Net new MRR
DEFINITION
Net new MRR is the amount of monthly recurring revenue a subscription business adds in a period after accounting for revenue lost to contraction and churn.
TABLE OF CONTENTS
RELATED TERMS
Net new MRR is the amount of monthly recurring revenue a subscription business adds in a period after accounting for revenue lost. It combines the recurring revenue gained from new customers and from existing customers who expand, minus the recurring revenue lost to downgrades and cancellations, giving a single figure for how much the recurring revenue base actually moved.
The metric matters because raw new sales alone overstate growth. A business can sign plenty of new subscriptions and still have stagnated growth churn and downgrades erase them. Net new MRR nets those forces against each other, so a positive number means the base grew and a negative number means it shrank despite any new business.
A subscription platform such as Recurly can track each of the underlying movements, new, expansion, contraction, and churned MRR, so net new MRR can be reported per period. Recurly's analytics go a step further, breaking out a fifth category — Reactivation MRR — that isolates revenue recovered from previously churned customers who resubscribe, rather than folding that revenue into New MRR, so a business can see whether reactivations are meaningfully contributing to growth or masking a leakier front door than the new-business number alone would suggest.
Why net new MRR matters for subscription businesses
Net new MRR is the truest single read on period over period growth in the recurring base, because it accounts for both what came in and what went out. It matters because it:
Shows real growth, not just gross additions, by subtracting contraction and churn.
Breaks into components that reveal whether growth is driven by new sales, expansion, or retention.
Feeds the MRR growth rate and forward forecasts as the numerator of the change.
Because it separates the forces at work, net new MRR points to where to act. Strong new business paired with heavy churn is a different problem from weak new business with solid retention, and the components make that visible.
How to calculate net new MRR
Net new MRR sums the period's positive movements and subtracts the negative ones: Net new MRR = New MRR + Expansion MRR - Contraction MRR - Churned MRR Where each component is:
New MRR: recurring revenue from customers acquired in the period.
Expansion MRR: added recurring revenue from existing customers upgrading or buying more.
Contraction MRR: recurring revenue lost from existing customers downgrading.
Churned MRR: recurring revenue lost from customers who cancelled.
To calculate it:
Total the New MRR added in the period.
Total the Expansion MRR from existing customers.
Total the Contraction MRR from downgrades.
Total the Churned MRR from cancellations.
Add New and Expansion, then subtract Contraction and Churned.
Illustrative worked example
The figures below are hypothetical, used only to show the calculation.
New MRR: 20,000 dollars
Expansion MRR: 8,000 dollars
Contraction MRR: 3,000 dollars
Churned MRR: 5,000 dollars
Net new MRR = 20,000 + 8,000 - 3,000 - 5,000 = 20,000 dollars
The business added 20,000 dollars of recurring revenue that period on a net basis. Gross additions were 28,000 dollars, while 8,000 dollars was lost to contraction and churn, so reporting only new and expansion would have overstated the real gain.
Benefits and examples
Tracking net new MRR gives a subscription business one honest number for how much the recurring base grew, and a component breakdown that shows why. Its main benefits are a clear net view of growth, visibility into the drivers behind it, and a clean input to the MRR growth rate and revenue forecasts. For example, two businesses can each report 28,000 dollars in new and expansion revenue for a month, but if one lost 8,000 dollars to churn and contraction and the other lost 20,000 dollars, their net new MRR of 20,000 dollars versus 8,000 dollars tells the more useful story. Watching the components move over time is often more instructive than the headline figure alone.
Frequently asked questions
How do you calculate net new MRR? Add new MRR and expansion MRR, then subtract contraction MRR and churned MRR. The result is the net change in recurring revenue for the period.
What is the difference between net new MRR and new MRR? New MRR counts only recurring revenue from newly acquired customers. Net new MRR nets all movements together, adding expansion and subtracting contraction and churn, so it reflects the real change in the base rather than just gross additions.
Can net new MRR be negative? Yes. If contraction and churn exceed new and expansion revenue in a period, net new MRR is negative, meaning the recurring base shrank even if the business added new customers.
How does net new MRR relate to MRR growth rate? Net new MRR is the dollar change in recurring revenue for the period. Dividing it by the beginning MRR and multiplying by 100 gives the MRR growth rate, the same change expressed as a percentage.
