Expanding the Aerogel Platform into Electric Vehicles and Accelerating Growth



KEY POINTS
  • Aspen Aerogels believes that it is the global leader in aerogel technology with applications in the electric vehicle, sustainable building material, and energy infrastructure markets.
  • Aspen’s aerogel technology platform is proprietary and protected by 145 issued patents, with an additional 114 pending, in US and foreign jurisdictions.
  • Aspen believes it can double its revenues every 24 months, reaching $450 million by 2025 at 40% plus CAGR between 2021 and 2025E. By the end of 2023, it targets $225 million in revenue and a 30% gross margin.
  • To capture the EV market, Aspen has developed PyroThin™ to impede thermal runaway in electric vehicles. It has also developed carbon aerogel battery materials to boost the performance of lithium-ion batteries.
  • The fast-growing EV market is creating new growth drivers for the company, with a combined market opportunity per annum of $67 billion in EV thermal barriers and battery materials.
  • The company has secured a multiyear contract worth a potential $1 billion of revenue this decade with a US auto company to supply thermal runaway material, and the company expects additional OEM wins.
  • Management believes its COVID-19-impacted energy infrastructure business has bottomed and is poised for a recovery principally in the LNG, petrochemical, and refinery markets.
  • Our Initiation of Coverage report on Aspen can be accessed here. And the Fireside Chat can be viewed here.

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OUR INSIGHTS

The Opportunities

Aspen Aerogels has created a modified version of its aerogel insulation materials branded PyroThin™, which is a highly effective thermal barrier used to mitigate thermal runaway in lithium-ion batteries in electric vehicles (EVs). The company estimates this market could be a $30 billion opportunity over the 2020 to 2030 period. Second, the company is developing a battery material technology that can meaningfully improve the performance of lithium-ion batteries, with the potential to be a $37 billion market over the same period. At its core, this product expansion is creating a significant pivot for the company by enabling them to participate in the rapidly growing EV market.

The Obstacles

Although the potential revenue from the initial customer for PyroThin™ thermal barriers is significant, Aspen will likely need to expand its customer base in this market to reduce its reliance on the success of a single OEM in the EV market. In addition, given the market size and opportunity, competitive technologies might evolve and increase competitive pressure in the market. Note, also, that if Aspen successfully executes its strategic plan, it will need to expand annual capacity beyond the $200 million available in its East Providence, Rhode Island manufacturing facility.

Aspen Aerogels believes that it is the global leader in aerogel technology with applications in the electric vehicle, sustainable building material, and energy infrastructure markets.

EXECUTIVE DISCUSSION

Shawn Severson: My name is Shawn Severson, Co-Founder and President of Water Tower Research and Head of ClimateTech & Sustainable Investing. Thank you, everyone, for joining us again today in our ongoing Management Series focused on Sustainable Investing Today, we have Don Young, CEO of Aspen Aerogels.

Don, could you start with giving us a little bit of a background on the business and the aerogel platform? I know you have a slide you want to talk to in addition to some new market opportunities.

Don Young: Certainly. Aspen Aerogels is centered around what we refer to as our aerogel technology platform. This platform is supported by over 270 patents we developed over the last 20 years. Our strategy is to leverage that aerogel technology platform into high-value markets.

Our commercialization efforts really have two bookends to them.

First, we have two opportunities that we’ll delve into later in the chat around the ...

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