NRR (Net Revenue Retention), also called net dollar retention, is the percentage of recurring revenue from an existing group of customers that remains after a period, usually 12 months, once expansion, contraction and churn are counted. It is calculated as starting revenue plus expansion minus contraction and churn, divided by starting revenue, excluding new customers. Above 100% means the existing base grows before any new sale. Gross revenue retention ignores expansion, so high NRR with low GRR signals a few large clients growing while many leave. In usage-based payments businesses, NRR moves with merchants' own sales volumes. Buyers recompute it from billing data, and sustained figures above 110% support higher revenue multiples.
How to calculate NRR
The formula is: (starting recurring revenue + expansion − contraction − churned revenue) ÷ starting recurring revenue. Revenue from customers acquired during the period is excluded, which is what separates NRR from total revenue growth.
A worked example: a BaaS provider starts the year with €1,000,000 of annual recurring revenue from 40 clients. Over 12 months, clients add new card programmes and volume worth €250,000, two clients move to a cheaper tier, losing €40,000, and three clients leave, taking €90,000. NRR = (1,000,000 + 250,000 − 40,000 − 90,000) ÷ 1,000,000 = 112%. The cohort produced €120,000 more revenue than a year earlier without any sales to new logos.
NRR vs gross revenue retention
Gross revenue retention (GRR) uses the same formula but ignores expansion and is capped at 100%. In the example, GRR = (1,000,000 − 40,000 − 90,000) ÷ 1,000,000 = 87%. Reading both together shows the mechanics: high NRR with low GRR means a few large clients are expanding while many others leave, a concentrated and fragile pattern. NRR and GRR close together point to a stable base with little upsell. Logo retention, the share of customers kept regardless of revenue, adds a third view: 37 of 40 clients, or 92.5%, in the example.
NRR in payments and fintech
Usage-based fintechs, such as processors, issuers and payout platforms, earn revenue as a take rate on volume, so NRR moves with merchants' own sales: a 10% fall in a merchant's card turnover cuts a percentage fee by the same 10% without the merchant deciding anything. A payment gateway can show 125% NRR in a strong retail year and 95% the next with no change in its product. For that reason, analysts ask for NRR by cohort and split expansion into price increases, volume growth and new product adoption. Price-driven NRR is the weakest form because it can trigger churn later.
Definitions also vary. Some companies measure on monthly recurring revenue annualised, some exclude customers below a revenue threshold, and some count a client that moves volume from one product to another as expansion. Two businesses quoting 110% may not be comparable.
NRR and valuation
NRR feeds directly into customer lifetime value: a cohort that grows 12% a year is worth far more than one that shrinks 5%, even at the same starting revenue. In an acquisition, buyers recompute NRR from billing data, check whether one or two clients drive the expansion, and treat a sustained figure above 110% as justification for a higher revenue multiple.