Shares of Avalara Inc. (NYSE:AVLR) sank on Friday after the tax compliance automation provider reported its second-quarter results. While Avalara beat analyst estimates for both revenue and earnings, it wasn't enough to keep the pricey stock afloat. Avalara shares were down 8.1% as of 11:30 a.m. EDT, after being down as much as 16.9% earlier in the day.
Avalara reported second-quarter revenue of $63.7 million, up 25% year over year and $2.9 million higher than the average analyst estimate. Subscription and returns revenue totaled $59.7 million, up 24%, while professional services revenue grew 56% to $4.0 million. The company now has 8,080 core customers, gaining about 320 net new customers during the quarter.
Non-GAAP earnings per share came in at a loss of $0.19, up from a loss of $0.20 in the prior-year period and $0.04 better than analysts were expecting. On a GAAP basis, the company's net loss widened thanks to higher operating costs.
"Companies of all sizes are increasingly looking for modern, cloud-based transaction tax compliance automation solutions as they digitize their businesses and embrace powerful industry trends such as e-commerce and globalization," said CEO Scott McFarlane. "We believe Avalara is a clear choice based on our industry-leading platform and content, pre-built integrations, and partner channel."
Avalara expects third-quarter revenue between $66.0 million and $66.5 million, with full-year revenue between $260 million and $261 million. Non-GAAP operating loss is expected between $10 million and $11 million in the third quarter, and between $41.5 million and $43.5 million for the full year.
This was Avalara's first quarterly report as a public company. While it beat expectations, it wasn't enough to prevent the stock from slumping. With a market capitalization prior to Friday's plunge equivalent to 11.5 times full-year revenue guidance, the market may have been expecting more.