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Avalara (NYSE:AVLR) Reports Upbeat Q2, Stock Soars


Jabin Bastian /
2021/08/05 4:39 pm EDT
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Tax compliance software maker Avalara (NYSE:AVLR) reported strong growth in the Q2 FY2021 earnings announcement, with revenue up 45.1% year on year to $169 million. Avalara made a GAAP loss of $27.6 million, down on its loss of $10.1 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) Q2 FY2021 Highlights:

  • Revenue: $169 million vs analyst estimates of $154.2 million (9.62% beat)
  • EPS (non-GAAP): $0.02 vs analyst estimates of -$0.10 ($0.12 beat)
  • Revenue guidance for Q3 2021 is $170 million at the midpoint, above analyst estimates of $164.9 million
  • The company lifted revenue guidance for the full year, from $652 million to $674 million at the midpoint, a 3.37% increase
  • Free cash flow of $20.2 million, up from negative free cash flow of -$31.93 million in previous quarter
  • Net Revenue Retention Rate: 116%, up from 107% previous quarter
  • Customers: 16,570, up from 15,580 in previous quarter
  • Gross Margin (GAAP): 71.2%, in line with previous quarter

“The second quarter was an exceptionally great quarter for Avalara, as we continue to execute our vision to become the leading global cloud compliance platform. We reported total revenue growth of 45% year-over-year, the highest growth rate achieved since going public and 52% year-over-year calculated billings growth,” said Scott McFarlane, Avalara co-founder and chief executive officer.

Founded in 2004, Avalara offers software as a service that provides companies with real-time information on how much tax to charge and automates tax compliance. Transactional taxes are complex, with thousands of rules set by local, regional, state, federal and international authorities.

The demand for tax management software is driven by an increase in digital commerce and ongoing adoption of modern technology platforms which are scalable and make it easy to automate business processes.

Sales Growth

As you can see below, Avalara's revenue growth has been very strong over the last year, growing from quarterly revenue of $116.4 million, to $169 million.

Avalara Total Revenue

And unsurprisingly, this was another great quarter for Avalara with revenue up an absolutely stunning 45.1% year on year. On top of that, revenue increased $15.4 million quarter on quarter, a very strong improvement on the $8.84 million increase in Q1 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 22.1% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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Customer Growth

You can see below that Avalara reported 16,570 customers at the end of the quarter, an increase of 990 on last quarter. That is quite a bit better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Avalara Customers

We want to note that Avalara revised their customer calculation methodology to include revenue from the Streamlined Sales Tax solution (SST), which results in additional customers being included in reported customers.

Key Takeaways from Avalara's Q2 Results

Sporting a market capitalisation of $14.4 billion, more than $639.4 million in cash and with positive free cash flow over the last twelve months, we're confident that Avalara has the resources it needs to pursue a high growth business strategy.

We were impressed by how strongly Avalara outperformed analysts’ revenue expectations this quarter. And we were also glad to see the improvement in net revenue retention rate. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 5.02% on the results and currently trades at $178.21 per share.

Avalara may have had a good quarter, so should you invest 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 full report which you can read here, it's free.

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