Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Avalara Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then 1 on your telephone keypad. To withdraw your question, please press star one again. Thank you. Jennifer Gianola, Vice President of Investor Relations, you may begin. Good afternoon, and welcome to Avalara's fourth quarter and fiscal year 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 Chief Financial Officer, 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 impact 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 acquisitions, our expected future business and financial performance and financial conditions, and our guidance for the first quarter and fiscal year 2022, 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 Q4 2021 earnings call. I would like to congratulate the entire Avalara team for an outstanding performance in the fourth quarter and fiscal year 2021. 2021 was another terrific year for Avalara. We accelerated our top-line growth, reporting total annual revenue of $699 million, an increase of 40% year-over-year, with our first ever annual positive Non-GAAP operating income of $6 million. Even excluding acquisitions in 2021, organic revenue growth increased 29% year-over-year, consistent with the prior year's organic growth. We also reported free cash flow of $13 million, our third straight year of positive operating and free cash flow. Reflecting on the last three years since IPO, I'm proud of our team for delivering a 37% three-year revenue CAGR and consistent operating results that exceeded expectations in good and challenging times. In 2021, we added several exciting milestones. We achieved our first ever annual Non-GAAP operating profit. We crossed over 100,000 in total end customers. We were recognized as a leader in all three IDC MarketScape reports on global cloud tax automation. We delivered more new products and capabilities than ever before in our history. We expanded our relationship with Shopify to power cross-border duty and import tax features of its global commerce hub, Shopify Markets. We achieved the largest attendance ever at our virtual CRUSH, and we issued nearly $1 billion of convertible notes, providing ample financial flexibility for the large opportunity in front of us. As we approach $1 billion in annual revenue run rate, we are excited about our opportunity to leverage our growing scale, competitive moats, and ubiquity in the market to establish Avalara as the standard cloud platform for compliance. Our thesis and vision have not changed. We remain a leader and category definer in a massive global market driven by statutory requirements and with enviable tailwinds tied to the adoption of cloud, e-commerce, ROI, and regulatory. We believe that over the long term, every business will adopt tax automation. We are early in this journey, and we believe we are best positioned to capture the leading share. As we look forward to 2022, it feels as though we have more opportunity to capture than in prior years. Here are some of the opportunities that I get excited about. After 18 months of aggressively building and buying content and products, we have a significant opportunity to cross-sell more products to our large customer base. It feels like we are entering our second wave of partnership opportunities, where many large players from across the ecosystem are more focused on what we do. This opens exciting opportunities with new partners and potentially large expansions with existing partners. In addition to our core SMB market, we continue to expand our reach upmarket to large enterprises and downmarket to smaller businesses. Building on our 2021 success in international, we have opportunities to expand our presence and our product portfolio in existing and new markets. We believe compliance automation is inevitable. We are right where we want to be in our journey, and now we must continue to execute our strategy and drive towards our vision of becoming the global category-defining cloud compliance platform. I love talking about our customer wins. I believe they exemplify our leadership position, which has been built on years of investing in our differentiated strategy. They speak volumes to the value of our competitive moats, including how our content, broad product portfolio, and more than 1,200 signed partners integrations help us win competitive deals across nearly every size segment, industry, and geography. Over the years, it's been exciting to see the evolution of our customer wins, including larger deal values, more deals with multiple products and integrations, and more global customers. Here are just a few examples. During the fourth quarter, we won enterprise deals with a diverse group of companies. First, we won an enterprise deal with a florist company for a deal value of $300,000, including annual recurring revenue, one-time software, and services due to our integrations with disparate systems, including ERP, point-of-sale, and commerce platforms. Next, we won a deal with a boating supply company for a deal value of $180,000. After discovering serious license exposure, the company selected us to package an end-to-end license management and compliance offering built on the assets we acquired from our 2020 Business Licenses acquisition. We won a tree wholesaler in a multi-product deal for $238,000, including AvaTax, certificates, returns, and our SST program. We won this deal due to our integrations with a leading ERP application and our relationship with a global software and consulting partner. Finally, we won a deal with a financial services company for $99,000. The company is operating in 11 states, and a recent audit led to a negative judgment. We won this deal due to our pre-built integration with a leading ERP application, coupled with a strong recommendation from one of our business transformation partners. Additionally, we compiled several competitive wins and takeaways. We won a competitive enterprise deal with one of the leading distributors of air conditioning and heating supplies for a deal value of $215,000, including AvaTax, Consumer Use Tax, and exemption certificates. We won against the competition due to our embedded integration with a leading business software application. Next, we won a deal with a vehicle services company for a deal value of $170,000, including AvaTax, Consumer Use Tax, TTR Research, and CertCapture. We won this competitive deal due to our unified product offering, TTR Research, and our integration with a leading accounting and finance software application. We won a competitive takeaway deal with a global industrial company for a deal value of $100,000, including AvaTax, CertCapture, and TTR Research. We won due to our partner integration with a leading ERP application for global manufacturers and superior technology and feature set. Finally, we won a competitive takeaway exemption certificate management deal with a multinational conglomerate for a deal value of $231,000. The company wanted a better solution and was impressed with our ECMS platform. We have great examples of customers experiencing rapid growth that triggered the need to move away from status quo, manual processes to tax automation. First, we won a deal with a restaurant chain for a deal value of $147,000 for our licensing managed services. Thanks again to our Business Licenses team. The company was tracking licenses manually, and the rapid growth exceeded their ability to keep up with demand, triggering the need for a cloud-based solution that replaced Excel spreadsheets. We also won a diversified power solutions provider for a deal value of $53,000, including AvaTax and CertCapture. We won this deal due to our integration with a leading ERP application and our CertCapture offering. The company has been using manual processes for exemption certificates, and its rapid growth triggered the need to automate compliance. On the international side, we won a deal with a fast-growing tech company based in Spain for a deal value of $350,000, including AvaTax, VAT reporting, and India GST, beating out the competition. This win is a great example of why our portfolio of products matters in the world of global commerce. We won a multinational Indian conglomerate for a deal value of $40,000, including AvaTax Cross-Border and returns, opening the door for more opportunities in the future. We won this deal due to our integrations with a multinational ERP application and a leading enterprise commerce platform. Finally, we won a U.K.-based fashion retailer for a deal value of $309,000, including AvaTax Cross-Border and returns with future opportunities, including TTR Research and Business Licenses due to our integrations with an e-commerce platform and a leading cloud ERP system. As demonstrated through our customer wins, Avalara's partner moat continues to be a key differentiator, especially as businesses shift to omni-channel and seek a single tax compliance platform that can integrate into multiple disparate systems. That's why we continue to enhance our partner moat by actively forging new relationships that enable us to offer integrations with more business applications and exposure to potential customers. We offer far more pre-built integrations with these applications than any other tax software providers, and we plan to continue adding more. Our total number of partner integrations, including all of those that have been signed but are not yet live, has increased to 1,200. With that, today we are excited to announce several new partner deals. These new relationships are great examples of what I call the second wave of partnership deals for Avalara, building on the first wave of ERP deals during the early days of the company. First, we signed a multi-year partnership with an industry-leading online payroll and HR solutions company, expanding our reach to over 50,000 small and mid-sized accounting practitioners. This deal positions Avalara for Accountants, our recently launched suite of tax compliance tools, as the sales tax technology solution of choice for accounting practices. We signed a multi-year deal with one of the largest point-of-sale providers in the market, servicing many verticals, including restaurants, banking, retail, and hospitality, supporting thousands of locations. Next, we signed a tax services partnership deal with an international cloud-based accounting provider to build and offer a joint sales tax solution to small businesses in the United States. Today, this partner has over 200,000 customers in the United States and growing. We are excited to announce that the DAVO team we acquired last year signed a partnership deal with a leading restaurant and accounting bookkeeping company for small businesses with 1,900 locations. After evaluating our solution, this partner saw the return on investment immediately and chose Avalara to be the tax automation engine powering their sales tax function. Finally, we signed a deal with a large American multinational shipping company covering 5,000 stores. We were selected to help the company achieve their goals of increasing accuracy of sales tax automation at their point-of-sale locations and reducing the risk of liability in an audit. We believe these deals are just the beginning of more partnerships to come. We are engaged with providers like e-commerce platforms, marketplaces, point-of-sale providers, and payment processors, and they are being accelerated by the generational shift to e-commerce. 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, and we are succeeding and winning head-to-head deals. To further expand our moat, software developer engagement is a key focus area for Avalara. Software developers who build integrations that connect solutions and services into various business applications represent another essential partner segment for Avalara. That's why we're holding our second annual virtual developer conference called Avalara NEXT in March, where we bring together developers from all over the world at the forefront of global commerce and tax technology. Also, I want to remind you that we'll be hosting our virtual CRUSH Global in May 2022. We will provide more details in the coming weeks. We hope you'll be able to join us at this event. We believe we are building the most robust compliance platform, and 2021 was another milestone year for advancing our vision, both organically and through M&A. I am pleased by the early contributions from recent acquisitions. Our two largest acquisitions, TTR and Business Licenses, exceeded our expectations in 2021. We are entering 2022 with the strongest portfolio of products that we've ever had, including more great technology, content, and talented teams that we acquired over the last year. Going forward, we will continue to aggressively pursue and grow our core business in indirect tax through organic investments and M&A. We expect M&A will be an important contributor to our international growth plans. As we've always said, we believe we are a long and strong business, single-digit penetrated in a large addressable market and a long-term play based on automating a statutorily required function. We're excited that we're approaching $1 billion in annual revenue run rate and believe we can grow and scale Avalara into a multi-product, multi-billion dollar revenue company over time. Thank you. I will now turn it over to Ross. Thanks, Scott. We were very pleased with our full year 2021 results that exceeded our guidance throughout the year. I was particularly pleased to see our durable compounding growth story continue. We are building a great long-term business and are still very early in our journey. Despite the pandemic, we were able to consistently deliver 29% organic revenue growth in 2020 and 2021, showing no deceleration. This resulted in $699 million in total revenue, or 40% total year-over-year growth, including M&A. We coupled that with our third straight year of positive free cash flow and a new milestone of achieving positive annual Non-GAAP operating income. Q4 exceeded our guided metrics and was again driven by balanced execution across the business. Q4 total revenue was $195.1 million, up 35% year-over-year or up 27% after excluding revenue from acquisitions since Q4 2020. Subscription and returns revenue grew 34% year-over-year to $177.1 million or up 28% excluding acquisitions and represented 91% of our total revenue. Professional services revenue was $18 million, up 48% year-over-year. Our core customer count increased by 870 from the previous quarter to approximately 18,270 at the end of Q4 2021, a year-over-year increase of 22%. Our core customer count under our previous definition increased by 830. Our 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 113%, the second highest result since our IPO, resulting in a 110% four-quarter average. Core customer revenue grew 26% year-over-year to $155.4 million in Q4 and grew 28% for the year. Q4 revenue from non-core customers grew 32% year-over-year to $20.2 million, primarily driven by strong growth in EMEA, and grew 39% for all of 2021. Q4 revenue from acquisitions made since Q4 2020 was $19.5 million and $62.2 million for all of 2021. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, operating results, and share counts 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 $142.1 million in Q4, representing a 73% gross margin. This compares with gross profit of $107.7 million and a 74% gross margin in the same period last year. Subscription gross margins were 75%, down from 76% in the same period last year. The year-over-year impact on gross margin was driven by new acquisitions as well as higher hosting infrastructure costs. Sales and marketing expense was $75 million in Q4, or 38% of total revenue, compared to 37% last year. The increase in sales and marketing is a reflection of our desire to continue investing in our go-to-market motions to take advantage of the large market opportunity. Q4 research and development expense was $38.8 million, or 20% of revenue, down from 21% of revenue in Q4 2020, but included a higher benefit from capitalized software in the current quarter versus the prior year. Absent the increased capitalization, Q4 R&D expense would be roughly in line with the year-ago comparable period. Q4 general and administrative expense was $26.6 million, or 14% of revenue, down from 17% of revenue in Q4 2020. Q4 operating income was $1.7 million, which was better than our guidance, largely as a result of strong revenue and some expense favorability. Q4 net loss per share was $0.06 in the quarter, based on 87 million shares outstanding. Total deferred revenue at the end of Q4 2021 was $283 million, up 35% from $209.7 million at the end of Q4 2020, and up 34% year-over-year, excluding acquisitions since 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 liability. Calculated billings was $217.8 million in Q4 2021, up 30% year-over-year, and up 25% year-over-year, excluding acquisitions since Q4 2020. On an adjusted basis, when we exclude the impact of our large EU marketplace partner, our organic calculated billings was a consistently strong 29%. As a reminder, in Q4, we evolved our contract with this partner, resulting in lower volume-based pricing and a switch from annual to monthly billings over the course of 2022. These changes are intended to improve the customer experience and increase adoption volumes. As you know, we don't guide to billings, but as you think about your 2022 billings, please keep in mind that the changes to the agreement may impact our billings growth rate by a few percentage points while the impact of the new pricing and billings frequency normalize. We remain excited and believe we are still early in our journey 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 across more jurisdictions. Free cash flow was $18 million in the fourth quarter compared to $28.6 million the same quarter last year. For 2021, we achieved free cash flow of $12.7 million compared to $34 million for 2020. 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 Q4 2021, an increase of $840 million from $674 million at the end of Q4 2020. Looking now at our fiscal year 2021 results, total revenue of $699 million was up 40% year-over-year, or 29% after excluding $62.2 million in revenue from acquisitions since Q4 2020. Subscription and returns revenue contributed $633.1 million. This represented 91% of our total revenue, and it grew 36% year- over- year or 29% excluding acquisitions. Professional services and other revenue contributed $65.9 million. Gross profit was $513.7 million for 2021, representing a 73% gross margin. This compares with gross profit of $368.5 million and a 74% gross margin in 2020. We were very pleased to have achieved for the first time positive operating income of $5.5 million in 2021, which compares with a $3.1 million operating loss in the prior year. I will now conclude the call by providing guidance on revenue and Non-GAAP operating loss for Q1 and for the full year 2022. We are excited to be entering 2022 coming off a 31% organic billings and 29% organic revenue growth year. Our thesis and vision have not changed. Avalara is a simple story. In the long run, like other required back-office functions such as payroll, we believe every company will automate their tax compliance. We are addressing a large, low-penetrated market where we are a leader in the space with competitive moats and a differentiated business strategy. We are positioned to capture a leader's share of our market opportunity. We believe this position translates into durable, long-term organic revenue growth of 20%-25% as we continue to pursue a multi-billion dollar revenue business. In recent years, we have outperformed our long-term growth objectives. We will continue to strive for outperformance as we scale the business. For 2022, there are several growth initiatives where solid execution can help us achieve outperformance, including new customer acquisition velocity, cross-selling new products to our vast customer base, sustaining international growth, and expanding into new regions, and closing key second wave partner opportunities. Taken all together, our growth algorithm gives us confidence that we can deliver another strong year. For the full year 2022, we expect total revenue between $854 million and $859 million, which represents a 23% year-over-year growth rate at the midpoint of the range. We expect our full year 2022 Non-GAAP operating loss to be in the range of $17 million- $21 million. We are proud to have delivered positive free cash flow in each of the last three years and positive operating income in 2021. Our 2022 guidance reflects our view into numerous attractive investment opportunities that support our long-term growth thesis. We expect 2022 professional services revenue to be around 9% of total 2022 revenue. We expect 2022 revenue seasonality to be generally consistent with prior years. We expect 2022 total Non-GAAP gross margin to be similar to our 2021 results of 73.5%. This reflects an increase from our ongoing automation efforts, countered by a decrease from recent M&A and new product efforts, and work required by some of our exciting new partner relationships that require our solutions to run on another cloud infrastructure. For Q1 2022, we expect total revenue between $197 million and $199 million, which represents a 29% year-over-year growth rate at the midpoint of the range. We expect our Q1 Non-GAAP operating loss to be in the range of $9 million-$11 million. Please note that similar to prior years, we expect to have significant Q1 cash outflows for bonus payments, software and insurance renewals, and other large expenses. 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 and 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 continuing to evolve to a platform company, driving an increased supply of products and capabilities which will deliver even more value 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 JMP and Morgan Stanley in the first quarter. Thank you for participating in today's call. At this point, we would like to open up the call for your questions. As a reminder, if you'd like to ask a question, please press star then one on your telephone keypad. Our first question is from Brad Sills of Bank of America Securities. Your line is open. Oh, great. Thanks, guys for taking my question. I wanted to focus a little bit on, you know, reopening. There's been a lot of discussion around what impact that may or may not have on software in the industry, and just curious, what are your expectations as we get into that? I think e-commerce is a focus here. There's a decent amount of underlying transaction volumes that drive your business. Maybe even just if you could drill in on e-commerce versus ERP upgrades, how do you expect those two drivers to kind of, you know, trend as we get into reopening? Hey, Brad. Let me jump in on that and Ross can, you know, give some color if he wants after I'm done here. Look, I mean, we've always said this about Avalara. I mean, we're a good company in good and in bad times, right? I mean, a low beta business. As you know, with the emergence of e-commerce and all that has gone along with that, I mean, we've seen a lot of opportunity come out of that. We're secondary to it, right? It has to develop, you know, around the world, it has to develop with our partners, and then we come along behind that. It's a long-term growth program for us as we continue to work with those partners to grow. We see e-commerce as an important part of our business moving forward in 2022 and beyond. It's just we do not see it as a decreasing program, you know. As a matter of fact, we see it as one of the big drivers of our business as we move forward. That's great, Scott. Thank you very much. Brad, I just- Yeah. Yeah, go ahead. Sorry. No, I was just gonna say like 2020 pandemic hits, and, you know, everyone's worried about software and it's slowing down, and software did great, and we did really well and, you know, did almost 30% growth that year. Then, you know, you know, e-commerce did well for us, other things did well. Then 2021, you know, people worried that things were gonna slow down, like we were tied to e-com, it was gonna slow down with others, and we posted the same growth rate. We did 29% organic both years. You know, it's just like a strong position to be in. I think it goes to Scott's point that, you know, we're a consistent business that can compound growth good times and bad. You know, we're at the center of that, those four forces we always talk about, e-com, cloud, ROI, and regulatory change. I think those continue to be there in 2022, and e-com will be good, you know, ERP is important, and there's a lot of opportunity out there for us. That's great to hear. Thanks, Ross. Then one more, if I may, please. You mentioned focusing on investment in added geographies and segments. Could you drill into a little bit there, just a little bit more detail as to, you know, which geos and what are some of the segments that you're focusing on this year as far as investment? Thanks so much. Yeah, Brad. Look, I mean, we've talked about this pretty consistently. I mean, you know, we see, you know, we're single-digit penetrated in this huge SMB market. I mean, one of the things that I'm excited about this year is to continue to focus in on that. Having said that, I mean, there is opportunity for us as we intentionally move upstream into the enterprise world. I mean, that's, you know, that's something that we're gonna continue to do, and I think you saw that a little bit or heard that a little bit in my comments about the deals we're winning. Likewise, I mean, you know, our DNA is in partners. I mean, that's something that we just, you know, we thrive on. The SMB world is ripe for that, right? We talked a little bit about that in my, you know, my earnings script. I see those two as just sort of that's what we always do. Now, moving beyond that internationally, you know, we see huge opportunity in growing what we do in EMEA. You know, we've really had a good go of it in U.K. and some of the other countries, but we can expand that even more to more of the countries in EMEA. You know, we have a big presence in India, and we're gonna continue to use that presence to grow our sales business there. Brazil has been a great place for us to, you know, be a beachhead for us in LatAm. What I think you'll see us internationally is to continue to focus on the things I just talked about, but we'll start to do exploratory work in putting, you know, our BD and product management people in country in some of the other countries in Asia and LatAm so we can start to build that out. Because, I mean, developing these markets, it's not a single year journey, it's a multi-year journey. We wanna start that, albeit small, but growing, you know, outside of the areas that we're in today. That's exciting. Thanks, Scott. Our next question is from Gabriela Borges with Goldman Sachs. Your line is open. Hi, this is Kevin Kumar on for Gabriela. Thanks for taking my question. Curious on the enterprise go-to-market as you invest more sales resources there. Sorry. How's the surround strategy impacting the types of conversations you're having with customers? Are you starting to see a broadening of the use cases within enterprise? Thanks. Those good questions. Like I said, you know, we've been more intentional than we've ever been in our enterprise space. You know, that comes with, you know, growing out our products, growing out our feature sets, as well as building out the sales force. But I have to say our sales force is probably the most mature aspect of what we're doing in enterprise today. I mean, you know, when we talk about enterprise, you know, you have to be careful because there's the Fortune 1000, and then there are all the companies that need, you know, compliance that can spend a lot of money, a lot of money. Some of those you heard today, $300,000-$350,000, and those are not household names. Our team is pretty adept at selling those. We're growing out our product. But what I think one of the biggest areas that we continue to grow is build out our team of specialists and getting a better understanding, you know, around how you sell with the sales engineer in motion, and how you work with the big customers and the big partners that are out there. That's a long-term journey for us, and we continue to grow on it. I think it, as evidenced by, you know, as the script said in some of our use cases, case wins that we had. I think we're expanding in all areas. I mean, you could just see it, all industries, all geographies, you know, from an omni-channel perspective is where we really shine, and I think it's highlighted by, you know, the customers that we talked about today. I expect to see more of that. I expect us to get better at doing that over the years to come. I'm really excited about where we are and how we can grow enterprise. Great. Regarding the 2022 operating guide, coming in, I think it's slightly negative. How should we think about investment priorities between product and go-to-market this year, and just the general cadence of hiring throughout the year? Thank you. Ross, why don't you jump in on that one? I think where we're focusing our investments is a lot in sales and marketing. I think as we talked about last quarter, you know, you'll see a little bit of a deleveraging in sales and marketing as a percent of revenue as we focus on some of these opportunities that we've highlighted. We've got, you know, a huge opportunity with some of these partners who we're calling the second wave of partners, new partners, and expansion of existing partners. We are expanding our investments around those teams and functions. We've got, you know, a lot of opportunity to expand in international, new countries, and geos, so we're expanding investments there. You know, cross-sell, upsell, and just getting the you know, organization aligned, the teams aligned, and the investments required to hit that opportunity. We've got you know, a tremendous amount of new products and a great opportunity. We have over 100,000 end customers. We hit that milestone last year, total end customers. It's a lot of opportunity to sell more products to these customers, and so we're investing in that. You'll see that in the sales and marketing line. R&D as a% of revenue should stay somewhere similar to last year. We're going to continue to you know, invest at the same level, but that's you know, that's a high-level investment as we continue to build out the platform. Gives us opportunities for future growth. you know, we always think it allows us to really build something special in the global compliance platform and start to pull away from the competition. We like that a lot, and those are the two main areas with sales and marketing being the key one that'll increase year- over- year. You know, I'll just follow on with what Ross said because I think it's really worth mentioning. I mean, this is a huge market with just enormous opportunities, and the things that we focus on is being as focused as we possibly can in this world where there is so much opportunity. So when Ross talks about, you know, multi-products and cross-sell, big opportunity for us. I get immensely excited about that. But I mean, I just can't emphasize enough how exciting it is when you see the second wave of partners, right? I mean, like I said, partnerships are in our DNA. It's who we are. It's how we shine. The world economy and all that's happening is really driving a lot of business opportunity around that. I just feel like it was back in the day, and you know, it's an exciting opportunity. Then you have international to focus on, you know. This doesn't get said enough, but I think a lot of our investment is around, you know, how we wow our customers and our partners and how we, you know, build out our people and culture. You've got all those exciting opportunities, but there's just reality around, you know, you got to take care of your customers, your partners, your people, and all of those constituents. It's an exciting year for us, and I think there's lots of, you know, opportunity to do some great things. Appreciate the color. Thanks. Our next question is from Brent Bracelin with Piper Sandler. Your line is open. Brent Bracelin with Piper Sandler, your line is open. We'll move on to the next question, which is from Matt Stotler with William Blair. Your line is open. Yeah. Hey, thanks for taking the questions. You know, I guess first, you know, would love to maybe get an update on, you know, when thinking through some of the, you know, TAM expansion opportunities here. Obviously, you've made some recent acquisitions that get you more, you know, expand out of the initial indirect tax landscape into more direct taxes and other types of taxes. Any updates on how you're thinking about how those opportunities expand your functional TAM and any early traction or thoughts on how that progresses going forward? Yeah. I mean, at the highest level, you know, I always talk about this, right? You know, the four horsemen of tax. You know, those are the things that, you know, that everybody has to do. You know, it's sales tax, use tax, you've got exemptions, and you've got returns. I mean, that is what Avalara has been based on. You know, that's where the majority of our revenue is today. But as you talk, I mean, we've really started to expand outside of those four things into transactional tax, indirect taxes, as well, you know, that, you know, doing cross-border, doing a whole host of things like Business Licenses and then just, you know, research, TTR Research. you know, like I said, I mean, we really wanna focus and bring focus to making sure that we are expanding those areas as much as we possibly can. We've explored beyond those areas and early innings in going outside of indirect tax, and those have huge, you know, TAM implications. I mean, we know that those are big. We know that those are areas that we're gonna continue to grow. But as I said on one of the other earlier calls, I want everybody to, you know, to know that we are really focused on that indirect area because, I mean, there's just so much opportunity there. When I look at, you know, beyond indirect tax, I look at that as future-proofing the business. You know, we can take care of the business and grow the business with indirect and future-proofing the business with other, you know, compliance opportunities. We're gonna be proving out that thesis, you know, in this year and the years going forward. But I expect them to be big contributors, but not just immediately. We're gonna grow them like we do all of the other ones. We'll continue to, you know, to push that. But I wanna make sure that we're really focused on, you know, what we do really well and with the opportunity in front of us in indirect tax. Right. Got it. That's helpful. Maybe just one more, you know, looking at the enterprise investments and specific to go-to-market, and obviously you have this, you know, great, you know, kind of partner-driven motion that works very well in the SMB segment. The mid-market segment's been, you know, getting you guys into the enterprise as well. You've also talked about kind of building out more white glove services for those customers. They tend to like that, you know, higher touch in some cases. Any update on how you're thinking about, you know, building out those kind of white glove resources and that, you know, I guess, more intense, you know, services model upmarket? Sure. Like I said, I mean, I think from a sales perspective, I think we're, you know, pretty well, you know, set, and we're gonna continue to grow that, and that will evolve over time. When it comes to the white glove services, you know, that's where I think that build-out of the team that I was talking about, you know, your tax technologists, the people that are there, both involved in the selling process but also in the support implementation process. I want to point out that we are a partner-driven company, and, you know, moving into the enterprise space, we wanna do that in conjunction with partners. It's not something that we wanna do on our own. You know, we believe in the partner model, and we wanna utilize, you know, partners in doing that, in joining us in that white glove service. So it'll be, you know, us. We may take the lead, but our partners will be right there next to us in providing that, and that's a motion that, you know, we wanna continue to, you know, learn and grow and develop. That'll happen over the coming years. Got it. Understood. That's helpful. Thanks again. Our next question is from Siti Panigrahi with Mizuho. Your line is open. Thanks for taking my question. You talked about the second wave of partnership deals. Scott, help us understand how long it takes usually when you do this kind of investment with partners, when do they start contributing to revenue? You know, they take a while to develop. You started to see it, you know, I mean, you started to see it with Shopify, and I'll just talk about that in general. I mean, that was a company that we, you know, that came out of our emerging group, if you can imagine, right? It was, I mean, hardly anybody had heard about it. We had, you know, we started developing it with them. We started, you know, going to market with them. You know, that's been a six- year+ journey. They start to hit their stride. We start to hit our stride with them, and we continue to grow. Once you get that, you get second opportunities and third opportunities and fourth opportunities. What I mean by that is that you get a cross-border opportunity that you know that we announced last quarter. That starts to bring you know more and more revenue. You start to expand it even further, you know, to get a larger portion of their business, you know, and that continues to expand it even more. They feel comfortable with it. You get a little bit more integrated in with their solution. Finally you've really got something that's you know that's developing. We see that with almost every one of our partners. I mean, whether it be in the beginning with the Sages and the Epicors and the Microsofts or, you know, now with, you know, e-commerce payment processors, POS and the like. Yeah, you will always get a bump from them early on, but what you hope is that that bump continues to grow and expand beyond that, and then it's a really significant partner. That's how we see these developing. Our next question is from Brad Reback with Stifel. Your line is open. Great. Thanks very much. Ross, I think last quarter, as you talked about the sort of evolving relationship with your European e-marketplace customer, that they had stopped sending volume of sellers to you for a period of time. Now that you've renegotiated that deal, have those volumes picked back up and are they running at where they were pre-renegotiation? Thanks. Yeah. Hey, Brad. Thanks for the question. I mean, I'm probably not gonna get in the habit of talking about the volumes every quarter, you know, for one partner that's, you know, less than 4% of revenue. You know, we did work through the contract change and just a reminder to people, it's meant to drive adoption and at the end of the day, we're aligned on the same cause, which is that there's statutory requirements to be compliant with that for all these marketplace sellers, the merchants. We and the partner wanna get everybody compliant, and we want to get as many as we can on our platform. To do that, you know, there's the customer experience element, there's the pricing element, and then there's the, you know, the billing business model element. We made some adjustments to go, you know, from annual to monthly billing. We think that that'll help with the experience. It's what the customers want. You know, they hit a new volume tier, so that brings the pricing down. All of that is playing out as we discussed last quarter. I think as we talked about, it'll have some impact on revenue that's reflected in our guidance, and we said it'll have a few points impact on billings growth because billings gets impacted by pricing and by the duration change. Obviously, the duration change doesn't impact MRR or the economics, it's just a duration change. Overall, Brad, like what I would say is, you know, this is a really important partner. We have a lot of opportunity with this partner within the business that we're doing already, and then there are other opportunities outside of that business. You know, we think there's, you know, a long, you know, runway to do a lot more with this partner over the years and continue to grow that business. The last thing I would say is we're not depending on them. You know, it's with $27 million of revenue last year. It's less than 4% of our total revenue. We're not dependent on them. You know, we've got over 1,200 signed partners. We're diversifying in the EU. It's good business, you know, we'll work through this. It's not that huge a you know an issue and we're excited about all the opportunities we have with this partner, with other partners in the international realm over time. Our next question is from Stan Zlotsky with Morgan Stanley. Your line is open. Hi, guys. You have Ben Ezzo on for Stan. Congratulations on a strong quarter and pipeline for the upcoming year. Just could you talk about what the revenue and billings growth is, excluding their European marketplace business? On the billings growth excluding the partner in Q3 and Q4 were both 29%. For revenue, it's pretty close to the same, so I wouldn't worry about revenue. For billings, 29% in each of Q3, Q4, organic excluding the impact of the partner. Got it. One more follow-up question. Yep. Can you just provide us with an update on your relationship with the Big Four and any possible pipeline that build up that partnership is introducing in the near term? You know, I alluded that in some of the other conversations here. I mean, that's one of the journeys that we have to, you know, go forth with the enterprise space. I mean, you know, we have a nice relationship with them. You know, it hasn't been our, you know, number one area enterprise, so, you know, we've got some ground and some work to do with them to, you know, get up to their full potential. But we see them in many deals, right? We see that. I mean, you know, we're with them with many deals, you know, and I think one of the other questions was, is our surround strategy. You know, it does work, right? Because, you know, we see the Big Four and, you know, exemption certificate customers, you know, the big customers in excise fuel, most of our strategic products, many of the deals. I mean, I would say we're doing well with them. The pipeline is building. We see a good relationship with them. You know, frankly, I mean, that's an area that we wanna continue to grow and get better at as we develop that enterprise space. You know, I'm pleased with where we are, but there's always room for improvement. Our next question is from Brent Bracelin with Piper Sandler. Your line is open. Great. Can you hear me? Sure can. Hello? Hi, Brent. Oh, good. Hey, Brent. Sorry. Just making sure you can hear me there. Good afternoon. Thanks for the question here. I'm gonna ask one question and I'll direct it towards Ross. I think it's interesting, a year and a half, two years ago, the Wall Street narrative was, well, how much can commerce and e-com be a big driver for Avalara? Conversely, now people are a little worried about exposure to e-com. Ross, could you just maybe Put a finer point around what is Avalara's exposure to e-commerce today as we think about some tougher compares in the first half of the year there, and how we should think about the Avalara kind of exposure to higher or lower volumes given part of the business is volume dependent, part of it is more subscription dependent. Thanks. Yeah, I mean, it's a great question, Brent. I just think we're a lot more insulated from the ups and downs of the, you know, GMV pure e-commerce models that a lot of people watch. You know, it's funny, we talked about this. You go back in 2020, everybody was like, "Oh, you know, you're not gonna do well because of the pandemic." Then we did well, software did well, and it was like, "Oh, you benefited from e-commerce." Then in 2021, everyone was really concerned that we and others were gonna slow down as a result of e-commerce starting to slow down in 2021. You know, again, I just highlight something we're really proud of. You know, we did 31% organic billings for the year last year, and we did 29% organic revenue growth last year, which was the same as the prior year. 2021, we did 29% organic revenue growth. You know, very, very consistent, no deceleration in a year where everyone was worried that, you know, did you pull forward demand? Is it gonna slow down? What's your exposure to e-commerce? As I look forward into 2022 and beyond, you know, e-commerce is one of these great drivers of our. It's one of these four forces, along with cloud and along with ROI and along with regulatory, that propels our business. It's a, you know, it's a generational shift. It's for us, it's not about, you know, you became an e-commerce company and how much GMV you're coming in. It's about you became an e-commerce company, you may have some stores, you're on some marketplaces, you're selling in multiple channels, omni-channel. Therefore, where you used to be able to manage your tax complexity because you were a lot more simple. You know, old days, you were simple. You had a store, you have a single site, a fewer products, whatever, selling to a few jurisdictions. You could probably handle that. You know, now you're an e-commerce provider, you got some stores, you got multiple marketplaces, you're selling in many jurisdictions in the U.S., maybe beyond the U.S. globally, and you gotta be compliant with that. I mean, you know, accepting status quo and doing that manually is very, very difficult to do. That's what's driving our business. Everyone that's become an e-commerce company, that acceleration the last couple of years, most of those are still out there. They're getting calc in their, on their e-commerce engine, probably from us, but they haven't solved the rest of compliance. They haven't solved returns, they haven't solved exemptions. They may not be doing cross-border customs and duty. They may not be doing use tax. That's our, that licensing, like all these products we have, we gotta go after them and sell them more products. Think about us as you always have, Brent, consistent, long, strong business. Our next question is from Pat Walravens with JMP Securities. Your line is open. Thank you so much. This is Joe Mincik on for Pat. I just wanted to touch on the hiring environment and sort of back to those sales and marketing investments. You know, how are you thinking about your ability to recruit and retain talent? How do you think about the type of talent you know, you're looking for, as you continue to scale? Thank you, guys. Hey, Pat. Well, I mean, just as a general note, right, you know, sort of. I mean, I see us sort of struggling with the same things that everybody else in the pack are struggling with, right? I mean, it's not. I mean, this isn't rocket science. I mean, it's harder to hire people. It's, you know, we're having to pay them more. You know, return to the office is an issue. All of those things. You know, what I'm really proud of from an Avalara perspective is, I mean, we have not seen a change in, you know, our retention rates. You know, I think our engagement with our employees is the same as it has been, you know, prior to the pandemic and maybe even better a little bit. You know, finding people, I mean, is, I mean, something that we've been really competitive at. I mean, we've added 1,500, you know, people last year. I mean, we've been pretty good at doing that in a lot of different areas. We have not seen the same kind of challenge in some of the areas, and sales and marketing is one of those, as we have in, you know, hiring developers, which I'm sure everybody talks about because it's a difficult thing. A lot of our hiring is happening in the U.S. and outside of that because we're a global company on four different continents. I don't think I have anything, you know, out of the usual to report. You know? We're doing really well. We continue to grow our team in a large and aggressive way. Developers are always difficult, but we've been able to find our way to keep people and to add the people that we need to grow the business. Our next question is from Sterling Auty with JP Morgan. Your line is open. Hi, guys. This is Archit on for Sterling. Can you please provide details around FX impact on the quarter? What, what was that? Details on the what? I missed it. FX impact. Oh, FX. Yeah. You know, we've never called out an FX impact. It hasn't been meaningful enough for us. I know you're seeing it with a lot of other companies. International is about, you know, 8% of revenue now, so we're starting to look at it more. I wouldn't say it's a meaningful thing to disclose at this point in time. Our next question is from Peter Levine with Evercore ISI. Your line is open. Great. Thanks, guys. It's great to be in. Maybe just one for Scott, more high level. In your prepared remarks, you kind of sounded excited about your partner channels, maybe looking at the compliance side of the business, like what gets you excited about the compliance roadmap? Is it about integrated workflows with tax, AI automation, new product development, kind of that differentiates Avalara? Just curious to know kind of what you're excited about on the compliance side. Thanks. They sort of go hand in hand in this sense. I mean, what I'm really excited about is we have been on an aggressive program to build out what I think to be, you know, today, even in direct tax. I talked earlier, I mean, moving out of indirect tax and dipping our toe into direct tax, this broad end-to-end, you know, solution that helps customers with their compliance products. I mean, this has been one of my dreams is to build out, you know, this whole suite of services, so you're helping customers where they need the help throughout that process. You are their partner in going forward with their business. I just think the team has done a magnificent job of sort of pulling our platform vision, pulling our platform together. You're gonna start to see some really nice developments around our user experience around how this is all tied together. I think you'll see efficiencies at the back end of how we're tying all of this together that are really going to be good. Why I say that they're tied together with partners, because this is what partners are seeing. I mean, this is what gives us our competitive advantage. I mean, we've always been really good at finding the next thing in compliance, and whether it be right in the early days, it was adding, you know, sort of end-to-end, you know, calculation and returns or doing address validation, you know, to make the calculations and compliance, you know, even better. You add cross-border, which, you know, is just something that should be done, you know, right at the time of checkout. It's the combining of all of these things that makes our moat so strong and helps our customers so well. It's that combination of how it all fits together. I mean, that's what really gets me fired up. That's what gets me, you know, into the office every day, and that is the journey that you have to do to be part of every transaction in the world. When you do it both domestically and internationally, I mean, it's really compelling and, you know, it gets me and, you know, about 5,000 other people fired up every single day. Our next question is from David Hynes with Canaccord. Your line is open. Hey, this is Luke on for DJ. Thanks for taking the question. SST, I think, was a 300 basis points or so basis point headwind to growth this year, if I'm remembering correctly, due to that compensation formula change. First, should we expect any headwind in calendar 2022 as you lap that change that I believe took effect at the beginning of February? Second, how should we think about its impact on your net dollar retention as you lap that headwind? Is there upward bias there? Thanks, Luke. I think you nailed it. It ends in January, so January will be the last month. Starting February, we lap the compensation formula change. That pricing change headwind that we saw, you know, last year, you know, we're over with ending in January. You should think about. People ask, like, "How do you think about SST growing, like, in 2022?" Our view is think about our returns platform. It's our second-largest product. Customers in the U.S. have, they have nexus in certain states. Some of them are SST states, some of them are not, but they're buying our returns products. Some of them need more SST, some of them need less. It should grow, you know, somewhere in line with our returns, you know, product sales. That normalizes now, which is great. Then on NRR, you know, we've been showing the revised metric, and that revised metric includes SST and excludes professional services. The legacy metric we're also still reporting, which was the second highest since IPO, that one excludes SST. What you see is the legacy metric that excludes SST has been rising pretty consistently, and the new metric has been flat. Not in a bad way. It's been 160%. It's really strong, but it's been flat. That's because the new one includes SST, so it's getting the hit from the SST pricing impact. The old one does not, so you're seeing it go up because it's reflecting the rest of the business and not the SST impact. I expect in 2022 those will move in the same direction, okay? You should just think NRR long term. Our ambition internally here is we got a lot of products, we got a lot of customers. We have a huge opportunity to keep selling, you know, more products to our customer base. I think that supports our high NRR rates and, you know, we've said over time, we would love to push those even higher. Our next question is from Alex Sklar with Raymond James. Your line is open. Hi. Thanks for taking the question. This is John on for Alex. Just one from us. I know you've spoken about it quite a bit today, but as you look at the international opportunity, how do you think about Avalara Direct versus Marketplace and other partnerships contributing to your international growth over the next few years? I mean, we, as you said, we have talked about it a little bit, but I just, you know, I love saying it, so I'll just say it again. I mean, our DNA, our focus is in partnerships. I mean, you know, we have a rinse and repeat model that we really, you know, believe in the United States, and we've carried it, you know, into our international markets. Partnerships is key to how we believe, you know, the growth is going to happen. I mean, let's just call it the way it is, right? I mean, you can't be in this space, you have to have partnerships with the people who create the invoices. I mean, that's just a given. When we talk about international, you know, it's the same motion. You know, we wanna go to market with all sorts of different partners, you know, whether they be marketplaces, e-commerce, ERP, POS. We're just gonna continue to, you know, execute that model that we have. Our next question is from Andrew DeGasperi with Berenberg. Your line is open. Thanks for taking my question. I just had one for Ross. I know you talked a lot about the marketplace partner and the change on the rate card and duration of the contracts. I was just wondering, is this fully reflected in the Q1 guide? And then, is that impact linear as far as the year is concerned? And then lastly, how do I compare the Q1 growth guidance of 29% or high 20% relative to the full year growth? Is that just a function of conservatism on your part, or is there something else at play? Yeah, I mean, the marketplace is reflected in the guide, yes. You know, we don't guide to billings, as you know, but you know, we gave some color around. We think it's a few percentage points. Billings, remember, gets hit a little bit worse than revenue because you got the billings frequency duration change. You know, just as you guys think about your models and how you're gonna do billings, just keep in mind that you know, there's a few points impact from that partner situation. On revenue, it's reflected. Then, you know, I think your second part of your question you know is around Q1 versus the rest of the year. If that's correct, you know, I think our guidance philosophy has been consistent for years now, and it always starts with the point that, you know, think about us as a growth compounder, where we can grow revenue organically 20%-25% for a long time, you know, build a multi-billion-dollar business. We're in a large market, it's early days, low penetration, leader in the space, all that good stuff that gives us, you know, confidence that we can consistently compound growth for a long time. That's the starting point, you know, for the guidance for the year. You know, a lot of people will say, "Well, yeah, in the last few years you've outperformed that, you know, pretty meaningfully in the 30s%, you know, plus. You know, how do you kinda think about that?" It's like, any given year, we're gonna obviously work hard to exceed. It's not a guarantee, it's not a given. I think as we head into this year, we have some really exciting opportunities that Scott talked about. You know, the ones that really are there is just like that cross-sell opportunity of all these products to the base. You know, 100,000 end customers, 18,000 core customers. All these partnerships, the second wave concept Scott talked about, new partners and expansion of existing ones. You know, international, you know, the direct piece has been largely U.K., so expanding throughout Europe and other areas of the globe, you know, just really early opportunity there. You know, those are the three biggest highlights. you know, I just think we need to execute on those, and we feel good about the opportunities ahead and our ability to deliver, you know, a strong year. Our final question is from Daniel Jester with BMO Capital Markets. Your line is open. Great. Thank you for squeezing me in. Just two quick ones from me. When you're talking about the business wins earlier in this call, cross-border came up a couple times. You know, we've heard that, you know, some of the supply chain challenges globally have really disproportionately hit small business and mid-sized business. I'm wondering if that's being reflected in the growth and demand of that product. Are you able to kinda grow through that? Secondly, Ross, can you just comment, is there any inorganic revenue contribution in the guide? Thanks. Well, I mean, Scott, I just- I'll start out on the cross-border and then I'm gonna turn it over to Ross for... He can give color to it because Ross actually runs the cross-border business for us, and then he can finish up with your second question. You know, look, at cross-border, I think it is a very meaningful part of, you know, of the Avalara growth story in years to come. I would say that we do not see that impact that you were referring to, I mean, in our business. It's early days, and we're growing that business, you know, quite substantially. I think it will continue to do that. You know, just from a growth perspective, we're not seeing that supply chain, you know, hitch hit our business. Yeah. Look, that business is doing really well. Like the thing is, it goes back to the earlier question around like e-commerce models and GMV. Like, if you're shipping cross borders, like you have to be compliant with duties and tariffs and import taxes and all that, period, right? Like, you know, whether you're doing one thing or a billion things that you're shipping. While your GMV may go up and down from supply chain, you're either compliant or you're not compliant. You're not supposed to be semi-compliant. That's the good thing about our business is like, you know, you gotta do it. That business keeps going even if there's, you know, issues. Sometimes when there's issues, it's good for us because it heightens awareness. I think that's going fine. On the second question, is there inorganic in the guide? The guide does incorporate, you know, all acquisitions, including acquisitions we did in 2021. You know, we said last year that we wouldn't break out. Or we've been breaking out organic, inorganic. We always wanna be transparent to the extent that these are material, they'll be in our filings. The gap between organic and inorganic isn't like 10 points like it was last year. It's, you know, small and, you know, not material in our view. That's why we're not showing it. If it grows to be more material, it'll be in our filings, then we may talk about it, but we don't think there's a need to now. The way I think about it is you got a little, a tiny bit of inorganic there on the positive side. You got this EU marketplace situation on the negative side that's probably about balanced out and therefore what we're reporting is we think pretty reflective of the actual performance of the business. That will conclude our question and answer session. I'll turn the call back over to Co-founder and Chief Executive Officer, Scott McFarlane, for any closing remarks. Everybody, I'd like to take this opportunity to thank all of our employees, our great customers and partners for their hard work and support, and we look forward to talking to you and seeing everybody as soon as we possibly can. Thank you also very much for being on the call. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.