Aspen Aerogels, Inc. (NYSE:ASPN) Q3 2023 Earnings Call Transcript

Ricardo Rodriguez: Yes. I mean I think we would put them in similar bucket as the other OEMs. I mean they still haven’t announced a broad battery platform strategy. Instead, it’s more of a nameplate by nameplate approach, and that scope can increase, but we don’t see anything here in the near-term for 2024.

George Gianarikas: Thanks.

Don Young: Thank you, George.

Operator: We now turn to Chris Souther with B. Riley. Your line is open.

Chris Souther: Hey, guys, thanks for taking my questions here. Could you talk through the moving pieces on the revenue and EBITDA guidance for the fourth quarter? You said revenue is expected to grow, gross margins are expected to increase, and you had a $7 million EBITDA loss in the third quarter. So what are the moving pieces around the low end of the EBITDA guidance, $8 million loss? Can you talk through what you’d need from a revenue perspective to hit the positive EBITDA in the fourth quarter or is some specific output out of China or other factors that would kind of be in play there?

Ricardo Rodriguez: Yes. No, that’s a good question. We knew you’d kind of go there. And we really are protecting for the doomsday scenario here. If you look at the negative 40 of EBITDA, right, of potential EBITDA. I think we’ll be forthcoming tightening that up as November materializes here. But for us, really, when we looked at the UAW agreement not being ratified, some of the big certification work streams with the contract manufacturer still in full swing and the potential cost of an additional turn of certification on those products. Really, if you combine all of those negative things, that could happen, albeit with low probabilities, that’s how you end up at the negative 40 of EBITDA. And yes, I mean I do think that given the ramp that we expect for Q4, we will have an opportunity to potentially tighten that range.

Chris Souther: Understood. Okay. That’s really helpful.

Don Young: Yes. Chris, I would say that there’s a reasonable chance that we’ll provide one more update before year-end on some of these topics that you and your colleagues have asked about revenue and EBITDA, additional OEM awards, commentary on the DOE LPO, those sorts of things I think it could very well be appropriate for us to again to update you all one more time before year-end.

Chris Souther: Got it. Okay. That’s really helpful. And then just you kind of talk through your sales not matching up kind of as a leading indicator of GM production because obviously the implied ASPs otherwise would have been very high here. Where are the ASPs kind of shaken out if we exclude the Scania stuff just for kind of general cars SUVs that are in your OEM awards? And how much revenue are you guys getting from awards that you haven’t yet received as far as kind of component sales that are related to testing and the like? I just wanted to see if you could kind of provide a bit more clarity around that.

Ricardo Rodriguez: Yes. I mean, the prototype revenues right now make up, well, less than 10% of our PyroThin revenues. And then I’m assuming you mean more around in when it comes to the rest of the PyroThin revenues, you mean more around our content per vehicle, right. How that is tracking?

Chris Souther: Yes, exactly. Yes, exactly.

Ricardo Rodriguez: Yes. And so I mean we’re still pretty consistently seeing our content per vehicle in that $700 to $1,000 per vehicle range, given that the bulk of what we’re supplying is vehicles with pretty large packs and pouch cells, right. And when we add one of these prismatic programs, I think the content there is more in that $350 to $400 per car range, and – but nonetheless, I mean it’s a much simpler part to produce. It requires a lot less capital. And so we’re happy with the economics of those awards as well. But right now, I mean if you’re looking at what we’re producing here, what we produce here in Q3, what we’ll do in Q4, and most of 2024, it’s still going to be this large pouch configuration with the CPV in that $700 range.

Chris Souther: Got it. Okay. That’s really helpful. I’ll hop in the queue. Thanks.

Don Young: Thanks so much.

Operator: Our next question comes from Tom Curran with Seaport Research Partners. Your line is open.

Tom Curran: Good morning, guys. When it comes to the supplemental supply that you’re in the process of testing with your Chinese contract manufacturing partner, is the expectation still that once that’s fully ramped to the maximum expected capacity, that your available quarterly revenue capacity for Energy Industrial would be around $37.5 million? And then when it comes to that $118 million backlog of unfilled orders, how much time do you feel you have to catch up with those orders? And do you have any risk or liability related to letting them remain unfilled past a certain point in time?

Don Young: Well, it’s a good question, Tom. We are very close to our Energy Industrial customers and the distribution channels and the engineering firms, and we actively communicate with them to be sure that we’re meeting their expectations. And – but we are in a position to switch over to the supplemental supply again early next year. And we feel that we will fulfill our obligations, our responsibilities to those customers, and quite frankly, that business is strong. Our sales team on the Energy Industrial side is very active on the Pyrogel side of the business and the Cryogel side, and the LNG part of the business. And so that business is going to continue to grow and be an important baseload of revenue and gross profit for our company.

And so again, we feel we’re in a good position with those customers communicating well. Yes, the backlog and you might remember if you go back to the last time we were short of capacity. The backlog is substantial, and – but we’re in good shape. As long as we communicate well, I think we’re good.

Ricardo Rodriguez: Yes. And if I may add, I mean, the team is pretty good at assessing what gets into that $118 million backlog and which orders they accept. And an order there makes it into that $118 million if the team has line of sight to fulfilling it within a reasonable time frame.

Tom Curran: Glad to hear that. That’s reassuring. And just to follow-up and try to clarify, within the $550 million, would you think of fully – eventual fully available annual revenue capacity for EI being around $150 million?

Don Young: Yes. Yes, we would.

Tom Curran: Okay.