ASPEN AEROGELS INC, 10-Q filed on 11/5/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Nov. 05, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Trading Symbol ASPN  
Entity Registrant Name ASPEN AEROGELS, INC.  
Entity Central Index Key 0001145986  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   26,867,920
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-36481  
Entity Tax Identification Number 04-3559972  
Entity Address, Address Line One 30 Forbes Road  
Entity Address, Address Line Two Building B  
Entity Address, State or Province MA  
Entity Address, City or Town Northborough  
Entity Address, Postal Zip Code 01532  
City Area Code 508  
Local Phone Number 691-1111  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, par value $0.00001 per share  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 11,314 $ 3,633
Accounts receivable, net of allowances of $295 and $144 20,072 32,254
Inventories 9,427 8,768
Prepaid expenses and other current assets 1,595 1,114
Total current assets 42,408 45,769
Property, plant and equipment, net 48,099 53,617
Operating lease right-of-use assets 3,702 4,032
Other long-term assets 88 84
Total assets 94,297 103,502
Current liabilities:    
Accounts payable 8,354 12,596
Accrued expenses 4,081 8,057
Current portion of long-term debt 367  
Revolving line of credit   3,123
Deferred revenue 2,275 5,620
Operating lease liabilities 1,056 1,038
Total current liabilities 16,133 30,434
Prepayment liability 9,568 9,786
Long-term debt 3,298  
Operating lease liabilities long-term 3,845 4,292
Other long-term liabilities 566  
Total liabilities 33,410 44,512
Commitments and contingencies (Note 8)
Stockholders’ equity:    
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2020 and December 31, 2019
Common stock, $0.00001 par value; 125,000,000 shares authorized, 26,865,309 and 24,302,504 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   0
Additional paid-in capital 562,657 545,140
Accumulated deficit (501,770) (486,150)
Total stockholders’ equity 60,887 58,990
Total liabilities and stockholders’ equity $ 94,297 $ 103,502
v3.20.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Allowance for accounts receivables $ 295 $ 144
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 125,000,000 125,000,000
Common stock, shares issued 26,865,309 24,302,504
Common stock, shares outstanding 26,865,309 24,302,504
v3.20.2
Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenue:        
Total revenue $ 24,195 $ 35,425 $ 77,255 $ 92,870
Cost of revenue:        
Gross profit 1,900 7,742 10,731 14,974
Operating expenses:        
Research and development 2,088 2,046 6,436 5,842
Sales and marketing 2,755 3,992 9,051 11,012
General and administrative 3,761 3,857 10,682 11,449
Total operating expenses 8,604 9,895 26,169 28,303
Loss from operations (6,704) (2,153) (15,438) (13,329)
Interest expense, net (49) (136) (182) (280)
Total interest expense, net (49) (136) (182) (280)
Net loss $ (6,753) $ (2,289) $ (15,620) $ (13,609)
Net loss per share:        
Basic and diluted $ (0.25) $ (0.09) $ (0.60) $ (0.57)
Weighted-average common shares outstanding:        
Basic and diluted 26,728,205 24,171,811 26,150,236 24,074,565
Product [Member]        
Revenue:        
Total revenue $ 23,939 $ 35,046 $ 76,772 $ 90,739
Cost of revenue:        
Cost of revenue 22,243 27,510 66,403 76,703
Research Services [Member]        
Revenue:        
Total revenue 256 379 483 2,131
Cost of revenue:        
Cost of revenue $ 52 $ 173 $ 121 $ 1,193
v3.20.2
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock 0.00001 Par Value [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2018 $ 70,254   $ 541,839 $ (471,585)
Beginning balance, shares at Dec. 31, 2018   23,973,517    
Net loss (6,002)     (6,002)
Stock compensation expense 878   878  
Vesting of restricted stock units (454)   (454)  
Vesting of restricted stock units, shares   273,290    
Ending balance at Mar. 31, 2019 64,676   542,263 (477,587)
Ending balance, shares at Mar. 31, 2019   24,246,807    
Beginning balance at Dec. 31, 2018 70,254   541,839 (471,585)
Beginning balance, shares at Dec. 31, 2018   23,973,517    
Net loss (13,609)      
Ending balance at Sep. 30, 2019 59,066   544,260 (485,194)
Ending balance, shares at Sep. 30, 2019   24,300,264    
Beginning balance at Mar. 31, 2019 64,676   542,263 (477,587)
Beginning balance, shares at Mar. 31, 2019   24,246,807    
Net loss (5,318)     (5,318)
Stock compensation expense 996   996  
Issuance of restricted stock, shares   50,328    
Vesting of restricted stock units 10   10  
Vesting of restricted stock units, shares   3,129    
Ending balance at Jun. 30, 2019 60,344   543,249 (482,905)
Ending balance, shares at Jun. 30, 2019   24,300,264    
Net loss (2,289)     (2,289)
Stock compensation expense 1,011   1,011  
Ending balance at Sep. 30, 2019 59,066   544,260 (485,194)
Ending balance, shares at Sep. 30, 2019   24,300,264    
Beginning balance at Dec. 31, 2019 58,990   545,140 (486,150)
Beginning balance, shares at Dec. 31, 2019   24,302,504    
Net loss (3,169)     (3,169)
Stock compensation expense 992   992  
Vesting of restricted stock units (1,195)   (1,195)  
Vesting of restricted stock units, shares   336,951    
Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093 and issuance costs of $285 14,751   14,751  
Proceeds from underwritten public offering, net of underwriting discounts and commissions, shares   1,955,000    
Ending balance at Mar. 31, 2020 70,369   559,688 (489,319)
Ending balance, shares at Mar. 31, 2020   26,594,455    
Beginning balance at Dec. 31, 2019 58,990   545,140 (486,150)
Beginning balance, shares at Dec. 31, 2019   24,302,504    
Net loss (15,620)      
Ending balance at Sep. 30, 2020 60,887   562,657 (501,770)
Ending balance, shares at Sep. 30, 2020   26,865,309    
Beginning balance at Mar. 31, 2020 70,369   559,688 (489,319)
Beginning balance, shares at Mar. 31, 2020   26,594,455    
Net loss (5,698)     (5,698)
Stock compensation expense 1,007   1,007  
Issuance of restricted stock, shares   45,066    
Vesting of restricted stock units 16   16  
Vesting of restricted stock units, shares   5,629    
Proceeds from employee stock option exercises 869   869  
Proceeds from employee stock option exercises, shares   200,159    
Ending balance at Jun. 30, 2020 66,531   561,548 (495,017)
Ending balance, shares at Jun. 30, 2020   26,845,309    
Net loss (6,753)     (6,753)
Stock compensation expense 991   991  
Proceeds from employee stock option exercises 118   118  
Proceeds from employee stock option exercises, shares   20,000    
Ending balance at Sep. 30, 2020 $ 60,887   $ 562,657 $ (501,770)
Ending balance, shares at Sep. 30, 2020   26,865,309    
v3.20.2
Consolidated Statements of Stockholders' Equity (Parenthetical)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Equity [Abstract]  
Underwriting discounts and commissions $ 1,093
Issuance costs $ 285
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities:    
Net loss $ (15,620,000) $ (13,609,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 7,670,000 7,651,000
Amortization of debt issuance costs 6,000  
Provision for bad debt 171,000 0
Stock-compensation expense 2,990,000 2,885,000
Reduction in the carrying amount of operating lease right-of-use assets 719,000 702,000
Changes in operating assets and liabilities:    
Accounts receivable 12,011,000 1,203,000
Inventories (659,000) (6,141,000)
Prepaid expenses and other assets (485,000) (484,000)
Accounts payable (3,794,000) (2,865,000)
Accrued expenses (3,976,000) 826,000
Deferred revenue (3,563,000) 4,870,000
Operating lease liabilities (818,000) (743,000)
Other liabilities 566,000 (56,000)
Net cash used in operating activities (4,782,000) (5,761,000)
Cash flows from investing activities:    
Capital expenditures (2,600,000) (1,589,000)
Net cash used in investing activities (2,600,000) (1,589,000)
Cash flows from financing activities:    
Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093 15,036,000  
Issuance costs from underwritten public offering (285,000)  
Proceeds from issuance of long-term debt 3,686,000  
Issuance costs from long-term debt (27,000)  
Proceeds from (repayments of) borrowings under line of credit, net (3,123,000) 682,000
Prepayment proceeds under customer supply agreement   5,000,000
Proceeds from employee stock option exercises 987,000  
Payments made for employee restricted stock tax withholdings (1,211,000) (464,000)
Net cash provided by financing activities 15,063,000 5,218,000
Net increase (decrease) in cash 7,681,000 (2,132,000)
Cash and cash equivalents at beginning of period 3,633,000 3,327,000
Cash and cash equivalents at end of period 11,314,000 1,195,000
Supplemental disclosures of cash flow information:    
Interest paid 168,000 333,000
Income taxes paid 0 0
Supplemental disclosures of non-cash activities:    
Initial recognition of operating lease liabilities related to right-of-use assets   5,995,000
Right-of-use assets obtained in exchange for new operating lease liabilities 389,000 353,000
Changes in accrued capital expenditures $ (448,000) $ (430,000)
v3.20.2
Consolidated Statements of Cash Flows (Parenthetical)
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Statement Of Cash Flows [Abstract]  
Underwriting discounts and commissions, net $ 1,093
v3.20.2
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Description of Business and Basis of Presentation

(1) Description of Business and Basis of Presentation

Nature of Business

Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy infrastructure and building materials markets. In addition, the Company is developing high value applications for its aerogel technology in the electric vehicle market. The Company also conducts research related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research contracts. The Company has decided to cease efforts to secure additional funded research contracts and to wind down existing contract research activities.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC.

Liquidity

During the nine months ended September 30, 2020, the Company incurred a net loss of $15.6 million and used $4.8 million of cash in operations. On February 18, 2020, the Company received net proceeds of $14.8 million upon the completion of an underwritten public offering of the Company’s common stock. On May 4, 2020, Aspen Aerogels Rhode Island, LLC received loan proceeds of $3.7 million upon the execution of a promissory note pursuant to the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and administered by the U.S. Small Business Administration (SBA) (see note 7). The Company had cash and cash equivalents of $11.3 million, total debt of $3.7 million and no outstanding borrowings under its revolving line of credit as of September 30, 2020 (see note 8). After giving effect to $1.4 million of outstanding letters of credit, the amount available to the Company at September 30, 2020 under the revolving line of credit was $8.1 million. The existing revolving line of credit matures on April 28, 2021.

The Company is increasing investment in the research and development of next-generation aerogel products and manufacturing process technologies. The Company is developing aerogel products and technologies for the electric vehicle market. The commercial potential for the Company’s technology in the electric vehicle market is significant and could require the Company to hire additional personnel, incur additional operating expenses, and incur capital expenditures to expand aerogel manufacturing capacity, build an automated fabrication operation, and meet automotive quality system requirements, among other items.

The Company expects its existing cash balance and the amount anticipated to be available under the existing revolving line of credit will be sufficient to support current operating requirements and research and development activities. However, the Company plans to supplement its cash balance and available credit with debt financings, customer prepayments, technology licensing fees or equity financings to provide the capital necessary to fund the evolving commercial opportunity in the electric vehicle market and other strategic business opportunities.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2019 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 6, 2020.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of September 30, 2020 and the results of its operations and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the cash flows for the nine month periods then ended. The Company has evaluated subsequent events through the date of this filing.

The Company’s results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or any other period. In addition, the Company is uncertain of the ultimate duration and severity of the COVID-19 pandemic and recent global oil market volatility, and the impact they will have on the Company’s results of operations for the year ending December 31, 2020 or any other period.

v3.20.2
Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies

(2) Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements, which have been prepared in accordance with U.S. GAAP, include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, product warranty costs, inventory valuation, the carrying amount of property and equipment, stock-based compensation and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including current economic conditions, which are believed to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances warrant. Illiquid credit markets, volatile equity markets and declines in business investment can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts. All cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the nine months ended September 30, 2020, the Company recorded a charge for estimated customer uncollectible accounts receivable of $0.2 million. The Company did not record a charge for uncollectible accounts receivable during the nine months ended September 30, 2019.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details.

Leases

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). See note 9 for further details.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards, which requires a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility

of the underlying security, a risk-free interest rate and the expected term of the option. The fair value of restricted stock and restricted stock unit grants is determined using the closing trading price of the Company’s common stock on the date of grant. The fair value of awards containing market conditions is determined using a Monte Carlo simulation model based upon the nature of the conditions, the expected volatility of the underlying security, and other relevant factors.

During the nine months ended September 30, 2020, the Company granted 165,430 restricted common stock units (RSUs) with a grant date fair value of $1.3 million and non-qualified stock options (NSOs) to purchase 617,627 shares of common stock with a grant date fair value of $2.4 million to employees under the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan). The RSUs and NSOs granted to employees will vest over a three-year period. During the nine months ended September 30, 2020, the Company also granted 45,066 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase 58,902 shares of common stock with a grant date fair value of $0.2 million to its non-employee directors under the 2014 Equity Plan. The restricted common stock and NSOs granted to non-employee directors will vest upon the earlier of the date that is the one-year anniversary of the grant or the day prior to the Company’s annual meeting of stockholders to be held in 2021.

Stock-based compensation is included in cost of revenue or operating expenses, as applicable, and consists of the following:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Cost of product revenue

 

$

98

 

 

$

125

 

 

$

544

 

 

$

365

 

Research and development expenses

 

 

169

 

 

 

130

 

 

 

482

 

 

 

374

 

Sales and marketing expenses

 

 

179

 

 

 

168

 

 

 

524

 

 

 

461

 

General and administrative expenses

 

 

545

 

 

 

588

 

 

 

1,440

 

 

 

1,685

 

Total stock-based compensation

 

$

991

 

 

$

1,011

 

 

$

2,990

 

 

$

2,885

 

 

Pursuant to the “evergreen” provisions of the 2014 Equity Plan, the number of shares of common stock authorized for issuance under the plan automatically increased by 486,050 shares to 7,974,980 shares effective January 1, 2020.

As of September 30, 2020, 4,536,565 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the 2014 Equity Plan. In addition, as of September 30, 2020, 81,663 shares of common stock were reserved for issuance upon the exercise of outstanding stock options granted under the Company’s 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan). Any cancellations or forfeitures of the options outstanding under the 2001 Equity Plan will result in the shares reserved for issuance upon exercise of such options becoming available for grant under the 2014 Equity Plan. As of September 30, 2020, the Company has either reserved in connection with statutory tax withholdings or issued a total of 2,546,810 shares under the 2014 Equity Plan. As of September 30, 2020, there were 809,942 shares of common stock available for future grant under the 2014 Equity Plan.

Net Loss per Share

The Company calculates net loss per share of common stock based on the weighted-average number of shares of common stock outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and RSUs. Common equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.

Segments

Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company views its operations and manages its business as one operating segment.

Information about the Company’s total revenues, based on shipment destination or services location, is presented in the following table:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

9,736

 

 

$

15,191

 

 

$

31,501

 

 

$

41,415

 

International

 

 

14,459

 

 

 

20,234

 

 

 

45,754

 

 

 

51,455

 

Total

 

$

24,195

 

 

$

35,425

 

 

$

77,255

 

 

$

92,870

 

Warranty

The Company provides warranties for its products and records the estimated cost within cost of revenue in the period that the related revenue is recorded. The Company’s standard warranty period extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product.

The Company’s products may be utilized in systems that involve new technical demands and new configurations. Accordingly, the Company regularly reviews and assesses whether warranty reserves should be recorded in the period the related revenue is recorded. For an initial shipment of product for use in a system with new technical demands or new configurations and where the Company is unsure of meeting the customer’s specifications, the Company will defer the recognition of product revenue and related costs until written customer acceptance is obtained.

The Company did not record any warranty expense during the nine months ended September 30, 2020 and 2019. As of September 30, 2020, the Company had satisfied all warranty claims.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption to its consolidated financial statements.

Standards Implemented Since December 31, 2019

The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the nine months ended September 30, 2020.

Standards to be Implemented

The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its consolidated financial statements.

v3.20.2
Revenue from Contracts with Customers
9 Months Ended
Sep. 30, 2020
Revenue From Contract With Customer [Abstract]  
Revenue from Contracts with Customers

(3) Revenue from Contracts with Customers

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance

obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The Company determines standalone-selling prices based on the price at which the performance obligation is sold separately. If the standalone-selling price is not observable through past transactions, the Company estimates the standalone-selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at December 31, 2019 and did not enter into any contracts during the nine months ended September 30, 2020 that contained a significant financing component.

The Company records deferred revenue for product sales when (i) the Company has delivered products but other revenue recognition criteria have not been satisfied or (ii) payments have been received in advance of the completion of required performance obligations.

Shipping and Handling Costs

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in the cost of product revenue. The associated amount of revenue recognized includes the consideration to which the Company expects to be entitled to receive in exchange for incurring these shipping and handling costs.

Product Revenue

The Company generally enters into contracts containing one type of performance obligation. The Company recognizes product revenue when the performance obligation is satisfied, which is generally upon delivery according to contractual shipping terms within customer purchase orders.

The Company also enters into rebate agreements with certain customers. These agreements may be considered an additional performance obligation of the Company or variable consideration within a contract. Rebates are recorded as a reduction of revenue in the period the related product revenue is recognized. A corresponding liability is recorded as a component of deferred revenue on the consolidated balance sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes.

The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $0.1 million at both September 30, 2020 and December 31, 2019.

Subsea Projects

The Company manufactures and sells products that are designed for pipe-in-pipe applications in subsea oil production and are typically customized to meet customer specifications. Subsea products typically have no alternative use and contain an enforceable right to payment. Customer invoicing terms for subsea products are typically based on certain milestones within the production and delivery schedule. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, or over time utilizing the input method. The timing of revenue recognition is assessed on a contract-by-contract basis. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $8.3 million and $14.4 million, respectively, in connection with subsea projects.

Research Services

The Company performs research services under contracts with various government agencies and other institutions. These contracts generally have one type of performance obligation associated with the provision of research services including certain licenses to any resulting intellectual property. The Company records revenue using the percentage-of-completion method in two ways: (1) for firm-fixed-price contracts, the Company accrues that portion of the total contract price that is allocable on the basis of the Company’s estimates of costs incurred to date to total contract costs; and (2) for cost-plus-fixed-fee contracts, the Company records

revenue that is equal to total payroll cost incurred times a stated factor plus reimbursable expenses, to a stated upper limit. The primary cost under the Company’s research service contracts is the labor effort expended in completing the research. Typically, the only deliverable, other than the labor hours expended, is reporting research results to the customer or delivery of research grade aerogel products. Because the input measure of labor hours expended is also reflective of the output measure, it is a reliable means to measure the extent of progress toward completion. Revisions in cost estimates and fees during the course of the contract are reflected in the accounting period in which the facts that require the revisions become known. Contract costs and rates used to allocate overhead to contracts are subject to audit by the respective contracting government agency. Adjustments to revenue as a result of audit are recorded within the period they become known. To date, adjustments to revenue as a result of contracting agency audits have been insignificant.

Disaggregation of Revenue

In the following tables, revenue is disaggregated by primary geographical region and source of revenue:

 

 

 

Three Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

9,617

 

 

$

9,617

 

 

$

 

 

$

10,535

 

 

$

10,535

 

Canada

 

 

 

 

 

25

 

 

 

25

 

 

 

 

 

 

5,372

 

 

 

5,372

 

Europe

 

 

 

 

 

4,635

 

 

 

4,635

 

 

 

 

 

 

3,726

 

 

 

3,726

 

Latin America

 

 

 

 

 

182

 

 

 

182

 

 

 

 

 

 

601

 

 

 

601

 

U.S.

 

 

9,736

 

 

 

 

 

 

9,736

 

 

 

15,191

 

 

 

 

 

 

15,191

 

Total revenue

 

$

9,736

 

 

$

14,459

 

 

$

24,195

 

 

$

15,191

 

 

$

20,234

 

 

$

35,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

8,612

 

 

$

12,307

 

 

$

20,919

 

 

$

14,812

 

 

$

18,286

 

 

$

33,098

 

Subsea projects

 

 

868

 

 

 

2,152

 

 

 

3,020

 

 

 

 

 

 

1,948

 

 

 

1,948

 

Research services

 

 

256

 

 

 

 

 

 

256

 

 

 

379

 

 

 

 

 

 

379

 

Total revenue

 

$

9,736

 

 

$

14,459

 

 

$

24,195

 

 

$

15,191

 

 

$

20,234

 

 

$

35,425

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

33,373

 

 

$

33,373

 

 

$

 

 

$

25,044

 

 

$

25,044

 

Canada

 

 

 

 

 

715

 

 

 

715

 

 

 

 

 

 

7,278

 

 

 

7,278

 

Europe

 

 

 

 

 

9,590

 

 

 

9,590

 

 

 

 

 

 

16,713

 

 

 

16,713

 

Latin America

 

 

 

 

 

2,076

 

 

 

2,076

 

 

 

 

 

 

2,420

 

 

 

2,420

 

U.S.

 

 

31,501

 

 

 

 

 

 

31,501

 

 

 

41,415

 

 

 

 

 

 

41,415

 

Total revenue

 

$

31,501

 

 

$

45,754

 

 

$

77,255

 

 

$

41,415

 

 

$

51,455

 

 

$

92,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

29,039

 

 

$

39,394

 

 

$

68,433

 

 

$

35,727

 

 

$

40,585

 

 

$

76,312

 

Subsea projects

 

 

1,979

 

 

 

6,360

 

 

 

8,339

 

 

 

3,557

 

 

 

10,870

 

 

 

14,427

 

Research services

 

 

483

 

 

 

 

 

 

483

 

 

 

2,131

 

 

 

 

 

 

2,131

 

Total revenue

 

$

31,501

 

 

$

45,754

 

 

$

77,255

 

 

$

41,415

 

 

$

51,455

 

 

$

92,870

 

Contract Balances

The following table presents changes in the Company’s contract assets and contract liabilities during the nine months ended September 30, 2020:

 

 

 

Balance at December 31, 2019

 

 

Additions

 

 

Deductions

 

 

Balance at

September 30,

2020

 

 

 

(In thousands)

 

Contract assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsea projects

 

$

2,811

 

 

$

8,254

 

 

$

(8,659

)

 

$

2,406

 

Research services

 

 

172

 

 

 

250

 

 

 

(233

)

 

 

189

 

Total contract assets

 

$

2,983

 

 

$

8,504

 

 

$

(8,892

)

 

$

2,595

 

Contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

4,991

 

 

$

997

 

 

$

(4,122

)

 

$

1,866

 

Subsea projects

 

 

491

 

 

 

4,387

 

 

 

(4,469

)

 

 

409

 

Research services

 

 

138

 

 

 

94

 

 

 

(232

)

 

 

 

Prepayment liability

 

 

9,786

 

 

 

 

 

 

(218

)

 

 

9,568

 

Total contract liabilities

 

$

15,406

 

 

$

5,478

 

 

$

(9,041

)

 

$

11,843

 

 

During the nine months ended September 30, 2020, the Company recognized $4.6 million of revenue that was included in deferred revenue at the beginning of the period.

A contract asset is recorded when the Company satisfies a performance obligation by transferring a promised good or service and has earned the right to consideration from its customer. These assets may represent a conditional or unconditional right to consideration and are included within accounts receivable on the consolidated balance sheets.

A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. 

v3.20.2
Inventories
9 Months Ended
Sep. 30, 2020
Inventory Disclosure [Abstract]  
Inventories

(4) Inventories

Inventories consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Raw materials

 

$

4,847

 

 

$

4,334

 

Finished goods

 

 

4,580

 

 

 

4,434

 

Total

 

$

9,427

 

 

$

8,768

 

v3.20.2
Property, Plant and Equipment, Net
9 Months Ended
Sep. 30, 2020
Property Plant And Equipment [Abstract]  
Property, Plant and Equipment, Net

(5) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

Useful

 

 

 

2020

 

 

2019

 

 

life

 

 

 

(In thousands)

 

 

 

 

 

Construction in progress

 

$

977

 

 

$

1,309

 

 

 

 

Buildings

 

 

24,016

 

 

 

24,016

 

 

30 years

 

Machinery and equipment

 

 

124,681

 

 

 

122,485

 

 

3-10 years

 

Computer equipment and software

 

 

8,737

 

 

 

8,556

 

 

3 years

 

Total

 

 

158,411

 

 

 

156,366

 

 

 

 

 

Accumulated depreciation

 

 

(110,312

)

 

 

(102,749

)

 

 

 

 

Property, plant and equipment, net

 

$

48,099

 

 

$

53,617

 

 

 

 

 

 

Depreciation expense was $7.7 million for both the nine months ended September 30, 2020 and 2019.

v3.20.2
Accrued Expenses
9 Months Ended
Sep. 30, 2020
Payables And Accruals [Abstract]  
Accrued Expenses

(6) Accrued Expenses

Accrued expenses consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Employee compensation

 

$

2,401

 

 

$

6,472

 

Other accrued expenses

 

 

1,680

 

 

 

1,585

 

Total

 

$

4,081

 

 

$

8,057

 

v3.20.2
Debt
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Debt

(7) Debt

On May 1, 2020, Aspen Aerogels Rhode Island, LLC (Borrower) executed a promissory note (Note) in favor of Northeast Bank to receive an unsecured loan in the principal amount of $3,685,800 (the PPP Loan) pursuant to the Paycheck Protection Program (PPP) established by the CARES Act, as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act), and administered by the SBA. The Borrower conferred with representatives of the SBA prior to finalizing the PPP Loan. The PPP Loan was subsequently sold by Northeast Bank to The Loan Source, Inc. (PPP Investor), a secondary market investor.

The PPP Loan carries an interest rate of 1% per year and matures two years from the date of the Note. The PPP Loan indebtedness may be forgiven in whole or in part upon application by the Borrower to the PPP Investor. The PPP Investor will determine to what extent the PPP Loan is eligible for forgiveness, subject to SBA guidelines and other regulations, based on the use of loan proceeds for payroll costs, payment of interest on covered mortgage obligations, rent and utility costs over either an eight-week or 24-week period, at the Borrower’s option, following the Borrower’s receipt of the loan proceeds. Upon the Borrower’s application for forgiveness, the SBA will review the Borrower’s eligibility, use of proceeds and other certifications in connection with the application for the PPP Loan. Upon such review, the SBA may approve or deny the Borrower’s loan forgiveness application, in whole or part. As of September 30, 2020, the Borrower had not applied for forgiveness.

If the Borrower has not applied for forgiveness within ten months from the end of the 24-week period following receipt of the loan proceeds, the Borrower shall then be required make payments of principal and accrued interest in equal monthly installments over the remaining term of the loan. In addition, the Flexibility Act permits the Borrower and the PPP Investor to mutually agree to extend the term of the PPP Loan to five years from the date of the Note. The Borrower may repay the PPP Loan at any time without penalty.

While the Borrower is not required to apply for forgiveness of the PPP Loan, upon application for forgiveness, the Borrower may not receive forgiveness of the PPP Loan in whole or in part. In addition, the amount of potential loan forgiveness may be reduced if the Borrower fails to maintain employee and salary levels during the applicable eight-week or 24-week period following receipt of the loan proceeds. If the Borrower applies for forgiveness, and the PPP Loan is not forgiven in whole or only forgiven in part, the Borrower shall then be required to immediately begin making payments of principal and accrued interest in equal monthly installments over the remaining term of the loan for any post-forgiveness balance outstanding.

The Note contains customary events of default relating to, among other things, payment defaults, breaches of representations and warranties, and defaults under any loan or agreement with another debtor, including the Company’s credit facility with SVB, to the extent the PPP Investor believes such default may materially affect the Borrower’s ability to repay the PPP Loan. The occurrence of an event of default, if not cured, may result in the Borrower’s repayment of the PPP Loan prior to maturity.

The Borrower has used the proceeds of the PPP Loan to support ongoing operations and to sustain staffing levels in its East Providence, Rhode Island manufacturing facility despite the unfavorable impact of the COVID-19 pandemic and volatile energy markets on its business.

 

 

 

Long-term debt consists of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Long-term debt, principal

 

$

3,686

 

 

$

 

Current portion of long-term debt

 

 

(367

)

 

 

 

Debt issuance costs, net of accumulated amortization

 

 

(21

)

 

 

 

Long-term debt

 

$

3,298

 

 

$

 

The schedule of required principal payments remaining on long-term debt outstanding as of September 30, 2020 is as follows:

 

Year

 

Principal

Payments

 

 

 

(In thousands)

 

2020 (excluding the nine months ended September 30, 2020)

 

$

 

2021

 

 

1,609

 

2022

 

 

2,077