Source: Capital IQ, Zero One
As an addition to our Chine Tech Digital Economy Winners portfolio, we have been tracking a U.S. remote work management portfolio as well.
Oddly, it took a pandemic to bring out the obvious - people don’t need to always be traveling to an office to work, wasting hours in commutes unnecessarily, when all of their work tools are accessible from anywhere with a data connection.
Moreover, broadband speeds today have made streaming video communications essentially free or very low cost, whereby you can easily run streaming video even from your phone, thanks to 4G connectivity. So what’s possible today is also a function of mobile data speeds.
While face to face teamwork and management will always have a place, we also see the stigma of remote work dramatically diminished.
Going forward, the mix of work done remotely will be permanently higher than what existed pre-COVID. Below are some of the more prominent names creating our new work normal. Their shares have dramatically outperformed the S&P500 but are in mixed range of relative performances vs. the tech-heavy Nasdaq.
As seen in the chart above, companies like Zoom and DocuSign have seen their stock prices more than double from the start of the year as businesses rapidly adopt their digital solutions in force. Based on the huge price upswings, it’s clear that investors expect demand for remote working tools to only continue increasing even after lockdowns and social distancing end.
Earlier in July, Zoom announced its new hardware-as-a-service (HaaS) business by offering customers a variety of productivity appliances for a fixed monthly subscription. The new appliances, which include 27-inch screens, soundbars, and video bars, are aimed at making employees more productive as work-from-home arrangements become the norm.
The counter-intuitive move comes at a time when Zoom’s video solution continues to gain popularity as more businesses adopt video conferencing tools. 1Q results saw the company grow customers with more than 10 employees by ~350% YoY. Zoom’s actions highlight how the next battleground for remote work could be at-home hardware. Afterall, while Zoom and other video conferencing solutions work pretty well, they are currently limited by individuals' home screen size and hardware/environment quality.
DocuSign recently completed its acquisition of Liveoak Technologies. Building on its existing integration with the secure agreement-collaboration platform, the company plans to leverage Liveoak’s technology & domain expertise to accelerate the launch of its new product, DocuSign Notary.
Slated for launch this summer 2020, DocuSign’s new product is aimed at enabling remote online notarization - making it possible to notarize documents even when the signers and notary republic are in different places. This entails a massive boost for what has to date been an extremely cumbersome process. It also further legitimizes using digital signatures in general.
While Square’s payment processing business continues to face headwinds from lockdown measures (processing volumes fell 15% YoY in 2Q), the company’s consumer payments business has been a clear COVID winner. While not a standard remote work management business you might expect, we are enthused by the company’s development into a digital bank platform during the current period. The company’s Cash App is capturing a shift away from cash and towards digital payments and transforming into a digital bank - because now you can manage a bank and service your customers remotely.
Earlier in June, management reported that the Cash App had 30 million monthly transacting customers with 7 million of them spending on the Cash Card. This led to a year-on-year gross profit increase of 167% to US$281mn. Earlier this year, the company finally won conditional approval for a banking license.
Five9, a provider of cloud contact center software, recently announced the launch of its intelligent virtual assistant. The virtual assistant leverages conversational AI and to answer commonly asked questions and automate manual tasks. With brick & mortar under pressure for the foreseeable future, the use case for remote automated staff has only grown stronger to become the default mode of customer service.
Atlassian, the company responsible for enterprise collaboration tools like Jira, Confluence, and Trello, is doubling down on the transition towards digital by offering free editions of their products. This serves two purposes - firstly it expands Atlassian’s total user base giving free word-of-mouth marketing and useful insights for future product development and secondly it gives the company a wide base of existing users to upsell/ monetize in the future.
According to the company’s latest earnings results, signups for Jira Software, Confluence, and Jira Service Desk increased over 150% YoY as COVID pushed businesses to accelerate their transition online.
Microsoft’s size and broad exposure across a wide range of COVID winner sectors make it uniquely positioned to benefit from multiple structural tailwinds.
While a weaker spending environment has dinged its more advertising-reliant Big Tech counterparts, Microsoft’s 2Q results show how the new work-from-home paradigm has helped multiple of its business units thrive. On a year-on-year basis, Xbox gaming revenue grew 65%, Azure cloud grew 47%, CRM Dynamics 365 went up 38%, while Surface product sales increased by 28%.
Earlier in June, Slack announced a multi-year agreement with Amazon Web Services to deliver better enterprise workforce solutions. According to the press release, the partnership will see deeper integration and interoperability between the two companies’ products that will allow developer teams to manage their AWS resources in Slack channels and Amazon Chime chat rooms.
We see this development as a positive catalyst that can help drive sustained momentum for both companies as businesses transition online. We note that in 1Q, Slack’s revenue rose 50% YoY to US$202mn it added 12,000 new paying customers. Slack’s growth is a sign to us that remote workforce tools are expanding dramatically.
Whereas Slack has chosen to join forces with AWS, Citrix has inked a new multi-year agreement with Microsoft expanding and building upon their existing partnership.
The multi-year deal will see Microsoft promote Citrix as a “preferred digital workspace solution” while Citrix will use Microsoft Azure as its go to cloud service provider. Additionally, the two will lead a collaborative sales effort which will emphasize Citrix solutions integration capabilities with Microsoft’s Windows Virtual Desktop.
With ~70% of people believing that the nature of work will permanently change due to COVID, Salesforce is planning to launch a new product called “Salesforce Anywhere” that will enable teams to sell, service, and market from anywhere in the world. According to management, the new app will leverage existing Salesforce tools but also enhance collaborative features such as real-time alerts, embedded chats, and AI-prompted actions.
The product is currently in a beta phase and is expected to be available by the 4th quarter of 2020. One has to feel Salesforce is a bit late to create this - shouldn’t we have been able to use it anywhere previously?
In response to the rise of unified communication platforms like Microsoft Teams and Slack, Google is evolving Gmail to become a more integrated workplace experience. The company is currently rolling out a new Gmail that will have four distinct components: Mail (as it is currently), Chat (to individuals or groups), Rooms (virtual spaces for files & task management), and Meet (video conferencing).
In doing so, Google is hoping to keep customers more entrenched in its ecosystem without the need to switch across different applications. Automatic inclusion of Google Meets for calendar invites is a great example of how Google can use its dominant position to seriously threaten companies like Zoom.
Dropbox launched a slew of new features in June to help users get more organized both at home and at work. New features for home use include an in-built password manager, “Vault” which adds an extra layer of security for sensitive documents, and automatic computer backups. New features for work use include natively embedded “HelloSign” eSignatures capabilities and an app center to better integrate with Dropbox partners such as Zoom, Slack, and Google.
During the company’s 1Q results, revenue grew 16% YoY to US$467mn. Interestingly the company’s shares have lagged overall tech peers. The company likely needs to expand beyond its core storage use case to become more of a work platform.
Box is launching new capabilities across its products lines in order to help businesses digitize and automate processes even further.
Box Relay, which handles digital asset reviews and work order submission approvals, is getting a library of new pre-built templates to simplify workflows while also adding a new file request integration tool. Meanwhile, the company’s security solution, Box Shield, is also getting an upgrade in the form of an intelligent classifications feature that automatically scans files and categorizes them based on content to better secure sensitive data. The company’s shares have also lagged tech peers, which could indicate that it hasn’t yet been recognised as a strong remote work winner.
Source: Capital IQ, Zero One