Chinese HR SaaS Provider CDP Files For $125m New York IPO

CDP Holdings, which provides software for human resources management in China, last Friday has filed for an initial public offering (IPO) with the U.S. Securities and Exchange Commission to raise up to $125 million.

The company, which is yet to disclose pricing terms of the IPO, plans to go public on the New York Stock Exchange under the symbol “CDP.”

CDP, founded in 2006, operates as a human capital management (HCM) company that mainly provides services including payroll, tax, social security management, benefits programs, and workforce management through a software-as-a-service (SaaS) platform.

The company has offered HCM services to over 3,600 customer entities in China and worldwide, representing about 1,000 group customers as of September 30, 2019, and approximately one million user accounts as of November 15, 2019, according to its prospectus.

The firm, headquartered in Shanghai, also leases offices in Beijing, Hong Kong, Shenzhen, Guangzhou and several other second-tier cities in China.

The company is developing in the HCM market, whose total revenues in China grew from about 176 billion yuan in 2014 to 363 billion yuan ($51.8 billion) in 2018, and is expected to further increase at a compound annual growth rate (CAGR) of 18 per cent to reach 842 billion yuan ($120.0 billion) in 2023, according to Frost & Sullivan.

CDP offers cloud-based workforce management services, targeting a large number of emerging tech-driven companies that grow “at exceptional paces” nationwide and find it “challenging to staff and manage workforces,” said the company in the prospectus.

The company recorded a 28.1 per cent increase in net revenues, from 526.4 million yuan for the nine months ended September 30, 2018 to 674.2 million yuan ($94.3 million) in the same period in 2019.

In 2017 and 2018, the company booked net losses of 7.3 million yuan and 31.2 million yuan ($4.4 million), respectively. The net losses kept expanding to reach 157.5 million yuan ($22.0 million) for the nine months ended September 30, 2019, shows the prospectus.

Garamond Partners Limited, which is controlled by Wayne Wei Wang (chairman and CEO) and Wei Lu (president and director), currently owns a 31.4 per cent stake in CDP Holdings.

Nasdaq-listed Chinese recruitment website 51job holds a 20.2 per cent stake, while private equity firm China Broadband Capital (CBC) has a 14.0 per cent stake. Other shareholders in the company include Investor AB with 11.9 per cent shares, CSV Capital Partners with 9.4 per cent shares, and Eight Roads with 6.5 per cent shares.

CDP plans to use the proceeds from the offering to enhance its SaaS platform, and lift sales and marketing efforts to expand service coverage in China and internationally. The company will also use the money to pay for general corporate purposes.

BofA Securities, Citi and Haitong International are the joint bookrunners on the deal.