Expanding From Pure Recurring SaaS Revenues to Financial Services - How Hybrid Platforms Report their Combined Revenues.

Revenue reporting in SaaS used to be straightforward. You charged a monthly or yearly subscription, tracked MRR and ARR, and that was pretty much it. But things have changed. For many SaaS companies today, subscriptions are just one part of the story.

As more companies add payment processing, transaction fees, or usage-based pricing, their revenue mix is no longer purely recurring—and that shift is reshaping how they report it.

In this article, we’ll look at how complex technology businesses like Toast and Shopify are updating their reporting to match the reality of hybrid revenue models. We’ll break down the difference between recurring and re-occurring revenue, how companies think about Run Rates, and why all of this matters—for transparency, smarter planning, and investor trust. Keep reading to explore:

• The Two Flavors of SaaS Revenue

• How Leading SaaS Companies Do Revenue Reporting

• How We Report Revenue at Upflow
  

1. Understanding the Two Flavors of SaaS Revenue

1.1. What is Recurring Revenue?

In a traditional SaaS model, recurring revenue is the gold standard. It’s predictable, contract-based income that comes in regularly—usually through monthly or annual subscriptions. This revenues forms the foundation of metrics like:

• MRR (Monthly Recurring Revenue): the total predictable revenue generated, measured at the end of the period (usually the month).

• ARR (Annual Recurring Revenue): simply MRR multiplied by 12, giving a forward-looking view of annualized subscription income.

Recurring revenue is valued for its stability. It helps companies forecast with confidence, track retention, and measure customer lifetime value over time. Unlike revenue reported on a profit and loss statement—which looks backward over a period—MRR is a snapshot of the current recurring income. That’s what makes ARR so useful—it projects that if nothing changes, your recurring revenue over the next 12 months will be at least what you’re generating today, times twelve.

1.2. What is Re-occurring Revenue?

Re-occurring revenue may sound similar, but it’s fundamentally different. It’s driven by customers who come back and buy again—not because they’re under a contractual commitment, but because they choose to.

Think of it like a gym. Recurring revenue is the monthly gym membership—you’re billed whether you show up or not. Re-occurring revenue is the pay-per-class model—there’s no obligation, but loyal members often keep coming back, week after week.

It’s the same with things like payment processing fees or transaction-based charges. These aren’t guaranteed, but they often repeat regularly, especially in businesses where product usage is consistent over time.

While less predictable in theory, reoccurring revenue can still behave like recurring revenue—particularly in SaaS businesses with strong product adoption and loyal customers.

1.3. So What’s the Real Difference?

The key distinction lies in predictability and retention:

• Recurring revenue is locked in by a contract. It’s highly predictable and tied to retention metrics like Net Revenue Retention (NRR).

• Re-occurring revenue is usage-based or activity-driven. It lacks contractual stability but can still be regular and reliable in practice.

In many SaaS businesses, the line between the two starts to blur. When customers consistently use a service (e.g. payment tools), reoccurring revenue on large cohorts of users becomes highly predictable—even without a formal subscription. That’s why more companies are using metrics like Run Rate, which blends both revenue types to better reflect actual business performance.

From an investor’s perspective, what matters most is the predictability, scalability and profitability of revenue streams. Whether contractually locked in or behavior-driven, both contribute to a company’s ability to grow reliably—and that’s what ultimately drives confidence and increased valuation.

2. Real-World Revenue Reporting: How Leading SaaS Companies Do It

Understanding how SaaS companies report their revenue isn’t always straightforward—especially when they blend subscriptions and usage-based models. While traditional accounting focuses on actual recognized revenue (under GAAP), companies often choose to share non-GAAP metrics like MRR and ARR to give investors and stakeholders a clearer view of their growth potential.

2.1. What GAAP Covers — and What It Doesn’t

Public companies are required to file a 10-K or 10-Q, which includes financial statements under U.S. GAAP. However, metrics like MRR, ARR, or Run-Rate are not GAAP-defined—they’re typically shared in the Management’s Discussion and Analysis (MD&A).

This means companies have some flexibility in how they define and present these metrics. Some focus purely on recurring revenue; others also include reoccurring or usage-based revenue to paint a fuller picture.

That said, let’s look at two very different approaches — starting with Shopify, then Toast — to see how each interprets and applies these metrics in practice.

2.2. Case Study: Shopify’s Subscription-First Approach

Shopify is the leading e-commerce platform that generated nearly $9 billion in revenue in 2024, powered by a mix of software and services. Its business model blends two primary revenue streams:

• SaaS subscriptions for merchants using Shopify’s platform (contract-based monthly or yearly plans)

• Usage-based merchant services such as payment processing, referral fees, and shipping, captured under its Merchant Solutions segment.

This split raises an important question: How does Shopify report these two distinct types of revenue? Unlike some SaaS businesses, such as Toast, that blend fixed and variable revenues under recurring metrics, Shopify clearly separates the two—offering a distinct view into how each stream contributes to its growth.

As mentioned, the foundation of Shopify’s model is its Subscription Solutions segment, which generates predictable, contract-based income through fixed monthly fees. This is captured in Shopify’s core metric, Monthly Recurring Revenue (MRR), defined as follows:

"We calculate MRR at the end of each period by multiplying the number of merchants with subscription plans by the average monthly fee, excluding variable platform fees."

That last exclusion is key. Shopify’s MRR only includes fixed subscription fees—not variable platform revenues like payment processing or transaction fees. Those usage-based revenues are excluded from MRR, even though they are recurring in practice for many merchants.

By reporting MRR this way, Shopify provides a strict view of what it considers as contractually guaranteed recurring revenue. It’s a conservative lens that separates truly locked-in income from revenue that depends on merchant activity—even when that activity is consistent over time.

Shopify’s MRR at the end of 2024 was $178 million (so an Annual Recurring Revenue, or ARR, of roughly $2 billion), while its total revenue was nearly $9 billion (see screenshot below). The difference comes from usage-based Merchant Solutions revenue, which is excluded from MRR and ARR.

This distinction matters because Shopify’s goal with MRR is to report only contractual, subscription-based revenue, which is the most predictable and high-margin part of its business. Usage-based Merchant Solutions revenue, while larger in absolute terms, is more variable and carries lower margins. By separating the two, Shopify gives a clearer picture of its recurring revenue base without overstating stability.

2.3. Case Study: Toast’s Blend of Subscriptions and Payments

Toast is a cloud-based restaurant management software company that reached nearly $5 billion in annual revenue in 2024. Its business model combines two core revenue streams:

• SaaS subscriptions for its restaurant software (restaurants use Toast’s point of sale platform via contract-based subscriptions)

• Payment processing services for transactions made via its platform (restaurants can also opt into its payment processing services to handle transactions)

Unlike Shopify, Toast does not separate these streams in its recurring revenue reporting. Instead, it combines both into a single recurring metric.

Let’s unpack what that means and why it matters.

2.3.1. Creating New Business Metrics to Reflect Reality

Just like Shopify, Toast reports a standard line of recurring revenue, primarily tied to its software subscriptions plans. But given the scale and importance of its payment business, Toast goes a step further by introducing custom metrics to reflet how its model really works.

In its 2024 financials, Toast introduced two non-GAAP metrics designed “to help evaluate its business, identify trends affecting its business, formulate business plans and make strategic decisions.”

1 — Gross Payment Volume (GPV)

“Defined as the sum of total dollars processed through the Toast payments platform across Toast Processing Locations in a given period. GPV is a key measure of the scale of Toast’s platform, which in turn drives our financial performance. As Toast customers generate more sales and therefore more GPV, Toast generally sees higher financial technology solutions revenue.”

(source: Toast Announces Fourth Quarter and Full Year 2024 Financial Results)

GPV reflects the overall volume of transactions flowing through Toast’s platform—not the revenue Toast itself earns. In 2024, GPV reached $159 billion, up from $126 billion in 2023. As restaurants process more sales through the platform, Toast earns a small percentage in transaction fees—so while GPV reflects customer activity, not Toast’s own revenue, it serves as a leading indicator of future payments-related income.

2 — Annualized Recurring Run-Rate (ARR)

In Toast’s 2024 financials, the Annualized Recurring Run-Rate is defined as:

"A key operational measure of the scale of Toast’s subscription and payment processing services for both new and existing customers."

In other words, Toast’s ARR is an operational metric designed to capture the full scale of both subscriptions and payments, even though the latter is technically reoccurring, not recurring.

"ARR is determined by taking the sum of (i) twelve times the subscription component of MRR and (ii) four times the trailing-three-month cumulative payments component of MRR."

This metric combines SaaS subscription revenue, and payment processing revenue (specifically, gross profit, not total volume).

ARR = (12 * subscription component of MRR) + (4 * 3-month trailing payments component of MRR)

(source: Toast Announces Fourth Quarter and Full Year 2024 Financial Results)

2.3.2. Addressing Common Concerns

Is Toast inflating growth by including Payments?

Not at all. Toast explicitly distinguishes ARR from revenue and cautions against over-interpreting it:

"ARR should be viewed independently of (…) Toast’s revenue (…) and is not a forecast of future revenue."

The inclusion of payments doesn’t artificially boost numbers. In fact, subscription and payments revenue are growing at similar rates, which supports the integrity of this approach.

But are SaaS and Payment margins comparable?

It’s a valid concern. SaaS revenue often has margins of 70–90%, while payments may hover around 20% due to third-party fees.

To address this, Toast includes only the “adjusted payment service fees, exclusive of estimated transaction-based costs” from their payment solution in its ARR calculation—not total payment volume or gross revenue. This avoids inflating the figure and keeps the comparison with SaaS revenue meaningful.

Toast explains its methodology clearly in its 2024 financial results:

"Monthly Recurring Run-Rate (“MRR”), is measured on the final day of each month as the sum of (i) Toast’s monthly billings of subscription services fees, which we refer to as the subscription component of MRR, and (ii) Toast’s in-month adjusted payments services fees, exclusive of estimated transaction-based costs, which we refer to as the payments component of MRR."

This means only net revenue from payments—after deducting fees paid to networks and processors—is included. It’s a more conservative and accurate reflection of the business’s recurring economic value.

What do critics say?

Some industry observers have raised concerns about Toast’s methodology. For instance, Alex Oppenheimer, in his article “Inventing ARR. Sorry Toast, but this just doesn’t make sense…”, argues that including payments in an Annualized Recurring Run-Rate could be misleading.

While these perspectives are valid and highlight the importance of transparency in financial reporting, Toast’s methodology is clearly disclosed in its financial statements. By including only the net payments profit in its ARR, Toast aims to provide a realistic view of its revenue streams.

2.3.3. Key Takeaway: Transparency in a Blended Model

In a nutshell, while payment revenues are technically reoccurring, Toast includes them in a consolidated Annualized Recurring Run-Rate (ARR) to better reflect how the business operates. This isn’t about inflating growth. And to ensure consistency in margin comparison, Toast reports only the gross profit from payments, not the full payment volume.

2.4. Different Philosophies, Both Valid

Both Shopify and Toast’s approaches are legitimate — they simply reflect different ways of thinking:

• Shopify prioritizes clarity and consistency, reporting only predictable subscription income in its MRR.

• Toast favors a more holistic view, blending subscriptions and payments to reflect how the business actually operates.

At Upflow, we align more closely with Toast’s philosophy — and in the next section, we’ll explain why.

3. How We Report Revenue at Upflow

3.1. Why Toast’s Model Works for Us

At Upflow, we share a similar philosophy to Toast when it comes to revenue reporting —because it aligns with how we see our business today and where it’s going.

We believe Shopify is far more than just an e-commerce SaaS platform — it’s building the infrastructure of a modern fintech company. That’s why “Merchant Solutions” (including Payment solution) now account for nearly 75% of its total revenue.

But when more than half of your business comes from non-subscription activities, relying on a reporting metric that only reflects the SaaS portion gives an incomplete picture. This approach doesn’t fully reflect how we operate at Upflow — and we believe transparency calls for a broader view.

Putting it in perspective within our mission to “Revolutionize how B2B businesses get paid”, we’re not just building a SaaS platform. We’re also building a complete Financial infrastructure that will one day offer both Payment and Financing solutions. These aren’t side features, they’re core components of our business model.

So when we look at Upflow’s performance, we need a metric that reflects the full scope of operations—not just our SaaS revenue. Like Toast, we believe a consolidated ARR helps paint a clearer picture of how the business is truly performing.

3.2. How we calculate our combined ARR at Upflow

At Upflow, our approach to ARR has evolved alongside our product and business maturity.

In the early days, we calculated ARR using Gross Payment Revenue. The goal was to focus on growing usage and payment volume, not just optimizing margins. Since margins in payments come from scale, we saw this as a volume-driven game, and wanted our revenue metrics to reflect that scale.

Today, as our payments business matures, we’ve adopted Toast’s exact methodology to bring our reporting in line with market and investors expectations. That means our ARR now reflects both the predictability of our SaaS subscriptions and the real economic contribution of payments, while smoothing out short-term volume fluctuations.

Here are the two components included in our Total Annualized Recurring Run-Rate (ARR) :

• SaaS ARR = MRR x 12 (MRR includes contract-based, subscription revenue from our platform)

• Payments ARR = L3M Payment Profit x 4 (where Gross Profit = Gross Payment Revenue - transaction-related costs)

The exact formula of our Total ARR is then:

Total ARR = (12 * SaaS component of MRR) + (4 * 3-month trailing gross payments profit)

3.3. Why This Change Matters

This shift allows us to track and communicate the full scope of our revenue streams without overstating what’s actually retained by Upflow. By transitioning to a profit-based calculation, we better reflect the true economics of our payments business while keeping our Annualized Recurring Run-Rate consistent, predictable, and investor-ready.

Final Thoughts: What Metrics Should Reflect

As SaaS businesses evolve, so must the way we report and interpret revenue.

In the past, MRR and ARR were straightforward metrics rooted in subscription-only models. But today, many companies — including Upflow — operate with hybrid revenue streams, blending SaaS, Payments (and soon Financing). In this new reality, reporting only subscription revenue provides an incomplete and often misleading view of business performance and cross selling opportunities that are baked into our strategic business vision.

That’s why companies like Toast are redefining how ARR is calculated — by including usage-based or reoccurring revenues that behave with stability and scale. And it’s why others like Shopify, while taking a more conservative and segmented approach, are increasingly viewed as fintech players, not just SaaS platforms anymore.

At Upflow, we believe our revenue reporting should reflect the full picture of how our business operates — not just the part that’s easiest to quantify. Today, we also transitioned to margin-based reporting — because that’s the most transparent and honest way to communicate the strength of our model, while conforming to the expectation of the market regarding the strong margins of our revenues.

In short: Metrics should match your model. And at Upflow, we're committed to using metrics that reflect the full scope of the value we deliver.

We hope this blog post helped clarify how we think about revenue reporting for hybrid re-occurring business — and why it reflects the way they derive value from multiple product lines. If you have thoughts, questions, or just want to chat, we’d love to hear from you — feel free to reach out!

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