ASPN shares are rallying today on their earnings announcement, along with announcing some improved numbers from their much-hyped PyroThin barrier for the EV battery market. They continue to feel confident in this growth by also announcing a new Georgia facility that will support up to $1.35B of PyroThin revenues annually.
At the end of Q3 the company said PyroThin thermal barrier revenues “exceeded $1.0M year-to-date” while at the end of Q4 they “generated $6.7M of PyroThin thermal barrier revenue in 2021 from 10 customers.” That would mean Q4 revenues of PyroThin came in somewhere around $5.7M at best.
With overall revenues in Q4 at $31.5M, that translates into $25.8M of revenues for their “base” business, which is up from the $23.0M in Q4 2020 but down pretty sharply from the $29.4M in Q3 2021 or the $31.7M in Q2 or even the $28.1M in Q1. But never fear, we are assured that COVID-related production constraints pushed $6M to $8M of revenues into Q1, even though inventories managed a $2.3M rise.
Any clues about the margin profile for this amazing new line of business? Prior to this big bump in PyroThin revenues, gross margins through the first 9 months of the year were around 13%. Q4? Negative 5%. If you assume their “base” business of $25.8M did around 13%, that translates to $3.35M in gross profit. To hit a negative $1.666M gross margin, that would mean their $5.7M in PyroThin revenues lost around $5.0M for a negative gross margin close to 90%. But once again never fear, they are still projecting to hit $720M of revenues by 2025 with gross margins in the 35% range. I suppose that’s one way to break into a new line of business.
Profitability, likewise, continues to take a hit. After losing 22 cents a share in Q1, that expanded to 23 cents in Q2 and then 24 cents in Q3 before blowing it wide open with a 50 cent loss in Q4 for a loss of $1.22 during 2021. Apparently making their PyroThin termal barriers is not a very profitable business as of yet.
Unfortunately, that doesn’t appear ready to improve. Guidance for the year places net losses between $66.7M and $70.7M, almost double the $37.1M rate of 2021. This is all apparently due to their “investment” in additional manufacturing and their new facility. So those $30M in extra losses must translate into a pretty large bump in sales at least, right?
Revenue guidance for the year is expected to be between $145M-$155M, which would be nicely higher than the $121.6M they printed in 2021, but every dollar of revenue increase appears to be leading to a matching dollar of net losses for the year. PyroThin revenues are expected to be around $20M for the year, a $13.3M increase over 2021. If it is true that $6M-$8M worth of revenues were pushed into Q1, then these 2 items pretty much explain the most of the increase in guidance.
Finally, to start this new production facility in Georgia, they announced an additional $50M investment from the Koch brothers along with a $100M convertible note offering. Those are merely down payments on the $700M that they plan to invest in this new facility, which all but guarantees mounting losses for years and years to come. All for a contract that the OEM can walk away from at any time.
“While the OEM has agreed to purchase its requirement for Barriers from the Company for locations to be designated from time to time by the OEM, it has no obligation to purchase any minimum quantity of Barriers under the Contracts.”