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Babak Poushanchi, Cota Capital - Stock pick: Avalara

Cliona O'Dowd and Glenda Korporaal
The Australian
 • 
Dec 3, 2021

There is no bigger or unsolved problem than taxes which remains consuming, complicated and error prone. Businesses still manage their taxes with a combination of pen and paper and excel and the complexities are only increasing. Babak Poushanchi says Avalara, based in Seattle, is solving the problem. The software company has grown at an annual revenue at a rate of 30-40 per cent over the past decade and has more than 17,000 customers.

“It continues to have big opportunity ahead with less than 5 per cent market share,” says Poushanchi. “The business model is predictable with over 90 per cent of its revenue reoccurring and 74 per cent gross margin. It has the bold vision is to help automate and be a part of every transaction in the world.”

The fund manager says the company is very well positioned to grow from a roughly $700m revenue business today to a multi-billion dollar revenue business over the next four to five years. And the shares, he says, offer a “compelling investment opportunity.”

Avalara business is driven by four major secular tailwinds including the “explosion” of e-commerce, the generational shift to the cloud, increased focus on ROI and the heightened regulatory environment.

Current domestic market opportunity is said to be big and is estimated to be about around $15bn, which is up from three years ago at the IPO when the company estimated it to be $8bn.

This article was originally posted by The Australian here.

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