Unbilled deferred revenue

Revenue that has been contracted but not yet billed to the customer, representing future backlog not yet on the balance sheet.

Unbilled deferred revenue represents contracted future revenue that has not yet been invoiced to the customer. In software-as-a-service (SaaS) and subscription business models, customers are often signed to multi-year contracts but billed annually. The unbilled portion of these multi-year commitments sits off the balance sheet as a component of Remaining Performance Obligations (RPO). For investors, tracking changes in this metric helps gauge the health of long-term customer commitments and future revenue predictability. Because it represents contracted business, it provides a clearer picture of a company's sales pipeline and backlog than looking at deferred revenue alone, which only captures amounts already invoiced. A decline in unbilled deferred revenue often indicates that a company is signing fewer multi-year deals or shifting toward shorter billing cycles, which can signal a near-term slowdown in forward-looking demand. Conversely, a rising balance suggests strong long-term sales momentum.

Company A signs a 3-year contract with a client for a total contract value of $300,000, billing $100,000 upfront for the first year. The $100,000 billed is recorded as deferred revenue on the balance sheet. The remaining $200,000 for years two and three is classified as unbilled deferred revenue and sits off the balance sheet within RPO: $300,000 (Total RPO) - $100,000 (Deferred Revenue) = $200,000.