Avalara (AVLR) Reports Q4 2020
Avalara (AVLR) reported results after the close yesterday that handily beat expectations on virtually all metrics. Q4 revenue was up 35% to $144.8 million (beating by $11.4 million) while adjusted EPS of $0.09 beat by $0.15. Billings of $167 million were up 38%. Adjusted gross margin increased from 71% to 74% and free cash flow increased from $14.2 million to $28.6 million. Avalara ended the quarter with $674 million in cash. For the full year, revenue was up 31%. Looking forward, management guided for 2021 revenue of $628 million to $633 million (up 26% at the midpoint), comfortably above consensus estimates of $620 million. As a point of reference, Avalara now has a market cap of over $15 billion, versus less than $3 billion when we jumped into the stock in February 2019.
It was a very strong quarter with the only lukewarm metric being that the customer count of 14,890 was down 1% from the previous quarter (though still roughly 100 above expectations). Stepping back, Avalara continues to push forward in what remains a large market opportunity for sales tax automation tools in an increasingly complex regulatory environment where retailers are selling a wide variety of goods through multiple channels and across both state and country lines. There’s no practical way to do this manually. Avalara isn’t the only player out there but it’s certainly one of the biggest and the best. Initiatives to keep pushing into larger companies, grow the tax library (excise, use tax, cross border tax, insurance, etc.), expand into other areas of compliance (1099, power of attorney, licensing and landing cost, etc.) and grow the international business (both geographically and through more tax content) point toward several more years of 20%+ growth.
The stock is not cheap, trading with an EV/2022 estimated revenue multiple of almost 19. But based on where peers are (average multiple of 17) and that Avalara is growing faster than average, the stock should continue to trade at a premium.
The stock entered the earnings report trading right near all-time highs after a swift rally from 139 to 180. I’m not expecting a HUGE day as there were no really big positive surprises but this report and outlook should be good enough to get the stock to punch through resistance and break out to fresh highs, if not today then in the next week or two. You can continue to buy into both strength and/or weakness. BUY