Annual Recurring Revenue
Definition
The annualised value of predictable, recurring subscription-based revenue. Annual recurring revenue normalises monthly or multi-year subscription contracts into a single comparable metric, and serves as the primary top-line KPI for SaaS and subscription businesses. Investors use ARR as the basis for revenue-multiple valuations, with ARR growth rate, net retention, and gross margin being the key modifiers of the applicable multiple.
Related Terms
Related FAQ
What is Monthly Recurring Revenue (MRR)?
MRR is the total monthly revenue expected from subscription customers at a point in time, the foundational metric for SaaS companies and one of the earliest indicators investors examine.
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