Avalara Announces Q4 and Fiscal Year 2021 Financial Results

Avalara, Inc, a leading provider of tax compliance automation for businesses of all sizes, today announced financial results for its fourth quarter and fiscal year ended December 31, 2021.

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“For the full year we accelerated our topline, achieving revenue growth of 40% year-over-year, and we delivered our third consecutive year of positive operating and free cash flow,”

“As we enter fiscal 2022, we are excited about the opportunity to leverage our growing scale, competitive moats, and ubiquity in the market to establish Avalara as the standard cloud platform for compliance. We believe we are in the early days of addressing a huge addressable market to automate compliance for businesses of all sizes.”

Scott McFarlane, Co-Founder and CEO, Avalara.

Avalara Q4 2021 Financial Results

• Revenue: Total revenue was $195.1 million in the fourth quarter of 2021, up 35% from $144.8 million in the fourth quarter of 2020. Subscription and returns revenue was $177.1 million, up 34% from $132.6 million in the same period last year. Professional services revenue was $18.0 million, up 48% from $12.2 million in the same period last year.
  
• Gross Profit: GAAP gross profit was $136.7 million in the fourth quarter of 2021, representing a 70% gross margin, compared to a GAAP gross profit of $104.2 million and a 72% gross margin in the fourth quarter of 2020. Non-GAAP gross profit was $142.1 million, representing a 73% non-GAAP gross margin, compared to a non-GAAP gross profit of $107.7 million and a 74% non-GAAP gross margin in the fourth quarter of 2020.
  
• Operating Loss: GAAP operating loss was $28.1 million in the fourth quarter of 2021, compared to a GAAP operating loss of $19.7 million in the fourth quarter of 2020. Non-GAAP operating income was $1.7 million in the fourth quarter of 2021, compared to non-GAAP operating loss of $0.6 million in the fourth quarter of 2020.
  
• Net Loss: GAAP net loss was $35.0 million in the fourth quarter of 2021, compared to a GAAP net loss of $11.0 million in the fourth quarter of 2020. Non-GAAP net loss was $5.3 million in the fourth quarter of 2021, compared to non-GAAP net income of $8.1 million in the fourth quarter of 2020.
  
• Net Loss per Share: GAAP basic and diluted net loss per share was $0.40 based on 87.0 million weighted average shares outstanding in the fourth quarter of 2021, compared to a GAAP basic and diluted net loss per share of $0.13 based on 84.8 million weighted average shares outstanding in the fourth quarter of 2020. Non-GAAP diluted net loss per share was $0.06 based on 87.0 million weighted average shares outstanding in the fourth quarter of 2021, compared to a non-GAAP diluted net income per share of $0.09 based on 89.3 million diluted weighted average shares outstanding in the fourth quarter of 2020.
  
• Deferred Revenue: Total deferred revenue was $283.0 million at December 31, 2021, up from $209.7 million at December 31, 2020. The current portion of deferred revenue was $280.8 million at December 31, 2021, up from $208.0 million at December 31, 2020.
  
• Cash: Net cash provided by operating activities was $25.4 million in the fourth quarter of 2021, compared to $31.6 million provided by operating activities in the fourth quarter of 2020. Free cash flow was $18.0 million in the fourth quarter of 2021, compared to $28.6 million in the fourth quarter of 2020. Cash and cash equivalents totaled $1.5 billion at December 31, 2021, compared to $673.6 million at December 31, 2020.
  
• Calculated Billings: Calculated billings were $217.8 million in the fourth quarter of 2021, compared to calculated billings of $167.1 million in the fourth quarter of 2020.

Reconciliations of GAAP to non-GAAP financial measures have been provided in the tables included in this release.

Fiscal Year 2021 Financial Results

• Revenue: Total revenue was $699.0 million in fiscal year 2021, up 40% from $500.6 million in fiscal year 2020. Subscription and returns revenue was $633.1 million, up 36% from $465.8 million in the prior year. Professional services revenue was $65.9 million, up 90% from $34.7 million in the prior year.
  
• Gross Profit: GAAP gross profit was $494.1 million in fiscal year 2021, representing a 71% gross margin, compared to a GAAP gross profit of $357.5 million and a 71% gross margin in fiscal year 2020. Non-GAAP gross profit was $513.7 million in fiscal year 2021, representing a 73% non-GAAP gross margin, compared to a non-GAAP gross profit of $368.5 million and a 74% non-GAAP gross margin in fiscal year 2020.
  
• Operating Loss: GAAP operating loss was $106.6 million in fiscal year 2021, compared to a GAAP operating loss of $62.0 million in fiscal year 2020. Non-GAAP operating income was $5.5 million in fiscal year 2021, compared to a non-GAAP operating loss of $3.1 million in fiscal year 2020.
  
• Net Loss: GAAP net loss was $125.2 million in fiscal year 2021, compared to a GAAP net loss of $49.2 million in fiscal year 2020. Non-GAAP net loss was $13.2 million in fiscal year 2021, compared to a non-GAAP net income of $9.6 million in fiscal year 2020.
  
• Net Loss per Share: GAAP basic and diluted net loss per share was $1.45 based on 86.3 million weighted average shares outstanding in fiscal year 2021, compared to a GAAP basic and diluted net loss per share of $0.61 based on 81.0 million weighted average shares outstanding in fiscal year 2020. Non-GAAP diluted net loss per share was $0.15 based on 86.3 million weighted average shares outstanding in fiscal year 2021, compared to non-GAAP diluted net income per share of $0.11 based on 85.4 million diluted weighted average shares outstanding in fiscal year 2020.
  
• Cash: Net cash provided by operating activities was $34.1 million in fiscal year 2021, compared to $42.6 million provided by operating activities in fiscal year 2020. Free cash flow was $12.7 million in fiscal year 2021, compared to $34.0 million in fiscal year 2020.

Reconciliations of GAAP to non-GAAP financial measures have been provided in the tables included in this release.

Fourth Quarter and Fiscal Year 2021 Highlights

• Key Metrics: During the second quarter of 2021, we revised our core customer calculation methodology to include revenue from our Streamlined Sales Tax solution (SST), which results in additional customers being included in reported core customers. During the second quarter of 2021, we also revised our net revenue retention rate calculation methodology to include revenue from SST that previously was not included, and to exclude professional services revenue, as these services tend to be more one-time in nature. We have included both the revised and legacy Key Metrics methodologies for core customers and net revenue retention in a table at the end of this release.
  
  Under the revised calculation methodology, Avalara ended the fourth quarter of 2021 with approximately 18,270 core customers, up from approximately 17,400 core customers at the end of the previous quarter and approximately 15,020 in the fourth quarter of 2020, representing a 22% increase year-over-year.
  Under the revised calculation methodology, our net revenue retention rate was 116% in the fourth quarter of 2021 and has averaged 115% over the last four quarters.
  
• In 2021, Avalara was named a Leader in three IDC MarketScape reports covering tax automation solutions for small and mid-size businesses (SMB), enterprise, and value-added tax (VAT).
  
• In 2021, we launched our corporate sustainability site, highlighting our existing initiatives, and outlining the ongoing commitment to being a responsible employer and corporate leader in social, environmental, and governance programs.
  
• In 2021, Avalara announced that the company’s cross-border compliance capabilities will power the new duty and import tax features of Shopify’s global commerce hub, Shopify Markets. We also announced Avalara Managed Tax Classification, Avalara Content Generation for POS, Avalara Shipping Verification, Avalara Vendor Exemption Management, Avalara Trade Treaty Support, and Avalara Trade Restrictions Management. Finally, we announced an array of new tax compliance automation products and services designed specifically for accountants.
  
• In 2021, Avalara announced the appointment of Srinivas Tallapragada, Marcela Martin, and retired Lieutenant General Bruce Crawford to our board of directors. Tallapragada is president and chief engineering officer of Salesforce, the leader in customer relationship management, where he leads a global team responsible for building and managing the company’s products and platform. Martin is chief financial officer of Squarespace, the all-in-one website building platform, where she oversees the company’s finance and corporate development functions. Crawford is senior vice president for strategic development, growth, and sales at Jacobs, a leading technology-enabled solutions provider.
  
• In August 2021, Avalara issued $977.5 million aggregate principal amount of 0.25% convertible senior notes due 2026, which includes the exercise in full of the $127.5 million option granted to the initial purchasers of the notes in a private offering. We received net proceeds of $959.9 million, after deducting fees and expenses payable by the company. We used approximately $75.3 million of the net proceeds from the notes to pay the cost of the capped call transactions entered into in connection with the offering.
  
• In 2021, Avalara closed the acquisitions of CrowdReason Limited Liability Company, Track1099 LLC, 3CE Technologies, Inc., DAVO Technologies LLC, and INPOSIA Solutions GmbH.

Financial Outlook

For the first quarter of 2022, the Company currently expects:

• Total revenue between $197 and $199 million.
• Non-GAAP operating loss between $9 and $11 million.

For the full year 2022, the Company currently expects:

• Total revenue between $854 and $859 million.
• Non-GAAP operating loss between $17 and $21 million.