What an ARR Bridge Shows a Buyer

An ARR bridge is a table that walks your annual recurring revenue from the start of a period to the end of it. It shows each piece of the change on its own line: new customers, expansion, reactivation, contraction, churn and currency effects. A buyer asks for one because ending ARR on its own says that you grew. The bridge says where the growth came from, and whether the business is still growing for the same reasons it used to.

This guide covers what each row means, how an acquirer’s analyst reads the table, and how to build one from Stripe billing data so that it ties to your other numbers.

What an ARR bridge looks like

Here’s a two-quarter bridge built from a small synthetic dataset: seven made-up customers, not a real company. The customer-level data is in the worked example below, and you can download it as CSV to rebuild every number yourself.

	Q1	Q2
Beginning ARR	$48,000	$54,000
+ New	$8,400	$10,800
+ Expansion	$6,000	$0
+ Reactivation	$0	$3,600
− Contraction	$2,400	$2,400
− Churn	$6,000	$9,600
± FX	$0	$0
Ending ARR	$54,000	$56,400

Every quarter must satisfy one equation:

Ending ARR = beginning ARR + new + expansion + reactivation − contraction − churn ± FX

Each quarter’s ending ARR is the next quarter’s beginning ARR. If either rule breaks anywhere in your bridge, the first thing an analyst does is stop trusting the rest of it.

Worked example: from customer MRR to the bridge

An analyst builds the bridge from customer-level MRR, so it’s worth seeing the method once. These are the seven synthetic customers’ MRR at the end of December, March and June. To keep it readable, each customer changes at most once per quarter; with real data, classify every customer’s change month by month.

Customer	Dec	Mar	Jun	Q1 movement	Q2 movement
A	$1,000	$1,500	$1,500	Expansion +$500	—
B	$800	$800	$0	—	Churn −$800
C	$600	$400	$400	Contraction −$200	—
D	$0	$700	$700	New +$700	—
E	$500	$0	$300	Churn −$500	Reactivation +$300
F	$0	$0	$900	—	New +$900
G	$1,100	$1,100	$900	—	Contraction −$200
Total MRR	$4,000	$4,500	$4,700

The rules, applied to each customer:

MRR goes from zero to positive: new, or reactivation if the customer paid before (customer E in Q2).
MRR goes from positive to zero: churn.
MRR goes up: expansion. MRR goes down but stays above zero: contraction.
Add up each category, then multiply by 12 to annualize. Q1 new is D’s $700 × 12 = $8,400.
Check the equation: $48,000 + $8,400 + $6,000 + $0 − $2,400 − $6,000 = $54,000, which is March MRR of $4,500 × 12.

The rows, in order

Beginning ARR. Recurring revenue at the end of the month before the period, annualized. With monthly MRR, that is MRR × 12.
New. ARR from customers who started paying for the first time during the period.
Expansion. Increases from existing customers: upgrades, added seats, price increases.
Reactivation. Customers who had churned and came back. Kept separate from new so returning customers don’t inflate new-customer acquisition.
Contraction. Decreases from customers who stayed: downgrades, removed seats, discounts.
Churn. ARR lost from customers who left entirely.
FX. The change caused by exchange rates when you bill in more than one currency. It is neither growth nor loss from customers, so it gets its own row.
Ending ARR. Recurring revenue at the end of the last month of the period, annualized.

How a buyer reads it

Ending ARR grew in both quarters of the example, but for different reasons, and the rows show it.

Where growth comes from. In Q1, growth came from one new customer and one expansion. In Q2, there was no expansion at all: growth came from a new customer and a returning one. A buyer will ask whether that’s a pattern. Growth driven mostly by new customers depends on acquisition continuing. Growth driven by expansion depends on customers getting more value over time. Both are fine stories, but they lead to different follow-up questions.

Whether losses are rising. Churn went from $6,000 to $9,600 while contraction stayed at $2,400. One quarter isn’t a trend, so an analyst will often ask for eight quarters or more and look at churn as a share of beginning ARR (12.5% in Q1 and about 17.8% in Q2 here). Rising churn two quarters running usually leads to a request for the customer list behind the number.

Whether it ties. The bridge should agree with the MRR table, the customer list and, over time, with revenue in the financial statements. A bridge that can’t be reconciled gets rebuilt by the buyer’s team from raw billing data, and differences found that way are harder to explain than differences you document yourself.

Quarters and years. Analysts usually want both: quarterly rows to see the trend, and calendar-year rows to compare with annual financials. Year-over-year growth of ending ARR is often added as a last row.

ARR bridge, revenue bridge and MRR movements

These terms overlap, and people use them loosely:

MRR movements are the same categories (new, expansion, contraction, churn, reactivation) at monthly scale. Most subscription analytics tools show them as a monthly chart.
An ARR bridge is the same movements annualized and grouped by quarter or year. It’s the format that turns up in diligence requests and investor updates.
A revenue bridge sometimes means the same thing, and sometimes means a walk of recognized revenue between two periods, including one-time and services revenue. If someone asks for a “revenue bridge”, ask whether they mean recurring revenue or total revenue.

How to build one from Stripe data

Stripe invoices contain everything you need, but a few rules decide whether the result holds up:

Normalize every plan to a monthly amount. An annual plan billed at $12,000 is $1,000 of MRR every month of its term, not $12,000 in the month it was invoiced.
Leave out one-time charges. Setup fees, services and other non-recurring invoice lines aren’t recurring revenue.
Classify each customer’s change once per month. Compare each customer’s MRR at the end of the month with the end of the previous month. Zero to positive is new, or reactivation if they paid before. Positive to zero is churn. Up is expansion, down is contraction.
Annualize at the edges. Beginning ARR is MRR at the end of the month before the period × 12. Ending ARR is MRR at the end of the period’s last month × 12.
Pick a reporting timezone and stick to it. An invoice paid at 11 p.m. on March 31 in New York is already April in UTC. Month boundaries decide which quarter a movement falls in.

Common reasons a bridge doesn’t tie

Annual invoices counted in full in the month they were billed.
One-time charges included in ARR.
Refunds or credit notes netted against the wrong month.
Deleted test customers or internal accounts left in.
Quarters built from different month-end cutoffs than the MRR table.

How Bright Vault produces it

Bright Vault builds an ARR bridge from your Stripe history and exports it as CSV, in quarters and then calendar years. Beginning ARR is the MRR of the month before the period × 12, and ending ARR is month-end MRR × 12. The movement rows sit in between, contraction and churn are shown as positive amounts that reduce ARR, and year-over-year growth of ending ARR is the last column. It ties to the MRR table on screen, and you can filter it to one plan or a group of plans. The metrics follow ChartMogul’s methodology.

Bright Vault also exports the per-customer MRR schedule that analysts use to check a bridge line by line.

If your bridge shows churn going up, the next questions are about who is leaving: net revenue retention shows how much of the existing base you keep, and the due diligence checklist shows where the bridge fits among everything else a buyer asks for.

FAQ

Is an ARR bridge the same as an ARR waterfall?

Yes. “Waterfall” usually refers to the chart: the same rows drawn as bars stepping up and down from beginning to ending ARR.

What’s the difference between ARR and revenue?

ARR is a run rate: what recurring subscriptions are worth over a year at today’s prices. Revenue is what you’ve earned in a period under accounting rules, including one-time charges. A business can have rising ARR and flat revenue for a while, especially if it signs annual contracts late in the year.

How far back should an ARR bridge go?

Long enough to show a trend. Eight quarters is a common minimum, and longer is better if your billing history allows it.

What an ARR bridge shows a buyer