Ladies and gentlemen, thank you for standing by. Welcome to the Aspen Aerogels Fourth Quarter and Full Year Earnings Results Conference Call. [Operator Instructions]. Please note that this call is being recorded today Thursday, February 26, 2015 at 5:00 PM Eastern Time. I would now like to turn the meeting over to your host for today's call. Susan White, VP Finance and Corporate Strategy. Please go ahead, Ms. White.

Thanks, Courtney and thank you everyone for joining us for the Aspen Aerogels conference call. I'm Susan White, Vice President, Finance and Corporate Strategy. Before turning the call over to Don Young, our President and CEO and John Fairbanks, our CFO. There are couple of housekeeping items would like to take care of. First, we will take questions at the end of our prepared remarks. As the operator said, an archive version of this webcast will be available in the Investor section of our website www.aerogel.com. The press release announcing our fourth quarter and fiscal 2014 results and our business outlook as well as a reconciliation of management's use of non-GAAP financial measures as compared to most applicable GAAP measures is available on the Investor section of our website. There you will also find a summary statement of operations, a summary balance sheet and a summary key financial and operating statistics for the fourth quarter of fiscal 2014. Please note, that our discussion today will include forward-looking statements including any statements regarding outlook, expectations, beliefs, projections, estimates, targets, prospects, business plans and any other statement that is not a historical fact and such statements are subject to risk and uncertainties. Aspen Aerogels actual results may differ materially from those expressed in the forward-looking statements. A list of factors that could affect our actual results can be found in the press release we issued today and are discussed in more detail and the reports we filed with the SEC. Particularly in our most recent quarterly report on Form 10-Q. The press release we issued today and our filings with the SEC can be found in the Investor Relation section of our website www.aerogel.com. The forward-looking statements made today represent our views as of today February 26, 2015. Aspen Aerogels disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. During this call, we will refer to non-GAAP financial measures including adjusted EBITDA. These financial measures are not prepared in accordance with the US General Accepted Accounting Principles or GAAP. These non-GAAP financials measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions of reconciliations of these non-GAAP financials measures to the most directly comparable GAAP financial measures and the discussions why we present these non-GAAP financial measures is available on today's press release, which is also available on our website. I will now turn the call over to Don Young, President and CEO of Aspen Aerogels.

Thank you, Susan. Good afternoon, everyone. Thank you for joining us for our Q4, 2014 earnings call. I will provide comments about the business and our performance and John Fairbanks our CFO will present the financial details of our fourth quarter and fiscal year and update guidance for 2015. We will conclude the call with a Q&A session. 2014 was an important year for Aspen Aerogels in part because we completed our IPO in June. The proceeds from the IPO provided the funds to build the third manufacturing line in our East Providence Plant, which is on schedule to operate during the second quarter. The additional manufacturing capacity is critical in order to meet growing customer demand for our products. The IPO proceeds also enabled us to eliminate virtually all of our outstanding debt and will provide the foundation for financing our second manufacturing plant. During 2014, we also achieved many financial milestones. On an annual basis, total product revenue grew by 21% despite our being capacity constrained for much of the year. We also significantly improved our profitability as measured by gross margin, gross profit and adjusted EBITDA. During the fourth quarter, we delivered record revenue, record gross profit and record adjusted EBITDA. I'd like to begin with a review of our commercial business against the backdrop of lower oil prices. From the time of our June IPO to-date, oil prices have dropped by roughly 50%. However, during this time we have been challenged to meet customer demand. Our lead time to remain at record levels about 26 weeks, which when combined with our commercial pipeline provides confidence for our performance in 2015 and into 2016. We have not seen in any cancellations of purchase orders or any pricing pressure that we believe is related to the price of…

Thanks, Don. Good afternoon. As Don highlighted during his comments, our financial performance was strong. We achieved seventh consecutive quarter of positive adjusted EBITDA in our quarterly revenue gross profit and adjusted EBITDA, for reaching new record. I'd like to start by running through our financial results for the fourth quarter and fiscal 2014 at a summary level. Fourth quarter revenue grew 15% year-over-year to $28 million. For the year, revenue increase 19% to $102.4 million. Fourth quarter GAAP net loss was $2.7 million or $0.12 per share which represented a significant improvement over the last year. For the year GAAP net loss was $66.3 million or $5.37 per share. Fourth quarter adjusted EBITDA was $1.3 million compared to $200,000 a year ago. 2014 adjusted EBITDA was $3 million up from negative $1.8 million a year ago. We defined adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expense and other items that we do not believe are indicative of our core operating performance. Overall, we're pleased with our performance. Our 2014 revenue, net loss, earnings per share and adjusted EBITDA each exceeded our guidance. I'll now provide additional detail on the components of our results. First I'll discuss revenue. Total fourth quarter revenue was comprised of product revenue of $27.3 million and research services revenue of $700,000. For the year, product revenue was $99.3 million and research services revenue was $3.1 million. As Don mentioned, our product revenue remains well diversified across geographies, sub-segment to the energy market in all phases of maintenances and project work. In the fourth quarter, our product revenue increased 17% versus a year ago. For the year, product revenue increased 21%. This growth is due to continued strength in the petrochemical and refinery sectors in Asia and the US…

[Operator Instructions] your first question comes from the line of Chip Moore with Canaccord. Your line is open.

Yes, thanks for taking the question and congrats on the nice results. I guess. First, I appreciate the granularity what you've seen in this macro environment 26-week lead time maybe you can talk about confidence there, you can shift things around if you do see pricing pressure is select areas or cancellations?

Hi, Chip. This is Don. We're not anticipating cancellations and there is a lot demand for this product today. These are some of that work is Reliance or excuse me is the large petrochemical plant. It is very diverse set of purchase order including as I talked about before all phases of energy infrastructure work, all sub-segment, lots of geographies, hot and cold work etc. so we're anticipating that 26-week lead time is solid as a rock.

Okay, that's helpful and on Cryogel, you know it sounds like you're tracking some larger size projects still maybe little more detail there and then, I think that's about 10% of the business, what do you think that can get to here?

Well, the market overall is about 20% cold and 80% hot and so we're as you know we're tracking closer to 10% right now, as we begin to take on, as we continue to do that adoption cycle process that I described. We think, we will get to that 20% level and these projects would certainly enable us to reach those kind of percentages again which reflects the market overall.

Yes, okay that's helpful. And on the third line great to see that's on track with the weather here in the North East particularly. Plant two it sounds like you got a site in mind maybe you can talk about lead times on some of that equipment in terms of when you need to get financing in place etc.

So we actually have, we have narrowed it to a small group of states and sites within those states. We are going to be doing that work here over the coming months. We will need to begin ordering long lead time items by the end of this year and that again would enable us to commence operation of that second plant during 2017. In terms of the financing and John do you want to say a word?

Yes, so we've been in contact with several banks and some private debt firms as well. And we have a high degree of confidence that we'll be able to raise the capital that we need to complete the first line in the second plant. Doing this project in the US actually makes that job a bit easier. Our cash flow, the bulk of our assets today and our cash is here in the US and ultimately that EBITDA and that access to cash will make easier for us to leverage and raise the funds that we require with a high degree of confidence that we'll be able to accomplish that well in advance of the time necessary for that cash to be in hand to complete the project on time.

Okay, that's perfect and then just lastly, maybe you can talk about impact of mix on price potentially lower offshore business in 2015, how that plays out versus price increases, maybe if you can just tease that that out a little? Thanks.

Yes, so that's a really good question. The offshore product pricing is higher. We fabricate that product and as part of that, we'll take a square foot of Aerogel and actually cut it down by say half, but ultimately we charge twice as much for it. And so realistically, we get the same sort of revenue per level of output out of our plant. It just comes at a higher price slightly lower square feet, but higher price giving us equivalent amounts of revenue and so what we would expect this year, would be to actually generate higher square foot. So our production will be higher, the square feet we deliver will be higher at a slightly lower price, but we would expect no real significant impact on our bottom line. So we're relatively neutral from a profit standpoint as to the mix of product that we saw.

Okay, thanks folks.

Thanks, Chip.

Your next question comes from the line of Tyler Frank with Robert Baird. Your line is open.

Hi, guys. Congratulations. Thanks for taking the question. I was hoping, could you elaborate just on that a little bit more. I mean it looks like pricing per square foot during the fourth quarter was around $2.73. How should we think about pricing going forward and can you talk a little bit about your ability to pass on price increases potentially throughout the year?

Yes, so we really peaked in the fourth quarter the $2.73 per square foot. We'd expect our pricing in the first quarter to be more in the range of the $2.40 plus or minus $0.05 but we do expect offshore projects during the remainder of the year. So overall, we would expect our pricing during 2015 to be higher than 2014 due principally to the increased pricing that we implemented in the fourth quarter of 2014. So we will get quarterly variability in pricing, but that doesn't necessarily mean that we'll see quarterly variability and profitability. When we see lower pricing per square foot due to mix, we'll also see lower material cost per square foot from that mix and we'll get essentially the same contribution per square foot from that revenue.

Tyler, you also mentioned price increases as you know, we put in our first price increase in 2013. Also roughly 4% or 5% across the mix. Did the same thing the following year for 2014 and we had successfully done is also here for 2015. The next logical time for us to increase price would be for the 2016 here.

We have not seen any discounting or price decreases associated with the drop in oil prices. So we've been able to sustain our list prices this year and especially with the large long lead times that we haven't had any reason or haven't actually gotten any pressure from our customers to drop that price.

Great, thank you. That very helpful and then just on the margin front. The drop in margin expected in Q1 is that just related to the third line coming up and how should we think about margin ramping throughout the year?

Yes, so in the first half of - so our gross margin in the fourth quarter of 2014 was 19%. So we'd expect in the first half of 2015 for our gross margins to run in the range of 17% plus or minus a 0.01% or 0.02% depending on the nature of product mix and project work. When we begin to operate Line three near capacity, we expect the step function increase in gross margins in the low to mid-20s, due to the increase contribution against our fixed cost. As I mentioned in my comments. We expect line three to operate at about 80% of capacity in the third quarter of 2015. So at that time, we'd expect to realize that step function into the low to mid-20s and we'd see that in terms of the impact on gross margins and those gross margin expectations are reflected in our 2015 guidance. In terms of EBITDA, we ran at about 3% for the whole of 2014, 3% of revenue EBITDA margin and approximately 5% in the fourth quarter, 2014. Again, for the first half of 2015 we'd expect to say in the low single digits with the added cost of operating line three, but when we begin to run line three at 80% of capacity so in the third quarter, 100% of capacity in the fourth quarter. We'd expect to step function increase in EBITDA margins into that low-to-mid teen range.

Perfect, that's very helpful. Thank you very much guys.

Thanks, Tyler.

Your next question comes from the line of James West with Evercore. Your line is open.

Yes, hi. This is actually Samantha Hoh filling in for James. First of all congratulations on the 4% to 5% pricing you were able to poach through earlier this year. And I was just wondering, have you had conversations with your material supplier about potentially lowering your cost there and then, if you could also elaborate on the variance between US and international suppliers for on just material cost side?

So Samantha, thank you for that question. We have worked successfully now for the past few years to broaden the number of raw material suppliers that we have and we've continued, I think we'll continue to do that and overall, our raw material cost have dropped over the course of that period of time. Going forward, we're modelling that we'll hold these prices for the most part and so we have not modelled continued price decreases in our raw material supply. We have an aggressive team and they will continue to work with those suppliers to get the very best pricing that we can. In terms of US and European suppliers. What has been interesting and what to some degree certainly reinforced our decisions to build plant two in the United States was to simple fact that, our suppliers both American companies and European companies were eager to expand in the United States driven by a stronger market, lower energy prices and that had a real influence on us. They were less inclined to expand in Europe at this point and we want them to continue to expand and for us to have as many choices in as ample of supplies as possible. So even our European investors have assets here in the United States and as I said there, in the position to expand those, as we continue to expand our own operations.

That's it from me. Thanks and congrats on the quarter.

Thanks a lot.

There are no further questions in queue at this time. I will now turn the call over to Mr. Young for any closing comments.

Thank you, Courtney. Overall, I'm very pleased with our results this quarter and for the year. We made important strides improving our financial performance in 2014 and we are well positioned to succeed in 2015. Customer demand remains strong and has diversified across geographies end-users and sub sectors. Operations are running well and we are effectively managing our cost. We are also successfully executing our major capital project of building line three and it remains on track to contribute during the second quarter. We want to thank you for your interest in Aspen Aerogels. We look forward to reporting our first quarter results to you in May. Have a good evening.

This concludes today's conference call. You may now disconnect.