Q2 2024 Aeries Technology Inc Earnings Call
All of the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
And with that we'll begin today's conference call.
Good afternoon, and welcome to areas technologies second fiscal quarter 2024 earnings call joining us from the company is Chief Executive Officer, and co founder of Aries suite of your patent Cassidy Chief Financial Officer, Rajeev, now and Chief Investment Officer, Daniel with today's call will begin with scripted remarks, and then we'll open the call to participants for questions.
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 for a full list of risks inherent to the business and the company. Please refer to the company's SEC filings areas undertakes no obligation to revise or update any forward looking statements to reflect events.
Circumstances that occur after the call.
Today's call and webcast will include non-GAAP financial measures within the meaning of SEC regulation G. When required reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be top of the Companys website.
Speaker Change: And with that I would like to turn the call over to suit here sit here.
Speaker Change: Thank you operator, my name is severe panic of shedding and I'm, the CEO and cofounder of <unk> technology.
Speaker Change: We thank everyone for joining us yesterday on our first earnings call as the company began trading on NASDAQ under the symbol <unk>.
Speaker Change: Now about eight credit correctly.
Speaker Change: We are addressing what we believe is that greater than $1 4 billion with an incredible LTV to CAC of that box and I think that's gonna find nine X for calendar year 'twenty two.
Speaker Change: Yeah, I'm, sorry, I was 1600 professionals around the world and not adding to our already impressive talent for it.
Rajeev: Rajeev in Iowa.
Rajeev: An experienced public company executive who joined the <unk> team as CFO this month as well as Daniel.
Former CEO of worldwide Web acquisition called <unk>, who joins us as chief investment officer, and things with them deep M&A and capital raising XP against you'll hear from them. Both on this call shortly.
Rajeev: For those who may be new to the story. It is technology as a global professional services and consulting partner for businesses and stakeholders seeking a partner during past periods of operation, including private equity sponsors and their portfolio companies.
Rajeev: <unk> deploys distinctive custom tailored engagement models that are designed to provide the right makes up deep vertical knowledge functional expertise and the right software and systems to help clients scale and optimize the tangible results that can be felt in the organization and seen on the bottom line.
The end result is a flexible bespoke engagement that can potentially produce up to 65% labor savings split versus hiring talent locally while bringing in tailored emerging technology solutions to the businesses.
Rajeev: As a reminder, it is profitable today and has been operating cash flow positive since 2013, our second year of operation.
Rajeev: Understanding before the funding of <unk>. There were two main base towards those tech enabled services, neither of which were ideal for our target markets. The first for us to use the legacy outsourcing vendor, which provides the flexibility and cost savings that private equity firms and their portfolio companies are looking for.
Rajeev: But I have a number of disadvantageous.
Rajeev: This include a minimal ability to innovate due to a lack of strategic alignment and visibility into internal operations and outside mentality among those assigned to that count.
Rajeev: And the implementation Pamela strategic positions, which can be a major roadblock to a successful deployment of solutions.
The second approach is to create a subsidiary subsidiary overseas and in house surpluses, which largely solves many of the issues mentioned.
Rajeev: Outsourcing, but presents a new setup very complicated challenges.
Rajeev: While this approach like seats in creating a team that is aligned with the goals and culture of the company.
Rajeev: It is very costly to stop and to scale. It creates a litany of packs and regulatory requirements and it eliminates the unique viewpoint that outside contractors working with multiple companies can bring.
Rajeev: It is solstice problems without even a read through approach and reach out operations are fully integrated into the business of claims.
Rajeev: Customers use our services to get top talent in India and across the world into all the details of that organization, including software development Cyber security Finance HR customer service and operations are customers willing to review on the hire candidates resource setup and bonus structures for the candidates and active guidance.
Rajeev: In collaboration with us and treat them as a bad bad Walnut twice once they are hired.
Talent becomes an extension of our claims team with the opportunity for promotion recognition and caveat, but progression, resulting in higher employee satisfaction and lower attrition.
Rajeev: You manage the regulatory lags recruiting compliance administrative D and indeed for the outsource standards. We believe this disruptive business model daily was overall cost and operational efficiencies with the ability to deliver digital transformation solutions tailor made for our customers' growth strategies.
Rajeev: Coupled with a net and flexibility that arrangement offers our customers an evolving and implementing these strategies to victory.
Rajeev: The <unk> model is crafted to create a more flexible more specialized and less expensive labor for our customers.
Rajeev: A better work environment with more opportunities for the employees.
Rajeev: We believe it creates significant innovation through strategic alignment and increase the visibility at senior levels.
Rajeev: It insulates, our clients from regulatory and tax issues and it provides the flexibility to scale up or down as the business needs to change by utilizing proven business and implementation plans tried and true software and automation support and the highest level of data integrity and compliance policies.
Rajeev: We aim to ensure consistent quality results at.
Rajeev: Cros are deploying medicine delivers significant value for leadership teams.
Solution is designed to deliver all the benefits of the alignment with top line goals, but their visibility into winning playbooks from multiple companies that only <unk> can deliver.
Rajeev: We are committed to our medium to long term strategy is done organically.
Rajeev: The Guy who didn't grow with the clear objective of seeing us as a significant player in the emerging everyone. The outsourcing industry, but a differentiated solution at prices that are geared towards meeting these challenges.
Rajeev: Customer facing today, our sharpening business cycles.
Rajeev: Believe we have today is strong validated and upfront suitable foundation in terms of business model differentiated service offerings and customer base with.
Rajeev: With a strong team and we are committed to our growth path and being a trusted partner to our customers.
Now I would like to hand, the call over to Daniel Webb Chief investment officer at all.
Adi's technology Daniel.
Rajeev: Yeah.
Speaker Change: Thank you for that my name is Gavin away and as you mentioned I joined the areas in November after being CEO of worldwide Web acquisition Corp, a publicly traded company, which took public.
That's over 10 years in investment banking at both Bank of America Citi and three more as founder CEO WWE deep I'm thrilled to come on board as Chief investment Officer of Ares as having spent time evaluating many businesses in both my investment banking career and as potential targets.
Speaker Change: Click area that stood out as differentiated profitable growth.
A large part of the differentiation.
Think that purpose built.
Speaker Change: Client engagement model when you first engage with the client our team gathers requirement, that's a existing infrastructure processes and workflows and determines overall scope to recommend the best options to the client.
Speaker Change: This paves the way for us to start identifying and hiring the right team members to handle the initial appointment.
Speaker Change: From the start of engagement, we began implementing the solution to fit the needs identified with our client.
In many cases, our clients are newly acquired portfolio companies of private equity firms. There are multiple areas to build out that's a proper development I T finance and operation.
Media effect quickly scaling up these teams can have a positive impact on both the bottom line and top line for our clients.
Speaker Change: Our clients move through the lifecycle of their deployment with us when you layer in additional solution such as AI analytics cyber security or other digital solution.
Speaker Change: Based on the needs of our clients.
Speaker Change: Many of our clients come as references from private equity sponsors of our current clients, which helps accelerate our growth, while keeping sales and marketing cost below our goal is to become integral and essential to our clients' operations and with an average contract value of slightly over $2 million. We are seeing success in reaching our goal.
Speaker Change: Korea, our growth to our purpose built model and the positive outcomes that delivers for our clients.
It's about the trust and confidence in leadership team and leads to very high rates of rebuilt.
Speaker Change: With an NPS of 93, we believe we are able to create a network effect within the executive leadership and be eating into the our results and new client wins.
Speaker Change: We believe this network effect contributes to incredible results for our business.
Speaker Change: Did you mention as an operating cash flow in 2013 for the second fiscal quarter, our revenues were up 38% year over year and our adjusted EBITDA was up 107% over the same period now.
Speaker Change: Now on to handle hand, the call over to Rajeev there.
Rajeev: The area of technology for a detailed rundown of our second fiscal quarter and fiscal half numbers.
Rajeev: Thank you Danielle and thanks again for joining the call with US today on our first earnings call.
Speaker Change: I will now walk through our second quarter and first half numbers in more detail.
Speaker Change: Our total revenues for the second quarter, we have $17 6 million.
Which was an increase of 38%.
Speaker Change: Year over year.
Speaker Change: On a first half basis, we generated $33 9 million.
Speaker Change: For the six months ended on September 30th 2023.
Speaker Change: Which was an increase of 34% versus the year prior.
Speaker Change: I have seen it.
Speaker Change: Our gross profit.
Speaker Change: For the second quarter was $4 8 million.
Speaker Change: Which was an increase of 44%.
Year over year.
Speaker Change: And with.
Speaker Change: The filtered in the gross margin of approximately 20.
Speaker Change: 27% versus 26% in the prior period.
Speaker Change: On a first half basis.
Speaker Change: Gross profit increased by 32%.
Speaker Change: Two $9.3 million for the six months ended September 32023.
Speaker Change: Is it filtered in a gross margin of approximately 27%.
Versus 28% in.
Speaker Change: In the year prior period.
Speaker Change: Our STM due for the ticketing cartoon with $3.3 million, which was a decrease of 11% year over year from $3 8 million.
Speaker Change: On a first half basis, the G&A was $7 million, which was an increase of 19% from $5 9 million in the year.
Prior period.
Speaker Change: We generated operating income of $1.5 million in the second quarter, we took.
Speaker Change: Was an increase compared to an operating loss of.
Speaker Change: $420000 in the prior.
Speaker Change: Ear period.
Speaker Change: On a six months basis.
Speaker Change: Trading income was $2 3 million, which was a 92% increase.
Speaker Change: Year over year.
On the bottom line.
Speaker Change: Net income for the second quarter was 926000.
Speaker Change: Which was an increase of.
Speaker Change: From a net loss of 222000.
Speaker Change: On a six months basis.
Speaker Change: The net income was $1.4 million.
For the period ending September 32, an eternity.
Speaker Change: Well I suppose and it didn't come off 1.1 million.
In the prior period.
Speaker Change: This resulted in adjusted EBITDA for the.
Speaker Change: Second quarter of 2024 or two.
Speaker Change: Two 9 million and.
Speaker Change: An increase of 107% year.
Speaker Change: Year over year from.
Speaker Change: One 4 million.
Speaker Change: On a first hand basis, we generated adjusted EBITDA of $5 8 million.
Speaker Change: For the six months ended September 32023.
An increase of 71% compared to $3 4 million.
Speaker Change: In the year.
Speaker Change: I have period.
Speaker Change: Finally, I wonder to view, our financial outlook for the calendar 2024.
Speaker Change: As we mentioned in our press release on Monday.
Speaker Change: We are currently expecting total revenue of between $95 million to $105 million a year and then just didn't EBITDA.
Speaker Change: Between 16 and $20 million.
Speaker Change: Thank you all for joining the call and with that I would like to other operators to open the line for questions.
Speaker Change: Operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for parts.
The pits using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Our first question comes from Jeff Martin from Roth.
Please proceed.
Speaker Change: Thanks, Good morning.
Speaker Change: Wanted to get a sense.
Some of the assumptions embedded in your 2020 guidance first of all on the clarify that to calendar year.
Speaker Change: Projection and two are you are you planning to move.
Speaker Change: Move to calendar year reporting period.
Speaker Change: So starting off with some of the assumptions no wonder if.
Speaker Change: What are the new logo assumptions for 2024, and what sort of revenue do you expect contribution from those new logos versus growth from existing logos.
Oh right, Yes, I think so I want to thank you for the question I think Rajiv do you want to take it from there.
Rajiv: Sure. The first part I can answer that yeah. This is for the.
Rajiv: Calendar year.
Rajiv: Any further guidance and.
For now we still plan to continue with the Sis.
Rajiv: Just give you a year and we have because of the March 31st.
Rajiv: But in the future we may move to work in Indiana, but the.
Rajiv: The U S kind of linear but that is not immediately planned.
Speaker Change: And in your guidance for calendar or calendar 'twenty for guidance is that correct.
Speaker Change: That's gonna Kiss.
Speaker Change: Okay, and then depending on the grade five and six.
Speaker Change: <unk> so the conundrum, yes.
Speaker Change: Right right.
Speaker Change: What are some of the new logo.
Speaker Change: Assumptions.
Speaker Change: Embedded in that guidance.
Shelly: So do you have do you want to take that all Shelly go ahead.
Shelly: Yeah, you can go to the detailing but very broadly.
I would say that the bulk of the revenue.
Speaker Change: Got it.
Come from.
Speaker Change: How do you learn from the logos that Rio.
Speaker Change: Acquired.
Speaker Change: In the past one or wanted to want enough yes.
Speaker Change: Those are expanding.
Speaker Change: And as you know.
Have you set up there.
Speaker Change: Sales and marketing team unlike earlier.
Speaker Change: Ben.
Speaker Change: Got it.
Speaker Change: These were largely through that flows and contacts and networks and the private equity and so the management connections et cetera.
Focused sales and marketing team.
Speaker Change: Please no.
Speaker Change: And we expect that the new logos.
Speaker Change: <unk> should contribute the green.
Speaker Change: <unk> integrated person the revenues.
Speaker Change: And then maybe like some rate I assume right.
Speaker Change: Thank you and then.
Speaker Change: Acquisitions are a part of your strategy and corridors I was just curious if you could kind of outline the.
Our strategy and what kind of timing and sources.
Speaker Change: Capital to execute that strategy.
Speaker Change: Yeah, so as far as the sales marketing team is concerned it's already in place. So we will not need any additional significant capital outlays.
Speaker Change: That aspect.
Speaker Change: That will carry on into the momentum that we have them all.
Speaker Change: The teams are working hard.
Speaker Change: It's a very focused approach towards.
Speaker Change: Our traditional book.
Private equity.
Speaker Change: That's a very focused approach towards a.
Private equity relationships.
Speaker Change: Our relationships and accelerating.
Speaker Change: The connection somewhat that Nick books.
Speaker Change: The second is Oh so.
Speaker Change:
Speaker Change: Activity in mining the significant private equity conditions.
Speaker Change: Currently and.
Speaker Change: With the intent to expand within that existing.
Speaker Change: Portfolio companies. So these two.
Speaker Change: Our ongoing process and I would say that the next.
Speaker Change: A three to five years.
<unk> growth phase for us.
Speaker Change: And that is our strategy.
Speaker Change: We will be a growth company.
Speaker Change: And we'll continue to be debt until we reach it.
Speaker Change: Sites that we are satisfied with respect to.
Speaker Change: Stabilizing and then from then onwards, it'll be driven by innovation.
Speaker Change: And two dynamic.
Speaker Change: Oh client mining and so on and so forth.
Speaker Change: So to be a significant player.
Speaker Change: And then <unk> do you want me to take the M&A question.
Speaker Change: Sure.
Speaker Change: So on the M&A front.
We're actively always looking at target and that's a key part of our go forward strategy is.
Speaker Change: To find.
Speaker Change: Profitable strong targets, where we think there are significant synergies.
Speaker Change: Where we see the real ability.
Speaker Change: To get companies that great multiples.
Speaker Change: And.
Speaker Change: Give them included into our platform very quickly and.
And we think that the.
Speaker Change: The financing strategy will be.
Speaker Change: Depending on the size of the companies.
Speaker Change: Business is profitable.
Speaker Change: Essentially has no debt today, and so we have significant ability to go out and finance with debt.
Speaker Change: And now that we're a public company, obviously, there's opportunity to do equity raises are.
Speaker Change: Convertible and so really depending on the size of the target and.
Speaker Change: And kind of where we are in the stage of our of our company than any of those options could be there for financing.
Speaker Change: Great and then one more if I could in terms of client progression.
Speaker Change: Maybe help characterize when a when a new client comes on and what type of services, you do and as they progress how that how that Oh.
Speaker Change: Our service set expand again tomorrow.
Complex technologies anymore.
Speaker Change: <unk> productivity oriented technologies.
Speaker Change: Yeah. So typically are our contract.
Speaker Change: In a fully matured condition goes through four phases full stages still.
Speaker Change: Stage, one this bad be nishu.
Speaker Change: Array instrument with the client and typically we evaluate the entire organization every function without exception and then slot them into basically three categories. Those functions, which are in the neighborhood outsourcing the second of those functions with Jeremy noble to blood flow improvements process improvements and lastly, those funds.
Speaker Change: So Joe I'm unable to adopt.
Speaker Change: Adoption of the new age technology solutions automation, and so on and so forth.
Speaker Change: Italy.
He hopes of glass to get also of all operations is that.
Speaker Change: It usually starts with the.
Speaker Change: Low hanging fruit so to speak.
Speaker Change: Which is cost efficiency and outsourcing so transition from heico's, two low cost geography that is always two starting point we have seen.
Speaker Change: And then in stage two as you ramp up the operations.
Speaker Change: And the low cost geography, the company sees.
<unk> savings coming in efficiencies coming in process improvements flowing and it.
Speaker Change: It doesn't moves into the.
Speaker Change: Second for yourself expansion within multiple other functions within the organization.
Speaker Change: But yet I am unable to off shoring outsourcing.
Speaker Change: And then based on the learnings.
Speaker Change: We then moved to stage, three which is I hate to do fine.
Speaker Change: Clearly potential solutions for automation and process improvements business systems improvement cloud migration.
Speaker Change: And so on and so forth adoption of new age technology solutions.
Speaker Change: Eventually matures into a combination of.
Speaker Change: Outsourcing.
Speaker Change: Under the <unk>.
Speaker Change: <unk> shifted engagement model coupled with.
Digital transformation activities that actually have blamed.
Speaker Change: Upgrade themselves on a technology front. So this is solid.
Speaker Change: Typically the contract in its maturity full maturity cycle moves in four phases.
Speaker Change: Yeah.
Speaker Change: Great. Thanks for taking my questions.
Speaker Change: Just if I can add towards severe Ted we are.
Speaker Change: Being significant network effect in terms of the.
Speaker Change: New customer acquisitions.
Speaker Change: For example in 2023, we signed 10 new customers.
Speaker Change: Hum.
A significant increase from an average number of customers who used to be like four to five in the year.
Speaker Change: We are seeing significant.
Speaker Change: Traction from our existing client restaurants and testimonials.
Speaker Change: And being a public company would be.
Speaker Change: We think this will only accelerate.
Speaker Change: The father, Tony with New New logo acquisition, and we're also seeing it trend from our existing customers because we have been working with them for.
Speaker Change: The last couple of years with a strong relationship.
Speaker Change: We are also seeing a trend in terms of more value added services like digital transformation and more consulting work.
Speaker Change: This will improve our margins and the mix.
Speaker Change: Next calendar year.
Speaker Change: That's helpful. Thank you.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
If you need any assistance with asking a question. Please press star zero to route to an operator.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.