AVLR - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Avalara’s Fourth Quarter and Fiscal Year 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’d now like to hand the conference over to your speaker today, Jennifer Gianola, Vice President, Investor Relations. you. Thank ahead. go Please

Jennifer Gianola

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

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

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

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

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

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

Scott McFarlane

the fiscal like I’d earnings the team year We entire joining to welcome beginning non-GAAP in performance of XXXX. million. revenue, challenges. Avalara our despite to loss COVID-XX and call. a than expected ended of Thanks, QX achieving for from increase everyone Jennifer. outlook our year, XX% $X an quarter congratulate the of year-over-year $X.X narrower beat year And operating in XXXX the outstanding the with billion an fourth We

cash gross We In non-GAAP margin also year-over-year. annual QX, revenue $XX an reported XX% of reported total our representing record to of and free to million XX%. increased $XXX we million, increase of flow

QX growth XX% We calculated also billings of reported year-over-year.

few the driven by and Our XX% the business, total across addition we execution continued in of acquisitions growth rate that was strong revenue closed a highly QX. strategic

the history. business results demonstrate strength resilience our times. others than model In pulling ever back, products in before XXXX, and in we of released our while new more Our challenging were

enterprise acquisition largest licensing our and in market. portfolio announced and we bolster addition, and In our registration entered and the acquired extend the compliance to global capabilities, companies of to insurance and content offerings our e-invoicing,

the We that strong proud global today and future. found category-defining us And allows have bold that build have a compliance to deliver the we formula aggressively a vision. of results platform cloud I’m working

XXXX way deliver you very to the continue all accelerate our of Fortune XXX diverse, sizes, without we is base are large Our in development how tiny Many emerging encompassing ask, to that in we acquisitions product globally. all of customers would on focus we customer small COVID? While ambition have investing to believe also done increasing core businesses. in mid-market, enterprises, our we and to journey end-to-end penetration will compliance the

and business brick various and models as our increasingly companies mortar reinvented cloud these. Our to they adopted our e-commerce BXB customers solutions operate sales from with and omnichannel many adopted In on solutions. business direct models of their to combinations ranging XXXX, and retail, rapidly e-commerce

sales have chose did We direct a plan also sales prospects didn’t us. who many their their tax But we BXB direct expanded solutions to compliance have e-commerce delay time. a business automation inevitable. had to as with well, future believe automation and We result and our purchased is and terrific or companies that do

As built COVID or Businesses excellent retreats, to we is business to the compliance complexity their The grow. be. expect prospects durable and e-commerce long omnichannel strong acceleration as our and Avalara are us, trend. we e-commerce remain exposure for have adopting it of expanding

value, software is great the as solution. needs for classic tax, seven-figure solutions. quarter. onetime lead within as other deal for in nothing software, Avalara play with who begin our for And includes communication cloud deal deals to struggled, for complexity adoption return during growing might of Company one including difficult say businesses solution growth trigger economic cellular tax related annual have efficiency a of services AvaTax our companies. network a which to We of increasing This that filing cases, customers sales ability time we’ll handle plus in and trends use largest selected event expect communications regulatory their segment. as to its the We calculations example, support of the to marketplace and and included requirements. The to cost pandemic, a many and during that media XXXX trends recurring adoption both, fees out return real fastest these fourth the streaming the international saw our We there again and multiproduct the same and Colorado’s our of environment. to company, the well sales of won persisted Other communications, they experience imperative be

enterprise of our and with completed makes partner of for company our integrate our example a to We deal our value because with application. food wins it of business an system. customers products for $XX,XXX, into an several deal easier ERP centered how competitive won is takeaways. a solutions we Additionally, disparate integration This their

the competition. business, head head food main point the dollar a pain multibillion customer. international for to this was Next, a going against won we compliance tax deal with Use

transactional shop won including also global for strategy determination, marketplace tax, deal competitors won U.S. sales valued internet VAT one returns. tax sales and international to above in all We streamlined a $XXX,XXX. use calculation and compliance a needs, tax stop returns, our and against their our due We

we their to large Plus. want NetSuite our integration the win vendor. and for our e-commerce takeaway for of the we with integration international The of deal and marquee incumbent value omnichannel use a Avalara Avalara and in Finally, medical benefits with $XXX,XXX to chose platform the Shopify an unseated NetSuite to with due compliance, device tax single company. cloud ERP recommended commerce space, customer watches. maker Japanese multinational In strength and sales

will for pre-built belief overwhelmed why to no deal untenable tax tax ERP XX for been solution our Plus, into their of longer compliance. more value. we and value this software disclosure with of rapid years BigCommerce I this tax e-commerce décor tax in nexus Shopify’s converted our due status accounting be Company’s large deal addressed favorite to that vendor stick an integration in Shopify. our safety process relationship trusted In known This to on deal ecommerce around a child voluntary due multiproduct could company who and my integration Avalara more that $XX,XXX to as multiproduct a addition, Avalara customer’s leading to Shopify what only our for of noncompliance by we are and application. growth of exemplifies BigCommerce, deal, And doing has The the for and products deal omnichannel well a compliance, led omnichannel ERP a company calculations vendor. the tax customer our e-commerce leading integrated through They automation. registration is integration deal agreement, supporting mid-market than The This capabilities, selected value, and and my ERP found business platform. with sales well with services, automate business Shopify burdens Shopify our customers Plus. at as them for study, quarter feel a many But home adopted moving than they’re and quo. FFC pet now led company, evolved state Also, and time, for of transactions multinational Like $XXX,XXX including every to a a Avalara an $XXX,XXX to program. over firm omnichannel by our apparel a prebuilt was

offerings, returns solution. Our our and compliance services managed and CertCapture exemption management

for As demonstrated businesses continues as through Avalara’s our add than That’s multiple more. partner relationships We to enhance shift a any integrate plan our applications, to software single offer moat with potential wins, seek differentiator, integrations new with and to key platform customer systems. why providers, moat continue offer other exposure these more prebuilt to far disparate by can tax be that that especially and forging tax more applications compliance customers. omnichannel we to business partner a and integrations actively

of been know in including reminder, As up to our and great is choose a all over not a engaged are new those to integrations, launch and emerging total Avalara, that these to our of running. number landscape, signed, team It’s competitive have fully live companies that continue X,XXX. and yet is these partnerships but partner get

updated tax position into applications solutions Avalara us create Alcohol multiproduct Avalara all for developer represent ever transformation we and Attendees to of connect learned a opportunity Avalara commerce Beverage With the with event I’m for this together a was journey. and for from world including and Rules valuable where build Avalara’s their market, AvaTax Fiscal accelerated our our NEXT, product business community. help partner product at of our compliance the Businesses, our extend had remarkable best we application. and with first developers global resources, recently seven in Cross Use, year We an Consumer brand into India progress business support Returns forefront talk and Avalara. the of commerce solution, products, and Avalara for Working product the integration test Small build into Transaction releases our about was including global to tools, technology. leadership to who APIs, held various tax our another build developers service. Software Avalara technology registrations the NEXT community, to essential of Rep e-Invoicing services and showcase and compliance, Advanced that over new important relationships you we code-focused Border, to a our releases, practices GST Avalara for hundreds about as segment brought machine. excited total connect Avalara XXXX awareness, platform portal,

knowledge in Accountants, journey channel as to business. cloud in tax solution build another The and enables practice compliance software firms, release services. our clients on returns for availability industry have deep the event the is our while firms attracted sales extend designed in with milestone we for to product products experience selling market. Returns service that is add value group managed MRA of latest Avalara Avalara accounting services, and provide automated accounting competing industry team MRA. tax Our for our exclusively accomplished for MRA sales preparation Managed January an other out high focusing benefit also returns known a accountant tax is fully technology their with efficiency filing and with

I’d like in XXXX, talk expansion. our our new of challenges the hard platform about further M&A a content tax acquisitions. We through leadership than repository, our expand and bit Now, and geographic to Rather proof little capabilities technology leveraged our compliance recent to future our global and organically the add we continue to cloud building drove M&A space. amid and retreating

are In addition, brightest impressive of aggregating talent in and minds some we’ve tasks. added transactional the

our offering We of efficient to our compliance a In to our we from opportunities hasten rapidly Recently, market ambition. definitive signed we where the real-time U.S. acquisition Assets go-to-market we to licensing solution compliance our address and enable accelerate And enterprise with enter replication Limited to near a the in platform compliance into the believe Impendulo market. M&A substantially acquired include our requirements global of acquisition moat to we products And roadmap Transaction complementary acquire in QX, through will a entry improved and long-term for we Tax agreement content Inc. the and Resources, and of registration the are presents insurance globally. Business growing and which Licenses. market our INPOSIA, expanded

indirect excited on details acquired Now, is On more insurance compliance tax compliance, tax welcome market. experts Xth, James, December I’m global premium slice as pie significant insurance employees tax of compliance to of to taxes the specializing and for global in compliance compliance and support of communications, insurance global governments the enter we the we the revenue I’d family. market Insurance for acquisition founder Like with addition technology are like Chris you around and INPOSIA. to companies. share and for fuel, just with is that multinational world. offering. services, growing another all that Impendulo the Impendulo for in as based Impendulo funds and a leading lodging, provider the automation to a to Impendulo our believe enter markets, natural ripe London our beverage and well past Avalara a alcohol stream insurance insurance

is integration subject focused to German like reporting, real-time to transaction. address you on and year, definitive acquire companies On first tax December this about requirements deal most close closing XXth, to and company expected signed we to of to the to talk Now, e-invoicing, a software conditions. data INPOSIA satisfactory for worldwide. compliance recent I’d business digital agreement INPOSIA. half our This is in a

we will believe around receive future Avalara’s around time transaction. will due transactional it real-time, have result in enable critical. where invoicing between where tax U.S. be today. business be would different serves information any environment need the a compliance client now? tax reporting, winner proof globe. monthly all that able and Avalara requirements, must and to that happen and authorities strategy words, element transactions INPOSIA in believe this INPOSIA of the next is invoice happen. government In connect see INPOSIA to party footprint where business we vendor is recreate This time no essential businesses our believe moment other the data are every to anticipate future provides in from U.S. real essential trusted we be The facilitation sellers Winning more innovate of corners at INPOSIA remittance compliance automation to generation our will real-time sights, why application in globally, of critical capability. and have magic the government. the Where to of weekly monies and calculation that which we of a So, their the will being suppliers With will each European connect our our compliance is calculation, tax requirement, compliance The tax others The a to expands Automation any as to that become so U.S. global and environment move middle. and ambition had is leading chain maybe is end like complex meaning opportunity not the to from transactional reporting an in of further and time, commerce. the all same making authority, be a platform our the live to will and system Our why to moat business. taxing and We a the electronic customer, governments party global INPOSIA, vision provider. to real will today any platform success or across

is number and the in it not support to cross that Mission going acquired. Business expected. we including Integration Mission product. Licenses. as We one our companies, two for invest and and is is new of is continue acquired sell the businesses to growth on integrating focus we’ve TTR standalone to number us

companies We well are to can where sell with working shared to opportunities prospects. for begin to uncover existing we customers both

already were opportunities early with pipeline coworking have large building TTR, and one another’s that several enterprise to We cross of customers partner and we deals customers. are an mostly sold

Company. improve looking ensure We ability fresh products new opportunities made these for customers founded upsell to years to believe will continue that the and are existing road machine us and avenues we these we’ve product synergy down customers, we five a we believe and our believe to in And our M&A opportunities we off. we build integrate the to better ever-changing we in are that growth and been acquisitions and look We provide future. and cross-sell enhanced manifesto are acquire and for growing the offerings. since optimistic has our market. And new that must that paying provide remain will investments Avalara our will monetize objectives. about relevant Both with sustain our we in Avalara potential into acquisitions. companies pursue from the The

always digit said, based and single statutorily strong long-term and we business, automating a large we’ve penetrated As required long addressable in are market play, believe on a we functions.

reached have billion time. a and to and a in revenue $X.X multiproduct, excited over we revenue, We’re grow multibillion can Avalara dollar into over believe scale company

encourage our Investor Finally, business to Thank page you believe that we Sustainability and is our to quarter, more Ross. on website to in our to highlight disclosure. to more resiliency. Relations I I’m tell will you fourth key progress call value you. requests now information. excited sustainability a the And address the the I turn and We long-term to investors’ that for component for over our site go launched

Ross Tennenbaum

Scott. Thanks,

range our pleased challenging of is growth our very of QX year our $XXX.X compound up non-GAAP strong our and XX% grew the a cash excluding automates did results year-over-year, XX% with business durable, delivering XX% QX XXXX while to revenue. XXXX $XX.X $X.X was that record exceeded increasing and up XX% excluding on are time. of XX% across Avalara can million, million revenue, strategy, $XX the and or beginning We $X.X then guided up a year. at compliance $XXX.X non-GAAP achieved We or for million guidance building posted that our XX% new acquisitions acquisition XX% the of of revenue milestone excluding reaffirmed Xth tax business belief to market and year-over-year, full operating by a flow that board exceeded primarily Avalara the margin year-over-year free XXXX $X.X Licenses. that gross XX% after acquisition leadership revenue. long-term XXXX, total revenue at despite Professional or up uniquely in as up was of our returns October to XX% metrics. growth, Subscription that every year-over-year million, XX% billion We mark loss performance provided represented nearly November services a over the XX% million. million Xth acquisitions. from total and TTR, Business of hitting revenue

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

unexpectedly meaningfully X%. churn a revenue revenue with than annual measurement accounts define as that contribution at with it of lower gross revenue during associated is annual recognized billing We gross While churn in their level ticked us, a up XXXX, all remains that the the agreements divided period. total by cancel revenue

As our include churn does revenue a gross downgrade. reminder, not

revenue XXX%, a last average. net and four-quarter Our XXX% quarter, from down retention XXX% was rate resulting in

impacted NRR Our two is by factors.

total is is NRR using services. revenue, our First, professional to subject calculated of impact non-recurring which the

Sales Streamlined Second, grew program, to NRR when may upsell Conversely, our subscription our our from revenue in revenue our SST calculation NRR changes our excludes for SST standard XXXX. returns Tax customer occur currently includes program. which from that program significantly existing contraction

NRR by our is million. SST only captures Avalara’s While offset downgrade of XXXX SST calculation $XX.X the was this downgrade. upsell, the the from revenue value

a January the headwind in growth as realize is factored million an this program though of SST a in continue program QX, revenue compares this into and our pricing basis XX, the additional issued points invest backlog. add SST was recently As reconciled or margin all XX% note revenue, travel customers otherwise sales-related Sales change, the reduced earnings that revenue year-over-year. than benefited are profit and operating results QX XXXX expected revenue in In XXXX, that please research count ‘XX. the work a grow a to XX% and million to to to as margin. was that stated, million formula expense and December in and expect the period improvement aggressively of unless would capacity from in marketing healthy reminder, long million in our results rate, guidance. intend non-GAAP existing program’s a our or included QX the of was term, same still statement, Even XX% We of revenue, and slight and share we just from development percentage was of gross three-year which representing GAAP SST will again covering believe as see an board of expense we before $XXX.X call. gross of to new the marketing XX% renewed XXXX, events. for we we our down more X the revenue X, XXXX to references in total expenses, environment. profit $XX.X release more expense SST XX% with remainder QX in discussing million or our on income a is and Gross year. This per down XXX another in to compensation We absent continue we $XX.X XXXX. and marketing renewal $XX.X The demand XXXX. are press gross quarter reduction governing that in absorb in XXXX last Sales basis SST sales

based was QX and and XX.X stronger and is outstanding. third-party loss reduced on travel result as than as long-term M&A revenue $XX.X event diluted $XXX,XXX, margin, and increase to R&D for in administrative recent global slower guidance, QX of platform, was million of QX as and general QX integrating than of revenue approximately shares was more QX $X.XX XX% expenses. expect in and cloud included to professional which diluted expense our million in and $X.X ‘XX. revenue the of we building income legal activity. gross fees our versus growth of million revenue, per efficiency. aggressively operating in or acquisitions hiring, capabilities net We building share cost quarter, in support drive G&A expense better our new XXXX percent a a invest expected XX%

acquisition primarily or results. of XXXX Looking now in year $X.X Xth fiscal XX% revenue, our revenue year-over-year, October at was TTR XX% of after the million Total up from $XXX.X and million excluding acquisition $XXX.X and This of million. returns revenue, our contributed total Licenses. year-over-year or QX in $XXX.X contributed revenue XX% a profit $XX.X margin million. XXXX, XXXX gross of compares with This $XXX.X gross other reduced margin. loss XXXX of prior $X.X and million for and and investments a to Operating XX% million as due revenue. in our a for Xth cost XX%, Business compared was represented Professional services operating representing automation of profit expenses and the million, XX% was XX% it acquisitions. our COVID-XX million year. Subscription in lowered excluding gross with revenue November grew $XX.X loss Gross then

‘XX, cash the consideration XXX.X to on million year-over-year, equivalents the cash $XXX.X and up acquisitions XXX.X in QX in contract the and in Free the XX% of million, the deferred cash, quarter into same the a metric well last QX Calculated of billings excluding QX and end the was change XX%, revenue increase impact Calculated from revenue at $XXX.X end from million QX quarter billings Our in end restricted ‘XX. million revenue an million were the million flow cash that compared revenue up $XX.X liabilities. million revenue, year. fourth is Total or was as ‘XX, million liabilities. $XX.X as deferred in from contract the change end ‘XX. takes QX of of at non-GAAP QX ‘XX $XXX.X was XX% at deferred $XXX at of

XXXX. by for year For for full of and XXXX, and providing guidance we on I the million non-GAAP to flow the cash $XX record call QX $XX operating will million, loss conclude compared revenue for achieved free now XXXX.

compliance results, clear. investing Our work while hard day deliver Avalarains future. in XXXX, the strategy simultaneously those producing every like platform build strong aggressively to to is the

have our a tax to We ambitions. platform believe of a our position can compliance we that growth sustains leadership for evolve vision maintain the and long-term future

XXXX, in on seen more we provide product to a to our are market, launches addressing durable organic being XX%. well-positioned have this growth, evolution is long-term through and revenue XX% deliver acquisitions. Avalara like thesis has that of believe Specific clarity is expectations. changed. combination large, to We’d mix not We to a you low-penetrated As built XXXX, and

total QX and This previously Business of subscription the acquisition, services we in in that will For be other not our expectation Much is XXXX this of X% million revenue. due is of and strategy. $XX mix Licenses, returns a from professional other of our and our mix split in one-third from revenue professional XXXX, services expect categorization revenue core revenue. of revenue of two-thirds revenue, the business to in higher change for a approximately predominantly and XXXX guided

we revenue QX revenue represents at these estimate the XX% which X or price in percentage year-over-year ‘XX. of We have figures approximately growth closed approximately QX million XX% rate or XXXX, For acquisitions excluding from between expect without million, total in the million million, year-over-year, lower $XXX been range, are a the and SST three would they points $X XXX midpoint than reduction.

and spending in and and and $XX a resumption in bonus software We aggressive Similar prior expect million, for sales other significant in our QX to million research M&A outflows we years, QX marketing, expect non-GAAP payments, operating loss to be development, cash integration. more expenses. have the to range large renewals and $XX of to reflecting insurance

the SST million, which at represents total the million midpoint a in figures expected lower rate closed acquisition $XX full XXXX, reduction. percentage-point revenue the price $XX these and estimate the revenue QXXX. to million or we X.X of $XXX year-over-year, growth from X year-over-year without XX% been would range, or an excluding $XXX in than to they We are For have between year expect $XX million XX% million,

acquisition dozens companies since through content, founding. don’t we’ve rather M&A to of and additional but new compliance our As Avalara’s the acquire talent, for expansion. We of technology revenue Avalara’s accelerate acquired to DNA, platform geographic is reminder, part become a vision and of the global

non-GAAP investments research XXXX full to million, In range automating the M&A and $XX million operating drove our gross we integration. activities development of aggressive made progress expect and in reflecting sales in year in margin more a $XX resumption to We that loss be and leverage. XXXX, marketing,

geographies. We for gross to benefited products continue will the also that investing pandemic. savings from slower and we and automation We from other our margin expect in improve COVID-XX hiring intend core

these higher we and until carry new expect offset gross scale. recent improvements However, and acquisitions a automate margin, by lower products that we may drive be

a our We this similar XXXX in is result to expect may XXXX margin results. that gross

we burn We modest level a be conjunction XXXX our in Thank quarter. Please with in Day of like Goldman virtual Thursday, open call and continue point, Also, participating with first earnings Morgan annual Securities, upcoming will for virtual to up November you CRUSH Analyst to our today’s on consistent questions. this including in we Raymond call. cash conferences held we James in Sachs, that XXXX, your shared conference. May XXth would users’ note free for will in JMP expect Stephens, call. Stanley, participate on what our the the At

Operator

[Operator Instructions] comes The first from go ahead. you. Goldman Sachs. Chris from Thank question Please Merwin

is line Your open.

Chris Merwin

great required? like that that integration finish ask some INPOSIA the to Can like talk bit about acquisition. the be And in to a to about Thanks. a I ERPs and this you would U.S., systems, a what governments? of about with has integration year. on Congrats you product work wanted talk the roll out today core the can

Scott McFarlane

it do solution, what is, you reporting your information INPOSIA, phenomenon. I’m it thanks in and all transactional really to a of The is, is bat because it this does and going actually But, I is say That’s start real-time. Chris, reporting. where mean, bunch. that with way really a what does in, INPOSIA Hey e-invoicing I today takes would does an international bat out. that

to right, closer it we are where making actually moving transactional. the it’s in that So, U.S.,

are transaction. the middle of the in getting the So, governments

have the on audit that’s with know so So, they trail. going the they information an e-invoice,

the the that So, fundamental actually in that’s difference. the to where we transactional in closer It’s pushing U.S. nature are

like the probably international to going government’s I same in the here U.S. to it’s ultimately the something to happening on actually making So, keen it’s what’s in U.S. but more going do It’s that U.S. here. thing do not business. that’s we’re government think, But not come the --

think take to that it while will I for So, a happen.

connectors you -- global a you the it do the integrated So, INPOSIA is on then INPOSIA in I and mean, our product, what basis. is take with

on and in a bounce real-time. and in, stored they government, to That’s to able return to place, Chris. when reported what’s get essentially transaction So, comes taking that out information be approval, then it’s know the

Chris Merwin

the And additional is something part a sense. a makes sold brought fee be into opportunity or package suite going any for lot of an the there like just your on of transaction as to this, That Okay. is subscription broader of basis? that’s component this and e-invoicing with

Scott McFarlane

expensive doing a States, Internationally, it’s really Avalara, all really are today, calculation then is for you really not calculation much. VAT the returns. I not United and -- that world, for returns us. it’s the charge No, and mean, we In reporting. have very just we in for the because bonus calculations a VAT revenue-generating is the about area

our by today to calculation it’s e-invoicing, will So, all we making moving much internationally. the don’t we of module transactions that actually and more important, get

Operator

of from from go question Brad Bank Sills next comes Your America. Please ahead.

line open. Your is

Brad Sills

those meet builds you changes some traction. product some remind from about has to ask a mentioned to and how us the enterprise the and different wanted standpoint, there. Scott, the Avalara nice I you made requirements go-to-market pipeline requirements? Can how enterprise is there,

Scott McFarlane

doubt I guy. that, That’s a That’s no feel That’s our where mid-market where a question. There comfortable. great home is where Look, just is. That’s I’m most we started. right? about

built that deals marketplace, already fair towards of And by and both in we go-to-market up, we’re winning and team as enterprise same I those strategies out our using we come deals enterprise so, these opportunistic when are a is, largest solution. takeaway the deals our program today, meaning of mean turn and new the because have what And enterprise, goal. our companies for that share the most we deals,

of upmarket. go them declared that the now longest for to just and But, time. XX, takeaways. we’ve the are years. So, into moving most where enterprise from XX we’ve rip this full mean, time is I the shying the start been we doing doing away replace bore I’m

would have out So, say to are as there. we’ve to mid-market. so good I all make be we a have our processes But, we businesses spent how the of feature do and that our lot ways in our product, in of more in out as we our products a time to out parity -- great work the we’ve to enterprise operations, done big with go and building build

have do ability consulting build to technology just services, -- really go-to-market do in our to have process work we out we for our companies. high-level to and largest the So, order the definitely

invest quarters, an have that to coming really to enterprise And in we’re machine. to the going so, be in in order

Brad Sills

please. more, I may, one if And then,

about kind job Day compliance the more interesting a Analyst and if last top Avalara could platform. workflows. Just these great sales and remind compliance year, at are you with on has new And you of you where compliance-related Obviously, tax the footprint applications talked cost landed beyond us of done some offerings. some expanding of the things licensing into like

might So, when so us are if you those remind to those kind could much. where start of just contribute. Thanks and

Scott McFarlane

really step-up really heard right, for did deals functionality the work we point. returns their You really in of a the a about things largest of take know in and I use lot our you’ve to exemption. And me it of one heard been mean, the When examples. use enterprise, -- is don’t to I’m and to customers. use got most everybody’s this. the tax, -- sales comes like people sales in that pain the of those we able tax, talk that horsemen And enterprise tax, the of for four I is lot it way be our building a proud we’ve right? of tax, most usability tax out are mean, selling, and team winning

led we of and that what enterprise And you space. some in actually by the examples, doing use that’s so, improving our tax, the saw in with,

today, added rinse repeat a almost exemption able been So, it. which we’ve is, then big model, revenue, certificates, we pleased sort really and returns. I’m Returns to out our continue XX% of our add that to look, calculation, we with of started

use continue just do that tax. we with So, to

that do the to pedal And and the upsell. growing of this to can think Brad. to where TTR on we’ve you you been And we’re what our on in business with business how then able that’s how services that and continuing doing I our and just of on to our able to really we’re continue expand licenses, see We’re aspects one unique and and add significantly. that of footprint pattern sales that’s subscription Cross-Border, keep start new in do. one, And the to foot going we’re

Operator

Your JP from go ahead. Morgan. Auty next Please question from comes Sterling

open. Your is line

Sterling Auty

With So, decisions Scott, solution additions expect in talked should out you of customer some terms new pushing about that throughout in customers of tax pandemic. investors the XXXX, mind, potential what because especially post-pandemic?

Scott McFarlane

general, can we’re I in bring here. got up he We so then there, to I’ll over mean -- going in so and in. chime Ross wake to him talk

as thinks want we to e-commerce but is around until are decided that of well questions trigger lot about large I’m mean, what’s as the again. work our play is be I that out they’re that push everybody do So, the sure of doing we’re But, know, that. will is e-commerce, we’ll do at so there start get what on customers, section decision-making unbelievable, didn’t so we businesses. think just are a there people I look, of the focused when huge COVID that’s amount And know businesses that everybody this back and at process this area. I over, have cross to And and to on events

sitting I sidelines automate, but little group So, that there to know automate, that on want of continue customers to to need bit. the are mean, out pent-up a a we there’s

as into that us So, tailwind to move a for we I and expect Ross? be beyond. XXXX

Ross Tennenbaum

mean, Yes. said it Sterling. Hi, well. you I

not diverse industry. largest smallest the I to every the from It’s bad think, is, point our good. just -- or customers it’s we very have in

whether as brick-and-mortar, And, sales and And they’re economy amid the there’s this the the so, that done number a direct come hopefully that improves, well pandemic. e-commerce, those situation we unfortunately and would recedes hope haven’t back. of businesses,

pursuing that how and, in a They player into e-com Scott for the meantime, saw do for relationships be local a had how you got which in the in be into recedes, business And and given Shopify remarks, impact like then, anymore. prepared pet and about upsell Plus. lot in we that then surge past calculating They relationships. news XXXX. into my feel they people on it to we’ll going so, get if those bill would many we get our great mission compliance, customers, where gosh, good of to in us e-commerce, ground to be them. a those the Shopify, the hunting was a get for the built hey, company, our oh and and And those. we the is us with realized XXXX, your the that, not since there back in was to pay try And and we And And in customers XXXX, then in on with is, be the And XXXX? everybody. is we the business? calculation, ask built The platforms, partners example were we’re gives want own about

crazy. been is global. do status I’ve We’re national, the in maybe can’t And compliance compliance the I quo doing past. that

later, years Shopify us. to and come them they called XX So Shopify told to

upsold pretty $XXX,XXX-plus into We’re much returns, the for we compliance, everything, them SST, document deal back calculation. already on getting management. And doing

haven’t all hope innings early customers come back And much And continue XXXX funnel compliance commerce on it’s so, that obligations but for and that hope e-commerce the do just still more made we their complex, in companies, of of realized some we’re the type that’s businesses becoming prosecuting, of the didn’t that to those And those are under. to we pursue term. well again. prosecute the and they’re long customers

all long, think I it we that goes the to strong model about. So, talk

Brad Sills

those The added, how TTR? Ross, just of housekeeping. customers one quick net from XXX many came

Ross Tennenbaum

None, core now. there’s in the customers no M&A right

Operator

comes next Please Walravens question Your Pat JMP. go from from ahead.

open. Your line is

Pat Walravens

that maybe out what you just were? and you Hey the there and revenue Ross, downtick the one components start. net retention break for over to the biggest again Can of go

Scott McFarlane

always I Scott to I too. Pat. Thanks, and love get Yes. starting, tired. start gets

states, asked explicit So, really you it. I’m That was surprise few us, rate out And quarters. But, about want retention yes, because so and glad I XXX%. called revenue think net be really issue where, we mostly didn’t to the last this states. I calculation you in to and that this all you’re let’s just the Pat, SST and all pretend So, right? XX returns calc in do is a due you’re XX customer, downtick

want a we say, those let’s in platform. later, for or just with you subscription those XX to upon SST. it a calc returns states. all into states one of us that and in then, you to year its SSTs bring enter it And bring You both you and us renewal,

not. difference there. coupon SST states, we We’re or whether bill difference the clip running through So, one SST do pay when right? only subscription, paying of you, only the in compliance that’s you, remittance a SST, we real versus is, The solution it’s outside states the client, the are the for the

XX so, add subscription, states. And in then that go XX hey, that renewal, for the we states happens and are what so XX to say And are you Pat, on with that XX-state SST. for the SST states SST downgrade upon the we want non-SST I is, your mechanically

but so, it’s But, for was data is it but why happens. that’s so, the XX, revision explained, up the actually, that it in the it’s and paying doesn’t what not? the with happens some it paying future in we the can calculation, include the are a you’re hope I well Well, And related XX for upsell. the that come for NRR up bill, offer. what And SST and And thing it’s our unfortunate states same saying picks that out XX, bill; an NRR you’re downsell to But way date. correct a set we that

XX that’s actually around So, that to XXXX if from NRR. from around think existing, some you in in and of just is not increase impacting about going SST XXXX, XX revenue

So, then, from XXXX but there’s think, downsell. some a things. There’s more the more And in weight. there’s you nothing we other downsell just that’s scary expect than few what’s COVID in putting had we past

because some of and really circumstance. struggled there’s overall, market it’s market, there. Our fuel end issues end that calculation just excise numbers, downsell business on SST But small it some but had the

Ross Tennenbaum

next in We of the services which the all year. professional away the also calculation, goes include

punitive really it’s regard. from So, that

Pat Walravens

you following had investors today? you. one a from And you two you here. take mean, for are then, even beginning, going things those lot us sort been guys away think the who the big should or from of important What of picture like I that Okay. on have most Scott, for

Scott McFarlane

in have the and I the a business I it I we think really our this And here really of in think prepared and delivering that of We regard, -- it I So, from now. proud found remarks. have mean, stride. I really all mean, and over-performing during my I said COVID taught the found I’m Company crisis doing. But, an I the beyond rhythm we and because the where five term delivering just future-proofing. today is me team that but essentially ability in we’re to I that’s to is now. word years. business innate word, Ross short focused a on look this in look in what performing going mean, love

I the going; to the say, be okay, saying, do when that, long is, in describe the to market doing. front. been factor SST it’s VAT is it’s in And together, in in way We that today started and can where and here we look SST. look and help an best where And is we’ve it us this is We’re we’re out short at can is this we look really going. to what Wayfair it, always Pat, XXXX, important with position term but us really at all things is term. I like come trying did what post

way. is I that think, Cross-Border

that really I’m our on be to way. going is enterprise focus. keen TTR growing think I And

about what were growing rate, I think we integrating continue I to is I day enterprise the think, if Pat. and making So, they in high say that out, sure to businesses the grow that had focus, and day I -- at a think

Operator

from Stifel. Brad go ahead. question Reback next from Please comes Your

is Your open. line

Brad Reback

Ross, much. one on very last just Thanks the dollar net one retention. Great.

XQ in puts As we range? and not? expect should if we think it about takes, stay the be What would the to XXXX,

Ross Tennenbaum

to mean, Brad, don’t I guide Yes. we it.

exactly want it. can’t how answer I you So,

this right? always to the the some SST that. definition, I In I was so to in plus And the XXX information. it’s a issue. as about said, bit gives is it past, better intention little realization the my from that of think believe But, that divergence including and without of provide you still kind it or we’ve guys minus, revision so think

from fully lot journey of businesses. of think outcomes bought the our more bunch go think And we’ve So, there’s just that new sets being ultimately, -- monetize of a I for in is end-to-end the term, able customers. up you of that. launched want those upsell us some to to customers. still a long And outcomes compliance a one if to I our new We lot But products. bag

specifics the the -- So, really But, you. channel I now. right on focus upwards for more that it customers our can’t XXXX. thing drive is expectation I isn’t and me, drive metric and internal time. working through over give But, for That’s to correct to our you you to for my got through and

Operator

Scott question Please go from next Needham. Your ahead. from comes Berg

line Your is open.

Scott Berg

you’ve to enterprise a of wanted your of introduced XX that segment or excise you’ve question. what that’s Brad’s the maybe driving start on months, that of particular that to feature there follow-up XX over I success the some be But, seen. would some Scott, set was strength kind last recently? a functionality that if with It’s --

Scott McFarlane

solutions the we areas Thanks, Scott. mean, that I mean, not just Look, I we did out. just did not focus have, I feature mean, -- parity the one with it on. best it’s enterprise of

between that Over the do. operational that want And I of something then distinguish parity is last few sort years, those. to there and and we that feature we’ve is needed there’s service parity. decided And to

go-to-market gaps the to whether didn’t to order motion. And this role doing do. build phrase inside And also I’ve out integration big played tax doing we we’re will find we’re in enterprise. in coined really really out in for the have competitive, continue which or in whether us way. really the table. I four relationship definite to I motion, that. gets our a and happens time. think, we’re -- royals, royals. the functionality important marketplace. there. play it’s operations big to do making biggest our will, And to what when I’m to in we’re And that way the new pretty determine huge the us you of a the role the that And go-to-market improve and be grow pleased a But, in have I say have one in it the I both are called take gaps, bit royals the starting steps come getting, that who It the businesses the and rules, it. think to four, them The Company big of And expand is we takeaway one mean, process, of -- I sales we and those fill complex if call the with custom the with now wins they we an order filling when technologists to around the to and four the the

we’ve game quarters. and coming the to So, got we’re better over get the in

Scott Berg

And revenues of Ross, from and earlier mentioned of the your follow-up. had then, in a one marketplace you kind platforms comments. quick

seen that One have segment, tailwinds of you’ve e-commerce obviously platforms lot exposure the in had this to of your customer I’ve from of how about great maybe but questions should the kind acceleration the year your contributions a some is some pipe, direct these their think received what’s not that we to of or businesses? revenue

Ross Tennenbaum

I mean, this drivers say, generational it look, Thanks, drive time. would beginning, marketplace, it’s is and just long for Yes. two been I I cloud whole business Scott. mean, doing got e-commerce view, trend, the us term. Avalara’s the my are be top that e-commerce long but the Scott’s shift and to will since

driver. if this the we the So, doing in guide got to XX% in year, year-over-year could calc keep maybe a in performance store, $XXX that It’s we how to point were ago when big a original XX we’ll we you do really it think about you year last comes quantify was and years But you just Day returns. growth and down that And and e-commerce million, that the our exceeded pandemic, storefront did at year. to like appreciate making. Analyst delivered walked the that figure omnichannel people out you

one transacting But -- have or but a go lot a locally you’re nationally just you geography. omnichannel, not You and usually direct you’re you maybe e-com, is you’re you’re didn’t what didn’t now of maybe marketplaces, once business, have e-com you globally. products, stores, usually not had happens you on

first customers, I the got a calc. think you so, thing the of And

collection the make states, they’re And really our I’m that, first XX compliance oh, global feels DBAs, those. all of mission, of just so, out platforms in notices got these the really and check Until these problem, a many they got to in And I potentially we’re do really for do out and get gosh, because got that’s customer compliance got I document of they’ve compliance and they states. got to out to headaches. filings, maybe There’s these then, through and back in I And got all to states. I built now, to do filings. registered calc. got do I good. works figure n good, all where I’m calc got all I get to management. got I’ve feeling sure to I in do realize I’m kinds

is the XX you can And it pet for status just many example so, saying quo years, way last not cases. this to do I’m the apparel like I’ve in as done just going imagine, tenable the

ask surge And know seen question to to going drives COVID, XXXX we what everyone only that’s again, off some cover post-COVID. that from the all it. that’s my businesses back so, wants in and point, you the a And -- question,

And else. is or upselling that I talk to that trying get we things perfect like we’re of so, customers they Avalara? we And publicly, this worry to we inside, funnel feel just what’s and the still BigCommerce everything where going look, one when say, Shopify to happen we’re on to said

to but We’re where doing in. into want be dialed we’re not pretty we well,

We continue on focus to monetization. the

automate fulsomely. over good doing the so, very there’s we’re we and that go on. cases as position time, there believe, early have them. we lot And just one a more a in calculation And get going many out they’re adopt just innings of And those really to their to

goes like it to backing day day them we out. again, -- just it’s think I keep So, in, down

they’re have it, to us keep to Some have But, accelerate want events. their going adopting. trigger over do. people to hard They time, to

Operator

question Canaccord. ahead. from comes next Your Please Hynes go DJ from

is Your open. line

DJ Hynes

guys. Hey. Good results. Thanks numbers. Congrats the on

terms I’m is you enforcement. first, think of curious market the regulatory maybe in So, where

I think, to there was a big for obviously, and an year then expectation out that states XXXX figure be COVID could hit. Wayfair,

ahead thinking how versus to of the lines? those get compliance after along ‘XX having issue many guess, trying turn curious, customers I is, you’re to And you related I’m So, how question a one? about

Scott McFarlane

and Gosh, there at unpack. a I’ll to work way the start my lot back. try end to

said So, I we’ve this think, before.

majority If not CFOs doing it with there, you you’re out of the is, doing tax, how we’re ask the right. sales that is probably answer

or marketplace time. understand it’s whatever still do more going would what data can put enforcement. not not not of other about to COVID And that the is, it, in They question that that, the particular around basis best that we’ve is just mean, TBD. that is get or to them they at usually that the I enforcement. to of know more How it’s big doing it businesses time But, doing the event most have biggest hold that But, tide then comes to they of everybody one. trigger this kicks actually year. swimming that’s this There’s They can answer and on things sort they is Having guess, is, sort with I’ve doing They’re right resources the when to right. events, they’re would of it they’ll to to do do and come always we’re them a said before so it the knows is I they like makes one host obviously, mean, government trying the to they’re into better. mean, I that. have don’t the inclination happen. those. talked change. I some degree happen? of regulation figure thing there’s doing said a the audit a and get out So, making what information, understanding I those can. they’re high the the trigger mean, to And state always say, every that and how trying I

federal how ideas them the able continues they’re on of to is working just think that that. and same But, out I to to ways time, strategies to figure some at get right to because the do now money many I all of to COVID out be bail think enforce. states’

acute of environment I particular over much really a think tailwind, it’s it’s So, way -- transactional. to stringent, will that. different I at countries. international, happen. doing internationally make of that mean, more what domestically you’re the mean, between more XXXX got, Spain, enforcement interesting. of they’re is the look I order a a in mean, you’ve outside Poland, taking transaction, regulatory happen, and e-invoicing now, bunch than XXXX, Philippines, it’s really will France, How get And to I seeing it with it they’re I -- strong are activity degree mean, to they’re the that have here. it where measures trying is and in countries And a lot to

DJ Hynes

Yes.

helpful super then, if one And can. maybe That’s Okay. Scott, I more, color.

at all pace should It you first right? like bunch water? seems it toe other adjacencies. Wondering the categories, Business to such these opportunity, a think the there’s in other Just the we what like into of compliance market. Like, compliance your expect a a see tax how Is expand is come? obviously, core in -- to of to about big others Licenses just just

Scott McFarlane

goal. -- want at been said, and and just been growth way area, our the Well, core I I number our down same out to build with happy able ultimate channel cloud really again, on job mean, goal. because is work we the build unique in Like right? that different I focus I’ve here the allow us out the SaaS and and be some job just reiterate of strong platform, this, with is to the compliance able have a ultimate platform. we way things to always the that’s to think one mean, aspects the time to move one cloud I which we’ve really I number now And compliance integrations

there’s integration W-X, our lots us existing seen like you’ve what I I W-X, what we’ve platform think So, mean, XXXX, do mean, take allows and we tax. property that platform our to things I said. mean, of about can areas that calculations, to I then really if have and content, that because combine it’s and engines to be reporting get to do the returns government. you we the able and the all the expand with content. it, with And

to think, to that a continue to And I we’ve I direction continue well-positioned we’re we’re that. think, move So, in. going that’s do to that said

Operator

from James. question next Your ahead. Please Raymond Peterson Brian go from comes

Your line is open.

Brian Peterson

There’s you’re one next particularly those few the going really Thank environment we initiatives. about as the I’m There’s high the think a over and and you. efforts of growth how a lot curious years? level. how thinking me, looks. adding in So, hiring about from people on. the should go-to-market just product just lot side, And

Scott McFarlane

one the of by been great that mean, mean, years. the say, from is that the all I would criteria that one off and start I a just innovative technology. I one the reasons tax think, things been I built And out, mean, through developers people of over our tax I think, people and of benefit I’d finding tax we’ve saying, great of understand time. I world-class the we’ve has acquisitive acquisitions. team we technologists, that

So, but need. is acquisitions for always find to positioned. the do we found In I we space, us great to difficult. have it. talent that be difficult exceedingly It’s difficult well it to our been a way exceedingly have mean, Avalara not

we in good India that bring India people good -- and say almost our when developers have our in they I people. people X,XXX location challenge think, I is will at for people, a hire in we finding in and us along times. India,

it domestically be really good with mean, acquisition. to teams So, I and and recruiting to bit. hone we’ve internationally, able think, in program I through it got a a us our But, on stretches

Operator

Your last go from Please Mizuho. Panigrahi question Siti ahead. from come will

open. is line Your

Siti Panigrahi

like e-commerce expanding you the many then, international. products XXXX, Ross, and you products, going downmarket of like Scott X and and about was talked tailwinds, of kind So, so one upmarket,

XX% in organic so you growth, XXXX? are the What excited So, you are at most for drivers think key about? do as what you XXXX, look you

Scott McFarlane

there’s excited get and on, I about our about. lot ability start have think, lot just you -- to excited as What a say, going more. moving a upmarket is, we I to be There’s

move for we will think, space. I But, it think a challenge will us big us. as that I into stretch opportunity It it’s us.

we our products, we or all be dynamic think is how them, them with exciting. or it Shopify really, we really how them, I or Woo variety have, of partnerships, that a we grow those of of whether a Amazon monetization partnerships really think, push how BigCommerce, monetize I can forward with

SST that I we’re program despite been that the that a contract I for know us. And area. grow know I think, going that has reduction the -- to in fantastic price,

when to just of our okay, we I about take care and it, like, I moat. have So, stop it’s think

I We have these mid-market to other pulling we’ve and TTR take years, monetize in strong avenues, that the that all but care mean, those in. been of so for

mean, we’ve lot be think we just to really use stay upsell for, can a I bag. in if sort those partnerships lot And got I So we a in to thankful drive business. of focused, our and nice cross-sell, some

Operator

Q&A call session. like for McFarlane, CEO, the remarks. will back turn would I This today’s Scott and co-Founder now over conclude to closing to

Scott McFarlane

all our hard it. our for to their to for take partners work like you. just much you this your to this very forward customers, in Thank support. appreciate Thanks employees, of We I’d look And call. we our to on next difficult XXXX. thank all opportunity talking

Operator

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

may You disconnect. now

Avalara (AVLR) 11 Feb 212020 Q4 Earnings call transcript