What is ARR?
ARR is a core concept in modern B2B revenue. Here is a clear, accurate definition, why it matters, and how Ardovo handles it.
Short answer
ARR, or annual recurring revenue, is the value of a subscription business's recurring revenue normalized to a one-year period. It counts only predictable, contracted subscription revenue, excluding one-time fees. ARR is the headline metric for SaaS companies because it shows the stable revenue base the business can count on each year.
Key takeaways
- Annualized value of recurring subscription revenue.
- Excludes one-time and non-recurring charges.
- The headline metric for subscription businesses.
- Equals MRR multiplied by twelve.
Why it matters
ARR is the number investors and boards track because it reflects durable, predictable revenue. Growth in ARR, net of churn, is the clearest measure of a subscription business's health.
How Ardovo handles it
Ardovo derives ARR from your deal and billing data so the number ties out to signed contracts rather than a spreadsheet guess. Rook can break ARR down by segment, product, and cohort on request.
Frequently asked questions
How is ARR calculated?
Sum the annualized value of all active recurring contracts, or multiply monthly recurring revenue by twelve. Exclude one-time fees, services, and usage overages that are not contractually recurring.
What is the difference between ARR and revenue?
ARR counts only recurring subscription revenue, annualized and forward-looking. Total revenue includes one-time fees, services, and usage, and is recognized as earned. ARR measures the durable base, not everything booked.