AVLR - Earnings call transcript Q2 2021

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Operator

Hello everyone and welcome to the Avalara Second Quarter 2021 Earnings Conference Call. My name is Daisy and I will be coordinating this call. [Operator Instructions] I would now hand to your host Jennifer Gianola, the Vice President of Investor Relations from Avalara to begin.

So Jennifer please go ahead.

Jennifer Gianola

Good afternoon, and welcome to Avalara's Second Quarter 2021 Earnings Call.

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

such COVID-XX expectations business include statements from regarding synergies of into our of the growth financial business opportunities and arising trends, the and integration Forward-looking our business global and and concerning impacts statements on acquisitions. economic conditions, acquisitions

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

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

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

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

Scott McFarlane

to exceptionally XXX going revenue to welcome highest vision an Avalara quarter public. million for execute the increase an of compliance platform. a we great rates Jennifer, XXXX our total leading of XX% Thanks, report was We has on cloud everyone continue joining our to become year-over-year, global call. as QX QX earnings our and representing growth

growth was of results. we by balanced revenue since all very and be would success acquisitions, industries, performance Officer of outstanding see to as segments, the President was acquisitions and quarter new couldn't success that deals, range in sell Amit continued excluding I stellar QX. main our and the organic acquisition. to Mathradas, Even our and like wide and across I excited team, multi a year-over-year. our thank addition in XX% Our more coming customers close strong with growth our from key geographies, as Chief wins initiatives. pleased points large Avalarian with a from success attracting I driven business his Operating for to more accelerated strategic cross across seeing product well

solid retention also net We revised XXX%, A activity. our upsell of is quarter. great up strong customer retention to XXX% experienced last proof expansion from point and the rate

by wins also performed great ability to regulatory catalysts. and again very the monetize our International some powered Business quarter, second Our customer in well

in And our brand conference as a Groupon and in momentum commerce, thought to like our success attendance, Grant beginning Sage, higher IDC May We name just and few. times brands, beauty Untuckit, global was full six previous crushed with Our the building compliance. virtual than Thornton, a is partners big of trusted CRUSH leader a our first from ever all and customers heard big amazing event. record

must further for the have to will of compliance from and international tax largest code XXXX We the the to the automating grail reemergence what landmark a classifications, Next, and we our defend of and ourselves we global classifications. future join are second even best We business aggressively this refer trade in all and robust dominate onboarding code including are best gearing of We hope event. and By summit the Inspire shows called content, in place the putting mapping holy scale up of indirect busy tax to more most not mapping believe event including I partner annual systems and in tools half, in of platform you to for us competition. number mention class to compete as onboarding the integrations, the technology the automated October. market. tax the

and never are brisk quarter been automate a customers choosing you to value see, first proposition And relevant. half Avalara has more compliance at from can As our their outstanding tax pace. results, our

a we our with selling higher, on our broader more a and strategy We our selection level. are customers at engaging executing products of are of strategic

said be the in today and future. to aggressively I've a transaction to that of we And compliance before, have of a us the bold working results I'm deliver vision part the proud formula every cloud we found As category strong allows defining platform that global world. have build

the maybe our have organically believe to news started. getting of that and through just making past journey best the of we is future is the us compliance. investments years, we global and all positioned And several the Over acquisitions lead have been shape that

Avalara. compliance their based benefiting excellent the prospects commerce in the growth adopting expanding along infrastructure, exposure e-commerce The complexity of and is a adoption and with from marketplace fabric in commerce rising are omni-channel regulatory for as and of opportunity fundamental or selling We of Businesses shifts market. ROI generational for grows. us and the obligations, omni-channel cloud expectations are

to a of market. the shifted to premise all novel As compliance more applications on approach businesses more with replace concept in the sizes cloud expectation services has and cloud an continue from of

quarter. efficiency second the by prospects. play be beyond resonate ROI COVID, services decisions drivers this delivered expect saw wins purchasing customers and we our the to economic shift is and these and efficiency One continue out cost cloud automation. with a of partners of to with messaging driver We of Even our trends key our the and in

examples. their $XXX,XXX, which revenue, able a integrate of value recurring a platform, a annual Oneworld, expense services. with The time and system strategy, with company recurring and to all to software platform. few known Avalara including includes a just selected are billing e-commerce we well deal unmatched for We IT where one our enterprise of deal large transactional company a infrastructure won Here management do partner systems, were NetSuite an integration

XX announced large deals, In our We the Avalara addition, to we of deal including won fiscal won wine on a enterprise to large our beverage a provider return provider. verification This with a world's connector We SSD tax deal payment the compliance, rep value fastest for online countries, program. deal growing us deal Europe's well technology Avalara alcohol product, and six $XXX,XXX. one compliance company countries, one largest of companies based services with industry as selected positioning global for $XXX,XXX. deal international won of known couple processing our a in The of managed due ongoing our marketplaces a value recently solution. enhancement shipping a of includes in and

also and compliance. and future leading we TTR, fiscal valued harmonized $XXX,XXX. global In is projects with reporting, India SST product product Brazil addition, a regulatory company and This calculation including AvaTax, capture. Switzerland, well in deal is to at company beauty VAT as us and The duties want rep system filings, their to classifications, with as requirements meet multi on working deal, a including

and with with competitive tech we several deal company multinational takeaway interaction communication want to go TTR for a We see our We center with and early enterprise data an SSP. TTR deal integrations value of strategy. including accessories for on also a cert platform competitive and a an $XXX,XXX a integration, of value capture, of to software we management for $XXX,XXX, a TTR our cloud and Shopify platform, a licenses deals including won We accounting and winning continue Avalara deal market financial it wins provider our And premise services a $XXX,XXX. takeaways. platform. for to business Avalara vendor. We won well deal won industrial company known success to selected a our packing ERP The an won due customer deal plus value company replacing additionally, this with due integration

Next, takeaway integrations systems, to due sales for for company such as a a retail value a leading retail company The platform. selected capture, platform $XXX,XXX. and In and integrations customer medical $XXX,XXX, a cert software value custom cloud deal integrations for cloud a MedSpa And designer disparate with with $XX,XXX leading cross relations with tax BXC platform. fashion e-commerce devices management of code. our platform, a company of popular Avalara due we customizable and and value POS commerce TTR of of to our leading we competitive a won won to platform, we a border, a deal deal including won

a for deal won also TTR omni-channel a We $XX,XXX. funeral company value including a product with products of multi deal

been their for a of letter One year Avalara Canadian the my The states years significantly a business automate why to managing that States, firm belief in products expand out the tax $XX,XXX. This compliance. will a and business compliance overtime, deal of at of the The for five doing was and stick is company value ago. and realize fencing one after deals out rapidly company selling receiving owner not where the with did started exemplifies that to this has the deal products was XX from United was they sell. grow favorite company and old of a reached company Winning I was risk. with manually business business compliance years every tax

of moats IT funeral partner provider. offer and add it, step one customer integrations industry in tax I than over from We We across to we examples working the just to with services. services we nearly other integrations stopped you believe more never all discussed, think in software any XXXX If and applications more. with fencing we've to business products the all sign economy most built back selling the And growing. about far defensible every software are

demonstrated and can not disparate shift is platform evaluating customer if continues to a enabler, businesses be system. wins single applications compliance Integrations integrate deciding diverse multiple often our major, a mode key to Avalara. to factors a As when Avalara's commerce that tax are partner by omni-channel seek and business as especially niche broad

the strategy long So tail important. remains

one We to In of with business our largest and marketplaces. deepen ecosystem marketplaces relationships with excited we announce partners of good the are progress. the expand online our e-commerce border making levels cross and world's our all continuing and are at to expansion I'm of

During our globally plus have we off. and is we on focus analysts investment a paying recent that that to dedicated day team XXX marketplaces stated

XXX a marketplaces March challenges. counted our and address of table largest demonstrating by the compliance with their identify ability world's and marketplaces we customers have earned to As help as XX, customers, at the seat

a little journey the our major in transformation. are build accelerating to from investments talk our with our and We cloud R&D I'd AWS. a platform market. about and Now started to Today, outpace ago, bit approximately Three engineering moved cloud our years quarter how us R&D tripled vast our one hired machine services We modern like major we investment Avalara's in companies engineers experience to R&D. to headcount, work leaders of first cloud solutions. employees and allowing

advancement and the have witnessing Avalara's to of serve compliance customers, in bigger sharp on much are on or We the others cloud focus opportunity building result, a are a solutions we cloud while that tax. now as premise point our

XXXX, building global compliance roadmap. important our wins, major a a means as feedback releases product cloud are term Cloud the buy That products our version portfolio and vision, include more for have of and customers on will interaction. to we our new pricing, as central, broader today. compliance platform service documents subscription a information. In upcoming are just We than transfer will into of support Connect, we products and expect future software from products that and a believe significant content new we product complement dozen a long our that Based deliver

up TTR opening our We content through are to. sell we with moat expanding new industries acquired that to new and are

to partner the of integration. with our code expand studio, no we continue accelerate of low We long new building so a our tail way can mode connectors code, integration extractors and

charge our acquisition strategy. ahead to continue also We in

platform compliance We of organically to power, comes end Avalara systems multiple merchants the economy, continue are cloud and in expand proposition. leverage leadership first M&A where sell our to to content That's multiple hard our through M&A tax future to and employing We capabilities experience. digital today's channels expansion. our building in unique proof add and technology, and compelling with new space. this and geographic repository, driving have ability and global expand our size across geographies value the in disparate any customer In our

tax, property can compliance consolidate and believe of recent WX, areas partners discussed of more. will customers we we day expect potentially compliance As our landscape healthcare, to WX, value activities completely automate new new support compliance our at logistics, platform to analysts products. that environmental, employment, overtime and XXXX, our including fragmented today's We and add content shipping and

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

development continue we with board. and like officer would to leader Finally, I where directors. retired and a growth and Prior president Jacobs, on the technology our served chief was acquisitions. responsible global Army team Tallapragada global for multiple leaders and Oracle Bruce leadership Sri and in is backgrounds United for the years. held the diverse Senior to force, Sri led leading technology of Jacobs, strategic sales integration software provider. building force solutions platforms. engineering numerous general and Bruce the SAP, innovator, leads development bring products joining President of talented he XX is to Srinivas and at for to managing enabled at sales enterprise to board company's and Prior he Avalara's States and Crawford roles a sales welcome for for where Vice responsible the lieutenant Bruce

During the senior bring who addition years platform for teams guide ensure to and one programs more army Srini leadership will to character military which Avalara's career, leaders developing and most Bruce the continue build prowess development soldiers, across equipped future of and of other important missions, to combined competence, oversaw to army's through contributing are global the that essential a class to world expertise and the our industries cloud among leadership XX we than our expansion, are board. of develop our success. traits technical his to to the rapid board Bruce able and are Their leadership, help

market business required we've believe large As driving play statutorily in we and compliance. addressable and long term low the based and of outpacing future automating penetration believe functions. always are said, a we long with competition we a are on strong global the We a

and We to we are again over with for dollar grow company year And Avalara it a over believe raise Thank you. into scale that, guidance to time. our And XX. I'll yet excited turn can multibillion Ross. fiscal multi-product, revenue we

Ross Tennenbaum

posts in our especially excluding $XXX.X SST formula and we to up after We with existing North in returns exceeded starting XX% million deals deals this demand February which revenue excluding Avalara of our values. XX% in product outstanding revenue XX% acquisitions revenue our rise $XXX.X compensation by services tailwind in Thanks, tax shift QX balanced across revenue. large an XXX%. was total that million, customer $XX.X acquisition up billings a strengthen performance across metrics. and business was and was QX, international remain for including strong Scott. professional year-over-year by from all guided recovery the for registrations QX and QX of XX% driven growth to a year-over-year, multi up be which driven inorganically exceeded new including the revenue Services omni-channel business, represented board our rate XXXX largely growth deal driven million, of growth, were revenue expectations, driver organic the generational Subscription revenue The since grew from will by QX or across acquisitions the year-over-year the and services. customers, execution and XXXX. impact the high of reduction XX% the and the and segments services term. QX, total outgrew the e-commerce continued to licenses TPR, pleased programs believe licensing up offer or strong Professional given in with year. America, longer

customers, customers. our XXXX core to methodology we being include of customers additional quarter calculation from customer reported results in SST revised in revenue included second the core which our During

we rate one that In nature. time our retention included, services the as SST not quarter to calculation addition, and was second of in services include methodology exclude to be more during XXXX also to revised professional the net from revenue revenue tend previously revenue

We of press previous table methodologies at results have net customers and retention revenue our end core revised in key included and the metrics financial release. a for the both

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

previous count our customer core definition Our under by XXX. increased

revenue retention up quarter average. XXX% for rate net in last XXX%, from a quarter, was revised XXX% Our resulting

improving retention increased Gross revised references with XXX% income customers, XXX% with profit with our under QX customer and EMEA. and results gross year. result last remainder million M&A please coupled XX% was $XX.X reconciled our very a are from release basis press in non-GAAP by non in from XX% both QX were a This grew growth call. was QX NRR period. primarily resulting the from $XXX.X quarter that the strong driven from Our NRR as year our for discussing XX% statement unless the profit compares last representing of previous of execution average. and gross ago to that million. up improved QX the $XXX.X GAAP all customers definition margins operating $XX.X are up million core just rates period to was execution margin. grew We note were slightly XX% to issued the expenses, gross otherwise to this $XX.X core sales revenue revenue see strong results revenue and XX% Subscription share gross earnings to of XXX% stated in to before a customers in count same margin dynamics. a our existing quarter year-over-year million from In in year-over-year pleased million.

our focus gross over ongoing automation. We in our through to investments increasing on margin time continue subscription

margins on products. gross acquisitions However, less some our mature partially improvement will in be margin of subscription and by offset our gross

mix $XX.X and and expense million services more total basis and XX% or also gross Our than the of revenue. professional in marketing improvement of margins year-over-year. of by was subscription QX be will points XXX total impacted Sales revenue

aggressively demand ‘XX, second Assuming capacity but marketing and of in development revenue in we half included the higher software quarter. XX% QX, environment the of from unchanged the persists of sales healthy to expenses invest more XX% capitalized in million and QX current or benefit revenue research $XX intend in XXXX. a from

also and the cash easier same to ‘XX was of on $X.X growth, strong ‘XX. last acquisitions Free guidance Calculated compared QX, COVID-XX Calculated invest a term revenue year. new to We R&D the QX, and $XXX of as a and flow on our drive expense of was end versus million change which ‘XX. $X.X the takes as cost the demand in end up some in liabilities. was capabilities million deferred income million per and was excited largely areas. of calculated margin in billings quarter And well quarter into building was was XX% our non-GAAP was year-over-year the growth QX strong in million revenue general efficiencies. than XX% an to million and in integrating expense administrative billings quarter net change Total XX% environment as year-over-year. gross revenue, from cloud revenue $XX.X $XXX.X consideration global favorability which $XXX.X continue operating million, comparison organic deferred were second better revenue at in billings result excluding billing. XX% long the and the to platform, We QX, outstanding. year-over-year at revenue aggressively XX% million million, or the ‘XX. QX, QX acquisitions XX.X as $X.XX contract $XX.X in up QX, a income since ‘XX produce of and QX and that share in other to shares in from reflected up XX% impact based metric building XX QX,

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

conclude were mix cash for and from XXXX. call the ‘XX. end will million of $XXX.X QX by the revenues. guidance strategy. to of of now the operating recent to non-GAAP the year our the you a an cash expect and million our full expectation ‘XX, We $XXX.X revenue higher update total million core like I end at and at loss This not equivalents range XX% services mix about a in professional revenue our of providing Our from in slightly We'd now M&A on XXXX of $XXX.X to of increase X% QX, of for is and business QX, due revenue change mix predominantly expectations. the

growth million, rate between or a close since For total we XX. revenue midpoint believe $XXX the These QX, XX% of figures excluding of price from X the XXXX percentage range, revenue at $XXX reflect the headwind acquisitions points. QX, SSP year-over-year approximately XX% and represents which which reduction, growth expect million produces we year-over-year, a

non-GAAP more M&A We to to in in second operating of the and development, marketing, X range QX and sales expect be ramp and aggressive research million a in our million, especially loss integration. X reflecting spending, half

which For represents midpoint million the $XXX the QX, XXXX the million, revenue an full and $XX million expect close acquisitions year-over-year rate growth expected since year-over-year, or range XX% revenue XX. year of at excluding from between in XX% total a we $XXX

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

to expect especially reflecting million, and marketing, full half and more range year the research million in ramp spending, $XX in to XXXX and We and integration. $XX non-GAAP aggressive our of operating loss development a M&A be second sales

and customers. environment an tax have coupled to should believe in level building cash more opportunity their difficult in requires this changing operating In growth and a regulatory closing, it a produce of business jurisdictions loss We positive tax to durable a a for company of non-GAAP time, modest continue level to evolving exciting believe shift we flow changes deliver ever At we and technology. make become value cloud. the XXXX. free compliance to we we products the expect are maintain a market a to capabilities same an These the operate demand an seeing automation increased We supply of We're as that e-commerce increase adopt leader transformation automation. early still company. even large in to able platform driving omni-channel with to we to compounding is are many are businesses

We also we continue to market so invest long for that market, growth continue term. win to up down and to compound can internationally the

For getting and quarter. in we all these for it we would often Thank we're reasons, your point, you to conferences started. in Sandler Please this call questions. upcoming call. like participating for note are feels in third just Citi today's open the including Canaccord Piper At participating like Genuity up the

Operator

question go you open. Please much, first ahead. [Operator is Bank from Securities. of is Bradley Our Brad Thank your Ross. Sills from America very Instructions] line

Bradley Sills

that some you different get of for organizations, of real quarter much, on to congratulations areas as Great. XX, offerings Thanks shown other to licensing up going Is you're increasingly logistics, about these so here, expansion These market. yes other there into property real landed moving success here. I you've tax But the cost, ask but are shipping things some into into audience? And other example nice a as like sales nature. guys. midsized a tax employment, compliance obviously you compliance wanted opportunity categories. get

find sponsors that can how on go comment that that you you compliance is Avalara these some that So you other perhaps, areas? if common if could sales there kind into at Or audiences organization all? then of different

Scott McFarlane

appreciate I it. mean, Brad. Thanks,

business mean with close and stayed exemptions. and and very returns So -- licenses the doing registrations we a

all see. So those same I the audience mean, that we always all are

but buyers, different most these are Now organization. see in often same them within managed taxes end champions the different of of sort or we arena, as the

organization little building for a those it's So In be areas, to sales property particular we'll could some bit. different a continue like little have a cases the tax, force, sales stretches the that. something it bit out

bought say do WXs in very, that tested partnerships WXs It we ended the Avalara that like us were by XXXX, because successfully. that is many that I to it XXXX can of know, sell and water really, we've continue the we Now, unable something WXs up past. allowed force, various vendors the some our with many, will successfully we with those partners that and got players But really years. other had line. to sales We done XXXX WXs for had in very and WXs, WXs and

to we're automation is those that can and how really and really many customer our think the compliance back automation antiquated with relationships and that there broaden to attention our it not applications. where tied huge That's community relationship what end of that bring where that thirst a that of our about really have the in offering you into bear products systems. So I had within add, because I'm of helps accounting ability areas really situation is the businesses not trusted into a tax have does is the to and our take concerned within ARPs do the tie this we we these a about automate really the unique

all that. businesses and fall the different property have within the adapted And area a really slightly general although indirect tax, we're into doing at does might sales the So same they tax, around motion, like. it

We relationship a great have customers. with our

out I think excited because I'm really, be to it So works really branching well.

Bradley Sills

for there end Scott, thanks you trigger environment here. a Can much. back And so those across for that upgrades? a much. and key customers That's the in the so projects then tailwind catalyst great, during acceleration adopt perhaps in seeing And to multi upgrades into channel obviously, of classify ERP Some whenever ERP ecosystem, if the Avalara. What suggest suggests things results we've is happens. that office just trends. upgrades to if a seen another be the get been reopening are pandemic. that as there you some been improving more, that has pause your for could ERP doing segment the the I feedback commerce we type ERP large has on omni-channel are one you Thank may the for driver market business enterprise

Scott McFarlane

go down that in we'll one talked pull are there. past. just where in Well, and have main position let us. four real really it really a level major we about then tailwinds the up helping and I got just We've me mean, we it fortunate quickly, are

obviously. e-commerce got You've

You really it's driven said omni-channel, but by e-commerce.

fortunate of got are model, and sort the aspect the the say I of that but get certainly government. applications the been combination aggregate thinks really an that's of customers, now. helping really to need I financial e-commerce, And from about been all to omni-channel It's need of it's to one get to you going generational. need business you the playing the house. or really that three You've cloud tax way of ERP everybody get the those. to I then those to them and automate And then any times adoption during the the do I pressures that all is are least of things, difficult is sales it, mentioned, the mean, because we the And driving on. mean just two data have the which involved right we at regulatory or four could mean, ROI are in everybody's those the I general. the are drivers all big businesses back And then ROI that helping I be of with

but ERP in significant really backdrop your part that are of a really and really quarter. from, ERP advantage trigger Amit this that are with along just the ROI, gets of where is proud a and situation looking tax. of benefiting of seeing it's what looking that those decision just the I ERP the what I'm specifically think dragged that And a comeback we're taking to of of of that's and They're of partner that comeback all question. to we're really for make I is around that's that sales efficiencies. look along in, people that So is and and mean, team

So it's quarter been and seeing a we're us nice good a comeback for there.

Bradley Sills

Scott. you, Thank

Operator

Our Sitikantha ahead. Siti Securities. comes from is from open. line question Mizuho next go Please Panigrahi your

Sitikantha Panigrahi

quarter. Hey, And thanks my for taking a congrats guys, on question. great

made about some opportunity, you market, forward products, organic look sustainable your sequentially. I going So when lot about the seasonal and basis, about talked think at acquisitions. a down and you also, you when even big wondering I'm even international talked up increase of on going multiple moving and how a it's of trends Scott an growth,

So wondering contribute to long going are term them versus the of seeing some term? opportunity you're are near what that's

Scott McFarlane

same again, got in situation that us interestingly sales I be moment I major really about driving where mean, you're general, and of as tax, sort I talk mean about four statutory we're business means fortunate calculation a for a the to this mean, with calculation I we've very tailwinds always Indirect in is tax is is requirement just And, this business. time. for everybody. I so Well, mean are this in this this me, big the for like a said, at small doing it's

have order that be some there not is moving to in because market. things statutory. you do down and up build But a some difficulty features Now that may and to the of

this that are We this the and at. the market, term long is is can't to Now really and it I and business. us makes to going general think this creating over what interesting who except in invoices people I really is a what sustainable that for by drives market is really and we're with Avalara what good really, why go partner think

So for we've about. the talking upstream like really market partners, ability with those the as been moving to the is work and our Shopify, the to Wix others. all And we up us down with have and move then

have high on as may see some just been to thoughts don't So that different. as significantly motion really we've continue just that I that to We well. level you doing. execute at have our the Ross,

Ross Tennenbaum

Yes.

about Just We've a where and as strong want compound long year business about talked we building a say us, when think durable a And want and investors XX to can is dollar is build and we're story always we business. exactly. multi-billion growth sustainability, I'd to you this add say company. a

so do It's it big not how And about year. is any It's really quarter maximize about sustain how think or sustainability. a how market. and we do do we up a growth we in ourselves drive we roll

it's really a market, win going And win up out going to market. say, about how many just the And year. or Well, in we're and really meaning about for internationally, that is so talk this having and market this market, quarter execution. running But to things? well, market, not people out vision a some outpacing down it's then we about going said, we're down competition, Scott and as no, it's all how strategy when too fast

down and ability sustainability comes it So talent great to with there the execution. and realize is to having

Scott McFarlane

out. tax I final just absurd. transactional where is say is we result we automated are, end interesting This thing I world, one is market business result The because really just the mean, plays what everybody exemplifies to said manually, mean, it it this me Let of a think going the this and be sales is. around that I I've and because I an think doing know know is taxes. how we mean, is. end we where concept we digital always look, that think

the I you get mean, know, of it you And we're the where have the you're, So end that just not worry mean, the is to result. situation, partnerships. when that's because know sustainability actually going, we in right

I we really to do have mean as have effort I just way and need That's perspective, is from quickly execute that our efficiently market. as in get we to. this strong fundamentally sustainability believe order grow is, really to the a but we to business where a long mean, that and We to have

Sitikantha Panigrahi

product, and what that now one on mainly success now this that targeting? So investing address segment, talked a making about investment terms one employee to of are customer on customer multi to of up but your of multi there, you're in follow third sales and changes kind marketing, of you kind R&D you working

Scott McFarlane

do even could we I and did set mean, our the think this cost. we great in believe have that after a mean, That's made can conjunction he I is not we things prove the and I I IPO sales, and the has and In on of fundamentally with And the dial marketing. comment our turned proven that sales the you're dial maybe one this that the of far think one. for marketing. going to we've to and noise the that next past and out some have to see efficiency of have but scale to around this I things second himself really on Ross a think up we're sales the that, little and proven grow bit that year we I that one And efficiency try the to question. on that too going in the half in of year

we in We'll know we areas people So there more we'll people partner larger add in relationships, get around let much the enterprise. up impact issue. problem. sales to on out that sales tax start solve with will we is to really probably there an is go expand our people a Avalara that throughout And organization. and where make

the So in as you're do and just start done I us going to start sales a to make same that we'll move think to R&D we've well. shift and in see marketing way

Sitikantha Panigrahi

for Thank color. you. the Thanks

Scott McFarlane

Siti. Thanks

Operator

Our Instructions] question Auty go from Sterling, from JPMorgan. ahead. [Operator next Please comes line your is open. Sterling

Unidentified Analyst

this on for Sterling. Hi, Maya is

Just have first. at question a clarifying

look additions, So from contribution of that XXX if kind guess I does acquisitions? that core customer net customers that so like? And does include what

Ross Tennenbaum

the acquisition. yet not include does it No,

customers core we we into As highlight them add that.

yet. So does not no, them it include

Unidentified Analyst

customers the include then, market point? in more enterprise? at strategy just guess Or great. Are this market there? I And broad to just is Okay, based it I mostly what you international targeting terms the mid down is expansion. of guess the

Scott McFarlane

I to are companies the many that them. in part mid many, really at say our internationally, want around the advent I easy a I us is market most here. in and mid Brazil not with lot will where And and strategy work slightly companies. easy areas of upper EMEA to multinational. that multinationals. that internet the is internationally is than market into, don't of opportunity, That's sizes the we're really different for but it the say targeted mean, domestically with it's multinational to The see we business For get and we've all

So variety ourselves customers, focus. multinational of a find it really we but of is working a more with

Unidentified Analyst

you. thank great, Okay,

Operator

next Our Bracelin Brent Piper question line ahead. go from Brent Please comes open. Sandler. from to is

Unidentified Analyst

strong could Hi, my you regarding wondering on the that It's was address questions. new Inposia actually opportunities I Thanks for good on update seen acquisition, international you've this guess to I just a challenges the Hannah in foothold building growth or guys, into last Europe, you if today. an gave question. landscape is on quarter. the you've Europe? and share hear Brent you tax But compliance this learned stronger [indiscernible] about what taking for the as any

Scott McFarlane

to a Tam have that Inposia. known the it's talking expecting numbers We larger we've the say on today. forward, market. Well U.S. But it's listen, we've in going it's outpace big be it's we a little early I for We us mean, about U.S. is to international smaller always a it that were a

So what And know, as we're goes Inposia us the really internationally. pleased we doing of as with team they're is the e-invoicing way the the far that future. developing basis is

that and requirements. with that I will working just multinational opportunities. up e-invoicing we're strategy. we it that want been it we've happens, open broader that more but know wanting to grow that There more integrating So and them companies mean, doing business them, business, is with more to the that And with standalone the as into deal

give a difference. building is And to our to offering an our end add? that very, from but the very future. way specifics, to is mean, make bunch you do you confident have a this to into the going it basis of early little So mean, we're I anything of end Ross, into

Ross Tennenbaum

and large of and couple in No, I the revenue April. a well. in big And well well it's see bring was own, on just sort think of back attaching the marketplace came that online M&A to well, really think quarter. XX%, a customer you'll it international international going my so ticked I just really starting just I is quarter year-over-year, the good. growth, our just medal I XX% from internationals gold in did another its as direct queue did NRR, business million total Inposia really new the contributors say quarter billings, as is highlight mean, opinion, up. But

partner is opportunity our this a expand so to And moat big globally.

application on to continue and to side connect side be one and time. any We the to expand other any any over government on any

international. long it be to and so good that forward gives into platform. set capabilities term to really drive continue we'll integrating And of us the technology And

pleased international and with a doing really quarter, strategy. with of really is the our pleased is part Inposia big how So

Unidentified Analyst

Super you. helpful. Thank

Scott McFarlane

Hannah. Thanks

Operator

from Blair. ahead. Stotler Our is question Matt William Please open. Matthew next go your comes line from

Matthew Stotler

out ask the Any bundles. the expect Hey, that of terms the in Day. forward? interesting of updates you those can of market or is was come that to you building where on for kind develop guess the guys, I I of vertical out taking question. for things just you're progress I'll the interest thank Analyst you question. for seeing thought my how those one that in provide and initial going really

Ross Tennenbaum

integrations, think about company take and it. in past both a is company the Analyst platform top application. that driving how tax talked will will as and indirect build of we sell one within everybody solutions to the beyond And just our And technology That stack we platform expanding SaaS platform that underneath platform in be to a content that our of and I about evolution evolution specific like we for having part leverage applications Matt [indiscernible] our our everything we where a applications Day Yes. a layer. future. up layer beyond, and returns APIs,

can are do so to they that layer own we everything, build the our solutions what is want and we regional and we start are those attach to workflows, own workflows. solutions basically, is And and API-fying that geared capabilities we and where industries, towards reach build can or complete where verticals, SaaS can and They to stack, buy are we that And customers so configure down have can their a do their to apps. geographies, into other what we prepackaged, verticals. want apps can

is verticals early core That must customers they selling the they to the it. that consume designs to I solutions it productize around But out them and say just actually we can want work our executing we So do that's in they're we're and are doing deliver What on. early, have to attach those components do, things things the have have to some what are base building line want? that's more value to What different it? and sell the that started. getting way that But going in have. are still would are and we that basically are as what is that a it and market.

I'd we bunch that So into build quarters stay tuned over really say that market. out of get as next the on and

Scott McFarlane

or mean see to what's just real we a we're problem, automation, cool tax tax, question or as of this And whether it dimensional sales types. one different That's at them. of multi multi goes alcohol, when solving remind it we're looking I Because, types everybody, it, about as that taxes it's your whether communication right? so it, those taxes, problem. tax And I be it's dimensional tax beverage mean, all tax

bit special comprehensive a all and then makes really also as Avalara’s it the different special it those one geographies industries. we taking what think that with little segments everything's But proud industry look what alluded segments like, That's and approach of each of and were to a enterprise is really of. to I the that I'm at I and in. dimensions. market have You And and think to tackle we how you different every a a themselves be mid one

Matthew Stotler

That's Thanks great. again.

Scott McFarlane

Matt. Thanks

Operator

go open, question from next ahead. please Citi. [indiscernible] comes is line [Daniel], Our your from

Unidentified Analyst

happening cross TTR enterprise the cross more how from I afternoon. for sell generally, that base just Great, color have? thanks. Appreciate my XXX sells scripts. taking they the the Thanks question. was on Thank the customers? And any given just Good within wondering, are of you. customer Fortune them is I motion guess

Scott McFarlane

to everybody at have result a They customers I of tax of is but they're the pipeline, I yes. deal enterprise mean, answer these but not more the world Avalara main into our not pipeline are extended these of getting these in in some deals into discussions mean, that of because is in the is gotten it. growing as is many pipeline it's as result they TTR. are building in moment that out pulled growth of that it, are the we And mean, it really and short this knows it they market. I is family. a trust pulled the their would and Yes frankly, in happen overnight, part a that So

a for is area So growth it us. strong

Unidentified Analyst

Thanks. Great.

Operator

question from is line Needham. your next comes Please Our go from ahead. open. Berg Scott, Scott

Unidentified Analyst

on guys, Hey, is Josh for Scott. this

takeaways just the trigger Cloud from creating digging more competitive And activity and opportunities source ecosystems in of So activity When competitors? say guys. the ERP business a in Thanks, also quarter or ERP from you're well? seeing the SAP driving driving there you of on premise on lot the is from based that Oracle is question. as legacy

Ross Tennenbaum

our that a one we doing of I improvement, significant I around a mean last short for results the then was yes, sort quarter saw what answer Again increase. during mean, second our year ERPs significant core market COVID on established is

that new that our new fair and lot markets pressure share especially of just as And our and a both of so, existing, existing, of result business. of then of established puts is a winning And it a on existing those competitors. And the result we're opportunities.

Operator

your Morgan Our open, is next Stan go line question comes from Zlotsky ahead. from please Stanley. Stan,

Unidentified Analyst

strong on your to you for Congratulations about And Can continue more [Ben] increases the sort elaborate quarter. prior back thanks long to time. for think you of term based upstream. expand for should also on we great as the Stan. Hi, on two the be retention quarters? And on back revenue net how

Ross Tennenbaum

It's Yes. Ross.

it. we guide because on Let commentary give NRR our me you some general don't to

to which revised we a can see, had revenue, moves Analyst and that for our subscription May, came Day services fix SST it issue with metric, revenue. in excludes while improved it's and As telegraphing in the professional we a out been you

both we're numbers. So reporting

the the For year, for of report numbers. we'll both the rest rest

QX And have both them ticked it. of meaningfully. So pretty you in up

customers we was there as things, doing really selling get the we things we NRR. nothing than COVID, upsell that lift than on therefore other little well. that that about been through have we in we and would COVID, I And our churn to had hope as COVID. And and more improve, churn. that more but a alleviate, Or bit as more in bookings, we weight little downside weight we or COVID. existing words, And would have last down prior scary, hypothesized talked a more a had to year, prior think, sell hypothesized that, bit there

on upsell downside a And here getting strong quarter has where and so seeing I NRR you're pulled bookings less down and think on little therefore the been little it's improved. a a we're the wait

last to easiest in year-over-year year had the it things where be fair, have also You COVID. comp some QX from tough

guiding this metric, and guys too in early, give want So not to this a over existing. a to we And able to of value to we and to raise statement more we a a lot day sort believe of is we've SSP been per our our really the got organically We're mapping and commitment showed we chain do is inorganically. products customers. new we've where the we've you the analyst customer how to sort it's go we this we're It's really before it. got bit things not comfortable around about little is I to go. new benchmark internally a But ambition, talked an say would going that more of what is around

our so ticking necessarily not is that over term, to And keep over longer up ambition next quarter. the

that It's to So I guidance. an keep definitely some ambition on. ours gives moving hope you

Operator

question is final is ahead. your line Our from from Peter, please open, Levine go Evercore. Peter

Peter Levine

in. me squeezing for Thanks Great.

have Obviously us get wanted is partners SI -- you will want customers just big you're that enough So update enough, partnering on at opportunity? your more with influence could or least to involved. your

rates, support close influencing service bring and kind So side. of pipelines, expectations even curious what your they partners or how you on see the

Thanks. So more that. little around color just wondering a if you bit get

Scott McFarlane

my position was I've continue those the that we with more we're and of SI based more especially move perspective, concept we that more Sure. to critical. critical. that more And ourselves And motion partner From become I really mean, Avalara expand of things our business one mean, an mean, on up things our about to and have with talked we be from and competing want to And of them we more market channel. prided as becomes area, it's that I I in relationships founded never the perspective, our our being a where a with is in one on.

everybody to four and continue level. both And the to and the that need we the to the push at so my at instruction is accounting at big SI level team that

our one move the is that talked to and big royals I I've how four. the inside with So of areas. muscle have to And the call as what we big work develop company upstream, the about,

progress organization good we're product in moving really our making talent we're and into that think and in the I bringing there how that So we're the both upstream.

important phase excited accounting So that where the a the more play I'm business. in much sort for the and of role business really big firms the of SIs

Peter Levine

Thank you.

Operator

At the to of time, conclusion have come Q&A our this we session.

Scott I'll CEO McFarlane now So Avalara. over to hand of co-founder and back

Scott McFarlane

So, nice the consider the to all back from me, the and their I'd this here next hopefully Ross take thank I opportunity I thank to sitting support to to what talking customers you to our forward like in medal and for be to seeing time partners on We all it's employees, first you. call. Ross. office look Ross are across you a hard and for for and be and gold work quarter.

Ross Tennenbaum

awesome. It's

Scott McFarlane

soon. to Talk everybody. Thanks, you

Operator

today's earning call. for all you Thank joining

have and day. You may your disconnect now lovely lines a

Avalara (AVLR) 6 Aug 212021 Q2 Earnings call transcript