Aspen Aerogels at Canaccord Conference: Strategic Growth and Challenges

On Tuesday, 12 August 2025, Aspen Aerogels (NYSE:ASPN) shared its strategic insights at Canaccord Genuity’s 45th Annual Growth Conference. The company presented a robust outlook, highlighting strong Q2 earnings and a promising future for its EV thermal barrier business, despite uncertainties in the EV market. Aspen Aerogels is focusing on cost efficiency and strategic partnerships to bolster its financial health and market position.

Key Takeaways

• Aspen Aerogels reported Q2 2024 results at the higher end of expectations for revenue, gross profit, and adjusted EBITDA.
• The company plans to double its EBITDA in the second half of 2025 through cost structure modifications.
• Aspen’s EV thermal barrier business is poised for significant growth, with projected sales of $350 million by 2027.
• Strong partnerships with OEMs like Mercedes, Stellantis, and GM are expected to diversify revenue streams.
• The company aims for a 35% gross margin and a 25% EBITDA margin across all business segments.

Financial Results

• Q2 2024 Performance: Revenue, gross profit, and adjusted EBITDA exceeded expectations.
• Cost Structure: Adjustments made to maintain profitability at lower revenue levels.
• EBITDA Growth: Expected to double in the second half of 2025, reflecting cost efficiency.
• CapEx: Projected to remain in the mid-teens ($15-17 million), supporting a CapEx-light model.
• Long-term Targets: Aims for $500 to $550 million in revenue by 2027, with a 35% gross margin and 25% EBITDA margin.

Operational Updates

• Energy Industrial Business: Anticipates a rebound in 2026, with recent gross margins reaching the low 40s.
• EV Thermal Barrier Business: Stable volumes with GM, and new opportunities with Ford’s electric pickup truck program.
• Manufacturing Partnerships: Strong external partnerships facilitate effective tariff management and expansion capacity.

Future Outlook

• Growth Projections: The energy industrial segment is expected to resume growth in 2026.
• Revenue Diversification: Partnerships with major OEMs like Mercedes, Stellantis, and others are set to drive revenue growth.
• Market Positioning: Aspen’s focus on efficient CapEx and improved margins positions it well for future challenges.

Q&A Highlights

• GM Volumes: Expected to remain steady in Q3 and Q4, supporting Aspen’s market position.
• Battery Technology: The limited variety of battery chemistries and form factors benefits Aspen’s thermal solutions.
• Revenue Targets: A potential $700 million revenue target, with significant contributions from OEM partnerships.

Aspen Aerogels’ strategic adjustments and partnerships underscore its resilience and growth potential. For more detailed insights, refer to the full conference call transcript below.

Full transcript - Canaccord Genuity’s 45th Annual Growth Conference:

George Genericus, Sustainability Analyst, Canaccord Genuity: Hi, everyone. Good afternoon. I’m I’m George Genericus, one of Canaccord Genuity’s sustainability analysts, And we’re very happy to have Aspen Aerogels with us here today from the company are Don Young, CEO, Ricardo Rodriguez, CFO, and Neil Baranowski from Investor Relations. Gentlemen, thank you so much.

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Thanks for having us.

George Genericus, Sustainability Analyst, Canaccord Genuity: Maybe to start off just as a softball, can you just sort of talk about what happened on your q two earnings report, which you I think reported last week?

Don Young, CEO, Aspen Aerogels: Yeah. Q two, so trying to remember back. So it was a quarter for us that was at the higher end of our expectations in terms of revenue and gross profit and adjusted EBITDA. It was also an important period for us because during the second quarter and really during the first half of the year, modified our fixed cost structure quite markedly such that we are in a position to be able to maintain profitability at lower revenue levels. And as we see uncertainty around the EV space, and we thought this was an important thing to be able to do.

And we fully implemented it over the course of that period of time. And it was reflected both in our Q2 performance and in our second half of the year outlook where we basically outlined the idea of having similar revenue in the second half of the year as we did in the first half, but with twice as much EBITDA, again reflecting the cost structure changes that we made.

George Genericus, Sustainability Analyst, Canaccord Genuity: I’d like to focus first on the energy industrial business. It was humming along incredibly well, then over the last couple of quarters, it’s an excellent business that maybe has had a little bit of a soft patch. Can you just sort of talk about maybe why that happened and the potential for that to rebound over the next several quarters?

Don Young, CEO, Aspen Aerogels: Yeah. So those, this is a business where we provide thermal management and fire safety systems, and it’s a range of end markets for us from subsea pipelines to refineries and petrochemical plants, power stations, nuclear facilities, and more recently and importantly LNG facilities as well. And the business is broken really into two parts. One is the maintenance side of our work day in and day out work. That tends to be very steady and grow gradually over time, 60% of our overall revenue in that segment.

And then 40% is project work. And so for us project work in particular is subsea pipelines and LNG facilities. We had just come off of two record breaking years in 2023 and 2024 where we averaged about $30,000,000 per year in the subsea, and that’s up from years of being in that 5 to $15,000,000 range. And no question, we a lull here in those projects and we’re dropping down to the lower end of normal. And we did not anticipate that as well as we probably could have or should have.

What’s heartening though is that our customers in that space, these are companies like Technip and Subsea seven, big engineering, Subsea engineering companies are announcing wins in their backlog, very substantial record backlogs for them. And while we don’t win, not every project requires the level of thermal performance that we bring. Many projects do. And we really dominate the space, I think, over the course of maybe the last 15 projects that have been awarded. We’ve won 14 of them.

So we’re really strong. We have a great value proposition and a great reputation in this space. So while we’re in a bit of a lull right now, no question, we do believe that as we get through the year and into the new year, those wins that they’re getting today will translate to wins for us again later this year and next year. And then the LNG side, again, had very substantial 2024. We see excellent projects on the horizon, and I think we’ve got just generally strong trends behind that part of the business as well.

So we’re optimistic that that part of the business, our energy industrial business, will resume its growth in 2026. Again, for those who aren’t so familiar with the business, it’s a business that we’ve increased the gross margin in that business from numbers like 1520% to above our target of 35%, and we’ve been in the low 40s for at least two or three recent quarters. So it’s a nice profitable business that we think we can grow long term, you know, ten, fifteen, 2020% per year.

George Genericus, Sustainability Analyst, Canaccord Genuity: And it doesn’t sound like you’ve lost any market share. You’ve won fourteen and fifteen.

Don Young, CEO, Aspen Aerogels: I I don’t think so. We we’ve gone through quite a lot though, if you if you think about we were five quarters capacity constrained, and then we went through most of 2024 where we transitioned over to our external manufacturing facility, our supplemental supplier. And so I think there’s just, you know there’s been a lot of transition over the course of that period of being capacity constrained and then bringing on a new supplier to help us out in that part of the market. To this point, think one of the other things that has been accomplished in recent quarters is just significantly lowering our CapEx profile. So you’ll see capex numbers from us because we have ample supply and we have this supplemental capability that our capex members will come down into the mid teens, $15.16, $17,000,000 below depreciation a really strong position for us from a balance sheet point of view.

George Genericus, Sustainability Analyst, Canaccord Genuity: As that energy industrial business recovers next year, would assume we could expect that target gross margin range of 35

Don Young, CEO, Aspen Aerogels: Yeah. We’re very confident that we’ll maintain that 35% target.

George Genericus, Sustainability Analyst, Canaccord Genuity: Moving on to the to the pyrothin business, clearly have an anchor customer, so to speak, with GM, who appears to be going through a transition of their own right now, trying to, I guess, bob and weave with all the changes in in legislation. So you you shared a chart in your in your deck where you talked about, their their volumes as forecasted by IHS, I think it was, that they should come down next year. How should we think about the cadence of your GM related volumes over the next, you know, several quarters?

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Martij? Yeah. Definitely. So, I mean, any vehicle that, is gonna be sold here over the next month or so has probably had to have been produced at least a month ago or two even. And so we see a lot of the demand from GM, well in advance of when a vehicle is sold, right, two to three months earlier.

And and that’s why we were actually pretty encouraged by the steady volumes that we’re seeing from GM on the production side here in q one and q two. There was a healthy increase of about 20% in volumes quarter over quarter from GM. And then we see that, you know, really holding up here in q three even though if you read the press, it all it talks about is the $7,500 consumer tax credit that is going away. And so we believe that GM is going to sell into that potential, boost of sales here in q three and then continue producing in q four at a steady volume. And that’s what’s implied in our guidance in order to then restock the dealers to have enough inventory to keep selling vehicles.

Right? And so even though the the picture from a regulatory standpoint here in The US around the CAFE standards, penalties for having bad emissions coming from your fleet, etcetera, are, you know, with that potentially going away here, we do see GM having spent a lot of money to build, you know, 16 to 17% market share in this space. It’s getting them customers along the coasts of The US that otherwise would not be purchasing an EV. And that’s what leads us to I think that, you know, the IHS volumes could hold up and production volumes could hold up going into the fourth quarter of this year and next year. IHS does have a step down in the production numbers, for next year.

And I think that’s just more linked to we find whenever we talk to IHS that there isn’t much specific line vehicle by vehicle thinking in terms of how they model it. It’s just probably meant to reflect a broader macro view that they have of the overall new car market in The US, which in an environment in which interest rates decrease hopefully here in the fall, that could, you know, bring in some additional support for the new car market. And and I think these some of these EVs that will have a higher level of incentives than what than what they have today next year. So, you know, it may seem like the sky is falling, and sometimes we’ve called when the sky was truly falling and everybody was optimistic. But we actually have more reasons to believe in the resiliency of these volumes and on GM wanting to, maintain this foothold that they have on the EV market.

If you look at a vehicle like the Chevy Equinox, it was the number one non Tesla EV sold in The US here in July, and, and they’re obviously not gonna let go of that market share gain.

George Genericus, Sustainability Analyst, Canaccord Genuity: You’ve been pretty early in calling the turns good or bad in in the EV space, so maybe we’ll just hold steady and IHS is assuming the worst and

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. I think so. I mean, we all we’re all running on limited information. Right? But I can assure you that GM’s numbers for the rest of this year are higher than what’s implied in our guidance, and they’re also higher than what IHS has.

So I guess as time plays out, we’ll see who’s right.

George Genericus, Sustainability Analyst, Canaccord Genuity: And what’s interesting too is that Honda has an incredibly successful EV that

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. The prologue. Yeah. The pro I mean, the prologue is right there after the Equinox as, as the third best selling EV. There, there are some pretty attractive incentives that I think, really push sales of that model in July.

It’ll be interesting to see to what extent there’s enough inventory to support increasing sales in August and September.

George Genericus, Sustainability Analyst, Canaccord Genuity: GM’s I forget what his title is. Kurt Kelty.

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah.

George Genericus, Sustainability Analyst, Canaccord Genuity: He’s in charge of their

Don Young, CEO, Aspen Aerogels: Batteries are.

George Genericus, Sustainability Analyst, Canaccord Genuity: Batteries are. That’s right. He’s been in the press a lot, and he talks about all the changes they’re making to their architecture and and different processes, with as it relates to their their EV manufacturing. Does any of that impact you? I mean, it sounds like it’s mostly good so far.

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. I mean, I think, a lot of the a lot of what he has presented since he joined General Motors almost a year ago if you recall, GM had a Battery Day presentation at around this time last year that sometimes I, you know, I get questions about it, and then you I ask questions back, and you’re like, oh, this person only read the headlines and exactly what was in the presentation. Because the presentation from Curt at GM actually confirmed a hypothesis that we’ve been having all along around battery chemistries and form factors. And it’s that over the next, you know, ten to fifteen years plus, these OEMs are limited to the pouch and prismatic form factor and maybe three potential chemistries, LFP, NMC, or some variant. Right?

And that, you know, lays out the fairway very clearly for us in terms of where we can solve thermal runaway. And when we see the this most recent award that we got from GM, it does not replace the original Ultima award. It’s actually supplemental volume for a small midsize pickup truck. And the chemistry on that is being confirmed as either LFP or some variant. And a lot of these recent announcements are in essence around evolving GMs, batteries, using only those two form factors and potentially three chemistries.

Right? No talk of solid state coming next year, which has been, you know, in the news for thirty years, and it’s been three years away for thirty years. And, and in essence, no real technical, you know, triple somersaults that would change their requirements for us. And so that lays out a pretty clear commercial glide path, not just within GM, but also for all of the other OEMs as to what we need to solve for, over the next ten, fifteen years plus. And then the then to add, if, you know, GM’s budget for all this stuff was x, with the recent policy changes, the budget to make any drastic changes or to go chase technical triple somersaults is now maybe a half x or point seven x, which tends to extend the runway of some of the existing technologies.

So we believe that that has the potential of extending the runway of the programs that we’re on right now.

George Genericus, Sustainability Analyst, Canaccord Genuity: You also have several OEMs that you’ve announced deals with or their partners, and your official timeline to start ramping those is, I think, towards the end of next year. Can you just sort of talk about that momentum, what we should expect maybe financially as those start to pick up? And I also noticed that Mercedes, you know Mhmm. Announced a huge lineup, for EVs sort of running counter to what everyone else is doing. How does that impact you exactly?

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. I mean, so for us, we laid out during our q one call what the business could look like in 2027 on the EV thermal barrier side. And if you called every customer that has awarded us business and asked them, what are your expected volumes for these vehicles times Aspen’s price, right, what the price that you’ve agreed to to purchase product from Aspen at, you end up with somewhere around $700,000,000. Now we’ve learned to discount that to at least 50 by at least 50%, and so that gets you a business that’s around $350,000,000. And we do believe that, other customers within the original $700,000,000 number can drive over $200,000,000 worth of sales.

And that includes Mercedes, as you mentioned, Stellantis, which we’re actually launching here in q four of this year, and that’ll ramp up next year. And then we have Audi, Porsche, Scania, Volvo truck, and some others that we haven’t yet announced an award with that could contribute into diversifying the revenue mix in 2027 of the EV thermal barrier business. And then maybe just for additional context, that $700,000,000 sort of theoretical potential revenue number was about $1,200,000,000 before the election. So it already reflects the OEM’s different views of the market by 2027. So what the team is working on now is really just that bridge between now and then with the ramp of these other customers that I mentioned.

George Genericus, Sustainability Analyst, Canaccord Genuity: Another company that was in the news, I think yesterday, they did before, is Ford. They seem to have built a new electric pickup that I I don’t have all the specs yet, but it seems interesting price is right. Is that a potential customer over the next, you know, several quarters or years?

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: We think so. I mean, our team has been working with Ford for over two years at this point. Our reps in Detroit are as close to Ford as they are to GM when it comes to quoting a lot of these different variations. And what was announced here recently is actually very positive for us because it means that Ford is taking more control over the design of their battery pack. We believe that this program is an LFP, chemistry on prismatic cells, which makes it perfectly compatible with what we do.

We have a pretty low cost solution that delivers thermal runaway protection for that type of vehicle, And that is much better than, you know, the current v the current EVs that Ford produce, like the Lightning and the Mach E, where Ford’s hands are kinda tied in terms of how much control they take over the design of that battery pack because that’s almost purchased as a turnkey, battery pack from SK today. And so yeah. I mean, again, the details were not, fully laid out over the last couple days, but there’s a very meaningful technical opportunity to be there in a 30,000 v dollar vehicle, which, I mean, if that doesn’t make EVs popular, I don’t know what would. Right? Yeah.

Yeah.

George Genericus, Sustainability Analyst, Canaccord Genuity: I’d say the profile, the financial profile of the firm has changed over the last, know, call it two to four quarters where there was a big project, you were planning on building, and now you’ve gone mostly into CapEx light mode to your earlier point on. So, maybe first, how’s the relationship with your your partners, your international partners in production, and and how should that translate into CapEx again? Should is it a sustainable 15 to $20,000,000, call it, over the next several years?

Don Young, CEO, Aspen Aerogels: Well, starting with the latter part there, our relationship with our external manufacturing partner is strong, and it’s a relationship that very much benefits us and it very much benefits them. And that’s why I believe it’s a sustainable relationship and will continue to grow. They do have substantial capability to expand capacity, and we take virtually all of their products that they produce. And we’re focused today on our energy industrial business from that source, and it has allowed us, because we have the capability to also produce those products in East Providence, we have the ability to manage our way around tariffs quite well, and in essence supplying the rest of the world from that facility and our U. S.

Customers from our East Providence facility. So far it’s allowed us to navigate that changing tariff landscape more or less unaffected.

George Genericus, Sustainability Analyst, Canaccord Genuity: And that CapEx level is sustainable in the low teens?

Don Young, CEO, Aspen Aerogels: We believe so, yeah. Mid teens, I want to say, fifteen, sixteen, 17. And we’re spending that money on supporting the additional OEMs with our fabrication capabilities, so our part making capabilities. So we think the only reason that number would be larger is because we’ve won more OEMs and they’re growing faster.

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. Maybe to put it in perspective, if you look at the the CapEx of the plant in Rhode Island, right, which is outside of EMF, our main source for producing the aerogel, In that 2019 through 2021 time frame, the CapEx for that facility was around one and a half to two million dollars max max. We’ve increased that here over the last two years to roughly 10 to $15,000,000. And so we’re at the point where there’s only so much more that we could do to that facility. Right?

And so you’re you’re more likely going to see the CapEx on the plant in Rhode Island go down to the single digits level per year, which then, to Don’s point, makes the bulk of the CapEx go, to our plants in Mexico to tool up in order to make these prismatic cell programs. Now the other benefit that these prismatic cell programs bring relative to what we’re currently supplying GM is that we can actually share the tooling across different customers. And so, I mean, if we were spending rough numbers, $80,000,000 to ramp up what’s shaping out to be $300,000,000 of annual revenues with General Motors, with the tooling required to make the prismatic cells, we’re probably spending $25,000,000 of capex to deliver the same $300,000,000 worth of revenues. And so it’s a way more efficient product from a capex perspective and from a d and a perspective that enables, you know, better margins and more flexibility.

George Genericus, Sustainability Analyst, Canaccord Genuity: Any questions from the audience? I have a last one. So we were able to dream the dream a little bit here going to 2627 beyond. Energy industrial has come back. GM has stabilized, figured out what’s going on in the world.

You start ramping more OEMs. What sort of margin profile we’ll plug in our own revenue, you know, for those years, but what sort of margin profile does the firm have, and what sort of free cash flow per share margin, profile does the firm have?

Martij Alsemgeest, Unidentified role, likely executive, Aspen Aerogels: Yeah. That’s an interesting question because, again, I keep thinking back to the 2027 slide and that framework that we still stand by, right, of you’d have a business of, give or take, 500 to 550,000,000, right, if you take $3.50 plus what the, energy industrial business could be. And as Don mentioned earlier, our goal is to do everything at 35% plus gross margins, which would translate, especially on the lighter OpEx load that the company would have by that point in time, into about 25% EBITDA margins. And then if you look at our EBITDA, the beauty is that it’ll almost have no I and no t. Right?

We’re carrying, over $300,000,000 of NOLs. That’s before you include the large write down that we had in q one, related to plan two. And then at that point, the debt load the net debt load on the company will be very low. We at the rate that we’ll company will be paying down the term loan, it’ll have less than $50,000,000 on it. So so, yeah, the cash conversion will be pretty good along with the net income breakeven point.

Even right now, the net the net income breakeven point is pretty close to 280, $290,000,000 of revenue level.

Don Young, CEO, Aspen Aerogels: The way I like to think about it is, last year we had $450,000,000 of revenue, $90,000,000 of EBITDA, and to produce that same $90,000,000 of EBITDA, it’s a number between fifty and three sixty. So we’ve meaningfully reduced our revenue requirements to maintain that level of profitability, for example. Another way of thinking about it is at that same level of four fifty, you know, we have we have EBITDA approaching the $150,000,000 level as long as we remain disciplined in keeping our cost structure right where it is, which we believe we can do. That we have all the people and other assets in place.

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