Net Dollar Retention Rate (LTM)

What is Net Dollar Retention Rate (LTM)?

Net Dollar Retention Rate (NDR), also known as Net Revenue Retention Rate or Customer Dollar Retention Rate, is a crucial financial metric that measures the share of the current Annual Recurring Revenue (ARR) retained from existing customers who were active 12 months prior. It takes into account Contraction, Churn, and Expansion of revenue over the last 12 months.

Why is it Important to Measure Net Dollar Retention Rate (LTM)?

Net Dollar Retention Rate (LTM) is a key financial metric with a specific focus on the last 12 months. It provides valuable insights into the financial health, growth, and long-term resilience of a business during this specific period. Here's why it's important:

• LTM Focus: NDR (LTM) analyzes the ability to retain and grow revenue from customers who were active 12 months ago. This provides a snapshot of recent customer retention and expansion efforts.
• Financial Health: It measures how effectively the company retained and expanded revenue from existing customers during the last 12 months, reflecting financial stability.
• Recent Performance: NDR (LTM) offers insights into the company's performance in retaining and expanding revenue over a short-term period, helping assess recent customer satisfaction and loyalty.
• Growth Trends: It helps identify growth trends, indicating whether the company is effectively upselling and retaining customers over the past year.

How is Net Dollar Retention Rate (LTM) Calculated?

Net Dollar Retention Rate (LTM) is calculated as a percentage of the starting ARR from customers who were active 12 months ago, accounting for changes in revenue due to Churn, Contraction, and Expansion during the last 12 months.

Formula

Net Dollar Retention Rate (LTM) =Starting ARR (12 months ago) - Churn - Contraction + ExpansionStarting ARR (12 months ago) This formula provides insights into how effectively the company managed its existing customer base over the last 12 months in terms of revenue retention and growth.