Aspen Aerogels, Inc. Oppenheimer 29th Annual Technology, Internet & Communications Conference

My name is Colin Rusch. I am the head of Industrial Innovation Research here at Oppenheimer. We are thrilled to be joined by the management team from Aspen Aerogels: Don Young, CEO, Grant Thoele, CFO, and Neal Baranosky, head of IR. Guys, obviously you just put up a great quarter and a great guide. I just want to get a sense of with Thermal Barrier revenue up sequentially, but down from a year ago, how are you thinking about some of the cadence of volumes on EV programs in North America? We should think about those volumes scaling up here or maintaining over the next several quarters.

Thanks, Colin. Thank you for having us. On the North American PyroThin Thermal Barrier business, we have obviously been through a little bit of a journey here over the course of the past 12 and 24 months. After very rapid growth from really 2020 into 2025, the market share of EVs in the U.S. for regulatory and incentive reasons, were cut in half, in essence from roughly low double digit percentages to a range today. They seem to have stabilized around 5.5%, 6%, depending on the calculation. Our numbers reflected that. We believe that we have largely stabilized at this point, or that market has stabilized around 6%. The key driver for us in North America, of course, is General Motors.

What we see of them here in Q3 that is a little different from what we saw of them in the first half of the year, is that they seem to be producing vehicles at the rate that they are selling vehicles. They had a significant destocking or lowering of inventory during the first half of the year. Even though sales rates were at one level, production rates were at a lower level. What we have seen is that leveling out now, and even potentially building modestly inventory. We are seeing that as creating a more robust second half for us, from a North America Thermal Barrier business. We are seeing it here in Q3 and most forecasts have it continuing through the year.

Okay. I trust that is giving you a little bit more comfort on 2027 build rates, even though it is a little early to predict where those things end up.

Yeah, I think our expectation and when we look at IHS Markit and some of the other analysts' views of the North American build in market share, look, we think that that 5.5%, 6% market share number will gradually grow, and that we'll be the beneficiaries of that as it does grow. We haven't provided an outlook for 2027, but we do believe that that part of our business will be a growth vehicle for us in 2027.

Just to add onto that, I think one thing to keep in mind is that right now GM has number 2 market share, and we believe that going into 2027, that it's a very strong possibility that they're going to maintain that market share. You have a lot of other launches, in terms of other vehicles from other OEMs that are launching in 2027. So, we're optimistic and we're confident that we can supply GM maintaining that number 2 market share throughout 2027.

Excellent. I guess changing geographies into Europe, you guys raised your outlook to $20 million-$30 million this year. I just want to get a sense of where that upside is coming from. Is that coming from new nameplates? Is it higher content per vehicle, or is it just more units selling through? Because we've seen some pretty strong numbers in the EU. How do you see that market evolving over the next couple of years, given some of the new relationships that you've been able to announce?

Yeah. Thank you. Over the course of the 2 earlier earnings calls before the one most recently, we had signaled that we were expecting European Thermal Barrier revenue to be in the $10 million-$15 million range. As you cite, we raised that recently to $20 million-$30 million based in part on the fact that we had already booked revenue for approximately $11 million in the first half. So, we're coming at this from a pretty strong position as we get into that $20 million-$30 million category for the year. I would say that it is broad-based, Colin Rusch. We have 7 OEMs now where we have won design awards that are beginning to ramp their business. So it's broad across those 7 as opposed to any one or 2.

And honestly, these are still ramping volumes as opposed to SOP volumes, which we anticipate some of them to engage in in 2027, quite possibly all of them. As we also cited last week, we won the JLR, the Jaguar Land Rover design award, which is a terrific award for us. It is pretty late stage, in that we think that it will begin to generate revenue, not in the usual 2 plus year incubation, but almost immediately here, they are well through their design phases here. That is why we are confident in the $20 million-$30 million this year, and we cited on slide 6 in our Q2 2026 earnings presentation, the potential. The calculation is, the design award contracts that we have, basically volume times price equals that $135 million opportunity for us in 2027.

We cited, through experience, that we think we have the opportunity, quite comfortably, to double our 2026 revenue. So that $20 million-$30 million, $40 million-$60 million in 2027.

Just to add to that, the $135 million is purely for our awarded OEMs. So that is the 7 that Don Young was just speaking about. We have a robust quoting pipeline that there still is potential for other OEMs that do have an SOP in 2027 to, if we win those awards, that that could impact 2027. Looking at 2028 when these design awards are ramping at serial volumes in 2027, we feel very confident that there is going to be not only 7, but there could be a few others. The best part about this is that we do not need a grand slam from one of the OEMs. We can get singles, doubles, triples from various OEMs to fill out and diversify our Thermal Barrier revenues.

I guess I want to dig into this Jaguar agreement a little bit more, just from a technology perspective. Obviously, you guys have been talking to them for a fairly long time. There has been some evolution around architectures here. The fact that you have won a next gen architecture award, it seems significant to me. Can you talk a little bit about that process and what you think it signals out to the rest of the EV landscape around available alternatives and where architectures are going? Jaguar has been one of the early movers in bringing EVs to market. Just want to get a bit better sense of what the broader significance is of that deal for your technology position and longer-term growth.

The design award does have a history to it, and kind of an unusual history in that, I would say approximately 2 years ago, we were notified that we lost that piece of business, Colin. We stayed with them and we wanted to learn more, and so we stayed close with JLR through the process, as close as possible. It was really JLR that came back to us, I want to say approximately 6 months ago, and said, "Hey, we want to reengage with Aspen." We don't know all the details, but I think it's fair to say that the other solution didn't work or wasn't robust enough or couldn't deliver for whatever reason. We were there for them, and we have won that design award now, as they are very close to ramping themselves.

It is two different architectures across several of their vehicles that they will be promoting in Europe and in the U.S.