Annual Recurring Revenue (ARR)

Annual recurring revenue (ARR) is the yearly revenue from a company’s existing annual subscriptions. ARR is a key metric used by software as a service (SaaS) or subscription-based businesses. ARR can be calculated by using the following formula:

ARR = (Overall subscription cost / year + recurring expansion revenue) – revenue lost from customer churn

Where recurring expansion revenue = fees related to upgrades, upsells, and add-ons