SaaS Talk™ with the Metrics Brothers - Strategies, Insights, & Metrics for B2B SaaS Executive Leaders  cover image

SaaS Talk™ with the Metrics Brothers - Strategies, Insights, & Metrics for B2B SaaS Executive Leaders

CARR, ARR, and the Impact of Usage-Based Pricing

Sep 25, 2024
Dive into the complexities of Contracted Annual Recurring Revenue (CARR) and Annual Recurring Revenue (ARR) as the hosts dissect their definitions and calculations. Discover how Usage-Based Pricing is reshaping revenue reporting in the SaaS industry. The conversation highlights the challenges of categorizing variable revenue, the transition from fixed licenses to more flexible pricing models, and the importance of implied ARR. Gain insights into revenue recognition practices and the evolving metrics crucial for navigating subscription-based businesses.
25:18

Podcast summary created with Snipd AI

Quick takeaways

  • Understanding the differences between CARR and ARR is crucial for accurately measuring a SaaS company's financial commitments and performance.
  • The rise of usage-based pricing introduces complexities in revenue reporting, often obscuring the sustainability of revenue streams in financial forecasts.

Deep dives

Defining ARR and CARR in SaaS

Annual Recurring Revenue (ARR) and its related term Contracted ARR (CARR) are crucial metrics for SaaS companies. ARR is defined as the sum of subscription recurring revenue calculated on an annual basis, excluding one-time fees or professional services fees. In contrast, CARR represents the revenue contracted for a specific period, regardless of whether the service is currently in production. This distinction helps in understanding a SaaS company’s financial commitments, particularly in situations where bookings occur months ahead of actual service activation.

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