CARR vs ARR
Lightbridge defines committed annual recurring revenue (CARR) as live ARR plus recurring revenue from signed contracts not yet activated and committed expansions, minus known churn. Annual recurring revenue (ARR) counts only recurring subscription revenue currently live and billing. CARR is the forward-looking commitment; ARR is the realized run-rate.
CARR is the forward commitment; ARR is the live run-rate.
Committed annual recurring revenue (CARR) and annual recurring revenue (ARR) both measure recurring subscription revenue, and they differ on one point: timing of activation. ARR counts only what is currently live and billing, so it is the realized run-rate. CARR adds recurring revenue from signed contracts that are not yet live, plus contractually committed expansions, and many teams subtract known churn, so CARR is the forward-looking commitment. CARR is therefore typically greater than or equal to ARR.
These metrics are SaaS-finance conventions with variable definitions, not GAAP or FASB requirements. Different teams choose different rules for which contracts count as committed, whether known churn is netted, and how committed expansions are treated, so two companies can both report CARR while computing it differently. The discipline that matters is documenting your method once and applying it consistently. Lightbridge is a cross-entity advisory group, and this guide states the most common conventions plainly so founders, CFOs, and RevOps leaders can align on a shared definition.
Both metrics count recurring subscription revenue only. They exclude one-time setup, implementation, and professional-services fees, and they exclude non-contractual variable usage, though committed or contractual usage minimums can be included. For the full ARR building block, including MRR-to-ARR normalization, see the Lightbridge annual recurring revenue guide. CARR and ARR sit within a wider family of growth-finance metrics, alongside retention measures such as net revenue retention and gross revenue retention.
CARR equals live ARR plus signed-but-not-live contracts and committed expansions.
The cleanest way to hold CARR and ARR apart is to see ARR as the base and CARR as the base plus a backlog. ARR is what is live. CARR takes that live figure and adds the recurring revenue that is signed but not yet activated. The difference between them is the backlog, and it carries a signal of its own.
Annual recurring revenue (ARR)
ARR is the normalized, annualized value of recurring subscription revenue that is currently live, active, and billing. It excludes one-time setup, implementation, and professional-services fees, and it excludes non-contractual variable usage. ARR is the realized run-rate: the recurring revenue a company is delivering right now.
Committed annual recurring revenue (CARR)
CARR is ARR plus the annualized value of signed contracts that are booked but not yet live (for example, in onboarding or implementation), plus contractually committed expansions, and many teams subtract recurring revenue from customers who have formally notified they will churn. CARR is the forward-looking commitment.
The backlog gap
CARR minus ARR is the booked-but-not-yet-activated backlog. It is recurring revenue that is signed and committed but not yet being delivered or billed. A wide gap is a signal of implementation ramp and time-to-live: revenue is contracted but waiting on activation.
CARR is built from three parts: live ARR, signed backlog, and net adjustments.
Committed annual recurring revenue is assembled, not measured in one stroke. It starts from the live run-rate, adds the recurring value of contracts that are signed but not yet delivering, and then applies committed expansions and, for many teams, known churn. Each part is a distinct input, and stating how each is treated is what makes a CARR figure trustworthy.
Live ARR (the base)
The starting point of CARR is current ARR: recurring subscription revenue that is active and billing today. This is the realized run-rate, the same figure ARR reports on its own. Everything else in CARR is added to or subtracted from this base.
Signed but not yet live
CARR adds the full annualized value of contracts that are signed but have not yet started delivering or billing, such as accounts still in onboarding or implementation. A deal signed in October that goes live in January counts in CARR immediately, but does not enter ARR until it activates.
Committed expansions and known churn
CARR adds contractually committed expansions and upgrades that are signed but not yet active. Many teams also subtract the annualized value of customers who have formally notified that they will not renew or will downgrade, so CARR reflects net commitment rather than a gross booking figure.
A worked example shows why CARR exceeds ARR when a contract is signed but not yet live.
Take a SaaS company with 4,000,000 dollars of live ARR: recurring subscriptions that are active and billing today. In October it signs a new customer worth 600,000 dollars of annualized recurring revenue, but that account will not go live until it finishes implementation in January. It also signs a committed expansion worth 200,000 dollars on an existing account, activating next quarter. Separately, one existing customer worth 100,000 dollars has formally given notice that it will not renew.
ARR stays at 4,000,000 dollars, because none of those changes is live and billing yet. CARR equals 4,000,000 plus 600,000 plus 200,000 minus 100,000, which is 4,700,000 dollars. CARR exceeds ARR by 700,000 dollars, and that gap is the booked-but-not-yet-activated backlog. When the new customer and the expansion go live and the notified account churns, ARR converges toward CARR. The size and age of that gap is a read on implementation ramp: a large, slow-moving gap means signed revenue is waiting too long to reach delivery.
CARR definitions vary by team, so the method must be documented and applied consistently.
Committed annual recurring revenue is a management convention, and its exact scope is a choice. Whether known churn is netted, whether committed expansions are included, and which contracts qualify as committed all move the number. The rules below hold across the common definitions, and they are what let a CARR figure survive scrutiny.
Committed and contracted are synonyms
The C in CARR is read as both committed and contracted annual recurring revenue, and the two labels describe the same metric. What matters is not the label but the method: which contracts count, whether known churn is netted, and how expansions are treated. Document that method once.
These are management conventions
CARR and ARR are SaaS-finance conventions, not GAAP or FASB requirements. They describe commercial momentum, not recognized revenue. Two companies can both report CARR while including or excluding churn and expansion differently, so a CARR figure is only comparable when its method is stated.
Not recognized revenue
Neither CARR nor ARR is revenue under ASC 606. Recognized revenue depends on performance obligations and delivery, governed by ASC 606, and a signed contract in implementation carries CARR while recognizing no revenue yet. Retention and recognition answer different questions and rarely equal each other.
CARR and ARR are commercial metrics, not recognized revenue.
CARR and ARR describe commercial momentum: how much recurring revenue is committed and how much is live. They are management conventions computed on recurring revenue, not accounting outputs. Revenue recognition is a separate discipline that governs when revenue may be recorded in the financial statements. A signed contract that is still in implementation carries CARR while recognizing no revenue yet, because recognition depends on performance obligations and delivery rather than on commitment.
Where the two views meet is the financial system. Once CARR and ARR are defined, the recurring revenue they measure has to reconcile to how that revenue is billed and recognized. Lightbridge ERP owns the recognition and billing side of this work: see the guides on deferred revenue and ASC 606 revenue recognition. When the CARR and ARR in a board deck reconcile to the numbers in the books, commitment and recognition tell one coherent story instead of two.
Lightbridge helps growth teams define and instrument CARR and ARR consistently.
The first failure mode for committed-revenue metrics is inconsistent definitions. One team nets known churn out of CARR, another reports it gross; one counts committed expansions, another waits for activation. Lightbridge is a cross-entity advisory group, and its practices help SaaS founders, CFOs, and RevOps leaders agree on a single documented method for CARR, ARR, and the backlog between them, then instrument it so the numbers are reproducible rather than rebuilt by hand each board cycle.
From there, the work connects to the systems that hold the revenue. The Lightbridge ERP practice ties CARR and ARR definitions to billing and recognition in the financial system, so reported metrics reconcile to the books. This is general information and not financial, accounting, or investment advice. For a definition or instrumentation review, the right next step is a conversation about your specific model.
CARR vs ARR: frequently asked questions
- What is committed annual recurring revenue (CARR)?
- Committed annual recurring revenue (CARR) is the annualized value of a SaaS company's recurring subscription commitments. It equals live ARR plus recurring revenue from signed contracts that are booked but not yet activated (for example, accounts in onboarding or implementation), plus contractually committed expansions, and many teams subtract recurring revenue from customers who have formally notified they will churn or downgrade. CARR is a forward-looking indicator: it captures revenue that is contractually committed but not yet being delivered or billed. It excludes one-time fees, professional services, and non-contractual variable usage, and it is a management convention, not a GAAP measure.
- What is the difference between CARR and ARR?
- The difference is timing of activation. Annual recurring revenue (ARR) counts only recurring subscription revenue that is currently live and billing, so it is the realized run-rate. Committed annual recurring revenue (CARR) adds recurring revenue from signed contracts that are not yet live plus committed expansions, and often subtracts known churn, so it is the forward-looking commitment. CARR answers how much recurring revenue is contractually committed; ARR answers how much is being delivered right now. The gap between them is the booked-but-not-yet-activated backlog, which signals implementation ramp and time-to-live.
- Is CARR the same as contracted ARR?
- Yes, for practical purposes. The C in CARR is read as both committed annual recurring revenue and contracted annual recurring revenue, and the two labels are used synonymously to describe the same forward-looking metric: live ARR plus signed contracts not yet activated and committed expansions, often net of known churn. What varies between teams is not the label but the method, such as whether churn is netted and how expansions are counted. The discipline that matters is documenting one method and applying it consistently, so a stated CARR figure is comparable across periods.
- Why is CARR usually higher than ARR?
- CARR is usually higher than ARR because it includes signed contracts that are not yet live, while ARR includes only what is currently billing. When a company signs a deal that will not activate until onboarding or implementation finishes, that recurring revenue counts in CARR immediately but enters ARR only when it goes live. The difference, CARR minus ARR, is the booked-but-not-yet-activated backlog. CARR is therefore typically greater than or equal to ARR, and a wide gap points to a longer implementation ramp between signature and delivery.
- Does CARR include professional services or one-time fees?
- No. CARR includes only recurring subscription revenue that is contractually committed. It excludes one-time setup, implementation, and professional-services fees, and it excludes non-contractual variable usage, though committed or contractual usage minimums can be included. This mirrors how ARR is scoped: both metrics measure recurring commitment, not total contract value or total bookings. A large one-time implementation fee changes cash and bookings but does not change CARR or ARR, because neither one-time nor discretionary usage revenue is recurring in the sense these metrics require.
- Is CARR a GAAP or ASC 606 measure?
- No. CARR and ARR are SaaS-finance conventions, not GAAP or FASB requirements, and neither is revenue recognized under ASC 606. Recognized revenue depends on performance obligations and delivery, so a signed contract sitting in implementation carries CARR while recognizing no revenue yet. CARR is a planning and momentum measure taken at a point in time, closer to a balance-sheet snapshot than an income-statement figure. Treat CARR as a leading commercial indicator, and reconcile it to billing and recognized revenue in the financial system rather than reporting it as recognized revenue.
- How do teams treat expected churn in CARR?
- Practice varies, which is exactly why the method must be documented. Many teams subtract the annualized value of customers who have formally notified that they will not renew or will downgrade, so CARR reflects net committed revenue rather than a gross booking total. Other teams report CARR gross and track churn separately. Neither is wrong, but the two produce different numbers, so a CARR figure is only meaningful alongside its definition. State whether known churn is netted, whether committed expansions are included, and which contracts qualify as committed, then apply that method every period.
- How does Lightbridge help with CARR and ARR?
- Lightbridge is a cross-entity advisory group, and its practices help SaaS founders, CFOs, and RevOps leaders define CARR and ARR consistently and instrument them in their systems. Because definitions of committed revenue, churn netting, and expansion vary across teams, the first step is agreeing on a single documented method. From there, the Lightbridge ERP practice connects those definitions to billing, deferred revenue, and revenue recognition in the financial system, so the CARR and ARR a board sees reconcile to the books rather than living only in a spreadsheet.
From committed to live, one number the board can trust.
When CARR and ARR need to mean the same thing across finance, RevOps, and the board, Lightbridge helps define the method and reconcile it to the financial system.