Aspen Aerogels (ASPN) Q1 2021 Earnings Call Transcript

Aspen Aerogels (ASPN 0.95%)
Q1 2021 Earnings Call
Apr 29, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Aspen Aerogels Q1 2021 earnings call. [Operator instructions]. We're going to hand the conference over to your speaker today, John Fairbanks.

Thank you. Please go ahead.

John Fairbanks -- Chief Financial Officer

Thank you. Good afternoon. Thank you for joining us for the Aspen Aerogels conference call. I'm John Fairbanks, Aspen's chief financial officer.

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 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 first quarter ended March 31, 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 In addition, the Investors section of Aspen's website will contain an archived version of this webcast for approximately one year.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 Aerogel's 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 in 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. The forward-looking statements made today represent the company's views as of today, April 29, 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 Young -- President and Chief Executive Officer

Thank you, John. Good afternoon. Thank you for joining us for our Q1 2021 earnings call. Today, I will describe the opportunities we have for substantial value creation over the next five years, and we'll provide a progress report on our strategic initiatives.

John will recap our Q1 performance to finish with our updated outlook for 2021. We will conclude today's call with a Q&A session. The key point from my comments day are; first, we are now developing and supplying prototype and production thermal barriers to five of the 10 largest automotive OEMs; second, acid battery materials has received requests from five battery and automotive companies for evaluation samples of our carbon aerogel materials; and finally, our energy infrastructure business is showing early signs of a post-pandemic rebound, including a new LNG with. At the time of our last earnings call, we posted a new company presentation on our website.

I want to share key points captured in that deck because to appreciate our full potential, it is important to understand our strategy, the scope of our opportunities, and the progress we're making to create value. Leveraging our Aerogel technology platform is at the core of our strategy to be a global, technology leader in sustainability with a focus on multi-billion dollar opportunities in high growth, high-value markets, and on creating proprietary diverse, and valuable business. We have several opportunities currently in motion that fit this profile with a spectrum spanning from those in the R&D sales to those in the full commercial model. I will discuss three of them today.

PyroThin, Thermal barriers, which we believe represent an opportunity through this decade of $30 billion after battery materials, which we believe represents an opportunity through this decade of over $35 billion. And PyroGel and Cryogel products for energy infrastructure, which we believe represent an opportunity during this decade of over $30 billion. Our PyroThin, Thermal barriers allow manufacturers to manage thermal runaway. Thermal runaway is the phenomenon where a cell and a lithium-ion battery pack has a sudden release of energy that can result in a fire, it is a challenge for all the battery platforms.

PyroThin batteries are designed to impede the propagation of thermal runaway and to reduce the severity of the event. Aspen technology offers a unique combination of performance such attributes that enable EV manufacturers to achieve critical safety goals without sacrificing drive range. In Q4 2020, we announced that a major U.S. automotive OEM awarded Aspen contracts to supply PyroThin, Thermal barriers for use in its EV battery platform.

We have the potential from these contracts alone to generate revenue of $75 million in 2023, and $150 million per year from 2024 to 2030. These contracts alone represented an opportunity of approximately $1 billion for Aspen over this decade. The ultimate value of the contract depends on our customer success in participating in the global transformation to electric vehicles. And we believe this customer is well-positioned to succeed.

Since that time, we have developed a robust business development pipeline for PyroThin, Thermal barriers. We are becoming a leading industry resource for the rapid development, testing, and prototyping of thermal runaway solutions for mitigating the impact of thermal runaway. It might be helpful for me to describe the various stages of our business development pipeline. The first stage is our initial engagement and is marked by the fact that we are connected with the subject matter expert path of the target company to exchange technical ideas and requirements.

We have dozens of companies in this category. I'm not going to focus on this first stage in my remarks today, but instead on the more substantive second and third stages of our pipeline. In the second stage, we provide PyroThin samples to prospective customers for fundamental testing. We are involved with more than 15 companies in this phase, including automotive OEMs, battery OEMs, and stationary energy storage companies.

At this point, we engage more formally with the potential customers to apply our technical expertise and provide optimal solutions to address the runway in that customer's battery system. This group of companies represents commercial opportunities principally beginning in the 2022 to 2024 timeframe. In the third stage, we advanced to providing target customers with full thermal barrier prototypes and production parts for system testing and integration. Our goal in this stage is just to transition our potential customer from casting paraffin samples to purchasing prototypes and onto broad enough multi-year supply contracts similar to the ones we announced in Q4, 2020.

We are now engaged with five of the 10 largest automotive OEM in this third stage. Altogether, these five companies sold over 35 million [Inaudible] vehicles and EVs in 2019, and have committed more than $140 billion to electrification. Each of the companies has promised all-electric lineups within a decade. These companies either have launched EVs or we're launching EVs by 2022, and represent a great opportunity for Aspen to ramp volumes quickly in the coming few years.

With the accelerating pace of our thermal barrier work, we are increasing our investment in the business. We are recruiting people with deep automotive and media experience covering technology, supply chain, quality, automation, and business development. We are also planning the capital investment in our Advanced Thermal Barrier center or ATB sales. This investment is consistent with our goal to be the expert industry resource for thermal barrier solutions.

This best-in-class facility will enable rapid prototyping, performance testing, collaborative customer engagement, and both low volume and automated production and parts. We believe these investments are thermal barriers opportunity has the potential to generate significant returns. The second opportunity I'd like to review today is Aspen Battery Materials, which we refer to as ABM. we'll be deploying our carbon aerogel technology in the design of low-cost, high performance, looking rich and it's in lithium-ion batteries.

The replacement of graphite and anodes with silicon is widely viewed as the best near-term approach to boost lithium-ion battery performance and to reduce costs. The approach enables drop-in materials compatible with the manufacturing technology underlying today's battery Giga factories. Our work centers on leveraging our two decades of experience in the design and manufacture of aerogel nanomaterials at scale in order to optimize the cost and performance of our carbon aerogels. We are confident that we can meet the targets set forth by our evaluation partners.

We are responding today to requests for evaluation samples from five battery and automotive companies. These companies are seeking a high capacity of silicon anodes that are readily available to use with their current battery designs and may play a role in future battery designs including solid-state. We are encouraged with the development of our silicon-carbon aerogel solution. This increased level of market engagement in our carbon aerogels has given us the confidence to accelerate our plan to make additional investments in ABM.

We are having scientists and engineers on the team and it kicked off a significant facility expansion to accelerate the enhanced development and testing of full multi-layer lithium-ion battery cells. This expansion will also speed market development by providing much-needed production capacity for larger quantities of evaluation materials to meet demand from the growing list of battery and automotive OEMs. The investment in the ABM facilities is being done in conjunction with an expansion of our overall laboratory assets that support our R&D and new business creation teams. All consistent with our strategy to leverage our aerogel technology platform into new high-growth, high-value markets.

I'll now provide a few comments on our energy infrastructure business. Revenue with $28.1 million exceeded our expectations and was roughly on par with a pre-pandemic Q1 2020. One quarter alone does not signal an end to the pandemic, but there were green shoots that suggest a relatively good first half and something closer to quote normally as we work our way through the year. In particular, a few of our regions are beginning to show signs of a post-pandemic uptick in inactivity.

In the U.S. market, we see our distributors beginning to restock and our end users begin to address deferred maintenance work. We also see an increase in LNG project work which includes the award of the Arctic LNG contract. We believe that we are well-positioned to emerge from the COVID-19 period with a strong operating platform and energy infrastructure and significant strategic momentum for the company as a whole.

At this point, I'd also like to provide an update on the targets and milestones for 2023 that we first introduced earlier this year. We set a revenue target of $225 million for 2023, approximately doubling revenue from our 2021 outlook. The breadth and intensity of our engagement with automotive OEMs around the PyroThin thermal barrier and the positive signs in the energy infrastructure market caused us to be yet more confident in our ability to achieve this 2023 revenue target. We also believe that we have the opportunity to double revenue not only between 2021 and 2023 but again, between 2023 and 2025.

Our belief is based both on the positive macro environment and support of immobility and on our potential for several additional multi-year battery platform OEMs for our unique and protective PyroThin thermal barrier technology. In addition to the investments that we are making to keep pace with the progress of PyroThin thermal barrier and Aspen Battery Materials. We are also planning to expand capacity with the second aerogel manufacturing. We have the required capacity today in our East Providence plant to support our 2023 revenue target of $225 million.

But with the opportunity to double revenue again by 2025, we will need additional capacity by late 2023. We plan to build Plant Two in a modular fashion and will determine the capacity of the first phase of Plant Two based on the potential value of additional thermal barrier contract awards. A definitive plan for Plant Two comprised of a site slipped locations, a set schedule, and an appropriate balance sheet is important to the large EV OEMs who want us not only to have ample capacity but also a diversity of manufacturing sites. We will share details of our plans for Plant Two in the coming months.

Overall, the key points from my comments today are first, we are developing and supplying prototype and production thermal barriers now to five of the 10 largest automotive OEMs, Aspen Battery Materials has received requests from five battery and automotive companies for evaluation samples of our carbon original materials. Next, our energy infrastructure business is showing early signs of a post-pandemic rebound including a new LNG win. And lastly, we have decided to accelerate investment in these businesses based on significant momentum and opportunity. John, I'll turn it into you.

John Fairbanks -- Chief Financial Officer

Thanks, Don. I'll start by running to our reported financial results for the first quarter of 2021 at a summary level. Total revenue declined 1% to $28.1 million from $28.4 million in the first quarter of 2020. That loss increased to $6.2 million or $0.22 per share this year versus a net loss of $3.2 million or $0.13 per share in the first quarter of last year.

And adjusted EBITDA was a negative $2.6 million, compared to positive $500,000 a year ago. Redefined adjusted EBITDA net income or loss before interest, taxes, depreciation, annualization, stock-based compensation expense, and other items that we do not believe are indicative of our core operating response. I now provide additional detail on the components of our results. First, I'll discuss revenue.

Total revenue decreased by 1% to 28.1 million gallons. This decrease in first-quarter revenue was driven by a decrease in demand in the refinery and petrochemical market particularly in Asia, and a decrease in project work in the subsea market offset in large part by strong demand in the global LNG market led by shipments to the Arctic LNG and PTT LNG projects. Total shipments for the quarter increased 6% to 8.6 million square feet of original blankets on an average selling price increased by 6% or $3.25 per square foot. The decrease in average selling price reflected a decrease in the mix of higher-priced subsea products and an increase in the mix of lower-priced 5 millimeter and LNG products this year versus the first quarter of 2020.

Next, I'll discuss gross profit. Gross profit was $4 million or 14% during 2021 versus $6 million or 21% during 2020. Decreasing gross profit was driven by the 6% decrease in average sales price, an increase in material costs offset in part by a 6% increase in volume, and a reduction in manufacturing expense. On a highlight that our first-quarter gross profit was reduced by $1.2 million, and our gross margin by 400-basis-points as a result of $1.8 million reductions and I've finished goods and decline during the quarter.

We expect those finished goods inventories and regain that contribution later in the year. Next, I'll discuss operating expenses. First-quarter operating expense increased by $1.1 million or 12% versus last year to $10.1 million. The increase in operating expense was primarily the result of additional recruiting expense and compensation costs associated with new hires, including those supporting our immobility business development initiatives offset in part by reduced travel expenses associated with ongoing COVID-19 reading restrictions.

Next to discuss our balance sheet and cash flow for the quarter. Cash used in operations is $1.9 million reflected our adjusted EBITDA of negative 2.6[inaudible] offset in part by our $700,000 decrease in working capital investment during the quarter. The decrease in working capital was principally the result of a decrease in inventories at $2.3 million during the quarter. Capital expenditures during the quarter were $1.5 million.

We're focused on improving the efficiency and reliability of our East Providence manufacturing facility and to a lesser extent, establishing our thermal barrier fabrication operations. Cash provided by financing activities of $4.1 million was comprised of $6.2 million, generated by our sale of equity for the existing ATM facility, offset in part by a net of $2.1 million cash used for employee equity transactions. As a result, we ended the quarter with $17.2 million of cash. Net current assets of $27 million.

No borrowings under our revolving credit facility, and shareholders equity of $66.6 million. We also had access to an additional $13.1 million available under our revolving credit facility at quarter-end. I'll now turn to our full-year 2021 outlook. As COVID-19 continues to depress activity in our energy infrastructure markets particularly in Asia, we're seeing early signs of improved demand in North and South America.

As a result, we are now projecting revenue growth for the last three quarters of 2021 in the mid-single digits to mid-teens, and we're increasing our 2021 revenue outlook by $3 million dollars to between$103 million and $111million for the year. We've also decided to increase our strategic investments during the remainder of 2021, and supported by our ability business development initiatives. This investment includes $10 million of incremental expense to enhance the technical, commercial, and operational teams and resources in support of our thermal barrier and gathering materials and opportunities. Of the total, we expect to incur $6 million of incremental expense and cost of sales.

For additional manufacturing and fabrication supply chain quality and engineering personnel and the operating costs associated with our new fabrication facilities. We expect to incur the remaining $4 million of incremental expense in operating expense. For scientists, researchers, salespeople, and administrative support personnel to expand and protect our patent portfolio, including our immobility mobility products and technology, and for operating costs associated with our expanded research and corporate facilities. Our 2021 strategic investments will also include an incremental $18 million of capital expenditures to construct our advanced Thermal Barrier Center to expand our battery materials production, fabrication, and testing facilities, and to complete the initial engineering designs for our second Silica Aerodrome manufacturing plant including the strategic capital investment, we project our capital expenditures range between $20 million and $25 million for the full year.

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. To leverage our original technology platform, to develop new high-growth businesses, and to resume the strong operating performance that characterized 2019 when the impact of COVID-19 subsides. Including the impact of these strategic investments, our revised 2021 forward your outlook is as follows; we expect total revenue of between $103 million and $111 million. Net loss of between $28.3 million and $31.9 million.

Adjusted EBITDA between negative $15.2 million and negative $18.8 million. EPS between a loss of a dollar of one, a loss of a dollar or 14 per share. This EPS outlook assumes a weighted average of 28 million shares outstanding for the year. In addition, this 2021 outlook assumes depreciation of $8.9 million stock-based compensation expense of $4 million, an interest expense of $200,000.

Spewed full-year outlook also projects the gross margin in the mid-teens and average selling price of between $3.35 and $3.40 per square foot. Turning to cash. We're confident our cash on hand available credit proceeds from potential equity sales under the existing ATM facility will be sufficient to fund operating requirements, the strategic capital expenditures for the remainder of the year, longer-term we're working on a number of potential financing alternatives to fund the construction of our second silica aerogel manufacturing facility and other capital expenditures required to support our immobility business opportunities and post 2021 operating requirements. We'll announce additional details of the second plant.

Other capital projects as our planning efforts progressed during the year. I'll now turn the call over to Mike for Q&A.

Questions & Answers:

Operator

[Operator instructions]. Your first question comes from Eric Stine from Craig-Hallum.

Eric Stine -- Craig-Hallum Capital Group

Hi, Don. Hi, John.

Don Young -- President and Chief Executive Officer

Hi, Eric.

Eric Stine -- Craig-Hallum Capital Group

Hey, I just pay for all the details don't really know where to start here but maybe just on the thermal barrier side. So talking about the 20 you know that you get deep engagement with and the five that are more advanced. Just curious how that has kind of accelerated since you announced your first partner, what -- obviously, there's urgency from those five but kind of what are you saying in terms of urgency in this area from the group, and I guess, I would assume you still have confidence in securing at least one to two more this year?

Don Young -- President and Chief Executive Officer

Well, I think we are feeling that urgency and we believe as we've said in the past that now is the time to win these contracts. These are multi-year design wins. And I think just from an external point of view or a macro point of view the momentum around immobility electrification the proliferation of e-business is growing at least as swiftly as people expected and maybe even more so. So, we believe that we will win additional contracts during 2021.

Eric, just the progress that we've made from stage 1 as I described it to two and we're now down into the third, the third stage. We believe that we'll continue to move companies through that. There's, I think the issue of thermal runaway is also becoming increasingly prevalent. As you've seen, recalls occurring for many companies and others.

Let me say regulatory maybe warnings around some of these things in all three regions in Asia, in Europe, and here the United States.

Eric Stine -- Craig-Hallum Capital Group

One thing I know that as of later over the last couple of months you've had increased competency your ability to eventually build it flows through your current customer is. Curious event is still if and it's still an area that you're confident in. And is there an event that triggers that or how should we think about potential timing there?

Don Young -- President and Chief Executive Officer

Yes. We've said that we expected to do it during the second quarter of this year. And we think that is still the case. It is interesting and not just with this one but with others who are in Stage 3.

There is an element of strategy for them and in the way, they might be addressing thermal runaway. And so I don't think all the companies are going to -- I think many companies are going to view this as a proprietary aspect of their battery platform and perhaps not want to do big announcements. Having said that, we expect that we will be able to make announcements along the way. Because it's in their interest I think.

Look we're investing in a second plant as I said a significant investment. We have to have the confidence of our people have to understand what is the basis for that confidence and have major players in the EV space aligned with us. If you go around from a runaway. It's just an important endorsement.

And I think a blessing that kind of major capital decision.

Eric Stine -- Craig-Hallum Capital Group

Right and fair to say that I mean that's a capital decision you wouldn't make if you didn't have a high level of confidence in additional business on both parts, thermal runaway, and PyroThin, thermal.

Don Young -- President and Chief Executive Officer

yeah. That is true. I think having that -- one of the nice parts about our ability to the way in which to build these manufacturing plants is is in that sort of modular form and even the one that we built earlier in these problems, we built the original line, we expanded the original line first and then we built another module in line 2 and then yet another one in line 3. So, we're well versed in being able to sort of let out the line a little bit here if you will and in the way we go about this.

One of the interesting aspects of our work today and thinking about Plant Two is its sizing that first a module correctly and then it's going to be based on contracts in hand. There's no question about that. But that's it. That's a great way to build these things where demand is really the driver as opposed to let's say, "build it and they will come".

This is going to be really demand-driven.

Eric Stine -- Craig-Hallum Capital Group

Absolutely. It's very good to hear. Maybe you ask them for me just on the carbon aerogel part. I mean clearly, the last call you talked about and it accelerated you've moved up the timeframe a little bit.

It seems like it continues to do so when you mentioned the five companies. Does that five include SK innovation or those five in addition to those two?

Don Young -- President and Chief Executive Officer

It includes one. That includes one of them. And no I don't need to be elusive about that. SK is very much on the customer side.

Antibiotic as you know is a that is a supplier of materials to their partner to us in that sense. And so, the five that we mentioned one of which is SK our mistakes are market-facing.

Eric Stine -- Craig-Hallum Capital Group

OK. got it. Thank you very much.

Don Young -- President and Chief Executive Officer

Thanks, Eric.

Operator

Our next question comes from [Inaudible] from B. Riley.

Unknown speaker

Thanks, guys for taking my questions here. Maybe to start on the $18 million incremental spendings for the advanced thermal battery center. Is completion of this and by definition acting as any kind of barrier to additional wind do you think? Is this really just about demonstrating manufacturing expertise for these larger customers and then speeding up your production and kind of timeframes here. I just want to get a sense of how you guys are as you would when you're kind of building this out to potentially demonstrate with customers kind of give the rationale and more the capabilities you're going to have coming out of that.

Don Young -- President and Chief Executive Officer

John, will you take that?

John Fairbanks -- Chief Financial Officer

Sure. Sure. It really does both. So the advanced thermal barrier center will be a customer center where will do rapid prototyping in response to customer demand.

And then we're doing that today and we're doing it on a bit of a shoestring so the ATPC will help us there. It also is -- it will actually house our automated fabrication operations as well. And we'll be producing new millions of thermal barriers for -- or the contract per year for the contract that we have already won. And we anticipate that we will with additional wins, that number will only increase.

So we need to automate that thermal barrier fabrication operation in order to ultimately be successful in delivering these components to our customers. So it will help us gain more customers, and then it will help us produce products for those customers with contracts ultimately.

Unknown speaker

Now that makes a lot of sense. And then just on the progress of the second facility planning here. Obviously, it can be kind of customer dependent but based on when you get these awards potentially come in throughout this year and next year. A bunch of -- we're talking about in 2022 to 2024 for your rants with a bunch of these customers potentially.

How do we -- the modular approach here when you guys do kind of pencils down and kind of speak to the street as far as to what the plans are going to be. It seems like it could kind of continue to evolve the size that you're going after. I'm just kind of curious there. Is it something that by year-end that will get more details and then could extend in 2022 if there's no additional customer wins? How can we kind of think about it?

Don Young -- President and Chief Executive Officer

Chris, I think we are going to build a Plant Two and for us what we are studying how big to build that first line if you will. That first phase of this project and it's important. I said in my notes a little bit, it's important not only because we need the capacity but also because these large OEMs are expecting us to have not only ample capacity but they would also like us to have a diversity of manufacturing sites. And I think this is a significant commitment on our part to that -- to this new business that we've entered into.

So in terms of timing, I think that we will make announcements before the end of the year as to how this will play out in terms of site location, and most probably size as well. And obviously, because we really need to get after it here. We need this capacity as we get laid into 2023, and certainly, by the time we start 2024. And it's about a 24-month process.

And so we're -- we have a dedicated team today working on this. As John described, putting some of the initial design together with all the lessons we've learned from building line -- a building line one, line two, line three, and in East Providence facility. So a tremendous amount of work is being done on this today. So I think you can expect announcements sooner rather than later.

Certainly, before the end of this. Before the end of this year.

Unknown speaker

Got it. And then it's going to 24 months from started production go further than any incremental line. What would be the timeframe --timeframe you think you'd need, which you're going to need to be expanded beyond the initial scope?

Don Young -- President and Chief Executive Officer

Well, if you mean how does it take us less time to go to the second phase. Got it. It's a yes. But still, it probably truncated from 24 months to 15 months or 18 months something like that.

I mean, we have a structure and we have the infrastructure. So it's a no. It truncated the event the week. We need to get this first phase on the mark from a scientific point of view as best we can right from the get-go.

Unknown speaker

It makes a lot of sense. And then just the last one here. On the $10 million in incremental expense this year on the Navy side. You mentioned $6 million and $4 million split between cogs and opex.

Can you talk about what the impact was in the first quarter, maybe I missed that? And then we were what the cadence would be for the rest of the year for the rest of that spend maybe. It would be helpful.

John Fairbanks -- Chief Financial Officer

Yeah. So that incremental spend is all Q2 to the end of the year. And so it's going to come from this point forward. So it didn't include any expenses that we incurred in the first quarter.

Unknown speaker

OK. Well, what was kind of the impact to cogs from the increased EV side?

Don Young -- President and Chief Executive Officer

It was in the range of maybe a point of margin at this juncture. It was not that significant, but it will scale up quickly as we move from prototype production, which is what we're doing today to full-scale commercial production. And so -- but that was in our initial projections, we're just really just accelerating some of these expenses that we had originally planned maybe for 2022 into 2021. In response to this increase in interest in our thermal barriers and our confidence that these thermal barrier business is going to grow rapidly and in 2022 to 2025.

Unknown speaker

Thanks, guys. I'll return in the queue.

Don Young -- President and Chief Executive Officer

Thanks, Jeff.

Operator

Your next question comes from Jed Dorsheimer from Canaccord.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Hi.Thanks for taking my questions. I have several if you don't mind. I guess first, maybe just energy infrastructure. I mean first off congrats on you know the better top line and the bold move of the capacity expansion at these levels.

So if we just dig into that energy infrastructure, clearly pricing is starting to increase on the traditional higher hydrocarbon-based fuels. Is there anything else other than sort of rig counts and refineries or utilization that's kind of driving a level of confidence on this side of the business in terms of that ramp? And then then I've got follow-ups on the other two areas.

Don Young -- President and Chief Executive Officer

I think our indicators are sort of threefold. One is, we're seeing restocking. And you might remember in Q2 last year, I talked about the destocking that we saw going on through our very well-established distribution channel here in the United States and around the world. Those distributors are pretty close to the ground sort of speak and they have a good sense of what is happening facility by facility.

So we do that as a positive sign. Second, we've been clear that we believe that. Because of the low-density worksites that have been required during this COVID period, which continues in many parts of the world most parts of the world probably. There is no question that there was deferred maintenance, and we're beginning to see some of that deferred work be initiated and attended here.

And so we view that as a positive sign. And then third, we are seeing the project pipeline begin to -- you'll begin to come alive again. The worst thing that a contractor and you ask we don't have to do is start a project and have it, team, on-site, off-site, on-site, off-site. It's a terrible way to run an expensive water run or a project.

So more projects not just were either not started or put on hold. And we're beginning to see some of those come back to life here. And we were -- we are positioned neatly in the specifications for several of these projects. So that gives us confidence in a force which we announced earlier with the new LNG project so-called the Arctic LNG that win.

So those are three things Jed that I think we're seeing and the numbers we're staying and the activity levels, and it's -- again it's not true across but around the world entirely. But it's certainly true in pockets. And we think as the pandemic gets a little further behind us it will become the case in almost all regions.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Got it. And then just it is, it's a reminder of the value profit if you will. I know on the oil side, I believe that thermal benefits on the heat as well as the rust under pipe guy are kind of the major drivers. On the LNG, is that working the same but cryogenically in terms of the cooler temps, or is that still a thermal heat value prop there.

Don Young -- President and Chief Executive Officer

So thermal management is still an important part of our value proposition in that space. Fire protection is also an important element. In one that is a loop is really pronounced, I would say on the LNG side is the ability to install our materials more rapidly with a less skilled workforce in modular yards as opposed to necessarily on site. So the durability of our material to be transported on the pipe or on a vessel from a yard too, let us say the remote site.

Our materials are very durable in that way. So our value proposition on the LNG side is broad and strong and I think the fact that we piece together a 50% revenue case into 2015, and we really invested in that space that tells a story pretty well.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Got it. And then just maybe a pivot to the EV and the battery materials side. So on the thermal runaway opportunity. What are you replacing in terms of the core shell? Because it's a -- there are thermal mitigation and propagation solutions in terms of/or mitigation reduction solutions now.

So I'm just curious what are you prepared at this point to sort of talk about the improvements that you're seeing versus what OEM or battery manufacturer might be replacing it and using your material instead?

Don Young -- President and Chief Executive Officer

Yeah. I look -- I think a few things. I mean a lot of the battery platforms that we are working through that one, two, three-stage process that I described are new. And they are looking for optimal materials to address this issue.

So in some sense, we're really not knocking an incumbent out of the box. We are part of the original design of these battery new platforms and that's a strong place for us to be. And that's why it's so important for us to invest in that advanced thermal center to really be that industry resource for helping them address this challenge that all of the battery platforms have. And so it's unlikely that the energy infrastructure business in the sense that we largely needed to knock out incumbents that had been in place for a long time.

And that was a slow arduous process, and we've done the hard work, and we're making significant inroads in not in that space. It's a little different here with the new battery platforms Jeff, where -- they don't have long histories with existing insurance. And if I could just say the attributes of our material we refer to them. It's a really unique combination of that thermal management.

That the noncombustible, the mechanical durability with that very thin profile taking up very little space within these packs so that they can get more settled in place. So any of which is to say more drive range. And so we really have -- I think an important product here and we're doing our best to work for these companies through our development funnel here as they themselves, let me say sort of settle on their battery platforms.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

And then the last question, I guess just on the battery materials on the anode side of things. Obviously, moving to Silicon anode has a tremendous amount of benefits, but the issue's always been the coefficient of thermal expansion associated with the thermal increase. So, I'm just curious where are you in terms of the data with that testing with five -- with the customer base that you're featuring. Are there any metrics that you might be able to share at this point in terms of that solution?

John Fairbanks -- Chief Financial Officer

Providing the data is a goal for us publicly is a goal for us here in 2021. And we think that it's a relatively bold move not many are doing that. Not many companies that are doing this are putting their data out working to do it. And you're right.

That is the challenge is the expansion of the silicon what 3x is significant. And how do you protect that expansion through to cycle life? And a lot of the work that we're doing with our evaluation partners is around exactly that cycle of life. How durable are these materials? And we think our carbon aerogel is a perfect scaffolding for that given its mechanical durability. Our ability to manipulate the poor size creates uniformity of the poor side.

Do enough of a variety of things that protect that silicon as well as possible. And so that's really our focus and an enormous amount of our scientific team is dedicated to that issue. But the idea of presenting our data publicly here during 2021.

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Great. Thank you.

John Fairbanks -- Chief Financial Officer

Thank you, Jed.

Operator

Your next question comes from Doug Becker from Northland Capital.

Doug Becker -- Northland Securities Inc. -- Analyst

Hey guys. Don you made the point you're not knocking out incumbents specifically, but curious if there have been any notable changes around the competitive landscape with competing solutions for thermal barriers or the carbon arrow, John?

John Fairbanks -- Chief Financial Officer

We're assuming and I think it's fair to assume that these automotive OEM that we had in five of the 10 largest automotive volumes in the world are looking at all materials and that we were awarded the contract for. We know that they started with a number of materials, but you know in the first stage of that three-part rescue. And so, we're progressing pretty efficiently through that funnel right now as many of these companies as possible began dozens in stage one, 15 or 20, and Stage two. Now five significant companies in stage three you know we don't know all of the materials that we're being compared against, but we know some of them.

And this is an extremely hard problem that you just don't come up with -- just don't come up with a solution easily. And what was important for us and the reason that we've been so strong in this to date is that product PyroThin is a direct descendant of the past of fire protection products that we used in energy infrastructure. Will pass with fire protection that's so critical. Yes, we've optimized it significantly for the lithium-ion batteries, but we were very experienced with the issue coming into it.

And again, it put us in a very strong position, a very strong position. You also mentioned that on the acid battery materials and in the Silicon Regina material that we've talked about. Yes, there are a number of companies that are focused on this. I mean, it's well well understood agreed upon I think that adding silicon to serve the current style of lithium-ion batteries is that are the next logical step along with the technology roadmap and the great benefit of it.

Of course, to is that it fits within the process technology the manufacturer and technology at least these big gigafactory some of which are operational today. And some of which have been announced and will be operational in the coming year or two. And so that's all -- that's been that's a requirement of these kinds of materials and I think in most everyone's opinion. And so it's an area where we think that the work that we've done in developing.

And then manufacturing on the scale these nanomaterials for the better part of 20 years gives us an advantage at that level especially when you're talking about cost and performance. Cost and performance. Those two things go together. It's one thing to have pure performance at a very high cost.

It's not going to get it done. It's cost and performance. Again, we feel that we're in a great position, and we've added since the last time we've talked about this, three additional companies to who is requesting and samples who have gone through our data and materials and what have you and so the list has expanded and we've got a lot of work to do. We're investing in the business that will bring scientists and engineers in.

Our confidence has grown and I think that the next logical things are for us to continue to share data and compare that data with other solutions but also to announce additional partnerships. In addition to our Korean partner and our German partner that all sounds very consistent.

Doug Becker -- Northland Securities Inc. -- Analyst

What you've said in the past. Yes, no competitors out there but no major changes in that. Ok. And then, maybe a quick update on the opportunity for stationary energy storage and distributed generation didn't seem to get a lot of airtime today.

Has that opportunity just taken a backseat given the other opportunities we have in front of you?

Don Young -- President and Chief Executive Officer

Not really, actually. Certainly, our team is focused on. Obviously, even these bases are so much -- so prevalent right now out there in the world. The stationary energy.

So think of this for those who are listening to energy storage systems associated typically with residential or small businesses. So behind a meter, a lot of times sort of battery type systems. Again, using the same lithium-ion technology battery cells typically perched up next to one's home. And so some of the formal right away issues are prevalent there as well.

And so, we have continued to make progress with two entities, one in Germany, one here in the United States. I should say one in Europe and one here in the United States. And we've made -- we've continued to make good progress with them. Really, I think it's a really interesting and important area for us.

Doug Becker -- Northland Securities Inc. -- Analyst

And I think last quarter you mentioned you were involved in some RF queues. I assume those are still continuing to move forward. But is there any way to frame the opportunity specifically from this aspect of your business?

Don Young -- President and Chief Executive Officer

I think the fact that we have five major OEMs in the third stage of our development on, I think of that as pretty advanced and whether it's exactly an RFQ or not or advanced prototyping and providing production parts, it's pretty advanced at this point. And so, it's -- `I would say at that point they have limited their choices down to very, very few possible solutions at that point in time. So again, we haven't won until we win, but we feel strongly that we are wearing them in an excellent position to be able to announce some additional contracts with this calendar year.

Doug Becker -- Northland Securities Inc. -- Analyst

And just to clarify, I was actually specifically talking about the stationary energy storage or IPO policy.

Don Young -- President and Chief Executive Officer

I would do that we'll have one of those announced here in 2021.

Doug Becker -- Northland Securities Inc. -- Analyst

OK. Thank you.

Operator

Your next question comes from Amit Dayal of H.C. Wainwright.

Don Young -- President and Chief Executive Officer

Good afternoon. How are you?

Amit Dayal -- H.C. Wainwright -- Analyst

I'm ready. They're closed down your name is right.

Operator

Sorry, I messed up.

Don Young -- President and Chief Executive Officer

Hi, how are you?

Amit Dayal -- H.C. Wainwright -- Analyst

Good, thank you. So you speak to this every opportunity right. There have been some recent headlines about supply chain challenges in the auto space. Is that impacting any of your timelines or is that much of a concern at this point.

Don Young -- President and Chief Executive Officer

Well, it is. It is not directly impacting us in the sense that if you're referring to semiconductor shortages etc. to not directly but you know that perhaps in some indirect sense yes If it necessarily slows things down. I can say that just sort of more broadly if you will.

All of us whether you're the biggest OEMs or supplier like Aspen, there's no question that the supply chain is being challenged and it's just a matter of unimportant in the process after -- I don't mean to say the pandemics over but as we get over on the other side of it at least. And these big supply chains aren't really meant to start and stop, and start and stop. They're not really shaped that way. And so it came to a significant slow down if not stop for a lot of these parts.

And it's going to take a little while to kind of root reset. And so it wouldn't surprise me if there are some disruptions along the way. I think we've already read about some of them. But in terms of our work, it works.

We're not anticipating any issues from our side.

Amit Dayal -- H.C. Wainwright -- Analyst

Understood. Thank you for that. And then, have indicated you're expecting single-digit millions of sale into that opportunity for getting one and going through? Is there any change to that outlook or are you still sort of the background?

Don Young -- President and Chief Executive Officer

We can get together. We think that's a good expectation for you to have. I did say in my notes that we are as confident as ever more confident about our 2023 target of $225 million. Again, based on the fact that we've got these significant automotive OEM in the third stage of our development funnel, and we're seeing activities in our energy infrastructure business that are promising.

That starting to feel a little bit normal again. And again, we've got a ways to go but that is moving in the right direction and we haven't said that for four quarters as you know. If it was really just sideways at a little level, then we're just seeing any sort of a little bit maybe in our revenue in Q1. I think it was better than expected.

And again, it's one quarter doesn't make it into the pandemic. But we feel we're in a good direction there. So that target of 2023. Again, we feel confident in that.

We're building up 2021, 2022. These investments that we're making. Our ability to move toward automated higher volume parts production on the thermal barrier side are all critical elements to be successful here.

John Fairbanks -- Chief Financial Officer

One other comment. The single-digit millions in 2021 and 2022 were from the U.S.-based automotive OEM alone. So, if we have additional contract wins it could give us an upside on those numbers in particular in 2022. But as long as the U.S.

automotive company is successful they should achieve those numbers and additional contract points would get us upside.

Amit Dayal -- H.C. Wainwright -- Analyst

Right. Thank you for the clarification. That's helpful. Just one last one for me.

You know the decreasing average selling prices may be because of the product mix in one to this sort of again, the situation and the managing to this going forward.

Don Young -- President and Chief Executive Officer

Yeah it's really is a function we sold a lot of 5-millimeter products and we sell our five-millimeter product for about half the average selling price as I can monitor the product. So that mix drove it down. So it's temporary. It is project-related, and we expect that to continue into the second quarter, but sort of resume lower or higher levels of average selling prices in the second half of the year.

And just to clarify are our building material costs per square foot for the thinner product for the 5-millimeter product is lower as well. So we really maintain our margins. We have lower revenue. And then we also have a lower material cost which gives us the same contribution.

So there's been no economic degradation on it and we will rebound in the second year.

Amit Dayal -- H.C. Wainwright -- Analyst

Thank you for that. That's all I guess appreciate all the color. Thank you.

Operator

Your next question comes from Jeffrey Campbell from Alliance Global Partners.

Jeffrey Campbell -- Alliance Global Partners -- Analyst

Good afternoon, and thanks for squeezing me on that. The first thing I want to ask about. I just wondered if there was much segregation between those battery folks that are deep into pirate and adoption or you know sampling and testing and those that are showing the strong and increasing interest in the common anode product. Because it seems like these are both the necessary products in the same batteries.

That they perform the expectations.

Don Young -- President and Chief Executive Officer

Yeah. It's a good question. I would say that I think about it there is overlap, but I would say -- I mean, on the one hand, I would say it's sort of coincidental, but on the other hand, I would say "you know what it's not very surprising". There are different groups within these firms who are working on these things.

But there are only so many players. Let's face it. At the end of the day, so and we believe will be so many successful players the end of the day. Some of the incumbent companies will be successful, some of the newcomers will be successful.

And until it's not too surprising. But I wouldn't say that. They're necessarily related to one another. A lot of times I would even wager.

Well, that one group within one of these big companies clearly even knows that the other group is working with us on the other ones. So again, I call it a little bit coincidental but not surprising.

Jeffrey Campbell -- Alliance Global Partners -- Analyst

OK. Well, thank you for that. Regarding the OEMs and the battery manufacturers that are in the second or third of the fire centers that you outlined. Can you provide some color just on geography like U.S., EU, Asia, etc.? To get some sort of sense of that.

Don Young -- President and Chief Executive Officer

They represent all three regions. I'm also sorry, all three major regions. So this is going very terribly helpful but there are participants from Asia, participants from Europe, and participants from the U.S. In a two and three.

John Fairbanks -- Chief Financial Officer

And within Asia, it's China and other countries within Asia as well. So we actually agreed during our great geographic diversity.

Jeffrey Campbell -- Alliance Global Partners -- Analyst

And John, you mentioned China's is interesting is significant because we've talked in the past about how there's some entity there that infringes on your patents, but it sounds like maybe this -- if you've got if you're doing work in China it means there's more to it than just being able to nation marriage must be all the other research that you've done and the other people that you're working with. Is that the right way to think about it?

John Fairbanks -- Chief Financial Officer

There are come back.

Don Young -- President and Chief Executive Officer

Yeah, I think it is that and that these companies aspire to be international companies. And we've done -- we've been very aggressive and successful and let me say defending our intellectual property around the world. And so I would just say that they're -- I would just say that they are -- so I just I would just say that they are focused on if they want to be international companies they do not want to be violating intellectual property, and we've seen that in their behavior as well.

Jeffrey Campbell -- Alliance Global Partners -- Analyst

Now that makes a great point. I think that they want to be able to sell outside of the most. My last question and you sort of alluded to this but earlier of a little bit of color too. You mentioned that some large OEMs are cognizant of the diversity of supply locations.

I'm just wondering as you're planning your future roofline expansion maybe not just Phase 2, but maybe even a further phase If it comes to that. Are there any potential large foreign customers that are indicating the Pyrogel or PyroThin facility source closer to their manufacturing capability is of any importance to that?

Don Young -- President and Chief Executive Officer

You know Jeffrey, on our arm materials shipped very effectively and cost-effectively. We've exported historically approximately two-thirds of our product to all corners of the globe. And so I think having a diversity of supply, I think having ample supply are the two most important things. Having a nearby stock supply, and I think has been voiced more than nice to have and not all a requirement.

I think as we come to the full capacity of Plant 2, we will have to think very hard about where we locate Plant 3. And it is very likely driven by where we are particularly successful in the thermal barrier side of the slate. So I could make that if I were to bring the project forward for five years. I could make a good argument for Europe, and I could make a good argument for Asia.

So we'll see how it plays out.

John Fairbanks -- Chief Financial Officer

In the interim as well, we could cite fabrication operations in Europe and in Asia, but make the air into the base very general base pirated product here in the U.S. . Just to make sure we have that proximity and quick turnaround on prototype designs. And then delivery of fabricated parts as well.

Don Young -- President and Chief Executive Officer

Ok. And that's a really good point, John. I think you'll see much more of that. That is much lighter, but to do that sort of thing and to build a full-fledged manufacturing plant.

So I think that's a very logical car maybe interim.

Jeffrey Campbell -- Alliance Global Partners -- Analyst

Yeah. I appreciate that color it makes perfect sense. Thank you.

Don Young -- President and Chief Executive Officer

Great.

Duration: 75 minutes

Call participants:

John Fairbanks -- Chief Financial Officer

Don Young -- President and Chief Executive Officer

Eric Stine -- Craig-Hallum Capital Group

Unknown speaker

Jed Dorsheimer -- Canaccord Genuity -- Analyst

Doug Becker -- Northland Securities Inc. -- Analyst

Amit Dayal -- H.C. Wainwright -- Analyst

Jeffrey Campbell -- Alliance Global Partners -- Analyst

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