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Market Opportunities Post-COVID-19

COVID-19 will likely curb future business travel, reduce regulatory barriers for online tools and contribute to a greater appreciation for risk management. It is Catalyst Investors' view that these trends will require significant upgrades to tech infrastructure, including an acceleration of 5G rollouts and cloud transitions. In software, we see meaningful tailwinds in communications software, particularly in telehealth and e-learning. Additionally, Governance, Risk & Compliance software is well positioned for strong growth, most notably in business continuity and 3rd party vendor risk management.

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Market Opportunities Post-COVID-19

  1. 1. 1 Market Opportunities Post-COVID-19 April 2020 Allie Forlenza & Brian Rich
  2. 2. 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. 3. 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% CollaborationSaaS TelecomTowers SaaS InfrastructureSoftware Security S&P SocialMedia HCMSoftware AdTech
  4. 4. 4 Technology in Response to COVID-19 Infrastructure 5G 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. Software Communications 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. 5. 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,, and GoogleDrive, which enable collaboration amongst a distributed workforce
  6. 6. 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. 7. 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. 8. 8 Please send any inquiries to