An ARR waterfall and an ARR bridge run the same reconciliation. Both begin with the opening ARR balance, add new business and expansion, subtract contraction and churn, and land on the closing balance. The difference between the terms is habit rather than method. Waterfall usually describes the detailed monthly view finance operates from. Bridge usually describes the summarized version that reaches a board deck.
The reconciliation both perform
Every version answers the same question: how did the recurring base get from where it started to where it ended? A net ARR growth number hides that entirely. Two companies can post identical net growth while one runs on healthy new business and expansion and the other barely covers heavy churn with aggressive acquisition. The reconciliation separates them.
Because the reconciliation chains, it also validates itself. Beginning ARR for any month equals ending ARR from the month before. If the periods do not chain, something got restated quietly, and finding that before a board meeting is worth the effort of building the view monthly.
The line items worth breaking out
ORM reconciles the monthly movement across a specific set of lines: beginning ARR, churned customer ARR, churned product ARR, product decrease ARR, new customer ARR, new product ARR, increased product ARR, and ending ARR. Pete Furseth calls this reconciling waterfall by month the magic in retention reporting.
The detail earns its place because the summarized four-bucket version blurs distinct problems together. Churned customer ARR and churned product ARR both land in a single churn bar on a board slide, but they demand different responses. An account that cancels entirely is a relationship failure. An account that drops one product while keeping three is a product or packaging failure inside a customer who still wants to be there.
Which one goes to the board
Send the bridge, keep the waterfall behind it. Four movement components and the two retention percentages fit on one slide and carry the story. The full monthly line detail belongs in an appendix for directors who want to trace a figure.
Show net revenue retention and gross revenue retention on the same chart as the movement, since both percentages are derived from the lines already on it. A board that can see how the retention number was produced stops treating it as an assertion. The same reconciliation also feeds forward, because the churn and expansion rates it exposes are the inputs to any credible revenue forecast for the recurring base, and a renewal forecast built on assumed retention rather than measured retention is guesswork with a chart attached.
Frequently Asked Questions
Is an ARR waterfall the same as an ARR bridge?
They perform the same reconciliation, and most teams use the words interchangeably. In practice waterfall tends to mean the detailed monthly view with every movement component broken out, and bridge tends to mean the summarized four-component version that goes in a board deck or investor update. Neither name changes the math.
What line items belong in an ARR waterfall?
ORM reconciles beginning ARR, churned customer ARR, churned product ARR, product decrease ARR, new customer ARR, new product ARR, increased product ARR, and ending ARR. Splitting churn into customer churn and product churn matters, because losing a product line inside a retained account is a different problem than losing the account.
Should the waterfall run monthly or quarterly?
Monthly for operating use. Beginning ARR each month equals the prior month's ending ARR, so the periods chain into a continuous reconciliation with nowhere for movement to hide. Quarterly rollups are fine for the board, but they should be built by summing the monthly view rather than recalculated from period endpoints.
Where do gross and net retention fit?
On the same chart. Gross revenue retention comes from the churn and contraction lines against beginning ARR, and net revenue retention adds the expansion lines back in. Presenting both alongside the waterfall shows the board where the retention percentages came from instead of asking it to trust two standalone figures.
Put these metrics to work
ORM builds custom revenue forecast models that turn concepts like arr waterfall vs arr bridge into prescriptive action for your team.
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