Justworks filed an amended IPO filing today, with new financial data and an estimate of the company’s value when it goes public. For those looking for a single number, Justworks may be valued at more than $2 billion at the high end of its current range based on a simple share count.
However, that is not nearly enough information. Therefore, The Exchange will compute the company’s different simple and fully diluted valuation marks this morning, run multiples using the company’s recent quarter’s performance, and compare all of the data to the company’s final known private value. I had planned to post a 2022 IPO primer this morning, covering the future IPOs of Reddit and Via, but that will have to wait for another day. If you wish to follow along, the Justworks S-1/A filing may see here. Let us discuss HR software for small businesses.
Let us recap if you missed our initial look at the Justworks story: There are two main business lines in the corporation. Justworks charges a monthly fee for access to its service, which includes “HR knowledge, employment and benefits law compliance services, and other HR-related services,” according to its application.
“Benefits and insurance-related revenue” is the other, bigger component of its top line. The former has a large margin, whereas the later has a smaller one. Here is how the corporation fared in its most recent quarter, which ended on November 31, 2021: As you can see, Justworks saw significant year-over-year growth, with even larger improvements in gross profit.
If the business’s resultant gross profit appears to be low in comparison to its revenues, keep in mind that Justworks isn’t just a software company; its revenues include a lot of the lower-margin “benefits and insurance-related income” mentioned before. Simply put, the firm operates in the SMB HR area, which means that their software unlocks client activity that does not yield SaaS-like profits. Despite this, the company’s overall results show growth and minor losses. Therefore, while noting that the company’s income mix differs from that of other software businesses, we do not have to be harsh about it.