The early 2022 IPO cohort is beginning to take shape. Recall that Reddit recently filed to go public, albeit privately. That’s going to be a huge debut.

With Samsara closing out 2021 and Reddit set to ensure fireworks, we might be content. But there are more offerings coming, including Justworks: The HR software company filed late last week, so we’re going to tear into its S-1 to see just what the company has built.

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TechCrunch has covered Justworks several times during its startup life, including when it raised a $40 million round back in 2018. The former startup also closed a $50 million round as 2020 kicked off, bringing its total known capital raised to just over $140 million. In addition, Justworks CEO Isaac Oates sat down with one of his investors and TechCrunch earlier this year to go over that 2018 Series B pitch deck. You can find our notes here.

We’ve also reported on the Justworks category more broadly, for example, when startup Blink raised $20 million at a $100 million valuation. At the time, our own Ingrid Lunden noted that HR software aimed at non-tech companies was having a moment.

Today, we’ll dig into Justworks’ business, its economic performance and what it might be worth. Let’s have a little IPO fun one last time this year!

What’s a ‘Justworks’?

Justworks’ software helps small businesses keep things running. What’s on offer? Things like payroll, vendor payments, payroll tax filings, unemployment insurance, accounting software and e-signature support.

A grab bag of tooling that, even at lower price tiers, allows SMBs to actually do the core work of being in business. The tech company also has more expensive plans that include access to health insurance products.

All told, Justworks sells its software on a per-employee, per-month basis, with set costs for companies up to 175 employees; past that, the company wants you to call them.

So, SMB-focused, HR-themed SaaS. That classification of Justworks helps us know what questions to ask:

  • Is Justworks a pure software company, or does its product require more human inputs that lower its gross-margin profile? (In simpler terms, how high-quality is its revenue?)
  • Does the company have churn under control? (In simpler terms, are SMB customers as churn-heavy as we’ve been historically warned by venture capitalists?)
  • Finally, does Justworks have attractive net retention metrics? (In simpler terms, how far can you upsell customers with limited employee footprints if you charge per worker?)

Let’s explore.

Is it a good business?

Yes? It’s certainly not a traditional software IPO, however.

The company’s revenue mix contains software income and a huge chunk of low-margin insurance and benefits coverage. And Justworks has a history of profitability that we don’t see often.