Aeries Technology, Inc.

Greetings and welcome to the ARIES Technology Business Update Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. I would now like to turn the call over to Ryan Gardella, Investor Relations. Ryan, you may begin.

Thank you. Good afternoon, good morning, and welcome to ARIES Technology's Business Update Call. Joining us from the company is Chief Executive Officer and Co-Founder of Aries, who's here with Anne Cassery, Chief Financial Officer, Rajiv Nair, and Chief Investment Officer, Daniel Webb. Today's call will consist of commentary around the company's fiscal 2024 and first fiscal quarter 2025 results. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking in nature. Statements on this call may be deemed as forward-looking and actual results may differ materially. Words such as believe, estimate, and expect, as well as similar expressions, are intended to identify forward-looking statements. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings and earnings press release. ARIES undertakes no obligation to revise or update any forward-looking statements to reflect the financial circumstances that occur after the call. Today's call and webcast will include non-GAAP financial measures from the meeting of SEC Regulation G. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, GAAP measures. When required, reconciliations called non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the company's earnings releases, filings, or other materials available on the company's website. With that, I'd like to turn the call over to Sudhir. Sudhir?

Hi. Thank you, operator. Thank you, everyone, for joining us. Today, I will start by walking through some high-level first fiscal quarter results and the actions we are taking to better position Aries for the long-term success. I will then go over some highlights from our fiscal year 2024 results before handing it over to Daniel for a discussion of our new client wins and additional color on our operational initiatives. For the first fiscal quarter of 2025, our revenues were U.S. dollars $16.7 million, up 2% from the year prior period. where our gross profit was US$4 million, resulting in a gross margin of 24%. Our adjusted EBITDA for the first fiscal quarter was US$400,000 versus US$2.9 billion in the year prior. Our results in the first fiscal quarter reflect the impact of investments we are making in ongoing growth, which we believe will benefit Aries in the long term. While we expect the next few quarters to reflect the focus on our strategies, we are confident regarding the resultant business growth and the cost realigning to an optimum level required for sustaining a growth-oriented business. We are in parallel focused on accelerating our return to high profitability with a number of operational initiatives completed and underway that will achieve that goal. On the revenue side, we saw the completion of certain projects ahead of schedule and the start of several new projects pushed out slightly, which also contributed to our lower gross margins due to the nature and profile of those projects. However, our revenue base is robust and consistent, and we have great confidence in our new business pipeline for the remainder of the fiscal year and beyond. We believe that this year-over-year comparison will be our weakest of the fiscal year. We have also been aggressively pursuing the portfolio companies of private equity firms we have a relationship with, as well as the clients of several consulting companies. As a reminder, our primary growth vector remains expanding into the portfolio companies of private equity firms, and we already count some of the largest firms in the United States as clients. Moving on to our operating expenses, as I said earlier, We will realign costs to an optimum level that enhances profitability by laying the foundations for positioning the company for sustained growth in the future. This will be an ongoing effort, properly calibrated, to ensure that in a planned manner we will achieve profitability as we advance further in our growth strategies, both organically and inorganically, as opportunities start converting. The effect of these savings will be seen in the coming quarters in a progressive manner. Turning to our fiscal year 2024 financial results, I'm pleased with our end to the fiscal year, including revenue of $72.5 million, representing 37% growth year over year, and driven primarily by new clients on the Aries outsourcing platform, as well as additional spend from existing clients. Adjusted EBITDA was $9.2 million, which was in line with our expectations. As I said, we are now and for the next few quarters in our next stage of execution of growth strategies and corresponding investments in time, efforts, and costs to achieve our objectives. North America remains our strongest and target market, representing approximately 79% of our revenue in the fiscal year and 93% in the first fiscal quarter. This is a purposeful shift of focus towards the United States and away from APAC to drive majority of our future growth. As I noted on our last call, Mexico has been a particular area of focus for ARIES, and in September we announced the opening of our second office in Mexico, located in La Colonia Americana area of Guadalajara. This new office will support a diverse range of roles for our clients, including customer service representatives, implementation specialists, training specialists, and other technology positions aimed at enhancing operational efficiency and adding business value to our clients. Nearshoring remains a powerful trend in the IT services space as companies aim to balance cost efficiency with operational agility, proximity, and cultural alignment. We are proud to continue investing in Mexico. support our North American clients and believe this will give ARIES a distinct advantage over our competitors. Expansion of our Latin American operations also supports the increasingly popular dual-shoring strategy, which combines near-shoring in locations like Mexico with maintaining centers of excellence in India, enabling us to provide 24x7 coverage while significantly reducing costs. Our expansion in Mexico has already been incredible, going from 10 staff members in the country to over 150 within 18 months. We similarly continue to explore other geographies with focus on sustainable pools of talent and business expansion opportunities. And with that, I would like to turn the call over to Daniel Webb, Chief Investment Officer, to discuss some details of new client deployments, as well as some more details on our strategic initiatives. Daniel?

Thanks, Sudhir, and thanks again to everyone for being on the call. Today, I want to share two of our client wins that contributed to our growth in the year, as well as some additional color on strategy and operational initiatives. First, as we announced in June, we have partnered with Clear Lake Portfolio Company, Victory Live, a global technology platform focused on sports and entertainment, event management, data, and ticketing software solutions to establish an innovative global capability center in Hyderabad, India. This GCC will focus on building a team of data analytics and integration engineers, further solidifying our position as a provider of experienced, trained team members, the skills that go beyond the average pool of talent at traditional IT service providers. Next, in August, we announced that we had been selected by Diligent, a leading GRC SaaS company, and also a Clear Lake portfolio company, to establish and grow their presence in Guadalajara, Mexico. This new operation will house a dedicated team focused on customer success, highlighting our shared commitment to enhancing customer experience and operational agility. By leveraging our established presence in Mexico, we're enabling Diligent to respond more swiftly and flexibly to market changes and customer needs. This partnership is a testament to our ability to drive transformation and add substantial business value through local talent and technological advancements. We are dedicated to supporting and driving our clients' global growth by providing a range of services, including professional advisory services and operations management services, to build and manage GCCs in suitable and cost-effective locations based on client business needs, with a focus towards digital enterprise enablement. These GCCs are designed to act as seamless extensions of client organization, providing access to top-tier resources, We believe this empowers our clients to remain competitive and nimble to achieve their goals of enduring cost efficiencies, operational excellence, and value creation without sacrificing functional control and flexibility. As we've consistently highlighted in our earnings calls, our unique engagement model and focus on building long-term partnerships continue to drive our success. We're confident that these partnerships will contribute significantly to our revenue growth and further solidify our position as a global leader in professional services and technology consulting. We've expanded our global capability centers strategically, ensuring business continuity and minimizing risks. This approach not only insulates our clients from regulatory and tax issues, but also provides the flexibility to scale operations efficiently, ensuring we meet evolving business needs. The importance of AI and digital transformation in driving future growth at ARIES cannot be overstated. We're actively integrating AI and advanced analytics into our service offerings, which has already begun to yield positive results. Our clients are increasingly turning to us for support in their AI and digital transformation journeys, recognizing the value we bring in terms of innovation and efficiency. As we continue to invest in AI and digital solutions, we anticipate further accelerating client acquisition and deeper engagements with existing teams. This, in turn, drives greater adoption of our digital transformation solutions, driving improved margins and higher value work to our clients. We've also made strategic investments in talent and workforce management to support our AI initiatives. By focusing on AI talent acquisition and training, we've built a team of skilled professionals across various roles, from data scientists to AI architects. This has allowed us to maintain a competitive edge while managing cost pressures in a tight labor market. And now I would like to turn it over to Rajiv Nair, CFO, for a more detailed view of the financials. Rajiv?

Thank you, Daniel. Now I will be reviewing our financial performance for the first quarter in more detail, followed by our fiscal year 2024 results. Our total revenues for the first quarter of 2025 were $16.7 million, which was an increase of 2% year over year. Our gross profit for the first quarter of 2025 was $4 million, which was a decrease of 10% year over year and resulted in gross margin of approximately 24% versus 27% in the previous year period. As to be referenced, this was largely the result of the nature and profile of the project that shifted out of the quarter. We remain confident on the robustness of our existing revenue base and the pipeline moving forward. Our SG&A expenses in the first quarter were 20.4 million, which was an increase of 457% year over year from $3.7 million. This gain was primarily due to one-time non-cash top compensation for executives and an increase in employee compensation and benefits due to the expansion of our operations. Taken together, this resulted in operating loss of 16.4 million in the first quarter of 2025. Our gap net loss for the first quarter of 2025 was 15.3 million versus a net income of $500,000 in the same period of 2024. Adjusted EBITDA for the first quarter of 2025 was $400,000 versus $2.9 million in the same period of 2024. As we have mentioned, we have taken action to control expenses and increase our profitability, including a reduction in headcount. We are also working on additional cost saving measures, which are expected to further improve our business. Given these initiatives are still underway, we are withdrawing our prior 2024 guidance. On the balance sheet, we had 4.2 million in cash for the period ending June 30, 2024. The total long-term debt was 1.7 million. Turning to our fiscal year, financial results, total revenues for the fiscal year 2024 were 72.5 million, up 37 compared to 53.1 million for the fiscal year of 2023. Our gross profit for fiscal year 2024 was 21.6 million compared to 13.6 million in the year-ago period. And this represented a gross margin of 30%. an increase from 26% in the year-ago period. Our SGN expenses for fiscal year 2024 was 18.7 million, which was an increase of 65% year-over-year from 11.3 million. Taken together, this resulted in operating income of 3 million in the fiscal year 2024. This resulted in a gap net income of 17.3 million for financial year 2024 versus a net income of 1.7 million in fiscal year 2023. Adjusted EBITDA for fiscal year 2024 was 9.2 million versus 8.7 million in fiscal year 2023. Thank you all for joining and we look forward to updating you again soon.

Thank you. This concludes today's call. You may now disconnect your lines. Thank you for your participation.