UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. )
Filed by the Registrant x
Filed by a Party other than the
Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under § 240.14a-12 |
Aspen
Aerogels, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check
all boxes that apply):
x |
No fee required |
¨ |
Fee paid previously with preliminary materials |
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
Aspen Aerogels, Inc.
30 Forbes Road, Building
B
Northborough, Massachusetts
01532
SUPPLEMENT DATED MAY 13,
2024
TO PROXY STATEMENT
DATED APRIL 10, 2024
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30,
2024
On April 10, 2024, Aspen Aerogels, Inc.
(“Aspen” or the “Company”) filed a definitive proxy statement (the “Proxy Statement”) with the Securities
and Exchange Commission for the Company’s Annual Meeting of Stockholders scheduled for May 30, 2024 (the “Annual Meeting”),
and on May 6, 2024, the Company filed a supplement to the Proxy Statement solely to correct an inadvertent error in the number of shares
of common stock outstanding as of the close of business on April 3, 2024, the record date for the Annual Meeting. The Company is filing
this additional supplement to its Proxy Statement to provide additional information for consideration by stockholders in voting on the
proposals set out in the Proxy Statement.
Dear Aspen Aerogels, Inc. Stockholders:
We are writing to encourage you to vote in
accordance with the recommendations of our Board of Directors (the “Board”) on all of the proposals in the Proxy Statement.
In particular, for the reasons described below and as set out in the Compensation Discussion and Analysis (“CD&A”) beginning
on page 28 of the Proxy Statement, we encourage you to vote “FOR” Proposal 3, the advisory vote on approval of executive compensation
as disclosed in the Proxy Statement (the “Say-on-Pay Proposal”).
You may have seen recommendations from the
proxy advisory firms Institutional Shareholder Services and Glass Lewis that stockholders vote “AGAINST” the Say-on-Pay Proposal.
We strongly disagree with those recommendations and believe that a vote “FOR” the Say-on-Pay Proposal is warranted, for the
reasons described below.
The
Company’s 2023 Financial and Operational Performance was Strong (and Strong Performance has Continued in the First Quarter of 2024)
Aspen is an aerogel technology company that
designs, develops and manufactures innovative, high-performance aerogel materials used primarily in the energy industrial, sustainable
insulation materials and electric vehicle (“EV”) markets. Among other opportunities, we believe that Aspen has a tremendous opportunity
for continued growth as producer of the leading material for managing thermal issues in EVs. Capturing that opportunity will require Aspen
to attract, retain and incentivize the high-performing leaders who can drive the development and successful execution of the Company’s
strategies in a dynamic market environment. We also firmly believe that the evidence shows that Aspen’s executive compensation program
has been effectively structured to provide our executives with the right incentives to help the Company to deliver on our stated goals.
In this regard, in fiscal 2023, Aspen achieved its previously announced goal of effectively doubling its revenues in two years (with $238.7
million in consolidated revenue for 2023, as compared to $121.6 million for 2021). Aspen has also delivered progress on its guidance to
investors targeting increased gross margins and Adjusted EBITDA margins on a path toward profitability, as shown in the Company’s
performance results from the 2023 fiscal year and the first quarter of fiscal 2024.
During the 2023 fiscal year, Aspen focused
on driving top line growth from both our Thermal Barrier and Energy Industrial business segments, improving productivity and yields, maintaining
careful control of operating expenses, optimizing the timing of capital expenditures, and accelerating on the path to near-term profitability.
The Company’s performance results during 2023 included the following:
| · | Grew record consolidated revenue 32% year-over-year to $238.7 million. |
| · | Generated record PyroThin®
thermal barrier revenue of $110.1 million, up 98% year-over-year. |
| · | Delivered Energy Industrial revenues of $128.6 million, despite being capacity constrained, and initiated deliveries from our external
manufacturing facility. |
| · | Recorded 2023 gross margins of 24%, with a quarterly progression from 11% in Q1 to 17% in Q2, 23% in Q3, and 35% in Q4. |
| · | Delivered record company profitability in Q4 2023, where $84.2 million in quarterly revenue enabled gross margins of 35% and operating
income of $1.4 million. |
| · | Secured PyroThin award with Audi, a luxury brand of the Volkswagen Group, to supply a vehicle platform with start of vehicle production
expected in 2025. |
| · | Awarded PyroThin contract from Scania, a commercial vehicle division of the Volkswagen Group, for a commercial truck nameplate with
start of production expected in 2024. |
| · | Announced PyroThin award from The Automotive Cells Company (“ACC”), a battery cell joint-venture between Stellantis N.V.,
Saft-TotalEnergies, and Mercedes-Benz, to supply the Stellantis STLA Medium vehicle platform with an expected start of production in 2025. |
| · | Announced the right-timing of our second aerogel manufacturing facility in Statesboro, Georgia to better align with the expected ramp
of our EV customers. |
| · | Completed $75 million registered direct offering of common stock at $12.375 per share in December 2023. |
| · | Ended the year with cash and equivalents of $139.7 million and believe that we are fully funded to deliver on our near-term operating
plans. |
| · | Invited into the formal
due diligence and term sheet negotiation phase by the U.S. Department of Energy (“DOE”)
Loan Programs Office (“LPO”) for the Company’s pending application seeking
a loan pursuant to the DOE LPO’s Advanced Technology Vehicles Manufacturing (“ATVM”)
for re-accelerating construction of our planned second aerogel manufacturing plant in Statesboro,
Georgia.1 |
| · | For the second consecutive year, Aspen was awarded a Silver Medal rating from EcoVadis for its overall sustainability scorecard, placing
Aspen in the 85th percentile of companies assessed by EcoVadis. |
Further, the Company’s strong performance
has continued during the first quarter of fiscal 2024, and we believe that the incentives created by our executive compensation program
have contributed to our continued success. On May 1, 2024, the Company announced its financial results for the first quarter of fiscal
2024 and discussed business developments, highlights of which included the following:
| · | Company revenue of $94.5 million, up 12% quarter-over-quarter (QoQ) and 107% year-over-year (YoY). |
| · | Thermal Barriers: $65.4 million of revenue, up 23% QoQ and 459% YoY. |
| · | Energy Industrial: $29.1 million of supply constrained revenue, down 7% QoQ and down 14% YoY. |
| · | Energy Industrial segment on path to deliver over $150 million of revenue in 2024, shipped $14.6 million of revenue from our external
manufacturing facility in Q1. |
1 The DOE’s continued
evaluation of the application is not an assurance that the terms and conditions of a term sheet will be consistent with terms proposed
by the applicant. The foregoing matters are wholly dependent on the results of DOE review and evaluation, and the DOE’s determination
whether to proceed.
| · | Delivered gross margins of 37%, a 2-percentage point improvement QoQ and 26-percentage point improvement YoY. |
| · | Net loss was $1.8 million, compared to a net loss of $16.8 million in the first quarter of 2023. Net loss per share was $0.02, compared
to a net loss per share of $0.24 in the first quarter of 2023. |
| · | Adjusted EBITDA2 of $12.9 million, a $3.8 million improvement
or 42% QoQ and $26.9 million improvement YoY. |
| · | Operating income of $2.4 million, a $1.1 million improvement or 76% QoQ and $21.3 million improvement YoY. |
| · | Ended first quarter of 2024 with cash and equivalents of $101.5 million. |
| · | Received coveted Automotive News PACE Award for PyroThin cell-to-cell (“C2C”) barrier platform; Automotive News’ PACE program
is recognized globally as the most prestigious innovation award for automotive suppliers. |
| · | Also presented with a PACE Innovation Partnership Award, recognizing Aspen’s collaboration with General Motors centered on our
PyroThin C2C barriers as the thermal runaway solution for GM’s Ultium battery platform. |
Our 2023 Corporate Bonus Plan Delivered
Rewards to our Named Executive Officers Consistent with our Strong 2023 Performance
The fundamental objective of the Company’s
executive compensation program, as designed by the Compensation and Leadership Development Committee (the “Compensation Committee”)
and the Board in consultation with the Compensation Committee’s independent compensation consultant, Meridian Compensation Partners,
LLC (“Meridian”), is to attract, retain and motivate talented executives who are critical to our continued growth and success
of building a profitable business, and to align the interests of these executives with those of our stockholders. Consistent with that
objective, a significant portion of the target total direct compensation of our named executive officers for the 2023 fiscal year (76%
for the CEO and an average of 63% for the other named executive officers) was structured as at-risk compensation.
Our Corporate Bonus Plan is one key component
of at-risk compensation for our named executive officers, providing an annual cash incentive opportunity based on the achievement of applicable
performance objectives. Under the 2023 Corporate Bonus Plan, the Compensation Committee and the Board established rigorous financial performance
goals based on the achievement of specified levels of Adjusted EBITDA (to which 75% of the target bonus opportunity was allocated) and
revenue (to which 25% of the target bonus opportunity was allocated), with the maximum potential award based on the achievement of the
financial performance goals limited to 225% of target. Consistent with the Company’s stage in its lifecycle and our objective of
driving progress on a path toward profitability, the Adjusted EBITDA goal was established at a target level (in thousands) of $(53,578).
As described in the Proxy Statement, actual Adjusted EBITDA performance greatly exceeded that goal at $(17,046), and, based on the combination
of outperformance on the Adjusted EBITDA performance goal and revenue achievement near target, the maximum bonus amounts were earned for
fiscal 2023.
The 2023 Corporate Bonus Plan also included
a Management by Objective (or “MBO”) component based on the achievement of strategic performance goals, which served as a
potential modifier of up to 10% (positive or negative) to the amount earned based on the achievement of financial performance goals. As
originally established by the Compensation Committee, the MBO goals, consistent with Company strategy at the time, included a goal based
on securing financing necessary to complete the Company’s planned second aerogel manufacturing facility in Statesboro, Georgia (“Plant II”).
When the Company subsequently announced a major strategic pivot to right-timing the construction of Plant II, however, the Compensation
Committee adjusted this MBO performance goal in order to focus our executives on constraining spending on Plant II while preserving both
the value of existing spending and the ability to re-start Plant II construction to meet projected future demand. In approving this adjustment,
the Compensation Committee maintained alignment between our executives’ Corporate Bonus Plan opportunities and the Company’s
key strategic objectives.
2
Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation
of net loss to Adjusted EBITDA, please see Appendix A, attached.
Based on the Company’s strong performance
during fiscal 2023, especially its outperformance on the most heavily weighted goal of Adjusted EBITDA, our named executive officers earned
annual cash incentive payouts at the maximum level under the 2023 Corporate Bonus Plan. We believe that our 2023 performance results and
the corresponding payouts under the 2023 Corporate Bonus Plan demonstrate that our executive compensation program is working as intended
for the benefit of the Company and its stockholders. We further note that the Compensation Committee and the Board regularly evaluate
the Company’s executive compensation program, and changes are made from time to time that are determined to be appropriate. In that
regard, we note here for the consideration of our stockholders that, in a change from the design of the 2023 Corporate Bonus Plan, the
Company’s 2024 Corporate Bonus Plan includes maximum payout levels that are calculated independently for each applicable financial
performance goal.
Special Stock Option Grants Awarded
in September 2023 Promote the Retention of Key Employees, Incentivize Long-Term Stockholder Value Creation, and Strengthen Alignment with
Stockholder Interests
As described in the Proxy Statement, on September
7, 2023, the Compensation Committee and the Board approved special retention incentive grants of stock options to certain of our named
executive officers and other employees. These stock option awards were carefully designed by the Compensation Committee and the Board,
after considering the advice of Meridian, to provide important retention incentives for key employees, to incentivize those individuals
to drive long-term value creation for stockholders, and to strengthen their alignment with the interests of stockholders. The need for
and size of the special stock option awards was specifically informed by analysis from Meridian regarding the retention value of outstanding
unvested equity awards held by Aspen executives relative to typical market standards. After considering that analysis, the Compensation
Committee and the Board determined that the special stock option awards were critical to address retention and incentive challenges for
key members of the Company’s leadership team.
Further, to emphasize the long-term incentive
value of the awards, the special stock option awards were granted with a three-year cliff vesting schedule, so that the options will not
become exercisable at all until September 7, 2026 and will have value at and after that time based upon growth in our stock price after
the date of grant of the options. This special vesting schedule differs from the three-year graded vesting schedule applicable to stock
options granted under the Company’s regular annual long-term incentive program, in recognition of the importance of retaining and
appropriately incentivizing key executive leadership over the next three years, as we continue to execute our multi-year strategy to build
a profitable company and create value for our investors and other stakeholders. We believe that the special stock option grants will serve
as a significant incentive to focus the grantees on driving the growth that will be critical to achieving our long-term strategies.
We are Committed to the Responsible
Use of Equity Compensation Awards
As described in the CD&A section of the
Proxy Statement, in March 2024, the Compensation Committee approved the cancellation of the outstanding, unearned portion of certain performance-based
restricted stock awards that had been granted as special equity incentive grants (“SEIG Awards”) to the named executive officers
and certain other key employees on June 29, 2021 (to Mr. Young) and on June 2, 2022 (to the other applicable employees, including the
other named executive officers). By cancelling the unearned portion of the SEIG Awards, which the Compensation Committee determined to
have ceased to have incentive value for the grantees based on market conditions, we were able to add the shares subject to the cancelled
SEIG Awards to the share reserve under the Company’s 2023 Equity Incentive Plan, in a responsible exercise of stewardship of stockholder
value.
The Company Greatly Values Feedback
from Stockholders, and will Continue to Take Stockholder Feedback into Account in its Ongoing Evaluation of our Executive Compensation
Program
The Company places a high value on feedback
received from stockholders on a variety of issues, including (but not limited to) executive compensation matters. Through our stockholder
engagement efforts, we have identified areas of concern to our stockholders and have taken action to address those concerns, such as by
expanding the disclosure provided in our proxy statement regarding our Corporate Bonus Plan.
Further, the Company is engaged in an ongoing
review of its executive compensation program, which will include, among other considerations, the evaluation of our short-term and long-term
incentive compensation programs for potential improvements. In that regard, we look forward to continued engagement with our stockholders,
and we will take the feedback we receive into account as we continue to evaluate our executive compensation program.
On behalf of the Board, we strongly encourage
you to vote in accordance with the Board’s recommendations on all of the proposals in the Proxy Statement, including a vote “FOR”
the Say-on-Pay Proposal.
Sincerely,
/s/
William P. Noglows |
|
/s/
Mark L. Noetzel |
William
P. Noglows |
|
Mark L.
Noetzel |
Chairperson
of the Board of Directors |
|
Chairperson
of the Compensation and Leadership
Development Committee of the Board of Directors |
Appendix A
Non-GAAP Financial Measures
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.
We use
Adjusted EBITDA:
| · | as a measure of operating performance because it does not include the impact of items that we do not consider indicative of our core
operating performance; |
| · | for planning purposes, including the preparation of our annual operating budget; |
| · | to allocate resources to enhance the financial performance of our business; and |
| · | as a performance measure used under our bonus plan. |
We also believe that the presentation of Adjusted
EBITDA provides useful information to investors with respect to our results of operations and in assessing the performance and value of
our business. Various measures of EBITDA are widely used by investors to measure a company’s operating performance without regard
to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital
structures and the methods by which assets were acquired.
Although measures similar to Adjusted EBITDA
are frequently used by investors and securities analysts in their evaluation of companies, we understand that Adjusted EBITDA has limitations
as an analytical tool, and you should not consider it in isolation or as a substitute for net income (loss), income (loss) from operations,
net cash provided by (used in) operating activities or an analysis of our results of operations as reported under U.S. GAAP. Some of these
limitations are:
| · | Adjusted EBITDA does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual
commitments; |
| · | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| · | Adjusted EBITDA does not reflect stock-based compensation expense; |
| · | Adjusted EBITDA does not reflect our income tax expense or cash requirements to pay our income taxes; |
| · | Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments
on our debt; |
| · | although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated, amortized or impaired
will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; and |
| · | other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting their usefulness as a comparative
measure. |
Because of these limitations, our Adjusted
EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure
of cash available for us to meet our obligations.
The following table presents a reconciliation
of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the year ended December 31, 2023:
| |
Year Ended December 31, | |
| |
2023 | |
| |
| ($ in thousands) | |
Net loss | |
$ | (45,811 | ) |
Depreciation and amortization | |
| 15,318 | |
Stock-based compensation (1) | |
| 10,954 | |
Gain on the extinguishment of debt | |
| — | |
Other (income) expense | |
| (3,392 | ) |
Adjusted EBITDA | |
$ | (22,931 | ) |
| (1) | Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of restricted stock
units and vesting and modification of restricted common stock. |
The following table presents a reconciliation
of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:
| |
Three Months Ended | |
| |
March 31, | |
| |
2024 | | |
2023 | |
| |
(In thousands) | |
Net loss | |
$ | (1,835 | ) | |
$ | (16,796 | ) |
Depreciation and amortization | |
| 5,786 | | |
| 2,704 | |
Stock-based compensation(1) | |
| 4,706 | | |
| 2,267 | |
Other expense (income) | |
| 3,515 | | |
| (2,112 | ) |
Income tax expense | |
| 756 | | |
| — | |
Adjusted EBITDA | |
$ | 12,928 | | |
$ | (13,937 | ) |
| (1) | 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. |
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