Mobix Labs, Inc. (NASDAQ:MOBX) Q4 2024 Earnings Call Transcript

Mobix Labs, Inc. (NASDAQ:MOBX) Q4 2024 Earnings Call Transcript December 19, 2024

Operator: Good afternoon. Thank you for standing by. And welcome to Mobix Labs Inc. Fiscal Fourth Quarter and 2024 Financial Results Conference Call. Please be advised today’s conference is being recorded and a replay will be available on Mobix’s Investor Relations website. I would now like to turn the conference over to Lori Barker, Investor Relations. Please go ahead.

Lori Barker: Thank you. Good afternoon, everyone. I’m Lori Barker, Investor Relations for Mobix Labs. And I’d like to thank you for joining us today as we report Mobix fiscal fourth quarter and 2024 financial results for the period ending September 30th. With me on the call today are Fabian Battaglia, Mobix’s Chief Executive Officer; and Keyvan Samini, President and Chief Financial Officer. This call is simultaneously being webcast on the Investor Relations section of our Web site at mobiclabs.com. Before we get started, I would like to remind everyone of our Safe Harbor policy. Comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.

Any statement that refers to expectations, projections or other characterizations of future events, including financial projections, future market conditions or future product enhancements or development is forward looking statement. Mobix’s actual future results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings. Mobix assumes no obligation to update any such forward-looking statements except as required by law. For greater detail about risks and uncertainties, please see our SEC filings, including on our Form 10-Q for the quarter ended June 30, 2024 and the section entitled Risk Factors in the Form S-1 filed on August 12, 2024. In addition, this call includes non-GAAP financial measures.

Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our fourth quarter earnings release posted on the Investor Relations section of our Web site. With that, I will turn the call over to Fabian Battaglia. Fabian, please go ahead.

Fabian Battaglia: Thank you, Lori. I am pleased to announce a successful fourth quarter that caps off Mobix Labs’ results as we approach our first fiscal year as a public company. It is an exciting time as we unleash the performance of next generation wireless sensing and connectivity solutions. I’m proud of our team’s execution as we quickly grow the breadth of our offerings through organic growth and synergistic accretive acquisitions. Integrating employees and technologies is part of our core DNA and shaping tomorrow’s connectivity is front and center for all Mobix employees. In the fourth quarter, we executed on our plan and we grew revenues sequentially by 44% for a full year fiscal growth rate of 426%. Also, gross margins increased as we integrated RaGE Systems and continued working on synergies in a more favorable mix of products and engineering services.

We closed out the fiscal year with strong bookings, which position us well for our next fiscal year and mergers, and acquisitions at Mobix Labs will continue to be in the news as we diversify our technology portfolio. Our recent announced letter of intent to acquire Spacecraft Components is an excellent example of our accretive funnel of M&A opportunities. Spacecraft is a leader in high precision mission critical components for aerospace, defense and commercial applications. Also, they are recognized for their cutting edge engineering and manufacturing capabilities. These electrical connector components and accessories are vital to critical missile technology, submarines, naval ships, oil rigs, railcars, military and commercial jet aircraft and many other applications.

Notably, these components are utilized in the Patriot missile, the US Army’s primary missile defense system and in tactical manned and autonomous vehicles. Additionally, Spacecraft supplies key components for railcar systems in major metropolitan areas, such as Chicago and New York. As a long-standing supplier to Mobix Labs, we were aware of Spacecraft’s excellent reputation and we see them as a natural fit as we expand our offerings into aerospace, military and defense sectors and in more near term the transportation market. We expect that the acquisition will be accretive to Mobix Labs’ earnings and will increase our workforce by approximately 150 employees. We are really excited about this acquisition and expanding our reach. Each quarter since becoming a publicly traded company, you’ve heard me talk about our acquisition strategy.

Our mission remains consistent as we target and attract synergistic accretive opportunities that will expand our customer base and footprint and make life easier for our customers as they look to reduce their number of suppliers. Mobix Labs is a nimble supplier that can deliver demanding next generation solutions at best-in-class lead times. Today, I’d like to highlight two solutions groups. EMI interconnect solutions and our wireless system solutions from the RaGE Systems acquisition. Let me start with the EMI interconnect solutions, which are used by many leading companies in aerospace, military and medical applications. In June, we announced our new filtered ARINC connectors, which are setting a new standard in price, performance and customization.

I’m pleased to say in the fourth quarter, we saw increased bookings for these high performance connectors used in advanced aircraft electronic systems. In the fourth quarter, we landed significant new customers in aerospace and defense sectors and we are now scheduled to produce custom filtered next generation high performance connectors for the customers’ flight guidance and cockpit display systems. We are excited about our overall growth in EMI solutions and the planned growth in our interconnect product line, and we believe that we are well positioned in this core part of Mobix for further developments of these solutions as we expand our strong relationships and deliver what we believe is the fastest delivery of EMI filtered parts in the world.

Customers value our engineering support and our nimble hands-on approach. The second area I’d like to highlight this quarter, wireless systems, achieved strong revenue and increased margins during the RaGE Systems’ first full quarter with Mobicx. RaGE Systems has a strong customer base and exciting funnel of opportunities. We are quickly identifying synergies between Mobix Labs and RaGE Systems so we can expand on our customer base and products, and to deliver IP and technology across the entire product line portfolio. Within wireless systems, our security imaging and detection services and products continue to grow and expand. While we continue building and shipping present generation modules, we are also developing multiple generations of products with our customers to help them offer new products in new markets.

This is all about helping our customers to envision different futures for imaging and detection in their established markets and in areas they are targeting for expansion. Also, our multi-spectral imaging and detection or MSID programs continue to expand. We added new MSID capabilities to our customer supported test facility and demonstrated new capabilities and functionality beyond security imaging detection. We believe the new capabilities that we are demonstrating in non-visual imaging and multi-sensor fusion should begin generating incremental revenues in 2025 and beyond in areas like infrastructure imaging and fault detection. Partnerships are an important part of developing our business and a good example is our expanding relationship with UMASS Lowell in Massachusetts.

Together, we’re working on several technologies and projects for infrastructure imaging and satellite communications. The pop-up laboratory created on the grounds of UMASS is focused on gaining a better understanding of infrastructure degradation and safety for the rail industry. Another joint program is working on identifying and investigating the feasibility of low power, low cost and high performance monolithic software defined system on a chip for SATCOM applications. Both technology development projects could lead to new product introduction in 2025 and 2026. In summary, customers come to Mobix Labs because we are a nimble supplier that can deliver demanding next generation solutions at best-in-class lead times. Also, execution of our acquisition strategy is diversifying our offerings and expanding on our end markets while growing revenue and margins.

Now Keyvan will tell you a bit more about those financial results.

Keyvan Samini: Thank you, Fabian. I’m excited to walk you through the financial highlights of our fourth fiscal quarter ending September 30th as well as our full fiscal year ending September 30, 2024 and to share our outlook for the first fiscal quarter of 2025. Unless otherwise stated, the figures I’ll discuss today are on a non-GAAP basis. Before discussing the numbers, I want to underscore the significant milestone Fabian mentioned earlier. Our letter of intent to acquire Spacecraft Components. If completed, this strategic acquisition is expected to be transformative for Mobix Labs, expanding our reach into high demand sectors, including military, defense, aerospace and rail. Spacecraft is a well-established business and its acquisition is expected to be immediately accretive.

In addition to delivering immediate financial benefits, we believe this acquisition will enhance our sales strategy, strengthen our position in critical markets and significantly accelerate revenue growth for fiscal year 2025. Upon closing, we expect the transaction to materially increase Mobix Labs’ revenue compared to fiscal 2024 while driving synergies that boost operational efficiency and long term scalability. Now let’s look at our financial results for the fourth quarter and full fiscal year 2024. We delivered revenues of $2.95 million, surpassing the midpoint of our guidance range and representing a robust 44% sequential increase over the prior quarter. For the full fiscal year 2024, annual revenue grew by $6.44 million, marking an exceptional 426% increase over fiscal 2023.

Turning to gross margin. Our fourth quarter adjusted gross margin improved 16.3 percentage points sequentially to 56.6%. This impressive growth was driven by a favorable product mix, pricing strength and operational efficiencies. On a full year basis, our fiscal 2024 adjusted gross margin reached 45%, a dramatic turnaround from fiscal 2023. We also made substantial progress reducing our adjusted loss from operations. For the fourth quarter, adjusted loss from operations declined by more than 12% to $3.6 million, down from $4.1 million in the last quarter. For the full fiscal year, adjusted loss from operations improved by 14.6%, narrowing to $15.96 million compared to $18.7 million in fiscal 2023. Our balance sheet remains stable and improving with cash growing to $266,000 at the end of Q4, up from $205,000 in the prior quarter.

To support our acquisition strategy and meet rising customer demand, we are actively pursuing additional financing that will enable us to execute on our growth opportunities and scale further. Looking ahead to our first fiscal quarter of 2025, we are forecasting consolidated revenues of between $3.05 million and $3.15 million, a strong continuation of our growth momentum. As we look to the future, our long term financial goals remain clear. We are committed to achieving an adjusted gross margin of 60% and an adjusted operating margin of 30%. While revenue scale we will maintain discipline by ramping R&D and SG&A expenses at a slower pace driving profitability and operating leverage over time. In summary, we are incredibly pleased with the results from the September quarter and the full fiscal year 2024.

Our acquisition strategy has delivered the transformational revenue growth we set out to achieve. With an expanding pipeline of M&A opportunities, increasing customer demand and operational improvements, Mobix Labs is positioned for long term success and scalable growth. Operator, we’re now ready to take questions.

Q&A Session

Operator: [Operator Instructions] Our first question will come from the line of Kevin Cassidy of Rosenblatt Securities.

Kevin Cassidy: You had mentioned that EMI interconnect solutions having increased bookings. Can you go into a little more details on that? Is it the market getting better or are there things you’re doing that are increasing the bookings?

Fabian Battaglia: As you likely know the geopolitical [stripe] that exists today unfortunately is not calming down. So we’re getting increased opportunities or increased request for, uh, products in that area. And as you know, EMI fits in that space. So aerospace and defense is a key driver for EMI and that’s why we’re seeing the increases that we see.

Kevin Cassidy: Can you say what the visibility is? Is it out one quarter, two quarters?

Fabian Battaglia: Typically, it’s out to two quarters is what we see.

Kevin Cassidy: And then just one other question with the Spacecraft Components, 150 employees is impressive. But will you be able to get some leverage with those employees, like you’ll be able to take over more of the say SG&A portion of the spending?

Fabian Battaglia: Yes, like all acquisitions, we look at the synergies and that’s something that we’re very experienced in doing. So we would take a company like Spacecraft who’s got great technology, great capability, especially manufacturing capability and you match that with our go-to-market strategy and our experience in that space. We feel that that will be a great benefit when we combine forces.

Kevin Cassidy: And maybe could you say what percentage of those employees are engineers?

Fabian Battaglia: I would say it’s less than 5%.

Operator: And our next question will be coming from the line of [Martyn Lucas].

Unidentified Analyst: Thank you very much for allowing me on your call today. I represent the investor family known as the [Lucas Ades] who watch my YouTube TV show and follow Mobix with great enthusiasm. I have two questions for you. The first one is, what specific strategies or initiatives is Mobix Labs prioritizing to drive shareholder value and ensure consistent stock price growth in both the short and long term?

Fabian Battaglia: Our strategy has been consistent from day one. So it’s in two parts, the organic growth and then an M&A strategy to accelerate that growth. On the organic side, we focus on connectivity, wireless communications, security imaging and detection. Those are our primary focuses. And then on the M&A side, we have a well defined process and we’re looking at areas in aerospace and defense, transportation, medical, wireless communications. So it’s a combination, both short term what we have in front of us will drive the organic growth and then over the longer term, our M&A strategy will accelerate that growth.

Unidentified Analyst: My follow-up question. As we all know, investors around the world are extremely passionate and excited about where NVIDIA is going. So my viewers have asked me to ask this question. As NVIDIA is so popular now with retail investors and there are — are there any ways that you could introduce your technology to them for a strategic partnership, this would surely be a great move?

Fabian Battaglia: Yes, we agree with that. Well, first, we applaud NVIDIA in their great success. We are a believer of GPU accelerated solutions and of course AI is driving that. And I think, we’re seeing more AI end use cases, right? So we expect that that will continue to grow. Now we believe that Mobix IP is applicable in the same ecosystem. So we’re excited to be attached to applications that live alongside where NVIDIA lives. Now what we expect, as of course with their success, we’re going to see use cases, which we think are going to require increased expectations for things like higher demand rate and higher bandwidth type applications and we feel that that fits really well in the areas that we’re developing.

Unidentified Analyst: Well, thank you very much for that, and giving us the chance to ask a question a few questions. And congratulations today on your call from all of the [Lucas Ades], thank you very much.

Operator: Thank you so much for participating in today’s conference call. This now concludes today’s meeting. You may all disconnect.