# ARR — Meaning and details

## ARR meaning

Annual Recurring Revenue

## What is ARR?

Annual Recurring Revenue (ARR) is a metric used primarily by SaaS or subscription businesses that have term subscription agreements, representing the value of the contracted recurring revenue components of your term subscriptions normalized to a one-year period. ARR is a subset of MRR (Monthly Recurring Revenue) and is used to measure the predictability and health of the revenue stream.

## How is ARR calculated?

ARR is typically calculated by taking the monthly recurring revenue (MRR) and multiplying it by 12. For instance, if a company's MRR is $10,000, its ARR would be $10,000 x 12, or $120,000.