In this workout, we're going to calculate the net revenue retention or NRR.

We are provided with some assumptions about the next four quarters of business as well as the recurring revenue on the prior most recent quarter.

So we have the number of new customers per quarter.

We have the number of customers with upgrades, the number of lost customers, and the number of customers with downgrades.

We also have the product price per customer as well as the product upgrade and downgrade revenue per customer.

So let's begin our calculation of the net revenue retention metric by starting with our recurring revenue in the prior quarter.

That's 50,000.

We're going to use that as the beginning value of the recurring revenue for the next quarter.

So that's our starting value here.

And now we're gonna add any new recurring revenue.

So for that, I'm gonna take the number of new customers and I'm going to multiply times the product price per customer, adding $1,000 of new recurring revenue in Q1.

Now we're gonna incorporate the expansion recurring revenue, and this is related to customer upgrades.

So here I can take the customer with upgrades, which is 5 of them times the product upgrade per customer.

And that gives me an additional $250 of recurring revenue.

Now let's account for our lost recurring revenue or our return, and that would be the number of customers lost, which is 3e times the product price per customer that's 100, and we wanna make this number negative since we are losing that recurring revenue.

Finally, the contraction recurring revenue, and this is related to the downgrades.

So the number of customers with downgrades is 3 times the product downgrade per customer of 25 times negative 1 gives me $75 of contraction recurring revenue.

So if we add all of these numbers together here we get ending balance or an ending recurring revenue for Q1 of 50,875.

With this data, we can now compute our net revenue retention metric.

So let's take the ending recurring revenue balance, excluding any revenue from new customers, and divide it by the beginning balance for the same period.

And we get a net revenue retention of 99.8%.

Now this number is lower than 100%, which means that the expansion revenue is being more than offset by the lower revenue from lost customers and customers with downgrades.

Let's now take the formulas and copy them to the right across all four quarters.

And as we can see, not only is the net revenue retention below 100% in the first quarter, but it's actually worsening over the timeline.