Value Investing

ValueX Vail 2015: Finding Value Off The Beaten Path Halogen Software

Greenhaven Road Capital presentation on Halogen Software Inc (HGN.CA) from the ValueX Vail, June 2015.

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Executive Summary Of Greenhaven Road

Operating Background

  • Managed a paper bag factory after graduating college
  • Co-Founder of Acelero Learning. Several roles including CFO, CTO, Chief Strategy Officer, and currently board member. Acelero has grown from three co-founders in a tiny office to 1,100+ employees

Who We Are

  • A long-biased, value focused hedge fund. Intensive up-front research, concentrated positions and then...patience.

What We Believe

  • Fundamentals matter - the market will recognize this over time.
  • Diversifying away risk also means diversifying away returns - invest in only the best ideas..
  • Stakeholder interests must be aligned - a meaningful personal investment in the fund and LP-friendly investment terms are just
    the starting point.
  • There is power in simplicity - no need to over-complicate the investment process and leverage isn’t necessary to generate returns

Halogen Software

Halogen Software


Halogen Software

Business Description

  • The Company’s Words: Halogen Software Inc. is a provider of cloud-based talent management solutions. The Company's software offers an organically built cloud-based talent management suite that reinforces and drives employee performance across all talent programs whether that is recruiting, performance management, learning and development, succession planning or compensation.
  • Glass Half Empty View: Busted small cap Canadian Tech IPO with limited volume - No Thanks.
  • My View: Personnel and Benefits are most operating businesses largest expenses. For service businesses they are typically greater than 70%. Optimizing these expenses is a big deal. Tell me more.

Case Study: Leading Early Education Provider (Non Halogen Customer)

Silo Specific Solutions are Sub Optimal

None of these Systems Speak to Each Other

  • There are multiple systems to maintain. An employee gets married and changes her name - the change has to be made in eight places
  • 25% Turnover means hundreds of new employees are getting up in 8 systems per year.
  • To conduct an effective performance review requires accessing multiple systems.

Limited Transparency and Flawed

There is limited to no transparency to see if key activities such as 1:1 meetings. Are they happening? What is being discussed? If there is a change in managers, the new manager is often flying blind when using a paper based system, unless it is a very smooth and thoughtful transition.

Halogen Organically Developed for Interoperability

Typical Halogen Customer

Has 500 Seats

Buys 2 .3 Pro ducts out of 8 Offered

  • Almost all customers use Performance Review Offering
  • Multi-rater (360 review) is next most popular followed by Learning and Compensation
  • Performance is the most expensive - generally 2X the other offerings

Spends $25K+ on Halogen > $30M On Personnel/Benefits

  • The average spend per customer is approximately $25K on Halogen to help optimize over $3oM+ in Personnel spend or less than 1/10 of 1%

Solved Real Problems / Gets More Valuable Over Time

  • Spends more each year
  • As the offerings get populated with critical data, the applications become more useful over time.
  • Switching is possible, but relative to the product cost should not be an attractive proposition

Halogen Software

See full presentation below.