Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended March 31, 2015
OR
 
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from                      to                     
Commission file number: 001-36481

ASPEN AEROGELS, INC.
(Exact name of registrant as specified in its charter)

 
			
Delaware	 	04-3559972	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	

30 Forbes Road, Building B
Northborough, Massachusetts	 	01532	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (508) 691-1111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x      No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x      No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	 	¨	  	Accelerated filer	 	¨	
				
Non-accelerated filer	 	x   (Do not check if a smaller reporting company)	  	Smaller reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
As of April 30, 2015, the registrant had 22,992,273 shares of common stock outstanding.

 

Table of Contents
 ASPEN AEROGELS, INC.
INDEX TO FORM 10-Q

 	 	 	  	Page	 	
			
	 	PART I FINANCIAL INFORMATION	  				
			
Item 1.	 	Financial Statements	  	 	3	  	
			
	 	Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014 (audited)	  	 	3	 	
			
	 	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2015 and 2014	  	 	4	  	
			
	 	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2015 and 2014	  	 	5	  	
			
	 	Notes to Consolidated Financial Statements (unaudited)	  	 	6	  	
			
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	13	  	
			
Item 3.	 	Quantitative and Qualitative Disclosures About Market Risk	  	 	23	  	
			
Item 4.	 	Controls and Procedures	  	 	23	  	
			
	 	PART II OTHER INFORMATION	  				
			
Item 1.	 	Legal Proceedings	  	 	24	  	
			
Item 1A.	 	Risk Factors	  	 	24	  	
			
Item 2.	 	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	24	  	
			
Item 3.	 	Defaults Upon Senior Securities	  	 	25	  	
			
Item 4.	 	Mine Safety Disclosures	  	 	25	  	
			
Item 5.	 	Other Information	  	 	25	  	
			
Item 6.	 	Exhibits	  	 	25	  	
		
SIGNATURES	  	 	26	  	
Trademarks, Trade Names and Service Marks
We own or have rights to use “Aspen Aerogels,” “Cryogel,” “Pyrogel,” “Spaceloft,” the Aspen Aerogels logo and other trademarks, service marks and trade names of Aspen Aerogels, Inc. appearing in this quarterly report on Form 10-Q. Solely for convenience, the trademarks, service marks and trade names referred to in this report are without the ® and TM symbols, but such references are not intended to indicate, in any way, that the owner thereof will not assert, to the fullest extent under applicable law, such owner’s rights to these trademarks, service marks and trade names. This report contains additional trademarks, service marks and trade names of other companies, which, to our knowledge, are the property of their respective owners.
 
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PART I — FINANCIAL INFORMATION
 
 Item 1.	Financial Statements.	
ASPEN AEROGELS, INC.
 Consolidated Balance Sheets
(Unaudited)

 	  	March 31,
2015	 	 	December 31,
2014	 	
 	  	(In thousands, except
share and per share data)	 	
Assets	  				 				
Current assets:	  				 				
Cash and cash equivalents	  	$	33,010	 	 	$	49,719	 	
Marketable securities	  	 	2,501	  	 	 	—  	  	
Accounts receivable, net of allowance for doubtful accounts	  	 	19,260	 	 	 	17,924	 	
Inventories	  	 	5,905	 	 	 	4,897	 	
Prepaid expenses and other current assets	  	 	1,195	 	 	 	836	 	
	  	 	 	 	 	 	 	 	
Total current assets		 	61,871	 		 	73,376	 	
Property, plant and equipment, net		 	79,520	 		 	71,492	 	
Other assets		 	130	 		 	175	 	
	  	 	 	 	 	 	 	 	
Total assets		$	141,521	 		$	145,043	 	
	  	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity									
Current liabilities:									
Capital leases, current portion		$	77	 		$	76	 	
Accounts payable		 	13,390	 		 	14,202	 	
Accrued expenses		 	3,325	 		 	5,588	 	
Deferred revenue		 	1,362	 		 	292	 	
Other current liabilities		 	50	 		 	50	 	
	  	 	 	 	 	 	 	 	
Total current liabilities		 	18,204	 		 	20,208	 	
Capital leases, excluding current portion		 	69	 		 	89	 	
Other long-term liabilities		 	1,027	 		 	1,030	 	
	  	 	 	 	 	 	 	 	
Total liabilities		 	19,300	 		 	21,327	 	
Commitments and contingencies (Note 9)									
Stockholders’ equity:									
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2015 and December 31, 2014;		 	—  	 		 	—  	 	
Common stock, $0.00001 par value; 125,000,000 shares authorized, 22,992,273 shares issued and outstanding at March 31, 2015 and at December 31, 2014		 	—  	 		 	—  	 	
Additional paid-in capital		 	524,095	 		 	522,800	 	
Accumulated deficit		 	(401,874	) 		 	(399,084	) 	
	  	 	 	 	 	 	 	 	
Total stockholders’ equity		 	122,221	 		 	123,716	  	
	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity		$	141,521	 		$	145,043	 	
	  	 	 	 	 	 	 	 	
See accompanying notes to unaudited consolidated financial statements.
 
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ASPEN AEROGELS, INC.
 Consolidated Statements of Operations
(Unaudited)

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	 	2014	 	
 	  	(In thousands, except share and per
share data)	 	
Revenue:	  				 				
Product	  	$	23,211	 	 	$	21,493	 	
Research services	  	 	289	 	 	 	870	 	
	  	 	 	 	 	 	 	 	
Total revenue		 	23,500	 		 	22,363	 	
Cost of revenue:									
Product		 	18,845	 		 	18,541	 	
Research services		 	141	 		 	476	 	
	  	 	 	 	 	 	 	 	
Gross profit		 	4,514	 		 	3,346	 	
Operating expenses:									
Research and development		 	1,304	 		 	1,284	 	
Sales and marketing		 	2,332	 		 	2,238	 	
General and administrative		 	3,623	 		 	2,722	 	
	  	 	 	 	 	 	 	 	
Total operating expenses		 	7,259	 		 	6,244	 	
	  	 	 	 	 	 	 	 	
Loss from operations		 	(2,745	)		 	(2,898	)	
	  	 	 	 	 	 	 	 	
Interest (expense) income		 	(45	)		 	(16,151	)	
	  	 	 	 	 	 	 	 	
Total interest (expense) income		 	(45	)		 	(16,151	)	
	  	 	 	 	 	 	 	 	
Net loss		$	(2,790	)		$	(19,049	)	
	  	 	 	 	 	 	 	 	
Net loss attributable to common stockholders		$	(2,790	)		$	(19,049	)	
	  	 	 	 	 	 	 	 	
Net loss attributable to common stockholders per share:									
Basic		$	(0.12	)		$	(6,066.56	)	
	  	 	 	 	 	 	 	 	
Diluted		$	(0.12	)		$	(6,066.56	)	
	  	 	 	 	 	 	 	 	
Weighted-average common shares outstanding:									
Basic and diluted		 	22,992,273	 		 	3,140	 	
	  	 	 	 	 	 	 	 	
See accompanying notes to unaudited consolidated financial statements.
 
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ASPEN AEROGELS, INC.
 Consolidated Statements of Cash Flows
(Unaudited)

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	 	2014	 	
 	  	(In thousands)	 	
Cash flows from operating activities:	  				 				
Net loss	  	$	(2,790	)	 	$	(19,049	) 	
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:	  				 				
Depreciation and amortization	  	 	2,184	 	 	 	2,631	 	
Loss on disposal of assets	  	 	—  	  	 	 	15	 	
Debt issuance costs	  	 	—  	  	 	 	17	 	
Accretion of debt to fair value	  	 	—  	  	 	 	16,071	 	
Stock compensation expense	  	 	1,295	 	 	 	339	 	
Other	  	 	—  	  	 	 	(3	) 	
Changes in operating assets and liabilities:	  				 				
Accounts receivable	  	 	(1,336	)	 	 	2,509	  	
Inventories	  	 	(1,008	)	 	 	(767	) 	
Prepaid expenses and other assets	  	 	(339	)	 	 	65	 	
Accounts payable	  	 	(471	)	 	 	415	  	
Accrued expenses	  	 	(2,263	)	 	 	(1,923	)	
Deferred revenue	  	 	1,070	 	 	 	459	  	
	  	 	 	 	 	 	 	 	
Net cash (used in) provided by operating activities		 	(3,658	)		 	779	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:									
Capital expenditures		 	(10,531	)		 	(1,108	) 	
Purchases of marketable securities		 	(2,501	)		 	—  	  	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities		 	(13,032	)		 	(1,108	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:									
Borrowings under line of credit		 	—  	  		 	4,500	 	
Repayments under line of credit		 	—  	  		 	(4,000	)	
Financing costs		 	—  	  		 	(17	)	
Repayment of obligations under capital lease		 	(19	)		 	(23	) 	
Proceeds from issuance of common stock		 	—  	  		 	2	  	
Deferred offering costs		 	—  	  		 	(552	) 	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities		 	(19	)		 	(90	)	
	  	 	 	 	 	 	 	 	
Net decrease in cash and cash equivalents		 	(16,709	)		 	(419	)	
Cash and cash equivalents at beginning of period		 	49,719	 		 	1,574	 	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period		$	33,010	 		$	1,155	 	
	  	 	 	 	 	 	 	 	
Supplemental disclosures of cash flow information:					
Interest paid		$	45	 		$	62	 	
	  	 	 	 	 	 	 	 	
Income taxes paid		$	—  	  		$	—  	  	
	  	 	 	 	 	 	 	 	
Supplemental disclosures of non-cash activities:					
Changes in accrued capital expenditures		$	(341	)		$	(260	)	
	  	 	 	 	 	 	 	 	
Capitalized interest		$	—  	  		$	17	 	
	  	 	 	 	 	 	 	 	
Unpaid deferred initial public offering costs		$	—  	  		$	1,180	 	
	  	 	 	 	 	 	 	 	
See accompanying notes to unaudited consolidated financial statements.
 
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ASPEN AEROGELS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Description of Business and Basis of Presentation
Nature of Business
Aspen Aerogels, Inc. (the Company) is an energy technology company that designs, develops and manufactures innovative, high-performance aerogel insulation. The Company also conducts research and development related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research and development contracts.
The Company maintains its corporate offices in Northborough, Massachusetts. The Company has two wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC and Aspen Aerogels Germany, GmbH.
On June 18, 2014, the Company completed an initial public offering (IPO) of 7,500,000 shares of its common stock at a public offering price of $11.00 per share. The Company received net proceeds of $74.7 million after deducting underwriting discounts and commissions of $4.3 million and offering expenses of approximately $3.5 million. Upon the closing of the offering, all of the Company’s then-outstanding (i) warrants to purchase Series C preferred stock (the “Series C warrants”) were subject to an automatic net cashless exercise, (ii) convertible preferred stock (including the shares of Series C preferred stock issued upon the automatic net cashless exercise of Series C warrants) automatically converted into 115,982 shares of common stock, and (iii) Convertible Notes and Senior Convertible Notes (see note 7) automatically converted into 15,319,034 shares of common stock.
Prior to the closing of the offering, the Company completed a 1-for-824.7412544 reverse stock split of its common stock. All common shares and related per share amounts in the financial statements and notes have been adjusted retroactively to reflect the reverse stock split.
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, 2014 (the Annual Report), filed with the Securities and Exchange Commission on March 13, 2015.
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 March 31, 2015 and the results of its operations and cash flows for the three months ended March 31, 2015 and 2014. The Company has evaluated events through the date of this filing.
The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or any other period.
There have been no changes to our significant accounting policies described in the Annual Report that have had a material impact on our consolidated financial statements and notes thereto.
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.
 
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(2) Significant Accounting Policies
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, inventory valuation, the carrying amount of property and equipment, fair value of debt and capital stock, 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 the current economic environment, which it believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets and declines in business investment 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.
Marketable Securities
Marketable securities consist primarily of marketable debt securities which are classified as available-for-sale and are carried at fair value at March 31, 2015. The Company held no marketable securities at December 31, 2014. The unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive income (loss). The Company considers all highly liquid investments with maturities of 90 days or less at the time of purchase to be cash equivalents, and investments with maturities of greater than 90 days at the time of purchase to be marketable securities. When a marketable security incurs a significant unrealized loss for a sustained period of time, the Company will review the instrument to determine if it is other-than-temporarily impaired. If it is determined that an instrument is other-than-temporarily impaired, the Company will record the unrealized loss in the consolidated statement of operations.
The following table classifies our marketable securities by contractual maturities as of March 31, 2015 (in thousands):

Description	  	Fair Value	 	
Due in one year or less	  	$	2,501	 	
Due in more than one year	  	 	—  	  	
	  	 	 	 	
Total marketable securities		$	2,501	  	
	  	 	 	 	
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) consists of changes in the fair market value of available-for-sale securities. As of March 31, 2015, amortized cost of available-for-sale securities approximated fair value.
Fair Value of Financial Instruments
Fair value is an exit price that represents the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company discloses the manner in which fair value is determined for assets and liabilities based on a three-tiered fair value hierarchy. The hierarchy ranks the quality and reliability of the information used to determine the fair values. The three levels of inputs described in the standard are:

Level 1:		Quoted prices in active markets for identical assets or liabilities.	
		
Level 2:		Observable inputs, other than Level 1 prices, for the assets or liabilities, either directly or indirectly, for substantially the full term of the assets or liabilities.	
		
Level 3:		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.	
 
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Under the Fair Value Option Subsections of Financial Accounting Standards Board (FASB) ASC Subtopic 825-10, Financial Instruments — Overall , the Company has the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument by instrument basis, with changes in fair value reported in earnings each reporting period. As a result of electing this option, the Company recorded its previously outstanding Subordinated Notes, Senior Convertible Notes and Convertible Notes at fair value in order to measure these liabilities at amounts that more accurately reflect the economics of these instruments (see note 7).
During the three month period ended March 31, 2014, the Company valued its then outstanding Subordinated Notes, Senior Convertible Notes and Convertible Notes utilizing Level 3 inputs.
Upon the completion of the Company’s IPO discussed in note 1, the Company used a portion of the net proceeds to settle all obligations under the Subordinated Notes in full, and the Senior Convertible Notes and Convertible Notes automatically converted into 15,319,034 shares of common stock.
At March 31, 2015, the Company held marketable debt securities classified as available-for-sale securities totaling $2.5 million, which were valued utilizing Level 1 inputs. The Company held no marketable securities at December 31, 2014.
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.
In March 2015, the Company issued 219,944 restricted common stock units (RSUs) and non-qualified stock options (NSOs) to purchase 231,223 shares of common stock to employees under the 2014 Employee, Director and Consultant Equity Incentive Plan (the 2014 Equity Plan). The RSUs and NSOs will vest over a three year period. Pursuant to the “evergreen” provisions of the 2014 Equity Plan, the number of shares of common stock available for issuance under the plan automatically increased to 3,698,257 shares effective January 1, 2015.
Earnings per Share
The Company calculates net loss per common share based on the weighted-average number of common shares outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, restricted common stock units and warrants. 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 discrete financial information is available for evaluation by the chief operating decision maker when 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 revenues, based on shipment destination or services location, is presented in the following table:

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
 	  	(In thousands)	 	
Revenue:	  				  				
U.S.	  	$	10,684	 	  	$	10,650	 	
International	  	 	12,816	 	  	 	11,713	 	
	  	 	 	 	  	 	 	 	
Total		$	23,500	 		$	22,363	 	

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Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
(3) Fair Value Measurements

 	  	 	 	  	Fair Value Measurement at
Reporting Date Using	 	
Description	  	March 31, 2015	 	  	Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)	 	  	Significant
Other
Observable
Inputs
(Level 2)	 	  	Significant
Unobservable
Inputs
(Level 3)	 	
 	  	(In thousands)	 	
Marketable securities:	  				  				  				  				
U.S. corporate bonds	  	$	1,003	 	  	$	1,003	 	  	$	—  	  	  	$	—  	  	
Foreign corporate bonds	  	 	1,498	 	  	 	1,498	 	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total		$	2,501	 		$	2,501	 		$	—  	  		$	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of March 31, 2015, amortized cost available-for-sale securities approximated fair value.
(4) Inventories
Inventories consist of the following:

 	  	March 31,
2015	 	  	December 31,
2014	 	
 	  	(In thousands)	 	
Raw materials	  	$	4,485	 	  	$	4,052	 	
Finished goods	  	 	1,420	 	  	 	845	 	
	  	 	 	 	  	 	 	 	
Total		$	5,905	 		$	4,897	 	
	  	 	 	 	  	 	 	 	
(5) Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:

 	  	March 31,
2015	 	  	December 31,
2014	 	  	Useful
life	
 	  	(In thousands)	
Construction in progress	  	$	1,654	 	  	$	24,124	 	  	—  	
Buildings	  	 	23,253	 	  	 	16,303	 	  	30 years	
Machinery and equipment	  	 	102,939	 	  	 	78,378	 	  	3-10 years	
Computer equipment and software	  	 	6,681	 	  	 	5,556	 	  	3 years	
	  	 	 	 	  	 	 	 	  		
Total		 	134,527	 		 	124,361	 			
Accumulated depreciation		 	(55,007	)		 	(52,869	)			
	  	 	 	 	  	 	 	 	  		
Property, plant and equipment, net		$	79,520	 		$	71,492	 			

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Depreciation expense was $2.2 million and $2.6 million for the three months ended March 31, 2015 and 2014, respectively.
Construction in progress totaled $1.7 million and $24.1 million at March 31, 2015 and December 31, 2014, respectively. In March 2015, the Company placed into service approximately $31.8 million of assets related to the Company’s completed third production line at its manufacturing facility in East Providence, RI.
(6) Accrued Expenses
Accrued expenses consist of the following:

 	  	March 31,
2015	 	  	December 31,
2014	 	
 	  	(In thousands)	 	
Employee compensation	  	$	2,408	 	  	$	4,851	 	
Professional fees	  	 	165	  	  	 	76	  	
Deferred rent	  	 	168	  	  	 	155	  	
Other accrued expenses	  	 	584	 	  	 	506	 	
	  	 	 	 	  	 	 	 	
Total		$	3,325	 		$	5,588	 	
	  	 	 	 	  	 	 	 	
(7) Interest Expense
Interest expense consists of the following:

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
 	  	(In thousands)	 	
Changes in fair value:	  				  				
Subordinated Notes	  	$	—  	  	  	$	796	 	
Senior Convertible Notes	  	 	—  	  	  	 	3,535	 	
Convertible Notes, net of capitalization	  	 	—  	  	  	 	11,740	 	
Debt closing costs	  	 	—  	  	  	 	17	 	
Other interest	  	 	45	 	  	 	63	 	
	  	 	 	 	  	 	 	 	
Total		$	45	 		$	16,151	 	
	  	 	 	 	  	 	 	 	
As of March 31, 2014, the Company had Subordinated Notes, Senior Convertible Notes and Convertible Notes outstanding that were measured at fair value utilizing level 3 inputs.
The change in fair value of the Subordinated Notes for the three months ended March 31, 2014 was determined by utilizing a probability weighted discounted cash flow analysis of the amount to be paid on the notes upon the occurrence of certain events in which the Subordinated Notes would be repaid to the noteholders in cash. This analysis utilized assumptions related to the probability of the occurrence of each of the various events and appropriate discount rates for each of the scenarios.
The change in the fair value of the Senior Convertible Notes and the Convertible Notes for the three months ended March 31, 2014 was determined by utilizing a probability weighted discounted cash flow analysis which took into consideration market and general economic events as well as the Company’s financial results and other data available as of that date. This analysis determined the amount to be paid on the notes in either cash or shares at the occurrence of certain events in which the Senior Convertible Notes and the Convertible Notes would be converted into shares of the Company’s common stock or would be repaid to the noteholders in cash. This analysis also utilized assumptions related to the probability of the occurrence of each of the various events and appropriate discount rates for each of the scenarios.
 
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(8) Revolving Line of Credit
The Company maintains a revolving credit facility with Silicon Valley Bank. On September 3, 2014, the Company amended and restated the loan and security agreement to extend the maturity date of the facility to August 31, 2016 and increase the maximum amount the Company is permitted to borrow, subject to continued covenant compliance and borrowing base requirements, from $10 million to $20 million. At the Company’s election, the interest rate applicable to borrowings under the revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, the Company is required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility. The revolving credit facility is secured by a first priority security interest in all assets of the Company, including those at the East Providence facility, except for certain exclusions.
At both March 31, 2015 and December 31, 2014, the Company had no amounts drawn on the revolving credit facility. The Company had outstanding letters of credit backed by the revolving credit facility of $1.4 million at March 31, 2015 and December 31, 2014, respectively, which reduce the funds otherwise available to the Company. Based on the available borrowing base, the effective amount available to the Company under the revolving credit facility at March 31, 2015 was $10.9 million after consideration of the $1.4 million of outstanding letters of credit (see note 9). Under the revolving credit facility, the Company is required to comply with financial covenants relating to, among other items, minimum Adjusted EBITDA, maximum unfinanced capital expenditures and other non-financial covenants. At March 31, 2015, the Company was in compliance with all such financial covenants.
(9) Commitments and Contingencies
Letters of Credit
Pursuant to the terms of its Northborough, Massachusetts facility lease, the Company has been required to provide the lessor with letters of credit securing certain obligations. In addition, the Company has been required to provide certain customers with letters of credit securing obligations under commercial contracts.
The Company had letters of credit outstanding of $1.4 million at March 31, 2015 and December 31, 2014, respectively. These letters of credit are secured by the Company’s revolving credit facility (see note 8).
Litigation
The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure.
(10) Net Loss Per Share
The computation of basic and diluted net loss attributable to common stockholders per share consists of basic and diluted weighted average shares outstanding of 22,992,273 and 3,140 at March 31, 2015 and 2014, respectively.

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
 	  	(In thousands, except
share and per share data)	 	
Numerator:	  				  				
Net loss attributable to common stockholders	  	$	(2,790	) 	  	$	(19,049	) 	
	  	 	 	 	  	 	 	 	
Denominator:									
Weighted average shares outstanding, basic and diluted		 	22,992,273	 		 	3,140	 	
	  	 	 	 	  	 	 	 	
Net loss attributable to common stockholders per share, basic and diluted		$	(0.12	)		$	(6,066.56	)	

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Potential dilutive common shares that were excluded from the computation of diluted net income (loss) attributable to common stockholders per share because they were anti-dilutive consist of the following:

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
Common stock options	  	 	1,231,542	 	  	 	96,999	 	
Restricted common stock units	  	 	524,847	 	  	 	—  	  	
Common stock warrants	  	 	131	 	  	 	131	 	
	  	 	 	 	  	 	 	 	
Total		 	1,756,520	 		 	97,130	 	
	  	 	 	 	  	 	 	 	
As of March 31, 2015, there was no dilutive impact of the common stock options, restricted common stock units and common stock warrants.
(11) Income Taxes
The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all periods presented. Accordingly, the Company has not recorded a provision for federal or state income taxes.
 
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 Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	
The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 13, 2015, which we refer to as the Annual Report.
Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.
Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A of this Quarterly Report on Form 10-Q, and under “Risk Factors” in Item 1A of the Annual Report.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1 “Financial Information” and our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We design, develop and manufacture innovative, high-performance aerogel insulation. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-use customers select our products where thermal performance is critical and to save money, reduce energy use, preserve operating assets and protect workers.
Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, LNG facilities, power generating assets and other energy infrastructure. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. We also derive product revenue from the building and construction and other end markets. Customers in these markets use our aerogels for applications as diverse as wall systems, military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear.
We generate product revenue through the sale of our line of aerogel blankets. We market and sell our products primarily through a sales force based in North America, Europe and Asia. The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service.
Our salespeople work directly with end-use customers and engineering firms to promote the qualification, specification and acceptance of our products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 30 countries around the world that ensures rapid delivery of our products and strong end-user support. Our salespeople also work to educate insulation contractors about the technical and operating cost advantages of our aerogel blankets.
We also perform research services under contracts with various agencies of the U.S. government, including the Department of Defense and the Department of Energy, and other institutions. Research performed under contract with government agencies and other institutions enables us to develop and leverage technologies into broader commercial applications.
 
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We manufacture our products using our proprietary process and technology at our facility in East Providence, Rhode Island. We have operated the East Providence facility since 2008. We commenced operation of a second production line at this facility during 2011, which doubled our annual nameplate capacity to 40 million to 44 million square feet of aerogel blankets, depending on product mix. We completed the construction and start-up of a third production line in the East Providence facility during the first quarter of 2015 with a total construction cost of $31.8 million. We expect that this third production line will increase our annual nameplate capacity by 10 million to 11 million square feet of aerogel blankets, depending on product mix.
Our total revenue for the three months ended March 31, 2015 was $23.5 million, which represented an increase of 5% from the three months ended March 31, 2014. Net loss for the three months ended March 31, 2015 was $2.8 million and net loss per diluted share was $0.12. Net loss for the three months ended March 31, 2014 was $19.0 million and net loss per diluted share was $6,066.56.
Key Metrics and Non-GAAP Financial Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Square Foot Operating Metric
We price our product and measure our product shipments in square feet. With the successful commissioning and start-up of our third production line at the East Providence facility in March 2015, we estimate our annual nameplate capacity is 50 million to 55 million square feet of aerogel blankets, depending on product mix. We believe the square foot operating metric allows us and our investors to measure the growth in our manufacturing capacity and product shipments on a uniform and consistent basis. The following chart sets forth product shipments associated with recognized revenue in square feet for the periods presented:

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
 	  	(Square feet in thousands)	 	
Product shipments in square feet	  	 	8,780	 	  	 	8,803	 	
Adjusted EBITDA
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, which occur from time to time, that we do not believe are indicative of our core operating performance. In previous periods these items included loss on disposal of assets, gain or loss on extinguishment or exchange of debt, write-off of costs of postponed financing activities and write-off of construction in progress. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with accounting principles generally accepted in the United States of America, or 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.
 
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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 U.S. GAAP, income from operations 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 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.
To properly and prudently evaluate our business, we encourage you to review the U.S. GAAP financial statements included elsewhere in this Quarterly Report on Form 10-Q, and not to rely on any single financial measure to evaluate our business.
The following table presents a reconciliation of net income (loss), the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:

 	  	Three Months Ended
March 31,	 	
 	  	2015	 	  	2014	 	
 	  	($ In thousands)	 	
Net loss	  	$	(2,790	) 	  	$	(19,049	) 	
Interest expense (1)	  	 	45	 	  	 	16,151	 	
Depreciation and amortization	  	 	2,184	 	  	 	2,631	 	
Loss on disposal of assets	  	 	—  	  	  	 	15	 	
Stock-based compensation (2)	  	 	1,295	 	  	 	339	 	
	  	 	 	 	  	 	 	 	
Adjusted EBITDA		$	734	 		$	87	  	

(1)	Interest expense in 2014 consists primarily of fair market value adjustments related to our subordinated notes, senior convertible notes, and convertible notes.	
(2)	Represents non-cash stock-based compensation related to vesting and modifications of stock option grants and vesting of restricted common stock units.	
Our Adjusted EBITDA is affected by a number of factors including the mix of aerogel products sold, average selling prices, average material costs, our actual manufacturing costs, the costs associated with and timing of expansions and start-up of additional production capacity, and the amount and timing of operating expenses. As we continue to grow our base of product revenue and to build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a negative impact on Adjusted EBITDA, but will set the framework for improved Adjusted EBITDA moving forward. Accordingly, we expect that our Adjusted EBITDA will vary from period to period as we continue expand our manufacturing capacity.
 
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Components of Our Results of Operations
Revenue
We recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of the U.S. government and other institutions. Product revenue is recognized upon transfer of title and risk of loss, which is generally upon shipment or delivery.
Cost of Revenue
Cost of revenue for our product revenue consists primarily of materials and manufacturing expense, including direct labor and manufacturing overhead, including depreciation on manufacturing assets. Cost of product revenue is recorded when the related product revenue is recognized. Cost of product revenue also includes stock-based compensation of manufacturing employees and shipping costs.
Material is our most significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, blanket thickness and manufacturing yields. As a result, material costs as a percentage of revenue will vary from period to period due to changes in the mix of aerogel products sold. However, in general, we expect material costs in the aggregate to decline as a percentage of revenue as we seek to achieve higher selling prices, material sourcing improvements and manufacturing yield enhancements for our aerogel products.
Manufacturing expense is also a significant component of cost of revenue. As we continue to increase manufacturing capacity in our East Providence facility and ultimately in a second plant, we expect manufacturing expense as a percentage of product revenue will increase in the near-term following each expansion but will decrease in the long-term with increased revenues supported by the effect of completed capacity expansions.
Cost of revenue for our research services revenue consists of direct labor costs of research personnel engaged in the contract research, third-party consulting expense, and associated direct material costs. This cost of revenue also includes overhead expenses associated with project resources, development tools and supplies. Cost of revenue for our research services revenue is recorded when the related research services revenue is recognized.
Gross Profit
Our gross profit as a percentage of revenue is affected by a number of factors, including the mix of aerogel products sold, average selling prices, average material costs, our actual manufacturing costs and the costs associated with expansions and start-up of production capacity. As we continue to build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a negative impact on gross profit, but will set the framework for improved gross profit moving forward. Accordingly, we expect our gross profit in absolute dollars and as a percentage of revenue to vary from period to period as we expand our manufacturing capacity. However, in general, following the completion of our capacity expansions, we expect gross profit to improve as a percentage of revenue in the long-term due to increases in manufacturing productivity, increased production volumes, improved manufacturing yields and material purchasing efficiencies.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits, incentive compensation and stock-based compensation. We expect to continue to hire a significant number of new employees in order to support our anticipated growth. In any particular period, the timing of additional hires could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue.
Research and Development Expenses
Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technology. We believe that these investments are necessary to maintain and improve our competitive position. We expect to continue to invest in additional research and engineering personnel and the infrastructure required in support of their efforts. Accordingly, we expect that our research and development expenses will continue to increase in absolute dollars but decrease as a percentage of revenue in the long-term.
 
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Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities-related costs. We plan to expand our sales force and sales consultants globally to drive anticipated growth in customers and demand for our products. We expect that sales and marketing expenses will continue to increase in absolute dollars but decrease as a percentage of revenue in the long-term.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs of compliance with securities, corporate governance and related laws and regulations, investor relations expenses, increased insurance premiums, including director and officer insurance, and increased audit and legal fees. In addition, we expect to add general and administrative personnel to support the anticipated growth of our business and continued expansion of our manufacturing operations. We expect that general and administrative expenses will continue to increase in absolute dollars but decrease as a percentage of revenue in the long-term.
Interest Expense
For the three months ended March 31, 2015, interest expense consisted primarily of fees related to our revolving credit facility.
For the three months ended March 31, 2014, interest expense consisted primarily of interest expense associated with fair market value adjustments to our subordinated notes, senior convertible notes and convertible notes.
Provision for Income Taxes
We have incurred net losses since inception and have not recorded benefit provisions for U.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards.
Results of Operations
Three months ended March 31, 2015 compared to the three months ended March 31, 2014
The following tables set forth a comparison of the components of our results of operations for the periods presented:
Revenue

 	  	Three Months Ended March 31,	 	 	 	 	
 	  	2015	 	 	2014	 	 	 	 	
 	  	 	 	  	 	 	 	 	 	  	 	 	 	Change	 	
 	  	Amount	 	  	Percentage
of
Revenue	 	 	Amount	 	  	Percentage
of
Revenue	 	 	Amount	 	 	Percentage	 	
 	  	($ In thousands)	 	
Revenue:	  				  				 				  				 				 				
Product	  	$	23,211	 	  	 	99	%	 	$	21,493	 	  	 	96	%	 	$	1,718	  	 	 	8	%	
Research services	  	 	289	 	  	 	1	%	 	 	870	 	  	 	4	% 	 	 	(581	) 	 	 	(67	)%	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	 				
Total revenue		$	23,500	 		 	100	%		$	22,363	 		 	100	%		$	1,137	  		 	5	% 	
	  	 	 	 	  				 	 	 	 	  				 	 	 	 	 				
The following chart sets forth product shipments in square feet for the periods presented:

 	  	Three Months
Ended March 31,	 	  	Change	 	
 	  	2015	 	  	2014	 	  	Amount	 	  	Percentage	 	
Product shipments in square feet (in thousands)	  	 	8,780	 	  	 	8,803	  	  	 	(23	)	  	 	0	% 	
 
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Total revenue increased $1.1 million, or 5%, to $23.5 million for the three months ended March 31, 2015 from $22.4 million in the comparable period in 2014, primarily as a result of an increase in product revenue, offset, in part, by lower research services revenue.
Product revenue increased $1.7 million, or 8%, to $23.2 million for the three months ended March 31, 2015 from $21.5 million in the comparable period in 2014. This increase reflects price increases during 2014 and a shift in mix of aerogel products sold toward higher priced products. The average selling price per square foot of our products increased by an effective $0.20, or 8.2%, to $2.64 per square foot for the three months ended March 31, 2015 from $2.44 per square foot for the comparable period in 2014. In volume terms, product shipments remained relatively flat for the three months ended March 31, 2015 and 2014.
Research services revenue decreased $0.6 million to $0.3 million for the three months ended March 31, 2015 from $1.0 million in the comparable period in 2014. The decrease was primarily due to a reduction in active research contracts with government agencies during 2015. During the three months ended March 31, 2015, we provided research services on four contracts compared to eight contracts in the comparable period in 2014. This decrease in contracts is principally the result of limitations on our eligibility to receive certain contract awards under federal guidelines and programs due to a variety of factors including the size of our revenues, the number of our employees and the makeup of our ownership.
Product revenue was 99% and 96% of total revenue for the three months ended March 31, 2015 and 2014, respectively. Research services revenue was 1% and 4% of total revenue for the three months ended March 31, 2015 and 2014, respectively. We expect that product revenue will continue to comprise a significant percentage of our total revenue due to the anticipated growth in demand for our products in the energy infrastructure market.
Cost of Revenue

 	  	Three Months Ended March 31,	 	 	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	  	Percentage
of Related
Revenue	 	 	Percentage
of Total
Revenue	 	 	Amount	 	  	Percentage
of Related
Revenue	 	 	Percentage
of Total
Revenue	 	 	Amount	 	 	Percentage	 	
 	  	($ in thousands)	 	
Cost of revenue:	  				  				 				 				  				 				 				 				
Product	  	$	18,845	 	  	 	81	%	 	 	80	%	 	$	18,541	 	  	 	86	%	 	 	83	%	 	$	304	  	 	 	2	%	
Research services	  	 	141	 	  	 	49	%	 	 	1	%	 	 	476	 	  	 	55	%	 	 	2	% 	 	 	(335	)	 	 	(70	%)	
	  	 	 	 	  				 				 	 	 	 	  				 				 	 	 	 	 				
Total cost of revenue		$	18,986	 		 	81	%		 	81	%		$	19,017	 		 	85	%		 	85	%		$	(31	)		 	0	% 	
	  	 	 	 	  				 				 	 	 	 	  				 				 	 	 	 	 				
Total cost of revenue remained flat at approximately $19.0 million for the three months ended March 31, 2015 and 2014. An increase of $0.3 million in product cost of revenues was offset by a corresponding decrease of $0.3 million in cost of research services for the three months ended March 31, 2015 versus the comparable period during 2014.
Product cost of revenue increased $0.3 million, or 2%, to $18.8 million for the three months ended March 31, 2015 from $18.5 million in the comparable period in 2014. This increase was the result of an increase in compensation expense of $0.6 million and higher operating supplies expense of $0.2 million, offset, in part, by a decrease in depreciation expense of $0.4 million and improved manufacturing yields of $0.1 million. We expect that product cost of revenue will increase significantly during the remainder of 2015 due to an increase in manufacturing expense, including compensation, depreciation, utilities and maintenance costs, associated with the operation of the third manufacturing line in the East Providence facility. In addition, we expect material costs to increase in line with increased volumes produced and shipped from the facility.
Product cost of revenue as a percentage of product revenue decreased to 81% during the three months ended March 31, 2015 from 86% during the three months ended March 31, 2014 due primarily to the impact of price increases during 2015 and a favorable mix of products sold. We expect that product cost of revenue as a percentage of revenue during the remainder of 2015 will decrease from the levels realized during the three months ended March 31, 2015 due to increases in manufacturing productivity, increased production volumes, and improved manufacturing yields associated with the operation of the third manufacturing line.
 
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Research services cost of revenue decreased $0.3 million, or 70%, to $0.1 million for the three months ended March 31, 2015 from $0.5 million in the comparable period in 2014. The decrease in cost of research services revenue was due principally to the 67% reduction in research services revenue during the three months ended March 31, 2015.
Gross Profit

 	  	Three Months Ended March 31,	 	 	 	 	  	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	  	Percentage
of Revenue	 	 	Amount	 	  	Percentage
of Revenue	 	 	 	 	  	 	 	
 	 	 	 	 	  	 	 	 	Amount	 	  	Percentage	 	
 	  	($ in thousands)	 	
Gross profit	  	$	4,514	  	  	 	19	% 	 	$	3,346	 	  	 	15	%	 	$	1,168	  	  	 	35	% 	
Gross profit increased $1.2 million, or 35%, to $4.5 million for the three months ended March 31, 2015 from $3.3 million in the comparable period in 2014. The increase is due to $1.7 million in incremental contribution from an effective 8.2% sales price increase during 2015 and $0.1 million in lower material costs as a result of improved manufacturing yields, offset, in part, by $0.2 million in lower contribution due to the decline in research services revenue and a $0.4 million increase in manufacturing expense.
Gross profit as a percentage of total revenue increased to 19% of total revenue for the three months ended March 31, 2015 from 15% in the comparable period in 2014. We expect gross profit as a percentage of total revenue during the remainder of 2015 to increase during the remainder of 2015 from the levels realized during the three months ended March 31, 2015 due to anticipated increases in production volumes and continued improvement in manufacturing yields associated with the operation of the third manufacturing line.
Research and Development Expenses

 	  	Three Months Ended March 31,	 	 	 	 	  	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	  	Percentage
of Revenue	 	 	Amount	 	  	Percentage
of Revenue	 	 	 	 	  	 	 	
 	 	 	 	 	  	 	 	 	Amount	 	  	Percentage	 	
 	  	($ in thousands)	 	
Research and development expenses	  	$	1,304	  	  	 	6	% 	 	$	1,284	  	  	 	6	% 	 	$	20	  	  	 	2	%	
Research and development expenses remained flat at $1.3 million for the three months ended March 31, 2015 and 2014. An increase in stock-based compensation charges of $0.2 million was offset by a corresponding decrease in other research and development expenditures. We expect that our research and development expenses will increase in the long-term as we invest in additional research and engineering personnel and the infrastructure required in support of their efforts. However, we expect that research and development expenses will decline as a percentage of total revenue in the long-term due to projected growth in product revenue.
Sales and Marketing Expenses

 	  	Three Months Ended March 31,	 	 	 	 	  	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	  	Percentage
of Revenue	 	 	Amount	 	  	Percentage
of Revenue	 	 	 	 	  	 	 	
 	 	 	 	 	  	 	 	 	Amount	 	  	Percentage	 	
 	  	($ in thousands)	 	
Sales and marketing expenses	  	$	2,332	  	  	 	10	% 	 	$	2,238	  	  	 	10	% 	 	$	94	  	  	 	4	%	
Sales and marketing expenses increased $0.1 million, or 4%, to $2.3 million for the three months ended March 31, 2015 from $2.2 million in the comparable period in 2014. The $0.1 million increase was primarily due to an increase of $0.2 million in stock-based compensation charges and $0.1 million in compensation for sales personnel, offset by a decrease of $0.2 million in general marketing expenses. We plan to continue to expand our sales force to support anticipated growth in customers and demand for our products. We expect that sales and marketing expenses will increase in absolute dollars in the long term as we increase sales personnel and our marketing efforts. However, we expect that sales and marketing expenses will decrease as a percentage of total revenue in the long-term due to projected growth in product revenue.
 
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General and Administrative Expenses

 	  	Three Months Ended March 31,	 	 	 	 	  	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	  	Percentage
of Revenue	 	 	Amount	 	  	Percentage
of Revenue	 	 	 	 	  	 	 	
 	 	 	 	 	  	 	 	 	Amount	 	  	Percentage	 	
 	  	($ in thousands)	 	
General and administrative expenses	  	$	3,623	  	  	 	15	% 	 	$	2,722	  	  	 	12	%	 	$	901	  	  	 	33	%	
General and administrative expenses, or G&A expenses, increased to $3.6 million, or 33%, during the three months ended March 31, 2015 compared to the same period in 2014. G&A expenses as a percentage of total revenue increased to 15% for the three months ended March 31, 2015 from 12% in the comparable period in 2014. The $0.9 million increase was primarily the result of an increase in stock-based compensation charges of $0.5 million in combination with an increase of $0.4 million in insurance and professional services expense related to operating as a publicly traded company. We expect that G&A expenses will increase in absolute dollars in the long term as we incur additional expenses in support of the anticipated growth of our business and expansion of our manufacturing operations. However, we expect G&A expenses will decline as a percentage of total revenue in the long-term as a result of projected growth in product revenue.
Interest Expense

 	  	Three Months Ended March 31,	 	 	 	 	  	 	 	
 	  	2015	 	 	2014	 	 	Change	 	
 	  	Amount	 	 	Percentage
of Revenue	 	 	Amount	 	 	Percentage
of Revenue	 	 	 	 	  	 	 	
 	 	 	 	 	 	 	 	 	Amount	 	  	Percentage	 	
 	  	($ in thousands)	 	
Interest expense	  	$	(45	) 	 	 	0	%	 	$	(16,151	) 	 	 	(72	)% 	 	$	16,106	  	  	 	(100	)% 	
Interest expense of less than $0.1 million during the three months ended March 31, 2015 was comprised primarily of costs related to our revolving credit facility. During the three months ended March 31, 2014 we recorded approximately $16.2 million in interest expense comprised of changes in fair value for our then outstanding subordinated notes, senior convertible notes and convertible notes. Upon completion of the IPO in June 2014, the subordinated notes were repaid and the senior convertible notes and convertible notes were converted to equity.
Liquidity and Capital Resources
Overview
We have experienced significant losses and invested significant resources since our inception to develop and commercialize our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures and investment in working capital balances.
We are currently experiencing revenue growth as we gain share in our target markets. Our current financial forecast anticipates continued revenue growth, increasing gross profit and improving cash flows from operations. However, we expect to incur significant capital expenditures through 2017 related to the expansion of our manufacturing capacity to keep pace with expected growth in demand.
We believe that our existing cash balance and available credit will be sufficient (i) to fund the remaining amounts included in accounts payable related to the completed construction of our third production line in East Providence, and (ii) to fund a portion of the design, development and construction of a second production plant in the United States. We expect to supplement our cash balance with anticipated cash flows from operations, local government grants, debt financings and potentially equity financings to provide the capital required to complete the first production line in our second facility.
Primary Sources of Liquidity
Our principal sources of liquidity are currently our cash and cash equivalents, marketable securities and revolving credit facility with Silicon Valley Bank. Cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks. As of March 31, 2015, we had $33.0 million of cash and cash equivalents. In addition, we had $2.5 million of marketable securities at March 31, 2015 comprised of available-for-sale securities.
From our inception through March 2013, our primary sources of liquidity were funds raised through issuances of common stock, preferred stock, subordinated notes, senior convertible notes and convertible notes to venture capital funds and other private investors. In June 2014, we completed an initial public offering of our common stock and received net proceeds of $74.7 million after underwriting discounts and
 
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offering expenses. Upon the closing of the offering, all principal and accrued interest of our senior convertible notes and our convertible notes automatically converted into shares of our common stock. In addition, we utilized $19.8 million of the net proceeds of the offering to repay all amounts outstanding under our subordinated notes and revolving credit facility. At March 31, 2015, our only debt obligations were $0.1 million related to capital lease obligations. At March 31, 2015, we also had $1.4 million of outstanding letters of credit.
In March 2011, we entered into a $10.0 million revolving credit facility with Silicon Valley Bank. This facility has been amended at various dates through 2014. On September 3, 2014, we further amended the loan and security agreement to extend the maturity date of the revolving credit facility to August 31, 2016 and to increase the maximum amount we are permitted to borrow, subject to continued covenant compliance and borrowing base requirements, from $10 million to $20 million. At our election, the interest rate applicable to borrowings under the amended revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility.
Due to the borrowing base limitations of the revolving credit facility, the effective amount available to us under the facility at March 31, 2015 was $10.9 million after giving effect to the $1.4 million of letters of credit outstanding. As of March 31, 2015, we had no outstanding balances drawn on the revolving credit facility.
Analysis of Cash Flow
Net Cash Provided by (Used in) Operating Activities
During the three months ended March 31, 2015, we used $3.7 million net cash from operating activities, as compared to generating $0.8 million in net cash during the comparable period of 2014, a decrease of $4.5 million. This decrease was primarily the result of a decrease in cash from changes in operating assets and liabilities of $5.1 million, offset, in part, by an increase in net loss adjusted for non-cash items in the period of $0.7 million.
Net Cash Used in Investing Activities
Net cash used in investing activities is primarily related to capital expenditures to support our growth and the purchase of marketable securities. Net cash used in investing activities for the three months ended March 31, 2015 and 2014 was $13.0 million and $1.1 million, respectively. Net cash used in investing activities for the three months ended March 31, 2015 included $10.5 million of capital expenditures primarily for the third production line to expand the capacity of our East Providence manufacturing operations and $2.5 million for the purchase of marketable securities.
Net Cash Used in Financing Activities
Net cash used in financing activities for the three months ended March 31, 2015 totaled less than $0.1 million for repayments of obligations under capital leases.
Net cash used in financing activities for the three months ended March 31, 2014 totaled $0.1 million. Financing activities during the period primarily consisted of $0.6 million of cash payments of deferred financing costs, offset, in part, by $0.5 million of net borrowings under the revolving credit facility.
Off Balance Sheet Arrangements
Since inception, we have not engaged in any off balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
        Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements; and therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report on Form 10-K for the year ended December 31, 2014, filed on March 13, 2015 with the Securities and Exchange Commission, and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.
 
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Certain Factors That May Affect Future Results of Operations
The Securities and Exchange Commission, or SEC, encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, future profits, capital requirements, and the need for additional financing; the performance of our aerogel blankets; the estimated effects of our third production line on our annual nameplate capacity; our estimates of annual production capacity; our beliefs about the usefulness of the square foot operating metric; our beliefs about the financial metrics that are indicative of our core performance; our beliefs about the usefulness of our presentation of Adjusted EBITDA; our expectations about the effect of manufacturing capacity on financial metrics such as Adjusted EBITDA; our beliefs about the outcome, effects or estimated liabilities of current or potential litigation; our expectations about hiring additional personnel; our plans to devote substantial resources to the development of new aerogel technology; our expectations about product mix; our beliefs about the impact of sales price increases; our expectations about future material costs and manufacturing expenses as a percentage of revenue; our expectations of future gross profit and the effect of manufacturing expenses, manufacturing capacity and productivity on gross profit; our expectations about our resources and other investments in new technology and related research and development activities and associated expenses; our expectations about short and long term (a) research and development (b) general and administrative and (c) sales and marketing expenses; our expectations of continued revenue growth, increased gross profit, and improving cash flows; our expectations about incurring significant capital expenditures in the future; our expectations about the expansion of our workforce and resources and its effect on sales and marketing, general and administrative, and related expenses; our expectations about future product revenue and growth of demand for our products; our expectations about the effect of stock based compensation on various costs and expenses; our expectations about potential sources of future financing; our beliefs about the impact of accounting policies on our financial statements; our beliefs about the effect of interest rates, inflation and foreign currency fluctuations on our results of operations and financial condition; and our beliefs about the expansion of our international operations.
Words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and under the heading “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014.
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur. Stockholders and other readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to Aspen Aerogels, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
 
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 Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure results primarily from fluctuations in interest rates as well as from inflation. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our line of credit under our revolving credit facility as well as cash flows. We may also face additional exchange rate risk in the future as we expand our business internationally.
Interest Rate Risk
We are exposed to changes in interest rates in the normal course of our business. At March 31, 2015, we had unrestricted cash of $33.0 million. These amounts were held for working capital purposes in our operating cash account at a financial institution in the United States. We believe that we do not have any material exposure to changes in the fair value of our cash as a result of changes in interest rates.
As of March 31, 2015, we have no debt outstanding other than capital lease obligations of approximately $0.1 million with fixed interest rates. In September 2014, we amended our revolving credit agreement to extend the maturity date of the facility to August 31, 2016 and increase the maximum amount we are permitted to borrow, subject to continued covenant compliance and borrowing base requirements, from $10 million to $20.0 million. As of March 31, 2015, we had no outstanding balance drawn on the revolving credit facility and outstanding letters of credit of $1.4 million. At our election, the interest rate applicable to borrowings under the amended line of credit may be based on the prime rate or the LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. Based on the available borrowing base, the effective amount available to us at March 31, 2015 was $10.9 million due to the limitation of $1.4 million of outstanding letters of credit against the line.
Inflation Risk
Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented. However, our business may be affected by inflation in the future.
Foreign Currency Exchange Risk
We are subject to certain risks inherent to operating in a global economy. Principally all of our revenue, receivables, purchases and debts are denominated in U.S. dollars. Although our international operations involving foreign currencies are currently not significant compared to our operations denominated in U.S. dollars, we expect to expand our international operations in the long-term. An expansion of our international operations will increase our potential exposure to fluctuations in foreign currencies.
 
 Item 4.	Controls and Procedures.	
(a) Evaluation of Disclosure Controls and Procedures . We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As of March 31, 2015, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded, that, as of March 31, 2015, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls . During the three months ended March 31, 2015, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II — OTHER INFORMATION
 
 Item 1.	Legal Proceedings.	
We are not currently a party to any material legal proceedings.
 
 Item 1A.	Risk Factors.	
There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
 
 Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	
(a) Unregistered Sales of Equity Securities. Not applicable.
(b) Use of Proceeds from Initial Public Offering of Common Stock . We registered shares of our common stock in connection with our initial public offering pursuant to a registration statement on Form S-1 (File No. 333-195523), which was declared effective by the SEC on June 12, 2014, and a registration statement on Form S-1 (File No. 333-196719) filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, or the Securities Act.
We received aggregate net proceeds from the offering of approximately $74.7 million, after deducting $4.3 million of underwriting discounts and approximately $3.5 million of offering expenses.
As of March 31, 2015, we have used $19.8 million of the net proceeds of the offering to repay all amounts outstanding under our subordinated notes and our revolving credit facility and $21.8 million of the net proceeds of the offering for capital expenditures. The remainder of the net proceeds is held in a deposit account with a major financial institution in North America. We have broad discretion in the use of the net proceeds from our initial public offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our stock. There has been no material change in our planned use of the balance of the net proceeds from the offering as described in our final prospectus dated June 12, 2014, filing with the Securities and Exchange Commission on June 16, 2014.
(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers . We did not repurchase any of our equity securities during the quarter ended March 31, 2015.
 
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 Item 3.	Defaults Upon Senior Securities.	
None.
 
 Item 4.	Mine Safety Disclosures.	
Not applicable.
 
 Item 5.	Other Information.	
None.
 
 Item 6.	Exhibits.	
(a) Exhibits

31.1		Certification of principal executive officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.	
		
31.2		Certification of principal financial officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.	
		
32		Certifications of the principal executive officer and the principal financial officer under Section 906 of the Sarbanes-Oxley Act of 2002.	
		
101		The following materials from Aspen Aerogels, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited) as of March 31, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2015 and 2014, (iii) the Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2015 and 2014, and (iv) the Notes to Consolidated Financial Statements (unaudited).	

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 SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 		 		ASPEN AEROGELS, INC.	
				
Date: May 8, 2015				By:		/s/ Donald R. Young	
						Donald R. Young	
						President and Chief Executive Officer (principal executive officer)	
				
Date: May 8, 2015				By:		/s/ John F. Fairbanks	
						John F. Fairbanks	
						Vice President, Chief Financial Officer and Treasurer (principal accounting and financial officer)	
 
26

Exhibit 31.1
CERTIFICATIONS UNDER SECTION 302
I, Donald R. Young, certify that:
 
1.	I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:	
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2015				/s/ Donald R. Young	
				Donald R. Young	
				President and Chief Executive Officer
(principal executive officer)	

Exhibit 31.2
CERTIFICATIONS UNDER SECTION 302
I, John F. Fairbanks, certify that:
 
1.	I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:	
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2015				/s/ John F. Fairbanks	
				John F. Fairbanks	
				Vice President, Chief Financial Officer and Treasurer (principal accounting and financial officer)	

Exhibit 32
CERTIFICATIONS UNDER SECTION 906
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Aspen Aerogels, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 8, 2015				/s/ Donald R. Young	
				Donald R. Young	
				President and Chief Executive Officer
(principal executive officer)	
			
Dated: May 8, 2015				/s/ John F. Fairbanks	
				John F. Fairbanks	
				Vice President, Chief Financial Officer and Treasurer (principal accounting and financial officer)	
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.