“We were at a crossroads. The business wasn’t making money, we were just selling people for an hourly rate because we didn’t have any IP (intellectual property),” Hansen says.
“It was around that time that I saw deregulation was starting… I knew that with deregulation, customer information systems would require a customer interface, as customers suddenly had the right to choose [their provider]. Systems had to change.
“We took a punt that we wanted to develop software once, but have used it many times.”
That punt paid off, and today the business generates almost $300 million in revenue and profit after tax of $42.2 million.
Its customers include Vodafone, Virgin, Vocus, Orange, Simply Energy and Energy Queensland.
The company has been listed on the ASX since 2000 and reached a peak share price of more than $6.59 in November 2021. It currently trades around $5.
While loss-making tech companies have been heavily sold-off in the last year, with the likes of Xero, Fineos and Life360 all down more than 35 per cent, its focus on profitability paid off for Hansen, with it trading flat on this time last year.
Hansen is the largest shareholder of the company, with 17.5 percent of the company, according to its most recent annual report. Long-standing board member David Osborne also has a 17.4 percent stake. Another board member, Bruce Adams, owns 17.3 percent, while QVG Capital has a 4.5 percent stake and Long Path Partners has a 4.4 percent share.
Despite having a $1 billion market capitalization, the company has flown under the radar in comparison to its software peers such as WiseTech, Xero and TechnologyOne.
This, Hansen admits, is partly his own doing.
“It’s due a little bit to me that it hasn’t been a widely publicized story. We’re a public company, but the people we sell to globally are not looking at Hansen based on its history, but on its applications,” he says.
“[I realised] we have thousands of investors, and we’re probably doing them a disservice. We’re a sustainable, profitable business that’s been around for 50-odd years – I don’t know many companies that could say that.”
For the most part, the company’s growth can be tied to three things – deregulation, the economy and acquisitions.
In the ’90s the wave of deregulation created opportunities for competitors to emerge in both the telecommunications and utilities sectors, creating opportunities for Hansen to broaden its customer base.
Since then, Hansen says the company’s growth has come down to the speed of the economy and acquisitions, which have enabled it to expand internationally.
M&A is back
“If the economy grows by 5 percent, so will we,” he said. “How we speed that up is by doing acquisitions, we have [effectively] bought customers in Finland, Norway, Denmark and more to add to the mix.
“To move into a market like Norway, you can buy a company with 200 staff and 100 customers, or send someone there with $30 million to build up the business [which would take a lot longer].”
Hansen says the company has made around 30 acquisitions, and he considers them all successful – meaning they’ve delivered a positive return on investment. Much like fellow acquisitive software company WiseTech, he says the company’s acquisition process is well-oiled, with integrations taking only 90 days on average.
In 2021, it found itself on the receiving end of a bid from PE fund BGH, but after a six-week exclusive due diligence period, the takeover talks collapsed.
In 2023, analysts expect Hansen to record modest revenue growth. But, Hansen has told investors that it is facing margin pressure in 2023, which disappointed analysts, who had expected margins to be maintained at historically peak levels. This pressure is thanks to the company growing its headcount, but organic growth being low.
“Hansen highlighted three customer deals (Excelon, Energy Queensland, Essential Energy) with a combined total contract value of $80 million and terms ranging between three and seven years. We think these contracts provide a good degree of confidence that revenue growth can deliver at 3 percent to 4 percent in FY23,” Shaw and Partners’ Jules Cooper said in a note.
“M&A is a genuine catalyst for HSN, but the challenge is always visibility and timing.”
Hansen has previously set a target of $500 million in sales by the 2025 financial year, but in its full-year 2022 results deck, the company did not mention this goal.
Blue Ocean Equities analysts Vic Lee and Nicholas O’Shea believe the company can still hit $500 million in sales, but to do so it will need to do more acquisitions.
“They will not overpay, as [the] Hansen family has serious skin in the game,” they wrote in a note.
In the last three years Hansen has not made any acquisitions.
This, Hansen says, is because valuations got too heated. But, he’s confident the business will do a deal in the next 12 months.
“It comes down to valuations. I’m investing shareholders money, like it’s my money. There are still some silly numbers in targets we’re looking at where bankers are promising the world, but some reality is coming back in,” he says.
“We’re extremely optimistic that valuations will be repriced, and we’re set to go.”
Despite leading the business for the last 32 years, Hansen doesn’t intend to step back yet. But, he is already planning for his succession.
The company has been recruiting younger executives, and he has also brought his two sons into the company.
“I will know, probably before the board, when it’s time to go, and I’m not adding value anymore,” Hansen says.
“We have a great executive management team, and they take on a lot of responsibility. The only thing I do is approve every new employee – they cost $150,000, so you want a process around it.”