Annual Recurring Revenue (ARR)

What ARR measures

Annual Recurring Revenue (ARR) is the normalized annualized value of every active subscription on a given date. It is the SaaS metric that aggregates monthly, annual, and other periodic plans into one comparable yearly revenue number.

The simplest formula:

ARR = MRR * 12

If monthly recurring revenue is $10,000, ARR is $120,000. If a user is on an annual plan paying $99 once per year, that contributes $99 to ARR (and $8.25 to MRR).

Why ARR matters for mobile apps

For pure consumer mobile apps, MRR is often the primary metric. But ARR shows up the moment you ship annual plans, which most subscription apps do for a few reasons:

• Annual plans lock in revenue and reduce monthly churn risk
• Apple and Google offer different commission rates after 12 months of paid subscription
• ARR smooths out the lumpiness of annual renewals and makes year-over-year growth comparable

For a mixed monthly/annual subscription business, ARR is the cleanest top-line number for investor conversations, board updates, and capacity planning.

How ARR and MRR relate

They are the same metric on different time scales. The conversion is mechanical: ARR is 12x MRR. But they tell slightly different stories:

• MRR is sensitive to short-term changes (a churn spike shows up immediately)
• ARR averages across the year and smooths volatility
• Annual plans contribute their full value at the moment of purchase to ARR, but only 1/12 per month to MRR

Most subscription app dashboards (RevenueCat, Adapty, App Store Connect Analytics) expose both.

How is ARR calculated for a mixed plan mobile app?

Sum the annualized value of every active subscription on a given date:

• A monthly plan at $9.99/month contributes $119.88 to ARR
• An annual plan at $79.99/year contributes $79.99 to ARR (its actual yearly price, not 12x its monthly equivalent)
• A 6-month plan at $49.99 contributes $99.98 to ARR (the 12-month annualized value)

What does not count: one-time purchases, consumable IAPs, and trials in progress (only paid, active subscriptions).

Does ARR include trials or free users?

No. ARR only counts active paying subscribers. Trials in progress are excluded because they have not paid yet. Free-tier users and lifetime free users do not contribute to ARR. Once a trial converts to paid, the new subscription is included from that day forward.

How localized pricing affects ARR

This is where global mobile apps get interesting. ARR sums actual paid revenue in your reporting currency (usually USD). When you ship localized PPP-tuned pricing, the impact on ARR depends on which markets you adjusted:

• Lower prices in emerging markets: ARR per user drops, total ARR usually grows via volume
• Higher prices in high-income markets (Switzerland, Norway): ARR per user grows, total ARR grows
• Net effect depends on your country mix and price elasticity

RevenueCat's State of Subscription Apps consistently shows localized pricing growing total ARR despite per-user ARR dropping in some markets.