LTV estimates the cumulative recurring revenue a customer will pay before churning, multiplied by gross margin. Common formula: ARPU × Gross Margin × (1 / Churn Rate). LTV is paired with CAC in the LTV:CAC ratio - a key SaaS efficiency metric where >3:1 is considered healthy. NRR > 100% extends effective LTV indefinitely (the cohort grows over time, not shrinks).
ARPU × Gross Margin × (1 / Annual Churn Rate)$10K ARPU × 80% gross margin × (1 / 10% churn) = $80K LTV.
See how public B2B SaaS companies disclose this metric, with full historical time series.