ACV & Revenue / cash received mismatch, page-3

Thanks heaps for the response.

I read the ASX Aware Query answer from 3DP. I was really surprised by their approach saying ACV & ARR are the same thing. In all my experience reading many documents from companies with SaaS recurring revenues, I have never seen them referred to as the same thing.

The reporting I normally see of ARR, is a snapshot of RR at the time stated, based on the previous month. eg. at the end of June, ARR was $24m, calculated from RR for June being $2m multiplied by 12. ACV, (as found in heaps of web sites) is a forward looking value for the coming year. It is calculated from, for each contract, the total contract value (TCV) divided by the no. of years. Then the individual annual values for each contract are totaled. eg. Contract A: $5m with 2 years remaining, contract B: $5m with 5 years remaining. Total ACV for the coming year from the date the ACV is being stated = $2.5m + $1m = $3.5m.

In some circumstances, they could be the same but normally not. An obvious eg. is where a contract which finished at the end of the month in question has its RR included in ARR but not in ACV.

Aside from this, more importantly, it seems to me 3DP's explanation of ACV seems to confirm that the mismatch is due to miss stated values. In their answer they say "ACV represents the US$ total (in Pointerra’s case) of customers that are paying or have committed to pay for (or subscribe for)".

The key words are "are paying or have committed to pay". So it would be misleading to include any amounts that are not mandatory under the contract without saying so. i.e. not 3DP estimates. Have they included forecasts in their stated values? It seems so. As I said the opening ACV for FY22 was $13m, but Revenue came in = $9.8m. FY23 looking much worse.

When putting a value on a company, an investor needs the most accurate facts of current revenue & future revenue commitments plus any company forecasts but stated clearly for what they are, fact or forecast.

As you point out, Revenue is growing, but so are the expenses, so how can we determine when profits are likely? Why would a company state a high ACV which seems to bear no relation to the final facts unless it was trying to make things look better than they really are?