ARR, or Annual Recurring Revenue, is a key metric used by subscription-based businesses to measure the predictable and recurring revenue generated from customers over a year. It helps companies assess their financial health and growth potential by providing a clear view of revenue streams from subscriptions, contracts, or memberships. Calculating ARR involves taking the total revenue from subscriptions and normalizing it to a yearly figure. For example, if a company earns $1,000 monthly from subscriptions, its ARR would be $12,000. This metric is crucial for investors and stakeholders to evaluate the company's performance and future prospects.