An ARR bridge is a reconciliation report that explains how Annual Recurring Revenue (ARR) changes from one period to the next by breaking the change into standardized revenue movements such as new business, expansion, contraction, churn, and renewals. It helps revenue, finance, and RevOps teams attribute ARR growth or decline to specific customer and contract events using consistent rules.
What an ARR Bridge Shows
An ARR bridge starts with Beginning ARR, adds and subtracts defined movements, and ends with Ending ARR for the period.
Common movement categories include:
- New ARR: ARR from new customers that started during the period.
- Expansion ARR: Additional ARR from existing customers (upsells, added seats, added products, higher tiers).
- Contraction ARR: Reduced ARR from existing customers (downgrades, fewer seats, reduced scope).
- Churned ARR: ARR lost from customers who canceled fully.
- Reactivation or Win-back ARR: ARR from previously churned customers who returned.
- Price changes and adjustments: List price increases, discount roll-offs, true-ups, or corrections.
- FX impact: Changes caused by exchange rates for multi-currency billing, when reported.
How an ARR Bridge Is Built
ARR bridges are typically built using subscription and contract events tied to an account and product catalog:
- Define ARR consistently: For example, contracted recurring revenue normalized to a 12-month value.
- Choose the grain: Customer-level, product-level, or both (often called “product ARR bridge”).
- Classify movements: Apply rules to label each change as new, expansion, contraction, churn, or other.
- Reconcile totals: Ensure movements sum to the difference between beginning and ending ARR and match billing or finance reporting.
Why ARR Bridges Matter
ARR bridges are used to:
- Explain growth drivers: Identify whether ARR growth came from new logos, expansions, or pricing.
- Diagnose retention issues: Quantify how much ARR was lost to churn and downgrades.
- Improve forecasting: Use historical movement patterns to forecast future ARR.
- Align teams: Provide a shared view of revenue movements across finance, sales, and customer success.
ARR Bridges in AI-Assisted RevOps
With automated data pipelines, ARR bridges can be generated continuously rather than only at month-end:
- Automated movement detection: Systems label subscription events and calculate ARR deltas.
- Segmented insights: AI can summarize drivers by cohort, region, product line, or sales motion.
- Anomaly detection: Alerts flag unusual spikes in churn, large contractions, or misclassified movements.
- Explainable narratives: AI-generated commentary can describe top ARR movers and the accounts contributing most to change, using standardized categories.
Frequently Asked Questions
Is an ARR bridge the same as an MRR bridge?
They are similar, but an ARR bridge tracks annualized recurring revenue and an MRR bridge tracks monthly recurring revenue.
Do renewals appear as a separate line in an ARR bridge?
Sometimes. Many models treat a renewal as “no change” unless price, scope, or term changes create expansion or contraction.
Does an ARR bridge include one-time fees?
Usually no. It focuses on recurring revenue only, unless a company explicitly includes certain recurring services.
What causes ARR bridge numbers to disagree across teams?
Different ARR definitions, inconsistent product mapping, duplicated accounts, and mismatched timing rules for start dates, cancellations, and proration.
What is the output format of an ARR bridge?
It is often shown as a waterfall chart or a table that reconciles beginning ARR to ending ARR by movement category.
