Re-occurring vs Recurring revenues

For new age businesses in the subscription economy Annual Recurring Revenues (ARR) is a key measure.

Recurring revenue, often called subscription revenue, is usually fixed and occurs at highly regular intervals – like every month.

Re-occurring revenue, often call consumption or pay-as-you-go revenue, varies from recurring revenue in its regularity and variability.

Companies with high recurring revenues generate high valuation multiples from investors, because these revenues are highly predictable and indicate a high level of customer retention.

Re-occurring revenues on the other hand are still highly valued, though they are typically assigned a lower valuation than recurring revenues due to their weaker correlation with customer retention and their inherent unpredictability.

However, when re-occurring revenues are tied to highly sticky metrics with minimal deviation from the mean—such as the annual value of monthly bills issued by an electricity utility—they can be valued on par with recurring revenues due to their stability and predictability in cash flow.