[Technical Difficulty] and I will be your conference operator today. At this time, I would like to welcome everyone to the Aspen Aerogels' Q2 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer Session. [Operator Instructions] Thank you, John Fairbanks, you may begin your conference.

Good afternoon. Thank you for joining us for the Aspen Aerogel's conference call. I'm John Fairbanks, Aspen's Chief Financial Officer. There are a couple of housekeeping items that I would like to address before turning the call over to Don Young, Aspen's President and CEO. The press release announcing Aspen's financial results and business developments, as well as a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures is available on the investors section of Aspen's website, www.aerogel.com. Included in the press release is a summary statement of operations, a summary balance sheet, a summary of key financial and operating statistics for the quarter ended June 30, 2017. In addition, the investors section of Aspen's website will contain an archived version of this webcast for approximately one year. 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 risks and uncertainties. Aspen Aerogels' actual results may differ materially from those expressed in these forward-looking statements. A list of factors that could affect the company's actual results can be found in Aspen's press release issued today and are discussed in more detail in the reports Aspen files with the SEC, particularly in the company's most recent Annual Report on Form 10-K. The company's press release issued today and filings with the SEC can also be found in the Investors section of Aspen's website. Forward-looking statements made today represent the company's views as of today August 3, 2017. 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 U.S., Generally Accepted Accounting Principles or GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The definitions of and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of why we present these non-GAAP financial measures is also available on today's press release. I will now turn the call over to Don Young, President and CEO of Aspen Aerogels.

Good afternoon. Thank you for joining us for our Q2 2017 earnings call. I will start by providing comments about the business and our performance. Next, John will present financial details for Q2 and the first half of 2017 and comment on our guidance for the year. We will conclude the call with a Q&A session. I plan to cover three topics in my prepared remarks. First, I will review the three important indicators related to the performance of our business that we believe will mark 2017 as a successful year. Second, I will discuss the current commercial environment, including our market outlook for the remainder of 2017. And third, I will reiterate our strategy and describe the longer term scope of our opportunity. Our first topic today is an update on the three important indicators related to the performance of our business that we believe will mark 2017 as a successful here. Our first indicator is focused on our goal for 2017 to build momentum each consecutive quarter by gaining market share in our core end markets, principally refinery and petrochemical companies by demonstrating value and growth in our LNG, district energy and power adjacent markets and by taking a partnered approach in the development of new markets, including building materials. Progress toward achieving this goal will be demonstrated by gaining commercial momentum throughout the year with Q2 stronger than Q1, Q3 stronger than Q2 and Q4 stronger than Q3. This momentum will position us to resume our revenue and adjusted EBITDA growth trajectory in 2018. We achieved revenue growth from Q1 to Q2, 2017 of $2.1 million or 9%, $25.1 million. This growth was supported by maintenance activities in our core refinery and petrochemical businesses and by solid growth in our district energy and LNG adjacent markets in…

Thanks, Don. Let's just start by running through our reported financial results for the second quarter and the first six months of 2017 at a summary level. Second quarter total revenue declined 10% to $25.1 million versus $27.7 million in 2016. Second quarter net loss was $5.5 million or $0.23 per share versus a net loss of $1.4 million or $0.06 per share last year. Second quarter adjusted EBITDA was negative $1.4 million compared to positive $2.5 million a year ago. We define 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. Patent enforcement costs had a less significant impact on our net loss and adjusted EBITDA during the second quarter this year than in previous quarters. We incurred $152,000 of patent enforcement cost during the second quarter versus $379,000 in the second quarter last year. For the first half, total revenue declined 21% to $48.1. Net loss was $14.6 million or $0.62 per share in the first half of 2017 versus a net loss of $3.2 million or $0.14 per share last year and adjusted EBITDA for the first half was negative $6.6 million compared to positive $4.5 million last year. For the first half of 2017, patent enforcement costs had a disproportionate impact on both our net loss and adjusted EBTIDA. We incurred $2.9 million of patent enforcement cost during the first half of 2017 versus $573,000 last year. At a summary level, the decline of $11.1 million in first half adjusted EBITDA versus the first half of 2016 was driven by three principle factors. First, a decline in gross profit associated with the year-over-year decline in product revenue and production levels. Second, the increase in patent…

[Operator Instructions] Eric, your line is open.

Just wanted to start with the Pyrogel HPS product. I know that when, you know, as you've been talking about that you kind of positioned it as power generation, but on the launch it also talked about refinery and also chemical processing. So just wondering if you can speak to what you see the opportunity and how that product fits in those end markets. And then kind of a follow on to that would just be, are you still targeting or hoping for a lead customer in power gen or could it potentially be in one of those other end markets?

The HPS launch, so the key attributes of the product and what makes it different from our standard Pyrogel product is that it's particularly well-tuned to the high-end of the temperature curve, which is very characteristic of the way people run power generation facilities. There are also applications within our core refinery and petrochemical businesses. Those parts of a refinery or petrochemical plant that are operating within those particular temperature ranges and sure enough given our close relationship with those companies and moving product to them we have been able to target some of those applications. Those are sort of, let me just call it maybe low hanging fruit in some sense largely because of the relationship. We were able to work our way into some very key specifications early on in the process. And that has helped us gain some momentum in that area. We're also very focused on the power plants themselves and I would anticipate that over the course of this year we have an opportunity to create case studies within very specific highly regarded owners of some power stations during the remainder or part of this year. And again we think those case studies are our bestselling tools in the power industry as we head into 2018 and really trying to build that business out. And again, the idea of a lead customer is very much on our mind. There are a few different variations we think of that power stations, power asset owners for one. The turbine manufacturers are also interesting to assess as potential lead customers if you will. But our target of getting that $1 million to $3 million of revenue in the latter part of 2017 is very much within our grasp and things are going well. Our team has done a terrific job planning and executing. The capital project behind this and the marketing and roll out of this product I would say it's the best one that we done as a company.

And just can you talk a little bit about and you mentioned in your remarks, but just wanted to just flush it out a little bit. When we think about refinery, petrochem, LNG, where you're going from maintenance work to then greater scope and then eventually into pretty sizable numbers, whereas District Energy is a little bit different, where it's kind of just singles and doubles in just getting deeper in with the customer. I mean would you put it in the first category of increasing scope or more similar to District Energy as this plays out?

I think as it plays out we'll have the opportunity to do larger scope. I would bet our first wins will be measured let me just say in the hundreds of thousands of dollars as opposed to the five and ten million dollars range. But there is plenty of opportunity to do larger scope projects within the power generation business, no question about it. Again, well over a $1 billion of annual sales with inflation going into that business. So that's comprised. To get to a number like that that's comprised more than singles and doubles. And don't get me wrong we love our singles and doubles. But there will be some opportunities for us in the '18, '19, and 2020 timeframe to hit some homeruns in that business.

Maybe just turning to the refinery business, I mean, certainly in the market I'm starting to hear signs of increased turnaround activity and I know you're - it sounds like you're still I mean obviously viewing '17 as similar to '16 just for outlook purposes. But are you seeing any of that increased activity. I mean it sounds like you're getting a little more positive even if you're not changing that outlook.

I think I used the word encouraged in my formal script. I think that size this up well, I don't want to say the market is breaking loose, but we're seeing some signs of the market getting a little better and we're encouraged that we will be able to build that momentum that I talked about in my script just as Q2 was better than 1Q, Q3 better than 2, Q4 better than 3. And that's I think a function of all of these markets, just maybe getting just a bit better.

Maybe last one from me, just you mentioned the refinery project that went in Brazil. Just any clarity you could give into that size, timing if that's something you're able to do.

Timing is this year and size is single digit million for us, which is just - there is so much opportunity there and we've got a good team there. [indiscernible] and these kinds of projects and it's great to get one into the wind column. I suspect we could have some other ones as well.

Your next question comes from the line of Sean Hannan from Needham & Company. Your line is open.

Hello, Sean?

Sean, your line is open.

Yeah thanks folks, can you hear me a little bit better now?

Hi Sean, how are you?

So just to circle back on the new products for power generation in other markets. What's going on right now, I realize it's of course early, but what's going on in terms of either sampling or initial shipments for this. What type of indication are you getting so far in the path of the uptake?

Our team had done a good job preparing for the launch and we took as I have stated in the earnings script, $1 million to $3 million. We took in purchase orders the lower end of that range right out of the gate. And so we're feeling confident that we're going to be - we're going to be within that range for the remainder of this year. So I think we have - the team exceeded the market effectively, again coming right out of the gate. We launched that product on July 17.

Is there a sense though of how the product is being used, is this going right into the facilities and being used in primary locations or is there a sampling process per se in more non-critical areas as they try to get a better understanding and comfort around the quality of the product.

I'm not sure we have that kind of feedback yet given the - probably the product is being delivered to them as we speak. But having said that, we have been very focused on testing the product carefully ourselves and having a good sense for how it will perform in these applications. So we're confident that it's going to perform well and maybe save that question Sean, for our next report out. And I think we'll have more imperial reports from the field at that point in time.

And then on the BASF partnership, so that's been in place now for a bit and you referenced it a little bit earlier in the prepared remarks. I think on at least on my side trying to better understand, when it is that this relationship actually hits that inflection point driving some more meaningful revenue contribution. It sounds like you've got a little bit more encouragement around building materials over in Europe. Just looking to see if we can get a little bit more color here on the direction and potentially timing for a more meaningful trajectory?

I think we'll start seeing more noticeable numbers next year, Sean, from that agreement. We have gone through a rigorous process of qualifying the material with BASF across the EU and we've been able to begin to put sample quantities out into the field here in 2017. Again think of it as building those case studies with the Spaceloft A2 product. And we believe that that will lead to sales in 2018, again noticeable to us as a follower of the company. And I feel strongly that the technical specifications are moving in our direction across the EU.

And then last question here, if you are to think about June say as your base, as we move from this period forward. Again, it seems like the senses, we're going to be having some increases in our revenues here. Can you rank order perhaps the contributions you'd expect to see in the back half of this year in terms of the products or markets that are going to be giving you momentum back on that upswing? For example, you've been making good progress District Energy, you've referenced that. Just trying to understand and put some of these different end application areas in context. Thanks.

So I think we're very focused on penetrating these accounts that we've had for a long time in the core around globally. And we will continue to do that. We are having a good success in the adjacent markets. The strategy is working. That idea of diversifying our revenue, getting into these new markets District Energy, LNG and now power are very important to us for growing revenue on the margin and sort of filling in the hole that was left in part by the ending of South Asia petrochemical project, which obviously we had anticipated and the slower activities in the Subsea market. You might remember at the last earnings call I think we said that Subsea and the South Asia project would be in the range of 10% of our revenue for the year and we move that up to 15% this year in part as I said in my script, the Subsea bidding process has been more than we had anticipate. And as I described in my comments, it's really based on these asset owners, these platform owners, leveraging their existing assets, using extended lines, longer Subsea pipelines coming into those assets. And if you think about the thermal challenge associated with that that fits very neatly into our value proposition. And so we're seeing more activity in that area than we had suspected. So the way I would say it, Sean, is that we're going to continue to grow that base revenue that non-Subsea, non-Southeast Asia petrochemical project revenue meaningfully as we did Q2 versus Q1 throughout the rest of the year and we're going to prove on top of that around the Subsea that you may or may not have expected coming into the year.

Your next question comes from the line of Chip Moore from Canaccord. Your line is open.

So you just hit partly there on Subsea, but the pickup you're seeing in bidding activity there, is that broader based or do you have visibility on more of a few specific opportunities or how should we think about that?

What we're seeing - what I think we would generally see where you're extending existing assets, we'll see smaller projects and some of the ones that we've got historically, not exclusively. There are some very measurable out there for sure. But I think what we're seeing is the opportunity to bid for a whole series of opportunities, some we believe will come to fruition, some may not or some may come out in 2018, but we are very competitive in this particular area and we'll win more than our fair share of them in my estimation. So we'll see several projects that are kind of in that 123 range and maybe one larger than that.

And I guess just bigger picture, slightly more encouraging outlook with the base business on track, obviously you're going to be - you're being prudent with the outlook. But as we look to '18, how do you balance sort of seeing these newer adjacent opportunities, new markets versus fulfilling some of this potential pickup in demand? Thanks guys.

I said a few times in my script that such and such action was preparing us to resume our growth trajectory in 2018. While we're not prepared to provide guidance to 2018, all three of our performance indicators for 2017, building quarterly momentum, building the base, demonstrating our ability to introduce new products like HPS, taking on a new market, those are all fundamental to our resuming the growth trajectory in 2018. We're determined to do that. And we think we have the technology and the products to do that. And it would be terrific if the market even just slightly kind of worked in our direction a little bit that would be great. And again, I think we're in a really good position to resume that growth in 2018.

And there are no further questions at this time. I will now turn the call back over to Mr. Young, CEO.

Thank you, Emily. We appreciate everyone's interest in Aspen. We look forward to reporting our third quarter 2017 results to you in early November. Thank you very much, have a good evening.

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