Fresh MRR/ARR Calculations 🍋✨

We're happy to share significant improvements to how we calculate Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR). We believe this update will provide more accurate insights into your subscription revenue metrics.

What's changed?

Previously, Lemon Squeezy’s MRR/ARR charts were calculated in real-time based on the number of active subscriptions on the given date. This approach provided insights into current revenue, but lacked precision for historical revenue metrics, as it didn't account for cancelled subscriptions that were active in the past.

With these updates, we now take a daily snapshot of your current MRR/ARR, bringing all your historical data up to date.

Taking daily revenue snapshots allows for better MRR/ARR projections, enabling accurate calculation of churning subscriptions. This approach addresses the previously overlooked recurring discounts which often led to inflated revenue metrics, particularly for merchants with extensive lifetime discounts.

We now correctly calculate all percentage-based recurring discounts toward MRR/ARR, regardless of whether they're full or partial.

What this means for you

These improvements mean your MRR and ARR metrics now more accurately reflect your actual recurring revenue, particularly if you:

• Offer perpetual discounts to customers
• Have subscriptions with multiple quantities
• Use different billing intervals across your products
• Mix trial and active subscriptions

Looking forward

To offer a clear distinction, we're introducing the newly updated charts as "Monthly Recurring Revenue" and "Annual Recurring Revenue." These new charts will serve as the default for all new merchants. We also understand the importance of consistency for our existing merchants. As an existing merchant, your charts will continue defaulting to our previous MRR/ARR methodology, now dubbed "Cumulative MRR" and "Cumulative ARR".

A key distinction between the chart types is that Cumulative MRR/ARR operates in a more "real-time" fashion, while the new "Monthly Recurring Revenue" and "Annual Recurring Revenue" charts update on a daily basis. This change allows for more precise projections and helps accurately calculate subscriptions that are set to churn.

We're excited for you to try out these enhanced charts! If you have any questions or feedback, please don't hesitate to reach out to us. We're here to help you gain the clearest view of your subscription revenue.

Why has MRR/ARR increased?

Earlier, we used to exclude any subscriptions in MRR that were ending in the future.
For example, if a subscription was created in January but set to cancel in November, it wasn't being calculated toward MRR.

Since this change, MRR will be included for subscriptions that end far in the future. This works the same way for ARR too, but only if the subscription is set to be canceled after the current period. For example, subscriptions with more than 1 year period.

Why has MRR/ARR decreased?

We weren't previously accounting for recurring discounts, resulting in higher metrics. We are now subtracting recurring discounts that apply forever on subscriptions, which leads to more accurate numbers.

Why is there a new line on the MRR/ARR graphs?

This new line illustrates your MRR/ARR as if no discounts had been applied. It provides a comparative view to help you understand the financial impact of your discounting strategies.
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Stay fresh - Lemon Squeezy team 🍋