AVLR - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Avalara’s Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Greg McDowell, Investor Relations. you. Thank sir. ahead, go Please

Greg McDowell

afternoon, and year quarter fiscal Avalara’s welcome earnings call. to XXXX fourth and Good

We discussing me issued Executive after Scott will press CFO, Vice market our be McFarlane; Initiatives, closed the President results of today. Ross Ingram; With Bill are Strategic CEO, in Avalara’s and announced Tennenbaum. release

provisions XXXX. contain Securities Litigation Private forward-looking will made call the which are pursuant Act of of to Today’s statements, the safe harbor Reform

financial and our statements representing and include first financial concerning and future guidance financial such believe, today statements. any performance Forward-looking identified subsequent and our our views and intend, or not business statements condition, words expected quarter These business date, as trends, expect, and can and seek statements we for by only, anticipate, as reflect any the these fiscal be of be year not update do duty to our as views plan, should undertake at will. upon relied

address that subject expectations. differ Forward-looking statements, actual could matters to are and by to uncertainties materially results from cause that nature, their risks

important For other material XX-K February press the Securities Exchange our discussed today’s SEC. of that could results, XXXX, the refer XX, risks our Commission risks in and our filed to filings on and the report with with a Form annual release, please periodic affect the discussion on actual and factors other

our with will investor.avalara.com. with we non-GAAP the filed in also are non-GAAP reconciliation financial release, earnings included discuss which call, and also accounting at on generally the is and accepted has our accordance the principles. prepared is During available results measures, GAAP in SEC website of which not been press A

me call let Scott. over that, to the turn With

Scott McFarlane

year. welcome QX strong call. and everyone was amazing capping Avalara XXXX Greg, another earnings off our an to Thanks, quarter for QX joining

revenue quarter the $XXX.X we million, XX% year. QX, total reported last increase an same of In representing of over

solid wide across new saw Our across execution range strong and geographies the growth upsell We and wins by driven was segments customer business. of and experienced a activity. rate a industry retention we continued strong customer

I contributed continued in thank our to and our And greatly to of chance meeting. The to their would each our their of work, success customers event. amazing our to our of success like introduction company I our we’ve thank customers, new and the five-year appreciated. partners our and the would at was recently who like vision our hard XXXX. commitment Avalara. annual all-hands all of employees work other had document, celebrate involvement, to and employees We is for to see It hard the at all highlight of year meeting our at vision enthusiasm our fourth, excitement, was this this written a

of outline account management, got share I are We a as see automation. key such live inventory business we it We lives see every the payments the in world digital management, work been with others, and automated some our repeatable fulfillment all Before like laggards. of how it but manual once aspects and among salesforce resource in receivable, enterprise our I lives vision well. requirements you, to our thrives there as we personal Many would of in have that here. of day because planning,

the every where business exist steps on government This still manual planet mandated burden, ease the We obligations to processes global businesses endless and for to governments state regulatory are As the most array obligations of surrounding the complicated collect taxes, evolving of you the compliance. tax face, know, worldwide must government and the a require compliance compliance impose remit and businesses. confounding transaction Avalara and is bulk and of in.

inevitable be automated. and compliance process. to is should vision automation It is We believe it not to Avalara This back is evolved. and believe core that it our and not a how remain otherwise manual for brings should is think our simply will irrational. belief compliance will me and We

is me we When true decade even to started I’ve ago, service tax when it. that how was to vision part has as than said over exciting the more encompass in Avalara that as the today of is to our compliance only articulated grown before was view ago broader be it we transaction years first challenge. an wanted a But we This calculation. world. XX of what’s every

management Avalara registration and very document an automated other focused storage robust compliance compliance was end-to-end licensing collection, So having and certificate naturally our on cross-border returns remittance and Today, services, added and provider, is grand more. solutions, exemption vision transactions. services, and

required process prime now, time manage vision in now on do. global their imperative. commitment principles and key take updated also the global automate aspects reconfirm business to our big we the customers meeting for to be we compliance enough, long-range also really promises an seeking the compliance is everything and growth claim of becoming enough payments clarified it. planet to some of What businesses. for just while transaction we pursue and we wasn’t returns capture filed we directive, our all our the for this Through and our on to about to lengthy that documents thorough behalf, to part driving to undertook platform we forth. And frame remains our our efficiencies and customers, So our cloud process, a make We compliance oddly every so

and term. the towards improving in our marketing and I’m the business of excited achieve breakeven. margins long During sales we XXXX, improving the on we focused efficiency driving the about on those continuing emphasis placing results and on proud cash are flow we from efforts

element parts for every onboarding, These our support partner the technologies profound self today exciting of application impact have business to on customer and the business. touch service our investments advanced initiatives, of initiatives journey. from compliance Efficiency of continued the and a manual

So we believe days Avalara. remain of early they in for the creation value

machine and artificial learning application intelligence of technology we last Index A from good that example acquired is year. the

primary of global one AI product initial you using team of to new As tax recall, asked database massive content the mapping was explore the accelerate we codes, the projects the and a code. to of acquisition the may of

We area. and progress rates click amazing tax sales most button. use can by at in the of are for a excited this We the team share states now to source

automation we tools assist have product addition, In with cross-border delivered that classification.

leaving Our tools experts new content automation team, dedicated on a to group tax content. work that our maintain relies and use more to expand Avalara now content of assemble and compliance database these to efficiently, time to extensive

of U.S. taxes our state last our rate reminder I and to include take base of governs engine. the updates, tasks, to vertical, These busy. more. added and we AvaTax that acquisition rate can the everything new maintenance changes stats articulate and difficulty with to tax and holidays, of As made database. changes, a updates In and changes new and amendments, markets year. tax are the partner rule some the potential content geographic from global the our unlocks database regulations the XXX,XXX customer changes XXXX, made If local a want to minute share These on Avalara, be and each based laws tax type new around to change calculation our compliance boundary ever-changing almost expanding I for content or taxability

investments large the that show internal major even that office with big as our accounting up our of I’m technology only but or our keep efficiencies sized not usability excited business small a accounting improvements existing and up firm. medium in in all new. processes, to drive trying a Imagine or for also customers,

SKUs new classifications accelerate automated onboarding. customer and new We are of customers. AvaTax taxability tax to process be analysis automatic our to customer’s and for code substantially can in ease burden the the labor and system of mapping will codes a final the portfolio testing The new intensive product

tax AI and powered rate technology. an with lookup our tool backend better updating also search We’re

before of who at American brought the briefly our GE. coming and Express me my new today, comments Officer Lee in marketing an Finally, hires to Marketing Avalara I of allow in caliber Chief we and prior to leadership close leadership want Avalara. for Jay astounding organization. two today roles Last the I talent most the our team. as have joined on PayPal, recognize touch November, at joined from team into recent year,

was Prior including blockchain SAP Salim and an Avalara marketing platform on technology products month, of technology Technologies. sharing And last Loyakk, built Avalara, enterprise companies and Salim and global data SVP overseeing International. enterprise as Ali has joined of CEO notable partnership to Veritas for efforts

not partner With Bill last past hand my that, Ingram you a about close my me would for the in of join his the skill. sure CFOs to call for several great be willingness this Bill alongside I to allow today I section we’ve what of many can by are with confidently not for I’m more are we has of believe for. to enthusiasm years one to that honor and career leadership grateful been over work say best we the the his earnings could our been It company. led time. this where and I business. I’m without be and waiting to

business. excise and our his communications I a will last today is when businesses, VIACK As follow his of since us in transition arriving IPO. Credit for career Avalara folks cross-border, IPO. Goldman our team our his Avalara Suisse choice Group final to leadership the at one Ross’ Sachs collaboration our financial years XX-year began led at plan trust lodging, was years at banking nearly his that in stellar Ross built director seven managed growth I for strategic working software investment deliver phone a was worked side-by-side the has Corporation, year, In Ross best Sachs, on and has with he Strategic Initiatives testament the that, that over managing Ross a prep experience Ross come. role our which helping They and company. with at roles our the Goldman to including in Since will believe footsteps. enjoy represents and strategies XXXX Tennenbaum web to areas updates led Ross and

With that over to you, Bill.

Bill Ingram

Thanks, Scott.

effective a standard, modified XXXX Avalara reminder, the January new on a XXX, retrospective basis. recognition revenue X, As accounting adopted ASC

a presented results ASC results in conformity in historical with As XXXX are compliance financial while financial to presented result, are prior ASC with during XXXX XXX. XXX,

Our release the information ASC reconcile standard. impacts includes the adoption additional to the press XXX earnings of of

fiscal execution demand. sales by continued strong year XXXX fourth highlighted and were Our results and quarter market

million. grew the our ASC to revenue For year, $XXX.X total XXX under XX%

$XXX.X both was a revenue combined For total customers A sales new up driven by the in basis. execution increased demand million, and was quarter once quarter, the again XX% growth with year-over-year channels. strong strong fourth existing across on from

revenue Subscription was was grew $X.X represented of year-over-year. Professional returns million. and $XX.X it our and XX% XX% total revenue This services million. revenue

end XX,XXX customer increased of core QX XXXX. by to count Our approximately at XXX the

averaged Our is the XXX% in and net four last XXX% revenue QX was retention over quarters. rate

the GAAP call. discussing statement, Our non-GAAP rate, gross otherwise supported share was expenses, churn, and by all before that to unless stated count low are revenue In note strong of to reconciled customer results on the to references press and contributes our release remainder earnings just this income value. that are the a results issued in retention lifetime our basis operating please

Gross XX% decline a discussed This of we $XX.X for and third-party gross $XX.X from expansion and quarters. point markets have representing gross last profit a with primarily hosting our as international software The XX% the prior XXXX, margin profit into period margin QX costs in margin. same million percentage was in in gross results million year. compares two gross

operating expenses. to Turning

XX% sales million fuel XXX or and of or of marketing and expense growth a in marketing in $XX.X would been XX% and invest to was sales $XX.X million continue have acquisition. new revenue. Sales basis, marketing On revenue. to expense customer QX long-term We and

marketing and line expectations our mainly this up in to due sales on sequential was basis, was While expense with and a seasonality.

sales marketing continued are We our and with efficiency. pleased

new and development research we mode. expense expense growth research increase invest and XX% features drive increase in revenue. development to was was consistent our content million of continue expectations sales to QX, For and efficiency The and with $XX.X competitive or in our as products,

recognized expense during $XX.X in an QX, administrative recovery, primarily general and decrease litigation was from quarter by and general was For the prior administrative which quarter. or XX% The million insurance driven expense the was of revenue.

was million Non-GAAP million previous than revenue which was $XX.X $X.XX fourth basis, on a our per $X.XX per $X.X $XX.X XXX Non-GAAP due non-GAAP a XXXX. loss compared XXX in per XX.X of the primarily shares quarter non-GAAP guidance better operating On basis, a in XXXX the operating fourth million operating QX upside on outstanding. was quarter. the of outstanding. for to compared loss share million in based is $X.XX based the loss QX, to On non-GAAP loss quarter was to loss in XX.X shares million share loss share

an discovered previously first we impacting financial statements, our of reported financial error commissions annual quarters XXX XXXX ASC immaterial sales the in our for preparing results. In XXXX recording deferred three

in for the schedules, of expenses first resulted no marketing million change the previously XXXX, additional reported have operations results. On as the quarters sales of ASC three each presented of last $X as of ASC The each XXXX under statements of the of three There quarters correction for unaudited we and financial XXX corrected. previously page consolidated are of and reported is financial to approximately our first XXX.

$XX.X year Looking now at grew XX% XX% of up This services contributed and $XXX.X million. year-over-year. million. was represented XXXX our XX% Total and $XXX.X of on returns Professional revenue total fiscal results. our year-over-year and basis. it million, a revenue revenue revenue contributed other Subscription

with compares gross also for factors in $XXX.X was gross gross discussed earlier, XX% gross the XXXX, to $XXX.X contributed full impacted year. million same our The a of QX XX% a gross which results profit This margin. profit XXXX. million margin margin for margin Non-GAAP and the representing gross

XXXX to of operating the of drive a customer adoption consistent with and was improvement our operating The expectations the as XXX. we $XX.X Non-GAAP million year-over-year in ASC invest loss due growth $XX.X loss business continue in million with note, new acquisition. the for our are year. results long-term to loss $XX million Of to was prior compared in

balance sheet our to cash Turning flow and statement.

Total end cash ASC of million $XXX revenue XXXX $XXX.X an QX XXXX. under was QX the $XXX.X million, at at of $XXX.X XXX from QX QX million and equivalents from cash Our of the as of the million $XX.X X% end were of increase XXXX. XXXX, at end up million deferred

the liabilities. up $XX.X that same the Calculated in year. in in is million XXXX, and Calculated takes from were as metric change in the deferred XX% revenue billings non-GAAP a billings last consideration into QX as period contract $XXX.X change revenue million well

increasing our meaningfully reminder, XXXX. began late billings in calculated a As growth rate

$XX challenging We quarter last million XXXX. quarter Free will cash continue compared same the to was face fiscal relative year $X.X to this to flow the comparisons year-over-year trend throughout for million year. in

past our capital, timing flow well our stated of expense as calls, will free factors, billing As caused of we on level of quarter-to-quarter and the in many working from our cash the have by the investment cycles, seasonality including as business. overall fluctuate

leading Vice banking Directors. built have over Ross career I into with the Chief the As Chief step have announced, over investment previously Board very on and Strategic Goldman Tennenbaum, at role including Ross’ in to its him our Suisse and I President were will March be Sachs of and Officer. we will our and Ross working IPO retiring a Initiatives Scott of of Financial Credit XX, confidence in Avalara Financial since of have was XX-year Officer. take Executive joined great we experience XXXX and fortunate XXXX. role

company built want I the is the I for to financial at operations our well addition, for In believe future. firmly the thank team we’ve strong positioned Avalara.

call let me Ross. over the that, to turn With

Ross Tennenbaum

high leadership has like to a I to financial Avalara, of over has built behalf Officer Bill thank foundation as team a me and offering entire as great engaged mentor that many of our to team. has Directors I’m Bill advisor to and joined trusted growth. Avalarians been accessible and grateful and will Board long-term would four Bill the Financial that last our and operations an scaled On support a years. initial he’s and Bill. Chief Thanks, strong our for remain public his

investment ambitions. advisor finance help Officer Chief achieve to company work Avalara year excited alongside almost joined to position banking drive as I’ve in I’m the the the nearly Financial one to and company six years. deeply and assume Bill its immerse ago experiences, the to team and had these Bill serving after myself long-term the operations. an Scott, for business the Through I to opportunity

of conclude will guidance ASC call I for and and year for XXXX the providing now the by under QX revenue operating loss the standard. XXX on non-GAAP full

XXXX. year-over-year As performance comparisons growth, a by more we challenging in to XXXX XX% a after strong reminder, highlighted face revenue expect

we to between XXXX, QX $XXX.X and For million. be $XXX.X total million expect revenue

that be to loss We our operating of $X.X the non-GAAP range to QX $X.X million. in million expect

between and For XXXX, million. revenue million total we full $XXX be year to $XXX expect the

our to of full We to in $XX million. the range loss non-GAAP expect million year $XX operating be

modest what and in earnings with XXXX customer to large business, a continue call. consistent our in the we our all We continued investment We our level leadership believe November business economics, expect support shared drive growth. in momentum cash XXXX burn long-term compelling on position a in of market to the

Wednesday, will attendance interested, our will team. held you’re our Louis in that Users Day note Investor Analyst St. on so In-person Conference. please XX, closing, in CRUSH contact if be be with Before Investor conjunction please our limited, May Relations Annual and

those For your we website. At accessible like point, of webcast for who on the the open cannot our up us in-person, call a event be of will questions. join you to this IR would

Operator

first Thank Merwin you. Sachs. Chris comes [Operator Your from question Instructions] from Goldman

is open. line Your

Chris Merwin

Okay. gaps prepared the certain Thanks about any of the I progress aggravating on thinking those how in in up, for so gaps end great either you open you in time. more content. Thanks. much through or about you been the have us M&A and opportunity could organically customer tax and that verticals, remarks, has index talked additions might are making guess a congratulations potentially on bit you Can year. how a Scott, content update still closing and your

Scott McFarlane

of we We’ve said on calls have previously Chris. U.S. of content Yes. have about, we someplace I Thanks, that around XX% would the say

a Now content big that some there’s for of market it. doesn’t not really,

going said to the that all and simultaneously. do food can can in us the I we future, and kicks we’re So in big it’ll once to we’re allow my of manufacturing. margin automotive, around think And to are basis, focusing things gross starting big start the will the but we’ve effort work we forward. maintenance the exactly majority I want kind areas, up impacts add change lot Those going efficiency on that beverage, One, our an also of on once teams I a on think to growth us for the there’s but do, it us. for That’s index that’s automated in that a growth. of and got initiative work have as pick remarks, that of

optimistic I’m So pretty that. about

Chris Merwin

XXXX and you Thank the the just guidance, in follow-up. like looks one a came plan. out of growth year all. Okay, year realized I a quick fiscal probably you. it margin of bit accelerated model for great. They The it well implies Maybe little full original deleveraging was of

where So about opportunities maybe I should just extent about continued that in you in and we’d be over kind that that some can you talk to bottom line reinvest you you’re thinking guess growth? flowing through to investing delivery, see do of XXXX or Thanks. do the see to

Bill Ingram

Yes, Thanks, Chris. Bill. is this

pleased see growth. very continue profile We’re and going said, to the ability our as we invest improvements in long-term to the across of with Scott statement income margin. where to we’re drive And

investments administrative. And our areas invested We’ve product development, other marketing the our I’m general management. in done invested year sales product in network. with. so and this content we’ve of the we’ve a capacity our network, in And then We’ve invested very our and of security number of in and pleased also marketing, product along

blocks to company much really foundation We’re putting the building build bigger here. in a

that to don’t levers to and Scott deleveraging have that making is the I be concerned and we jobs, and out statement. But as about so, we’re pull. a we’ve and keenly coming and you kind anything about like was marketing and sales pointed the we concern that. income served across And income out some think all had year done biggest really of that broaden IPO as the our overly statement you eyes start nice of the what market and the earlier I, a Ross deliver demonstrating The investments half efficiency prudently clearly can total on ago our also efficiencies talked we

and great also. capacity, infrastructure, security scalability, Now, place into core a content, the our the we’re network taking of the the

we’ve think the we Chris, So, mixture here. got thanks. great

Chris Merwin

Bill. Thanks,

Operator

Auty from comes from Sterling next JPMorgan. question Your

line Your is open.

Sterling Auty

Thanks. guys. Hi Yes.

Is you’re understand a us added adding Can these the again would you customers are year even what you versus there that that’s the ago? profile, the so help and by the fourth bringing XXX mix is those another how tip I say And the the larger quarter. of you’re what develop? spear? kind of the spear focus what’s let’s customers companies over profile, them what smaller So see of you calc of today it always mean is customers of in starting tip kind in tax characterize, and to or that

Bill Ingram

This That’s is I start Thanks, and the kind question. cover to in, a can good add of Sterling. others will jump rent. Bill. in

customers in want first purely So not all, everybody, $X,XXX the the It’s of those new generated customer more is months. ads. remind than to we of metric our I XX count of just core net have last report revenue that

it’s a newer it We we year than larger And to your But premise compare predictable. a are very year your ago. very like slightly to customers now. point margin nice it’s so was seeing a because metric. That on seen we’ve ago

is larger. comment I the customer as of size know make a first minutes not ago, the just started the be few even company. point calc. entry where Scott I So, we said that’s it’s average And tax would

cross-border that and have really business, multiple tax verticals just that calc, returns, compliance, we certain also entry now couple comes of through. our other for and points a not but our But expertise

point other the customer I on last was counts, don’t emphasize the about your numbers. decimal, rate going make growth thing core again over the So to the or

core last inorganically from came customers we acquisition. reported Compli those remember you If our XX of quarter,

many, XX,XXX solid low currently. as a grows And the business that but liked we’ve me real is see here so see is we our TAM, base thing revenue many that growth over large the my steady, it at brings years. tagline, very basis. and more to back cohort steady core strong, it’s selling price you because increasing a the on for which churn, And still nice stable Scott? which average now the – represents it’s a XX% again, And than customer the count margin, nice about is represents of

Scott McFarlane

said a doing the four in color to Let that is, Right. lot think a that I bit I always it just there’s than which calculation a remarks me little of I that. I we’re other opening things just tax we mean, And of have problem, is, I mean, are which have problems. you calculation Those returns of you issue, all problem, tax certificate the tax, mean, you a you horsemen a right, right have sales exemption you have one these have ways. a bit those my did. I or the say add filing – or little use of problem. of an

And build really work tried so product offering. has Avalara to to out our

So wherever entry you problem have an is, point into your Avalara.

and Now, course have cross we’ve border as VAT added of then you well.

So we easy into it business to really seven do we our to can them customers and ways have that that. make want pain, they for feel come

Sterling Auty

makes And Can in sense one like people? give much a maybe then a is cloud So where And investment, follow-up of of support the much the what us that in how us of you with of can this see headcount margin directionally the That was us is to give the it on at do we international? terms words, the end year actual and you outlook. help just other headcount in sense. infrastructure how investment increase, other sense, that, and the going? the

Bill Ingram

really people is and headcount in the can of Thanks, four us. what It’s But Scott years great We company. out the here, been you the about plus absolutely in the in you we to grown tell join Bill. has to headcount at talked attracted, got break have Sterling. company I’ve new I leadership, I matured don’t year. we brought tell the and end

the I’m So the pleased very profile workforce. of with

terms your of question, XX:XX, kind In terms and in investment, but people XX% the is and have the say, of investment of it percentages, development. would you out talent for way phrased I the of don’t kind we overall it’s of in broken training and

We’re training great on development things front. some the doing

the that the from really confident feel very function systems, investment about we of of and talked big kind for because future XX% step about business. a I I’ve think, other are in has the But come us long-term earlier some

we’re because And for I’m HR so – a overseeing makes company. core market really our to for filer my to just cap worldwide a going example, implementation now. system putting us in good team for that’s very be the SOX having large accelerated of

some think, very So things there’s just which we’re prudent. big now, that are doing of company kind I

so to was kind fifty-fifty headcount of I’d And your question in it say systems.

Sterling Auty

Thank you.

Operator

from America Your Brad Bank from Sills comes next question of Securities.

is Your line open.

Brad Sills

my question. know taking on I the international. for Where Thanks guys. are ask do wanted about has content to kind you this a I been hi you Great, focus side. in feel the Europe of international and to LatAm, regions particularly content, potential in to build-out close customers originate more we're of go-to-market that kind getting geographies. of in investment those in in such

Scott McFarlane

the we I’ll that Brad. Thanks of for promise take When the I'll about around or at every the different I internet, XXXX focus for year to a But international, us. level in countries calculate, anywhere, outside AvaTax, XXX in anything, because do big international rates over groundwork at the remind International, we are talk sort everybody And me of about really, calculating. mean, I the is mean XXX of this do one. for every anytime, have be place, reside this. as of the said, let to any we we’ve And U.S. lay countries, world. talking businesses we least fact that highest prepared

So which countries. all, at being able XXX be times distinguishes in mean, to to able that order calculate centered to and is basic really do of do to sort I think have that I you service so, around our is business good Avalara at

is that and level down. we rates think Now we question take your specifically driving start now high to I

their an that four years group leading content. and EMEA they around acquisition We countries ago and pretty So with – content. the I think about we good were the made have

for what and that today. So we've been Getting a into pretty it is business. integrated we're able EMEA AvaTax growing to doing base have good take

good even and that we really our further think more help So UI can I customers. UX and send content to experiences expand it out and use

lot that. we to lot done we'll is coming a year grow LatAm, mean, know continually the I we'll that we're moving really continue update that Brazil. out we regime. is and years. And content. started tax do LatAm in hardest Brazil other never a because And grow And in we the continue job it's and as build to that and into, to and area Mexico this over and to regions But outlet all

our investments are – investment with And secondary even we've and expand to that obviously. want about bases those that the right that main beyond. our that the two the we got So faster like we've that further and made – our now we in talked

go two on have we a an basis. start continue a think I base from good in ways areas. to And grow there. long to So got we've we'll international But

Brad Sills

That's Thanks great. please. if And one I then more may Scott.

XXX% a – contributing do those would ago those is are say more? think do On is geographies, the you. am unpack I at secondary at like today this level year then more I you border, net sure driver. growth retention services guess then one of three, possible is they when what's to et key, that And is I which XXX%-ish how it retention, say guess got Thank And that? more little you've states, driving is Transaction, where versus bit other net the rank you revenue volume landed look kind you obviously your cetera. a cross revenue cost, sustainable?

Bill Ingram

the one thanks. four Brad look we we any as average always opposed to encourage Sure, of kind at you say to Well, quarter quarter.

quarter have XXX%. than pleased average so we And less ago with that. are pretty would the been year A XXX% four

has a up four moved points fair So Again a few that I'm quarter-to-quarter. to not average, I quarter say about year-over-year. talking think it it's

know file for more in registering customers retention. we’ve about weighted our and is talked kind to Wayfair that is basically lot to the net past term the You new that Wayfair. revenue a contributes in to driving a customers tailwind existing states the Well and long really existing business of as out you

a We customers talked existing revenue in come the up to cross-border SST about point play. And two. that's past, then is I think, bit starting into or which little a with primarily picks

that for requirement whether again kind have that's it's not early steady really, think a not fair for think an a all, or companies, but say today most long of I some they're us. we using transaction, most tailwind companies international to us

a it. to are from us asked ago. much and those you points you retention up have I can't answer picked more add can’t year So driving what revenue in as you said, net things few for a the but question

Brad Sills

Great. Thanks Bill.

Bill Ingram

Yes.

Operator

question JMP comes Walravens Pat from next The Securities. from

Your is open. line

Pat Walravens

thank and One then for for one Great, you. Ross Bill. Scott and

your in AI-powered talked mean of can assistance, intelligent What you AI some something us think about by broad that I know, you learning, mean, that? category you prepared some first can you Scott you do automation, specific So machine process, applying you of examples do better? get robotic remarks tools. sort

Scott McFarlane

of to app all very be phone, have in for and on today – manual in like focus on Sure, happened, that I us when on changes taking can we're I've consolidating states way. find looking do what with there's information information have said you this because a and like the more there's we applications the we're to and Pat. where AI, we're I there's machine But mean and everybody way and and go lots the But would I just We're AI. the of lots get computer, us, that things think tax efficiently around for that. done past learning, doing updates send research of for that the

I to it of it can look that a crawl can get – and machines out, and information, group people it out. and consolidate could go that audit mean, I that that for information then be test mean, people produce information, that that to able

find So manual and mean, to that's to extend out. becomes I function, Grail of be whereas then I is ability really us, all new can mean, for Holy automatically. the that the that only extra done, auditing should content, work The

no now that way so don't can to fashion. I are longer have in My in do mean, way that gross today. automated have because I expand all it's market we content goodness, people that growth find margin use an that faster. you to a and your able to mean is boon accelerate we go a to also big And we a to

to able of how Doing them onboarding, customers inside tax-ability going are Presenting and to that to and have that their their making that, burden it's the the codes the stuff taking a allow sure suggest as accounting step, nexus, and have is take taxed they all manipulate that and taking them information where to perspective. having or products manual, do the manual customer burden for it onboarding. from to being be us for that it's solutions a systems able decisions, the of without being them for do tax and at then so to and product in mapping a to

So a our to – us to thing, of and customers can internally, we we it the the take the IP provide degree that information out fantastic we've it's Pat. got that index from got and that

Pat Walravens

super right, you. helpful. All that's Thank

guide you CFO years. on Bill, the So Ross, congratulations. thank last helping the front, us for four for

the it, have like be, given about me? than willing dealing you extent So that you're listen, might not what and with advice analysts to investors to share Ross you

Ross Tennenbaum

question. great idea was a That's that answer to question. no good it, it's going great a a question. but they're have how I Yes,

Bill Ingram

Scott Well, just one, more to fortunate we're prep Ross I to But Pat. you that. and got for give be We have I couldn't didn't here. so poised.

great, us high integrity. For it's be very super to smart, going

And so outstanding. I think you'll find working with just Ross

but need So encouragement Ross, advice, support all that the I and he him you. to give doesn't my over I'll can.

Ross Tennenbaum

Yes, piece low he's of churn. me market number given the big is advice one

here long-term, the Bill So been really would really, we I the it's have. into externally, believing the that joined terms really in for IPO I now have the company plan place of and with But transition. in years now the six Scott hang great I put company that. a the company I opportunity And working through a leading to having say year and about and

now the myself that his financial operates, in being a a Board business, as being and we team. will with together been wisdom spend important of day from operating great and Bill working say leader immerse a and growth working are year important several getting Spending team operator, immersed for of areas how the an our it into Bill, company, a with whole he the and the that operating businesses alongside deeply Bill me the really And has just hours lot deeply I'm advice. on operation, and And member. there thankful overall, continue would I as financial the

have So thing, I'm a not that advice his here and of transition and I Bill but Scott will and any have it. tutelage. That’s appreciative it's continue affected one to smart

Scott McFarlane

And would same I new mean, business really thing Pat, deeply in this joining get and away. have believe and What in something all have Bill say opportunity learn And a tendency to Ross the that to the this again. this we been company is I to want in never leaders the executives. we you’ll people right business. everything the new Ross the do because it for I year for is, my time, here the is did is Scott. And the I say to everybody have and doing this take your advice is jump all is the

then then the understand the customers, understand ready that and job. you take to operate the how once we Learn business, on you’re do

that’s Ross as it then Amit, the effective and business from it that for Saleem really be just all complicated, jobs. I the other in for of same demo hard, mean So do the be it’s can it’s you people. Learn to product, your as that for able and our

Pat Walravens

perspectives. those for all you Thank

Operator

Brad Stifel. question Reback next from from comes Your

line Your open. is

Brad Reback

point of much. you Bill, would and bottom? very Thanks to us great. Hi, will when help out to gross maybe willing margins think sort be you

Bill Ingram

do pretty hasn’t is on around our been manual we're decades, – years. of around you I been for really taking of But And Brad. probably the heard very got compliance. process, can't tax as Scott for And process say this, It I what a taking kind we've of this funny. thousands can that says controls. it's really it's hands really me we're say Well,

And and really very, process cloud automating very so in time, first it this least a for we're we're at solution. manual the taking

automation. there's a And of about so friction as We've to it. talked result, lot that a

You on heard Scott earlier. it question talk about that

see over confident here. just I'm very improvement nice time margin that you'll so And I emphasized time,

say done can't an again we're term near I any process, quarters, on market focus we're And gross internal the wouldn't be these still confident to margin as industry, we going across that's never steady, because a manual it's I and when very gradual and automating do this has that this numerous see taking much But we'll I'm before, business expansion. status quo. inevitable things

growth I lines, just really see there a of such the us. scale we'll opportunity due reasonable long, a to operating steady on ahead And think marginal because we have improvement

Pat Walravens

Great. Thanks much. very

Operator

Your next Needham. Scott question comes from Berg from

Your line is open.

Scott Berg

and congrats a for a Scott's the makes Bill good correct? thanks the guess And this in good on I Hi questions. Ross next quarter my new boss, Bill luck you adventure. technically I and guess that Scott. taking is

Bill Ingram

We like that.

Scott McFarlane

Board. the on And

Ross Tennenbaum

I think heard don't I haven't it. And

Scott Berg

Index acquisition, of there. more because customers onboarding obviously that rates today, But opportunities mapping of let's made kind market quickly your you it in have I guess the you of since competitive end the of mean make change me, with from that I questions functionality? two that any based win seen on on enamored Scott, the the content start could it out or one, maybe have some or given specifically you that in are how

Scott McFarlane

Bill rolled remarks opening it, the it to I enamored I out a I as we it, that. – were close game just So our think it's for a mean, mean think And And well. that and Avalara mean, I'm I not very it I have I've for customers. changer. with in I said changer big yet. that I very, mean it's said And think game said I real doing

service will efficiencies that customer high to kind have we and we quarters in around that it the provide hopes the of want that come. really So the

stay it's So that tuned us. on for think, important one I because,

Scott Berg

timeframe Great. relative follow-up may be if the for And customer over you've before customers quarters, over that? probably or ARPU had there. five new of customer the ecosystem Avalara on can trends? last nice or four year coming from a increase core in nice the into Ross to XX-month comment Bill Maybe are that or is last But then growth perspective, those acceleration for some XX-month you that

Bill Ingram

is Bill. I'll it Scott. comments. for take This sure. thanks Yes, kind your And

that But base coming But and the can fact. margin through. you're I they're do we I did math of core deals year kind is are with any guess, over now up. this our math Analyst want And at seeing what last I should degradation the the ticking in say. again ARPU, of not a slightly Day. larger seeing overemphasize you customers on We to don't XX,XXX

that in per average of core kind revenue customer. steady, seeing upticks nice, You're

and assume there's was going size the few it bigger. we're in would that are average the and is going And slightly That group so slight a size new but uptick coming if core of more hundred the the our customer. a significant, customers, of And in core probably on. you deals because per it base, be only can after, revenue opportunity of

Operator

Your next question comes Canaccord. from Richard Davis from

line is open. Your

Richard Davis

thanks. hiring challenge know is a companies. for days Hi, that we Look, all these

versus how is that. guys you to think a are you – was it. kind have whether because think XX company paths about per know, as I and stuff Thanks. there Is curious been wondering, on how you a to We've was, ratio ratio employee reporting guys also done company, basis? like you XXX do whatever – two or always I've Portway guys as you hiring, I'm I how – I seen a But a think when there that? buy there's you acquihire. And of about it acquihire just is dollars employees. or go the Toronto different our so forward more don't you mean, in

Scott McFarlane

I mean, question. Richard, thanks, interesting

beginning one I aspects the and don't of the the the mean, up, in always it has willingness was said was for part. the and rules IP acquisitions. to – tuck-in is think I a of I us, technology this it them of one were Avalara it really in that of for success getting around content key getting a Avalara about make So, But I mean around, catching our doing I Because most and past, think some and be that. was actually about combination. would been in people without where rates,

just we we let's a when to And turn something have really, towards have don't And really well do enter it I with mean, always internally. certainty, where to need lot say the us we internally, it we learn bias with – we we just not, this what so will for do doing a can mean, outside. just I people. I China our will with we of

We it, will to mean, I acquisition. look make an

look those enter will the to and for technology expertise the markets. We

compared do what comparison. externally what do. we can getting with obviously it start we a do. it which would what action speed you to to And And out cost bias I towards really that at We're us and we at the we do that's information. mean, and build the looking internally always

think I can bias is We and just I what say, through, that. I to everybody But continue I the really happen do and think our towards – So do I think, difference we'll as that don't you us of making acquihire. what you and said. I think sort think say that action distinguishes would it like methodology

Richard Davis

set, but all I'm I much. very you it. Thank appreciate quarter. Good

Operator

Your next question comes Raymond Sklar from from Alex James.

open. line is Your

Alex Sklar

on Yes, had international. questions thanks. two I

of international early that about just or I to talked know looking then last go-to-market any company's the changes added his I make and you you can month. new but it's there? the about First And talk today you again in think any SVP role in you're release results shaping only a there. strategy the been month,

Scott McFarlane

lane I'll the this moved But what executives, I'll that I there. to left done Salim. with make Dooren, worked we Van we to develop had strategy. it when a Kushniruk, I is one vacancy, It's with which he us we've to aside, a acquisitions international. Pascal I Alex. drove our how And mean, move Thanks this who mean, Europe. us just do bit that's started Sure. with. what decided when for Marshal long stepped of we time filled to our him internationally, say memory down walk senior And begin took little to do

drives think, have and obviously most we those. had a I in to of we then happens complex we the it really great to LatAm. EMEA areas. way had EU, mean, area of really that's cover going sort a hey, And saying, those what had, Brazil I And we've market enter strategic So the strategy to and because think very I around world's

second that same markets one think we mote and about mean I your should it way do first? those our more third? do other today? really when of in do go we've go one to and Salim we that we been mean, strategy say, move enter how But and Asia? develop question advantage to mote how say India, I the is around, I we we is the we're How take internationally, not these in which out Which And develop we going we so should able actually internationally U.S. How in do of

Amit the that's think and Salim for drive really that I'm I that looking to us. thing to

Alex Sklar

makes all fourth up that steady in far part, average? kind the Got at sense. could of than that, answered up growth inflection just that we're X% and where revenue. guess rate it, this the faster investments do far of pick year that last kind international we grows percent revenues quarter? following that you Did held And through with an on think just I so kind enough of at of in internationally see that you the it how blended about

Bill Ingram

reported international we've percent to overall well remember done you in the pretty Thanks, Alex. It's Yes, stays we’ve Bill. U.S. got how but

sort you say, investment, was blocks putting And Remember, those we XX so profile. ago those faster building get development see also I years rate company duplicated things was a what many there being now at blocks founded this is like building what revenue the going And in to are there's and got of of say you're years internationally. certain we're into fundamental and change to Well, to place in certainly effort. before place. many, any

plan But point. our out when of it international is to breaking revenue that our at gets total over XX% start

in international demands the talked so company. our a going very similar but we’re presents internationally compelling, with we we've opportunity we're on we're there the pleased – for similar long-term yet, international So tailwinds international, investment what's marketplace we're and not and about quite very, think there, seeing investing very

Scott McFarlane

sort big for good base. a get I past. is It's Yes, base And am we just of where But out as that hard It's And in the It's area on of we're growing that. pretty with are. mean, areas. and big area good to really really that Bill news one growing this number. the how about small well. fast it strong, is, And is us. growing the and front our is has just pleased for growth is a strong the excited a growing of everybody I think in I talked us. knows It's for company a

Operator

Piper comes question Sandler. next from Brent from Bracelin Your

open. Your line is

Brent Bracelin

question the taking the hour guess here. I of here. for Thanks top I'll the wishes Bill's well retirement echo for

to quick I for automating in are law place did latest a the kind follow-up tailwind follow-up learn of here, here. regulation? facilitators? the the tailwind QX. what facilitator be quarter for new that was early And a regulation to And tax the team marketplace some and and to regulation CFO Scott one you question Scott feedback continues to some and again, the went business, Bill What – Ross. for those of First complexity. that of of in kind has some been The around the is have kind marketplace from the what's of of

Scott McFarlane

what always in think what us. And of it's I've is the I the it's, happening Thanks Marketplace the a that into about our complexity and learned for bunch. all it's creating that Brent. It's, of things is said I VAT this what always are inevitable. in – think fantastic are reporting, reflection always just But tailwinds I've I seeing I I in rest the tax world thing, Wayfair, marketplace, those we're complexity. mean, Hey, think there the they the just that are of one is efforts what's those that world. case, friend. reporting, is And not are much, a of mean, think putting this awareness all it's what act. of around I this culmination to mean, driving they all live one I

then to but nothing specifically doing if on for as just marketplaces because the changed. way And they're their if something complex around they own I in one mean more sense, it have became site, easier report eCommerce then everything customers

already don't report report more they what And what and what so actually they they before. have deciphering done have than because it's to had difficult been to is really,

we that that they're And throughout – so dealing we're themselves, the chain throughout starting marketplaces, in discussions see our mean with. the marketplaces – the around I customers conversations

I of concept more do say and So along. aware mean, whole one they around sales to tax, more exactly which them of I to it. the what it's getting the is have everybody difficulty is and think, pushing But hard

Brent Bracelin

cohort, over but Bill cohort non-core, Ross, as this low color. business XX% cohort of XX% smaller I helpful I that then smaller it, two think of The customer of the million business, Got a $XXX components about growing that business, business, and range. XX% the that's customer much as in remaining faster the pretty think growing core are just growth And kind consistently year-over-year $XX the year. million

that assume kind of takes deal customers, cohort, faster you Walk sizes. them As kind business upsell about an of just think to growing growing growth convert and these that those Is fast into cohorts? the levers core me smaller in are court, the today. revenue puts that there smaller the part customer opportunity through of I but smaller

Scott McFarlane

merchants, Brad, XX historic five lot million market employees marketplace, XXX,XXX, Sure, are over to the in smaller math. the mid-market described, your reconcile than the States. we which States, want businesses we mid But as XXX,XXX of identify in of always But don't fewer the opportunity, see United I a in that in customers. United I've segment of there's the kind registered

while companies. out here, we executives we've Jay long great to days and I us Amit, PayPal think your know very very and tail – further familiar that marketplace their from of so very, smaller others are significant. point is some with And this at and other merchants like that got

customer on, a up month so know until we at upsell, $XX,XXX up a core a number $X,XXX and as add But at terms in they if new the new so year, if again, one. and we of customer not $X,XXX sign in on you And this a core customer year, customer so, month-XX. forth, a core sign well, a and they're customer are metric

I going which very, of the to And segment automated, very we're But is much that it say much of volume smaller of of the to much the more making But with like and we're things needs goes to larger, Scott lower been be that market potential thousands both going aggressively. so in something believe there's do to which we've those. of mid out self-served, significant it in we're very after customers I kind area friction. more be there. obviously needs hundreds still segment of We're said much investments successful to segments of lots be approach kind to needs it that I’d

back open customer we opportunities that more in in we premise us early to the adoption kind points, them or so or of think cycle for hurdles, smaller about up them use And those Not my will to as our again to large service, sell bumps, here friction this we're only we to segment. think things. but speed solve then get

Operator

William comes [Operator question Bhavan from Instructions] next from Your Blair. Suri

line Your is open.

Bhavan Suri

taking job question. thanks guys, Really a Hey nice my last for and one here.

you et of idea automation, someone the about the flow, a lot you might manual or took stuff [indiscernible]. of of And like workflow large to a the lower-end players There's higher-end from sort just for cetera, customers. give that's process there, the done want integration, I really brief. think environment, competitive I'll talk So then players? a any to just the as changes you

up more obvious automation, of or that that the relationships, to of because move limits deep you you strategic more guys and might limit that natural of you that sort there strategic think market and market. have do As some what guys does more the become is just there in a Thanks.

Scott McFarlane

thank you. Bhavan

higher there end. things that the changing beneficial think out that the for they're And fighting about, and us end talked along. mean in competition the changed. they part mean competition that's last really that because they're relationships. I that's I hasn't that would we've status low Your I guess and the of are what question, around doing moat is I aspect probably with I'll think, I more love at the our And what is against. more we've difficult And And and doing are content what would it. is trade is, around of quo. is had think, the happen places focus Avalara created the I we've there at the really that say our I the beginning the to it's always But awareness. tailwinds probably pushing that's we're and only partner

and of of it break moat. pushing, cross all for do and things to tailwinds makes – that they raises things help are adding the exceedingly because the border just like But right. that people But definitely we internationally difficult boats, into all

there. So they're out

workflow to for ones up said, saying I but streamlining part space, it'll I natural And be of question, like are that, and comments. those you opening us that. of Yes, mean, there not all great lots for that products we last yes, to the around But out in beyond it just of that. what in to and the doing move but are, goes I deal opportunity actually workflow returns, do we're was us things there'll can be on a like calculation your going and that. in mean my things of we enterprise comment to which now, add market do as I the started

moving time, But said but low all we're having mid see our focused big on. the the what end, that, are focus is the it really we're I you protecting market mean, upstream, we mid-market. is that

you that doing So we’ll which – initiatives be do to things [indiscernible] that. around going our is let market, include be effort most into the of not talking to were continue and the about, some would doing into mid products of

Bhavan Suri

guys. I for question. appreciate Thanks my job. take color. Nice Thank the you,

Scott McFarlane

bet. You

Operator

question comes Analysis. Terry First next Your from Kiwala from

is open. line Your

Terry Kiwala

speed of crack technologies using sellers. state-by-state any or down themselves, any other level with and Bill. If how the you've to remote you. returns. customer filing with and Scott, Congratulations Scott I'm been Hey, of there's about talked actual working But compliance seeing signs the any your base. for for automation either one about each good you afternoon. benefiting pleasure if a are It's to municipal noncompliant on a of – wondering on question coordinating states automation that’s signs it's

Scott McFarlane

and think made thanks. Terry it's past this I've mention I to in the notable.

customers’ using do want they like your will will answer card, methodologies, direct So that the But card I not And they be it. yet. start looking credit they're at that yes, and they transactions digital to question and is transactions. no, mean, to sophisticated credit sophisticated ecommerce

credit what's they are cash done, over thresholds. happening at they'll doing done, like as are but what information to know not their And get done, what's they not they to and in they that everybody retail look may when checks So just know cards may customers else. are are when when is they happening can start

notices already so need look hey, send then the out a approaching to states to we to over to go starting being you at you data threshold, And see to around trying some saying, are that. you customers find or that organized threshold the see take you're and

now. because would But mean, what think And be we're do. is okay fantastic to and to haven't haven't that like. doing but yet, right need it there not contact me said get you this I the Avalara, that's that they we get from But still collected you all here able for they're trying. and don't They let's gotten been registered

Terry Kiwala

Great. Thank you.

Operator

next from Your Mizuho. comes Panigrahi from Siti question

open is line Your

Siti Panigrahi

Panigrahi. Siti

Okay, pleasure looking with working Bill and you Congratulation Ross. and working with you. to forward

guys quarter, XXX about pull from you of marketplace XX up marketplace. potential last talked that think, I Just a law, partners to a facilitator

second Just wondering any that six I partners. to and marketplace taxes. GMV due to facilitator eBay their effective law impact the on months one this update I collecting on that talked went on having sales that, the And guess, more about last quarter

I XXXX, should are update they that I'm some of wondering, one wandering – we is help will any be I’m on guess partner So great. their – that and

Bill Ingram

we'll And about we marketplaces, good been partners sort the a question. going both lots And out for but get pointy that. of And call, report driving continue conversations. us talking the doing. trying and us our it mean Avalara's on to what partnerships solve that XXXX them on more our drive it’s we're It's everyone into initiative mentioned team on that's problem. a good the deep in and for and development able help that butter. the don't is and list, of is business report trying to you is big it that mean, each bread of to be at But And can this – I every that's to talk to more think internationally. domestically out sphere. to they I team, really I what firm, become end as And and

Operator

now Co-Founder questions. CEO, the McFarlane, remarks. Scott have further call no over turn I to closing and We for will

Scott McFarlane

what vision and in in by close customers you we and goals with and Sure. ambitious excited for Thank renewed call Avalara interest all. our for you saying work the employees, I us about you. and of to thank and commitment Thank to partners want you beyond. to to With our XXXX was an exciting our XXXX. I'm look ahead your forward expanded next

you all. Bill, a future. you. Couldn't to journey. congratulations it's with the excited really Thank And And fantastic in without have you been done it work Ross to

Operator

gentlemen, conference call. concludes today's this Ladies and

now disconnect. may You

Avalara (AVLR) 12 Feb 202019 Q4 Earnings call transcript