What happened

Shares of Avalara (NYSE:AVLR) rose on Thursday after the tax compliance automation provider reported its second-quarter results. Surging revenue beat analyst expectations, and the company posted a smaller-than-expected net loss. The stock was up about 11.9% at 12:55 p.m. EDT.

So what

Avalara reported second-quarter revenue of $91.3 million, up 42% year over year and about $6.7 million above the average analyst estimate. Subscription revenue jumped 42% to $85.0 million, while professional services revenue was up 56% to $6.3 million.

A rising chart.

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Avalara ended the quarter with 10,430 core customers, up from around 9,700 at the end of the first quarter. The net revenue retention rate, which measures revenue expansion with existing customers, was 111%.

Non-GAAP (adjusted) earnings per share came in at a loss of $0.03, better than a loss of $0.19 in the prior-year period and $0.08 better than analysts were expecting. The adoption of the ASC 606 revenue recognition accounting standard improved non-GAAP earnings per share (EPS) by $0.07 compared to the old standard, which was in place during the prior-year period.

Now what

For the third quarter, Avalara expects revenue between $92.5 million and $93.5 million, along with a non-GAAP operating loss between $7 million and $8 million. For the full year, the company expects revenue between $364 million and $366 million, and a non-GAAP operating loss between $15 million and $20 million.

"We continue to believe that the automation of transaction tax compliance will be adopted over an extended period, as customers upgrade systems, expand their businesses both domestically and internationally, and respond to changing government rules...We believe our broad tax content, robust platform, partner channel, and pre-built integrations position Avalara as a clear choice to lead this automation cycle," said Avalara CEO Scott McFarlane in prepared remarks included in the earnings release.

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