Q1 2027 Capillary Technologies India Ltd Earnings Call

August 4, 2026

Speaker #1: Please note that anything said on the call which reflects the outlook for the future, or which could be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces.

Speaker #1: To give you some in-depth understanding of the company and to answer all your queries regarding the results and the company, we have with us, from the management side, Mr. Anish Reddy Bodu, Founder, Managing Director, and CEO.

Kanav Khanna: To give you some in-depth understanding of the company and answer to all your queries regarding the result and the company, we have with us from the management side, Mr. Aneesh Reddy Boddu, founder, Managing Director, and CEO, and Mr. Anant Choubey, Executive Director, CFO, and COO. With that being said, I would like to hand over the call to Aneesh to take you guys through the presentation. Thank you. Over to you, Aneesh.

Speaker #1: And Mr. Anant Chobe, Executive Director, CFO, and COO. With that being said, I would like to hand over the call to Anish to take you all through the presentation.

Speaker #1: Thank you. Over to you, Anish.

Speaker #2: Hi everyone, thanks for joining the call today. We'll jump in right away. I think Kanam covered some of these. Again, quickly reintroducing the company for everyone: Capillary plays in the loyalty and customer engagement space globally.

Aneesh Reddy Boddu: 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 are regarded to be a market leader by any analyst globally in this space. What do we mean by loyalty? Any kind of a long-term retention program for consumers or small businesses. Yeah. In terms of markets, we today are fairly present across markets globally. US is our largest market. About 60-odd% of our MU 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 have customers live in about 53 countries.

Speaker #2: We are regarded as a market leader by any analyst globally in this space. What do we mean by loyalty? Any kind of long-term retention program for consumers or small businesses.

Speaker #2: Yeah. In terms of markets, we today are fairly present across markets globally. The US is our largest market; about 60-odd percent of our revenue comes from the US.

Aneesh Reddy Boddu: In terms of markets, we today are fairly present across markets globally. US is our largest market. About 60-odd% of our MU 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 have customers live in about 53 countries.

Speaker #2: 15% comes from Europe and about 25% comes from Asia today. In terms of scale, we work with about 465 brands globally. Twenty-five of these are Fortune 500 customers.

Speaker #2: There's a lot of scale on the platform—about 2.7 billion consumer profiles on the platform today. We have customers live in about 53 countries, with 19 offices globally. In total, we have about 750 employees.

Aneesh Reddy Boddu: 19 offices globally. In total, about 750 employees. We have an infrastructure-like product. We sit in every transaction that hits our customers, whether it's in the store or online or at the airport or wherever. Uptime is important, so we are at almost a 5 nines product uptime again for this quarter. 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 4 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 either in number 1 or very rarely in number 2 in what we do. Moving ahead, I thought we'll just spend a minute on this.

Speaker #2: We're an infrastructure-like product. We sit in on every transaction that hits our customers, right? Whether it's in the store, online, at the airport, or wherever, right?

Speaker #2: So, uptime is important. We are at almost 99.9% 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.

Speaker #2: So, typically, we have 3-, 5-, and 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.

Aneesh Reddy Boddu: Typically 3, 5, 7-year contracts with these very large global enterprises. It's a cloud-native product. All our implementations are across 4 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 either in number 1 or very rarely in number 2 in what we do. Moving ahead, I thought we'll just spend a minute on this.

Speaker #2: Pick any analyst in the marketing space, Forrester or Gartner or Everest or QK, as you will see us in the either in number one or very rarely in number two in what we do.

Speaker #2: Moving ahead, I thought we'll just spend a minute on this. This is the Forrester Wave, the most recent one, which came out about nine months ago.

Aneesh Reddy Boddu: 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. If you look at Capillary, both from a current offering as well as what we are building and strength of strategy, we are well ahead of the rest of the market. Like I 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.

Speaker #2: Forrester is the leading marketing analyst globally. They have had a report on loyalty for the last 10 or 15 years now. They call it the 'loyalty wave.'

Speaker #2: Right? So, if you look at Capillary, we are, both from a current offering as well as what we are building and standing to strategy, well ahead of the rest of the market.

Aneesh Reddy Boddu: Like I 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.

Speaker #2: Like I had mentioned last time, we have a 505 score on 22 out of their 27 criteria, and a 3 out of 5 on the rest of the five criteria that they have.

Speaker #2: We are 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.

Speaker #2: We'll talk a little bit more about IRA in some of the slides coming up. What we also excel at is supporting very complex programs for very, very large enterprises.

Aneesh Reddy Boddu: What we also excel with is in supporting very complex programs for 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. Hence, unlike a lot of our competitors where they tend to have just a loyalty stack, some of the major agencies that you saw here, Epsilon, Kobie, et cetera, 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. Now, at the base of the product is a data platform where we integrate into all kinds of data sources from a customer. If they have a CDP, we just plug into that right away. We don't monetize the data platform side of the stack.

Speaker #2: That's our niche. Yep. With that, let's move ahead. Quickly, spending a minute on the product—you know, the intent with the product is to deliver loyalty and retention as an outcome.

Speaker #2: And hence, unlike a lot of our competitors, where they tend to have just a loyalty stack—you know, some of the major agencies that you saw earlier, Epsilon, Kobie, etc., which were there on the earlier slide—Capillary tends to be broader as a product, so that we can deliver loyalty or retention as an outcome.

Aneesh Reddy Boddu: Capillary tends to be more broader as a product so that we can deliver loyalty or retention as an outcome. Now, at the base of the product is a data platform where we integrate into all kinds of data sources from a customer. If they have a CDP, we just plug into that right away. We don't monetize the data platform side of the stack.

Speaker #2: Right. So now, at the base of the product is a data platform where we integrate into all kinds of data sources from a customer.

Speaker #2: 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.

Aneesh Reddy Boddu: 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. 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. More applicable to banks and to telcos, where they generally doesn't give points or coupons. It tends to be an additional reward that you get for being loyal.

Speaker #2: 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 retention mechanic—it could be memberships, subscriptions, points, rewards—you know, it differs by industry, and it differs by the mechanics that a business wants to use to retain their customers.

Speaker #2: 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.

Aneesh Reddy Boddu: 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. More applicable to banks and to telcos, where they generally doesn't give points or coupons. It tends to be an additional reward that you get for being loyal.

Speaker #2: Insights is all kinds of dashboards that are available for the business users to, you know, look at all kinds of loyalty use cases. We don't monetize Insights.

Speaker #2: It's a layer on top of the product. And finally, rewards, right? More applicable to banks and to telcos, where they generally, rather than give points or coupons, it tends to be an additional reward that you get for being loyal, right?

Speaker #2: So, that's the reward stack. That's about 5%, 7%, 8% of our revenues there. Again, across the platform, we have our AI assistant, which does a lot of stuff.

Aneesh Reddy Boddu: That's the Rewards stack. That's about five, seven-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. Okay. 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 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.

Speaker #2: We'll talk about it in the next few slides, right? So, oh, okay. We'll get to IRA in a few slides. But in the interim, I think we've had a pretty decent Q1 and a good start to the year.

Speaker #2: Like we always talk about, really, there are three levers of growth and three levers of profitability. On the first part, I think, on NRR, we've had roughly 111% expansion from our existing customer cohort.

Aneesh Reddy Boddu: On the first part, I think, on NRR, we've had roughly 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.

Speaker #2: There are three levers there: more platform usage or inflationary increases, product upgrades, and new brands and geographies. Now, if you take out one of the largest customers we have—if you take them out—then the NRR has actually been 116.

Speaker #2: So, it tends to continue to be in that, you know, good, good range for the majority of the customer cohort that we have. Now, the second axis of growth for us is new customer wins.

Aneesh Reddy Boddu: 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. Very good momentum on new logo signups across markets, whether it's Asia, UK, Europe, or US. Good momentum there. Finally, coming to M&A, we had announced the SessionM acquisition, which we had bought from Mastercard on 1 May. We've had two full months of the integration of the SessionM numbers into the overall plan.

Speaker #2: You know, we continue to win large enterprises across globally. If you take the last 12 months of performance, you know, our new ACB, which is the new annual recurring contract value that we've signed up, has grown about 75% year on year.

Speaker #2: Excluding that one large healthcare customer that we had won the year before, right? So, very good momentum on new logo sign-ups across markets, whether it's Asia, UK, Europe, or US.

Aneesh Reddy Boddu: Very good momentum on new logo signups across markets, whether it's Asia, UK, Europe, or US. Good momentum there. Finally, coming to M&A, we had announced the SessionM acquisition, which we had bought from Mastercard on 1 May. We've had two full months of the integration of the SessionM numbers into the overall plan.

Speaker #2: Right? So, good momentum there. Finally, coming to M&A, we had announced the SessionM acquisition, which we had bought from MasterCard on May 1st.

Speaker #2: So, we've had two full months of the integration of the session and numbers into the overall plan. Like I mentioned on the last call, this acquisition strengthens our footprint across markets.

Aneesh Reddy Boddu: Like I had mentioned on the last call, this acquisition strengthens our footprint across markets, North America, LATAM. It adds to our impact portfolio as well. SessionM, 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 Kognitiv acquisition in May of last year. It closed on 1 May 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. With that, moving ahead.

Speaker #2: North America, LatAm—it adds to our APAC portfolio as well. And SessionM, that product stack is known for its QSR and airline customers.

Speaker #2: So it's those two categories are places where we didn't have we had customers but not as much penetration. So it got us a good, good, you know, a good presence there.

Speaker #2: And finally, some very good talent that has also come from Session M over. As you might remember, we had done the Cognitive acquisition in May of last year.

Aneesh Reddy Boddu: Finally, some very good talent that has also come from SessionM over. As you might remember, we had done the Kognitiv acquisition in May of last year. It closed on 1 May 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. With that, moving ahead.

Speaker #2: 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.

Speaker #2: And, you know, we think it’ll be much faster and require far less effort from both the customer and our side to get these upgrades done.

Speaker #2: Right? So, moving ahead—again, the three large profitability levers for the firm, as we've always mentioned: any net retention rate-related expansion comes at a higher gross margin.

Aneesh Reddy Boddu: 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. 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, this is around about 60% of our costs are not linked to customer revenue. Not related to COGS. These scale at a much lower pace than the revenue scales.

Speaker #2: 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%.

Speaker #2: Our organic gross margins are upwards of 75 now. You know, so we're being consistently upwards of 75% for the last few quarters. So I think we are in so a lot of this NRR expansion on the organic side is fueling better gross margins, on the organic side of the business.

Aneesh Reddy Boddu: 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, this is around about 60% of our costs are not linked to customer revenue. Not related to COGS. These scale at a much lower pace than the revenue scales.

Speaker #2: Coming to the second lever of profitability, this is around the about 60% of our costs are not linked to, you know, what to customer revenue.

Speaker #2: Right? So, not related to comps. So, these scale at a much lower pace than the revenue scales, right? So, if you look at year-on-year non-comps cost for FY21, it is at least 12-15% lower than the revenue increase that you're seeing here.

Aneesh Reddy Boddu: If you look at year-on-year non-COGS costs for FY 2021, is at least 12% to 15% lower than the revenue increase that you're seeing here. Hence, as revenue keeps scaling, 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. As we migrate, they get to the platform margins of 70% to 75%, and that drives the increase. This quarter, for example, same quarter last year, we were at roughly a 10% EBITDA margin. Now we are more at 17% to 18% adjusted EBITDA margin overall, and roughly a 20%+ EBITDA margin for the organic side of the business.

Speaker #2: Right? So, and hence, as revenue keeps scaling, our below-the-comps cost will continue to scale at a much lower pace. Finally, the third lever of margins is the upgrade of customers from the M&A side.

Speaker #2: Now, like we had mentioned earlier, typically the acquisitions we do are more around the 30% gross margin mark. And, you know, as we migrate, they get to the platform margins of 70–75%.

Aneesh Reddy Boddu: Now, like we had mentioned earlier, typically the acquisitions we do are more around the 30% gross margin mark. As we migrate, they get to the platform margins of 70% to 75%, and that drives the increase. This quarter, for example, same quarter last year, we were at roughly a 10% EBITDA margin. Now we are more at 17% to 18% adjusted EBITDA margin overall, and roughly a 20%+ EBITDA margin for the organic side of the business.

Speaker #2: And that drives the increase. So 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.

Speaker #2: And roughly a 20% plus EBITDA margin for the organic side of the business, right? So, a big move there actually comes from the successful migration or the upgrades from customers for Riley, Persuade, and Rewards.

Aneesh Reddy Boddu: 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 June of 2023, all of them have been migrated over, which is driving that big move on margins. That's the last part there. I think in the last six to nine 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. With that, moving forward. We spoke a bit about this in the last 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.

Speaker #2: Those three acquisitions that we had done before 2020, you know, 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.

Speaker #2: I think in the last six to nine months, we've also now built a very AI-led upgrade platform, where it really simplifies the amount of work needed to shift from, you know, one of these acquired platforms to Capillary.

Aneesh Reddy Boddu: I think in the last six to nine 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. With that, moving forward. We spoke a bit about this in the last 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.

Speaker #2: We think it will continue to deliver good margins for us over the next year or two, right? So, yeah, with that moving forward... Yeah, we spoke a bit about this in the last analyst call as well.

Speaker #2: You know, in terms of AI, we think it's a net positive for us. And today, for example, you know, we actually sit in the system of record, the loyalty stack is like a banking ledger for, you know, all your points, rewards, all of that stuff.

Aneesh Reddy Boddu: The loyalty stack is like a banking ledger for all your points, rewards, all of that stuff. 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 base pricing that we have on that side. Not much change on this part of the business. Now, 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 wide space in the loyalty marketing space. It's priced on outcomes, like number of queries you ask, number of questions you're asking.

Speaker #2: Right? So, it is a system of record. And hence, you know, AI or no AI, you will still need a system of record to keep that going.

Speaker #2: 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. So, not much change on this part of the business.

Speaker #2: Now, what we've done over the last year or so is try and expand beyond that into a system of intelligence, which is our IRA stack. You know, typically work that goes through an analytics agency or to, you know, manual dashboards—things like that.

Aneesh Reddy Boddu: Now, 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 wide space in the loyalty marketing space. It's priced on outcomes, like number of queries you ask, number of questions you're asking.

Speaker #2: We solve that through conversational analytics and Gen AI. There's fairly white space in the loyalty marketing space, and it's priced on outcomes like the number of queries you ask, the number of questions you're asking, and we're seeing very, very good adoption for this. You know, today out of our 150 customers, about 26 customers are actually live using the product, and just a little less than 10 of them are actually paying us for it.

Aneesh Reddy Boddu: We're seeing 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. Even in all our new deals, the very large ones that we're winning, aiRA is now tending to be that big differentiator over the market. Our win rates continue to be upwards of 35% across the globe now. Thanks to some of the 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.

Speaker #2: So it is a use, you know, and then over a few months, you sign up for the outcome-based pricing type approach. So we're seeing very good adoption as well as commercialization start on IRA now.

Speaker #2: Even in all our new deals—the very large ones that we're winning—IRA is now tending to be that big differentiator over the market.

Aneesh Reddy Boddu: Even in all our new deals, the very large ones that we're winning, aiRA is now tending to be that big differentiator over the market. Our win rates continue to be upwards of 35% across the globe now. Thanks to some of the 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.

Speaker #2: In terms of, and our win rates continue to be upwards of 35%. So across the globe now, you know, thanks to some of this AI stuff that's there in the product.

Speaker #2: 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.

Aneesh Reddy Boddu: 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. Moving ahead. We spoke about this last time.

Speaker #2: That's the Action Agent piece. Again, as I mentioned, Engage, which kind of sits here—the Engage product is only 5% of our revenue.

Speaker #2: So this is an attempt at, you know, 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.

Aneesh Reddy Boddu: 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. Moving ahead. We spoke about this last time.

Speaker #2: But overall, we're seeing very good traction with what's happening on the IRA side, both in terms of the analytics agent and the action agent in the business.

Speaker #2: Right? So, moving ahead—yeah, I mean, we spoke about this last time. The intent with IRA is to provide intelligence and actions across the marketer's lifecycle and go from that system of record overall.

Aneesh Reddy Boddu: 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 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. That acts as a very nice learning loop for the product to improve by itself. 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 INR 32 million ARR of customer contracts that we had acquired through this. There've been no surprises on that side. All the entire INR 32 million have agreed to sign our paper, move over to Capillary.

Speaker #2: What we will do well now on IRA is a good learning loop as well. So, we now have, like, thousands of queries being—I mean, I think we're at roughly about 10,000 queries now.

Speaker #2: Which our customers are asking us to do. And that acts as a very nice, you know, learning loop for the product to improve by itself.

Speaker #2: Right? So, with that, I will move ahead. This is a quick update on the session and acquisition. You know, things are on plan. I think it's been two months, you know, and we had projected about a $32 million ARR of customer contracts that we had acquired through this.

Aneesh Reddy Boddu: 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 INR 32 million ARR of customer contracts that we had acquired through this. There've been no surprises on that side. All the entire INR 32 million have agreed to sign our paper, move over to Capillary.

Speaker #2: So, there have been no surprises on that side. So, all the entire 32 million have agreed to sign our paper and move over to Capillary.

Speaker #2: So that's been a good, positive movement. Secondly, you know, we've been able to turn the session fully profitable. The first two months have generated—although small—cash, like just a little around the ₹5–6 crore type mark, is what we've been able to generate as free cash from the acquisition.

Aneesh Reddy Boddu: That's been a good, positive moment. Secondly, we've been able to turn SessionM fully profitable. The first two months have generated, although small cash, around the 5, 6 crore type mark is what we've been able to generate as free cash from the acquisition. The business is at a breakeven. It's profitable now. 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.

Speaker #2: Right? So the business is at a breakeven. It's profitable now, right? And I think what we're also very excited about on the session side is that the quality of customers is really good.

Aneesh Reddy Boddu: 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.

Speaker #2: And a lot of them have shown a lot of interest in buying the IRA Stack—in trying to go beyond just the loyalty platform that SessionM is into—and taking the other products we have as well.

Speaker #2: So we do think it's a it is going to be a big driver on the NRR side going forward as well. Next is you know, I think we also now have a very good view of what we've actually spent to buy session M net of all the adjustment you know, we've actually paid about about 17 odd crores for buying the business.

Aneesh Reddy Boddu: 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 INR 17 odd crores for buying the business. It's also been a very good financial deal. You've essentially spent $1.5 million to buy, or probably a couple of million to buy a $32 million ARR business. It's been a very good deal. We think we'll break even on this in a few quarters. The business is already profitable, it's already started generating cash, so we do think it will deliver a payback possibly within this year. With that, moving forward, we did a very small tuck-in, not material in terms of financial numbers on what we spent. It's a platform called CustomerGlu.

Speaker #2: So it's also been a very, very good financial deal. You know, you've essentially spent one and a half million, or probably a couple of million, to buy a $32 million ARR business.

Speaker #2: Right? So it's been a very good deal. We think we'll break even on this in a few quarters, right? So the business is already profitable.

Aneesh Reddy Boddu: We think we'll break even on this in a few quarters. The business is already profitable, it's already started generating cash, so we do think it will deliver a payback possibly within this year. With that, moving forward, we did a very small tuck-in, not material in terms of financial numbers on what we spent. It's a platform called CustomerGlu.

Speaker #2: It's already started generating cash, so 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, you know, like, very... It was a platform called Customer Glue.

Speaker #2: You know, it enables front-end experiences. Capillary is very known for the back-end scale that we have. What Customer Glue does is it enables front-end experiences in a mobile app or on a website for loyalty-like use cases.

Aneesh Reddy Boddu: It enables front-end experiences, like Capillary is very known for the back-end scale that we have. What CustomerGlu does is it enables front-end experiences in a mobile app or on a website for loyalty-like use cases. You can quickly launch a game, 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 an EBITDA. More an acqui-hire IP-led acquisition. Yep.

Speaker #2: 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.

Speaker #2: We're rebranding this product and calling it Experiences Plus, which sits very well with what IRA and Engage Plus 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.

Aneesh Reddy Boddu: 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 an EBITDA. More an acqui-hire IP-led acquisition. Yep. With that, I will hand over to Ananth. Ananth, over to you.

Speaker #2: You know, but again, not material from a spend or a revenue or an EBITDA—more an acqui-hire, IP-led acquisition. Yep. With that, I will hand over to Ananth.

Aneesh Reddy Boddu: With that, I will hand over to Ananth. Ananth, over to you.

Speaker #2: Ananth, over to you.

Speaker #3: Thanks, Anish. Great. So, am I audible?

Anant Choubey: Thanks, Aneesh. Great. Am I audible?

Speaker #2: Yeah, you're good.

Aneesh Reddy Boddu: Yeah. You're good.

Speaker #3: So, 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—sorry, 43% growth over Q1 last year.

Anant Choubey: I'm glad to share our financial performance for the last quarter. We closed the quarter at INR 256 crore revenue, which is 43% growth over Q1 last year. This revenue growth coupled with scale leverage and other cost initiatives, the EBITDA for Q1 stands at INR 44 crore. That's a 132% improvement over Q1 last year. PAT stands at -INR 9.5 crore for the quarter. 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 INR 25 crore. Can we go to the next slide?

Speaker #3: Now, this revenue growth coupled with scale leverage and other cost initiatives, the EBITDA for Q1 stands at ₹44 crores. That's a 132% improvement over Q1 last year.

Speaker #3: Now, that stands at minus ₹9.5 crores for the quarter. Now, adjusting this for the one-time exceptional loss which happened due to a cyber fraud incident.

Speaker #3: And with a one-time deferred tax liability, the normalized PAT for the quarter stands at ₹25 crore. Can we go to the next slide?

Speaker #2: Yeah.

Aneesh Reddy Boddu: Yeah.

Speaker #3: Right. Now, 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 the Rule of 40.

Anant Choubey: What you see on the slide is a year-on-year business growth of 43%, and year-on-year profit growth of 132%. 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. 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-cost, as well as from M&A synergies. Next slide.

Speaker #3: Meaning growth rate plus EBITDA is equal to 40. That's kind of a gold metric that product companies are valued on. On this metric, Capillary today stands at 60, which is 43% growth and 17% EBITDA.

Speaker #3: If you look at only the organic business, the organic business grew at 17% year-on-year, with about 23% EBITDA. So again, that's about 40 on a rule of 40.

Anant Choubey: 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. 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-cost, as well as from M&A synergies. Next slide.

Speaker #3: Now, what drives this margin expansion, or what drove this margin expansion from a year before? This improvement from 11% to 17% comes through a combination of growth through NRR expansion, operating leverage on non-core costs, as well as from M&A synergies.

Speaker #3: Next slide. Now, ARR is a good leading metric for the business. It has consistently grown from ₹608 crore in FY25 to ₹765 crore in FY26, to ₹1,026 crore in Q1 FY27.

Anant Choubey: NRR is a good leading metric for the business. It has consistently grown from INR 600 crore, INR 608 crore in FY 2025, to INR 765 crore in FY 2026, to INR 1,026 crore in Q1 FY 2027. It's a year-on-year growth of 34%, with a strong contribution from SessionM acquisition, NRR, as well as new ACV. Trailing 12-months new ACV, if we exclude one large healthcare customer, we see a growth of about 75% year-on-year to about INR 90, INR 92 crore. This is further supplementing our growth and efficiencies. The trailing 12-month Q1 FY 2026 base included exceptional new contract value from one large healthcare customer. That's what we have normalized to give you a figure on a like-to-like basis. Next slide. We talked about year-on-year performance. I take quarter-on-quarter performance on profitability.

Speaker #3: It's a year-on-year growth of about 34%, with a strong contribution from session M acquisition, NRR, as well as new ACV. Now, trailing 12 months new ACV excludes one large healthcare customer.

Speaker #3: We see a growth of about 75% year-on-year to about ₹92 crore. Now, this is further supplementing our growth and efficiencies. The trailing 12-month Q1 FY26 base included exceptional new contract value from one large healthcare customer.

Anant Choubey: This is further supplementing our growth and efficiencies. The trailing 12-month Q1 FY 2026 base included exceptional new contract value from one large healthcare customer. That's what we have normalized to give you a figure on a like-to-like basis. Next slide. We talked about year-on-year performance. I take quarter-on-quarter performance on profitability.

Speaker #3: So that's what we have normalized to give you a figure on a like-to-like basis. Next slide. Now, we talked about year-on-year performance. On a quarter-on-quarter performance on profitability, adjusted EBITDA improved from ₹35 crores to ₹44 crores in Q1 this year compared to Q1 last year.

Anant Choubey: Adjusted EBITDA improved from INR 35 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 INR 19 to 25 crore from Q4 to Q1. This also includes increased amortization from SessionM acquisition. Understanding PAT and normalized PAT here. The delta between INR 25 crore PAT and INR -9.5 crore normalized PAT. We had an 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. If you look at business over the last many quarters or years, EBITDA and adjusted EBITDA are nearly equal given adjustment of finance income and ESOP expenses.

Speaker #3: This is in spite of Q1 being a quarter when you have annual hikes. And normalized PAT improved from ₹19 crore to ₹25 crore from Q4 to Q1.

Speaker #3: Now, this also includes increased amortization from the SessionM acquisition. Now, regarding PAT and normalized PAT here, the delta between ₹25 crore PAT and minus ₹9.5 crore normalized PAT is due to an exceptional loss that happened because of a cyber banking fraud.

Anant Choubey: The delta between INR 25 crore PAT and INR -9.5 crore normalized PAT. We had an 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. If you look at business over the last many quarters or years, EBITDA and adjusted EBITDA are nearly equal given adjustment of finance income and ESOP expenses.

Speaker #3: And a one-time deferred tax liability. So that's what has been the adjustment over here to give you a view on the normalized PAT. Next slide.

Speaker #3: Now, if you look at business over the last many quarters or years, EBITDA and adjusted EBITDA are nearly equal, given adjustment of finance income and ESOP expenses.

Speaker #3: If you look at the trend over the year, depreciation and amortization is at ₹20 crore for Q1 this year, which is up from ₹17 crore for the same time last year.

Anant Choubey: If you look at the trend over the year, depreciation and amortization is at INR 20 crore for Q1 this year, which is up from INR 17 crore for same time last year. This higher amortization reflects recent acquisitions of SessionM this year and Kognitiv last year. Perfect. With this, would be happy to take any questions.

Speaker #3: Now, this higher amortization reflects recent acquisitions of Session M this year and Cognitive last year. Perfect. With this, we would be happy to take any questions.

Speaker #2: Thanks, Anish and Ananth. Now, I would request the participants to raise their hands in case they have questions. So, the first question is coming from Vinay Menon.

[Company Representative] (Capillary Technologies India): Thanks. Thanks, Anish and Anant. I would request the participants to raise their hands in case they have questions. The first question was coming from Vinay Menon. Please go ahead, Vinay. Vinay, unmute yourself and go ahead.

Kanav Khanna: Thanks. Thanks, Anish and Anant. I would request the participants to raise their hands in case they have questions. The first question was coming from Vinay Menon. Please go ahead, Vinay. Vinay, unmute yourself and go ahead.

Speaker #2: Please go ahead, Vinay. Vinay, unmute yourself and go ahead.

Speaker #4: Yeah, hello, 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 migrated from Session M already, and what kind of run rate we are seeing across FY27, that would be great for me.

Vinay Menon: Yeah. Hello. Congratulations on a great set of numbers. Couple of questions from my side. If you can call out the percentage of clients who migrated from SessionM already and what kind of run rate are we seeing across FY 2027, that would be great. Thanks.

[Analyst 1]: Yeah. Hello. Congratulations on a great set of numbers. Couple of questions from my side. If you can call out the percentage of clients who migrated from SessionM already and what kind of run rate are we seeing across FY 2027, that would be great. Thanks.

Speaker #4: Thank ank you.

Speaker #2: So, Ananth, should I take that? I'll take that.

Anant Choubey: Anant, you want to take that?

Aneesh Reddy Boddu: Anant, you want to take that?

Anant Choubey: Yes, please.

Anant Choubey: I'll take that.

Aneesh Reddy Boddu: I'll take that.

Speaker #4: Yeah.

[Company Representative] (Capillary Technologies India): Yeah.

Anant Choubey: Yeah.

Speaker #2: So Vinay, we've just done the SessionM acquisition, right? So you shouldn't expect any—usually, the way it works is, we spoke about it, I think, at the Analyst Day as well, that it typically takes about two to three years for all the customers to get upgraded.

Anant Choubey: Vinay, we've just done the SessionM acquisition, right? You shouldn't expect any. Usually the way it works is, we spoke about it I think in 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 migration till probably end of this year or early next year. Right? 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. There is a lot of operational efficiencies that we are already seeing in SessionM. Better run in terms of server costs, all that.

Aneesh Reddy Boddu: Vinay, we've just done the SessionM acquisition, right? You shouldn't expect any. Usually the way it works is, we spoke about it I think in 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 migration till probably end of this year or early next year. Right?

Speaker #2: So, we will not start any Session M migrations till probably the end of this year, or early next year, right? Now, there are some customers who want to move irrespective of an upgrade. They're like, "Look, we just want to move to Capillary."

Aneesh Reddy Boddu: 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. There is a lot of operational efficiencies that we are already seeing in SessionM. Better run in terms of server costs, all that.

Speaker #2: That we are fast-tracking. That's, what, three or four out of the forty-five-odd customers that have come from Session M. But there is a lot of—how do I put it?

Speaker #2: Like, there are a lot of operational efficiencies that we are already seeing in session M, right? Better run in terms of server costs, all that.

Speaker #2: So you will see more margins coming out over the next few quarters from Session M 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?

Anant Choubey: 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. There is enough. We do think we can get that business to a 5% to 10% margins even without any upgrades.

Aneesh Reddy Boddu: 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. There is enough. We do think we can get that business to a 5% to 10% margins even without any upgrades.

Speaker #2: So there is enough—we do think we can get that business to a 5% to 10% margin even without any upgrades.

Speaker #4: Okay, okay. That's helpful. And as clients migrate, will our subscription revenue go up? Is that how we are looking at the Session M clients to be for our company?

Vinay Menon: Okay. That's helpful. Vinay, as clients migrate, will our subscription revenue go up? Is that how we are looking the SessionM clients to be for our company?

[Analyst 1]: Okay. That's helpful. Vinay, as clients migrate, will our subscription revenue go up? Is that how we are looking the SessionM clients to be for our company?

Speaker #2: Yeah, so two parts, right? Vinay, so usually when you're upgrading a customer, you don't actually charge for more, right? I mean, there's already an existing contract.

Anant Choubey: Yeah. Two parts, right, Vinay? Usually when you're upgrading a customer, you don't actually charge for more, right? There's already existing contract. You've 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+. Those are opportunities to charge more. Those are opportunities where the customers are willing to pay more because additional functionality is something that they were not using today. All of these books of business, the 110% to 116% NRR we keep talking about, right? That is the place where this bigger book of business, the INR 32 million, does have a potential to add another 10% to 15% additional revenues each year through the NRR motion. Did I answer your question, Vinay?

Aneesh Reddy Boddu: Yeah. Two parts, right, Vinay? Usually when you're upgrading a customer, you don't actually charge for more, right? There's already existing contract. You've 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+. Those are opportunities to charge more.

Speaker #2: You've just bought the—I mean, you've bought the company, so you can't charge for more. But let's say we're seeing a lot of these customers wanting to buy IRA, or buy the Engaged product, or buy Experiences Plus, and those are opportunities to charge more.

Speaker #2: Right? So 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.

Aneesh Reddy Boddu: Those are opportunities where the customers are willing to pay more because additional functionality is something that they were not using today. All of these books of business, the 110% to 116% NRR we keep talking about, right? That is the place where this bigger book of business, the INR 32 million, does have a potential to add another 10% to 15% additional revenues each year through the NRR motion. Did I answer your question, Vinay?

Speaker #2: So all of these books with the 110 percent to 116 percent NRR we keep talking about, right? Depending on—so that is the place where this bigger book of business, the $32 million, does have a potential to add another 10 to 15 percent additional revenues each year through the NRR motion.

Speaker #2: Did I answer your question, Vinay?

Speaker #4: Yeah, yeah, that helps, sir. And just one more thing on IRA: are you seeing any kind of monthly run rate? And last time, you mentioned that a lot of POCs were happening.

Vinay Menon: Yeah. That helps, sir. Just one more thing on aiRA. Any kind of monthly run rate are you seeing? Last time I heard you mentioning that a lot of POCs were happening. How are you seeing aiRA scale over FY2027?

[Analyst 1]: Yeah. That helps, sir. Just one more thing on aiRA. Any kind of monthly run rate are you seeing? Last time I heard you mentioning that a lot of POCs were happening. How are you seeing aiRA scale over FY2027?

Speaker #4: How are you seeing IRA scale over FY27?

Speaker #2: Yeah, so we are right now, I would say, at like $2 million to $2.5 million in terms of revenue run-rate on IRA.

Anant Choubey: Yeah. We right now, I would say at like 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.

Aneesh Reddy Boddu: Yeah. We right now, I would say at like 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. Right. 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 insisting 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.

Speaker #2: I think it'll—my hope is that we'll try and get to probably at least 5 to 10 percent of our revenue coming from IRA this year.

Speaker #2: Right? But 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 enterprises we work with.

Aneesh Reddy Boddu: Right. 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 insisting 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.

Speaker #2: So, they really are very, uh, particular about their budgeting cycles, right? So, but in terms of adoption and in terms of as people turn over to their new financial year, can they put more budget to it?

Speaker #2: I think we're seeing good traction there.

Speaker #4: Okay, okay. And one last thing. On the acquisition, you mentioned that it will give you some kind of holding ability in the platform, where clients can create something. So if you can just elaborate on that and kind of give what functionality we wanted from this acquisition, that would be helpful.

Vinay Menon: Okay. One last thing. On the acquisition, you mentioned that it will give you some kind of holding ability in the platform where clients can create something. If you can just elaborate on that and give what functionality we wanted from this acquisition, that would be helpful.

[Analyst 1]: Okay. One last thing. On the acquisition, you mentioned that it will give you some kind of holding ability in the platform where clients can create something. If you can just elaborate on that and give what functionality we wanted from this acquisition, that would be helpful.

Speaker #2: Yeah, so today Capillary is a loyalty platform, right? So a customer can go in and configure, saying, this weekend I want to give 3X bonus points on this airline, right?

Aneesh Reddy Boddu: Yeah. Today, Capillary is a loyalty platform, right? A customer can go in and configure, saying, "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. 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. 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?

Speaker #2: Or this route or whatever. So it's the backend configurations, the backend coupons, all of that—promotions—becomes very easy with the Capillary platform.

Speaker #2: 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.

Aneesh Reddy Boddu: 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. 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?

Speaker #2: 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.

Speaker #2: Right? In the app, to get a page done—and usually all of these IT teams have their own roadmaps—so although the loyalty manager can use our platform to run the backend very quickly, the front-end would take them like two or three months to configure, get in the pipeline, off the IT development, and stuff.

Vinay Menon: Okay.

[Analyst 1]: Okay.

Aneesh Reddy Boddu: Like in the app, go get a page done. Usually, all of these IT teams have their own roadmaps. 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 Glue, 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, like 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. Make the dependency on IT teams less and make the masters more independent in that sense.

Speaker #2: What customer glue, what experience plus does what experiences plus does now well is it's an SDK that you plug in into the website or into the app once.

Speaker #2: Right? And once you've done that, just like how you're in the backend configuring a new promotion, you could also go configure a front-end experience.

Aneesh Reddy Boddu: Once you've done that, like 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. Make the dependency on IT teams less and make the masters more independent in that sense. I hope I answered that for you.

Speaker #2: Right? So 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, and front-ends.

Speaker #2: And kind of make the whole make the dependency on IT teams less and make the marketers more independent in that sense. I hope I answered that for you.

Aneesh Reddy Boddu: I hope I answered that for you.

Vinay Menon: Yeah. Done. Thank you so much, sir. I'll get back in the queue and all the best for the future. Thank you.

[Analyst 1]: Yeah. Done. Thank you so much, sir. I'll get back in the queue and all the best for the future. Thank you.

Speaker #4: Yeah. Thank you so much, sir. I'll get back in the queue, and all the best for the future. Thank you.

Speaker #1: Thanks, Vinay. So the next question is from Shaure Yadav. Please unmute yourself and go ahead.

[Company Representative] (Capillary Technologies India): Thanks.

Aneesh Reddy Boddu: Thanks.

[Company Representative] (Capillary Technologies India): Thanks, Vineet. The next question is from Shaurya Yadav. Please unmute yourself and go ahead.

Kanav Khanna: Thanks, Vineet. The next question is from Shaurya Yadav. Please unmute yourself and go ahead.

Speaker #5: Hello. Am I audible?

Shaurya Yadav: Hello, am I audible?

[Analyst 2]: Hello, am I audible?

Speaker #1: Yeah, we can hear you.

[Company Representative] (Capillary Technologies India): Yeah, we can hear you.

Kanav Khanna: Yeah, we can hear you.

Speaker #5: Yeah, thanks for the opportunity. I have a couple of questions. First one, in the last on-call, you said we are upgrading cognitive customers to the Capillary platform.

Shaurya Yadav: Yeah. Thanks for the opportunity. I have a couple of questions. First one, in last con call, you said we are upgrading Kognitiv 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?

[Analyst 2]: Yeah. Thanks for the opportunity. I have a couple of questions. First one, in last con call, you said we are upgrading Kognitiv 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?

Speaker #5: So, where are we in that journey, and what challenges are we facing in that journey—if you can elaborate? And post-upgradation, how much incremental margin can flow into our consolidated financials?

Speaker #2: Right. I think, yeah, so that process has started. I think the first customer will fully migrate on September 1st. And like I said, the way we are doing this migration is using an AI platform.

Aneesh Reddy Boddu: Right. That process has started. I think the first customer will fully migrate on 1 September. Like I said, the way we are 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. Let me spend a minute on what this AI platform does in terms of helping migrations. Because these are very old companies that we're buying. Kognitiv, 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. It goes configures the Capillary platform, builds up any middleware that needs to sit in between the Kognitiv implementation and the Capillary implementation.

Speaker #2: So 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?

Speaker #2: So, because these are very old companies that we're buying, right? Cognitive, I think, is a company set up in the 1980s. Their oldest customer has been on that platform for 30 years.

Aneesh Reddy Boddu: Kognitiv, 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. It goes configures the Capillary platform, builds up any middleware that needs to sit in between the Kognitiv implementation and the Capillary implementation.

Speaker #2: So what the AI pieces do is look up the code, look up the implementations, and automatically come up with what it is that has to be migrated?

Speaker #2: Then it goes and 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 an AI-first approach, without doing it with humans, right?

Aneesh Reddy Boddu: All of this is done in an AI-first approach without doing it with humans. Without doing it with people. With that, we're looking to have the first customer going live on 1 September. Once that happens and that's proven, Kognitiv is about 20 customers in total. Actually, not even 20. It's about 16, 17 customers in total. You could accelerate the next 10 in probably a two, three quarter timeframe. What took us 3 years with a Brierley or a Rewards+ or a 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 18 to 24 months type upgrade cycle. Like we said, 1 May last year is when we bought this.

Speaker #2: So, without doing it with people. And so with that, we are looking to have the first customer going live on September 1st. Now, once that happens and that's proven, then you can, cognitive, it's about 20 customers in total.

Speaker #2: I would actually not even 20. It's about 16, 17 customers in total. So then you could accelerate the next 10 and probably two, three-quarter timeframe, right?

Aneesh Reddy Boddu: You could accelerate the next 10 in probably a two, three quarter timeframe. What took us 3 years with a Brierley or a Rewards+ or a 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 18 to 24 months type upgrade cycle. Like we said, 1 May last year is when we bought this.

Speaker #2: So what took us, like, three years with a Briarley or a Rewards or a Persuade actually took us, like, four or five years. The intent is that with this AI stuff, we should be able to see the same gains in probably, like, an 18- to 24-month type upgrade cycle.

Speaker #2: And like we said, May 1st was when we May 1st last year is when we bought this. So the goal is that can we close can we get the upgrades done by latest September of next year, right?

Aneesh Reddy Boddu: The goal is that can we get the upgrades done by latest September of next year, 2027. All the acquisitions that we do typically work at a 30% gross margin. Post we can get them to a 65% or 70% plus gross margin. Kognitiv was roughly about INR 75 odd crores of revenue. I think there's at least another INR 10 to 15, 20 crores of EBITDA that will come through as the migrations happen. We've already realized some of the gains with better server costs, better all of that. 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 INR 1,065 crores.

Speaker #2: 27th. Now, all the acquisitions that we do typically work at a 30% gross margin, and post-acquisition, we can get them to a 65% or 70% plus gross margin.

Speaker #2: I definitely think, and Cognitive was roughly about ₹75 crore of revenue. So, I think there's at least another ₹10 to ₹15, maybe ₹15 to ₹20 crore of EBITDA that will come through as the migrations happen.

Speaker #2: Right? So we've already realized some of the gains—with better server costs, better all of that. But there's more margin to see, for sure.

Aneesh Reddy Boddu: We've already realized some of the gains with better server costs, better all of that. 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 INR 1,065 crores.

Speaker #2: 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 crores.

Speaker #2: Out of that, organic—which is the core Capillary platform revenues at 75% gross margin—is about 670-something crores, 673 crores, I think. The rest was acquired revenues, which were barely at break-even.

Aneesh Reddy Boddu: Out of that, organic, which is the core Capillary platform revenues at 75% gross margins, is about INR 670 something crores, INR 673 crores, I think. The rest was acquired revenues which were barely at a breakeven. We were projecting about INR 20 crores of margins from the acquired revenues. That INR 20 crores from the INR 390 odd crores revenues that we're talking about, has the potential to deliver INR 120, 130 crores incrementally as the migrations happen. As the upgrades happen. Even in Kognitiv, probably in the next year, on that INR 80 crores, you'll at least see an INR 20 odd crores of more margins coming through. Did I answer that question, Shaurya?

Speaker #2: We were projecting about ₹20 crore of margins from the acquired revenues. So that ₹20 crore from the ₹390-odd crore of revenues that we're talking about has the potential to deliver ₹120–130 crore incrementally as the migrations happen, right?

Aneesh Reddy Boddu: That INR 20 crores from the INR 390 odd crores revenues that we're talking about, has the potential to deliver INR 120, 130 crores incrementally as the migrations happen. As the upgrades happen. Even in Kognitiv, probably in the next year, on that INR 80 crores, you'll at least see an INR 20 odd crores of more margins coming through. Did I answer that question, Shaurya?

Speaker #2: As the upgrades happen, even in cognitive, probably in the next year, on that ₹80 crores, you will at least see ₹20-odd crores more in margins coming through.

Speaker #2: Did I answer that question, Shaure?

Speaker #5: Yeah, Anish. Thank you. Second question is on the organic NRR of 111%. So can you bifurcate how much is coming from upsell, cross-sell, and the price increase?

Shaurya Yadav: Yeah, 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?

[Analyst 2]: Yeah, 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?

Speaker #5: How are we upselling and cross-selling our services? Which areas or rooms are we targeting?

Speaker #2: Anand, do you want to talk about it?

Aneesh Reddy Boddu: Anant, do you want to talk about it?

Speaker #5: Sorry, am I audible now, Anish?

Shaurya Yadav: Sorry, am I audible now, Aneesh?

[Analyst 2]: Sorry, am I audible now, Aneesh?

Speaker #2: Yeah, we can hear you. I was asking Anand to.

Aneesh Reddy Boddu: Yeah, we can hear you. I was asking Anant.

Speaker #1: Sorry, can you repeat the question?

Anant Choubey: Sorry, can you repeat the question?

Speaker #5: Yeah. So I was saying, out of the organic NRR of 111%, can you bifurcate how much is coming from upsell, cross-sell, and price increase?

Shaurya Yadav: Yeah. I was saying, out of the organic NRR of 111%, can you bifurcate how much is coming from upsell, cross-sell, and price increase? How we are upselling and cross-selling our services? What areas of rooms we are targeting?

[Analyst 2]: Yeah. I was saying, out of the organic NRR of 111%, can you bifurcate how much is coming from upsell, cross-sell, and price increase? How we are upselling and cross-selling our services? What areas of rooms we are targeting?

Speaker #5: How are we upselling and cross-selling our services? What areas or rooms are we targeting?

Speaker #2: Got it.

Anant Choubey: Got it. Shaurya, we typically divide our NRRs 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 category 3 expansion for us is through entering into or expanding into newer geographies or newer customer cohorts. Right? On that, you would then further have any churn in the business. Net of churn is what you see as a final NRR of 111. Right? In terms of, I don't have exact numbers, but rough bifurcation would be, I think about 4%-5% would be through inflationary increases and overages. Then probably another 10% between upsells and entering into new customer cohorts with the customer.

Speaker #1: So, Shaure, 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 and cross-sell.

Speaker #1: And the category three expansion for us is through entering into or expanding into newer geographies or newer customer cohorts. And on that, you then further have any churn in the business.

Anant Choubey: On that, you would then further have any churn in the business. Net of churn is what you see as a final NRR of 111. Right? In terms of, I don't have exact numbers, but rough bifurcation would be, I think about 4%-5% would be through inflationary increases and overages. Then probably another 10% between upsells and entering into new customer cohorts with the customer.

Speaker #1: So, net of churn is what you see as the final NRR of 111. In terms of— I don't have the exact numbers, but a rough bifurcation would be, I think, about 4-5% would be through inflationary increases and overages.

Speaker #1: And then probably another 10% between upsells and entering into new customer cohorts with the customer.

Speaker #5: Got it. And if you can tell, what will be our churn rate in this NRR?

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

[Analyst 2]: Got it. If you can tell, what will be our churn rate in this NRR?

Speaker #1: About five-ish percent.

Anant Choubey: About five-ish%.

Speaker #5: Five-ish percent. Okay, got it. And just one more question: there was some cyber fraud incident, maybe last month. So, was there any customer data or employee data breach due to that incident?

Shaurya Yadav: Five-ish%. Okay, got it. Just one more, Roshan. There was some cyber fraud incident maybe last month. Was there any customer data or employee data breach due to that incident?

[Analyst 2]: Five-ish%. Okay, got it. Just one more, Roshan. There was some cyber fraud incident maybe last month. Was there any customer data or employee data breach due to that incident?

Speaker #1: 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.

Anant Choubey: 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.

Speaker #5: Got it. Thank you. And all the best.

Shaurya Yadav: Got it. Thank you and all the best.

[Analyst 2]: Got it. Thank you and all the best.

Speaker #1: Thank you.

Anant Choubey: Thank you.

Speaker #2: Thanks, Aarob. So, the next question is from Jayesh Agarkar. Please go ahead, Jayesh.

[Company Representative] (Capillary Technologies India): Thanks, Shaurya. The next question is from Jayesh Agarkar. Please go ahead, Jayesh.

Kanav Khanna: Thanks, Shaurya. The next question is from Jayesh Agarkar. Please go ahead, Jayesh.

Speaker #1: Hi. My questions are twofold. First of all, thank you for this update and congratulations on the performance in revenue. Two questions. One is, is the loss that you suffered due to fraud fully covered by insurance?

Jayesh Agarkar: Hi. My questions are twofold. First of all, thank you for this update and congratulations for performance and revenue. Two questions. One is the loss that you suffered due to fraud fully covered by insurance? Question two, if you could elaborate a little bit on how a customer, while transitioning from the Kognitiv platform or the other platform which you are acquiring to Capillary platform, will entail a higher gross margin.

[Analyst 3]: Hi. My questions are twofold. First of all, thank you for this update and congratulations for performance and revenue. Two questions. One is the loss that you suffered due to fraud fully covered by insurance? Question two, if you could elaborate a little bit on how a customer, while transitioning from the Kognitiv platform or the other platform which you are acquiring to Capillary platform, will entail a higher gross margin.

Speaker #1: And 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're acquiring to the Capillary platform, will entail a higher gross margin.

Speaker #2: Sure. So my first question—we do have an insurance policy, and we have initiated work on that. So our insurance provider is working on that.

Anant Choubey: Sure. Yeah. 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. 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. A little longish answer here. Most of our traditional competitors that we end up acquiring operate more in an agency model, where there is a huge T&M, 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.

Speaker #2: So, 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.

Speaker #2: So that work is in progress at this point in time. On your second question, Jayesh—a little longish answer, yes. Most of our traditional competitors that we end up acquiring operate more in an agency model.

Anant Choubey: A little longish answer here. Most of our traditional competitors that we end up acquiring operate more in an agency model, where there is a huge T&M, 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.

Speaker #2: Where there is a huge TNM, a big team is involved in delivering these loyalty programs 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.

Speaker #2: So, for doing work where in the past you used to have a lot of people, now you are able to just do that through some configurations on the tool.

Anant Choubey: For doing a 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, a couple of weeks where you have developers creating a campaign, doing segmentation of customers, executing something which would require QA, all of that can happen on Capillary platform through just configurations within an hour. That's a big delta in moving from a T&M model to a tech platform. A large part of that cost, which was people cost, which brings your gross margin down to 30s, changes drastically when you move onto a tech platform and get to late 60s or early 70s.

Speaker #2: Think of it as, and we have shown a demo before, a process which would take, say, a couple of weeks—where you have developers creating a campaign, doing segmentation of customers, executing something, which would require QA—all of that.

Speaker #2: This can happen on the Capillary platform just through configurations within an hour. So that's a big delta in moving from a TNM model to a tech platform.

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

Speaker #2: So, a large part of the cost, which was people cost—bringing your gross margin down to, say, the 30s—changes drastically when you move on to a tech platform and get to the late 60s or early 70s.

Speaker #1: All right. Thank you.

Jayesh Agarkar: All right. Thank you.

[Analyst 3]: All right. Thank you.

Speaker #2: Thanks. Thanks, Jayesh. Next question is from Rishi Junjunwala from IIFL. Rishi, please go ahead.

[Company Representative] (Capillary Technologies India): Thanks, Jayesh. Next question is from Rishi Jhunjhunwala from IIFL. Rishi, please go ahead.

Kanav Khanna: Thanks, Jayesh. Next question is from Rishi Jhunjhunwala from IIFL. Rishi, please go ahead.

Speaker #5: So thanks for the opportunity. Anish, Anand, can you give some—firstly, on the ACV that you have 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?

Rishi Jhunjhunwala: Thanks for the opportunity. Anish, can you give firstly, on the ACV that you have talked about, does it include anything from the SessionM part also, or is it only our older business X of the large healthcare client that we talked about?

Speaker #2: It doesn't include any session impact, Rishi.

Aneesh Reddy Boddu: It doesn't include any SessionM, Rishi.

Speaker #5: Understood. Okay. And the other thing is, I just want to understand, in terms of organic versus inorganic growth split, right? How do we measure it?

Rishi Jhunjhunwala: Understood. Okay. The other thing is, just want to understand, in terms of organic versus inorganic growth split up. How do we measure it? Because there would be two 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?

Speaker #5: Because there would be two months’ contribution from the session in this, and I’m assuming you have benefited from currency as well. What would be the organic and inorganic split, and do we in any way hedge our currency exposures?

Aneesh Reddy Boddu: Anant, do you want me to take that, or will you?

Speaker #2: Anand, do you want me to take that, or will you?

Speaker #1: Yeah. So, Rishi, in terms of growth, as I was mentioning, let's say 43% year-on-year growth from Q1 versus Q1, which actually considers two months of session impact.

Anant Choubey: Yeah. Rishi, in terms of growth, as I was mentioning, it's a 43% year-on-year growth from Q1 versus Q1, which actually considers two months of SessionM. In this year, there's two months of SessionM revenue versus zero in last year. Now, if we remove that as well as Kognitiv, any other inorganic revenue, 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.

Speaker #1: So, in this year, there's two months of session impart revenue, versus zero in last year. Now, if we remove that, and just remove that as well as cognize any of the inorganic revenue, organic growth is at 17%.

Speaker #1: Versus the same time last year. The other question you asked is the benefits through currency. That's about 6% on it.

Speaker #5: And do we hedge our currency exposures, or does everything flow down from the top line to the bottom line?

Rishi Jhunjhunwala: Do we hedge our currency exposure or everything flows down from top line to bottom line?

Speaker #1: So, if you look at it, about half of our cash actually is in USD and about half is in INR. Given about 60% of the business is US, you kind of keep cash over there.

Anant Choubey: If you look at half of our cash actually is in USD and about half is in INR. Given about 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.

Speaker #1: So, there is sort of a natural hedge in the business in that manner.

Speaker #5: Got it. And lastly, just the expectation on ESOP expenses for this year and next, if you could give some color.

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

Speaker #1: Sure. So our ESOP expenses for this year would be about ₹12 to ₹15 crore. And you would see that our ESOP expenses will sort of remain in this range.

Anant Choubey: Sure. Our ESOP expenses for this year would be about INR 12 to 15 crores, and you would see that our ESOP expenses will sort of remain in this range. We look to maintain it between 1% to 2% of the top line, and that's been the trend. We're looking to continuing on that.

Speaker #1: 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 continue that.

Speaker #5: Understood. Thank you so much.

Rishi Jhunjhunwala: Understood. Thank you so much.

Speaker #2: Thanks, Rishi. The next question is from Akshay Jogani. Please go ahead, Akshay.

[Company Representative] (Capillary Technologies India): Thanks, Rishi. The next question is from Akshay Jogani. Please go ahead, Akshay.

Kanav Khanna: Thanks, Rishi. The next question is from Akshay Jogani. Please go ahead, Akshay.

Akshay Jogani: Okay. Am I audible?

[Analyst 4]: Okay. Am I audible?

Speaker #3: I am audible?

Speaker #1: Yeah, Akshay, go ahead.

Aneesh Reddy Boddu: Yeah, Akshay, go ahead.

Speaker #3: Super. Thank you. Thank you. Hi, Anish, Anand. A couple of questions. During the call, you spoke about how, when you acquire a company, the customer does not necessarily migrate right away.

Akshay Jogani: Super. Thank you. Hi, Aneesh. Hi, Anant. A couple of questions. During the call, you spoke about how when you acquire a company, the customer does not necessarily migrate right away, and it's a journey, right? Now, historically, you always. Hello? Yeah. Am I audible?

[Analyst 4]: Super. Thank you. Hi, Aneesh. Hi, Anant. A couple of questions. During the call, you spoke about how when you acquire a company, the customer does not necessarily migrate right away, and it's a journey, right? Now, historically, you always. Hello? Yeah. Am I audible?

Speaker #3: And it's a journey, right? Now, historically, you've always—hello? Yeah, am I audible?

Speaker #2: Yeah, there's a disturbance?

Aneesh Reddy Boddu: Yeah, there's a disturbance, Akshay. Can you-

Speaker #3: Is it better now? Yeah. Historically, you've spoken about how you are buying agency-type businesses and then sort of transitioning them to the software platform that you have, right?

Akshay Jogani: Is it better now?

[Analyst 4]: Is it better now?

Aneesh Reddy Boddu: Yeah.

Akshay Jogani: 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, the transition where they are 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. When you give them a software, it actually transitions to the company employees or the marketing teams doing the same work. In the period of transition, how does it work? They took up the platform, but the people in, say, SessionM, are doing the work for the marketing teams. Can you help us help me understand how this exactly works as you kind of materially change the business, right?

[Analyst 4]: 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, the transition where they are 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.

Speaker #3: Now, when you are owning this business, the transition where they are still agency-type and you're transitioning them to software—logically, an agency-type business would have people on the roles doing the work for the company.

Speaker #3: And then, when you give them a software, it actually transitions to the company employees or the marketing teams doing the same work. So, in the period of transition, how does it work?

[Analyst 4]: When you give them a software, it actually transitions to the company employees or the marketing teams doing the same work. In the period of transition, how does it work? They took up the platform, but the people in, say, SessionM, are doing the work for the marketing teams. Can you help us help me understand how this exactly works as you kind of materially change the business, right? A marketing team using a software is so different from marketing team turning an agency. Can you help me with this?

Speaker #3: They took up the platform, but the people in, say, session impart doing the work for the marketing teams—can you help me understand how this exactly works?

Speaker #3: And you kind of materially changed the business, right? The marketing team using a software is so different from the marketing team telling an agency, "Can you help me with this?"

Akshay Jogani: A marketing team using a software is so different from marketing team turning an agency. Can you help me with this?

Speaker #2: Can I? I'll take this, Anand, right? So actually, I have two or three parts. So you're right. I mean, the first few acquisitions we did—Pursued, Brierley, even Rewards to a large extent—were agency-like.

Aneesh Reddy Boddu: I'll take this, Anant. 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, so was Kognitiv, right? Both are SaaS-ish. Now they are different issues, let me answer your question first on, what happens in agency is let's say you want to run a campaign. Now, because they don't have a great software platform, they will have someone go do a bunch of this, go build, write code to come up with that campaign. It takes two months, et cetera. Now, a lot of those companies that we bought didn't have an India presence.

Speaker #2: Session Impart is a SaaS company; so was Cognitive, right? Both are SaaS-ish. Now, they are different issues, but let me answer your question first. So what happens in an agency is, let's say you want to run a campaign, right?

Speaker #2: Now, because they don't have a great software platform, they will have someone go do a bunch of this—go build, write code to come up with that campaign.

Aneesh Reddy Boddu: Now, because they don't have a great software platform, they will have someone go do a bunch of this, go build, write code to come up with that campaign. It takes two months, et cetera. Now, a lot of those companies that we bought didn't have an India presence. 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.

Speaker #2: It takes two months, etc. Now, a lot of those companies that we bought didn't have an India presence. So 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.

Aneesh Reddy Boddu: 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.

Speaker #2: Especially when these are very backend-like jobs, they're not even customer-facing. So in fact, in none of our acquisitions do we change the customer-facing teams.

Akshay Jogani: Right.

[Analyst 4]: Right.

Aneesh Reddy Boddu: Especially when these are very back-end jobs. They're not even customer-facing. In fact, in none of our acquisitions do we change the customer-facing teams.

Aneesh Reddy Boddu: Especially when these are very back-end 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 subscale. Are like 10 million, 11 million, 12 million revenues.

Aneesh Reddy Boddu: All of these companies are, keep SessionM aside, are subscale. Are like 10 million, 11 million, 12 million revenues.

Speaker #2: And all of these companies are keep session impart aside, are subscale, right? Are like 10 million, 11 million, 12 million revenue. So they can't have the they can't have a setup here in India, right?

Akshay Jogani: Sure.

[Analyst 4]: Sure.

Aneesh Reddy Boddu: They can't have a setup here in India, right? They would typically work out of. That gives you the earlier momentum margins. Even in Kognitiv, when we bought it was probably at five, 10% margins. Today, they're already at a decent. Because we've done some of these changes through last year already. Right? Essentially for the customer, it's not just using the software. There was a lot of stuff which would ideally have been no code or a configuration, which people ended up doing in some of these older companies.

Speaker #2: So they would typically work out of—so that gives you the earlier momentum and margins. Even in Cogni, when we bought it, it was probably at like 5–10% margins.

Speaker #2: Today, they're already at a decent level because we've done some of these changes through last year already. Right? So essentially, for the customer, a lot of it is not just using the software.

Aneesh Reddy Boddu: Right? Essentially for the customer, it's not just using the software. There was a lot of stuff which would ideally have been no code or a configuration, which people ended up doing in some of these older companies.

Speaker #2: There was a lot of stuff that ideally should have been no-code or just configuration, but people end up doing it manually in some of these older companies.

Speaker #2: Right? So that's the piece that you're switching, right? So 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?

Aneesh Reddy Boddu: Right? That's the piece that you're switching. For example, Brierley is a good example I can give you. When we bought Brierley, or an year before we bought Brierley, it was, I don't know, 200 something people, right? Today, for that same revenue, we have 12 people.

Speaker #2: Today, for that same revenue, we have 12 people, right? So, it's not because it's the same customer-facing people that we have. We haven't changed that side of the angle at all.

Akshay Jogani: Wow.

[Analyst 4]: Wow.

Aneesh Reddy Boddu: 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?

Speaker #2: It's more that 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?

Speaker #2: For everything, they will send you a bill and put some five people to do something, right? So, the two steps to margins are: one step is you move to an India center for the backend-type work.

Aneesh Reddy Boddu: The two steps to margins are: one step is you move to India centers 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?

Speaker #2: The second step is you fully move to software, right? So that's the two steps to get to better margins in each of these cases.

Speaker #2: Yeah?

Speaker #3: Sure. And just to be sure, so for example, let's say a customer has not transitioned, and let's say in the case of a session impart, they do very simple.

Akshay Jogani: Sure. Just to be sure, for example, let's say a customer has not transitioned, let's say in the case of a SessionM. They do very simple. They were already using a different software, now they have got a better software, right? I would imagine 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 roll, say, in India or elsewhere who'd do the work for them?

[Analyst 4]: Sure. Just to be sure, for example, let's say a customer has not transitioned, let's say in the case of a SessionM. They do very simple. They were already using a different software, now they have got a better software, right? I would imagine 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 roll, say, in India or elsewhere who'd do the work for them?

Speaker #3: They were already using different software, and now they have got better software, right? I mean, I would imagine it has some bells and whistles.

Speaker #3: In that case, would you just take up a new software and learn how to do it, or would you keep people on your role, say in India or elsewhere, who would kind of do the work for them?

Speaker #2: So let's take session impart and how the margins will come there. So today, if you look at Capillary, on our book of business, our server costs are roughly about 7%, 8%, 9%.

Aneesh Reddy Boddu: Let's take SessionM and how the margins will come there.

Akshay Jogani: Yeah.

[Analyst 4]: Yeah.

Aneesh Reddy Boddu: I'll explain that to you. Today, if you look at Capillary on our book of business, our server costs are roughly about 7%, 8%, 9%.

Aneesh Reddy Boddu: I'll explain 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, et cetera. Some are seven, some are 10. In SessionM, their server costs are 50% of revenue. It's just a badly architected platform. The first initial set of gains that we are seeing on SessionM is just by getting that architecture right.

Speaker #2: Less than 10, right? Depending on which colo, etc. Some are 7, some are 10. But in that session impart, their server costs are 50 percent of revenue.

Aneesh Reddy Boddu: Less than 10.

Aneesh Reddy Boddu: Right? Depending on which colo, et cetera. Some are seven, some are 10. In SessionM, their server costs are 50% of revenue. It's just a badly architected platform. The first initial set of gains that we are seeing on SessionM is just by getting that architecture right.

Speaker #2: Because it was just a badly architected platform, right? So, the first initial set of gains that we are seeing on session impact is just by getting that architecture right.

Speaker #2: Right? Which obviously, we are a far more cost-conscious and much more frugally run company, so we are getting that together. Now, in Session Impart's case, like I said, it's already a SaaS business.

Aneesh Reddy Boddu: Which obviously, we are far more cost-conscious and a much more frugal in our company, so we are getting that act together. Now, in SessionM's case, like I said, it's already a SaaS business. There's already a software that customer use themselves. It's not an agency. In SessionM's case, what we are 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 customers.

Speaker #2: Right? So there's already a software that customers use themselves, right? It's not an agency. So in Session Impart's case, what we are doing is some of the UIs that they will use will also be available on our platform.

Aneesh Reddy Boddu: In SessionM's case, what we are 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 customers.

Speaker #2: So, it's not much of a change of experience or relearning for our customer. Can I ask you a question, Michelle?

Akshay Jogani: Sure.

[Analyst 4]: Sure.

Aneesh Reddy Boddu: Did I answer your question, Akshay?

Speaker #3: Yeah, I have one more question. Yeah, 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?

Akshay Jogani: Yeah. I have one more question. Yeah, that was super helpful. One more question is, does this definition of NRR, ACV, it's sort of super confusing. 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? And when you say organic NRR, does it mean that if a customer moves from Kognitiv to your platform, does it get added there or not? If somewhere you define this, it'll be very helpful.

[Analyst 4]: Yeah. I have one more question. Yeah, that was super helpful. One more question is, does this definition of NRR, ACV, it's sort of super confusing. 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? And when you say organic NRR, does it mean that if a customer moves from Kognitiv to your platform, does it get added there or not? If somewhere you define this, it'll be very helpful.

Speaker #3: What exactly do you mean by an ACV at a given point? And 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?

Speaker #3: I mean, if you define this somewhere, it will be very helpful.

Speaker #2: Should I take a shorter read, Anand, or probably—up to you? Sorry?

Aneesh Reddy Boddu: Should I take a shot at it, Anant? Shravya, up to you. Sorry.

Speaker #1: Okay, let me take this and add to it. So, Akshay, NRR is Net Retention Rate. Think of it as: all the customers that are present on the Capillary platform on 1st April 2026—how much revenue they contributed in the 12-month period before that, and how much revenue they'll contribute in FY27.

Anant Choubey: Okay. Let me take this. I will add to it. Akshay, NRR is net retention rate. Think of it as.

Akshay Jogani: Yeah

[Analyst 4]: Yeah

Anant Choubey: 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 will contribute in FY2027. FY2026, let us say you made $100 from them. In FY2027, if you make $111, then the NRR is 111%.

Speaker #1: And FY26, let's say you made $100 from them, and in FY27, if you make $111, then the NRR is 111 percent. 111.

Anant Choubey: FY2026, let us say you made $100 from them. In FY2027, if you make $111, then the NRR is 111%.

Speaker #5: Sure.

Akshay Jogani: Sure.

[Analyst 4]: Sure.

Speaker #1: So

Aneesh Reddy Boddu: When we're saying

Aneesh Reddy Boddu: 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. Organic for us is essentially revenues that are on the Capillary platform. Yeah. Anant?

Speaker #2: Akshay and everyone else on the call, when we're saying 'organic,' we're basically saying it's only Capillary platform revenues, right? So, organic for us is essentially revenues that are on the Capillary platform.

Aneesh Reddy Boddu: Akshay and everyone else on the call, when we're saying organic, we're basically saying it's only Capillary platform revenues. Organic for us is essentially revenues that are on the Capillary platform. Yeah. Anant?

Speaker #2: Right? So yeah.

Speaker #3: But if someone moved from Cognitive to your platform because you upsold them, then?

Akshay Jogani: If someone moved from Kognitiv to your platform because you upsold them, then?

[Analyst 4]: If someone moved from Kognitiv to your platform because you upsold them, then?

Speaker #2: We will consider that in NRR calculations next year, not this year.

Aneesh Reddy Boddu: We will consider that into NRR calculations next year, not in this year.

Speaker #3: Not in this year. Okay, yeah.

Akshay Jogani: Not in this year. Okay. Yeah.

[Analyst 4]: Not in this year. Okay. Yeah.

Speaker #2: Right? So that you have a like-for-like. So that you have a like-for-like.

Aneesh Reddy Boddu: That you have a like to like.

Speaker #3: Perfect. Perfect. Perfect. And ACV, how should we think of that? In the sense that, again, a simple explainer would be super helpful.

Akshay Jogani: Perfect.

[Analyst 4]: Perfect.

Aneesh Reddy Boddu: Right?

Akshay Jogani: Perfect. ACV, how should we think of that? In the sense that, again, this simpler explanation would be super helpful.

[Analyst 4]: Perfect. ACV, how should we think of that? In the sense that, again, this simpler explanation would be super helpful.

Speaker #3: In terms of how you are doing.

Speaker #2: Sure.

Speaker #1: So, ACV is annual contract value, right? A metric that we showed you is new ACV, so new annual contract value that Capillary won in that period.

Anant Choubey: Sure. ACV is annual contract value. Right?

Anant Choubey: Sure. ACV is annual contract value. Right? The metric that we showed you is new ACV. 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.

Anant Choubey: The metric that we showed you is new ACV.

Anant Choubey: New annual contract value that Capillary won in that period.

Speaker #1: So that's a leading indicator of how the business will be going forward, because whatever is newly won is business that is going live on the platform and will generate revenue in the following 12 months and thereafter.

Anant Choubey: 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.

Speaker #3: Okay, okay. So 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 platforms, and I started to pay $1.2 million a year instead.

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

[Analyst 4]: Okay. In this case, let's say I am already a customer of Capillary, and let's say our billing was a billion dollars a year, and then I decided to buy two more, say, Engage platform, and I started to pay $1.2 million a year instead. Then ACV addition, new ACV will be $0.2 million, right?

Speaker #3: So the ACV addition, new ACV will be $0.2 million, right?

Speaker #2: Correct.

Aneesh Reddy Boddu: Correct.

Speaker #1: Correct.

Speaker #3: Right. Now, let's say in this case, if you acquired Cognitive, and one of the Cognitive clients then moved to the Capillary platform, do you consider that ACV or new ACV? Or do you not consider that as new ACV?

Akshay Jogani: Right. Now, let's say in this case now, if let's say you acquired Kognitiv, one of the Kognitiv clients moved to the Capillary platform, do you consider that in ACV or new ACV or you would not consider that in new ACV?

[Analyst 4]: Right. Now, let's say in this case now, if let's say you acquired Kognitiv, one of the Kognitiv clients moved to the Capillary platform, do you consider that in ACV or new ACV or you would not consider that in new ACV?

Speaker #2: No, you don't consider that in new ACV, actually.

Aneesh Reddy Boddu: No. You don't consider that in new ACV actually.

Speaker #3: Okay. But then, that's also sort of...

Akshay Jogani: Okay, that's also sort of-

[Analyst 4]: Okay, that's also sort of-

Speaker #2: Akshay, I would request you to restrict your questions because there is a long queue, so we can get to everyone.

Anant Choubey: Akshay, I would request you to restrict your question because there is a long queue, we can get-

Kanav Khanna: Akshay, I would request you to restrict your question because there is a long queue, we can get-

Speaker #3: No, I understand, but this would be helpful for everyone. So, I'll go back.

Akshay Jogani: No, I understand. This will be helpful for everyone. I'll go back.

[Analyst 4]: No, I understand. This will be helpful for everyone. I'll go back.

Speaker #2: So you don't consider that in the new ACV, because you're not signing a new contract.

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

Speaker #3: Okay. Okay.

Akshay Jogani: Okay.

[Analyst 4]: Okay.

Aneesh Reddy Boddu: New ACV, even if there is an organic, just volume-based expansion of a customer.

Aneesh Reddy Boddu: New ACV, even if there is an organic, just volume-based expansion of a customer. We don't even consider that a new ACV.

Speaker #2: New ACV, we need. So, even if there is an organic, just volume-based expansion of a customer, we don't even consider that in new ACV.

Aneesh Reddy Boddu: We don't even consider that a new ACV.

Speaker #2: No inflation expansion, no. So, new ACV is just where we are comping our sales guys. There is a new contract; there is a new—right?

Akshay Jogani: Okay.

[Analyst 4]: Okay.

Aneesh Reddy Boddu: No inflation expansion. New ACV is just where we are comping our sales guys, there is a new contract.

Akshay Jogani: Super.

[Analyst 4]: Super.

Aneesh Reddy Boddu: Right? 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.

Speaker #2: Only those are considered 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.

Speaker #2: Right?

Akshay Jogani: Makes sense.

[Analyst 4]: Makes sense.

Speaker #3: So, super, this is helpful. Thank you so much, Anish. I'll come back in the queue.

Aneesh Reddy Boddu: Right?

Akshay Jogani: Super. This is helpful. Thank you so much, Aneesh. I'll come back in the queue.

[Analyst 4]: Super. This is helpful. Thank you so much, Aneesh. I'll come back in the queue.

Speaker #1: Thanks, Akshay. So, the next question is from Achin. Please go ahead. And let's just stick to one question only because of paucity of time.

[Company Representative] (Capillary Technologies India): Thanks, Akshay. The next question is from Achin. Please go ahead, and let's restrict our question to one only because of paucity of time. Achin, you can unmute yourself and go ahead.

Kanav Khanna: Thanks, Akshay. The next question is from Achin. Please go ahead, and let's restrict our question to one only because of paucity of time. Achin, you can unmute yourself and go ahead.

Speaker #1: Yeah. Achin, you can mute yourself. Unmute yourself and go ahead.

Speaker #3: Hi. Can you hear me? Hi. Can you hear me?

[Analyst]: Hi, can you hear me?

[Analyst 5]: Hi, can you hear me?

Anant Choubey: Yes.

Kanav Khanna: Yes.

[Analyst]: Hi, can you hear me?

[Analyst 5]: Hi, can you hear me?

Speaker #1: Yes, Achin. Go ahead.

Anant Choubey: Yeah.

Kanav Khanna: Yeah. Achin. Go ahead.

Aneesh Reddy Boddu: Achin. Go ahead.

Speaker #3: Yeah. Anish, can you tell me, let's say if there is no constraint on funding, can an AI-native company create what you have?

[Analyst]: Yeah. Anish, 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 younger Anish, with all the fundings and all the AI advancements which are happening to write code and everything, still cannot match what Capillary is today?

[Analyst 5]: Yeah. Anish, 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 younger Anish, with all the fundings and all the AI advancements which are happening to write code and everything, still cannot match what Capillary is today?

Speaker #3: So, what are the key things which, let's say, a younger Anish—with all the funding and all the AI advancements happening to write code and everything—still cannot match what Capillary is today?

Speaker #2: Yeah, so look, we play in the enterprise space, right? And I have struggled with this myself over many years. When we opened the US, when we—whatever, right?

Aneesh Reddy Boddu: Yeah, look, we play in the enterprise space, right? I've struggled with this myself over many years, when we opened the US, whatever, right? Just having a product doesn't mean that a Fortune 500 is going to come and buy from you. We've customers that are in the Fortune 50, right? 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. 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?

Speaker #2: So just having a product doesn't mean that a Fortune 500 company is going to come and buy from you. And we have customers who are in the Fortune 50, right?

Speaker #2: We have at least five customers in the Fortune 50. They won't buy, right? You need to be—it's not just matching what's there in the product.

Speaker #2: You also need to have enough implementations and be very well regarded by analysts. Let's think about this, right? Even today, enterprise AI adoption is abysmal.

Aneesh Reddy Boddu: You also need to have enough implementations, be very well-regarded by analysts. 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?

Speaker #2: Because it's risky, right? And most large enterprises live on risk. They don't want you to get fired for taking a very risky decision in a large enterprise.

Speaker #2: You don't get fired for doing nothing, right? So in my head, to your point, look, I think—I am a strong believer that, look, with AI, what's happening is your ability to build code is just increasing significantly, right?

Aneesh Reddy Boddu: In my head, to your point, look, I am a strong believer that, look, 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 this stuff. Because in a very confusing, very noisy world, you would mostly go ask someone else, 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.

Speaker #2: So distribution, brand, analyst view of things—I think some of those end up becoming far bigger differentiators than just the ability to write code.

Speaker #2: So at least in our head, it's both sides, right? So we continue to invest in being the best product out there and being at least a year ahead of everyone else.

Aneesh Reddy Boddu: 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 this stuff. Because in a very confusing, very noisy world, you would mostly go ask someone else, 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?

Speaker #2: And also, in all of these situations, because in a very confusing, very noisy world, you would mostly go ask someone else, 'Who should I buy from?'

Speaker #2: Another customer, another analyst, another partner. Right? So I feel the moat is in the moat is in as much in brand distribution all of these pieces as it is in just the quality of the product.

Speaker #2: Did I answer that for you, Akshay?

Aneesh Reddy Boddu: Did I answer that for you, Achin?

Speaker #3: Yeah, this is good. Thank you.

[Analyst]: Yeah. This is great. Thank you.

[Analyst 5]: Yeah. This is great. Thank you.

Speaker #1: Thanks, Akshay. Next question is from Sanjay Kumar Elangoan. Please go ahead.

Anant Choubey: Thanks. Thanks, Achin. Next question is from Sanjay Kumar Elangovan. Please go ahead. Sanjay, if you're saying something, we can't hear you. Sanjay? I think Sanjay has a network issue. We can move on. Next question is from-

Kanav Khanna: Thanks. Thanks, Achin. Next question is from Sanjay Kumar Elangovan. Please go ahead. Sanjay, if you're saying something, we can't hear you. Sanjay? I think Sanjay has a network issue. We can move on. Next question is from-

Speaker #2: Sanjay, if you're saying something, we can't hear you.

Speaker #1: Sanjay? I think Sanjay has a network issue. We can move on. So, the next question is from—I just got unmuted. All right, so can you hear me, guys?

Sanjay Kumar Elangovan: I was in--

[Analyst 6]: I was in--

Anant Choubey: Yeah.

Kanav Khanna: Yeah.

Sanjay Kumar Elangovan: I just got-

[Analyst 6]: I just got-

Anant Choubey: Go on

Kanav Khanna: Go on

Sanjay Kumar Elangovan: unmuted. All right. Can you hear me guys?

[Analyst 6]: unmuted. All right. Can you hear me guys?

Speaker #2: Yeah, we can hear you, Sanjay.

Anant Choubey: Yeah, we can hear you, Sanjay.

Kanav Khanna: Yeah, we can hear you, Sanjay.

Speaker #1: Yeah, okay. So, if I look at FY25 growth, it was 13% because you didn't have any acquisition, and now Q1 organic growth is around 11%.

Aneesh Reddy Boddu: Yeah.

Sanjay Kumar Elangovan: Okay. If I look at FY 2025 growth, it was 13% because you didn't have any acquisition, and now Q1 organic growth is around 11%. Just trying to understand 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, and how should I look at your organic growth in a year where you don't do any acquisitions?

[Analyst 6]: Okay. If I look at FY 2025 growth, it was 13% because you didn't have any acquisition, and now Q1 organic growth is around 11%. Just trying to understand 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, and how should I look at your organic growth in a year where you don't do any acquisitions?

Speaker #1: So, just trying to understand our organic growth in a year, you don’t do any acquisitions. So if you want to boost it by upselling or cross-selling, does it affect the economics?

Speaker #1: And how should I look at your organic growth in a year when you don't do any acquisitions?

Speaker #2: Yeah. So, Sanjay, the loyalty space is a red ocean, right? So that's 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 mentioning is actually wrong.

Aneesh Reddy Boddu: 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 saying 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 a only margin model, right? You shouldn't. If you look at our DRHP, it's very well covered in the DRHP.

Speaker #2: It's closer to 20 because we had done an accounting change in that year. Instead of looking at overall campaign revenues, including SMS cost and email cost, we had moved to an only-margin model.

Speaker #2: Right? So, which is why you shouldn't—I mean, 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.

Sanjay Kumar Elangovan: Okay.

[Analyst 6]: Okay.

Aneesh Reddy Boddu: 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. Yeah, something around that.

Speaker #2: If you look at that number, it's more like a 20 to 23-odd percent growth. I think it's, yeah, 498 to, yeah, something around that.

Speaker #2: So the number is blacking me out, but if you look at the DRHP, the numbers are there, right? So even this year, we will do roughly 20% to 23% organic growth.

Sanjay Kumar Elangovan: Okay.

[Analyst 6]: Okay.

Aneesh Reddy Boddu: The number's blanking me out, if you look at the DRHP, the numbers are there. Right?

Sanjay Kumar Elangovan: Okay.

[Analyst 6]: Okay.

Aneesh Reddy Boddu: 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. Which is why if you remove that, it's 116% NRR, if you remove that one healthcare customer. Overall, through the year, we are looking at a 23% growth including a currency impact of about 6%. You will see about a 17 odd % full year organic growth for the business. Now, if you look at the. We 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 INR 10 million in revenues. The INR 10 to 100 million bracket.

Speaker #2: This year, Q1 is a little bit of an aberration because this large healthcare customer we had didn't grow, right? So, which is why if you remove that, it's 116% NRR.

Speaker #2: If you remove that one healthcare customer, right? So overall, through the year, we are looking at 23% growth, including a currency impact of about 6%.

Aneesh Reddy Boddu: Overall, through the year, we are looking at a 23% growth including a currency impact of about 6%. You will see about a 17 odd % full year organic growth for the business. Now, if you look at the. We 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 INR 10 million in revenues. The INR 10 to 100 million bracket.

Speaker #2: So, you will see about a 17% or so full-year organic growth for the business. Now, look, if you look at—again, we had shared this in the Analyst Day piece that we had done.

Speaker #2: There are roughly about 90 companies in the loyalty space which have more than $10 million in revenues—the $10 to $100 million bracket, right—which is probably where our M&A thesis can play.

Sanjay Kumar Elangovan: Yeah.

[Analyst 6]: Yeah.

Speaker #2: And 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 like 0.3, 0.5, 0.1 percent.

Aneesh Reddy Boddu: Look, it is a red ocean. Loyalty is an old business. If you look at what we are paying for our acquisitions, it's like 0.3%, 0.5%, 0.1%, right? M&A actually in Capillary is a customer acquisition cost substitution story. We are not buying new functionality, we're not buying any of that. We are actually buying contracts, which are many year contracts. We are migrating those customers over a couple of years and then they become 70% gross margin businesses or revenues for us.

Speaker #2: 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— we're not buying any of that.

Aneesh Reddy Boddu: We are not buying new functionality, we're not buying any of that. We are actually buying contracts, which are many year contracts. We are migrating those customers over a couple of years and then they become 70% gross margin businesses or revenues for us. I do think, and we've mentioned about this in the RHP 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. Now everyone in the market knows that we buy. We buy at great prices. That discipline, I think, will continue to remain.

Speaker #2: Right? We are actually buying contracts, which are many-year contracts. We are migrating those customers over a couple of years, and then they become 70% gross margin businesses or revenue for us.

Speaker #2: Right? So, I do think, and we've mentioned this in the DRHP as well, we think the right way to think of Capillary is as a 15% to 20% organic growth business.

Aneesh Reddy Boddu: I do think, and we've mentioned about this in the RHP 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. Now everyone in the market knows that we buy. We buy at great prices. That discipline, I think, will continue to remain.

Speaker #2: 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?

Speaker #2: And now everyone in the market knows that we buy. So, we have a big inbound, and we buy at great prices. That discipline, I think, will continue to remain.

Speaker #1: Got it. No, I understood the M&A economics, but when you upsell or cross-sell, does it affect the economics? Are you forced to boost growth?

Sanjay Kumar Elangovan: Got it. I understood the M&A economics, but 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?

[Analyst 6]: Got it. I understood the M&A economics, but 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?

Speaker #1: Do you have to cut down on your economics?

Speaker #2: Upsell or cross-sell—you actually think of it as, let's say, whatever revenues that you bought, they migrated to Capillary. Now, those revenues continue to show the same 115-odd percent of net retention rate.

Aneesh Reddy Boddu: Upsell or cross-sell, you actually think of it as, let's say, whatever revenues that you bought, they migrated to Capillary. Those revenues continue to show the same 150 odd % of net retention rate. 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, so they will buy that or they will buy our experiences stack. That should not hamper. In fact, probably next time we can pull out saying what has been the NRR on the inorganic customers who migrated over.

Speaker #2: Right? So those revenues, once they come in, continue to grow at the same pace because there is no product like IRA. I mean, they didn’t have something, so they will buy that, or they will buy our experiences stack.

Speaker #2: So, that should not hamper—in fact, probably next time we can pull out and say what has been the NRR on the inorganic customers who migrated over.

Sanjay Kumar Elangovan: Yeah.

[Analyst 6]: Yeah.

Speaker #2: It's very similar. Once you're on the Capillary platform, there's no differentiation there.

Aneesh Reddy Boddu: It's very similar.

Sanjay Kumar Elangovan: Wow.

[Analyst 6]: Wow.

Aneesh Reddy Boddu: Once you're on the Capillary platform, there's no differentiation there.

Speaker #1: Okay. And lastly on IRA, can you give the actual ARR net of cannibalization? Because I think it affects two other products. So what is it?

Sanjay Kumar Elangovan: Last on aiRA, can you give the actual ARR net of cannibalization? Because I think it affects two other products. So what is the IRR and any economics there in terms of, let's say, gross margin after the imprints passed? I know it's early days, but anything on churn, retention on the early cohort of aiRA customers?

[Analyst 6]: Last on aiRA, can you give the actual ARR net of cannibalization? Because I think it affects two other products. So what is the IRR and any economics there in terms of, let's say, gross margin after the imprints passed? I know it's early days, but anything on churn, retention on the early cohort of aiRA customers?

Speaker #1: IRR and any economics there in terms of, let's say, gross margin after the inference cost? I know it's early days, but is there anything on churn or retention in the early cohort of IRA customers?

Speaker #2: We are at about $2.5 million-ish in ARR right now on IRA, Sanjay. None of this is cannibalized. The action agent side, I think, like we said, Engage is a very small—5% of revenue today.

Aneesh Reddy Boddu: We're at about two and a half million-ish in ARR right now on aiRA. Sanjay, none of this is cannibalized. The Action Agent side, I think, like we said, Engage is a very small 5% of revenue today. That will get from the Action Agent side, I think we can grow that hook of business. Today there is no cannibalization on that side.

Speaker #2: That will come from the action agent side. I think we can grow that book of business. But today, there is no cannibalization on that side.

Aneesh Reddy Boddu: That will get from the Action Agent side, I think we can grow that hook of business. Today there is no cannibalization on that side.

Speaker #2: Right? So okay.

Speaker #1: And gross margins in IRA, or contribution margins in IRA?

Sanjay Kumar Elangovan: Gross margins in aiRA or contribution margins in aiRA?

[Analyst 6]: Gross margins in aiRA or contribution margins in aiRA?

Speaker #2: Similar, because it's all upwards of 80%. Yeah.

Aneesh Reddy Boddu: Similar, because it's all upwards of 80%.

Sanjay Kumar Elangovan: Oh, okay.

[Analyst 6]: Oh, okay.

Speaker #1: Got it. All right. Thank you. All the best.

Aneesh Reddy Boddu: Yeah.

Sanjay Kumar Elangovan: Got it. All right. Thank you. All the best.

[Analyst 6]: Got it. All right. Thank you. All the best.

Speaker #2: Thanks. So, due to paucity of time, we'll take that as the last question. If anyone has any more questions, please feel free to reach out to either the Capillary or EY team.

[Company Representative] (Capillary Technologies India): Due to paucity of time, we will take that as the last question. Whoever has any more questions can reach out to us, either the Capillary or the EY team. I would like to hand over it back to Aneesh for his closing remarks.

Kanav Khanna: Due to paucity of time, we will take that as the last question. Whoever has any more questions can reach out to us, either the Capillary or the EY team. I would like to hand over it back to Aneesh for his closing remarks.

Speaker #2: So, I would like to hand it over back to Anish for his closing remarks.

Speaker #3: I think we have another five minutes, and I know last time also Srinivasuke's question didn't get asked. So we can continue for another five minutes.

Aneesh Reddy Boddu: No, I think we have another five minutes. I know last time also Srinivasa UK's question didn't get asked. We can continue another five minutes. I think we have three more questions.

Speaker #3: I think we have three more questions.

Speaker #2: Sure. Okay. So, Srinivasu, you can go ahead.

[Company Representative] (Capillary Technologies India): Sure. Okay. Srinivasa is going to go ahead.

Kanav Khanna: Sure. Okay. Srinivasa is going to go ahead.

Speaker #4: Hello. Am I audible, sir?

Srinivasa UK: Hello? Am I audible, sir?

[Analyst 7]: Hello? Am I audible, sir?

Speaker #2: Yeah, we can hear you.

Aneesh Reddy Boddu: Yeah, we can hear you.

Speaker #4: Yeah. My question is about agentic commerce. When a shopper is an agent rather than a person, what will happen to these points and tiers and the gamified front ends, like Experience Plus, that you have talked about, right?

Srinivasa UK: Yeah. My question is about agentic commerce. When a shopper is an agent rather than a person, what will happen to these points and tiers and the gamified front ends like Experiences+ that you have talked about it? Is Capillary's roadmap is to expose and earn and burn this through agents, which is agent-accessible endpoints?

[Analyst 7]: Yeah. My question is about agentic commerce. When a shopper is an agent rather than a person, what will happen to these points and tiers and the gamified front ends like Experiences+ that you have talked about it? Is Capillary's roadmap is to expose and earn and burn this through agents, which is agent-accessible endpoints?

Speaker #4: Is Capillary's roadmap to expose earn and burn through agents? Which endpoints are accessible to agents?

Speaker #2: 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 I mean, cognitive load of typically in loyalty, you get 2%, 3%, 4% points.

Aneesh Reddy Boddu: Absolutely. I think Srinivas, that's a great question. Like you said, when an agent is shopping, today as humans, cognitive load typically in loyalty you get 2%, 3%, 4% points. Usually loyalty in today's world is a very subconscious type of, I get something, so I get 5% points from this airline, so I will go there. It's not a very rational decision. When an agent buys on the other hand, even a 1% difference, the agent will say, "Okay, this is better than that." In an agent buying decision, we think loyalty will move to becoming more rational, not just the 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.

Speaker #2: Right? So, usually, loyalty in today's world is a very subconscious type of, 'I get something. So, I get 5% points from this airline, so I will go there.'

Speaker #2: 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, this is better than that."

Aneesh Reddy Boddu: When an agent buys on the other hand, even a 1% difference, the agent will say, "Okay, this is better than that." In an agent buying decision, we think loyalty will move to becoming more rational, not just the 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.

Speaker #2: Right? So 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." So 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 does not lazy like humans are.

Speaker #2: Right? It is going to measure to the last rupee, the last penny, and then take a call, right? So, and that's where we think we actually have a massive edge.

Aneesh Reddy Boddu: It is going to measure to the last rupee, the last penny and then take a call. That's where we think we actually have a massive edge. Then, when an agent is communicating with a platform or with a customer of ours, the turnaround times, the tech needed, all of that needs to be really, really good. If you look at most of our competitors, they are all agencies. Their tech is done and dusted. We do think, in fact in a lot of our newer wins that we talk about this quite a bit, that the importance of promotions, the importance of coupons, the importance of less than 100 millisecond turnarounds, all of that becomes much more critical in an extremely rational agent-like behavior, than it is actually when a human is buying. Did I answer that question for you, Srinivas?

Speaker #2: Because then, when an agent is communicating with a platform or with a customer—like a customer of ours—the turnaround times, the tech needed, all of that needs to be really, really good.

Speaker #2: And if you look at most of our competitors, they're all agencies. So their tech is gone and done and dusted, right? So we do think, in fact, in a lot of our newer wins, that we talk about this quite a bit.

Aneesh Reddy Boddu: We do think, in fact in a lot of our newer wins that we talk about this quite a bit, that the importance of promotions, the importance of coupons, the importance of less than 100 millisecond turnarounds, all of that becomes much more critical in an extremely rational agent-like behavior, than it is actually when a human is buying. Did I answer that question for you, Srinivas?

Speaker #2: The importance of promotions, the importance of coupons, the importance of less than 100-millisecond turnarounds—all of that becomes much more critical in an extremely rational, agent-like behavior.

Speaker #2: Then it is actually in when a human is buying. Did I answer that question for you, Srinivasu?

Speaker #4: Yeah, yes. Thanks a lot. Yeah.

Srinivasa UK: Yeah. Yes. Thanks a lot. Yeah.

[Analyst 7]: Yeah. Yes. Thanks a lot. Yeah.

Speaker #2: Yeah.

Aneesh Reddy Boddu: Yeah.

Speaker #3: Thanks, sir. We have the next question from Sankar Narayan. Please go ahead. Good evening, sir. Thanks for the opportunity. Am I audible?

[Company Representative] (Capillary Technologies India): Thanks. We have the next question from Shankar Narayan. Please go ahead.

Kanav Khanna: Thanks. We have the next question from Shankar Narayan. Please go ahead.

Shankar Narayan: Good evening sir. Thanks for the opportunity. Am I audible?

[Analyst 8]: Good evening sir. Thanks for the opportunity. Am I audible?

Speaker #2: Yeah. We can hear you.

[Company Representative] (Capillary Technologies India): Yeah. We can hear you.

Kanav Khanna: Yeah. We can hear you.

Speaker #3: Yeah. So firstly, yeah, I mean, calling multiple times that our big competitors are large agencies. Can you quantify the market share in the loyalty program space held by these agencies and an independent software player like us?

Shankar Narayan: Firstly, you have been calling multiple times that our big competitors are large agencies. Can you please 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?

[Analyst 8]: Firstly, you have been calling multiple times that our big competitors are large agencies. Can you please 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?

Speaker #3: And maybe the large ERP guys?

Speaker #2: Yeah, the very large agencies are—I can name them, right? They're all on the Forrester report, which is there on our website, and also on the first few slides.

Aneesh Reddy Boddu: Yeah. The very large agencies are. I can name them. They are 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, Epsilon was a couple of billion dollars. Merkle, which is part of Dentsu, last reported revenues was upwards of INR half a billion. We know that Kobie, Bond Brand, all of that gang is again in INR few hundred million of revenues. Software-only is a very, very small part of the. 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 far less than 10% of actual revenues sits with software today as compared with agencies.

Speaker #2: So there's people like Epsilon—last reported revenues of Epsilon were a couple of billion dollars. Merkle, which is part of Dentsu, last reported revenues were upwards of half a billion.

Speaker #2: We know that Kobe, Bondbrand, all of that gang is again in that few hundred million of revenues. Now, software only is a very, very small part — it is much more newer. There's us, there's Salesforce — I mean, they have a small loyalty product.

Aneesh Reddy Boddu: We know that Kobie, Bond Brand, all of that gang is again in INR few hundred million of revenues. Software-only is a very, very small part of the. 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 far less than 10% of actual revenues sits with software today as compared with agencies.

Speaker #2: There's Oracle, 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.

Speaker #3: All right, sir. Just to get an understanding, because they typically deal with the CMOs of Fortune companies, where they handle the marketing budgets, so...

Shankar Narayan: Got it. Just to get an understanding, because they typically deal with the CMOs of Fortune companies where they deal with the marketing budgets.

[Analyst 8]: Got it. Just to get an understanding, because they typically deal with the CMOs of Fortune companies where they deal with the marketing budgets.

Speaker #2: We are also in the same budget. Our customers are CMOs again.

Aneesh Reddy Boddu: We also are the same budget. Our customers are CMOs again.

Speaker #3: All right. So most of their growth is coming from the shift towards an independent software player like us, right? Is that the right way to put it?

Shankar Narayan: Got it. Most of their growth is coming from a shift towards an independent software player like us, right? Is the right way to put it?

[Analyst 8]: Got it. Most of their growth is coming from a shift towards an independent software player like us, right? Is the right way to put it?

Speaker #2: Correct. More and more, I think, teams want to have faster speed, and this agency model of everything taking two months doesn't work. That's driving the shift.

Aneesh Reddy Boddu: Correct. More and more, I think teams want to have faster speed. With agency model, everything taking two months doesn't work. That's driving the shift. Yeah.

Speaker #2: Yeah.

Speaker #3: Got it. Thanks. Thanks. So, next question is from Chintan Shah. Please go ahead.

Shankar Narayan: Got it. Thanks.

[Analyst 8]: Got it. Thanks.

[Company Representative] (Capillary Technologies India): Thanks. Next question is from Chintan Shah. Please go ahead.

Kanav Khanna: Thanks. Next question is from Chintan Shah. Please go ahead.

Speaker #5: Hi. Hi, Anish. This question is for you. So just one question that I had. Considering the sort of capabilities that we have built in terms of different verticals, as well as in terms of offerings and in terms of AI, do you think now is the stage where we should...

Chintan Shah: Hi. Hi, Anish. 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 pull more clients or?

[Analyst 9]: Hi. Hi, Anish. 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 pull more clients or?

Speaker #2: Chintan, if you're asking questions about—

Speaker #5: Clients, or... Okay. Hello? Now can you hear me?

Aneesh Reddy Boddu: Chintan, if you're asking a question, we can't hear you.

Chintan Shah: Okay. Hello? Now can you hear me?

[Analyst 9]: Okay. Hello? Now can you hear me?

Speaker #2: Yeah. We can hear you.

Aneesh Reddy Boddu: Yeah. We can hear you.

Speaker #5: Yeah, sorry. So, Anish, the only question I had was: now Capillary has built a lot of capabilities across different verticals, and now we have more AI offerings as well.

Chintan Shah: Yeah. Sorry. Anish, the only question I had was, now Capillary has built a lot of capabilities across different verticals, and now we have more AI offerings as well. Do you think now we're at a position where we should be able to sort of attract more larger clients organically as well? Or do you think there still needs more to be done for that to happen?

[Analyst 9]: Yeah. Sorry. Anish, the only question I had was, now Capillary has built a lot of capabilities across different verticals, and now we have more AI offerings as well. Do you think now we're at a position where we should be able to sort of attract more larger clients organically as well? Or do you think there still needs more to be done for that to happen?

Speaker #5: So do you think now we're at a position where we should be able to attract more, larger clients organically as well, or do you think there still needs to be more done for that to happen?

Speaker #2: Chintan, loyalty is a very sticky business here. The problem with a sticky business is that it's sticky for everyone, right? Whether it's for us or for our competitors.

Aneesh Reddy Boddu: Chintan, loyalty is a very sticky business. The problem with a sticky business is it's sticky for everyone, right? Whether it's for us or for our competitors. The problem we see is that, the product slide I showed you, the average number of places you integrate with a customer is about nine different places. Which is the reason why- Anish, you're not audible.

Speaker #2: So the problem we see is that on the product slide I showed you, the average number of places you integrate with a customer is about nine different places, right?

Speaker #2: So, which is the reason why—

Anant Choubey: Anish, you're not audible.

Speaker #3: Anish, you're not audible.

Speaker #5: Hello? Anish?

Chintan Shah: Hello, Anish?

Kanav Khanna: Hello, Anish?

Speaker #3: I think we lost Anish here. Am I audible?

Anant Choubey: I think we lost Aneesh here. Am I audible?

Speaker #5: Yes, please.

Aneesh Reddy Boddu: Yes, please.

Kanav Khanna: Yes, please.

Speaker #3: Okay, I'll just take it forward from here. So, Chintan, I'm guessing there are two parts to the question here. One is on the enterprise customers' organic motion.

Anant Choubey: Okay. I'll just take it forward there. Chintan, I'm guessing there are two parts to the question here. One is on the enterprise customers, organic motion on that. There's 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.

Speaker #3: Just a slightly different data point: If you look at some of our Fortune 50 and Fortune 500 customers, those have all been organic inbound.

Anant Choubey: 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.

Speaker #3: The largest healthcare customer, or one of the largest healthcare pharmacy chains in the US, or one of the largest fuel retailers—some of these are Fortune 50 customers—have been all organic inbound.

Speaker #3: So that, I think, as our presence in the US and brand awareness increase, that has constantly been improving for us. A point to note here is that we are just a five-year-old company in the US.

Anant Choubey: A point to note here is that we are 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, and 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.

Speaker #3: So, it took some time for some of this inbound to start happening, but now that we are a leader on a lot of these independent analyst reports, a lot of that inbound has started happening now.

Speaker #3: On the other side, obviously, if somebody has already if somebody is already on another platform, the time that it would take because of the stickiness for them to really get paid with it and do a RFP and come in the market, that is a constraint, and that's where the inorganic motion of buying companies come into the play.

Anant Choubey: 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, and 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.

Speaker #3: So, we use a combination of both of these to acquire more large or super-large enterprise customers.

Speaker #5: And 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?

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

[Analyst 9]: Anant, if I just flip it, is it fair to say that despite all this AI, et cetera, coming in still it's not going to make a difference for somebody else to use that and acquire clients unless the customers use it in-house?

Speaker #5: Unless the customers use it in-house.

Speaker #3: So, if you look at it, 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 to the market to look at the best provider and move their programs to them.

Anant Choubey: 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 program that was 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 bought by marketers, 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. Like if you think of loyalty is not just point earn and burn, right?

Speaker #3: And I think one of the main reasons for that is that loyalty is actually bought by a marketer, right? As in, it's more of a CMO buy than a CIO buy.

Speaker #3: And anything to do with marketing is fast-changing, so your requirements today versus your requirements next year keep on changing. And in places where some of these have been run in-house, there's this constant ask from the CMO to get things done, or to ask for newer future features—newer activations for their customers.

Anant Choubey: 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. Like if you think of loyalty is not just point earn and burn, right?

Speaker #3: If you think of loyalty, it's not just points earned and done, right? You will have badges, milestones, referrals — a bunch of those features that the team would keep looking for.

Anant Choubey: You will have badges, milestones, referrals, a 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. We're kind of seeing tailwinds on both these cohorts of the time for us.

Speaker #3: And that's where most in-house programs tend to end up becoming slow or constrained for marketers to try out new things. So, we are seeing things moving from in-house to tech providers, as well as seeing things from an agency world to a tech provider.

Speaker #3: So, it's kind of seeing tailwinds on both these cohorts of the TAM for us.

Speaker #5: Got it. Understood. Anand, that was very helpful. And just one last clarification on this session and acquisition cost. If I'm not wrong, earlier the cost we paid was around $17 million, right?

Chintan Shah: Got it, understood. Anant, that was very helpful. Just one last clarification on this SessionM acquisition cost. If I'm not wrong, earlier, the cost we paid was around $17 million, right? Now we're saying we have net paid INR 17 crores. What am I missing here? Is the remaining part is a huge leverage that we've gotten, or what exactly is the gap here?

[Analyst 9]: Got it, understood. Anant, that was very helpful. Just one last clarification on this SessionM acquisition cost. If I'm not wrong, earlier, the cost we paid was around $17 million, right? Now we're saying we have net paid INR 17 crores. What am I missing here? Is the remaining part is a huge leverage that we've gotten, or what exactly is the gap here?

Speaker #5: And now we're saying we have net paid 17 crores. So what am I missing here? Is there a remaining part? There's a huge leverage that we've gotten, or what exactly is the gap here?

Speaker #3: So Chintan, it's actually a $20 million buy. The deal value—the enterprise value—for the Session business that we bought is $20 million.

Anant Choubey: Chintan, it's actually a $20 million buy. The enterprise value for the SessionM business that 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. We had to structure it this way because some business was sitting in SessionM entity, some business sitting Mastercard. There was lack of clarity to the seller as well at the time when we were doing term sheet on a clean. There is no clean balance sheet or P&L statements for this portion of the business because of again business sitting in multiple entities. When we did the final true-up on 30 April, this value basically got down to about INR 17 crores.

Speaker #3: But 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 session MNTD, some business was sitting in MasterCard.

Speaker #3: So there was lack of clarity to the seller as well at the time when we were doing the term sheet on a clean—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.

Anant Choubey: There was lack of clarity to the seller as well at the time when we were doing term sheet on a clean. There is no clean balance sheet or P&L statements for this portion of the business because of again business sitting in multiple entities. When we did the final true-up on 30 April, this value basically got down to about INR 17 crores.

Speaker #3: So when we did the final true-up on 30th April, this value basically got down to about ₹17 crore.

Speaker #2: And just to clarify, there is no debt on the Session M entities we have got. So it's not like it is 17 crores plus some debt or something.

Aneesh Reddy Boddu: Just to clarify, there is no debt on the SessionM entities we have bought. It's not like it is INR 17 crores plus some debt or something. These are debt-free entities as well.

Speaker #2: These are debt-free entities as well.

Speaker #5: Okay, got it, understood. And finally, what have we paid for this Experiences plus the Blue acquisition?

Chintan Shah: Okay. Got it. Understood. Finally, what have we paid for this Experiences+, the CustomerGlu acquisition?

[Analyst 9]: Okay. Got it. Understood. Finally, what have we paid for this Experiences+, the CustomerGlu acquisition?

Speaker #2: Let's say a few hundred K—it's not worth talking about, Chintan.

Aneesh Reddy Boddu: Let's say a $ few hundred K. Not worth talking about, Chintan.

Speaker #5: Okay. Got it, got it. Understood. Yeah. Thanks, Anish. And thanks, Anand.

Chintan Shah: Okay. Got it. Understood. Yeah. Thanks, Anish, and thanks, Anand.

[Analyst 9]: Okay. Got it. Understood. Yeah. Thanks, Anish, and thanks, Anand.

Speaker #3: Thank you.

Anant Choubey: Thank you.

Speaker #4: Thanks. We have a last question from Kumar Saurabh. Please go ahead.

[Company Representative] (Capillary Technologies India): Thanks. We have a last question from Kumar Saurabh. Please go ahead.

Kanav Khanna: Thanks. We have a last question from Kumar Saurabh. Please go ahead.

Speaker #3: Hi, Anish. Congrats on a good set of numbers and glad to connect again. Two questions. One, this quarter our ACV is ₹92 crore against ₹53 crore.

Kumar Saurabh: Hi, Anish. Congrats on good set of number and glad to connect again. Two questions. One, this quarter, our ACV is INR 92 crore against INR 53 crore, and FY 2026 versus FY 2025, 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?

[Analyst 10]: Hi, Anish. Congrats on good set of number and glad to connect again. Two questions. One, this quarter, our ACV is INR 92 crore against INR 53 crore, and FY 2026 versus FY 2025, 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?

Speaker #3: And FY26 versus FY25, this number was almost flat, and now it's 80% growth. So how should we read it in terms of what is supposed to come in the next two, three quarters?

Speaker #2: Let me take that, Anand. So, first of all, the numbers we reported were trailing 12 months. It's not only one quarter. Both the 53 and the 90-odd numbers are trailing 12-month numbers, right?

Aneesh Reddy Boddu: Let me take that, Anant. First of all, sort of the numbers we reported were trailing 12 months. It is not only one quarter. Both the 53 and the 90-odd number are trailing 12-month numbers, right? Because our average deal cycles are nine months. It is a large enterprise business. Looking quarter to quarter is not the best way for a business like ours. Now, look, we are 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 do not know if we will do a 75% overall for the full year, but we will definitely do at least 30% and 40% more new ACV than last year for sure.

Speaker #2: Because our average deal cycles are nine months—it's a large enterprise business—so looking quarter to quarter is not the best way for a business like ours.

Speaker #2: Now look, we're seeing good momentum on new sales, which is that 53 to 90-something, right? So we continue to see very good momentum both in the US, Europe, and Asia.

Aneesh Reddy Boddu: Now, look, we are 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 do not know if we will do a 75% overall for the full year, but we will definitely do at least 30% and 40% more new ACV than last year for sure.

Speaker #2: My belief is that you should you know 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 percent more OB more new ACV than last year for sure.

Speaker #3: Last year. Exactly, exactly. Okay. The other question I had is, the latest acquisition, Session M, is a little different from all the previous acquisitions we have done because of the softer nature of the business.

Kumar Saurabh: Last year. Exactly.

[Analyst 10]: Last year. Exactly.

Aneesh Reddy Boddu: Yeah.

Kumar Saurabh: Okay. The other question we had is the latest acquisition, SessionM. This is little different from all the previous acquisitions we have done because of the softer nature of the business. Those businesses, if I remember, it took us two, three years to reach to 44% contribution margin. I do not know if that converts into a 20% plus EBITDA margin, but you can correct me. Given SessionM acquisition is a little different, if you can educate a little bit on how will be the growth trajectory and the EBITDA margin trajectory of SessionM you are planning for?

[Analyst 10]: Okay. The other question we had is the latest acquisition, SessionM. This is little different from all the previous acquisitions we have done because of the softer nature of the business. Those businesses, if I remember, it took us two, three years to reach to 44% contribution margin. I do not know if that converts into a 20% plus EBITDA margin, but you can correct me. Given SessionM acquisition is a little different, if you can educate a little bit on how will be the growth trajectory and the EBITDA margin trajectory of SessionM you are planning for?

Speaker #3: And those businesses, if I remember, it took us two to three years to reach a 44% contribution margin. I don't know if that converts into a 20%+ EBITDA margin, but you can correct me.

Speaker #3: Given that SessionM's acquisition is a little different, could you please educate us a little bit on what the growth trajectory and EBITDA margin trajectory for SessionM are that you are planning for?

Speaker #2: So even Cognitive, which was last year’s buy, sort of was SaaS-ish. It was not agency-only, right? Now look, I think all of these—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?

Aneesh Reddy Boddu: Even Kognitiv, which was last year's buy, sort of was SaaS-ish. It was not agency only, right? Now, look, I think the way to think about it is when you are at a 70-odd% 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% 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 large part of revenue. That we can bring down even without upgrading those customers to Capillary, right?

Speaker #2: Cost of sales and all of this. So, you should get to about a 40% free cash, 35% free cash being generated by that book of business.

Speaker #2: In session M, 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.

Aneesh Reddy Boddu: 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 large part of revenue. That we can bring down even without upgrading those customers to Capillary, right?

Speaker #2: So that we can bring them down even without upgrading those customers to Capillary, right? So we believe that there is at least— I would say at least $6, $7, $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.

Aneesh Reddy Boddu: We believe that there is at least, I would say, at least INR 6, 7, 8 million that we might save over the next few quarters, the next 3, 4 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% in an year, and then over another year, we will get to that 35%, 40% margin.

Speaker #2: Right? And so my gut is the journey from roughly breakeven now will be to a 15-odd percent margin in a year, and then over another year, we will get to that 35-40 percent margin.

Speaker #3: Got it. So just to conclude, I think we are doing better— I mean, we are doing very well both on the organic and inorganic side.

Kumar Saurabh: Got it. Just to conclude, as I think we are doing better compared to. We are 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 1 or 2 more quarters to just have a look at it?

[Analyst 10]: Got it. Just to conclude, as I think we are doing better compared to. We are 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 1 or 2 more quarters to just have a look at it?

Speaker #3: Will you retain 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?

Speaker #2: We will definitely beat our 1,065 in revenue and the 172 crore number. How much and all, I don't think we want to revise any guidance right now.

Aneesh Reddy Boddu: We will definitely beat our INR 1,065 revenue and INR 172 crores number.

Kumar Saurabh: Beats the.

[Analyst 10]: Beats the.

Aneesh Reddy Boddu: 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.

Speaker #2: We'll beat those numbers, but by how much, I don't think we should say it now.

Speaker #3: Great. Great. Wish you all the best, Anish.

Kumar Saurabh: Great. Wish you all the best, Adish.

[Analyst 10]: Great. Wish you all the best, Adish.

Speaker #2: Thank you.

Aneesh Reddy Boddu: Thank you.

Speaker #4: That will be the last question for today. I would now like to hand it over to the management for closing remarks.

[Company Representative] (Capillary Technologies India): That will be the last question for today. I would like to hand it over to the management for their closing remarks.

Kanav Khanna: That will be the last question for today. I would like to hand it over to the management for their closing remarks.

Speaker #2: 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 are very excited about what we're seeing, both from a logo perspective.

Aneesh Reddy Boddu: Thanks, Kanav. 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. As a business, I think we are very excited about what we are seeing both from a logos that we're able to win, the kind of conversations we are having, the adoption that we're seeing on the AI products. 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.

Speaker #2: That we're able to win the kind of conversations we are having, the adoption that we're seeing on the AI products, so 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.

Speaker #2: Right? So, thanks, everyone, for joining us today. Thank you.

Speaker #3: Thank you.

[Company Representative] (Capillary Technologies India): Thank you. Take care, everyone.

Kanav Khanna: Thank you. Take care, everyone.

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Q1 2027 Capillary Technologies India Ltd Earnings Call

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