Annual Contract Value (ACV) represents the average annual revenue per customer contract, excluding one-time fees. ACV is useful for understanding the revenue generated from long-term customer contracts and helps businesses forecast annual revenue more accurately.

ACV is calculated by dividing the total contract value by the number of years in the contract.

\[\text{ACV} = \frac{\text{Total Contract Value}}{\text{Number of Years in Contract}}\]

1. Basic Example: A customer signs a 3-year contract for $30,000. The ACV is:

\begin{align}ACV &= \frac{30,000}{3} \cr&= 10,000 \text{ USD}\end{align}

2. Multi-Year Example: A company signs five contracts, each worth $50,000 over 2 years. The ACV for each contract is:

\begin{align}ACV &= \frac{50,000}{2} \cr&= 25,000 \text{ USD}\end{align}