Customer Lifetime Value (LTV)
The total revenue or profit a business can expect from a customer over the entire duration of their relationship.
LTV = Average Revenue Per Account × Gross Margin % / Churn Rate. For a subscription business with $10K ARR per account, 75% gross margins, and 10% annual churn, LTV = $10K × 0.75 / 0.10 = $75K. The LTV:CAC ratio is the primary metric for assessing the unit economics of a customer acquisition strategy; ratios above 3:1 are generally considered healthy.
LTV calculations require assumptions about churn rates, expansion revenue, and gross margins that can be significantly affected by accounting choices and cohort selection. Document intelligence helps analysts extract disclosed LTV and churn metrics from financial filings and investor materials, surface the underlying assumptions, and identify whether the metrics are calculated on a consistent basis over time.
More financial Terms
10-K Filing
An annual report filed with the SEC that provides a comprehensive overview of a public company's financial performance.
Balance Sheet
A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of a company's operating profitability.
Amortization
The gradual reduction of an intangible asset's value or a loan balance through scheduled periodic payments.
Revenue Recognition
The accounting principle that determines when and how revenue is recorded in financial statements.
Cash Flow Statement
A financial statement that tracks the movement of cash in and out of a business across operating, investing, and financing activities.
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