Aspen Aerogels (ASPN) will present results on 7 August. They’ve had a good run based on very solid results but the stock has recently taken quite a beating due to general EV malaise. Let me quickly give the historic numbers and then give Q2 revenue expectations a bash.
Revenue
| Rev $m | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 28.1 | 31.7 | 30.4 | 31.5 |
| 2022 | 38.4 | 45.6 | 36.7 | 59.6 |
| 2023 | 45.6 | 48.2 | 60.8 | 84.2 |
| 2024 | 94.5 |
→ Clearly a very nice run on revenue, with Q1 revenue up 107% vs a year earlier. This remarkable growth was driven by two segments:
1. Energy industrial, which is their old revenue driver:
| Energy ind $m | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 28.1 | 31.7 | 29.4 | 25.8 |
| 2022 | 30.4 | 34.6 | 24.7 | 34.6 |
| 2023 | 33.9 | 35.6 | 28.0 | 31.3 |
| 2024 | 29.1 |
2. Pyrothin, which they call Thermal Barrier revenue
This is the reason for the explosive growth. They provide the thermal insulating material that is fantastic for use in EV batteries, and their anchor tenant here is GM (no, they don’t supply Tesla, as Tesla’s batteries use a different battery configuration). This revenue went from nothing in Q3 of 2021 to $65m in Q1 of 2024.
| Thermal Barrier $m | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 1.0 | 5.7 | ||
| 2022 | 8.0 | 11.0 | 12.0 | 25.0 |
| 2023 | 11.7 | 12.6 | 32.8 | 52.9 |
| 2024 | 65.4 |
For completeness, here is the Gross Margins and progression of same:
| GP % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 14.1% | 14.5% | 10.1% | -5.3% |
| 2022 | -4.7% | -2.7% | -17.3% | 24.1% |
| 2023 | 11.2% | 17.5% | 22.7% | 35.0% |
| 2024 | 37.0% |
→ Increasing gross margins over time. Not fantastic compared to software, but respectable for manufacturing.
And net income margin over time:
| NI % | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2020 | -11% | -18% | -26% | -52% |
| 2021 | -51% | -53% | -81% | -16% |
| 2022 | -37% | -32% | -22% | -1% |
| 2023 | -2% |
→ The company is at/near an inflection to positive (Gaap) net income margins.
Now on to Q2 expectations.
First consensus. The view from 7 Analysts are as follows for Q2 revenue:
Low: $90.7m
High: $111.8m
Average: $100.7m
→ Pretty evenly spread views from around $90m to $110m it would seem.
They’ve beaten consensus most quarters over the last years but also had a couple big misses. Last q’s beat was the biggest since 2020, and the stock responded by popping (a lot).
Next let’s look at guidance. This is for $380m for the full year: >$150m Energy Industrial and >$230m Thermal barrier. But consensus for the full year sits at $387m: $94.5m(a) → $101m(e) → $98m(e) → $94m(e).
Looking at the past, the qoq growth has been very non-linear/lumpy, which makes predictions quite difficult. This is revenue qoq growth for the past years:
| QoQ Rev | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2021 | 12.8% | -4.1% | 3.6% | |
| 2022 | 21.9% | 18.8% | -19.5% | 62.4% |
| 2023 | -23.5% | 5.7% | 26.1% | 38.5% |
| 2024 | 12.2% |
Now my guess:
-
Energy industrial
They are transitioning to an external supplier and that’s going well, and should enable at least $150m pa at better GMs. They have hovered around $30m pq for this segment / $120m pa. So let’s be aggressive and up this to $35m for this coming quarter from the $29m last q. That’s up 20% sequentially. -
Next the big unknown: Thermal barrier.
It went up for 6 quarters since they started producing this in Q3 2021 and then took a big step back in Q1 of 2023, and has been growing sequentially since then.
Current capacity for this segment is $500m pa, so that’s $125m per quarter max. For the year they expect GM to produce 200k EV’s and together with Toyota they estimate that this equates to >$230m of revenues for the year, of which they’ve done $64m in Q1 already, which leaves $54m pq for the remaining 3 if it was linear, which it probably won’t be. Sounds a bit light to me.
They have a similar dynamic to CELH and others who don’t supply to the actual end-user. They sell to GM and other OEMs, and that drives their revenues; not end user demand or production of the vehicles. I.e. if GM buys a lot of Pyrothin, ASPN’s revenues spike even if GM produces no EV’s. That makes forecasting this segment extremely difficult, as it is dependent on when the OEMs decide to order materials.
The CFO even explicitly called this out in the last Q:
We’ve seen some investors attempt to connect our customers’ volume plans to our revenue expectations. And we strongly advise against this because there’s a significant delay of weeks or even months for a finished EV thermal barrier part that we invoice customers for to end up in a produced vehicle.
Ok so what to do then?
A couple of analysts tried to get a better answer about what to expect in the quarters ahead and asked about linearity and whether the CFO saw inventory build at customers (i.e. GM) in Q1? The answer was no, no inventory build in Q1. The CFO expected a ramp in Q2 and Q3. That’s about all we have from the company then.
However, even though the CFO cautions against it, it is probably not a bad thing to check what their key customer, GM, had to say about EV production in their latest ER on 23 July. And that was very encouraging:
Our EV portfolio is scaling well and gaining market share. In fact, our U.S. EV deliveries grew 40% year-over-year in the second quarter, while the industry grew at 11%. We’re encouraged by these early results because disciplined volume growth is key to earning positive variable profits from our EV portfolio in the fourth quarter
And
As I said before our EV portfolio is growing faster than the market now that our module issues are resolved and we are scaling production. Our early sales are mostly incremental about 54% of customers are new to GM and we’re working to increase our conquest rate by raising awareness and launching new models. Our best-selling EV so far this year is the Cadillac LYRIQ and it is now the market leading luxury EV in 22 states including Florida, Texas, and Michigan. The GMC Hummer EV and the Chevrolet Blazer EV are also building momentum.
To unleash the next cycle of EV growth we’re scaling production of the Chevrolet Equinox EV with its unique combination of performance, technology, range, and affordability.
So let’s pencil in at least a modest ramp-up in Q2 from Q1 levels. What is modest. 5%? That’s about $69m thermal barrier revenue.
And there you have it. My guess for Q2 revenue: $35m energy industrial plus $69m Pyrothin = $104m. which should be good for a beat vs consensus, and an acceleration of yoy growth to 115%.
Any other takes??
-wsm
(Long ASPN)