How to determine which metrics you report on

The SaaS world version of the old “You are what you eat” adage is “You are what you report.”

As a metrics aficionado, I’ve always been fascinated with the game theory behind what companies choose to disclose, and even more so, what they purposefully do not.

For public companies, there are a set of tried and true metrics that you have to report on for Securities and Exchange Commission requirements. And then there’s the other stuff that provides color.

And more specifically, there are metrics that you both disclose and GUIDE towards - meaning you provide a forward looking estimate of where you think you’ll land for the quarter and fiscal year.

What you typically guide (FORWARD looking):

What you disclose (BACKWARD looking)… typically a selection of…

Here’s a comparison of what 20 tech companies Disclose and Guide to:

The blue boxes with yellow check marks are Guided, while the grey boxes with black check marks are results they Disclosed. If it’s blank, it means they don’t talk about it publicly.

Some notes on the comparison:

Most companies don’t pull a metric because it’s just looking too damn good. It’s the result of:

In my research I noticed at some point over the last year or so that Crowdstrike and Datadog both stopped reporting specific net dollar retention rates on a quarterly basis.

They now just say if it’s above or below “their benchmark” of 120% and do not elaborate any further.

I assume this is for a few reasons:

CRWD also did away with Total Customers. They now only provide the number of customers over $100K in their quarterly releases.

You don’t get style points here. In fact, you get crushed when you’re just a tad off. There’s a nonlinear relationship between the amount you miss your number by and the corresponding hit to share price. Investors take the numbers you guide to very seriously, and assume these are your absolute base case numbers that you know you can achieve.

Most companies have a street plan, a board plan, and an operating plan. Each one of these has an uplift, or cushion, baked in, with the operating plan being the largest number. And then most orgs go even a step beyond that, over assigning quota for each level of sales management.

So if you miss, analysts jump to draconian conclusions.

Therefore, you should guide to the bare minimum of metrics that your peers do. It leaves for less surface area to slip and fall. This is where it’s important to research what similar companies in your space guide to.

An example of standing out is Dynatrace, who guides to ARR ranges. This is dangerous, since the additions can be lumpy and throw off false signals around the business. It can also be hard to predict due to big deals that swing a quarter, as well as natural seasonality.

On the other hand, revenue gets amortized in a way that makes it less volatile from period to period and much more predictable.

So don’t go above and beyond in terms of what you guide to - it introduces an undue amount of forecasting risk.

A common theme I found is that companies are willing to guide to more on an annual basis vs quarterly basis. This gives investors more assurance on the business model, while giving the company’s management more flexibility on a short term basis (you can always try to make up a shortfall in Q2 in Q3… you get the point).

Palo Alto is a great example of this:

On a quarterly basis they provide guidance on three metrics.

And on an annual basis they provide guidance on six metrics.

Similarly, Tenable guides to billings and unlevered FCF on an annual basis, but not quarterly.

So pick your spots, and sprinkle in some love where it’s safe to.

Some nonstandard metrics that companies disclose on a quarterly basis:

Now, this all goes haywire when we get into private companies. Although private companies don’t report their results publicly, they do report and guide to metrics for their current and prospective investors.

And let me tell you, it’s the Wild West out there. That’s why I found this post by Lead Edge both hilarious and accurate (shoutout Theo Sanders on Twitter for the find).

Read the entire thing. The funnel makes sense. You are what you report - or better yet, you are what you don’t report.

A lot of this will be dictated by where your company is in it’s lifecycle - if you haven’t found product market fit yet, you are probably a ways away from talking about any sorts of profits.

But the sentiment rings true - the metrics you report on all sit on a spectrum, or ladder, with the ones you talk about also indicating the ones that you don’t have progress on yet to talk about. That’s exactly why some companies, as the snapshot points out, will talk about Subscribers instead of Monthly Active Users - they don’t have a grip (or a good story) around Monthly Active Users yet… Leaky bucket?!

Whatever you do decide to report, I suggest you:

And remember - sometimes it’s what you don’t say that matters the most.