Company Cancels Earnings Call in Light of
Transaction with Vista Equity Partners
Second Quarter Total Revenue of $208.6
Million
Total Revenue Growth of 23% From Second Quarter
2021
Avalara, Inc. (NYSE: AVLR), a leading provider of tax compliance
automation for businesses of all sizes, today announced financial
results for its second quarter ended June 30, 2022.
“We posted a solid second quarter delivering year-over-year
total revenue growth of 23%, in line with our guidance and we
outperformed on our operating income guidance. We remain focused on
delivering on the 2025 growth and profitability targets that we
laid out at our recent Investor Day,” said Scott McFarlane, Avalara
co-founder and chief executive officer. “Despite ongoing macro
uncertainties, we believe Avalara is a durable, diversified, and
resilient business, and that we are in the early days of addressing
a huge market to automate compliance for businesses of all
sizes.”
Second Quarter 2022 Financial Results
- Revenue: Total revenue was $208.6 million in the second
quarter of 2022, up 23% from $169.1 million in the second quarter
of 2021. Subscription and returns revenue was $189.8 million, up
24% from $152.4 million in the same period last year. Professional
services revenue was $18.8 million, up 13% from $16.6 million in
the same period last year.
- Gross Profit: GAAP gross profit was $146.5 million in
the second quarter of 2022, representing a 70% gross margin,
compared to a GAAP gross profit of $119.8 million and a 71% gross
margin in the second quarter of 2021. Non-GAAP gross profit was
$155.6 million, representing a 75% non-GAAP gross margin, compared
to a non-GAAP gross profit of $125.2 million and a 74% non-GAAP
gross margin in the second quarter of 2021.
- Operating Loss: GAAP operating loss was $56.0 million in
the second quarter of 2022, compared to a GAAP operating loss of
$30.2 million in the second quarter of 2021. Non-GAAP operating
loss was $2.0 million in the second quarter of 2022, compared to
non-GAAP operating income of $2.6 million in the second quarter of
2021.
- Net Loss: GAAP net loss was $55.8 million in the second
quarter of 2022, compared to a GAAP net loss of $31.0 million in
the second quarter of 2021. Non-GAAP net loss was $1.9 million in
the second quarter of 2022, compared to non-GAAP net income of $1.8
million in the second quarter of 2021.
- Net Loss per Share: GAAP basic and diluted net loss per
share was $0.63 based on 88.0 million weighted-average shares
outstanding in the second quarter of 2022, compared to a GAAP basic
and diluted net loss per share of $0.36 based on 86.1 million
weighted-average shares outstanding in the second quarter of 2021.
Non-GAAP diluted net loss per share was $0.02 based on 88.0 million
weighted-average shares outstanding in the second quarter of 2022,
compared to a non-GAAP diluted net income per share of $0.02 based
on 89.5 million diluted weighted-average shares outstanding in the
second quarter of 2021.
- Deferred Revenue: Total deferred revenue was $307.7
million at June 30, 2022, up from $283.0 million at December 31,
2021. The current portion of deferred revenue was $306.8 million at
June 30, 2022, up from $280.8 million at December 31, 2021.
- Cash: Net cash provided by operating activities was $6.2
million in the second quarter of 2022, compared to $25.6 million in
the second quarter of 2021. Free cash flow was essentially zero in
the second quarter of 2022, compared to $20.2 million in the second
quarter of 2021. Cash and cash equivalents totaled $1.5 billion at
June 30, 2022, compared to $1.5 billion at December 31, 2021.
- Calculated Billings: Calculated billings were $212.4
million in the second quarter of 2022, compared to calculated
billings of $181.0 million in the second quarter of 2021.
Reconciliations of GAAP to non-GAAP financial measures have been
provided in the tables included in this release.
Second Quarter 2022 and Recent Operating Highlights
- Key Metrics: We ended the second quarter of 2022 with
approximately 20,110 core customers, up from approximately 19,160
core customers at the end of the previous quarter and approximately
16,570 in the second quarter of 2021, representing a 21% increase
year-over-year. Our net revenue retention rate was 113% in the
second quarter of 2022 and has averaged 115% over the last four
quarters.
- We announced the appointment of human resources leader Ee Lyn
Khoo as our new chief people officer. She has held human resource
leadership roles at global companies, including Amazon and General
Mills. Her responsibilities include overseeing all global people
and culture-related initiatives, including human resources; talent
management and acquisition; diversity and inclusion; learning and
development; total rewards including compensation and benefits; and
organizational development.
Second Quarter 2022 and Recent Product
Highlights
- We announced Avalara Exemption Certificate Management Pro, a
new product that helps small-to-medium businesses (SMBs) simplify
exemption certificate collection and compliance management. This
new solution leverages AI and optical character recognition (OCR),
expanding Avalara's existing exemption certificate management
offerings for certificate review and validation. Avalara Exemption
Certificate Management (ECM) Pro is a new solution that helps
businesses automate the creation, collection, completion, usage,
and storage of exemption certificates and other sales tax
compliance documents.
- We announced the availability of Avalara Transfer Pricing
Reports for Accountants. This new solution, designed for use by
transfer pricing experts and nonexperts working in firms of all
sizes, delivers the automation to grow a global tax compliance
service, providing U.S. and OECD transfer pricing reports to
clients as needed for audit defense. Transfer Pricing Reports for
Accountants automates the transfer pricing documentation process
for any firm, supplying control and visibility, while enabling
firms with or without in-house transfer pricing expertise to
prepare transfer pricing reports for their clients in three simple
steps: data collection, documentation review, and report
generation.
Transaction with Vista Equity Partners
- In a separate press release issued today, we announced our
entry into a definitive agreement to be acquired by Vista Equity
Partners. A copy of the press release can be found on the investor
relations page of Avalara’s website at investor.avalara.com. Given
the announced transaction, Avalara will not host an earnings
conference call or provide financial guidance in conjunction with
this earnings release. We also will not participate in previously
scheduled conferences including the Canaccord Genuity Growth
Conference and the Goldman Sachs Communacopia and Technology
Conference. For further detail and discussion of Avalara’s
financial performance please refer to Avalara’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2022, which will be filed
later today with the SEC.
About Avalara, Inc.
Avalara helps businesses of all sizes get tax compliance right.
In partnership with leading ERP, accounting, ecommerce, and other
financial management system providers, Avalara delivers cloud-based
compliance solutions for various transaction taxes, including sales
and use, VAT, GST, excise, communications, lodging, and other
indirect tax types. Headquartered in Seattle, Avalara has offices
across the U.S. and around the world in Brazil, Europe, and India.
More information at www.avalara.com.
Forward-Looking Statements
This press release contains forward-looking statements
including, among others, statements about expected growth
opportunities. In some cases you can identify forward-looking
statements because they contain words such as “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “likely,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “target,” “will,” “would,” or similar
expressions and the negatives of those terms.
These forward-looking statements involve risks, uncertainties,
and assumptions that could cause actual performance or results to
differ materially from those expressed or suggested by the
forward-looking statements. If any of these risks or uncertainties
materialize, or if any of our assumptions prove incorrect, our
actual results could differ materially from the results expressed
or implied by these forward-looking statements. These risks and
uncertainties include risks associated with: our ability to sustain
our revenue growth rate, to achieve or maintain profitability, and
to effectively manage our anticipated growth; our ability to
attract new customers on a cost-effective basis and the extent to
which existing customers renew and upgrade their subscriptions; the
timing of our introduction of new solutions or updates to existing
solutions; our ability to successfully diversify our solutions by
developing or introducing new solutions or acquiring and
integrating additional businesses, products, services, or content;
our ability to maintain and expand our strategic relationships with
third parties; our ability to deliver our solutions to customers
without disruption or delay; our exposure to liability from errors,
delays, fraud, or system failures, which may not be covered by
insurance; our ability to expand our international reach; and the
risks described in the other filings we make with the Securities
and Exchange Commission from time to time, including the risks
described under the heading “Risk Factors” in our amended Annual
Report on Form 10-K/A for the year ended December 31, 2021, and
which should be read in conjunction with our financial results and
forward-looking statements. All forward-looking statements in this
press release are based on information available to us as of the
date hereof, and we do not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were made,
except as required by law.
Use of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we have disclosed non-GAAP cost of revenue, non-GAAP gross profit,
non-GAAP gross margin, non-GAAP research and development expense,
non-GAAP sales and marketing expense, non-GAAP general and
administrative expense, non-GAAP operating income (loss), non-GAAP
net income (loss), non-GAAP basic net income (loss) per share,
non-GAAP diluted net income (loss) per share, free cash flow, and
calculated billings, which are all non-GAAP financial measures. We
have provided tabular reconciliations of each non-GAAP financial
measure to its most directly comparable GAAP financial measure at
the end of this release.
- We calculate non-GAAP cost of revenue, non-GAAP research and
development expense, non-GAAP sales and marketing expense, and
non-GAAP general and administrative expense as GAAP cost of
revenue, GAAP research and development expense, GAAP sales and
marketing expense, and GAAP general and administrative expense,
respectively, before stock-based compensation expense and the
amortization of acquired intangible assets included in each of the
expense categories.
- We calculate non-GAAP gross profit as GAAP gross profit before
stock-based compensation expense and the amortization of acquired
intangibles included in cost of revenue. We calculate non-GAAP
gross margin as GAAP gross margin before the impact of stock-based
compensation expense and the amortization of acquired intangibles
included in cost of revenue as a percentage of revenue.
- We calculate non-GAAP operating income (loss) as GAAP operating
loss before stock-based compensation expense, amortization of
acquired intangibles, and goodwill impairments. We calculate
non-GAAP net income (loss) as GAAP net loss before stock-based
compensation expense, amortization of acquired intangibles, and
goodwill impairments.
- We calculate non-GAAP basic net income (loss) per share as
non-GAAP net income (loss) divided by weighted average shares
outstanding.
- We calculate non-GAAP diluted net income (loss) per share as
non-GAAP net income (loss) divided by diluted weighted average
shares outstanding. Diluted weighted average shares outstanding
includes weighted average shares outstanding plus the dilutive
effect, if any, of outstanding common stock equivalents.
- We define free cash flow as net cash provided by (used in)
operating activities less cash used for the purchases of property
and equipment and capitalized software development costs.
- We define calculated billings as total revenue plus the changes
in deferred revenue and contract liabilities in the period,
excluding the acquisition date impact of deferred revenue and
contract liabilities assumed in a business combination. Because we
generally recognize subscription revenue ratably over the
subscription term, calculated billings can be used to measure our
subscription sales activity for a particular period, to compare
subscription sales activity across particular periods, and as a
potential indicator of future subscription revenue, the actual
timing of which will be affected by several factors, including
subscription start date and duration.
Management uses these non-GAAP financial measures to understand
and compare operating results across accounting periods, for
internal budgeting and forecasting purposes, and to evaluate
financial performance and liquidity. We believe that non-GAAP
financial measures provide useful information to investors and
others in understanding and evaluating our results, prospects, and
liquidity period-over-period without the impact of certain items
that do not directly correlate to our performance and that may vary
significantly from period to period for reasons unrelated to our
operating performance, as well as when comparing our financial
results to those of other companies.
Our definitions of these non-GAAP financial measures may differ
from the definitions used by other companies and therefore
comparability may be limited. In addition, other companies may not
publish these or similar metrics. Thus, our non-GAAP financial
measures should be considered in addition to, not as a substitute
for, or in isolation from, measures prepared in accordance with
GAAP. We encourage investors and others to review our financial
information in its entirety, not to rely on any single financial
measure and to view non-GAAP financial measures in conjunction with
the related GAAP financial measure.
Definitions of Key Business Metrics
We also use the key business metrics of core customers and net
revenue retention rate.
Core Customers
We believe our core customer count is a key indicator of our
market penetration, growth, and potential future revenue. We use
core customers as a metric to focus our customer count reporting on
our primary target market segment. We define a core customer
as:
- a unique account identifier in our primary U.S. billing systems
(multiple companies or divisions within a single consolidated
enterprise that each have a separate unique account identifier are
each treated as separate customers);
- that is active as of the measurement date; and
- for which we have recognized, as of the measurement date,
greater than $3,000 in total revenue during the previous 12
months.
Currently, our core customer count includes only customers with
unique account identifiers in our primary U.S. billing systems and
does not include customers that subscribe to our solutions through
our international subsidiaries and certain legacy and acquired
billing systems that have not yet been integrated into our primary
U.S. billing systems (e.g., recent acquisitions and our lodging tax
compliance solution). As we increase our international operations
and sales in future periods, we may add customers billed from our
international subsidiaries to the core customer metric.
We also have a substantial number of customers of various sizes
that do not meet the revenue threshold to be considered a core
customer. Many of these customers are in the emerging and small
business segment of the marketplace, which represents strategic
value and a growth opportunity for us. Customers who do not meet
the revenue threshold to be considered a core customer provide us
with market share and awareness, and we anticipate that some may
grow into core customers. In addition, we have numerous
enterprise-level customers that only utilize our services for small
segments of their business, providing opportunities over time for
us to extend our relationship and make them core customers.
In addition to customers with whom we have a direct
relationship, some of our customers are business application
publishers (including ecommerce platforms) that include automated
tax determination powered by Avalara. While those platform
providers may be core customers to Avalara, their end-user
customers generally are not.
Net Revenue Retention Rate
We believe that our net revenue retention rate provides insight
into our ability to retain and grow revenue from our customers, as
well as their potential long-term value to us. We also believe it
reflects the stability of our revenue base, which is one of our
core competitive strengths. We calculate our net revenue retention
rate by dividing (a) total subscription and returns revenue in the
current quarter from any billing accounts that generated revenue
during the corresponding quarter of the prior year by (b) total
subscription and returns revenue in such corresponding quarter from
those same billing accounts. This calculation includes changes
during the period for such billing accounts, such as additional
solutions purchased, changes in pricing and transaction volume, and
terminations, but does not reflect revenue for new billing accounts
added during the one-year period.
Our net revenue retention rate includes only customers with
unique account identifiers in our primary U.S. billing systems and
does not include customers who subscribe to our solutions through
our international subsidiaries or certain legacy and acquired
billing systems that have not been integrated into our primary U.S.
billing systems.
Reported Consolidated Results
AVALARA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share amounts)
For the Three Months Ended
June 30,
2022
2021 (1)
Revenue:
Subscription and returns
$
189,764
$
152,442
Professional services
18,829
16,625
Total revenue
208,593
169,067
Cost of revenue:
Subscription and returns
51,036
41,477
Professional services
11,036
7,836
Total cost of revenue (2)
62,072
49,313
Gross profit
146,521
119,754
Operating expenses:
Research and development (2)
56,647
41,234
Sales and marketing (2)
101,242
72,651
General and administrative (2)
44,592
36,113
Total operating expenses
202,481
149,998
Operating loss
(55,960
)
(30,244
)
Other income (expense):
Fair value changes in earnout
liabilities
117
(1,181
)
Interest income
1,859
23
Interest expense
(1,497
)
—
Other income (expense), net
528
220
Total other income (expense), net
1,007
(938
)
Loss before income taxes
(54,953
)
(31,182
)
(Provision for) benefit from income
taxes
(895
)
148
Net loss
$
(55,848
)
$
(31,034
)
Net loss per share attributable to common
shareholders, basic and diluted
$
(0.63
)
$
(0.36
)
Weighted average shares of common stock
outstanding, basic and diluted
87,989
86,090
For the Three Months Ended
June 30,
(2) The stock-based compensation expense
included above was as follows:
2022
2021 (1)
Cost of revenue
$
6,200
$
3,082
Research and development
14,641
7,192
Sales and marketing
11,905
5,955
General and administrative
13,954
10,390
Total stock-based compensation
$
46,700
$
26,619
The amortization of acquired intangibles
included above was as follows:
Cost of revenue
$
2,851
$
2,394
Research and development
—
—
Sales and marketing
3,603
2,905
General and administrative
839
894
Total amortization of acquired
intangibles
$
7,293
$
6,193
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s 2021 Form 10-K/A.
AVALARA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share amounts)
For the Six Months Ended June
30,
2022
2021 (1)
Revenue:
Subscription and returns
$
376,630
$
291,760
Professional services
36,493
30,908
Total revenue
413,123
322,668
Cost of revenue:
Subscription and returns
101,113
79,510
Professional services
21,085
14,299
Total cost of revenue (2)
122,198
93,809
Gross profit
290,925
228,859
Operating expenses:
Research and development (2)
107,499
80,508
Sales and marketing (2)
187,689
136,744
General and administrative (2)
86,786
67,312
Total operating expenses
381,974
284,564
Operating loss
(91,049
)
(55,705
)
Other income (expense):
Fair value changes in earnout
liabilities
4,118
(2,531
)
Interest income
2,045
47
Interest expense
(2,993
)
—
Other income (expense), net
654
(704
)
Total other income (expense), net
3,824
(3,188
)
Loss before income taxes
(87,225
)
(58,893
)
Provision for income taxes
(1,180
)
(2,209
)
Net loss
$
(88,405
)
$
(61,102
)
Net loss per share attributable to common
shareholders, basic and diluted
$
(1.01
)
$
(0.71
)
Weighted average shares of common stock
outstanding, basic and diluted
87,728
85,765
For the Six Months Ended June
30,
(2) The stock-based compensation expense
included above was as follows:
2022
2021 (1)
Cost of revenue
$
9,959
$
5,114
Research and development
24,104
12,596
Sales and marketing
18,616
10,010
General and administrative
26,671
17,756
Total stock-based compensation
$
79,350
$
45,476
The amortization of acquired intangibles
included above was as follows:
Cost of revenue
$
5,496
$
4,414
Research and development
—
—
Sales and marketing
7,209
4,445
General and administrative
1,693
1,755
Total amortization of acquired
intangibles
$
14,398
$
10,614
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s 2021 Form 10-K/A.
AVALARA, INC. UNAUDITED CONSOLIDATED BALANCE
SHEETS (in thousands)
June 30,
December 31,
2022
2021 (1)
Assets
Current assets:
Cash and cash equivalents
$
1,460,594
$
1,514,064
Restricted cash
—
37,700
Trade accounts receivable—net of allowance
for doubtful accounts
115,523
114,248
Deferred commissions
18,629
16,364
Prepaid expenses and other current
assets
43,244
29,267
Total current assets before customer fund
assets
1,637,990
1,711,643
Funds held from customers
72,957
62,509
Receivable from customers—net of allowance
for doubtful accounts
1,889
1,472
Total current assets
1,712,836
1,775,624
Noncurrent assets:
Deferred commissions
56,946
52,155
Operating lease right-of-use
assets—net
44,874
44,385
Property and equipment—net
52,765
46,464
Intangible assets—net
86,986
96,818
Goodwill
677,496
672,381
Other noncurrent assets
12,565
10,704
Total assets
$
2,644,468
$
2,698,531
Liabilities and shareholders'
equity
Current liabilities:
Trade payables
$
19,188
$
16,683
Accrued expenses
80,897
109,792
Deferred revenue
306,834
280,816
Accrued purchase price related to
acquisitions
5,597
51,476
Accrued earnout liabilities
38,135
33,151
Operating lease liabilities
12,076
11,453
Total current liabilities before customer
fund obligations
462,727
503,371
Customer fund obligations
75,399
64,302
Total current liabilities
538,126
567,673
Noncurrent liabilities:
Convertible senior notes—net
963,029
961,259
Deferred revenue
859
2,139
Accrued purchase price related to
acquisitions
6,720
7,988
Accrued earnout liabilities
59,424
81,485
Operating lease liabilities
43,620
45,614
Deferred tax liability
5,863
5,158
Other noncurrent liabilities
487
761
Total liabilities
1,618,128
1,672,077
Commitments and contingencies
Shareholders' equity:
Preferred stock
—
—
Common stock
9
9
Additional paid-in capital
1,825,991
1,732,742
Accumulated other comprehensive loss
(8,386
)
(3,428
)
Accumulated deficit
(791,274
)
(702,869
)
Total shareholders’ equity
1,026,340
1,026,454
Total liabilities and shareholders'
equity
$
2,644,468
$
2,698,531
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s 2021 Form 10-K/A.
AVALARA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in thousands)
For the Three Months Ended
June 30,
2022
2021 (1)
Cash flows from operating
activities:
Net loss
$
(55,848
)
$
(31,034
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Stock-based compensation
46,700
26,619
Depreciation and amortization
11,594
9,030
Amortization of debt issuance costs
886
—
Impairment of capitalized cloud computing
costs
136
—
Deferred income tax expense
435
251
Non-cash operating lease costs
2,618
2,533
Fair value changes in earnout
liabilities
(117
)
1,181
Bad debt expense
788
394
Other
404
267
Changes in operating assets and
liabilities:
Trade accounts receivable
(2,683
)
6,283
Prepaid expenses and other current
assets
(4,150
)
(1,377
)
Deferred commissions
(4,808
)
(7,413
)
Other noncurrent assets
(1,873
)
(2,138
)
Trade payables
463
(995
)
Accrued expenses
10,924
12,102
Deferred revenue
3,955
12,978
Operating lease liabilities
(3,220
)
(3,131
)
Net cash provided by operating
activities
6,204
25,550
Cash flows from investing
activities:
Purchase of property and equipment
(962
)
(1,704
)
Capitalized software development costs
(5,274
)
(3,642
)
Cash paid for acquisitions of businesses,
net of cash and restricted cash equivalents acquired
(11,713
)
(21,842
)
Cash paid for acquired intangible
assets
—
(1,500
)
Proceeds from maturity of customer fund
available-for-sale securities
73
—
Net cash used in investing activities
(17,876
)
(28,688
)
Cash flows from financing
activities:
Proceeds from exercise of stock
options
1,816
4,668
Acquisition-related post-closing
payments
(48,736
)
(18,850
)
Payments related to asset acquisition
earnouts
(43
)
—
Payments on financed asset purchases
(64
)
—
Net increase (decrease) in customer fund
obligations
9,031
(703
)
Net cash used in financing activities
(37,996
)
(14,885
)
Foreign currency effect
(617
)
(428
)
Net change in cash, cash equivalents,
restricted cash, and restricted cash equivalents
(50,285
)
(18,451
)
Cash, cash equivalents, restricted cash,
and restricted cash equivalents—Beginning of period
1,583,553
741,313
Cash, cash equivalents, restricted cash,
and restricted cash equivalents—End of period
$
1,533,268
$
722,862
Reconciliation of cash, cash equivalents,
restricted cash, and restricted cash equivalents to the
Consolidated Balance Sheets, end of period:
Cash and cash equivalents
$
1,460,594
$
639,479
Restricted cash
—
37,803
Restricted cash equivalents—funds held
from customers
72,674
45,580
Total cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
1,533,268
$
722,862
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s Form 2021 10-K/A.
AVALARA, INC. UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in thousands)
For the Six Months Ended June
30,
2022
2021 (1)
Cash flows from operating
activities:
Net loss
$
(88,405
)
$
(61,102
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation
79,350
45,476
Depreciation and amortization
22,726
16,101
Amortization of debt issuance costs
1,771
—
Impairment of capitalized cloud computing
costs
136
345
Deferred income tax expense
660
2,279
Non-cash operating lease costs
5,141
4,708
Fair value changes in earnout
liabilities
(4,118
)
2,531
Bad debt expense
1,309
976
Other
388
(122
)
Changes in operating assets and
liabilities:
Trade accounts receivable
(2,357
)
(8,412
)
Prepaid expenses and other current
assets
(14,096
)
(10,563
)
Deferred commissions
(7,056
)
(9,773
)
Other noncurrent assets
(1,996
)
(1,597
)
Trade payables
2,801
(2,890
)
Accrued expenses
(31,447
)
(3,532
)
Deferred revenue
24,610
28,819
Operating lease liabilities
(6,279
)
(5,941
)
Net cash used in operating activities
(16,862
)
(2,697
)
Cash flows from investing
activities:
Purchase of property and equipment
(3,110
)
(3,070
)
Capitalized software development costs
(11,179
)
(5,953
)
Cash paid for acquisitions of businesses,
net of cash and restricted cash equivalents acquired
(11,713
)
(24,009
)
Cash paid for acquired intangible
assets
—
(1,500
)
Proceeds from maturity of customer fund
available-for-sale securities
73
—
Net cash used in investing activities
(25,929
)
(34,532
)
Cash flows from financing
activities:
Proceeds from exercise of stock
options
4,097
10,197
Proceeds from purchases of stock under
employee stock purchase plan
8,006
7,088
Acquisition-related post-closing
payments
(48,736
)
(20,821
)
Payments related to business combination
earnouts
(10,770
)
—
Payments related to asset acquisition
earnouts
(636
)
(690
)
Payments on financed asset purchases
(125
)
—
Net increase in customer fund
obligations
11,097
2,895
Net cash used in financing activities
(37,067
)
(1,331
)
Foreign currency effect
(777
)
(422
)
Net change in cash, cash equivalents,
restricted cash, and restricted cash equivalents
(80,635
)
(38,982
)
Cash, cash equivalents, restricted cash,
and restricted cash equivalents—Beginning of period
1,613,903
761,844
Cash, cash equivalents, restricted cash,
and restricted cash equivalents—End of period
$
1,533,268
$
722,862
Reconciliation of cash, cash equivalents,
restricted cash, and restricted cash equivalents to the
Consolidated Balance Sheets, end of period:
Cash and cash equivalents
$
1,460,594
$
639,479
Restricted cash
—
37,803
Restricted cash equivalents—funds held
from customers
72,674
45,580
Total cash, cash equivalents, restricted
cash, and restricted cash equivalents, end of period
$
1,533,268
$
722,862
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s Form 2021 10-K/A.
AVALARA, INC. UNAUDITED PRESENTATION AND
RECONCILIATION TO NON-GAAP FINANCIAL MEASURES (in thousands,
except per share amounts)
The following schedules reflect our non-GAAP financial measures
and reconcile our non-GAAP financial measures to the related GAAP
financial measures:
Summary of Non-GAAP Financial Measures:
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021
2022
2021
Non-GAAP cost of revenue
$
53,021
$
43,837
$
106,743
$
84,281
Non-GAAP gross profit
$
155,572
$
125,230
$
306,380
$
238,387
Non-GAAP gross margin
75
%
74
%
74
%
74
%
Non-GAAP research and development
expense
$
42,006
$
34,042
$
83,395
$
67,912
Non-GAAP sales and marketing expense
$
85,734
$
63,791
$
161,864
$
122,289
Non-GAAP general and administrative
expense
$
29,799
$
24,829
$
58,422
$
47,801
Non-GAAP operating income (loss)
$
(1,967
)
$
2,568
$
2,699
$
385
Non-GAAP net income (loss)
$
(1,855
)
$
1,778
$
5,343
$
(5,012
)
Non-GAAP basic net income (loss) per
share
$
(0.02
)
$
0.02
$
0.06
$
(0.06
)
Non-GAAP diluted net income (loss) per
share
$
(0.02
)
$
0.02
$
0.06
$
(0.06
)
Free cash flow
$
(32
)
$
20,204
$
(31,151
)
$
(11,720
)
Reconciliation of Non-GAAP Financial Measures:
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021 (1)
2022
2021 (1)
Reconciliation of Non-GAAP Cost of
Revenue:
Cost of revenue
$
62,072
$
49,313
$
122,198
$
93,809
Stock-based compensation expense
(6,200
)
(3,082
)
(9,959
)
(5,114
)
Amortization of acquired intangibles
(2,851
)
(2,394
)
(5,496
)
(4,414
)
Non-GAAP Cost of Revenue
$
53,021
$
43,837
$
106,743
$
84,281
Reconciliation of Non-GAAP Gross
Profit:
Gross Profit
$
146,521
$
119,754
$
290,925
$
228,859
Stock-based compensation expense
6,200
3,082
9,959
5,114
Amortization of acquired intangibles
2,851
2,394
5,496
4,414
Non-GAAP Gross Profit
$
155,572
$
125,230
$
306,380
$
238,387
Reconciliation of Non-GAAP Gross
Margin:
Gross margin
70
%
71
%
70
%
71
%
Stock-based compensation expense as a
percentage of revenue
3
%
2
%
2
%
2
%
Amortization of acquired intangibles as a
percentage of revenue
1
%
1
%
1
%
1
%
Non-GAAP Gross Margin
75
%
74
%
74
%
74
%
Reconciliation of Non-GAAP Research and
Development Expense:
Research and development
$
56,647
$
41,234
$
107,499
$
80,508
Stock-based compensation expense
(14,641
)
(7,192
)
(24,104
)
(12,596
)
Amortization of acquired intangibles
—
—
—
—
Non-GAAP Research and Development
Expense
$
42,006
$
34,042
$
83,395
$
67,912
Reconciliation of Non-GAAP Sales and
Marketing Expense:
Sales and marketing
$
101,242
$
72,651
$
187,689
$
136,744
Stock-based compensation expense
(11,905
)
(5,955
)
(18,616
)
(10,010
)
Amortization of acquired intangibles
(3,603
)
(2,905
)
(7,209
)
(4,445
)
Non-GAAP Sales and Marketing
Expense
$
85,734
$
63,791
$
161,864
$
122,289
Reconciliation of Non-GAAP General and
Administrative Expense:
General and administrative
$
44,592
$
36,113
$
86,786
$
67,312
Stock-based compensation expense
(13,954
)
(10,390
)
(26,671
)
(17,756
)
Amortization of acquired intangibles
(839
)
(894
)
(1,693
)
(1,755
)
Non-GAAP General and Administrative
Expense
$
29,799
$
24,829
$
58,422
$
47,801
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s 2021 Form 10-K/A.
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021 (1)
2022
2021 (1)
Reconciliation of Non-GAAP Operating
Income (Loss):
Operating loss
$
(55,960
)
$
(30,244
)
$
(91,049
)
$
(55,705
)
Stock-based compensation expense
46,700
26,619
79,350
45,476
Amortization of acquired intangibles
7,293
6,193
14,398
10,614
Non-GAAP Operating Income
(Loss)
$
(1,967
)
$
2,568
$
2,699
$
385
Reconciliation of Non-GAAP Net Income
(Loss):
Net loss
$
(55,848
)
$
(31,034
)
$
(88,405
)
$
(61,102
)
Stock-based compensation expense
46,700
26,619
79,350
45,476
Amortization of acquired intangibles
7,293
6,193
14,398
10,614
Non-GAAP Net Income (Loss)
$
(1,855
)
$
1,778
$
5,343
$
(5,012
)
Reconciliation of Non-GAAP Basic Net
Income (Loss) Per Share:
Net loss per share
$
(0.63
)
$
(0.36
)
$
(1.01
)
$
(0.71
)
Stock-based compensation expense per
share
0.53
0.31
0.90
0.53
Amortization of acquired intangibles per
share
0.08
0.07
0.16
0.12
Non-GAAP Basic Net Income (Loss) Per
Share
$
(0.02
)
$
0.02
$
0.06
$
(0.06
)
Reconciliation of Non-GAAP Diluted Net
Income (Loss) Per Share:
Net loss per diluted share
$
(0.63
)
$
(0.35
)
$
(0.99
)
$
(0.71
)
Stock-based compensation expense per
share
0.53
$
0.30
0.89
0.53
Amortization of acquired intangibles per
share
0.08
$
0.07
0.16
0.12
Non-GAAP Diluted Net Income (Loss) Per
Share (2)
$
(0.02
)
$
0.02
$
0.06
$
(0.06
)
Shares used in computing non-GAAP diluted
net income (loss) per share
87,989
89,518
89,080
85,765
(2) For the three months ended June 30,
2022, all common stock equivalents have been excluded from the
diluted share count as their effect is antidilutive. Non-GAAP
diluted net income per share for the three months ended June 30,
2021, was calculated using the diluted share count which includes
approximately 3.4 million dilutive shares related to employee stock
options and stock-based awards. Non-GAAP diluted net income per
share for the six months ended June 30, 2022, was calculated using
the diluted share count which includes approximately 1.4 million
dilutive shares primarily related to employee stock options. For
the six months ended June 30, 2021, all common stock equivalents
have been excluded from the diluted share count as their effect is
antidilutive.
Free Cash Flow:
Net cash provided by (used in) operating
activities
$
6,204
$
25,550
$
(16,862
)
$
(2,697
)
Less: Purchases of property and
equipment
(962
)
(1,704
)
(3,110
)
(3,070
)
Less: Capitalized software development
costs
(5,274
)
(3,642
)
(11,179
)
(5,953
)
Free Cash Flow
$
(32
)
$
20,204
$
(31,151
)
$
(11,720
)
(1) Prior year amounts have been adjusted
to reflect the correction of an immaterial error related to
stock-based compensation expense, which are further described in
the Company’s 2021 Form 10-K/A.
AVALARA, INC. UNAUDITED PRESENTATION OF CALCULATED
BILLINGS AND RECONCILIATION TO REVENUE
Three Months Ended
Jun 30,
2022
Mar 31,
2022
Dec 31,
2021 (1)
Sep 30,
2021 (1)
Jun 30,
2021 (1)
Mar 31,
2021
Dec 31,
2020 (1)
Sep 30,
2020
Total revenue
$
208,593
$
204,530
$
195,142
$
181,167
$
169,067
$
153,601
$
144,760
$
127,879
Add:
Deferred revenue (end of period)
307,693
303,610
282,955
257,883
239,395
225,531
209,690
180,640
Contract liabilities (end of period)
643
897
6,918
8,597
11,406
12,466
10,134
7,673
Less:
Deferred revenue (beginning of period)
(303,610
)
(282,955
)
(257,883
)
(239,395
)
(225,531
)
(209,690
)
(180,640
)
(167,719
)
Contract liabilities (beginning of
period)
(897
)
(6,918
)
(8,597
)
(11,406
)
(12,466
)
(10,134
)
(7,673
)
(6,195
)
Deferred revenue and contract liabilities
assumed in business combinations
—
—
(747
)
(430
)
(886
)
—
(9,194
)
—
Calculated billings
$
212,422
$
219,164
$
217,788
$
196,416
$
180,985
$
171,774
$
167,077
$
142,278
(1) These quarters include reconciling
adjustments to exclude the acquisition-date fair value of deferred
revenue assumed in business combinations.
AVALARA, INC. UNAUDITED PRESENTATION OF KEY BUSINESS
METRICS
Jun 30, 2022
Mar 31, 2022
Dec 31, 2021
Sep 30, 2021
Jun 30, 2021
Mar 31, 2021
Dec 31, 2020
Sep 30, 2020
Number of core customers (as of end of
period)
20,110
19,160
18,270
17,400
16,570
15,730
15,020
14,300
Net revenue retention rate
113
%
115
%
116
%
116
%
116
%
113
%
115
%
116
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220805005468/en/
Investor Contact Jennifer Gianola Avalara
jennifer.gianola@avalara.com 650-499-9837 Media Contact
Tommy Morgan Avalara media@avalara.com 540-448-7551
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