Net New ARR
Growth
Industry:
SaaS
Short Definition
Net New ARR is the change in Annual Recurring Revenue during a period. It’s the sum of New Logo ARR and Expansion ARR, minus Contraction ARR and Logo Churn ARR. Count changes on the effective (go-live) date, not when they’re signed (signed-for-later sits in CARR—Contracted ARR—until start).
Why it matters for Investors
Net growth signal: Shows whether the recurring base is growing or shrinking this period.
Planning & predictability: Links directly to next period’s ARR run-rate.
Go-To-Market (GTM) quality check: Breakout (New Logo vs Expansion vs Churn/Contraction) reveals what’s driving results.
Formula
Practical considerations -
Count when live: Use the effective start for New Logo and Expansion ARR and the effective end for Contraction and Churn ARR. Signed-not-live stays in CARR.
Split mixed changes once: Feature/tier drop → Down-sell (Contraction); seats/minimum/price cuts → Reduction (Contraction).
ARR only: Exclude one-time fees and uncommitted/overage usage (those are revenue, not ARR).
Reversals: If undone in the same period, net to $0; if undone later, record as Expansion (or Reactivation/New Logo if the account had fully churned).
Worked Example
Starting ARR (Feb 28): $1,200,000
Period: March (snapshot Mar 31)
Account | Event | Effective by Mar 31? | Account ARR @ Mar-31 ($) | Δ ARR in March ($) | Category | Notes |
|---|---|---|---|---|---|---|
A | New logo, annual $24,000, starts Mar 4 | Yes | $24,000 | +$24,000 | New Logo | Counts in New Logo |
B | New logo, annual $36,000, starts Apr 1 | No | $0 | $0 | Booking / CARR | Signed, starts next month |
C | Upsell on existing (+$18,000) eff. Mar 15 (prior $50,000) | Yes | $68,000 ($50,000 → $68,000) | +$18,000 | Expansion | Counts in Expansion |
D | Cancellation effective Mar 31 (prior $40,000) | Yes | $0 | −$40,000 | Logo Churn | Account to $0, included in Churn |
E | Year-2 ramp $20,000 → $35,000 on Mar 1 | Yes | $35,000 | +$15,000 | Expansion (ramp) | Counts in Expansion |
F | Downgrade: Enterprise $50,000 → Standard $42,000 (Mar 20) | Yes | $42,000 | −$8,000 | Contraction — Down-sell | Tier/plan downgrade (Included in Churn) |
G | Remove Analytics module ($6,000/yr) on Mar 25 (prior total $30,000) | Yes | $24,000 ($30,000 → $24,000) | −$6,000 | Contraction — Down-sell | Module removed; account still active |
Net New ARR (March): New Logo $24,000 + Expansion $33,000 − Contraction $14,000 − Logo Churn $40,000 = $3,000
ARR Bridge (March):
New Logo ARR: +$24,000 (A)
Expansion ARR: +$33,000 (C + E)
Contraction ARR: −$14,000 (F + G)
Logo Churn ARR: −$40,000 (D)
Net New ARR: +$3,000
Ending ARR (Mar 31): $1,200,000 + $3,
Notes:
B is signed for April → stays in CARR for March.
Show each flow separately (New Logo, Expansion, Contraction, Logo Churn); Net New ARR is the net of these.
Mixed amendments: split once between Down-sell (feature/tier) and Reduction (seats/minimum/price).
Ignore one-offs (credits/refunds); ARR tracks recurring commitments only.
Best Practices
Always show the split: New Logo vs Expansion vs Contraction vs Logo Churn—then the net.
Waterfall every period: Reconcile Starting ARR → Ending ARR via the four flows; avoid double counting.
Call out big movers: List top +/- accounts so readers see what drove the result.
Track signed-not-live separately: Keep a simple CARR list to explain what’s coming next period.
FAQs
Is Net New ARR the same as New ARR?
No. New ARR is inflows only (New Logo + Expansion). Net New ARR subtracts Contraction and Logo Churn.Can Net New ARR be negative?
Yes—if logo churn/ contractions are larger than new logos/expansion in the period.When do we count a change?
On the effective (go-live/end) date, not when the paper is signed.Do one-time fees or overage revenue count?
No. Only contracted, recurring ARR changes.How does Net New ARR relate to Ending ARR?
Ending ARR = Starting ARR + Net New ARR, if you ignore changes caused by currency movements or accounting reclassifications.
Related Metrics
Commonly mistaken for:
New Revenue (includes non-recurring items)
New ARR (inflows only)
CARR (signed but not live)