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Avalara (NYSE:AVLR) Posts Better-Than-Expected Sales In Q1, Stock Soars


Kayode Omotosho /
2022/05/05 4:41 pm EDT
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Tax compliance software maker Avalara (NYSE:AVLR) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 33.1% year on year to $204.5 million. Guidance for next quarter's revenue was $209 million at the midpoint, which is 1.64% above the analyst consensus. Avalara made a GAAP loss of $32.5 million, down on its loss of $29.9 million, in the same quarter last year.

Is now the time to buy Avalara? Access our full analysis of the earnings results here, it's free.

Avalara (AVLR) Q1 FY2022 Highlights:

  • Revenue: $204.5 million vs analyst estimates of $198 million (3.26% beat)
  • EPS (non-GAAP): $0.08 vs analyst estimates of -$0.12 ($0.20 beat)
  • Revenue guidance for Q2 2022 is $209 million at the midpoint, above analyst estimates of $205.6 million
  • The company lifted revenue guidance for the full year, from $856.5 million to $869 million at the midpoint, a 1.45% increase
  • Free cash flow was negative $31.1 million, down from positive free cash flow of $18 million in previous quarter
  • Net Revenue Retention Rate: 115%, in line with previous quarter
  • Customers: 19,160, up from 18,270 in previous quarter
  • Gross Margin (GAAP): 70.6%, in line with same quarter last year

“We started 2022 with another strong quarter, exceeding our guidance and achieving topline revenue growth of 33% year-over-year,” said Scott McFarlane, Avalara co-founder and chief executive officer.

Founded by Scott McFarlane in 2004, Avalara (NYSE:AVLR) offers software as a service that provides companies with real-time information on how much tax to charge and automates tax compliance.

The demand for easy to use, integrated cloud based finance software that integrates tax and accounting operations continues to rise in tandem with the difficulty workers find trying to use existing accounting tools like spreadsheets given the growing volume of finance data littered across a multitude of enterprise applications. A related demand driver is the secular increase of e-commerce and rising adoption of modern point of sales and payments platforms which easily integrate with backend financial software.

Sales Growth

As you can see below, Avalara's revenue growth has been very strong over the last year, growing from quarterly revenue of $153.6 million, to $204.5 million.

Avalara Total Revenue

And unsurprisingly, this was another great quarter for Avalara with revenue up 33.1% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $9.38 million in Q1, compared to $13.9 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Avalara is expecting revenue to grow 23.6% year on year to $209 million, slowing down from the 45.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 20% over the next twelve months.

There are others doing even better than Avalara. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Avalara reported 19,160 customers at the end of the quarter, an increase of 890 on last quarter. That's in line with the customer growth we have seen over the last couple of quarters, suggesting that the company can maintain its current sales momentum.

Avalara Customers

Key Takeaways from Avalara's Q1 Results

With a market capitalization of $7.06 billion Avalara is among smaller companies, but its more than $1.48 billion in cash and positive free cash flow over the last twelve months give us confidence that Avalara has the resources it needs to pursue a high growth business strategy.

It was good to see Avalara deliver strong revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 7.15% on the results and currently trades at $75 per share.

Should you invest in Avalara right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.