Aeries Technology, Inc. — Fiscal 2024 Form 10-K
Reporting period: Fiscal year ended March 31, 2024, compared with the year ended March 31, 2023. This is an annual report, not a standalone 2023 fourth-quarter report. Aeries completed its business combination on November 6, 2023; the transaction was accounted for as a reverse recapitalization, with AARK treated as the accounting acquirer. The company also changed its fiscal year-end from December 31 to March 31.
Business context and financial performance
Aeries provides consulting, operations management, and technology services, with a focus on establishing and operating Global Capability Centers for private-equity portfolio companies and mid-market businesses. It reported more than 30 clients and approximately 1,700 employees at March 31, 2024.
| Metric | FY2024 | FY2023 | Change |
|---|---|---|---|
| Revenue | $72.509 million | $53.099 million | Up 37% |
| Cost of revenue | $50.868 million | $39.442 million | Up 29% |
| Gross profit / margin | $21.641 million / 30% | $13.657 million / 26% | Margin up about 4 percentage points |
| SG&A | $18.654 million | $11.326 million | Up 65% |
| Operating income | $2.987 million | $2.331 million | Up 28% |
| Net income | $17.256 million | $1.706 million | Up $15.550 million |
| Adjusted EBITDA (non-GAAP) | $9.192 million; 12.7% margin | $8.683 million; 16.4% margin | EBITDA up; margin down |
| Operating cash flow | $(4.299) million | $2.111 million | Declined $6.410 million |
| Cash at year-end | $2.084 million | $1.131 million | Up $0.953 million |
Revenue growth reflected $18.3 million from new clients and $1.1 million from existing-client ramp-ups. North America contributed $56.958 million of FY2024 revenue; Asia Pacific and Other contributed $15.551 million. Management attributed higher gross margin primarily to increased project-based consulting, which it says typically earns higher margins.
Net income included a $16.167 million non-cash gain from changes in fair value of derivative liabilities: $14.765 million related to the forward purchase agreement (FPA) put option and $1.402 million related to warrants. Accordingly, reported net income substantially exceeded operating income. Adjusted EBITDA excludes this fair-value change and other items; it is a non-GAAP measure and should be considered alongside GAAP results.
Liquidity, debt, and balance sheet
- At March 31, 2024, cash was $2.084 million, current assets $32.836 million, and current liabilities $38.125 million, implying a current-liability excess of approximately $5.289 million.
- Total liabilities were $50.587 million; total assets were $49.407 million. Shareholders’ equity was in deficit by $1.914 million.
- Borrowings included $6.778 million of short-term borrowings and $1.440 million of long-term debt. The company also reported $8.151 million of lease liabilities.
- Accounts receivable increased to $23.757 million from $13.416 million. The company recorded a $1.263 million allowance for credit losses, versus none reported for the prior year.
- Operating cash flow was negative despite positive net income; the filing attributes the decline mainly to increased receivables. Financing cash flow was $7.056 million, including $8.666 million of net proceeds associated with the business combination and increased borrowing.
- The $3.8 million Kotak Mahindra revolving facility was available for operations. The company also reported a $0.834 million loan from a director’s family member at 10% interest and other affiliate borrowing.
Changes, outlook, and material risks
- Going concern: Management and the auditor identify substantial doubt about the company’s ability to continue as a going concern, citing negative operating cash flow and the equity deficit. Management expects operations, cash reserves, and debt capacity to support the next 12 months, but that assessment depends on mitigation measures, including additional financing and restructuring liabilities. The filing states that the financial statements remain prepared on a going-concern basis.
- Subsequent financing and ownership changes: An April 2024 private placement raised $5.0 million gross and approximately $4.68 million net. On April 5, 2024, founder Venu Raman Kumar exchanged AARK shares for 21.337 million Class A shares. The filing reports that 10.566 million additional exchange shares remained to be issued, including 7.741 million subject to conditions. These and other issuances may dilute shareholders.
- FPA exposure: The FPAs cover approximately 4.0 million shares. For shares still held at the one-year maturity, holders may elect $2.00 per share in cash or additional shares intended to provide a $2.50-per-share return. The company warns of a potential cash payment of up to approximately $8 million or dilution.
- Client concentration: The top five clients represented 49.8% of FY2024 revenue, compared with 63.8% in FY2023. Two clients each exceeded 10% of FY2024 revenue, at 14% and 12%. Client termination, slower collections, and lengthy sales cycles are material risks.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at March 31, 2024. Identified material weaknesses include inadequate segregation of duties, delays in recording significant transactions, and deficiencies in information, communication, and monitoring controls. Prior carve-out financial statements were restated for errors involving EPS and share counts; remediation is ongoing.
- Audit and listing: The auditor issued an unqualified opinion on the financial statements but did not opine on internal-control effectiveness. The audit committee replaced KNAV with Manohar Chowdhry & Associates in August 2024; the filing notes expanded audit procedures were requested for revenue arrangements in the Middle East and APAC. Nasdaq notified the company of delinquent periodic filings; the 10-K says the June 2024 Form 10-Q was still outstanding and a compliance plan may be required.
- Other risks and outlook: No quantified revenue or earnings guidance is provided. Management’s strategy includes expanding private-equity and mid-market sales, cross-selling digital and AI services, international expansion, and potential acquisitions. Key risks include foreign exchange exposure, collection uncertainty, dependence on India and Mexico delivery operations, competition, employee retention, cybersecurity and data privacy, AI-related risks, and potential equity dilution.
- Fair-value disclosure to reconcile: The MD&A text describes the March 31 FPA put-option liability as $42.3 million in one passage, while the balance sheet and detailed fair-value note report $10.244 million. Investors should verify the correct figure and the related accounting; this summary uses the financial-statement balance-sheet and note values.
Important facts for investors to verify
- Reconcile the FPA put-option liability disclosure and understand the maturity cash-versus-share election and potential funding requirement.
- Track receivable aging, subsequent collections, and credit-loss allowances, particularly in newer international markets.
- Assess operating cash generation and the company’s progress on financing, liability restructuring, and its going-concern mitigation plan.
- Confirm the status of remaining exchange rights, issued shares, equity awards, and other potential dilution; compare the 15.619 million shares outstanding at fiscal year-end with 44.500 million reported at September 27, 2024.
- Monitor remediation of material weaknesses, future filing timeliness, and Nasdaq listing compliance.
- Evaluate the effect of client concentration and client termination rights on recurring revenue and margins.