1

Market Opportunities Post-COVID-19

April 2020Allie Forlenza & Brian Rich

2

The Future of Work Following COVID-19

In a matter of weeks, the COVID-19 pandemic has changed the way businesses and individuals will conduct themselves for years to come

Although it’s still too early to grasp the full implications of the pandemic, behavioral changes we anticipate include:

1

3

2

A Decrease in Business Travel / Greater Acceptance of a Distributed Workforce

• After seeing success conducting meetings over communication tools such as Zoom during the quarantine, we suspect companies will see less value in taking incremental business trips

• A distributed workforce could become more prevalent as managers will have meaningful experience with remote employees

Less Regulatory Barriers for Online Tools

• The U.S. Centers for Medicare and Medicaid Services has made steps to expand the accessibility of telemedicine. Although the accommodations are theoretically temporary, we suspect there will be permanent policy changes to come

• Despite teachers and school districts being historically resistant to allowing partial homeschooling or online learning for K-12 kids, it will be difficult to prevent further innovation in this area after large homeschooling efforts during quarantine

A Better Appreciation for Risk Management

• Many companies were not prepared to handle the business challenges that arise during an emergency situation such as a pandemic

• We believe businesses as well as educational institutions will be more cognizant of contingency plans and ensure they are equipped with the proper technology to handle business disruptions

3

What Can We Learn from the Public Markets?

Amidst the worst Q1 stock performance in history, investors sought out tools that promoted collaboration as well as well as predictable revenue streams

YTD Stock Performance (as of 3/31/20) Performance Commentary

• Tailwinds in collaboration: Collaboration software was the top performing subsector, as usage surged with millions of employees working from home

• Safety in stable revenue streams: SaaS models as well as tower stocks experienced less of a selloff, likely due to a greater stability of revenues

• HCM under pressure: Given the steep economic downturn as a result of the virus, HCM software will likely remain under pressure in the near-term

• Ad tech challenged: Ad tech significantly underperformed, as advertisers pull back spend amidst a national quarantine and financial pressuresSources: CapIQ

12%

3%

-12%-15% -16%

-20%

-26% -29%

-40%-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Co

llab

ora

tio

n S

aaS

Tele

com

To

wer

s

SaaS

Infr

astr

uct

ure

So

ftw

are

Secu

rity

S&P

Soci

al M

edia

HC

M S

oft

war

e

Ad

Te

ch

4

Technology in Response to COVID-19

Infrastructure5G and Cloud Products

5G rollouts will accelerate after seeing the stress mass quarantines have put on the current

infrastructure. Also, the pandemic will motivate companies to prioritize their transition to the cloud.

SoftwareCommunications and GRC

Business communication tools will become a staple for companies and there will be significant progress

made in telehealth and e-learning. Additionally, GRC software will become an essential for businesses across a variety of industries.

Technology Trends in a Post-COVID-19 World:

How will technology respond in the wake of COVID- 19? Early indicators suggest a greater emphasis on infrastructure improvements, risk assessments and tools that promote collaboration

5

Key Infrastructure Implications

Source: [1] CNBC

• Acceleration of 5G Rollouts and Broadband Investment• Mass quarantines have put unprecedented stress on the current telecom infrastructure

• Verizon estimated that there was a 75% increase in bandwidth demand from March 8 to 15 alone[1]

• Carriers even sought out additional network capacity through temporary spectrum loans in order to ensure connectivity

• As many essential services including healthcare and education make strides in their digital delivery, increasing the rate of 5G rollouts will be crucial• There will also need to be investment in supporting billing infrastructure/network management to take full advantage of

the 5G commercial opportunity

• This pandemic also exposes the need to advance broadband in rural areas in an effort to decrease the current digital divide in the market

• Connectivity is Key: Cloud Infrastructure and Collaboration Tools • Companies that had invested in cloud infrastructure were better prepared for a transition to working from home

• Despite being a somewhat timely and arduous process, we suspect cloud transitions will accelerate in the upcoming months given the clear benefits the connectivity and flexibility of the cloud provides

• Other beneficiaries include offerings such as Dropbox, Sync.com, and GoogleDrive, which enable collaboration amongst a distributed workforce

6

Key Software Implications

Source: [1] EHS Today; [2] Axios

• Contextual Communications Will See Sustained Demand • Business communication tools such as Zoom and Slack will become staples for every business following employees’

dependence on them during quarantine

• Telehealth is particularly poised for outsized growth, assuming continued regulatory support• The Centers for Medicare and Medicaid Services (CMS) recently allowed for the temporary expansion of telehealth by

adding 80 additional services under coverage• Although this is intended to be a temporary allowance, we suspect the shift in policy will largely endure

• E-Learning is also an area likely to see an uptick in demand as policy around alternative education methods evolves

• GRC Software Will Be Deemed Essential• Many companies were caught off-guard for a pandemic by either lacking a business continuity plan or having insufficient

technology to support employees working from home• One survey found that while 60% of businesses have a continuity plan in place, but only 37% actually have the necessary

technology to enable employees to work from home [1]

• Third-party vendor risk management software has also stood out as an important segment of the market as companies assess the criticality of their various vendors in an age where supply chains have become extremely diverse• Coronavirus has disrupted supply chains for nearly 75% of U.S. companies[2]

7

COVID-19 Implications

Industry 4.0

Long-Term Implications

Short-Term Implications

Higher Growth

Lower Growth

Cloud Infrastructure /

MSPs

Towers

HR Tech

Communication / Collaboration

Tools

Ad Tech

E-Learning

Telehealth

Business Continuity

3rd Party Vendor

Risk

Food Order & Delivery

Tech

Travel Tech

E-Commerce

Fulfillment / Last Mile Delivery

Co-Working Spaces

Data Protection / Application

Security

8

Please send any inquiries to allison@catalyst.com