Because SaaS businesses like Pointerra have a no lock-in/commitment commercial model (ie thecustomer can cancel at any time), ACV/ARR for SaaS businesses is expressed as the annualised totalof all customers (regardless of their payment cycle/frequency) at any point in time.If a customer stops paying or cancels their account then their contribution to ACV isremoved. Similarly, if a customer grows/reduces their spend there is a similar upward impact onACV.
There's a mismatch in how these are treated. Consider a new contract, which immediately contributes to ACV (we have seen announcements to that effect in the past). Yet a new customer is very likely not paying anything yet as they are still figuring out how to get their data into the platform.
I have long stated that in my experience, these SaaS "contracts" and "commitments" are merely intentional statements and are not binding. SaaS is a "pay-as-you-go" system, and if you stop "going" you stop paying. ACV is thus merely a guesstimate of where we are at any point in time, and it seems not a great guesstimate at that.
I agree 100% that this should be called ARR, not ACV. The terminology is very misleading. I further expect that we'll move away from this metric to instead reporting invoiced revenue.
3DP Price at posting:
15.5¢ Sentiment: Hold Disclosure: Held
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