# Definitions

**Churn**

* **Theoretical Description**:\
  Churn refers to the rate at which customers stop doing business with a company over a given period. It is often expressed as a percentage of total customers lost.
* **Churned’s Standard Interpretation**:\
  We define churn as a customer who has stopped engaging with the product/service for a period long enough to be considered inactive. The exact definition varies based on the business model (e.g., subscription cancellations for SaaS, no purchase for X months in e-commerce, or no engagement for Y days in media).
* **Enrichment**:
  * Users are considered **churned** if they have canceled all active subscriptions and do not have a new contract starting within the next **7 days** after their latest contract has ended.
  * **End\_date** has been added to the subscription, and it is in the past.
* **Alternative Interpretations**:
  * **Revenue churn**: Measures the percentage of revenue lost due to downgrades or cancellations.
  * **Logo churn**: Counts the number of distinct customers lost.
  * **Voluntary vs. involuntary churn**: Differentiates between customers who cancel intentionally and those lost due to failed payments.

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#### **MRR (Monthly Recurring Revenue)**

* **Theoretical Description**:\
  MRR represents the predictable revenue generated from active subscriptions on a monthly basis. It is a key metric for SaaS and subscription-based businesses.
* **Churned’s Standard Interpretation**:\
  We calculate MRR as the sum of all active subscription revenues normalized to a monthly basis, including expansions, contractions, and downgrades. One-time charges and usage-based fees are not included.
* **Alternative Interpretations**:
  * **Gross MRR**: Includes all revenue, regardless of churn or downgrades.
  * **Net MRR**: Adjusts for expansion, contraction, and churn to reflect overall revenue stability.
  * **Contracted MRR**: Only includes revenue from fixed contracts, excluding usage-based billing.

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#### **ARR (Annual Recurring Revenue)**

* **Theoretical Description**:\
  ARR is the total expected recurring revenue for a full year, calculated based on active subscriptions.
* **Churned’s Standard Interpretation**:\
  ARR is calculated as **MRR × 12**, considering only recurring revenue. It excludes one-time charges and short-term promotions.
* **Enrichment**:
  * Expected ARR is calculated by summing the **term\_payment\_allow\_renew\_days** for all currently **Active Customers**.
* **Alternative Interpretations**:
  * **Committed ARR**: Only considers revenue from contracts signed for a minimum of 12 months.
  * **Run-rate ARR**: Annualizes the latest MRR without considering future expansions or contractions.
  * **Logo ARR**: Measures ARR from individual customers rather than total revenue.

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#### **Amount of Active Customers**

* **Theoretical Description**:\
  The total number of customers currently using a product or service. The definition of "active" can vary by business model.
* **Churned’s Standard Interpretation**:\
  We count active customers based on sustained engagement, such as:
  * SaaS: Customers with an active paid subscription.
  * Media: Users consuming content within a defined period.
  * E-commerce: Customers who have made a purchase in a set timeframe.
  * Charities: Donors who contributed in the past year.
* **Enrichment**:
  * A user is considered **Active** if they have at least one active **subscription** where:
    * **Start\_date** is in the past
    * **End\_date** is in the future or does not exist
* **Alternative Interpretations**:
  * **Billing-based activity**: Only counts customers who have been billed recently.
  * **Engagement-based activity**: Includes customers who interacted with the product but may not be paying.
  * **Rolling activity window**: Defines "active" based on engagement within X days instead of a static definition.

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#### **New Customers**

* **Theoretical Description**:\
  New customers refer to first-time buyers or subscribers within a given period. The definition can vary based on how a company tracks acquisitions.
* **Churned’s Standard Interpretation**:\
  We define a new customer as an individual or business that has made their first transaction, activated their account, or subscribed to a service for the first time. The tracking period is aligned with reporting cycles (e.g., monthly, quarterly).
* **Enrichment**:
  * Users are considered **New Customers** if they have subscriptions where **Start\_date** falls within a specific month.
  * No filtering is applied to exclude test accounts or other internal records.
* **Alternative Interpretations**:
  * **First-time revenue customers**: Only counts customers generating revenue for the first time.
  * **Trial-to-paid conversion**: Includes free trial users who convert into paying customers.
  * **New logo acquisition**: Focuses on acquiring new companies rather than individual users.
  * **Reactivated customers**: Some businesses count returning customers as "new" if they were inactive for a long period before repurchasing.