What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 216 added, 101 removed, 327 unchanged (49% of the section changed)

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In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including Part I Item 1 “Financial Statements,” which includes our financial statements and related notes, and under the sections titled “Risk Factors” in Item 1A of the Annual Report and this Quarterly Report on Form 10-Q.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including Part I, Item 1 “Financial Statements,” which includes our financial statements and related notes, and under the sections titled “Risk Factors” in Item 1A of the Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and this Quarterly Report on Form 10-Q.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.

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We also derive revenue from a number of other end markets.

Customers in these markets have used our products for applications such as military aircrafts, trains, and buses.

Customers in these markets have used our products for applications such as military aircraft, trains, and buses.

We believe we will have additional opportunities to address high-value applications in the global insulation market, as well as in adjacent market opportunities such as energy storage applications, including battery energy storage systems, electrification applications, and other potential adjacent applications subject to their commercial potential, the differentiation of our products, and the ability to leverage our existing manufacturing platform.

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We manage the capacity of our East Providence facility on an ongoing basis in order to meet expected demand for our aerogel products.

We also utilize a flexible supply strategy, including, but not limited to, use of our external manufacturing facility in China, which currently support our Energy Industrial segment.

We also utilize a flexible supply strategy, including, but not limited to, use of our external manufacturing facility in China, which currently supports our Energy Industrial segment.

We are working closely with our external manufacturing facility as we seek to expand its capabilities to support our Energy Industrial and Thermal Barrier segments and to enhance short- and long-term supply flexibility.

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On April 8, 2026, an explosion occurred at our manufacturing facility in East Providence, Rhode Island.

The incident related to a high temperature oven and resulted in damage to a portion of the facility’s production space and temporary cessation of operations.

As of May 8, 2026, the facility remains offline.

We continue to work with the relevant authorities to execute a plan to resume operations, which restart is dependent on the continued progress of mechanical, operational and safety reviews and our work with local and state agencies.

To date, we believe we have mitigated any significant commercial impact of the disruption by working through inventory and by leveraging the capacity of our external manufacturing facility.

However, our ability to continue to mitigate the impacts of the disruption assume that the staged restart of our East Providence manufacturing facility proceeds as we currently expect, and that we are able to continue to meet customer demand for our products through a combination of restored production in East Providence, production at our external manufacturing facility and other efforts to mitigate the impact of the disruptions.

The incident related to a high temperature oven and resulted in damage to a portion of the facility’s production space and the temporary cessation of operations (the April 2026 Incident).

On May 14, 2026, we initiated a staged restart of the facility and we are proceeding with a phased ramp-up of production.

To date, we believe we have mitigated any significant commercial impact of the disruption by working through existing inventory, leveraging the capacity of our external manufacturing facility, and resuming limited production at our East Providence facility.

However, our ability to continue to mitigate the impacts of the disruption assumes that the staged restart of our East Providence manufacturing facility proceeds as we currently expect, and that we are able to continue to meet customer demand for our products through a combination of restored production in East Providence, production at our external manufacturing facility, and other efforts to mitigate the impact of the disruptions.

If we are unable to resume normal operations at our manufacturing facility in East Providence in a timely manner or manufacture the full array of our products, it may impact our ability to meet customer demand, which could have a material adverse impact on our business, results of operations and financial condition.

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Financial Summary

Our revenue for the three months ended March 31, 2026 was $37.9 million, which represented a decrease of $40.8 million, or 52%, from $78.7 million of revenue for the three months ended March 31, 2025.

Net loss for the three months ended March 31, 2026 was $23.7 million and net loss per share was $0.29.

Net loss for the three months ended March 31, 2025 was $301.2 million and net loss per share was $3.67.

Revenue for the three months ended March 31, 2026 includes $3.5 million of revenue from a settlement agreement with a customer for $37.6 million for a claim for certain losses incurred arising from lower forecasted long-term demand by the customer which is being deferred and recognized as revenue over a period of approximately two years.

Our revenue for the six months ended June 30, 2026 was $87.7 million, which represented a decrease of $69.0 million, or 44%, from $156.7 million of revenue for the six months ended June 30, 2025.

Net loss for the six months ended June 30, 2026 was $47.0 million and net loss per share was $0.57.

Net loss for the six months ended June 30, 2025 was $310.3 million and net loss per share was $3.78.

Revenue for the six months ended June 30, 2026 includes $8.4 million of revenue from a settlement agreement with a customer for $37.6 million for a claim for certain losses incurred arising from lower forecasted long-term demand by the customer which is being deferred and recognized as revenue over a period of approximately two years from the settlement date.

Key Metrics and Non-GAAP Financial Measures

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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.

These excluded items include costs related to the East Providence Incidents, including expedited freight, professional fees, and the incremental cost of temporarily sourcing certain Energy Industrial products from our external manufacturing facility until the East Providence facility returns to full production capacity.

Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with U.S.

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Three Months Ended

Six Months Ended

(In thousands)

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Stock-based compensation (1)

Other expense

Income tax (benefit) expense

Other (income) expense, net (2)

Income tax expense

Restructuring and demobilization costs

Impairment of property, plant and equipment

Insurance recovery receivable (3)

Loss on property damage

East Providence incident-related costs (4)

Adjusted EBITDA

(1) Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, restricted stock units (RSUs) and restricted common stock, and cash settled RSUs.

(2) Other (income) expense, net in the accompanying condensed consolidated statement of operations includes an $8.9 million insurance recovery receivable recognized in connection with the April 2026 Incident.

For purposes of calculating Adjusted EBITDA, this amount has been presented separately to enhance comparability between periods.

(3) Represents an $8.9 million insurance recovery receivable recognized in connection with the April 2026 Incident.

This amount is included within Other (income) expense, net in the accompanying condensed consolidated statement of operations and fully offsets the loss on property damage recognized during the period.

(4) Represents items management believes are not indicative of ongoing operating performance related to the East Providence Incidents, including expedited freight and professional fees.

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, and the amount and timing of capital and operating expenses.

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Our supply agreements generally include pricing step-down provisions over the production life of a program, consistent with industry practice.

We expect thermal barrier revenues to continue to decline in 2026 compared to 2025, primarily due to lower anticipated production volumes.

We expect thermal barrier revenues for full year 2026 to decline compared to 2025, primarily due to lower anticipated production volumes.

In addition, we have experienced operational disruptions at our manufacturing facility in East Providence, Rhode Island in 2026, which have adversely impacted our manufacturing capacity and are expected to increase near-term costs.

In January 2026, there was a fire at our manufacturing facility in East Providence, Rhode Island.

The January 2026 fire damaged one of our emissions control units and rendered it inoperable.

Subsequently, on April 8, 2026, an explosion occurred at our manufacturing facility in East Providence, Rhode Island.

The incident related to a high temperature oven and resulted in damage to a portion of the facility’s production space and temporary cessation of operations.

As of May 8, 2026, the facility remains offline.

To date, we believe we have mitigated any significant commercial impact of the disruption by working through inventory and by leveraging the capacity of our external manufacturing facility.

In January 2026, there was a fire at our manufacturing facility in East Providence, Rhode Island (the January 2026 Incident).

The January 2026 Incident damaged one of our emissions control units and rendered it inoperable.

Subsequently, on April 8, 2026, an explosion occurred at our manufacturing facility in East Providence, Rhode Island (the April 2026 Incident, and together with the January 2026 Incident, the “East Providence Incidents”).

The incident related to a high temperature oven and resulted in damage to a portion of the facility’s production space and the temporary cessation of operations.

On May 14, 2026, we initiated a staged restart of the facility and we are proceeding with a phased ramp-up of production.

production at our East Providence facility.

However, our ability to continue to mitigate the impacts of the disruption assumes that the staged restart of our East Providence manufacturing facility proceeds as we currently expect, and that we are able to continue to meet customer demand for our products through a combination of restored production in East Providence, production at our external manufacturing facility and other efforts to mitigate the impact of the disruptions.

Even if we are successful in our mitigation efforts, if we experience increased customer demand, we may be unable to produce sufficient product to meet such increased customer demand, which could have a material adverse impact on our business, results of operations and financial condition.

These efforts to mitigate the disruption at our East Providence manufacturing facility and expand the external manufacturing facility’s capabilities, including expedited freight and expedited repair costs related to our East Providence manufacturing facility, are expected to result in increased costs of revenue and increased general and administrative expenses during 2026.

These efforts to mitigate the disruption from the East Providence Incidents and expand the external manufacturing facility’s capabilities, including expedited freight and expedited repair costs related to our East Providence manufacturing facility, are expected to result in increased costs of revenue and increased general and administrative expenses during 2026.

We expect energy industrial revenue to increase in 2026, driven by anticipated volume growth in our core petrochemical and refinery markets, project-based demand, and continued penetration into adjacent applications.

We expect Adjusted EBITDA to decline in 2026 primarily due to lower thermal barrier revenue, as well as the increased costs of revenue and increased general and administrative expenses during 2026 related to the supply disruptions and mitigation efforts resulting from the operational disruptions at our East Providence manufacturing facility.

We expect Adjusted EBITDA to decline in 2026 primarily due to lower thermal barrier revenue, as well as the increased costs of revenue.

However, we expect net loss to improve relative to 2025, as the impairment recorded for the previously planned second plant in Statesboro, Georgia (the Statesboro Plant) is not expected to recur.

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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.

During 2026, we expect to incur increased costs of revenue due to the supply disruptions and mitigation efforts resulting from the operational disruptions at our East Providence manufacturing facility.

During 2026, we expect to incur increased costs of revenue primarily due to the supply disruptions and mitigation efforts resulting from the operational disruptions from the East Providence Incidents.

Manufacturing expense is also a significant component of cost of revenue.

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Accordingly, we expect our gross profit to vary significantly in absolute dollars and as a percentage of revenue from period to period.

During 2026, we expect gross profit to decline in absolute dollars and as a percentage of revenue due to expected decreases in total revenue and production volumes.

During 2026, we expect gross profit to decline in absolute dollars and as a percentage of revenue due to expected decreases in total revenue and production volumes and the inclusion of certain related costs associated with the East Providence Incidents in cost of revenue.

Operating Expenses

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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.

During 2026, while we expect to continue our ongoing cost reduction measures, we expect our general and administrative expenses to increase due to the impact of supply disruptions and mitigation efforts resulting from the operational disruptions at our East Providence manufacturing facility.

We expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part I, Item 3 of our Annual Report and “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q, if protracted, could result in significant legal expense over the medium to long-term.

Restructuring and Demobilization Costs

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During the fiscal year ended December 31, 2025, impairment of property, plant and equipment consists of impairment incurred on our previously planned Statesboro Plant and impairment of other property, plant and equipment in connection with a restructuring action.

Loss on property damage

Reflects the write-off of the net book value of property, plant and equipment damaged in the April 2026 Incident during the three months ended June 30, 2026.

Interest Expense, net

Interest expense, net consists of interest expense and amortization or write-off of deferred financing costs related to our other financing arrangements including our Amended MidCap Loan Facility (as defined below), 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.

Interest expense, net consists of interest expense and amortization related to our other financing arrangements including our Amended MidCap Loan Facility (as defined below), 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.

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 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.

federal 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 provisions for state income taxes and our Mexican maquiladora operations.

Results of Operations

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Three months ended June 30, 2026 compared to the three months ended June 30, 2025

The following tables set forth a comparison of the components of our results of operations for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

(In thousands)

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Total revenue

Total revenue decreased $40.8 million, or 52%, to $37.9 million for the three months ended March 31, 2026 from $78.7 million in the comparable period in 2025.

Total revenue decreased $28.2 million, or 36%, to $49.8 million for the three months ended June 30, 2026 from $78.0 million in the comparable period in 2025.

The decrease in total revenue was the result of decreases in thermal barrier revenue and energy industrial revenue.

Energy industrial revenue decreased by $8.2 million, or 28%, to $21.6 million for the three months ended March 31, 2026 from $29.8 million in the comparable period in 2025.

This decrease was driven by a decrease in revenue from the global petrochemical and refinery markets of North America, Asia and Latin America, and project-based demand in the subsea market, offset in part by an increase in revenue from the global petrochemical and refinery market of Europe.

Energy industrial revenue for the three months ended March 31, 2026 included $4.7 million and $3.6 million from two North American distributors, in comparison to $2.5 million and $10.7 million for the comparable period of 2025.

The average selling price per square foot of our energy industrial products decreased by 5% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Energy industrial revenue decreased by $2.4 million, or 11%, to $20.4 million for the three months ended June 30, 2026 from $22.8 million in the comparable period in 2025.

This decrease was driven by a decrease in revenue from the global petrochemical and refinery markets of Asia, Europe, and Latin America, offset in part by an increase in revenue from the global petrochemical and refinery market of North America.

Energy industrial revenue for the three months ended June 30, 2026 included $5.5 million and $4.6 million from two North American distributors, in comparison to $2.6 million and $1.7 million for the comparable period of 2025.

The average selling price per square foot of our energy industrial products decreased by 6% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

The decrease in average selling price reflected a change in the mix of products sold.

This decrease in average selling price had the effect of decreasing product revenue by $1.1 million for the three months ended March 31, 2026 from the comparable period in 2025.

In volume terms, energy industrial product shipments decreased by 24% as measured by square feet of our energy industrial products shipped for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

The decrease in volume had the effect of decreasing product revenue by $7.1 million for the three months ended March 31, 2026 from the comparable period in 2025.

Thermal barrier revenue decreased by $32.6 million, or 67%, to $16.3 million for the three months ended March 31, 2026 from $48.9 million in the comparable period in 2025.

During the three months ended March 31, 2026 and 2025, thermal barrier revenue included $11.2 million and $47.4 million, respectively, from a major U.S.

This decrease in average selling price had the effect of decreasing product revenue by $1.3 million for the three months ended June 30, 2026 from the comparable period in 2025.

In volume terms, energy industrial product shipments decreased by 5% as measured by square feet of our energy industrial products shipped for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

The decrease in volume had the effect of decreasing product revenue by $1.1 million for the three months ended June 30, 2026 from the comparable period in 2025.

Thermal barrier revenue decreased by $25.8 million, or 47%, to $29.4 million for the three months ended June 30, 2026 from $55.2 million in the comparable period in 2025.

During the three months ended June 30, 2026 and 2025, thermal barrier revenue included $23.7 million and $53.8 million, respectively, from a major U.S.

automotive OEM.

The decrease in thermal barrier revenue

was driven by a reduction in the volume of parts ordered by our OEM customer and a lower contractual component price during the period compared to the same period in the prior year.

Thermal barrier revenue for the three months ended June 30, 2026 includes $4.9 million of revenue from a settlement agreement with a customer for $37.6 million for a claim for certain losses incurred arising from lower forecasted long-term demand by the customer which is being deferred and recognized as revenue over a period of approximately two years from the settlement date.

Cost of Revenue

Three Months Ended June 30,

(In thousands)

Cost of revenue:

Energy industrial

Thermal barrier

Total cost of revenue

Total cost of revenue decreased $6.1 million, or 12%, to $46.6 million for the three months ended June 30, 2026 from $52.7 million in the comparable period in 2025.

The decrease in total cost of revenue was the result of a decrease in thermal barrier cost of revenue offset by an increase in energy industrial cost of revenue.

Energy industrial cost of revenue increased $2.0 million, or 14%, to $16.5 million for the three months ended June 30, 2026 from $14.5 million in the comparable period in 2025.

The $2.0 million increase resulted from an increase of $8.1 million in manufacturing costs, unabsorbed overheads, and other operating costs, partially offset by a decrease of $6.1 million in material costs.

Thermal barrier cost of revenue decreased $8.1 million, or 21%, to $30.1 million for the three months ended June 30, 2026 from $38.2 million in the comparable period in 2025.

The $8.1 million decrease was the result of a decrease of $15.4 million in manufacturing costs and a decrease of $5.0 million in material costs partially offset by an increase of $7.0 million in costs due to the plant shut-down, and $5.3 million in costs related to the East Providence Incidents.

Material costs decreased primarily due to lower volume.

Manufacturing costs decreased due to lower volumes, benefits from the headcount reduction and other cost cutting efforts.

Three Months Ended June 30,

(In thousands)

Gross profit:

Energy industrial

Thermal barrier

Total gross profit

Total gross profit decreased by $22.0 million, or 87%, to $3.3 million in gross profit for the three months ended June 30, 2026 from $25.3 million in the comparable period in 2025.

The decrease in gross profit was the result of the $28.2 million decrease in total revenue and the inclusion of certain related costs associated with the East Providence Incidents in cost of revenue.

Research and Development Expenses

Three Months Ended June 30,

(In thousands)

Research and development expenses

Research and development expenses decreased by $0.6 million, or 16%, to $3.2 million for the three months ended June 30, 2026 from $3.8 million in the comparable period in 2025.

The $0.6 million decrease reflects a decrease in operating material and supplies of $0.3 million, decreases in compensation and related costs of $0.2 million, driven by a headcount reduction, and a decrease in other expenditures of $0.1 million.

Research and development expenses as a percentage of total revenue increased to 6% of total revenue for the three months ended June 30, 2026 from 5% in the comparable period in 2025.

Sales and Marketing Expenses

Three Months Ended June 30,

(In thousands)

Sales and marketing expenses

Sales and marketing expenses increased by less than $0.1 million, or 0%, to $7.0 million for the three months ended June 30, 2026 from $6.9 million in the comparable period in 2025.

The less than $0.1 million increase primarily reflects increases in compensation and related costs.

Sales and marketing expenses as a percentage of total revenue increased to 14% of total revenue for the three months ended June 30, 2026 from 9% in the comparable period in 2025.

General and Administrative Expenses

Three Months Ended June 30,

(In thousands)

General and administrative expenses

General and administrative expenses decreased by $0.8 million, or 6%, to $13.0 million for the three months ended June 30, 2026 from $13.8 million in the comparable period in 2025.

The $0.8 million decrease was primarily the result of a decrease in insurance fees of $0.8 million.

General and administrative expenses as a percentage of total revenue increased to 26% for the three months ended June 30, 2026 from 18% in the comparable period in 2025.

Restructuring and Demobilization Costs

During the three months ended March 31, 2026, we began implementing a restructuring plan to consolidate the operations of the automated fabrication facility in Mexico to improve costs.

The plan included reducing our headcount in Mexico and consolidating facilities.

In connection with the restructuring, we incurred $0.4 million of severance costs for headcount reduction.

During the three months ended June 30, 2026 we did not incur restructuring and demobilization costs.

In February 2025, we announced and began implementing a restructuring plan to realign our operational focus to improve costs and align capital expenditure to anticipated long-term demand.

The plan included reducing our headcount and ceasing construction of our previously planned Statesboro Plant.

Restructuring and demobilization costs include severance and other personnel costs of $3.1 million and facility closures and other costs associated with demobilization of $1.8 million for the three months ended June 30, 2025.

Impairment of property, plant and equipment

Impairment of property, plant and equipment costs for the three months ended June 30, 2025 of less than $1.0 million was due to impairment incurred on research and development equipment.

Loss on property damage

On April 8, 2026, an explosion occurred at our manufacturing facility in East Providence, Rhode Island.

The incident related to a high temperature oven and resulted in damage to a portion of the facility’s production space and the temporary cessation of operations.

On May 14, 2026, we initiated a staged restart of the facility.

During the three months ended June 30, 2026, we incurred an $8.9 million loss on property damage associated with the April 2026 Incident.

Other Income (Expense), net

Three Months Ended June 30,

(In thousands)

Other income (expense):

Interest expense, net

Total other income (expense), net

The $0.3 million decrease in interest expense, net for the three months ended June 30, 2026 is primarily due to the result of a decrease in interest income of $0.4 million.

During the three months ended June 30, 2026, we recorded a receivable for estimated insurance recoveries of $8.9 million within other income related to property damage resulting from the April 2026 Incident.

The receivable reflects management's estimate of probable insurance recoveries associated with the net book value of damaged property, plant and equipment.

Income Tax Expense

Three Months Ended June 30,

(In thousands)

Income tax expense

The $0.6 million of income tax expense for the three months ended June 30, 2026 is primarily related to an expense of $0.6 million related to our Mexican maquiladora operations.

The $0.8 million of income tax expense for the three months ended June 30, 2025 is related to our Mexican maquiladora operations, in addition to a provision for state income taxes of $0.4 million.

Results of Operations

Six months ended June 30, 2026 compared to the six months ended June 30, 2025

The following tables set forth a comparison of the components of our results of operations for the periods presented:

Six Months Ended June 30,

Percentage of

(In thousands)

Energy industrial

Thermal barrier

Total revenue

Total revenue decreased $69.0 million, or 44%, to $87.7 million for the six months ended June 30, 2026 from $156.7 million in the comparable period in 2025.

The decrease in total revenue was the result of decreases in energy industrial revenue and thermal barrier revenue.

Energy industrial revenue decreased by $10.6 million, or 20%, to $42.0 million for the six months ended June 30, 2026 from $52.6 million in the comparable period in 2025.

This decrease was driven by a decrease in revenue from the global petrochemical and refinery markets of Asia, Latin America, North America, Europe, and project-based demand in the subsea market.

Energy industrial revenue for the six months ended June 30, 2026 included $10.2 million and $8.2 million from two North American distributors, in comparison to $12.3 million and $5.3 million for the comparable period of 2025.

The average selling price per square foot of our energy industrial products decreased by 5% for the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

The decrease in average selling price reflected a change in the mix of products sold.

This decrease in average selling price had the effect of decreasing product revenue by $2.3 million for the six months ended June 30, 2026 from the comparable period in 2025.

In volume terms, energy industrial product shipments decreased by 16% as measured by square feet of our energy industrial products shipped for the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

The decrease in volume had the effect of decreasing product revenue by $8.3 million for the six months ended June 30, 2026 from the comparable period in 2025.

Thermal barrier revenue decreased by $58.4 million, or 56%, to $45.7 million for the six months ended June 30, 2026 from $104.1 million in the comparable period in 2025.

During the six months ended June 30, 2026 and 2025, thermal barrier revenue included $34.9 million and $101.2 million from a major U.S.

automotive OEM, respectively.

The decrease in thermal barrier revenue was driven by a reduction in the volume of parts ordered by our OEM customer and a lower contractual component price during the period compared to the same period in the prior year.

Thermal Barrier revenue for the three months ended March 31, 2026 includes $3.5 million of revenue from a settlement agreement with a customer for $37.6 million for a claim for certain losses incurred arising from lower forecasted long-term demand by the customer which is being deferred and recognized as revenue over a period of approximately two years.

Thermal barrier revenue for the six months ended June 30, 2026 includes $8.4 million of revenue from a settlement agreement with a customer for $37.6 million for a claim for certain losses incurred arising from lower forecasted long-term demand by the customer which is being deferred and recognized as revenue over a period of approximately two years.

Cost of Revenue

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Total cost of revenue

Total cost of revenue decreased $22.3 million, or 40%, to $33.6 million for the three months ended March 31, 2026 from $55.9 million in the comparable period in 2025.

Total cost of revenue decreased $28.4 million, or 26%, to $80.2 million for the six months ended June 30, 2026 from $108.6 million in the comparable period in 2025.

The decrease in total cost of revenue was the result of a decrease in thermal barrier cost of revenue, offset by an increase in energy industrial cost of revenue.

Energy industrial cost of revenue increased $0.2 million, or 1%, to $18.3 million for the three months ended March 31, 2026 from $18.1 million in the comparable period in 2025, primarily due to a higher volume of energy industrial products manufactured at our plant and allocation received of overheads during temporary plant shutdown.

The $0.2 million increase resulted from a $5.7 million increase in manufacturing and other operating costs, partially offset by a $5.5 million decrease in material costs due to lower volume.

The higher manufacturing costs were driven by a shift in production of energy industrial products from an external facility to our plant compared to the prior year, combined with the allocation of overheads during our temporary plant shutdown.

Thermal barrier cost of revenue decreased $22.5 million, or 59%, to $15.3 million for the three months ended March 31, 2026 from $37.8 million in the comparable period in 2025.

The $22.5 million decrease was the result of a $13.9 million decrease in manufacturing costs and an $8.6 million decrease in material costs.

Energy industrial cost of revenue increased $2.2 million, or 7%, to $34.8 million for the six months ended June 30, 2026 from $32.6 million in the comparable period in 2025.

The $2.2 million increase resulted from an increase of $8.5 million in manufacturing costs, unabsorbed overheads and other operating costs, and an increase of $5.9 million in other related shut-down costs, partially offset by a decrease of $12.2 million in material costs due to lower volume.

Thermal barrier cost of revenue decreased $30.6 million, or 40%, to $45.4 million for the six months ended June 30, 2026 from $76.0 million in the comparable period in 2025.

The $30.6 million decrease was the result of a decrease of $25.8 million due to manufacturing costs and a decrease of $20.8 million in material costs, offset by an increase of $10.7 million in costs due to the plant shut-down, and $5.3 million related to the East Providence Incidents.

Material costs decreased primarily due to lower volume and operational efficiencies generating lower scrap.

Manufacturing costs decreased due to lower volumes in comparison to the same period in 2025, benefits from the headcount reduction and other cost cutting efforts in 2026 offset by the allocations of overheads during our temporary plant shutdown.

Three Months Ended March 31,

Manufacturing costs decreased due to lower volumes in comparison to the same period 2025, benefits from the headcount reduction, and other cost cutting efforts.

Six Months Ended June 30,

(In thousands)

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Total gross profit

Total gross profit decreased by $18.5 million, or 81%, to $4.3 million in gross profit for the three months ended March 31, 2026 from $22.8 million in the comparable period in 2025.

The decrease in gross profit was the result of the $40.8 million decrease in total revenue, partially offset by the $22.3 million decrease in total cost of revenue.

Total gross profit decreased by $40.6 million, or 84%, to $7.5 million in gross profit for the six months ended June 30, 2026 from $48.1 million in the comparable period in 2025.

The decrease in gross profit was the result of the $69.0 million decrease in total revenue and the inclusion of certain related costs associated with the East Providence Incidents in cost of revenue.

Research and Development Expenses

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Research and development expenses

Research and development expenses decreased by $1.6 million, or 37%, to $2.7 million for the three months ended March 31, 2026 from $4.3 million in the comparable period in 2025.

The $1.6 million decrease reflects decreases in compensation and related costs of $1.0 million, driven by a headcount reduction, a decrease in utility expenses of $0.5 million and a decrease in other expenditures of $0.1 million.

Research and development expenses as a percentage of total revenue increased to 7% of total revenue for the three months ended March 31, 2026 from 6% in the comparable period in 2025.

Research and development expenses decreased by $2.2 million, or 27%, to $5.9 million for the six months ended June 30, 2026 from $8.1 million in the comparable period in 2025.

The $2.2 million decrease reflects decreases in compensation and related costs of $1.2 million, driven by a headcount reduction, a decrease in utility expenses of $0.5 million, a decrease in operating material and supplies of $0.3 million and a decrease in facility maintenance costs of $0.2 million.

Research and development expenses as a percentage of total revenue increased to 7% of total revenue for the six months ended June 30, 2026 from 5% in the comparable period in 2025.

Sales and Marketing Expenses

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Sales and marketing expenses

Sales and marketing expenses decreased by $1.7 million, or 20%, to $6.7 million for the three months ended March 31, 2026 from $8.4 million in the comparable period in 2025.

The $1.7 million decrease reflects decreases in compensation and related costs of $1.4 million, partially driven by a headcount reduction, freight related expenses of $0.2 million and other expenses of $0.1 million.

Sales and marketing expenses as a percentage of total revenue increased to 18% of total revenue for the three months ended March 31, 2026 from 11% in the comparable period in 2025.

Sales and marketing expenses decreased by $1.7 million, or 11%, to $13.6 million for the six months ended June 30, 2026 from $15.3 million in the comparable period in 2025.

The $1.7 million decrease reflects decreases in compensation and related costs of $1.3 million, decreases in marketing expenses of $0.3 million, and decreases in facility related expenses of $0.2 million, offset by an increase in other expenses of $0.1 million.

Sales and marketing expenses as a percentage of total revenue increased to 16% of total revenue for the six months ended June 30, 2026 from 10% in the comparable period in 2025.

General and Administrative Expenses

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

General and administrative expenses

General and administrative expenses increased by $2.3 million, or 17%, to $15.3 million for the three months ended March 31, 2026 from $13.0 million in the comparable period in 2025.

The $2.3 million increase was the result of a $1.9 million increase in property taxes, $1.1 million increase in bonus expense, $0.5 million increase in professional fees, $0.4 million increase in foreign currency losses, $0.3 million increase in information technology costs and a $0.1 million increase in other expenses, offset by a decrease in base compensation and benefit costs of $1.5 million and $0.5 million decrease in insurance costs.

General and administrative expenses as a percentage of total revenue increased to 40% for the three months ended March 31, 2026 from 17% in the comparable period in 2025.

General and administrative expenses increased by $1.4 million, or 5%, to $28.3 million for the six months ended June 30, 2026 from $26.9 million in the comparable period in 2025.

The $1.4 million increase was the result of a $1.9 million increase in property taxes, primarily offset by a decrease of $0.4 million due to a foreign exchange gain.

General and administrative expenses as a percentage of total revenue increased to 32% for the six months ended June 30, 2026 from 17% in the comparable period in 2025.

Restructuring and Demobilization Costs

During the three months ended March 31, 2026, we began implementing a restructuring plan to consolidate the operations of the automated fabrication facility in Mexico to improve costs.

The plan includes reducing our headcount in Mexico and consolidating facilities.

The plan included reducing our headcount in Mexico and consolidating facilities.

In connection with the restructuring, we incurred $0.4 million of severance costs for headcount reduction.

During the three months ended June 30, 2026, we did not incur restructuring and demobilization costs.

In February 2025, we announced and began implementing a restructuring plan to realign our operational focus to improve costs and align capital expenditure to anticipated long-term demand.

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Impairment of property, plant and equipment

Impairment of property, plant and equipment costs for the three months ended March 31, 2025 was due to impairment incurred of $286.6 million on our previously planned Statesboro Plant.

Impairment of property, plant and equipment costs for the six months ended June 30, 2025 was due to impairment incurred of $286.6 million on our previously planned Statesboro Plant.

Loss on property damage

On April 8, 2026, an explosion occurred at our manufacturing facility in East Providence, Rhode Island.

The incident related to a high temperature and oven resulted in damage to a portion of the facility’s production space and the temporary cessation of operations.

On May 14, 2026, we initiated a staged restart of the facility.

During the six months ended June 30, 2026, we incurred a $8.9 million loss on property damage associated with the April 2026 Incident.

Other Income (Expense), net

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Interest expense, net

Total other expense, net

The $1.2 million increase in interest expense, net for the three months ended March 31, 2026 is primarily due to the result of a decrease in interest income of $1.3 million.

The other income decrease of $1.1 million for the three months ended March 31, 2026 is primarily due to the result of a legal settlement payment to us in the comparable period in 2025.

Income Tax Benefit (Expense)

Three Months Ended March 31,

Total other income (expense), net

The $0.9 million increase in interest expense, net for the six months ended June 30, 2026 is primarily due to a decrease in interest income of $1.7 million offset by a decrease of $0.8 million in interest expense from the MidCap Loan Facility and sale and leaseback transactions.

The other income decrease of $1.1 million for the six months ended June 30, 2026 is primarily due to the result of a legal settlement payment to us in the comparable period in 2025.

During the six months ended June 30, 2026, we recorded a receivable for estimated insurance recoveries of $8.9 million within other income related to property damage resulting from the April 2026 Incident.

The receivable reflects management's estimate of probable insurance recoveries associated with the net book value of damaged property, plant and equipment.

Income Tax Expense

Six Months Ended June 30,

(In thousands)

Income tax benefit (expense)

The $0.3 million of income tax benefit for the three months ended March 31, 2026 is related to a benefit of $0.3 million related to the Mexican maquiladora operations offset by provision for state income taxes of less than $0.1 million and provision for income tax related to German operations of less than $0.1 million.

The $1.1 million of income tax expense for the three months ended March 31, 2025 is related to our maquiladora operations in Mexico, in addition to a provision for state income taxes of less than $0.1 million.

Income tax expense

The $0.4 million of income tax expense for the six months ended June 30, 2026 is primarily related to an expense of $0.3 million related to our Mexican maquiladora operations.

The $1.9 million of income tax expense for the six months ended June 30, 2025 is related to our Mexican maquiladora operations, in addition to a provision for state income taxes of $0.4 million.

Liquidity and Capital Resources

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The net proceeds to us from the Offering were approximately $93.2 million, after deducting underwriting discounts and commissions and offering expenses payable by us.

We believe that our March 31, 2026 cash and cash equivalents balance of $173.9 million will be sufficient to support current operating requirements and capital expenditures required to support our existing business in the energy industrial and EV markets for at least the next twelve months from the date of this Quarterly Report on Form 10-Q.

We believe that our June 30, 2026 cash and cash equivalents balance of $151.7 million will be sufficient to support current operating requirements and capital expenditures required to support our existing business in the energy industrial and EV markets for at least the next twelve months from the date of this Quarterly Report on Form 10-Q.

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 support our long-term growth strategy.

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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.

Our principal sources of liquidity are currently our cash and cash equivalents, availability under the Revolving Facility of $13.2 million, 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 March 31, 2026, we had $173.9 million of unrestricted cash and cash equivalents.

As of June 30, 2026, we had $151.7 million of unrestricted cash and cash equivalents.

Analysis of Cash Flow

Three Months Ended

Six Months Ended

(In thousands)

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Financing activities

Net increase (decrease) in cash

Net decrease in cash

Cash, cash equivalents and restricted cash at beginning of period

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Net Cash Provided by Operating Activities

During the three months ended March 31, 2026, we generated $34.1 million in net cash in operating activities, as compared to the generation of $5.6 million in net cash during the comparable period in 2025, an increase in cash provided by operations of $28.5 million.

During the six months ended June 30, 2026, we generated $17.9 million in net cash in operating activities, as compared to the generation of $1.7 million in net cash during the comparable period in 2025, resulting in an increase in cash provided by operations of $16.2 million.

This increase in cash provided by operations was the result of an increase in net cash generated by changes in operating assets and liabilities of $43.2 million offset by a decrease in net loss adjusted for non-cash items of $26.9 million.

Cash generated by operating activities during the three months ended March 31, 2026, includes $37.6 million for settlement of a claim with a Thermal Barrier customer which is being deferred and recognized as revenue over a period of approximately two years.

Cash generated by operating activities during the six months ended June 30, 2026, includes $29.2 million for settlement of a claim with a thermal barrier customer which is being deferred and recognized as revenue over a period of approximately two years.

Net Cash Used in 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 for 2025 construction costs for the previously planned Statesboro Plant.

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was $1.4 million and $13.0 million, respectively.

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 in 2025 for construction costs for the previously planned Statesboro Plant.

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was $3.2 million and $25.9 million, respectively.

Net Cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 totaled $15.8 million and consisted of $7.6 million in cash used for the repayment of the Revolving Facility, $6.5 million for the repayment of the Term Loan Facility, $1.5 million in repayments of the finance obligation under the sale and leaseback transaction, and $0.2 million for payments made for employee tax withholdings associated with the vesting of RSUs.

Net cash used in financing activities for the three months ended March 31, 2025 totaled $21.5 million and consisted of $13.2 million in cash used for the repayment of the Revolving Facility, $6.5 million for the repayment of the Term Loan Facility, $1.2 million in repayments of the finance obligation under the sale and leaseback transaction, $0.6 million for payments made for employee tax withholdings associated with the vesting of RSUs, and less than $0.1 million in cash used for fees and issuance costs.

Net cash used in financing activities for the six months ended June 30, 2026 totaled $19.9 million and consisted of cash used of $13.0 million for the repayment of the Term Loan Facility, $7.6 million in cash used for the repayment of the Revolving Facility, $3.0 million in repayments of the finance obligation under the sale and leaseback transactions, $0.2 million for payments made for employee tax withholdings associated with the vesting of RSUs, partially offset by cash received of $3.5 million borrowing from the Revolving Facility, $0.2 million in proceeds from employee stock option exercises, and $0.2 million in cash proceeds from employee stock purchase plan purchases.

Net cash used in financing activities for the six months ended June 30, 2025 totaled $29.1 million and consisted of $13.2 million in cash used for the repayment of the Revolving Facility, $13.0 million for the repayment of the Term Loan Facility, $2.4 million in repayments of the finance obligation under the sale and leaseback transactions, $0.6 million for payments made for employee tax withholdings associated with the vesting of RSUs, $0.2 million in proceeds from employee stock option exercises, and less than $0.1 million in cash used for fees and issuance costs.

Contractual Obligations and Commitments

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the impact of new legislation on our financial statements;

our expectations with respect to the financial and operational impacts from the East Providence Incidents, the recovery from the East Providence Incidents, and the staged restart of the East Providence manufacturing facility;

the performance of our aerogel products;

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beliefs about our contracts with the major automotive manufacturers;

our expectations about the size and timing of awarded business in the EV market, future revenues and

profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the EV market;

our expectations about the size and timing of awarded business in the EV market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the EV market;

beliefs about the performance of our thermal barrier products in the battery systems of EVs;

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our expectation to meet long-term aerogel demand by utilizing both our East Providence facility and our flexible supply strategy, including, but not limited to, using external manufacturing capabilities;

our ability to resume operations at the East Providence manufacturing facility;

our ability to manufacture the full array of our products at the facility and to meet expected customer demand;

our ability to mitigate the potential impacts from the operational disruption on our business, operations and financial performance;

our ability to manufacture the full array of our products at the East Providence facility and to meet expected customer demand;

our ability to mitigate the potential impacts from the operational disruption on our business, operations and financial performance resulting from the East Providence Incidents;

the effects of current and potential future tariffs on our business, our customers and our results of operations;

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All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements.

These risks include, but are not limited to, those under the heading “Risk Factors” contained in Item 1A of our Annual Report.

These risks include, but are not limited to, those under the heading “Risk Factors” contained in Item 1A of our Annual Report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur.

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We are exposed to changes in interest rates in the normal course of our business.

As of March 31, 2026, we had unrestricted cash and cash equivalents of $173.9 million.

As of June 30, 2026, we had unrestricted cash and cash equivalents of $151.7 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.

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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 March 31, 2026, we had $86.0 million of the Term Loan Facility outstanding and $7.1 million of revolving line of credit outstanding.

As of June 30, 2026, we had $79.5 million of the Term Loan Facility outstanding and $10.9 million of revolving line of credit outstanding.

Under the terms of the Credit Agreement, as amended by Amendment No.

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A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on the results of our operations.

As of March 31, 2026, we had $1.7 million of restricted cash to support our outstanding letters of credit.

As of June 30, 2026, we had $1.7 million of restricted cash to support our outstanding letters of credit.

Inflation Risk

7 unchanged sentences

Certain of our and our subsidiaries’ transactions are denominated in currencies other than the functional currency.

During the three months ended March 31, 2026 and 2025, our largest exposures to foreign exchange rates consisted primarily of the Mexican Peso against the U.S.

For the three months ended March 31, 2026 and 2025, we had foreign exchange losses of less than $0.1 million and $0.4 million, respectively.

During the six months ended June 30, 2026 and 2025, our largest exposures to foreign exchange rates consisted primarily of the Mexican Peso against the U.S.

For the six months ended June 30, 2026 and 2025 foreign exchange gains were $0.4 million and $0.8 million, respectively.

The foreign currency transaction gains and losses were recorded within operating expenses on the consolidated statements of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis