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Total Contract Value

Zuora

Total Contract Value

Total Contract Value (TCV) is a metric that represents the value of one-time and recurring charges. It does not include usage charges. TCV is a projection of your booking revenue and can be useful when planning expenditure and managing the growth of your business. See Exporting TCV data for analysis for more information.

TCV is the measure of the value a customer has committed to you in contracts or orders. It does not match the total invoice amounts that are billed for charges over the subscription term. For Order TCV, see Key Metrics for Orders.

How TCV is Calculated?

Zuora calculates TCV for every charge segment, and rolled up through the charge, subscription, and account.

TCV of Rate Plan Charges

Zuora calculates TCV for one-time and recurring rate plan charges.

TCV of One-Time Rate Plan Charges

TCV of one-time charges are calculated based on the term setting:

  • If the subscription does not expire (an Evergreen subscription), TCV is null.
  • If the subscription expires after a period (a Termed subscription), TCV is the full value of the charge. For example, you provide a one-time charge with $10 flat fee. TCV is $10. 
    Note that TCV is 0 if charges are generated from prepayment.

TCV of Recurring Rate Plan Charges

TCV of recurring charges are calculated based on the term setting:

  • If the subscription does not expire (an Evergreen subscription), TCV is null.
  • If the subscription expires after a period (a Termed subscription), TCV is the value of the segment for the full period from the start date to end date. See the following for calculation.

TCV of a recurring charge equals to the Monthly Recurring Revenue (MRR) multiplied by the number of months that the charge is effective.

Follow the formula below to calculate TCV values of recurring charges. Note that the TCV value may include proration if the charge period includes a partial month at the end. Zuora uses the actual number of days in the month for proration.

TCV = MRR * (Charge_Effective_End_Date Charge_Effective_Start_Date)

Example 1:  A recurring rate plan with full month period

  • Charge Model: Flat Fee Pricing
  • MRR: $100
  • ListPriceBase: Month
  • Billing Period: Month
  • Charge Effective Start Date: January 1
  • Charge Effective End Date: March 1

Charge effective period: 2 months (= 03/01 - 01/01)

TCV = MRR * 2 = $200

Example 2: A recurring rate plan with partial month period

  • Charge Model: Per Unit Pricing
  • MRR: $100
  • ListPriceBase: Month
  • Billing Period: Month
  • Charge Effective Start Date: January 1
  • Charge Effective End Date: March 15

Charge effective period: 2.4516129032258065 months (= full months+partial months=2+(15-1)/31)

TCV = MRR * 2.4516129032258065 = $245.16129032258065

Example 3: A recurring rate plan with weekly based billing period

  • Charge Model: Flat Fee Pricing
  • Price: $140
  • ListPriceBase: Week
  • Billing Period: Week
  • Charge Effective Start Date: January 1
  • Charge Effective End Date: April 1

Charge effective period: 3 months

MRR = (140/7)*30=$600

TCV = MRR * 3 = $1800

TCV of Subscriptions

Every one-time charge and recurring charge in a subscription has an associated TCV value:

  • For a one-time charge, the TCV is the value of the individual charge.
  • For a recurring charge, the TCV is the sum of all the charges that a customer pays over the charge effective period. The charge effective period is from the date the subscription started until the end of the current term.

TCV of Subscriptions that Contain Fixed Amount Discounts

Fixed amount discounts can be applied to charges only if the discount period and the charge term have an overlap. If both recurring charges and one-time charges exist, the discount charge will first be applied to recurring charges, then to one-time charges.

If the discount period is not one natural month, the fixed amount will be prorated based on the days in the natural month. For example, a discount charge with an effective period from January 5 to February 5 will be prorated because it spans two natural months, January and February. It is to simplify the complexity of calculation if multiple charges are eligible for discount application.

For example, a subscription contains the following charges:

  Charge 1  Charge 2 Charge 3
Charge model Flat fee pricing - recurring charge One-time charge Fixed amount discount
Price $100 /billing period $80 $200 /billing period
Billing period Month N/A Month
Charge effective period 03/01/2021 - 04/01/2021 03/15/2021 - 03/16/2021 03/10/2021 - 04/10/2021

Zuora's Charge Metrics service does the following calculation to get the TCV for charge 1 and charge 2:

  1. Calculate the fixed amount proration for Charge 3. The available discount amount that can be used for March is 200 * 22 / 31 =141.94. Similarly, the available discount amount available for April is 200 * 9 / 30 = 60.
  2. Apply the discount to the recurring charge (Charge 1). The recurring charge is split into two parts: 
    • 03/01/2021 - 03/09/2021: Cannot apply the fixed amount discount. The total charge for this period is 100 * 9 / 31 = 29.03 
    • 03/10/2021 - 04/01/2021: Can apply the fixed amount discount. The total charge for this period is 100 * 22 / 31 = 70.97 - 70.97 (from discount charge) = 0
    Therefore, the charge metrics for Charge 1 are:
    • MRR: 29.03 + 0 = 29.03
    • TCV: 29.03 * 1 = 29.03
  3. Apply the remaining balance of discount to the one-time charge (Charge 2). The remaining discount charge balance of Charge 3 is 141.94 - 70.97 = 70.97. Therefore, TCV for Charge 2 is: 80.00 - 70.97 = 9.03

TCV of Customers

The TCV value of an account is the sum of TCV values of all its subscriptions that are not in draft status. 

TCV After Subscription Amendments

TCV are automatically recalculated if amendments are made to the charge during its life cycle. If an amendment to a recurring charge is made then the charge is split into sections defined by effective start date and effective end date. Each section has a different TCV. For example, if a customer upgrades to a more expensive product partway through the subscription, the TCVs of the modified recurring charge, the subscription, and the customer increase.

For example:

Suppose your customer subscribes to your recurring charge in an order:

  • Charge Model: Per Unit Pricing
  • List Price: $10
  • List Price Base: Per Billing Period
  • Billing Period: Month
  • Quantity: 10
  • Charge Effective Start Date: January 1, 2027
  • Charge Effective End Date: January 1, 2028

Later, your customer wanted to update the product with the following changes:

  • Quantity: 12
  • Amendment Effective Date: February 15, 2027

Charge section 1:

Full months: 1 month (January 1, 2027 - February 1, 2027)

Partial month: 14 days (February 1, 2027 - February 15, 2027)

TCV 1 = 150 (= MRR * (full months+partial month) = 100 * (1 + 14/28))

Charge section 2:

Full months: 10 months (February 15, 2027 - March 15, 2027, March 15 - April 15, 2027, April 15, 2027 - May 15, 2027, May 15, 2027 - June 15, 2027, June 15, 2027 - July 15, 2027, July 15, 2027 - August 15, 2027, August 15, 2027 - September 15, 2027, September 15, 2027 - October 15, 2027, October 15, 2027 - November 15, 2027, November 15, 2027 - December 15, 2027)

Partial month: 17 days (December 15, 2027 - January 1, 2028)

TCV 1= MRR * (February 15, 2027- January 1, 2028) = MRR * (full months+partial month)

TCV 2 = 1265.80645161290328 (= 120 * (10 + 17/31))

TCV of the charge = TCV 1 + TCV 2 = 1415.80645161290328

Note that TCV is calculated for this example is based on the actual days in a month. The TCV value might be different if you set the billing rule to use 30 days in a month.

Where can I find TCV?

TCV values are automatically calculated by the system and displayed in the Zuora UI, REST API, and SOAP API.

TCV of a charge

In the Zuora UI, you can find TCV values for individual charges in a subscription in the following way:

  1. Navigate to Customers > Subscriptions in the left-hand navigation section.
  2. Click the name of the desired subscription (or the View link) to enter the detailed subscription view
  3. At the bottom of the page in the Product & Charges section select View by Key Statistics in the drop-down box. TCV values for each one-time and recurring charge will be displayed in the table below.

    Charge_TCV_UI.jpg

For more information on how these TCV values are comprised, hover your mouse over the green icon in the history column of the table. A popup window will appear showing the MRR and TCV for each section of the charge.

In the Zuora REST API, use the tcv field in the Get subscriptions by key or Get subscriptions by account method.

In the Zuora SOAP API, use the TCV field on the RatePlanCharge object.

TCV of a subscription

You can find the TCV value for each subscription in the Zuora REST API, use the totalContractedValue field in the Get subscriptions by key or Get subscriptions by account method.

TCV of a customer

In the Zuora UI, navigate to Customers > Customer Accounts in the left-hand navigation section, and select a customer. In the detailed view that appears, scroll to the Subscriptions & Amendments section, and view the Total TCV value in the Subscriptions-Owned tab.

Total_TCV.png