Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Avalara, Inc. (NYSE:AVLR)
Q1 2020 Earnings Call
May 7, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Avalara's First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Greg McDowell, Investor Relations. Thank you. Please go ahead, sir.

Greg McDowell -- Investor Relations

Good afternoon, and welcome to Avalara's first quarter 2020 earnings call. We will be discussing the results announced in our press release issued after market close today. With me are Avalara's CEO, Scott McFarlane; and CFO, Ross Tennenbaum. Today's call will contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, the impacts of COVID-19 on our business and global economic conditions, our expected future business and financial performance and financial condition, and our guidance for the second quarter and fiscal year, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will.

These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of the material risks and other important factors that could affect our actual results, please refer to the risks discussed in today's press release, our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020, and our other periodic filings with the SEC. During the call, we will also discuss non-GAAP financial measures, which are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the GAAP and non-GAAP results is included in our earnings press release, which has been filed with the SEC and is also available on our website at investor.avalara.com.

With that, let me turn the call over to Scott.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Thanks Greg, and welcome to everyone joining our Q1 2020 earnings call. Q1 was another good quarter for Avalara. Our revenue was $111.4 million, up 31% year-over-year with subscription and returns revenue up 35% year-over-year. Overall, our execution was solid. We experienced strong new sales in January and February that met our internal expectations. In March, our new sales were impacted by the COVID-19 crisis and this impact continued in April. We believe we can emerge from this crisis even stronger than before. Not all SaaS businesses enjoy the structural advantages we have. We benefit from having market tailwinds at our backs. We help businesses become more efficient. And we have a strong and sticky customer base.

We believe we are well-positioned to grow within our customer segments, but are doing well in the current environment and that we're relatively insulated from the risk represented by our customer segments that are struggling. Businesses that have been forced to pivot to remote workforces now have tangible evidence of the advantage of moving to the cloud, which helps many SaaS providers including us. Many e-commerce businesses along with marketplaces and e-commerce platforms that enable them are benefiting from the current environment and we see it in our data where around half of our transaction volume comes from e-commerce and our revenue from customers experiencing meaningful increased transaction volume is currently on par with our revenue from customers experiencing decreases.

We believe this crisis will accelerate businesses move to the cloud and e-commerce and we will be there alongside our partners to help businesses succeed in their journey. We partner with leading marketplace and e-commerce platform providers who are all open for business with many continuing to thrive. When the COVID-19 crisis began, we quickly increased our engagement with existing and prospective marketplace and e-commerce platform partners reinforcing the message that their compliance obligations continue and reminding them that our solution put them in a position of strength to press forward in this time. I'm happy to say that the intensity of our conversation with these important partners has increased as a result and we expect to announce exciting new and expanded relationships in 2020.

We also believe our customer base is relatively well-insulated from the negative consequences of this crisis. While our customer base includes small businesses, more than 80% of our revenue comes from our core customers and we did not see a meaningful increase in gross revenue churn in March. While the crisis has changed the landscape, our vision and our plan remain the same. We are here to accelerate the inevitable, the move to compliance automation and we are unwavering in our goal to alleviate the burden of government-mandated compliance requirements. Avalara supports all types and sizes of businesses. Regardless of the size or type, we believe all businesses will look for efficiencies as they prioritize and optimize spend. The pain of manual tax compliance will not diminish in the months to come.

In fact, it may become more acute as everyday complexities are multiplied by a patchwork of new rules, payment deadlines, relief offers and short-term rate changes. Every business will be compelled to navigate the new environment and we will be there for those who haven't yet automated. No doubt, we will feel the impacts from the crisis. But I believe our compelling ROI story and the resilient business model may insulate Avalara from some of the difficulties other companies are facing. Even before COVID, as a compliance company, we've been building and testing a system that our customers can trust. And today that is on display. Nearly 100% of our global employees are working from home and our employee productivity remains high. As a SaaS company and a global business we have been using cloud-based collaboration tools for videoconferencing, project management and other functions for many years.

These technologies allow us to bridge geographic distance. So it's been a seamless shift for us to recalibrate with the current reality. Many investors have asked us how we are selling. And I just want to remind everybody that we have a high velocity inside sales force, many of whom were remote employees before the crisis. Because we don't have long sales cycles or high ASPs, our sales reps rarely have to get on a plane to visit prospects. The crisis has put some of our teams into overdrive. As global tax authorities use rates and deadlines as mechanisms to provide business release, our compliance, support and marketing teams have generated numerous resources for businesses to help them understand or respond for the options available.

These resources includes updates on legislative changes worldwide, educational assets to help businesses pivot effectively to new models, the ability of customers to defer payments to states based on new legislations and promotional pricing alongside our partners. Capturing and simplifying changing tax rules has always been our specialty. Because understanding tax compliance complexities can be overwhelming to companies navigating the crisis. We have made that expertise more openly available on our website. We believe this will strengthen our existing customer relationships and attract new businesses who want an expert to help navigate new realities going forward. Many investors understandably have questions about the mechanics of our business and how it works.

First of all, our business model is designed to be stable. While we certainly enjoy positive business cycles driven by external forces like Wayfair, we haven't suffered as much as many other businesses during previous economic upheavals. A simple framework is to think about our business in two parts. One is tied to calculations and the other is tied to compliance. Let's talk about both in more detail. We recognize revenue from our calculation product, AvaTax and our pricing model provides some insulation against economic downturns. AvaTax price plans are based on the number of transactions over the subscription term. Our customers pay for an annual subscription based on transaction volume and a large majority of our customers pay upfront. Unused transactions are not carried over to the next subscription term.

Furthermore, our transaction bands are generally quite wide. So a customer would have to see a significant degradation in transaction volumes in order to downgrade to a different band. And even if they chose to downgrade at renewal the impact to revenue on a percentage basis is meaningfully less than the percentage decline in transaction volume. We also recognize revenue from a number of compliance products. Sales tax returns, bad compliance returns, exemption certificate management and others. These products are not tied to transaction volumes or our customers' revenues. For example, our returns processing services are primarily charged on a subscription basis or an allotted number of returns to process within a given time period. Tax authorities around the world are offering flexibility to impacted businesses.

For some, tax returns must be filed on existing schedules with the option to defer payments and for other both the return and the payment may be submitted at a later date. Ultimately, these returns and payments must be submitted and will provide these compliance services to our customers. We're adding value to our customers as we help them remain in compliance and understand and react to a rapidly evolving and complex environment. We've not seen a meaningful impact in our churn rate. In fact, our gross revenue churn in Q1 remained meaningfully below 4%. We believe it would be difficult, costly and frankly crazy for our customers to rip out our solutions and go back to manual processes especially in this time when efficiency is so critical for so many businesses.

Of course, there is a risk that churn will increase if macro conditions further deteriorate. But we believe churn would likely be concentrated among small businesses, which is the lower end of the markets for Avalara and therefore should have a lesser impact on our revenue churn rate. I would like to now share where we've been impacted by the crisis. As I said earlier like many companies, our new business activity has been impacted by COVID-19. We don't have significant customer or industry concentration. Where we have customers in more heavily impacted industries, specifically lodging and fuel, I want to point out that these two industries each represent a low single-digit percentage of our total revenue and they are heavily weighted to compliance products that are not tied to customers' revenue or transaction volumes.

Our cross-border business is also being impacted. As a reminder, Avalara Item Classification makes it easier for customers to sell anywhere in the world. We are offering that identifies and maps tariff codes to customers' products. Because global B2C trade has been down meaningfully, that part of our business has suffered. Professional Services, which represents 5% of our total revenue in Q1 saw a year-over-year decline due to a very strong comparable in Q1 2019 and lower engagement from the customers for our Professional Services as a result of COVID-19. Regarding the impact on opportunity generation, the crisis has wiped out the tradeshow environment and it's unclear when that type of gathering will regain its footing. Historically, Avalara has used trade shows to market alongside our partners and reach their customers.

In 2020, we had planned to do more than 350 events with 100 of those already being canceled. We are working closer than ever with our partners to find new and different models to reach their customers. To summarize my thinking on the COVID-19 crisis, I believe Avalara is well-positioned to succeed in the long-term. Today, we are experiencing economic uncertainty as businesses move quickly to new normal operations. Regardless of the impact, every business will be considering the efficiency and ROI of their investments and it just makes sense to adopt a cloud-first philosophy when considering new tools, technology and processes. As cash flow is tightened and teams are forced to slow head count growth and further control costs, Avalara's cloud technology cost-effectively automates mandatory compliance processes.

This return on investment for any business is appealing, especially in times of ambiguity. This has been Avalara's value proposition for many years and we serve thousands and thousands of customers today who rely on us to make their teams more efficient and processes more seamless. Just like many other companies that are focused on driving internal efficiency, we remain vigilant about improvements in this area for ourselves. In our last earnings call, we discussed efforts to drive efficiency within our business, including the application of machine-learning to our tax and product content to enable new product and customer growth. Today, I want to touch on two additional programs that are driving new efficiencies for Avalara teams and our customers. First is the migration of our return service platforms. Previously, our core sales and use tax returns team required two separate tools to process and file returns.

Now in a single sales and use platform our compliance team has a more streamlined platform that will enable us to process more returns per employee per month. And we plan to integrate our other tax types like communications and excise into this tool. We have made meaningful progress in deflecting many types of support cases through better self-service tools. This effort includes major projects like AvaTax calculation review, which shows customers a detailed breakdown of exactly how a sales tax rate calculation was determined, a very common inbound request. As I introduced in Q4, this quarter we launched the beta of AvaTax tax code mapping for customer onboarding.

By deploying advanced technology in this process we give new customers and implementation teams the ability to quickly and more accurately map product libraries to tax codes through a decision tree tool. With broader use this tool will get more accurate and further reduce this aspect of manual implementation work. Our efficiency efforts are global. Our European team has moved much of the exchange of materials and documents for registrations and filing services from email to a web-based portal enabling our compliance agents to handle more accounts, moving seamlessly among them and avoiding manual data transfer tasks. These types of improvements reflect a relentless effort by our product and engineering teams from which our employees, customers, and partners all stand to benefit.

Wrapping up, we announced last month that Justin Sadrian, a Managing Director at Warburg Pincus will be leaving the Board of Directors when his current term ends in June 2020. Justin's contribution to Avalara since joining the board in 2014 has been invaluable. I'm grateful for the positive impact he has made on our business. I would also like to welcome Brian Sharples to the board. Brian is Co-Founder and former CEO of HomeAway and an accomplished leader on other public company boards such as Yelp, GoDaddy, and Ally Financial.

I will now turn the call over to Ross to talk through our financial results.

Ross Tennenbaum -- Chief Financial Officer

Thank you Scott. Our first quarter results were highlighted by a continued increase in market demand with strong sales execution in January and February and as Scott noted, softness in March. For the first quarter, total revenue was $111.4 million, up 31% on a year-over-year basis. Subscription and returns revenue grew 35% year-over-year to $105.5 million, which represented 95% of our total revenue. Professional Services revenue was $5.9 million, down 12% year-over-year. The year-over-year decline in Professional Services revenue was attributable to the COVID-19 crisis and a difficult comparable as our Q1 2019 Professional Services revenue were 92% year-over-year. Our core customer count increased by 750 to approximately 12,710 at the end of Q1 2020, a year-over-year increase of 31%.

Our net revenue retention rate was 109%, up from 107% in Q1 2019 resulting in a 111% four-quarter average, which is equal to the four-quarter average we reported in Q4. Equal to the fourth quarter we reported in Q4. Our new sales demand was meaningfully impacted in March and remained impacted in April. However, we saw some improvement in our opportunity funnel in April though it's too early to know if this will sustain. Despite the current macro environment, our customers must still calculate taxes and file returns and our business model and customer base so far has shown the resiliency we expect. To illustrate, I like to provide you with more details on both our logo and revenue churn as well as share some additional details on our customer composition.

In Q1, the number of logos that churned out of our business was actually down year-over-year as a percentage of our renewal base with no meaningful uptick in March. Our gross revenue churn, which in the past we've said has been lower than 4% remain meaningfully below 4% in Q1 2020 and was on par with the rate we saw in Q1 2019. We define gross revenue churn as the annual revenue contribution associated with billing accounts that canceled all of their agreements with us in the last four quarters divided by the total annual revenue recognized during last four quarters. As a reminder, our gross revenue churn design include downgrade, the value of which was not a significant percent of total revenue in Q1. While our customer base does comprise small businesses more than 80% of our revenue comes from our 12,710 core customers that paid us more than $3,000 in the trailing 12 months.

Our 2019 average core customer revenue was approximately $30,000 calculated by taking our 2019 total core customer revenue and dividing by 10,515 average 2019 core customers. As a reminder, this does include larger marketplace and commerce platform customers that are aggregators of many of their own end customers. Finally, as Scott discussed, a number of our e-commerce customers along with the marketplaces and commerce platforms that enable them are benefiting from the current environment, providing us with opportunities to increase our penetration in this important channel. In discussing the remainder of the income statements, please note that unless otherwise stated all references to our expenses, operating results, and loss per share are on a non-GAAP basis and are reconciled to our GAAP results in the earnings press release that was issued just before this call.

Gross profit was $79.6 million for Q1 2020 representing a 71% gross margin. This compares with gross profit of $61.6 million and a 72% gross margin in the same period last year. Sales and marketing expense was $46.2 million in Q1 or 41% of total revenue, an improvement of over 150 basis points year-over-year. We made meaningful investments in Q4 2019 to increase our marketing and sales capacity to address a healthy demand environment. We continued those investments in January and February but slowed investments in March and April as we began to see a slowdown in end customer demand for our products as a result of COVID-19. Q1 research and development expense was $23.5 million or 21% of revenue, up from 17% of revenue in Q1 2019. This increase was consistent with our expectations as we continue to invest in our global cloud platform including the new products, content and features to drive sales growth and cost efficiency.

Q1 general and administrative expense was $18.1 million or 16% of revenue versus 15% of revenue in Q1 2019. Our Q1 2020 G&A expense includes unplanned charges totaling $1.6 million primarily related to increasing legal reserves, increasing our estimate of foreign non-income tax accruals and higher bad debt expense. Q1 non-GAAP operating loss with $8.1 million, which was better than our previous guidance. Our non-GAAP operating loss reflects revenue upside and higher margin subscription and returns revenue and lower than expected employee costs in the quarter offset by lower than expected Professional Services revenue and gross margin. Non-GAAP loss per share was $0.05 in the quarter based on 77.9 million shares outstanding.

Turning to our balance sheet and cash flow statement our cash and cash equivalents were $450.5 million at the end of Q1 2020, a decrease of $16.5 million from $467 million at the end of Q4 2019. Total deferred revenue as of Q1 '20 was $165.4 million, up 3% from $161.2 million at the end of Q4 '19. As a reminder, our fourth quarter is typically our strongest in terms of end customer demand and billing and therefore we would expect our first quarter deferred revenue to be flat decline as compared to our fourth quarter. Calculated billings as a non-GAAP metric that takes into consideration revenue and the change in deferred revenue as well as the change in contract liability. Calculated billings were $116.7 million in Q1 '20, up 21% from $96.4 million in the same period last year. Calculated billings was impacted in Q1 by a writedown to total deferred revenue of approximately $1 million, primarily as a result of increasing our allowance for doubtful account balance amid the uncertainty of COVID-19.

Additionally, since our calculated billings metrics includes total revenue, the calculated billings growth rate was also impacted by lower than expected Professional Services revenue as previously discussed. Although we normally don't discuss billings linearity in the quarter, I would like to share a little more color with respect to the month-to-month fluctuations. In January and February, our year-over-year calculated billings growth was similar to our Q4 2019 year-over-year billings growth rate. However, in March our calculated billings decelerated meaningfully due to the crisis. We saw an impact more in our new customer acquisition demand and to a lesser extent on upselling cross-out deals to our existing customers. Free cash flow consumption was $25.9 million compared to consumption of $12.5 million in the same quarter last year. The increased cash consumption and level of spend in Q1 was expected and was largely driven by the payment of our annual corporate bonuses totaling $20.4 million, a large insurance renewal for $3.5 million and the renewal of various software licenses for $5 million. Free cash flow was also impacted by lighter than expected accounts receivable collections in the quarter.

As we have stated on past calls, our free cash flow will fluctuate from quarter-to-quarter, but by many factors including the timing of working capital, the seasonality and levels of our billings and expenses as well as our overall level of investment in the business. I will now conclude the call by providing guidance on revenue and non-GAAP operating loss for Q2 and for the full-year of 2020. We've expanded the range of our guidance due to the uncertainties surrounding the COVID-19 pandemic. Our guidance is also based on the assumption that the most significant headwinds will occur in the second quarter with a modest improvement of third quarter. We are further assuming that economic conditions will more broadly open up by the end of the year. Clearly, significant variation from this assumption could cause us to modify our guidance higher or lower.

For Q2 2020 we expect total revenue to be in the range of $109 million to $111 million. Although not a standard practice for us to break out expected growth rate between subscription and return and professional services, for this quarter only, we would like to share that we expect year-over-year subscription and returns revenue growth in the low-to-mid 20% area while we expect Professional Services revenue to modestly decline year-over-year. Management is focused on delivering efficient growth and as such we are being responsible about how we manage our expenditures and cash flow. In early March, we thoroughly reviewed our 2020 hiring plan and decided to slow hiring across the business. Additionally, we have been curtailing or delaying non-essential operating expenses. We expect our Q2 non-GAAP operating loss to be in the range of $8 million to $9 million.

For the full-year 2020, we are lowering our total revenue guidance from a range of $470 million to $474 million to a range of $455 million to $465 million. We expect some mix shift based on our assumption that 2020 Professional Services revenue growth will be flattish year-over-year. We continue to expect our full-year non-GAAP operating loss to be in the range of $18 million to $22 million. Turning to our views on cash flow for the year, we have implemented Responsible Solutions to manage cash flow. As AR collections began to slow as a result of the crisis, we increased our efforts to extend accounts payable terms with vendors and take advantage of other programs that would delay cash outflow including the deferral of employer payroll tax payments under the recently passed CARES Act.

We continue to expect a modest level of cash burn in 2020 consistent with what we shared on our February 2020 earnings call, however, our cash burn maybe slightly higher due to the potential impact to billings and increase in day sales outstanding. In closing, I would like to emphasize a few points that Scott touched on in his prepared remarks. While our business is not immune from the COVID-19 crisis, we believe we are well-positioned to grow within our customer segments that are doing well in the current environment and that we are relatively insulated from the risk represented by our customer segments that are struggling. And we enjoy some business model advantages that are appealing in these trying times including; first, the vast majority of our sales team is inside sales.

We expect our sales teams can be as productive at home as in the office. Second, our ASPs are modest compared to many software sales and we typically don't have lengthy implementation projects or the need for people to be on site. So we can continue to take customers live on our products. And finally we are in the compliance industry. Businesses still have to calculate taxes, file tax returns and remit payments. So we believe this function is still very important relative to other software purchases, businesses maybe making. On June 23, we will be hosting a virtual Analyst Day for the investment community. A webcast of the event will be accessible on our IR website and we will share additional details shortly.

At this point we would like to open up the call for your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Chris Merwin from Goldman Sachs. Your line is open.

Christopher Merwin -- Goldman Sachs -- Analyst

Okay. Thanks so much for taking my question. I just wanted to ask you about trigger events. I know there's many of them that cause customers to become aware about Avalara. In the past, ERP has been one of the bigger ones, I know point-of-sale replacements can -- at least has been a big one as well, but obviously we're dealing with a much different environment now, so wondering if you're seeing new trigger events are causing customers to come through or just what, what that has looked like more recently? Thank you.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Hey Chris, this is Scott. So as you pointed out, there's probably eight or nine, that we call -- eight or nine trigger events that we call out on a regular basis, anywhere from ERP, the audit, the change of CFO, to moving into a different product arena, and a different geography, but I would actually have to say that over the years that ERP has been our strongest one. When somebody says hey, I am going to go change my ERP, that's the time to go solve a problem that everybody knows that they have, right. If you're out there talking to controllers and CFOs, they all know that they probably got some work to do in the sales tax arena, and they take that opportunity of an ERP change or financial application change, POS change whatever it is, business application change in order to, in order to do that.

Now having said that I mean having gone through the 2008 and 2009 sort of downturn that, that we had, we learned that probably the best trigger of them all is uncertainty. Our biggest competitor is status quo, and when they are forced with having to look at ROI decisions, efficiency decisions this is what brings them to the fore. So I can actually make the case that the COVID 19 environment, right, the one that we're in right now where people are having to look at all of their inefficiency or looking at their efficiency measures in order to help the business, this is one of the strongest triggers that are out there.

Christopher Merwin -- Goldman Sachs -- Analyst

Great. Thanks very much. And maybe just if I can ask one more and apologies if I missed it in the prepared remarks, but just wondering if you called out what percent of customers are actually trading down to a lower tier because of significant pressure on revenue? I know gross revenue churn kind of like was very strong at south of 4%, but just curious if you'd called out the impact of that? Thanks.

Scott McFarlane -- Co-Founder and Chief Executive Officer

We didn't -- I didn't call it out specifically although that we've -- but we're not seeing a meaningful change in anybody downgrading at this moment in time.

Ross Tennenbaum -- Chief Financial Officer

Yeah. And Chris, it's Ross. When we look at our transaction volumes, we see the base is very stable. We see volumes that are up, we see volumes that are down, but what Scott did say was when you look at those that are more meaningfully up versus those that are more meaningfully down on a dollar basis, they're offsetting each other. So on a dollar basis, the ones that are up are about equal to the ones that are declining.

Christopher Merwin -- Goldman Sachs -- Analyst

Great. Thanks so much.

Operator

Your next question comes from Sterling Auty from J.P. Morgan. Your line is open.

Sterling Auty -- J.P. Morgan Securities -- Analyst

Yeah. Thanks. Hi guys. Apologize, I'm bouncing between calls so if you did cover this, but I'm curious in terms of when we look at some of the exposure to some of the smaller companies so through the Wix, the BigCommerce, etc, what are you experiencing with that end of the spectrum, and is that a meaningful amount of revenue? So if you see variability is it really going to move the needle much anyway?

Scott McFarlane -- Co-Founder and Chief Executive Officer

Well. I'll give you an overview and then Ross can fill in some of the details Sterling. So that segment has not been a big sort of revenue area for us. It's been a big strategic area for us, because if you recall, we sort of did our land and expand in the mid-market, and then it's an opportunistic up-market, but down market we wanted to protect ourselves through the big aggregators. And so we've done big volume deals in those areas with those -- with those customers, and then we'll be working overtime to monetize those relationships even more than we are today. But from an overall perspective, it does not have a meaningful impact on the business if that were to go south. Interestingly though, we're seeing a lot of businesses, I mean small businesses actually want our services, and are thinking about doing it because it's so -- of the efficiency -- the efficiency aspect of it. So there's a good and bad tail to that end of the market.

Ross Tennenbaum -- Chief Financial Officer

Yeah. And Sterling, how are you doing? Hope you're well. I would just add one thing to it. I think there's kind of two questions in there. One is on the commerce side. I think is a great opportunity for us. And as COVID causes more of an acceleration to commerce, we stand to benefit from that. So that's the positive. I think the other part of your question was just small business exposure. And there are few ways we think about it. We said on the call, our 2019 average core customer revenue which is 80% to 85% of our total revenue. The average is $30,000. So it's skewed a little high from commerce and marketplace customers that are bigger. But it's still even when you net that out, that average revenue per core customer is a pretty sizable number, that doesn't look like something that comes from a small business.

And then, and then the other thing I would say is when you think about just our gross churn which we said is meaningfully below -- our gross dollar churn is meaningfully below 4% when you just think about that and you think about well software companies that only serve small businesses have monthly churn, that looks a lot like our annual churn, why isn't ours higher and I think that suggests that either we have fewer of those classic small businesses where the dollar contribution from them is just pretty insignificant with respect to our dollar churn. So that's a little more color on, on the composition.

Sterling Auty -- J.P. Morgan Securities -- Analyst

That makes sense. Thanks very much guys.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Thanks Sterling.

Operator

Your next question comes from Brad Sills from Bank of America Securities. Your line is open.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Hey, great. Thanks guys. I wanted to ask a question about the comments earlier on the migration to the new platform for compliance, it sounds like that could be a catalyst for communications and excise tax, new categories, could you just provide a little color on where you are in those two and how this new platform might enable that? Thank you.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Hey Brad, Scott. I'm very excited about that -- about that move. I mean, and I'm really proud of the team, I mean we've been working on this for a couple of years, and we've been -- we had our new customers all going on the new platform, but to get everybody over to it we had to make, you have to make sure all of the features and everything is, is working properly. And so over the last nine months, we've been migrating thousands of customers over to this new platform, and it's allowing us to duplicate one of the platforms that we've had for a while. So the efficiency of just going to one single platform that allows you to better service your customers, to help them onboard, to help our agents respond to customers and work with them easier. I mean it's just a great benefit for everybody. And then as you suggest there are areas that we can use to drive more business better through a single, more sophisticated platform. So, we're really excited about that, and it's something that I'm really proud of the team for getting done under the circumstances because they did the final migration of some of the biggest and toughest, and many of the customers during the COVID crisis.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Thanks, Scott. And then I wanted to ask about the comments made earlier on funnel improvement toward the latter part of April. Are you assuming if that is the case, is that reflected in your guidance that that sustains or are you assuming more of kind of the environment that you saw prior on gross adds? Thank you.

Ross Tennenbaum -- Chief Financial Officer

Yes. Yeah. Brad -- go ahead, Scott.

Scott McFarlane -- Co-Founder and Chief Executive Officer

No. Go ahead, Ross. Go on.

Ross Tennenbaum -- Chief Financial Officer

I was going to say March we had some commentary around -- March was impacted as we had COVID-19 and April looked a lot like March. There was some improvements on the booking side on some of the subcategories of bookings and then we saw -- when we looked at the overall opportunity funnel, we saw nice improvement in April and in the first week of May, we continue to see that hanging in there. So I would say we're being very cautious. We're not ready to call that a trend. They're just some observations we're seeing some improvements. And so when we think about the guidance as I mentioned on the prepared remarks, Q2 we see as being the most impaired. We kind of modeled several scenarios and we're looking at something that's more like a U-shape. So Q2, most impaired some improvement in Q3 and then, more broadly opening up in Q4.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Okay. Got it. Thanks Ross. Appreciate it. Yes, go on.

Scott McFarlane -- Co-Founder and Chief Executive Officer

I'll add real quickly, Brad. I'll add real quickly to this that when we saw the COVID crisis developing, having been through 2008 and 2009 personally and knowing what the message was, I got together with the team and we rapidly switched to an ROI efficiency message, and the team responded really, really well to develop lots of digital assets, lots of things that we can do to drive business, and it took us that month of March to switch over and I think April, May, and June will prove out that they've done a pretty good job of making that transition. And the number of people we have coming to our webinars are at an all-time record as you might expect, but it really is -- the new message really is driving new opportunities so we're very hopeful that that will continue throughout the year.

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

That's great. Thanks so much guys.

Operator

Your next question comes from Pat Walravens from JMP Securities. Your line is open.

Joey Marincek -- JMP Securities -- Analyst

Great. Thank you so much. This is Joey on for Pat. I was wondering if you could talk about the opportunity you see with marketplaces? And then, how are you guys thinking about M&A at this time? Thank you.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Well, again I'll start out and Ross can jump in on the marketplaces and then, we'll go to M&A. But look, I mean this -- this is -- we had really believed in the marketplace and e-commerce. And I just -- I want to remind everybody when we think about this space, I think of it lot like how we got involved in the ERPs in the beginning. You get into the ERPs, you win those -- that business, you secure those partners as loyal partners to yourselves and then you work with them to develop and monetize those relationships. So for the last couple of years we've been really focused on how we're working with the big aggregators in e-commerce and marketplaces like Shopify, BigCommerce, Wix, and that's exactly what we've been doing.

And coming along, seeing COVID, nobody saw that happening, and just the demand that is being generated in that area right now, and the number of transactions, and the increases that people are having is really quite amazing. And we've been working with them to solidify our relationships, to help them take advantage of the opportunity now. But it really is one of those kinds of things where you are just strategically getting them, getting them in place, making sure that it's all working, and working with them so you become a trusted partner, this will monetize itself over time. But no doubt marketplaces are a strong driver in the market today. Ross you want to jump in on that one?

Ross Tennenbaum -- Chief Financial Officer

Yeah. No, I think it's great. I mean, it's a great opportunity, we've spent the last couple of years really developing these relationships with the important commerce platforms, marketplaces. We've expanded the team in 2019 to focus on those efforts. And it's a really great long term opportunity, and it's tied to what we think will be an acceleration of adoption of e-commerce given COVID. So we're excited about the opportunities. I would say the intensity of conversations in Q1 and in April were very, very encouraging. Two-way conversations on where we can be helpful. But what I'd say is this is a long term game. This is a long term opportunity for us that will play out. We're not a GMV model. We'd like to say we're lower beta, so in tough times the base holds in, and the good stuff will play out over the years. But we're not GMV model where the revenue shows up immediately or goes away immediately. So as we have success and growth of the segment, it'll come over time, but it's not -- don't look for it in Q2.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Yeah. What I have been really impressed with is that the number of strategic conversations that we're having, means you expect it could go either way, right? But for us it really has been a big time when we're talking to lots of different players now, lots of marketplaces, lots of e-commerce businesses. And as I said in my prepared remarks, I think that we'll start announcing some of those things in the months and quarters to come. So it's a -- it really is a good area for us. And now to for M&A, we're an acquisitive company, and we've had areas that we've wanted to look at. We're always evaluating things on a build and buy process -- build buy partner. But we have identified some targets that we would like to look deeper at in the coming months and quarters, so we're going to continue to lean in when it comes to acquisitions.

Joey Marincek -- JMP Securities -- Analyst

Great. Thank you so much.Your next question comes from Scott Berg from Needham. Your line is open.Hey guys this is Josh on for Scott. Thanks for taking my question, on the partner side, just curious, how impacted is ERP change event versus some of the other partner groups out there in generating leads, and have you seen any improvement specifically with ERP in the last few weeks, I know you touched on this a bit, but just wanted to get some more color?

Scott McFarlane -- Co-Founder and Chief Executive Officer

Yeah. Great question and I think it goes to sort of the heart of Avalara and our partner model. Interestingly, when everybody talks about ERPs, I mean, I think people just assume that its new business right. I mean we're really -- it really boils down into two segments, you have new business of which there is not just a lot of new ERPs, in the United States that are being sold on, on an annual basis, and less so in a crisis like we're dealing with here. But the real part of the market that we're dealing with our ERP customers is, is work with them, those that are already what we call existing customers right, existing customers in the micro -- in the dynamic world, the Sage world, the Epicor world. So we're working with those companies through our partner channel, our team of SAM, strategic account managers, we work with them in order to come up with programs that are driving their customers to implement a more efficient way to do sales tax or use tax. So yes, so it really is a moment where we can where we can stop and focus on the existing customer bases of the ERPs which is really a target rich environment and drive that that efficiency message.

Josh Reilly -- Needham & Co. LLC -- Analyst

Okay, great. And then just to follow up given the shift in demand for some items are you finding any products where you didn't have tax content built out previously but are surging now at customers and you're redirecting the team to build that?

Scott McFarlane -- Co-Founder and Chief Executive Officer

That's a good question. That's a good question. I'd encourage everybody to go look at our blog on the -- on our website about some of the interesting things that we've seen around the COVID crisis survival goods are on the rise. Lots of things that you would expect. But we did have all that content. I've not heard of an area where it's just really off the charts that we did not have content for, but I'll have to go back and check on that one because I haven't heard that one.

Josh Reilly -- Needham & Co. LLC -- Analyst

Thanks.

Operator

Your next question comes from DJ Hynes from Canaccord. Your line is open.Hey guys. This is Luke on for a DJ. So I was wondering are there differences in the profiles of customers you're adding today versus pre-COVID, and that is as in, are they concentrated in certain verticals or are you seeing differences in geographies? And then also are there discernible changes in the types of trigger events that are driving new bookings today, and over the last couple of months that you've been able to identify?

Scott McFarlane -- Co-Founder and Chief Executive Officer

We have not noticed any discernible change in the kind of customers that we're getting. We hear this all the time, some really large deals that we deal with and they're like no, this is a problem for us. We've got to, we've got to step up we've got to make it -- we've got to get this done regardless of what's going on. And we don't see it, our customers coming in any different area or lack of an area whether it be New York or Louisiana or Arkansas, some of the things that places that are that are hit harder. We haven't seen a meaningful change in the way customers are approaching us or I mean buying the product. If anything, we see somebody says hey, I can't make a decision this month, I want to push it off to another month. I mean we see we see some of that. But for the most part it really is business as usual although the way we're talking to them around efficiency and ROI is different.

Luke Morison -- Canaccord Genuity -- Analyst

That's helpful thanks.

Operator

Your next question comes from Brian Peterson from Raymond James. Your line is open.

Alex Sklar -- Raymond James & Associates, Inc. -- Analyst

Great thanks. This is Alex Sklar on for Brian. Ross I know you mentioned being more measured on hiring but are there any -- have there been any other shifts in terms of the buckets you planned to invest in this year whether it be international or product development, automation or is it just business as usual outside of the hiring?

Ross Tennenbaum -- Chief Financial Officer

It's largely business as usual. What I would say is in early March we went through all of the head count, I mean we're fortunate as a high growth tech company that we can slow our hiring to manage expenses, and we went through all the head count across the whole company, and we looked at areas where we can slow hiring, and taking cost out of Q2 and we're evaluating on a weekly basis as everything evolves in a very fluid dynamic situation. How we want to modulate hiring? So we got the figures on the dials of the hiring pace. What I would say is that we still look at continuing our investments in products and engineering. We have a really attractive roadmap for delivery of some really exciting products this year and we'll talk more about them on our Analyst Day in June, but we got some exciting products that are for long-term growth and for efficiency drivers.

And so, we really are doing great there and we want to continue making those investments. So while we are slowing all areas of the business in terms of hiring, I think will be more normal in the R&D side. Sales and marketing, the good news is as we commented on prior calls; we felt we're a little bit behind in our sales and marketing capacity as we exited 2019. So in Q4, we were ramping our capacity and that continued in January so we've got a lot of that behind us and so, we modulated that further as COVID hit and we'll continue to look at that. And then, on G&A, I think we did have some unexpected expenses in Q1 and I think we can get some leverage in there. So, pretty much business as usual, but a little additional color right there.

Scott McFarlane -- Co-Founder and Chief Executive Officer

And we probably won't be quite as aggressive to expand internationally this year. We'll just probably hunker down and focus on EMEA, LatAm and a little bit of growth in India, but we'll probably tone it down a little bit internationally.

Alex Sklar -- Raymond James & Associates, Inc. -- Analyst

Got it. Scott, one other question for you. One of the things we've heard consistently is that handling of paper-based documentation has been one of the biggest challenges during the work-from-home environment. Have you seen any uptick in demand for some of our digitization products like CertCapture?

Scott McFarlane -- Co-Founder and Chief Executive Officer

You mean -- not as of yet. But we do believe that that is a big tailwind for the business, right? I mean, the realization of what you have to do at home and something like this really is driving people to really contemplate how can I go online, how can we use a cloud-based product. We did see some -- one of our largest CertCapture deals that we've ever had happened in Q1. So, people are looking at it. It is one of our top three product line. But I haven't seen a huge switch to that in the last 45 days.

Alex Sklar -- Raymond James & Associates, Inc. -- Analyst

Got it. Thank you.

Operator

Your next question comes from Brent Bracelin from Piper Sandler. Your line is open.

Brent Bracelin -- Piper Sandler & Co. -- Analyst

Thank you. Couple of questions here from me. Scott, maybe we'll start with you. Obviously, there is going to be some new EU VAT rules that go into effect here in January of 2021. I know Europe is small, international is small. But walk us through the opportunity you see as those rules go into place. Is that kind of a nice to have, or can that be a change agent to accelerate growth in Europe? And then, a couple more follow-ups. Thanks.

Scott McFarlane -- Co-Founder and Chief Executive Officer

I mean, it's a really good question. I mean, look, all that's going on in Europe is -- and around the world for that matter is really, I mean, playing into our strength and driving the business, right? The Brexit rules, all of the different -- all the different VAT changes that are happening, I mean, are certainly a tailwind for us. So, it's no -- I mean, there is no question about that. And that's why we're sort of doubling down and investing in that area and we're looking at other ways to be able to deal with the digitization and the like in EMEA.

So, I would say, yes, it will, but COVID has put a dampening effect on -- I mean, on international for -- because it's just been so widespread there, hit really hard -- I mean, hit really hard. So, I mean, nobody is really questioning a lot of the initiatives that we're driving things and we'll see how it all settles out. But right now, we know it's a tailwind, we know it will be a driver -- will be a driver of the business. One of the interesting things about VAT is that unlike sales tax which is state, I mean, VAT is a federal tax. And so, they are using VAT as a way to soften the blows and do some of the different things. So, it's a political hot potato and I think it'll have to fall out in the coming quarters. We'll see how the fallout happen.

Brent Bracelin -- Piper Sandler & Co. -- Analyst

Helpful color there. And then, I guess, shifting to you, Ross, here, as you look at your customer base, 12,000 customers, there is a mix of those customers that are kind of offline, online, multi-channel. We're clearly seeing acceleration to kind of the online opportunities. And I'm just wondering where you at in pivoting your go-to-market efforts to target more of the online businesses and how quickly can you kind of pivot to capture what looks like a pretty sharp acceleration here that we're seeing at some of the other platforms out there. I get your marketplace partners, but are there things you can do to drive more opportunities top of the funnel specifically with some of the online activities happening now?

Ross Tennenbaum -- Chief Financial Officer

Yeah, I mean, to me, that hasn't really changed, we've been at that game for a while now. We said on the call about 50% of our transaction volume comes from e-commerce. So, this could be pure e-commerce or this could be the evolution of a storefront that have migrated into mixed models. And so, we see that across our base. And I think, as Scott talked about, it's not just marketplaces, but also the commerce platform partners or the businesses that are doing it on their own and just doing commerce on their own, that's been a big growth area for our business in the past. It's something that is woven into the talk track of our go-to-market model and we have many customers that are pure commerce or a mixed model.

And I think as we talked about before, we really laid the groundwork over the last couple of years of getting the partners and putting ourselves in a position to establish yourself as a leader and I think when you look at our platform and the ability to have sales tax, compliance, cross-border, international, exemption certificates, we're becoming this multi-product platform company and so in working with these customers that are inherently global as they become e-commerce, then they have varying needs across the tax compliance journey. I just find that we're shining in our ability to deepen our partnerships and attract our customers. So, again, it's a long-term opportunity and I think we'll be advantaged by -- I agree with what you say which is the acceleration of the journey to e-commerce by potential customers out there.

Scott McFarlane -- Co-Founder and Chief Executive Officer

We saw one of the most interesting things. We had a customer come here just recently, I mean, it's very, very fast, a household name that we all know -- would know, I mean, they've been selling almost exclusively retails in malls and stores all over and in the 115 years, they've never sold any other way than that. And with our -- one of our partners, one of our new, relatively new partner Tulip Retail, that's who they had selected and they were using Avalara, we got them up and going and selling in just like record time, but it's a big brand, never gone online and we do see business like that driving our way.

Brent Bracelin -- Piper Sandler & Co. -- Analyst

Very encouraging. Ross, it's really around the go-to-market -- the Pro Services business. You've talked about kind of billings being pretty good in January, February and then obviously, a step down. Obviously, part of that step down in billings you talked about being tied to Pro Services. So, what was the linearity of Pro Services? Are you pivoting more to virtual implementation? Just trying to understand the drivers of Pro Services, the run rate kind of in March and what it implies for Q2.

Ross Tennenbaum -- Chief Financial Officer

Yeah. Good question. PS, I think one important thing about PS, well, first of all, we definitely saw an impact starting in February from some international PS and then meaningfully in March, including in the U.S. and our global PS business. And so, that hit and then we're looking at, I think PS grew 92% year-over-year in Q1 '19, so we're kind of facing that year-over-year comparison which was difficult. But I think the important part that I want people to understand is that, we don't view PS as a good leading indicator for our subscription business. What's most important in that business is that we continue to sell and add on products, expanding our existing customers' add-on products, our existing customers, and we land new customers and take them live. And when we look at our go-lives, in March, it was down from January and Feb, but it was at or above many of the months in 2019, and then April is above March. And so, we're still doing a good job of bringing in customers and taking them live and that's really what drives subscription.

And so, on PS, to give you a little more color, PS is really comprised of things like nexus studies and voluntary disclosure agreements and registrations and even like customs brokerage support services. And so, little of the PS revenue for the core high-velocity business comes from implementations. So, the services are all very valuable to our customers. I think, right now, they're focused on their business and they just want to get this tax headache, which I think has become more complex and it's going to continue to be more complex, they just want to get the taxes calculated and the returns filed and the payments made. And the other things dealing with back filings, the BTA, I think they can put that on pause and come back to that later. And so, that's the majority of the PS services and that's I think where we see the impact. And in the guide, we've kind of given some color that we see it being flattish for the year. It's just difficult to see when that comes back and we had a strong year in the first half of the year. Last year, I think we did 52% growth year-over-year in Q2 '19 as well. But I think the important point is we don't look at it as a leading indicator of the subscription business.

Scott McFarlane -- Co-Founder and Chief Executive Officer

And I just want to point out to everybody on the call that we're very conflicted when it comes to professional services because we do not want to be in competition with our partners, the people who are bringing us business and doing the implementations. So, we walk a very fine line in what we're doing with how much we grow that business and how much we involve the partners and we always want to be partner-first.

Operator

[Operator Instructions] Your next question will come from Matt Stotler from William Blair. Your line is open.

Matt Stotler -- William Blair & Co. LLC -- Analyst

Hi, guys. Thanks for taking my questions. You addressed most of them, just a couple of quick ones for me. First of all, you talked about your stable customer churn which was positive. Sounds like downgrades are pretty benign at this point. But outside of the kind of structured downgrades that you're seeing, are you seeing any requests from customers for flexibility in billing terms, or ACV relief, or anything like that?

Scott McFarlane -- Co-Founder and Chief Executive Officer

Yeah. We have seen customers ask for extended payment terms. So, can we pay net 90 instead of net 45. We've seen some of that. We've seen elongation in our days sales outstanding. But it's a few million dollars, it's nothing too concerning at this point. And we haven't -- on the pricing side, really, customers haven't been as focused on increasing discounts for new sales, but they've been more interested in cash relief. And so, I think that manifests itself in maybe giving them a net 90 or something longer. And also, we've had seen some customers request instead of paying annual in advance, can they pay quarterly or monthly? So, we are getting some of those requests, it's not a significant portion yet, but I expect we'll see more of that.

Matt Stotler -- William Blair & Co. LLC -- Analyst

Right, OK, that's helpful. And then the second one, it's from a higher level, obviously, you guys have over the past decade or so built this massive library of content, and you've expanded that both organically and through acquisitions. Just wondering, looking forward, what kind of priorities you have in terms of continuing to expand content and capabilities whether that's geographically or in terms of different types of tax coverage? Thank you.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Yeah. I mean, Ross actually addressed this when we talked a little bit about where we're going to take our investments going forward, and we've really tried really hard to protect in what we're doing around content, around development, R&D. So, we can drive the new products, we're bringing out the efficiencies and content is just one of those and we've got I think a very strong roadmap around the content that we want to deliver to fill in the holes in the US and what we need to do internationally as well, in particular EMEA and Brazil. So, we're going to stay on that game plan and fill in the holes that we've had. I've been saying all the way along the line, we don't have all the content that we need in the U.S. and we're going to continue to be relentless in making that happen either through our own efforts, through the Indix acquisition as we can start to point that AI service to get that done and, well, as acquisitions when they come up. So, I mean, we're going to be relentless in driving that forward.

Matt Stotler -- William Blair & Co. LLC -- Analyst

Got it. Thank you for taking my questions.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Thank you.

Operator

Your next question comes from Siti Panigrahi from Mizuho. Your line is open.

Siti Panigrahi -- Mizuho Securities -- Analyst

Hey. I'm glad to hear you guys are doing well. Most of my questions are asked. Just a quick question, you talked about revised guidance lower. I'm just wondering where do you see the impact more between your calculation business versus compliance? You guys talked about the business model. Just wondering where you expect more impact.

Ross Tennenbaum -- Chief Financial Officer

Yeah, I mean, I think, one, when we think about sort of roughly half of the subscription business is compliance. And so, that's not really tied to transaction volume or anything like that. So, we feel really well insulated and then we talked about how the other half which is calculation. And we feel reasonably well insulated there because of how our pricing model where we're pricing wide bands. And so, customers have to be meaningfully impaired and they'd have to meaningfully impair to downgrade in the way the pricing model is built, they're pretty wide. So, it's hard to get downgraded and then the impact on revenue to us is less than the impact to transaction volume.

So, there is really good reasons why we're insulated across the board. And as we talked about our churn and downgrades, that is looking good so far. Not sure how they play out going forward. But so far, the base is really stable and the metrics look good. When we think about guidance for 2020, I'd say we're focused on three things, right? We modeled a few scenarios, V-shape, U-shape, L-shape, we kind of zeroed in on the U-shape. As we model the scenarios, we're able to get the boundaries high and low on what revenue can look like for the year and we're able to get comfortable around those boundaries. And the three areas we looked at was just sort of that shape of the curve and how it'll affect new bookings. And so, Q2 being the hardest hit and then Q3 improving from there, and Q4 opening up more broadly. And then the second part is churn.

As I commented, it's just what do we think about churn and March was good, April was on par with March. So, so far, we're really seeing a stable churn base, it could uptick, we did model and assume some uptick, we expect it would, but so far it's been holding in nicely. And then the third one is we've got a bunch of new products coming out this year and some of them we had projections for revenue in the back half of the year, we're still going to launch those products and we still are going to focus on getting revenue from those products, but I think in this environment, that could dampen our expectations, that has dampened our expectations for what we expect out of those products. So, kind of those three things and the scenario model I talked about is how we got our arms around the guidance.

Siti Panigrahi -- Mizuho Securities -- Analyst

Okay. Thanks for taking my question.

Ross Tennenbaum -- Chief Financial Officer

Thanks, Siti.

Operator

Your last question comes from Daniel Jester from Citi. Your line is open.Great. Thanks, everyone and thank you for squeezing me and two really quick ones. First on the growth opportunities, you talked about just a little bit earlier about being opportunistic going up market. I guess, how does that rank in your growth priorities given that going up market might be a little bit of a higher-touch sale which could be a little more difficult in the current environment? So, it's the first question. And then the second question is when state and local jurisdictions change up sort of the filing date, is that for -- how does that impact you, especially for the customers that aren't on a subscription for tax returns, if that shifts the revenue, does that add any incremental cost on your side? Any insight there will be great. Thank you.

Scott McFarlane -- Co-Founder and Chief Executive Officer

So, I'll take the -- Ross, do you want to take the last question first and then we'll deal with the other one. Go ahead.

Ross Tennenbaum -- Chief Financial Officer

Yeah. So, we're monitoring and cataloguing the changes that jurisdictions are making, allowing our customers to delay file, in some cases, you can delay your payment, but you have to file; some cases, you can delay filing as well. What I would say is over the past few years, we've really moved the compliance business to mostly annual subscriptions paid upfront and so, the returns revenue is recognized ratably. There still are some, I call, pay as you file, so you have we file, we bill and recognize the revenue, but it's become really a significant majority -- I mean, minority of the compliance and most of its annual recognized ratably. And so, we could see that small minority, if you file a little later, it might shift some revenue. But we don't see that as a really meaningful impact into revenue.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Hey, Daniel, can you repeat the first question?

Daniel Jester -- Citi -- Analyst

Sure. Just on going up market, it feels like in this type environment, it might be a little bit of a difficult high-touch sale, kind of where is that ranked in your priorities right now?

Scott McFarlane -- Co-Founder and Chief Executive Officer

I mean, look, I mean, we're going to continue to be opportunistic in the enterprise space. I mean and that means -- and when I say opportunistic, the thing that I really mean about opportunistic is that we don't change our sales motion. We don't -- the way we go after the upper end of the mid-market is the same way we go against -- I mean, up market into the enterprise space. So, for us, there really is no change in sales motion and we're going to be as aggressive of doing those opportunistic changes, I mean, opportunistic deals as we possibly can and we do quite a number of those every quarter.

What I would say is we're just in the process of having a limit availability of our custom rules and that's really the biggest element that I've talked about in the past that we need to have as a feature in order to really go up market. And we've been driving toward getting that release and bringing that out over the coming quarters. And so, yeah, we have our sights set on continuing to be opportunistic and moving up and hopefully it will coincide with the loosening of all of the COVID issues. So, yeah, it could be really good timing for us.

Daniel Jester -- Citi -- Analyst

Right. Thank you very much.

Scott McFarlane -- Co-Founder and Chief Executive Officer

Thank you.

Operator

We have no further questions. I would like to turn the call back over to Scott McFarlane, Co-Founder and CEO for closing remarks.

Scott McFarlane -- Co-Founder and Chief Executive Officer

I want to close by saying thank you to Ross and congratulations on his first earnings call with Avalara and to all the employees for your adaptability and to our customers and partners for your trust. We will navigate the coming months together and I'm confident that Avalara will emerge from this crisis stronger as a team and as a valued technology to our customers and partners. Thank you all for your interest in Avalara and we look forward to talking to you on the next call. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 76 minutes

Call participants:

Greg McDowell -- Investor Relations

Scott McFarlane -- Co-Founder and Chief Executive Officer

Ross Tennenbaum -- Chief Financial Officer

Christopher Merwin -- Goldman Sachs -- Analyst

Sterling Auty -- J.P. Morgan Securities -- Analyst

Bradley Sills -- Bank of America Merrill Lynch -- Analyst

Joey Marincek -- JMP Securities -- Analyst

Josh Reilly -- Needham & Co. LLC -- Analyst

Luke Morison -- Canaccord Genuity -- Analyst

Alex Sklar -- Raymond James & Associates, Inc. -- Analyst

Brent Bracelin -- Piper Sandler & Co. -- Analyst

Matt Stotler -- William Blair & Co. LLC -- Analyst

Siti Panigrahi -- Mizuho Securities -- Analyst

Daniel Jester -- Citi -- Analyst

More AVLR analysis

All earnings call transcripts

AlphaStreet Logo