Hi, everyone. Thanks for joining us today for our second, you know, quarterly call and our first annual call. Can you hold? Yeah, I think Kanav has introduced us already, let's move. Kanav's again taking us through the. We thought we'll spend a few minutes as a quick refresher to what we do as a company. We play in the loyalty and engagement space. We are a global leader in what we do. We basically offer AI-powered, on-the-cloud solutions for large enterprises to run their loyalty programs. We today work with 20 of the Fortune 500 customers, right? About 400 brands that use our platform.
We probably have the largest data set on customer loyalty globally, about 1.9 billion consumers on the platform for these large brands that work with us. Customers in about 49 countries now. About 700 employees worldwide. We are a system of record, part of the infrastructure for every transaction that happens for any of our customers ends up hitting our platform, so uptime is very important for us. We have a five nines of time as a platform. What's loyalty? Loyalty is any kind of a long-term retention mechanic. In India, if you've stayed at a Taj, the Taj InnerCircle program, or if you've flown an IndiGo recently, the IndiGo BluChip, you know, or if you've shopped at the Tatas, the Tata Neu program, right?
Any kind of a long-term earn retention kind of program is what loyalty is. We power that for some of the brands that I mentioned right now, and for about 115 large enterprises globally. With that, let's move forward, Anant. That's the latest Forrester Wave that came out at the end of last year, in December of 2025. You can see us right at the top there. Both in terms of the strength of the current offering and in terms of strategy on what we wanna build, we are regarded to be the best in the world at this.
Pick any analyst report for that matter, whether it's an Everest, whether it is a SPARK, whether it's Loyalty360, you will see us either in the first position, sometimes in the second. Again, what do analysts and customers like about us? You know, our tech stack is fairly AI-native now as compared to most of our competition, which tends to be agencies or, you know, mega vendors. You know, we have a much more deeper tech stack, very AI-first platform approach. Yeah, the report's actually available on our website for a download. If you read it up, it talks about our AI-first platform approach. It also talks about good customer feedback.
Out of the 27 criteria that Forrester has for loyalty, we have a 515 on 22. I think that's probably the highest that you have in that report for anyone. With that, let's move forward, Anant. Again, quickly recapping on the products of the company. You know, we have a customer data platform at the base. Basically, we integrate into every touch point of the customer, whether it's the POS, whether it's the e-commerce, mobile apps, et cetera. We get all of their customer data into one place. We then use that to run their loyalty program across channels, across all touchpoints. Our loyalty stack is roughly, I'd say 90% of our revenues, majority of our revenues come from the loyalty stack.
It is a system of record. It's priced on a, you know, a per member or a per transaction, time pricing. Very system of record like a bank ledger, like pricing there. This is our bread and butter. It's what we're best at. Our customers also use some of our other products. Engage+ is our, you know, marketing automation, campaigns, type product. About 5%, 7% of our revenues come from the Engage+ . Insights is our dashboards and, some of that rewards. We power third-party rewards for a lot of our customers, especially banks and telcos, who work with us. Rewards+, again, more around the 5%, 7% of our revenues come from the Rewards+ .
Of late, you know, we in the last few calls have spoken about our AI stack, aiRA. aiRA has seen some pretty good love in the last quarter or so. We're a few million dollars now in revenues from the aiRA stack. The aiRA stack will, I think over a period of time, replace our Insights+ piece. We'll talk about it more in the slides ahead. Overall, what we try and do as a platform is deliver loyalty as an outcome, you know, which kind of differentiates us quite a bit against our competition, which tend to be more like a points program or more like a points solution. We tend to do, like, not only the system of record piece, but also help you action it out, help you see your insights, and a lot more on the same platform. With that, Anant, do you wanna move next?
Coming to growth and profitability levers for the firm, you know, we've covered this in the last two calls as well. There are really three levers of growth for the business. The first is net retention rate expansion, which is how much are our customers growing annually on our platform. If you look at our FY 2026 net retention rate, we had 110% NRR for the full year. Organic, which is customers who started the year on the Capillary platform, right?
As you know, we also do acquisitions, there is a chunk of revenue that sits on platforms that we've acquired. Usually we call organic as customers who started the year on the Capillary platform. Organic expansion has been at 114% for the year, you know, powered by three levers again. The first is platform usage overages and inflationary increases. We've seen pretty good growth coming there. The second is product upgrades, things like the AI stack, things like Engage+. We're seeing very good traction on the AI stack, specifically about a fourth of our customers now are either piloting it or already paying us for using that stack.
The third, of course, is, you know, our existing customers taking us to more new brands or geographies. This is, let's say, a customer like Tata's who are a large customer for us, taking us to a new brand that they have acquired or a customer like Abbott taking us to a new country, right? That's, that's the third expansion piece. Together, we've delivered 114% on the Capillary stack. On the inorganic side, our net retention rate for the year is 94%. As we had mentioned in the DRHP and spoken about last time as well, typically on inorganic, you acquire the business, you get a bunch of customers, then you upgrade them onto the Capillary platform from the older platform that they were on.
During this upgrade, you tend to give them a discount. Not everyone migrates, right? You give them one-time discount. Last year we had significant migrations from Brierley as well as the Persuade platforms. Overall, NRR for the inorganic side was 94%. Overall, that brings you to an average of 110% between the organic and the inorganic pieces, right? That's the first lever of growth. Net retention rate continues to be pretty good on the platform side and on the Capillary platform side. We continue to see the 114%-115% NRR. Second axis of growth for us is the new customer wins. This is net new logos that we continue to win.
Last year was a pretty good year in terms of number of deals that we did. We also announced a very large Fortune 50 retailer, a $20 million deal over a four to five year period that we signed up in March. If you look at last year, we've signed at least, I think three to four Fortune 500 customers through the year. Some very, very good momentum, especially in the U.S., on the new logo side. Coming to our third axis of growth, M&A. We announced acquiring the merchant loyalty business from Mastercard. It's a company called SessionM on Feb 24. We closed that transaction on May 1st.
It's a sizable $35 million business. 40+ logos, including five Fortune 500 companies. We had spoken about this in the last call that this should take us to, over the next 12 to 18 months, this will take us to INR 115 million in ARR as an entity. Having said that, you know, M&As take time to deliver EBITDAs for us because, you know, as the customers upgrade to the Capillary platform is when you see the margins increase. So the EBITDA expansion cycle might take a year or two on the SessionM side. On the Kognitiv part, we're already starting to see EBITDA getting accrued from the acquisition.
We've been having very good conversations on upgrading the Kognitiv customers to our platform. There's also a lot of interest from Kognitiv as well as SessionM customers on the aiRA stack, which is helping these conversations on a faster upgrade, which will eventually lead to both revenue as well as EBITDA growth. Right. I think overall growth has been pretty good for the year. Q4 grew at 26% year-on-year. For the full year, we grew at 23%. Some good solid growth there. Coming to profitability levers, we again have three profitability levers there. First is the net retention rate-led expansion. Comes at a higher margin because your cost of data, the servers, the, you know, the team cost is already loaded, right?
Any net retention rate typically comes at 85%-90% gross margins, which then reflects in the overall gross margin going up. At FY 2026 over FY 2025, our overall gross margin has increased by about a percent. Thanks to this overall NRR of 110% rate. The second axis of growth is leverage on the non-COGS cost. You know, about 60% of our cost is not linked to, you know, cost of goods sold is below the gross margin. This is things like technology, sales and marketing, corporate functions. If you look at our last year's numbers, revenue grew 23%, but overall cost grew about 14%, right? That, that again shows up as a clean flow-down into EBITDAs. Finally coming to upgrade of customers from M&A.
As you know, our strategy is to buy on the M&A side, competing platforms and, you know, which typically run on a low gross margin, and upgrade those customers to the Capillary platform. What the customers get is a AI-first stack, very high efficiency. You can do a lot of stuff by just configurations. Where it also helps us is as the customer upgrades, we move from this 30% gross margin to a 65% gross margin, which means better profitability and better cash flow generation. We shared some data in our last analyst call, where we actually showed you that, you know, for the first two acquisitions that we did, we've had a four year cash payback.
We're expecting Brierley as well as the Kognitiv acquisitions to also return cash in about the cash we paid fully back in about a similar timeframe, right? Another big update here is we've now developed a AI-led platform to upgrade customers from our acquired stacks to Capillary. We think this will significantly improve the pace of, you know, upgrades, one. Second, I think it also improves the experience for the customer. Instead of a big migration and a lot of work, it's typically a two to four week UAT bits that the customer needs to do. We're very hopeful that this will lead to a lot of acceleration on improvement in margins and, you know, integrations from acquisitions.
Not taking a long time, but happening in a 12-18 month time period. Right. Again, overall on the EBITDA numbers, you know, we closed Q4 at a 19% adjusted EBITDA margin. A good improvement from last year. For the full year, again, we had a pretty good 14.7% margin for the full year. Yeah. With that, let's move forward, Anant. We spoke about this last time as well. You know, we spend about, I'd say about 20% of our revenues on technology teams. We're constantly building to keep the platform at the cutting edge. You know, I think the goal is to be the best loyalty platform globally.
We today are there, and we'll hopefully continue to be there, going forward as well. There's really five things we do to really be at the cutting edge. The first is the pieces around the AI first loyalty. There is a lot of stuff, even non-generative AI, right? Just the older AI stuff around forecasting, fraud prevention, helping you to configure better. A lot of that in the tool. The second is of course conversational interfaces. The idea is to remove the need for any training for anyone to use the platform, right? Simple English, you should be able to do a lot of stuff. We've also now launched a bunch of stuff around no-code work-workflows for integration, for faster go-lives, and things like that. The third is going beyond the usual points and membership.
We think the younger audiences tend to like a lot more community rewards, challenges, gamification-type loyalty experiences. We probably again have the best Swiss Army knife-type coverage on a lot of these non, you know, financial rewards and loyalty experiences. Fourth, although we are a horizontal play across multiple verticals, we've always looked at loyalty as being vertical specific. We continue to make those investments. You know, today we support, although we started off with retail, we support hotels, we support, you know, airlines, we support healthcare, we support a bunch of verticals. Every year, we pick one or two verticals and build deep for it. This also plays very well into the AI pieces.
You know, I think, we're also able to embed a lot more of the vertical specific use cases, both on analytics and on campaigns or actioning through a very vertical specific focus. Finally, we work with very, very large enterprises, there is a constant investment on privacy, data security, compliance, et cetera, which keeps us, you know, ahead of the curve on the trust, governance, and the enterprise readiness side. Anant, you wanna move on next?
Coming to the AI piece, you know, there's a lot of talk on the AI side. We thought we'd cover this a little bit more in detail today. I think the foundation of what we do is the core loyalty platform, right? This is a system of record. It is a bank ledger for customers who give points out or give rewards out or give coupons out and things like that. It's truly a system of record, very accurate, very auditable. A lot of our customers run annual audits, so it can't be a fuzzy AI-led system. It's a very hard, you know, very stable, deep database that we maintain for each of our customers. The pricing here is again a per transaction or a per member based pricing, right? This is a very, it's a very system of record-like pricing.
We do believe that with AI coming in, you might move from one system of record to another, which would have happened even in a pre-AI world. System of records will continue to exist and stay, right. That's the core platform. That's 90%+ of our revenues. Rewards+ is another system of record. Between system of records, we probably have between 90%-95% of our revenue coming from that. What we are actually seeing is with aiRA and some of the stuff that we've done now, we're able to go beyond a system of record, right? What we're able to do is we now have a very powerful analytics agent.
Given the depth of data that we have across customers, right, 1.9 billion consumers, over 10 billion transactions every year, over $1 trillion of commerce that hits the platform annually now. We've been able to codify this down into a very, very strong analytics agent, right? The idea is that if you're a user on the customer side, you can ask it any kind of question, any kind of analysis, and it will do a very deep job of responding, you know, specific to that vertical, specific to this customer's language.
We think this is a very large space in the loyalty marketing or in general in the retention marketing space. Because today what happens is mostly a lot of this is done by agencies, right? The experience with the agency is you send them an email, you call them, they will send you a PPT, you've already moved on. While here it is like chatting with ChatGPT or Claude, right? You just type in a question, five minutes, it tells you what you asked for.
We're seeing very, very good adoption on the aiRA stack. It's been, like adoption-wise, I think it's been our fastest in terms of both trials and then, you know, as customers use, they continue to use more. We're also pricing this interestingly on a action and outcome-based price, which is number of questions you asked, number of analysis you did, type pricing. I think there is a possibility of a serious increase in ARRs if this takes off. The third piece is once you've done your analysis, you know, you want to run a campaign or you want to, you know, go do some action, right? You want to target someone better.
You want to like plan out which products you want to put in which stores or, you know, some kind of an analysis, some kind of an action, right, beyond the analysis. We're now taking aiRA into more the action space as well. You know, again, this will kind of replace a little bit of what we do on the Engage+. But again, we're seeing very, very good adoption here. Overall, I think, you know, our TAM today was largely in the loyalty platform, the foundation space that you see. We are now expanding into the intelligence and the action spaces as well, right? Which traditionally has been like less than 5% of our revenue.
We think there is significant addition of TAM that will happen if this plays out like how we are seeing it play out. Just summarizing for you, AI does not replace the loyalty platform. We continue to be a system of record, so hard to replace that. What it does is it does multiply what the platform can do, right? Instead of going to an analytics agency for your analytics, or instead of going to some other tool for your campaigns or actions, today you can do pretty much a lot of that stuff in Capillary, right? We do think we are seeing a lot of uptake for trials and using some of this. We do think this will play out into serious revenues over the next few quarters, right?
With that, this is a little bit on aiRA. We've added more functionality to aiRA from last time. It was a little bit more support and analytics. Today we do campaign execution, a lot of decision intelligence type stuff. Analytics insights we had last time as well. We're also adding a creative studio to it. As a marketer, you could just say spin out five different type of campaigns and emailers and creatives. It will do that for you. We're also doing a lot of very cool stuff on trying to build a harness, so you can have very good brand context and memory here. You know, a bunch of good stuff that, you know, some of these demos are available on our website.
I don't want to use a lot of the call for it today. Very good traction on this. In fact, what we're starting to see is a lot of learning that's starting to happen, right? You analyze, you ask some questions, you analyze data, you decide what you wanna do, you act, then the system goes back and measures if that worked or that didn't work, right? I think we're starting to see that loop taking shape on the platform very well. With that, over to you, Anant, on the numbers.
Thanks, Aneesh. Am I audible?
Yeah.
Okay. Cool. Here's a quick snapshot of Q4 as well as FY 2026. We ended Q4 at a healthy growth of 26% year-on-year on revenue versus last year, at INR 191 crore. Adjusted EBITDA saw another 28% year-on-year growth for the same time period, at about INR 35.7 crore. In terms of PAT, we stand at INR 43 crore for the quarter. If we normalize this, that's at about INR 19.6 crore and I'm gonna take you in detail on what this normalization is over the next few slides. In terms of FY 2026, we ended the year at revenue of INR 734 crore. That's at 23% year-on-year increase.
At a 43% increase in adjusted EBITDA, at about INR 107 crores, and a normalized PAT for the year at about INR 32 crores. Right. Moving ahead. What you see on the screen is a 53% CAGR revenue over the last four years. As you have seen by now, loyalty is a very sticky business, which compounds naturally at a high single digit, right? As we shared before, our NRR have been in the range of 110%-115%, which means that your existing customers are growing at 10%-15% year-on-year. Right? What makes it very predictable is that about a third of this growth comes from inflationary increases, from metric expansion.
Things that don't need any effort, and it continues to be a healthy trend for our business. On EBITDA front, you can see constant growth over the last few years. Over the last four years, our adjusted EBITDA has grown from -3% to about 14.6%. Large contributors for this growth is NRR-linked growth, because that comes at a much higher margin. Aneesh was telling that our costs are growing at a much lower rate compared to the top-line growth. Lastly, migration of the customers that we get through acquisitions onto Capillary platform. A combination of these show a healthy trend on both revenue as well as on adjusted EBITDA. Moving ahead, a little bit more color on inorganic NRR over here.
When we acquire companies, what we get is a business with low gross margin and a people-intensive time and material-based model, which is then moved onto Capillary platform and converted into a tech model from an agency-driven model. This migration means that the gross margin goes up significantly. In this process, we end up retaining about 70% of the top line that of what we acquired. Hence you see a sub-100 of NRR, right? This revenue profile converts to a 45%-50% contribution margin. This is a design of the business to keep in mind as you see on both growth and profitability. The other important piece is, 45% CAGR on run rate.
We ended the year at a run rate of INR 765 crore. In terms of new business, we continue to see a strong new business. We have new ACV of INR 121 crores, similar to that of last year. You would see that our sales investment is at about 17% of top line, which is best in class in the industry. Right. In terms of profitability metric, this is an important slide. Our PAT for whole of last year was about INR 14 crore, right? Just Q4 normalized PAT is at INR 19.6 crore. You can see the trajectory of the business here. Now to understand the delta in PAT versus normalized PAT here, in Q4, we had a one-time exceptional income of INR 25 crore.
This exceptional income represents compensation received under a churn indemnity clause in the Kognitiv acquisition, which was triggered because seller failed to meet certain agreed commitments. It's a one-time thing. Hence we have called it out separately and hence a normalized PAT has been shared. Right. You can see a healthy growth in both Q4 as well as FY 2026 level on PAT growth. Right. At a normalized level, you see a 51% growth at a Q4 level and 128% growth at a FY 2026 level. Right. Moving ahead on cash front, the business inherently generates cash, and this can be seen from the fact that we had a adjusted EBIT of INR 107 crore and operating cash flows of INR 150 crore. Right.
This happens because we bill and collect money upfront in a, in a healthy growing business. A good KPI to look at over here is free cashflow to PAT. That's also at a very healthy number of 200%. In terms of return on capital employed, we have seen a constant improvement and today stand at about 3%. A more relevant term for a cash-generating business like us is a cash return on invested capital. Right? This stands at 22%. Moving ahead. If you look at the relation between PAT, EBITDA and adjusted EBITDA, PAT of about INR 43 crore, removing the exceptional one-time income of about INR 25 crore from here.
If you look at the tax expense or credits, that continues to be that is negative and would continue to be negative given given we have accumulated tax losses. About depreciation and amortization expense, about INR 19 crores for Q4. Again, this trend would continue given given the acquisitive nature of the business. Finance cost of about INR 1 crore. That gets us to a EBITDA of INR 38 crores. ESOP expenses continues to be in range of about INR 3 crores-INR 4 crores, and finance income of about INR 6 crore. That takes to adjusted EBIT of INR 35 crores. Our adjusted EBITDA margins for Q4 has been at about 19%, and for the year it stands at about 15%. That brings us to the end of the presentation. We have shared our FAQs, but happy to take any questions.
Thanks, Anant. Now whoever wants to ask a question, please use the Raise Hand symbol on your screen, and we'll wait for a while for the questions to assemble. First question is from the line of Rishi Jhunjhunwala . Rishi, please go ahead.
Hello. Am I audible, sir?
Yes, Rishi. Please go ahead.
Yes, thank you so much for this opportunity, and congratulations for a good set of results. Looking at the margin trajectory, we can clearly see operating leverage playing out. The 16% sort of EBITDA that we've done in Q4, how sustainable do you feel this is? I think as our base is rising, the operating leverage will get more benefit due to that. Where do you see this sustainability of the 16% margins, and how do you see the steady state margin level?
Anant, do you wanna take that?
If you look at the business, Rishi, it's a run rate driven business and high stickiness in terms of revenue. I expect these margins, margin levels to continue. Now you see a bit of increase in cost in Q1 given the salary increments happen in this quarter. There is a bit of softness that happens in Q1, but what you see on Q4 is a sustainable number going forward. Now in terms of the percentage numbers, you might see a dip given we have just announced acquisition of SessionM. On absolute dollar as in or rupee value number, you would continue to see healthy growth.
Just in terms of a percentage, this year I think we had, compared to last year, 150 bips sort of margin expansion. Can we continue to grow in terms of the percentage basis, 150 to 200 bips, increase can we see in FY 2027 and going ahead?
Rishi, we have delivered percentage expansion over the last few years. As I was showing you, like, last four years trend, we have continued to have percentage expansion. I don't wanna comment on what the future might be given the large acquisition that we have just done. Percentage growth might be a little slow, but the absolute number growth would continue.
You know, let me break that up for you, Rishi. There is the Capillary core platform revenues. Which today generate pretty much all the EBITDA in the business. Those you will continue to see rise. Even in this, I don't know, in this INR 735 crores, probably about INR 80 crores or INR 100 crores might be acquisition-linked, probably a little bit more, might be acquisition-linked revenues, which don't generate much margin. For the organic platform side, you will continue to see this 2%, 3% more margin growth, and probably that's a better way to show it. We'll probably change the slides, hopefully next time. The inorganic side, which is the $35 million that we bought from SessionM. Those will not show much margins for the next 12 months.
Overall margins might not show the same or might show a 1% growth, 1.5% growth. The core business continues to, like, ramp up on margins. In terms of steady-state margins to your question, we spoke about this in the DRHP and as well. I think this is a very high gross margin business, right? At steady state we'll be at like 70% gross margin. We spend about 15%-16% on tech. We spend a similar amount on sales and marketing. We spend about 5%-7% on G&A. Net-net, you know, this should be a 25%-30% steady state, probably more, EBITDA margin business, right? What's happening is the core organic business is moving fast towards that 25%, 30% margin. We keep acquiring competitors who we acquire at zero, and over two years get them to that same 30% margin. That's the balance that keeps happening. I hope I was able to answer your question, Rishi.
Yeah, that was really, really clear. Thank you so much for that. This acquisition, can you just elaborate a bit more on what sort of synergy benefits are we expecting? Any more inorganic acquisition on the cards that you're looking at?
Should I take that, Anant?
Yeah, go ahead.
On the M&A side, this is obviously a very large acquisition, right? SessionM was part of Mastercard for the last six years. Very good business. 5 Fortune 500 customers, multiple very large logos. It is a large acquisition. We've now gone met all the customers over the last two months. We're very encouraged by, you know, what we're seeing there. There's a lot of interest in our AI stack. We do think that this should deliver similar or better outcomes than what our earlier acquisitions have delivered. We've also got this at a very good price, right? At like half times revenue is what we've got the deal at.
In terms of synergies, we had spoken about this on the last call. All the business should be at a break even for year one and probably a little bit positive margins for year two, right? Year three is when you will start seeing significant margins as the upgrades happen, as the customers fully move over. From an EBITDA standpoint, it will not hurt. It will not like burn for this year, right? On the revenue growth side, of course, it's significant, right? It like you might see another year of like very good, great growth CAGR, like Anant was referring to on the growth side. We have very, very good visibility on revenue growth for next year. Thanks to both the SessionM acquisition as well as, you know, the organic adds that we have done through the year. Yeah.
If you look at, like, Legado last year, and we have shared this in the FAQ as well. Our headcount increase has been about 1%, which delivered about 23% in growth. As in the non-COGS is where you would see a lot of synergies coming in as we integrate the business.
Yeah. If, if we had spoken about this again in the last M&A thing. Look, usually, you know, once we upgrade these customers, it delivers a 45% contribution margin. If you're buying $35 million, let's say you're able to migrate like 70% of revenues, which is again what we have seen in the last few acquisitions that we've done. You know, that delivers a 45% contribution margin. SessionM should easily deliver about a, I'd say about a $15 million type EBITDA to the business over the next few years. Annual EBITDA going forward. Today that number is at zero, if it plays the way the last three, four acquisitions have played, you should have another $15 million coming in as we integrate SessionM fully.
Okay. On the growth side, you mentioned that we have good visibility. Any sort of number you like to put on the revenue growth that we can expect for this year?
Yeah. Just integrating SessionM, you know, just those revenues coming in will take you, like, closer to INR 1,050 crore-INR 1,100 crore mark, you know. I mean, you have that visibility right now, right? The acquisition closed, you, we'll comfortably cross like INR 1,000 crore-INR 1,050 crore in revenues next year. I mean this year, FY 2027.
Okay. Okay. That was really helpful. Thank you so much, and all the best.
Thank you. Whoever would like to ask a question, please use the raise symbol, raise hand symbol on your screen. The next question is from Bharat Gulati. Bharat, please let us know your name of the organization and go ahead.
Yeah. Hi, Bharat from Dalal & Broacha. Thank you for the opportunity. Just had a question regarding the ACV and our ARRs. Just wanted to understand the link between the two. Would it fair to say that the growth that we've seen in ARRs and the ACVs that have come in this year have contributed to that growth?
Anant, do you want to take that? I mean, I think I missed the question a bit, but you could.
Bharat, we actually have to divide growth into three levers. The part of growth comes from new customers acquisition. Second set of growth comes from expansion of existing customers, and the third comes through acquisitions. The ACV over, like ACV detail that we shared is essentially from acquiring new customers as well as expansion from existing customers. That's a number of about INR 121 crore that you that we showed you. The second question that you asked is about ARR. That's the run rate at a point in time, right. FY 2026, end of FY 2026, while the revenue was, like revenue for the year was about INR 735 crore, we are at a run rate of INR 765 crore.
This is without including. Yeah. Yeah, Bharat. Sorry, go on.
Sorry, you can go ahead. Yeah.
This doesn't include the SessionM acquisition, because that we've closed only, like, on May first, right? End of March, we were at that INR 765 crore run rate.
Yeah, I get that. Anant, I think my question, I'll be a little more specific, was that this ARR encompasses these new ACV wins, so that would bring us to this current ARR that we are at, right? I was just trying to get that understanding.
Yeah, that's correct, Bharat.
So, you know, when I do that math, there is a roughly a delta of INR 36 crores. I'm just trying to understand that, is that the natural hike that we have in our existing contracts or that, you know, like a 5.5%, 6% kind of increase in commit that we have embedded in our existing contracts that is giving us that extra delta of bringing our ARRs to the current 76-
The inflationary hike changes from geography to geography. Like in West you would see more like 3%-4%, and higher inflationary countries you'll see like 7%-8%. Combination of this plus the metric expansion, meaning all these contracts are linked to number of transactions or number of customers on the platform, which also grows at couple of percentage every year. What you're saying is, as in combining these two is the natural growth that you see year-on-year in our existing contracts.
You know.
Got it.
Bharat, to your point.
Yeah.
The INR 735 crores- INR 765 crores is not all only inflationary increase or that part. What happens is, you know, let's say we won this large, INR 20 million contract, right? Which we had announced last quarter. Not all of it goes live in the first quarter itself, right? It takes about probably six months, nine months to go live. There is also that delta. That INR 120 crores that of ACV that we've signed up, not all of it is fully live right now. There is still more there, and that does not include in the INR 765 crores. There is some delta there which will show up in Q1 and Q2 of this year as well.
Got that. Got that. Really helpful. Really helpful.
On top of that-
So I'm just-
Yeah.
Yeah, sorry, I missed that. Sorry.
It's actually all the three levers of growth which contribute to that INR 30 crores, and there is more left in terms of the growth in terms of what's already locked in as numbers for next year.
Fair. Fair. Got it. I'm just trying to understand that when we look at NRR, there would be a percentage of NRR that is that inflationary increase that we are getting, and on top of that, whatever our contract expansions that happen. Just trying to understand what would be a ballpark NRR figure that we would like to see going forward, and how much contribution would we see to top line X of NRR? That means customers that newly come in. Roughly this year it would be 13 percentage points. What would that be on a, you know, going forward basis?
Got it. Usually, the way we plan the business, Bharat, is about a 115% NRR on the organic business, right? Inorganic, you know, you don't want to chase NRR, you want to chase upgrades, right? Because that delivers the margins. Right, that really delivers the margins there. The focus on the inorganic side is that get the customers to a better experience, lower churn, better margins, right? It's a win-win-win for the customer, for us, for the bottom line as well. On the organic side, you know, we try and target this 115% NRR, right? That's the 115% NRR on the organic side will roughly translate to like a 10%-11% growth coming from the NRR motion.
You know, if we are closing, let's say about INR 80, INR 90 crores of new business or INR 70 crores-INR 80 crores of new business a year, which is where we are today, that's another 10% growth from the new ACV that you're closing. Now, this year, of course, we've had a very big acquisition, so that also adds to the overall number, right? Was I able to explain that for you, Bharat? The NRR, then the new ACV, and then the M&As piece?
Yeah, I get a fair understanding of it. I was just also trying to allude to organically the customers that we, you know, onboard onto just on, in terms of new business, X of acquisitions. What would that typically range if we don't acquire and just go for new customer additions in the year?
It'll be about Like this year we did about INR 70 crores-INR 80 crores of absolutely new customers, right? People who were never on the Capillary platform earlier. I think next year you should assume something similar. About 10%.
10% growth on top of whatever NRR we are doing, X of acquisitions is a fair ballpark to play with.
Correct. Correct.
Got it. Just on the last question would be on the front on head count. Even the head count's not growing, costs are significantly growing almost in line with, you know, percentage growth on revenue terms. When can we see that significantly come down so that leverage starts playing in a much larger way? Or is that not what we expect?
Yeah. I think what's happening, Bharat, a little bit is that our head count hasn't grown. Like Anant mentioned, if you look at year-over-year head count, we've grown 1% while revenue has grown 23%. What we have done is we have ramped up our sales teams in the U.S. Our per cost, you know, sales guys are expensive, right? That's why you see a little bit of that, you know, the head count hasn't kept pace with the overall cost growth. We've had, I would say, roughly a 13%-14% cost growth over a 23% revenue growth, right? We'll continue to Look, I think the U.S. business is still only five years old. We are in a very, very solid place. We have the best-rated platform.
We probably are winning as much business as anyone else in the market, right? We are in a very, very good place. Like, we'll continue to make some of those investments. I don't think, you know, you're continuing to see margin growth happening. You're continuing to see EBITDA numbers expand. We are here. I think there's a long way to go, right, in terms of just steady state revenue. We'll continue to invest in good resources globally.
Got it. Thank you. Very clear. Thank you so much.
Thanks. Whoever wishes to ask a question, please use the raise hand symbol on your screen. The next question is from the line of NGN Puranik. Please let us know your organization name, and please go ahead.
Hello?
Yes, please go ahead.
Hi, Mr. Aneesh. I would like to understand how will you manage buying companies which have strong IP, good platform, and struggling margins? How do you make them smarter and bring to your company level average?
Right. You know.
What's your secret sauce?
Let me put it this way, right? I think most of the acquisitions This is our fifth acquisition in SessionM. we've done this five times now. If you look at loyalty as a space, it has existed for a while, right? So loyalty as a-
Very long. Very long, yes, sir.
Yeah. It's a 30, 40 year old.
Yeah, 30-40 year old business.
It's a very sticky business. What happens is, once you go live with a loyalty platform. You have some seven, eight integrations in a customer. For a customer to then, you know, move, it really needs a lot of pain, right? What we've generally seen is, given the fragmented nature of the loyalty industry, there aren't many players beyond the, you know, INR 1,500 million in revenues, right? What that means is there are a lot of people below INR 15 million, and technology changes have been Like, in the 18 years of Capillary, you've had a cloud wave come in, you had a mobile wave come in, you had a social wave come in, you had an AI wave come in, and you had an e-commerce wave come in, right?
Tech changes. most of these platforms aren't able to continue to invest that INR 10 million-INR 20 million every year to keep the platform going, right? That's why what ends up happening is you get to a very good cohort of customers. At some point in time, the business is delivering 5%, 10% margins. The management, you know, the founders of those companies are comfortable, they stop investing in tech, they start falling back, right? A big customer leaves, you start seeing margins deplete. We're really doing a roll-up of companies which were great earlier, right?
Let's put it that way. That's a big win then for the exiting shareholders, because they get some money off the table. It's a good win for the customers who are coming in, because they get to the best platform in the space. It's a good win for us because fundamentally, you know, you're moving from a 20% margin platform to a 65%-67% gross margin platform in Capillary.
Can you be specific and elaborate on a specific company where you did acquisition recently, you know?
Let's talk about Brierley, right?
Yeah.
Like, this is our, We actually spoke about this quite a bit on the last call. I encourage you to go listen to the last.
Sure, sure.
Just summarizing that for you. The way it works is, let's say we bought $100 of revenue. We roughly paid $100 on an average. Right? like, we paid anything between 0.3x to 1.5x-
Sure. Mm-hmm.
Revenue. Average of $ 100 of revenue means you've spent $ 100. You upgrade those customers over the next, you know, 24-36 months. As you migrate, you give these customers discounts, not everyone migrates. We've roughly seen 70% of revenues migrating post-discount, post-churn. Usually give a healthy 10% discount in the first year to help with the migrations. Of the $100, you have $70 left. Now the $70 in the last, the first three acquisitions, Persuade, Brierley and Rewards+, we've been able to get them to a 45% contribution margin, and a like a 65% gross margin, right. The $70 is now delivering about $ 30-$35 of cash for you every year.
Oh. Mm-hmm.
Right? We did share this data in the last. If you think of it, take an 18-24 months to start delivering this, then a two to three years to pay off the. Roughly on a four year basis, four to five year basis, you should make all the cash back on any acquisition that you have done. If you, like, if you've bought something at 0.5x revenue, then obviously you want to make cash back a lot sooner, which is the case with the SessionM business. I hope you got the broad math of.
Yeah, I got the broad math, but what I'm trying to understand is, what will these companies bring to the table? The customer access, or is it the IP they will add to your platform? What do they bring?
Mostly, like 90% of the value comes from the customer access.
Right. Just given loyalty is a very sticky business, I think getting access to sticky long-term revenues is the biggest goal. Having said that, each of these have got, like, the Persuade business got us a lot of good digital capabilities. The Brierley business got us a very, very strong best-in-class consulting arm to the business. A very small part of our revenues, very, very important in terms of winning new customers. The Rewards+ business got us a reward stack. With SessionM, we're getting a bunch of this whole card link loyalty type stuff. I would put them more as, you know, the 10%, 20% of the benefit. 80% of the benefit comes from the revenue and the margin increase that they deliver.
Beyond the loyalty, you have anything else?
You know, like I don't know if you joined the call late, but we did have the products that we spoke about. There's of course the Engage+ , which is a broader marketing automation stack. There's a lot of the AI stuff. It's still very early days. You know, we probably had about 4%-5% of our revenues coming from the AI stack. Now not all of it is live. The newer customers are the ones signing up for more of the AI stack. Yeah, I think there is more there, especially with this AI stuff. We spoke about the whole system of intelligence, system of action, right? There is more there as well.
AI is productive or AI is predictive?
Sorry, can you repeat that? AI is?
The AI, what you are using is productive AI or predictive AI?
You know, you use a little bit of everything, right? There are very predictive models, propensity, et cetera, et cetera. In the tool as well. There are also very, like, very prescriptive type stuff, right? In the tool. I don't think from a customer standpoint, how does it matter, right?
Yeah.
They have.
From your perspective, I'm saying.
Yeah, both. I mean,
Think of AI on the stack, we're definitely ahead of the rest of the market. Speak to any analyst, they'll talk about some of the use cases being like way ahead.
How will you get the deal sizes better on a platform, loyalty platform like this? You think it can get much better in size for you to get into the next league of growth?
Size in terms of per customer.
Yeah, per customer average sign-ups. You do need to do something about the platform on the IP side. Do you need to strengthen that, the more intelligence coming out of the platform on customer actions going forward? Is there anything that?
There's enough, I mean, I'd encourage you to go look at our website. There's a bunch of very good demos there. Look, I think like I spoke about on the AI side, we're looking to price it as a usage-based model. There's gonna be the fixed fee for or the system of record type pricing for the base license for loyalty, and then you'll have more usage-based revenues from the AI stack. There's enough there. I think you'll have to give it some time to play out. Just given large enterprises, you know, sales cycles are long, they take time to decide, right?
Correct. Correct. Mm-hmm.
You have to give it time to play out.
Wonderful, Aneesh. Nice talking to you. Bye.
Thank you. Whoever wishes to ask a question, please use the raise hand symbol on your screen and go ahead. Since we do not have any questions, so, I'll hand it over to Aneesh for his closing remarks. Aneesh, please go ahead.
Thanks, Kanav. Thanks everyone for joining the call. I think we've had a very, very good quarter, both in terms of numbers and general momentum on the business with winning a Fortune 50 customer, acquiring SessionM, and closing that deal as well. I think we've very good visibility of both revenue growth as well as EBIT growth for the foreseeable next few quarters. Right? Yeah, looking forward to continuing to deliver on the promise at Capillary. Thanks, everyone.
Thank you, everyone. Have a nice day.
Thank you.