Hi everyone, thanks for joining the call today. We'll jump in right away.

I think Kanav covered some of these. Again quickly reintroducing the company for everyone, Capillary plays in the loyalty and customer engagement space globally.

We're regarded to be a market leader by any analysts globally in this space. What do we mean by loyalty?

Any kind of a long-term retention program for consumers or small businesses. In terms of markets, we today are fairly present across markets globally.

US is our largest market, about 60-odd percent of our revenue comes from the US, 15% comes from Europe, and about 25% comes from Asia today. In terms of scale, we work with about 465 brands globally, 25 of these are Fortune 500 customers.

Lots of scale on the platform, about 2.7 billion consumer profiles on the platform today. We've customers live in about 53 countries, 19 offices globally, in total about 750 employees.

We're an infrastructure-like product, we sit in every transaction that hits our customers, right, whether it's in the store or online or at the airport or wherever, right? Uptime is important, we're at almost a five nines product uptime again for this quarter, right?

In terms of our monetization model, more than 90% of our revenue comes from long-term subscription contracts, typically 3, 5, 7-year contracts with these very large global enterprises. It's a cloud-native product, all our implementations are across four colos globally.

We're fairly well recognized by all analysts, pick any analyst in the marketing space, Forrester or Gartner or Everest or QKS, you will see us in the either number one or very rarely in number two in what we do. Moving ahead, I thought we'll just spend a minute on this, this is The Forrester Wave, the most recent one which came about 9 months ago.

Forrester is the main leading marketing analyst globally, they have a report on loyalty for the last 10, 15 years now, they call it the Loyalty Wave, right? If you look at Capillary, we're both from a current offering as well as what we're building and strength of strategy, we're well ahead of the rest of the market.

Like I'd mentioned last time, we have a 5 on 5 score on 22 out of their 27 criteria, a 3 on 5 on the rest of the 5 criteria that they have. We're definitely the most AI-first platform out there in the space.

Pick any analyst, they will talk about our AI use cases being very ahead. We'll talk a little bit more about AiRA in some of the slides going ahead.

What we also excel with is in supporting very complex programs for very, very large enterprises. That's our niche.

Yep, with that, let's move ahead. Quickly spending a minute on the product, the intent with the product is to deliver loyalty and retention as an outcome, and hence, unlike a lot of our competitors where they tend to have just a loyalty stack, some of the major agencies that you saw earlier, Epsilon, Kobie, etc., which were there on the earlier slide, Capillary tends to be more broader as a product so that we can deliver loyalty or retention as an outcome, right?

Now at the base of the product is a data platform where we integrate into all kinds of data sources from our customer. If they have a CDP, we just plug into that right away.

We don't monetize the data platform side of the stack. Loyalty is our bread and butter product, that's what we are known for globally.

Over 90% of our revenues globally today come from the loyalty stack. Think of loyalty as any kind of a retention mechanic, could be memberships, subscriptions, points, rewards, differs by industries, differs by mechanics that a business wants to use to retain their customers.

Then we have the Engage stack, which is a one-on-one personalized customer communication platform. Roughly about 5% of our revenue comes from the Engage stack today.

Insights is all kinds of dashboards that are available for the business users to look at all kinds of loyalty use cases. We don't monetize Insights, it's a layer on top of the product.

Finally, Rewards, right, more applicable to banks and to telcos where they generally rather than give points or coupons, it tends to be a additional reward that you get for being loyal, right? That's the Rewards stack, that's about 5, 7-odd percent of our revenues there.

Again, across the platform, we have our AI assistant, which does a lot of stuff, we'll talk about it in the next few slides, right, so. We'll get to AiRA in a few slides, but in the interim, I think we've had a pretty decent Q1 and a good start to the year.

Like we always talk about really three levers of growth and three levers of profitability. On the first part, I think, on NRR we've had roughly a 111% expansion from our existing customer cohort.

Three levers there: more platform usage or inflationary increases, product upgrades, and new brands and geographies. Now, if you take out one, the largest customer we have, if you take them out, then the NRR has actually been 116%, tends to continue to be in that good range for majority of the customer cohort that we have.

Now, the second axis of growth for us is new customer wins. We continue to win large enterprises across globally.

If you take the last 12 months of performance, our new ACV, which is the new annual recurring contract value that we've signed up has grown about 75% year on year, excluding that one large healthcare customer that we had won the year before, right? Very good momentum on new logo sign-ups across markets, whether it's Asia, UK, Europe, or US, right, good momentum there.

Finally, coming to M&A, we had announced the SessionM acquisition, which we had bought from Mastercard on May 1st. We've had 2 full months of the integration of the SessionM numbers into the overall plan.

Like I had mentioned on the last call, this acquisition strengthens our footprint across markets: North America, LATAM, it adds to our APAC portfolio as well. SessionM is that product stack is known for its QSR and airline customers, those two categories are places where we had customers, but not as much penetration, it got us a good presence there.

Finally, some very good talent that has also come from SessionM over. As you might remember, we had done the Cognitive acquisition in May of last year, it closed on May 1st, 2025.

We've started the process of upgrading those customers over to Capillary, and this time we're using a lot of AI to do it. We think it'll be far more faster and far lesser effort on the customer as well as our side to get these upgrades done, right?

With that, moving ahead. Again, three large profitability levers for the firm.

As we've always mentioned, any net retention rate related expansion comes at a higher gross margin, right, because the cost of the servicing is already taken care of. Our subscription gross margin for the entire business, including the organic part and the inorganic part, is today at 66%.

Our organic gross margins are upwards of 75% now. They've been consistently upwards of 75% for the last few quarters, a lot of this NRR expansion on the organic side is fueling better gross margins on the organic side of the business.

Coming to the second lever of profitability, about 60% of our costs are not linked to customer revenue, right? Not related to COGS.

These scale at a much lower pace than the revenue scales, right? If you look at year on year, non-COGS cost for FY '21 is at least 12-15% lower than the revenue increase that you're seeing here, right?

Hence, as revenue keeps scaling, our below-the-COGS cost will continue to scale at a much lower pace. Finally, the third lever of margins is upgrade of customers from the M&A side.

Now, like we had mentioned earlier, typically the acquisitions we do are more around the 30% gross margin mark, and, as we migrate, they get to the platform margins of 70-75%, and that drives the increase. This quarter, for example, same quarter last year, we were at a roughly a 10% EBITDA margin.

Now we are more at a 18%, 17-18% adjusted EBITDA margin overall, and roughly a 20%-plus EBITDA margin for the organic side of the business, right? A big move there actually comes from the successful migration or the upgrades from customers for Brierley, Persuade, and Rewards.

Those three acquisitions that we had done before 2020, before June of 2023, all of them have been migrated over, right, which is driving that big move on margins. That's the last part there.

I think in the last 6 to 9 months, we've also now built a very AI-led upgrade platform where it really simplifies the amount of work needed to shift from one of these acquired platforms to Capillary. We think it will continue to deliver good margins for us over the next year or two, right, so.

With that, moving forward. We spoke a bit about this in the last I think analyst call as well.

In terms of AI, we think it's a net positive for us. Today, for example, we actually sit in the system of record.

The loyalty stack is like a banking ledger for all your points, rewards, all of that stuff, right? It is a system of record, and hence, AI or no AI, you will still need a system of record to keep that going.

It's also priced like a system of record. It's a per-transaction or a per-member based pricing that we have on that side, not much change on this part of the business.

What we've done over the last year or so is try and expand beyond that into a system of intelligence, which is our AiRA stack. Typically work that goes to an analytics agency or to manual dashboards, things like that, solve that through conversational analytics and GenAI, fairly white space in the loyalty marketing space, and it's priced on outcomes, like number of queries you ask, number of questions you're asking, and we're seeing very, very good adoption for this.

Today, out of our 150 customers, about 26 customers are actually live using the product. About just a little less than 10 of them are actually paying us for it, it is a use, and then over a few months, you sign up for the outcome-based pricing type approach.

We're seeing very good adoption as well as commercialization start on AiRA now. On new deals, the very large ones that we're winning, AiRA is now turned to be that big differentiator over the market and our win rates continue to be upwards of 35% so across the globe now, thanks to some of this AI stuff that's there in the product.

Finally, coming to the actions piece, which is you've got your insight, you've got what you want to do, and in simple English you can then go tell it to run a campaign or tell it to update a CRM or tell it to create a dashboard for you or create a game, that's the action agents piece. Again, as I had mentioned, Engage, which kind of sits here, the Engage product is only 5% of our revenue, this is an attempt at increasing that spread of revenues for us.

More newer in terms of the action agents, I think we're still building out this part quite a bit. Overall, we're seeing very good traction to what's happening on the AiRA side, both in terms of the analytics agent and the action agent in the business, right?

Moving ahead. We spoke about this last time.

The intent with AiRA is to provide intelligence and actions across the marketer's life cycle and go from that system of record overall. What we've been able to do well now on AiRA is a good learning loop as well, we now have thousands of queries being I think we're at roughly about 10,000 queries now, which our customers are asking this to do, and that acts as a very nice learning loop for the product to improve by itself, right?

With that, I will move ahead. Time.

This is a quick update on the SessionM acquisition. Things are on plan, I think.

It's been 2 months, and we had projected about a $32 million ARR of customer contracts that we had acquired through this. They've been no surprises on that side, all the entire $32 million have agreed to sign our paper, move over to Capillary.

That's been a good positive movement. Secondly, we've been able to turn SessionM fully profitable.

The first 2 months have generated, although small cash, just a little around the 5, 6 crore type mark as is what we've been able to generate as free cash from the acquisition, right? The business is at a break-even, it's profitable now, right?

I think what we're also very excited about on the SessionM side is the quality of customers is really good. A lot of them have shown a lot of interest in buying the AiRA stack, in trying to go beyond just the loyalty platform that SessionM is into and taking the other products we have as well.

We do think it is going to be a big driver on the NRR side going forward as well. Next is, I think we also now have a very good view of what we've actually spent to buy SessionM.

Net of all the adjustment, we've actually paid about 17-odd crores for buying the business. It's also been a very, very good financial deal.

You've essentially spent $1.5 million to buy a or probably a couple of million to buy a $32 million ARR business, right? It's been a very good deal.

We think we'll break even on this in a few quarters, right? The business is already profitable, it's already started generating cash, we do think it will deliver a payback possibly within this year, right, so.

With that, moving forward, we did a small, very small tuck-in, not material in terms of financial numbers on what we spent or, it's a platform called Customer Glu. It enables front-end experiences, like Capillary is very known for the back-end scale that we have.

What Customer Glu does is it enables front-end experiences in a mobile app or on a website for loyalty-like use cases. Like you can quickly launch a game, click click click, you can launch, you don't need to write code, you can quickly launch experiences, things like that.

We're rebranding this product and calling it as Experiences+, fits very well with what AiRA and Engage+ can do. We're also pricing this again on a usage-based type model.

We're already seeing a lot of our very large customers liking this because they don't need to depend on their IT teams to launch new interesting stuff in the app. Again, not material from a spend or a revenue or a EBITDA in more a acqui-hire IP-led acquisition.

Yep, with that, I will hand over to Anant. Anant, over to you.

Thanks Aneesh. Great, am I audible?

You are.

I'm glad to share our financial performance for the last quarter. We closed the quarter at ₹256 crore revenue, which is 43% year-on-year, 43% growth over Q1 last year.

Now, this revenue growth coupled with scale leverage and other cost initiatives, the EBITDA for Q1 stands at 41, ₹44 crore. That's a 132% improvement over Q1 last year.

Now, PAT stands at -₹9.5 crore for the quarter. Now, adjusting this for one-time exceptional loss, which happened due to a cyber fraud incident, and a one-time deferred tax liability, the normalized PAT for the quarter stands at ₹25 crore.

Can we go to the next slide? Yeah.

What you see on the slide is a year-on-year business growth of 43% and a year-on-year profit growth of 132%. Now, a great metric to look at for product companies is Rule of 40, meaning growth rate plus EBITDA is equal to 40.

That's kind of gold metric where product companies are valued on. On this metric, Capillary today stands at 60, which is 43% growth and 17% EBITDA.

If you look at only the organic business, the organic business grew at 17% year on year at about 23% EBITDA. Again, at about 40 on a Rule of 40.

Now, what drives this margin expansion or what drove this margin expansion from a year before? This improvement from 11% to 17% comes through combination of growth through NRR expansion, operating leverage on non-COGS cost, as well as from M&A synergies.

Next slide. Now, ARR is a good leading metric for the business.

It has consistently grown from ₹600 crore, ₹608 crore in FY '25 to ₹765 crore in FY '26 to ₹1,026 crore in Q1 FY '27. It's a year-on-year growth of about 34%, with strong contribution from SessionM acquisition, NRR, as well as new ACV.

Now, trailing 12-months new ACV, if we exclude one large healthcare customer, we see a growth of about 75% year on year to about 90, ₹92 crore. Now, this is further supplementing our growth and efficiencies.

The trailing 12-month Q1 FY '26 base included exceptional new contract value from one large healthcare customer, so that's what we have normalized to give you a figure on like-to-like basis. Next slide.

Now, we talked about year-on-year performance. At a quarter-on-quarter performance on profitability, adjusted EBITDA improved from ₹35 crore to ₹44 crore in Q1 this year compared to Q1 last year.

This is in spite of Q1 being a quarter when you have annual hikes. Normalized PAT improved from ₹19 crore to ₹25 crore from Q4 to Q1.

Now, this also includes increased amortization from SessionM acquisition. Now, understanding PAT and normalized PAT here, the delta between ₹25 crore PAT and -₹9.5 crore normalized PAT, we had a exceptional loss that happened due to a cyber banking fraud and a one-time deferred tax liability.

That's what has been the adjustment over here to give you a view on the normalized PAT. Next slide.

Now, if you look at how business showed up for the last many quarters or years, EBITDA and adjusted EBITDA are nearly equal given adjustment of finance income and ESOP expenses. If you look at the trend over the year, depreciation and amortization is at ₹20 crore for Q1 of this year, which is up from ₹17 crore for same time last year.

Now, this higher amortization reflects recent acquisitions of SessionM in this year and Cognitive last year. Perfect.

With this, would be happy to take any questions.

Hello. Congratulations, sir, on a great set of numbers.

A couple of questions from my side. If you can call out the percentage of clients who have migrated from SessionM already, and what kind of run rate are we seeing across FY '27, that would be great for.

Thank you.

Anant, should I take that? Please.

Yeah. Vinay, we've just done the SessionM acquisition, right?

Usually, the way it works is we spoke about it, I think, at the Analyst Day as well, that it typically takes about 2 to 3 years for all the customers to get upgraded. We will not start any SessionM migrations till probably end of this year, early next year, right?

Now, there are some customers who want to move irrespective of an upgrade, that, "Look, we just want to move to Capillary." That we are fast-tracking, that's about 3, 4 out of the 45-odd customers that have come from SessionM.

How do I put it, there is a lot of operational efficiencies that we're already seeing in SessionM, right, better run in terms of server costs, all that. You will see more margins coming out over the next few quarters from SessionM as well, even without the upgrades piece.

I think their infrastructure and the way they ran it when it was part of Mastercard was definitely very excessive. Right, we do think we can get that business to a 5% to 10% margins even without any upgrades.

That's helpful. As clients migrate, will our subscription revenue go up?

Is that how we're looking the SessionM clients to be for our company?

Two parts, right, Vinay. Usually when you're upgrading a customer, you don't actually charge for more, right?

Because there's already existing contract, you bought the company, you can't charge for more. Let's say we're seeing a lot of these customers wanting to buy AiRA or buy the Engage product or buy Experiences+, and those are opportunities to charge more.

Right, those are opportunities where their customers are willing to pay more because it's additional functionality, it's something that they were not using today. All of these books of the 110% to 116% NRR we keep talking about, right, depending on.

That is the place where this bigger book of business, this $32 million does have a potential to add another 10, 11, 10% to 15% additional revenues each year through the NRR motion. Did I answer your question, Vinay?

That helped, sir. Just one more thing, on AiRA, any kind of monthly run rate are you seeing?

Last time, last quarter, you were mentioning that a lot of POCs were happening. How are you seeing AiRA scale over FY '27?

We're right now, I would say, at $2 million to $2.5 million in terms of revenue run rates on AiRA. My hope is that we'll try and get to probably at least 5% to 10% of our revenue coming from AiRA this year.

Look, it is a new AI product. The adoption is very good.

I think the thing that we have to deal with here is that these are all large enterprise we work with, they really are very this thing about their budgeting cycles, right? In terms of adoption and in terms of as people turn over to their new financial year, can they put more budgets to it, I think we're seeing good traction there.

One last thing, on the acquisition you mentioned that it will give you some kind of coding ability in the platform when clients can create something. If you can just elaborate on that and kind of give what functionality we wanted from this acquisition, that would be helpful, sir.

Today, Capillary is a loyalty platform, right? A customer can go in and configure saying, "There is this weekend I want to give 3x bonus points on this airline," right, or this route or whatever.

It's the back-end configurations, the back-end coupons, all of that promotions becomes very easy with the Capillary platform. Now we also allow you to run games and give bonus points for running games and all of that stuff, right?

The front-end experiences of a scratch card, a game, I'm sure you've played some of these on the various apps. Now today, for a lot of our customers, if they have to do it, they have to go work with their IT team to actually build the front end out, right?

Like in the app, go get updates done, and usually all of these IT teams have their own roadmaps, and so although the loyalty manager can use our platform to run the back end very quickly, the front end would take them 2, 3 months to configure, get in the pipeline of the IT development and stuff. What Customer Glu, what Experiences+ does now well is it's an SDK that you plug in into the website or into the app once, right?

Once you've done that, how you're just in the back end configuring a new promotion, you could also go configure a front-end experience. Right, it really helps take out the dependency on the IT teams.

Think of it as a low-code/no-code platform to spin up games, experiences, front ends, and kind of make the dependency on IT teams less and make the marketers more independent in that sense. I hope I answered that for you, Vinay.

Yeah. Thank you so much, sir.

I'll get back in the queue, and all the best for the future. Thank you.

Hello, am I audible?

We can hear you. Yeah.

Thanks for the opportunity. I have a couple of questions.

First one, in last concall you said we are upgrading Cognitive customers to Capillary platform. Where are we in that journey, and what challenges we are facing in that journey if you can elaborate?

Post-upgradation, how much incremental margins can flow in our consolidated financials?

Right. I think, yeah, so that process has started.

I think the first customer will fully migrate on September 1st. Like I said, the way we're doing this migration is using an AI platform.

The first customer is also an attempt to fine-tune the AI platform to do further migrations, right? Now, let me spend a minute on what this AI platform does in terms of helping migrations, right?

Because these are very old companies that we're buying, right? Cognitive, I think, is a 1980s set-up company, their oldest customer is 30 years old on that platform.

What the AI pieces do is look up the code, look up the implementations, and automatically come up with what is it that has to be migrated, then it goes configures the Capillary platform, builds up any middleware that needs to sit in between the Cognitive implementation and the Capillary implementation. All of this is done in a AI-first approach without doing it with humans, right?

Without doing it with people. With that, we're looking to have the first customer going live on September 1st.

Now, once that happens and that's proven, then Cognitive is about 20 customers in total. I would actually not even 20, it's about 16, 17 customers in total.

Then you could accelerate the next 10 in probably a 2, 3-quarter time frame, right? What took us 3 years with a Brierley or a Rewards or a Persuade, Persuade actually took us 4, 5 years, the intent is that with this AI stuff, we should be able to see the same gains in probably a 18 to 24-month type upgrade cycle.

Like we said, May 1st was when we May 1st last year is when we bought this, the goal is that can we get the upgrades done by latest September of next year, right, 2027. Now, all the acquisitions that we do typically work at a 30% gross margin, and post, we can get them to a 65% or 70%-plus gross margin.

I definitely think, and Cognitive was roughly about 75-odd crores of revenues, I think there's at least another 10 to 15, ₹15-20 crore of EBITDAs that will come through as the migrations happen, right? We already realized some of the gains with better server costs, better all of that, but there's more margins to see for sure.

In fact, we had detailed this out a little bit in our last deck where we kind of broke our revenues down as saying, "Look, this year we're doing ₹1,065 crore. Out of that, organic, which is the core Capillary platform revenues at 75% gross margins is about 670-something crore, ₹673 crore, I think.

The rest was acquired revenues, which were barely at a break-even. We were projecting about ₹20 crore of margins from the acquired revenues."

That ₹20 crore from the 390-odd crores of revenues that we're talking about has the potential to deliver 120, ₹130 crore incrementally as the migrations happen, right, as the upgrades happen. Even in Cognitive, probably in the next year, on that ₹80 crore, you will at least see a 20-odd crores of more margins coming through.

Did I answer that question, Shaurya?

Aneesh. Thank you.

Second question is on the organic NRR of 111%. Can you bifurcate how much is coming from upsell, cross-sell, and the price increase?

How we are upselling and cross-selling our services? What areas of rooms we are targeting?

Anant, do you want to talk about?

Sorry, am I audible now, Aneesh?

We can hear you. I was asking Anant to.

Sorry, can you repeat the question?

I was saying out of the organic NRR of 111%, can you bifurcate how much is coming from upsell, cross-sell, and price increase? Like how we are upselling and cross-selling our services?

What areas of rooms we are targeting?

Got it. Shaurya, we typically divide our NRR into a few categories.

One category is essentially inflationary price increases, as well as overage-linked expansions. The other is through upsell, cross-sell, and the category three expansion for us is through entering into or expanding into newer geographies or newer customer cohorts, right?

On that, you then further have any churn in the business. Net of churn is what you see as final NRR of 111.

I don't have exact numbers, but rough bifurcation would be I think about 4-5% would be through inflationary increases and overages, and then probably another 10% between upsells and entering into new customer cohorts with the customer.

Got it. If you can tell what will be our churn rate in this NRR?

About 5-ish percent.

5-ish percent. Got it.

Just one more question. There was some cyber fraud incident maybe last month, was there any customer data or employee data breached due to that incident?

No, there was no exposure to any customer or employee data. It was a banking fraud where the bank account of one of our subsidiaries was impacted.

Got it. Thank you, and all the best.

Thank you.

Hi. My questions are twofold.

Thank you for this update and congratulations for performance and the revenue. Two questions.

One is, is the loss that you suffered due to fraud fully covered by insurance? Question number two, if you could elaborate a little bit on how a customer, while transitioning from the Cognitive platform or the other platform which you are acquiring to Capillary platform, will entail a higher gross margin?

Sure. On your first question, we do have insurance policy and we have initiated work on that.

Our insurance provider is working on that. In short, yes, it is covered by insurance, but how much and when it would be recovered, I think that we don't have clarity on.

That work is in progress at this point in time. On your second question, Jayesh, little longish answer here.

Most of our traditional competitors that we end up acquiring operate more in a agency model where there's a huge T&M, like a big team is involved in delivering loyalty as an outcome in the form of services. What predominantly changes from these companies to Capillary is that you're moving them onto a tech platform.

For doing work where you in the past used to have a lot of people, now you are able to just do that through some configurations on the tool. Think of it as, and we have shown a demo before that a process which would take, say, couple of weeks where you have developers creating a campaign, doing segmentation of customers, executing something that would require QA, all of that, can happen on Capillary platform through just configurations within an hour.

That's the big delta in moving from a T&M model to a tech platform. A large part of the cost which was people cost, which brings your gross margin down to 30s, changes drastically when you move on to a tech platform and get to late 60s or early 70s.

Right, thank you.

Yes, thanks for the opportunity. Aneesh, Anant, can you give some, firstly on the ACV that you've talked about, does it include anything from the SessionM part also, or is it only our older business, ex of the large healthcare client that we talked about?

It doesn't include any SessionM, Rishi.

Understood, okay. The other thing is just want to understand in terms of organic versus inorganic growth split-up, right, how do we measure it, right?

Because there would be 2 months' contribution from SessionM in this, and I'm assuming you have benefited from currency as well. What would be organic, inorganic split, and do we in any way hedge our currency exposures?

Anant, do you want me to take that, or will you?

Yeah. Rishi, in terms of growth, as I was mentioning, it's a 43% year-on-year growth for Q1 versus Q1, which actually considers 2 months of SessionM.

In this year, there's 2 months of SessionM revenue versus 0 in last year. Now, if we remove that and just remove that as well as Cognitive, like any of the inorganic revenue, the organic growth is at 17% versus same time last year.

The other question you asked is the benefits through currency, that's about 6% on it.

Do we hedge our currency exposures, or everything flows down from top line to bottom line?

If you look at, half of our cash actually is in USD and about half is in INR. Given about 60% 60% of the business is US, and you kind of keep cash over there, there is sort of a natural hedge in the business in that manner.

Got it. Lastly, just the expectation on ESOP expenses for this year and next, if you could give some color?

Sure. Our ESOP expenses for this year would be about ₹12 crore to ₹15 crore, and you would see that our ESOP expenses will sort of remain in this range.

We would typically look to maintain it between 1% to 2% of the top line, and that's been the trend, we are looking to continuing on that.

Understood. Thank you so much.

Hey, am I audible?

Akshay, go ahead.

Super, thank you. Hi, Aneesh, hi Anant.

A couple of questions. During the call, you spoke about how companies, whenever you acquire a company, the customer does not necessarily migrate right away, and it's a journey, right?

Hello, yeah, am I audible?

Yes, there's a disturbance, Akshay.

Is it better now?

Yeah.

Yeah. Historically, you've spoken about how you are buying agency-type businesses and then sort of transitioning them to a software platform that you have, right?

Now, when you are owning this business in the transition where they're still agency-type and you're transitioning them to software, logically an agency-type business would have people on the rolls doing the work for the company. Then, and when you give them a software, it actually transitions to a the company employees or the marketing team is doing the same work.

In the period of transition, how does it work? Like they've took up the platform, but but the people in, say, SessionM are doing the work for the marketing teams?

Can you help us help me understand how how this exactly works as you kind of materially change the business, right? A marketing team using a software is so different from marketing telling an marketing team telling an agency that, "Can you help me with this?"

Can I

I'll take this, Anant. Right, so, Akshay, two, three parts.

You're right. The first few acquisitions we did, Persuade, Brierley, even Rewards to a large extent, were agency-like.

SessionM is a SaaS company, was Cognitive, right? Both are SaaS-ish.

Now, they have different issues, but let me answer your question first on So what happens in an agency is, let's say you want to run a campaign, right? Now, because they don't have a great software platform, they will have someone go do like a bunch of this like go build, write code to like come up with that campaign, it takes 2 months, etc.

Now, a lot of those companies that we bought didn't have like an India presence. Right?

The first thing we do, even before you migrate, is that some of these low-level works of just keeping a platform updated, being able to run promotions, you can do that very well from here, right, especially when, these are very back-end like jobs, they're not even customer-facing. In fact, in none of our acquisitions do we change the customer-facing teams.

All of these companies are Keep SessionM aside, are sub-scale, right, are like $10 million, $11 million, $12 million revenues, they can't have the they can't have a setup here in India, right? They would typically work out of So that gives you the earlier momentum and margins.

Like even like even in Cognitive, when we bought it, it was probably at like 5-10% margins. Today, they're already at like a a decent Like because we've done some of these changes through last year already.

Right? Essentially for the customer, a lot of the it's not just using the software, there was a lot of stuff which should ideally have been like no-code or a configuration, which people end up ended up doing in some of these older companies.

Right? That's the piece that you're that you're switching, right?

Like for example, Brierley is a good example I can give you. When we bought Brierley or a year before we bought Brierley, it was, I don't know, like 200-something people, right?

Today, for that same revenue, we have 12 people.

Wow. Right?

It's the same customer-facing people that we have. We haven't changed that side of the angle at all.

It's more you don't need to write code for running campaigns, you don't need to write code for pulling a report out, you don't need to do all of that, which is what agencies end up doing, right? For everything, they will send you a bill and put some five people to do something.

Right? The two steps to margins are, one step is you move to a India center for the back-end type work.

The second step is you fully move to software. Right?

That's the two steps to get to better margins in each of these cases. Yeah?

Sure. Just to be sure, so, for example, let's say a customer has not transitioned, and let's say in the case of a SessionM, it was very simple, they were already using a different software, and now they've got a better software, right?

I would imagine, and with some bells and whistles. In that case, they would just take up a new software and learn how to do it, or you would keep people on your rolls, say, in India or elsewhere who would kind of do the work for them?

Let's take SessionM and how the margins will come there, I'll describe that to you. Today, if you look at Capillary, on our book of business, our server costs are roughly about 7%, 8%, 9%, less than 10, right, depending on which colo, etc.

Some of ours are 7, some are 10, but At SessionM, their server costs are 50% of revenue, because it's just a badly architected platform, right? The first initial set of gains that we are seeing on SessionM is just by getting that architecture right, which, obviously we're a far more cost-conscious and a much more frugally run company, we are getting that act together.

Now, in SessionM's case, like I said, it's already a SaaS business, right? There's already a software that customer use themselves, right?

It's not an agency. In SessionM's case, what we're doing is some of the UIs that they will use will also be available in our platform, it's not much of a change of experience or relearning for our customer.

Did I answer your question, Akshay?

That was super helpful. One more question is this definition of NRR, ACV, it's sort of super confusing in the sense that can you help us understand what exactly do you mean by an NRR at a given point?

What exactly do you mean by an ACV at a given point? When you say an organic NRR, does it mean that if a customer moves from Cognitive to your platform, does it get added there or not?

If somewhere you define this, it will be very helpful.

Should I take a shot at it, Anant, or? Up to you.

Sorry?

Okay. Let me take this, add to it.

Akshay, NRR is net retention rate. Think of it this way: all the customers that are present on Capillary platform on 1st April 2026, how much revenue they contributed in 12-months period before that and how much revenue they'll contribute in FY '27.

In FY '26, let's say you made $100 from them, in FY '27, if you make $111, then the NRR is 111%. 111.

Sure.

Just to add, but when we're saying,

Akshay and everyone else on the call, when we're saying organic, we're basically saying it's only Capillary platform revenues. Right?

Organic for us is essentially revenues that are on the Capillary platform, right? Yeah.

If someone moves from Cognitive to your platform because you upsold them, then?

We will consider that into NRR calculations next year, not in this year.

Not in this year, okay. Yeah.

Right, so

that you have a like-to-like.

Perfect. ACV, how should we think of that in the sense that, again, this simple explainer would be super helpful in terms of how you are doing it.

Sure. ACV is annual contract value, right?

The metric that we showed you is new ACV. The new annual contract value that Capillary won in that period.

That's a leading indicator of how the business would be going forward, because whatever new we have won, that's the business which is going live on the platform and will give revenue in the following 12 months and thereafter.

In this case, let's say I am already a customer of Capillary, and let's say our billing was $1 billion a year, and then I decided to buy two more, say, Engage platform, and I started to pay $1.2 million a year instead. The new ACV will be $0.2 million, right?

Correct.

Right. Now, let's say in this case, if let's say you acquired Cognitive, and one of the Cognitive clients then moved to the Capillary platform, do you consider that in ACV or new ACV, or you do not consider that in new ACV?

You don't consider that in new ACV, Akshay. Then

that's also sort of.

you can get. I understand, but this would be helpful for everyone, I'll go back after this.

You don't consider that in the new ACV because you're not signing a new contract.

Okay.

Even if there is a organic, just volume-based expansion of a customer, we don't even consider that in new ACV. No inflationary expansion, no.

New ACV is just where we are comping our sales guys, there is a new contract. Only those are considered a new ACV.

The way this migrated customer comes over is next year the revenue on the Capillary platform goes up, and then you track it through NRR.

Makes sense. Super, this is helpful.

Thank you so much, Aneesh. I'll come back in the queue.

Hi, can you hear me?

Yes, Achin, go ahead.

Yeah. Aneesh, can you tell me, let's say if there is no constraint on funding, can an AI-native company create what you have?

What are the key things which let's say the younger Aneesh with all the fundings and all the AI advancement which are happening to write code and everything still cannot match what Capillary is today?

Look, we play in the enterprise space, right? I've struggled with this myself over many years when we opened the US, when we whatever, right?

Just having a product doesn't mean that a Fortune 500 is going to come and buy from you. We've customers even in the Fortune 50, right, like we have at least five customers in the Fortune 50.

They won't buy. Right?

It's not just matching what's there in the product, you also need to have enough implementations, be very well regarded by analysts. Like let's think about this, right?

Even today, enterprise AI adoption is abysmal because it's risky, right? Most large enterprises live on risk.

You get fired for taking a very risky decision in a large enterprise, you don't get fired for doing nothing. Right?

In my head, to your point, look, I think I'm a strong believer that with AI what's happening is your ability to build code is just increasing significantly, right? Distribution, brand, analyst view of things, I think some of those end up becoming far bigger differentiators than just the ability to write code.

At least in our head, it's both sides, right? We continue to invest on being the best product out there and being at least a year ahead of everyone else, and also in all of these stuff.

Because in a very confusing, very noisy world, you would mostly go ask someone else that, "Who should I buy from?" Another customer, another analyst, another partner, right?

I feel the moat is in as much in brand, distribution, all of these pieces as it is in just the quality of the product. Did I answer that for you, Achin?

This is very clear. Thank you.

Sanjay, if you're saying something, we can't hear you.

I just got unmuted. All right, can you hear me, guys?

We can hear you, Sanjay. Sanjay, go ahead.

Okay. If I look at FY '25 growth, it was 13% because you didn't have any acquisition, and now Q1 organic growth is around 11%.

Just trying to understand our organic growth in a year you don't do any acquisition. If you want to boost it by upselling or cross-selling, does it affect the economics?

How should I look at your organic growth in a year where you don't do any acquisitions?

Sanjay, the loyalty space is a red ocean, right? Which is why we have this dual engine of organic and inorganic.

Now, in the year that we didn't do an acquisition, that 13% number you're seeing is actually wrong. It's more closer to 20% because we had done an accounting change in that year.

Instead of looking at overall campaign revenues including SMS cost, email cost, we had moved to our only margin model. Right?

Which is why, if you look at our DRHP, it's very well covered in the DRHP. You should look at the net revenue number because then both accounting standards look similar.

If you look at that number, it's more like a 22-23-odd percent growth. I think it's yeah, 498 to something around that.

The number is blanking me out, but if you look at the DRHP, the numbers are there, right? Even this year, we will do roughly a 20%, 23% organic growth this year.

Q1 is a little bit of an aberration because this large healthcare customer we had didn't grow, right? Which is why if you remove that, it's a 116% NRR if you remove that one healthcare customer, right?

Overall through the year, we're looking at a 23% growth, including a currency impact of about 6%, you will see about a 17-odd percent fully-year organic growth for the business. Now, look, we had again shared this in the Analyst Day piece that we had done.

There's roughly about 90 companies in the loyalty space which are more than $10 million in revenues, that $10 million to $100 million bracket, right, which is where probably our M&A thesis can play. Look, it is a red ocean, loyalty is an old business.

Now, if you look at what we are paying for our acquisitions, it's 0.3%, 0.5%, 0.1%, right? Now, M&A actually in Capillary is a customer acquisition cost substitution story.

Right? We are not buying new functionality, we are not buying any of that, right?

We are actually buying contracts, which are many-year contracts. We are migrating those customers over a couple of years and moving, and then they become 70% gross margin businesses or revenues for us, right?

I do think, and we've mentioned about this in the DRHP as well, we think the right way to think of Capillary is 15% to 20% organic growth business and inorganic, and we will continue to do inorganic. It's almost like a sales motion.

I have a team which constantly looks for acquisitions, right? Now everyone in the market knows that we buy, we have a big inbound, and we buy at great prices.

That discipline, I think, will continue to remain. Right, so.

No, I understand the M&A economics. When you upsell or cross-sell, does it affect the economics?

Are you forced to boost growth, do you have to cut down on your economics?

Upsell or cross-sell, you actually think of it as whatever revenues that you've got, they migrated to Capillary. Now those revenues continue to show the same 115-odd percent of net retention rate.

Right? Those revenues, once they come in, continue to grow at the same pace because there is no product like AiRA, they didn't have something, they will buy that, or they will buy our Experiences stack.

In fact, probably next time we can pull out saying what has been the NRR on the inorganic customers who migrated over. It's very similar.

Once on the Capillary platform, there's no differentiation there, right, so.

Okay. Last on AiRA, can you give the actual ARR net of cannibalization because I think it affects two other products?

What is the ARR and any economics there in terms of, let's say, gross margin after the inference cost? I know it's early days, but anything on churn, retention on the early cohort of AiRA customers?

We're at about $2.5 million-ish in ARR right now on AiRA, Sanjay. None of this is cannibalized.

The action agents side, I think like we said, Engage is a very small 5% of revenue today. From the action agent side, I think we can grow that book of business, but today there is no cannibalization on that side, right, so.

Okay. Gross margins in AiRA or contribution margins in AiRA?

Similar, because it's all upwards of 80%. Yeah.

All right, thank you. All the best.

I think we have another 5 minutes, and I know last time also Srinivasu P.S.' s question didn't get asked, we can continue another 5 minutes.

I think we have three more questions.

Hello, am I audible, sir?

We can hear you.

Yeah. My question is about agentic commerce.

When a shopper is an agent rather than a person, what will happen to this points and tiers and the gamified front ends like Experiences+ that you have talked about today? Is Capillary's roadmap is to expose and earn and burn this through agents which is agent-accessible endpoints?

Absolutely. I think Srinivasu, that's a great question, right, so.

Like you said, when an agent asks for, when an agent is shopping, today as humans, right, if the cognitive load of, like typically in loyalty you get 2%, 3%, 4% points. In usually loyalty in today's world is a very subconscious type of a, "I get something, I get 5% points from this airline, I will go there," right?

It's not a very rational decision. When an agent buys, on the other hand, even a 1% difference, the agent will say, "Okay, like this is better than that," right?

In an agent buying decision, we think loyalty will move to becoming more rational, not just this subconscious preference of, "Oh, I know I get something." We think that, both promotions, the value of points, personalizing it to a user, all of this becomes a lot more critical because an agent is not lazy like humans are.

Right? It is going to like measure to the last rupee, the last penny, and then take a call, right?

That's why we think we actually have a massive edge, because then, when an agent is communicating with a with, with a platform or with a customer like customer of ours, the turnaround times, the tech needed, all of that needs to be like really, really good. Like and most of if you look at most of our competitors, they're all agencies.

Their tech is like gone and done and dusted, right? We do think, you know In fact, in a lot of our newer wins that we we talk about this quite a bit, that, the the importance of promotions, the importance of coupons, the importance of like, less than 100 100-millisecond turnarounds, all of that becomes much more critical in an extremely rational, agent-like behavior than it is actually in, when a human is buying.

Did I answer that question for you, Srinivasu?

Yes. Thanks a lot.

Yeah.

Good evening, sir. Thanks for the opportunity.

Am I audible?

We can hear you.

Yeah. Firstly, you have been calling multiple times that our big competitors are large agencies.

Can you help quantify the market share in the loyalty program space held by these agencies and an independent software player like us and maybe the large ERP guys?

The very large agencies are, I can name them, right? They're all on the Forrester report, which is there on our website, which is also there on the first few slides.

It's people like Epsilon, last reported revenues of Epsilon was a couple of billion dollars. Merkle, which is part of Dentsu, last reported revenues was upwards of half a billion.

We know that Kobie, Bond Brand, all of that gang is again in that few hundred million of revenues. Now, software-only is much more newer.

There's us, there's Salesforce, they have a small loyalty product, there's Oracle's CrowdTwist, which we haven't seen in competition for many years now. I would say less than 10% of actual revenues far less than 10% of actual revenues sits with software today as compared with agencies.

Sir. Just to get an understanding, because they typically deal with the CMOs of Fortune companies where they deal the marketing budgets.

So.

We also are the same budget. Our customers are CMOs again.

Got it. Most of that growth is coming from shift towards an independent software player like us, right?

Is that right way to put?

Correct. More and more, I think teams want to have faster speed, and this agency model of everything taking 2 months doesn't work.

That's driving the shift. Yeah.

Got it. Thanks.

Hi, Aneesh. This question is for you.

Just one question that I had. Now considering the sort of capabilities that we have built in terms of different verticals as well as in terms of offerings, in terms of AI, do you think now we're at a stage where we should be able to attract more larger clients organically as well, or do you think there's still needs more to be done for that to happen?

Chintan, loyalty is a very sticky business, yaar. The problem with the sticky business, it's sticky for everyone, right?

Whether it's for us or for our competitors. The problem we see is that the product slide that I showed you, the average number of places you integrate with a customer is about nine nine different places, right?

Which is reason why.

Hello, Aneesh? I think we lost Aneesh here.

Am I audible?

I just take it forward there. Chintan, I'm guessing there are two parts of the question here.

One is on the enterprise customers organic motion on that. Just a slight different data point.

If you look at some of our Fortune 50 and Fortune 500 customers, those have all been organic inbound. Like the largest healthcare customer or one of the largest healthcare pharmacy chain in the US or one of the largest fuel retailers, some of these are Fortune 50 customers have been all organic inbound.

That I think as our presence in the US and the brand awareness is increasing, that has constantly been improving for us. Point to note here is that we're just 5-year-old in the US, it took some time for some of this inbound to start happening, but now that we are leader on a lot of these independent analyst reports, a lot of that inbound has started happening now.

On the other side, obviously if somebody is already on another platform, the time that it would take because of the stickiness for them to really get pained with it and do a RFP and come in the market, that is a constraint. That's where the inorganic motion of buying companies come into the play.

We use combination of both these to acquire more large or super large enterprise customers.

Anant, if I just flip it, is it fair to say that despite all this AI, etc. coming in, still it's not going to make a difference for somebody else to sort of use that and acquire clients unless the customers use it in-house?

If you look at, AI is not really making things move from a provider to in-house. Rather, what we're seeing more and more is that even programs that were being run in-house, some of those are actually coming in the market to look at the best provider and move their programs to them.

I think one of the main reason for that is that loyalty is actually it's bought by a marketer, right? As in it's more CMO buy than a CIO buy.

Anything to do with marketing is fast-changing. Your requirements today versus your requirements next year keep on changing.

In places where some of these have been run in-house, this constant ask from CMO to kind of get things done or ask for newer features, newer activations for their customers. If you think of loyalty is not just point earn and burn, right?

You will have badges, milestones, referrals, bunch of those features that the team would keep looking for. That's where most in-house programs tend to end up becoming slow or constrained for marketers to try out new things.

We are seeing things moving from in-house to tech providers, as well as we are seeing things from an agency world to a tech provider. You're kind of seeing tailwinds on both these cohorts of the TAM for us.

Got it, understood. Anant, that was very helpful.

Just one last clarification on the SessionM acquisition cost. If I'm not wrong, earlier the cost to be paid was around $17 million, right?

Now we're saying we have net paid ₹17 crore. What am I missing here?

Is there a remaining part as a huge leverage that we've got in, or what exactly is the gap here?

Chintan, it's actually a $20 million buy. The deal value, the enterprise value for the SessionM business we bought is $20 million.

The way we had structured the deal was that it would be adjusted for any net debt items at the time of closing. Now we had to structure it this way because some business was sitting in SessionM entity, some business was sitting in Mastercard.

There was lack of clarity to the seller as well at the time when we were doing term sheet they didn't have a clean balance sheet or P&L statement for this portion of the business because of, again, business sitting in multiple entities. When we did the final true-up on 30th April, this value basically got down to about ₹17 crore.

Just to clarify, there is no debt on the SessionM entities we have bought. It's not like you get ₹17 crore plus some debt or something.

These are debt-free entities as well.

Got it, understood. Finally, what have we paid for this Experiences+, the Glu acquisition?

A few hundred k, not worth talking about, Chintan.

Got it, understood, yeah. Thanks, Aneesh, and thanks, Anant.

Hi Aneesh, congrats on good set of number, and glad to connect again. Two questions.

One, this quarter, our ACV is ₹92 crore against ₹53 crore, and FY '26 versus FY '25, this number was almost flat, and now it's 80% growth. How should we read it in terms of what is supposed to come in next two, three quarters?

Let me take that, Anant. Saurabh, the numbers we report is a trailing 12-month, it's not only one quarter.

Both the 53 and the 90-odd number are trailing 12-month numbers, right? Because our average deal cycles are 9 months, it's a large enterprise business, looking quarter-to-quarter is not the best way for a business like ours.

Now look, we're seeing good momentum on new sales, which is what is that 53 to 90-something, right? We continue to see very good momentum, both in the US, Europe, and Asia.

My belief is that I don't know if we will do a 75% overall for the full year, but we will definitely do at least 30%, 40% more new ACV than last year for sure.

Last year, exactly, exactly. Okay.

The other question I had is the latest acquisition, SessionM, this is little different from all the previous acquisitions we have done because of the software nature of the business. Those businesses, if I remember, it took us 2, 3 years to reach to 44% contribution margin.

I don't know if that converts into a 20%-plus EBITDA margin, but you can correct me. Given SessionM acquisition is little different, if you can educate little bit on how will be the growth trajectory and the EBITDA margin trajectory of SessionM you're planning for?

Even Cognitive, which was last year's buy, Saurabh, was SaaS-ish, it was not agency-only, right? Now, look, I think the way to think about it is when you're at a 70-odd percent gross margin as a business, you probably have 25% cost of SG&A, right, cost of sales and all of this, you should get to about a 40% free cash, 35-40% free cash being generated by that book of business.

In SessionM, like we said, the problem is slightly different. Their server costs are 50% of revenue, actually more, right?

Their server costs are a very, very large part of revenue. That we can bring down even without upgrading those customers to Capillary.

Right? We believe that there is at least, I would say, at least $6 million, $7 million, $8 million that we might save over the next few quarters, the next three, four quarters, by just not focusing on upgrading them to the Capillary platform, but by just bringing this server cost down, right?

My gut is the journey from roughly a break-even now will be to a 15-odd percent in an year and then over another year we will get to that 35-40% margin.

Got it. Just to conclude, as I think we're doing very good both on the organic and inorganic side, will you retain with the same kind of guidance, or do you think now it is looking on the conservative side, or will you wait for one or two more quarters to just have a look at it?

We will definitely beat our 1,065 and revenue and ₹172 crore number. How much and all, I don't think we want to revise any guidances right now.

We'll beat those numbers, but by how much, I don't think we should do it now. Great,

great. Wish you all the best, Aneesh.

Thank you.

Thanks, Kanav. No, I think it's been a good quarter, both on the organic and the inorganic side.

I think we had this fraud incident, which was the bummer, but as a business, I think we're very excited about what we're seeing both from a logos that we're able to win, the kind of conversations we're having, the adoption that we're seeing on the AI products. We continue to, I think build on, and we do believe that hopefully someday we'll be able to get to being the largest and the best loyalty business out there, right?

Thanks everyone for joining us today. Thank you.

Thank you everyone.