Mobix Labs, Inc. Call - MOBIX LABS INC

Good afternoon everyone and welcome to the MobX Lab investor update call. A Rare Earths investor presentation will be posted to the investor section of the MobX Labs website at the conclusion of today's call. At this time all participants are in listen-only mode. As a reminder this conference is being recorded and a replay will be available on the investor relations page of the Mobics website in a few days. With me today are Phil Sanson, Chief Executive Officer of Mobics Labs, and Paul Cingarella, Co-Founder and Chief Executive officer of Special Project Delivery. This call is being webcast live in the investor relations section of our website at mobicslabs.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 risk and uncertainties. Any statements regarding expectations, projections, or other characterizations of future events including financial outlooks market conditions product developments and the proposed acquisition of special project delivery by mobix labs and of winter 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. MOBICS Labs assumes no obligation to update any forward-looking statements, except as required by law. For a more detailed discussion of risk 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 13th, 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 24th announcement, we now expect revenue for fiscal fourth quarter 2026, which ended September 30th, to come in closer to the high end of our $1.4 to $1 million guidance range, well above the $1 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 Morbix Labs, has agreed to acquire, announced a definitive agreement to acquire Winter 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 six 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 Cingarella, CEO of SPD. Paul? Thank you, Phil. This summer, Mobics 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 Mobics, our public partner. We 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 that that vertical is nested into a broader set of verticals, each one directly focused on national security and the nation economic priorities. And here we are, less than two months later. happy to report on our early progress. Winter 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. Winter'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 Winter for three years, over which time we built a strategic partnership that progressed naturally through today's announcement that we will combine our businesses. The fit is hand in glove. Winter 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 multi-billion 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 us 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 earth 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. Winter is our first and our anchor critical minerals business. It won't be our last. Build Create 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. Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you may press star 11 again. stand by while we compile the Q&A roster. Our first question comes from the line of Mike Neuser of Roth Capital Partners. Your line is open, Mike. Well, thank you. 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 earths. Can you qualify, without violating any trade secrecy or such, how it's able to accomplish this? Sure, Mike. This is Paul Singarello. Great question. Very carefully. We've been at this for 10 years. We have been very successful at it. The $53 million that came to winter in six chunks over that decade demonstrate that DOE and DOD have been impressed with the progress that we've made. 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 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, you know, 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 a high confidence that we're going to meet the standard, you can sell that product into the concrete industry as an aggregate. It works pretty well there, too. Does that help, Mike? Yeah, it does. That's interesting because I think what you're describing is something like a solvent extraction process, which if you've already broken ground in Alabama, you've probably crossed the biggest hurdle, which is permitting. But one of the big problems with solvent extraction in China is 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 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 that I think you're hinting at. Yeah, 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 step? Great questions. No, you're absolutely right. We have WINR, I should say, and WINR is on the line, 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 WINR for three years now, and we feel very close with with these folks um yes the demonstration plant we broke ground uh last month it's fully funded it's a 25 million dollar plant you can't break ground on a plant like that without having all your permits in hand uh uh so uh we're we're well on our way uh these things don't Don't get built overnight, of course. We anticipate operations no later than Q1 2028. And if Todd Beers over at Winterwater, 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, measured twice, cut once. And congratulations to Winter, without a doubt. Just one more question, if I could squeeze one in. There are lots of different rare earths 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 is the winter 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, you know, relatively low concentrations. You know, 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 four or five 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, you know, the rare earth family is 17 chemicals on the periodic table, most of which no one has heard of unless they're 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 praseodymum, the two key, two of the four 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 are 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 percent 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 an underappreciated resource. It's got all kinds of goodies in it, and we're very focused on extracting maximum value out of it. Okay. Thank you very much. I'll go back on hold. Best of luck. Thank you, Mike. Thank so much. Thank you. Once again, to ask a question, please press Star 1-1 on your telephone. Our next question comes from the line of John Whitaker of Craig Harlem. Your line is open, John. Hey guys, congrats on the winner acquisition and great questions from the guy from La Jolla. That's a bunch of things 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. Sure, no, that's – I can appreciate your curiosity on that. You know, we have a very, very solid utility partner. I'm actually – please forgive me if I don't name names today, but we've been working – Winner has been working with this particular utility for a number of years, and they're I can tell you from participating in some of the DOE proceedings that, you know, these guys are really committed to this program they have. I can see the respect that they have for winter. And I can understand their interest because utilities all around the country literally have billions of dollars of contingent environmental liabilities on their books to deal with coal ash if it sits there in these impoundments as a waste. In contrast, this type of program where we can repurpose that material and turn it to beneficial reuse is such a sigh of relief for these utilities. So this has been a real sticky wicket for the utilities for decades. They're over there in the EPA world dealing with the regulators and the regulation of these coal ash impoundments, and they're already very deeply involved, a number of them, in the beneficial use into the aggregate, into concrete. What we're doing is taking that and adding another dimension to that, which makes it look even better to them. Great. That's helpful. With regard to the DOE and the DOD, is either one of those leaning in a little harder than the other right now? And then final question would be, you know, you mentioned your proven capabilities, you know, around mega projects. Is there any more detail you could share on that? Sure, absolutely. So, we have two favorite federal agencies. You mentioned them both. They have both, quite frankly, been fantastic. There's more to come. We've got grants pending in DC. And we're very fortunate. This is a winner in SPD combined. And of course, down the road, Mobix. We're very unfortunate because both of those agencies have been focused on this for a number of years. And they've committed what we like to refer to as non-dilutive capital. I can tell you that there's a lot of interest in doing a public-private partnership on the ultimate build. So we love them both. I would never want to pick one over the other. They're both instrumental. But they're both, of course, out of D.C. They're all over there. They offices around the country but dc is is washington dc is really driving this and uh todd and karen and their team at winter have built wonderful relationships with doe and dod over the years we're at 53 million we're on our way to what we hope will be hundreds of millions of dollars through those federal partnerships so we're really gearing up back in dc and And we recently brought on board a strategic governmental affairs partner to help us with that. Because, you know, one thing you need to do when you're back in D.C. is make sure that they know that that you guys are the real deal and we are the Real Deal. We're going to deliver here. Todd and Karen have built tremendous trust and confidence over the years with with both energy and defense. And we're just looking forward to continuing to work with both of them as we proceed. In terms of the mega project experience, you know, the SPD team, myself and others, over many years going back to when I was in the salt mines at Latham and Watkins, my goodness, I'll just give you a couple of examples. You know, this hydrometallurgy that you use, the technology that you used to extract the rare earths from, from ore or ash, it's kind of the flip side of that is advanced water purification, quite frankly. That's how winter started, you know, back in 2013. I've worked on the largest desalination plant in the Western Hemisphere, Carlsbad, California. That's one of my capstone projects. Worked on the project finance deal of the year for San Diego Gas and Electric, the Sunrise Power Link Transmission Corridor. I've worked on mines and sand and gravel and power plants. The joy of working at Latham was we always had the opportunity to work on, you know, what I refer to as these mega projects. So I've been doing that forever, and I even did it when I was an engineer before I went to law school. I worked on Boston Harbor and Tampa Bay. And then the rest of the team at SPD has similar experience. I would be glad to give you a list of our top projects. Very helpful. I appreciate it. and uh thanks for taking time to answer my questions congrats again thank you once again to ask a question please press star one one on your telephone again that's star one on one your telephone to ask a question Our next question comes from the line of Thomas Halei of TomWords. Thomas, your line is open. Thomas Haley, TomWord.com Can you hear me? Yes, sir. Please proceed. Yeah, as MobX deepens its role across defense platforms and expands into NDAA-compliant systems, what specific steps is the company taking to position itself for program of record participation, which is typically the gateway to larger multi-year DOD investment? Phil, you want to take a shot at that, or do you want me to jump in? Yeah, you can jump in on that one, Paul. Well, one of the key things we're doing is we are working on our profile and our visibility. There's no reason with the tech that MobX already has, both in radio frequency RF with its subsidiary and the filtering technology. We're in the Tomahawk program. um uh we're in other programs the f-16 there's no reason that we shouldn't be more visible and more present uh with the military and and and with the kind of money that's coming through the national defense authorization act uh you know shame on us if we're not doing that right So that's one of the reasons that we recently decided, you know what, this group Continental is going to help us with that back in D.C. They're actually there this week working on our projects. So we're very bullish on being able to take the existing programs that MobX has, couple them with the NSM aspects that we're talking about and the rare earth elements, and expand their TAM and their presence in DOD and other issues of national economic importance. Yeah, I think that was a great answer, Paul. And again, Mobix is already an approved vendor to many of the Tier 1 defense contractors, US-based as well as some overseas. So I think the combination of what we're doing now and the increased exposure with the DoD will expand our opportunities significantly. And we will take all the appropriate steps to, you know, to maximize that opportunity. Thanks for the question, Tom. Are there any more questions, operator? No further questions in queue at this time. Okay, this is Phil Sansone from Mobix. I'd just like to make a couple more comments before we wrap up. I think it's important to view this. These are two separate transactions, and it's important to distinguish between them. Mobix has entered into an agreement to acquire SPD, and SPD has separately entered into an agreementto acquire WINR. Each transaction has its own closing conditions and approval requirements. So with respect to the Mobix shareholders, any approval that's required in connection with the Mobix and SPD transaction or the issuance of any Mobix securities will be presented to our shareholders through the applicable proxy process. I think that's important to point that out. And again, as I mentioned at the beginning of the call, it's a very exciting time for Mobix. We view this move that we're making into Rare Earth and the first steps being SPD and Winner as very transformational, and it's exciting to look forward with the transactions that Mobix has announced to this point and with them hopefully closing successfully. I can envision at this time next year, Mobix could be looking at a $30 to $50 million revenue run rate as we stand here today and see what's in front of us. And then what's beyond that is very exciting as well but we'll comment on that at an appropriate time so I wanted to make those closing comments anything else from you Paul Phil that that's a great place to wind up right there I think great okay thanks for everyone participating and we really appreciate the attention that you've given us today thank you this concludes today's conference call thank you for participating you may now disconnect