Market Overview

Avalara Announces Fourth Quarter and Fiscal Year 2019 Financial Results

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Fourth Quarter Total Revenue of $107.6 Million

Fiscal 2019 Total Revenue of $382.4 Million

Approximately 11,960 Core Customers as of December 31, 2019

Avalara, Inc. (NYSE:AVLR), a leading provider of tax compliance automation for businesses of all sizes, today announced financial results for its fourth quarter and year ended December 31, 2019.

"Avalara's strong fourth quarter closed out an exciting year, highlighted by Q4 revenue growing 40% year over year," said Scott McFarlane, co-founder and chief executive officer of Avalara. "As we look ahead to 2020, the global demand for compliance automation continues as laws, governments, and technologies change, and businesses everywhere grow. With renewed focus and energy around our vision, the Avalara team is focusing on driving efficient growth in every aspect of our business to capture the opportunity ahead of us."

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 three months and year ended December 31, 2019, including the presentation of financial results during 2019 under ASC 605 for comparison to the prior year.

Fourth Quarter 2019 Financial Results – ASC 606 (standard adopted effective January 1, 2019)

  • Revenue: ASC 606 total revenue was $107.6 million in the fourth quarter of 2019. Subscription and returns revenue was $99.9 million. Professional services revenue was $7.7 million.
  • Gross Profit: ASC 606 GAAP gross profit was $74.7 million in the fourth quarter of 2019, representing a 69% gross margin. ASC 606 non-GAAP gross profit was $76.8 million, representing a 71% non-GAAP gross margin.
  • Operating Loss: ASC 606 GAAP operating loss was $15.3 million in the fourth quarter of 2019. ASC 606 non-GAAP operating loss was $5.1 million.
  • Net Loss: ASC 606 GAAP net loss was $12.3 million in the fourth quarter of 2019. ASC 606 non-GAAP net loss was $2.0 million.
  • Net Loss per Share: ASC 606 GAAP net loss per share was $0.16 based on 77.1 million weighted-average shares outstanding in the fourth quarter of 2019. ASC 606 non-GAAP net loss per share was $0.03 based on 77.1 million weighted-average shares outstanding.
  • Deferred Revenue: ASC 606 total deferred revenue was $161.2 million at December 31, 2019. The current portion of ASC 606 deferred revenue was $160.3 million at December 31, 2019.
  • Cash: Net cash provided by operating activities was $17.0 million in the fourth quarter of 2019, compared to $7.0 million provided by operating activities in the fourth quarter of 2018. Free cash flow was $14.0 million, compared to $4.5 million in the fourth quarter of 2018. Cash and cash equivalents totaled $467.0 million at December 31, 2019, compared to cash and cash equivalents of $142.3 million at December 31, 2018.
  • Calculated Billings: Calculated billings were $120.8 million in the fourth quarter of 2019, compared to calculated billings of $93.4 million in the fourth quarter of 2018.

Fourth Quarter 2019 Financial Results – ASC 605

  • Revenue: ASC 605 total revenue was $107.7 million in the fourth quarter of 2019, up 40% from $76.9 million in the fourth quarter of 2018. Subscription and returns revenue was $100.0 million, up 39% from $71.7 million in the same period last year. Professional services revenue was $7.7 million, up 48% from $5.2 million in the same period last year.
  • Gross Profit: ASC 605 GAAP gross profit was $74.8 million in the fourth quarter of 2019, representing a 69% gross margin, compared to a GAAP gross profit of $54.7 million and a 71% gross margin in the fourth quarter of 2018. ASC 605 non-GAAP gross profit was $76.9 million, representing a 71% non-GAAP gross margin, compared to a non-GAAP gross profit of $56.2 million and a 73% non-GAAP gross margin in the fourth quarter of 2018.
  • Operating Loss: ASC 605 GAAP operating loss was $21.2 million in the fourth quarter of 2019, compared to a GAAP operating loss of $19.4 million in the fourth quarter of 2018. ASC 605 non-GAAP operating loss was $10.9 million, compared to a non-GAAP operating loss of $13.3 million in the fourth quarter of 2018.
  • Net Loss: ASC 605 GAAP net loss was $18.2 million in the fourth quarter of 2019, compared to a GAAP net loss of $18.4 million in the fourth quarter of 2018. ASC 605 non-GAAP net loss was $7.9 million, compared to a non-GAAP net loss of $12.3 million in the fourth quarter of 2018.
  • Net Loss per Share: ASC 605 GAAP net loss per share was $0.24 based on 77.1 million weighted-average shares outstanding in the fourth quarter of 2019, compared to a GAAP net loss per share of $0.28 based on 66.7 million weighted-average shares outstanding in the fourth quarter of 2018. ASC 605 non-GAAP net loss per share was $0.10 based on 77.1 million shares outstanding in the fourth quarter of 2019, compared to ASC 605 non-GAAP net loss per share of $0.19 based on 66.7 million shares outstanding in the fourth quarter of 2018.
  • Deferred Revenue: Total ASC 605 deferred revenue was $175.4 million at December 31, 2019, up from $134.7 million at December 31, 2018. The current portion of ASC 605 deferred revenue was $166.4 million at December 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.

Fiscal Year 2019 Financial Results – ASC 606 (standard adopted effective January 1, 2019)

  • Revenue: ASC 606 total revenue was $382.4 million in fiscal year 2019. Subscription and returns revenue was $355.2 million. Professional services revenue was $27.2 million.
  • Gross Profit: ASC 606 GAAP gross profit was $267.1 million in fiscal year 2019, representing a 70% gross margin. ASC 606 non-GAAP gross profit was $275.1 million, representing a 72% non-GAAP gross margin.
  • Operating Loss: ASC 606 GAAP operating loss was $55.9 million in fiscal year 2019. ASC 606 non-GAAP operating loss was $14.4 million.
  • Net Loss: ASC 606 GAAP net loss was $50.2 million in fiscal year 2019. ASC 606 non-GAAP net loss was $8.7 million.
  • Net Loss per Share: ASC 606 GAAP net loss per share was $0.68 based on 73.3 million weighted-average shares outstanding in fiscal year 2019. ASC 606 non-GAAP net loss per share was $0.12 based on 73.3 million weighted-average shares outstanding.
  • Cash: Net cash provided by operating activities was $22.4 million in fiscal year 2019, compared to $3.1 million used by operating activities in fiscal year 2018. Free cash flow was positive $12.2 million, compared to negative $18.5 million in fiscal year 2018.
  • Calculated Billings: Calculated billings were $423.4 million in fiscal year 2019, compared to calculated billings of $314.5 million in fiscal year 2018.

Fiscal Year 2019 Financial Results – ASC 605

  • Revenue: ASC 605 total revenue was $383.0 million in fiscal year 2019, up 41% from $272.1 million in fiscal year 2018. Subscription and returns revenue was $355.9 million, up 40% from $254.1 million in the prior year. Professional services revenue was $27.1 million, up 50% from $18.0 million in the prior year.
  • Gross Profit: ASC 605 GAAP gross profit was $267.7 million in fiscal year 2019, representing a 70% gross margin, compared to a GAAP gross profit of $193.4 million and a 71% gross margin in fiscal year 2018. ASC 605 non-GAAP gross profit was $275.7 million, representing a 72% non-GAAP gross margin, compared to a non-GAAP gross profit of $199.1 million and a 73% non-GAAP gross margin in fiscal year 2018.
  • Operating Loss: ASC 605 GAAP operating loss was $74.4 million in fiscal year 2019, compared to a GAAP operating loss of $76.1 million in fiscal year 2018. ASC 605 non-GAAP operating loss was $32.9 million, compared to a non-GAAP operating loss of $45.0 million in fiscal year 2018.
  • Net Loss: ASC 605 GAAP net loss was $68.8 million in fiscal year 2019, compared to a GAAP net loss of $75.6 million in fiscal year 2018. ASC 605 non-GAAP net loss was $27.3 million, compared to a non-GAAP net loss of $44.5 million in fiscal year 2018.
  • Net Loss per Share: ASC 605 GAAP net loss per share was $0.94 based on 73.3 million weighted-average shares outstanding in fiscal year 2019, compared to a GAAP net loss per share of $1.95 based on 38.7 million weighted-average shares outstanding in fiscal year 2018. ASC 605 non-GAAP net loss per share was $0.37 based on 73.3 million shares outstanding in fiscal year 2019, compared to ASC 605 non-GAAP net loss per share of $0.67 based on 66.2 million non-GAAP shares outstanding in fiscal year 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.

Fourth Quarter and Fiscal Year 2019 Operating Highlights

  • Key Metrics: We ended the fourth quarter of 2019 with approximately 11,960 core customers, up from approximately 11,240 core customers at the end of the previous quarter and up from 9,070 at the end of the previous fiscal year. Our net revenue retention rate was 111% in the fourth quarter of 2019 and has averaged 111% over the last four quarters.
  • Chief Financial Officer Transition: We announced that chief financial officer ("CFO"), Bill Ingram, will retire March 31, 2020, and will be succeeded as CFO by Ross Tennenbaum, Avalara's executive vice president of strategic initiatives. Ingram joined Avalara in December 2015 as CFO and built a finance team ready to manage a public company and lead the team through Avalara's IPO. On January 29, 2020, Ingram was appointed to the Board of Directors and will continue to serve as a director following his retirement. In Tennenbaum's current role as executive vice president of strategic initiatives, he leads several businesses that have developed from Avalara's investments and acquisitions and represent important growth initiatives for the company. Tennenbaum's experience was built over a 10-year investment banking career at Goldman Sachs and Credit Suisse, including working with Avalara since 2014 and leading our IPO in 2018.
  • Expansion of International Management Team: We announced the appointment of enterprise software executive Salim Ali as senior vice president of international. His responsibilities include shaping the company's growth and go-to-market strategies internationally to scale and accelerate growth across all international markets including EMEA, Brazil, and India. Ali brings more than two decades of enterprise software, marketing, and business management experience to Avalara. He has overseen global marketing, product, and partnership efforts for notable enterprise technology companies, including SAP and Veritas Technologies. Ali comes to Avalara from Loyakk, Inc., where he served as chief executive officer driving the creation, launch, and growth of the company's portfolio of customer experience and customer success offerings across the globe.
  • Appointment of Chief Marketing Officer: We announced the appointment of marketing veteran Jay Lee as chief marketing officer. His responsibilities include shaping the company's global demand generation and communication strategies to drive commercial growth across markets and customer segments. Lee brings more than two decades of marketing and business management experience to Avalara. He has overseen B2B strategic marketing and business development teams at some of the world's most recognizable companies including GE and American Express, and comes to Avalara from PayPal, where he served as the global head of marketing for the company's Business Financing Solutions division.

Financial Outlook

For the first quarter of 2020, the Company currently expects:

  • ASC 606 total revenue between $107.5 and $108.5 million.
  • ASC 606 non-GAAP operating loss between $8.5 and $9.5 million.

For the full year 2020, the Company currently expects:

  • ASC 606 total revenue between $470.0 and $474.0 million.
  • ASC 606 non-GAAP operating loss between $18.0 and $22.0 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, February 12, 2020, 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 2860179. 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 Wednesday, February 19, 2020 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 2860179.

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 Canada, the U.K., Belgium, Brazil, and India. More information at www.avalara.com.

Forward-Looking Statements

This press release and the accompanying conference call contain forward-looking statements including, among others, statements about our financial outlook for the first quarter and full year 2020. 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 Annual Report on Form 10-K for the year ended December 31, 2018 and in any subsequent Quarterly Reports on Form 10-Q, all of 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 loss, non-GAAP net loss, non-GAAP net loss per share, non-GAAP shares outstanding, 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 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 loss as GAAP operating loss before stock-based compensation expense, amortization of acquired intangibles, and goodwill impairments. We calculate non-GAAP net loss as GAAP net loss before stock-based compensation expense, amortization of acquired intangibles, and goodwill impairments.
  • We calculate non-GAAP shares outstanding for 2018 as GAAP weighted-average shares outstanding during the period adjusted as if (1) the conversion of preferred stock into common stock and (2) the issuance of 8,625,000 shares of common stock in our IPO had both occurred as of January 1, 2018.
  • We calculate non-GAAP net loss per share as non-GAAP net loss divided by non-GAAP shares outstanding.
  • We define free cash flow as net cash (used in) provided by operating activities less cash used for the purchases of property and equipment.
  • We define calculated billings as total revenue plus the changes in deferred revenue and contract liabilities in the period. Because we 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 an 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 comparing our financial results to those of other companies.

As a result of adoption of ASC 606 effective January 1, 2019, non-GAAP financial measures for the three months and year ended December 31, 2019, as computed in accordance with ASC 606, are not as comparable to non-GAAP financial measures for the three months and year ended December 31, 2018, which are computed in accordance with ASC 605. Except for calculated billings, the reconciliation of non-GAAP measures provided below includes additional information to reconcile the impacts of the adoption of ASC 606 on the non-GAAP financial measures for the three months and year ended December 31, 2019, including presentation of the non-GAAP measures for 2019 under ASC 605 for comparison to the prior periods.

The company has not reconciled its expectations of non-GAAP financial measures to the corresponding GAAP measures primarily because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

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 key business metrics, such as core customers and net revenue retention rate.

Core Customers

We believe core customers 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 billing system (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 last twelve 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 who subscribe to our solutions through our international subsidiaries or certain legacy billing systems primarily related to past acquisitions that have not been integrated into our primary U.S. billing systems. 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 who do not meet the revenue threshold to be considered a core customer. These customers provide us with market share and awareness, and we anticipate that some may grow into core customers. We believe there is strategic value to addressing the small business and self-serve segment of the marketplace.

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 revenue in the current quarter from any billing accounts that generated revenue during the corresponding quarter of the prior year by (b) total 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.

Currently, 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 billing systems primarily related to past acquisitions.

 

Reported Consolidated Results

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

For the Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

$

99,956

 

 

$

71,730

 

Professional services

 

 

7,671

 

 

 

5,193

 

Total revenue

 

 

107,627

 

 

 

76,923

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

 

28,287

 

 

 

18,572

 

Professional services

 

 

4,592

 

 

 

3,700

 

Total cost of revenue (1)

 

 

32,879

 

 

 

22,272

 

Gross profit

 

 

74,748

 

 

 

54,651

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development (1)

 

 

25,619

 

 

 

13,577

 

Sales and marketing (1)

 

 

46,310

 

 

 

49,630

 

General and administrative (1)

 

 

18,154

 

 

 

10,816

 

Goodwill impairment

 

 

 

 

 

 

Total operating expenses

 

 

90,083

 

 

 

74,023

 

Operating loss

 

 

(15,335

)

 

 

(19,372

)

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income

 

 

(1,786

)

 

 

(742

)

Interest expense

 

 

3

 

 

 

113

 

Other (income) expense, net

 

 

(1,559

)

 

 

(160

)

Total other (income) expense, net

 

 

(3,342

)

 

 

(789

)

Loss before income taxes

 

 

(11,993

)

 

 

(18,583

)

Provision for (benefit from) income taxes

 

 

326

 

 

 

(151

)

Net loss

 

$

(12,319

)

 

$

(18,432

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.16

)

 

$

(0.28

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

77,147

 

 

 

66,654

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended December 31,

 

(1) The stock-based compensation expense included above was as follows:

 

2019

 

 

2018

 

Cost of revenue

 

$

845

 

 

$

484

 

Research and development

 

 

1,966

 

 

 

908

 

Sales and marketing

 

 

2,325

 

 

 

1,818

 

General and administrative

 

 

3,307

 

 

 

1,300

 

Total stock-based compensation

 

$

8,443

 

 

$

4,510

 

 

 

 

 

 

 

 

 

 

The amortization of acquired intangibles included above was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

1,219

 

 

$

1,114

 

Research and development

 

 

 

 

 

 

Sales and marketing

 

 

618

 

 

 

468

 

General and administrative

 

 

4

 

 

 

 

 

 

$

1,841

 

 

$

1,582

 

 

The total employer payroll tax expense on employee stock transactions included above was $0.5 million for the three months ended December 31, 2019, of which $0.1 million is included in cost of revenue, $0.1 million is included in research and development, $0.1 million is included in sales and marketing, and $0.2 million is included in general and administrative.

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

For the Year Ended December 31,

 

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

$

355,181

 

 

$

254,056

 

Professional services

 

 

27,240

 

 

 

18,042

 

Total revenue

 

 

382,421

 

 

 

272,098

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription and returns

 

 

97,824

 

 

 

66,556

 

Professional services

 

 

17,475

 

 

 

12,093

 

Total cost of revenue (1)

 

 

115,299

 

 

 

78,649

 

Gross profit

 

 

267,122

 

 

 

193,449

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development (1)

 

 

82,442

 

 

 

51,909

 

Sales and marketing (1)

 

 

168,634

 

 

 

168,817

 

General and administrative (1)

 

 

71,918

 

 

 

39,603

 

Goodwill impairment

 

 

 

 

 

9,174

 

Total operating expenses

 

 

322,994

 

 

 

269,503

 

Operating loss

 

 

(55,872

)

 

 

(76,054

)

Other (income) expense:

 

 

 

 

 

 

 

 

Interest income

 

 

(6,037

)

 

 

(1,553

)

Interest expense

 

 

289

 

 

 

2,608

 

Other (income) expense, net

 

 

(865

)

 

 

(583

)

Total other (income) expense, net

 

 

(6,613

)

 

 

472

 

Loss before income taxes

 

 

(49,259

)

 

 

(76,526

)

Provision for (benefit from) income taxes

 

 

955

 

 

 

(976

)

Net loss

 

$

(50,214

)

 

$

(75,550

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.68

)

 

$

(1.95

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

73,345

 

 

 

38,692

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31,

 

(1) The stock-based compensation expense included above was as follows:

 

2019

 

 

2018

 

Cost of revenue

 

$

3,122

 

 

$

1,665

 

Research and development

 

 

6,666

 

 

 

3,179

 

Sales and marketing

 

 

8,736

 

 

 

5,492

 

General and administrative

 

 

15,825

 

 

 

5,585

 

Total stock-based compensation

 

$

34,349

 

 

$

15,921

 

 

 

 

 

 

 

 

 

 

The amortization of acquired intangibles included above was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

4,854

 

 

$

4,020

 

Research and development

 

 

 

 

 

 

Sales and marketing

 

 

2,271

 

 

 

1,951

 

General and administrative

 

 

15

 

 

 

17

 

Total amortization of acquired intangibles

 

$

7,140

 

 

$

5,988

 

 

The total employer payroll tax expense on employee stock transactions included above was $6.0 million for the year ended December 31, 2019, of which $0.6 million is included in cost of revenue, $1.0 million is included in research and development, $1.7 million is included in sales and marketing, and $2.7 million is included in general and administrative.

 

AVALARA, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

466,950

 

 

$

142,322

 

Trade accounts receivable—net of allowance for doubtful accounts

 

 

51,644

 

 

 

40,287

 

Deferred commissions

 

 

9,279

 

 

 

 

Prepaid expenses and other current assets

 

 

14,127

 

 

 

11,307

 

Total current assets before customer fund assets

 

 

542,000

 

 

 

193,916

 

Funds held from customers

 

 

24,383

 

 

 

13,113

 

Receivable from customers—net of allowance for doubtful accounts

 

 

420

 

 

 

270

 

Total current assets

 

 

566,803

 

 

 

207,299

 

Noncurrent assets:

 

 

 

 

 

 

 

 

Deferred commissions

 

 

29,137

 

 

 

 

Operating lease right-of-use assets—net (1)

 

 

49,321

 

 

 

 

Property and equipment—net

 

 

34,997

 

 

 

33,373

 

Intangible assets—net

 

 

22,932

 

 

 

19,371

 

Goodwill

 

 

101,224

 

 

 

61,300

 

Other noncurrent assets

 

 

2,853

 

 

 

1,589

 

Total assets

 

$

807,267

 

 

$

322,932

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Trade payables

 

 

11,693

 

 

 

4,847

 

Accrued expenses

 

 

62,104

 

 

 

42,101

 

Deferred revenue

 

 

160,271

 

 

 

125,260

 

Accrued earnout liabilities

 

 

4,120

 

 

 

116

 

Operating lease liabilities (1)

 

 

8,756

 

 

 

 

Total current liabilities before customer fund obligations

 

 

246,944

 

 

 

172,324

 

Customer fund obligations

 

 

24,783

 

 

 

13,349

 

Total current liabilities

 

 

271,727

 

 

 

185,673

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Deferred revenue

 

 

970

 

 

 

9,393

 

Accrued earnout liabilities

 

 

9,835

 

 

 

 

Operating lease liabilities (1)

 

 

58,301

 

 

 

 

Deferred rent

 

 

 

 

 

17,317

 

Deferred tax liability

 

 

337

 

 

 

560

 

Other noncurrent liabilities

 

 

2,375

 

 

 

436

 

Total liabilities

 

 

343,545

 

 

 

213,379

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

8

 

 

 

7

 

Additional paid-in capital

 

 

976,627

 

 

 

599,493

 

Accumulated other comprehensive loss

 

 

(2,719

)

 

 

(2,345

)

Accumulated deficit

 

 

(510,194

)

 

 

(487,602

)

Total shareholders' equity

 

 

463,722

 

 

 

109,553

 

Total liabilities and shareholders' equity

 

$

807,267

 

 

$

322,932

 

 

(1) Avalara adopted the new lease accounting standard for the year ended December 31, 2019.

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,319

)

 

$

(18,432

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

8,443

 

 

 

4,510

 

Depreciation and amortization

 

 

4,123

 

 

 

3,412

 

Deferred tax expense (benefit)

 

 

(361

)

 

 

(184

)

Amortization of deferred rent

 

 

 

 

 

(41

)

Non-cash operating lease costs

 

 

1,620

 

 

 

 

Non-cash change in earnout liability

 

 

(1,653

)

 

 

28

 

Non-cash bad debt expense (recovery)

 

 

765

 

 

 

94

 

Other

 

 

112

 

 

 

33

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(3,214

)

 

 

(5,656

)

Prepaid expenses and other current assets

 

 

(270

)

 

 

(2,162

)

Deferred commissions

 

 

(5,934

)

 

 

 

Other noncurrent assets

 

 

(434

)

 

 

(259

)

Trade payables

 

 

965

 

 

 

(1,066

)

Accrued expenses

 

 

13,941

 

 

 

9,171

 

Deferred revenue

 

 

12,776

 

 

 

16,444

 

Operating lease liabilities

 

 

(1,605

)

 

 

 

Deferred rent

 

 

 

 

 

1,144

 

Net cash provided by operating activities

 

 

16,955

 

 

 

7,036

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,984

)

 

 

(2,569

)

Net (increase) decrease in customer fund assets

 

 

(7,520

)

 

 

(1,935

)

Net cash used in investing activities

 

 

(10,504

)

 

 

(4,504

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options and common stock warrants

 

 

6,436

 

 

 

1,254

 

Taxes paid related to net share settlement of stock-based awards

 

 

 

 

 

(39

)

Payment related to business combination earnouts

 

 

 

 

 

(1,523

)

Net increase (decrease) in customer fund obligations

 

 

7,520

 

 

 

1,935

 

Net cash provided by financing activities

 

 

13,956

 

 

 

1,627

 

Foreign currency effect on cash and cash equivalents

 

 

(20

)

 

 

70

 

Net change in cash and cash equivalents

 

 

20,387

 

 

 

4,229

 

Cash and cash equivalents—Beginning of period

 

 

446,563

 

 

 

138,093

 

Cash and cash equivalents—End of period

 

$

466,950

 

 

$

142,322

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(50,214

)

 

$

(75,550

)

Adjustments to reconcile net loss to net cash provided by (used in) operating

activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

34,349

 

 

 

15,921

 

Depreciation and amortization

 

 

15,807

 

 

 

12,802

 

Goodwill impairment

 

 

 

 

 

9,174

 

Deferred tax expense (benefit)

 

 

(223

)

 

 

(1,294

)

Amortization of deferred rent

 

 

 

 

 

190

 

Non-cash operating lease costs

 

 

5,000

 

 

 

 

Non-cash change in earnout liability

 

 

(1,043

)

 

 

(402

)

Non-cash bad debt expense (recovery)

 

 

1,367

 

 

 

(288

)

Other

 

 

340

 

 

 

559

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(12,862

)

 

 

(13,508

)

Prepaid expenses and other current assets

 

 

(3,544

)

 

 

(4,850

)

Deferred commissions

 

 

(19,149

)

 

 

 

Other noncurrent assets

 

 

(1,265

)

 

 

(808

)

Trade payables

 

 

5,783

 

 

 

(4,419

)

Accrued expenses

 

 

16,246

 

 

 

15,266

 

Deferred revenue

 

 

37,558

 

 

 

42,422

 

Operating lease liabilities

 

 

(5,764

)

 

 

 

Deferred rent

 

 

 

 

 

1,723

 

Net cash provided by (used in) operating activities

 

 

22,386

 

 

 

(3,062

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(10,180

)

 

 

(15,483

)

Cash paid for acquisitions of businesses

 

 

(30,310

)

 

 

 

Cash paid for acquired intangible assets

 

 

(139

)

 

 

(5,002

)

Net (increase) decrease in customer fund assets

 

 

(11,506

)

 

 

118

 

Net cash used in investing activities

 

 

(52,135

)

 

 

(20,367

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offering, net of underwriting discounts

 

 

274,705

 

 

 

192,510

 

Payments of deferred financing costs

 

 

(555

)

 

 

(2,084

)

Payments on credit facility

 

 

 

 

 

(63,000

)

Proceeds from credit facility

 

 

 

 

 

23,000

 

Repayment of note payable

 

 

 

 

 

(234

)

Proceeds from exercise of stock options and common stock warrants

 

 

58,019

 

 

 

7,041

 

Proceeds from purchases of stock under employee stock purchase plan

 

 

12,293

 

 

 

 

Taxes paid related to net share settlement of stock-based awards

 

 

(1,183

)

 

 

(2,365

)

Repurchase of shares

 

 

 

 

 

(1,806

)

Payment related to business combination earnouts

 

 

(375

)

 

 

(1,523

)

Net increase (decrease) in customer fund obligations

 

 

11,506

 

 

 

(118

)

Net cash provided by financing activities

 

 

354,410

 

 

 

151,421

 

Foreign currency effect on cash and cash equivalents

 

 

(33

)

 

 

255

 

Net change in cash and cash equivalents

 

 

324,628

 

 

 

128,247

 

Cash and cash equivalents—Beginning of period

 

 

142,322

 

 

 

14,075

 

Cash and cash equivalents—End of period

 

$

466,950

 

 

$

142,322

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF THE NEW REVENUE RECOGNITION STANDARD (ASC 606)

(in thousands, except per share amounts)

 

 

 

For the Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

As Reported

(ASC 606)

 

 

Impacts from

Adoption

 

 

Without

Adoption

(ASC 605)

 

 

As Reported

(ASC 605)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and returns

 

$

99,956

 

 

$

56

 

 

$

100,012

 

 

$

71,730

 

Professional services

 

 

7,671

 

 

 

(8

)

 

 

7,663

 

 

 

5,193

 

Total revenue

 

 

107,627

 

 

 

48

 

 

 

107,675

 

 

 

76,923

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and returns

 

 

28,287

 

 

 

 

 

 

28,287

 

 

 

18,572

 

Professional services

 

 

4,592

 

 

 

 

 

 

4,592

 

 

 

3,700

 

Total cost of revenue

 

 

32,879

 

 

 

 

 

 

32,879

 

 

 

22,272

 

Gross profit

 

 

74,748

 

 

 

48

 

 

 

74,796

 

 

 

54,651

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,619

 

 

 

 

 

 

25,619

 

 

 

13,577

 

Sales and marketing

 

 

46,310

 

 

 

5,934

 

 

 

52,244

 

 

 

49,630

 

General and administrative

 

 

18,154

 

 

 

 

 

 

18,154

 

 

 

10,816

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

90,083

 

 

 

5,934

 

 

 

96,017

 

 

 

74,023

 

Operating loss

 

 

(15,335

)

 

 

(5,886

)

 

 

(21,221

)

 

 

(19,372

)

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(1,786

)

 

 

 

 

 

(1,786

)

 

 

(742

)

Interest expense

 

 

3

 

 

 

 

 

 

3

 

 

 

113

 

Other (income) expense, net

 

 

(1,559

)

 

 

 

 

 

(1,559

)

 

 

(160

)

Total other (income) expense, net

 

 

(3,342

)

 

 

 

 

 

(3,342

)

 

 

(789

)

Loss before income taxes

 

 

(11,993

)

 

 

(5,886

)

 

 

(17,879

)

 

 

(18,583

)

Provision for (benefit from) income taxes

 

 

326

 

 

 

 

 

 

326

 

 

 

(151

)

Net loss

 

$

(12,319

)

 

$

(5,886

)

 

$

(18,205

)

 

$

(18,432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.16

)

 

$

(0.08

)

 

$

(0.24

)

 

$

(0.28

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

77,147

 

 

 

 

 

 

 

77,147

 

 

 

66,654

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF THE NEW REVENUE RECOGNITION STANDARD (ASC 606)

(in thousands, except per share amounts)

 

 

 

For the Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

As Reported

(ASC 606)

 

 

Impacts from

Adoption

 

 

Without

Adoption

(ASC 605)

 

 

As Reported

(ASC 605)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and returns

 

$

355,181

 

 

$

744

 

 

$

355,925

 

 

$

254,056

 

Professional services

 

 

27,240

 

 

 

(158

)

 

 

27,082

 

 

 

18,042

 

Total revenue

 

 

382,421

 

 

 

586

 

 

 

383,007

 

 

 

272,098

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and returns

 

 

97,824

 

 

 

 

 

 

97,824

 

 

 

66,556

 

Professional services

 

 

17,475

 

 

 

 

 

 

17,475

 

 

 

12,093

 

Total cost of revenue

 

 

115,299

 

 

 

 

 

 

115,299

 

 

 

78,649

 

Gross profit

 

 

267,122

 

 

 

586

 

 

 

267,708

 

 

 

193,449

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

82,442

 

 

 

 

 

 

82,442

 

 

 

51,909

 

Sales and marketing

 

 

168,634

 

 

 

19,149

 

 

 

187,783

 

 

 

168,817

 

General and administrative

 

 

71,918

 

 

 

 

 

 

71,918

 

 

 

39,603

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

9,174

 

Total operating expenses

 

 

322,994

 

 

 

19,149

 

 

 

342,143

 

 

 

269,503

 

Operating loss

 

 

(55,872

)

 

 

(18,563

)

 

 

(74,435

)

 

 

(76,054

)

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(6,037

)

 

 

 

 

 

(6,037

)

 

 

(1,553

)

Interest expense

 

 

289

 

 

 

 

 

 

289

 

 

 

2,608

 

Other (income) expense, net

 

 

(865

)

 

 

 

 

 

(865

)

 

 

(583

)

Total other (income) expense, net

 

 

(6,613

)

 

 

 

 

 

(6,613

)

 

 

472

 

Loss before income taxes

 

 

(49,259

)

 

 

(18,563

)

 

 

(67,822

)

 

 

(76,526

)

Provision for (benefit from) income taxes

 

 

955

 

 

 

 

 

 

955

 

 

 

(976

)

Net loss

 

$

(50,214

)

 

$

(18,563

)

 

$

(68,777

)

 

$

(75,550

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

 

$

(0.68

)

 

$

(0.25

)

 

$

(0.94

)

 

$

(1.95

)

Weighted average shares of common stock outstanding, basic and diluted

 

 

73,345

 

 

 

 

 

 

 

73,345

 

 

 

38,692

 

 

AVALARA, INC.

CONSOLIDATED BALANCE SHEETS

RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF THE NEW REVENUE RECOGNITION STANDARD (ASC 606)

(in thousands)

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

As Reported

(ASC 606)

 

 

Impacts from

Adoption

 

 

Without

Adoption

(ASC 605)

 

 

As Reported

(ASC 605)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

466,950

 

 

$

 

 

$

466,950

 

 

$

142,322

 

Trade accounts receivable—net of allowance for doubtful accounts

 

 

51,644

 

 

 

1,181

 

 

 

52,825

 

 

 

40,287

 

Deferred commissions

 

 

9,279

 

 

 

(9,279

)

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

14,127

 

 

 

 

 

 

14,127

 

 

 

11,307

 

Total current assets before customer fund assets

 

 

542,000

 

 

 

(8,098

)

 

 

533,902

 

 

 

193,916

 

Funds held from customers

 

 

24,383

 

 

 

 

 

 

24,383

 

 

 

13,113

 

Receivable from customers—net of allowance for doubtful accounts

 

 

420

 

 

 

 

 

 

420

 

 

 

270

 

Total current assets

 

 

566,803

 

 

 

(8,098

)

 

 

558,705

 

 

 

207,299

 

Noncurrent assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred commissions

 

 

29,137

 

 

 

(29,137

)

 

 

 

 

 

 

Operating lease right-of-use assets—net

 

 

49,321

 

 

 

 

 

 

49,321

 

 

 

 

Property and equipment—net

 

 

34,997

 

 

 

 

 

 

34,997

 

 

 

33,373

 

Intangible assets—net

 

 

22,932

 

 

 

 

 

 

22,932

 

 

 

19,371

 

Goodwill

 

 

101,224

 

 

 

 

 

 

101,224

 

 

 

61,300

 

Other noncurrent assets

 

 

2,853

 

 

 

 

 

 

2,853

 

 

 

1,589

 

Total assets

 

$

807,267

 

 

$

(37,235

)

 

$

770,032

 

 

$

322,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

 

11,693

 

 

 

 

 

 

11,693

 

 

 

4,847

 

Accrued expenses

 

 

62,104

 

 

 

(5,197

)

 

 

56,907

 

 

 

42,101

 

Deferred revenue

 

 

160,271

 

 

 

6,125

 

 

 

166,396

 

 

 

125,260

 

Accrued earnout liabilities

 

 

4,120

 

 

 

 

 

 

4,120

 

 

 

116

 

Operating lease liabilities

 

 

8,756

 

 

 

 

 

 

8,756

 

 

 

 

Total current liabilities before customer fund obligations

 

 

246,944

 

 

 

928

 

 

 

247,872

 

 

 

172,324

 

Customer fund obligations

 

 

24,783

 

 

 

 

 

 

24,783

 

 

 

13,349

 

Total current liabilities

 

 

271,727

 

 

 

928

 

 

 

272,655

 

 

 

185,673

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

970

 

 

 

8,020

 

 

 

8,990

 

 

 

9,393

 

Accrued earnout liabilities

 

 

9,835

 

 

 

 

 

 

9,835

 

 

 

 

Operating lease liabilities

 

 

58,301

 

 

 

 

 

 

58,301

 

 

 

 

Deferred rent

 

 

 

 

 

 

 

 

 

 

 

17,317

 

Deferred tax liability

 

 

337

 

 

 

 

 

 

337

 

 

 

560

 

Other noncurrent liabilities

 

 

2,375

 

 

 

 

 

 

2,375

 

 

 

436

 

Total liabilities

 

 

343,545

 

 

 

8,948

 

 

 

352,493

 

 

 

213,379

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

8

 

 

 

 

 

 

8

 

 

 

7

 

Additional paid-in capital

 

 

976,627

 

 

 

 

 

 

976,627

 

 

 

599,493

 

Accumulated other comprehensive loss

 

 

(2,719

)

 

 

 

 

 

(2,719

)

 

 

(2,345

)

Accumulated deficit

 

 

(510,194

)

 

 

(46,183

)

 

 

(556,377

)

 

 

(487,602

)

Total shareholders' equity

 

 

463,722

 

 

 

(46,183

)

 

 

417,539

 

 

 

109,553

 

Total liabilities and shareholders' equity

 

$

807,267

 

 

$

(37,235

)

 

$

770,032

 

 

$

322,932

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF THE NEW REVENUE RECOGNITION STANDARD (ASC 606)

(in thousands)

 

 

 

For the Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

As Reported

(ASC 606)

 

 

Impacts from

Adoption

 

 

Without

Adoption

(ASC 605)

 

 

As Reported

(ASC 605)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,319

)

 

$

(5,886

)

 

$

(18,205

)

 

$

(18,432

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

8,443

 

 

 

 

 

 

8,443

 

 

 

4,510

 

Depreciation and amortization

 

 

4,123

 

 

 

 

 

 

4,123

 

 

 

3,412

 

Deferred tax expense (benefit)

 

 

(361

)

 

 

 

 

 

(361

)

 

 

(184

)

Amortization of deferred rent

 

 

 

 

 

 

 

 

 

 

 

(41

)

Non-cash operating lease costs

 

 

1,620

 

 

 

 

 

 

1,620

 

 

 

 

Non-cash change in earnout liability

 

 

(1,653

)

 

 

 

 

 

(1,653

)

 

 

28

 

Non-cash bad debt expense (recovery)

 

 

765

 

 

 

 

 

 

765

 

 

 

94

 

Other

 

 

112

 

 

 

 

 

 

112

 

 

 

33

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(3,214

)

 

 

(136

)

 

 

(3,350

)

 

 

(5,656

)

Prepaid expenses and other current assets

 

 

(270

)

 

 

 

 

 

(270

)

 

 

(2,162

)

Deferred commissions

 

 

(5,934

)

 

 

5,934

 

 

 

 

 

 

 

Other noncurrent assets

 

 

(434

)

 

 

 

 

 

(434

)

 

 

(259

)

Trade payables

 

 

965

 

 

 

 

 

 

965

 

 

 

(1,066

)

Accrued expenses

 

 

13,941

 

 

 

(354

)

 

 

13,587

 

 

 

9,171

 

Deferred revenue

 

 

12,776

 

 

 

442

 

 

 

13,218

 

 

 

16,444

 

Operating lease liabilities

 

 

(1,605

)

 

 

 

 

 

(1,605

)

 

 

 

Deferred rent

 

 

 

 

 

 

 

 

 

 

 

1,144

 

Net cash provided by operating activities

 

 

16,955

 

 

 

 

 

 

16,955

 

 

 

7,036

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,984

)

 

 

 

 

 

(2,984

)

 

 

(2,569

)

Net (increase) decrease in customer fund assets

 

 

(7,520

)

 

 

 

 

 

(7,520

)

 

 

(1,935

)

Net cash (used in) provided by investing activities

 

 

(10,504

)

 

 

 

 

 

(10,504

)

 

 

(4,504

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options and common stock warrants

 

 

6,436

 

 

 

 

 

 

6,436

 

 

 

1,254

 

Taxes paid related to net share settlement of stock-based awards

 

 

 

 

 

 

 

 

 

 

 

(39

)

Payment related to business combination earnouts

 

 

 

 

 

 

 

 

 

 

 

(1,523

)

Net increase (decrease) in customer fund obligations

 

 

7,520

 

 

 

 

 

 

7,520

 

 

 

1,935

 

Net cash (used in) provided by financing activities

 

 

13,956

 

 

 

 

 

 

13,956

 

 

 

1,627

 

Foreign currency effect on cash and cash equivalents

 

 

(20

)

 

 

 

 

 

(20

)

 

 

70

 

Net change in cash and cash equivalents

 

 

20,387

 

 

 

 

 

 

20,387

 

 

 

4,229

 

Cash and cash equivalents—Beginning of period

 

 

446,563

 

 

 

 

 

 

446,563

 

 

 

138,093

 

Cash and cash equivalents—End of period

 

$

466,950

 

 

$

 

 

$

466,950

 

 

$

142,322

 

 

AVALARA, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

RECONCILIATION OF THE IMPACTS FROM THE ADOPTION OF THE NEW REVENUE RECOGNITION STANDARD (ASC 606)

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

As Reported

(ASC 606)

 

 

Impacts from

Adoption

 

 

Without

Adoption

(ASC 605)

 

 

As Reported

(ASC 605)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(50,214

)

 

 

(18,563

)

 

$

(68,777

)

 

$

(75,550

)

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

34,349

 

 

 

 

 

 

34,349

 

 

 

15,921

 

Depreciation and amortization

 

 

15,807

 

 

 

 

 

 

15,807

 

 

 

12,802

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

9,174

 

Deferred tax expense (benefit)

 

 

(223

)

 

 

 

 

 

(223

)

 

 

(1,294

)

Amortization of deferred rent

 

 

 

 

 

 

 

 

 

 

 

190

 

Non-cash operating lease costs

 

 

5,000

 

 

 

 

 

 

5,000

 

 

 

-

 

Non-cash change in earnout liability

 

 

(1,043

)

 

 

 

 

 

(1,043

)

 

 

(402

)

Non-cash bad debt expense (recovery)

 

 

1,367

 

 

 

 

 

 

1,367

 

 

 

(288

)

Other

 

 

340

 

 

 

 

 

 

340

 

 

 

559

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(12,862

)

 

 

(372

)

 

 

(13,234

)

 

 

(13,508

)

Prepaid expenses and other current assets

 

 

(3,544

)

 

 

 

 

 

(3,544

)

 

 

(4,850

)

Deferred commissions

 

 

(19,149

)

 

 

19,149

 

 

 

 

 

 

 

Other noncurrent assets

 

 

(1,265

)

 

 

 

 

 

(1,265

)

 

 

(808

)

Trade payables

 

 

5,783

 

 

 

 

 

 

5,783

 

 

 

(4,419

)

Accrued expenses

 

 

16,246

 

 

 

(3,107

)

 

 

13,139

 

 

 

15,266

 

Deferred revenue

 

 

37,558

 

 

 

2,893

 

 

 

40,451

 

 

 

42,422

 

Operating lease liabilities

 

 

(5,764

)

 

 

 

 

 

(5,764

)

 

 

 

Deferred rent

 

 

 

 

 

 

 

 

 

 

 

1,723

 

Net cash provided by (used in) operating activities

 

 

22,386

 

 

 

 

 

 

22,386

 

 

 

(3,062

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(10,180

)

 

 

 

 

 

(10,180

)

 

 

(15,483

)

Cash paid for acquisitions of businesses

 

 

(30,310

)

 

 

 

 

 

(30,310

)

 

 

 

Cash paid for acquired intangible assets

 

 

(139

)

 

 

 

 

 

(139

)

 

 

(5,002

)

Net (increase) decrease in customer fund assets

 

 

(11,506

)

 

 

 

 

 

(11,506

)

 

 

118

 

Net cash used in investing activities

 

 

(52,135

)

 

 

 

 

 

(52,135

)

 

 

(20,367

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from common stock offering, net of underwriting discounts

 

 

274,705

 

 

 

 

 

 

274,705

 

 

 

192,510

 

Payments of deferred financing costs

 

 

(555

)