Mobix Labs, Inc. (MOBX) Earnings Call Transcript

Good afternoon, everyone, and welcome to the Mobix Labs Investor Update Call. A rare earth investor presentation will be posted to the Investors section of the Mobix Labs website at the conclusion of today's call. As a reminder, this conference is being recorded, and a replay will be available on the Investor Relations page of the Mobix website in a few days. With me today are Phil Sansone, Chief Executive Officer of Mobix Labs; and Paul Singarella, Co-Founder and Chief Executive Officer of Special Project Delivery, Inc. This call is being webcast live in the Investor Relations section of our website at mobixlabs.com. Before we begin, I'd like to remind everyone of our safe harbor policy. This call and webcast contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 which are subject to risks and uncertainties. Any statements regarding expectations, projections or other characterizations of future events, including financial outlook, market conditions, product developments and the proposed acquisition of Special Project Delivery by Mobix Labs and of Winner Water Services by Special Project Delivery are forward-looking statements. These include statements about the expected timing, completion and benefits of those transactions, which remain subject to stockholder approvals, the effectiveness of a registration statement and other closing conditions. Actual results may differ materially from those expressed due to various factors, including those outlined in our SEC filings. Mobix Labs assumes no obligation to update any forward-looking statements, except as required by law. For a more detailed discussion of risks and uncertainties, please refer to our SEC filings, including our most recent annual report on Form 10-K, our quarterly report on Form 10-Q for the quarter ended June 30, 2026, and the Risk Factors section of our Form S-1 filed on July 9, 2026. I will now turn the call over to CEO, Phil Sansone.

Good afternoon. I'm Phil Sansone, CEO of Mobix Labs. Thank you for joining today's investor update call. This is an exciting time for the company. Our existing business continues to improve, and at the same time, we are expanding into the rare earth and critical minerals market. As we've communicated previously, our vision is to transform the company into NSM Labs under our National Security Matters initiative. When we last spoke on August 13, announcing our definitive agreement to acquire Special Project Delivery or SPD, we laid out our strategy. National security starts with critical minerals, and we will build this company by acquiring proven capability rather than starting from scratch. Before we get to the reason for today's call, I'd like to share a quick update on the Mobix business. Following our September 24 announcement, we now expect revenue for fiscal fourth quarter 2026, which ended September 30, to come in closer to the high end of our $1.4 million to $1.8 million guidance range, well above the $1.6 million midpoint. That would represent more than 100% growth quarter-over-quarter, along with substantially higher gross margins. The growth is coming from both sides of our business with higher wireless system shipments and continued strong military demand, and we expect that growth to continue in fiscal first quarter 2027. Now the reason we're here today. On Monday, SPD, the company Mobix Labs has agreed to acquire, announced a definitive agreement to acquire Winner Water Services. Winner is a revenue-generating U.S. rare earth company based in Sharon, Pennsylvania. It recovers rare earth elements, scandium and alumina from coal ash, material that's already above ground, so there's no new mine to permit. Over the past 10 years, Winner has earned 6 consecutive awards from the Department of Energy and the Department of Defense, totaling $53 million. And in August, Winner broke ground on its rare earth extraction demonstration plant at the National Carbon Capture Center in Wilsonville, Alabama. Winner will be the first operating company to join our National Security Matters platform, and it's exactly what our NSM mandate calls for, proven capability that strengthens America's domestic supply of critical minerals. To tell you more, I will turn it over to Paul Singarella, CEO of SPD. Paul?

Thank you, Phil. This summer, Mobix and SPD launched the National Security Matters initiative. We are now pleased to give you more color and detail on how that initiative is taking shape and how it is transforming Mobix our public partner. We are still in the early stages, and there is a great deal of work ahead. We told you we were building a company capable of helping to onshore the nation's critical minerals and rare earth supply chains. We told you that, that vertical is nested into a broader set of verticals. each one directly focused on national security and the nation's economic priorities. And here we are, less than 2 months later, very happy to report on our early progress. Winner Water Services has been developing its rare earth recovery program from the ground up for the past decade and is now building its fully funded $25 million demonstration plant, as Phil said, in Alabama. Winner's success along the way has been validated by repeat funding awards from the United States Department of Energy and the United States Department of Defense. SPD has known Winner for 3 years, over which time we've built a strategic partnership that progressed naturally to today's announcement that we will combine our businesses. The fit is hand in glove. Winner brings deep and proven technology, chemical engineering and operating expertise. SPD for its part, brings project execution and finance expertise at scale. This combination is exactly what is needed to achieve commercial success for a multibillion-dollar plant, which is exactly what it will take to produce rare earths at the scale needed to break the nation's foreign dependency. We are different from the pack in important ways. There are very few U.S. companies that have a decade-long history in rare earth recovery. There are very few U.S. companies that combine that with the mega project success that the SPD team brings to the table. There are very few U.S. companies that have made the cut in the rare earth space over and again with DOE and DoD. And there are very few U.S. companies that have what we have a focus on extracting the rare earths from coal ash, which is a virtually limitless supply of feedstock that does not involve the complexities and delays of opening a new mine. So to say the least, we are bullish on what we are building. And we believe that further combining with our public partner, Mobix which already has an established presence in national defense and security tech gives us access to the public capital markets, which together with federal and partner capital is how projects of this scale get built. Winner is our first and our anchor critical minerals business. It won't be our last. Build great teams, acquire critical capabilities, execute with discipline, create lasting value for our shareholders. That's the road we are on. With that, operator, let's open it up for questions.

[Operator Instructions] Our first question comes from the line of Mike Niehuser of ROTH Capital Partners.

Congratulations on your ongoing success with your plan. A couple of quick questions, if I could. Fly ash and coal waste are notoriously difficult to get to separate rare earth. How is -- can you qualify without violating any trade secrecy or such, how it's able to accomplish this?

Sure, Mike. This is Paul Singarella. Great question. Very carefully. We've been at this for 10 years. We've been very successful at it. The $53 million that came to Winner in 6 chunks over that decade demonstrate that DOE and DoD have been impressed with the progress that we've made. It's -- on a technical basis, Mike, it's a multistage treatment train. You're absolutely right that it's not an easy thing to do. But one thing to make clear is that when you combust coal, you end up concentrating the rare earth concentrations over what's in the actual coal ore to begin with. So that's your starting place. You've taken you've taken the carbon content largely out of it. And then it's a number of steps to actually get all the way to metallization, which we are not doing at this point. It's literally hundreds of steps. We're focused on key steps being an acid leaching of the ash, solvent extraction steps, oxalate precipitation, calcining to the high-purity concentrate. What we're producing is a mixed rare earth oxide. We have plans at our demonstration plant to go further and break that down into the heavies and the lights and also into a scandium product. And then, Mike, to your point, you end up with a lot of stuff that isn't actually the rare earth oxide because of those somewhat low concentrations. So the byproducts are important, too. Once you've gotten the rare earths out, then you've got a material that if it fits the standard, and we have high confidence that we're going to meet the standard, you can sell that product into the concrete industry as an aggregate works pretty well there, too. Does that help, Mike?

Yes, it does. That's interesting because I think this -- what you're describing is something like a solvent extraction process, which if you've already broken ground in Alabama, you probably crossed the biggest hurdle, which is permitting. But one of the big problems with solvent extraction in China is the being able to find a safe place for the tailings. So it sounds like you're able to turn that into something that's inert and even a product that you could unload without having to go to any extreme environmental costs and other expenses. Is that true? Or is that close?

That's exactly right, Mike. In contrast to a typical mining operation, which we are not doing, you end up with massive piles of tailings that, quite frankly, we have all over the Western United States. And then what do you do with that? Well, a lot of those sites turn into regulated sites. That's not what we have. What we're doing is taking a byproduct of 100 years of burning coal at coal-fired power plants and repurposing that material and making a beneficial reuse of it. So you take it out of the waste bucket, which is how the utilities have to deal with it, and you bring it into the chemical and engineering rare earth side of the coin. And what you're doing is you're taking what's been lying around in these coal ash impoundments for decades and you're putting it to use and you're turning out useful products of that and you're avoiding the types of environmental liabilities I think you're hinting at.

Yes. So this is a -- this has been permitted for the demonstration facility. So in my mind, you've already crossed the biggest permitting hurdle is just getting off the starting line. So I'm assuming that's correct, one question. And the other is where do you go from the demonstration facility? What's the next?

Great questions. No, you're absolutely right. We have Winner, I should say. And winner is on the line, and of course, they know that I'm already in the habit of saying we, and that reflects the fact that SPD, my partner, John Dewey and I and the SPD team, we've been working with Winner for 3 years now, and we feel very close with these folks. Yes, the demonstration plant, we broke ground last month. It's fully funded. It's a $25 million plant. You can't break ground on a plant like that without having all your permits in hand. So we're well on our way. These things don't get built overnight, of course. we anticipate operations no later than Q1 2028. And if Todd Beers over at Winner Water, if he keeps up the pace that he's on, maybe we'll see that grand opening and that ribbon cutting even sooner. We'll keep you posted on that, Mike. Love to see you there.

Well, measure twice cut once. And congratulations to Winner without a doubt. Just one more question, if I could squeeze one in. There are lots of different rare earth and critical elements in coal waste. Do you have your eyes on others that might be economic? Some of these can be just trace levels, but are you going to be -- is the Winner technology or process robust enough that you'd be able to extract other things? And would you care to share what might be top of mind if there are any?

Sure. And it's a great point. I mean, the magic of this, if you will, of course, there's nothing really magic about it. But if you look at our pie charts, you can see that we're starting with the feedstock, the coal ash, we're starting with relatively low concentrations. You can barely see that on the pie chart. But as we go through the various steps, that slice of the pie increases along the way until after 4 or 5 major steps, you're well over 90% of that pie being the rare earth elements. What was your other question, Mike?

Just could you name some of those other elements that might be of interest?

Sure. Well, the rare earth family is 17 chemicals on the periodic table, most of which no one has heard of, unless they are a real chemistry nerd. I happen to be a former chemistry major. I've been making molecules since before, I'd like to admit. We're going to have a heavy fraction that will include the neodymium and the praseodymium, the key -- 2 of the 4 key ingredients, rare earths that go into the so-called permanent magnets. We're going to have a lighter fraction. Scandium is considered to be part of the rare earth family. We're very focused on that as well. But overall, we're building a platform that is very ambitious in terms of what chemicals we're looking at. We're also looking at germanium and gallium. We're looking at what we can do with the aluminum, which is not a rare earth element itself, but it can be very valuable. The coal ash actually has on the order of 15% to 20% aluminum in it. That's not something that's commonly known. So it's a great point, Mike, because the fact of the matter is this coal ash, we consider it a very valuable resource and underappreciated resource. It's got all kinds of goodies in it, and we're very focused on extracting maximum value out of it.

[Operator Instructions] Our next question comes from the line of John Whitaker of Craig-Hallum.

Congrats on the Winner acquisition and great questions from the guy from [ ROTH ]. I was going to ask. A couple of things on the follow is I'd love to know more about your feedstock partners and if you've identified your preferred initial partner for feedstock. And then I'll probably have a couple on the back of that.