ARR = MRR x 12, where MRR is monthly recurring revenue
ARR is the predictable yearly revenue from subscriptions.
What it is
Annual Recurring Revenue is the yearly value of the contracted, repeating revenue a subscription company expects from its customers at a point in time. It counts only recurring items like subscriptions and committed usage, and excludes one-time charges such as setup fees, professional services, or hardware. It is a snapshot of run-rate revenue, not an accounting figure from the income statement.
Why it matters
ARR shows the durable, predictable core of a SaaS business better than a single quarter of total revenue, which can be distorted by one-off sales. Investors track ARR growth and its trajectory to judge how fast the recurring base is compounding. Because it is non-GAAP and self-defined, the exact components a company includes should always be checked.
How it's calculated
Take the recurring revenue earned in a month or quarter and annualize it, or sum the annualized value of all active recurring contracts; always strip out non-recurring fees.
How Quintarthai uses it
When a company reports ARR, you can sanity-check it against the reported GAAP revenue trend in the Financials tab of its company deep-analysis page.
Cross-border note. ARR is a non-GAAP metric under both US GAAP and Canadian-reporting IFRS, so neither regulator standardizes it; a Canadian SaaS issuer and a US peer may define ARR differently, and currency (CAD vs USD) must be matched before comparing.
FAQ
What is the difference between ARR and revenue on the income statement?
Income-statement revenue is the GAAP/IFRS amount actually recognized over a period, including one-time items. ARR is a non-GAAP snapshot of only the recurring portion, annualized; the two will not match exactly.
Is ARR the same as MRR?
They measure the same thing on different time scales. MRR is monthly recurring revenue; ARR is generally MRR multiplied by 12.
Check your understanding
A SaaS company reports ARR of $12M but its most recent quarterly income-statement revenue annualizes to only $10M. What is the most likely reason for the gap?
ARR is a self-defined, non-GAAP snapshot of annualized recurring contracts, so it legitimately differs from GAAP recognized revenue rather than indicating fraud.