Metric guide · Revenue
ARR: annual recurring revenue
Short answer
ARR, or annual recurring revenue, is the yearly value of every active subscription at the end of a period. For monthly and mixed billing it is usually calculated as month-end MRR multiplied by 12. It excludes one-time fees, services and usage charges that are not contracted to recur.
The formula
ARR = month-end MRR × 12
Unit: US dollars. Better when it goes up.
How to calculate it
- Calculate MRR as of the last day of the period, with annual and quarterly plans normalized to monthly amounts.
- Multiply that MRR by 12.
- Exclude implementation fees, one-time services and variable usage that is not committed in the contract.
- Label the figure with its as-of date so it is not read as revenue earned over a year.
Mistakes that distort it
ARR is a forward-looking snapshot of recurring value. Revenue over the last 12 months reflects the past, including customers who have since left.
Multiplying a short-period revenue figure by 52 or 365 produces a run rate, not ARR. ARR should come from active subscriptions at a point in time.
A contract with a future start date is contracted ARR. Keep it separate until the subscription is live and billing.
Where Sondola reads it from
Sondola reads this metric from RevenueCat, Stripe and Paddle, with the source and period on every reading. Each reading keeps where it came from, the period and the date it was recorded, and you can download all of it at any time.
See all 34 integrations →Questions
When should a company report ARR instead of MRR?
ARR is common when most contracts are annual or multi-year, which is typical in B2B SaaS. Consumer subscription apps with mostly monthly plans often lead with MRR. Both come from the same subscription data.
Does ARR include usage-based revenue?
Only the committed portion of a contract belongs in ARR. Usage above the commitment is better tracked as its own revenue line.
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