Annual recurring revenue

The contracted, repeating revenue of a subscription business, annualised from the current run rate.

A company with ₹42 crore of monthly recurring revenue reports ₹504 crore of annual recurring revenue.

The number is not an accounting figure and is not audited, which is why definitions vary. Some companies include one-off implementation fees, some include contracts signed but not started, and some annualise a strong month.

Compare it with reported revenue in the financial statements. A large and growing gap needs an explanation.

Read it beside deferred revenue on the balance sheet, which is the audited trace of the same commitments. A company whose annual recurring revenue grows much faster than its deferred revenue is counting contracts that have not been invoiced, and the gap is the part of the growth that has not yet been paid for.