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Avalara Announces First Quarter 2019 Financial Results
Posted on: 14/May/2019 10:02:22 AM
Avalara, Inc. (NYSE: AVLR), a leading provider of tax compliance automation for businesses of all sizes, today announced financial results for its first quarter ended March 31, 2019.
“We are off to a strong start in fiscal 2019, as our first quarter revenue grew 38% over the prior year’s quarter”
“We are off to a strong start in fiscal 2019, as our first quarter revenue grew 38% over the prior year’s quarter,” said Scott McFarlane, Avalara co-founder and chief executive officer. “In addition, we strengthened and expanded our leadership team during the quarter. We believe that the automation of transaction tax compliance will be adopted over an extended period, as customers upgrade systems, expand their businesses both domestically and internationally, and respond to changing government rules, such as the recent legislative responses to the Supreme Court’s Wayfair decision. Based on our broad tax content, robust platform, partner channel, and pre-built integrations, we believe Avalara is positioned as a clear choice to lead this automation cycle.”
Adoption of the New Revenue Recognition Standard – ASC 606
Avalara adopted the new revenue recognition accounting standard Accounting Standards Codification (“ASC”) 606 effective January 1, 2019 on a modified retrospective basis. Financial results for reporting periods during 2019 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to 2019 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard ASC 605. This press release includes additional information to reconcile the impacts of the adoption of the new revenue recognition standard on the Company’s financial results for the quarter ended March 31, 2019, including the presentation of financial results during 2019 under ASC 605 for comparison to the prior year.
First Quarter 2019 Financial Results – ASC 606 (standard adopted effective January 1, 2019)
Revenue: ASC 606 total revenue was $85.0 million. Subscription and returns revenue were $78.2 million. Professional services revenue was $6.7 million.
Gross Profit: ASC 606 GAAP gross profit was $59.7 million, representing a 70% gross margin. ASC 606 non-GAAP gross profit was $61.6 million, representing a 72% non-GAAP gross margin.
Operating Loss: ASC 606 GAAP operating loss was $9.7 million. ASC 606 non-GAAP operating loss was $1.5 million.
Net Loss: ASC 606 GAAP net loss was $9.2 million. ASC 606 non-GAAP net loss was $1.0 million.
Net Loss per Share: ASC 606 GAAP net loss per share was $0.14 based on 68.4 million weighted-average shares outstanding. ASC C 606 non-GAAP net loss per share was $0.01 based on 68.4 million weighted-average shares outstanding.
Deferred Revenue: ASC 606 total deferred revenue was $132.7 million at March 31, 2019. The current portion of ASC 606 deferred revenue was $131.7 million at March 31, 2019.
Cash: Net cash used in operating activities was $10.4 million, compared to $13.4 million used in operating activities in the first quarter of 2018. Free cash flow was negative $12.5 million, compared to negative $17.0 million in the first quarter of 2018. Our cash and cash equivalents totaled $146.9 million at March 31, 2019.
Calculated Billings: Calculated billings were $96.4 million in the first quarter of 2019, compared to calculated billings of $73.0 million in the first quarter of 2018.
First Quarter 2019 Financial Results – ASC 605
Revenue: ASC 605 total revenue was $85.0 million, up 38% from $61.4 million in the first quarter of 2018. Subscription and returns revenue was $78.3 million, up 35% from $57.9 million in the same period last year. Professional services revenue was $6.7 million, up 91% from $3.5 million in the same period last year.
Gross Profit: ASC 605 GAAP gross profit was $59.7 million, representing a 70% gross margin, compared to a GAAP gross profit of $43.9 million and a 71% gross margin in the first quarter of 2018. ASC 605 non-GAAP gross profit was $61.6 million, representing a 72% non-GAAP gross margin, compared to a non-GAAP gross profit of $45.1 million and a 73% non-GAAP gross margin in the first quarter of 2018.
Operating Loss: ASC 605 GAAP operating loss was $16.1 million, compared to a GAAP operating loss of $15.3 million in the first quarter of 2018. ASC 605 non-GAAP operating loss was $7.8 million, compared to a non-GAAP operating loss of $10.3 million in the first quarter of 2018.
Net Loss: ASC 605 GAAP net loss was $15.6 million, compared to a GAAP net loss of $15.2 million in the first quarter of 2018. ASC 605 non-GAAP net loss was $7.4 million, compared to a non-GAAP net loss of $10.3 million in the first quarter of 2018.
Net Loss per Share: ASC 605 GAAP net loss per share was $0.23 based on 68.4 million weighted-average shares outstanding, compared to a GAAP net loss per share of $2.47 based on 6.2 million weighted-average shares outstanding in the first quarter of 2018. ASC 605 non-GAAP net loss per share was $0.11 based on 68.4 million non-GAAP shares outstanding in the first quarter of 2019, compared to ASC 605 non-GAAP net loss per share of $0.16 based on 65.7 million non-GAAP shares outstanding in the first quarter of 2018.
Deferred Revenue: Total ASC 605 deferred revenue was $146.2 million at March 31, 2019, up from $134.7 million at December r 31, 2018. The current portion of ASC 605 deferred revenue was $136.7 million at March 31, 2019, up from $125.3 million at December 31, 2018.
Cash: The adoption of ASC 606 did not have an impact on cash and free cash flow.
Reconciliations of GAAP to non-GAAP financial measures have been provided in the tables included in this release.
Operating Highlights
· Key Metrics: We ended the first quarter of 2019 with approximately 9,700 core customers, up from approximately 9,070 core customers at the end of the previous quarter. Net revenue retention rate was 107% in the first quarter of 2019 and has averaged 107% over the last four quarters.
· Announced New Leadership Team Members: We announced the appointment of Amit Mathradas as president and chief operating officer (COO), Sanjay Parthasarathy as chief product officer (CPO), and Ross Tennenbaum as executive vice president of strategic initiatives. Based out of the company’s Seattle headquarters, the three newly created positions joined Avalara’s leadership team and more than 1,800 team members worldwide.
Amit Mathradas, president and COO, will oversee the end-to-end customer experience for businesses seeking tax compliance support, including business development, sales, marketing, customer success, global compliance, and professional services. Prior to joining Avalara, Mathradas served as general manager and head of North American Small Business at digital payments company PayPal, where he led the company’s small business segment, managing teams responsible for acquisition, activation, cross-sell, and retention for millions of merchants. Sanjay Parthasarathy, CPO, joined Avalara from Indix, an artificial intelligence-based product information platform, after its acquisition in February 2019. As CPO, Parthasarathy is charged with unifying global product management, enhancing the in-product customer experience, and driving the long-term global product roadmap. Before founding Indix, Parthasarathy was a senior executive and leader at Microsoft for nearly 20 years. Ross Tennenbaum is now executive vice president of strategic initiatives, which encompasses products from various investments and acquisitions, and is at the heart of many of Avalara’s primary growth initiatives. He joined the company from Goldman Sachs, where he served as a managing director in its technology investment banking division.
· Recognized as a Leader in First IDC MarketScape Report on Global Tax Automation: We were named as a Leader in the IDC MarketScape: Worldwide SAAS and Cloud-Enabled Sales Tax and VAT Automation Applications 2019 Vendor Assessment (doc #US43263718, January 2019). The report highlights an increase in business interest and need for a tax automation solution to mitigate new compliance risks resulting from a rapidly expanding global digital economy, new legislation acroross the globe to capture new revenue from this digital transformation, and enhanced indirect tax enforcement tactics. The IDC MarketScape report is a guidance tool for businesses seeking to digitize their tax compliance processes. The report suggests considering Avalara when “your business is growing and encountering indirect tax management challenges, such as navigating regulatory change, beginning an omni-channel ecommerce strategy, facing new product expansion, or selling in new geographic areas.”
Financial Outlook
For the second quarter of 2019, the Company currently expects:
ASC 606 total revenue between $84.0 and $85.0 million.
ASC 606 non-GAAP operating loss between $7.5 and $8.5 million.
For the full year 2019, the Company currently expects:
ASC 606 total revenue between $346.0 and $349.0 million.
ASC 606 non-GAAP operating loss between $10.0 and $15.0 million.
Conference Call Information
Avalara will host a conference call at 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time) today, May 7, 2019, to discuss its financial results and business highlights. The conference call can be accessed by dialing (844) 882-5970 from the United States and Canada or (647) 253-8697 internationally with conference ID 3856977.
A live webcast of the call will also be available on the Avalara investor relations website at investor.avalara.com.
A telephone replay of the conference call will be available until 8:59 p.m. Pacific Time on Tuesday, May 14, 2019 and a webcast replay will also be archived at investor.avalara.com. The telephone replay will be available by dialing (800) 585-8367 from the United States and Canada or (416) 621-4642 internationally with conference ID 3856977.
