Recurring Revenue Tracker · Reading NorthAI in 2026

Format stub, what this is. This file defines the recurring-revenue tracker's schema, milestone targets, reporting cadence, and pivot thresholds. The engagement populates actuals. The format shows what the engagement produces. The engagement produces the content. No numbers in this file are current MRR or ARR. They are target trajectory benchmarks derived from comparable GovCon-AI productization patterns and the R6 v1.1 valuation scenarios.

Why Recurring Revenue Ratio Is the Diligence Anchor

Ch 13 is unambiguous: "When you stop selling hours, you need different justification methods. The unit of value determines everything." The diligence anchor for any federal-AI raise is not total revenue. It is the recurring fraction of that revenue. A company billing $5M in project fees with 0% recurring looks like a services firm (1.5x multiple). A company billing $3M in project fees plus $2M in contract-obligated recurring looks like a tech-enabled services firm (2.5-4x multiple). Same revenue. Very different valuation thesis.

Year 1 Milestone Targets

These are targets, not actuals. Actuals populated at engagement start.

The milestone table below derives from Scenario B (Year 1 Tech-Enabled target: $8-12M ARR) and works backwards through a 12-month ramp. Starting point is whatever MRR exists at engagement start. The engagement team sets the baseline in Month 1 and populates actuals going forward.

Month 3

[current MRR]

Baseline established. LOIs signed. First productized-service contract drafted.

Month 6

1-2 paying

1-2 signed contracts obligated. Recurring billing established under CLINs. Baseline MRR x 2-3.

Month 9

$150-300K ARR

3 paying customers (Ch 6 validation threshold). First option-year exercise visible. NRR calculation possible.

Month 12

$500K-1M ARR

Diligence-ready recurring base. FedRAMP 20x LI-SaaS application in process. Investor conversations change.

Tracking Schema

The tracker reports four metrics monthly. All four go into the investor-facing recurring-revenue summary and the board dashboard (once a board exists).

Cohort Retention View

Federal customers often do not churn in the traditional SaaS sense. They exercise or do not exercise option years. The cohort view tracks by contract class:

COHORT VIEW — OPTION-YEAR EXERCISE RATE ═══════════════════════════════════════════════════════════ Cohort Customer Base CLIN OY1 OY2 OY3+ ────────────────────────────────────────────────────────────── FY[XX] [Agency 1] $[base] [exercised] [exercised] [—] FY[XX] [Agency 2] $[base] [exercised] [—] [—] FY[XX]+1 [Agency 3] $[base] [pending] [—] [—] ────────────────────────────────────────────────────────────── OY Exercise Rate: [X]% NRR: [Y]% Avg contract length: [Z] years [ALL FIELDS POPULATED AT ENGAGEMENT START FROM TIM/STEPHANIE CONTRACT DATA]

Reporting Cadence for Board and Investors

Critical "No" Thresholds: When to Pivot

Metric	Definition (NorthAI context)	Why It Matters	Data Source
MRR Monthly Recurring Revenue	Sum of all contract-obligated monthly billing under active CLINs. Excludes one-time deliverables (CLIN 0002 onboarding fees). Includes productized-service monthly retainers, data-access subscriptions, and per-seat SaaS fees.	Primary recurring-revenue signal. Federal contracts can generate MRR before FedRAMP through monthly-deliverable productized services.	Invoices + contract obligated amounts from Tim/Stephanie
NRR Net Revenue Retention	(ARR at end of period from customers present at start of period) / (ARR at start of period). Includes expansions (new CLINs, option-year exercises) and subtractions (terminations, scope reductions).	Federal contracts have option years. Option-year exercise rate is NorthAI's version of churn. NRR above 110% signals healthy expansion within existing customers.	Contract option-year exercise records
Gross Margin on recurring revenue	(MRR − direct delivery costs) / MRR. Direct delivery costs: fractional staff time allocated to recurring deliverables, tooling costs for recurring access, ConMon allocation (prorated per customer).	Ch 13 targets 60-80% gross margin on productized services vs. 15-25% on custom T&M. This ratio validates the productization thesis to investors.	Internal P&L from Tim/Stephanie
Recurring Fraction	MRR × 12 / Total ARR. Total ARR includes all revenue (project fees, one-time deliverables, T&M under CLIN 0003). Recurring Fraction = what percent of total revenue is contracted-recurring vs. project-fee.	This is the valuation-multiple lever. 60%+ recurring = Scenario B multiple. Below 30% = Scenario A multiple.	MRR tracker + total billing records

Report	Cadence	Audience	Contents
MRR Flash	Monthly, first week	Tim + Stephanie (internal)	MRR, new contracts signed, option-year exercises, ChN and NorthAI revenue split
Diligence-Ready Recurring Summary	Quarterly	Investors (as needed)	MRR trend (3-month), NRR, Gross Margin on recurring, Recurring Fraction vs. total ARR, ConMon cost as % of ARR
Board Dashboard Row	Monthly (once board formed)	Board	Single row: MRR, NRR, Gross Margin %, Recurring Fraction %, vs. prior month and vs. milestone target
Investor Data Room Update	Per raise cycle	Diligence investors	12-month MRR cohort table, NRR by cohort, contract vehicle breakdown (GSA / SBIR / T&M / Other), ConMon cost audit trail

Conditions that trigger a strategy review, not just a tactics adjustment

Recurring Fraction below 20% at Month 9. If 80%+ of revenue at Month 9 is still project fees and one-time deliverables, the productized-service thesis is not holding. The mix says "services firm." Trigger: pivot pricing strategy, restructure CLIN design, or accept Scenario A valuation.
NRR below 80% after first option-year window. Option-year non-exercises at this rate signal that customers are not finding the value warranting continuation. Trigger: structured discovery on non-exercising customers before Month 12.
Gross Margin on recurring below 40%. A productized service at 40% gross margin is closer to T&M economics than product economics. Ch 13's target is 60-80%. Below 40% means delivery cost is too high relative to price. Trigger: scope reduction on CLIN 0001 (standardize more, customize less), or pricing increase on new contracts.
ConMon cost exceeds 20% of ARR. If FedRAMP 20x LI-SaaS ConMon ($50-100K/year) exceeds 20% of total ARR, the business is not at the scale where authorization is accretive. This signals either (a) authorization was premature or (b) revenue ramp is behind plan. Trigger: pause new authorization investment until ARR base can support it sustainably.