MRR vs ARR
Each, defined
MRR
MRR is a recurring-revenue metric, calculated as Sum of normalized monthly recurring subscription value. Excludes one-time fees, usage overage, services, and taxes.
Formula: Sum of normalized monthly recurring subscription value
ARR
ARR is a recurring-revenue metric, calculated as MRR × 12. Only meaningful for subscriptions. Never for transactional revenue.
Formula: MRR × 12
Side by side
| MRR | ARR | |
|---|---|---|
| Unit | One month | One year |
| Typical use | Monthly plans | Annual contracts, enterprise |
| Relationship | ARR ÷ 12 | MRR × 12 |
The same subscriptions, two units
340 customers on a $249 monthly plan and 15 annual contracts at $24,000. Normalized to a month that is $114,660 of MRR — annual contracts count at a twelfth — and $1,375,920 of ARR.
| Line | Amount |
|---|---|
| Monthly-billed MRR | 84,660.00 |
| Annual contracts, normalized to a month | 30,000.00 |
| MRR | 114,660.00 |
| ARR (MRR × 12) | 1,375,920.00 |
How they relate
Neither is a GAAP figure. Revenue on the income statement follows delivery under ASC 606; MRR and ARR are run-rate measures of the contracts in force on one day.
Companies selling monthly plans tend to quote MRR; those selling annual contracts tend to quote ARR. Setup fees, services and one-off usage are left out of both.
Questions
- Is ARR the same as revenue?
- No. Revenue is recognized as the service is delivered; ARR is a snapshot of contracted recurring value.
- How is an annual contract counted in MRR?
- At one twelfth of its annual value.
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.