Which measure projects ARR based on current performance?

Which measure projects ARR based on current performance?

• A. Run rate is a projection of ARR based on current performance.
• B. Annual recurring revenue
• C. New ARR
• D. Churn rate

Answer: (A)

Run rate is used to project ARR from current performance by annualizing the current period’s recurring revenue. In practice, you take the present recurring revenue (often monthly recurring revenue) and multiply by 12, or sum the last 12 months, to estimate what ARR would look like if the current pace continued. It’s a quick, forward-looking snapshot that assumes no changes in performance. This differs from actual ARR, which is the true annualized amount given existing contracts and terms, not a forecast. New ARR measures only the ARR gained in a period from new or expanded bookings, not a forward projection. Churn rate tracks the rate at which customers cancel, which is a separate metric about attrition. So the measure that projects ARR based on current performance is the run rate.

Run rate is used to project ARR from current performance by annualizing the current period’s recurring revenue. In practice, you take the present recurring revenue (often monthly recurring revenue) and multiply by 12, or sum the last 12 months, to estimate what ARR would look like if the current pace continued. It’s a quick, forward-looking snapshot that assumes no changes in performance.

This differs from actual ARR, which is the true annualized amount given existing contracts and terms, not a forecast. New ARR measures only the ARR gained in a period from new or expanded bookings, not a forward projection. Churn rate tracks the rate at which customers cancel, which is a separate metric about attrition. So the measure that projects ARR based on current performance is the run rate.