The Remaining Performance Obligation (RPO) metric has become a more standard metric that public company Wall Street analysts have started to follow closely to help evaluate the bookings growth of recurring revenue companies. CAC and Growth cover the following topics regarding RPO including:

• Why was the Remaining Performance Obligation created
• What does the Remaining Performance Obligation (RPO) metric tell investors
• How is RPO calculated
• The difference between RPO and deferred revenue
• How multi-year agreements impact both the RPO and Deferred Revenue calculations

If you are interested in how public company analysts use the RPO metric or are just a student of the SaaS industry - this episode dives deep into an increasingly important SaaS investor metric!

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Customer Retention is a hallmark of the SaaS recurring revenue business model. But what is the primary metric to measure the cost of retaining each customer, how is the efficiency to renew ARR calculated, and what goes into that metric?

Dave "CAC" Kellogg and Ray "Growth" Rike go deep into the components of Customer Retention Costs and the value in measuring including:

• The benefits of measuring Customer Retention Costs
• Customer Retention vs Customer Renewal Costs
• The Components of Customer Retention Costs
• Total ARR or Renewed ARR - which is the best to measure Retention Costs against

The SaaS industry has multiple metrics that measure the cost to acquire a customer (Customer Acquisition Cost), the efficiency of acquiring new customers (CAC Ratio), the payback period on Customer Acquisition Costs (CAC Payback Period) and how much recurring revenue is retained every period (Gross Revenue Retention- GRR)...but no standard metric that measures the efficiency of retaining and renewing customers.

During this episode, CAC and Growth dive deep into the topic of the Customer Retention Cost Ratio and the Customer Renewal Cost Ratio!

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New investment announcements in B2B SaaS companies are not quite what they seem!? Over the past few years, public announcements have moved from how much capital was raised to what the valuation of the company was at funding. BEWARE - those valuation headlines are full of nuance and details that are not disclosed!!!

Dave "CAC" Kellogg and Ray "Growth" Rike - also known as The Metrics Brothers go deep into the details that are left out and are present behind the headline valuation announcements including:

• Class of stock
• Liquidation preferences
• Participating preferences
• Redemption Rights
• Secondary Sales

If you are in the B2B SaaS industry and interested in the "story behind headline valuation announcements" - this is a great conversation to hear!!!

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Contracted Annual Recurring Revenue (CARR) and Annual Recurring Revenue (ARR) are commonly used terms in the SaaS and Cloud Industry but are not standardized leading to inconsistent calculation. In fact, they were the first two metrics the SaaS Metrics Standards Board published standards upon.

Dave and Ray discuss the current definitions, calculations and how Usage-Based Pricing is impacting the historic ARR reporting model.

During today's episode CAC and Growth cover the following topics:

• Contracted Annual Recurring Revenue (CARR) - Definition and Calculation
• Annual Recurring Revenue (ARR) - Definition and Calculation
• Usage-Based Pricing and impact on revenue reporting
• Introduction of Recurring and Re-ocurring revenue
• Reporting variable revenue from Usage-Based Pricing models

With ARR not being a FASB / GAAP Revenue reporting standard - the opportunity and challenges for having multiple calculation and reporting models is easy to identify - but hard to rectify.

If you are using, considering using or do not use Usage-Based Pricing this conversation and episode is a great listen.

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Free Cash Flow is a key metric for any SaaS investor and thus for SaaS CFOs and CEOs. Moreover Free Cash Flow Margin is a key variable in the Rule of 40 - a key enterprise value creation metric. Dave "CAC" Kellogg and Ray "Growth" Rike dive deep into the value behind the FCF metric and the different ways to calculate!

During this episode Dave and Ray discuss the following elements of Free Cash Flow:

• Where to find Free Cash Flow on public company filings
• The three primary Cash Flow statements
• Different formulas to calculate Free Cash Flow
• The impact of capitalizing sales commissions and R&D
• The Rule of 40 calculation - Free Cash Flow as the profitability metric

Free Cash Flow is not a metric limited to B2B SaaS companies but has become an increasingly important metric to SaaS investors as the industry matures as measured by how Enterprise Value has become more correlated to a blend of growth and profitability.

This episode is a great listen for anyone interested in the core financial metrics that impact the value of a B2B SaaS company!

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Bessemer Venture Partners recently released their 9th annual Cloud 100 Report. Dave "CAC" Kellogg and Ray "Growth" Rike dive deep into the impact of AI companies on the top 100 private cloud companies which increased their aggregate enterprise value to $820B and increased their growth rate to 70%!

Key highlights Dave and Ray discuss include:

• Aggregate enterprise value of the Cloud 100 increased 25% year over year
• Average growth rate increased from 55% in 2023 to 70% in 2024
• 97% of the Cloud 100 will be over $100M ARR by the end of the year
• Top 10 companies in the Cloud 100 represent ~ 30% of the total Enterprise Value
• Ai companies represent the top category of the Cloud 100 EV (21% of total)
• EV:Revenue multiples are down YoY (23x) but still at very attractive levels

As a follow-on to the BVP "State of the Cloud 2024 Report" the Cloud 100 highlights the era of AI has moved from hype to reality as measured by growth rates and enterprise value!

If you are interested in the latest "CLOUD" industry trends as measured by company value, revenue growth rates and industry impact this episode is a must listen!

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Go-to-Market continues to be a trending topic for the majority of B2B SaaS companies being challenged to optimize efficient revenue growth. ICONIQ recently published a report entitled "State of GTM Benchmarks" and Dave "CAC" Kellogg and Ray "Growth" Rike discuss the report's findings and what the benchmarks mean to both operators and investors.

Key GTM benchmarks covered during today's episode include:

• Growth Rate Trends ('24 vs '23)
• Customer Acquisition Logo Velocity
• Pipeline Coverage Ratio
• Pipeline Conversion Rates
• Partner Sourced Contributions
• Expansion ARR vs New Logo ARR

If you are a B2B SaaS CEO, CFO or GTM executive this episode is full of interesting insights based upon the most recent GTM benchmarks.

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The SaaS Mendoza line highlights the slope of the long term growth rate that investors expect and operators should target on a path to IPO. Dave "CAC" Kellogg and Ray "Growth" Rike break down the updated expectations.

Veteran software VC, Rory O’Driscoll of Scale Venture Partners proposed a theory to identify the growth rate below which a company may not be on the VC-to-IPO trajectory.

In 2018, Rory started with an analysis of SaaS companies at the time of IPO. In 2018, SaaS companies going public had a minimum run rate ARR of $100M and at least a 25% forward growth rate. He then examined growth rates over time and observed that the growth persistence - which represents the rate of growth decay year over year, that public SaaS companies grew at 80-85% of their previous year’s growth. This metric is commonly known as "Growth Endurance".

Dave and Ray discuss the new reality of the SaaS Mendoza line, with the most recent data in 2023-2024 suggesting that a SaaS company must have at least $400M - $500M" in revenue before they can IPO as evidenced by the recent Klaviyo, OneStream and Rubrik initial pubic offerings.

CAC and Growth highlight other common "growth expectation" models including the T2D3 (Triple, Triple, Double, Double Double) and 56789 models.

If you are evaluating what it takes for early stage company to attract new investors as your growth on a path to IPO - this conversation is full of great insights and perspective on investor expectations.

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