Avalara Q2 2022 Financial Analysis

Avalara Has Touted the Resilience of Its Business to Macro Factors What Avalara Said Three Months Ago What Avalara Is Claiming Now 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) High growth software valuation multiples typically exhibit an inverse relationship with interest rates Avalara Q2 Earnings Represented Avalara's First Miss and Would Likely Have Required Avalara to Lower Its Forward Guidance Q2'22 Revenue Prior to Q2'22, Avalara has beat top-line consensus estimates 15 out of 16 quarters, with median beat of 7% 60% Of U.S. subscriptions and returns revenue is from tax calculation products 40% Of U.S. subscriptions and returns revenue is from tax returns and compliance management products > Most compliance products fluctuate minimally with economic activity > Calculation products are insulated from economic activity because of our wide tiered pricing bands jotur Source Down Fanting AVALARA ANALYST DAY VIRTUAL "Our business model has proven to be resilient, historically showing low volatility in good and challenging times because our customers must always calculate taxes and file returns. And, our pricing model is designed to absorb downside shocks and upside bounces amid changes in economic activity. All this continues to reinforce our belief that we can compound growth organically in the 20% to 25% range for years to come...' "1 35x 30x 25x 20x 15x 10x 5x 6-Jul-2022 Avalara Undisturbed Multiple 6.0 % 5.0% 4.0% 3.3% 3.0 % 2.0 % 8.8 x 8.1 x 1.0 % Prior to Leak: 6.8 Ox 0.0 % Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Avalara Peer Median ---20Y Treasury Yield $ 209.1 (03) Consensus Estimates FY2022E Revenue $ 208.6 Actual Lower expected 2022 performance and major execution challenges would likely have required Avalara to modify public guidance previously disclosed in Q1 earnings Source: FactSet Bloomberg, Avalora merger proxy, Public filings, Capital IQ, IBES Note: S in milions Avalare peers include Alteryx, BigCommerce, Blackline, Coupe, Dotadog, Flestir, Hubspot, MongeDR, Okto, PagerDuty, Paylocity, Shopify, Smartsheet, Zscaler. $904 $869 May Projections July Projections "Avalara expects the challenging macroenvironment [sic] and high interest rates to continue to weigh on its valuation for a protracted period." We agree with the Company's remarks at its Analyst Day and believe it is insulated from economic challenges and remains positioned to grow in the current environment 6 1 Source: Avalara Analyst Day, June 28, 2022. 2 Source: Avalara Investor Presentation, filed with the SEC on September 23, 2022. Altair US, LLC

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