analyst day...2021/05/27 · delivery saas free trial online buy integrations esb platform...

Analyst DayMAY 27, 2021

SAFE HARBOR STATEMENT:This presentation contains “forward-looking ” statements – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “may,” “might,” “plan,” “believe,” “continue,” “could,” “estimate,” “seek,” “see,” “likely,” “potential,” “predict,” “project,” “target,” “should,” “would,” “will,” or similar expressions. 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 impact of the novel coronavirus (COVID-19) pandemic and any associated economic downturn on our business operations, results, and financial position; 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 other risk factors discussed in our most recent annual report on Form 10-K filed with the SEC under the heading “Risk Factors.”

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

This presentation includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission (the “SEC ”) rules. These non-GAAP financial measures are in addition to, and not a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix.

©Avalara. A V A L A R A A N A L Y S T D A Y V I R T U A L | 2

MAY

27

VI DEO

Avalara Demand Inflection

M EG HI GGI NS

eCommerce Momentum

S ANJAY PARTHAS ARATHY

Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

03

04

05

06

01

07 Live Q&A with Presenters

A V A L A R A A N A L Y S T D A Y V I R T U A L | 3

©Avalara

Meg HigginsVice President/

General Manager,eCommerce & Marketplace


VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

03

04

05

06

01


©Avalara

MARKETPLACE

B2B DIRECT

ECOMMERCE

B2C STORES


C A S E S T U D Y : O M N IC HANN EL C O M P L E XITY

P R O D U C T S

C O N N E C T O R S

P A I N P O I N T S

Reporting & Registrations needed upon launch in 2017 43 states and growing for returns filings200%+ transaction growth Added ERP integration to address expansion

Shopify NetSuite One WorldC U S T O M E R V A L U E

$190,000

Consumer brands company

C U S T O M E R S I Z E

>150 employeesG E O G R A P H I E S

Global

Registrations Sales Tax Calc Managed Returns

SST ReturnsEnterprise Support

©Avalara A V A L A R A A N A L Y S T D A Y V I R T U A L | 6

Diverse eCommerce growth programs

AVALARA INCLUDED

“White label” calculation in platform

Partner subsidizes basic calc; future monetization from upsell

ECOMMERCE DIRECT

Built-in to platform through traditional connector

Partner refers, Avalara closes, commission paid

MARKETPLACE

Enterprise sale to platform for direct compliance

Services expansion; future sell-through potential


Q1 20 Q1 21

©Avalara

eCommerce portfolio ARR growth(excl. SST revenue)

$167M

$120M+39%


eCommerce DirectAvalara Included MarketplaceNote: Represents total annual recurring revenue for all Marketplaces and customers that have at least one connector to an eCommerce platform. ARR is not allocated for customers with multiple connectors including non-eCommerce connectors, and category segmentation is calculated discretely.

Q1 20 Q1 21

©Avalara

SST rapid adoption from eCommerce channel(recognized revenue)

$6.2M

$1.9M

+224%


Note: Represents total quarterly recognized SST revenue for all Marketplaces and customers that have at least one connector to an eCommerce platform; Revenue is not allocated for customers with multiple connectors including non-eCommerce connectors, and category segmentation is calculated discretely

eCommerce DirectAvalara Included Marketplace

Early in monetization journeyAVALARA INCLUDED


Cumulative Activations

140K+>100% y/y

Active Customers

60K+>100% y/y

ARR

$40M+>40% y/y

©Avalara

# OF MARKETPLACES

AVERAGEANNUALIZED

REV (>$3K)

# > $100K ANNUALIZED

REV

Q1 19 95 $70K 16

Q1 20 145 $88K 29

Q1 21 228 $106K 48

Increasing share

MARKETPLACE:

$1.3MLarge direct

marketplace customer

800+Target global marketplaces


Note: Annualized Revenue represents Q1’21 revenue multiplied by four quarters to annualize. Average Annualized Revenue >$3K only counts Marketplace customers with more than $3K in Q1’21 revenue.

C U S T O M E R V A L U E

$74,000

Consumer brands company


<100 employeesG E O G R A P H I E S

Global

C A S E S T U D Y : S E A M LE S S A N D F R I C T IONL ES S C O M P L IANC E

P R O D U C T S & S E R V I C E S

P A I N P O I N T S

Avalara client since 2017Decided to volunteer nexus in every state following the Wayfair decision Filing in 50 statesInternational compliance and upfront duties & tax calculation

RegistrationsSales Tax CalcManaged ReturnsSST Returns

Cross-Border Calc Item Classification Enterprise Support


Capturing growth in Omni-Channel

ECOMMERCE DIRECT:

©Avalara

Omnichannel StoresOrder Management

POS

eCommerceSocial/Channels

Capturing growth in Omni-Channel

ECOMMERCE DIRECT:

©Avalara

Omnichannel


900+ Salesforce customers trust Avalara

ORDER MANAGEMENT

B2B COMMERCE

B2C COMMERCE

Tax compliance wherever companies transact across Salesforce

REVENUE CLOUD SALES CLOUD

©Avalara

eCommerce growth strategy

AVALARA INCLUDED:

Increase activationsExpand products on platform Digitally drive upsell conversion

ECOMMERCE DIRECT:

Dominate partner mindshareIncrease new customer land velocityAdd more partners

MARKETPLACE:

Increase market share Expand existing footprint Monetize sell-through


Avalara expands partnership withANNOUNCEMENT:


©Avalara

Sanjay Parthasarathy

Executive Vice President & Chief Product Officer


VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

04

05

06

01


© Avalara. A V A L A R A A N A L Y S T D A Y V I R T U A L | 19

Investing to pull away

Making complex simple

Product machine

Growing platform

Risk management

Tax payment facilitation

Insights

Content subscriptions

Content & calculation delivery

network

Geo

New doc types

Workflows

Digital locker

New license typesTax & product content

Enterprise features Returns for new audiences

New tax typesin core

Returns for new tax types

Real-time returnsFederated calc

Integrations


Product Roadmap – Analyst Day 2020O

ppor

tuni

ty

Fiscal InsightsCalculation Returns & Reporting Documents Licenses


Execution since Analyst Day 2020

Tax & product content

Enterprise features:Advanced Rules, ACU

Returns for new audiences: RSB, MRA

New tax types in core: XB, VAT, GST, BEVALC

Returns for new tax types: VAT, GST

Real-timeFederated calc:

Fuel Excise

Integrations: 110+ NEW

Risk Management:

Fiscal Representation


Insights

Content subscriptions

Content & calculation delivery network:

Content Generation for POS

Geo

New doc types

Workflows: Know Your Customer

Digital locker

New license types


Opp

ortu

nity

E-invoicing

Tax & product content: New Industries

Enterprise features: Add’l Cross Border

Returns for new audiences: ARA

New tax types in core: VAT

Returns for new tax types: Transfer Pricing

Real-time returnsFederated calc

Integrations: Integration Studio, ESB Suite


Insights

Content subscriptions:Product catalog

subscription

Content & calculation delivery network:Cloud Connect

software version

Geo

New doc types

Workflows

Digital locker: Document Central

New license types


2021 Roadmap Execution


Opp

ortu

nity

E-invoicing

Risk management

© Avalara A V A L A R A A N A L Y S T D A Y V I R T U A L | 23

Calculation

Sales Tax

Returns & Reporting

Sales tax returns

U.S. Sales tax content

ERP integrations

SAAS

© Avalara.

Global Compliance Platform


Regions IndustriesSegments

SOLUTIONS

Calculation InsightsFiscalLicensesDocumentsReturns & Reporting

APPLICATIONS

Tax Content Compliance Content Product Content

CONTENT

DeliveryAPIs Integration

PLATFORM

PLATFORM

CONTENT

APPLICATIONS

SOLUTIONS

Solutions & Bundles

Product ContentCompliance ContentTax Content


Region: USASegment: Enterprise

Industry: Hospitality

CalculationsReturns & Reporting

Sales tax returnsMulti-tax returns

Business Licenses Sales Tax

RegistrationsLicense Management

Exemption Certificates NexusMulti-tax RatesTax Answers Subscription

LodgingSales TaxUse TaxAncillary

Hotel

MealsAlcohol

Advanced Transaction

Rules

Licenses Documents Fiscal Insights

Delivery

SaaSCloud ConnectPoint of Sale

Integrations

ERP | Res. Mgmt.Professional Services

Enterprise Support

API

Sandbox

Tax Codes Multi-tax Forms Product IDs

Region: USASegment: ESB

Industry: Retail eComm

PLATFORM

CONTENT

APPLICATIONS

SOLUTIONS

Returns for Small Business

License GuidanceRegistration

Exemption CertificatesCompliance Document

Management

Economic Nexus Insight

Tax Rate Download

Sales TaxUse Tax

CalculationsReturns & Reporting

Licenses Documents Fiscal Insights

Delivery

SaaSFree trial

Online buy

Integrations

ESB platform connectors and extractors

API

Embedded option Self serve onboardSimple, unified, guided

user experience

Solutions & Bundles

Product ContentCompliance ContentTax Content


Auto Tax Code Mapping

License Forms Item Catalog Enrichment

PLATFORM


CONTENT



Global Compliance Cloud

APPLICATIONS

InsightsFiscalLicensesDocumentsCalculation Returns & Reporting

SOLUTIONS


C A L C U L A T I O N

Broaden and deepen

Content driven calculation everywhere

Enterprise class detail, flexibility and use cases

Enterprise integrations

Delivery options


C A L C U L A T I O N

Leapfrog

Cross Border AI driven classification

Compliance super network

Next generation API


PLATFORM

CONTENT





APPLICATIONS


SOLUTIONS


Global integration platform

E-invoicingAny to AnyPre-built integrations

Compliance super network


Delivery

Cloud data centers

Software cloud connect Point of sale Self-serve

content delivery


APIs

End to end compliance Unified Integration

studioDeveloper community


PLATFORM


CONTENT




APPLICATIONS


SOLUTIONS


Product catalog

AI-driven classification UPC Expanded

Product IDsNew

use cases


P R O D U C T E X P E R I E N C E :

Make complex simple

Designers & editors

Design & content systems

In productanswers & guidance


© Avalara. AVALARA ANALYST DAY VIRTUAL | 39


PLATFORM

CONTENT

APPLICATIONS

SOLUTIONS

Plug-and-play any system and government

Any compliance question

Every tax type & compliance task

Every industry, segment and region

PRODUCT VISION: Make the complex simple & autonomous

©Avalara

Amit MathradasPresident &

Chief Operating Officer


VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

03

05

06

01


©Avalara.

EXPANDING

TAM

PARTNERS(Hundreds Thousands)

GEOS(U.S. Global)

CHANNELS(ERP Omnichannel)

SEGMENTS(Mid Large and Small)

Multiple growth levers

PLATFORM(Product Platform)

41Note: Thousands of partners refers to our more than 1,000 signed partner integrations today and aspiration to continue to expand.

Strategy for customers of all sizes

©Avalara.

Emerging Small 1-19 EMPLOYEES

Greenfield

High velocity; digital-first

eComm partner “included” model

Enterprise500+ EMPLOYEES

Greenfield + displacement

Inside sales + higher touch GTM

SI-enabled partner model

Small & Mid20-499 EMPLOYEES

Greenfield

Velocity; inside sales

Partner-enabled referral model


MonetizingMore

©Avalara.

Bigger dealsAll customer segments

Bigger customersLarger deals


©Avalara.

Bigger deals: All customer segments

14

138

275

360

Emerging Small Mid Enterprise

Core customers >$100K TTM revenue

787


$53,000

$64,000

$71,000

Q1 2019 Q1 2020 Q1 2021

Avg. TTM revenue for 1,977 core customers >500 employees

Note: Core customers, inclusive of SST impact, and average TTM revenue as of 3/31/19, 3/31/20 and 3/31/21, respectively

C L I E N T V A L U E

$173,000

©Avalara.

Digital and direct-to-garment printing services


~300 employeesG E O G R A P H I E S

Global

C A S E S T U D Y : B I G G E R D E A L S – A N Y S I Z E C U S T O M E R

P R O D U C T S

C O N N E C T O R S

API

P A I N P O I N T S

No defined automation strategy amid strong growthGlobal business raises complex compliance challengesPoor management of exemption certificationsLean staff with low bandwidth

Sales Tax CalculationCertificate ManagementManaged ReturnsTTR ContentCross Border Classification

Cross Border CalculationVAT RegistrationVAT ReturnsEnterprise Support


U.S. Enterprise business>500 employees

Winning in enterprise

© Avalara.

Top 2,000Enterprises

Upper mid-market enterprises

Heritage mid-market strategyDisplacing status quo

18,000Upper Mid-Market Enterprises

Top 2,000 enterprises

“Surround and displace” strategyDisplacing incumbent technology and manual processes

20,000+


Enterprise “surround” strategy

©Avalara.

LEGACY

Calculations

ReturnsCertificate

Mgmt.

Comms.

Fuel Excise


Enterprise “surround” strategy

©Avalara.

LEGACY

Calculations

ReturnsCertificate

Mgmt.

Lodging

Beverage Alcohol

Comms.

Fuel Excise

CrossBorder

TTR Content Subscription

License & Reg. Mgmt.


Enterprise “displace” strategy

©Avalara.

Multi-tax, multi-geo calc

Integrated use tax

Multiple deployment options

Enhanced partnerships with Enterprise platform partners

Returns

Documents

Lodging

Beverage Alcohol

Comms.

Fuel ExciseTransfer Pricing

E-invoicing

CrossBorder

TTR Content Subscription

POS

License & Reg. Mgmt.

Calculations


Enterprise strategy

©Avalara.

PARTNERS:

Enhance partnerships with big Accounting and SI partnersPower accounting channel with Returns for Accountants

GTM:

Increasing enterprise quota carriersNamed accountsSolution selling with tax technologist overlay

DELIVERY:

Higher touch support modelPartner support and certificationExpert enterprise services




$192,000

©Avalara.

Cloud technology company


~6,000 employeesG E O G R A P H I E S

Global

C A S E S T U D Y : E N T E R P RIS E

P R O D U C T S

C O N N E C T O R S

P A I N P O I N T S

Aggressive growthIncreased auditsLooking to improve efficienciesReduce risk

Sales Tax CalculationCertificate Management

Exploring Managed Returns and VAT Registration & Filings

Oracle FusionFinancial Force

NetSuiteZuora



$147,000

©Avalara.

Luxury brand retailer


Global 2,000G E O G R A P H I E S

Global

C A S E S T U D Y : E N T E R P RIS E

P R O D U C T S

C O N N E C T O R S

Large ERP platform providerRetail Pro

P A I N P O I N T S

Issues with existing vendorRequired cloud-based solutionRequired guaranteed accuracy for sales tax calculations Multi-connector integration


Managed Returns

Emerging & Small Business<100 Employees

Winning in small business

© Avalara.

500K+Small Business

Emerging small business

<20 employeesRequire simple, easy-to-use solutions

5 Million+Emerging Small Business

Small business

20-99 employeesTax complexity of mid-marketOmnichannel + multi-jurisdictional

5.5M+


Small business strategy

©Avalara.

PLATFORM:

SIMPLE, seamless experienceAuto-configure tax codes, integrations, & setupExpanded compliance offerings

PARTNERS:

Leverage partnerships with eComm & POS aggregatorsBroader compliance partnerships

GTM:

No touch digital demand genOnline buy

DELIVERY:

Instant Go LiveIntuitive UXDigital, scaled support



$21,000

©Avalara.

Vertically integrated manufacturing company in the defense sector



National

C A S E S T U D Y : S M A L L B U S I N E S S

P R O D U C T S

C O N N E C T O R S

P A I N P O I N T S

Grew fast and needed to address compliance problemRequired pre-built integrations with all of their systems Appreciate large partner integration moat to support future system changes


Managed Returns

Adobe Commerce CloudQuickBooks

WooCommerce



$18,000

©Avalara.

Accessories for off-road vehicles



Global

C A S E S T U D Y : S M A L L B U S I N E S S

P R O D U C T S

C O N N E C T O R S

P A I N P O I N T S

Recent global expansionFast growthLack of internal resource to maintain

Sales Tax CalculationManaged ReturnsCross Border Calculation

Item ClassificationNexus Analysis

QuickBooks Desktop WooCommerce


Our partner moat is stronger than ever

©Avalara.

1,000+Signed partner integrations

40%of ARR from long-tail and API integrations*

3,500+Resellers, software integrators, and accountants

Marketplaces

eCommerce POS

ERP & Billing Applications

*Long-tail defined as integrations other than the Top 50 ARR contributors.

Expanding across regions

©Avalara.

NORTH AMERICA

BRAZIL

INDIA

SUPPORT

165+countries


EUROPE

Multiple vectors for customer expansion

©Avalara.

PRODUCT ADD-ONS PARTNER INTEGRATIONS

Cross-sell new products

Omnichannel –add more connectors

CUSTOMER GROWTH

More transactions, jurisdictions, geos

BUNDLING & PACKAGING

Solution sales and optimized pricing


Expanding TAM (U.S. View)

IPO (2018)

Fewer productsSMBSales-tax

TODAY

Multi-productMulti-segmentMulti-taxGlobal

FUTURE

Global compliance platform

©Avalara.

TAM

$8BTAM

$15BTAM


Path to multi-billion

PLATFORM

Multi-product

Solutions & bundles

Global integration platform

SEGMENT & GEOS

Up & down market

Global

Digital motion

Verticals

PARTNERS

Accounting and SIs

Deepen & increase partner relationships

eCommerce aggregators


©Avalara

Scott McFarlaneCo-founder &

Chief Executive Officer


VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

03

04

06

01


Compliance automation is inevitableBELIEVE IT:


The global cloud compliance platform- every transaction in the world

OUR VISION:

The journey is just getting started…

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Revenue

©Avalara.

History of disruptive growth

Balanced strategy

Strong annual performance

Investing for long-term vision

Organic + M&A investments

=+


$501M

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

History of disruptive growth

2007Trustfile2006

SST

2008New Horizons

ISPI

2010Taxcient

2011Tax Solutions

Group

2013Avex Solutions

TTS (CertCapture)

2016Gyori

2020Impendulo

Business LicenseTTR

2021DAVOINPOSIA

2014

Zy TaxOmni channel partnerships with

SuitePlusApplianz

VATLive.com

2018

2019

Indix

2015

iVAT


2012Matrix Master

Lead the future of global compliance

OUR 10-YEAR VISION

©Avalara.

Broader compliance platform

Transactional tax compliance


SAAS

© Avalara.




SOLUTIONS

Calculation InsightsFiscalLicensesDocumentsReturns & Reporting

APPLICATIONS


CONTENT


PLATFORM

Future of transactional tax compliance

ANY BUSINESS APPLICATION

ERP eCommercePoint-of-SaleBilling Marketplace

ANY GOVERNMENT

©Avalara

Expanding content moat

Existing Avalara content*

Additional content opportunities to pursue

General sales & gross receipts

Motor fuel sales

Other selective sales & gross receipts

Alcoholic beverage sales

License fees & taxes

Insurance premium sales

Property taxesPublic utilities sales

Tobacco product sales

Amusement sales

A V A L A R A A N A L Y S T D A Y V I R T U A L | 69Total U.S. Sales, Gross Receipts, and License Fees and Taxes

* Avalara doesn’t necessarily have 100% of the content in orange slices; we continue to broaden and deepen our content within orange slices and expand to cover grey slices.

©Avalara

Expanding content to broader compliance

1099

W-9 & W-8

Payroll

Know-your-customer

Insurance

Employment

Industry trade

Environmental

Hazardous waste

Shipping & logistics

Healthcare


TODAY:

Point-to-PointCertificate Mgmt.

FUTURE:

Avalara Certificate Network


Networks of compliance disruption

Certificateregistry

Business

Individual

Business

Business Individual

Individual Business

Business

+ Newcertificate

Business

Individual

+ Newcertificate

Business

+ Newcertificate

Business

BusinessBusiness

The Avalara connected, compliance network

CONNECT ADD VALUE

EXPANDCONNECT & VERIFYSHARE VIA DOCUMENT CLOUD

Truck drivers Employees

Trade professionals

Health professionals Marketplaces

Avalara Integration

Network

Trade professional

websitesLinkedIn Compliance

reporting Insights

Manage documents

Create and renew


The Avalara connected, compliance network

ComplianceWallet

Powered by Avalara

L O G I N W I T H Y O U R C R E D E N T I A L S

Client ID

API ID

API Password

L O G I N

Compliance Wallet

NEVADA

Nursing LicenseEXP: DEC. 2021

73

Compliance Wallet

MANAGE OTHER DOCS:

NEVADA

Nursing LicenseEXP: DEC. 2021

RENEW NOW

W9 formInsurance policyExemption certificates

The next 10-year cloud growth opportunity

©Avalara

Increasing share of wallet

Capturing generational

shifts

ExpandingTAM

Bold 10-year compliance vision

ExpandingGTM


©Avalara

Ross Tennenbaum

Executive Vice President & Chief Financial Officer


VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

03

04

05

01


2020 HIGHLIGHTS

2020 was an outstanding yearduring unprecedented times

©Avalara.

107%4Q Avg. NRR*

$34MRecord FCF**

$501MTotal Revenue, +31% YoY

125%Total Stock Return***

~15KCore Customers

75%Subscription GM**

* Based on legacy NRR definition.** Non-GAAP – see appendix for reconciliation of Non-GAAP to GAAP financials.*** Based on the AVLR closing stock price on 12/31/2019 and 12/31/2020. A V A L A R A A N A L Y S T D A Y V I R T U A L | 76

$172MCalculated Billings*,

+47% YoY

$160MOrganic Calculated Billings*,

+37% YoY

Momentum Continues

2021:

Q1’2021 HIGHLIGHTS

$154MTotal Revenue,

+38% YoY

$143MOrganic Total Revenue,

+28% YoY

A V A L A R A A N A L Y S T D A Y V I R T U A L | 77*See appendix for reconciliation of non-GAAP to GAAP financials. Organic calculations exclude results from acquisitions since Q4’2020.

Driving the next 10-year cloud growth opportunity

2010 2020

©Avalara.

Just getting started…Omnichannel complexityExpanding platform Expanding GTM Expanding geographiesIncreasing TAM

Proven track record of durable growth

$501M40% 10-year revenue CAGR


CORE CUSTOMERS (revised to include SST)

BILLABLE ACCOUNTS END CUSTOMERS

15,730 27,000+ 87,000+(97K incl. MyLodge)

21% 26% 77%

Q1

2021

Y/Y

Gro

wth


Note: Core Customers as reported and revised to include adjustment for SST revenue; see appendix for definition. Billable Accounts is the sum of Core Customers, direct EMEA customers of ~2,000, and non-core customers. Prior Analyst Day Billable Accounts included ~11K MyLodge Tax customers which we have excluded due to year-over-year flatness from COVID impacts to hospitality market. End Customers is the sum of Billable Accounts and indirect active customers using our calculation solution through our Included program. All figures, unless otherwise noted, exclude our MyLodge and recent M&A customers.

CY '18 CY '19 CY '20

Revenue segmentation by customer type

©Avalara.

CORE CUSTOMER REV

15,730 Core Customers in Q1*

Customers >$3K in TTM revenue

Adjusted to include SST revenue which was previously “non-core”

Excludes customers from International, <$3K TTM revenue, M&A since Oct’20, indirect active customers on eComm partner platforms

Core CustomersA V A L A R A A N A L Y S T D A Y V I R T U A L | 80

87%

88%

88%$236M

$336M

$441M

+31%

+42%

*Q1 reported Core Customers of 15,580, revised to include SST; see appendix for revised core customer definition.

Revenue segmentation by customer type

©Avalara.

M&A REV

From M&A since Oct’20

NON-CORE CUSTOMER REV

Adjusted to move SST revenue to Core Customer revenue

Includes revenue from International, MyLodge Tax, and with <$3K in TTM revenue

CY '18 CY '19 CY '20

Core Customers Non-core Customers M&A CustomersA V A L A R A A N A L Y S T D A Y V I R T U A L | 81

87%

88%

88%13%

12%

11%

$272M

$382M

$501M

+42%

+31%

+14%

+29%

+41%

+31%

Note: see appendix for revised core customer definition.


Q1' 21 Customers Q1' 21 Revenue

15,73021% YoY

~9K24% YoY

~10K0% YoY

~2K, 51% YoY

$127M28% YoY

$4M 19% YoY

$2M, 4% YoY

Core Customers <3K TTM Rev International MyLodge M&A

N/A

$10M, 47% YoY

60K+, 100% YoY

Indirect eComm

$11M, NA YoY

Future Monetization

Note: International customers includes only EMEA customers and excludes customers monetized through our large marketplace partner and customers in Brazil and India. Approximately 50% of International revenue is from our large marketplace partner. Q1’21 revenue total also includes interest income, which is not represented with a color, given small contribution.

$154M~97K

Potential Future

Customer Growth

Avg. Rev. / Cust.

Customer Growth

Avg. Rev. / Cust.

Customer Growth

Avg. Rev. / Cust.

Customer Growth

Avg. Rev. / Cust.

Customer Growth

Avg. Rev. / Cust.

N/A

N/ATo

tal E

nd C

usto

mer

s

Bill

able

Acc

ount

s

Cor

e C

usto

mer

s

82% of total Q1 revenue

Highly diversified

28%

21%

11%

10%

6%

5%

4%

4%

4%3% 2% 2%% of ARR by Partner

All other partners

API

ERP #1

ERP #2

ERP #3

eComm #1

eComm #2

ERP #4

ERP #5

ERP #6

eComm #3

ERP #7


23%

22%

18%

10%

6%

% of ARR by Industry

Wholesale &DistributionManufacturing

Retail

Software / Tech

Professional &Scientific

Note: % of ARR by Partner assumes an ARR allocation for multi-connector customers. Some partners may have a larger % of ARR when counting total ARR of a customer that has multiple connectors without allocation.

Monetizing more

© Avalara.

Core customers with >$100K TTM revenue

>$100K core customer segmentation

Avg. TTM revenueper core customer segment ($000)

556 616

668 732

787

52% 52% 49%44% 42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100

200

300

400

500

600

700

800

900

1Q 20 2Q 20 3Q 20 4Q 20 1Q 21

Core Customers Growth YoY

$53

$64 $71

$29 $32

$36

$18 $20 $23

$13 $13 $14

1Q 19 1Q 20 1Q 21

ENT Mid Small Emerging


360

275

138 14

ENT Mid Small Emerging

787

Note: See appendix for revised core customer definition.

Strong dollar retentionGross annual revenue churn below 4%

1Q 19 2Q 19 3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21


Meaningfully below 4%

COVID impact on 2020

Excludes downgrades

Note: See appendix for definition of gross annual revenue churn.

1Q 20 2Q 20 3Q 20 4Q 20 1Q 21

Expanding customersQuarterly Net revenue retention (revised)

LEGACY:104%REVISED:115%






Note: See appendix for definition of net revenue retention rate.

Revised NRR definition excludes PS revenue, includes SST

More meaningful expansion

Drivers: customer expansion, add-on, price optimization

Early in add-on journey

Expanding total available market (U.S. View)

IPO (2018) TODAYPlatform play

FUTUREGlobal compliance platform

©Avalara.

$8BTAM

$15BTAM

Monetization of more products

Expansion beyond tax to broader compliance


©Avalara.

Expanding U.S. TAM by numbers

CUSTOMER SEGMENT IPO TODAY 90TH

PERCENTILE

Enterprise500+ employees $500M+ revenue

$2.0B 19,699 firms$50K-150K $2.0B 20,139 firms

$50K-150K $129K

Mid Market100-499 employees$50-499M revenue

$2.3B 90,742 firms$20K-30K $3.0B 92,358 firms

$25K-40K $70K

Small20-99 employees$5-49M revenue

$1.6B 538,283 firms$1K-5K $8.2B 544,485 firms

$10K-20K $39K

Emerging Small<20 employees<$5M revenue

$2.1B 5,305,960 firms$200-600 $2.1B 5,339,918 firms

$200-600 $6K

$8.0B Total AvailableMarket (U.S.) $15.3B Total Available

Market (U.S.)

Source: # of firms at IPO and Today based on 2015 and 2017 US Census Data, respectively; Average revenue per customer ranges at IPO based on internal data at time of IPO in 2018. Today’s average revenue per customer based on data and analysis of trailing twelve months as of March 31, 2021 for representative customers in segment. A V A L A R A A N A L Y S T D A Y V I R T U A L | 88

Significant improvements in Non-GAAP operating loss and free cash flow

Non-GAAP Operating Loss ($M) Free Cash Flow ($M)

($45)

($14)

($3)

2018 2019 2020

($18)

$12

$34

2018 2019 2020

A V A L A R A A N A L Y S T D A Y V I R T U A L | 89Note: See appendix for reconciliation of non-GAAP to GAAP financials.

Well capitalized for growth

STRONG BALANCE SHEET

Modest cash burn$639 million in cash end of Q1’2021No debtFinancial flexibility

INVESTING FOR GROWTH

Maintain leadership positionInvest to pull awayPlatform companyExpanding segments and geographiesStrategic M&A and integration


Gross margin (Non-GAAP) PrioritiesConsolidate legacy platformsIncrease content and compliance automationIaaS consumption efficiencyGoLive and Support

Leverage“Core Avalara” continue to see leverageNew product, M&A, and PS mix impact on gross margin

0%

20%

40%

60%

80%

$0

$100

$200

$300

$400

FY18 FY19 FY20 Q120 Q121

Gross Profit % of Revenue

Quarterly72%73%

74%

$80

74%71%

$113

$199

$275

$369

Annual


Sales and marketing (Non-GAAP) PrioritiesRamping marketing program spend and quota carriersFocus on new and strategic productsExpand customer segs and geos

LeverageIncrease as % of revenue with increased focus on growth

Annual

0%

20%

40%

60%

80%

$0

$50

$100

$150

$200

FY18 FY19 FY20 Q120 Q121

S&M Expense % of Revenue

Quarterly$188

41%

59%

37%$46

38%41%

$58

$158$161


Research and development (Non-GAAP)

PrioritiesNew productsPlatformModern architectureM&A integration

LeverageConsistent % of rev as we focus on pace and platform

0%

5%

10%

15%

20%

25%

$0

$20

$40

$60

$80

$100

$120

FY18 FY19 FY20 Q120 Q121

R&D Expense % of Revenue

Quarterly

$49

$76

$10620%

18% 21%

$23

22%21%

$34

Annual


General and administrative (Non-GAAP)

PrioritiesLeadershipCorp. Dev. & Integration teamScale shared services for growth

LeverageFlat to improve as % of rev

0%

4%

8%

12%

16%

20%

$0

$20

$40

$60

$80

$100

FY18 FY19 FY20 Q120 Q121

G&A Expense % of Revenue

Quarterly

$34

$56

$7815%12%

15%

$18

15%16%

$23

Annual


Long-term Target Model (Non-GAAP)

% OF REVENUE 2018 2019 2019 2020 LT TARGET

Gross Margin 73% 72% 72% 74% 80-82%

Sales and Marketing 59% 46% 41% 37% 33-35%

Research and Development 18% 20% 20% 21% 14-16%

General and Administrative 12% 15% 15% 15% 8-10%

Operating Margin -17% -9% -4% -1% 20-25%

ASC 605 ASC 606


Financial highlights

©Avalara.

Large, expanded market; early days

Land larger, expand higher, monetize more

Long-term growth compounder

Efficiently investing for growth

Built-in long-term leverage


MAY

27

VI DEO


M EG HI GGI NS

eCommerce Momentum


Platform for Growth

AM I T M ATHRADAS

Expanding TAM

S COTT M CFARLANE

The Next 10 Years

ROS S TENNENBAUM

Monetizing More

02

03

04

05

06

01

Live Q&A with Presenters


Appendix:Financial definitions and reconciliations



Metric Legacy Definition Revised DefinitionCore 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 primary U.S. billing systems (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 previous 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 that subscribe to our solutions through our international subsidiaries and certain legacy and acquired billing systems that have not yet been integrated into our primary U.S. billing systems (e.g., recent acquisitions and our lodging tax compliance solution). 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 that do not meet the revenue threshold to be considered a core customer. Many of these customers are in the emerging and small business segment of the marketplace, which represents strategic value and a growth opportunity for us. Customers who do not meet the revenue threshold to be considered a core customer provide us with market share and awareness, and we anticipate that some may grow into core customers. In addition, we have numerous enterprise-level customers that only utilize our services for small segments of their business, providing opportunities over time for us to extend our relationship and make them 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 primary U.S. billing systems (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

previous 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 that subscribe to our solutions through our international subsidiaries and certain legacy and acquired billing systems that have not yet been integrated into our primary U.S. billing systems (e.g., recent acquisitions and our lodging tax compliance solution). 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.

Prior to May 2021, revenue from our Streamlined Sales Tax solution (SST) was not included in our calculation of total revenue during the previous twelve months. This meant customers that would have otherwise met the definition of a core customer, with inclusion of attributable SST revenue, were excluded from our core customer count as well as our disclosures on the percentage of total revenue attributable to core customers. In May 2021, we revised the methodology for core customers to include revenue from SST.

We believe these changes improve the usefulness of this key business metric, which is to measure both the growth of existing customers into core customers and the acquisition of new customers of a certain size.

We also have a substantial number of customers of various sizes that do not meet the revenue threshold to be considered a core customer. Many of these customers are in the emerging and small business segment of the marketplace, which represents strategic value and a growth opportunity for us. Customers who do not meet the revenue threshold to be considered a core customer provide us with market share and awareness, and we anticipate that some may grow into core customers. In addition, we have numerous enterprise-level customers that only utilize our services for small segments of their business, providing opportunities over time for us to extend our relationship and make them core customers.

Core Customers: Legacy and Revised DefinitionsProviding Greater Transparency & Usefulness

Note: This presentation includes core customers and net revenue retention rate for each of the periods presented based on both the legacy and revised definitions for comparison purposes.

Net Revenue Retention (NRR): Legacy and Revised DefinitionsProviding Greater Transparency & Usefulness


Metric Legacy Definition Revised Definition

Net Revenue Retention (NRR)

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 and acquired billing systems that have not been integrated into our primary U.S. billing systems. Our Streamlined Sales Tax solution (SST) is not included in net revenue retention rate. This means that revenue expansion from existing customers adopting our SST solution is not included, while revenue contraction from customers replacing one or more of Avalara’s other solutions with SST is included.

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.

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 and acquired billing systems that have not been integrated into our primary U.S. billing systems.

Prior to May 2021, our Streamlined Sales Tax solution (SST) was not included in our reported net revenue retention rate. This meant that revenue expansion from existing customers adopting our SST solution was not included, while revenue contraction from customers replacing one or more of Avalara’s other solutions with SST was included.

In May 2021, we revised the calculation methodology for net revenue retention rate to include revenue from SST. In addition, professional services revenue is no longer included in the revised calculation methodology, as these services tend to be more one-time in nature.

We believe these changes improve the usefulness of this key business metric, which is to measure our ability to retain and grow revenue from existing customers over time.

Note: This presentation includes core customers and net revenue retention rate for each of the periods presented based on both the legacy and revised definitions for comparison purposes.

Gross Annual Revenue Churn: Definition


Metric Definition

Gross Annual Revenue Churn

We define gross annual revenue churn as the annual revenue contribution associated with billing accounts that cancel all of their agreements with us divided by the total annual revenue recognized during a measurement period.

As a reminder our gross annual revenue churn does not include downgrades and does not include customers that subscribe to our solutions through our international subsidiaries and certain legacy and acquired billing systems that have not yet been integrated into our primary U.S. billing systems (e.g., recent acquisitions and our lodging tax compliance solution).

Reconciliation to Non-GAAP Financial Measures ($000)


ASC 605 ASC 605 ASC 606 ASC 606 ASC 606 ASC 606

2018 2019 2019 2020 Q120 Q121

Reconciliation of Non-GAAP Gross Profit:

Gross Profit 193,449$ 267,122$ 267,122$ 357,474$ 77,189$ 108,930$

Stock-based compensation expense 1,665$ 3,122$ 3,122$ 5,909$ 1,196$ 2,207$

Amortization of acquired intangibles 4,020$ 4,854$ 4,854$ 5,166$ 1,230$ 2,020$

Non-GAAP Gross Profit 199,134$ 275,098$ 275,098$ 368,549$ 79,615$ 113,157$

Reconciliation of Non-GAAP Gross Margin:

Gross margin 71% 70% 70% 71% 69% 71%

Stock-based compensation expense as a percentage of revenue 1% 1% 1% 1% 1% 1%

Amortization of acquired intangibles as a percentage of revenue 1% 1% 1% 1% 1% 1%

Non-GAAP Gross Margin 73% 72% 72% 74% 71% 74%

Reconciliation of Non-GAAP Research and Development Expense:

Research and development 51,909$ 82,442$ 82,442$ 119,710$ 25,847$ 39,156$

Stock-based compensation expense (3,179)$ (6,666)$ (6,666)$ (13,226)$ (2,394)$ (5,286)$

Amortization of acquired intangibles -$ -$ -$ -$ -$ -$

Non-GAAP Research and Development Expense 48,730$ 75,776$ 75,776$ 106,484$ 23,453$ 33,870$

Non-GAAP Research and Development Expense (% of Revenue) 18% 20% 20% 21% 21% 22%




2018 2019 2019 2020 Q120 Q121

Reconciliation of Non-GAAP Sales and Marketing Expense:

Sales and marketing 168,817$ 187,783$ 168,634$ 204,490$ 49,634$ 64,304$


Amortization of acquired intangibles (1,951)$ (2,271)$ (2,271)$ (4,664)$ (607)$ (1,540)$

Non-GAAP Sales and Marketing Expense 161,374$ 176,776$ 157,627$ 187,679$ 46,212$ 58,498$

Non-GAAP Sales and Marketing Expense (% of Revenue) 59% 46% 41% 37% 41% 38%

Reconciliation of Non-GAAP General and Administrative Expense:

General and administrative 39,603$ 71,918$ 71,918$ 95,242$ 21,388$ 30,851$


Amortization of acquired intangibles (17)$ (15)$ (15)$ (819)$ (4)$ (861)$

Non-GAAP General and Administrative Expense 34,001$ 56,078$ 56,078$ 77,535$ 18,058$ 22,972$

Non-GAAP General and Administrative Expense (% of Revenue) 12% 15% 15% 15% 16% 15%

Reconciliation of Non-GAAP Operating Loss:

Operating loss (76,054)$ (74,435)$ (55,872)$ (61,968)$ (19,680)$ (25,381)$

Stock-based compensation expense 15,921$ 34,349$ 34,349$ 48,170$ 9,731$ 18,777$

Amortization of acquired intangibles 5,988$ 7,140$ 7,140$ 10,649$ 1,841$ 4,421$

Goodwill impairment 9,174$ -$ -$ -$ -$ -$

Non-GAAP Operating Loss (44,971)$ (32,946)$ (14,383)$ (3,149)$ (8,108)$ (2,183)$

Non-GAAP Operating Margin (% of Revenue) -17% -9% -4% -1% -7% -1%




2018 2019 2019 2020 Q120 Q121

Free Cash Flow:

Net cash used in operating activities (2,913)$ 22,150$ 22,150$ 42,618$ (24,471)$ (28,247)$

Purchases of property and equipment (14,373)$ (7,885)$ (7,885)$ (4,501)$ (883)$ (1,366)$

Capitalized software development costs (1,110)$ (2,295)$ (2,295)$ (4,159)$ (717)$ (2,311)$

Free Cash Flow (18,396)$ 11,970$ 11,970$ 33,958$ (26,071)$ (31,924)$

ASC 606

Q121

Reconciliation of Non-GAAP Subscription Gross Profit:

Subscription Gross Profit 101,155$

Stock-based compensation expense 1,699$

Amortization of acquired intangibles 1,068$

Non-GAAP Subscription Gross Profit 103,922$

Reconciliation of Non-GAAP Subscription Gross Margin:

Gross margin 73%

Stock-based compensation expense as a percentage of revenue 1%

Amortization of acquired intangibles as a percentage of revenue 1%

Non-GAAP Subscription Gross Margin 75%



Calculated Billings

Organic

Calculated

Billings

Q119 Q219 Q319 Q419 Q120 Q220 Q320 Q420 Q121 Adjustments(1) Q121

Reconciliation of Calculated Billings:

Total Revenue 84,970$ 91,299$ 98,525$ 107,627$ 111,443$ 116,487$ 127,879$ 144,760$ 153,601$ (10,601)$ 143,000$

Add:

Deferred revenue (end of period) 132,714$ 138,811$ 148,466$ 161,241$ 165,369$ 167,719$ 180,640$ 209,690$ 225,531$ (12,537)$ 212,994$

Contract liabilities (end of period) 4,208$ 4,508$ 4,843$ 5,197$ 6,330$ 6,195$ 7,673$ 10,134$ 12,466$ (518)$ 11,948$

Impact of adoption of ASC 606 on deferred revenue 11,250$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Less:

Deferred revenue (beginning of period) (134,653)$ (132,714)$ (138,811)$ (148,466)$ (161,241)$ (165,369)$ (167,719)$ (180,640)$ (209,690)$ 11,575$ (198,115)$

Contract liabilities (beginning of period) -$ (4,208)$ (4,508)$ (4,843)$ (5,197)$ (6,330)$ (6,195)$ (7,673)$ (10,134)$ 463$ (9,671)$

Impact of adoption of ASC 606 on contract liabilities (2,090)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Deferred revenue assumed in business combinations -$ -$ -$ -$ -$ -$ -$ (9,194)$ -$ -$ -$

Calculated Billings 96,399$ 97,696$ 108,515$ 120,756$ 116,704$ 118,702$ 142,278$ 167,077$ 171,774$ (11,618)$ 160,156$

(1) Adjustments relate to amounts attributable to acquisitions since October 2020.