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Definitions of Key Business Metrics
Annualized Recurring Revenue ("ARR")
ARR represents the annualized value of all recurring contracts as of the end of the period. ARR mitigates fluctuations due to seasonality,
contract term, one-time discounts given to help customers meet their budgetary and cash flow needs and the sales mix for recurring and
non-recurring revenue. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures
presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with
or to replace either of those items. ARR is not a forecast, and the active contracts at the end of a reporting period used in calculating ARR may
or may not be extended or renewed by our customers.
Net Revenue Retention Rate (“NRR”)
We believe that our ability to retain and grow recurring revenues from our existing customers over time strengthens the stability and
predictability of our revenue base and is reflective of the value we deliver to them through upselling and cross selling our solution portfolio.
We assess our performance in this area using a metric we refer to as Net Revenue Retention Rate (“NRR”). Beginning in the first quarter of
2021, we intend to exclude from our calculation of NRR any changes in ARR attributable to Intersect customers, as this product is sold
through our channel partnership with EAB and is pursuant to annual revenue minimums, therefore the business will not be managed based
on NRR. We calculate our dollar-based NRR as of the end of a reporting period as follows:
•Denominator. We measure ARR as of the last day of the prior year comparative reporting period.
•Numerator. We measure ARR from renewed and new sale opportunities booked as of the last day of the current reporting period from
customers with associated ARR as of the last day of the prior year comparative reporting period.
The quotient obtained from this calculation is our dollar-based net revenue retention rate. Our NRR provides insight into the impact on
current year recurring revenues of expanding adoption of our solutions by our existing customers during the current period. Our NRR is
subject to adjustments for acquisitions, consolidations, spin-offs and other market activity.
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