10 CHAPTER 1 METRICS AND PERFORMANCE MEASUREMENTS 03 Net Revenue Retention Cohort Cohort size Cohort’s total MRR relative to its initial MRR (after expansion, contraction, and churn) Initial $ MRR Sign-up month added Month 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 13 2021 July 42,162 100% 98% 98% 98% 97% 97% 97% 97% 98% 99% 100% 101% 96% 99% 2021 August 55,433 100% 103% 103% 104% 104% 104% 105% 105% 105% 106% 107% 108% 104% 107% 2021 September 56,681 100% 103% 103% 104% 104% 105% % 105% 107% 108% 109% 111% 107% 110% 105 2021 October 58,264 100% 103% 103% 104% 104% 105% 105% 106% 108% 109% 111% 112% 108% 2021 November 46,314 100% 103% 106% 107% 109% 112% 112% 113% 114% 115% 117% 120% 2021 December 58,841 100% 103% 106% 107% 108% 109% 112% 114% 115% 116% 118% 2022 January 49,172 100% 105% 108% 108% 109% 112% 114% 115% 118% 119% 2022 February 63,241 100% 105% 108% 110% 113% 114% 115% 116% 117% 2022 March 66,295 100% 105% 106% 109% 111% 113% 115% 118% 2022 April 67,559 100% 104% 105% 108% 110% 111% 114% 2022 May 57,715 100% 104% 106% 109% 110% 113% 2022 June 70,583 100% 105% 108% 110% 112% 2022 July 60,505 100% 105% 108% 109% 2022 August 74,126 100% 105% 107% 2022 September 75,768 100% 105% 2022 October 72,524 100% Weighted average 100% 104% 106% 107% 108% 109% 110% 111% 111% 110% 111% 111% 105% 106% The weighted average net revenue retention rate is in relation to the initial MRR or ARR added from each cohort. Net revenue retention is the most all-inclusive retention measure of a company's performance. It measures how much recurring revenue a cohort generates after a certain period relative to how much was initially acquired, taking into account all components of a cohort's recurring revenue, including retention, expansion, contraction, and churn. Using the analogy of a leaky bucket, if net revenue retention is 100% or greater, the company's revenue streams are not "leaking," meaning it would continue to have at least the same level of revenue even if it stopped acquiring new customers. If net revenue retention is less than 100%, the company is "leaking" and would continuously lose revenue unless it acquired new customers. A leaky bucket is not sustainable, so achieving net revenue retention of at least 100% is critical for sustainable performance. In the example, where the one-year average net revenue retention is over 100%, this tells us that the company's revenue is not leaky and can sustain its level of revenue over time. WHAT GREAT LOOKS LIKE ▪ >120% net revenue retention for enterprise clients, >100% net revenue retention for SMB clients ▪ Improving annualized retention over time (horizontal axis) ▪ Improving landing contract over time ▪ Improving upsell over time ▪ Retention is consistent across the cohort and not driven by a few power users