Okay, hey, hey everybody. We're gonna, we're gonna kick this one off. Thanks. Appreciate it. Okay, so a quick intro. I'm Chip Moore on the research side here, sustainability team at Roth. Very pleased to have Don Young, President and CEO of Aspen Aerogels, I think. I've known the company a long time, just reinitiated fairly recently, but one of the most exciting growth stories in sustainability, I think, right now. So, so worth paying attention here. And, with that, I'll pass it over maybe to you, Don, to just give the quick, high-level overview for folks.
Sure. Thank you. The company's about 20 years old, and we've been public for about 10 of those years. We are a technology platform company, what we refer to as the Aerogel Technology Platform. Our strategy is to leverage that platform into large dynamic markets, especially those with sustainability themes. We have two major business segments today, one being what we refer to as our energy industrial business, and this relates to bringing conservation sustainability to traditional energy settings: refineries, petrochemical plants, LNG terminals. We had about $130 million of revenue constrained by supply in that business last year. We'll do $150 million or more this year. I'll talk a little bit more how we busted through that supply constraint that we had there in a moment.
Second segment has been providing thermal barriers protection to mitigate the risk of the propagation of thermal runaway within lithium-ion batteries in electric vehicles. We have grown that business pretty significantly over the course of the past few years. 2021 revenue was about $7 million. 2022 revenue was $55 million. Last year was $110 million. We'll continue to grow that business significantly here in 2024. Overall, we've had a significant focus on our profitability over the course of the past four and six quarters. You can see it in our—in our gross margin over—really over the course of 2023, 11% in Q1, 17% in Q2, 24% in Q3, 35% in Q4. So very significant progression from a—from a gross profit point of view over the course of that period of time.
We feel that's very reflective of how we are levered as a company or geared as a company. We are in a position today with our current assets to have approximately a $650 million business. We believe we can maintain those 35% gross margins, perhaps expand them, and achieve 25% EBITDA margins, you know, as we progress to those levels. That's a quick thumbnail of the company.
Yeah. Perfect. Thanks. And so maybe we dive into the future outlook. That thermal barrier growth, very impressive, $110 million from $6.6 million, I think you said. You know, we see a lot of headlines, right? A lot of choppiness in that market, higher interest rates. And I think you guys have been out in front of that, right? And you've shifted accordingly, but that's happened already. So maybe just walk us through those dynamics.
So our thinking on this and, Ricardo Rodriguez, who's our CFO, has said this many, many times, you know, we were a little suspicious in 2021 and 2022 that, you know, all the headlines were positive and all the OEMs were, you know, going to the moon, basically, with growth and, you know, all electric, etc., etc. And we thought that was optimistic. And we were very careful over the course of the past several quarters to plan for that. It's a difficult thing to do. Those customers are very demanding. We have five OEMs today, where we've won the design awards, General Motors and Toyota being the longest-standing of those two.
We now read the headlines and, and I don't think it's quite as bad as the headlines would suggest at this point in time. So I think we maybe overshot a little bit in 2021, 2022, and maybe overshooting in the other direction here in 2023 and 2024. Having said that, we still take what IHS and what the OEMs themselves say to us as to what they're going to produce in 2024 and their outlook into 2025 and 2026. And we are careful, and we do discount those numbers. And, you know, we're really intimately involved with these companies, really, within their value chain. And so we've been pretty good predictors so far.
So again, we've discounted them back anywhere from, say, the 20% of the low end of an OEM's estimate to as much as 50% of IHS numbers for the individual OEMs themselves.
Great. And so the five OEMs, obviously GM, Ultium, great validation. And I think you have another one, right, that's about to cross the finish line. You've talked about, maybe two things. Maybe talk a little bit about that design process and the importance of getting sort of specced in early, right, because it's automotive. And then that opportunity, you're playing pouch and prismatic.
Yeah. So it is a process for sure. So, these OEMs are moving towards the design of their own battery platforms. GM was quite early in that process where they decided that they were going to have a common platform across all of their nameplates. You look at some of the other companies that might have gotten out a little ahead, especially some of the traditionals, OEMs, they were really designing on a per-nameplate basis. Most all of them have stepped back now and are creating a platform. It’s a much more efficient and economic way of doing it. So our design activity is to be a thought leader when it comes to thermal management and addressing thermal runaway in these lithium-ion battery systems. It is a problem that has two aspects to it.
One is the fire protection itself. Again, we're trying to isolate, let's say, the bad cell within that module and at minimum slow the propagation. Much of the regulation that is in Asia and Europe and likely to come here in the US is related to slowing that propagation to provide warning time, evacuation time, and what have you. In some of the designs, we're trying to stop the propagation or stop the thermal runaway at the bad cell. It becomes more of a service event than a car melting fire, which is ultimately what happens to these vehicles. So we're trying to be thought leaders. We have our Advanced Thermal Barriers Center outside of Boston.
That is where we work with the OEMs and do our testing and our fast prototyping. We know a lot about it. So it's thermal runaway, but there's also a mechanical aspect to this. So the cells expand and contract with each cycle. You need to provide that stability for those cells in a very dynamic scenario, where it has to work for a long time, for 10 years or more. That mechanical part is also very, very interesting and very challenging. To be able to do both the thermal runaway aspect and the mechanical portion of this makes us particularly unique in solving this, solving this problem for the OEMs.
That's great. And maybe we sort of pivot to the manufacturing side for a minute. You talked about the capacity you have and the energy piece. You're currently transitioning to a partner. When I look out, it's pretty clear to see the demand that you'll become, you know, thermal barrier will dwarf energy. Just talk a little bit about, A, that transition for energy industrial, historically, some cyclicality, you know, maybe harder to manufacture in some cases. So talk about PyroThin, the thermal barrier, why manufacturing that makes so much sense in Rhode Island. And then you're going to run out of capacity pretty quickly here at some point. And address that.
Yeah. So what we announced over the course of 2023 was that we were going to rely on a supplemental supply and a manufacturing partner for our, for our, let's say, our legacy products for energy industrial. And by doing that, we open up our existing plant in Rhode Island, let's call it Plant One, and to be dedicated to producing our PyroThin material for our thermal barrier business for our automotive OEM business. And so today we have, say, $150million-$165 million of supplemental supply. And as we dedicate Plant One, we have recently had some excellent performance there. And we've been able through throughput and yield, we've been able to expand the capacity of that Plant One for thermal barriers from $400-$500 million.
And so it's that $500 million plus the $150 million supplemental supply that gets me to the $650 million number that I talked about earlier. Again, we can generate $150million-$160 million of EBITDA from those kinds of numbers. And it changes the profile of our company pretty significantly. Chip is correct. That would only last us for a period of time. And we have in the works today Plant Two, which is located in Statesboro, Georgia. And we have paused. This was four or five quarters ago. We paused the construction of that. And we worked through this supplemental supply and the dedication of Plant One and focused on our profitability.
And we will restart that plant, and we will, at the point where we can see the demand and very likely, in partnership with the DOE Loan Programs Office, where we are in the midst of advanced due diligence and term sheet negotiation. And that would help support the building of that second plant. That second plant would have approximately $1.2 billion of revenue capacity, dedicated to the thermal barrier business.
Great. And clearly you will run out of capacity at some point, but more near term, talk about, you know, first half of this year, if we have sort of this EV winter, right, gets worse, do you have flexibility as you transition the energy piece, you know, to backfill, right, just in the front half, if need be?
Yeah, exactly. So we are bringing on the supplemental supply. We had about $3.1 million of it in Q4 of last year, really sort of testing the system, if you will. That number is significantly larger, will be significantly larger in Q1 here. So we're really working that system, but we are still producing energy industrial product in Plant One. And because we want to make sure we absorb all the costs in that facility appropriately. And again, we're extremely focused on our profitability and growing the business. So even with, you know, the EV winter, so to speak, we believe we'll see significant growth in our EV business from Q1 to Q1 or 2023 to 2024, however you want to look at it.
There's a significant amount of growth to be had here for us. Quite honestly, we sort of like this pacing. And it is enabling us to drive to that profitability level, those profitability levels that I talked about, as we anticipate. And look, I think the thread there is, you know, our cost of capital when we build the rest of Plant Two will be much better as a significantly profitable company than, especially in these markets today.
Question.
Yep.
Are you replacing a thermal protection solution or are you creating one anew?
Yeah. Today, we specialize in pouch and prismatic cell forms. And so, today, there are not thermal barriers in many EVs that you see today. But what is in most of all of them are foam-based materials that are addressing that mechanical aspect that I talked about. And those are quite expensive materials. And so, you know, our goal is to displace those and introduce the thermal protection part of it.
Which goes way beyond.
Which adds that second element of safety, which is, we believe will be required to some degree, through regulation. But I think more importantly, around brand reputation and around liability. You know, General Motors is our largest customer and certainly, you know, they had their challenges with the Chevy Bolt and have had, along with LG, you know, multi-billion-dollar kinds of recalls and what have you. So this is a serious problem. And it can thwart the growth of the EV market if it's not addressed properly.
If we look out, you're going to have some very good cash flow in the future. I, you know, I sort of envision Aspen as this materials platform over time. Talk about some of those opportunities, whether it's hydrogen, energy storage, and then carbon aerogels, battery materials, right? A lot of, a lot of interest. You've been very active there in the past, but, but fairly quiet, I would say, in more recent history. Just kind of walk us through that.
We're a technology company. We're a technology platform company. We have over 300 patents. We have a very significant R&D effort. And, again, as I said, our strategy is to leverage that technology platform into big dynamic markets. And, I've talked about principally the two that we're heavily engaged with and generating significant revenue from. But we have several other ideas for this. Chip, you mentioned some of them. Examples are, you know, we're very active in the LNG market today, providing thermal management for those enormous both gasification, liquefaction, and regasification facilities around the world. And, those are, of course, done at cryogenic temperatures. If you look at the hydrogen economy, much of the hydrogen infrastructure will need significant thermal management again at cryogenic temperatures. And our materials are extremely interesting at that.
So I would call it sort of a first cousin to the LNG products that we produce today, but a very good through line to that development. And so we're engaged in those areas. We have other areas as well. Everything I've talked about so far has been around our silica aerogel material. We do have a program around our carbon aerogels, which can be part of the battery chemistry to improve energy density and charge times. We're hard at work. These are hard problems to solve. And we're hard at work addressing those. And I think I would anticipate that over the course of 2024, we'll talk more about those.
And I think the logical step for us in those programs would be to announce development partners who can help us target the exact commercial products that we would seek to offer to the market.
I think we've got time here for questions from the audience if anyone has any. Maybe just follow up on that competition question there. Thermal barrier is such a nascent market, right, where in contrast to energy where you were displacing, you know, long-used, cheaper products. How do you see that market, the competition developing over time, given the opportunity?
Again, it's a hard problem to solve where I think we're doing a good job across all three major regions, being designed into these systems and being, again, a thought leader in the design of these materials. So we have a real, you know, head start, for sure. And being designed in has an enormous, positive long-term impact on our ability to maintain that business over a longer period of time. We're always trying to improve our products, both from a performance and a cost point of view. And those are our main defenses. I referenced our intellectual property earlier. We have been successful over the years defending our intellectual property aggressively. And we'll continue to do that.
Yeah, no small expense over your history, right, on the IP side. Maybe, unless there's more audience, audience questions, feel free to, to fire away.
Yeah.
You talked about the pausing of the Georgia facility. Then you said that it's going to be commenced pretty soon. Is the firing back up not related to the DOE loan?
They're important. Both, the DOE loan is an important aspect of it. We, I don't want to say that it requires the DOE loan, but that would be an accelerator, for sure, receiving that. Look, there's no guarantee that we will, even though we're at a very advanced stage, even though we're an excellent candidate for it, there's no guarantee, of course, that we'll get it. So, we do have Plan B, but that very much is Plan A. The other part of, if I may, kind of turn your question just a little bit, the other part that's important here is, you know, if you're a major OEM, you want to make sure we have enough capacity in 2027, 2028, and 2029. And so, that plant, we've invested between $275million-$300 million in it. This is not already in the ground.
Most of the investments that we're making in Plant Two here in 2024 are, of course, protecting those assets that we have on the ground today, and advancing it so that we're in a ready state to complete that project. It's likely to take six to eight quarters to complete it once we restart it. And so those automotive OEMs, it's an important part of our story to them.
I think a great point there on capacity, right, and the OEMs, perhaps you can operate from a position of strength, on the margin side, right? Talk, talk about that.
Well, if I could just add one more thought on the competition. Look, this is not for the faint-hearted. This requires a significant amount of capital to be able to do it, to do these sorts of things. So it's a very complex technology. And so again, from a competition point of view, having the intellectual property, having their operating assets, having the know-how, and having significant capacity already is also a pretty meaningful competitive blocker, as well. This is not something that you could do for $100 million or even $300 million or $400 million. You know, it's a significant investment to get into this business at this point.
You know, I should say, you know, in our energy industrial business, which was our first business, we're just approaching $1.5 billion of installed capacity or installed product today. And so, we've learned a lot. We've really driven our costs down. I've shown, I talked about our thermal barrier business and our expertise in manufacturing that product. That's been reflected in our upping the amount of capacity that we have in our Plant One, from $400 million-$500 million. That is really through efficient production of the materials.
Yeah, and maybe on that point, volume leverage, right? Just as you scale, you have huge opportunities to drive more earnings power. Just talk about, right, positive adjusted EBITDA $30 million you're, you're forecasting this year. That's going to be the first time, pretty big milestone.
Yeah, we've provided some sort of baseline guidance, outlook this year. And that was roughly $350 million, roughly 50% growth, on the revenue line and 8%-9% EBITDA margin. If you annualize Q4, you know, we were at like annualized $332 million and $35million-$40 million of EBITDA. So, I'm not suggesting those are necessarily conservative, but we wanted to be careful, just given the EV market as it stands today.
Well, great. Unless there's any more questions here. Yep, in the back.
What percentage is the EV net right now?
Say it again.
What percentage is the EV?
In that $350 million baseline revenue outlook that we provided, $150 million of it is energy industrial and $200 million of it is thermal barrier.
Could you remind us, Fisker is not a customer of yours, right?
Correct. Not.
That's a rumor. Oh, it is. Okay. Okay. And then, GM, what do they have a guarantee with you going forward? Do you have any guarantee or can you help us understand what the real visibility is once you do build this facility and when you get the loan?
We do not have a take-or-pay contract with General Motors. We're designed into their Ultium platform. And so to the extent they sell electric vehicles, they will use Ultium. And we're part of Ultium. But we have a relatively traditional supplier, tier one supplier relationship with General Motors. So our technology has been designed into that technology platform.
As long as you can produce it, they're going to hopefully make purchases as.
Yep, cheer them on. I mean, we need it'd be great for GM to, they're very dedicated to this program and their success is important to us.
That would be replacing the cone that they're currently using at a higher price.
Correct.
Do you know the price differential, roughly?
Well, we'll, we'll. I think we need to cut it off there for the next one. Good follow-up here. Thank you very much, Don.