Q2 2021 Aspen Aerogels Inc Earnings Call
[music].
Good afternoon. Thank you for attending the Aspen.
Aero Joe's incorporated Q2, 2021 earnings call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the and I would now like the pass the conference over to your host John Fairbanks with Aspen Aerogels. Thank you you May proceed Mr. Burbank.
Thanks, Devin and good afternoon. Thank you for joining us for the Aspen Aerogels conference call from John Fairbanks, Aspen's, Chief Financial Officer.
There are a few housekeeping items that I would like to address before turning the call over to Don Young Aspen's, President and CEO.
The press release announcing aspens.
Aspen and actual results and business developments as well as the reconciliation of management's use of non-GAAP financial measures compared to the most of applicable GAAP measures is available on the investor sections of the website Www Dot aerogel Dot com.
Included in the press release to the summary statement.
And the like relations of summary balance sheet, and a summary of key financial and operating statistics for the second quarter and 6 months ended June 30 of 2021 and.
In addition, the Investor section of Aspens website will contain an archived version of this webcast for approximately 1 year.
Please note.
And then of Oshkosh and today will include forward looking statements, including any statements regarding outlook expectations beliefs projections estimates targets prospects business plans and any other statements and does not on <unk>.
The Oracle fact.
These forward looking statements are subject to risks and uncertainties Aspen aerogels actual.
Actual results may differ materially from those expressed and these forward looking statements.
The list of factors that could affect the company's actual results can be found and aspens press release issued today and are discussed in more detail on the reports of Aspen files with the SEC.
Particularly and the company's most recent annual report.
The largest form 10-K the.
Company's press release issued today and filings with the SEC can also be found on the investors section of Aspen's website.
Forward looking statements made today represent the company's views as of today July 29th 2020.1 Aspen.
Aspen Aerogels disclaims any obligation to update.
These forward looking statements to reflect future events or circumstances.
During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA.
These financial measures are not prepared in accordance with U S. Generally accepted accounting principles or GAAP. These non-GAAP financial measures are not intended.
And on considered and isolation or as a substitute for results prepared in accordance with GAAP.
The definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
And discussion of why we present these non-GAAP financial measures are included in today's press.
To be on.
I'll now turn the call over to it on.
Thanks, John Good afternoon, everyone and thank you for joining us for our Q2.2021 earnings call.
Today I will describe the key highlights of our progress towards achieving our near term and longer term business goals John.
And really then recap of our Q2 performance and finish with our updated outlook for 2021.
We will conclude today's call with the Q&A session.
The key points I intend to cover.
Alright, and we closed a valuable financing with Coke strategic platforms, we delivered strong Q2 financial.
John with the Orleans, we raised guidance for the second time this year.
We won additional piracy and thermal barrier contracts and we enhanced our Aspen and battery materials strategy.
On June 30th we completed of $75 million private placement with Coke strategic platform.
<unk> or KSP.
<unk> is part of Koch industries, 1 of the largest privately owned industrial companies and the world.
We were and ideal investment target for KSP, given its focus on high growth companies, especially those innovating and new economy industries.
<unk> is targeting investments.
And fossil fuel value chain transformation, new sources of energy energy infrastructure and the electrification of transportation.
Markets, where aspen, the strength of resource efficiency asset resiliency and safety translate to significant growth opportunities over this decade.
Securing K Sps and Investor is also consistent with our strategy, which is to leverage our aerogel technology platform.
All right.
Right.
Securing K S P. As in the Investor is also consistent with our <unk>.
Strategy, which is to leverage our aerogel technology platform into high value high growth markets that support our position as the technology leader and sustainability.
We believe we have the opportunity to double revenue every 2 years through this decade.
Growth of this rate will.
Scaling challenges and for this reason KSP isn't the ideal investor for Aspen.
K Asps and investment not only strengthens our balance sheet, but brings with it broader corporate technical and logistical resources that are available to Aspen as we scale our operations to keep pace with.
With the rapidly growing demand for our aerogel products.
We believe that these resources will be valuable, particularly as we move into high gear and the design engineering and construction of plant 2.
We are in the midst of discussing plans to with the coke team to ensure a well designed.
Bring the that it's delivered on time and on budget.
Overall, ksp's investment will help unleash aspen full potential to create significant value during the emerging era of energy transformation.
And regarding Q2 performance and 2021 guidance.
And we delivered a strong quarter with revenue of $31.7 million compared to $24.6 million and the second quarter last year at 29% increase.
Gross profit grew to 61% showing the leverage associated with increasing utilization of our manufacture.
<unk> plant.
Over the course of the pandemic, we indicated our belief that the low density work sites of our energy infrastructure and users would create pent up demand both for maintenance and project work.
We were confident that as the impact of the pandemic began.
To subside, we would see revenue levels begin to increase towards pre pandemic levels.
Significant revenue growth and Q2, particularly in regions with higher vaccination rates is a good sign that this premise appears to be correct and this positive indicator is the principal.
The reason, we raised guidance for the second time this year.
1 of the key components of our commitment to double revenue from 2021 to 2023 is to recapture our pre pandemic revenue levels, and our energy infrastructure business, which averaged $35 million per quarter.
During 2019.
We believe that we are well positioned to achieve this goal by 2023.
And 1 last point about the second quarter, the KSP investment increased our cash balance at quarter end to over $100 million, which puts it puts us in the.
<unk> position to continue to execute our strategy.
Yeah.
Turning to our piracy and thermal barrier opportunity, we continued to make strong progress and developing our business opportunities during the quarter.
Aspen Tech Aspen technology offers a unique combination of per.
Strong and its attributes that enable EV manufacturers to achieve critical safety goals without sacrificing drive range.
Activity levels are high and the 3 stage business development funnel that I described in detail at the time of our last earnings call.
During the second quarter, we won additional.
Scope for Pirate's and thermal barriers in the battery platform of our original major U S automotive customer.
Began Q2 with approximately $1 billion of potential revenue through 2030 from our prior contract wins.
During the quarter, we were awarded 2 contracts with potential.
Pro forma revenue through 'twenty 30 of.
Of an additional $300 million.
Note that these 2 kind of new contracts run through 2034, which adds additional revenue potential in the years beyond 2030 and support our view debt thermal runaway.
Potemkin and will be of long term requirement and the EV market.
In addition, we are on the cost of and important design win with a leading Asian automotive OEM.
This expected design win is for a specific EV model planned to be sold in multiple regions beginning in <unk>.
Q1 of 2022.
This expected contract award positions us for a larger design win as the automotive OEM completes the design of its own battery platform that is expected to power all of the T V models through the decade.
We are eager to announce the names.
Names of both our large north American OEM, and the leading Asian OEM as soon as possible.
For now we remain focused on securing additional design wins for pirate and thermal barriers as we strive to become the EV industry standard for the management of thermal runaway.
Moving to Aspen battery materials, which we referred to as a b and we are developing our carbon aerogel technology and the design of low cost high performance Silicon rich anodes and lithium ion batteries.
On the replacement of graphite with silicon and and it is widely viewed.
And that's the best near term approach to boost lithium battery performance.
And to reduce costs.
The approach enables drop and materials compatible with the manufacturing technology underlying todays battery Giga factories. Our work is centered on leveraging our 2 decades of experience in.
Fine and manufacture of aerogel and nano materials at scale in order to optimize the cost and performance of our carbon aerogels.
As ABM has increased its level of partner engagement and made additional investments and outstanding scientists engineers and.
On the facilities, we have decided to add 2 additional angles to our commercialization strategy.
We are exploring the idea of providing our patent protected carbon aerogels to other companies that have their own and silicon anode programs, our carbon aerogels or mechanically strong and the highly conductive.
And since we have the ability to the minute to manipulate pore size and to make them of uniform. These.
These attributes.
<unk> for an ideal protective host of scaffold for Silicon and helps address the challenge posed by silicon expansion during charge discharge cycles.
This approach.
Plays to the strength of our technology and May enable the broadest adoption of our carbon aerogel solution and the EV battery market.
And second we are sampling with the evaluation partners, our silicon carbine carbon materials for use as the Android and solid.
I would state batteries.
We believe this 3 pronged approach to the commercial development of our carbon Aerogels will enable us to partner with additional battery and EV Oems and with battery material companies to leverage our technology technology more broadly and to reach commercial validation.
Patient for ABM more rapidly.
We are excited about abms potential and expect to formalize additional partnership.
As we approach year end.
At the beginning of the year, we said that our target would be the double revenue from 2021.
2023, and reach the $225 million level with 30% gross margins. We believe that we have both the business activity levels and the existing manufacturing capacity to achieve this goal.
We also said that our target would be the double revenue again from 2020.
The 3 to 2025 the.
Key elements to achieving this objective, our and active pirate than business development funnel, restoring revenue and the energy infrastructure to pre pandemic levels.
And solid execution of the plant to capital projects.
<unk> our confidence in achieving these targets is based on our potential for several additional multiyear battery platform wins for our unique and protected piracy and thermal barrier technology.
For the plant to capital project, our plan is to bring the additional capacity online by.
At the end of 2023.
As we said at the time of our last earnings call of well capitalized balance sheet and the ability to scale of operations are important factors to the large EV Oems, who want us not only to have ample capacity, but also of diversity of manufacturing sites.
The financial and capital project resources provided by Coke strategic platforms heightened our confidence that we will execute a successful capital project.
In closing the key takeaways.
Our debt, we closed the valuable financing with K S. P.
We delivered strong Q2 financial performance, we raised guidance for the second time. This year, we increased potential revenue from additional contract awards from prior thins and thermal barriers and we enhanced our strategy for Aspen and battery materials, we are and a strong position to double revenue twice through 2020.
And we believe we have the commercial opportunity to continue that pace of growth through the decade.
John over to you.
Uh huh.
Thanks Dawn.
I'll start by running through our reported financial results for the second quarter of 2021 out of a summary level.
Total revenue grew 29% the $31.7 million from $24.5 million in the second quarter of 2020.
Net loss increased to $6.7 million or 23 per share this year versus a net loss of $5.7 million or 21 cents per share and.
Fourth quarter last year.
And adjusted EBITDA was negative $3.4 million compared to negative $2.1 million from the second quarter of 2020.
We define adjusted EBITDA, and net income or loss before interest taxes, depreciation amortization and stock based compensation.
And the sex fence and other items that we do not believe are indicative of our core operating performance.
And I'll provide additional detail on.
On the components of our results first I'll discuss revenue.
Total revenue increased by $7 million or 29% the $31.7.
Millions of dollars this increase and second quarter revenue was principally driven by the beginning phase of of post COVID-19 recovery and demand and the refinery and petrochemical market, particularly in the United States.
Solid growth and the European and building market and continued shipments to the Arctic LNG.
Based on that Jack.
Offset in part by a decrease and project work both on the subsea market and due to the conclusion of the PTT LNG project.
Total shipments for the quarter increased by 35% to $9.9 million square feet of aerogel blankets, while the.
The average selling price.
Decreased by 5% to $3.19.
Per square foot.
The decrease in average selling price reflected an increase and the mix of lower price and building materials products and 5 millimeter LNG infrastructure products this year versus the second quarter of 2020.
The pro next I'll discuss the gross profit gross profit was $4.6 million of 14% during the second quarter this year versus $2.9 million of 12% during the second quarter of 2020.
This increase in gross profit was driven by the 35 per cent increase and volume.
And the decrease and material costs offset in part by an increase and manufacturing expense and the decrease in average selling price.
Next I'll discuss the operating expense.
This year, we were purposely increasing operating expense levels in order to enhance the capabilities of our tenants.
Technical and commercial teams and the associated resources and support of our thermal barrier and battery materials businesses.
We've also increased spending this year to expand and defend our IP portfolio supporting our energy infrastructure from a barrier and battery materials businesses.
And contrast during.
And quarter of 'twenty, and 'twenty, we significantly reduced compensation and spending levels and response to the uncertainty associated with the emerging COVID-19 pandemic.
As a result second quarter operating expense increased by $2.7 million of 32% versus last year 2 of 11 point too.
Millions of dollars.
Next I'll discuss our balance sheet and cash flow for the quarter cash.
Cash generated from operations of $1.3 million reflected a $4.7 million dollar decrease and working capital investment during the quarter offset in part by our adjusted EBITDA of negative 3 point.
And the $7 million.
Decrease in working capital investment was broad based and included decreases in accounts receivable and inventory balances and increases in accounts payable and accrued expense.
And the balances.
Capital expenditures during the quarter were $2.4 million and we're focused.
And for principal on improving the efficiency and the liability of our east Providence manufacturing facility.
And to a lesser extent of establishing our thermal barrier of fabrication operations.
Cash provided by financing activities of $86.1 million was comprised of a net $73.
Focus $6 million from our private placement with Coke strategic platforms.
$12.3 million generated by our sale of equity through our ATM facility and $200000 from employee option exercises.
As a result, we ended the quarter with $102.3 million of cash.
Sick net current assets of $105 million no borrowings under our revolving credit facility and shareholders' equity of $147.1 million.
We also had access to an additional $7.9 million available under our revolving credit facility at quarter end.
Cash and I also want to highlight that moving forward, we do not intend to sell any additional stock under our existing ATM facility.
I'll now turn to our full year 2021 outlook.
Although COVID-19 continues to negatively impact our energy and infrastructure markets, particularly Lee.
And in Asia, We're seeing continued signs of improving maintenance related activity and north and South America and in Europe.
We're also experiencing solid growth and the European and building market as.
As a result, we are now projecting revenue growth for the full year of between 10% and 18%.
And we are increasing our 2021 revenue outlook by $7 million, the between 110 and and $118 million for the year.
As we noted at the time of our Q1 earnings call, our 2021 outlook and $10 million of incremental expense to enhance the technical commercial.
So on and operational teams and resources and support of our thermal barrier and battery materials opportunities of.
<unk> thousand and 21 outlook also includes up to $18 million of incremental capital expenditures to construct our advanced thermal barrier of center to expand our battery materials production fabrication and test.
Testing facilities.
And to complete the initial engineering designs for a second silica aerogel manufacturing plant.
We believe the strategic investments will position the Aspen to take advantage of the significant growth opportunities available to us today and the electric vehicle market to leverage our aerogel technology platform.
Commercial new high growth businesses.
And to resume the strong operating performance the characterized 2019 on the impact of COVID-19 subsides.
We remain firmly committed to making these investments over the course of 2021.
Our revised 2021 full year outlook is as <unk>.
The balance we expect total revenue between 110 and $118 million.
Net loss of between 28, 9% and $31.7 million.
Adjusted EBITDA of between negative $14.7 million and negative $17.5 million.
EPS of between a loss.
Fall of the 4 and a loss of the $1.4 per share.
This EPS outlook assumes a weighted average of $30.6 million shares outstanding for the year.
In addition, this 2021 outlook assumes depreciation of $9 million stock based compensation expense of $5 million and.
Interest.
And the 9 months of $200000.
This full year outlook also projects that gross margin and the mid teens and and average selling price of approximately $3.35 per square foot for the year.
Turning to cash we currently project our capital expenditures will range between 18 and 23.
Millions of dollars for the full year.
As our planning efforts progressed during the year, we plan to provide multiyear capital expenditure projections for our second silica aerogel manufacturing facility and other capital assets required to support our electric vehicle business opportunities.
But overall, we're confident in our.
Just a certain $2.3 million dollar cash balance and available credit under our SBB facility will be sufficient to fund our near term operating requirements and our strategic capital expenditure plan.
I'll now turn the call back over to Bethany for Q&A.
Or how do they can lean and we will now begin the question and answer session. If you would like to ask a question. Please press star followed by 1 on your Touchtone keypad. If for any reason you would like to remove that question. Please press star followed by 2 again to ask a question. Please press star 1 as a reminder.
Using a speaker phone please remember to pick up your handset before asking your question, we will pause briefly to on a question to generate and Q.
The first question and from the line of Eric Stine with Craig Hey, Ma'am you May proceed.
And on that John.
How are you.
Hello.
And so maybe we can start on the thermal barrier side and.
On the contract income.
And with the OEM and hand any.
The color there.
And I would assume that's more of vehicles or potentially it's more <unk>.
For vehicle or maybe how that breaks down as you look at these 2 new contracts.
Yes, Eric the.
And this is a more content per vehicle and ease of additional parts per vehicles. So the same <unk>.
Number of vehicles.
Forecast if you will.
But I'm just more content.
Intents to vehicle.
Yes.
And the.
Oems.
I mean, I guess the thought process on that is it is it realizing that.
This is more of a problem the things than they thought or.
Or is it simply just part of optimized.
Rising there and they are battery platform.
Yeah, No I think it's more of the lot or actually I think it's a function of.
On becoming more familiar with our materials to be honest and and finding additional.
Thermal management uses for our our paraffin products within the within.
And their battery platform, so I wouldn't necessarily say this is.
These are sort of emergency parts. If you will I would say that this is sort of the fine tuning of the design.
Got it.
Is that something that as you think about.
As you mentioned.
And you've got a lot of activity and the 3 levels that you've laid out as you think about that content per vehicle do you think this is the direction that other Oems Bill.
As you start to knock out some of awards.
Yeah, I think it's a good.
It's a good question and just to review, what we've said and the task.
And including in our presentation on our.
And in our Investor website there.
We.
We presented the idea of around 275 doll.
<unk> of content per vehicle.
And our model and we've also said often in the past that we believe our content will.
And we'll be.
And 100 and $300 per vehicle with really depending.
On the on.
And the size of the vehicle sedan, and Christmas Suvs versus trucks, and and and and maybe also how Oems.
Finalize their designs and what have you and so I think those numbers are.
And between if anything I would not cause us up a little bit, but but until we get more and hand, I think John and I are very comfortable with.
With those kind of numbers from a modeling modeling point of view.
Got you Okay. That's helpful.
And maybe just on the advanced battery materials side.
And a little bit of a new strategy.
And maybe the thought process there.
Rather than going so low obviously, I guess expanding your market opportunity, but have you had inbounds on that.
Yeah.
And just maybe what drove you in that direction.
Yeah, I think it's I think.
And just a couple of things 1 is we've been very active as you know Eric and the development phase of the material working with our 2 announced partners S K, and Korea, and Havana, and Germany, but as we've said before we are of a small handful of other companies with whom we are engaged and.
Do you think it's that I think it's.
Just moving down the learning curve.
And <unk>.
Opened new ideas to us some of his generated internally and probably some suggested to us externally.
And and it and so and.
<unk> driven that expanded or enhanced strategy to include our our own silicon rich on it.
Dividing.
And our carbon aerogel to others and then.
Exploring the role.
Our.
Carb.
So, it's our job silicone and it could play.
And in a solid state battery as well.
Gotcha.
Maybe just sneaking in 1 last 1 just on building materials.
Haven't heard you talk about that and.
It's been a long long time, so that kind of caught.
Caught my attention I mean, do you think that that is something where it's a bit of the catch up with the answer that for us.
On kind of the fruits of the refocusing that they did I think the earlier this year.
As we've said before we've been disappointed.
And at the rate of growth or the debt the.
The market penetration that we've had so far in that area.
I think it is fair to say that.
We were pleasantly surprised by the by the nice uptick and in revenue and building materials.
We firmly believe.
And that our high performance Noncombustible highly and highly efficient materials and have a role to play.
And the and the building materials market and and and you know.
And we're just starting to get a little traction there, but we were very pleased by by the progress we've made and the second quarter.
First half overall.
Yeah, that's great. Thank you.
Thank you rich thank you Sir.
Yeah.
Thank you Mr Stein.
The next question comes from the line of Chris Souther with B Riley you May proceed.
Hey, guys. Thanks for taking my question here.
And maybe just a little more details on the extension here with that first customer how does this change the cadence you previously talked about should we think about this essentially is the 30% increase and each of the years on the platform. So you know.
And really if the 2023, where you talked about and I think $75 million or so.
And due to a 100 million or is it kind of more.
More back and.
Some of the later models, having kind of the more content and maybe just kind of walk through the timing of the cadence increase here.
For now Chris what.
And if you want to of the expectations that we want to set or are consistent with what we've what we've said before and as you know you know low single digit millions this year of higher single digit millions of next year as new models of rolling off and <unk>.
And we were targeting that $75 million.
Mark in 'twenty, and 'twenty, 3 and then that doubling and and 'twenty 'twenty 4 and and the in the outer years of the of the decade.
It is fair to say that.
This I don't want to say it was and the back and necessarily because this is really of content per vehicle.
We issued 4 so it's an uptick of cross across that board and does not necessarily all backend loaded its of content per vehicle calculation for you. So so the work.
Extra comfortable with those numbers that we that we outlined previously and that's really fortifies that and and gives us.
Vehicle a bit more content per vehicle and no question.
Got it okay. So maybe just on to the.
And Asian automotive OEM that you you talked about being on the cuts of the win here with which is great to hear maybe just a little bit more on the scope of the program there.
Is this the global OEM that you're working on for of battery platform 1 of.
Of the kind of top 10 traditional Oems that you've talked about where you've got 5 and that late stage of this 1 of them or is it because the E V kind of only player on.
And then what are kind of the model years, where that platform is expected.
As launch and you can provide that I think would be helpful for people as well.
Yes, great.
It is it is 1 of the top 10 of a major.
Automotive OEM.
With a significant.
On the EV program going going forward and.
And.
Asia.
Much of the waste as we as we as we mentioned on what's interesting about this for us is that.
We are we're being designed in and there and a pretty rapid way into a very specific model of significant launch that they have planned and.
And several regions around.
The around the world beginning in Q1 of 2022 and there was a.
And there was a significant focus on on having that model launched on time and there was a concerted effort to too.
And to bring the pieces together, if you will and and we were very responsive to that and and that's.
Asia mature.
Of the.
The design win that we were anticipating here and the very near term.
What is interesting and our work with this company is that they.
And they have had.
A keen focus on let's just call it for them sort of Gen..2.
Which is the.
The the the advancement of their own.
Battery platform and that battery platform is destined to.
Power share Evs and all of their models over the course of of that the.
This decade, and so winning this.
The first piece.
Is.
Is it really I think puts us in the cat bird seat.
And to be designed into the the platform here in the opinion kind of.
Coming period of time, and so you know and just again kind of.
Rough numbers.
On this and you know the focus on on.
On the.
Content per vehicle is not dissimilar.
From from the.
The the North American company that we have.
Debt, we've announced previously so.
This is of great start for us with this.
The other customer and we think it's just the start and we've got a long future with that outstanding company.
Excellent and it's great to hear all hope and the queue here. Thanks guys.
Chris This is of course.
Thank you Mr sort of thing.
The next question is from the line of Amit Dayal with H C. Wainwright you May proceed.
Thank you grant from the guys.
The.
With respect to you all of these models hitting the market early 'twenty.
To maybe first quarter of anybody too.
Do you anticipate potentially shipping you know a product against these.
And Q3 of Q4 I mean.
Some of this probably is already underway for you I'm just trying to see you know in terms of revenue recognition by the end of the year.
And from the E V style of at least to me you know on something to start coming in for you guys.
And I I actually on that that's a good question, we the the the launches actually.
And at the end of Q1.
But we would anticipate some initial shipments in the.
The 20 in Q4.
And but we've got that baked into our 2021 aggregate outlook for this year. So.
It's not it's not going to change the.
The overall estimates of our EV thermal barrier of business significantly in 2021, but there is some potential for sort.
The revenue from that second customer of this year.
Understood.
And then you know.
On the building material side was this sort of the gist of it.
Near doing sort of the.
And for you from maybe some projects but.
Came up with us and being more.
1 of the concrete trend going forward that you will see potentially more contribution on the building material side moving forward.
The observation that debt we have here is that.
You know of building materials.
More broadly.
We're very active markets.
And several regions.
Of the world Interestingly around the pandemic and and we certainly felt it here and the United States and and and in Europe, I think with our materials and particular.
And this was not driven by any 1 given project or even 1 or 2 or 3 given projects. This was pretty broad based.
Activity levels.
Where our materials again high performance highly efficient noncombustible again, finding roles and a whole host of opportunities and in the in the segments. So.
We believe this is.
The beginning of of our ability to grow that business and the.
And the.
In the years to come and we really do believe that debt.
And the market.
And is moving towards the idea of it.
Highly energy efficient and and Noncombustible.
And and and we've got and we've got a very very important offering I think of that space.
Thank you.
1 last 1 from me in terms of the GSP investment should be single of TSB.
You know being little more passive versus more active and like how should we think the dairy Logan.
Most of you know.
Most of them and the company.
Well the KSP their investors first and and they focus on making good investments and they're very focused on on certain.
Segments that.
That.
They want to get a.
Kind of a bird's eye view on and and and they've made obviously the investment and us and some other fine companies.
It is also part of their strategy, though to bring more than money too.
To the balance sheets over there of their portfolio.
And to bring other resources and so for us or the the most if you will must logical most near term and given that where as I said in my notes you know moving into high gear here around plant to.
No. They they are they do significant projects all around the world.
And for us to be able to supplement our very good capital projects team.
With resources from.
From.
And the Coke team. It is that is the big advantage for us. So again first and foremost of investors, but part of their strategy is to help their portfolio of companies and any way they can.
And okay.
That's on the base. Thank you so much thank you Amit and thanks all.
All of it.
Thank you Mr. Diana.
The next question is from the line of Doug Becker with Northland Capital markets. You May proceed.
And then thanks.
And you started to address this a little bit but was hoping to get a little more color on framing of the potential size of the the imminent deal with the Asian automotive we.
And the shorter term and really the longer term opportunity and it's.
Sounded like you were saying the content per vehicle would be similar but if you could frame it a little bit of.
A little bit more on the longer term and so as I said.
And I think the and done done was it was trying to explain this but with the U S automotive OEM, where in a battery platform and that battery platform will be used across you know.
25, or 30 model.
And that way.
With the Asian automotive OEM win.
There were initially and a single model, although that model is a global model and it will be sold in Asia, and Europe and in the U S.
But it is I think in terms of con.
And the sulfur vehicle, it's about the same but by its very nature of that initial contract the expected contract.
We will not be as and I spoke of assuming more of the U S. Automotive OEM. However.
It puts us in line to ultimately secure a battery platform win which could be as.
The 10th again, that's what we've seen but that's not what's on the table today, what's on the table today and say.
The single model win and so.
Contextually it would be 125th of what you know just using 25 models 125th of what we'd expect from them from the U S business at present, but could ultimately be.
And that that we're able to win the platform.
It also might be as big as what we're seeing out of the U S.
Understood.
And 1 of the remaining steps to being able to officially announce the steel it really does seem like it's imminent to try and get something into and 2 of the first quarter model.
Yeah.
And to the extent.
And we have been.
And finalizing.
The.
The design and the contract and.
I think the slow enough Doug that we would not have.
Talked about being on the cusp of unless we were on the cost and so.
And where.
Alright and working.
And being on that on.
And the final elements of the of the contract and the agreement.
Got it.
And then in light of some potential customers looking at the use of the carbon nano materials and solid state batteries.
Just wanted to get your latest thoughts on.
On.
And the opportunities and the threats from solid state batteries, because at least arguably it really could eliminate the thermal runaway issue.
But that might be on much longer term.
Term of a threat.
We.
So.
And so artwork again where were.
And we're engaged.
On the solid state.
With the solid state and focus with with the.
2 entities and.
And.
And.
Yes in the.
Early days.
And of testing and evaluating our materials in the context of a solid state.
Battery structure.
2 the 2 it and.
And we'll keep we'll keep you.
Up to date as we make progress I think and interesting milestone.
And would be.
And to be able to announce the kind of evaluation partnerships that we have of SK and the bionic with these companies and some of these other focal focal areas for us so.
With respect to.
The the.
And I suppose the.
The right of of solid state.
We believe that.
The lithium ion batteries will be around for quite a long time and and.
And that and the solid state.
We will develop over a fairly long period of time and.
Debt that solid state.
Technology to reach at scale is something that is out in 10 and 15 years.
And we believe that.
As we go towards.
<unk> of solid state.
And that the thermal.
Rob.
Runaway risks only escalate over the course of that period of that period of time.
We also believe that with the amount of work and scale that is going into lithium ion batteries that they will continue to improve.
Performance.
Also cost and will and will be a very challenging.
Competitor.
And if and when solid state reaches scale.
And so look we were.
As we as I indicated in my comments.
Part of the.
But the contract.
Of the North American entity reaches out beyond 2030 for us that's an indication that people are planning for.
Thermal runaway to be an issue.
All of it into the out into that kind of timeframe 10, and 15 year kind of timeframe.
So.
And of course, there are no guarantees for anything forever and we.
10, and 15 years as it is of very very long runway, especially for the technology platform company that is constantly innovating and entering into.
A variety of a variety of new market. So again, we're very respectful of others.
Of it and in fact.
We're putting some chips on the table ourselves on the solid state side, because it's sort of thing for us too rough to do.
No that sounds very good.
Any change to the E B M T.
Tam or is that.
Total too soon to be to be broadening that that opportunity.
And I think we'd like to leave those numbers along for now.
Fair enough and they're pretty sizable as of Oh, we would have to ask the guy much.
Thanks, Doug.
Thank you Doug.
Thank you Mr Bad debt.
The next question is from the line of Shawn Severson with W. P. R.
You May proceed.
And so guys Hello.
Hey, Sean Don and I was wondering if what kind of just going back to the energy infrastructure business for a moment.
I'm, assuming most of the.
<unk> has been and maintenance stuff and turnarounds right now and things that have been the way, but how does the project work look going out over the next the next couple of years and I know that can be lumpy and the timing difficult, but obviously, there can be bigger ramps and and bigger projects to come out and then and then to that what about the anything on the hydrogen.
And I'm trying to updates.
Yeah. So so you you are correct that that the you know the highest activity levels that we have seen here.
As we are.
I just want to say coming out of the pandemic. The these days are a little murky on that but but as certainty.
And the price we.
And certain regions are working their way through it.
Most of them.
Most of everything has been maintenance and we love maintenance work.
And so it you know we've been we've been restocking the supply chain and.
And the distribution channels theres been a tremendous amount of activity.
And it's especially in the heat and the U S. As John said in his and his comments.
We did as we announced on the last quarterly call, we and another LNG business and Arctic LNG.
Which is a terrific project for us here of this year with respect to additional projects I really.
I believe that we're.
And a very strong position in the specifications of the wide range of projects that were put on pause.
The leading into the that's the pandemic started.
We have seen some of them begin to come to life.
Again and again.
And the planning stage, if you will and.
And I believe that as those projects initiate.
We will we will and our fair share of work there and we have every expectation that our revenue mix of 60% and maintenance and 40% project.
Will will will will be the norm.
Here again, as we as we get to the back side of the of the pandemic.
With the scan and thanks.
And if I could maybe it's the place yet.
The the pipeline a little bit differently and looking at the for the pirate than product or are all of those those Oems and customers and there they all chasing.
Our model year and 4 of launch I mean, if we're looking at you know even though they are in different stages of development with you is this all kind.
Kind of coming into of 'twenty 'twenty 4 year of 2023, and just trying to understand the time and even though they may be in different stages of development is there a year. The this is really converging on.
Oh.
You know, what what we've seen and and what they've announced.
It is the.
If you look at the if you look at these companies that day.
And typically they have announced you know 1 or 2 or 3 vehicles here out of over the course of the next 2 or 3.
And 3 quarters and then it's really 2023, where you start to see you know of some of the of the.
The company is saying that they will have 5 and 10 vehicles out and then as you get 2004.25, you see some of them, saying 2025, even 30 on vehicles.
Electric vehicles and.
And those model years, so it's it's not.
And consistent really with the ramp that we've talked about from the from the North American the company that we've we've discussed on you.
No.
The.
Low single digits.
Millions of this.
This year.
Mid to upper single digits next year boom, you know that $75 million target number in 2023, that's a function of the battery platform being utilized.
And over.
A greater number of models and <unk>.
And.
And and and picking up picking up market share and then of course by the time to get out to 2025, and you know your you're more than doubled that number so I think that day.
And that ramp is very emblematic of of of sort of the timing of these companies.
Rolling out there.
And there are various models.
Great. Thanks, guys.
Thanks, Sean.
Thanks, Sean.
Thank you Mr. Steve Ritchie.
The next question.
Is from the line of Tom Curran with Seaport Global.
You May proceed.
Good evening guys.
And any time soon.
Starting on the part of it inside just to bring a bit more detail and on this pending design win with the age and automaker what would be the the remaining steps and timeline and progressing from the single model Award to some.
The form of a multi model battery platform based contract.
What will the time I think it really.
It really relates as much to their development.
The finalization of the development of their battery platform. So it.
And just.
The.
A little.
Brief history, I mean, what what we if you look at the a variety of of companies and and the approaches people took.
You know some people how to dedicated battery platform concept really and the 2015.2017 and sort.
And the frame and they've been driving down that road ever since and and I would say our north American entity.
The design.
Customer.
On.
It is a good example of that others came.
Came to this.
Approach a little later and.
And and.
And they did that because I think they viewed.
On their approach.
They were going to rely and they were gonna be more of a sort of integrators, if you will and and really rely more on on their battery cell partners of the LG and Samsung as the S. K as of the Panasonic The C H.
Sales of the world to really drive their program and and and I think no.
As.
Certain of companies began to change their tune.
And and you know Tesla is probably a good example of that right where they they really made a very.
Specific change and bringing.
And more and more of their technology in house around energy storage and they think of themselves to great extent as and energy storage company. At this you know at this point, so and and several companies have really focused on this battery platform idea.
So and so they are at different stages of development in in and their own per.
On their own corporate and.
The timelines and we.
I think the eat the Asia based.
Customer.
I think that's a good example of share.
They don't want us to flow down.
From launch.
And so they're there.
The first approach was to be sure.
Yeah.
Has the model from ready to enroll well and.
The problem.
But.
We know that debt, they're focused on the battery platform and stuff and we've worked with.
Each of them on that.
That's.
Helpful and then when it comes to the the remaining prospective customers you've had at state Street and the development pipeline.
Assuming this decision on automaker was 1 of them.
As of the last update you gave us you've gone from 5 to 4 day.
Does the current leading candidate for becoming the next customers seem most likely to start.
With the a prototype order of similar to the very first sale you made in China and the.
Zine win maybe for a single model or 2 or jump straight into a big battery platform based production volume contracts such as your.
First north American customer.
I think it will I think there'll be a combination of of the louder to really you know the the specific model.
And and <unk>.
And we're working very closely with on the.
And on a broader battery platform for the for the entity, but there there are some who are quite advanced and their battery platform work and.
And so we couldn't we couldn't be brought into that you know that final that final stage with with the others and.
And as well, Tom So I think of.
I would like for your expectations to be that it'll be a combination of those of those 2 with respect to the idea of prototypes we were active selling.
Total parts too.
At least 5.
Maybe maybe more of that maybe more at this point, but at least 5 companies, where we're selling parts on to these 2 these companies and the distinction is as you know.
Is prototype parts of Europe.
Going into vehicles out there that.
Out there and not planning on selling and production parts of our go into vehicles, whereby there, they're rolling the mountain and selling them to the to the public so.
Yeah Yeah.
And Tom Yes, so in the in the second quarter, we had revenue from.
All of the companies in and.
And stage 3.
But it was prototype revenue so to get the to get the stage 3 of the kind of in the prototype book it already and.
And what we've been doing is converting them to the commercial contracts.
And are either for a battery platform or floor of model.
I think so that that's very very helpful. So ever since you.
And you realize that first dollar of prototype revenue back in <unk>, 2020, you've had just a steady stream of.
Prototypes part sales and stage III and it's all about converting that now and to some form of production.
Production Award.
Yeah, It's really becomes production award and it's really when that material and it's going to end up in vehicles that go to their dealers right. So that's the difference and wonder if the prototype stage theyre, putting it and prototype vehicles and ensuring those vehicles driving around and make sure they meet the.
And on.
Specifications or they're yes, they're going into the thermal barriers go into lithium ion batteries, they might put them in on.
Our lab and instigate the thermal runaway and make sure those barriers perform as advertised and so but it that at that point they are buying material from us.
That's a helpful clarification and.
On the a b and side it'll be and my last 1 on and try to help you guys finish on the hour.
And when it comes to the first prong of of your strategy is it your understanding that your partners.
Are you using those evaluation samples to explore anode structures or investigate you.
Uses and some other way that the differs from your scaffolding host design.
No.
And the first of all that and.
And the first leg of the 3.3 legs and the R.
Our traditional approach if you will we have we have been supplying.
And then on.
Our our silicon rich on the material to them and Iterating with them as they had set metrics or milestones for.
And for us to to achieve and and oftentimes.
On T.
Together with with the specific <unk>.
Recommendations back and forth as we as we iterate so.
And I hope that answered your answer to your question Tom So it if that was sort of traditional approach that was our initial approach and and we're still very engaged at that level by the by far of the 3 approaches and that's our that's our biggest.
Focus today and these other areas really emerged from.
The conversations that we had again with the small handful of of automotive and.
Battery Oems.
Who wanted to explore some additional ideas with us and that's how we came.
And you know our expertise of course is around the carbon aerogels the manipulation of that of those of those carbon materials and so.
We know that.
It's a it's a particularly interesting material host material and and.
With the unique we think and and the way that we can construct that that material.
And it and it gives us as I said in my notes.
<unk> community to have a broader.
The adoption you know, we've talked about being OEM agnostic and with Paris, and we've talked about being an industry standard with.
Part of the thing.
I'm not quite there yet with our with this other approach on on a b M. But the concept is the same.
And that it will allow a broader adoption if we provide this particular aspect.
Aspect of it really suits it goes right to our technology technological strength and so.
That's the nature of the discussions and and and collaborative work that we're doing with these other companies.
Got it thanks for taking my questions.
Thank you Tom Thanks, Tom.
Yeah.
Thank you Mr Cohen.
The next question is from the line of Jed Bush on.
On the way of Canaccord.
Thank you you May proceed.
Hi, Thanks, most of been asked but I guess.
The first product out of the gate.
Is that gonna be a value engineering implement or a new platform.
Launch in other words, if there is a battery on the market that has some <unk>.
Existing.
From from a fire mitigation.
<unk>.
Would you be slotted into.
And existing model or is this for a new model.
Yeah.
The.
Piracy and work that we're doing for the thermal barriers is going into a new model and and.
And so.
It's a very good it's a very good distinction actually jud.
We.
Because we know that there are.
And there are existing electric vehicles there.
That are running into the thermal management thermal runaway challenges for sure right and so.
The.
The vast majority of the work we are doing is on new models typically.
Focused on new battery platforms and not doing.
Remediation work looking backwards and if that's the right that's the right term.
Got it yes. That's helpful. Then on just the.
Silicon anode.
Our efforts there.
And I thought it and maybe I misunderstood, but I thought I heard you talking earlier about solid state yet all of the solid state companies seem to be abandoning.
The development or at least pushing out of time frames and coming back to <unk>.
And as a traditional and moving into our silicon.
Based and of which would seem to increase your value proposition and just.
Want to make sure the.
The year not endeavoring into a solid state at this point that you're still squarely focused on.
Developing your.
Silicon anode the solution.
That's our principles.
Silicon and focus and you are right, we're seeing a lot of interim steps beats.
Between where we are today, where the where the industry is today and what people sort of.
Think of as such.
Sometimes people use the expression of the true solid state and and the work that we're.
We're doing it again.
Predominantly focused on.
On today's Chemistries and today's approaches today.
Giga factories et cetera.
Have done some work on.
And what role are silicon carbon Aerogels may play.
And in a solid state construction. We believe this is very much on the our stage and and down the road. Many many years, but we're learning a lot and we do believe.
And that our materials have unique properties even.
With the solid electrolyte so.
And again, we believe.
And that is and the distant.
Out of many many years from now.
So again, our principle focus as I said earlier is on that so the kind of rich added material, bringing that carbon aerogel structure to current technology and essence.
1 last question from me.
And let everybody get on with their night, the the LNG work that you're doing up north.
And is there a hydrogen component in terms of steam Reformation or is that.
Strictly LNG.
LNG.
It is.
It is.
Our role is on the LNG side and.
But we've continued to.
Internally articulate.
The role that we may have and.
Providing.
And thermal management and fire safety.
For the both the storage and the transportation of liquid hydrogen and again, if it's such a natural offshoot of our value proposition and in LNG and.
And the scale that they're talking about.
And to have.
Sort of and Interstate system of.
Of hydrogen is the nub.
<unk> are just as unit very well know are just strike and it kinds of numbers, we're exploring our role where we're trying to partner up with some of the leaders in the in the space to get smart on it and make sure.
The dollar have a keen understanding of all of the value proposition and our materials can bring into that into that market.
Great well. Thank you listed on that thank you I appreciate it thanks, Jeff.
Yeah.
Thank you Mr Chairman.
There are no additional questions.
Waiting at this time I would like to pass the conference back over to Don Young for any closing remarks.
Thank you Bethany and thanks, very much hey, we appreciate everyone's interest and Aspen and and we look forward to reporting our third quarter 2021 results to you in late October.
People ever be well have a good evening. Thank you.
Thanks, everybody.
That concludes the Aspen Aerogels incorporated Q2, 2020.1 earnings call I Hope you all enjoy the rest of your day.
October.
Okay.
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Okay.
[music].
And then.
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Sure.
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