Aspen Aerogels Inc Q4 FY2024 Earnings Call

Good morning. Thank you for attending the Aspen Aerogels, Inc. Q4 2024 Financial Results Call. All lines will be muted during the presentation portion of the call. I would now like to turn the conference over to your host, Neal Baranosky, Aspen's Senior Director, Head of Investor Relations and Corporate Strategy. Thank you. You may proceed, Mr. Baranosky.

Thank you, Ezra. Good morning, and thank you for joining us for the Aspen Aerogels fourth quarter 2024 financial results conference call. With us today are Don Young, President and CEO; and Ricardo Rodriguez, Chief Financial Officer and Treasurer. The press release announcing Aspen's financial results and business developments and the slide deck that will accompany our conversation today are available on the Investors section of Aspen's website. During this call, we will refer to non-GAAP financial measures, including adjusted EBITDA. The reconciliations between GAAP and non-GAAP measures are included in the back of the slide presentation and earnings release. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the disclaimer statements on Page 1 of the slide deck as the content of our call will be governed by this language. I'd also like to note that from time to time in connection with the vesting of restricted stock units and/or stock options issued under our long-term equity incentive program, we expect that our Section 16 officers will file Forms 4 to report the sale and/or withholding of shares in order to cover the payment of taxes and/or the exercise price of options. I also want to highlight a few of our near-term IR engagements. On Tuesday, February 25, management will be hosting virtual one-on-one investor meetings at the Oppenheimer 10th Annual Emerging Growth Conference. On Wednesday, February 26, management will be hosting virtual one-on-one investor meetings at the CG Sustainability Virtual Summit. And finally, on Monday, March 17, management will be hosting one-on-one meetings at the 37th Annual ROTH Conference in Dana Point, California. I'll now turn the call over to Don.

Thanks, Neal. Good morning, everyone. Thank you for joining us for our Q4 2024 earnings call. My comments will focus on the recent quarter and full year performance, the status and expected impact of several key elements of our strategy and our view of the current environment. Ricardo will dig deeper into our 2024 financial performance and our strategy and will provide a first look at our 2025 plan. We look forward to your questions. We operated well in Q4 and for the full year 2024. The execution of the plan was driven by the strength of our teams throughout the company. Revenue of $453 million, adjusted EBITDA of $90 million, and net income of $13 million were all milestones. We grew revenue by 90% in 2024, exceeded our long-term target of 35% gross margins, and increased adjusted EBITDA from negative $23 million in 2023 to positive $90 million. Our PyroThin Thermal Barriers revenue increased from $7 million in 2021 to $56 million in 2022 to $110 million in 2023 and to $307 million in 2024. At the last earnings call, we announced a new OEM award to supply PyroThin Thermal Barriers to Mercedes-Benz. And on this call, we are pleased to announce a PyroThin Thermal Barriers Design Award from Volvo Truck, our second in the Commercial Vehicle segment, highlighting the significant opportunities in this space. A major Korean Battery Manufacturer is supplying the cells to Volvo Truck, and we expect start of production during the second half of 2026 and for sales to ramp in 2027. This award was our third in 2024 and our eighth overall. Our Energy Industrial business also had an outstanding 2024 and a significant fourth quarter. A key achievement was the productive transition to our External Manufacturing Facility or EMF, and the better matching of our supply capabilities with a growing global demand for our Energy Industrial products. The year-long drive to qualify our full line of products and to produce them in a high-quality, efficient manner was a success with gross margins measurably exceeding our overall target of 35%. Our Energy Industrial revenue in Q4, most always the strongest quarter of any year, was $53 million with over $48 million produced by EMF and up from just over $3 million from EMF in the same quarter in 2023. As a point of reference, for the year 2024, we paid approximately 30% tariffs for Energy Industrial products delivered from EMF to the U.S. and generated gross margins exceeding 40%. Historically, approximately 40% of our overall Energy Industrial sales have been made in the U.S. In 2025, we are proactively addressing potential tariff risks through pricing strategies, sourcing optimization, and working closely with our EMF partner to lower product costs. In a world where tariffs are used to accomplish a wide range of national and international goals and can come and go over a relatively short period of time, we believe it is difficult and likely unwise for us to make reactive and substantial structural changes based on tariffs. Overall, we believe the Energy Industrial business is well-positioned for a policy approach in the United States that promotes an intensified focus on energy and power generation. The goal for the Energy Industrial team is to create shareholder value by consistently expanding the base load of revenue and profit for the company. Looking back on 2024, we executed successfully three key elements of our strategy. First, the conversion of the East Providence aerogel manufacturing plant to support the growth of the PyroThin Thermal Barriers business; second, the transition to our external manufacturing facility to support the growth of the Energy Industrial business; and third, the financial stewardship to reinforce the strength and flexibility of the company, in part by generating positive net income in 2024 and by finishing the year with over $220 million of cash on the balance sheet. We believe that our strategic execution in 2024 provides the resources and operating flexibility necessary to navigate any near-term challenges and deliver long-term profitable growth. Looking ahead to 2025, we’re taking decisive actions to navigate an evolving environment. Most notably, we've made the decision to cease construction of Plant II in Statesboro, Georgia, and will meet long-term thermal barrier demand by maximizing capacity at our East Providence manufacturing facility while utilizing a flexible supply strategy. Our strong working relationship with EMF, which has been vital to our Energy Industrial segment, provides additional options to support our manufacturing capacity as we scale our businesses. This approach allows us to create capacity in a modular fashion that can more closely anticipate the demand curve and to do so with minimal capital. Other actions we are taking include the reduction of fixed costs by at least $8 million per quarter, which returns us to a level on par with the 2023 run rate. When we shared our 2024 outlook a year ago, we thought we were being aggressive with revenue growth rate approaching 50% and with significant improvement in adjusted EBITDA. We had doubled revenue from 2021 to 2023, and there was plenty of uncertainty around EV adoption rates and the transition to EMF to serve our energy industrial business. As the year played out, our initial outlook proved conservative with beat and raises in each quarter culminating a full year revenue growth of 90% and a correspondingly high adjusted EBITDA result. As we enter 2025, there are of course, even more variables at play, and we feel it is prudent to provide an outlook for Q1 alone, at least until the macro environment settles and the rules of the game become clearer. Our lead EV customer, GM, had a robust 2024, and our numbers reflected that level of activity. GM has set 300,000 vehicles as its target for 2025 and reiterated that number again this week. While our Q1 outlook does not reflect that pace, we are prepared to meet it as General Motors' sole source thermal barrier supplier. With a strong foundation in place, we are confident in our ability to adapt, innovate and capture significant opportunities in 2025. Our focus remains on delivering both critical solutions to our customers and sustained value to our shareholders.

Thank you, Don, and good morning, everyone. I'm pleased to announce another record-breaking quarter on behalf of our team, starting on Slide 3. We achieved $123.1 million in revenue for Q4, reflecting a 46% year-over-year growth. This brings our annual revenue run rate to over $490 million. Our Q4 revenues surpassing our total annual revenues from 2021 highlights our team's ability to scale efficiently. Our annual revenues reached $452.7 million, marking a 90% year-over-year increase and slightly exceeding our earlier expectation of $450 million for the year. Our Energy Industrial revenue set a new quarterly record at $53.1 million, a 70% year-over-year increase, almost doubling our supply-constrained revenues from Q3. Most of this segment's product was sourced from our external manufacturing facility. Total 2024 revenues of $145.9 million indicate a 13% year-over-year increase, establishing another record that exceeded our guidance of $135 million for this segment in 2024. EV thermal barrier revenue of $70 million rose by 32% year-over-year but declined by 23% quarter-over-quarter, underscoring that produced parts take several weeks to flow through our customers' value chains into finished vehicles. A significant portion of the parts used in Q4 vehicle production was actually produced in Q3, which had about 10 fewer production days due to various holidays. As vehicle inventory reached our customers' target levels, we began seeing OEMs adjust production schedules downward following the U.S. presidential election, even with increased vehicle sales at the end of the quarter. We will provide more details on this later. Nonetheless, revenues of $306.8 million in EV thermal barrier represent a 179% year-over-year increase and significantly surpassed our initial expectations for this segment in 2024. In Q4, our gross profit margins at the company level were 38%, resulting in a gross profit of $47.1 million, which is a 59% improvement over the same quarter last year. Our total gross profit for the year reached $182.9 million, reflecting a 40% gross margin and three times the gross profit from last year, demonstrating our business's scalability. Both segments contributed to this success, with our Energy Industrial business achieving gross margins of 39% in Q4 and 40% for the year. Our EV thermal barrier business maintained gross margins of 41% for the year and 38% in Q4, impacted by lower part volume during the quarter yet still above our segment target of 35%. Our adjusted EBITDA for Q4 was $22.7 million compared to $9.1 million in the same period last year. For the year, adjusted EBITDA amounted to $89.9 million, which is $112.8 million higher than the $22.9 million adjusted EBITDA loss in 2023 and aligns closely with our previous expectation of $90 million for 2024. Adjusted EBITDA is defined as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation expenses, and other non-core operating performance items. In Q4, adjustments included $2.5 million for stock-based compensation, $5.4 million for depreciation, $3.5 million in net interest expenses, and $200,000 in net income tax expenses. Our Q4 net income was $11.4 million, or $0.14 per diluted share, based on 82.99 million shares, contributing to an annual net income of $13.4 million, or $0.17 per share on 80.3 million shares. Now, let’s discuss cash flow and our balance sheet. We generated positive free cash flow of $20.9 million in Q4 by releasing $14.6 million of working capital while funding CapEx of only $14.8 million. Of this CapEx, $7.4 million supported Plant II in Statesboro, Georgia, while the remainder funded projects at our aerogel plant in Rhode Island and additional assembly equipment for new OEM programs in our EV thermal barrier assembly facility in Mexico. Our net financing activities during the quarter totaled $86.5 million, encompassing the details of our $93.2 million equity offering on October 21, 2024, and a $6.5 million repayment of our term loan. We concluded the quarter with $220.9 million in cash and shareholders' equity of $614.7 million. With positive free cash flow and a lower CapEx forecast, we aim to strategically use our cash to optimize our capital structure as we navigate through 2025. Now let’s move to Slide 4, where I’ll outline the main differences between what drove our business in 2024 and what we are considering for our planning in 2025. We are fortunate to be capitalizing on our aerogel technologies and products in two complementary and largely uncorrelated markets. Our Energy Industrial and EV thermal barrier business segments are both performing well, delivering gross margins exceeding 35% and showing growth. Our Energy Industrial Insulation business is no longer supply constrained in 2025. The subsea, refining, LNG, and power generation markets are favoring investment and asset efficiency. Depending on our product mix, we anticipate delivering between $150 million and $200 million of product annually while sustaining an annual growth rate in the teens, comparable to our 13% growth rate in 2024. The demand outlook for 2025 is as positive as it was in 2024, and we have the flexibility to grow. Our EV thermal barrier business continues to develop as the preferred cell-to-cell product for OEMs deploying next-generation EVs or making substantial mid-cycle enhancements. We are consistently adding to our growing list of OEM awards in a market where EV investments are adjusting as demand expectations in North America and Europe shift. In the long run, we believe that as we develop our business from a low base, we will outpace the overall growth of the EV market by serving the right customers. In 2024, we benefited from scaling a new product in the automotive sector and the necessary vehicle inventory build-up. By supporting several new vehicle launches, we met demand for parts used by automakers to refine their manufacturing processes and improve yields, as well as parts for an initial inventory of finished vehicles. This additional demand for 70 to 100 days of finished vehicles was significant and drove much of the exceptional demand we met in 2024 that exceeded our initial forecasts. The $7,500 EV credit in the U.S., combined with the looming threat of stricter emissions and fuel economy regulations, also motivated OEMs to ramp up production in 2024. As we move into 2025, these demand boosts are less pronounced due to the number of vehicle launches and the fact that OEMs have already established inventory banks of several weeks of finished vehicles. We are also fully aware of the impact that persistently high interest rates and the potential reduction of EV incentives could have on new vehicle and EV sales. We also question the motivation of OEMs to produce a high volume of EVs in an environment with potentially less stringent emissions and fuel economy regulations. That said, to determine an appropriate revenue level for our EV thermal barrier business in 2025, we consider its revenue of $110 million in 2023 and our original expectations of $200 million in 2024, compared to the more than $100 million that it actually delivered in 2024 at $306.8 million. Mapping the trajectory to 2025 from 2023 or comparing initial 2024 expectations to 2024 actuals seems to be the best approach, given the demand dynamics and the anticipation that we won’t see significant volume contributions from European OEMs reflected in our earnings until late 2025 and the first half of 2026. It is likely that these new programs may drive significant demand in 2026, similar to what we experienced with the Ultium launches in 2024. Transitioning to Slide 5. As we did in early 2023, we recognized that EV expectations were ahead of any potential reality and adjusted our capital investments while expediting our path to profitability. Entering 2025, we are approaching the year cautiously by taking three proactive steps. First, we are halting construction of Plant II. We will meet long-term demand by optimizing capacity at our aerogel facility in Rhode Island and supplementing with the external manufacturing model that proved effective for our Energy Industrial products in 2024. This approach alleviates the need to take on an additional $671 million of debt while still fulfilling anticipated demand. Second, we aim to enhance our profitability by reducing our fixed cost base by over $35 million annually through a reduction in various positions and outside spending. Third, we bolstered our balance sheet last fall, holding $228 million in cash at the end of January, which fully funds our plans and allows us to evaluate various growth opportunities, optimize our capital structure, and potentially return capital to shareholders. Additionally, we have $57 million in unused capacity on our revolver, bringing our total available liquidity to $285 million. With these actions completed, we believe we are uniquely positioned to safeguard our profit and cash generation potential across a range of demand scenarios. Providing annual guidance isn’t prudent; instead, we will navigate this year quarter by quarter, offering our best estimates of potential outcomes. When our visibility improves, we will revert to providing a baseline expectation for the year. Now, turning to Slide 6 to focus on Q1 of 2025. We anticipate total revenues between $75 million and $95 million in the first quarter. The revenue breakdown is expected to be $35 million to $40 million from our Energy Industrial segment, with the remainder from our EV thermal barrier segment. Within this range, we expect to achieve breakeven EBITDA to $15 million of EBITDA or a net loss of $15 million to breakeven on a net income basis, translating to an earnings per share loss of $0.19 to being approximately breakeven. While we assess and minimize the costs associated with demobilizing Plant II in Georgia, we do not expect to invest more than $7 million in CapEx for our operations in Rhode Island and Mexico during the quarter. Annual CapEx, excluding Plant II demobilization costs, will be managed to remain below $25 million. We recognize that this is a significant reset compared to recent levels in the last three quarters. Q1 will represent a necessary hurdle and a potential low point in the development of our EV thermal barrier business. We experienced a similar situation in Q1 of 2023, and as OEM vehicle sales begin to align with production of our successful nameplate launches, there is potential for upside in the remainder of the year. Let me clarify: we are discussing finished vehicle inventories at General Motors, where we are the sole source supplier, not the PyroThin inventories in the value chain, which we can fully monitor. GM had a strong production surge in 2024 and is aiming for over 300,000 vehicles in 2025, including the Honda and Acura nameplates. Our guidance for Q1 reflects what we believe is a temporary drop in production to lower finished vehicle inventory levels. With an annualized U.S. sales rate of over 270,000 vehicles in Q4 last year and a market share of 19%, it is reasonable to expect GM to ramp up production after Q1 to meet its targets and introduce three additional nameplates. Looking further into 2026 and beyond, new programs will continue to strengthen and diversify our revenue base within this segment. For example, we estimate that the Volvo award mentioned by Don will add at least $45 million in revenue annually once launched. The trends from the past five quarters displayed on the right side of the slide show that our team has recent experience accelerating the company’s path to profitability while controlling spending to generate cash. Thanks to our timely and decisive actions, we are enthusiastic about continuing to replicate this approach at a scale that is no longer limited by capacity constraints, and we remain highly motivated to keep executing.

Thank you, Ricardo. Before we move to Q&A, I'd like to comment that while we may have an unsettled near-term environment, we believe that electrification through this decade will be a major driver for both our Thermal Barrier and Energy Industrial businesses. Our customers in these two businesses have vital safety, cost, and performance goals, and our products, both current and future, provide critical solutions to them. Going forward, we are confident that electric vehicles will be the choice of a growing number of car buyers and that energy and power generation will be important macroeconomic drivers, and we have an important role to play in both. We continue to invest in our strategy to leverage our aerogel technology platform into large dynamic markets. Our operational and financial performance in 2024 exceeded all expectations, and we believe we will continue to perform at a high level in the years to come. We are focused on profitable growth and believe that we are positioned to thrive and win. Ezra, let's turn to Q&A, please.

Our first question comes from George Gianarikas with Canaccord Genuity. George, your line is open. Please go ahead.

So maybe given the change in business strategy, can you just help us sort of quantify and think about what the long-term financial profile/business model looks like? What sort of EBITDA margin can we expect? What sort of revenue capacity? What sort of free cash flow margin do you think the enterprise is capable of producing over time? Thank you.

Thanks, George. Yes, I mean, the margin targets remain unchanged. We want to do everything at 35% plus gross margins and to gear the company to deliver over 20% EBITDA margins. The supply strategy does not change that. And in fact, as you've seen in the energy business, we picked up a couple of points of margin thanks to working with our external manufacturing supply. And so when we look at that for the EV thermal barrier business versus deploying an incremental $671 million of capital, it really is a no-brainer, right? We can more modularly build up the supply source for that. We would not have gotten awards last year and this year if customers were not okay with that. And everything that we've discussed previously about our revenue potential and the pipeline remains the same. It is just that rather than supplying it now with one very large capacity original project, which is what Plant II was, we are going to incrementally build the capacity beforehand. Don and the team were actually in China here a couple of weeks ago looking at that capacity get built up. And it's just really encouraging to see how that will be there ready to supply all of this additional demand that we expect in as early as 2026 without requiring additional capital from us.

Thank you. Maybe as a follow-up, so is China the jurisdiction in which you'll be building additional capacity for PyroThin? Or are you exploring other geographies and how much?

Initially, yes.

Are the margin targets you mentioned inclusive of any tariffs from China?

That's correct.

Thank you very much. Our next question comes from Colin Rusch with Oppenheimer. Colin, your line is now open. Please go ahead.

Thanks so much guys. With the lower fixed costs, can you just walk us through timing on how we should start thinking about that savings being realized? And what the nature of it is? Is that related to some of the scrap getting reduced in the manufacturing process? Or is there a process change that we should be thinking about in terms of the production? Or is it really just related to migrating some of the production into the contract manufacturing?

The cost reductions that Don and I discussed, approximately $8 million per quarter and $35 million overall, are primarily related to structural costs. We have already reduced several positions within the company in the first half of this quarter, focusing on overhead in operations, OpEx spending, and external expenditures. There are about $3 million in restructuring charges expected to affect us in Q1, which are included in our guidance. Starting from Q2, we will begin to see these $8 million in savings from the fixed cost base, rather than from material costs in other areas of the profit and loss statement. Essentially, we are working to restore the company’s fixed cost structure back to the levels of Q4 2023. As we anticipate improvements in gross margin in the second half of this year, or possibly in Q2, we expect to gain several benefits. Our primary aim with these measures is to ensure the company can maintain profitability and generate cash flow.

That's super helpful. And then from a customer perspective, you guys have been out working with customers for a number of years now. I'm curious about not just with the pricing dynamic, but just in terms of the product development and integration into new vehicles, are you seeing any sort of acceleration in the sales cycle? Any slowdown? And any commentary around kind of previous expectations for ramp with some of the European OEMs and timing of those production schedules would be helpful.

Yes. We see an acceleration in adoption interest but a deceleration when it comes to ultimately the OEMs making the sourcing decision and launching these nameplates, right? With the Europeans, I think we all know what's going on at Northvolt. It's worth highlighting that our award with Audi and Scania was originally intended to be supplied with Northvolt cells. We're actually in the middle of validating the Plan B cell source for those programs. And just reiterating what I mentioned in my remarks, we do expect those guys to launch here towards the end of this year and in the first half of next year.

Great. Thanks so much guys.

Thank you. Our next question is from Eric Stine with Craig-Hallum. Eric, your line is now open. Please go ahead.

So should we take it from your commentary, is it fair to say that you think that the GM inventory is something that largely normalizes in Q1? And then Ricardo in the remarks, you talked about looking at the progression from '23 to your original '24 outlook as a way to think about '25. Could you just be a little more specific? Are you saying take the original outlook you had for '24 and kind of take that progression and grow it from there? Just looking for some directional outlook, and I realize there are a lot of uncertainty. There's a lot of headwinds here, at least in the near term, but that would be helpful.

Yes, we view the situation this way: regardless of General Motors' production targets and the number of vehicles they plan to wholesale this year, we estimate approximately 83,000 units were sitting in inventory at the end of the year. We are dealing with reality here. The production schedule we receive is typically accurate for about 40 weeks in advance, and we have started to observe a decline in December and January. This trend helps explain the current inventory levels. When determining the appropriate expectations for the year, I suggest considering our original expectations from last year, which were around $200 million, essentially doubling our levels for 2023. This serves as a better starting point for estimating 2025 rather than using the $100 million outperformance on top of the $200 million we anticipated last year. I believe the number could still exceed last year's performance if General Motors reaches the 300,000 unit mark. However, given the demand for parts and the existing inventory of vehicles, we do not anticipate significant progress in Q1. In Q2, we are likely to see an increase. However, considering the current environment and the $7,500 credit, the strong incentives that encouraged OEMs to produce and clear out EVs and offer attractive leases are not as robust heading into 2025. If GM achieves 300,000 vehicles or more, including Honda and Acura models, we will be pleased as it would indicate a better year than last. Unfortunately, that is not the trend we are observing in Q1.

Got it. So to clarify, jumping off point, you’re just saying $200 million is a fair place to start and then make your judgment about how the remainder of the year plays out.

Correct. I mean, we doubled '23 to 2024, right? Then we almost doubled that again, right? And I think the growth rate for '25 could be somewhere in between where we would have ended up in 2024 with our original expectations and doubling, right?

Thank you. Our next question is from Chip Moore with ROTH. Chip, your line is now open. Please go ahead.

Good morning. Thanks for taking the question. I want to ask on Statesboro the capital you've deployed there, can you use some of the assets? How much capital is stranded and some of the equipment on the ground? What are your plans there?

Some of it, we are moving to Rhode Island to increase the throughput of that facility, particularly some post-processing equipment. And then the rest, as we mentioned in the press release and in our remarks, I do think there's a lot of value there, and we'll work to capitalize on it, and there is a potential to send some of the equipment to the external manufacturing facility as well, which we'll be evaluating. But that's all happening now as we speak.

Got it, Ricardo. And for the sort of modular strategy and adding capacity as you need it, is there a thought on how quickly you can do that and stage that? Obviously, I would assume it was faster with external partners, but how do you think about that sort of staging?

Yes. I mean, again, going back to what we covered with George, in essence, I mean we had to find a supply source for 2026. If you recall, Plant II would not have been available until 2027. And so the facility that would supply this is being built right now as we speak. Don and the team were there in January. And the speed with which things get done there is really incredible. So the goal is to have this facility online, ready to supply in 2026.

Got it. And if I could sneak one last one in, back to capital and maybe getting some more from Statesboro. You mentioned organic and inorganic potential uses of capital. Just expand on that and then even return of capital, buyback or what are you thinking about there? Thanks.

Yes. I mean, I think we obviously want to see how the rest of the year plays out, and even though we're playing it safe here in Q1, there is no denying the fact that we’re sitting on $220 million of cash, right? And so we have several R&D efforts that we could leverage. If you take this strategy of mission-critical materials that solve key problems where you can generate 35% gross margins, we do see several opportunities in that space. And I do think that as we work our way through the year, we’re going to figure out what the right amount of cash on the balance sheet is. And to whatever extent there’s some excess cash, we obviously need to see where the equity is. I think at that point, we could go out and reduce the share count.

Thank you very much. Our next question is from Jeff Osborne with TD Cowen. Jeff, your line is now open. Please go ahead.

Thank you. Maybe just following up on a couple of other questions before. As it relates to the annualized capacity with moving the Georgia equipment to Rhode Island and also the EMF expansion that Don saw in China, can you just give us an update on what that annualized capacity will be in '26? And then adjacent to that or in relationship to that question, what is the process for qualifying Chinese-made PyroThin product with GM and others? Is that a requalification, rebidding, repricing process? Or do they not care where it's made?

They don't care where it's made. It's basically another PPAP for recertifying, and we're looking at adding that capacity in increments of $150 million to $200 million of supply per year.

And what will Rhode Island be with the equipment movement?

Rhode Island could be closer to $600 million.

And then China is $200 million today and adding $150 million to $200 million more?

Correct. And then with literally no limit to that, right? So we could replicate that several times over within China or even outside of China.

Thank you very much. Our next question comes from David Anderson with Barclays. We're going to have to go through to the next question with Ryan Pfingst with B. Riley. Please go ahead.

Yeah, hi guys. Thanks for taking my question. For the Volvo commercial trucks program, could you give us an idea of CPV there? And just broadly, and you touched on it earlier, but do you see additional wins coming here in the near term? Or are OEMs maybe taking a wait-and-see approach as policy changes take hold?

Yes, regarding the CPV, it's similar to our other commercial vehicle truck program. For instance, with a 70 to 90-kilowatt-hour prismatic battery, we would have around $300 of content. Some of these batteries reach sizes above 350 and 300 kilowatt-hours, indicating that the CPV opportunity is significant, even without diving deeply into specifics. On the broader landscape, China has already reached a 50% EV penetration, while North America and Europe are still hovering around 10% to 15%. It raises questions about our progress. Although there's considerable noise and uncertainty about the U.S. regulatory environment, it appears to be a lower priority compared to various other initiatives the new administration is pursuing. Time will reveal the outcome. OEMs seem to be maintaining their course, setting targets with the caveat that they depend on the regulatory landscape remaining stable. This cautious approach is sensible given the lengthy nature of regulatory changes. The previous administration barely made progress on modifying the CAFE standards during their term, highlighting the time it can take. Rapid pivots can be costly for companies and potentially lead to substantial capital losses. In Europe, the requirements show no signs of easing. With global OEMs, our European customers are also maintaining their course and still aiming for a certain mix of EVs. Four years in a 20-year electrification transition is relatively short. While some OEMs are proceeding cautiously in their capital deployment, the overall new vehicle market appears under pressure as Western OEMs face challenges in China, affecting their CapEx budgets. This is likely causing delays in launching new vehicles, introducing new nameplates, and sourcing new technologies, including ours. As we approach 2025, we are proceeding with caution, but we anticipated these developments back in early 2023 when we adjusted the timing for Plant II.

Got it. Appreciate the color.

Thank you very much. We currently have no more questions. That marks the end of our Q&A session. I will now hand back over to Don for any closing remarks.

Thank you, Ezra. We appreciate your interest, as always, in Aspen Aerogels and look forward to reporting to you our first quarter results in early May. Be well. Have a good day. Thank you.

Thank you very much, Don, and thank you, Neal, and Ricardo for being our speakers today. Thank you, everyone, for joining. We appreciate your participation. You may now disconnect your lines.