MRR (Monthly Recurring Revenue) - Business Calculation Guide

Overview

This document explains how Monthly Recurring Revenue (MRR) is calculated in Younium Insights from a business perspective. It describes what data sources are used, the business rules applied, and how the various MRR metrics are derived.

What is MRR?

Monthly Recurring Revenue (MRR) represents the predictable, recurring revenue component of your subscription business normalized to a monthly amount.

Key Characteristics:

• Recurring Only: Only includes charges with recurring billing (subscriptions), not one-time fees
• Monthly Normalized: All recurring revenue converted to a per-month basis
• Predictable: Represents expected revenue stream from active subscriptions
• Multiple Currencies: Tracked in original currency, group currency, and base currency

Related Metric - ARR:

Annual Recurring Revenue (ARR) = MRR × 12

ARR represents the annualized value of recurring revenue.

Source Data and Fields

Primary Source: Charge Records

MRR is calculated from Order Product Charges - the individual line items on customer orders that represent recurring subscription fees.

Key Fields Used:

Note: Younium Insights also includes MRR for charge type Usage, this is not covered in this user guide.

Related Data Sources:

From Orders:

• Order Status (Active, Cancelled, etc.)
• Order Type (Subscription, Sales Order)
• Order Currency
• Is Last Version (ensures we use current order version)
• Cancellation Date

From Products:

• Product Name and Number
• Product Category
• Product Type

From Accounts:

• Customer Account Information
• Account Type

From Milestones:

• Planned Start/End Dates (when exact dates not specified)

From Discounts:

• Discount Percentage
• Discount Period (start and end)

From Exchange Rates:

• Monthly exchange rates for currency conversion

Calculation Steps

Step 1: Identify Eligible Charges

Not all charges contribute to MRR. The system filters for:

✅ Included:

• Recurring charges (ChargeType = Recurring)
• Active or Cancelled orders (but not drafts or deleted)
• Latest version of orders

❌ Excluded:

• One-time fees (OneOff charges)
• Usage-based charges
• Measured charges
• Credit charges (change state = Credit)
• Draft orders
• Deleted orders

Step 2: Extract Monthly Recurring Amount

For each eligible charge, extract the recurring monthly amount:

Three Currency Levels:

1. Original Currency: The amount in the charge’s currency (e.g., €500/month)
2. Group Currency: Converted amount for consolidated reporting
3. Base Currency: Amount in the tenant’s home currency (pre-converted)

Step 3: Determine Active Period

Each charge has an active period defined by:

Start Date:

• Use Effective Start Date if available
• Otherwise, use Milestone Planned Date
• This determines the first month the charge contributes to MRR

End Date:

• Use Effective End Date if specified
• Otherwise, use Milestone Planned Date
• If neither exists, default to “evergreen” (far future date)
• This determines the last month the charge contributes to MRR

Important Rule: If a charge ends mid-month (not on the last day), it does NOT contribute to that month’s MRR.

Step 4: Expand to Monthly Records

Each charge is “expanded” into individual monthly records:

Example:

• Charge: €500/month from March 15, 2024 to August 20, 2024
• Creates records for: March, April, May, June, July 2024 (5 months)
• Each month shows €500 MRR
• August is excluded (ends mid-month)

Step 5: Apply Discounts

If discounts are configured on the order:

Discount Calculation:

• Apply time-based discounts to the appropriate months
• Multiple discounts compound (20% + 10% = 28% total, not 30%)
• Net MRR = Gross MRR × (1 - Discount %)

Example:

• Gross MRR: $1,000/month
• Discount: 20% for first 3 months
• Net MRR: $800/month for months 1-3, $1,000/month thereafter

Step 6: Apply Currency Conversion

For Group Currency reporting:

• Monthly exchange rates are applied (average rate for the month)
• Each month can have different exchange rates
• Allows tracking of FX impact on revenue

Example:

• Charge: €500/month
• January rate: 1.10 USD/EUR → $550 MRR
• February rate: 1.08 USD/EUR → $540 MRR

Step 7: Handle Renewals

For charges approaching renewal:

Auto-Renewal Charges:

• If marked for automatic renewal
• System creates forward-looking MRR records
• Represents expected future revenue (subject to churn)

Manual Renewal Charges:

• Require explicit customer action to renew
• Also tracked separately for churn risk analysis

Step 8: Aggregate by Customer and Month

Finally, all charge-level MRR is summed by:

• Customer Account
• Legal Entity
• Month
• Custom dimensions (as configured)

Time Period Logic

Month Identification Format

Months are represented in YYYYMM format:

• 202401 = January 2024
• 202412 = December 2024

Inclusion Rules

A charge contributes MRR to a specific month if:

✅ Included:

1. Start date is on or before the last day of the month
2. End date is on or after the start date
3. End date, if mid-month, is in a future month

Key Rule: Charges ending mid-month do NOT contribute to that month’s MRR.

Examples

Example 1: Full Month

• Start: March 1, 2024
• End: March 31, 2024
• Result: Contributes to March 2024 MRR

Example 2: Mid-Month Start

• Start: March 15, 2024
• End: August 31, 2024
• Result: Contributes to March, April, May, June, July, August 2024

Example 3: Mid-Month End

• Start: March 1, 2024
• End: August 15, 2024
• Result: Contributes to March, April, May, June, July 2024 (NOT August)

Example 4: Evergreen (No End Date)

• Start: March 1, 2024
• End: (Not specified)
• Result: Contributes to March 2024 onwards until cancelled or ended

Milestone-Based Dates

When exact dates aren’t specified:

Milestone Start:

• If Effective Start Date is blank
• Use the Planned Date from the Start Milestone
• Represents revenue dependent on milestone achievement

Milestone End:

• If Effective End Date is blank
• Use the Planned Date from the End Milestone
• Or default to evergreen

Discount Application

How Discounts Work

Discounts can be applied to charges and affect net MRR:

Discount Timing

Discount Period Options:

1. Aligned to Order: Discount follows order start and end dates
2. Custom Period: Discount has specific start and end dates

Discount Calculation

Single Discount:

• 20% discount on $1,000 MRR = $800 net MRR
• Formula: Net MRR = MRR × (1 - 0.20)

Multiple Discounts (Compound):

• 20% discount + 10% discount
• Formula: Net MRR = MRR × (1 - 0.20) × (1 - 0.10)
• Result: $1,000 × 0.80 × 0.90 = $720 (28% total discount)

Time-Based Discounts

Discounts can vary by month:

Example:

• Promotional discount: 50% off first 3 months
• Standard discount: 10% ongoing

Tracking

The system tracks both:

• Net MRR: After discounts (primary metric)
• Discount Amount: The value of discounts applied