financial-metrics
MRR is the monthly expression of contracted recurring revenue. It is the operational dashboard metric; ARR is usually the annualised version used in fundraising and M&A.
Finance teams manage ARR in board decks. Operators manage MRR in the billing system: new MRR, expansion, contraction, churned MRR. The two should reconcile.
MRR = Σ (normalised monthly recurring fee for active contracts)
Annual contracts are typically converted as fee / 12. Multi-year prepaid deals should be normalised, not dumped into the month cash arrived.
A widely used identity:
Ending MRR = Opening MRR + New + Expansion − Contraction − Churn ± reactivation
ARR ≈ Ending MRR × 12 (before FX, one-off credits, and definition gaps)
Illustration only. Hypothetical vertical SaaS, one quarter.
| MRR bridge | €k |
|---|---|
| Opening MRR | 320 |
| New logos | +28 |
| Expansion (upsell) | +11 |
| Contraction | −6 |
| Churn | −9 |
| Closing MRR | 344 |
| Implied ARR | €4.13m |
Net new MRR is +24k. Logo count could still have fallen if expansion came from two whales. That is why MRR bridges belong next to cohort tables, not instead of them.
Sales compensation; cash forecasting when combined with collections; early-warning churn; the monthly input to ARR used in capital raising.
MRR is silent on gross margin, implementation backlog, and IFRS cut-off. “Committed usage MRR” can vanish when consumption falls. Marketplace take-rate MRR is a different economic object from seat-based SaaS MRR.
Dazur asks for an MRR bridge with a written policy (credits, pauses, non-recurring add-ons). Without that, subscription due diligence becomes a debate about Excel rather than about the book of business.