Aspen Aerogels Stock

Aspen Aerogels, Inc. operates as an aerogel technology company.

The company designs, develops, and manufactures high-performance aerogel materials used primarily in the energy industrial, sustainable insulation materials and electric vehicle markets.

The company provides high-performance aerogel insulation to the energy industrial and sustainable insulation markets. The company has developed and is commercializing its proprietary line of PyroThin aerogel thermal barriers for use in battery packs in electric vehicles. In addition, the company is developing applications for its aerogel technology in the battery materials market and a number of other high-potential markets.

The company’s aerogel insulation has undergone rigorous technical validation and is used by many of the world’s largest oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas facilities and power generating and distribution assets, such as ExxonMobil, Reliance Industries, PTT LNG, and Royal Dutch Shell. The company’s products replace traditional insulation in existing facilities during regular maintenance, upgrades and capacity expansions. In addition, the company’s aerogel products are increasingly being specified for use in new-build energy industrial facilities.

The company introduced its two key aerogel insulation product lines for the energy industrial market, Pyrogel and Cryogel, in 2008. Pyrogel and Cryogel have undergone rigorous technical validation by industry-leading end-users and achieved significant market adoption. The company introduced its aerogel insulation product for the sustainable insulation materials market, Spaceloft, in 2006.

The company has grown its business by forming technical and commercial relationships with industry leaders, which has allowed the company to optimize its products to meet the particular demands of targeted market sectors. The company has benefited from its technical and commercial relationships with ExxonMobil in the oil refinery and petrochemical sector, with TechnipFMC in the offshore oil sector, and with BASF in the sustainable insulation market. The company will continue its strategy of working with innovative companies to target and penetrate additional opportunities in the energy industrial and sustainable insulation materials markets.

The company is also actively developing a number of promising aerogel products and technologies for the electric vehicle market. The company’s PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. The company’s thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties. These properties enable electric vehicle manufacturers to achieve critical battery performance and safety goals.

In addition, the company is seeking to leverage its patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells. These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of electric vehicles.

The company has entered into multi-year production contracts with General Motors to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. The company is supplying thermal barrier production parts to both General Motors and Toyota. The company is also supplying thermal barrier prototype parts to a number of other U.S., European and Asian manufacturers of electric vehicles, grid storage and home battery systems.

The company’s aerogel thermal barrier products are designed to enable the company’s customers to enhance the safety and performance of their lithium-ion battery systems. These barriers are designed to impede the propagation of thermal runaway in lithium-ion battery systems at the battery cell, module and pack levels across multiple lithium-ion battery system architectures. The company’s ultra-thin, lightweight and flexible thermal barriers are designed to allow battery manufacturers to achieve critical safety goals without sacrificing energy density. The company offers the best technology available for the management of thermal runaway in the electric vehicle market.

The company manufactures its products using its proprietary technology at its facility in East Providence, Rhode Island. To meet expected growth in demand for the company’s aerogel products in the electric vehicle market, the company is planning to expand its aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia, construction of which is in progress. The company expects to start up the second aerogel plant in the first-half of 2024.

Markets

The company’s principal market is the energy industrial insulation market. This market is global, well-established and includes large and well-capitalized end-users. This market includes companies operating refinery, petrochemical, oil production, and LNG production and storage facilities. The market also includes firms operating gas, coal, nuclear, hydro and solar thermal power generating plants and district energy systems. Insulation systems in the energy industrial market are designed to maintain hot and cold process equipment, piping and storage tanks at optimal temperatures, to protect plant and equipment from the elements and from the risk of fire, and to protect workers. The market is served by a well-organized, well-established worldwide network of distributors, contractors, and engineers.

The major end-user markets that drive demand for the company’s products include oil refining, petrochemical, natural gas and LNG production and storage, onshore oil production, offshore oil production and power generation.

The company has also developed and commercialized a proprietary line of aerogel-based thermal barriers for use in battery packs of electric vehicles and energy storage systems. The market for the company’s thermal barrier products encompasses batteries used in mobile platforms, including automobiles, trucks, buses and light aircraft, and fixed platforms, including home storage, grid storage and other commercial applications.

The company has entered into production contracts with General Motors, to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation electric vehicles, or the Contracts.

The company also sells its products for use in the sustainable insulation materials and other end markets, including for the fabrication of insulation parts by OEMs. These OEMs develop products incorporating the company’s aerogel blankets for applications in a diverse set of markets, including military aircraft, trains, buses, appliances, apparel, footwear and outdoor gear.

Growth Strategy

The company’s strategy is to create economic value by leveraging its technological and market leadership in aerogels to be the premier provider of high-performance aerogel products serving the global electric vehicle and energy industrial markets.

The key elements of the company’s strategy are to leverage aerogel technology platform in the electric vehicle market; strategically increase capacity to meet demand; capitalize on innovation to develop new markets; and broaden energy market diversity and grow market share.

Aerogel Products

Silica aerogels are highly porous structures in which 97% of the volume consists of air trapped between intertwined clusters of amorphous silica solids. Silica aerogels are low-density, extremely fragile materials. However, the company’s proprietary manufacturing process produces silica aerogels in a flexible, resilient, durable and easy-to-use blanket form.

The core raw material in the production of the company’s aerogel insulation products are alkyl silicate and silane precursors. The company’s manufacturing process initially creates a semi-solid alcogel in which the silica structure is filled with ethanol. The company produces aerogel by means of a supercritical extraction process that removes ethanol from the gel and replaces it with air. The company’s process allows the ethanol to be extracted without causing the solid matrix in the gel to collapse from capillary forces.

The materials used in the production of the company’s silica aerogel products consist primarily of several silica precursors, fiber batting, and other additives. The company purchases silica precursors from several suppliers in the United States, Europe and Asia, including China.

The company’s aerogel blankets are reinforced with fiber batting. The company manufactures and sells its blankets in 60-inch-wide, three-foot diameter rolls with a standard range of thickness of two millimeters to ten millimeters. The company’s base products are all flexible, hydrophobic, vapor permeable, compression resistant and able to be cut and fabricated using conventional tools. The company has specifically developed its line of aerogel blankets to meet the requirements of a broad set of applications within the company’s target markets. The composition and attributes of the company’s standard aerogel blankets are described below:

Electric Vehicle & Energy Storage Market

PyroThin: PyroThin thermal barriers are the company’s new generation of ultra-thin flexible aerogel products engineered to satisfy the needs of the electric vehicle and energy storage industries to address thermal runaway issues in lithium-ion batteries. PyroThin thermal barriers can be used to provide passive fire protection at the cell, module or pack level within multiple lithium-ion battery system architectures. PyroThin thermal barriers can also be customized to offer a unique combination of thermal management, mechanical performance and fire protection properties that enable an electric vehicle manufacturer to achieve targeted battery performance and safety goals.

Energy Industrial Markets

Pyrogel XTE: Pyrogel XTE, the company’s best-selling product, is reinforced with a glass-fiber batting and has an upper use temperature of 650° C. Pyrogel XTE was initially designed for use in refineries and petrochemical facilities, but has proven to have wide applicability throughout the energy industrial market. Pyrogel XTE is optimized for high temperature applications between 100° C and 400° C. Pyrogel XTE’s hydrophobicity and vapor permeability reduce the risk of corrosion under insulation in energy industrial operating systems when compared to traditional insulation.

Pyrogel HPS: Pyrogel HPS is optimized for applications within the power generation market with operating temperatures greater than 400° C. With an upper use temperature of 650° C, high durability and extremely low thermal conductivity, Pyrogel HPS is ideal for installation in high performance turbine systems and in demanding thermal environments in power plants and systems. Pyrogel HPS also provides strong value at high temperatures and in demanding thermal applications in refining and chemical processing systems.

Pyrogel XTF: Pyrogel XTF provides thermal performance similar to Pyrogel XTE, but is reinforced with a glass- and silica-fiber batting. Pyrogel XTF is specially formulated to provide strong protection against fire.

Cryogel Z: Cryogel Z is designed for sub-ambient and cryogenic applications in the energy industrial market. Cryogel Z is reinforced with a glass- and polyester-fiber batting and is produced with an integral vapor barrier. Cryogel Z is also specially formulated to minimize the incidence of stress corrosion cracking in stainless steel systems. Cryogel Z’s combination of properties allows for simplified system designs and reduced installation costs in cold applications throughout the energy industrial market when compared to traditional insulation.

Spaceloft Subsea: Spaceloft Subsea is reinforced with glass- and polyester-fiber batting and is designed for use in pipe-in-pipe applications in offshore oil production. Spaceloft Subsea is typically fabricated and pre-packaged to permit faster installation. Spaceloft Subsea allows for small profile carrier pipelines and associated reductions in capital costs.

Other Markets

Spaceloft Grey: Spaceloft Grey is reinforced with a glass-and polyester-fiber batting and is designed for use in the sustainable insulation materials market. Spaceloft Grey is either utilized in roll form by contractors in the field or fabricated by OEMs into strips, panels and systems that meet industry standards. Spaceloft Grey is designed for use in solid wall buildings and where space is at a premium.

Spaceloft A2: Spaceloft A2 is reinforced with a glass-fiber batting and specifically designed to meet Euroclass A2 fire standards in the sustainable insulation materials market. Spaceloft A2 is designed to provide industry-leading thermal performance in applications where building regulations require the use of non-combustible products.

Cryogel X201: Cryogel X201 is similar in composition to Cryogel Z, but is produced without the integral vapor barrier. Cryogel X201 is designed for use in cold system designs where space is at a premium. Cryogel X201 is targeted to OEMs that design, produce and sell refrigerated appliances, cold storage equipment and aerospace systems.

R-Values by Material

Insulation is a material or combination of materials that slows the transfer of heat from one side of the material to the other. The composition of the company’s aerogel products minimizes the three mechanisms of thermal transport:

Conduction: Heat conduction through a material is correlated to the material’s density. Aerogels are very low-density solids. As a result, thermal conductivity through the aerogel material itself is extremely low.

Convection: Heat convection in gases is through movement of gas molecules. Due to the restricted movement of gases in the nanoporous aerogel structure, thermal convection is eliminated inside the aerogels.

Radiation: Radiation requires no medium to transfer the heat. Thermal radiation is partially absorbed by aerogels. The company’s aerogel products also contain infrared absorbing additives to reduce radiant heat transfer significantly.

The company’s aerogel products offer the lowest levels of thermal conductivity, or best insulating performance, of any widely used insulation or thermal barrier available on the market today.

Qualification for Use

The company’s products have undergone rigorous testing and are now qualified for global usage in both routine maintenance and in capital projects at many of the world’s largest oil producers, refiners, and petrochemical companies, and within the next-generation lithium-ion battery systems of two of the largest global automotive manufacturers. These end-users of the company’s products have well-defined practices, codes, specifications and standards for materials and systems installed in their vehicles or used in their facilities. These specifications include system design standards, material qualification and selection processes, insulation application practices, and quality control requirements.

Sales Channel

The company markets and sells its products primarily through its global sales force. The company’s sales personnel are based in North America, Europe and Asia; and travel extensively to market and sell the company’s products to new and existing customers. The efforts of the company’s sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. The company’s sales force establishes and maintains customer and partner relationships, delivers highly technical information and provides first-class customer service. The company plans to expand its sales force and business development resources globally to support anticipated growth in customers and demand for the company’s products.

The company’s sales force calls on and maintains relationships with participants at all levels of the energy industrial supply chain. The company has established a network of insulation distributors to ensure rapid delivery of its products in critical regions. The company’s sales personnel work to educate insulation contractors about the technical and operating cost advantages of aerogel blankets. The company’s sales force also works directly with end-users and engineering firms to promote qualification, specification and wider acceptance of the company’s products in existing and new applications. In the energy industrial market, the company relies heavily on the existing and well-established channel of distributors and contractors to deliver products to the company’s customers. In addition, the company’s sales and business development personnel work directly with OEMs and strategic partners, including within the electric vehicle industry, to create new product designs and solutions to expand the company’s market reach.

The company’s relationships with technically sophisticated customers and strategic partners serve to validate the company’s technology, products and value proposition within a target market.

Customers and End-Users

Customers

Energy Industrial

The company’s primary customers in the energy industrial market are distributors, installation contractors and fabricators that stock, install and customize insulation products, components and systems for technically sophisticated end-users that require high-performance insulation.

Distributors: The company operates through a global network of 67 insulation distributors. In general, insulation distributors stock, sell and distribute aerogel materials to insulation contractors and end-users. The distribution of the company’s product outside of the United States is at times conducted under agreements that provide for exclusivity by geography linked to annual purchase volume minimums. These insulation distributors typically market, promote and advertise the company’s aerogel materials across their market.

Contractors: The company sells directly to a number of insulation contractors under project specific contracts or general purchase orders. Insulation contractors generally perform insulation installation, inspection, maintenance and project management for end-users. In addition, some insulation contractors provide end-users with project engineering and design services.

Fabricators: The company sells directly to a small network of fabricators that design, customize and manufacture insulation components and systems for use in the energy industrial, sustainable insulation materials, transportation, appliance and apparel markets.

Direct Sales to End-Users: In certain instances, the company sells directly to end-users in the energy industrial insulation market. In these instances, the company’s end-users directly manage and control specification, logistic, installation, inspection, maintenance and fabrication activities of the company’s aerogel products.

Electric Vehicle and Energy Storage

The company’s customers in the evolving electric vehicle and energy storage markets include electric vehicle manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies. The company’s existing and prospective customers range from start-ups to the largest automotive manufacturers in the world.

The company typically supplies thermal barrier products to its automotive OEM customers through purchase orders, which are generally governed by general terms and conditions established by the OEM.

Additional Customer Information

General Motors LLC and Distribution International, Inc. represented 25% and 22%, respectively, of the company’s total revenue in 2022.

The company’s product revenue is generated by sales to customers around the world. In 2022, 63% of the company’s product revenue was generated in the United States, 19% in Asia, 12% in Europe, 3% in Canada, and 2% in Latin America, based on shipment destination.

A substantial portion of the company’s sales are to shipment destinations located outside of the United States, including France, Norway, Thailand, Canada, Germany, Taiwan, Great Britain, Columbia, and South Korea.

End-Users

The end-users of the company’s aerogel blankets and thermal barriers include some of the largest and most well-capitalized companies in the world. The company’s products are installed in more than 50 countries worldwide.

Energy Industrial

Oil Refining: The company’s products have been installed in more than 30% of the world’s 640 refineries. In addition, the company’s aerogel blankets are used by 24 of the world’s 25 largest refining companies, including ExxonMobil, Shell and Chevron, among others.

Petrochemical: The company’s aerogel blankets are used by all of the world’s 20 largest petrochemical companies, including Reliance Industries, Formosa Petrochemical, and LyondellBasell Industries, among others.

Natural Gas and LNG: The company’s products are in use at facilities operated by PTT LNG, ExxonMobil, and Dominion Energy, among others.

Onshore: The company’s aerogel blankets are in use in several Canadian oil sands facilities owned and operated by Suncor Energy, ConocoPhillips and Husky Energy, among others.

Offshore: The company’s products are used in subsea projects off the coast of Brazil, in the Gulf of Mexico, in the North Sea, off the coast of Malaysia and off the west coast of Africa. The company’s products are installed in offshore projects owned by Total, Marathon Oil, ConocoPhillips, and Shell, among others.

Power Generation: The company is targeting operators of gas, coal, nuclear, hydro and solar power generating facilities. The company’s products are used at facilities owned and operated by NextEra Energy Resources, Southern Company, and Duke Energy, among others.

District Energy: The company’s products are used in medium- to high-temperature steam distribution networks in universities and municipalities within the United States and Asia.

Electric Vehicle Market

The company’s thermal barrier products are in use today in electric vehicle battery systems of General Motors and Toyota with a leading global platform. The company’s customer base will expand in the near term to include additional electric vehicle manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies.

The company is targeting the manufacturers of battery components, batteries, grid battery systems, and electric vehicles as potential customers for the company’s carbon aerogel materials.

Sustainable Insulation Materials and Other Markets

Traditionally, the company has relied on the efforts of a small network of partners, OEMs and fabrication houses to serve the sustainable insulation materials, transportation, apparel and appliance markets. These partners, OEMs and fabricators are manufacturers of components and systems for buildings, refrigerated and hot appliances, cold storage equipment, automobiles, aircraft, trains, electronics, and outdoor gear and apparel. The end-users of the company’s products in these markets include a wide range of institutions, businesses, individuals, municipalities and government agencies.

Research and Development

The company’s research and development expenditures were $16.9 million for the year ended December 31, 2022.

Intellectual Property

As of December 31, 2022, the company owned 59 issued U.S. patents, 85 pending U.S. patent applications, 196 issued foreign patents and 241 pending foreign patent applications.

The company uses trademarks to brand some of its products, including Pyrogel, PyroThin, Cryogel and Spaceloft. As of December 31, 2022, the company had five trademark registrations in the United States, two trademark registrations with the World Intellectual Property Organization, and 80 trademark registrations in foreign jurisdictions, including the European Union, the United Kingdom, Japan, China, Canada, Mexico, India, South Korea and Brazil. Additionally, the company had four pending U.S. trademark applications and six pending foreign trademark applications.

Cross License Agreement with Cabot Corporation

The company has a cross license agreement with Cabot Corporation under which each party grants to the other party certain intellectual property rights. The cross license agreement remains in effect until the expiration of the last to expire of the issued patents or patent applications and acquired patents licensed thereunder.

Seasonality

The company’s energy industrial product offerings make the company less susceptible to seasonal patterns as its operating results are generated in part by demand for insulation associated with new-build construction of facilities, capital expansions and related capital projects, and larger maintenance-related projects in the energy industrial market. Historically, the company’s third and fourth quarter (year ended December 2022) results have shown increased levels of revenue, which is associated with the company’s end-user customers’ maintenance schedules and timing of capital projects.

Competition

The company competes in the aerogel materials market with Cabot Corporation, Armacell International S.A., Guangdong Alison Hi-Tech Co., Ltd. and Nano Tech Co., Ltd.

History

Aspen Aerogels, Inc. was founded in 2001. The company was incorporated in 2008.