Annual Contract Value (ACV) is the total revenue that a company fetches from a contract or client in a year. This metric is mostly used by SaaS companies since these generally have yearly or multi-year contracts with clients. ACV is also known as an annual average of total contract value (TCV). ACV calculations are based on recurring revenue from a single client or account. Therefore it normally doesn't include one-time fees.
ACV formula = Total contract value / Total years in the contract. Suppose a client signs a 5-year contract with a company for using its software. The contract value is $50,000. Therefore, the annual contract value will be $50,000/5 = $10,000. If there is an initial signup fee of say $150, this amount will not be included in the ACV.