Monthly Recurring Revenue (MRR): Normalizing Subscription Revenue Into a Monthly Run Rate

Monthly recurring revenue (MRR) is an operating metric that expresses an issuer-defined recurring subscription base as a monthly run rate.

For a simple annual subscription of $12,000, a company might assign $1,000 of MRR by dividing the subscription price by twelve covered months.

MRR is not monthly GAAP revenue

MRR is not a standardized GAAP measure and is not automatically the revenue recognized in the income statement for that month.

A subscription can contain multiple performance obligations, variable consideration, implementation services, discounts, or contract modifications that affect GAAP revenue recognition differently from an operating MRR calculation.

How issuers may calculate MRR

Vertex defines MRR by dividing software subscription price, including discounts, by the number of subscription-covered months and includes customers with MRR at the end of the measurement month.

Another issuer could use a different contract population, normalize usage differently, exclude short-term customers, or include different recurring services. The label alone does not make the figures comparable.

MRR and ARR are related but not identical concepts

A common convention is:

ARR = MRR × 12

That identity works only when the issuer actually defines ARR that way. Some companies calculate ARR directly from annualized active contract value or another run-rate method.

An investor should therefore preserve the issuer's definition rather than forcing all recurring-revenue metrics into one formula.

Expansion, contraction, and churn

MRR can rise because of new customers, upgrades, price changes, or greater usage. It can fall because of churn, downgrades, credits, or lower consumption.

Those movements connect naturally to Customer Churn Rate, Gross Revenue Retention, and Net Revenue Retention.

Point-in-time sensitivity

MRR is often measured at period end. A large contract starting on the final day of a quarter can affect ending MRR even though it contributed little recognized revenue during the quarter.

The reverse can occur when a contract expires near period end. This makes MRR useful as a run-rate indicator but different from a period revenue measure.

Investor interpretation

Check the customer population, subscription scope, treatment of discounts and usage, measurement date, currency convention, and whether contracts must be active at period end. An analyst-calculated MRR should be labeled as an estimate if it does not come directly from the issuer's disclosed methodology.

Sources

• Vertex 2025 Form 10-K, MRR and ARR definitions
• Vertex June 2026 Form 10-Q, current MRR methodology

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