AVLR - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Avalara’s Second Quarter 2020 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 first speaker today, Jennifer Gianola, Vice President, Investor Relations. you. Thank ahead. go Please

Jennifer Gianola

welcome second and call. XXXX to afternoon, quarter Avalara’s earnings Good

Avalara’s and XXXX. will announced will to closed safe Reform after are results discussing contain Litigation today. Private Securities harbor Scott our me We are the the issued forward-looking in statements, be made Today’s Ross CFO, Tennenbaum. press which release With provisions of CEO, call the McFarlane; pursuant Act market of

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

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

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

included website press turn has GAAP with and the me SEC Principles. to also in reconciliation the During non-GAAP and results measures, filed let With our Accepted accordance at is the on financial prepared are with which we that, Generally in been A release, over call, not Accounting available call the discuss Scott. earnings investor.avalara.com. will of is which our non-GAAP also

Scott McFarlane

XXXX strong expectations, quarter a challenging our QX that to climate. and earnings joining business amid QX Jennifer, Thanks, our exceeded welcome call. everyone was another

non-December year-over-year. XX% see I throughout ever. with up momentum accelerate million, quarter $XXX.X was bookings the our best to was revenue Our total pleased month our representing June

costs we been believe businesses has like has SaaS commitment in my and it multiyear their again. durable the of Not tougher our times challenging proud to ROI Our crisis we'd to macro of effective hard solutions, is well been or as our an we trends Avalara team, for a Avalara with Avalarians of efficiency COVID-XX critical validate nothing in kind people confident I'm reduce their difficult before, of compelling Avalara. in time. believe adaptability I'll I've have will more either model and amazing. QX in to ever to build our results proposition, that aspects and thrive all during for allow produce resiliency always short but the both so they're created businesses and the enhanced more Automating growth which is this that resonating facilitate said and that look with The it their times. value good advantages this characteristics. reallocate of work reduce to our prospects our view, us has headcount. business structural are pandemic employees in team The even ability or and efficiency. to company customers. and and four with way I'm thank created than lasting tailwinds equal of say software our

In many able becoming ecommerce is first the Globally ecommerce manually. The acceleration tax compliance by been business. have the an to adoption. get businesses business past managing every of is sales

multiple and tax can moving without businesses manage today, to which across they're a sales in fixed you stores, probably omni-channel have few means are ecommerce, makes become websites, so selling you compelling businesses exponentially If format this solutions stores but a our stickier. and us, our In proposition their few even and locations, amplifies many compliance much national, marketplaces. international which value channels, e-tailers. increases and complexity, This or multiple more tax or one

is solutions crisis of systems, cloud COVID-XX platform We as play cloud legacy, We we is believe to cloud trend to the The these as and systems. out believe businesses adoption address modernize industry-leading the will companies to workforces. inflexible their see acceleration daily compliance businesses the the second shed forcing digital remote this on-prem accelerate needs. this trend adoption. to move offer The We of facilitate cloud.

and I The ROI is as trend, growing on emphasis efficiency. third mentioned before, the related to

more automate their and a to to efficiency solutions businesses sense and facilitates Avalara look As become ROI costs compelling for at look demonstrable our software and business. efficient, makes only it customers. help reduce that provides

applying generating regulatory a company's IT costs an towards stricter projects. the tailwind ROI increasing resulting example, face us. services are a company automated of date the reduction technology tax the enforcement of and partners. Avalara selected directly and due in may a we State is automatically global that governments with application, integrations local one tremendous lastly, information into is our As kept the believe we budget on a transferred in think laws and jurisdiction to And challenge, for and revenue horizon. of to these become Rates up save enforcement fiscal tax key

a or states the retail Avalara and when growth one competitors the purchasers is big of participating the makes know, differentiator businesses. among program some and in SST jurisdictions. than U.S. currently sales organization. our are are collection revenue arrangement sales in streamlined reducing our great of been this the primary Created easier for risks SST widen audit selling seller cost providers and compliance service of state tax of the from payment SST lot as first XXXX, original the for the has SST is of governments the us. Avalara SST XX the Being a cooperative certified not helps a XXX%. by our of lowering different tax, process engine certified XXXX, by providers. located part more into is program half moat may a and SST, In you grew by the program for year-over-year As multiple for And tax and of a

trends are these out. We seeing play

me share examples. let few So, a a customer spend moment and

One deal global type we us invested of of platform strength to largest logo is but market, years for in was solution. exemption of chose for certificate tougher we've recent our services. XXX electrical, and our Avalara evaluated and fortune our would suite, competition. been to about cloud's have This leader on three, continue products communication the selected offer but product and management ago, other because company two suite, industrial provider enhancing product the enterprise solutions and feel end our the to emerging of the robust a health management deals ability with customer other The ability selected ultimately win managed Avalara SST the me of, market. that win. medical to exemption over supplies and because an let one, business Avalara our This At the of our our of return and, facilities federal Two, leading our small A certificate spectrum, integration pre-built QuickBooks. including good with share services.

their custom because the of it's I'm base classifications, that Avalara value. $XXX,XXX that largest calculations purchased Our deal, can and excited import quarter selected solution contract this multi-channel U.K. about particularly because suite. U.S. we file. deal and products a compliance sold in sales tax returns platform of are our of calculations global retailer because to provider mainly and an total company international support including a cross-border needs, cross-border taxes deal duties The our was

for have to proud product winning is are deals selected product, as Avalara with result. large won Coast which we Additionally, West and use we're large a a a brand and on became X. new available our consumer prestigious university, new June that deal already This

had We marketplace. ecommerce have the new business also in success

As XXX management it sales dedicated Day, cross-border has our Avalara XXXX compliance in marketplaces. global focus XXX as of services. investment marketplaces that we recent discussed paid those team off. And XXX and/or account we on determination, leverage to the Today, global and Analyst

logo new customers. we're to wins, on marketplace relationship our also addition focused with In existing deepening

cross-border used solution solutions. indicative the our and U.S. above rates, consumer AvaTax cross-border, apparel pursuing For example, opportunity geographies, and tax expanded sales for securing building fast our strategy muscle more tax supporting who customer examples their with sites, ecommerce and are such the a or into since calculations marketplaces additional it's healthy Avalara's use as new of whether across or selecting segments, calculation growing platforms. are new marketplace, maximize we size XXXX sustain industries growth moving by with relationship us partnerships The new has

We are finding to and customers relationships partners. prospects, customer existing with build stronger new ways

Analyst reiterate Prior available expected Day, consumer which milestone products. a And enhanced a be for transforming separate in that building announced But generally weeks. a next product announced for product backing told We few X. with as global we of Analyst is are you on cadence you on are Day, and Avalara is cross-border solution. compliance key heard Avalara we want about Day, business, development use we product grown a is our availability our And machine. a platform company, into to in The accelerated. After investment capabilities our to the Analyst small is initiatives. June is our rapidly lot a I cloud and this product to portfolio that are we a returned Adler big few

since content, foundational elements and of we pipeline. and nothing move has business. We It's presence solutions been been that liked important I on has our forward but also our international a an that our the our to longer have part been the our continue robust manifesto since we than always expand with last M&A success. deal, in front. company, changed of founded has Acquisitions

growth to and opportunities objectives. believe look for close sustain our we will improve will continue that Avalara and We

in and We mention including executive are a And, to include expand execution development new corporate team, president to build our the out I additional partners. will course, to can't deal who fail world-class expertise our vice continuing of team integration. global

in bookings strong support partner The results the integrations new offers sequentially becoming more that solid world prospects that know, systems. precarious of and strategic integrations applications from companies continue and But run center do with and result story, amid cloud the our creates differentiator rapidly beneficial ROI of and hundreds the quarter, In with ways us. This reach prospects and are improving partner you in exceeded to incredibly and grow pre-built of to a global key drove significant is relationships our largest offering that improve our was or to to our strategy any funnel mutually our customers. we has strategies, existing and their new to a our even advantage a also the The acquire drive one advantage moat and today's we traditional greater differentiator is growth. The embrace a this early replicate marketing providers customers. new results The company revamp innovative competitive will towards than mode, applications resulted messaging the market play drives business to vision of a of expectations our Each As We strength saw depth as and tail, working our and for new in breadth long to specialized when competitor. QX partners with the as few a difficult we the of automation compliance our created for is this efforts had smaller we quarter into our use Avalara. rebound long-term continue our partner integration. this partners where been customer our an since very our has so omni-channel Avalara strong in founding, Avalara within time. platform. using our far June. nicely business combination took longstanding quarter represents we strategy we

the of maniacally We advantage partnerships, cloud the cloud content and and also compliance sustain seeing, to our increasing a our are encouraging opportunity large crisis our included situation, focused in with Our remains improvements keep needs. the To fluid but expanding inorganic leadership our our cautiously continued We through our down we and organic COVID-XX are uncertainty. extending or on QX levers, on results based to optimistic we strong have take very headlines remain gross intend both platform margin. platform, suggesting head data

amid our intense improving on changed. and driven gross QX in over largely long-term QX COVID-XX. that hasn't have previously our improvement discussed was slowdown The hiring the margin We focus

We that will in future. continue gross efficiencies in the automation drive investments to margin make believe we

well as to are filed We additional enable encouraging us increasing employee. beginning are see in scale efficiencies investments and headcount, that will support technologies investments just automation our to that as from less per with returns compliance customer processes in

XXXX On District and dismissed only to the a you merit, to conduct minus all always XX, the all significant victory. decision invalidate the claims avoid Now, PTPs plaintiff brief a are a claims was brought did U.S. patent, We dismiss attempt Court for a the we and the at sham knew the for legal were against claims the Avalara. submitted team. us. and to by on comment the May this have also remaining legal Court's win The found OneClick. complete an Avalara case declaration behind I'd make like judgment. without in a summary delighted Thank Court our in distraction to its PTP Not Court

all corporate that Vice continue Head Jayme expand Sovos. content, footprint He years to Jayme in industries culture workplace Chief largest expert, firms be compliance of at our Avalara, in business development the and his providing as is as with the development industry and of for at scaling most our to FIS, XX country. recently has Kathleen pleased throughout of Development, president Taxware, global we'll in America. recently ongoing for and Corporate nearly sales, Corporate Avalara Kathleen joined on front, On customers. And Human Executive remain the all a cement various the SaaS sizes consulting Weslock systems, data new Jayme, he share mission places SunGard tax role and I'm most formerly announce carrying Avalara. several on and building is work companies our industries, held Kathleen in professional tax Officer. division I'm North including services to resources a experience technology human the Cisco, across subsidiary across unique of Development. ran Kathleen. of me. more. add Ryan and Welcome geographies Resources Avalara as the joined best working Fishman the of of talent also to business, Jayme. Avalara privately pleased Marshall led as Deloitte, and to organization inclusive to now and brings publicly past Kushniruk, corporate by of of leadership to programs one to software Welcome served as President projects true to overseeing our one is of the that industry the recently technologies, and who our employees Jayme one aspect working and the we special outgoing consulting every will helping development of our expertise founding transition global company, in

the will will Ross so I us to financial of am you know, executive fortunate now June. talk through and believe to in The hope since I on I Analyst revenue in turn you beyond. take that team company. our by continued a was full Day watch it. bolster a results. to over display the call chance becoming executives we've our to I $X at As talent our billion had surrounded leadership to a public to be virtual team

Ross Tennenbaum

to new you, and a June. impact business? like April May earnings like would glimpse March. noted I'm into sales visibility would forward to was our leads will we in the we and in our CFO, caution April early were lead hopeful first It lot these results. when and on grappling bookings likely call, growth with May my since customers that We were time Fast with We're Thank today, pleased to the our and questions very as March call Scott. ways improving that We turn many long billings QX a feels look into surrounding and funnel our impact it what and begin provided COVID-XX a Avalara demand.

We new value tirelessly partners, launch innovate Our team to trusted June become in to products here our valuable we reflected ROI day these from with night to and pleased drive works with efforts proceed digital see to and evolve to meaningful in our advisors and our increases billings we and demand to and And market stronger growth. generation cautious proposition our go were to year-over-year how sequential enhance May market customers. optimism. booking,

large not therefore, included, that called good market operating half a you. we the our digit free and global produce and that investors non-GAAP flow demand is on business nor in believe based strong single challenging have we needed. We we can positive cash remind be leader And that performance should remains times, we income and can second and are penetrating. We modeling yet are a proven very June's and and a when in trend. June pent-up

to capitalize and business opportunities of our build revenue compounds a all continue the will for growth long-term. on rates to We that high work tirelessly sustainable at

Now, let's results. our get quarter second into

revenue that For year-over-year subscription million, and revenue adjustment. one million, the of in were the total public. which on subscription the million, the year-over-year services XX% XX% $XXX.X growth approximately pleased total time returns $X growth XX% was Professional Subscription at was second basis. XXXX with services We rate, COVID-XX up year-over-year a up year-over-year. million Professional going quarter, QX strongest our pandemic $XXX.X grew time revenue reflected our $X included since revenue revenue very revenue. given represented XX% to

end XXX quarter Our the of count to approximately at XXXX, from increase customer increased of a by year-over-year the core previous QX XX,XXX XX%.

the customers COVID-XX. of QX, core moderate of a the data lagging Avalara of reminder impact as for be the was to a increase a in result in and is As expected

end customers in when the approximately This that count, of we services core customer. QX change We core with win that customers they core of a include disclosure results at back. definition back XXXX. XX,XXX our meet revising have not the previously included We Avalara in customer customer our later terminated won core these customers to

our both in we have For numbers press release. provided earnings transparency,

Our stated XXX%, XXX% longer basis. rate net in revenue four term previously which quarter think should on about what is we the retention resulting a average, was you percentage is

our total a As impact to reminder, revenue, of the net rate professional services. calculated non-recurring revenue using is which is retention subject

to currently the excludes as the SST, customers. base. file upsell expect. in our addition, and like of which In of we returns shown year-over-year has and still stable base customer well turned customers in business resiliency number a percentage environment, Despite on through QX, the streamlined model In provide and as I business, calculate customer existing logos to or illustrate, so macro new that down far sales as our has was must to details more and calculation growing tax, you sales customers, business the taxes remained with significantly again renewal our To current base. been our out our of our material XXXX

the Our gross with the been last annual have during gross revenue has defined revenue contribution cancel said lower recognized period. X% meaningfully We remained churn, their divided past churn we with measurement as in which a by revenue revenue annual line all total than with the in agreements that quarter. our billing accounts associated us,

and potential making We important spent release on gross given and cash ensure in income we the the the our operating discussing flow. As on does COVID-XX results would just and time most our QX basis, please statement, our remainder you call. be results all downgrade. our that and was press expenses, stated are call references our results before reconciled of share that business, our impacts non-GAAP earnings modeling were considerable to responsible expenses include unless a investment. We In GAAP the to churn per a issued to reminder, with scenarios revenue not are note only otherwise on that we uncertainty earnings this told

result income in in actions free positive flow. expense a cash Our strong operating and non-GAAP that resulted savings

an margin control proud and demonstrate spend these to believe of deliver position believe are compares representing XX% margin growth. with representing winds the margin QX related in expenses the XX highest slowed million in expense gross pleased XX% the we've improvement year lower we of resumption gross and show gross our profit expense aggressive marketing improvement investments very in will of Sales more versus While gross our program results of hiring, highest they and sales Gross to period gross profitability, gross our last large a margin and with due was events. our Sales we margin. XXX a XX% year-over-year. QX and or This rate points to for basis QX. than XX% market, to represent million a level support our of leadership we travel reduced resume of $XX.X That total ability normal with was in spend QX, able believe been year. and the marketing reduced $XX.X profit was million as $XX.X quarters. revenue, we in same marketing a said, We're and

XX% of seen we revenue, stronger net per of previous slightly QX Non-GAAP reduced end started growth platform, our in and share our guidance was $XX.X was have and as administrative million was million, on new travel expectations $X.X result marketing. invest of have research sales $X.XX drive the expected development revenue from in diluted outstanding. cloud or in diluted than sales expense better a as hiring operating cost quarter and expectations XX% our QX was in a to and was events revenue, and XXXX. QX non-GAAP content XX% aggressively more continue which up global we million This efficiency. increase and to of XX.X demand, As to invest XX% our in exceeded $XX.X we of lower features pickup based than shares including or product, million and revenue revenue and in XXXX. was general income consistent customer with expenses. QX QX versus expense a income

flow and statement. sheet balance our Turning to cash

as cash an deferred of of equivalent of XXXX QX deferred a from the to into XXXX, increase of Total $XXX.X that end change at billing well as million XXXX. compared was contract million in million at Calculated non-GAAP at revenue consideration $XXX.X in $XXX.X the metric the revenue, as was QX Calculated million is $XX.X million $XXX.X revenue were the end QXX end XXXX. liabilities. million change Our cash and and $XXX.X the of takes up March year-over-year April May of with a XX% an June. year-over-year. year-over-year around It while XX% and XX% above to XXXX, not area difficult billings very at the forward difficult pleased saw each future was were billings QX to that results. XXXX and our acceleration QX similar We results, in mid comparison. of billings we our predict is in XX%, and given COVID-XX currently June to pandemic modeling are the our growth quarters billings we QX

last reminder, due comparison, as in in XXXX, we strong a promotion to was million flow special XX continue performance difficult As self saw in a quarter will that versus QX Free our full we compared a to QX was the flow by in $X.X negatively year. free same the terms our included $X.X for face both normal launch to cash QX net impacted XX. million year. the year-over-year cash and net of payment

payments conclude our tax now by deferral the employer, providing operating by U.S. revenue non-GAAP under call payroll positively impacted and was I CARES of the it So, on Act. loss. will guidance

improvement XXXX, guidance a QX for For third the the economic the year assumes full quarter. in of and modest our environment in

higher by or from to guidance our could We are these will end variation us the broadly open more economic assuming year. Clearly the of conditions modify further lower. that significant up assumptions cause

revenue services For flat year-over-year. to range the million of expect QX expect professional to revenue $XXX $XXX total be be million XXXX, in and to we

$X operating momentum the range early non-GAAP delay better due COVID-XX demand did to of in Moving curtail and operating our have hiring. $X stages and crisis, million operating of be loss non-essential to the to more Therefore, to we conditions, expenses we the resumed aggressive in We our expect loss. QX non-GAAP million. but

raising a year million. are $XX $XXX to from million range We're For also million guidance to $XXX XXXX, of of range full million $XXX range $XX raising operating year to million to $XX our a our million. we a to of total non-GAAP $XX revenue to million of range full million the from $XXX loss

would year in flow not of for expect the on have points Our we views prepared. a a closing, cash In changed, in like emphasize and modest on touched to cash Scott few XXXX. to I continue that burn level his

the our business. to macro not resiliency proposition. of value our the business from model based and that immune believe advantage business our COVID-XX crisis, our are we four large results opportunity of are a While well-positioned I is trends on QX take validate driving the

your market close commenced Please that due we today, laws, requirements be of public that not the the common offering after we note a announced has Avalara to Thank able will propose regarding our the to this July Q&A. during call open our to results answer questions like up would point, the Finally, of offering or At we public for questions. stock. securities you.

Operator

Thank Instructions] you. Thank [Operator you.

Your Sterling comes from from Auty JPMorgan. question first

Your line is open.

Jackson Ader

tonight. questions, start is Great. Jackson Sterling we Thanks M&A. guys. if for Ader that for taking my in Scott, This can with you made on comment

be What it a to the been of year. it would there? think color that you'd true? organization? since last been main and do Has just us price? Is you size bit little potential Can and like transactions? than it's you the been why has you said it been as I execution think this longer you Has driver give

Scott McFarlane

Thanks. company. the things. mean, Jackson, in to We've all is say would of XX is, look, our done content our those expand we started our been it's I since Sure. DNA. I IP tuck-in and M&A acquisitions and What expand around

took know do what efficiency we've a And to on getting I new really the or executive that to I on this, things we on deals we as we internally, looking brought continually can that everybody doing And so, that think what the time always the lot the of so, around settled a team. And and go always focusing back in we're to deals. seat growth. acquisitions. do do jobs, said, around been on -- -- space, their to discussions do organization. all there's And focused a lots of and We've in there's we're looking people

So, that changed front. nothing on has

Jackson Ader

forward Okay. or maybe any there June? deals Great. for you April what and May feel you, was up June, And in what July, all hit didn't from to it getting did then, in spins into that in happened that a previous was pull actual came you and in follow-up like demand Ross. see Without

Ross Tennenbaum

Yeah. was Thanks, Jackson. I pull don't think it forward.

was pent-up it probably think demand. I more

the As April were and that. the you everyone with know, and COVID of with situation how height March to grappling deal

in business then think pent-up our as to were our was nice growth increase that to demand fall to And so, market how May figure there started and in and a progress and And trying billings demand. out that customers I rate we forward, saw June. out our and some

than pent-up more was any forward. it think I So, pull

Jackson Ader

Got you. Thanks, guys.

Scott McFarlane

Thank you.

Operator

from from Your JMP. Walravens next question comes Pat

open. Your line is

Pat Walravens

and perked you from very it and and up real and element Scott, money my a when that ago, the opportunities the Great. company time getting did Long to you much there's covered the I in about had customs people terms their this, a duties. wind some of were remember I ROI congratulations. back that cross-border government. talking Thank ears

If just you you Can what opportunity is on the right? lay the track all this out products? cross-border stuff,

Scott McFarlane

is the I've the at digital consumer, And it's it's of absurd. where We such have deliver I acquiring things proponent to another then mean, cross-border. you to one then bill what this and a in having it mean, this -- thanks. it it and they world, you the those Hey, go seller concept of purchase, go people to order, both and mean, should third and the exactly all when ought ought the cost really kinds have I mean, the an of -- Pat, said I right ecommerce today's buy I to they I am marketplace buyer that to ecommerce it. gets -- know happen third-party at moment think a is product. that clicking especially of of the in before pay time of to in commerce I of a -- the world segregated place to know huge right?

And the so, fundamentally it transactions commerce. I've aspect time all to was always to this the add at magic that of that moment believed important of

extra a this it. I benefit saying have and people extra the don't don't don't don't back, take so, ecommerce want product. think this ship as especially want product, huge it's -- publishers, ecommerce to pay right? costs, I have it I the I with Or I And to deal think to goes, I ecommerce back. they that and it just need because duty the if

away make issue classifications. We And other huge all in nobody the do the the so the for it's everything Avalara are for does and all this space consumer, than right. time. sure the do with We And that because a of a manufacturers. us, help we of at abandonment rates that. actually manufacturer help competitive advantage the ecommerce huge And is

advantage manufacturers And to so, and we a customer. the it's great think a huge for benefit

Pat Walravens

a quick just area there's Great. you I if content or is that Is can today? you would more follow-up. need to do, do you where that And acquire an have like everything M&A there help, ask that could

Scott McFarlane

it. And aligned then started an acquisition making all that started around Then product codes Tradestream. building that the sure our we did we codes announced internally, of are system. of Portway acquisition So, to we the the and in HS classification

content and more improve always And we're help two so, in that for And made will that more IP looking the service. we've area. acquisitions

think mean, I we're I answer is So, looking for yes, always that. the

Pat Walravens

you. Thank Great.

Ross Tennenbaum

Thanks, Pat.

Operator

[Operator Instructions] you. Thank

from question comes Brad next from Your Stifel. Reback

Reback, your is line open. is Brad open. line Your

Brad Reback

compliance. mute. was should cross-border much revenue Ross, like on just multi-product as talking trade you a guys I that we on How expansion think impacting about become Sorry. of going more there rates net forward? we were company,

Ross Tennenbaum

Brad. Thanks, Yeah.

a has in concerned COVID upsell which I churn. than higher. call about talked healthy. we side, think about. based based on One non-issue. as on been has bit of on to upsell and Normally, is but guys nothing booking bit our factor, higher, really It's be know, that little older retention It's in new a healthy. then, which little down-sell you really a sort as the it's net And been

expand been our forward we -- with but Day to products forward, as is to June, to I have customers. them land of our existing these new go most them them in customers, as We Analyst they've little just and go not to and Day only about before we launched. Analyst goal think talked use had them a use new

And is cross-border a so, the example. great

customers. calling our saying, Going you use? you We companies the and them to by it's built connector how national international cross-border? going doing are back back consumer e-tailers, and back this to how or and add are saying, going on should are be into that back and definition companies doing You e-com and are should

expanding So, think it we over more. to be customers net our should it I -- I -- retention still XXX% to think, that said about -- a time benefit we should should revenue we've said be always minus. or plus

long-term, And over expect of see now, I existing in down-sell customers. some of COVID, been a out more the due it's so, right from time. our from expect I expansion And little improve to will south bit we'll the of that that

Brad Reback

Great. Thanks very much.

Operator

comes from from Your next Chris Sachs. Goldman question Merwin

Your line is open.

Chris Merwin

my much very for taking Thanks question. Hi.

a I an the this which in talked was hear. to You $XXX,XXX exciting remarks enterprise really customer. deal, prepared about imagine is

any how Thank customers to to more the as changes landed today like but So customer. more this product go-to-market motion can and solving that? and just it motion The well. about motion problems XXX like as it that the go-to-market see integrations, businesses, evolving going talk the time we you further sounds partner with plus you you for reach more you. forward, think Obviously, might about go-to-market broadening curious you large in suite think about have

Scott McFarlane

I when doing of it know start the customers. find selling which Chris. impetus we -- want to that's we people the has you our about Avalara that always And we our to that said in that to bag And I've end that we features upper don't we're all also continue have envelope at to And changing that the things need to push we XXXX, had everybody. them. transition. those opportunistic, by the around being salespeople's motion always called we've have mean, we've use product level move cloud. not make is see to sell to opportunistically, sales customers for enterprise I that anybody, the of talked us. that to that from see on-prem as but to it, there that said it they Sure, well mean, existing been because were we that, I I But mean, as all typically going for would

rules use, a that those, in very all want consumer And adding we time. customers period of we'll talk so, to the cross-border, these short have adding And have them the or things about. now, are advanced enterprise

So, stepping the future. be to but be approach it's to up now, would the way not we I opportunistic, least in at our would say going foreseeable I change don't that we a go-to-market, for think huge

Chris Merwin

Thanks a guys. lot,

Operator

next comes Your question from Scott Berg from Needham.

line open. is Your

Scott Berg

quarter. to opportunities Hi, or vendors chat or of substantial or for the kind heard questions bit the good about Scott in and vendors my with marketplaces? contributions you taking those are a partners you're switch you that Didn't on on comment -- your an recently. with gears guys either platform not? today. that from ecommerce volumes current having Can if haven't Thanks I in a little momentum XXX% year-over-year pandemic. to some Congrats GMV different guess, area Ross. due a We've line the or report of those seen the up know those growth revenues nearly with rates

Scott McFarlane

back nailed we beginning call mean, but the so our been turn I all load. Avalara, API. I'll ecommerce weren't of of right? and platforms, program. ERP But -- on this around one we over tie as got all fired all it gets the beginning, this Ross, in funnel ERPs, day, start out many about Avalara from really ecommerce up then since we look, of And In because the they it he I'll has to the But it'll mid-market the and really that up. with ecommerce, did there top

were came we huge platforms SDK that. and around uptick Then in seeing So, had that. our a we started and out ecommerce robust a selling we business

do, marketplaces that we what say matters these significant you with the business ecommerce do it's that thing partners to of ERP. So must guess, I the that that and turn only a it really win would happened you in thing I thing because same over And is first the I portion our before is today. Ross, have to

the must order You Epicors, and protect and in to all win and suites net Sages those the the the of most.

winning first to because And anything all the it in NetSuite, kinds of you relationships. thing over that of you'll those going I first we the the about the winning on BigCommerce, monetizing Ross, process know because so, winning have winning turn more that's I'm this. is love focused talking to deals than Shopify, the these

Ross Tennenbaum

a it's BigCommerce right Shopify right -- love us. and The enroll they acceleration happy the about are you top they're plus is I doing away. to funnel seen platforms the we've it our really all is think they away, Yeah. great ecommerce shows versus I model, happy months question great. because am mean, ecommerce last XX in for and our about And the ecomm stats move that on like And see with Scott, four way have it Shopify, if we're customers platform. would years. then I they GMV got up add of We that it, they more three,

each know, you as for one. As Shopify pays a fee

they're our So, liked they that. really hold. we know can nice we from -- really we get calculating that. are. game then We our platform, grow We and them, ours our core other et use then And -- market growth on customers, who into and a to But and then and them products of cross-border. cetera. them all and convert customer certs And returns consumer direct grow them to takes

we've They're funnel, as future so, evolve of about these and And I us, but always really more enlarge quarters on will that years them it as are and with our for and think it's they would top just will convert customers. our we platform products. said, them

Operator

Brian James. Your next from Raymond question comes from Peterson

is line Your open.

Brian Peterson

the Hi. question. taking Thanks for

think some and you that seen near on maybe maybe in guess, So, in next Scott, I over -- that you I or mentioned it's the heard Thank know unfolding you. horizon. -- the on that confidence years. year. you've might few curious XXXX, the enforcement, that an that but how just gives I'm about you term commentary interesting be been what

Scott McFarlane

company what are Well, think of all always a tell relief is I've reality itself. up form. mean, in that states, a be deficits, will But of coming our And way, impose shape that all I will the of I that reality back paid programs I or got share. the few here have in countries to everybody with will the anecdotes I some

VAT EU in just -- I a it's I that is coming. of to enforcement supposed I are they there, doing has paying for E-invoicing, all free there. looking are programs even are and paying their there the rules so say than all played around the fair more reporting, where more world it's was share are these companies it's mean, say, be whether out that in out the and U.S. or Calc, live ensure this it's for are that people So, that are the the notice that not And ensure little this a to in people I to earnest, Wayfair, this that around once government to continuation and no world. real-time, happening mean, bit. marketplace are sort the going plays already And paying once we of to what that that are -- pandemic out it's was once think knows itself continue. a transactions trend E-invoicing don't programs designed the and lunches stretch are

Brian Peterson

Well said. Thanks, Scott.

Operator

from Your next Brent question Sandler. Piper comes from Bracelin

open. Your line is

Brent Bracelin

Thanks.

Wayfair SST I'm contribution, a that? there or it here. little Is up pent-up So, think, just would hear some there ecommerce helpful. Thanks. sort after it Wayfair. triple tailwinds? here, surprised off you bit year-over-year I digits doesn't programs of drivers years SST Could Was for new mean, about just offline talk over little Scott some is to to a state digits two SST, Ross on quarter. weigh be the a promoting was in years the contribution just triple color we're demand? or this to I online of of Was any a two

Scott McFarlane

SST disassociated least pre-Wayfair. SST things in theoretically same Well, that Wayfair things, out. -- do but at the set I'll really is in from right? up was start practice, They're --

would whereby states sign and get would revenue. the customers up drive it program Avalara be which to CSTs, a the was the So, to pay

sales at of, the with team, who the are our have so But it. can doing this the the paying but I marketing -- forefront, governments have message about The in huge kudos really because put thinking your but -- So -- Avalara, has it. money obviously, to and give everybody's in for right? you transactions dialed to actually, save message, Wayfair to

the and a The paid, And a well. for so, get win-win on get break the Avalara states everybody. cost it's as customers benefit can

message. just work it see So, real a of dialed make that's one cost because to program. aspect they well. taking in and the the customers know out those that of things really We of just are advantage We've how worked effective

Brent Bracelin

cost The very to It's them. seem be benefits healthy. Got helping it.

Scott McFarlane

We're at Absolutely. very articulating it good now.

Ross Tennenbaum

remarks, from point Yeah. Brent, going sure call All dialed really SST the to out execution's SST make retention if someone's we last the were a is and on I'm There great. it been that retention rate. really in it want because ask up year. the currently net I revenue And is to net not not about included included.

is getting that counted. So, what's to upsell the happening getting existing not we're is,

And sometimes into downgrade the an get SST, SST other when they existing may drops services customer to program.

pick we So, but up upsell. the the downgrade, don't up pick we

look going promising, it's not going look look change be something not it's saying go to I'm we're going lower. think I go at or metric, to take at QX, So, at. the something it. to to we're just a going in we're higher it's

Brent Bracelin

Helpful color. you. Thank

Operator

Our from next comes from Matt question Blair. William Stotler

open. is line Your

Jason Ader

think quarter. But most Hi, Congrats just Which terms good you Matt. the establishing everyone. success about more partnerships. upmarket? and talked is are if kind in provide curious I'm on focused actually move do I Ader transactions. it products But that. just cross-border these the various curious of you've your Europe color of This on Jason relationships crucial enterprise for in to on know the in

Scott McFarlane

the Oracle do aspect and SAP doing to most starting and all of important been that's we've that. of upmarket mean, and Look, first connectors. the I Sure.

custom mean, mean, an they're we even customers of or And aspect. to think that not is that to most be motion something and to relationship I kitchen we I'm I and move customers. move has our that it think content that to we to different I something most guess, because to with keen four would that's able need nice interesting that we mean, of firm mean, the to four firms. I'm focusing feature constantly I And them. using complex their even always we're them Complex phone sort big the but say provide build closer I trying so developing on SAP Oracle. an that's big we're the is on relationship over time. the of rules into the one past, more benefit Avalara the we the with had that better really people forward. I that area And with than content develop the that accounting need as And promote SI or we on. But system. a allows go with rules. that take SAP, with I Oracle forward we're aspects And I relationship -- it's in would the to be will really that's custom closer opportunistic, as Avalara -- of all around have in

have bigger concept because now have it content It'll this much content something take this getting else it. someplace they're firms, big else's half don't into relationship you second -- to this do their new that these So, functionality releasing is us actually to we're content year more of provide they or that SI implementation. to allow a of will because with it allow the somebody and us meaningful can put

Jason Ader

for Sounds again Thanks the quarter. color great good. congrats the on and

Ross Tennenbaum

you. Thank

Scott McFarlane

Appreciate it.

Operator

Canaccord. from Hynes David from comes question next Your

Your is line open.

David Hynes

thanks Hey, guys.

I is driven prepared of So, kind remarks in ROI the again heard change on it right, which and maybe from Really guess Day, renewed a -- a bit Scott, a we we focus your at today. you that Analyst heard real doesn't just it of the driven ROI what's market? talk the little the bit a change model message of more about feel manager? And delivering been communicating past. to like and you're an sales in that in how event a Can selling,

Scott McFarlane

I It ERP. fantastic you're talking automated about that you're we is don't a of this driven, mean, you all have, Why you manual tax all most driven. only driven, best actually. does, because really that's creates business Yeah. way event event ROI this the doing you've your liability. think about user think creates David. driven, have upgrading that, event -- It time I tax? in describing that actually end When know It's us you're benefit know tax, sales efficiency. you're know right? what as the when you're -- about Mean, help It doing and momentous for -- for no So, you is We this benefit. that no look no It's you're a about event let message say, that you -- when that sales not off is doing we customer. -- at you ERP. had because really meaningful an the format. at sales doing has when is something audit

perfect when efficiency like to do to face, easier crazy, may And it. the in seeing now absolutely is we're outsourcing because the market right to wants time the the it face into that. just about going times talk way and than is So, uncertain nobody times to ability minimal functionality. talk is to and when you produce this liability to of about is time to talk outsource have ability in results these the decrease kind and to the with them to and effort that it's them to It their best

as all to of have what best memory so, because we I the difficult times and -- appropriate, in when the those mean, is even do well. trigger muscle trigger using doing and other And everybody's the events develop having to continue times they're or that in the this events

So, it's a of combination both.

Operator

Mizuho. Your Michael next question from comes from Burns

Your line is open.

Michael Burns

Hi -- seeing went there. any Vertex. and competition wondering move quarter. you as Congrats are if public, competitors specifically, you great guys to on other often. upmarket, more They ask less on wanted or I I or them was recently

Scott McFarlane

move known And business I Look -- has friend it's upmarket. running of question there today. best. Vertex the We've -- the family When the XXX we forever. what think just system we errand right dear always your they're fantastic in Vertex business been to is our up We it. do it that product, of SAP, because key that that's something were it when that forward. see where conversation, can try in happen, come place, those in this mean, wish done. and to them to seriously, to The have things the your in we a we're put you of do to really on Oracle. want a position they've wondering to when optimistically until as when certified I've to in done you grill it. I ready we move is mean, chasing said we've those moving a in was all I I I I would run time, at, POS that that be your and pound ways. doing And can happen, certified opportunistically team, it's that company forward, on do. else the the Walmart been We're variety very, started very ours. a events designs fool's in have way I jump we're and

We in I have it. have a mean, experienced basis team for doing doing this. we that's

our have consumer the We through strong in of whether different strong we fuel place. have That's internationally. these in leading surrounded lot a it have SaaS the our -- many means, all leader We're model. of our be I that. customers relationships telecom certificate enterprise doing in we our use. business, these of with the approach. players have means, business, And a exemption in we We're pieces cross-border business mean,

we've about. done to and I've just continue will features talked what So, we're do the that just upmarket. move gradually add to going we And

Ross Tennenbaum

only business. we're thing I in would and half we different just opportunistic, out. Michael, I from say, when mean enterprise And in say we feel half the people like hear it some Yeah. we what the had, think because I are mean, I

sales We have team. an enterprise

will. every team. out deals with to believe technology point favorite your an Walmart and and it's But go, -- tax optimistic they convince We it's change the to marketing win pick reevaluate displacement would along have quarter. they Hey, time systems all market is, hard enterprise enterprise Scott's we your company. of all We a it. now's

always can because going deliver that, to at deal include COVID, over their or suite, the with they're some have conversations lot those of to requirements we to trying a on And to want as we backend reevaluate what we deal will past their as there in think trying that end all the with systems, and point, technology. we've especially done capabilities are. have said, tax now just and As to ecommerce, for deliver years And the news. be the an great to the to end work them, few they're they're we've platform, we with

our conversations, expect to we those we think and can we So, be in share. win fair

Operator

Your last question comes Stephens. from from Brett Huff

Your line is open.

Brett Huff

in question somebody really world. about COVID want him I evening. and glad for the to value Question, asks ask see the taking going resonating upmarket. to market. about Good going proposition Thanks the down

always the sure end making middle One our the the of that flank very business defending in great enough questions in like with is we market, always news in on have models products. low the this good we're

resonating. give with thinking some QuickBooks the value customer, those And us that an distributors -- directly either with of I'm working conversations examples but directly changed of there. prop through also with the resonating? example are seeing folks? going so, is that you're How Thanks. are we just know I are gave that. of you guys -- the some I But after And some think how you

Scott McFarlane

Brett, off upmarket our that. question on way focusing is mean, that is, that one That's The really a mean being -- low fearful for end And partnerships. very, something that, partner market of win is about right, fool's the this errand I the is, exceed below. But always fearful, world on it's talked very model. great it's we're good try of opportunistic. we being to And what because that at Avalara it of means yourself dominate bread by -- protect I'm I mean, always personally, and one a the from and through butter right? things innovator's displaced of mid I to the sort we've dilemma, by the where a to mean, -- in market also the me I'm And I basis. just only

we're So, is all your of I've the it's relationships so in of said BigCommerce those the with entry. Wix Shopify and what why players and and particular, that's market your in barrier bit and couple And for for in proud is out is, to allows deliver things the which thing yourself. businesses. the to the kinds to next that those. returns is the they of small win you talked in monetize that to protect Returns said now, would marketplace of which the about Ross to important And But going like be those how small most important businesses, come some able Day, returns weeks. I package early, sellers it little and the these it's calculations I'm they're -- on got a ecommerce we a to already sell out the along my Analyst doing. say with they that future.

deals, the you with end the those in exemption fresh things. registrations deals, low they that's win that to how market. need. monetize books, the of things defend kinds -- the all them So, those have at zeros win things is But you key key of yourself you That's what of and other those there the other win these, grow certificates, you you those so how to and and key, or the -- to they -- that something like is key, then -- returns have or

Operator

turn the McFarlane, to have We further and for Avalara's closing to Scott like I'd over back remarks. questions. CEO, call no Co-Founder

Scott McFarlane

taking Thanks And Avalara. the all interest appreciate call. Avalarian. support. in. we to everybody forward Thank you. our on for We Well, thank talking the to joining next for Thanks look you all you to -- in your

Operator

for concludes today's call. and your Thank gentlemen, participation. conference this Ladies you

You may now disconnect.

Avalara (AVLR) 4 Aug 202020 Q2 Earnings call transcript