Avalara Q2 2022 Financial Analysis
7
Avalara Remains a Fundamentally Strong Business
We do not believe a $500,000 revenue "miss" in one quarter has any bearing on Avalara's ability to realize long-term value
Avalara expects the challenging macroenvironment and high interest
rates to continue to weigh on its valuation for a protracted period
NTM Time-Weighted Revenue Multiple Since Avalara's IPO to Last Trading Day Prior
to Deal Announcement (05-Aug-2022)
Avalara
Q2 Earnings Represented Avalara's First Miss and Would Likely Have Required
Avalara to Lower Its Forward Guidance
③ Avalara Revenue Projections¹
Q2'22 Revenue
$2,000
High growth software valuation multiples typically exhibit an inverse relationship with interest rates
+27% CAGR
$1,855
$1,793
Prior to Q2'22, Avalara has beat top-line consensus estimates 16 out of 16 quarters, with median
beat of 7%
$1,800
35x
6.0%
$1,600
$1,475
$ 209.1
(63)
$ 208.6
30x
5.0%
$1,400
25x
1
$1,160
$1,200
$1,106
4.0%
20x
3.3%
3.0%
Consensus Estimates
FY2022E Revenue
Actual
$1,000
$904
$869
15x
$800
Lower expected 2022 performance and major execution challenges would likely have required
Avalara to modify public guidance previously disclosed in Q1 earnings
10x
2.0%
8.8 x
8.1 x
1.0 %
$600
-4%
$904
$ 869
$400
5x
6-Jul-2022
Avalara Undisturbed Multiple
$200
Avalara
Prior to Leak: 6.8 x
0x
0.0 %
Jul-18 Jan-19 Jul-19
Jan-20
Jul-20
Jan-21 Jul-21 Jan-22
Jul-22
Peer Median'
-20Y Treasury Yield
$0
2022E
2023E
HHH
$1,405
-5%
-5%
-3%
2024E
2025E
May Projections
July Projections
Source: FactSet, Bloomberg, Avelara merger proxy, Public filings, Capital 10, 1BES
Note: $ in millions
1 Avalore peers include Alteryx, BigCommerce, Blackline, Coupo, Dotadog, Elastic, HubSpot, MongoDB, Okto, PagerDuty, Paylocity, Shopify, Smartsheet, Zscaler
■May Projections ■■July Projections
1
Avalara's Q2 2022 revenue "miss" was $500,000; we do not believe this is material, let alone that it portends a deterioration in the Company's prospects
2
3
This "downward revision" in guidance still implies 24% YoY revenue growth, which is consistent with the Company's long-term goal of compounding revenue at 20-25%2
-
The Company's July Projections – which reflect the Company's greater pessimism – still imply revenue growing at a CAGR of 27.1% through 2025; this is essentially
unchanged from the May Projections, which implied a CAGR of 27.3%³
1 Source: Avalara Definitive Proxy Statement, filed with the SEC on September 12, 2022, at pages 63-64.
2 Source: Avalara Analyst Day, June 28, 2022 ("[We believe] that we can compound growth organically in the 20% to 25% range for years to come...").
Altair US, LLC
3 Source: Avalara Definitive Proxy Statement, filed with the SEC on September 12, 2022, at pages 63-64.View entire presentation