leaseback transactions 14,983 — — Repayment of finance obligation for sale and leaseback transactions ( 868 ) — — Repayment of prepayment liability — — ( 9,728 ) Net cash provided by financing activities 122,018 75,477 478,370 Net (decrease) increase in cash, cash equivalents and restricted cash 81,305 ( 142,590 ) 205,997 Cash, cash equivalents and restricted cash at beginning of period 139,971 282,561 76,564 Cash, cash equivalents and restricted cash at end of period $ 221,276 $ 139,971 $ 282,561 Supplemental disclosures of cash flow information: Interest paid $ 7,007 $ 1 $ 153 Income taxes paid $ — $ — $ — Supplemental disclosures of non-cash activities: Right-of-use assets obtained in exchange for new operating lease liabilities $ 5,131 $ 10,380 $ 3,030 Capitalized Interest $ — $ 6,084 $ 2,723 Increase in debt discount due to modification of convertible note – related party $ — $ — $ 4,097 Changes in accrued capital expenditures $ ( 14,074 ) $ ( 8,217 ) $ 31,970 See accompanying notes to consolidated financial statements. 90 ASPEN AEROGELS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Description of Business Nature of Business Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel materials used primarily in the energy industrial, sustainable insulation materials and electric vehicle (EV) markets. The Company has provided high-performance aerogel insulation to the energy industrial and sustainable insulation markets for nearly two decades. The Company has developed and commercialized its proprietary line of PyroThin aerogel thermal barriers for use in battery packs in EVs. In addition, the Company is developing applications for its aerogel technology in the battery materials market and a number of other high-potential markets. The Company's core businesses is organized into two reportable segments: Energy Industrial and Thermal Barrier. The Company maintains its corporate offices in Northborough, Massachusetts. The Company has four wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC ("Aspen RI"), Aspen Aerogels Germany, GmbH, Aspen Aerogels Georgia, LLC, and Aspen Aerogels Mexico Holdings, LLC ("Aspen Mexico"). Additionally, we engaged Prodensa Servicios de Consultora to establish OPE Manufacturer Mexico S de RL de CV, a maquiladora located in Mexico (OPE), which assembles thermal barrier PyroThin products and operates an automated fabrication facility for PyroThin. OPE is currently owned by Prodensa, which charges a management fee. There is an option for OPE to be purchased by the Company after a period of 18 months. As of December 31, 2024 , the Company has notified Prodensa of the intent to purchase OPE. During the period between inception and the exercise of the purchase option, OPE operations are consolidated within the Company financial statements. Liquidity During the year ended December 31, 2024, the Company earned a net income of $ 13.4 million, generated $ 45.5 million of cash from operations and used $ 86.3 million of cash for capital expenditures. The Company had unrestricted cash and cash equivalents of $ 220.9 million as of December 31, 2024. In January 2024 and September 2024 , the Company entered into sale and leaseback arrangements, pursuant to which the Company sold certain equipment to an equipment leasing company for one-time cash payments of $ 5.0 million and $ 10.0 million, respectively, and leased back such equipment from the leasing company. The associated monthly lease rents will be paid over the lease term of three years . On August 19, 2024, the Company and Aspen RI (each, a Borrower and collectively, the Borrowers) entered into a Credit, Security and Guaranty Agreement (the Credit Agreement and the facilities provided thereunder, collectively, the MidCap Loan Facility) with MidCap Funding IV Trust, as agent (the Agent), MidCap Financial Trust, as term loan servicer, and the financial institutions or other entities from time to time party thereto as lenders (the Lenders), with respect to the MidCap Loan Facility, which is comprised of (i) the Term Loan Facility in an aggregate principal amount of $ 125.0 million and (ii) the Revolving Facility in an aggregate principal amount not to exceed the lesser of $ 100.0 million and the value of the Borrowing Base (as defined in the Credit Agreement). At closing of the Credit Agreement, the Company drew $ 125.0 million from the Term Loan Facility and $ 43.0 million from the Revolving Facility. The proceeds of the borrowings at closing, net of fees and costs, were used for repurchasing of the 2022 Convertible Notes (as defined below) for $ 150.0 million and for general corporate purposes. The amount available to the Company at December 31, 2024 under the Revolving Facility was $ 16.7 million. In October 2024, the Company entered into an underwriting agreement (the Underwriting Agreement) with Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC (collectively, the Underwriters), pursuant to which the Company issued and sold an aggregate of 4,887,500 shares of the Company’s common stock, which included 637,500 shares pursuant to the Underwriters’ option to purchase additional shares of common stock of the Company, to the Underwriters in a registered underwritten offering (the Offering). The price to the public in the Offering was $ 20.00 per share. The net proceeds to the Company from the Offering were approximately $ 93.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. In November 2022, the Company entered into a loan agreement (the GM Loan Agreement) with General Motors Holdings LLC (GM), an entity affiliated with General Motors LLC, which provides for a multi-draw senior secured term loan (the GM Loan) in an aggregate principal amount of up to $ 100.0 million, available to the Company on a delayed draw basis beginning January 1, 2023 to September 30, 2023 , subject to certain conditions precedent to funding. In September 2023, the Company amended the GM Loan 91 Agreement to (i) extend the draw period for the GM Loan to a period beginning on the date that is twelve months prior to the date agreed upon by the Company and GM for the start of production at an aerogel manufacturing facility in Statesboro, Georgia (the Plant) and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); (ii) extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and (iii) add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter. The Company has not drawn, and no longer has the ability to draw on the GM Loan. The associated unamortized deferred financing costs of $ 1.7 million were written off to interest expense upon the expiration of the draw period. On August 16, 2024, the Company and GM entered into the GM Termination Letter to terminate and payoff in full all obligations outstanding under the GM Loan Agreement. The Company has developed a number of promising aerogel products and technologies for the EV market. The Company will continue to invest in research and development of next-generation aerogel products and manufacturing process technologies. The Company believes that the commercial potential for the Company’s products and technology in the EV market is significant. The Company expects its existing cash balance will be sufficient to support current operating requirements, current research and development activities and the capital expenditures required to support the evolving commercial opportunity in the EV market and other strategic business initiatives. However, the Company may supplement its cash balance with equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities, establish the operations and complete the aerogel capacity expansions required to support these evolving commercial opportunities and strategic business initiatives. (2) Summary of Basis of Presentation and Significant Accounting Policies Principles of Consolidation The accompanying condensed consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity (VIE) where the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation. A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE in accordance with ASC 810, Consolidation (ASC 810) when it is the primary beneficiary of such VIE. As primary beneficiary, the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. The Company evaluates the initial consolidation of each consolidated VIE, which includes a determination of whether the VIE constitutes the definition of a business in accordance with ASC 805, Business Combinations (ASC 805), by considering if substantially all of the fair value of the gross assets within the VIE are concentrated in either a single identifiable asset or group of single identifiable assets. Upon consolidation, the Company recognizes the assets acquired, the liabilities assumed, and any third-party ownership of membership interests as non-controlling interest as of the consolidation or acquisition date, measured at their relative fair values. 92 Use of Estimates The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, product warranty costs, inventory valuation, the carrying amount of property and equipment, right-of-use assets, lease liabilities, stock-based compensation, and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including current economic conditions, which are believed to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances warrant. Illiquid credit markets, volatile equity markets, and declines in business investment can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. Cash and Cash Equivalents Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts and high-quality debt securities issued by the U.S. government via cash sweep accounts. All cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk. Restricted Cash As of December 31, 2024, the Company had $ 0.4 million of restricted cash to support its outstanding letters of credit. Concentration of Credit Risk Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company’s customers are primarily insulation distributors, insulation contractors, insulation fabricators and select energy and automotive end-users located throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the year ended December 31, 2024, the Company recorded a charge for estimated customer uncollectible accounts receivable of $ 0.2 million. During the year ended December 31, 2023, the Company recorded a charge for estimated customer uncollectible accounts receivable of less than $ 0.1 million. During the year ended December 31, 2022, the Company recorded a charge for estimated customer uncollectible accounts receivable of $ 0.1 million. Allowance for doubtful accounts was $ 0.6 million and $ 0.2 million at December 31, 2024 and 2023, respectively. The Company does not have any off-balance-sheet credit exposure related to its customers. For the year ended December 31, 2024 , two customers represented 64 % and 6 % of total revenue, respectively. For the year ended December 31, 2023 , two customers represented 41 % and 14 % of total revenue, respectively. For the year ended December 31, 2022 , two customers represented 25 % and 22 % of total revenue, respectively. At December 31, 2024 , the Company had two customers which accounted for 80 % and 5 % of accounts receivable, respectively. At December 31, 2023 , the Company had two customers which accounted for 60 % and 6 % of accounts receivable, respectively. Inventories Inventory consists of finished products, work-in-process, and raw materials. Inventories are carried at lower of cost, determined using the first-in, first-out (FIFO) method, and net realizable value. Cost includes materials, labor and manufacturing overhead. Manufacturing overhead is allocated to the costs of conversion based on normal capacity of the Company’s production facility. Abnormal freight, handling costs and material waste are expensed in the period it occurs. The Company periodically reviews its inventories and makes provisions as necessary for estimated excess, obsolete or damaged goods to ensure values approximate the lower of cost and net realizable value. The amount of any such provision is equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand, selling prices and market conditions. 93 Prepaid expenses and other current assets Prepaid expenses and other current assets primarily include value added tax and income tax receivables, prepayments of future services, and payments for pre-billed inventories. Property, Plant and Equipment, Net Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major betterments are capitalized as additions to property, plant and equipment. Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Assets related to leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Assets utilized in the Company’s operations that are taken out of service with no future use are charged to cost of revenue or operating expenses, depending on the department in which the asset was utilized. Impairments of construction in progress are charged to operating expenses upon the determination of no future use. Other Assets Other assets primarily include long-term deposits. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recognition and measurement of a potential impairment is performed on assets grouped with other assets and liabilities at the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details. Warranty The Company provides warranties for its products and records the estimated cost within cost of revenue in the period that the related revenue is recorded. The Company’s standard warranty period extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. The Company’s products may be utilized in systems that involve new technical demands and new configurations. Accordingly, the Company regularly reviews and assesses whether warranty reserves should be recorded in the period the related revenue is recorded. For an initial shipment of product for use in a system with new technical demands or new configurations and where the Company is unsure of meeting the customer’s specifications, the Company will defer the recognition of product revenue and related costs until written customer acceptance is obtained. Shipping and Handling Costs Shipping and handling costs are classified as a component of cost of revenue. Customer payments of shipping and handling costs are recorded as product revenue. 94 Stock-based Compensation The Company grants share-based awards to its employees and non-employee directors. All share-based awards granted, including grants of stock options, restricted stock and restricted stock units (RSUs), are recognized in the statement of operations based on their fair value as of the date of grant. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved, and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards. The Black-Scholes model requires the use of a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate and the expected term of the option. The fair value of restricted stock and RSUs is determined using the closing price of the Company’s common stock on the date of grant. All shares of restricted stock are not transferable until vested. Restricted stock or RSUs are typically issued to non-employee directors and typically vests over a one-year period from the date of issuance. RSUs are issued to employees and typically vest over a three-year period from the date of issuance. The fair value of restricted stock and RSUs upon which vesting is solely service-based is expensed ratably over the vesting period. If the service condition for shares of restricted stock is not met for any reason, the shares of unvested restricted stock will be forfeited and returned to the Company. For stock awards that contain a market condition, the Company uses the Monte-Carlo simulation model to determine the fair value of the awards. In addition to the input assumptions used in the Black-Scholes model, the Monte-Carlo simulation model factors the probability that the specific market condition may or may not be satisfied into the valuation. Stock-based compensation expense for awards with a market condition is recognized on a straight-line basis over the requisite service period for each such award. Research and Development Costs incurred in the Company’s research and development activities include compensation and related costs, services provided by third-party contractors, materials and supplies and are classified as research and development expenses as incurred. Earnings per Share The Company calculates net income (loss) per common share based on the weighted-average number of common shares outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of common shares included in the computation of diluted net income (loss) gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and RSUs. Common equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized in the financial statements are recorded as adjustments to income taxes payable or receivable, or adjustments to deferred taxes, or both. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes penalties and interest related to uncertain tax positions, if any, as a component of income tax expense. Segments Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision 95 maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company presently views its operations and manages its business as two operating segments. Leases The Company accounts for leases in accordance with FASB ASC Topic 842, Leases. The Company determines whether an arrangement is a lease at inception. For leases where the Company is the lessee, a lease liability and a right-of-use (ROU) asset is recognized for all leases, with the exception of short-term leases with terms of twelve months or less. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s payment obligations under the lease. Operating lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term. To measure its lease liabilities, the Company uses its incremental borrowing rate or the rate implicit in the lease, if available. The Company calculates its incremental borrowing rate using a synthetic credit rating analysis based on Moody’s Building Materials Industry Rating Methodology. ROU assets also include any direct costs and prepaid lease payments but exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company elected the short-term lease recognition exemption for all leases that qualify. For leases that qualify for this exemption, the Company does not recognize ROU assets or lease liabilities. For lease agreements with lease and non-lease components, the Company accounts for each component separately. However, in the case of equipment leases, the Company accounts for lease and non-lease components as a single component. Refer to Note 11. Leases for additional information. Sale and Leaseback Accounting The Company has entered into sale and leaseback transactions for certain equipment within its plants. Due to the Company not meeting criteria to account for the transfer of the assets as a sale, sale accounting is precluded. Accordingly, the Company uses the financing method to account for these transactions. Under the financing method of accounting for a sale and leaseback, the Company does not derecognize the assets and does not recognize as revenue any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as finance obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the finance obligation. Interest on the finance obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding finance obligation. Foreign Currency Transactions The Company converts foreign currency transactions recognized in the Consolidated Statements of Operations to U.S. dollars by applying the exchange rate prevailing on the date of the transaction. Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in general and administrative expenses, net in the Consolidated Statements of Operations. The Company had foreign exchange losses of $ 2.8 million and $ 0.2 million for the fiscal years ended December 31, 2024 and 2022, respectively. For the fiscal year ended December 31, 2023, the Company had foreign exchange gains of $ 0.5 million. Employee Retention Credits In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit: a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the Employee Retention Credits. We qualified for the Employee Retention Credits in the third and fourth quarters of 2020 and the first quarter of 2021. In September 2023, we submitted filings for CARES Employee Retention Credits totaling $ 2.2 million that are reported in the accompanying condensed consolidated balance sheet within prepaid expenses and other current assets as of December 31, 2023, and in the accompanying statement of operations for the year ended December 31, 2023. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption to its consolidated financial statements. 96 Standards Implemented Since December 31, 2023 In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses. Standards to be Implemented After December 31, 2024 In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures that requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for the Company’s fiscal year 2025. Early adoption is permitted. The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025. Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its Consolidated Financial Statements. The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its consolidated financial statements. (3) Revenue from Contracts with Customers Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The Company determines standalone-selling prices based on the price at which the performance obligation is sold separately. If the standalone-selling price is not observable through past transactions, the Company estimates the standalone-selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at both December 31, 2024 and December 31, 2023 and did not enter into any contracts during each of the years ended December 31, 2024 and 2023 that contained a significant financing component. The Company records deferred revenue for product sales when (i) the Company has delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations. Thermal Barriers The Company supplies fabricated, multi-part thermal barriers for use in battery packs in the EV market. These thermal barriers are customized to meet customer specifications. Although thermal barrier products are customized with no alternative use to the Company, the Company does not always have an enforceable right to payment. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of the control of the products is passed to the customer according to the terms of 97 the contract, including under bill and hold arrangements. The timing of revenue recognition is assessed on a contract-by-contract basis. Energy Industrial The Company generally enters into contracts containing one type of performance obligation. For a majority of the contracts, the Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, which is generally upon delivery according to contractual shipping terms within customer purchase orders. For a limited number of customer arrangements for customized products with no alternative use to the Company and an enforceable right to payment for progress completed to date, the Company recognizes revenue over time using units of production to measure progress toward satisfying the performance obligations. Units of production represent work performed as we do not generate significant work in process and thereby best depicts the transfer of control to the customer. Customer invoicing terms for contracts for which revenue is recognized under the over time methodology are typically based on certain milestones within the production and delivery schedule. The timing of revenue recognition is assessed on a contract-by-contract basis. The Company also enters into rebate agreements with certain customers. These agreements may be considered an additional performance obligation of the Company or variable consideration within a contract. Rebates are recorded as a reduction of revenue in the period the related revenue is recognized. A corresponding liability is recorded as a component of deferred revenue on the consolidated balance sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes. The Company estimates the amount of its sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related revenue is recognized. The Company currently estimates return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $ 0.3 million and $ 0.2 million at December 31, 2024 and December 31, 2023, respectively. Shipping and Handling Costs Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in the cost of product revenue. The associated amount of revenue recognized includes the consideration to which the Company expects to be entitled to receive in exchange for incurring these shipping and handling costs. Disaggregation of Revenue In the following tables, revenue is disaggregated by primary geographical region and source of revenue: December 31, 2024 U.S. International Total (In thousands) Geographical region Asia $ — $ 29,321 $ 29,321 Canada — 19,265 19,265 Europe — 45,027 45,027 Latin America — 100,568 100,568 U.S. 258,518 — 258,518 Total revenue $ 258,518 $ 194,181 $ 452,699 Source of revenue Energy industrial $ 63,761 $ 82,106 $ 145,867 Thermal barrier 194,757 112,075 306,832 Total revenue $ 258,518 $ 194,181 $ 452,699 98 December 31, 2023 U.S. International Total (In thousands) Geographical region Asia $ — $ 35,698 $ 35,698 Canada — 2,033 2,033 Europe — 42,731 42,731 Latin America — 7,219 7,219 U.S. 151,037 — 151,037 Total revenue $ 151,037 $ 87,681 $ 238,718 Source of revenue Energy industrial $ 52,838 $ 75,801 $ 128,639 Thermal barrier 98,199 11,880 110,079 Total revenue $ 151,037 $ 87,681 $ 238,718 December 31, 2022 U.S. International Total (In thousands) Geographical region Asia $ — $ 34,746 $ 34,746 Canada — 4,947 4,947 Europe — 22,239 22,239 Latin America — 4,464 4,464 U.S. 113,968 — 113,968 Total revenue $ 113,968 $ 66,396 $ 180,364 Source of revenue Energy industrial $ 64,699 $ 60,108 $ 124,807 Thermal barrier 49,269 6,288 55,557 Total revenue $ 113,968 $ 66,396 $ 180,364 Contract Balances The following table presents changes in the Company’s contract liabilities during the year ended December 31, 2024: Balance at December 31, 2023 Additions Deductions Balance at December 31, 2024 (In thousands) Contract liabilities Deferred revenue Energy industrial $ 2,316 $ 9,738 $ ( 9,855 ) $ 2,199 Total contract liabilities $ 2,316 $ 9,738 $ ( 9,855 ) $ 2,199 During the year ended December 31, 2024, the Company recognized $ 2.3 million of revenue that was included in deferred revenue at December 31, 2023. A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. 99 (4) Inventories Inventories consist of the following: December 31, 2024 2023 (In thousands) Raw material $ 13,671 $ 24,735 Work in process 9,664 7,936 Finished goods 24,216 6,518 Total $ 47,551 $ 39,189 (5) Property, Plant and Equipment, Net Property, plant and equipment consist of the following: December 31, 2024 2023 Useful life (In thousands) Construction in progress $ 352,567 $ 314,695 — Buildings 27,032 25,473 30 years Machinery and equipment 201,789 185,339 3 — 10 years Computer equipment and software 9,794 9,495 3 years Leasehold improvements 24,843 23,514 Shorter of useful life or lease term Total 616,025 558,516 Accumulated depreciation and amortization ( 156,749 ) ( 141,289 ) Property, plant and equipment, net $ 459,276 $ 417,227 Depreciation expense was $ 22.5 million, $ 15.3 million and $ 9.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Construction in progress totaled $ 352.6 million and $ 314.7 million at December 31, 2024 and 2023, respectively. The balance at December 31, 2024 and 2023 included engineering designs and construction costs totaling $ 323.6 million and $ 279.7 million, respectively, for a planned aerogel manufacturing facility in Statesboro, Georgia. The Company incurred $ 0.0 million and $ 6.1 million in capitalized interest for the years ended December 31, 2024 and December 31, 2023, respectively, for the construction in progress in Statesboro, Georgia. The Company recorded impairment charges of approximately $ 7.6 million during the year ended December 31, 2024, for equipment that will no longer be needed in manufacturing following customer directed engineering changes to a part it manufactures and for other property, plant and equipment that have become obsolete following development of new and more efficient equipment. The impairment charges of $ 7.6 million during the year ended December 31, 2024 consist of $ 4.1 million impairment included in cost of revenue and $ 3.5 million included in impairment of equipment under development on the Company's consolidated statement of operations. The Company received reimbursement for the losses incurred in connection with the customer-directed engineering changes which was recorded as an offset to the impairment loss recognized in cost of revenue. There were no impairments of property, plant and equipment during the year ended December 31, 2023. (6) Accrued Expenses Accrued expenses consist of the following: December 31, 2024 2023 (In thousands) Employee compensation $ 19,371 $ 16,876 Other accrued expenses 17,124 5,935 Total $ 36,495 $ 22,811 100 (7) Debt On August 19, 2024, the Borrowers entered into the Credit Agreement, by and among the Borrowers, the Agent, the Lenders and the other parties party thereto as additional guarantors and/or borrowers from time to time. Loans borrowed under the MidCap Loan Facility mature on August 19, 2029. The MidCap Loan Facility is comprised of (i) the Term Loan Facility in an aggregate principal amount of $ 125 million and (ii) the Revolving Facility in an aggregate principal amount not to exceed the lesser of (A) $ 100 million and (B) the value of the borrowing base (defined as the sum of (x) 85 % of certain eligible accounts of the Borrowers and (y) the lesser of 85 % of the NOLV or 85 % of the cost of certain eligible inventory of the Borrowers). Loans borrowed under the Term Loan Facility will bear interest rate equal to Term SOFR (as defined in the Credit Agreement) for a one-month interest period plus 4.50 % per year, subject to a Term SOFR floor of 4.50 % and a Term SOFR cap of 7.50 %. The Term Loan Facility is subject to amortization of principal, payable quarterly on the last day of each quarter, commencing September 30, 2024, in an amount as set forth in the Credit Agreement with the remaining aggregate principal amount payable on the maturity date. The Borrowers are required to pay the Lenders an exit fee of $ 2.5 million on the maturity date. Additionally, the Borrowers are required to pay an origination fee of $ 1.3 million annually on the anniversary of the closing date. Loans borrowed under the Revolving Facility will bear an interest rate equal to Term SOFR plus 4.60 % per year, subject to a Term SOFR floor of 2.50 %. The Revolving Facility has a required minimum balance set at 30 % of the average borrowing base during the immediate preceding month. The Borrowers are required to pay the Lenders under the Revolving Facility an unused line fee of 0.30 % of the average unused availability under the Revolving Facility, subject to the aforementioned minimum balance. The MidCap Loan Facility is guaranteed by Aspen Mexico and is secured by a lien on substantially all existing and after-acquired assets of the Loan Parties, including the equity interest in Aspen RI, Aspen Mexico and Aspen Aerogels Georgia owned by the Company, in each case, subject to customary exceptions. Aspen Aerogels Georgia is not a guarantor (thus not a Loan Party) and its assets are excluded from the collateral under the MidCap Loan Facility, subject to its entrance into the DOE Loan Documents (as defined in the Credit Agreement) within one year from the closing date of the MidCap Loan Facility. To the extent the DOE Loan Documents will not be entered into within such one-year period, Aspen Aerogels Georgia will be obligated to become a Loan Party under the MidCap Loan Facility and pledge substantially all of its assets as security for the obligations thereunder. The Credit Agreement includes representations and warranties, affirmative covenants (including reporting obligations), negative covenants and events of default that are usual and customary for facilities of this type, in each case, subject to certain permitted exceptions as set forth therein. The Credit Agreement includes financial covenants for the benefit of the Lenders, including (i) a covenant to maintain Liquidity (as defined therein) equal to or greater than $ 75.0 million at all times and (ii) a covenant to maintain EBITDA (as defined therein) equal to or greater than the specified applicable amount set forth in the Credit Agreement, tested quarterly with the first test set at $ 45.0 million commencing with the fiscal quarter ended September 30, 2024. The Borrowers will have the right to prepay the loans outstanding under the MidCap Loan Facility (or, with respect to the Revolving Facility, terminate the commitments thereunder), subject to a premium equal to 3.0 % of the amount prepaid or terminated, as applicable, during the first year after the closing date, which premium will be decreased to 2.0 % during the second year after the closing date and to 1.0 % thereafter. The Borrowers will be required to mandatorily prepay the loans outstanding under the Term Loan Facility with, among other things, certain casualty insurance proceeds or proceeds from non-ordinary course assets sales (which will also be subject to the aforementioned premium). The Borrowers will be required to mandatorily prepay the balance outstanding under the Revolving Facility (i) if the outstandings exceed the borrowing base in an aggregate amount equal to that excess or (ii) upon a cash dominion event of all the funds deposited in the lockbox account during the cash dominion period. A cash dominion event is triggered (x) upon the occurrence of any Specified Event of Default (as defined in the Credit Agreement to include payment default, failure to deliver monthly or annual financials, financial covenant breach or bankruptcy) or any event of default arising from the failure to comply with the requirement to deliver a monthly borrowing base certificate, in each case, after any applicable grace period set forth in the Credit Agreement and/or cure rights applicable thereto or (y) if the Liquidity is less than $ 100 million. 101 MidCap debt consists of the following: December 31, 2024 (In thousands) Term loan 118,500 Exit fee 264 Term loan issuance costs ( 4,053 ) Total debt 114,711 Current portion 19,750 Long term portion 94,961 The Revolving Facility had an outstanding balance of $ 42.1 million as of December 31, 2024, net of unamortized issuance costs. The amount available to the Company at December 31, 2024 under the Revolving Facility was $ 16.7 million. (8) Convertible Note - Related Party 2022 Convertible Note On February 15, 2022, the Company entered into a note purchase agreement (the Note Purchase Agreement) with Wood River Capital LLC (Wood River), an entity affiliated with Koch Strategic Platforms, LLC (Koch), relating to the issuance and sale to Wood River of convertible note (the 2022 Convertible Note) in the aggregate principal amount of $ 100.0 million. The transactions contemplated by the Note Purchase Agreement closed on February 18, 2022. The maturity date of the 2022 Convertible Note is February 18, 2027 , subject to earlier conversion, redemption, or repurchase. The 2022 Convertible Note is a senior unsecured obligation of the Company and ranks equal in right of payment to all senior unsecured indebtedness of the Company and will rank senior in right of payment to any indebtedness that is contractually subordinated to the 2022 Convertible Note. On August 19, 2024, the Company entered into a note purchase and sale agreement with Wood River (the Note Repurchase Agreement), pursuant to which the Company repurchased from Wood River $ 123.9 million in aggregate capitalized principal amount (inclusive of PIK interest paid through June 30, 2024) of the 2022 Convertible Note, such aggregate amount being the entire outstanding amount of the 2022 Convertible Note, for a total purchase price of $ 150.0 million in cash, which amount equals to the Redemption Price (as defined in the 2022 Convertible Note). Pursuant to the Note Repurchase Agreement, all rights and obligations, covenants and agreements under the 2022 Convertible Note and the Note Purchase Agreement were satisfied and discharged. The Redemption Price less capitalized principal amount and accrued interest to redemption date, of $ 24.6 million along with unamortized deferred issuance costs was classified in the income statement as Loss on Extinguishment of Debt. In accordance with ASU 2020-06, the 2022 Convertible Note is accounted for as a single unit of account and consists of the following: December 31, 2023 (In thousands) Convertible note, principal $ 100,000 Payment in-kind 18,318 Discount on convertible note, net of accumulated amortization ( 3,209 ) Debt issuance costs, net of accumulated amortization ( 117 ) Convertible note $ 114,992 In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. The 2022 Convertible Note did not have current observable inputs such as recent trading prices (Level 3) and was measured at fair value using a combination of option pricing and discounted cash flow models and incorporate management’s assumptions for stock price, volatility and risk rate. 102 The Company estimated the fair value of the 2022 Convertible Note was approximately $ 118.2 million as of December 31, 2023. However, as the Company has not elected to utilize the fair value option, it was carried at amortized cost of $ 115.0 million. (9) Related Party Transactions Convertible Note During the year ended December 31, 2022, the Company issued the 2022 Convertible Note to Wood River, an entity affiliated with Koch Strategic Platforms, LLC. The Company repurchased the 2022 Convertible Note on August 19, 2024. See Note (8) Convertible Note – Related Party for additional detail. For the years ended December 31, 2024, 2023, and 2022 interest expense on the related party convertible note was $ 7.5 million, $ 5.3 million, and $ 5.1 million, respectively. Common Stock Sales On March 28, 2022, the Company sold 1,791,986 shares of common stock to Wood River at a purchase price equal to $ 27.902 per share, for aggregate gross proceeds of approximately $ 50.0 million. On November 28, 2022, the Company sold 10,526,316 shares of common stock to Wood River at a purchase price equal to $ 9.50 per share, for aggregate gross proceeds of approximately $ 100.0 million, in an underwritten offering of common stock. Other During the year ended December 31, 2022, the Company recorded costs of $ 8.9 million as a component of construction in progress in connection with the planned aerogel manufacturing facility in Statesboro, Georgia in fees from an entity affiliated with Koch Strategic Platforms, LLC for project management services. During the year ended December 31, 2022, the Company sold 135,870 shares of its common stock to Robert M. Gervis, a director of the Company at the time, in the Company’s at-the-market offering pursuant to a sales agreement, dated March 16, 2022, by and among the Company and Cowen and Company, LLC and Piper Sandler & Co. (the Sales Agreement), for net proceeds of $ 4.4 million. (10) Other Income (Expense) Interest income (expense), net For the years ended December 31, 2024, 2023, and 2022 interest income (expense), net, included interest income of $ 5.7 million, $ 8.7 million, and $ 1.7 million, respectively, primarily related to interest earned on unrestricted cash and cash equivalents. For the year ended December 31, 2024, interest income (expense), net included MidCap related interest on the term loan and revolver. Employee Retention Credits The CARES Act provides an employee retention credit (CARES Employee Retention Credit), which is a refundable tax credit against certain employment taxes of up to $ 5,000 per employee for eligible employers. The tax credit is equal to 50 % of qualified wages paid to employees during a quarter, capped at $ 10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021. Based on these additional provisions, the tax credit is now equal to 70 % of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $ 10,000 of qualified wages per quarter. The Company qualified for the tax credit under the CARES Act for qualified wages for the years ended December 31, 2020 and 2021. In September 2023, the Company submitted filings for CARES Employee Retention Credits totaling $ 2.2 million that are reported in the accompanying condensed consolidated balance sheet within prepaid expenses and other current assets as of December 31, 2023 and 2024, and in the accompanying statement of operations for the year ended December 31, 2023. (11) Leases & sale and leaseback The Company leases office, laboratory, warehouse and fabrication space in Massachusetts, Rhode Island and Monterrey, Mexico under operating leases. Under these agreements, the Company is obligated to pay annual rent, real estate taxes, and certain other operating expenses. The Company also leases equipment under operating leases. The Company’s operating leases expire at various dates through 2034 . 103 During 2016, the Company entered into an agreement to extend its lease of approximately 51,650 square feet of office space in Northborough, Massachusetts. The lease commenced on January 1, 2017 and will expire on December 31, 2031 . The annual base rent associated with the lease was $ 492,000 during 2024 and is increasing by approximately 3 % annually for the term of the lease. The lease also requires the payment by the Company of its pro rata share of real estate taxes and certain other expenses. Prior to the expiration of the lease, the Company will have the right to extend the lease for an additional term of five years . Under the terms of the lease extension, the landlord provided the Company with an allowance of $ 1.2 million to be utilized for improvements to the leased premises. These amounts were considered a lease incentive and were excluded from the Company’s ROU assets upon its adoption of ASU 2016-02 on January 1, 2019. At December 31, 2024 and 2023 , the Company had capitalized $ 1.2 million in associated leasehold improvement costs. The Company incurred operating lease costs of $ 5.9 million and $ 5.3 million during the years ended December 31, 2024 and 2023, respectively. Cash payments related to operating lease liabilities were $ 5.6 million and $ 4.9 million during the years ended December 31, 2024 and 2023, respectively. At December 31, 2024, the weighted average remaining lease term for operating leases was 7.6 years. At December 31, 2024, the weighted average discount rate for operating leases was 12.1 % . Maturities of operating lease liabilities at December 31, 2024 are as follows: Year Operating Leases (In thousands) 2025 6,185 2026 5,671 2027 4,764 2028 4,668 2029 4,217 Thereafter 15,179 Total lease payments 40,684 Less imputed interest ( 14,257 ) Total lease liabilities $ 26,427 As of December 31, 2024 , the Company had no additional operating real estate or equipment leases that would commence during 2025. Sale and leaseback transaction In January and September 2024 , the Company entered into sale and leaseback arrangements, pursuant to which the Company sold certain equipment to an equipment leasing company for one-time cash payments of $ 5.0 million and $ 10.0 million, respectively, leased back such equipment from the leasing company. The transactions were considered as failed sale and leaseback transactions and accordingly, were accounted as financing transactions. The Company did not recognize gain on any of the proceeds received from the lessor that contractually constitute payments to acquire the assets subject to these arrangements. Instead, the sale proceeds received were accounted for as finance obligations. The monthly lease rents will be paid over the term of three years and will be allocated between interest expense and principal repayment of the financial liability. The outstanding finance obligation balance as of December 31, 2024 was $ 14.1 million. Maturities of finance obligations for sale and leaseback at December 31, 2024 are as follows: Year Finance Obligation (In thousands) 2025 5,945 2026 5,945 2027 5,707 Total lease payments 17,597 Less imputed interest ( 3,482 ) Total lease liabilities $ 14,115 104 (12) Commitments and Contingencies Cloud Computing Agreement The Company is party to multiple cloud computing agreements that are service contracts for enterprise resource planning software and payroll services. The amortization period of a cloud computing agreement was adjusted during the year ended December 31, 2024 to align with implementation of a new agreement that will begin to amortize during 2025. The amortization associated with the payroll services agreement began during the year ended December 31, 2024 and will amortize over a period of five years . The capitalized implementation costs are classified on the consolidated balance sheets as follows: December 31, December 31, 2024 2023 (In thousands) Cloud computing costs included in other current assets $ 637 $ 420 Cloud computing costs included in other assets 4,299 1,590 Amortization of cloud computing costs ( 1,053 ) ( 662 ) Total capitalized cloud computing costs $ 3,883 $ 1,348 Thermal Barrier Contract The Company is party to production contracts with GM to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation EVs (Contracts). Pursuant to the Contracts, the Company is obligated to supply Barriers at fixed annual prices and at volumes to be specified by the OEM up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034. While the OEM has agreed to purchase its requirement for Barriers from the Company for locations to be designated from time to time by the OEM, it has no obligation to purchase any minimum quantity of Barriers under the Contracts. In addition, the OEM may terminate the Contracts any time and for any or no reason. All other terms of the Contracts are generally consistent with the OEM’s standard purchase terms, including quality and warranty provisions that are customary in the automotive industry. Charges for Engineering Change In January 2024, the Company was notified by a customer of an engineering change to one of the parts the Company manufactures for that customer to enable incremental productivity and support a set of broader system level changes that could drive higher demand for its parts. The Company submitted claims to the customer for reimbursement for estimated inventory and equipment losses incurred by the Company and its vendors due to potential obsolescence. In connection with the same, during the three months ended March 31, 2024, the Company recognized a charge of $ 6.8 million, net of contractual recoverable of $ 1.9 million, in cost of revenues for inventory obsolescence and impairment of equipment. The claims were fully approved and recovered by December 31, 2024, and the reimbursements were recognized as an offset to the charge the Company recognized in cost of revenues. Letters of Credit The Company has provided certain customers with letters of credit securing obligations under commercial contracts. As of December 31, 2024, the Company had $ 0.4 million of restricted cash to support our outstanding letters of credit. The Company had letters of credit outstanding of $ 0.2 million at December 31, 2023 and these letters of credit were secured by the Company’s restricted cash. Litigation The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. See Part I, Item 3 (“Legal Proceedings”) of this Annual Report on Form 10-K for a description of certain of the Company’s current legal proceedings. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure. 105 Purchase Commitments As of December 31, 2024, the Company had purchase commitments of approximately $ 243.3 million, which included capital commitments of $ 172.4 million. Purchase commitments related to capital expenditures are anticipated to be spent over the next three years , while the Company's remaining purchase commitments are anticipated to be spent throughout 2025. Purchase obligations relate primarily to open purchase orders for capital expenditures, inventories, and goods and services. Purchase obligations are entered into with various vendors in the normal course of business and are consistent with the Company's expected requirements. Warranty The Company offers warranties to its customers depending upon the specific product. The Company’s standard warranty period for energy industrial products extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. The Company’s thermal barrier products provide quality and warranty provisions customary in the automotive industry. The Company recorded warranty expense of $ 1.4 million during the year ended December 31, 2024 . The Company recorded warranty expense of $ 0.5 million during the year ended December 31, 2023 . The Company recorded warranty expense of $ 0.2 million during the year ended December 31, 2022 . (13) Stockholders’ Equity At December 31, 2024 and 2023 , the Company was authorized to issue 255,000,000 shares of stock, of which 250,000,000 shares were designated as common stock and 5,000,000 shares were designated as preferred stock. (14) Employee Benefit Plan The Company sponsors the Aspen Aerogels, Inc. 401(k) Plan. Under the terms of the plan, the Company’s employees may contribute a percentage of their pretax earnings. During the year ended December 31, 2024, 2023, and 2022, the Company provided matching contributions of $ 1.6 million, $ 1.5 million, and $ 1.2 million, respectively. (15) Employee Stock Ownership Plans Effective June 12, 2014, the Company adopted the 2014 Employee, Director and Consultant Equity Incentive Plan (the 2014 Equity Plan). Under the 2014 Equity Plan, the Company was authorized to grant incentive stock options (ISOs), non-qualified stock options (NSOs), restricted stock, restricted stock units (RSUs) and other stock-based awards. Stock options under the 2014 Equity Plan were granted with an exercise price not less than the fair market value of the Company’s common stock at the date of grant. The 2023 Equity Plan was approved by stockholders at the Company’s annual meeting of stockholders on June 1, 2023 as the successor to the 2014 Equity Plan, and no further awards may be made under the 2014 Equity Plan after that date. Under the 2023 Equity Plan, the Company may grant ISOs, NSOs, restricted stock, RSUs and other stock-based awards. Stock options under the 2023 Equity Plan are to be granted with an exercise price not less than the fair market value of the Company’s common stock at the date of grant. Equity awards granted to employees generally vest over a service period of three to four years . Restricted stock, RSUs and stock options granted to nonemployee directors generally vest over a one-year service period. As of December 31, 2024, 4,955,249 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the Company’s equity incentive plans. Any cancellations or forfeitures of awards outstanding under the 2023 Equity Plan or the 2014 Equity Plan will result in the shares reserved for issuance pursuant to such awards becoming available for grant under the 2023 Equity Plan. As of December 31, 2024, the Company has either reserved in connection with statutory tax withholdings or issued a total of 5,981,915 shares under the Company’s equity incentive plans. As of December 31, 2024, there were 2,184,830 shares of common stock available for future grant under the 2023 Equity Plan. During the year ended December 31, 2024, the Company granted 250,968 restricted common stock units (RSUs) with a grant date fair value of $ 4.1 million and non-qualified stock options (NSOs) to purchase 581,658 shares of common stock with a grant date 106 fair value of $ 6.5 million to employees under its equity incentive plans. The RSUs and NSOs granted to employees will vest over a three-year period from the applicable vesting commencement date. During the year ended December 31, 2024, the Company also granted 13,264 shares of restricted common stock with a grant date fair value of $ 0.4 million and NSOs to purchase 11,618 shares of common stock with a grant date fair value of $ 0.2 million to its non-employee directors under the 2023 Equity Plan. The restricted common stock and NSOs granted to non-employee directors vest upon the earlier of the date that is the one-year anniversary of the grant date or the day prior to the Company’s annual meeting of stockholders to be held in 2025. Stock-based compensation is included in cost of sales or operating expenses, as applicable, and consists of the following: Year Ended December 31, 2024 2023 2022 (In thousands) Cost of product revenue $ 773 $ 583 $ 931 Research and development expenses 1,140 799 1,166 Sales and marketing expenses 1,692 1,484 1,883 General and administrative expenses 9,250 8,088 5,405 Total stock-based compensation $ 12,855 $ 10,954 $ 9,385 Stock Options Valuation and Amortization Method The fair value of each stock option is estimated as of the date of grant using the Black-Scholes option-pricing model. Key inputs into this formula included expected term, expected volatility, expected dividend yield and the risk-free rate. Each assumption is set forth and discussed below. The Company used a Monte-Carlo Simulation model to estimate the original grant date fair value of the CEO Options as well as the subsequent modifications. The simulation model was based on the Black-Scholes option-pricing model and a number of complex assumptions including (i) whether the vesting condition is satisfied within the time-vesting periods, and (ii) the date the common stock price target is met per the terms of the agreement. For stock options with a service condition, the fair value is amortized on a straight-line basis over the requisite service period of the options, which is generally a three-year vesting period from the date of grant. Expected Term The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. Accordingly, the Company uses the simplified method to calculate the expected term for options granted. Expected Volatility In 2024, 2023 and 2022 , the Company used its historical volatility as a basis to estimate expected volatility in the valuation of stock options. Expected Dividend The Company uses an expected dividend yield of zero . The Company does not intend to pay cash dividends on its common stock in the foreseeable future, nor has it paid dividends on its common stock in the past. Risk-free Interest Rate The Company uses a risk-free interest rate based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. Estimated Forfeitures The Company records the impact of forfeitures of service-based awards under the provisions of ASU 2016-09 at the time an award is forfeited. 107 Assumptions Utilized The following information relates to the fair value of the option awards estimated by use of the Black-Scholes option-pricing model: Year Ended December 31, 2024 2023 2022 Weighted average assumptions: Expected term (in years) 5.99 6.12 5.97 Expected volatility 75.04 % 70.04 % 61.85 % Risk free rate 4.11 % 4.08 % 2.13 % Expected dividend yield 0.00 % 0.00 % 0.00 % Weighted average fair value: Grant-date fair value of options granted $ 11.36 $ 4.91 $ 14.20 Grant-date fair value of options vested $ 7.59 $ 9.63 $ 5.06 Aggregate intrinsic value of options exercised $ 22,805,464 $ 1,652,567 $ 1,306,245 Outstanding Options The following table summarizes information about stock options outstanding: Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value ($ in thousands, except share and per share data) Options outstanding at December 31, 2023 5,234,194 $ 7.12 $ 11.37 5.26 $ 16,486,864 Granted 593,276 $ 11.36 $ 16.59 Forfeited ( 129,528 ) $ 7.29 $ 11.64 Expired ( 34,581 ) $ 32.86 $ 36.71 Exercised ( 1,268,742 ) $ 4.41 $ 8.44 $ 22,805,464 Options outstanding at December 31, 2024 4,394,619 $ 6.00 $ 9.88 6.56 $ 18,259,582 Exercisable at December 31, 2024 2,301,178 $ 5.03 $ 9.18 6.56 $ 11,644,479 Expected to vest at December 31, 2024 2,093,441 $ 7.06 $ 10.66 1.77 $ 6,615,103 As of December 31, 2024, total unrecognized compensation cost related to non-vested service-based options granted under the Company’s equity incentive plans was $ 9.0 million. The unrecognized compensation cost for the service-based options is expected to be recognized over a weighted average period of 1.77 years. Restricted Stock Awards and Restricted Stock Units The Company values restricted stock awards and RSUs based on the closing price of our shares on the date of grant. RSUs have time-based vesting conditions and typically vest over three or four years . Restricted stock awards issued to nonemployee directors generally vest in full one year from the date of grant. The following table provides detail of grants, vesting, and forfeitures of RSUs during 2024: Restricted Stock Units Weighted Average Grant Date Fair Value Balance at December 31, 2023 574,247 $ 11.38 Granted 250,968 16.36 Vested ( 209,166 ) 12.99 Forfeited ( 55,419 ) 11.94 Balance at December 31, 2024 560,630 $ 12.95 108 Restricted stock awards granted during 2024 are considered issued and outstanding common stock and are excluded from the table above. As of December 31, 2024, there were 13,264 shares of restricted stock outstanding which were granted to nonemployee directors. The total intrinsic value of restricted stock and RSUs that vested in 2024 and 2023 was $ 3.7 million and $ 1.3 million, respectively. As of December 31, 2024, 573,894 of the total shares of restricted stock and RSUs outstanding will vest upon the fulfillment of service conditions. As of December 31, 2024, total unrecognized compensation cost related to restricted stock awards issued to nonemployee directors of $ 0.2 million, and RSUs of $ 4.5 million is expected to be recognized over a weighted average period of 0.44 years and 1.81 years respectively. During the year ended December 31, 2021, the Company awarded 461,616 shares of restricted common stock to its Chief Executive Officer with vesting subject to the achievement of certain volume weighted average common stock price targets, over a three -to- five year period. The Company valued the shares using a Monte-Carlo simulation model to estimate the grant date fair value utilizing an expected volatility of 59.3 % and a risk free rate of 0.89 %. On June 2, 2022, the Company issued 53,590 shares of restricted common stock, pursuant to a performance-based restricted stock agreement, to each of certain employees, with vesting in tranches, subject to achievement of certain time and performance vesting conditions, as defined, over a three -to- five year period. The Company used a Monte-Carlo simulation model to estimate the grant date fair value utilizing an expected volatility of 63.4 % and a risk free rate of 2.92 %. On March 5, 2024, the Compensation and Leadership Development Committee (the Committee) of the Board of Directors of the Company approved the cancellation of the outstanding, unearned portion of the performance-based restricted shares granted to certain employees pursuant to the 2014 Equity Plan on June 29, 2021 (to Chief Executive Officer) and June 2, 2022 (to certain other employees). The Committee determined that based on current market conditions, the likelihood of achievement of any of the remaining performance hurdles applicable to the unearned restricted shares is remote, and that the unearned restricted shares therefore had ceased to have incentive value for the grantees. On March 6, 2024, the Company entered into cancellation agreements, pursuant to which the applicable employees agreed to such cancellation. The cancelled unearned restricted shares were added to the number of shares available for awards under the Company’s 2023 Equity Incentive Plan. For financial accounting purposes, the cancellation of the unearned restricted shares resulted in the immediate charge of approximately $ 2.2 million of unamortized stock compensation costs of which $ 2.0 million is included in the general and administrative expenses and $ 0.2 million is included in research and development expenses in the accompanying consolidated statement of operations. (16) Net Income (Loss) Per Share The computation of basic and diluted net income (loss) per share consists of the following: Year ended December 31, 2024 2023 2022 (In thousands, except share and per share data) Numerator: Net income (loss) $ 13,375 $ ( 45,811 ) $ ( 82,738 ) Denominator: Weighted average shares outstanding, basic 77,535,121 69,439,034 39,363,114 Weighted average shares outstanding, diluted 80,306,690 69,439,034 39,363,114 Net income (loss) per share, basic $ 0.17 $ ( 0.66 ) $ ( 2.10 ) Net income (loss) per share, diluted $ 0.17 $ ( 0.66 ) $ ( 2.10 ) 109 Potentially dilutive common shares that were excluded from the computation of diluted net loss per share because they were anti-dilutive consist of the following: Year ended December 31, 2024 2023 2022 Common stock options 141,134 5,234,194 3,904,080 Restricted common stock units 2,979 574,247 257,075 Restricted common stock awards 218 881,674 23,886 Convertible note, if converted — 3,951,833 3,601,533 Total 144,331 10,641,948 7,786,574 The potential dilutive shares from common stock options, restricted common stock units, restricted common stock awards, and the convertible note were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive for the periods presented. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse. (17) Income Taxes The Company incurred net operating income for the year ended December 31, 2024 and net operating loss for the years ended December 31, 2023 and 2022. The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all prior periods. Accordingly, t he Company has not recorded a provision for federal or state income taxes. The Company recorded income tax expense of $ 1.7 million for the year ended December 31, 2024 associated with its Mexican maquiladora operations. There was no respective income tax for the years ended December 31, 2023 and 2022. The reconciliation between the U.S. statutory income tax rate and the Company’s effective rate consists of the following: Year Ended December 31, 2024 2023 2022 U.S. federal income tax statutory rate 21 % 21 % 21 % Permanent differences 12 % — % 1 % State tax, net of federal benefit 3 % 7 % 5 % Changes in valuation allowance for deferred tax assets 9 % ( 17 )% ( 27 )% Stock-based compensation ( 29 )% ( 7 )% — % Research credits ( 8 )% — % — % Other ( 5 )% 2 % — % State rate change ( 3 )% ( 6 )% — % Foreign 11 % — % — % Effective tax rate 11 % — — 110 The tax effects of temporary differences between financial statement and tax accounting that gave rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are presented below: December 31, 2024 2023 (In thousands) Deferred tax assets: Net operating loss carryforwards $ 71,026 $ 82,563 Stock-based compensation 4,197 3,076 Operating lease liabilities 6,732 5,997 Capitalized research and development 12,250 6,320 Tax credit carryforwards 6,358 4,261 Reserves and accruals 7,491 6,180 Interest expense limitation 6,354 929 Total gross deferred tax assets 114,408 109,326 Deferred tax liabilities: Depreciation ( 2,715 ) ( 1,125 ) Operating lease right-of-use assets ( 5,061 ) ( 4,340 ) Total deferred tax liabilities ( 7,776 ) ( 5,465 ) Total deferred tax assets and liabilities 106,632 103,861 Valuation allowance ( 106,632 ) ( 103,861 ) Net deferred tax asset $ — $ — The net change in the valuation allowance for the year ended December 31, 2024 , was an increase of $ 2.8 million. The Company has recorded a full valuation allowance against its deferred tax assets due to the uncertainty associated with the utilization of the net operating loss carryforwards and other future deductible items. In assessing the realizability of deferred tax assets, the Company considers all available evidence, historical and prospective, with greater weight given to historical evidence, in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the Company’s deferred tax assets generally is dependent upon generation of future taxable income. At December 31, 2024 , the Company had $ 315.3 million of net operating losses available to offset future federal income, if any, of which $ 156.3 million expire on various dates through December 31, 2037 . Net operating losses of $ 159.0 million generated from 2018 through 2023 have an unlimited carryforward . At December 31, 2024 , the Company had $ 117.2 million of apportioned net operating losses available to offset future state taxable income, if any, and which begin to expire at various dates between 2025 and 2043 . For each of the years ended December 31, 2024, 2023 and 2022 , the Company did no t have any material unrecognized tax benefits and thus no interest and penalties related to unrecognized tax benefits were recorded. In addition, the Company does no t expect that the amount of unrecognized tax benefits will change significantly within the next twelve months. The Company files a federal income tax return in the United States and income tax returns in various state and foreign jurisdictions. All tax years are open for examination by the taxing authorities for both federal and state purposes. The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (R&D) expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during 2022. Capitalized R&D costs were $ 66.3 million as of December 31, 2024 . The Company will amortize these costs for tax purposes over 5 years for R&D performed in the U.S. and over 15 years for R&D performed outside the U.S. In 2024 , all R&D was performed in the U.S. (18) Segment Information Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire 111 Company. The Company reports two segments: Energy Industrial and Thermal Barrier. We evaluate segment performance based on the segment profit (loss) before corporate expenses. Summarized below are the Revenue, Cost of Goods Sold, and Segment Operating Profit for each reporting segment: Year Ended Year Ended Revenue Cost of Goods Sold December 31 December 31 2024 2023 2022 2024 2023 2022 (In thousands) Energy industrial $ 145,867 $ 128,639 $ 124,807 $ 87,425 $ 94,477 $ 105,963 Thermal barrier 306,832 110,079 55,557 182,377 87,320 69,425 Total $ 452,699 $ 238,718 $ 180,364 $ 269,802 $ 181,797 $ 175,388 Year Ended Segment Operating Profit (Loss) December 31 2024 2023 2022 (In thousands) Energy industrial $ 58,442 $ 34,162 $ 18,844 Thermal barrier 124,455 22,759 ( 13,868 ) Total $ 182,897 $ 56,921 $ 4,976 Corporate expenses 128,362 106,124 84,221 Operating profit (loss) 54,535 ( 49,203 ) ( 79,245 ) Other (expense) income, net ( 39,446 ) 3,392 ( 3,493 ) Income tax expense ( 1,714 ) - - Net income (loss) $ 13,375 $ ( 45,811 ) $ ( 82,738 ) Year Ended Depreciation Expense December 31, 2024 2023 2022 (In thousands) Energy industrial $ 11,685 $ 10,720 $ 8,476 Thermal barrier 10,841 4,598 746 Consolidated depreciation expense $ 22,526 $ 15,318 $ 9,222 Total Assets December 31, 2024 2023 (In thousands) Energy industrial $ 103,453 $ 93,168 Thermal barrier 159,934 118,565 Total assets of reportable segments 263,387 211,733 Construction in progress 352,545 314,678 All other corporate assets 279,212 176,637 $ 895,144 $ 703,048 112 Information about the Company’s total revenues, based on shipment destination or services location, is presented in the following table: Year Ended December 31, 2024 2023 2021 ($ in thousands) Revenue: U.S. $ 258,518 $ 151,037 $ 113,968 International 194,181 87,681 66,396 Total $ 452,699 $ 238,718 $ 180,364 (19) Subsequent Events The Company has evaluated subsequent events through February 27, 2025, the date of issuance of the consolidated financial statements for the year ended December 31, 2024. In February 2025, the Company decided to cease construction at its previously planned second manufacturing plant in Statesboro, Georgia and demobilize the site. The Company is in the process of assessing options to derive value from the assets, including potentially relocating certain equipment to improve and expand its existing manufacturing facility in East Providence. In connection with the demobilization, the Company is no longer pursuing its application for a loan from the Department of Energy’s Loan Programs Office and has withdrawn from the loan application process. The Company will assess the impact of the demobilization on the $ 332.4 million capitalized construction and interest costs. If necessary, the Company will adjust the capitalized value to its salvage value in accordance with U.S. GAAP. The Company may incur additional costs associated with the demobilization of the site. Further, the Company expects to write off deferred financing costs of $ 6.1 million incurred in connection with pursuing financing for the construction of the plant. 113 Schedule II VALUATION AND QUALIFYING ACCOUNTS (in thousands) Description Balance at Beginning of Year Charges to Costs and Expenses (a) Recoveries of Costs and Expenses (b) Deductions to Allowances for Uncollectible Accounts (c) Charges to (Deductions from) Other Accounts (d) Balance at End of Year Year Ended December 31, 2024: Allowances for uncollectible accounts and sales returns and allowances $ 230 247 — — 788 $ 1,265 Year Ended December 31, 2023: Allowances for uncollectible accounts and sales returns and allowances $ 255 ( 93 ) — — 68 $ 230 Year Ended December 31, 2022: Allowances for uncollectible accounts and sales returns and allowances $ 150 115 — — ( 10 ) $ 255 (a) Represents allowances for uncollectible accounts established through general and administrative expenses. (b) Represents recoveries of allowances for uncollectible accounts established through general and administrative expenses. (c) Represents actual write-offs of uncollectible accounts. (d) Represents net change in allowances for sales returns, recorded as contra-revenue. 114 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.