Ladies and gentlemen, thank you for standing by, and welcome to the Avalara Third Quarter 2021 Earnings Conference Call. All participant lines are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw yourself from the queue, press star one again. Thank you. I would now like to turn the call over to Jennifer Gianola, Vice President, Investor Relations. Please go ahead. Good afternoon and welcome to Avalara's Third Quarter 2021 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, expectations regarding the integration of acquisitions into our business, and growth opportunities and synergies arising from such acquisition. Our expected future business and financial performance and financial condition, and our guidance for the fourth quarter and fiscal year 2021, 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 a 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 25, 2021, 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. Thanks, Jennifer, and welcome to everyone joining our Q3 2021 earnings call. Q3 was another great quarter for Avalara, demonstrating the strength and durability of our business model. We reported Q3 total revenue of $181 million, representing an increase of 42% year-over-year, one of our strongest quarters in history. When combined with the first half, this was the best fiscal year to date performance in terms of revenue growth rate since going public. Our strong growth was driven by solid performance across the business and the addition of strategic acquisitions that we closed since Q4 2020. Even excluding acquisitions, organic revenue growth in the third quarter increased 29% year-over-year. Once again, I'm excited to see a very balanced quarter with success points coming from many key initiatives. Our success in attracting new customers across a wide range of industries, segments, and geographies is very exciting. We are winning large multi-product deals and cross-sell wins from our acquisitions. We also experienced strong customer retention and solid upsell activity. A great proof point is our revised net retention rate of 116%, and our legacy net retention rate of 112%, which was the second highest since our IPO. As part of our growth strategy to expand our international reach, we are very pleased with the attendance and the excitement at our annual international flagship event, Inspire Virtual 2021 in October. The event was a big success with more than 4,000 registrations from around the world, the largest in our history. The theme this year was Powering Global Commerce and was focused on empowering leaders with the knowledge they need to grow their business internationally. We believe that to dominate the future of global compliance and distance ourselves even further from the competition, we must have the best content powered by AI and machine learning, the largest number of partner integrations, and the most robust technology platform, not to mention best-in-class onboarding. As you can see from our year-to-date results, customers are choosing Avalara to streamline their tax compliance at a brisk pace, and our value proposition has never been more relevant. As further validation, we are honored to win significant independent third-party recognition from IDC, demonstrating the impact we are making in the industry. IDC recognized Avalara as a leader in three reports covering worldwide SaaS and cloud-enabled tax automation software for small and mid-sized businesses, enterprise, and value-added tax. Being recognized as a leader across all three IDC MarketScape categories further validates the pioneering innovation our teams are delivering to best serve our customers around the globe. Stepping back, we started our journey in the SMB market with aspirations to dominate all segments. Today, we are a leader in SMB, a massive greenfield opportunity and minimally penetrated. Over the past few years, we have successfully invested in expanding our reach into the enterprise, small, and international segments. As I've said before, it's a long-term journey, and we have a bold vision to be part of every transaction in the world. Our leadership recognition validates what we've been saying over the past few years, and we fully expect that our position in these industry analyst reports will continue to grow as we execute our vision. As I've mentioned before, Avalara is in a unique position to benefit from four major trends we are seeing impacting businesses of all sizes, including the fundamental shifts in the fabric of commerce and regulatory obligations, along with rising adoption of cloud-based infrastructure and ROI expectations in the market. The growth of omni-channel commerce is a generational opportunity for Avalara. Businesses adopting or expanding e-commerce and marketplaces selling are excellent prospects for us as their omni-channel complexity and compliance exposure grows. As more businesses of all sizes continue to replace on-premise applications with cloud services, the concept of cloud compliance has shifted from a novel approach to an expectation in the market. One of the drivers of this shift is the economic efficiency delivered by cloud services and automation. Even beyond COVID, we expect our cost efficiency and ROI messaging to continue to resonate and be a key driver for purchasing decisions with our prospects. Against this encouraging backdrop, growth remains our top priority, so we intend to increase our investments in problem and solution awareness. We know how this story ends. Compliance will be automated. Our goal and our obligation as a leader is to accelerate the process of helping companies around the world understand their exposure and how they can address it with the leading cloud compliance solution. Status quo has always been our most powerful competitor, and we intend to harness these catalytic trends and capture the future. Our customer wins are proof points that we are executing our strategy, including expanding our moats and building out our portfolio of offerings organically and through M&A. Here are just a few examples. We won a large enterprise deal with an iron products company for a deal value of $224,000, which includes annual recurring revenue, one-time software and services. We won the deal due to our pre-built integrations with several disparate systems, including a leading ERP application, a leading finance and operations application, an accounting software package, and a business process management application. We also won an iconic American snack brand for a deal value of $75,000 due to our ability to integrate through their entire quote-to-cash process, including our integration with a leading finance and operations application and two separate commerce platforms. Next, we won a large international multi-product deal with a U.K.-based sporting e-tailer for a deal value of $295,000, including cross-border duty classification, sales tax determination in 40 states, VAT, GST determination for the new European Union VAT regime called Import One-Stop Shop, or IOSS, and the U.K. government's Making Tax Digital, as well as access to our SST program. We continue to see success winning deals with our Avalara and TTR go-to-market strategy. As one example, we won an auto services company for a deal value of $48,000, including AvaTax, CertCapture, and our battery and tire content from TTR Tax Research. The competition under-delivered, so we brought in our TTR experts and took the deal away. Additionally, we won several competitive wins and takeaways. First, we won a competitive takeaway for a screen company for a deal value of $143,000, replacing an on-premise vendor. We won this deal by having all the required products, including AvaTax, TTR Research, registrations, CertCapture, and consumer use tax. Next, we won an e-commerce platform for a deal value of $97,000, including AvaTax, CertCapture, and SST. The competition did not have an exemption solution, and the company had audit exposure for not being registered yet in any states. We won a nail products distributor for a deal value of $86,000, including AvaTax, returns, and SST. We won this deal due to our pre-built integration with an e-commerce platform and our AvaTax integration with SAP ERP. We won a digital design company for a deal value of $154,000, including AvaTax, VAT calculations, and CertCapture. We won the deal due to our integrations with Shopify and our AvaTax integration with SAP ERP. Finally, we won a parking technology company for a deal value of $134,000, including AvaTax, TTR, and a future requirement for our SST program. The customer had a complex manual process for tax determination and couldn't find a vendor to fit until they met with Avalara and TTR. Among our cross-border successes was a deal with a commerce-as-a-services company for a deal value of $133,000, including our AvaTax cross-border and our Avalara managed tariff classification offerings. We won this deal by leveraging our strong partnerships with Shopify and one of the largest online marketplaces in the world. One of my favorite deals is with a vitamin company for a deal value of $78,000 including AvaTax, TTR research, and SST in 23 states. The company was established only nine months ago and experienced rapid growth but was managing the process manually and for only one state. This is a great example where economic nexus thresholds were broached quickly and a complex product with state-to-state nuances of taxability created the trigger to call Avalara to keep them compliant. We believe we've built one of the most defensible moats in all of software with over 1,000 signed partner integrations and growing. In fact, a recent IDC report highlighted our moat by stating, and I quote, "Avalara's experience gained from thousands of customers using these integrations for years has made it a no-brainer for buyers to pick Avalara in competitive situations." That's why our strategy from day one has been to offer far more integrations with business applications than any other tax software provider, and we never stop working to add more. We are continuing to expand and deepen our relationships with partners at all levels of our ecosystem. We have put ourselves in a leading position to expand our partner relationships across industries and tax types, and we are seeing new opportunities. As one example, we are excited to announce that we recently signed a partnership with a leader in enterprise management software for convenience retail and petroleum wholesale markets. This is a major win for Avalara. The company has agreed to rip and replace their own native reporting and returns module with Avalara's Returns for Excise as their OEM reporting solution and be jointly named, marketed, and sold to their enterprise customers in oil and gas. The company also intends to build a connector into our calculation and determination engine with initial plans to make this available to enterprise customers next year, giving us a brand-new channel in which to sell our entire technology stack for energy into some of the largest enterprises in oil and gas. Also at our Analyst Day in May, we announced that we entered into an agreement to assist Shopify in supporting their cross-border duties and tax solutions. I'm excited to share that as part of Shopify's recent Shopify Markets launch, the duties and tax solutions are now available in early access. This is scaling nicely with targeted plans to be generally available to all Shopify merchants in the coming months. This solution enables Shopify merchants to classify their product catalogs with international tax codes and calculate cross-border customs duties and taxes at the time of sale. Recently, Shopify declared that now every merchant is global by default, and we are excited to help Shopify enable the future of global commerce. This new relationship is a great example of what I call the second wave of partnership deals for Avalara. These deals are with providers like e-commerce platforms, marketplaces, and payment processors, and they are being accelerated by the generational shift in e-commerce adoption. It's really an exciting time for us because we have been building towards this watershed moment for years. It reminds me of when we were going after ERP vendors during the early days of the company. We knew we had to win those deals to solidify our position and lock out competitors. We are witnessing the same thing now in a second wave where e-commerce, payment processing, and compliance converge. We saw this coming a long time ago and strategically prepared for this moment by building a track record of success and credibility over 17 years. We have used this strategy to get ahead and stay ahead of our competitors in the past, and we believe we are going to win with it again. We also continue to advance our acquisition strategy. We are driving hard organically and through M&A to continue building our global cloud compliance platform and future-proof our leadership in this space. We leverage M&A to expand our tax content repository, add new capabilities and technology, inject talented new personnel into our business, and extend our geographic expansion. At our May Analyst Day, we highlighted potential additions to our product family to expand our offerings. I'm pleased to announce that we have entered new areas of compliance automation, including 1099s, W-9s, and property tax. We started with our roots in sales tax calculation and added returns and continue to expand into other indirect tax types over the last few years. Today, we are moving beyond indirect tax into areas of direct tax, such as 1099s and property tax, increasing our TAM as we build the most robust compliance platform in the market. To expand our range of compliance solutions, we acquired Track 1099, a provider of online software and services for cost-effectively managing, e-filing, and e-delivering IRS forms, including 1099s, W-2s, W-9s, and more. Track 1099 supported more than 40,000 customers with their filing needs in tax year 2020. By acquiring Track 1099, we are adding technology, content, and expertise to our platform and team. We are delighted to welcome founder Lindsey West and the team at Track 1099 to the Avalara family. Next, we acquired the assets of CrowdReason, a developer of SaaS-based property tax compliance applications, as well as a related property valuation and advisory service business to help solve property tax challenges. According to the U.S. Census Bureau data from 2018, state and local governments collected a combined $547 billion in revenue from property tax, or 17% of general revenue. Property tax revenue as a percentage of state and local general revenue was higher than each of the general sales tax revenue, individual income tax revenue, and corporate income tax revenue in 2018. We are delighted to welcome founder Carl Hoemke and the team at CrowdReason to the Avalara family. Adding property tax content and software to our global compliance portfolio extends Avalara's footprint into a large and exciting new tax type. We believe our customers and partners will value our platform for end-to-end compliance automation and the consolidation of today's fragmented landscape of compliance products. We will continue to look for and close opportunities that we believe will improve and sustain Avalara and our growth objectives. We continue to bring talented leaders with diverse backgrounds onto Avalara's board of directors. I would like to welcome global finance leader Marcella Martin to our board. Marcella is the Chief Financial Officer of Squarespace, where she oversees the company's finance and corporate development functions. Marcella brings more than 25 years of global finance and leadership experience across consumer technology, software, SaaS verticals with high-growth companies to Avalara's board. Her expertise in streamlining operations and M&A integration, combined with her experience guiding strategic operations during periods of growth, will add tremendous value to Avalara's board of directors. I am proud that Avalara's board is quite diverse. Today, more than a third of Avalara's board is made up of women. In addition, two out of three Avalara's board committees are led by chairwomen. As we've always said, we believe we are a long and strong business with low penetration in a large addressable market and a long-term play based on automating statutorily required functions. We believe we are outpacing the competition and driving the future of global compliance, and we believe we can grow and scale Avalara into a multi-product, multi-billion dollar revenue company over time. Thank you. With that, I'll turn it over to Ross. Thanks, Scott. Avalara posted another great performance in Q3 that exceeded our guided metrics and was again driven by balanced execution across the business. Q3 total revenue was $181.2 million, up 42% year-over-year, or up 29% after excluding revenue from acquisitions since Q4 2020. Subscription and returns revenue grew 38% year-over-year to $164.2 million, or up 30% excluding acquisitions, and represented 91% of our total revenue. Professional services revenue was $16.9 million, up 95% year-over-year. The high growth rate in services revenue was largely driven inorganically by the Q4 2020 acquisitions of business licenses and TTR. As a reminder, during the second quarter of 2021, we revised our core customer calculation methodology to include revenue from our SST customers, resulting in additional customers being included in reported core customers. We also revised our net revenue retention rate calculation methodology to include revenue from SST that previously was not included and to exclude professional services revenue as these services tend to be more one-time in nature. We have included both the revised and previous key metrics methodologies for core customers and net revenue retention rate in a table at the end of our earnings press release. Our revised core customer count increased by 830 from the previous quarter to approximately 17,400 at the end of Q3 2021, a year-over-year increase of 22%. Our core customer count under our previous definition increased by 820. Our revised net revenue retention rate was 116%, unchanged compared to 116% last quarter, resulting in a 115% four-quarter average. Our NRR under our previous definition increased to 112%, up from 110% last quarter, resulting in a 108% four-quarter average. We are very pleased with our NRR rates, which indicates strong sales execution among our existing customers, coupled with improving customer retention dynamics. Q3 revenue from revised core customers grew 27% year-over-year to $145.2 million. Q3 revenue from non-core customers grew 40% year-over-year to $19.3 million, primarily driven by strong growth in EMEA. Q3 revenue from acquisitions since Q4 2020 was $16.7 million. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, operating results, and share count 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 $133.2 million in Q3, representing a 74% gross margin. This compares with gross profit of $95.5 million and a 75% gross margin in the same period last year. Subscription gross margins were 75%, down from 76% in the same period last year. We continue to focus on increasing our subscription gross margin over time through our ongoing investments in automation. However, any improvement in subscription gross margin may be offset by lower gross margins on some of our acquisitions and less mature products. Our total gross margin will also be impacted by the mix of subscription and professional services revenue. Sales and marketing expense was $67.3 million in Q3, or 37% of total revenue, compared to 36% last year. As we discussed last quarter, this reflects our intention to increase our investment in sales and marketing in the second half of 2021. Q3 research and development expense was $36.3 million, or 20% of revenue, down from 23% of revenue in Q3 2020, but included a higher benefit from capitalized software in the current quarter. Absent the increased capitalization, Q3 R&D expense would be roughly in line with the year-ago comparable period. Q3 general and administrative expense was $26.1 million, or 14% of revenue, down from 15% of revenue in Q3 2020. Q3 operating income was $3.5 million, which was better than our guidance, largely as a result of strong revenue and gross margin and some expense favorability from capitalized software and slower hiring than forecasted. Q3 net loss per share was $0.03 in the quarter, based on 86.5 million shares outstanding. Total deferred revenue at the end of Q3 2021 was $257.9 million, up 43% from $180.6 million at the end of Q3 2020, and up 22% year-over-year, excluding acquisitions in Q4 2020. Calculated billings is a non-GAAP metric that takes into consideration revenue and the change in deferred revenue, as well as the change in contract liabilities. Calculated billings was $196.4 million in Q3 2021, up 38% year-over-year. We also produced 26% year-over-year organic calculated billings growth, which was impacted by a couple growth points from lower new customer billings in the EU with our largest marketplace partner. As a reminder, we are a back-end compliance platform for VAT registrations and filings for this partner's marketplace, and the partner controls the flow of customers to our service. In addition, in Q4, we expect to enter into a new contract and pricing rate card with this partner that we believe will result in higher volumes at lower prices for existing and new customers serviced through this partner's platform. As a result of these changes, we expect to realize a small headwind on total company billings and revenue growth in 2022. We remain excited about the global opportunity with this important partner and believe there are additional opportunities to expand our relationship by supporting them with a broader range of compliance offerings and in more jurisdictions. Revenues from this partner accounted for approximately half of Q3 international revenues, with the remainder coming from our EU direct business as well as international sales efforts in other regions, including Brazil and India. Free cash flow was $6.4 million in the third quarter, compared to $25.9 million in the same quarter last year. As we have stated on past calls, our free cash flow will fluctuate from quarter to quarter, caused 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. Our cash and cash equivalents were $1.5 billion at the end of Q3 2021, an increase of $472 million from $1.1 billion at the end of Q3 2020. During Q3 2021, we closed a convertible debt offering and raised $959.9 million in net proceeds after deducting fees and expenses. I will now conclude the call by providing guidance on revenue and non-GAAP operating loss for Q4 and for the full year 2021. We continue to expect the mix of professional services revenue in the range of 9%-10% of total 2021 revenues. For Q4 2021, we expect total revenue between $183 million and $185 million, which represents a 27% year-over-year growth rate at the midpoint of the range, or 23% year-over-year, excluding revenue from acquisitions closed since Q4 2020. We expect our Q4 non-GAAP operating loss to be in the range of $5 million to $7 million, reflecting a more aggressive ramp in second-half spending, especially in sales and marketing. For the full year 2021, we expect total revenue between $687 million and $689 million, which represents a 37% year-over-year growth rate at the midpoint of the range, or 28% year-over-year, excluding an expected $57 million in revenue from acquisitions closed since Q4 2020. We expect our full-year 2021 non-GAAP operating loss to be in the range of $1 million-$3 million. We expect to produce positive free cash flow for 2021. We are in the early stages of our 2022 budget process and plan to provide detailed guidance on our fourth quarter conference call. That said, I would like to share some early thoughts regarding 2022. Our thesis and vision have not changed. We are addressing a large, low-penetrated market and believe that Avalara is well-positioned to deliver durable, long-term, top-line organic growth of 20%-25% as we continue to pursue building a multi-billion dollar business. Please note that beginning next year, we don't expect to break out organic and inorganic revenue contribution as we will have lapped the closing dates of our two largest acquisitions, TTR and business licenses. We believe 2022 revenue from our other 2021 acquisitions will not make a material contribution to next year's revenue growth. We are currently at the center of four powerful forces driving our long-term opportunity and continue to believe the solutions we provide are in the early innings of market penetration. Beyond opportunities to expand our core business, we see new growth drivers from our partner ecosystem, international, and our expanded platform story. The acceleration of e-commerce, coupled with favorable regulatory changes, has increased awareness of the importance and complexity of tax compliance for businesses, marketplaces, and e-commerce platform providers. For us, this is fueling an exciting wave of significant expansion opportunities with a number of industry-leading partners and is gaining the attention of businesses grappling with the complexities of both national and global e-commerce compliance requirements. The international landscape is also changing fast. We believe new regulations aim to make calculating and reporting transactional taxes more real-time, which will require software automation solutions. We also believe e-commerce is increasingly enabling even small businesses to be global merchants and thereby having to face a wide range of tax compliance complexities that also require our software solutions. Finally, our recent organic and inorganic product additions will help us transition to a platform company where we can offer a broader range of compliance solutions, thereby expanding the value we can provide our customers. As we consider these great opportunities for additional investment, efficient growth remains important to us. We have demonstrated our ability to drive leverage in non-GAAP operating loss, and based on our 2021 guidance, expect to produce positive free cash flow for the third year in a row to complement our 36% three-year revenue growth CAGR. However, we believe the momentum in our business, compelling customer economics, and unique position in a large market all support more aggressive investment in 2022. Again, we plan to provide detailed guidance on our fourth quarter conference call in February, but our early 2022 investment plans result in a modest non-GAAP operating loss margin of just a couple percentage points of 2022 expected total revenues. In closing, we have an exciting opportunity to continue building a durable growth compounding company. We believe we are a leader in a large market that is still early to adopt tax compliance automation technology. We are seeing a demand transformation as businesses become omnichannel, operate in many jurisdictions, and shift their business to e-commerce in the cloud. These changes, coupled with an ever-shifting regulatory environment, make it even more difficult to maintain tax compliance without automation. At the same time, we are beginning to evolve to a platform company driving an increased supply of products and capabilities to increase the value we deliver to our customers. We also continue to invest to win additional segments and geographies so that we can continue to compound growth for the long term. Please note we will participate in upcoming conferences, including Berenberg and Stephens in the fourth quarter. Thank you for participating in today's call. At this point, we would like to open up the call for your questions. The floor is now open for your questions. Again, to ask a question, please press star one on your telephone keypad. Your first question comes from Brad Sills of Bank of America. Oh, great. Hey, guys. Thanks for taking my question. Congratulations on a real nice quarter. I wanted to ask about the ERP end of the business. Obviously, a key trigger. E-commerce has been really strong for you all, and that's clear. We're seeing some evidence that ERP upgrades are starting to turn from some headwinds that we saw during the pandemic. What are you seeing in that end of the business and what impact could that have going forward? Hey, Brad, it's Scott. I would say that we're seeing, you know, the ERP world rebounding a bit. Having said that, I think we're seeing that, you know, across all of our different ERPs. I think sort of more important than that is it's just a reminder that for us, new ERPs, it's a great trigger, but there just aren't that many, you know, businesses that upgrade, you know, during the year and pick new ERPs. Avalara really has a lot of headroom in greenfields. It's in all those ones that are already, you know, in NetSuite, or already in Sage, or already in Microsoft, and that one of the other triggers are pushing them to say, "Okay, now is the time to adopt, you know, adopt sales tax." Because we're low penetrated throughout, you know, the channel. I know it's important to, you know, focus on the new ERPs 'cause it's such a great trigger for us, and that's happening. The real challenge, the real road ahead of us is how do we go deeper, you know, into the existing channels that aren't upgrading, but they're having one or the other triggers. Like, you know, they're moving into a different state, or they're going global. You know, or, you know, they've had a change in their accounting department and the CFO, new CFO or controller comes in. So, you know, that's really what I'm really looking for is how do we expand out into the base. We're seeing a nice trend with the new ERPs as well. Great to hear, Scott. One more if I may please. Just on the international side of the business. Obviously, you're starting to see some real success there, and it looks like it's outpacing the business overall. Could you remind us what it takes to address international from a content standpoint? Are you there? Do you feel like you have that footprint already in place to really go after it in a material way? Are there still some gaps there? Any color on that effort? Thank you so much. Sure, Brad. I remind everybody in our company this, you know, all the time. I mean, when we enter a market, you know, you need certain things, right? You have to be able to do calculation. You have to be able to do returns. You've got special services, you know, like exemption certificate in the United States. You know, it could be fiscal rep, you know, around, you know, in the EU. It's not just one thing, it's all of those things combined, and they all have their aspect of content, right? You know, you have to do the deep research around how calculations are done, how reports are filed, what return... What return forms are used, how that information gets onto the forms, and then all of those different, you know, special areas. I mean, wherever we go, content is the basis of how you enter. I mean, Brad, you and I have talked about this a bunch. Where, you know, to be part of every transaction in the world, you need two things to take place. I mean, you gotta execute really well, but two main things. First of all, you have to be connected in with all of the major, you know, ERPs and e-commerce, and all the people who are creating invoices around, you know, around the world. The second thing you have to do is have all the right content, so when you do those calculations and when you're entering that information on forms and when you're doing the remittances, it's accurate. Those are really the two combinations that Avalara focuses on the most. We've always talked about those are two of our strongest moats that we have. Avalara has a content team around the world. Our content team's on four continents. We take that really seriously. Now we're adding AI and machine learning in order to be able to do that. It's a real important aspect. Great to hear. Thanks so much, Scott. Thanks, Brad. Your next question comes from Siti Panigrahi of Mizuho. Hey, guys. Congratulations. Scott, when I'm looking at your, you know, acquisition strategy and even organic development, you're expanding your platform even now from tax, direct to indirect, even business license and even e-invoicing. It appears like you're becoming a platform where you're intermediary between government agency and businesses. When you take that approach, where do you see are the remaining opportunity? How big is that opportunity? Help us, like the area you could expand. Then as you're expanding, how do you see is it more displacing smaller solutions there, or is it more greenfield, businesses are managing manually, and you can come in and bring automation? Help us understand that opportunity. Sure. You know, early on, you know, we'd always had this vision about being a compliance, you know, about a compliance platform. We focused. You know, our beachhead was on, you know, sales tax. Knowing that it wasn't just sales tax 'cause it was that and, you know, if you wanna, you know, service the internet, anything, anywhere, any place, any time, you know, you have to be able to do that in, you know, 208, you know, nations countries. I mean, that's just, you know, table stakes for being in the, you know, in the business. I mean, it's a big TAM in and of itself, and it's largely greenfield. Having said that, you know, I mean, the basic strategy that I've always had and that we have in the business today is you've got to take care of the here and now. You know, sales tax, VAT, you know, all the expansions that we've done into the international, and it's doing well is fantastic, but you need to lay the groundwork for future-proofing the business. I mean, the way I see expanding our TAM, you know, our reach is using our really dynamic moat with partners and how we interconnect, especially with ERPs and the like, to allow us to expand into other areas. Other areas where you become a trusted resource of them in you know indirect tax. In this case, you know, sales tax and VAT and all of the other, you know, services that we do. You can then take that trusted relationship and solve other enormously complex areas of compliance for your customers. I mean, it's just a natural extension. Much of the information that you need for one is information that you need for the other. There's a synergy that is developing the further we go with the platform, and it really is a powerful tool for you know, making, I mean, making the customer sticky, adding more revenue to the business, you know, and driving penetration, you know, throughout the market. That's great. A quick follow-up, Ross. When you think of 2022 investment areas of investment, could you help us understand your priorities? Is it more on R&D side integration or more toward acquisition or even like go to market, you know, enterprise sales? Could you help us a little bit on that? Yeah. Yeah. Hi, Siti. If anyone missed the prepared remarks, we gave some color in 2022 when we talked about just the great investment opportunities we see and that, you know, we're thinking early thoughts, and we're still in the budget process around a couple percentage points, non-GAAP, operating loss as a% of revenue. Where does that investment go is the question. The first area I think about is research and development. We've been running, you know, in the low 20s as a% of revenue in R&D. We expect that to remain, you know, in a similar area for next year. Continue to invest heavily in that area as we look to build out the platform that Scott talked about expanding, you know, in indirect and beyond. There's new products we've been launching. There's new M&A that we're integrating. Really just, we've always said we think we can outrun the competition and build a really special platform in indirect and beyond. Continuing to make those investments are important to us. Second, in sales and marketing, I think we'll see a little bit of deleveraging in the sales and marketing as a% of revenue next year. Since IPO, we've been bringing sales and marketing as a% of revenue down and getting some really good efficiencies around there. You know, long term, there's plenty of opportunity for efficiencies, but as we find ourselves at the center of these four forces that are really putting tax as one of the front and center things, you know, in that magic moment of commerce, we just see a lot of opportunity. We've got new M&A to market and sell to, sell with and just a lot of good opportunities on the sales and marketing side. We'd like to deleverage a little bit there, invest a little more in sales and marketing. G&A, we still have a lot of infrastructure things to put in place. I'd hope to see a little bit of improvement in G&A as a% of revenue. Then on gross margin, you know, we'll build that out a little more in February as well as all of these when we provide formal 2022 guidance. Gross margin, as we've been saying, we're getting improvements in gross margin through automation. You've seen that over the last couple of years. We've also talked about new products in M&A as they come in or start at a little bit sub our corporate margins, and so they put some weight on that. We got to figure out how the mix will play forward and how that'll affect 2022 gross margins. We'll provide more color on that, but same commentary on gross margin I've given in the prior calls. Thanks, Ross, for that color. Great. Yep. Your next question comes from Brent Bracelin of Piper Sandler. Thank you, and good afternoon. I guess maybe we'll start with Ross and finish with Scott, if I could. Ross, can you remind us what the SST kind of revenue mix is in the quarter? I know that contract was renegotiated entering the year. Just remind us what the potential headwind from that contract renegotiation was in the quarter. Thanks. Yeah, so SST, and you know, we're trying to get away from calling it out because we've done a nice job of talking about it since last year to give everyone a true understanding of what was going to happen and walking you guys through what did happen and how it's affected the year. I think it's been a great year overall even with that. I think we managed through it quite nicely. You'll see in the 10-Q, it'll talk about SST. Q3 SST increased by $2.7 million. You guys can do the math, and you'll see it's slightly below corporate revenue growth. Consistent with our commentary over the last several quarters, we said coming into this year, it's gonna grow fast. It's gonna start to come down throughout the year because of the pricing change, which is offset by volume additions. As we go into next year, we won't have that pricing headwind anymore, so things will normalize next year. Yeah. Great. Well, good to see that business still growing healthily even with the price adjustment there that you talked about before. Let me ask, switching gears to Scott here. I'd love to get your view on Stripe TaxJar. Curious to see if you've seen them in the low end of the market at all with the calc-only solution. I would love to also get you to address kind of Shopify, the partnership there. It seems like you're strengthening the partnership with some new functionality announced this week as well. Walk us through that Stripe TaxJar relationship and some of the new developments that you're winning some new business in Shopify as well. Thanks. Sure. I don't really see the Stripe, you know, TaxJar acquisition, you know, playing out in the marketplace, at least anything that we can see that changes differently from what was happening in the past. I understand, you know, I mean, I'll say the same thing I've always said. I understand, you know, what they're thinking. They wanna, you know, they would love to build out, you know, that platform. I think it takes a lot in order to make that happen. You know, a lot of connectors, you know, a lot of content, you know, a lot of expertise in upmarket, and you have to be able to serve customers of all sizes. I'll say it again, I fundamentally believe that, you know, tax is, you know, complicated. It needs to be centralized in compliance in general. You know, Avalara will be that sort of back end for, you know, many of the different, you know, larger vendors. I think you're starting to see that, you know, as I called it out in my prepared remarks, you know, the second wave of, you know, these players coming along, whether it be eBay, Square, you know, Shopify, you know, some of, you know, some of those. I just think, you know, for 17 years, we've put ourselves in a place where, you know, you have SST, you have cross-border, you have the ability to, you know, take care of all their customers across, you know, their entire markets. You know, you have all the connectors in place. I think it's a formidable, you know, moat as to, you know, how those play out. I think in our press release yesterday, you know, with our new Shopify relationship, I think that's a portion of it. We build out cross-border, which I think is a natural for e-commerce providers. I love what Shopify said. You know, it's you know, every business is global. I've always believed that. I think it's you know, people need to deal with duties and I mean, all of that at the front end, not down the road. You know, right at checkout. I think it's a natural play, and it tightens our relationship with Shopify, and I think it you know, shows you know, shows off our strengths. I mean, you know, I think, you know, the IDC, you know, report, I think it really captured the way I'm thinking about it. You know, we put ourselves in a position with our deep partnerships and all of the customers that we have in those that we become a no-brainer, you know, when people go to choose a solution. We're the easy one to do or, you know, we've got all the modern capabilities. It's a natural for us. That's just the way we think about it. How do we improve our position to be able to take on these larger and larger customers and earn the ability to do that? We did that with ERPs. We did that, you know, with the ecosystem. Now with this second wave, we're in the process of doing it, and I like where we're standing in it. Well, it's great to see the partners validating the strategy here. Thank you so much. Again, as a reminder, to ask a question, please press star one. Also, in consideration of time, please limit to one question. Your next question comes from Matt Stotler of William Blair. Hey, guys. Thanks for taking the question. Just one in the interest of time. Would love to get an update on the accounting firm channel specifically and how that partner ecosystem is building out, both in terms of the interest you're seeing and the investments you've made in products specific to that channel and any early traction there, as well as thoughts on the roadmap for continuing to enable that channel going forward. Sure. You know, I've always been an enormous fan of this initiative. I mean, I think it's really important just to remind everybody, you know, what we've done is in Avalara's history, when we started doing returns in 2006, we've built out, you know, a fantastic platform for ingesting information and getting it onto tax forms and getting those tax forms filed and have the ability to follow that up with the payment. We always thought that, you know, back in the day, we would be able to just, you know, build it, and they will come. As we became more mature in our thinking of this space, it's why should we fight with, you know, the big four? Let's just take what we have and provide them to, you know, to the accounting firms and allow them to use what we've already built and charge that as a revenue source. Rather than competing with the accounting channel, let's use the accounting channel and help them make money and build them. It's just part of our strategy of how do you know, always look to partner first and do that. With that in mind, I'm pretty pleased with where we I mean, with where we are. I mean, you know, we started out with a group of beta users already built in. I mean, I think we're proving out the concept every single day, and you know, we're starting to see the uptake. These are big, you know, changes for many of these firms, so it's not something that happens overnight. I know that this is an area that will pay huge dividends for, you know, for Avalara, you know, next year and the year going forward. Your next question comes from Scott Berg of Needham. Hey, everyone. This is Michael Rackers. I'm on for Scott Berg. Thanks so much for taking my question, and congrats on the quarter. Just one quick one for me. It sounded like content was really picking up a lot of steam for you guys. I'm just kind of curious, on that side, you know, are there any other areas of content that you think you might need or, you know, would be beneficial to really excel in the enterprise market, if there are any? Thank you. Sure. I mean, I wouldn't characterize it as content is heating up. I mean, because the way I would say it is the minute we started this company, you know, content was on the front burner. The reality is right, if you don't have the right content, it doesn't matter how many partnerships you have, it doesn't matter what you do, you cannot calculate for them. You know, we've made, I mean, a real effort over the years to build out what I would consider a world-class, you know, content team that spans many areas from cross-border to, you know, to sales to VAT to, I mean, all over the world. I mean, we're on a long-term journey of content. Having said that, I mean, you know, content does play a huge role for us, but not so much, I would say, you know, is it in enterprise or is it in, you know, mid-market? Because, I mean, you can be a... I mean, if you're doing candles, I've always said this, if you're doing candles, you can do it, you know, out of your home, and the taxability and all the content is the same if you're, you know, a big producer that's selling candles all over the world. The content has to be there for big and small. I mean, that's just a general statement. Content for us, right, and where it does play with multinationals and where it does play throughout the world is when we wanna go international, the biggest thing that we have to solve is content. You move into Asia, you know, you have to have all of the appropriate content. You move from Brazil, which we're entrenched in, and you want to go to Mexico or Argentina, it's all about content. Content plays an important role for us and, you know, all your acquisitions are really acquisitions about, you know, doing getting bigger and better and the right content. I mean, you know, as we look at M&A, as we look at all sorts of things, content is always at the fore of what we do. Your next question comes from Stan Zlotsky of Morgan Stanley. Hi, guys. This is Hamza Fodderwala for Stan Zlotsky. Thank you so much for taking my question. Can you please provide details around FX impact on the quarter? Hey, I didn't catch the name, but FX, very minimal. Very minimal right now. I don't think FX, given international is about 8% of revenue, there is a little bit of impact, but it hasn't been enough to be calling it out. I would just say, it's a minimal thing that doesn't boil up to call out at this point. Your next question comes from Peter Levine of Evercore ISI. Great. Thanks for taking my question. Congrats on a good quarter. Actually the only one. Within the Shopify BigCommerce channel, I mean, are you seeing an uptick in conversions, upsells? You know, I think the trends we've seen with e-commerce, I would assume usage would pick up. I mean, maybe help us understand what does it take for these customers to kinda trigger a certain threshold of usage for you all to kinda be able to go back to them directly, upsell them? Really just wanna understand, you know, how the conversions, upsells among that channel have been trending. Thanks. Sure. I'll address it at the front end, and I'll let Ross, you know, jump in and talk a little bit about the, you know, the numbers and trends and things like that. What I would say is that, you know, our relationships with these partners are always strengthening. We've been, you know, seeing. You know, I would characterize it as we are seeing really good progress in our ability to work with them and get the messaging out to their partners. I'll just refer to Shopify and how, you know, they've, you know, jumped on the bandwagon and started to, you know, tell their customers that, you know, that they need to deal with this threshold. They need to, you know, take sales tax, I mean, you know, very upfront and they need to, you know, deal with it, you know, in their own right. It really, the minute they do that, it generates an enormous amount of calls and how do I, where do I go to? You know, being on their platform, being the provider that's there, I mean, you know, we've seen a nice uptick. You know, I'm pleased with that. You know, but our conversion has been improving as well. I'm pleased with the direction that we're going. I'm pleased that we're, you know, able to add cross-border to it as well because I think that that's an important aspect of it. You know, I just remind everybody, the way you win this market, I mean, it's just so important. The way that you deal with it is you must win that partner first. Getting in there and dealing with calculation and being their back-end support for that allows you then to come along and work with them to monetize things like returns, to do cross-border, and to expand the relationship with all of these. The first thing to do is win the deal. You just must win the deal and Avalara's been doing that, you know, in a significant fashion. Ross, got anything to add to that one? No. I mean, I think you covered it. I just think I was gonna say what you said at the end, which is it's all about winning the partners that are aggregators of these e-commerce merchants. These e-commerce merchants are, they're omni-channel. They've got e-com, they've got They often have ERP, sometimes they have stores. They have multiple systems. They're doing business in multiple channels, and we, you know, tie into all those. If you can do that, and if you can box out other competitors, you're built in, and now you've got that private hunting ground to go target them and sell them other things over time. What I've been saying is, like last year, you had this surge of e-com, and everyone was like, "Well, you know, Shopify's growing faster. Why aren't you growing faster as well?" It's like all these people that just became e-commerce providers in 2020, some of them expanded and used more of our services. They needed returns, they needed certs, they needed other things, and we convert them to core customers of ours, and we sell them more. There's many of them, you know, that haven't bought any more, that they just have calc in the Shopify cart or another partner's cart, and they haven't yet fully realized the complexity and the density of their tax complexities. Over time, we have the opportunity to sell them returns and certs, and if they're doing cross-border, you know, now they can do it natively on Shopify and many other products that we licensings, registrations, TTR content subscriptions, all the stuff that we've brought to bear, we can now sell them. That's the key. That seeds this consistent long and strong growth picture that we have is just own the partners, have those people calculating on your platform, and then have the opportunity to sell much more over time. That's the strategy, and I think that that's what we're trying to do very consistently. Your next question comes from DJ Hynes of Canaccord. Hey, guys. This is Luke on for DJ. Thanks for squeezing me in here. You mentioned last quarter that you had maybe turned the dial a little bit too far on efficiency around sales and marketing and that you were looking to find a better balance in the second half of this year. Sounds like this is playing out based on your commentary. Maybe you could just double-click for me there just to discuss sort of how that shift is going and maybe expand on some of the initiatives you're making within your sales org to accomplish that. You know, I do. I mean, it's really true. I mean, I think we demonstrated that we can really, you know, turn the dials and really make, you know, sales and marketing extremely efficient. I think that, you know, for me personally, I, as the leader, you know, as the leader in the space or, you know, one of the leaders in the space, I mean, we have an obligation, I think, to really talk about the problem, you know, and bring more people to the party, if you will. Our CMO, Jay Lee, I just. He gave me the greatest analogy, you know, at one of our meetings was he said, "Today, Avalara has been aspirin for sales tax or transactional tax problems," right? I've got a problem. I'm being audited, or, you know, I'm one of the trigger events, so therefore, I'm gonna go take aspirin, and I'm gonna go solve that problem with Avalara. What we're trying to signal to everybody is that we don't any longer wanna be aspirin. We think we have an opportunity and sort of an obligation as in our position to be able to teach people that, you know, be like vitamins or preventative medicine for them. Moving out of, "I have a problem right now. Take the pill and solve the problem." Let's get everybody going. Let's get everybody to understand the problem. Let's get everybody, you know, focused on what we can do to prevent, you know, the medical emergency. I think that's what we're going to do. I think you'll see us dial up awareness spend. You know, I think we're gonna double down on what we're doing with our partners and, you know, really engage with them to, you know, get to the next level. I think we'll work with our CAM team, our customer account managers, you know, to really sell the multiple products that we have. I think we'll organize around, you know, being able to do that both domestically and internationally. I mean, I think it's a challenge for us. I think, you know, stepping up into that role will be very exciting for the company, and I think it's a real opportunity for us to grow. Your next question comes from Alex Sklar of Raymond James. Great. Thanks. Scott, as we think about the broader compliance platform, do you see any opportunity to expand into ESG reporting compliance at all? I know in the past you've kind of talked about environmental compliance as a potential expansion area. I'm just curious what that vision looks like. Thanks. Hey, you know, I mean, I love that concept, right? I mean, you know, being able to, you know, we do it to a degree, right? You know, today, I've said this before. When we tax fuel and fuel moves from one state to another state, there's lots of compliance documents that have nothing to do with tax. They're just compliance documents that have to be filed when you move, you know, goods around. I mean, having that experience, there are lots of environmental, you know, documents that we can get involved in. Although it's not, you know, something that's on my radar screen, you know, right now, it's something that is there, and we continue to, you know, to think about how we can build that out. Because in our platform, my platform vision and the platform vision that we have for the company, being able to deal with, you know, documents and environmental documents in particular, is just a fantastic way to prove that out. Your next question comes from Andrew DeGasperi of Berenberg Capital Markets. Thanks for that. I just have one in particular. I know you're still finalizing your 2022 guidance and you're giving that out on Q4 earnings. I was just wondering, you brought up the couple percentage points headwind in next year in terms of the new marketplace contract. I was just wondering if that is just a function of you being conservative, given that the price will probably apply on day one and the volume benefits don't come until later on, and so we could see some improvement to that number. Yeah. Andrew, it's Ross. I just wanna correct. Didn't say couple percentage point headwind next year. We said when we talked about op loss, we talked about a couple percentage points of revenue non-GAAP op loss. What we were explaining is on the organic billings growth for Q3, it was 26%. When you unpack that, you look at the U.S. first, and that was close to 30% in the U.S., so it feels like where we all want it to be. Then you look international, and within international, you look at one specific very important partner. We had you know that's what caused the delta between that U.S. number and the 26%. And that is just. I was reminding everyone that there's, it's a very important large partner. We've got many opportunities with them over time to expand geographies, expand what we sell with them. I think, you know, it's just a great partner to have, and there's a lot of future opportunities, and we're diversifying beyond that partner. But we're the VAT registration and filing solution on their marketplace. They're the front end, we're the back end, so they control the flow of customers. In Q3, there were less customers flowing into us than prior quarters. It's been growing really fast. I just wanted to call out that we're going through a revised contract. With that contract, you know, we're gonna go from annual billing to monthly next year, so there'll be a little bit of duration change, and there'll be a bit of a pricing change. I don't want people to over-index on it. I mean, this is smaller than SST. Again, it's contained to a partner in international. It's really the spirit of transparency. We called out organic, inorganic growth rates. We called out SST. I think we did a really good job navigating all that. This is a smaller than SST thing that we just wanted to give some transparent color. We said it may have a small headwind on 2022. We'll talk more about it in the Q4 call if need be. Again, I would put it in that context and not overindex on it. Yeah. It's a small headwind for that particular partner. This concludes the question and answer session for today's call. I will now turn the floor back over to Scott McFarlane for any additional or closing remarks. Thanks. You know, I'd like to take this opportunity to thank, you know, all of our employees, customers, partners for all of their hard work and support during, you know, trying times for certain. You know, we look forward to talking to you on the next call. Thanks, everybody. Take care. Be safe. Ladies and gentlemen, this concludes today's event. Thank you for your participation. You may now disconnect.