Definition

Churned ARR is the Annual Recurring Revenue lost from a company's existing contracts that are no longer in effect. This could be due to reasons like non-renewal or cancellation of a contract within the contract period.

Example

Suppose ABC Co. has an ARR of $100,000 and at the time of renewal, it decides to discontinue or not renew the contract. This causes the ARR to drop to $0. Thus, Churned ARR = $100,000.

Why it matters

Churned ARR is an important metric since it highlights a company’s ability/inability to retain customers. By understanding the amount of Churned ARR, a company can discover potential issues like the efficacy of its product/services in satisfying or meeting the needs of the customers.

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