Justworks S-1(sec.gov)
sec.gov
Justworks S-1
https://www.sec.gov/Archives/edgar/data/0001623414/000162828021025176/justworkss-1.htm
37 comments
Ammended S-1: https://www.sec.gov/Archives/edgar/data/0001623414/000162828...
I would recommend linking to this instead since basic things like cap table was left empty
One of the few SaaS prospectuses that isn’t a complete disaster on the operating statement.
-GAAP profits
-Sales & Marketing in-line
-Not funding payroll at shareholders’ expense
However, they are very vulnerable to changes in their costs in “Benefits and Insurance”. They get a very thin gross margin here, and that can easily go negative under the wrong circumstances.
-GAAP profits
-Sales & Marketing in-line
-Not funding payroll at shareholders’ expense
However, they are very vulnerable to changes in their costs in “Benefits and Insurance”. They get a very thin gross margin here, and that can easily go negative under the wrong circumstances.
In what way are they vulnerable?
They are basically a consolidator and reseller of benefits and insurance to SMB's, they're just passing those costs along and charging management fees.
They're vulnerable in the way that a gas station, say, is vulnerable to higher gas prices. Like it could impact their business, and changes in the price might change the behavior of their customers, but I don't see any mechanism by which the margin would "go negative" unless I'm missing something.
They are basically a consolidator and reseller of benefits and insurance to SMB's, they're just passing those costs along and charging management fees.
They're vulnerable in the way that a gas station, say, is vulnerable to higher gas prices. Like it could impact their business, and changes in the price might change the behavior of their customers, but I don't see any mechanism by which the margin would "go negative" unless I'm missing something.
“The wrong circumstances” would be, for example, a steep rise in costs across the board, and they are faced with the choice of eating at least some of it, or losing a lot of customers. I spend a lot more time thinking about edge cases since, well, all this. Anyway, if you look at their gross margin on benefits, it varies between 4.8% to 5.9% in the periods they report, so it’s not a constant margin to begin with.
Gas isn’t a great analogy because gas is an inelastic product in a very liquid market where everyone on the retail level locally has the same cost structure. That is not the case with benefits
Gas isn’t a great analogy because gas is an inelastic product in a very liquid market where everyone on the retail level locally has the same cost structure. That is not the case with benefits
That's just not how their business model works. They charge a fixed per-employee fee every month. For benefits they give you a quote each year when policies renew and then you decide what you want to do.
Their health insurance rates have doubled and tripled for some customers, because our national system for health insurance is insane, and they just tell you that when the renewal comes up and you decide. I'm a customer, I've seen this first hand.
Your comment just doesn't really make sense. It's like wondering if a travel agent is going to "face the choice of eating some of the cost" when hotel rates go up or airline tickets get more expensive. The answer is no, that's just not how the pricing model works.
Their health insurance rates have doubled and tripled for some customers, because our national system for health insurance is insane, and they just tell you that when the renewal comes up and you decide. I'm a customer, I've seen this first hand.
Your comment just doesn't really make sense. It's like wondering if a travel agent is going to "face the choice of eating some of the cost" when hotel rates go up or airline tickets get more expensive. The answer is no, that's just not how the pricing model works.
Good luck
I think it's probably smarter to go into the market and find your margin like cloudflare etc, vs come into the market with it, as you mentioned, it could turn into a disaster quickly. If it was me I'd want to feel extremely confident in the stability of that baseline, and looking at the S1, it's not really established as such yet. I've never taken a company public so I have no clue what I'm talking about, but from the outside, if they overspent internally per a plan Q1 and 2 into the market, that then flip the script and found that margin in the market, I feel like them market would respond more favourably than going in and losing it if things go wrong, given how thin it is.
I remember they completely _screwed_ my employer in Benefits costs. Prices got incredibly out of control really fast, we saved a _LOT LOT LOT_ in costs by getting out with comparable coverage elsewhere.
Anecdote from when I was working at Plaid on a special product for the Payroll Protection Program, but the engineers @ Justworks burnt the midnight oil to get an MVP that let businesses verify their payroll eligibility with us. Unfortunately didn't get approved in time before the PPP funds to run out, but the team was great! Grats on the IPO :)
I like Justworks, and the fact they actually seem to already be profitable is refreshing.
Link to their Deal Roadshow presentation:
https://dealroadshow.finsight.com/retail-roadshows
https://dealroadshow.finsight.com/retail-roadshows
- Slide 38 has inconsistent signs for their cost of revenue line. Come on GS...you guys are left-lead.
- They love to highlight their LTV/CAC ratio, so let me say that their choice of LTV definition is not ideal (footnote 1 on slide 19) - change in adj. gross profit is not necessarily just attributable to the cohort one acquires in a given year (since they're using S&M expense in a given year to represent CAC). This number could be easily biased upwards if previous cohorts are increasing their sub revenue in the current year (which is seems they are given the chart on slide 31). Assuming LTV of a customer is a perpetuity based on retention rates is an assumption many people make, but also will overstate the LTV. View this metric cautiously.
This is a pretty cool site. do you happen to know why this is classified under "retail" roadshow?
It’s for “retail” investors as opposed to institutional. Simply a market convention.
I interned at Justworks years ago and it was a fantastic experience! Congrats to the team!
Has anyone used Justworks?
How does it compare to other offerings?
(This is the first I've heard of them.)
How does it compare to other offerings?
(This is the first I've heard of them.)
I've been a JustWorks customer since 2017, using it for my small business of <10 employees and contractors. The number one reason I got it was to have higher quality health plans (Aetna) at better prices than I could find anywhere else; many large health plans would not accept small companies. At the time, JustWorks' competitors focused on just payroll processing. The other alternative was Trinet, but I preferred the more SaaS-like engagement. At the time, even with the Justworks fees, it saved us many thousands per year in benefits cost, while getting higher quality benefits. I've not compared pricing since, as everybody seems happy with it and it's just kept pace with inflation.
Onboarding employees and contractors has been super easy. Their support through COVID was great, giving information and options for all the various aspects of it. Their online support has made compliance easy and any time I needed to talk to somebody, there was no wait time on the phone.
At first, having a PEO was confusing to some, as it is JustWorks' EIN on everything rather than my company's EIN.
My only real complaint is that one team member lives in Puerto Rico and for some reason, after a couple years, they stopped considering PR as part of the United States and refused handling payments to there; so I have to handle that person manually, including compliance and tax. More than my time, I think it's tacky to treat Puerto Rico that way.
Onboarding employees and contractors has been super easy. Their support through COVID was great, giving information and options for all the various aspects of it. Their online support has made compliance easy and any time I needed to talk to somebody, there was no wait time on the phone.
At first, having a PEO was confusing to some, as it is JustWorks' EIN on everything rather than my company's EIN.
My only real complaint is that one team member lives in Puerto Rico and for some reason, after a couple years, they stopped considering PR as part of the United States and refused handling payments to there; so I have to handle that person manually, including compliance and tax. More than my time, I think it's tacky to treat Puerto Rico that way.
> My only real complaint is that one team member lives in Puerto Rico and for some reason, after a couple years, they stopped considering PR as part of the United States and refused handling payments to there
How did this manifest? Did your employee get silently dropped by them or the carrier or did you get some advance warning?
How did this manifest? Did your employee get silently dropped by them or the carrier or did you get some advance warning?
Technically it was a "vendor" payment as the contractor operated under a CRL (a LLC in PR) rather than a sole proprietorship. They had no benefits, so it was just payments. Like normal, I scheduled payment per an invoice... then a week later when the payment was to be paid, it was cancelled. I thought I made a mistake and scheduled it again and again it was cancelled.
I reached out to their support and the response was: "Our payment to the vendor, <Vendor> CRL, has been canceled due to the vendor having an address outside of the US. Justworks can only send payments to vendors with US addresses." and further clarification in the chain: "Please be advised that in order for payments to be processed there needs to be a US address and US bank account on file."
This was April 2021, after about two years of successful payments. There was no warning beyond the generic cancelled payment email. They do get US 1099's and I have to use another service just for that one 1099.
I reached out to their support and the response was: "Our payment to the vendor, <Vendor> CRL, has been canceled due to the vendor having an address outside of the US. Justworks can only send payments to vendors with US addresses." and further clarification in the chain: "Please be advised that in order for payments to be processed there needs to be a US address and US bank account on file."
This was April 2021, after about two years of successful payments. There was no warning beyond the generic cancelled payment email. They do get US 1099's and I have to use another service just for that one 1099.
We used them at a previous small tech company. My experience was pretty good. They did all the legwork for payroll, med benefits and other HR-type stuff that a team of 10 engineers did not want to bother with.
Justworks and it ilk are part of the "business as a service" model that works really well. Corporate GMail or Outlook365 allowed small companies to let go of the burden of Email management, Justwork does the same for benefits/payroll dept. I'm sure Ziprecruiter and other companies are doing the same for hiring departments too.
Justworks and it ilk are part of the "business as a service" model that works really well. Corporate GMail or Outlook365 allowed small companies to let go of the burden of Email management, Justwork does the same for benefits/payroll dept. I'm sure Ziprecruiter and other companies are doing the same for hiring departments too.
So if you are a startup and need services to run your business, is there any back office function needed that a combination of Justworks + Google Workspace + Stripe doesn't cover?
Yes:
- Cap table management (Carta)
- Reimbursements (Expensify, Abacus, etc.)
- Quickbooks Online (accounting)
- Accounting and tax services (outsourced/agency)
- … probably more I’m forgetting
If you work with sensitive data, you’ll eventually want…
- Device management (Kandji)
- Device and user monitoring (Vanta)
- SOC 2 auditing
- Cap table management (Carta)
- Reimbursements (Expensify, Abacus, etc.)
- Quickbooks Online (accounting)
- Accounting and tax services (outsourced/agency)
- … probably more I’m forgetting
If you work with sensitive data, you’ll eventually want…
- Device management (Kandji)
- Device and user monitoring (Vanta)
- SOC 2 auditing
For a modern take on Quickbooks online, there's pilot.com
KPMG, among many others, will deal with SOC2 compliance/auditing for you, should you want to IPO.
KPMG, among many others, will deal with SOC2 compliance/auditing for you, should you want to IPO.
I can’t speak for Office365, but I know that GSuite includes device management as part of the platform.
This is super helpful. Thanks
They were one of the first things we started paying for after raising a seed round.
Payroll, healhcare benefits, perks, state-specific compliance, 401k, etc. all managed for you. Having come from a startup that used Trinet, Justworks was a breath of fresh air. Still super easy to use.
Payroll, healhcare benefits, perks, state-specific compliance, 401k, etc. all managed for you. Having come from a startup that used Trinet, Justworks was a breath of fresh air. Still super easy to use.
Would you consider Remote.com a competitor to Justworks?
We are very happy Just Works customers for our US operations and have been for years (migrated from another PTO). Beautiful interface, great service, timely support, fair price. When employees have a question about anything related to their benefits we just point them to Just Works and they get quality answers quickly. Can’t say enough good things about them. Happy to refer anyone.
Justworks was critical in bridging the 1 to 10 employee gap for our company that many other providers has.
The problem is, that when you hire your first employee many providers will consider you too small to provide health benefits, even if they can do your payroll. E.g. Gusto was happy to process payroll for us, even for a single employee (or just yourself), but wouldn't provide us health plans for our first W-2 hire (I think the minimum was 3 at the time). Their loss, as we switched to Justworks and provided full health benefits comparable to any big company for our first full time employee, and now we're at 10+ employees and growing and certainly not going to bother switching back.
Overall we've been very happy with Justworks. They make it super easy to hire employees in all US states while keeping compliant.
The problem is, that when you hire your first employee many providers will consider you too small to provide health benefits, even if they can do your payroll. E.g. Gusto was happy to process payroll for us, even for a single employee (or just yourself), but wouldn't provide us health plans for our first W-2 hire (I think the minimum was 3 at the time). Their loss, as we switched to Justworks and provided full health benefits comparable to any big company for our first full time employee, and now we're at 10+ employees and growing and certainly not going to bother switching back.
Overall we've been very happy with Justworks. They make it super easy to hire employees in all US states while keeping compliant.
My employer (50-person Series B startup) just switched payroll and health insurance to Justworks after extensive evaluation.
I have no idea if Justworks was objectively the best, or whether they were offering a sweet deal because they need to show customer growth during their IPO year.
Anyway, the Justworks UX seems fine: it’s competent modern SaaS on par with Gusto and much less frustrating than Workday.
I have no idea if Justworks was objectively the best, or whether they were offering a sweet deal because they need to show customer growth during their IPO year.
Anyway, the Justworks UX seems fine: it’s competent modern SaaS on par with Gusto and much less frustrating than Workday.
I was CTO of a company that was a pretty early user because they were physically located close and directly sold it to us, around 2014 IIRC. We were very happy with the service and the company still uses it.
I currently use Gusto for my own company and Justworks seems on par with that.
I used them at my last Startup, I setup the company on them and it was pretty easy.
The only negative, we were not assigned a CX or Account manager. In order to get ahold of someone you have to reach out to a chat support which is outsourced and then you will be put into contact with someone. We had a small plan so that could have been the reason.
I would totally use them again, it also showed me how easy it was to get insurance if I wanted to start my own company.
The only negative, we were not assigned a CX or Account manager. In order to get ahold of someone you have to reach out to a chat support which is outsourced and then you will be put into contact with someone. We had a small plan so that could have been the reason.
I would totally use them again, it also showed me how easy it was to get insurance if I wanted to start my own company.
Their numbers do not favorably compare against their peers. Paycom (PAYC) is of comparable revenue but profit margin is much higher (looking like ~400% higher) at PAYC. The two are growing at similar rates.
I'm wondering why they are choosing to go public now given these numbers.
I'm wondering why they are choosing to go public now given these numbers.
...because it's IPO now or wait a few years, probably. We're very late in the cycle, I think, and a correction is coming soon. Same reason Zillow got out of the house-buying business, if the truth be told.
Would you invest in this company?
Not investing advice, and technicals aside. When a SaaS company comes out underwritten by JP, Goldman and BoA, it's typically a decent medium term bet. If I decide to take a position in a stock like that, I'd typically take half on IPO, wait for it to drop, take the other half, and hold it 2/3 years long. The institutionals often create enough of a floor that you can make ok money over that timeframe, the problem thereafter is, is this ACTUALLY a growth business, or was it spring loaded? So keeping an eye on it during the time you hold it to judge that is extremely important.