Aspen Aerogels' (ASPN) CEO Don Young on Q3 2021 Results - Earnings Call Transcript

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Aspen Aerogels, Inc. (NYSE:ASPN) Q3 2021 Earnings Conference Call October 28, 2021 5:00 PM ET

Company Participants

Laura Guerrant – Vice President-Investor Relations and Corporate Communications

Don Young – President and Chief Executive Officer

John Fairbanks – Chief Financial Officer

Conference Call Participants

Eric Stine – Craig-Hallum

Colin Rusch – Oppenheimer

Alex Potter – Piper Sandler

Jed Dorsheimer – Canaccord Genuity

Amit Dayal – H.C. Wainwright

Chris Souther – B. Riley

Tom Curran – Seaport Research Partners

Chip Moore – EF Hutton

Jeff Osborne – Cowen

Operator

Welcome and thank you for attending the Aspen Aerogels Q3 2021 Earnings Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

I would now like to pass the conference over to your host, Laura Guerrant with Aspen Aerogels. Thank you. You may proceed, Ms. Guerrant.

Laura Guerrant

Thank you, Sarah. Good evening and thank you for joining us for the Aspen Aerogels conference call. I'm Laura Guerrant, Aspen's Vice President of Investor Relations and Corporate Communications. 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 Aspen's financial results and business developments, as well as a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures, is available on the Investors section of the Aspen's website, www.aerogel.com. Included in the press release is a summary statement of operations, a summary balance sheet, and a summary of key financial and operating statistics for the third quarter and nine months ended September 30, 2021. In addition, the Investors section of Aspen's website will contain an archived version of this webcast for approximately one year.

Please note that our discussion today will include forward-looking statements, including any statement regarding outlook, expectations, beliefs, projections, estimates, targets, prospects, business plans, and any other statement that is not a historical fact. These forward-looking statements are subject to risks and uncertainties. Aspen Aerogels' actual results may differ materially from those expressed in these forward-looking statements. A list of factors that could affect the company's actual results can be found in Aspen's press release issued today and are discussed in more detail on the reports Aspen files with the SEC, particularly in the company's most recent annual report on Form 10-K.

The company's press release issued today and filings with the SEC can also be found in the Investors section of Aspen's website. Forward-looking statements made today represent the company's views as of today, October 28, 2021. 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 to be considered in 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 a discussion of why we present these non-GAAP financial measures are included in today's press release.

I'll now turn the call over to Don. Don?

Don Young

Thanks, Laura. Good afternoon, everyone. Thank you for joining us for our Q3 2021 earnings call. I should note that Laura Guerrant joined us a couple of months ago as our VP Investor Relations and Corporate Communications. She has 30 years of professional experience and is joining us just in the nick of time. John and I have been moonlighting in the role since we went public in 2014 and we welcome Laura as we broaden our outreach to the investment community.

Today, I will describe the key highlights of our progress towards achieving our near-term and longer-term business goals. John will then recap our Q3 performance and finish with an updated outlook for 2021. We will conclude today's call with a Q&A session. The key points I intend to cover are the drivers for both strong Q3 revenue and our full year outlook, which we have now raised for the third time this year. The acceleration and expansion of our PyroThin thermal barrier business, which we believe sets the stage for 2022 PyroThin revenue to be two or more times our original 2022 revenue estimate. The progress on key investments related to Plant 2 and the technical and business developments for Aspen Battery Materials.

The third quarter was strong with top-line growth exceeding our expectations driven by both our energy infrastructure business and our emerging PyroThin thermal barrier shipments. Revenue grew 26% year-over-year to $30.4 million and gross profit increased 61% reflecting the leverage associated with increasing utilization of our manufacturing plant. The recovery of our energy infrastructure business is in line with our expectations as we come out of what we hope to be the worst of the COVID pandemic. We predicted that as the impact of the pandemic subsided, energy infrastructure revenue would begin to increase towards pre-pandemic levels as pent-up demand materialized. This has in fact been the case as we are seeing high levels of maintenance-related activity, especially in countries – especially in key countries with higher vaccination rates.

This positive indicator is an important factor contributing to our 2021 guidance, which we have raised for the third time this year. As a reminder, one of the key components of our goal to double revenue from 2021 to 2023 is to recapture our pre-pandemic energy infrastructure revenue, which averaged nearly $35 million per quarter during 2019. We believe that we are well positioned to achieve this goal no later than 2023. Over the longer term, we believe that value of our energy infrastructure products, which is based on resource efficiency, asset resiliency, and safety, particularly fire safety, will become yet more important to our customers in the years to come as they strive to attain their own sustainability goals.

And when you consider the potential of leveraging our aerogel technology platform into new markets, such as hydrogen infrastructure and carbon capture, we see significant growth opportunities over this decade for our energy infrastructure business. In my earlier comments, I mentioned our emerging shipments of PyroThin thermal barriers. This business is advancing at a faster pace than we initially anticipated. John and I have previously said that we expect 2021 PyroThin thermal barrier revenue to be in the low single-digit millions of dollars and 2022 PyroThin revenue to be in the mid to upper single-digit millions. During Q3, we exceeded $1 million of PyroThin revenue on a year-to-date basis and we now expect Q4 revenue alone to exceed $5 million. This acceleration of revenue we believe sets the stage for 2022 PyroThin thermal barrier revenue to be two times or more our initial expectations of mid to high single-digit millions.

On our last earnings call, we said that we were on the cusp of winning a contract with a major Asia-based automotive OEM with a leading global platform. We have in fact received our first orders for that OEMs first all electric vehicle that will be offered in Asian, European and North American markets. We are delivering the first production parts to this customer in Q4, and it should be noted that this OEM has partnered with another large Asian EV OEM that would use the same battery modules to power its electric offerings.

We are also delivering production parts to our major U.S. automotive OEM during the fourth quarter. These first deliveries are pre-loading the pipeline to these customers and enhancing our Q4 revenue. The transition from supplying prototype parts to production parts is a major milestone and signifies thermal barrier parts destined for Q4 and Q1 commercial EV launches. The milestone also represents a prerequisite for announcing the names of these two first customers, which we hope to do soon. There are several drivers accelerating PyroThin thermal barrier revenue, including the transition to production parts with our two existing EV OEMs, very active prototyping with new EV OEMs and our business development funnel and in cases where we are seeing an increasing scope of work as we establish ourselves as a technology partner to these companies.

I discussed earlier the importance of the move to production parts, and I will discuss the business development funnel in a moment, but first I want to explain in more depth, the importance of Aspen being viewed as a technology partner. Our approach is threefold. Our intent is for Aspen to be the industry expert in battery thermal management for PyroThin thermal barriers to be the industry standard and for Aspen to be OEM agnostic. As a technology partner to EV OEMs, we are being asked to focus more broadly on battery performance and safety. This expanded mandate is in addition to our current mission critical role of mitigating thermal runaway. Our team is designing more sophisticated aerogel-based solutions to optimize thermal management and mechanical performance during the standard operation of the battery system. Again, this mandate focuses more broadly on battery performance and safety, and the likely result of this advancement is more technical scope and more content per vehicle than we initially estimated. This development is resulting in increased thermal barrier revenue estimate in 2021 and 2022 and very likely in subsequent years.

We've made considerable progress during the quarter in the business development funnel for our PyroThin thermal barrier, the pace of engagement within our three-stage business development process remains high, and we are responding to multiple formal requests, including RFIs, RFQs, and performance validations. We continue to work with several of the remaining EV OEMs on developing solutions for improved battery safety in the event of thermal runaway, as well as for thermal and mechanical management solutions for improved battery performance during the normal course of the battery’s operation. With the increased intensity of the EV megatrend and our broader mandate around battery performance and safety, the pace of our commercial work is accelerating and the size of the opportunity is expanding.

In order to aggressively capitalize on our expanding demand profile, we're also expediting the work on our second aerogel manufacturing plant. We have selected a 90-acre parcel in the Southeastern United States as the site of the second plant and are working closely with state and local officials to finalize zoning approvals and incentive arrangements. Subject to the approval of our Board, we anticipate making a joint public announcement of our site selection with the Governor's office in the near future.

The site gives us a space to design Plant 2 to provide more than twice the capacity of Plant 1. We plan to have Phase 1 of Plant 2 operational during the second half of 2023. We are currently working to match the size of the first phase of the plant construction with the accelerated and expanded demand profile described earlier. We're also keenly focused on building a plant with low operating cost and one that has key raw materials generated onsite or nearby.

On a related note, it has been about four months since Koch Strategic Platforms made $75 million investment in Aspen. The premise of the investment was not only to strengthen our balance sheet, but also to bring to bear the broader resources of the significant Koch network to enable us to scale more effectively. Plant 2 engineering is a good example. We have engaged Koch project solutions to support our own outstanding strategic capital projects team with additional resources drawn from its vast experience. We expect this support will continue for the duration of the project, which includes Koch providing onsite project leadership during the construction phase.

There are additional opportunities for us to work with teams from Koch in areas such as the fabrication of thermal barrier parts in Mexico and the optimization of purchasing and logistics. With the opportunity to double revenue every 24 months throughout the decade, it is imperative for us to use all possible resources to achieve our full potential.

Moving to Aspen Battery Materials, which we refer to as ABM, we're developing our carbon aerogel technology in the design of low-cost, high-performance, silicon-rich anodes in lithium-ion batteries. The collection of attributes of our carbon aerogel technology creates an ideal, protective host or scaffold for silicon and helps address the challenges posed by silicon expansion during each charge cycle.

The nearly $10 million of investments that we are making in scientists, engineers, and facilities throughout 2021 are resulting in significant progress towards achieving key technical milestones in the areas of energy density and cycle life. The design of Aspen's carbon aerogel material allows lithium ions to move more easily across to start to more easily assess the capacity of silicon while simultaneously preserving the structural integrity of anode and extending cycle life. The events have also increased our production capacity to deliver larger samples of optimized materials to our partners. This approach to partner engagement plays to the strength of our technology, and we believe will enable the broadest and quickest adoption of carbon aerogel solutions in the EV battery market. When we provide our overall financial outlet for 2022, we will also share specific technical and commercial targets for ABM that will set the course for what we believe will be significant value creation.

At the beginning of this year, we said that our target would be to double revenue from 2021 to 2023 and again, from 2023 to 2025. And at the last earnings call, we said that we believe that we have the opportunity to double revenue every 24 months through the decade. With an accelerating battery performance and safety business led by our PyroThin thermal barriers and important energy infrastructure business driven by resource efficiency, asset resiliency and safety, are rich and commercially leverageable aerogel technology platform and an outstanding team of people to drive the significant scaling of the company, we are confident in our ability to achieve these targets.

In closing, I want to take a moment to recognize Aspen's 20-year anniversary, which we are celebrating this quarter. We have taken our collective vision and executed a strategy that is transforming the company to create the greatest value for our customers and for society as a whole. Even with 20 years behind us, we feel our work and important contributions are just beginning. We as a company, have a deep gratitude to all of those who have provided wisdom and support to us along the way.

And with that, John, over to you.

John Fairbanks

Thanks, Don. I'll start by running through our financial results for the third quarter of 2021 at a summary level. Total revenue grew 26% to $30.4 million from $24.2 million in the third quarter of 2020.

Net loss increased to $7.8 million or $0.24 per share this year versus a net loss of $6.8 million or $0.25 per share in the third quarter last year. I want to highlight that net loss this year reflected a $3.7 million gain on the extinguishment of debt.

Adjusted EBITDA was negative $7.8 million this year, compared to negative $3.2 million in the third quarter of 2020. We define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expense, and other items that we do not believe are indicative of our core operating performance. In the third quarter this year, these other items included the $3.7 million gain on the extinguishment of debt.

I’ll now provide additional details on the components of our results. First, I'll discuss revenue. Total revenue increased by $6.2 million or 26% to $30.4 million. This increase in third quarter revenue was principally driven by a continuation of the initial stages of the post-COVID recovery in the global refinery and chemical market, particularly in the United States and nearly $1 million of incremental revenue in the EV thermal barrier market, offset in part by a decrease in project work due to the conclusion of the PTT LNG project.

Total shipments for the quarter increased by 32% to 9 million square feet of aerogel blankets, while our average selling price decreased by 4% to $3.36 per square foot. The decrease in average selling price reflected an increase in the mix of lower price 5-millimeter products this year versus the third quarter of 2020.

Next, I'll discuss gross profit. Gross profit was $3.1 million or 10% during the third quarter of this year versus $1.9 million or 8% during the third quarter of 2020. This increase in gross profit was principally driven by the 32% increase in shipment volume and decrease in material costs, offset in part by an increase in manufacturing expense and the 4% decrease in average selling price.

Next, I'll discuss operating expenses. As we've discussed in prior calls, we are strategically increasing our investment in our electric vehicle market opportunities. Our strategic investment this year includes increased spending to enhance the capabilities of our technical, operational and commercial teams supporting our thermal barrier business, the research and development team supporting our carbon aerogel battery material opportunity, and our legal resources to expand and defend our IP portfolio. In contrast, during 2020 we purposely reduced compensation and spending levels throughout the company in response to the uncertainty associated with the COVID-19 pandemic. As a result, third quarter operating expenses increased by $6 million versus last year to $14.6 million.

Next, I'll discuss our balance sheet and cash flow for the quarter. Cash used in operations of $6.1 million reflected our adjusted EBITDA of negative $7.8 million offset in part by a $1.7 million decrease in working capital investment during the quarter. The decrease in working capital investment was broad-based and included decreases in accounts receivable and increases in accounts payable and accrued expense balances. Capital expenditures during the quarter of $2.3 million, we're focused on improving the efficiency and reliability of our East Providence plant and the initial engineering work for our second manufacturing facility. Cash provided by financing activities of $1.6 million was comprised of $800,000 generated by our final sales of equity through our ATM facility and $800,000 from employee option exercises. As a result, we ended the quarter with $95.5 million of cash, net current assets of $98.9 million, no borrowings under our revolving credit facility and shareholder's equity of $142.5 million. We also had access to an additional $9.5 million available under our revolving credit facility at quarter end. I want to highlight that during the quarter we applied for and received full forgiveness of our $3.7 million PPP loan from the small business administration.

Turned to our full year 2021 outlook. We expect continued revenue growth this year associated with the initial stages of a post-COVID recovery in the global energy infrastructure market and solid demand growth in the European green building materials market. In addition, we're increasing our outlook for PyroThin thermal barrier revenue by $5 million to a total of between $6 million and $7 million for the year. As Don discussed this increased thermal barrier outlook is related to an expanded scope for thermal management, mechanical stability and fire protection properties provided by our PyroThin thermal barriers that enhance EV battery performance and safety. In total, as a result we're increasing our 2021 revenue outlook by more than $10 million to between $122 million and $128 million for the year equivalent to growth of between 23% and 28% compared to 2020.

We're continuing to invest in people and assets to capitalize on our rapidly growing e-mobility opportunities. This investment includes planned incremental expense to enhance our technical, commercial and operational capabilities and resources and support of our thermal barrier and battery materials opportunities. This investment also includes our planned capital expenditures, design and construct our advanced thermal barrier center, to establish thermal barrier fabrication operations, to expand our carbon aerogel battery materials production, fabrication and testing facilities, and to design and construct our second silica aerogel manufacturing plant. Given the accelerating pace and scale of our PyroThin thermal barrier opportunities for increasing the target capacity for our second plant and anticipate will be – we will bring on a greater proportion of the plant assets during the second half of 2023.

As a result, we expect to incur a greater proportion of the required capital expenditures in the earlier stages of the project. Our engineers are focused on designing a greener and more dependable facility with more than twice the capacity of our East Providence plant and lower per unit operating costs. We're also considering establishing fence-line production of critical raw materials with few of our principal suppliers to shorten our supply chain and reduce our raw material costs. We expect to have the facility operational during the second half of 2023. We're also planning to establish a fabrication facility likely in Mexico in support of our PyroThin thermal barrier opportunity. We're planning to have the facility established in mid-2022 and fully automated operations play in place beginning in early 2023. We believe these strategic investments will position Aspen to take advantage of the significant growth opportunities available to us today in the electric vehicle market, and to leverage our aerogel technology platform to develop new high growth businesses. We'll provide additional detail on these strategic investments and associated financing arrangements as our planning efforts progressed during the next few quarters.

Our revised 2021 full year outlook is as follows. We expect total revenue of between $122 million and $128 million. Net loss of between $29 million and $31 million. Adjusted EBITDA between negative $18.5 million and negative $20.5 million. EPS of between a loss of $0.96 and a loss of $1.02 per share. This EPS outlook assumes a weighted average is 30.4 million shares outstanding for the year. In addition, this 2021 outlook assumes depreciation of $8.9 million, stock-based compensation expense of $5.1 million, a gain on extinguishment of debt of $3.7 million, and net interest expense of $200,000. This full year outlook also projects the gross margin in the low-to-mid teens and an average selling price of approximately $3.35 per square foot.

Turning to our outlook for cash, we currently projected capital expenditures of approximately $15 million for the first full year. As our planning efforts progressed during the next few quarters, we'll provide our investors with multi-year capital expenditure projections to include our second aerogel manufacturing facilities. Our Mexican fabrication operations and other capital assets required to support our electric vehicle business opportunities. We will want to raise capital, fund these facilities, equipment and people to keep pace with the expanding scale of our [indiscernible] with the opportunities. Importantly though we're confident our $95.5 million cash balance and available credit under our SVB facility will be sufficient to fund our near-term operating and capital expenditure requirements.

I'll turn the call over to Sarah for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] We will now take our first question from the line of Eric Stine with Craig-Hallum. You may proceed.

Eric Stine

Hi Don. Hi John.

John Fairbanks

Hi Eric.

Don Young

Hi Eric. How are you?

Eric Stine

Doing well. So, thanks for all the detail and good to hear about acceleration of the activity and the revenues in 2021 and 2022. Wondering if you could maybe just go into detail on that a little bit? I know part of that is increased content, but just curious is that – is that also more volumes with the two customers that you have in hand? I mean, is that visibility into additional customers? How should we think about that?

Don Young

It is principally content that the number of vehicles is pretty consistent with earlier expectations. But for us it's been more of a content issue, Eric, as we've been asked to think more broadly about what role aerogels can have more broadly in battery performance and safety. So, some things beyond the thermal runaway issue that we've been so focused on in the past year or two. And these things – these things include broader thermal management challenges that that these batteries have and certain mechanical performance that we are addressing as well with our PyroThin thermal barrier. So those things have added up to additional content per vehicle. And that's the reason to a large degree where we're having the kind of revenue that we're projecting and that we're estimating, I should say in Q4, and that we suggested that we would have 2 times or more the revenue that we were anticipating for 2022.

Eric Stine

Got it. And is that additional content? Is that with both OEMs or is it skewed to one versus the other? I know the one you've had in hand for the longest time that one is the platform versus the other one being the vehicle, but I'm curious on that?

Don Young

I think what I would like to say, Eric, just from a confidentiality point of view is that, this is being applied. This idea is being applied to several of the companies that are – that we're both serving and that are in our development funnel. So, this is a pretty universal opportunity for us. As we strive to become this idea of a technology partner. We're very engaged with several of these companies at the design level. And again, it's giving us the opportunity just to address more issues, including issues that take place during the normal course of a battery operation.

Eric Stine

Got it. And maybe sticking with the Asian OEM, and it sounds like that potentially is announced soon who that is. But just curious where your confidence level lies in winning the entire platform, I know you're starting with this one because they're under some time constraints, but the thoughts about getting the rest of it?

Don Young

Yes. We've worked very closely with the company continue to work very closely. We delivering production parts into its first vehicle. Again, we think we're in a strong position to be the partner for the battery platform more broadly, which rather take place here over the course of the coming few quarters?

Eric Stine

Got it. And then last one for me, just you mentioned you've always talked about the three levels of engagement and the things continue to trend well there, I mean, is it fair to characterize it kind of number of OEMs are pretty similar in the same buckets, just those, that level of engagement it's just gotten closer to resolution, whether it's an award or what next steps are?

Don Young

I think the level of engagement, the way I would say is that in some sense it's become more formal. As I said, in my comments we are seeing many more. We're engaged with many more requests for information, requests for quotation, and these kinds of things. So, I would just, it's advanced in the sense that it's more formal in that way, Eric.

Eric Stine

Okay. Thank you.

Don Young

Thank you very much.

John Fairbanks

Thanks, Eric.

Operator

Thank you, Mr. Stein. The next question comes from the line of Colin Rusch with Oppenheimer. You may proceed.

Colin Rusch

Thanks much guys. So, as you look at that pipeline, I'm just trying if we can get an overall scope and scale of what that pipeline looks like from a narrower square meter perspective or revenue number or total customers?

And then the second question within that is, the customers that you – it looks like you're working with are reacting to problems that they've had out in the field. I'm wondering about earlier stage engagement around proactively avoiding some issues around using material in a more structural way potentially to support their programs potentially other parts of the vehicle beyond just the matter?

Don Young

Thanks, Col. So, on the, wow, this is really a pretty fast-moving situation for us to really give you longer term projections because several of these things are somewhat binary if you will. And each one can have enormous impact on our revenue out in 2023 and 2025. And so, but a lot of these decisions are going to be made here over the coming – handful of quarters at the very, very most. And so, it's a large opportunity and there are investor deck, we've some projections in there and we're very confident in the size that we outlined at that point in time. So, it's definitely a multi-billion-dollar opportunity for us. And again, we're not really projecting much beyond that at the movement; but with each one that we win, it brings a fairly large chunk of revenue our way that, that is usually defined in a long-term contract.

In terms of…

John Fairbanks

Yes. in terms of your second question, what I would say is that we're, we're principally focused on the battery platforms themselves, I think there is additional work for us around the battery platforms that is interesting to us, and we have discussions around, but I wouldn't really extend the scope beyond the battery platforms themselves at this point in time. I mean, historically we have had sales let's call them transportation sales, sometimes in vehicles, sometimes in automobile excuse me, and trains arrive at different types of transportation vehicles. But again, our principle focus and the real drivers of our revenue are going to be our work around the battery platforms themselves.

Colin Rusch

Awesome. And then obviously there's a lot going on with basic materials from a cost perspective, logistics perspective, I guess, just since the end of the quarter starting with October, can you speak to any adjustments that are happening or concerns that you're seeing in terms of availability material cost structure, things like that, and your ability to pass those costs on to customers?

Don Young

Good. Very topical, we're not – we're not different than a lot of companies. Right now, we have – we have our supply chain and it's stretched or frankly around the globe and our customers are around the globe. So, there's – there are a lot of challenges associated with it. What I want to say about it is in our energy infrastructure business, for example we have in the past, and it has been largely in an industry practice to be able to pass along these kinds of increasing expenses, serve column inflationary type expenses increases. And so, I think I would expect that we will do the same in this particular – in this particular case especially now that it seems quite apparent that it will extend into 2022. And so, I think we're in good shape from that point of view with pricing power if you will. Again, we're not trying to take advantage of this situation. We're just – we're just trying to hold serve basically.

Colin Rusch

Perfect. Thanks so much, guys.

Don Young

Thank you, Colin.

Operator

Thank you, Mr. Rusch. The next question comes from the line of Alex Potter with Piper Sandler. You may proceed.

Alex Potter

Great. Thanks guys. Maybe one, I guess follow on question to what Colin was just asking there, less on the supply chain for what you're making now and more on the supply chain for plant number two. Are there any particularly long lead time pieces of equipment or anything like that that could be slowed down as a result of the pandemic or these logistical problems? Did that keep you up at night wondering whether you're going to have to delay the project as a result of any of that?

Don Young

Yes. We are very engaged with the vendors for our long lead time items, and we are in good shape right now. With that Alex, we are not expecting that to be an issue for the startup of plant 2 by the second half of 2023. I think our challenges are more just around that, more current day logistics of moving materials around both our raw materials and our products is just a challenge. It's keeping us up at night in particular, our supply chain team.

Alex Potter

Okay. Great. And then obviously this is the – these comments around expanded scope of work using PyroThin in for other purposes that all sounds great, upward revision to the revenue guidance that all sounds great. I don't know the extent to which you're comfortable talking, maybe in slightly more specific terms around what exactly it is that you'll be using PyroThin for, you mentioned sort of general thermal management or some structural, I guess characteristics of PyroThin. But can you elaborate on that exactly, but than just kind of encasing cells or packs or modules to prevent thermal runaway?

Don Young

Yes. Let me give, maybe an example that would be helpful. When you think about mechanical performance and mechanical durability, you know that typically in a module that the cells have material between them to keep them in place and constant pressure on the cell wall. And so, as the material, as the cells are expanding a contraction with each charge cycle, and so, if you think about our material, it has a – it's compressible and think of it as kind of a blanket like material. And so, there are – there can be roles for our materials sometimes with other materials as well to, to play a role in that. And that relates to the normal course of the battery's life as opposed to the extreme situation of thermal runaway, which one hopes doesn't ever happen, but we know it does. So that's the kind of thing that we are – that we're exploring today.

Alex Potter

Interesting. Okay. Thanks. That's very helpful. And then maybe I last question on the head, maybe the types of companies that are in your funnel as well as your own capacity, I guess, is there a natural limit to the number of inbound inquiries that you can entertain? And as a result, are you maybe rank ordering these inbound requests in order of – I guess, the long-term revenue potential, or your own perception of the quality of the customer? I guess maybe that's two questions buried in there. Are you dealing with all kinds of customers and treating them all more or less equal? And then second, is there a natural limit to the number of people that you can be dealing with? Thanks.

Don Young

Yes. So, in terms of regular, everyone's important to us, but some people are, or some companies are probably more important than others in some sense, because of scale, because the likelihood of them being successful, the breadth of their programs, the technical prowess of their teams, with those sorts of things really draw us in. And we engage very well with those kinds of – with those kinds of groups. So, I think there is some natural prioritization going on as you would think.

We are interested in a variety of areas including stationary energy storage and some other area; areas of aviation and what have you. But just from a breadth point of view it's hard to compete with one of the three or four or five largest automotive OEMs in the world or multiple of them, or and they can really absorbed a lot of our efforts.

In terms of sort of the; how many can you sort of take on, and if I understand that part of your question correctly. I think what I would say is, and John said in his comments, and I taught it's in my comments. We are looking very careful at the demand profile and that translate through us to the way we build Plant 2. And we've talked – we've described when we built Plant 1. We did it in three phases basically. And our initial thoughts about Plant 2 were to do it in a very similar kind of way bringing on the capacity sort of incrementally as you lock down business. And as this business comes out as more rapidly and we're having significant success within that development funnel and our confidence in progressing through the RFI, the RFQ processes increases. We are looking at building more of that plant during phase one, let me just say and – but it's going to be demand driven. We're not building and hope they come. It's going to be demand driven and we're working real hard to sort of coordinate those things.

And as I said, the business sort of comes in chunks and so – at least the contracts sort of come in chunks and then they rollout their vehicles. And we all know, Alex, more than most, some of them are going to be success – more successful than they're suspecting, and some are going to be less successful than they're suspecting. And so, that's why our strategy around being OEM agnostic is really important for us. And our intent to be the industry standard here as a – in our PyroThin thermal barriers is just really critical to us. So, I hope that sort of answers your multipart question, but that's the way we're thinking about the business.

Alex Potter

Yes, Don, thanks very much. That's super helpful. Thanks John.

Operator

Thank you, Mr. Potter. The next question comes from the line of Jed Dorsheimer with Canaccord Genuity. You may proceed.

Jed Dorsheimer

Hi, guys. Thanks for all the details and nice job on the quarter.

Don Young

Thanks, Jed.

John Fairbanks

Thanks, Jed.

Jed Dorsheimer

First question for you, I guess, the Georgia – the second facility down in Georgia, the state that is Statesboro, correct, that hasn't changed.

Don Young

We're referring to it as southeastern in the United States at the moment.

Jed Dorsheimer

Okay. Are you in – but in the Q you've previously announced or in your Ks the breaking ground of a facility in Georgia? Is it – I guess, is it for negotiations with between municipalities? Or is that sort of the stage that you're at in terms of where the location and what the incentives may be?

Don Young

Jed, I can clarify. So back in 2016, we had booked through Georgia and South Carolina. And at that time, we had selected Statesboro, Georgia for the location of a second facility, but we've reconsidered. We're looking at multiple locations and we have selected a site now, but we haven't – we have not announced that it is Statesboro, Georgia, Georgia, or South Carolina. We've just said southeastern United States.

Jed Dorsheimer

Got it. That's really helpful. Thanks. And I'm assuming when you do announce – yes, go ahead.

John Fairbanks

Oh, no, no. I was just going to say – you – I think it's where you're headed. We will announce jointly with the governor's office and we'll do this properly, let's say, in the not-too-distant future.

Jed Dorsheimer

Understand great. And good luck with the incentives for that too.

Don Young

Thank you.

Jed Dorsheimer

On the Mexico facility, when you say that production one, I guess, have you targeted a location, it sounds like you're further along there. So, I'm curious if you have settled on a, location there and then I just have – just curious about some of the details square footage or how we should think about production output from that facility?

Don Young

Yes. So, what we're doing in Mexico is, as we've been described our PyroThin thermal barriers, it's a multi-part system. And the automated fabrication of those parts that can equal millions of parts, we're doing in Mexico. We have had a team there looking at different sites. We do have an advisor in country that is guiding us. We've also leaned on the resources that coke industries has and they have substantial fabrication facilities in Mexico. So, we're trying to learn all the lessons and get as smart as we can about this and we are making good progress. And we would expect to have an operation there by the end of 2022. So, it's that – we're moving right along with the process that we have not quite picked a location yet. In terms of size, John, do you have – I don't have that really.

John Fairbanks

Yes, we're not. It's all part of our planning at present. So, Jed, once – the same way we're sizing our aerogel plant in the southeastern U.S. We're also engaged in an effort to size the fabrication facility. I think the important part is we'll pick at least – we'll lease a facility, so we're not going to have an extended lead time to get into a building. And it’s much less capital intensive and the equipment that we would actually put into the plants more readily available. And so, the lead time to get into a facility is measured in months. And the lead time to have automated fabrication operations in place is maybe a year. And it will absolutely meet our needs and allow us to keep pace with demand for PyroThin thermal barriers.

Jed Dorsheimer

Got it. Maybe just shifting gears, I didn't hear any update on the silicon anode. And just curious how that project is developing, any comments there.

Don Young

Yes, thanks. No, I did mention that we – we will have invested over the course of 2021, roughly, $10 million in it this year in scientists, in engineers and in facilities. And what it's allowed us to do is produce larger quantities of material, better materials, deepen our engagement with our announced partners and other partners as well, or other entities we're working with. And so, our focus, Jed, remains on really leveraging the unique aspect of our carbon aerogel in the protection of the silicon through its life cycle. And so, we're making very good progress. We're iterating faster with these other companies.

And that we just didn't have enough material before we made these investments to really keep pace and work at a large enough scale to satisfy them and we're now doing that. And it's been – this has been true for just about one full quarter now. So, the pace has quickened, and we're really excited about the work. And what we've committed to is that when we provide our 2022 guidance for the year, we will add at that point in time some –both commercial and technical milestones for Aspen Battery Materials to help you guys keep score just a little bit better throughout the year 2022.

Jed Dorsheimer

Great. Great, well, look looking forward to watching the progress. Thanks guys.

Don Young

Thanks, Jed. I appreciate it.

John Fairbanks

Thanks, Jed.

Operator

Thank you, Mr. Dorsheimer. The next question comes from the line of Amit Dayal with H.C. Wainwright. You may proceed.

Amit Dayal

Thank you. Good afternoon, everyone.

Don Young

Hi, Amit.

Amit Dayal

Hi. Just really quickly on – the expectations for next year from thermal runaway of PyroThin, you're doubling revenue expectations. Is this coming from visibility from customers you have in hand? Or are you expecting additional orders from – other customers that you are working with?

Don Young

So, this is really coming from additional content from the customers we have, Amit. And so that confidence was not coming – was not necessarily derived from winning more contracts and delivering production parts in 2022 from other entities that – think of that as upside. Our comments that John and I provided really related to content per vehicle from the two major automotive OEMs that we have one U.S. based, one Asia based.

Amit Dayal

So, if you do get additional orders from other customers, will you potentially be able to meet that demand with the capacity you have in hand?

Don Young

Yes, we do. We have capacity today to reach up into the mid-200s millions of dollars. And so, John's guidance was in the 118 to 128 for this year. And so, we've got some room to run here before we run out of capacity. And we believe that we can double revenue from 2021 to 2023 with the capacity that we have today. So, we've got room to run, but we are, as we said, expediting our work on Plant 2.

Amit Dayal

Yes. So, a similar question I had was you don't necessarily have to give up any energy infrastructure business to capture the EV opportunity fully for at least 2022.

Don Young

That's correct. And look our energy infrastructure business is very important to us. And we play an important role, I think, in that industry, our distributors, our contractors, our end users rely on this product. And we believe that we can continue to grow that business as well even if you subscribe to the idea that traditional energy might go sideways for the next three decades. We believe that just given our resource efficiency, asset resiliency and the safety nature of our products that those attributes will become at least or only more important to these companies as they try to achieve some of their own sustainability goals here over the course of the coming five and 10 years. And so, we do have room and we are anticipating that we'll continue to grow that business.

Amit Dayal

Understood. That's all I have guys. Thank you so much.

Don Young

Thank you, Amit.

John Fairbanks

Thanks, Amit.

Operator

Thank you, Mr. Dayal. The next question comes from the line of Chris Souther with B. Riley. You may proceed.

Chris Souther

Hi, guys. Just a quick one on the second facility planning. We're talking about out more than two times the size of the current facility, but are we going to get a full picture of the size, scope and cost like with the governor announcement you think, or is that – something that comes later or next year or something?

Don Young

Yes. Look – go ahead, John, yes.

John Fairbanks

Yes, hi. We know that we need to give that to you. It will definitely come by the time of the governor – the announcement with the governor. And the way we think about it internally is we want to tell you what the return is on the investment when we talk about the investment. And so, we'll make sure you understand the scope, the scale, the capacity, the operating efficiency of that plant. And we're targeting to have that out in public within the next few months.

Chris Souther

Okay. That's great. And then maybe just the CapEx cadence that we should be looking at in – I think the third quarter will be in the K – in the Q there, but fourth quarter, are we kind of starting to order any of the kind of long lead?

John Fairbanks

Yes, we're starting to put in orders for long lead time equipment although most of that cash – that cash would actually flow and it should be recognized as capital expenditures in 2022. We did give the guidance of $15 million of CapEx for the full year 2021.

Chris Souther

Got it. Okay. And then you kind of brushed on potential new wins for next year upside. I just wanted to get a sense when was essentially just a few months before the vehicle launched. So, what is the vehicle launch timeline for some of the stage three kind of late-stage folks? Is it fair kind of looking at vehicles potentially for 2022 launches? Or is it more 2023 and beyond after you're more…

Don Young

Yes. Chris, I think that wins that we will get during 2022 and even the first half of 2022 will really begin to materialize in terms of revenue and the following year. And then typically really kick in much more substantially in 2024. That's the pattern that we've seen in the contracts that we've won. And it's consistent with what we all read about projections and frankly the number of launches that these 7 or 8, 9, 10 companies have scheduled between now and even as late as 2025, really 2025 models typically in 2024. So, look, I think the majority of the revenue that we have in 2022 will come from the two customers we have today. And – but switching over to production parts with some of these entities and the latter part of 2022, again, really sort of sets the stage for a nice acceleration in 2023.

Chris Souther

Got it. Yes, on 2023, you're talking about launching the second facility here in the back half, just do we have a sense of size of particular modules at that facility? We get a sense of kind of the cadence of that over $500 million coming online. What would be kind of the timeframe we should think about if you don't want to say how much bigger than $500 million? How many stages and when we should expect kind of the different lines to come on?

John Fairbanks

Yes, we're going to – that's exactly the kind of detail that we hope to get out within the next few months and no later than our Q4 earnings call. We'll provide the overall size of the facility, what the CapEx costs are when we expect to incur those costs ultimately what the capacity of that facility will be to keep pace with revenue will obviously give you our 2022 guidance at that point in time as well. And we'll talk about how it's phasing in. So, we want to give you the whole picture, at once so that you can understand the dynamics of the business and not just the investment cost, but the return on the investment and what we're seeing moving forward.

Don Young

Chris, the thing I would add to John’s comment, I think, they call it kind of the Goldilocks thing, right, we don't want too big, too small. We certainly don't want to build this thing too small so that we're out of capacity before we get started because this is the time to win these contracts, and this is the time deliver. These are longer term contracts. And so, you've got to be capable. And so, that's our focus here.

And again, as John says, we're really trying to match up our demand profile with the size of that first phase. And of course, we're leaning towards building bigger in the beginning because that's what we're getting from the market.

John Fairbanks

Yes, the opportunities coming, it's larger and it's coming at an accelerated pace above even what we expected a quarter ago.

Chris Souther

Got it. Okay. Well, that's helpful. Thanks guys.

Don Young

Thanks Chris.

John Fairbanks

Thanks Chris.

Operator

Thank you, Mr. Souther. The next question comes from the line of Tom Curran with Seaport Research Partners. You may proceed.

Tom Curran

Hey guys. Thanks for squeezing in, even though we're over the hour now. I'll be quick. I've only got you left. Don at this juncture, does the apparent front runner to become customer number three thermal barriers seem most likely to extend you a design for single EV model, or to ink a multi-model platform wide contract, similar to customer number one. And what's the earliest you might secure that third customer? Could we see an announcement on that potentially before the 4Q earnings call at the soonest?

Don Young

So, it will be more battery platform in nature. So, I'm speculating here a little bit, there's a roster, or there are multiple OEMs in this RF, RFI, RFQ, product validation activity level today. I'm anticipating that the most sort of notable ones are more platform-oriented and I'm anticipating that. So, our earnings announcement is late February, so that's a pretty short period of time. So, I don't want to set expectations in that way, but I would just say that over the course of the next couple of quarters we'll continue to talk about the funnel and make announcements as we win them. There are going to be some decisions made though in this kind of two-quarter timeframe. And we think we're in a strong position again with some of the very largest companies and with some of the newcomers as well.

Tom Curran

Great. We're eagerly staying tuned. John, when it comes to plant number two, could you just revisit that very helpful heuristic you've previously provided when it comes to the expected CapEx outlay per dollar of incremental revenue, you'd be adding be an investment in additional production capacity? Does the $0.65 of CapEx per dollar of incremental revenue in production capacity, does that still hold or based on the work you've done thus far, would you update that for Phase 1 of plant number two? And then when it comes to Phase 2 in the second half of 2023, do you expect that just to be a seamless transition or might we see a pause between phases?

John Fairbanks

So, yes, I'll answer your second question first. We could potentially see a pause between phases. I think the real question, because when you talk about revenue capacity coming out of the plant, we had metrics that were for traditional aerogel products alone, but now we've got these multipart thermal barriers that add additional content, additional revenue. And so, I'm going to withhold making a comment on that at present until it really is going to be dependent upon the revenue that we get through the thermal barriers with aerogel just being a component of that overall revenue.

I would say, however, there is inflation out there, steel costs are up a big part of the cost of building this plant is steel. And then construction resources are in high demand and just like every other business out there, construction companies are having to pay up in order to get workers. So, inflation is working against us. The additional content on our thermal barriers is working for us. And when we'll put it all together and when we talk about the investment and the asset, we'll make it very clear, what's the capacity, what's the aerogel capacity, what's the aggregate thermal barrier revenue capacity that comes from the investment we make. And so, we'll make sure we package that and provide all that detail when we talk about the plant more fully in the next few months.

Tom Curran

Sounds fair. Makes sense. Thanks for taking my questions guys.

John Fairbanks

Thanks, Tom.

Operator

Thank you, Mr. Curran. The next question comes from the line of Chip Moore with EF Hutton. You may proceed.

Chip Moore

Good evening. Thanks for taking the question.

Don Young

Hi, Chip.

Chip Moore

Just quickly on the energy infrastructure side, guys, I don't think we touched on LNG. Maybe you can update a on the pipeline there and then anything on the subsea side in terms of trends?

Don Young

Well, I think we've all been reading about the importance of LNG in Asia and Europe and as a production center here in the United. So, I think activity levels are high. The pandemic did cause project work in general to slowdown. And we've talked about that a lot, frankly, it caused maintenance work to slowdown as well. We're seeing maintenance work come back quite nicely that some pent-up demand for sure. Project work is, I think, people are still a little hesitant to pull the trigger on a major project that has insecurity around workforce and the continuity of executing on that project.

So having said that, we are in the specifications of a number of projects and we're staying close to those projects. And we think, again, we'll win our fair share of them. Both LNG and chemical refinery type projects as well. So, we feel really strongly about our energy infrastructure business and our place in that business in the years to come.

The subsea work has always been a business, I think, dating back on you for most of our 20 years, it's been a business that typically has been somewhere between $5 million and $15 million in size, it's been sort of an important solid sort of niche for us. And I think it will continue to be here in 2022. And when we look out in our pipeline, we sort of keep about a three-year pipeline of sort of proposed projects at our subsea. Again, there are a nice handful of projects in 2022 that could materialize, and I would expect us to come fall into that $5 million to $15 million kind of range again in 2022. So again, just relatively consistent.

Chip Moore

Yes, no, that's helpful, Don. Obviously, we're seeing a number of things every day, high profile announcements in terms of fill out of battery supply chains here in the U.S., Canada, Europe. Wondering maybe if you could speak a bit to implications for your opportunity set, maybe from a geographic perspective, as well as some of the more advanced battery material opportunities, even though they are a bit further out at horizon?

Don Young

Yes. No, look, we're very engaged with these companies. We mostly talk about automotive OEMs, but when you talk about thermal barriers, but we're also engaged with the Tier 1s, with the battery OEMs themselves and then you switch over to the Aspen battery material side, our carbon aerogel. And again, we have the belief that on the carbon aerogel side that we're going to see sort of, I guess I would say sort of consortiums of companies come together and play import in sort of next generation batteries. And our goal is to be sure that our carbon aerogels join in on some of those consortiums.

And those will be comprised of large battery mandate OEMs some of the newcomers on the battery OEM side, but we also know that the automotive OEMs have significant battery programs, battery chemistry programs today.

So, I think you'll see, let's call it a materials company like ours pairing up with a battery OEM, big and small, pairing up with some of the large automotive OEMs. So, I think you're going to sort of see that play out here. And again, we believe that our carbon aerogels are special. And we'll find some daylight in those activities. So, that's what we're working towards. Again, I don't want to convey that this is a 2022 or 2023 revenue item for us, but we do think that it can be value generating as we get further third-party validation for our work, and we begin to be able to compare our data with some of the other companies that have worked hard in the battery material space as well.

Chip Moore

Got it. Look forward to watching it. Thanks,

Don Young

Hey, thanks Jeff. Appreciate it.

Don Young

Thanks Jeff.

Operator

Thank you, Mr. Moore. The next question comes from the line of Jeff Osborne with Cowen. You may proceed.

Jeff Osborne

Excuse me. Thanks for squeezing me in. Just had a couple quick ones. I think in the past you had talked to about a $100 to $300 content per vehicle. It sounds like that might be a bit higher now. Can you give us an update on where that should be?

Don Young

Yes. It is a valid number for some cases. And I think we will be at the higher end of that range or extend beyond that range with some of the other cases where again, we're playing a broader role in the battery construction, if you will the battery performance and safety. Where we're addressing some of the challenges around a battery module during its normal course of operation, as opposed to the mission critical part around thermal runaway. So, when we get into those situations, we're seeing expecting content per vehicle to be greater than that 100 to 300 level. And it is the principal reason why you're seeing us increase expectations for 2021 and 2022.

Jeff Osborne

Got it. That's helpful. And is it both the North American and the Asian customer that it's expanded the scope or just one of the two?

Don Young

Again, we'd rather, maybe not say, I mean, if there were 10 of them, I would say, well, three of them, but it's – this is going to get revealed here pretty soon who these companies are. And I just would like to…

Jeff Osborne

Understood. Maybe just two other quick ones given out of interest of time one for Don one for John. Don for you on the Asian customer, you mentioned that there is like a secondary party that might be using the platform. Is the award that you have just for one vehicle now, but there's a desire or an ambition potentially to expand that, or is it literally just a one model OEM?

Don Young

Yes. With our Asia base win is for a specific model that will be marketed in Asia, and Europe and in North America. But most of our engagement with the company has been – has included the team that's responsible – one team that's responsible for the vehicle and another team that's responsible for the battery platform overall. And so, they made commitments to launch that vehicle before the platform was completely designed. And so, we're engaged with both of those teams. We've obviously won with the vehicle and again we believe we excellent shape to win the platform longer term.

Jeff Osborne

Got it. That's helpful. And then the last question I had is John, you mentioned the $10 million of incremental investment in 2021. A common question we get is sort of the path to profitability, and obviously there is a lot of incremental margins that flow through as a result of utilization. But it's a bit on clear how much OpEx you guys need to invest in all of these in additional initiatives. So, I know you are not giving 2022 guidance, but would you say that $10 million is a drop in the bucket that of what's needed as it relates to say 2022 and 2023? And there is a pretty sharp hockey stick of incremental investment for each of these new initiatives, or do you expect it to be substantive or flattish at these levels?

John Fairbanks

Yes, the general profile, I think, makes sense. We've said single digit in OEMs next year from our initial two customers, we just updated that 2x, which we put it somewhere between $15 million and $20 million in that range. So, when you think about a $10 million operating expense investment or something even more significant than that, the EV business is going to generate losses in the 2022 timeframe. But you get a very significant expansion of revenue potential in 2023 and leading into 2024 and 2025.

So, definitely, we will see losses coming from the EV business in 2022, but then sharp increases in profit contribution from that business and resulting ultimately in profitability beginning in 2023 and clearly into 2024. So that's the general profile. We'll be much more specific though when we talk about the sizing of the plant, when we give 2022 guidance, we'll also try to give you a really good sense for the revenue ramp and the path to profitability at that time as well.

Jeff Osborne

Perfect. That's all I had. Thanks so much for squeezing me in.

Don Young

Thanks, John.

Operator

Thank you, Mr. Osborne. At this time, there are no additional questions, so I will pass it back to the management team to provide closing remarks.

Don Young

Thank you, Sarah. I appreciate it. Hey, we appreciate your interest in Aspen Aerogels and look forward to reporting to you our fourth quarter 2021 results in late February. Be well. And have a good evening. Thanks so much.

Operator

That concludes the Aspen Aerogels’ Q3 2021 earnings call. Thank you for your participation and enjoy the rest of your day.

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