"The 2B industry requires a ten-year perspective - it takes ten years to fill all the pitfalls."
These words spoken by JST Group founder and Chairman Luo Haidong four years ago seem like a prophetic statement tailored for his decade-long venture, as JST Group Corporation Limited was established in 2014.
As a leading enterprise in China's e-commerce SaaS ERP (Software as a Service) sector, JST Group finally achieved profitability of approximately 10.58 million yuan in 2024 after years of substantial losses.
Following four submissions to the Hong Kong Stock Exchange, JST Group recently passed the listing hearing and is now just one step away from going public. Meanwhile, only about two months remain before the deadline for its valuation adjustment mechanism (VAM) agreements with investors.
JST Group's rise represents a typical SaaS growth story propelled by capital investment.
Since its establishment in 2014, leveraging first-mover advantages in the e-commerce SaaS ERP sector, JST Group quickly attracted investments from several prominent institutions. Its valuation soared from 83 million yuan in the 2015 angel round to 6 billion yuan after the Series C round in 2020 - a 72-fold increase in post-investment valuation over five years. Behind this growth stand investors including CICC Capital, Blue Lake Capital, and even Alibaba Group CEO Wu Yongming.
However, JST Group's success has been accompanied by prolonged losses.
According to the prospectus, during the reporting period from 2022 to 2024, JST Group maintained steady revenue growth with figures of 523 million yuan, 697 million yuan, and 910 million yuan respectively. However, net profits during the same period were -507 million yuan, -490 million yuan, and 10.58 million yuan respectively. This means JST Group accumulated net losses exceeding 986 million yuan over just three years.
JST Group barely achieved its annual turnaround goal in 2024, but how substantial is this "profitability"?
According to the prospectus, JST Group recorded income tax credits of 90.2 million yuan in 2024, which was the primary factor behind its shift to profitability.
In the first half of this year, JST Group still reported losses of 39.5 million yuan, leaving uncertainty about whether it can achieve genuine full-year profitability.
Additionally, JST Group's prepayment cooperation model has created financial structural pressures. Since the company typically requires customers to prepay before gaining authorized access to SaaS products, its contract liabilities reached 1.96 billion yuan in 2024 - more than double its revenue of 910 million yuan for the same period.
In the first half of this year, JST Group's net current liabilities still amounted to 3.1 billion yuan. The growth in net current liabilities mainly occurred in 2023, due to the reclassification of convertible redeemable preferred shares from non-current liabilities to current liabilities.
Simply put, convertible redeemable preferred shares are special shares purchased by investors that can be converted to ordinary shares for significant profits if the company goes public successfully, or can demand repayment of principal and interest if the IPO fails or the company underperforms.
The 56-year-old Luo Haidong was already General Manager and Chairman of Shanghai Shengxun Technology Co., Ltd. (a company specializing in information technology system development and sales) 25 years ago.
However, nine years later, he chose to work as a Senior Director in the Technology Department at an e-commerce company primarily engaged in online luggage sales.
JST Group's Chief Product Officer He Xingjian, the second-largest individual shareholder after Luo Haidong, shares similar professional experience with Luo. The difference is that Luo earned a Master's degree in Theoretical Electrical Engineering from Shanghai University, while He graduated from Shanghai University of Sport.
JST Group was established in 2014 with initial registered capital of only 500,000 yuan and a simple equity structure, with Luo Haidong and He Xingjian's spouse holding 60% and 40% stakes respectively.
JST Group primarily provides SaaS products and services to e-commerce merchants on various platforms. Its core SaaS product, JST Group ERP (Enterprise Resource Planning system), serves merchants' core needs for cross-platform e-commerce order processing.
During the reporting period, JST Group's e-commerce SaaS ERP product revenue accounted for 87.4%, 86.1%, and 84% respectively. The company attributes revenue growth mainly to expanding and retaining its customer base. During the same period, the total number of SaaS customers was 45,700, 62,200, and 88,400 respectively.
In 2021, Luo Haidong said the To B industry requires a ten-year perspective, and JST Group was still encountering pitfalls that needed to be filled before considering going public.
However, by 2023, JST Group had already begun submitting applications to the Hong Kong Stock Exchange.
According to the prospectus, in February 2023, JST Group signed a shareholders' agreement with investors, granting them preferential subscription rights, liquidation rights, registration rights, and redemption rights.
The redemption rights under the shareholders' agreement and JST Group's current articles of association will terminate immediately before the first IPO submission to the Hong Kong Stock Exchange. If rejected or withdrawn by the Exchange, or if the IPO expires without renewal within six months, or if a qualified IPO is not completed by December 31, 2025, the redemption rights will automatically be restored.
Now, the core challenge still falls on founder Luo Haidong: Has this To B industry veteran used his ten years of effort to fill the deep pitfalls of the SaaS industry and successfully resolve the imminent VAM pressure?