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    CAPILLARY

    CAPILLARYGood
    Information Technology·6 Feb 2026
    Management Summary

    Capillary Technologies reported a strong Q3 and 9M FY26, driven by robust revenue growth and significant expansion in Adjusted EBITDA margins. The company highlighted its leading position in the loyalty management space, strong organic NRR, and the strategic importance of its AI-first approach (aiRA) in improving win rates and future monetization. While PAT saw a decline in Q3 due to one-time costs, the underlying business performance and cash generation remained healthy.

    Highlights

    8
    • Q3 FY26 Revenue stood at INR 184 crores, marking a 16% YoY growth.

    • 9M FY26 Revenue reached INR 543 crores, growing 22% YoY.

    • Adjusted EBITDA for Q3 FY26 was INR 30 crores, a 25% YoY increase, with a margin of 16.4%.

    • 9M FY26 Adjusted EBITDA was INR 71 crores, up 54.3% YoY, achieving a 13% margin.

    • PAT for Q3 FY26 was INR 8 crores (4.3% margin), a 29.8% decline YoY due to one-time expenses.

    • Trailing twelve months Net Retention Rate (NRR) as of December 2025 was 111%, with organic NRR at 115%.

    • New order book for 9M FY26 grew to INR 66 crores, a 24.5% increase from INR 53 crores in the prior year period.

    • Operating cash flow for 9M FY26 was INR 101 crores, representing 142% of Adjusted EBITDA.

    What Changed2

    vs Q4 FY26

    Guidance items6 → 5 (-1)Q&A highlights8 → 3 (-5)
    Key financials

    Metrics

    8

    Periods

    3

    Headline

    6
    • Revenue
      ₹184 Cr
      YoY+16%
    • Adjusted EBITDA
      ₹30 Cr
      YoY+25%
    • Adjusted EBITDA Margin
      16.4%
    • PAT
      ₹8 Cr
      YoY-29.8%
    • PAT Margin
      4.3%

    9M FY26

    1
    • New Order Book
      ₹66 Cr
      YoY+24.5%

    TTM Dec 2025

    1
    • NRR
      111%

    Guidance & targets

    5
    CategoryTargetPriority
    Profitability
    Non-COGS Cost Growth
    much lower rate than revenue
    Medium
    Profitability
    Non-COGS Cost Scaling
    inflation plus a few more points for team growth
    Medium
    Profitability
    Below COGS Items Contribution to Revenue
    further improvement / keep going down
    Medium
    AI Monetization
    aiRA Pricing Strategy
    know in a couple of quarters
    Low
    NRR
    AI Impact on NRR
    need a quarter or two to quantify
    Low

    Risks & concerns

    2
    RiskSeverity

    AI disruption to software/SaaS firms

    Analyst raised concerns about AI's potential to disrupt software businesses; management explained their insulation due to 'system of record' focus and outcome-linked pricing.Analyst acknowledged

    medium

    Pressure in US healthcare payer space

    Analyst asked about profitability pressures in the US healthcare payer sector; management clarified Capillary has no exposure to Medicare business, thus no direct impact.Analyst downplayed

    low

    Q&A highlights

    3

    “I think all enterprise software is not equal. So I would break enterprise software into really three big buckets. So one is like a system of record or a transaction system... And what's happening with AI is really I think the second bucket, which is the system of engagement and the system of intelligence are definitely seeing the most amount of, are seeing radical change. In our case, our pricing as I said is linked to number of transactions or number of customers or number of members, right? So slightly more outcome linked. And that again insulates us from any of these seat-based pricing shocks that you're now seeing in a lot of these seat-based pricing type software players.”

    This question directly addresses a major sector-wide concern and management's detailed response clarifies Capillary's positioning, insulation, and strategic leverage of AI.

    asked by Rishi Jhunjhunwala

    3 min read6 chapters

    Detailed Narrative

    01

    Q3 & 9M FY26 Financial Performance Overview

    Capillary Technologies reported a strong financial performance for Q3 and 9M FY26. Revenue for Q3 FY26 reached INR 184 crores, representing a 16% year-on-year growth. For the nine-month period, revenue was INR 543 crores, up 22% YoY. Adjusted EBITDA for Q3 FY26 grew by 25% to INR 30 crores, achieving a 16.4% margin, while 9M FY26 Adjusted EBITDA increased by 54.3% to INR 71 crores, with a 13% margin. PAT for Q3 FY26 was INR 8 crores, a decline from INR 11.4 crores in Q3 FY25, primarily due to one-time📎 expenses of INR 1.6 crores for gratuity and INR 2 crores for IPO expenses.

    02

    Net Retention Rate (NRR) and Growth Drivers

    The company's Net Retention Rate (NRR) for the trailing twelve months ending December 2025 stood at 111%. Notably, the organic business NRR was 115%, placing Capillary in the top 10 percentile of global SaaS companies. Growth is driven by three axes: NRR expansion (platform overages, inflationary clauses, upgrades), new customer wins, and M&A. The new order book for 9M FY26 increased by 24.5% to INR 66 crores, compared to INR 53 crores in the same period last year, with 12 new customers added in the nine-month period.

    03

    Profitability and Cost Structure Leverage

    Capillary's gross margins are robust at 69%-70%, with a 1.5% increase in 9M FY26. The company benefits from significant operating leverage, as approximately 60% of its costs (technology, sales & marketing, corporate) are not directly linked to revenue. While revenue grew 22% in 9M FY26, non-COGS costs grew only 11%. Depreciation and amortization increased from INR 13 crores in Q3 FY25 to INR 19 crores in Q3 FY26, largely due to the acquisition of Kognitiv in May. The company aims for further improvement in below COGS items as a percentage of revenue.

    04

    AI Strategy and Monetization (aiRA)

    Capillary is adopting an AI-first approach with its AI-powered Research Assistant (aiRA), which is seen as a force multiplier for improving win rates. aiRA helps customers with analytics, campaign management, and customer support, moving beyond traditional workflow systems. The company is currently offering a 3-month free pilot for aiRA and is in early conversations to bill for annual licenses linked to usage. Management expects to have a clearer understanding of aiRA's pricing strategy and its specific contribution to NRR within the next one to two quarters.

    05

    Business Model and Market Positioning

    Capillary positions itself as a 'system of record' for loyalty, managing the entire ledger of earn, burn, and customer profile data for its clients. This deep integration and data ownership contribute to high stickiness and switching costs. The company's pricing model is outcome-linked (per transaction or per member) rather than seat-based, providing insulation from AI-driven pricing shocks seen in other software segments. Capillary is highly rated by analysts like Forrester, positioned at the top of the Forrester Wave for its current offering and strategy, which aids in securing large enterprise deals.

    06

    US Healthcare Payer Exposure Clarification

    Addressing an analyst's concern regarding pressures in the US healthcare payer space, management clarified that Capillary has no exposure to the Medicare or Medicare books of business. Their focus is on direct payer and insurance type use cases, which typically operate on a January 1st cycle. The company has seen major go-lives in this segment, with member bases increasing by approximately 50%, indicating no direct impact from the reported industry pressures🌐.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.