What is the difference?

# MRR vs ARR

Monthly Recurring Revenue

Annual Recurring Revenue

#### What is it?

Monthly Recurring Revenue (MRR) is the sum of all subscription revenue expressed as a monthly value. For most companies, MRR is the sum of all new business subscriptions and upgrades (sometimes called expansion), minus downgrades (or contractions) and cancelled subscriptions. Though not a Generally Accepted Accounting Principle (GAAP) value, it's the Revenue equivalent used by every SaaS company. MRR is used interchangeably with ARR.

Annual Recurring Revenue (ARR) is the sum of all subscription revenue expressed as an annual value. For most companies, ARR is the sum of all new business subscriptions and upgrades (sometimes called expansion), minus downgrades (or contractions) and cancelled subscriptions. Though not a Generally Accepted Accounting Principle (GAAP) value, it's the Revenue equivalent used by every SaaS company. ARR is used interchangeably with Monthly Recurring Revenue (MRR).

#### Formula

ƒ Sum(Recurring Revenue irrespective of billing interval expressed as a monthly value)
ƒ Sum(Recurring Revenue irrespective of billing interval expressed as an annual value)

#### Example

If 10 customers are paying \$150 per month, then MRR would be; MRR = \$1500 If 7 customers are paying \$200 per month, and 3 customers are paying \$100 per month, then MRR would be; MRR = \$1700

If a customer subscribes to a service with a 1-year renewal agreement for \$12,000, then Annual Recurring Revenue would be; ARR = \$12,000 If a customer subscribes to a service for \$10,000 (with no contract), then Annual Recurring Revenue would be; ARR = \$0 If a customer subscribes to a service with a monthly renewal agreement for \$1,000 per month, then Annual Recurring Revenue would be; ARR = \$1,000 * 12 = \$12,000

#### Published and updated dates

Date created: Mar 28, 2018

Latest update: Sep 27, 2019

Date created: Apr 28, 2018

Latest update: May 20, 2020