--- title: "Net Revenue Retention (NRR) | Altss Glossary" description: "Net revenue retention (NRR) is the recurring revenue at the end of a period from the customers a company had at the start, after expansion, contraction…" canonical: "https://altss.com/glossary/net-revenue-retention" --- Glossary · Underwriting metric # Net Revenue Retention (NRR) Also called: net dollar retention · NDR Net revenue retention and net dollar retention (NDR) are the same measure under different names. "Logo retention" or "customer retention" counts customers, not revenue. Net revenue retention (NRR) is the recurring revenue at the end of a period from the customers a company had at the start, after expansion, contraction and churn, divided by those customers' recurring revenue at the start. Publisher: Altss LLCPublished 2026-01-08Content modified 2026-10-01 ALTSS-VC-036 Take the customers a company had a year ago and ignore everyone it has signed since. If those customers now pay more in total than they did a year ago, NRR is above 100%: the existing base grows by itself. If they pay less because some left or cut back, NRR is below 100%. ## Formula ### Net revenue retention ``` NRR = (starting ARR of the cohort + expansion − contraction − churn) / starting ARR of the cohort ``` `ARR_0` recurring revenue at the start of the period from customers active at the start `E` expansion from those customers during the period `C` contraction from those customers who remain `L` recurring revenue lost from those customers who leave Usually measured over 12 months on ARR. Variants: trailing-twelve-month cohort comparison, an average of monthly or quarterly NRR, or recognised revenue instead of ARR. Customers acquired during the period are always excluded. Price increases count as expansion unless the company says otherwise. ## Reading NRR NRR above 100% means revenue from the existing base grows without new customers; below 100% means the base shrinks and new sales must first replace losses before the company grows. The level that counts as strong depends on customer size and pricing model: products sold to large enterprises with seat or usage expansion can sustain higher NRR than products sold to small businesses with higher churn. Treat any benchmark figure as specific to its source, sample and date. ## NRR and GRR together NRR mixes good and bad news. Gross revenue retention (GRR) removes expansion and shows only what is kept, so it is capped at 100% and NRR is always at least equal to GRR. Investors read both: high NRR with low GRR, as in the second example, points to concentrated expansion and a weak core, which is riskier than the same NRR built on low churn. ## How investors use it Growth and venture investors use NRR as evidence of product value and pricing power and, in market practice, as a driver of valuation, on the view that expansion revenue usually costs less to win than new customers (compare customer acquisition cost). Lenders to software companies, for example in recurring revenue lending, focus more on GRR, because it shows how much revenue survives without any growth. In diligence, NRR is recomputed from customer-level data by cohort and segment, and reconciled to the [ARR](https://altss.com/glossary/annual-recurring-revenue) bridge. ## Comparing reported NRR Companies define NRR themselves, and definitions vary from company to company. Points to check: ARR versus recognised revenue; 12-month cohort versus averaged monthly figures; treatment of customers who leave and return; whether price increases, currency effects and usage overages are included; and whether the figure covers all customers or only those above a size threshold. ## Worked examples ### Illustrative retention for two companies ($ millions) Company A starts the year with 20.0 of ARR from its existing customers. During the year they add 5.0 of expansion, 1.0 of contraction and 1.5 of churn: NRR = (20.0 + 5.0 − 1.0 − 1.5) / 20.0 = **112.5%**, GRR = **87.5%**. ### The same NRR hiding more churn Company B also starts at 20.0 and also reports NRR of **112.5%**, but with 8.0 of expansion, 2.0 of contraction and 3.5 of churn. Its GRR is **72.5%**: it loses more than a quarter of its starting revenue each year and relies on a few expanding customers. The headline NRR is identical; the business is not. Examples are illustrative; figures are not market data. ## Not the same as - Gross Revenue Retention: GRR excludes expansion and is capped at 100%; NRR includes expansion and can exceed 100%. - [Annual Recurring Revenue (ARR)](https://altss.com/glossary/annual-recurring-revenue): ARR is a level of recurring revenue at a date; NRR is a ratio for one cohort over a period. ## Common mistakes - Including revenue from customers acquired during the period. - Compounding a single strong quarter into an annual figure: a quarterly NRR of 103% compounds to about 112.6% only if every quarter repeats it. - Reporting NRR without GRR. - Comparing NRR across companies with different definitions or customer thresholds. ## Edge cases - Usage-based pricing makes NRR volatile; trailing averages smooth it but lag turning points. - Acquisitions add customers whose revenue should be kept out of the existing cohort or disclosed separately. ## Questions ### What is a good NRR? It depends on the customer segment and pricing model; there is no universal threshold. Compare against companies selling to similar customers, using the same definition, and always alongside GRR. ### Can NRR be above 100%? Yes. Expansion from existing customers can exceed what is lost to churn and contraction. GRR, by contrast, cannot exceed 100%. ## Sources - [Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations (key performance indicators), Release Nos. 33-10751; 34-88094; FR-87](https://www.sec.gov/rules/interp/2020/33-10751.pdf). U.S. Securities and Exchange Commission, Dated 2020-01-30; effective 2020-02-25. Status: in force (interpretive guidance) (checked 2026-10-01). p. 3; p. 4, n. 11 — supports: Company-specific operating metrics (for example total customers or subscribers and average revenue per user) can vary significantly from company to company and industry to industry ## Related terms 1 term - [Annual Recurring Revenue (ARR)](https://altss.com/glossary/annual-recurring-revenue) ## Concept record Concept ID ALTSS-VC-036 Classification Underwriting metric Topics Venture capital & startups Version 2.0.0 Last reviewed 2026-10-01 Structured data [JSON](https://altss.com/reference/concepts/net-revenue-retention.json) ## Canonical URL https://altss.com/glossary/net-revenue-retention