Contrary to popular belief, not all "revenue" is created equal.

Not to throw anyone under the bus specifically, but it’s the Wild West these days on FinTwit (that’s finance twitter, for all the normies out there).

Pop in and you’ll see online marketplaces calling GMV Revenue and service based businesses calling one time Revenue ARR.

So let’s set the record straight:

------------------------------------

Commonly used for marketplaces (Etsy) and payment gateways (Stripe) that charge a fee or take rate. GMV is not a true reflection of a company's revenues, but rather its through-put, as most of the revenue goes to the original seller.

--------------

This is an accounting-based view of topline (or a "GAAP" view). Revenue is spread out, or accrued, to match the delivery of the product or service. In SaaS, total Revenue will usually trail total ARR or total Billings as it is accrued over time.

-----------------------

This is the opposite of accrued revenue and is a balance sheet item. It accounts for money prepaid for goods or services that have yet to be delivered. For example, in a 12-month SaaS contract, in month 4 there would be 8 months of deferred revenue left as a liability on the BS.

-------------------------------------------

RPO is all unrecognized contracted revenue. Deferred revenue goes out at most 12 months, so RPO extends further and includes both Deferred revenue and any unbilled portion of a multi year contract.

For a 3 year contract you’d have 12 months in deferred revenue and 36 months in RPO. Of the 36 months, 12 would be current RPO and 24 months would be non current.

This metric is increasingly used by companies with large multi-year commitments, especially consumption based businesses.

---------------

This is when the deal closes and the customer signs. It represents the commitment of a customer to spend money with your company. It's based on the execution of the contract, even if they haven't used the service or paid you yet.

---------------

This is when the accounting department actually "bills"' the customer for the "booking" that the sales team closed so you can get paid. The "booking" may be for a three year contract that you "bill" for annually. Therefore you would bill one third of it each year.

-------------------------------------

ARR represents the annualized revenue run rate of all committed subscription contracts as of the measurement date. It assumes all contracts that expire during the next 12 month's are renewed with existing terms 1x purchases or services are NOT ARR.

--------------------------------------

This is simply ARR / 12.

Said another way, MRR x 12 = ARR.

Once again, key word is "recurring"

---------------------------------

This is the summation of the annual values within a multi year contract.

Year 1: $200 ARR

Year 2: $300 ARR

Year 3: $400 ARR

TCV = $900 ARR

-------------------

This is:

TCV / # of years

In the example above this would be

Avg. ARR = $900 / 3 = $300

This is important for contracts with upfront discounting or a ramp period in the number of licenses under contract.

-------------------