The below page includes a deep-dive into the definition of ARR at GitLab and is a sub-page of the Sales Term Glossary Page.
GitLab defines ARR as the annual run-rate revenue of subscription agreements from all customers in a given month. GitLab calculates ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts of subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent GitLab's GAAP revenue on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue. ARR and MRR calculates subscription fees normalized to a monthly value, and does not include one-time or usage fees.
We snapshot ARR on business day 4.
The change in annual recurring revenue (ARR) from one period to another based on Subscription start and end dates.
When looking at a time horizon of the next twelve months Delta ARR will equal IACV except:
Delta ARR = iACV - [True Ups and CI Minutes] + [Coterm difference] +/- [Timing differences]
The Net ARR value of deals booked in a specific period based on SFDC Opportunity Close Date. It is the bookings equivalent to Delta ARR.
When looking at a time horizon of the next twelve months Net ARR will equal IACV except:
Net ARR = iACV - [True Ups and CI Minutes] + [Coterm difference].
The ARR Basis of a renewal opportunity is the ARR of the subscription it is renewing.
ARR Basis is automatically recalculated after every subscription change.
The Booked ARR value of a deal which includes renewal ARR Basis plus it's Net ARR. It is the bookings equivalent of ARR.
Example: A customer with a $100k ARR subscription ($100k ARR Basis) renews at $130k the following year.
Booked ARR also includes multi-year bookings where the ARR renews even if the deal is not officially up for renewal.
For more information on which opportunity fields are used in the calculation of ARR, see Salesforce Booking Metrics Field Data Dictionary.
ARR Opportunity Field Display
New Business/Add-On layout:
Renewal layout:
Note: Each row in the tables below represents a unique deal.
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 12 months | $120,000 | $120,000 |
| New Business | 24 months | $240,000 | $120,000 |
| New Business | 36 months | $360,000 | $120,000 |
Net ARR vs. Net iACV Comparison
| Type | Opportunity Term | Amount/TCV | Net ARR | Net iACV |
|---|---|---|---|---|
| New Business | 12 months | $120,000 | $120,000 | $120,000 |
| New Business | 24 months | $240,000 | $120,000 | $120,000 |
| New Business | 36 months | $360,000 | $120,000 | $120,000 |
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| Add-On Business | 6 months | $60,000 | $120,000 |
| Add-On Business | 12 months | $60,000 | $60,000 |
| Add-On Business | 18 months | $60,000 | $40,000 |
Net ARR vs. Net iACV Comparison
| Type | Opportunity Term | Amount/TCV | Net ARR | Net iACV |
|---|---|---|---|---|
| Add-On Business | 6 months | $60,000 | $120,000 | $60,000 |
| Add-On Business | 12 months | $60,000 | $60,000 | $60,000 |
| Add-On Business | 18 months | $60,000 | $40,000 | $40,000 |
| Type | Opportunity Term | Amount/TCV | ARR Basis | True-Up | Net ARR |
|---|---|---|---|---|---|
| Renewal | 12 months | $120,000 | $120,000 | $0 | $0 |
| Renewal | 12 months | $140,000 | $120,000 | $20,000 | $0 |
| Renewal | 12 months | $120,000 | $100,000 | $0 | $20,000 |
| Renewal | 24 months | $240,000 | $120,000 | $0 | $0 |
| Renewal | 24 months | $260,000 | $120,000 | $20,000 | $0 |
| Renewal | 24 months | $240,000 | $100,000 | $0 | $20,000 |
Net ARR vs. Net iACV Comparison
| Type | Opportunity Term | Amount/TCV | ARR Basis | True-Up | Net ARR | Renewal ACV | Net iACV |
|---|---|---|---|---|---|---|---|
| Renewal | 12 months | $120,000 | $120,000 | $0 | $0 | $120,000 | $0 |
| Renewal | 12 months | $140,000 | $120,000 | $20,000 | $0 | $120,000 | $20,000 |
| Renewal | 12 months | $120,000 | $100,000 | $0 | $20,000 | $100,000 | $20,000 |
| Renewal | 24 months | $240,000 | $120,000 | $0 | $0 | $120,000 | $0 |
| Renewal | 24 months | $260,000 | $120,000 | $20,000 | $0 | $120,000 | $20,000 |
| Renewal | 24 months | $240,000 | $100,000 | $0 | $20,000 | $100,000 | $20,000 |
Note: In FY22, future renewal opportunities are created automatically upon closure of any new business or renewal opportunity. On these future renewal opportunities, ARR Basis is calculated and stamped automatically at opportunity creation. In addition, ARR basis updates automatically when mid-term growth transactions occur, enabling real time data and accurate renewal forecasting.
In the event that, upon renewal, multiple subscriptions are consolidated into one renewal, the ARR Basis on the active renewal opportunity will be updated by Deal Desk to reflect the combined ARR Basis of both existing subscriptions. The inactive renewal opportunity will be close as Duplicate.
A Ramp Deal is defined as "a single deal with multiple individual ramp periods."
In FY22, Ramp Deals will be limited to 12 month ramp periods. This means that only multi-year deals can be ramped. Each ramp period will have its own opportunity in Salesforce. All ramp deals will be stamped with the "Ramp Deal" Opportunity Category value.
Opportunity 1 - Year 1:
| Ramp Period: 2021-01-01 to 2021-12-31 | Close Date: No more than 15 days prior to 2021-01-01 |
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 36 months | $600,000 | $100,000 |
Opportunity 2 - Year 2:
| Ramp Period: 2022-01-01 to 2022-12-31 | Close Date: 2022-01-01 |
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 12 months | $0 | $100,000 |
Opportunity 3 - Year 3:
| Ramp Period: 2023-01-01 to 2023-12-31 | Close Date: 2023-01-01 |
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 12 months | $0 | $100,000 |
Opportunity 1 - Year 1:
| Ramp Period: 2021-01-01 to 2021-12-31 | Close Date: No more than 15 days prior to 2021-01-01 |
| Type | Opportunity Term | Amount/TCV | ARR Basis | Net ARR |
|---|---|---|---|---|
| Renewal | 12 months | $600,000 | $100,000 | $0 |
Opportunity 2 - Year 2:
| Ramp Period: 2022-01-01 to 2022-12-31 | Close Date: 2022-01-01 |
| Type | Opportunity Term | Amount/TCV | ARR Basis | Net ARR |
|---|---|---|---|---|
| Renewal | 12 months | $0 | $100,000 | $100,000 |
Opportunity 3 - Year 3:
| Ramp Period: 2023-01-01 to 2023-12-31 | Close Date: 2023-01-01 |
| Type | Opportunity Term | Amount/TCV | ARR Basis | Net ARR |
|---|---|---|---|---|
| Renewal | 12 months | $0 | $200,000 | $100,000 |
For more information about quoting Ramp Deals, visit the Deal Desk Handbook.
A Contract Reset is defined as "a new subscription that replaces an existing subscription, where the existing subscription is canceled prior to its end date.
A Contract Reset consists of two opportunities. The first opportunity is for the new subscription - even so, this opportunity is always tagged as a Renewal Opportunity. This opportunity will be stamped with the "Contract Reset" Opportunity Category value. The second opportunity is a cancellation of the existing subscription, which produces a credit to the customer. This opportunity will be stamped with the "Credit" Opportunity Category value.
Existing Closed Won Opportunity (New Business)
Subscription Term: 2021-01-01 to 2021-12-31
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 12 months | $50,000 | $50,000 |
Credit Opportunity (New Business)
Subscription Term: 2021-07-01 to 2021-12-31
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 6 months | -$25,000 | -$50,000 |
Contract Reset Opportunity (Renewal)
Subscription Term: 2021-07-01 to 2022-06-30
| Type | Opportunity Term | Amount/TCV | ARR Basis | Net ARR |
|---|---|---|---|---|
| Renewal | 12 months | $100,000 | $0 | $100,000 |
In this scenario, the Credit Opportunity and Contract Reset Opportunity are closed on the same date. Between the two opportunities, combined Net ARR is $50,000.
For more information about quoting Contract Resets, visit the Deal Desk Handbook.
Existing Closed Won Opportunity (New Business)
Subscription Term: 2021-01-01 to 2021-12-31
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 12 months | $50,000 | $50,000 |
6-Month Add-On/Upgrade Opportunity
Amendment Term: 2021-07-01 to 2021-12-32
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| Add-On Business | 6 months | $50,000 | $50,000 |
In this scenario, the Net ARR for a 6 month add/on upgrade is $50,000. Because Net ARR is annualized, the value of a 6 month add-on/upgrade is equivalent to that of a contract reset scenario for an equivalent upgrade.
An Annual Payment Deal is defined as a multi-year deal that is paid annually. These deals will be captured on a single opportunity, if flat. If ramped, these deals will be captured on multiple opportunities, per the above Ramp Deal section. All annual payment opportunities will be stamped with the "Annual Payments" Payment Schedule value.
Opportunity:
Subscription Term: 2021-01-01 to 2023-12-31
| Type | Opportunity Term | Amount/TCV | Net ARR |
|---|---|---|---|
| New Business | 36 months | $300,000 | $100,000 |
Note: Annual Payments require additional approvals. See "Deferred Payments" in the Deal Approval Matrix.
For the technical documentation for the implementation of Net ARR, ARR Basis, and Booked ARR in Salesforce please use this page.
A measure of changes to ARR compared to the prior month. While retention calculations measure changes compared to the same period in a previous year, we also need to measure changes over smaller time periods (month-to-month and quarter-to-quarter) to make real-time business decisions and evaluate the immediate impact of our programs and initiatives. While the net and gross retention metrics are externally reported, corporate metrics, the month-to-month and quarter-to-quarter ARR changes reporting is used for internal analysis. ARR changes are reported at the parent account level by default, with drill down capability to the subscription-product grain for certain types of analysis. ARR changes are reported at the monthly level by default, and months are aggregated up for quarterly reporting.
Types of Delta ARR:
Reasons for Delta ARR:
The reasons for changes to Delta ARR can happen in combination, such as a change in tier and a change in quantity of seats at the same time. When this happens, the reporting will attribute a specific dollar value of contraction or expansion ARR to each reason. The attribution methodology gets more complex when there are two or three reasons for the ARR change. This analysis framework can also be used to calculate counts of customers that fall into each Delta ARR and Reasons for Delta ARR bucket.
The analysis framework can also be used to calculate counts of customers that fall into each Type of Delta ARR and Reasons for Delta ARR bucket. The Types of Delta ARR are mutually exclusive where a customer will only be counted for one Type of Delta ARR. However, the Reasons for Delta ARR are NOT mutually exclusive and a customer can have more than one Reason for Delta ARR resulting in the customer being counted in more than one Reason for Delta ARR bucket.
The current model only considers price changes when the tier stays the same. However, the next model iteration will consider price changes when the tier and price changes. This section will be updated at that time to reflect the additional insights realized off the next model iteration.
Here are the combinations of reasons that ARR change can be attributed to:
Here are examples of ARR changes when there are two reasons for the change:
