Q2 2025 Aeries Technology Inc Earnings Call

Greetings and welcome to the Ares technologies fiscal second quarter Conference call.

Speaker Change: 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.

Speaker Change: As a reminder, this conference is being recorded I would now like to turn the call over to your host Mr. Ryan Gardella Investor Relations for Ares technology. Thank you you may begin.

Ryan Gardella: Good morning.

Speaker Change: All of these fiscal second quarter 2025 earnings call joining us from the company is Chief Executive Officer and co function areas should you painted Catherine Chief Investment Officer, Daniel Wang and Chief Financial Officer, today's call will consist of commentary around the results from the fiscal second quarter 2025.

2024.

Speaker Change: As a reminder, this conference call contains statements about future events and expectations, which are forward looking statements.

Speaker Change: Statements on this call may be deemed as far as seeing an actual results may differ materially what is our belief.

Speaker Change: That is all 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 earnings press release areas undertakes no obligation to revise or update any forward looking statements travel expense or circumstances that occur after that.

Speaker Change: Today's call and webcast will include non-GAAP financial measures within the meaning of SEC regulation G.

non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from GAAP measures when required reconciliations of all non-GAAP financial measures. The most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the earnings release or with the materials available on the company's website.

Speaker Change: With that I'll turn the call over to sit here.

Speaker Change: Yeah.

Speaker Change: Thank you operator, and thank you everyone for joining us, let's start with a high level review of our results followed by a discussion on our next strategy steps. So what are you. What are you intend to invest in the business for sustainable long term growth.

Speaker Change: After that I'll pass the call over to Daniel to discuss more detail something sections.

Speaker Change: Today's call I'll be discussing both at Ford results, that's what I've seen so far or business, which ended up off the west coast, Our CT business Council stuff, you've got space long tenure of high quality clients.

Speaker Change: So that's a consistent like a new base.

Speaker Change: Oh, non core markets and businesses concert self constructing projects.

Speaker Change: The middle East, which we have not liked it.

Speaker Change: For the fiscal second quarter of 225, Oh revenues were 16 5 million down 4% from the client.

Speaker Change: Gross profit was $2.

Speaker Change: 3.6 million presenting in gross margin of 21 point.

Speaker Change: However for the second fiscal.

Speaker Change: Fiscal quarters, our North America revenue, which is about our core businesses was up.

Speaker Change: But in person to fill it up $15 7 million.

Speaker Change: Core business contributed positive dollar 183 clubs into it I just don't have it.

Speaker Change: Our results in the second fiscal quarter reflected decision to solely focus on the U pack portfolio business just that so that's.

Speaker Change: Oh of course.

Speaker Change: Our scores business is primarily caused by the capability center at GCC and is growing significantly faster than the north American piece of it.

Speaker Change: Exactly.

Speaker Change: I'm guessing new client opportunities with large complex at favorable margins and we have a high level of visibility into a pipeline of pre trip plan that can make I can talk to us going forward.

Speaker Change: As I have mentioned on past calls North America remains our strongest.

Okay.

Speaker Change: Representing approximately 93 personnel for revenue in the first fiscal quarter.

Speaker Change: This business is at the heart of the ADC and we believe it will continue.

Speaker Change: Continue to be so in the near to medium term.

Speaker Change: While we continue to assess potential markets worldwide based on profitability and risk.

Speaker Change: We have also made the decision to exit the.

Speaker Change: Non core market, it's conscious of consulting projects in the middle East.

Speaker Change: Additionally.

We estimate that these accounts have consistently slower collection cycles.

Yes.

Speaker Change: And higher than expected costs, which is reflected in our financial statements.

We do expect to receive payment from the majority of these in the future.

Speaker Change: Turning off payment remains uncertain.

Speaker Change: This noncore business, that's now gone to zero.

Speaker Change: And we do not anticipate seeing any additional business that in the near to medium term and certain critical business bad I mean, it does something it.

Part of it.

Speaker Change: As I discussed last quarter, we got laser focused on realigning our cost.

Speaker Change: And the answer was profitability.

Speaker Change: The foundation for sustained future growth.

Speaker Change: Between our previous call entity, we have cut over $2 4 million of additional annualized expenses.

Speaker Change: We expect to see the full effect of these savings starting.

Speaker Change: The third fiscal quarter.

In fact, given all the executives myself included will be taking pay cuts to ensure we can quickly return could be.

Speaker Change: Perfect.

That our investors expect.

Speaker Change: This will be coupled with renewed focus on organic revenue growth.

Speaker Change: Finally, I want to mention that one of the odd clients have.

Speaker Change: Exercise that confections like goodbye buyout, the offshore operations portion of the Spanish VAT.

Speaker Change: David.

Speaker Change: And a lot of capacity going forward.

So it will be a dodge some of high margin revenue in the fourth fiscal quarter.

Speaker Change: Yes.

Speaker Change: Nevada cutting revenue from them going forward from there.

Speaker Change: Oh God only two other plants in our history and typically have been spent there is a significant shift in the clients' business strategy necessitating Dan Campbell.

Speaker Change: All patients in house.

Speaker Change: We believe that some of these sections.

Speaker Change: Lead us to sustained.

Speaker Change: And deliver value to our stakeholders across the board in fact, we are already seeing improving sequential results.

Speaker Change: And expect that third quarter could be picked up on both the top and bottom line.

Second quarter.

Speaker Change: We also expect the fourth quarter to be sequentially better than the third quarter.

Speaker Change: With this in mind.

Speaker Change: I'd like to provide an updated financial outlook for fiscal 'twenty five.

Speaker Change: Revenue, we are currently expecting a range of $2 71 to $2 73 billion.

Speaker Change: Fourth quarter adjusted EBITDA, we are currently.

Speaker Change: Currently expecting a range of $2 $62 7 million.

Speaker Change: Both of these items are solely inclusive of our core business.

Speaker Change: And now I would like to pass the call over to Daniel for some additional details on our strategic actions.

Daniel Wang: Thanks, Pierre and thanks to everyone for listening today.

Daniel Wang: Our decision to focus solely on our core North America piggyback business is based on the quality of the clients and growth prospects play we're consistently seeing in the region.

Daniel Wang: We have a network of some of the biggest private equity and consulting partners in North America that already have a number of portfolio companies and clients on the Aries platform clients such as victory lives diligent and quick base, who are backed by a leading private equity sponsors are firmly embedded aries and the network of private equity professionals that accelerates a flywheel effect of our business model we have.

Daniel Wang: Have a renewed focus on organic growth in North America, and a concentrated on making inroads further into portfolio companies of private equity and consulting partners.

Daniel Wang: As has historically been an area of strength for Aries and we are leveraging our relationships in the industry to ensure we are positioning ourselves for growth in the near and long term.

Daniel Wang: Based on our client feedback or GCC model has proven to be a better solution for them and the standard consulting our digital transformation firms the retention and length of engagement with our core client base was in the order of magnitude above our noncore business on average our current core client base has been on the Aries platform for three six years.

Daniel Wang: Prior to the short term consulting nature of our noncore business.

Daniel Wang: Taken together, we believe that pursuing only our core business is a better use of time and resources and will yield higher quality results and better customer retention than our noncore business.

Daniel Wang: I mentioned, we've already reduced our noncore business to zero revenue.

Daniel Wang: Moving on to our cost control measures, we have cut over $4 million from our expenses on an annualized run rate. This was primarily achieved through two phases of head count reduction, which also served to further focus our talent on our core business. We are taking every measure possible to reduce unnecessary costs across the board, including a laser.

Speaker Change: Focus on controlling our outside vendor costs, including professional services and public company costs I'd now like to hand, the call over to Rajeev for more detailed review of our results Rajiv.

Rajeev: Thanks Danielle.

Rajeev: I will be reviewing our financial performance for the <unk>.

Rajeev: Second quarter in more detail.

Rajeev: Our total revenues.

Rajeev: For the second fiscal quarter will continue to <unk>.

Rajeev: $16 $9 million, which was a decrease of 4% year over year.

Rajeev: North America revenue.

You'll recall that <unk> was $15 $7 million, which was at 13, 3% increase.

Rajeev: $13 9 million year over year.

As we have discussed going forward.

Rajeev: And then just focus.

Rajeev: On the North American <unk> market.

Rajeev: And our private equity portfolio company claims had prospects.

Rajeev: Our gross profit.

Rajeev: For the second fiscal quarter of kidney failure.

Rajeev: $3.6 million, which.

Rajeev: Which was a decrease of 26% year over year.

Rajeev: And the filter and gross margins of approximately 2.2 question.

Rajeev: 207 point floor question did the previous year period.

Rajeev: And so the investments.

Rajeev: This was largely the result of the nature and profile of the projects.

Rajeev: Yes.

Rajeev: Sorry.

Speaker Change: We remain confident that all of the existing revenue base.

Rajeev: And the pipeline moving forward.

Rajeev: G&A expenses in the second quarter around $7.7 million.

Which was an increase of 130% year over year from $3 3 million.

Rajeev: Taken together.

Rajeev: This resulted in an operating loss of $4 $1 million.

Rajeev: The second fiscal quarter of 2025.

Rajeev: GAAP net loss for the type of opportunities.

Well, it's $2.3 million.

Rajeev: Well, that's just a net income of nine.

127 policies.

Rajeev: In the same period, so it just because we need to nucor.

Adjusted EBITDA.

For the second quarter of Ginnie 75 of negative $2.3 million.

Rajeev: So it's a positive $2 9 million from the same period from just because Theyre New Guinea cool.

Rajeev: Our core adjusted EBITDA.

Rajeev: So the second part of <unk> 75 was.

$183000.

Rajeev: Yes, a decrease of 82%.

Rajeev: The $1 million in the same PD from fiscal <unk>.

Rajeev: On the balance sheet we.

Rajeev: We had $3 6 million.

Rajeev: And cash and cash equivalents for.

Rajeev: For the period September 30 to 80 to 84.

Rajeev: The total long term debt was $1 $5 million.

Speaker Change: Thank you all for joining.

Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.