CMRR - Contracted Monthly Recurring Revenue
a) We use CMRR to measure the monthly recurring revenue we will have in the long run if everything is renewed, nothing is canceled, and no changes are made.
b) Bookings are recordings of contract events that affect CMRR. When a booking is created, the CMRR will be changed. A booking can be a new customer, expansion, contraction, and churn.
c) The booking date can be on the actual day the booking is made (order activated or changed), or the date of the order effective start date/ effective change date.
A booking with 1000 SEK MRR:
This booking will add 1000 SEK to the CMRR in May (as the effective date is 2019-06-19)
Example: If we sign a contract with a customer for a monthly price of 100 EUR and activate the order in Younium on December 12th, with an effective start date of January 1st, CMRR will get 100 EUR in December. If we get an upsell on 200 EUR in January, the January CMRR will be 300 EUR (CMRR accumulates).
The CMRR increases by bookings with new customers and expansions but can be decreased by contractions and lost customers (see definitions later in the article).
Short Term CMRR waterfall (Specific Bookings)
Long Term CMRR (Blocks per Booking Category)
- New Customer: An order on a new account is created
- Expansion: An existing order on an existing account is changed and the order CMRR increases
- Contraction: An existing order on an existing account is changed and the order CMRR decreases
- Lost Customer: When an order is canceled and the order is the only (or last) order of that account
a) Combined Contraction and Lost Customer
b) A churn only happens when an order is changed and gets a CMRR decrease, or when an order is canceled
MRR - Monthly Recurring Revenue
a) We use MRR to measure the revenue every month according to the monthly price and the effective start & end dates on the charges (the actual revenue per month according to the monthly price).
b) Is not affected by bookings: The MRR is calculated by the charge's price.
c) It starts on the order effective start date (if 'Start On' is 'Align to order') or on the charge's specific start date (if 'Start On' is specific date) and ends on the order effective end date (if 'End On' is 'Align to order') or the charge's specific end date (if 'End On' is 'Specific date').
For example, this charge will have 1 000 SEK MRR from the first of January 2020 until last December 2022:
- Committed: The monthly recurring revenue on an active charge (the MRR between the start and end dates on the charge)
- Milestones: Potential revenue from charges that has a milestone that has not been reached for the charge to be started
- Automatic Renewal: Potential revenue if an order is automatically renewed and the charge end date is aligned to the order
- Active Renewal: Potential revenue if an order is actively renewed and the charge end date is aligned to the order
ARR - Annual Recurring Revenue
a) we use ARR to measure the revenue 12 months ahead per each month according to the monthly price and the effective start & end dates on the charges (the actual revenue per month according to the monthly price).
b) ARR is essentially at a specific month for the MRR in the next 12 months.
c) Is not affected by bookings: The ARR is calculated by the charge's price.
d) ARR is segmented the same way as MRR.
"On this month, what is the MRR for the coming 12 months?"
CMRR: 1000 EUR
Start date: 2020-01-01
End date: 2020-12-31
ARR 2020-01: 12 000 EUR
ARR 2020-07: 6 000 EUR Committed + 6 000 EUR Active Renewal
a) The financial activity of recognizing the invoiced revenue over time
Recognized Revenue: Revenue Recognized (3xxx - Revenue Account) - If we have invoiced for the service period and closed the period: Order start --> order invoiced --> revenue schedule generated --> create revenue recognition journal --> revenue recognized over time --> close period (revenue from the invoiced order distributed over the closed period will be recognized, not the revenue distributed over future periods)
Deferred Revenue: Revenue deferred (2xxx) - if we have invoiced for the service period but not closed the period
Example: A charge is invoiced for the first quarter (3 months), the invoice is for 3 000 (1 000 per month), but the revenue in the invoice journal will be financially distributed over the three months (1 000 per month) on the deferred revenue account. When January is closed, the 1 000 deferred revenue in January will become recognized revenue.
EMRR - Estimated Monthly Recurring Revenue (Usage)
a) The combined monthly recurring revenue of CMRR and FMRR (estimated usage).
b) If a charge is not recurring but usage, and has no minimum value recurring each month, there will be 0 MRR for this charge.
c) However, when adding an estimated usage on an order charge, the EMRR will be calculated
Estimated Usage * Price + CMRR = EMRR
(+ CMRR If there are any recurring charges on the order other than the usage charge).
TCV - Total Contract Value
What is the total value of this contract?
Monthly Price * Contract Term Months + One-off fees = TCV
The total value of the order over the whole order period, including one-offs.
ACV - Annual Contract Value
What is the contract value per year?
CMRR * 12 = ACV
We do not include one-off fees because this is a specific time period and is not a total of the contract value.
For example, if we were to include one-off fees and the contract is for 3 years, the ACV would differ between years.
OTF - One Time Fees
The total value of all one-offs on the order.