ASPEN AEROGELS INC

Previous wording

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 and under “Risk Factors” in Item 1A of the Annual Report.

Current wording

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.

Previous wording

Our core businesses are organized into two reportable segments: Energy Industrial and Thermal Barrier. The following describes our key product offerings and new product innovations by reportable segment.

Current wording

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.

Previous wording

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, we are seeking to leverage our patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells. These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of EVs.

Current wording

We are actively developing a number of promising aerogel products and technologies for the 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 by impeding the propagation of thermal runaway in lithium-ion battery systems at the battery cell, module and pack levels across multiple lithium-ion battery system architectures. Our ultra-thin, lightweight and flexible thermal barriers are designed to allow battery manufacturers to achieve critical safety goals without sacrificing energy density. In addition, we are seeking to leverage our patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells. Our 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 battery materials in the EV market is significant.

Previous wording

We have entered into production contracts with certain major OEMs, including General Motors LLC (GM), to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation EVs. Pursuant to the contracts with GM, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While GM has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, GM may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with GM’s standard purchase terms, including quality and warranty provisions customary in the automotive industry. We have also entered into production contracts with Toyota, Scania, Audi, a luxury brand of the Volkswagen Group, ACC, a battery cell joint venture between Stellantis N.V, Saft-TotalEnergies and Mercedes-Benz, and a large EU battery manufacturer to supply a next generation vehicle platform of a major EU luxury sports car brand.

Current wording

We have entered into multi-year production contracts with a number of automotive EV 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),

Previous wording

We also design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy industrial and sustainable insulation materials markets. 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, LNG facilities, power generating assets and other energy industrial companies. Our Pyrogel® and Cryogel® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption.

Current wording

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 insulation products help end-users to improve resource efficiency, reduce energy consumption, and reduce the carbon footprint of their operations. These products enable compact system design, reduce installation time and costs, promote freight and logistics cost savings, reduce system weight, minimize required storage space and enhance job site safety. Our insulation products reduce the incidence of corrosion under insulation, which is a significant maintenance cost and safety issue in energy industrial facilities. 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.

Previous wording

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. To meet expected growth in demand for our aerogel products in the EV market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. However, in order to manage the development of the second plant so that its increased capacity comes online in a manner that aligns with our current expectations as to demand from our EV customers, we are extending the timeframe for construction and commissioning of the second plant until such time as its capacity is supported by increased demand. In the meantime, and until we ramp up construction, we believe that productivity improvements in our existing Rhode Island facility combined with our supplemental supply of our energy industrial products from an external manufacturing facility in China will permit us to achieve our target revenue capacity in 2024 and prior to the completion and start-up of the second plant. At present, we have engaged one third-party external manufacturing facility in China to produce certain of our Energy Industrial products. 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 agreement. 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 manufactures 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.

Current wording

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 our 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 to establish OPE Manufacturer Mexico S de RL de CV, 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 March 31, 2025, 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 our Energy Industrial segment and are capable of delivering increased aerogel production capacity. Accordingly, we have ceased construction at the previously planned Statesboro Plant. 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.

Previous wording

Our revenue for the nine months ended September 30, 2024 was $329.6 million, which represented an increase of $175.1 million, or 113%, from $154.5 million for the nine months ended September 30, 2023. Net income for the nine months ended September 30, 2024 was $2.0 million and net loss per share was $0.03. Net loss for the nine months ended September 30, 2023 was $45.3 million and net loss per share was $0.65.

Current wording

Our revenue for the three months ended March 31, 2025 was $78.7 million, which represented a decrease of $15.8 million, or 17%, from $94.5 million for the three months ended March 31, 2024. Net loss for the three months ended March 31, 2025 was $301.2 million and net loss per share was $3.67. Net loss for the three months ended March 31, 2024 was $1.8 million and net loss per share was $0.02.

Previous wording

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 accounting principles generally accepted in the United States of America (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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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 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 2024 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.

Current wording

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 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.

Previous wording

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 manufacturing employees and shipping costs. We expect that manufacturing expense will increase in absolute dollars and decrease as a percentage of revenue during 2024 due to increased staffing costs and spending levels in support of our thermal barrier business, including the operation of an automated fabrication facility in Monterrey, Mexico.

Current wording

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 manufacturing employees and shipping costs.

Previous wording

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 for the energy industrial market beginning in 2024. We expect that our energy industrial product material costs will increase in absolute dollars and as a percentage of revenue, and manufacturing expense and cost of revenue will decrease as a percentage of revenue due to projected volume growth, which will be manufactured through the external manufacturing facility.

Current wording

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, which began in 2024.

Previous wording

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. We expect our research and development expenses will increase in absolute dollars and decrease as a percentage of revenue in 2024 and the longer term.

Current wording

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.

Previous wording

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, costs of new product and process introductions, travel and related costs, consulting expenses and facilities related costs. We expect our sales and marketing expenses will increase in absolute dollars but decrease as a percentage of revenue in 2024 and in the longer term.

Current wording

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, costs of new product and process introductions, travel and related costs, consulting expenses and facilities related costs.

Previous wording

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 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. We expect that our general and administrative expenses will increase in absolute dollars and decrease as a percentage of revenue.

Current wording

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.

Previous wording

The $2.7 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.

Current wording

During the fiscal year ended December 31, 2024, the 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.

Previous wording

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 due 2027, which we sold and issued to Wood River.

Current wording

Interest expense, convertible note - related party is net of the capitalized interest related to the 2022 Convertible Note which we sold and issued to Wood River. The Company repurchased the 2022 Convertible Note on August 19, 2024.

Previous wording

We have incurred annual net losses since inception 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.

Current wording

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. We record tax expenses in connection with provisions for state income taxes and our Mexican maquiladora operations.

Previous wording

Total revenue increased $56.5 million, or 93%, to $117.3 million for the three months ended September 30, 2024 from $60.8 million in the comparable period in 2023. The increase in total revenue was the result of an increase in thermal barrier revenue, offset by a decrease in energy industrial revenue.

Current wording

Total revenue decreased $15.8 million, or 17%, to $78.7 million for the three months ended March 31, 2025 from $94.5 million in the comparable period in 2024. The decrease in total revenue was the result of a decrease in thermal barrier revenue, offset by an increase in energy industrial revenue.

Previous wording

Energy industrial revenue decreased by $1.2 million, or 4%, to $26.7 million for the three months ended September 30, 2024 from $27.9 million in the comparable period in 2023. This decrease was driven by a decrease in project-based demand in the subsea market and the global petrochemical and refinery markets of Asia, offset in part by an increase in the global petrochemical and refinery markets of Latin America, Europe, and North America.

Current wording

Energy industrial revenue increased by $0.7 million, or 3%, to $29.8 million for the three months ended March 31, 2025 from $29.1 million in the comparable period in 2024. This increase was driven by an increase in the global petrochemical and refinery markets of North America, Asia, Europe, and Latin America, offset in part by a decrease in project-based demand in the subsea market.

Previous wording

Energy industrial revenue for the three months ended September 30, 2024 included $5.6 million to a North American distributor, in comparison to $8.0 million for the comparable period of 2023.

Current wording

Energy industrial revenue for the three months ended March 31, 2025 included $10.7 million to a North American distributor, in comparison to $7.5 million for the comparable period of 2024.

Previous wording

The average selling price per square foot of our energy industrial products increased by 6% for the three months ended September 30, 2024, compared to the three months ended September 30, 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 $1.4 million for the three months ended September 30, 2024 from the comparable period in 2023.

Current wording

The average selling price per square foot of our energy industrial products increased by less than 1% for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in average selling price reflected the impact of price increases enacted in 2025 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 $0.1 million for the three months ended March 31, 2025 from the comparable period in 2024.

Previous wording

In volume terms, energy industrial product shipments decreased by 9% as measured by square feet of our energy industrial products shipped for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease in volume had the effect of increasing product revenue by $2.5 million for the three months ended September 30, 2024 from the comparable period in 2023.

Current wording

In volume terms, energy industrial product shipments increased by 2% as measured by square feet of our energy industrial products shipped for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in volume had the effect of increasing product revenue by $0.6 million for the three months ended March 31, 2025 from the comparable period in 2024.

Previous wording

Thermal barrier revenue was $90.5 million for the three months ended September 30, 2024 as compared to $32.8 million for the three months ended September 30, 2023. During the three months ended September 30, 2024 and 2023, thermal barrier revenue included $86.4 million and $29.5 million, respectively, to a major U.S. automotive OEM.

Current wording

Thermal barrier revenue decreased by $16.5 million, or 25%, to $48.9 million for the three months ended March 31, 2025 from $65.4 million in the comparable period in 2024. During the three months ended March 31, 2025 and 2024, thermal barrier revenue included $47.4 million and $60.6 million, respectively, to a major U.S. automotive OEM. The decrease in thermal barrier revenue was driven by reduction in the volume of parts ordered by our OEM customer and lower contractual component price during the quarter compared to the same period in the prior year.

Previous wording

Total cost of revenue increased $21.3 million, or 45%, to $68.2 million for the three months ended September 30, 2024 from $46.9 in the comparable period in 2023. The increase in total cost of revenue was the result of an increase in thermal barrier cost of revenue, offset by a decrease in energy industrial cost of revenue.

Current wording

Total cost of revenue decreased $3.5 million, or 6%, to $55.9 million for the three months ended March 31, 2025 from $59.4 in the comparable period in 2024. 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.

Previous wording

Energy industrial cost of revenue decreased $6.0 million, or 27%, to $16.0 million for the three months ended September 30, 2024 from $22.0 million in the comparable period in 2023, primarily due to a decrease in the volume of products shipped. The $6.0 million decrease was the result of a $5.0 million decrease in manufacturing and other operating costs due to lower volume of Energy industrial products manufactured at our plant as we move manufacturing to the external manufacturing facility, and a $1.0 million decrease in material costs.

Current wording

Energy industrial cost of revenue increased $0.6 million, or 3%, to $18.1 million for the three months ended March 31, 2025 from $17.5 million in the comparable period in 2024, primarily due to an increase in the volume of products shipped. The $0.6 million increase was the result of a $5.3 million increase in material costs offset by a $4.7 million decrease in manufacturing and other operating costs due to lower volume of energy industrial products manufactured at our plant as we move manufacturing to the external manufacturing facility.

Previous wording

Gross profit increased by $35.2 million, or 255%, to $49.0 million for the three months ended September 30, 2024 from $13.8 million in the comparable period in 2023. The increase in gross profit was the result of the $56.5 million increase in total revenue, offset by the $21.3 million increase in total cost of revenue.

Current wording

Gross profit decreased by $12.3 million, or 35%, to $22.8 million for the three months ended March 31, 2025 from $35.1 million in the comparable period in 2024. The decrease in gross profit was the result of the $15.8 million decrease in total revenue, partially offset by the $3.5 million decrease in total cost of revenue.

Previous wording

General and administrative expenses increased by $11.1 million, or 27%, to $52.5 million for the nine months ended September 30, 2024 from $41.4 million in the comparable period in 2023. The $11.1 million increase was the result of additional staffing costs combined with increases in compensation and related costs of $4.5 million, foreign currency transaction losses of $2.0 million, insurance costs of $2.0 million, utilities expenditures of $1.7 million, and legal costs of $0.9 million. Compensation and related costs include $2.0 million of charge from the cancellation of the unearned performance-based restricted shares.

Current wording

General and administrative expenses decreased by $4.2 million, or 24%, to $13.0 million for the three months ended March 31, 2025 from $17.2 million in the comparable period in 2024. The $4.2 million decrease was the result of decreases in compensation and related costs of $4.3 million, foreign currency transaction losses of $1.1 million and depreciation and facility related expenses of $0.4 million, partially offset by an increase in insurance costs of $0.8 million, utilities expenditures of $0.7 million and other expenses of $0.1 million. Compensation and related costs for the three months ended March 31, 2024 included $2.0 million of charge from the cancellation of the unearned performance-based restricted shares.

Previous wording

The $0.3 million of income tax expense for the three months ended September 30, 2024 is related to our maquiladora operations in Mexico. We did not incur income tax expense for the comparable period in 2023.

Current wording

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. We incurred $0.8 million of income tax expense related to our maquiladora operations in Mexico for the comparable period in 2024.

Previous wording

On August 19, 2024, we entered into a Credit, Security and Guaranty Agreement with MidCap Financial for a term loan facility in an aggregate principal amount of $125.0 million and an asset-based revolving credit facility in an aggregate principal amount not to exceed the lesser of $100.0 million or the borrowing base. At closing we drew $125.0 million from the Term Loan Facility and $43.0 million from the revolving loan facility. The proceeds of the borrowings, net of fees and costs, were used for repurchasing of the Convertible Notes for $150.0 million and for general corporate purposes.

Current wording

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. 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

Previous wording

In January and September 2024, we entered into sale and leaseback arrangements, pursuant to which we sold certain equipment to an equipment leasing company for two separate one-time cash payments of $5.0 million and $10.0 million and leased back such equipment from the leasing company. The associated monthly lease rents will be paid over the term of three years.

Current wording

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.

Previous wording

We believe that our September 30, 2024 cash and cash equivalents balance of $113.5 million, together with the funds available under the MidCap Loan Facility, 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.

Current wording

We believe that our March 31, 2025 cash and cash equivalents balance of $192.0 million, together with the funds available under the MidCap Loan Facility, will be sufficient to support current operating requirements, current research and development activities and the capital expenditures required to support the evolving commercial opportunities in the EV market and other strategic business opportunities.

Previous wording

We believe that consummation of equity financing could potentially result in an ownership change under Section 382 of the U.S. Internal Revenue Code of 1986, as amended. 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.

Current wording

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.

Previous wording

Our principal sources of liquidity are currently our cash and cash equivalents. Cash and cash equivalents consist primarily of cash, money market accounts, and sweep accounts on deposit with banks. As of September 30, 2024, we had $113.5 million of unrestricted cash and cash equivalents.

Current wording

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 March 31, 2025, we had $192.0 million of unrestricted cash and cash equivalents.

Previous wording

During the nine months ended September 30, 2024, we provided $9.9 million in net cash in operating activities, as compared to the use of $39.8 million in net cash during the comparable period in 2023, a decrease in the use of cash of $49.7 million. This decrease in use of cash was the result of net income adjusted for non-cash items of $97.8 million offset by net cash used by changes in operating assets and liabilities of $48.1 million.

Current wording

During the three months ended March 31, 2025, we generated $5.6 million in net cash in operating activities, as compared to the use of $17.7 million in net cash during the comparable period in 2024, an increase in cash provided by operations of $23.3 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 $48.9 million, offset by a decrease in net loss adjusted for non-cash items of $25.6 million.

Previous wording

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, expansion of our automated fabrication facility in Mexico and engineering designs and construction costs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $71.5 million and $147.7 million, respectively.

Current wording

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 construction costs for the previously planned Statesboro Plant. Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $13.0 million and $25.9 million, respectively.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024 totaled $35.6 million and consisted of $15.0 million in proceeds from a sales leaseback, $10.4 million in proceeds from employee stock option exercises, $119.7 in proceeds from the term loan, net of issues costs, and $42.7 in proceeds from the revolver, net of issuance costs, offset by $150.0 million in cash used for the repayment of the convertible note, $1.3 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units, $0.8 million in repayments of a sales leaseback, and less than $0.1 million in cash used for fees and issuance costs.

Current wording

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 revolver, $6.5 for the repayment of the Term Loan Facility, $1.2 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.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2023 totaled $0.1 million and consisted of $0.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units and $0.1 million issuance costs from private placement of common stock, offset, in part, by $0.4 million in proceeds from employee stock option exercises.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2024 totaled $5.3 million and consisted of $5.0 million in proceeds from a sale and leaseback transaction and $1.4 million in proceeds from employee stock option exercises, offset by $1.1 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units.

Previous wording

Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Information regarding new accounting pronouncements is included in "Note 2. Significant Accounting Policies." to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Our financial statements are prepared in accordance with U.S. GAAP. 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 our Annual Report and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.

Current wording

Our financial statements are prepared in accordance with U.S. GAAP. 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 our Annual Report and "Note 2. Significant Accounting Policies." to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.