Press Release Details

View all news

Avalara Announces Third Quarter 2020 Financial Results

Nov 05, 2020

Third Quarter Total Revenue of $127.9 Million

Total Revenue Growth of 30% From Third Quarter 2019

SEATTLE--(BUSINESS WIRE)-- Avalara, Inc. (NYSE: AVLR), a leading provider of tax compliance automation for businesses of all sizes, today announced financial results for its third quarter ended September 30, 2020.

“Avalara’s stellar third quarter performance exceeded our expectations, with revenue growth accelerating to 30 percent year-over-year, reaching a key milestone of a half a billion topline annual revenue run rate,” said Scott McFarlane, Avalara co-founder and chief executive officer. “Our results demonstrate the adaptability and resiliency of our business model during a changing business and economic environment presented by COVID-19. We continue to see a confluence of macro trends that are tailwinds for our business, from the accelerating growth of ecommerce to broader adoption of cloud-based solutions and a growing emphasis on efficiency to the increasing need for regulatory compliance enforcement. We believe that global demand for compliance automation is inevitable, and we are well positioned to capture the large opportunity in front of us.”

Third Quarter 2020 Financial Results

  • Revenue: Total revenue was $127.9 million in the third quarter of 2020, up 30% from $98.5 million in the third quarter of 2019. Subscription and returns revenue was $119.2 million, up 30% from $92.0 million in the same period last year. Professional services revenue was $8.7 million, up 33% from $6.5 million in the same period last year.
  • Gross Profit: GAAP gross profit was $92.9 million in the third quarter of 2020, representing a 73% gross margin, compared to a GAAP gross profit of $68.7 million and a 70% gross margin in the third quarter of 2019. Non-GAAP gross profit was $95.5 million, representing a 75% non-GAAP gross margin, compared to a non-GAAP gross profit of $70.8 million and a 72% non-GAAP gross margin in the third quarter of 2019.
  • Operating Loss: GAAP operating loss was $12.6 million in the third quarter of 2020, compared to a GAAP operating loss of $14.9 million in the third quarter of 2019. Non-GAAP operating income was $1.7 million in the third quarter of 2020, compared to a non-GAAP operating loss of $3.1 million in the third quarter of 2019.
  • Net Loss: GAAP net loss was $12.7 million in the third quarter of 2020, compared to a GAAP net loss of $13.3 million in the third quarter of 2019. Non-GAAP net income was $1.6 million in the third quarter of 2020, compared to a non-GAAP net loss of $1.5 million in the third quarter of 2019.
  • Net Loss per Share: GAAP basic and diluted net loss per share was $0.15 based on 82.3 million weighted-average shares outstanding in the third quarter of 2020, compared to a GAAP basic and diluted net loss per share of $0.17 based on 76.2 million weighted-average shares outstanding in the third quarter of 2019. Non-GAAP diluted net income per share was $0.02 based on 86.7 million weighted-average shares outstanding in the third quarter of 2020, compared to a non-GAAP diluted net loss per share of $0.02 based on 76.2 million weighted-average shares outstanding in the third quarter of 2019.
  • Deferred Revenue: Total deferred revenue was $180.6 million at September 30, 2020, up from $161.2 million at December 31, 2019. The current portion of deferred revenue was $178.9 million at September 30, 2020, up from $160.3 million at December 31, 2019.
  • Cash: Net cash provided by operating activities was $27.9 million in the third quarter of 2020, compared to $5.9 million provided by operating activities in the third quarter of 2019. Free cash flow was positive $25.8 million in the third quarter of 2020, compared to positive $3.6 million in the third quarter of 2019. Cash and cash equivalents totaled $1,064.1 million at September 30, 2020 compared to $467.0 million at December 31, 2019.
  • Calculated Billings: Calculated billings were $142.3 million in the third quarter of 2020, compared to calculated billings of $108.5 million in the third quarter of 2019.

Reconciliations of GAAP to non-GAAP financial measures have been provided in the tables included in this release.

Third Quarter 2020 and Recent Operating Highlights

  • Key Metrics: We ended the third quarter of 2020 with approximately 14,180 core customers, up from approximately 13,560 core customers at the end of the previous quarter and approximately 11,400 in the third quarter of 2019, a 24% increase year-over-year. Our net revenue retention rate was 108% in the third quarter of 2020 and has averaged 108% over the last four quarters.
  • Acquired Transaction Tax Resources, Inc.: We announced the acquisition of Transaction Tax Resources, Inc. (TTR) for approximately $377 million in cash in early October. TTR, known as the tax answer company, serves businesses of all sizes, offering U.S. sales and use tax rates, laws, software, and customer support required for the biggest and most complex companies. Avalara and TTR bring together leading tax technology with trusted tax content, extending Avalara’s current products and content, adding new capabilities, and reaching new segments. TTR’s team, with its culture, training, and experience serving enterprise businesses, will add enterprise capabilities across Avalara’s content, product, sales, and customer support. TTR brings Avalara more than 1,400 customers, including blue chip customers that represent more than 30% of the Fortune 500, the largest or second largest company in each of 40 industries, 9 of the top 10 healthcare companies, 8 of the top 10 telecommunications companies and 5 of the top 10 IT services firms. TTR will operate as a subsidiary of Avalara, continuing to serve its customers with trusted solutions while integrating key products and content into Avalara’s automation tools. As companies of all sizes continue to introduce, accelerate, or mature their digital strategies, with the addition of TTR, Avalara will build an enterprise-ready tax automation suite.
  • Completed Follow-On Public Offering of Common Stock: We completed a public offering of 4,527,558 shares of common stock, including the full exercise of the underwriters’ option to purchase 590,551 additional shares of common stock, at a price of $127.00 per share. We received net proceeds of $556.3 million, after deducting underwriting discounts and commissions and before deducting offering expenses paid and payable of $0.7 million.

Product Highlights

  • Introduced E-invoicing Solution to Help Businesses Manage GST Compliance in India: We announced the availability of Avalara India GST e-Invoicing, an end-to-end solution that helps companies manage e-invoicing requirements and comply with India’s e-invoicing reform. The new offering builds on Avalara’s range of technological solutions available to improve the Goods and Services Tax (GST) compliance experience for businesses in India by validating, storing, and managing invoices, and providing the option to automate GST returns and e-way bills.
  • Unveiled Comprehensive Beverage Alcohol Compliance Solution for Wineries, Distilleries, Breweries, Importers, and Retailers: We announced the availability of Avalara AvaTax for Beverage Alcohol, a new offering for wineries, distilleries, breweries, importers, and retailers that locates and calculates sales and use tax plus beverage alcohol tax rates with rooftop-level accuracy, and connects to ecommerce or accounting software already in use by customers. AvaTax for Beverage Alcohol is a central component in the Avalara for Beverage Alcohol suite of products, which provides comprehensive support for beverage alcohol businesses across the compliance life cycle, from licensing and product registrations to tax calculations and returns, helping to reduce noncompliance and audit risk exposure.
  • Introduced New Capabilities to Help Sellers Manage Cross-Border Tax Compliance: We announced enhanced capabilities for Avalara’s cross-border solution, an integrated offering that helps businesses sell internationally by managing the complexity of customs duty and import tax compliance. The enhanced offering builds on Avalara’s range of technological solutions available to improve the cross-border compliance experience for businesses. Avalara’s cross-border solution consists of Avalara AvaTax Cross-Border and Avalara Item Classification, providing users with an integrated approach or stand-alone offerings to address the complex processes of classifying products and calculating custom duties and import taxes.

Financial Outlook

For the fourth quarter of 2020, the Company currently expects:

  • Total revenue between $132.0 and $134.0 million.
  • Non-GAAP operating loss between $4.0 and $6.0 million.

For the full year 2020, the Company currently expects:

  • Total revenue between $488.0 and $490.0 million.
  • Non-GAAP operating loss between $7.0 and $9.0 million.

Note: Our financial outlook above includes the impact of acquisitions that have closed to date during the fourth quarter of 2020.

Conference Call Information

Avalara will host a conference call at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) today, November 5, 2020, to discuss its financial results and business highlights. The conference call can be accessed by dialing (866) 393-4306 from the United States and Canada or (734) 385-2616 internationally with conference ID 1473927. A live webcast of the call will also be available on the Avalara investor relations website at investor.avalara.com.

A telephone replay of the conference call will be available until 8:59 p.m. Pacific Time on Thursday, November 12, 2020 and a webcast replay will also be archived at investor.avalara.com. The telephone replay will be available by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally with conference ID 1473927.

About Avalara, Inc.

Avalara helps businesses of all sizes get tax compliance right. In partnership with leading ERP, accounting, ecommerce, and other financial management system providers, Avalara delivers cloud-based compliance solutions for various transaction taxes, including sales and use, VAT, GST, excise, communications, lodging, and other indirect tax types. Headquartered in Seattle, Avalara has offices across the U.S. and around the world in Brazil, Europe, and India. More information at www.avalara.com.

Forward-Looking Statements

This press release and the accompanying conference call contain forward-looking statements including, among others, statements about our financial outlook for the fourth quarter and full year 2020 and our expectations for the integration of TTR into our business. In some cases you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “likely,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

These forward-looking statements involve risks, uncertainties, and assumptions that could cause actual performance or results to differ materially from those expressed or suggested by the forward-looking statements. If any of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual results could differ materially from the results expressed or implied by these forward-looking statements. These risks and uncertainties include risks associated with: our ability to sustain our revenue growth rate, to achieve or maintain profitability, and to effectively manage our anticipated growth; our ability to attract new customers on a cost-effective basis and the extent to which existing customers renew and upgrade their subscriptions; the impact of the novel coronavirus (COVID-19) pandemic and any associated economic downturn on our business operations, results, and financial position; the timing of our introduction of new solutions or updates to existing solutions; our ability to successfully diversify our solutions by developing or introducing new solutions or acquiring and integrating additional businesses, products, services, or content; our ability to maintain and expand our strategic relationships with third parties; our ability to deliver our solutions to customers without disruption or delay; our exposure to liability from errors, delays, fraud, or system failures, which may not be covered by insurance; our ability to expand our international reach; and the risks described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent Quarterly Reports on Form 10-Q, and which should be read in conjunction with our financial results and forward-looking statements. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Use of Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we have disclosed non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP basic net income (loss) per share, non-GAAP diluted net income (loss) per share, free cash flow, and calculated billings, which are all non-GAAP financial measures. We have provided tabular reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure at the end of this release.

  • We calculate non-GAAP cost of revenue, non-GAAP research and development expense, non-GAAP sales and marketing expense, and non-GAAP general and administrative expense as GAAP cost of revenue, GAAP research and development expense, GAAP sales and marketing expense, and GAAP general and administrative expense before stock-based compensation expense and the amortization of acquired intangible assets included in each of the expense categories.
  • We calculate non-GAAP gross profit as GAAP gross profit before stock-based compensation expense and the amortization of acquired intangibles included in cost of revenue. We calculate non-GAAP gross margin as GAAP gross margin before the impact of stock-based compensation expense and the amortization of acquired intangibles included in cost of revenue as a percentage of revenue.
  • We calculate non-GAAP operating income (loss) as GAAP operating loss before stock-based compensation expense, amortization of acquired intangibles, and goodwill impairments. We calculate non-GAAP net income (loss) as GAAP net loss before stock-based compensation expense, amortization of acquired intangibles, and goodwill impairments.
  • We calculate non-GAAP basic net income (loss) per share as non-GAAP net income (loss) divided by basic weighted average shares outstanding.
  • We calculate non-GAAP diluted net income (loss) per share as non-GAAP net income (loss) divided by diluted weighted average shares outstanding. Diluted weighted average shares outstanding includes weighted average shares outstanding plus the dilutive effect, if any, of outstanding common stock equivalents.
  • We define free cash flow as net cash provided by (used in) operating activities less cash used for the purchases of property and equipment.
  • We define calculated billings as total revenue plus the changes in deferred revenue and contract liabilities in the period. Because we recognize subscription revenue ratably over the subscription term, calculated billings can be used to measure our subscription sales activity for a particular period, to compare subscription sales activity across particular periods, and as a potential indicator of future subscription revenue, the actual timing of which will be affected by several factors, including subscription start date and duration.

Management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate financial performance and liquidity. We believe that non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results, prospects, and liquidity period-over-period without the impact of certain items that do not directly correlate to our performance and that may vary significantly from period to period for reasons unrelated to our operating performance, as well as comparing our financial results to those of other companies.

The company has not reconciled its expectations of non-GAAP financial measures to the corresponding GAAP measures primarily because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Our definitions of these non-GAAP financial measures may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP financial measures in conjunction with the related GAAP financial measure.

Definitions of Key Business Metrics

We also use the key business metrics of core customers and net revenue retention rate.

Core Customers

We believe core customers is a key indicator of our market penetration, growth, and potential future revenue. We use core customers as a metric to focus our customer count reporting on our primary target market segment. We define a core customer as:

  • a unique account identifier in our primary U.S. billing systems (multiple companies or divisions within a single consolidated enterprise that each have a separate unique account identifier are each treated as separate customers);
  • that is active as of the measurement date; and
  • for which we have recognized, as of the measurement date, greater than $3,000 in total revenue during the last twelve months.

Currently, our core customer count includes only customers with unique account identifiers in our primary U.S. billing systems and does not include customers who subscribe to our solutions through our international subsidiaries and certain legacy billing systems that have not been integrated into our primary U.S. billing systems (e.g., our lodging tax compliance solution). As we increase our international operations and sales in future periods, we may add customers billed from our international subsidiaries to the core customer metric.

We also have a substantial number of customers of various sizes who do not meet the revenue threshold to be considered a core customer. These customers provide us with market share and awareness, and we anticipate that some may grow into core customers. We believe there is strategic value to addressing the small business and self-serve segment of the marketplace.

Net Revenue Retention Rate

We believe that our net revenue retention rate provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. We also believe it reflects the stability of our revenue base, which is one of our core competitive strengths. We calculate our net revenue retention rate by dividing (a) total revenue in the current quarter from any billing accounts that generated revenue during the corresponding quarter of the prior year by (b) total revenue in such corresponding quarter from those same billing accounts. This calculation includes changes during the period for such billing accounts, such as additional solutions purchased, changes in pricing and transaction volume, and terminations, but does not reflect revenue for new billing accounts added during the one-year period.

Currently, our net revenue retention rate includes only customers with unique account identifiers in our primary U.S. billing systems and does not include customers who subscribe to our solutions through our international subsidiaries or certain legacy billing systems primarily related to past acquisitions. Our Streamlined Sales Tax solution (SST) is not included in net revenue retention rate. This means that revenue expansion from existing customers adopting our SST solution is not included, while revenue contraction from customers downgrading one or more of Avalara’s other solutions in favor of SST is included.


Reported Consolidated Results

A VALARA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(
in thousands, except per share amounts)

 

 

For the Three Months Ended September 30,

 

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

$

119,193

 

 

$

91,986

 

Professional services

 

 

8,686

 

 

 

6,539

 

Total revenue

 

 

127,879

 

 

 

98,525

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

 

31,155

 

 

 

25,621

 

Professional services

 

 

3,777

 

 

 

4,157

 

Total cost of revenue (2)

 

 

34,932

 

 

 

29,778

 

Gross profit

 

 

92,947

 

 

 

68,747

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development (2)

 

 

32,562

 

 

 

21,871

 

Sales and marketing (1)(2)

 

 

49,057

 

 

 

41,263

 

General and administrative (2)

 

 

23,885

 

 

 

20,511

 

Total operating expenses

 

 

105,504

 

 

 

83,645

 

Operating loss

 

 

(12,557

)

 

 

(14,898

)

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income

 

 

(36

)

 

 

(2,202

)

Interest expense

 

 

 

 

 

2

 

Other (income) expense, net

 

 

(185

)

 

 

265

 

Total other (income) expense, net

 

 

(221

)

 

 

(1,935

)

Loss before income taxes

 

 

(12,336

)

 

 

(12,963

)

Provision for income taxes

 

 

393

 

 

 

341

 

Net loss

 

$

(12,729

)

 

$

(13,304

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.15

)

 

$

(0.17

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

82,288

 

 

 

76,156

 

 

 

 

 

 

 

 

 

 

(1) In preparing our 2019 annual financial statements, we discovered an immaterial error in recording deferred sales commissions for the first three quarters of 2019 impacting our previously reported quarterly financial results. We have presented the corrected consolidated statements of operations data for the third quarter of 2019. The correction to sales commission expense resulted in additional sales and marketing expenses of $0.9 million for the three months ended September 30, 2019.

 

 

 

 

For the Three Months Ended September 30,

 

(2) The stock-based compensation expense included above was as follows:

 

2020

 

 

2019

 

Cost of revenue

 

$

1,591

 

 

$

828

 

Research and development

 

 

3,781

 

 

 

1,781

 

Sales and marketing

 

 

3,157

 

 

 

2,135

 

General and administrative

 

 

4,292

 

 

 

5,178

 

Total stock-based compensation

 

$

12,821

 

 

$

9,922

 

 

 

 

 

 

 

 

 

 

The amortization of acquired intangibles included above was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

1,007

 

 

$

1,235

 

Research and development

 

 

 

 

 

 

Sales and marketing

 

 

447

 

 

 

605

 

General and administrative

 

 

4

 

 

 

4

 

Total amortization of acquired intangibles

 

$

1,458

 

 

$

1,844

 

 

AVALARA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

 

 

For the Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

$

333,258

 

 

$

255,225

 

Professional services

 

 

22,551

 

 

 

19,569

 

Total revenue

 

 

355,809

 

 

 

274,794

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

 

89,451

 

 

 

69,537

 

Professional services

 

 

13,065

 

 

 

12,883

 

Total cost of revenue (2)

 

 

102,516

 

 

 

82,420

 

Gross profit

 

 

253,293

 

 

 

192,374

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development (2)

 

 

85,253

 

 

 

56,823

 

Sales and marketing (1) (2)

 

 

144,731

 

 

 

122,324

 

General and administrative (2)

 

 

65,595

 

 

 

53,764

 

Total operating expenses

 

 

295,579

 

 

 

232,911

 

Operating loss

 

 

(42,286

)

 

 

(40,537

)

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income

 

 

(1,646

)

 

 

(4,251

)

Interest expense

 

 

 

 

 

286

 

Other (income) expense, net

 

 

(3,435

)

 

 

694

 

Total other (income) expense, net

 

 

(5,081

)

 

 

(3,271

)

Loss before income taxes

 

 

(37,205

)

 

 

(37,266

)

Provision for income taxes

 

 

947

 

 

 

629

 

Net loss

 

$

(38,152

)

 

$

(37,895

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.48

)

 

$

(0.53

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

79,715

 

 

 

72,064

 

 

 

 

 

 

 

 

 

 

(1) In preparing our 2019 annual financial statements, we discovered an immaterial error in recording deferred sales commissions for the first three quarters of 2019 impacting our previously reported quarterly financial results. We have presented the corrected consolidated statements of operations data for the first nine months of 2019. The correction to sales commission expense resulted in additional sales and marketing expenses of $3.1 million for the nine months ended September 30, 2019.

 

 

 

 

For the Nine Months Ended September 30,

 

(2) The stock-based compensation expense included above was as follows:

 

2020

 

 

2019

 

Cost of revenue

 

$

4,264

 

 

$

2,277

 

Research and development

 

 

9,255

 

 

 

4,700

 

Sales and marketing

 

 

8,928

 

 

 

6,411

 

General and administrative

 

 

12,352

 

 

 

12,518

 

Total stock-based compensation

 

$

34,799

 

 

$

25,906

 

 

 

 

 

 

 

 

 

 

The amortization of acquired intangibles included above was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

3,302

 

 

$

3,635

 

Research and development

 

 

 

 

 

 

Sales and marketing

 

 

1,603

 

 

 

1,653

 

General and administrative

 

 

12

 

 

 

11

 

Total amortization of acquired intangibles

 

$

4,917

 

 

$

5,299

 

 

 

 

 

 

 

 

 

 

AVALARA, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(
in thousands)

 

September 30,

 

 

December 31,

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,064,077

 

 

$

466,950

 

Trade accounts receivable—net of allowance for doubtful accounts

 

63,056

 

 

 

51,644

 

Deferred commissions

 

11,035

 

 

 

9,279

 

Prepaid expenses and other current assets

 

18,306

 

 

 

14,127

 

Total current assets before customer fund assets

 

1,156,474

 

 

 

542,000

 

Funds held from customers

 

25,297

 

 

 

24,383

 

Receivable from customers—net of allowance for doubtful accounts

 

535

 

 

 

420

 

Total current assets

 

1,182,306

 

 

 

566,803

 

Noncurrent assets:

 

 

 

 

 

 

 

Deferred commissions

 

34,806

 

 

 

29,137

 

Operating lease right-of-use assets—net

 

50,387

 

 

 

49,321

 

Property and equipment—net

 

33,553

 

 

 

34,997

 

Intangible assets—net

 

18,139

 

 

 

22,932

 

Goodwill

 

101,670

 

 

 

101,224

 

Other noncurrent assets

 

5,551

 

 

 

2,853

 

Total assets

$

1,426,412

 

 

$

807,267

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Trade payables

 

16,642

 

 

 

11,693

 

Accrued expenses

 

62,760

 

 

 

62,104

 

Deferred revenue

 

178,918

 

 

 

160,271

 

Accrued earnout liabilities

 

465

 

 

 

4,120

 

Operating lease liabilities

 

10,698

 

 

 

8,756

 

Total current liabilities before customer fund obligations

 

269,483

 

 

 

246,944

 

Customer fund obligations

 

26,669

 

 

 

24,783

 

Total current liabilities

 

296,152

 

 

 

271,727

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Deferred revenue

 

1,722

 

 

 

970

 

Accrued earnout liabilities

 

 

 

 

9,835

 

Operating lease liabilities

 

55,781

 

 

 

58,301

 

Deferred tax liability

 

530

 

 

 

337

 

Other noncurrent liabilities

 

5,537

 

 

 

2,375

 

Total liabilities

 

359,722

 

 

 

343,545

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

8

 

 

 

8

 

Additional paid-in capital

 

1,616,912

 

 

 

976,627

 

Accumulated other comprehensive loss

 

(1,884

)

 

 

(2,719

)

Accumulated deficit

 

(548,346

)

 

 

(510,194

)

Total shareholders’ equity

 

1,066,690

 

 

 

463,722

 

Total liabilities and shareholders' equity

$

1,426,412

 

 

$

807,267

 

 

 

AVALARA, INC.
U
NAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 

 

For the Three Months Ended
September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,729

)

 

$

(13,304

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

12,821

 

 

 

9,922

 

Depreciation and amortization

 

 

3,924

 

 

 

4,016

 

Asset impairments

 

 

794

 

 

 

 

Deferred tax expense

 

 

58

 

 

 

60

 

Non-cash operating lease costs (1)

 

 

2,067

 

 

 

1,213

 

Non-cash change in earnout liability

 

 

 

 

 

134

 

Non-cash bad debt expense

 

 

72

 

 

 

152

 

Other

 

 

101

 

 

 

32

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(3,214

)

 

 

(5,920

)

Prepaid expenses and other current assets

 

 

(693

)

 

 

(2,678

)

Deferred commissions

 

 

(2,485

)

 

 

(3,838

)

Other noncurrent assets

 

 

(1,055

)

 

 

(49

)

Trade payables

 

 

1,792

 

 

 

2,350

 

Accrued expenses

 

 

15,997

 

 

 

5,706

 

Deferred revenue

 

 

12,920

 

 

 

9,655

 

Operating lease liabilities (1)

 

 

(2,448

)

 

 

(1,599

)

Net cash provided by operating activities

 

 

27,922

 

 

 

5,852

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,118

)

 

 

(2,246

)

Cash paid for acquisitions of businesses

 

 

 

 

 

(13,000

)

Cash paid for acquired intangible assets

 

 

 

 

 

(8

)

Net (increase) decrease in customer fund assets

 

 

(3,662

)

 

 

7,892

 

Net cash used in investing activities

 

 

(5,780

)

 

 

(7,362

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offering, net of underwriting discounts

 

 

556,312

 

 

 

 

Payments of deferred financing costs

 

 

(300

)

 

 

(157

)

Proceeds from exercise of stock options

 

 

5,294

 

 

 

11,166

 

Proceeds from purchases of stock under employee stock purchase plan

 

 

5,621

 

 

 

4,629

 

Taxes paid related to net share settlement of stock-based awards

 

 

 

 

 

(1,090

)

Acquisition-related post-closing payments

 

 

(2,763

)

 

 

 

Payments related to business combination earnouts

 

 

 

 

 

(375

)

Net increase (decrease) in customer fund obligations

 

 

3,662

 

 

 

(7,811

)

Net cash provided by financing activities

 

 

567,826

 

 

 

6,362

 

Foreign currency effect on cash and cash equivalents

 

 

(302

)

 

 

127

 

Net change in cash and cash equivalents

 

 

589,666

 

 

 

4,979

 

Cash and cash equivalents—Beginning of period

 

 

474,411

 

 

 

441,584

 

Cash and cash equivalents—End of period

 

$

1,064,077

 

 

$

446,563

 

 

(1) Avalara adopted the new lease accounting standard as of January 1, 2019 in our Annual Report on Form 10-K for the year ended December 31, 2019. We have presented cash flows from operating activities for the quarter ended September 30, 2019 to include adjustments for the adoption of the new lease accounting standard. The adjustments do not impact previously disclosed net cash provided by operating activities.

 

AVALARA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 

 

For the Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(38,152

)

 

$

(37,895

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

34,799

 

 

 

25,906

 

Depreciation and amortization

 

 

11,923

 

 

 

11,684

 

Asset impairments

 

 

794

 

 

 

 

Deferred tax expense

 

 

193

 

 

 

138

 

Non-cash operating lease costs (1)

 

 

6,027

 

 

 

3,380

 

Non-cash change in earnout liability

 

 

(2,325

)

 

 

610

 

Non-cash bad debt expense

 

 

1,445

 

 

 

602

 

Other

 

 

546

 

 

 

227

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(12,205

)

 

 

(9,648

)

Prepaid expenses and other current assets

 

 

(4,179

)

 

 

(3,274

)

Deferred commissions

 

 

(7,425

)

 

 

(13,215

)

Other noncurrent assets

 

 

(2,698

)

 

 

(831

)

Trade payables

 

 

4,683

 

 

 

4,818

 

Accrued expenses

 

 

6,247

 

 

 

2,305

 

Deferred revenue

 

 

19,397

 

 

 

24,782

 

Operating lease liabilities (1)

 

 

(7,243

)

 

 

(4,158

)

Net cash provided by operating activities

 

 

11,827

 

 

 

5,431

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(5,674

)

 

 

(7,196

)

Cash paid for acquisitions of businesses

 

 

 

 

 

(30,310

)

Cash paid for acquired intangible assets

 

 

 

 

 

(139

)

Net (increase) in customer fund assets

 

 

(1,681

)

 

 

(3,986

)

Net cash used in investing activities

 

 

(7,355

)

 

 

(41,631

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offering, net of underwriting discounts

 

 

556,312

 

 

 

274,705

 

Payments of deferred financing costs

 

 

(300

)

 

 

(555

)

Proceeds from exercise of stock options

 

 

30,717

 

 

 

51,583

 

Proceeds from purchases of stock under employee stock purchase plan

 

 

11,337

 

 

 

12,293

 

Taxes paid related to net share settlement of stock-based awards

 

 

 

 

 

(1,183

)

Acquisition-related post-closing payments

 

 

(2,763

)

 

 

 

Payments related to business combination earnouts

 

 

(3,760

)

 

 

(375

)

Payments related to asset acquisition earnouts

 

 

(65

)

 

 

 

Net increase in customer fund obligations

 

 

1,681

 

 

 

3,986

 

Net cash provided by financing activities

 

 

593,159

 

 

 

340,454

 

Foreign currency effect on cash and cash equivalents

 

 

(504

)

 

 

(13

)

Net change in cash and cash equivalents

 

 

597,127

 

 

 

304,241

 

Cash and cash equivalents—Beginning of period

 

 

466,950

 

 

 

142,322

 

Cash and cash equivalents—End of period

 

$

1,064,077

 

 

$

446,563

 

 

 

 

 

 

 

 

 

 

(1) Avalara adopted the new lease accounting standard as of January 1, 2019 in our Annual Report on Form 10-K for the year ended December 31, 2019. We have presented cash flows from operating activities for the nine months ended September 30, 2019 to include adjustments for the adoption of the new lease accounting standard. The adjustments do not impact previously disclosed net cash provided by operating activities.

 

 

 

AVALARA, INC.
UNAUDITED PRESENTATION AND RECONCILIATION TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts)

The following schedules reflect our non-GAAP financial measures and reconcile our non-GAAP financial measures to the related GAAP financial measures:

 

Summary of Non-GAAP Financial Measures:

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Non-GAAP cost of revenue

 

$

32,334

 

 

$

27,715

 

 

$

94,950

 

 

$

76,508

 

Non-GAAP gross profit

 

 

95,545

 

 

 

70,810

 

 

 

260,859

 

 

 

198,286

 

Non-GAAP gross margin

 

 

75

%

 

 

72

%

 

 

73

%

 

 

72

%

Non-GAAP research and development expense

 

$

28,781

 

 

$

20,090

 

 

$

75,998

 

 

$

52,123

 

Non-GAAP sales and marketing expense

 

 

45,453

 

 

 

38,523

 

 

 

134,200

 

 

 

114,260

 

Non-GAAP general and administrative expense

 

 

19,589

 

 

 

15,329

 

 

 

53,231

 

 

 

41,235

 

Non-GAAP operating income (loss)

 

 

1,722

 

 

 

(3,132

)

 

 

(2,570

)

 

 

(9,332

)

Non-GAAP net income (loss)

 

 

1,550

 

 

 

(1,538

)

 

 

1,564

 

 

 

(6,690

)

Non-GAAP basic net income (loss) per share

 

 

0.02

 

 

 

(0.02

)

 

 

0.02

 

 

 

(0.09

)

Non-GAAP diluted net income (loss) per share

 

 

0.02

 

 

 

(0.02

)

 

 

0.02

 

 

 

(0.09

)

Free cash flow

 

$

25,804

 

 

$

3,606

 

 

$

6,153

 

 

$

(1,765

)

Reconciliation of Non-GAAP Financial Measures:

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Reconciliation of Non-GAAP Cost of Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

34,932

 

 

$

29,778

 

 

$

102,516

 

 

$

82,420

 

Stock-based compensation expense

 

 

(1,591

)

 

 

(828

)

 

 

(4,264

)

 

 

(2,277

)

Amortization of acquired intangibles

 

 

(1,007

)

 

 

(1,235

)

 

 

(3,302

)

 

 

(3,635

)

Non-GAAP Cost of Revenue

 

$

32,334

 

 

$

27,715

 

 

$

94,950

 

 

$

76,508

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Gross Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

92,947

 

 

$

68,747

 

 

$

253,293

 

 

$

192,374

 

Stock-based compensation expense

 

 

1,591

 

 

 

828

 

 

 

4,264

 

 

 

2,277

 

Amortization of acquired intangibles

 

 

1,007

 

 

 

1,235

 

 

 

3,302

 

 

 

3,635

 

Non-GAAP Gross Profit

 

$

95,545

 

 

$

70,810

 

 

$

260,859

 

 

$

198,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Gross Margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

73

%

 

 

70

%

 

 

71

%

 

 

70

%

Stock-based compensation expense as a percentage of revenue

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

Amortization of acquired intangibles as a percentage of revenue

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

Non-GAAP Gross Margin

 

 

75

%

 

 

72

%

 

 

73

%

 

 

72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Research and Development Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

32,562

 

 

$

21,871

 

 

$

85,253

 

 

$

56,823

 

Stock-based compensation expense

 

 

(3,781

)

 

 

(1,781

)

 

 

(9,255

)

 

 

(4,700

)

Amortization of acquired intangibles

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Research and Development Expense

 

$

28,781

 

 

$

20,090

 

 

$

75,998

 

 

$

52,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Sales and Marketing Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

49,057

 

 

$

41,263

 

 

$

144,731

 

 

$

122,324

 

Stock-based compensation expense

 

 

(3,157

)

 

 

(2,135

)

 

 

(8,928

)

 

 

(6,411

)

Amortization of acquired intangibles

 

 

(447

)

 

 

(605

)

 

 

(1,603

)

 

 

(1,653

)

Non-GAAP Sales and Marketing Expense

 

$

45,453

 

 

$

38,523

 

 

$

134,200

 

 

$

114,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP General and Administrative Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

23,885

 

 

$

20,511

 

 

$

65,595

 

 

$

53,764

 

Stock-based compensation expense

 

 

(4,292

)

 

 

(5,178

)

 

 

(12,352

)

 

 

(12,518

)

Amortization of acquired intangibles

 

 

(4

)

 

 

(4

)

 

 

(12

)

 

 

(11

)

Non-GAAP General and Administrative Expense

 

$

19,589

 

 

$

15,329

 

 

$

53,231

 

 

$

41,235

 

 

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Reconciliation of Non-GAAP Operating Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

$

(12,557

)

 

$

(14,898

)

 

$

(42,286

)

 

$

(40,537

)

Stock-based compensation expense

 

 

12,821

 

 

 

9,922

 

 

 

34,799

 

 

 

25,906

 

Amortization of acquired intangibles

 

 

1,458

 

 

 

1,844

 

 

 

4,917

 

 

 

5,299

 

Non-GAAP Operating Income (Loss)

 

$

1,722

 

 

$

(3,132

)

 

$

(2,570

)

 

$

(9,332

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Net Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,729

)

 

$

(13,304

)

 

$

(38,152

)

 

$

(37,895

)

Stock-based compensation expense

 

 

12,821

 

 

 

9,922

 

 

 

34,799

 

 

 

25,906

 

Amortization of acquired intangibles

 

 

1,458

 

 

 

1,844

 

 

 

4,917

 

 

 

5,299

 

Non-GAAP Net Income (Loss)

 

$

1,550

 

 

$

(1,538

)

 

$

1,564

 

 

$

(6,690

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Basic Net Income (Loss) Per

Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

$

(0.15

)

 

$

(0.17

)

 

$

(0.48

)

 

$

(0.53

)

Stock-based compensation expense per share

 

 

0.16

 

 

 

0.13

 

 

 

0.44

 

 

 

0.36

 

Amortization of acquired intangibles per share

 

 

0.02

 

 

 

0.02

 

 

 

0.06

 

 

 

0.07

 

Non-GAAP Basic Net Income (Loss) Per Share

 

$

0.02

 

 

$

(0.02

)

 

$

0.02

 

 

$

(0.09

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Diluted Net Income (Loss) Per

Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

$

(0.15

)

 

$

(0.17

)

 

$

(0.45

)

 

$

(0.53

)

Stock-based compensation expense per share

 

 

0.15

 

 

 

0.13

 

 

 

0.41

 

 

 

0.36

 

Amortization of acquired intangibles per share

 

 

0.02

 

 

 

0.02

 

 

 

0.06

 

 

 

0.07

 

Non-GAAP Diluted Net Income (Loss) Per Share (1)

 

$

0.02

 

 

$

(0.02

)

 

$

0.02

 

 

$

(0.09

)

Shares used in computing non-GAAP diluted net income (loss) per share

 

 

86,700

 

 

 

71,568

 

 

 

84,078

 

 

 

69,983

 

 

(1) Non-GAAP diluted net income (loss) per share for the three and nine months ended September 30, 2020 was calculated using the diluted share count which includes approximately 4.4 million dilutive shares related to employee stock options and stock-based awards. For the three and nine months ended September 30, 2019, all common stock equivalents have been excluded from the diluted share count as their effect is antidilutive.

 

 

Free Cash Flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

27,922

 

 

$

5,852

 

 

$

11,827

 

 

$

5,431

 

Purchases of property and equipment

 

 

(2,118

)

 

 

(2,246

)

 

 

(5,674

)

 

 

(7,196

)

Free Cash Flow

 

$

25,804

 

 

$

3,606

 

 

$

6,153

 

 

$

(1,765

)

 

AVALARA, INC.
UNAUDITED PRESENTATION OF CALCULATED BILLINGS AND RECONCILIATION TO REVENUE

 

Three Months Ended

 

 

Sep 30,
2020

 

 

Jun 30,
2020

 

 

Mar 31,
2020

 

 

Dec 31,
2019

 

 

Sep 30,
2019

 

 

Jun 30,
2019

 

 

Mar 31,
2019 (1)

 

 

Dec 31,
2018

 

Total revenue

$

127,879

 

 

$

116,487

 

 

$

111,443

 

 

$

107,627

 

 

$

98,525

 

 

$

91,299

 

 

$

84,970

 

 

$

76,923

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (end of

period)

 

180,640

 

 

 

167,719

 

 

 

165,369

 

 

 

161,241

 

 

 

148,466

 

 

 

138,811

 

 

 

132,714

 

 

 

134,653

 

Contract liabilities (end of

period)

 

7,673

 

 

 

6,195

 

 

 

6,330

 

 

 

5,197

 

 

 

4,843

 

 

 

4,508

 

 

 

4,208

 

 

 

 

Impact of adoption of

ASC 606 on deferred

revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,250

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

(beginning of

period)

 

(167,719

)

 

 

(165,369

)

 

 

(161,241

)

 

 

(148,466

)

 

 

(138,811

)

 

 

(132,714

)

 

 

(134,653

)

 

 

(118,209

)

Contract liabilities

(beginning of

period)

 

(6,195

)

 

 

(6,330

)

 

 

(5,197

)

 

 

(4,843

)

 

 

(4,508

)

 

 

(4,208

)

 

 

 

 

 

 

Impact of adoption of

ASC 606 on contract

liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,090

)

 

 

 

Calculated billings

$

142,278

 

 

$

118,702

 

 

$

116,704

 

 

$

120,756

 

 

$

108,515

 

 

$

97,696

 

 

$

96,399

 

 

$

93,367

 

 

  (1) The first quarter of 2019 includes reconciling adjustments to exclude the one-time impact of adoption of ASC 606 as of January 1, 2019.

AVALARA, INC.
UNAUDITED PRESENTATION OF KEY BUSINESS METRICS

 

Sep 30,
2020

 

 

Jun 30,
2020

 

 

Mar 31,
2020

 

 

Dec 31,
2019

 

 

Sep 30,
2019

 

 

Jun 30,
2019

 

 

Mar 31,
2019

 

 

Dec 31,
2018

 

Number of core

customers

(as of end

of period)

 

14,180

 

 

 

13,560

 

 

 

12,940

 

 

 

12,150

 

 

 

11,400

 

 

 

10,560

 

 

 

9,800

 

 

 

9,150

 

Net revenue

retention rate

 

108

%

 

 

107

%

 

 

109

%

 

 

111

%

 

 

113

%

 

 

111

%

 

 

107

%

 

 

108

%

 

Investor Contact
Jennifer Gianola
Avalara
jennifer.gianola@avalara.com
650-499-9837

Media Contact
Tommy Morgan
Avalara
media@avalara.com
540-448-7551

Source: Avalara, Inc.

Categories: Press Releases
View all news