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Cohorts Recurring Revenue

Overview

This report enables you to track the evolution of subscription cohorts in terms of:

  • Total revenue
  • Average recurring revenue generated
  • Number of received payments

Avangate creates cohorts by grouping together active, past due and trial subscriptions sharing billing cycle settings and the same starting month. This report does not include refunds. Reimbursements to your customers are included as revenue. Refunds are also not counted as transactions, and will not be subtracted from the number of payments reported.

Note: This report does not centralize data on products sold to partners.

Availability

Contact Avangate to have this report enabled.

Requirements

Data for this report has been logged starting with May 2013. As such, you will only be able to build the report when the time passed since cohort data has first started been logged is smaller than the minimum billing cycle interval set for your subscriptions.

Accessing the Cohorts Recurring Revenue report

  1. Go to Reports center -> Main reports.
  2. Click Cohorts Recurring Revenue in the SaaS reports area.

Running the report

To build Cohorts Recurring Revenue report you first need to select a number of filters.

  1. Billing cycle. The time interval elapsed between successive billing periods when subscriptions are renewed or expire. The billing cycle options available in this drop down menu correspond to the billing cycles setting you configured for those of your products that were actually sold to customers through Avangate. For example, if you're only selling monthly subscriptions, 1 month will be the only option available. Additionally, if you created a 3 year subscription product but did not sell a single unit, the 3 year option will be missing from this drop down menu.
  2. Cohorts from. Starting month of subscriptions included in the same cohort. Select All to compare the evolution of all subscription cohorts from a specific year.
  3. Cohort tracking range. The last month of the tracking interval for a cohort of subscriptions sharing the same starting month.
  4. Tracking period. Time interval elapsed between the start month of the subscription cohort you're analyzing and the end month of the last complete billing cycle within the tracking range date you selected. Make sure to select a billing cycle that is equal or smaller than the tracking range interval.
  5. Products. Lists with all active and disabled products from your account that were sold to customers via Avangate, and filters only subscription cohorts for specific offerings. Products lacking sales will not be available. If you re-label products, this drop down menu will display the current product name, and not old versions.
  6. Product pricing options. Available only when a single product with sales through the Avangate system is selected using the Products filter. This filter lists only those pricing options selected by customers when they made purchases through the Avangate system. 
  7. Revenue currency. Default settlement currency for your account along with active billing currencies. All payments for orders finished in the tracking interval you selected are converted to the currency selected when revenue is reported. The Avangate exchange rate for the day when orders were finished is used for converting.
  8. Report options
    • Revenue received. Total value of the payments for finished orders made by customers in the tracking interval you selected for each subscription in a cohort over a tracking period. Revenue includes Avangate's commission, affiliate fees and shipping costs, but not taxes (such as VAT and sales tax). In addition, discounts you offered are subtracted from the reported revenue. However, the report does not include refunds, and as such refunded amounts continue to be included into the reported revenue, even if the money was reimbursed. Avangate reports revenue received in the month when initial orders used to acquire subscriptions or the renewal orders were finalized. For example, if customers finalized the transaction on April 30, 2013 but the order was fulfilled on May 1, 2013, the revenue will be counted for the month of May.

Average recurring revenue

The estimative recurring revenue received on average per the subscriptions in a cohort. ARR is obtained by dividing the revenue received to the number of items in the cohort at the end of the billing cycle period (end size).

Number of payments

Total number of payments for finished orders made by customers in the tracking interval you selected for the each subscription in a cohort, starting with the initial acquisition and continuing with trial conversion, each recurring billing/renewal, and upgrade. Customers can make multiple payments for a single subscription within the same billing cycle.

Note: Avangate reports payments in the month when initial orders used to acquire subscriptions or the renewal orders were finalized. For example, if customers finalized the transaction on April 30, 2013 but the order was fulfilled on May 1, 2013, the payment will be counted for the month of May.

Let's assume that a customer purchases a 7-day trial for Subscription 1 paying $1 on May 1st, 2013. Subscription 1 is a yearly subscription which means that it's scheduled to renew on May 8, 2014, if the trial converts successfully.

At the end of the evaluation period the trial is converted to the full product and the customer is charged $199.99. On May 15, 2013 the customer upgrades Subscription 1, and pays another $50.

If no additional payments are made for this subscription for the first year, come May 8, 2014, the Avangate system will report a total of three payments for this single item within one billing cycle.

 

Payments and subscription billing cycle alignment

When the finalization of a transaction happens simultaneously with the moment when the subscription is generated, the two events along with the resulting revenue are reported in the same billing cycle. However, transactions can also be delayed due to a variety of issues, including the lack of funds, expired credit cards, fraud-related analysis, etc., and in such scenarios the payment can be logged in a subsequent billing cycle of an already created subscription.

For example, a customer purchases Subscription 1 that is configured to renew monthly, on March 30, 2013 and uses a debit card to pay. On April 30, the Avangate system attempts to auto-renew the subscription, but the transaction fails due to lack of funds. Subscription 1 enters the grace period. Avangate contacts the customer and provides a payment failure notification. On May 1, 2013 the customer renews Subscription 1 with a manual payment.

In the scenario described above, for the March 2013 cohort, the report will record the creation of the subscription and the payment. But for April 2013, while the report will still count the subscription as active, no payments will be logged. This is because the renewal transaction will only be recorded in May 2013.

 

Free trials and fully discounted purchases/renewals

The Avangate system considers and counts valid payments:

  • Acquisition of free trials for which customers provide their payment details;
  • Fully discounted (0 value) subscription purchases and renewals.

Start size

The total number of active and past due subscriptions at the start of the tracking interval.

If Subscription 1 is active on April 2nd, 2013, but is canceled on April 3rd, 2013, it will be counted for the start size of the April 2013 subscriptions cohort, but not for the end size.

End size

The total number of active and past due subscriptions at the end of the tracking interval, after items which expired or were canceled are subtracted, and equal to the subsequent start size.

If Subscription 2 is active on April 2nd, 2013, but is canceled on May 3rd, 2013, it will be counted for both the start size and the end size of the April 2013 subscriptions cohort.

Compare cohorts

When building the report, select the start year of the subscription cohort you're analyzing under the Cohorts from: option, and the option All instead of a specific month. In this manner the report will compare the evolution of all subscription cohorts from a specific year.

Comparison of subscription cohorts is also done through the juxtaposition of billing cycles. For example, comparing the January 2013 cohort with the March 2013 cohort for monthly subscriptions, means evaluating evolution of the first billing cycle, then the second, and so on, namely of January vs. March, February vs. April, etc.

 

Cohort start month

Billing cycle 1 for each cohort

Billing cycle 2 for each cohort

Billing cycle 3 for each cohort

Jan 2013

January

February

March

Mar 2013

March

April

May

Revenue received

Billing cycles reveal the evolution of total revenue generated by the payments for finished orders made by customers in the tracking interval you selected for each subscription in a cohort across successive billing cycles. Revenue reported is cumulative from one billing cycle to the next.

Let's look at the report below:

Cohort

Start size

Billing cycle 1

2

3

4

Jan 2009

13622

294,808.84 USD

339,426.51 USD

345,940.06 USD

348,864.94 USD

  • Billing cycle 1. The January 2009 cohort of 13,622 subscriptions generated 294,808.84 USD for the first billing cycle, which in this case is one (1) year.
  • Billing cycle 2. The same cohort produced a total of 339,426.51 USD by the second year billing cycle, namely 294,808.84 USD for 2009-2010 and 44,617.67 for 2010-2011.
  • Billing cycle 3. Moving only, revenues for 2011-2012 were just 345,940.06 USD, namely 339,426.51 for the first two years, and 6,513.55 USD for the third year.
  • Billing cycle 4. Between 2012 and 2013, the same 2009 cohort of subscriptions only generated 2,924.88 USD, which means that almost all of the initial customers have churned, and only a small number still renewed the subscriptions they acquired four years earlier.

Average recurring revenue

Billing cycles reveal the evolution of the estimative recurring revenue received on average per the subscriptions in a cohort across successive billing cycles. ARR is obtained by dividing the revenue received to the number of items in the cohort at the end of the billing cycle period (end size).

ARR reported is specific to each billing cycle.

Number of payments

Billing cycles reveal the evolution of the number of payments for finished orders made by customers in the tracking interval you selected for the each subscription in a cohort, starting with the initial acquisition and continuing with trial conversion, each recurring billing/renewal, and upgrade across successive billing cycles. Revenue reported is specific to each billing cycle.

Subscription cohorts tracking exceptions

Some changes to subscriptions will not be reflected by this report:

  1. Modifications in billing cycle and pricing options. The report will not account for modifications to the billing cycle or to the pricing options of subscriptions in their lifetime. The billing cycle settings and the product pricing options initially valid for a subscription will continue to be considered as associated to the item, even if they change.
  2. Upgrades and renewals with new product versions. The report will not account for upgrades to new offerings or for renewals with new product versions of subscriptions in their lifetime (billing cycle and pricing options updates are also not accounted for). Subscriptions will continue to be associated to the products initially sold to customers, even after upgrades or renewals with new product versions.
  3. Initial subscription is disabled during upgrade and replaced with a new subscription. The initial subscription will be considered as disabled and no longer reported, along with any payments or revenue.

FAQ

  1. Why can't I see any data in my report?

    • In scenarios in which the smallest billing cycle set for your products is larger than the cohort tracking interval selected the report will not display any data.

  2. Why is the tracking period in the report smaller than the interval I selected?

    • The report details subscription cohorts throughout their lifetime within the tracking intervals you select. However, the report will no longer provide data in scenarios in which all subscriptions in a cohort become inactive (they expire or are canceled) before the end date of your tracking interval. For example, let's assume you're tracking the cohort of 100 subscriptions started in January 2012 until January 2013 for product with a monthly billing cycle, and out the initial 100 subscribers you lose 10 each month. Because of the attrition rate, all initial customers have churned out by November 2012. This means that the report will not display any data for December, since no subscription from the cohort is still active.

  3. The start and end sizes of cohorts are not equivalent to the number of payments made and do not reflect the revenue received. Why is that?

    • As explained in a number of examples in this document, there are scenarios in which you can encounter discrepancies such as the situation described. Please read the details above carefully and contact Avangate directly if you have further questions.

  4. What happens when a customer purchases 10 units of a subscription via single order?

    • The report will count a one payment and a single subscription generated, but will reflect the total revenue, namely the cost per unit times the quantity purchased.

  5. What happens when an order is reversed?

    • If the subscription has already been generated it will be reported for the start size, but not for the end size of the cohort in the tracking period you select. No payment or revenue will be reported however.

  6. I cannot select the current month as the end of the tracking interval. Why is that?

    • The past complete month is the last that can be selected as the end of tracking interval.

  7. Are network-cross sale subscriptions, payment and revenue reported?

    • Yes, subscriptions sold through network cross-sale as well as the payment and revenue they generated are included in this report.

  8. Can lifetime/non-recurring subscriptions be included in this report?

    • In special scenarios yes, but this should not happen unless an exception is involved, including:

      • The lifetime of a subscription is prolonged indefinitely by you;

      • The customer upgrades to a non-recurring/lifetime subscription. In such scenarios, lifetime subscriptions are included under the start size and end size of the cohort, but no payments or revenue is reported.

  9. Are imported subscriptions included in this report?

    • Yes. Imported subscriptions will be included in cohorts based on the PurchaseDate you provide and not the import date. Additionally, revenue will only start being reported when the first payment made by the customer is finalized. For example, let's assume you imported Subscription 1 in April 2013, with 2012-12-01 (December 1, 2012) as the PurchaseDate. This subscription is renewed on May 1st, 2013 for the first time. As such, Subscription 1 is included in the December 2012 cohort, and will be reported for the start and end size until May 2013 and onward, without payment or revenue data. The first payment and associated revenue will only be reported starting with May 2013.

  10. When happens if I extend the billing cycle of a subscription?

    • The subscription will be considered valid and included into the report as long as it's active or past due, but no payments or revenue will be reported until the first renewal order is successfully finalized.