Earnings call transcript: Aeries Technology Q4 2024 sees 93% revenue from North America

Aeries Technology Inc. (AERT) reported its fourth-quarter earnings for 2024, highlighting a strategic realignment towards high-value North American clients and a growing focus on AI and automation services. The company achieved total revenues of $17.6 million, despite a 6.8% year-over-year decline. North American revenue grew by 13.1%, accounting for 93% of total revenue. The stock, currently trading at $0.54, sits near its 52-week low and has declined 78% over the past year. According to InvestingPro analysis, the company appears undervalued based on its Fair Value model, though investors should note its WEAK financial health score.

Key Takeaways

• Aeries Technology’s North American revenue increased by 13.1% year-over-year.
• The company reported a net income of $2 million, a significant improvement from a loss of $16.3 million in the previous year.
• A strategic focus on AI and automation is driving product innovation.
• The company plans to achieve cash flow positive status by realigning its business model.
• Aeries Technology exited non-core Middle East market segments to concentrate on North American clients.

Company Performance

Aeries Technology’s performance in Q4 2024 reflected a strategic shift towards high-value engagements in North America, with 93% of its revenue now originating from this market. This focus has resulted in a notable 13.1% increase in North American revenue, amidst a broader 6.8% decline in total revenue. The company’s pivot towards AI and automation services is part of its transformation-led engagement strategy, away from legacy cost-saving models.

Financial Highlights

• Total (EPA:TTEF) Revenue: $17.6 million, a 6.8% decline year-over-year
• North American Revenue: $16.4 million, a 13.1% increase year-over-year
• Net Income: $2 million, compared to a loss of $16.3 million in the prior year
• Gross Profit: $4 million, with a 23% gross margin
• Adjusted EBITDA: -$2 million
• Core Adjusted EBITDA: $1.5 million
• Cash and Equivalents: $2.4 million
• Long-term Debt: $1.5 million

Outlook & Guidance

For FY 2025, Aeries Technology projects revenue between $71 million and $73 million, with core adjusted EBITDA expected to be in the range of $6 million to $7 million. Looking ahead to FY 2026, the company anticipates revenue between $74 million and $80 million and adjusted EBITDA of $6 million to $8 million. These projections underscore the company’s commitment to leveraging its AI capabilities and focusing on long-term client engagements.

Executive Commentary

CEO Ajay Khare emphasized the company’s strategic focus, stating, "We have realigned our business model to concentrate on high-value long-term engagements." He also highlighted the traction gained by the company’s AI practice. CFO Daniel Webb reiterated the company’s commitment to maintaining a clear strategic focus as it targets cash flow positivity.

Risks and Challenges

• Market Saturation: As Aeries Technology focuses heavily on North America, it risks over-reliance on this market.
• Economic Pressures: Potential macroeconomic downturns could impact client budgets and spending.
• Technological Competition: Rapid advancements in AI could increase competition in the tech industry.
• Debt Levels: The company must manage its long-term debt effectively to maintain financial stability.
• Operational Realignment: The shift away from non-core markets must be managed carefully to avoid disruptions.

Aeries Technology’s Q4 2024 earnings call highlighted a significant strategic shift towards AI and North American markets. While the company faces challenges, its focus on innovation and high-value client engagements positions it for potential growth in the coming years.

Full transcript - Aeries Technology Inc (AERT) Q3 2025:

Conference Moderator, Ares Technologies: Good morning. Welcome to Ares Technologies Third Fiscal Quarter twenty twenty five Business Update Call. Joining us today are Ares’ Chief Executive Officer, Ajay Khare and Chief Financial Officer, Daniel Webb. This call will review the results of the quarter ended 12/31/2024 and discuss strategic priorities moving forward. Before we begin, please note that today’s discussion contains forward looking statements, including Ares’ expectations regarding future performance and market opportunities.

Actual results may differ materially. Please refer to the SEC filings and the earnings press release for a full discussion of risks and uncertainties. Additionally, this call will include certain non GAAP financial measures. Reconciliation of these measures to the most direct comparable GAAP measures are available on our earnings release and on our website. With that, I will now turn the call over to Ajay.

Ajay Khare, Chief Executive Officer, Ares Technologies: Thank you, and good morning, everyone. I’m Ajay Khare, the newly appointed CEO of Ares Technology. Many of you know me from my previous role as Chief Operating and Revenue Officer for the past ten years here at Ares. I’m honored to step into this role and lead the Company into a new phase of transformation and growth. I would like to take this opportunity to appreciate outgoing CEO, Sudhir Panikhesi’s leadership, which has set a strong foundation for our growth.

I’m also pleased to announce that Daniel Webb has been appointed as our Chief Financial Officer in addition to continuing his role as Chief Investment Officer. Daniel brings extensive experience in public market and investment banking. We believe his strategic insight will be instrumental in strengthening our financial discipline and ensuring that we deploy resources effectively to achieve our long term objectives. Today, I would want to focus on three key areas. Number one, strategic focus on profitable growth.

We have realigned our business model to concentrate on high value long term engagements with our core North American clientele, accounts that represent over 93% of our revenue. By existing non core segments such as Middle East, we are sharpening our focus on transformation led partnerships. This approach is designed to not only enhance our service quality, but also support our strategy of achieving profitable growth on both cash flow and adjusted EBITDA basis. Number two, robust cost discipline and financial health. Our recent cost optimization efforts have already delivered significant benefits.

This quarter, we further eliminated significant SG and A costs and annual expenses, a saving that is expected to positively impact our bottom line starting next quarter. Combined with our disciplined approach to resource allocation, these measures are designed to put us on a clear path to being cash flow positive for our foreseeable future. Lastly, innovation and AI driven transformation. The industry is evolving from legacy cost saving models towards transformation led engagements. Our Global Capability Center, GCC model, remains central to our growth strategy.

In parallel, we have observed that our AI practice is gaining traction. We now offer a complementary AI assessment to help clients analyze optimal areas for AI automation to drive process optimization and operational efficiency. Some recent examples of AI projects we have done include helping a telecom client achieve 90% accuracy in churn prediction. And in healthcare space, our automation solution for IT support has reduced human intervention by 40%. We believe these initiatives not only differentiate us in the marketplace, but also create tangible value for our clients.

In summary, with a strong leadership in place, our focused strategy on high value engagements and disciplined cost management, we believe Ares is well positioned to drive sustainable, profitable growth. We remain committed to excellence and delivering value to our stakeholders as we navigate an evolving market landscape. Now, I will turn the call over to Daniel to discuss our financial performance and outlook in greater detail.

Daniel Webb, Chief Financial Officer/Chief Investment Officer, Ares Technologies: Good morning, everyone, and thank you for joining us today. As mentioned earlier, I’m Daniel Webb, newly appointed as CFO, while continuing in my role as Chief Investment Officer. I’m excited to share our financial highlights and strategic outlook for fiscal years 2025 and 2026. For the third fiscal quarter of twenty twenty five, our key financial metrics are as follows: Revenues, North American revenue of $16,400,000 representing 13.1% year over year growth. Total revenues reached $17,600,000 down 6.8% year over year.

Importantly, North American revenue now represents over 93% of our business. Gross profit and margins. Our gross profit for the quarter was $4,000,000 resulting in gross margin of 23%. Income from operations. Income from operations for the third fiscal quarter of twenty twenty five was negative $5,200,000 compared to $700,000 for the third fiscal quarter of twenty twenty four.

Net income. Net income was $2,000,000 compared to negative $16,300,000 for the third fiscal quarter of twenty twenty four. Adjusted EBITDA. Adjusted EBITDA for the quarter was negative $2,000,000 While we experienced some headwinds in this period, our ongoing cost optimization efforts, including significant SG and A expense reductions, are expected to generate meaningful benefits in the upcoming quarters. Core adjusted EBITDA.

Core adjusted EBITDA for the third fiscal quarter twenty twenty five was $1,500,000 compared to negative $20,000 for the third fiscal quarter of twenty twenty four. Balance sheet. At 12/31/2024, we had $2,400,000 in cash and cash equivalents with the total long term debt at $1,500,000 Looking ahead, the company is reiterating its stated guidance for the fiscal year twenty twenty five. Revenue between $71,000,000 and $73,000,000 Core adjusted EBITDA between $6,000,000 and $7,000,000 In addition, we are introducing our fiscal year twenty twenty six outlook with expected revenues between $74,000,000 and $80,000,000 and adjusted EBITDA between $6,000,000 to $8,000,000 Fiscal 20 20 6 reporting and guidance will not include core adjusted EBITDA as we anticipate that all expected credit losses from prior non core markets will have been fully addressed this fiscal year. We believe our renewed focus on profitable growth backed by robust cash flow expectations and stringent cost controls, enhances Ares’ ability to achieve the same success.

We are committed to maintaining a clear strategic focus and leveraging our capabilities in AI, automation and GCC operations to drive value for our clients and shareholders. Thank you for joining the call.

Conference Moderator, Ares Technologies: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.

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