On April 1, 2021, the Company acquired the outstanding equity of Inposia under a Share Purchase Agreement (the “Inposia Purchase”). Inposia is a German software company that delivers e-invoicing, digital tax reporting, and system and data integration to support digital transformation efforts and address real-time compliance requirements for businesses. Inposia will build upon Avalara’s existing e-invoicing capabilities in Brazil and India to support customers worldwide with real-time compliance. The Company accounted for the Inposia Purchase as a business combination. Acquisition-related costs of $1.5 million were primarily for legal and due-diligence related fees and were recorded in general and administrative expense, of which $1.0 million was incurred in the second half of 2020 and $0.5 million was incurred in 2021.

The total consideration transferred related to this transaction was €31.8 million (or approximately $37.4 million using the exchange rate on April 1, 2021), consisting of net cash consideration of $14.5 million and 164,416 shares of the Company’s common stock paid at closing with an acquisition date fair value of $23.0 million. Net cash consideration consists of $12.2 million cash paid at closing, and a $2.4 million cash deposit paid in the fourth quarter of 2020, offset by $0.2 million cash received by the Company in the third quarter of 2021 as a result of net working capital adjustments. A portion of shares issued are held in escrow as of March 31, 2022, and will be released to the Inposia shareholders during the 18 months following the acquisition, subject to reduction for certain indemnification and other potential obligations of the Inposia shareholders. The shares held in escrow are considered issued and outstanding and are recorded in shareholders’ equity on the consolidated balance sheet as of December 31, 2021 and March 31, 2022.

Total consideration associated with this acquisition is presented below (in thousands):

	Total Consideration
Cash paid at closing (net of amounts returned)	$	14,456
Fair value of common stock issued at closing		22,971
Total consideration	$	37,427

Fair values of the assets acquired and the liabilities assumed in the Inposia Purchase as of the acquisition date are provided in the following table (in thousands):

	Fair Value
Assets acquired:
Cash and cash equivalents	$	1,264
Trade accounts receivable		1,767
Other current assets		268
Operating lease right-of-use assets		928
Property and equipment		98
Developed technology, customer relationships, and other intangibles		14,269
Goodwill		26,520
Other noncurrent assets		35
Total assets acquired		45,149
Liabilities assumed:
Trade payables and accrued expenses		1,478
Deferred revenue		810
Other liabilities, noncurrent		106
Operating lease liabilities		928
Deferred tax liability		4,400
Total liabilities assumed		7,722
Net assets acquired	$	37,427

The carrying amount of trade accounts receivable acquired in the Inposia Purchase approximates the fair value. The fair value of deferred revenue was estimated utilizing a discount rate of 4.0% based on the Company’s estimated pre-tax cost of debt.

The Company utilizes different valuation approaches and methodologies to determine the fair value of acquired intangible assets. The weighted-average amortization period for all intangibles acquired in the Inposia Purchase is 6.2 years. A summary of the valuation methodologies, significant assumptions, and estimated useful lives of acquired intangible assets in the Inposia Purchase are provided in the below table (in thousands):

Intangible	Fair Value		Valuation Methodology	Discount Rate	Estimated Useful Life
Customer relationships	$	3,288	Multi-period excess earnings-income approach	18.5%	8 years
Developed technology		9,572	Relief from royalty-income approach	18.5%	6 years
Noncompetition agreements		1,174	With-and-without valuation-income approach	21.0%	3 years
Tradename		235	Relief from royalty-income approach	18.5%	3 years

The excess of the purchase price over the net identified tangible and intangible assets is $26.5 million and has been recorded as goodwill, which includes synergies expected from the combined service offerings and the value of the assembled workforce. The goodwill is not expected to be deductible for tax purposes.

On April 20, 2021, the Company acquired substantially all the assets of Davo under an Asset Purchase Agreement (the “Davo Purchase”). Davo helps emerging small businesses automate the daily and ongoing requirements for sales tax. As a result of the acquisition, Davo extends Avalara’s ability to provide integrated sales tax compliance processes to alleviate the burden of compliance on small businesses. The Company accounted for the Davo Purchase as a business combination. Acquisition-related costs of $0.1 million were primarily for legal and due-diligence related fees and were recorded in general and administrative expense.

The total consideration transferred related to this transaction was $56.7 million, consisting of $23.5 million cash paid at close, a $0.3 million cash deposit paid in the first quarter of 2021, an acquisition holdback with a fair value upon acquisition of $2.6 million, and an earnout provision with a fair value upon acquisition of $30.3 million. The acquisition holdback represents an additional $2.6 million of cash to be paid Davo shareholders during the 18 months following the acquisition date, subject to reduction for certain indemnifications and other potential obligations of Davo shareholders. The earnout will be calculated as a multiple of certain performance metrics during the 12-month measurement periods ending March 31, 2022, and 2023, and there is not a stated minimum or maximum payment required under the earnout.

Total consideration associated with this acquisition is presented below (in thousands):

	Total Consideration
Cash paid through closing	$	23,818
Fair value of earnout provision		30,338
Fair value of holdbacks		2,591
Total consideration	$	56,747

Fair values of the assets acquired and the liabilities assumed in the Davo Purchase as of the acquisition date are provided in the following table (in thousands):

	Fair Value
Assets acquired:
Cash and cash equivalents	$	198
Funds held from customers		12,464
Trade accounts receivable		119
Other current assets		58
Operating lease right-of-use assets		46
Developed technology, customer relationships, and other intangibles		4,651
Goodwill		51,911
Other noncurrent assets		2
Total assets acquired		69,449
Liabilities assumed:
Accrued expenses		117
Deferred revenue		75
Operating lease liabilities		46
Customer fund obligations		12,464
Total liabilities assumed		12,702
Net assets acquired	$	56,747

The carrying amount of trade accounts receivable and deferred revenue acquired in the Davo Purchase approximates the fair value.

The Company utilizes different valuation approaches and methodologies to determine the fair value of acquired intangible assets. The weighted-average amortization period for all intangibles acquired in the Davo Purchase is 5.4 years. A summary of the valuation methodologies, significant assumptions, and estimated useful lives of acquired intangible assets in the Davo Purchase are provided in the below table (in thousands):

Intangible	Fair Value		Valuation Methodology	Discount Rate	Estimated Useful Life
Customer relationships	$	2,050	Multi-period excess earnings-income approach and replacement cost method-cost approach	13.5%	6 years
Developed technology		1,950	Relief from royalty-income approach	13.5%	5 years
Noncompetition agreements		564	With-and-without valuation-income approach	15.5%	5 years
Tradename		87	Relief from royalty-income approach	13.5%	1 year

The excess of the purchase price over the net identified tangible and intangible assets is $51.9 million and has been recorded as goodwill, which includes synergies expected from the combined service offerings and the value of the assembled workforce. The goodwill is expected to be deductible for tax purposes.

On September 7, 2021, the Company acquired substantially all the assets of 3CE under an Asset Purchase Agreement (the “3CE Purchase”). 3CE is a Canadian company that provides software and services for Harmonized System code classifications and verifications, primarily to government entities and logistics services providers. The acquisition will expand and improve Avalara’s Harmonized System classification content and provide a new self-service model to sell to the Company’s customers. The Company accounted for the 3CE purchase as a business combination. The total consideration related to this transaction is $11.2 million, consisting of $9.9 million cash paid at close and an acquisition holdback with a fair value upon acquisition of $1.3 million. The fair values of the assets acquired and the liabilities assumed in the 3CE Purchase as of the acquisition date include intangible assets of $3.7 million, primarily attributable to developed technology and customer relationships and goodwill of $7.1 million.

On October 1, 2021, the Company acquired substantially all the assets of Track1099 under an Asset Purchase Agreement (the “Track1099 Purchase”). Track1099 provides online software and services for cost-effectively managing, e-filing, and e-delivering Internal Revenue Service forms, including Forms 1099, W-2, and W-9. The Company accounted for the Track1099 Purchase as a business combination. Acquisition related costs of $0.1 million were primarily for legal and due-diligence related fees and were recorded in general and administrative expense.

The total consideration related to this transaction was $48.8 million, consisting of $35.0 million cash paid at close, an acquisition holdback with a fair value upon acquisition of $5.0 million, and an earnout provision with a fair value upon acquisition of $8.8 million. The acquisition holdback represents an additional $5.0 million of cash to be paid to the sellers 27 months following the acquisition date, subject to reduction for certain indemnifications and other potential obligations of the sellers. The earnout for Track1099 is calculated based on certain billing performance metrics during the 12-month measurement periods ending April 30, 2022 and April 30, 2023, not to exceed $12.5 million in total or $6.25 million in each earnout period.

Preliminary total consideration as of March 31, 2022, is presented below (in thousands):

	Total Consideration (preliminary)
Cash paid through closing	$	35,000
Fair value of earnout provision		8,820
Fair value of holdbacks		4,984
Total consideration	$	48,804

Preliminary estimated fair values of the assets acquired and the liabilities assumed in the Track1099 Purchase as of the acquisition date are provided in the following table (in thousands):

	Fair Value (preliminary)
Assets acquired:
Prepaid and other current assets	$	2
Developed technology, customer relationships, and other intangibles		5,850
Goodwill		42,962
Total assets acquired		48,814
Liabilities assumed:
Current liabilities		1
Deferred revenue		9
Total liabilities assumed		10
Net assets acquired	$	48,804

The estimated fair values for certain acquired intangibles, the earnout, and holdback are preliminary in nature and subject to adjustment when the necessary information is available to complete the valuation.

The Company utilizes different valuation approaches and methodologies to determine the fair value of acquired intangible assets. A summary of the valuation methodologies, significant assumptions, and estimated useful lives of acquired intangible assets in the Track1099 Purchase are provided in the table below (in thousands):

Intangible	Assigned Value		Valuation Methodology	Discount Rate	Estimated Useful Life
Customer relationships	$	3,200	Multi-period excess earnings-income approach	28.0%	5 years
Developed technology		1,250	Relief from royalty-income approach	28.0%	2 years
Noncompetition agreement		1,300	With-and-without valuation-income approach	30.0%	5 years
Tradename		100	Relief from royalty-income approach	28.0%	2 years

The excess of the purchase price over the net identified tangible and intangible assets is $43.0 million and has been recorded as goodwill, which includes synergies expected from the combined service offerings and the value of the assembled workforce. The goodwill is expected to be deductible for tax purposes.

On October 18, 2021, the Company acquired substantially all the assets of CrowdReason, Limited Liability Company and CorrelationAdvisors, LLC under an Asset Purchase Agreement (the “CrowdReason Purchase”). CrowdReason is a technology services company that provides software applications, solutions, and services for property tax compliance. CorrelationAdvisors provides consulting services related to property valuation and property tax compliance. The Company accounted for the CrowdReason Purchase as a business combination. Acquisition-related costs of $0.2 million were primarily for legal and due-diligence related fees and were recorded in general and administrative expense.

The total consideration transferred related to this transaction was $36.4 million, consisting of $8.3 million cash paid at close, acquisition holdbacks with a fair value upon acquisition of $1.7 million, and an earnout provision with a fair value upon acquisition of $26.3 million. The acquisition holdback represents an additional $1.7 million of cash to be paid to the sellers during the 18 months following the acquisition date, subject to reduction for certain indemnifications and other potential obligations of the sellers. The earnout is calculated as a multiple of revenue growth thresholds during the 12-month measurement periods ending October 31, 2022, 2023, and 2024, with the total purchase price, inclusive of earnouts, not to exceed $40.0 million.

Preliminary total consideration as of March 31, 2022, is presented below (in thousands):

	Total Consideration (preliminary)
Cash paid through closing	$	8,317
Fair value of earnout provision		26,320
Fair value of holdbacks		1,727
Total consideration	$	36,364

Preliminary estimated fair values of the assets acquired and the liabilities assumed in the CrowdReason Purchase as of the acquisition date are provided in the following table (in thousands):

	Fair Value (preliminary)
Assets acquired:
Current assets	$	1,426
Developed technology, customer relationships, and other intangibles		10,300
Goodwill		25,415
Total assets acquired		37,141
Liabilities assumed:
Current liabilities		101
Deferred revenue & contract liabilities		676
Total liabilities assumed		777
Net assets acquired	$	36,364

The Company utilizes different valuation approaches and methodologies to determine the fair value of acquired intangible assets. A summary of the valuation methodologies, significant assumptions, and estimated useful lives of acquired intangible assets in the CrowdReason Purchase are provided in the table below (in thousands):

Intangible	Assigned Value		Valuation Methodology	Discount Rate	Estimated Useful Life
Customer relationships	$	5,700	Multi-period excess earnings-income approach	18.0%	5 to 8 years
Developed technology		3,900	Relief from royalty-income approach	18.0%	5 years
Backlog		450	Multi-period excess earnings-income approach	15.0%	1 year
Noncompetition agreements		100	With-and-without valuation-income approach	20.0%	5 years
Tradename		150	Relief from royalty-income approach	18.0%	2 years

The excess of the purchase price over the net identified tangible and intangible assets is $25.4 million and has been recorded as goodwill, which includes synergies expected from the combined service offerings and the value of the assembled workforce. The goodwill is expected to be deductible for tax purposes.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for Avalara and all 2021 acquisitions as though the companies were combined as of January 1, 2021. There were no acquisitions during the three months ended March 31, 2022. The unaudited pro forma financial information presented also includes certain business combination accounting effects resulting from the acquisitions, including amortization charges from acquired intangible assets. No adjustments were made for the fair value of deferred revenue and contract liabilities or fair value measurement adjustments for earnout liabilities. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had occurred on the dates indicated.

	For the Three Months Ended March 31,
	2022			2021
Total revenue	$	204,530		$	163,275
Pre-tax loss		(32,272	)		(27,806	)