Annual Recurring Revenue (ARR)

Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue generated from all active subscriptions. MRR is calculated by summing the monthly-equivalent value of every active subscription — annual plans are divided by 12, weekly plans are multiplied by approximately 4.33, and monthly plans are counted at face value. MRR is the foundational financial metric for subscription app businesses because it provides a consistent, comparable measure of revenue trajectory regardless of billing cadence mix. MRR is typically broken down into component parts: New MRR (revenue from first-time subscribers), Expansion MRR (revenue from upgrades, upsells, or cross-sells), Contraction MRR (revenue lost from downgrades), Churned MRR (revenue lost from cancellations), and Reactivation MRR (revenue from previously churned subscribers who re-subscribe). Tracking these components separately reveals the underlying dynamics driving overall revenue growth or decline. A company with strong headline MRR growth but high churned MRR may be masking a retention problem with aggressive acquisition spending — an unsustainable pattern that component-level analysis makes visible.

Subscription revenue refers to the income generated from a recurring payment model, where users pay a regular fee, often on a monthly or yearly basis, to access premium features, content, or services within the app.

Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), measures the percentage of recurring revenue retained from existing customers over a given period, including the effects of upgrades, downgrades, and churn. An NRR of 100% means the business retains all of its existing revenue; above 100% means expansion from existing users exceeds losses from churn and downgrades. For subscription apps, NRR is a powerful indicator of product-market fit and monetization health. An app with 110% NRR is growing its revenue base by 10% from existing users alone, before any new customer acquisition — a strong signal that users find increasing value over time. NRR above 100% is often driven by users upgrading to higher-priced plans, purchasing add-ons, or re-subscribing after a lapse. Conversely, NRR below 100% indicates that the business must continuously acquire new subscribers just to maintain its current revenue level, putting pressure on user acquisition efficiency. Top-performing subscription businesses typically achieve NRR of 110–130%, and investors consider this metric one of the strongest predictors of long-term sustainable growth.

The number of users who have signed up for a recurring payment plan to access premium or additional features within the app. These subscriptions typically involve monthly or yearly payments, and give users access to features that are not available to non-subscribers.

Gross revenue is the total amount of money generated from subscriptions and in-app purchases before any deductions. Net revenue is the amount remaining after subtracting platform commissions (Apple's or Google's 15–30% fee), refunds, chargebacks, and applicable taxes. For mobile subscription businesses, the distinction between gross and net revenue is critical for accurate financial planning and reporting. A subscription app generating $100,000 in gross monthly revenue might net only $70,000–$85,000 depending on its commission tier, refund rate, and revenue mix. When calculating unit economics like LTV and LTV:CAC ratio, using gross revenue inflates the apparent profitability of user acquisition. Investors and financial analysts expect to see net revenue figures when evaluating subscription businesses. Apps that route a portion of their subscriptions through web-based checkout (avoiding or reducing platform commissions) see a narrower gap between gross and net revenue on those transactions, which directly improves margins and makes previously unprofitable acquisition channels viable.