ARR Waterfall Calculator

What an ARR waterfall is

An ARR waterfall (also called an ARR bridge) explains how annual recurring revenue moved from the start of a period to the end of it. It starts with beginning ARR, adds what new customers brought in and what existing customers added, subtracts what existing customers cut back and what was lost to cancellations, and lands on ending ARR. Drawn as a chart, each movement is a floating bar.

An ARR snowball is the same bridge laid out across several periods: each period's ending ARR becomes the next period's beginning ARR, so the base keeps rolling forward. Joe Hsu describes it as taking "the starting ARR for the year", subtracting churn and downsells, adding new logos and expansion, and getting a year-end figure that "builds on itself the next year". The calculator shows both: the bridge chart for one period or the whole window, and the snowball table underneath.

The four movements

• New ARR: recurring revenue from customers who signed during the period.
• Expansion ARR: upgrades, extra seats, add-ons and price increases from existing customers.
• Contraction ARR: downgrades and lower usage from customers who stay.
• Churned ARR: recurring revenue lost when customers cancel or do not renew.

David Sacks and Ethan Ruby's "The SaaS Metrics That Matter" (2021) lists the same split for MRR, plus a sixth line, "Resurrected", for revenue from former customers who come back. If you track it, add it to new ARR here and keep it as its own line in your board pack. ARR is recurring only: Sacks and Ruby note that one-time revenue such as services or pilots does not count.

Formulas

Ending ARR = Beginning ARR + New + Expansion − Contraction − Churn

Net new ARR = New + Expansion − Contraction − Churn = Ending ARR − Beginning ARR

NRR = (Beginning ARR + Expansion − Contraction − Churn) ÷ Beginning ARR. GRR = (Beginning ARR − Contraction − Churn) ÷ Beginning ARR. These are the formula-method definitions from our NRR guide and NRR vs GRR. New customers are left out because they were not in the base at the start. For a window of several periods, the calculator multiplies the period figures together, the same way quarterly NRR is turned into annual NRR. That treats customers won in one quarter as part of the next quarter's base, so it is close to, but not the same as, a strict cohort NRR.

SaaS quick ratio = (New + Expansion) ÷ (Contraction + Churn). ARR growth = Ending ARR ÷ Beginning ARR − 1.

Worked example (the default inputs)

An illustrative company starts the year with $2,000,000 of ARR and plans four quarters. In Q1 it adds $300,000 of new ARR and $100,000 of expansion, and loses $30,000 to contraction and $60,000 to churn. Ending ARR is $2,000,000 + $300,000 + $100,000 − $30,000 − $60,000 = $2,310,000. Q1 NRR is ($2,000,000 + $100,000 − $90,000) ÷ $2,000,000 = 100.5%, and GRR is $1,910,000 ÷ $2,000,000 = 95.5%.

Rolling all four quarters forward, ending ARR reaches $2,650,000, $3,030,000 and then $3,455,000. Across the year the company adds $1,390,000 of new ARR and $475,000 of expansion, and loses $140,000 to contraction and $270,000 to churn. Net new ARR is $1,455,000 and ARR grows 72.8%. The quick ratio is $1,865,000 ÷ $410,000 = 4.55. Compounding the four quarters gives NRR of 102.5% and GRR of 84.4%: expansion just outruns losses, but about 16 cents of every starting dollar walks out during the year.

For the year: net new ARR $1,455,000, ARR growth 72.8%, quick ratio 4.55x.

How to read the chart

Read the bridge left to right. A tall new-ARR bar with a tall churn bar means growth depends on sales running fast enough to refill a leaky base. A small churn bar and a large expansion bar means the base grows by itself, which shows up as NRR above 100%. The quick ratio sums it up in one number: Mamoon Hamid, who coined it, said "a quick ratio of four, is quite desirable, four or above".

Net new ARR also feeds other efficiency metrics. The burn multiple is net burn divided by net new ARR, and Sacks and Ruby define the magic number as net new ARR in a period divided by the prior period's sales and marketing spend. For month-by-month compounding of a single growth rate, use the MRR growth calculator; to put the waterfall inside a full plan with costs and cash, see the SaaS financial model guide.

Sources: David Sacks and Ethan Ruby, "The SaaS Metrics That Matter", Bottom Up, October 18, 2021; Joe Hsu, "Budgeting: don't forget the ARR snowball", February 5, 2025; Mamoon Hamid, SaaStr talk transcript. Read October 21, 2026.

A waterfall is only as good as the numbers behind it. Adlega builds the same MRR and ARR waterfall from your financial model and imported actuals, so the board-deck chart and the forecast come from one place.