Top Stocks For the remote Workforce

Inside this report

Accenture 3 Box 6 Citrix Systems 9 DocuSign 12 Microsoft 15 RingCentra� 18 S�ack 21 Smartsheet 24 Zoom Video Communications 27 Zsca�er 30

top stocks for the remote workforce 1 Welcome!

First, thank you for your loyalty to us and your commitment to our investing strategy during these uncertain times. We wouldn’t be here without loyal members like you, and we never forget that. Second, we’re working hard to uncover opportunities in companies uniquely poised to benefit from the unusual circumstances we’re in right now. To that end, we’re proud to present you with this brand new, member-exclusive report, Top Stocks for the Remote Workforce.

In this particularly timely report, we’ve identified 10 stocks we believe stand to benefit from our increasing reliance on digital tools and services as more and more people are working from home. From video conferencing to cloud-based storage to online productivity and security tools, these companies are dominating their spaces. And with many employers announcing that employees can continue to work from home even after the pandemic ends, the future is looking even brighter for these businesses. The stocks in this report aren’t meant replace your official Stock Advisor picks — in fact, more than half have never been recommended by Stock Advisor before! Instead, we view these stocks as an excellent complement to help you take advantage of timely opportunities in your portfolio right now.

We hope you enjoy the 10 companies featured in Top Stocks for the Remote Workforce and find some worthy contenders to add to your portfolio.

2 top stocks for the remote workforce Accenture NYSE: ACN

The Big Picture Why Accenture Works on its conference call that it had helped one of its clients go from The world was already undergoing Accenture has reinvented itself zero people using Teams to 61,000 massive changes before the COVID- over the past decade to adapt to in just five days. 19 outbreak, but the pandemic has the changing times. Accenture has That kind of agility is a big greatly accelerated many trends. placed an emphasis on developing reason clients tend to stay loyal Hundreds of millions of people are expertise in emerging tech trends to Accenture once they get up and being forced to shop, work, and such as cloud, digital, and security, running. In fact, 95 of Accenture’s socialize from home. How are busi- all of which fall under a category it top 100 clients have been buying nesses supposed to adapt to this refers to as “the New.” Demand for from the company continuously for new environment so quickly? these services has been robust, with at least a decade. One solution is to look to out- revenue from the New growing at That consistency has allowed side consultants for help, which is a a double-digit rate for years. This Accenture to regularly win its fair need that Accenture [NYSE: ACN] initiative is moving the needle share of new business. Last quar- fills beautifully. With more than in a meaningful way, and it now ter, the company’s bookings rose 500,000 highly trained experts in accounts for more than 60% of 22% to a record $14.2 billion, with its global empire, Accenture has the revenue. 65% of that number related to the talent, scale, and know-how to help But Accenture isn’t taking its New. The huge backlog of projects businesses handle any challenge foot off the gas just yet. The com- enabled its top line to increase 7%, that comes their way. pany has made numerous acquisi- while stock buybacks and margin Need help with strategy? tions in recent years to expand its expansion helped EPS rise slightly Supply chain? M&A? Technology? service offering. It has also pledged faster to 10%. Operations? Outsourcing? to put additional resources behind Management has a history of Procurement? Accenture has the New to cement its industry putting its growing cash flow to experts in all of these areas — and leadership. work on behalf of shareholders. many more — and it has steadily Those investments are paying Accenture makes regular acquisi- become a trusted resource to help off in a COVID-19 world. Many busi- tions, buys back stock, and pays out get jobs done. More than 6,000 nesses have been forced to transi- a strong dividend. The dividend clients from nearly every industry tion to a 100% remote work force, was just raised 10% to $0.80 per regularly turn to Accenture for and Accenture has helped many quarter, which gives the stock a help, including 91 members of the of them manage the transition. As yield of 1.7%. Fortune Global 100 and more than the largest user of Microsoft’s While we don’t expect hyper- 75% of the Fortune Global 500. [NASDAQ: MSFT] collaboration and growth from Accenture, we believe communication product Teams, its growth rates can remain decent Accenture was well positioned to for a long time to come. There’s no help its clients make the leap. In stopping the technological advance- fact, Accenture recently boasted ments, and companies everywhere

top stocks for the remote workforce 3 5-year Stock Chart: Accenture

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will always need help navigating the Fortune’s “Most Powerful Women” An unwise acquisition, especially changes. Accenture has size, scale, for many years. a large one, could steal manage- and expertise that make it a force Employees certainly seem to ment’s attention and put a dent in to be reckoned with, so high-single- appreciate working for Sweet. On its growth rate. digit to low-double-digit revenue Glassdoor, she earns a solid 90% Second, the market has long and earnings growth is possible. approval rating, and 77% of employ- awarded Accenture an above-aver- ees would recommend the company age multiple, and that holds true to a friend. The company as a whole today. The stock is trading for 24 Why We Like Leadership earns a strong 3.8 stars out of 5. times trailing earnings and free cash flow, so if it fails to deliver on Accenture is a people business, so its growth potential, returns could it is critical to have a respected Risks suffer. leadership team and a great corpo- rate culture in place. We think that We believe that Accenture is a low- Accenture excels on both fronts. risk stock, but two areas are worth Why We Like Accenture Julie Sweet might seem like a highlighting. Today rookie CEO, since she just took First, a big part of Accenture’s over the corner office in September growth strategy is to use a portion We don’t consider Accenture to 2019, but she’s no newcomer; Sweet of its cash flow to acquire comple- be a go-go growth stock; instead, joined Accenture in 2010 and mentary businesses. The idea is to we view it as a high-quality, highly served as the CEO of the North gain a foothold with new clients, profitable industry titan that American business in 2015 before expand geographically, and add to operates in a market that is built for taking over the top chair. Sweet has its talent stack in the New. Those steady gains over the long term. We held management roles in legal and acquisitions have paid off for think this compounding machine compliance at Accenture, and she investors so far, but it’s possible is more than capable of producing has been regularly ranked as one of that might not always be the case. market-beating returns.

4 top stocks for the remote workforce Key Info: Accenture

About the company Leadership

MARKET CAP $124.1 billion TENURE Julie Sweet has been CEO since September 2019 and has worked for Accenture since DIVIDEND $0.80/quarter (1.7% yield) 2010. SECTOR Technology

FOUNDED → IPO 1989 → 2001 OWNERSHIP Sweet owns shares that are worth just over HEADQUARTERS Dublin, Ireland $2 million; total insider ownership is less than 1%. Financials

NET MARGIN 11.2%

3-YEAR COMPOUND ANNUAL GROWTH SALES 5.6% EARNINGS 9.9%

CEO Julie Sweet

top stocks for the remote workforce 5 Box NYSE: BOX

The Big Picture 100,000 paying organizations, up Why We Like Leadership from 82,000 two years ago. Slowly but surely, many companies At the onset of the pandemic, Aaron Levie and Dylan Smith had been starting to transition to CEO Aaron Levie and Box’s founded Box while in college in remote work even before the coro- management team concluded that 2004. The pair quickly recognized navirus pandemic struck. COVID-19 the world had changed and that the potential of cloud storage has accelerated that shift as busi- the fundamental nature of work for businesses and secured seed nesses have been forced to adapt to would not revert to the way things funding from billionaire entrepre- the rapidly evolving public health were. The future of work is remote. neur Mark Cuban by cold emailing crisis, navigating unprecedented At a minimum, companies now him. Levie and Smith have served economic circumstances while recognize the need to invest in the as CEO and CFO since starting the trying to maintain productivity. necessary infrastructure to facili- company. Like many tech companies that tate remote work, which can help Over the past 15 years, Levie are helping to enable remote work organizations mitigate all sorts of and Smith have demonstrated during the outbreak, Box [NYSE: potential disruptions caused by strong leadership in growing Box BOX] is benefiting from increased external factors. into business with $700 million in demand for its services. Accordingly, Box accelerated revenue. its product road map and unveiled an overhaul to the platform that Why Box Works simplified the interface, intro- Risks duced new productivity features, Initially conceived as a cloud stor- and enhanced integration with Cloud storage has become a com- age and file-sharing service, Box has Zoom Video Communications moditized service as data center evolved into a broader enterprise [NASDAQ: ZM], which has also had infrastructure costs have declined content-management platform that an exponential increase in usage and larger tech giants have entered allows employees to collaborate on during the coronavirus outbreak. the space. That threatens pricing projects and files. Box expects revenue to increase power, particularly as bigger play- Box offers a free tier for users to 11% (at the midpoint of guidance) ers can offer cloud storage as part try out the service before poten- this fiscal year, and that outlook of bundled cloud computing and tially upgrading to a paid plan. Of does not factor in any potential infrastructure offerings. its 70.6 million registered users, effects from COVID-19. The crisis Box will need to continue Box estimates that more than 80% will affect IT budgets in myriad differentiating itself with additional are nonpaying users, with roughly ways, but platforms and services value-added services and new pro- 20% of remaining users being paid that help drive collaboration and ductivity features, as the company customers who are part of an enter- productivity will remain absolutely has yet to post a full year of GAAP prise account. At the end of the last essential. profitability (it achieved non-GAAP fiscal year, the company had nearly profitability last year).

6 top stocks for the remote workforce 5-year Stock Chart: Box

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Microsoft [NASDAQ: MSFT] has long been Box’s primary competitor. Even though the two companies partnered in 2017 for cloud content management with Microsoft’s Azure cloud platform, Microsoft remains a competitive threat as the enterprise software juggernaut continues to grow its own cloud computing business.

Why We Like Box Today

Many experts believe that COVID-19 has ushered in a new era of remote work. The post-pandemic work environment might never look the same, even after we overcome the virus, and that represents an oppor- tunity for tech companies that can cater to those evolving needs. Box is one such companies that will play an instrumental role in the future of remote work.

top stocks for the remote workforce 7 Key Info: Box

About the company Leadership

MARKET CAP $2.7 billion TENURE Aaron Levie has been CEO since he co-founded Box in 2005. SECTOR Technology FOUNDED → IPO 2005 → 2015 OWNERSHIP In a shareholder-friendly move, Box eliminated HEADQUARTERS Redwood City, California its supervoting Class B shares in 2018. In doing so, insiders effectively relinquished control of Box to public shareholders. Including Financials exercisable options, Levie owns approximately NET MARGIN (20.7%) 3.6% of the shares outstanding.

3-YEAR COMPOUND ANNUAL GROWTH SALES 11.2% EARNINGS n/a Box’s net loss has decreased from $155 million in fiscal 2018 to $144 million in 2020. REMAINING $768 million PERFORMANCE OBLIGATIONS CEO Aaron Levie

8 top stocks for the remote workforce Citrix Systems Nasdaq: ctxs

The Big Picture remotely while also offering a con- COVID-19 pandemic continues. sistent experience across multiple As businesses have been forced As the COVID-19 outbreak morphed types of devices. to immediately convert employees into a global pandemic in the first Customers install Citrix’s into remote workers, many IT quarter of 2020, challenging the software on their premises and departments have turned to the operations of millions of busi- provide it to employees on site or traditional solution of allowing nesses, Citrix Systems [NASDAQ: remotely through private networks. employees to access their work CTXS] leapt into overdrive. A Increasingly, however, customers desktops via virtual private global pioneer in providing digital are opting to purchase Citrix’s networks. While VPNs provide a workspaces, Citrix raced to help software-as-a-service solutions, time-honored solution to providing existing and new customers equip which are delivered to employees off-site access, this approach has their workforces with virtual tools via the cloud. its drawbacks, including bandwidth to weather an indefinite period of After several years of mid- issues and resulting slow perfor- remote work. single-digit growth, the company’s mance as multiple users attempt During the quarter, Citrix revenue rose 20% last quarter, to log in and work over a private offered a discounted, short-term, propelled by an 89% jump in sub- network. Sensing an opening, Citrix limited-use license of one of its scription revenue, due in no small announced in May that it’s extend- flagship products, Citrix Workspace, part to COVID-19–driven subscrip- ing its Remote PC Access product enabling businesses to rapidly shift tions for remote work solutions. to the cloud, providing companies operations to an online environ- Subscription annualized recurring with a fast, cloud-based, secure ment. This action boosted sales revenue, already in high gear from alternative to the VPN route, based in an already strong quarter while a recent business model shift to the on Citrix’s proprietary architecture. giving new customers a test run of sale of annual subscription licenses, In the current environment, its capabilities. Vigorous demand rose by 50% on a year-over-year the company is also benefiting for Citrix’s products over the first basis, to $837 million. from its reputation as a platform few months of 2020 provides a Yet sales growth potential is built for simplified administration tantalizing glimpse into what the just one attribute that’s attracting on the part of IT professionals. future might hold for this remote investors’ attention. Citrix’s focus Supplementing its streamlined work specialist. on virtualization software produces virtual environment management hefty profits. The company sports tools, the company offers server an enviable gross margin of 85%, virtualization to help IT staff Why Citrix Works and this high margin is reflected in reduce costs and create more its cash flow generation: Last year, efficient server environments. Citrix provides software to the Citrix produced $716 million in free Citrix also leans on a decades- desktop virtualization market. The cash flow from $3 billion in revenue. long partnership with Microsoft company’s products help end users It’s also taking steps now to keep [NASDAQ: MSFT] to provide easy and access familiar desktop environ- its economic engine humming seamless integration with Windows ments or customized workspaces for the next several years as the environments and online suites like

top stocks for the remote workforce 9 5-year Stock Chart: Citrix Systems

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Microsoft’s Office 365. organization’s gradual migration of 25 years of management expe- Strategically, Citrix’s next phase on-premise offerings to the cloud, rience and enjoys a stellar 89% of growth in the coming five to 10 and its shift in its licensing model, approval rating from employees on years will rest on a business by following quarterly metrics Glassdoor. transformation plan devised like cloud-subscription mix and Henshall has surrounded by its management team. This subscription ARR growth. In addi- himself with industry veterans who transformation, which envisions tion, look for Citrix to continue to bring decades of experience in lead- Citrix emerging as a dominant, deemphasize networking hardware ing divisions of the world’s largest cloud-based SaaS provider in its and services sales over time. This software companies. Chief product core expertise areas, includes the revenue stream makes up roughly officer P.J. Hough headed up teams following big-picture objectives: one-fifth of the company’s top line that developed Microsoft’s Visual ▶ Shifting software offerings from today, but the segment isn’t nearly Studio Products and the precursor on-premise to the cloud as profitable as the virtualization to the Office 365 suite. Recently ▶ Weaning customers off perpet- software business. appointed CFO Arlen Shenkman ual licenses and toward recur- served as German software giant ring subscription licenses SAP’s [NYSE: SAP] global head of ▶ Deemphasizing single-point Why We Like Leadership business development and eco- products in favor of signing systems and also served as CFO customers on to long-term Citrix’s management team reflects of its North American operations. platform solutions its status as an aggressive, seasoned Henshall has carefully cultivated software competitor. CEO David and recruited executives with deep This straightforward plan Henshall joined Citrix in 2003 product and operational expertise should ensure Citrix’s product lead- and served as both CFO and COO with the aim of expanding Citrix ership and continued market share before being promoted to helm well beyond its current $3 billion capture. Investors can monitor the the company in 2017. Henshall has annual revenue.

10 top stocks for the remote workforce Risks desktop infrastructure provider Why We Like Citrix Today CloudJumper in a bid to hasten its As with any entrenched tech way into this lucrative space. Even before the COVID-19 pandemic, organization, investors should Citrix has successfully adapted remote work was increasing at a keep watch over established and to numerous competitive chal- pace several times that of overall emerging competition. Citrix’s lenges in its 25 years as a public job growth in the United States. rivals include virtualization special- company, and its veteran leadership Given its comprehensive solutions ists like Nutanix [NASDAQ: NTNX] team should be able to meet new aimed at both end users and IT and VMware [NYSE: VMW]. While challenges head on. Of more imme- departments and an execution- the company boasts a long track diate concern, the company faces oriented management team, Citrix record of protecting its customer risk that its sterling cash flow might is positioned to enjoy accelerated base from such traditional com- take a temporary hit over the next growth for the next several years. petitors, the growth of remote few quarters if enterprise customers Better yet, the company is trading work will likely attract more begin to delay payments because of at just 26 times forward earnings, attention from established cloud pandemic-related cash constraints. making Citrix a reasonably priced platform players seeking an entry Citrix executives said they haven’t tech star selling at only a slight into the market. For example, in seen any adverse impacts on collec- premium to the overall market. April, cloud data provider NetApp tions to date and that they continue [NASDAQ: NTAP] acquired virtual to watch the situation closely.

Key Info: Citrix Systems

About the company Leadership

MARKET CAP $16.9 billion TENURE David Henshall has been CEO since 2017 and has held C-level positions at Citrix for 17 years. DIVIDEND $0.35/quarter (1.0% yield) SECTOR Technology OWNERSHIP Insiders own less than 1% of Citrix’s common FOUNDED → IPO 1989 → 1995 stock. HEADQUARTERS Fort Lauderdale, Florida

Financials

NET MARGIN 22.0%

3-YEAR COMPOUND ANNUAL GROWTH SALES 10.0% EARNINGS 27.0% CEO David Henshall

top stocks for the remote workforce 11 DocuSign Nasdaq: docu

The Big Picture top 10 technology companies throughout the course of a year, around the world. that’s $36,000 in savings. DocuSign [NASDAQ: DOCU] is the In fiscal 2020, which ended in leader and pioneer in electronic January, revenue rose 39% year over signature solutions. Essentially, Why DocuSign Works year, and 94% of the company’s DocuSign’s goal is to automate the revenue was subscription based. agreement process. Consider this example. Let’s say DocuSign’s customer count grew by In many cases, getting a physical that you want to buy a house. Your 24% during the year, and since reve- signature on a contract or other initial purchase offer requires a nue rose significantly faster, it’s fair legal document can be slow and signature from you (well, many to say that the average customer is difficult, not to mention a waste of signatures and initials), and so does spending significantly more over paper. By automating the process, every subsequent modification time. The company’s gross margin businesses and individuals can to the offer. The seller also needs improved, and non-GAAP operating accomplish in minutes what used to sign each counteroffer, as well income increased from $15 million to take hours or even days. To put it as the final accepted contract. If in 2019 to $47 million in 2020. mildly, having to obtain signatures you’re signing everything manually, DocuSign estimates its address- on documents has been a pain you’ll have to drive back and forth able market size at $25 billion point for businesses. to your real estate agent’s office for just its eSignature platform. The COVID-19 pandemic adds for each signature, and the process However, the company’s Agreement another good reason for businesses will probably consume hundreds of Cloud suite of products doubles to switch to electronic signatures. sheets of paper. You might be able this opportunity to $50 billion. In DocuSign offers a touchless solu- to do some of this by fax or email, addition to just signing contracts, tion that eliminates passing papers but in many cases, an original the Agreement Cloud facilitates the and pens back and forth among signature is required. DocuSign’s preparation and management of several parties and can be com- solutions allow each necessary contracts as well. pleted without having to physically signature to be completed and sent With less than $1 billion in go anywhere. DocuSign’s guidance to all relevant parties in just a few revenue over the past four quarters, for the current fiscal year calls for minutes. to say that DocuSign has barely 31% revenue growth, and while the Here’s why hundreds of thou- scratched the surface of its poten- economic climate could have some sands of customers are willing to tial would be an understatement. negative effects, we certainly think pay for this efficiency. By saving And to be clear, DocuSign isn’t strong growth is still achievable. time and resources, DocuSign the only player in the e-signature DocuSign’s products and estimates that every time a trans- business, but we foresee it retain- services are used by about 589,000 action is completed through its ing its top market share. After all, paying customers, including 18 of platform, the cost of doing business DocuSign has become synonymous the top 20 pharmaceutical compa- is reduced by $36. If a customer with the concept of e-signatures nies, 10 of the top 15 financial uses DocuSign’s platform to in the same way that “Kleenex” is services companies, and 7 of the facilitate 1,000 signed agreements used interchangeably with “tissue.”

12 top stocks for the remote workforce stock Chart: DocuSign

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Why We Like Leadership friend, and Springer has a 98% job competitors are currently offering. approval rating based on more than DocuSign’s stock also has quite DocuSign is led by CEO Dan 600 reviews on Glassdoor. Both a bit of growth priced in. The com- Springer, who has been in his percentages are some of the highest pany trades for roughly 23 times current role since 2017 and has we’ve seen. TTM sales and isn’t profitable nearly three decades of industry on a GAAP basis yet. So if growth experience, including his previous slows or the company doesn’t show role as CEO of Responsys. Risks investors a clear path to profits, the Management’s interests are well stock could suffer as a result. aligned with those of shareholders, No stock capable of multiplying with the bulk of executive compen- its revenue several times over is sation coming in the form of stock without risk. Why We Like DocuSign awards. About 92% of CEO Dan For DocuSign, competition is Today Springer’s fiscal 2020 compensation certainly a risk factor. While we was stock based. think DocuSign should retain its DocuSign is a clear leader in its Springer owns about 1.8% of No. 1 market share for the foresee- industry, offering tremendous value the stock, a stake worth about $380 able future, deep-pocketed tech to its customers. In the new socially million. If Springer delivers the rivals could potentially cause distanced world, DocuSign could kind of returns for investors that trouble. Adobe [NASDAQ: ADBE] find a tailwind from the desire for we think DocuSign is capable of, he is currently No. 2 in the space touchless solutions to everyday stands to make billions. and could decide to make a bigger activities. Although it’s not a cheap Springer has also done an push into the e-signature business stock, DocuSign could still be in the excellent job of building a strong (although we don’t see it becoming first few innings of its growth story, corporate culture: 90% of DocuSign a big priority for the tech giant). and we’re excited to be along for employees say they would recom- And the full-featured Agreement the ride mend the company to a job-seeking Cloud is something that no

top stocks for the remote workforce 13 Stock Chart: DocuSign

About the company Leadership

MARKET CAP $23.7 billion TENURE Dan Springer has been CEO since 2017. He has about 30 years of experience in the industry, SECTOR Technology including several CEO roles. FOUNDED → IPO 2003 → 2018

HEADQUARTERS San Francisco OWNERSHIP Springer owns 1.8% of the stock, and no insider has a significant amount of control over the Financials company.

NET MARGIN (21.0%)

3-YEAR COMPOUND ANNUAL GROWTH SALES 37.0% EARNINGS n/a DocuSign’s net loss widened from $52 million in fiscal 2018 to $208 million in 2020. CEO Dan Springer

14 top stocks for the remote workforce Microsoft Nasdaq: MSFT

The Big Picture purchasing new versions of the Microsoft is gaining share in this software every few years — which rapidly growing industry. In all, Even after a cure is found, the could cost $150 or more — as is global public cloud service revenue, coronavirus pandemic is likely to often necessary with traditional which includes cloud application have a lasting impact on how and software packages, users can get a services like Microsoft 365, will where we work. Many people will Microsoft 365 subscription for as surpass $350 billion by 2022, up demand the right to work from little as $5 per month. These rela- from less than $230 billion last year. home, and businesses that have tively inexpensive set-it-and-forget- Looking ahead, we’ll be watch- experienced the benefits of a it plans help reduce the chance that ing the cloud wars closely to see distributed workforce during the users will balk at making a large if Microsoft can continue to take COVID-19 crisis will gladly oblige. renewal purchase and switch to a share from the mighty Amazon The companies that enable less expensive competitor. [NASDAQ: AMZN] Web Services — remote work stand to profit hand- Microsoft’s Azure cloud infra- and ward offAlphabet ’s [NASDAQ: somely from this powerful trend. structure platform should also see GOOG, GOOGL] Google’s cloud And no company is poised to play a increased demand due to the trend advances. We’ll also be monitoring more important role in this post- toward distributed workforces. Microsoft 365’s growth closely, and pandemic world than Microsoft Azure helps power Microsoft 365 we’d like to see rising subscriber [NASDAQ: MSFT]. and many other cloud-based counts and evidence of strong software applications. The COVID- renewal rates. If that occurs — 19 pandemic will likely drive more and we think it will — Microsoft’s Why Microsoft Works businesses and organizations to revenue, profit, and cash flow accelerate their digital transforma- should all trend nicely higher, Multiple aspects of Microsoft’s tion plans, if only to be able to con- leading to a steadily rising dividend business are likely to benefit from tinue their operations should they stream and fortune-building share the work-from-home trend. be forced to shutter their offices price appreciation for investors. Microsoft 365, the company’s once again (for pandemic-related productivity software suite that reasons or otherwise). The cloud includes cloud-based versions of its gives businesses flexibility and Why We Like Leadership popular Word and Excel applica- redundancy, and Microsoft’s Azure tions, could see heightened demand. platform is one of the best in the CEO Satya Nadella has made Cloud software is easier to deploy industry in this regard. Microsoft a force in the cloud. to distributed workforces. It’s also Azure is likely to be Microsoft’s He helped lead the transition easier to update and secure. most powerful growth driver in of Microsoft’s venerable Office Moreover, software subscrip- the coming decade. The cloud franchise to a cloud-based model tions delivered via the internet infrastructure market will grow to (Microsoft 365), which has helped help to lock in users by eliminat- more than $74 billion by 2022, up to reignite growth for this key ing critical decision points and from $40 billion in 2019, accord- profit driver. He also helped Azure large up-front costs. Rather than ing to Gartner [NYSE: IT] — and become the cloud infrastructure

top stocks for the remote workforce 15 5-Year Stock Chart: Microsoft

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titan it is today. the cloud services market due to Why We Like Microsoft Better still, Nadella has Amazon’s impressive scale and Today rekindled an innovative spirit propensity to reduce prices, but at Microsoft. He’s also done we think it can. One reason is that Microsoft possesses a rare com- the impossible: made Microsoft Amazon has a growing list of bination of immense financial cool again. After years of being enemies, such as retailers and strength and tantalizing long-term lampooned by its rivals for being logistics companies, that don’t growth prospects. With more boring and stale (remember those want to give their cloud business to than $70 billion in net cash on its Mac vs. PC ads?), Microsoft’s brand their archnemesis and would much fortress-like balance sheet, the is once again synonymous with cut- rather do business with Microsoft. tech titan can withstand even the ting-edge tech. That’s an impressive Still, Amazon is not to be taken most severe pandemic-induced feat, and it’s just one of the reasons lightly. economic downturn. And with its we think Nadella has the chops to Alphabet’s Google is another cloud-based businesses fueling lead Microsoft well into the future. powerful rival. It has built its G its growth, Microsoft is likely to Suite cloud productivity software become an even larger behemoth into a respectable platform in than its current $1.36 trillion Risks recent years. We don’t see it as market cap implies. a serious threat to Microsoft 365 Amazon is a formidable opponent. just yet, but we’ll be watching its It won’t be easy for Microsoft to development closely. continue to increase its share of

16 top stocks for the remote workforce Key Info: Microsoft

About the company Leadership

MARKET CAP $1.36 trillion TENURE Satya Nadella has been CEO since 2014 and has worked at Microsoft since 1992. DIVIDEND $0.51/quarter (1.1% yield) SECTOR Technology OWNERSHIP Insiders own about 1.4% of Microsoft, worth FOUNDED → IPO 1975 → 1986 about $20 billion. HEADQUARTERS Redmond, Washington

Financials

NET MARGIN 33.4%

3-YEAR COMPOUND ANNUAL GROWTH SALES 11.4% EARNINGS 25.5% CEO Satya Nadella

top stocks for the remote workforce 17 RingCentra� NYSE: RNG

the Big Picture RingCentral offers tailored RingCentral’s annual revenue, up solutions for various types of 63% from a year ago. The ability to work from anywhere businesses. Its small-business suite That strength continued in has gone from being a productivity- focuses on affordability, bringing the first quarter of 2020, even as enhancing option to an absolute together cloud-based voice, team RingCentral made a big shift in necessity. Even before the messaging, and online meeting its product lineup. RingCentral coronavirus pandemic struck, capabilities in plans starting at has collaborated for years with workers increasingly asked for — $25 per user per month. For larger video conferencing specialist and in many cases demanded — the enterprise customers, higher-priced Zoom Video Communications flexibility and freedom that comes plans bring added features such [NASDAQ: ZM] to provide the video from being able to work remotely. as automatic call recording, video portion of the platform, but in April, The biggest criticism of remote meetings with up to 200 partic- RingCentral released its reimagined work is that it can be a challenge to ipants, real-time data analytics, RingCentral Video conferencing keep employees engaged and able and integration with third-party service as part of its RingCentral to work together effectively. There software providers to help bring in Office platform. The company is are many ways that workers can customer relationship management pleased to have a fully native video communicate to keep information and developer platform tools as service that also makes customer flowing, but they don’t all allow for well as industry-specific features. onboarding easier. the same level of interaction that Customers have flocked to working side by side brings. RingCentral’s solutions. In 2019, total revenue rose 34% year Why We Like Leadership over year, with similar growth Why RingCentral Works in subscription-based revenue. RingCentral founder and CEO Particularly notable was a 71% Vlad Shmunis has the entrepre- RingCentral [NYSE: RNG] has jump in annualized recurring neurial skills we like to see. Back aimed to change that. With its revenue from customers generating in the early 1990s, the Ukraine- business communications services, $100,000 or more in business every born executive decided to create RingCentral combines several com- year for RingCentral, along with the Ring Zero Systems software munication methods into a single 59% growth in mid-market custom- package, which allowed Microsoft platform, allowing workers to use ers bringing in $25,000 or more in [NASDAQ: MSFT] Windows to the power of chat-based messaging, annualized revenue. incorporate communications capa- file sharing, telephone, and video RingCentral has also success- bilities. After selling to Motorola conferencing capabilities. Moreover, fully brought in customers through Solutions [NYSE: MSI] a few years RingCentral has extended its exper- strategic partnerships. Deals with later, Shmunis saw there was still tise to cover business communi- big-name telecom players like a lot of untapped potential from cations with customers, which has AT&T [NYSE: T], Avaya [NYSE: his idea. As a result, he decided to also become increasingly important AVYA], and French IT consulting buy back the intellectual property as e-commerce replaces in-person giant Atos [OTC: AEXAY] were at the heart of Ring Zero, and that visits to stores and offices. responsible for $300 million of became the basis for the start of

18 top stocks for the remote workforce 5-Year Stock Chart: RingCentra�

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RingCentral in 1999. Risks Finally, investors need to be Shmunis believes that the prepared for volatility. RingCentral enemy of innovation is bureaucracy, RingCentral’s biggest risk is expects to make less than $1 per so the RingCentral CEO strives to competition. In particular, Zoom’s share in adjusted earnings in 2020, have an open corporate culture to video conferencing platform has which means its recent stock price encourage the free flow of ideas. gotten a lot of publicity, and it’s of $275 works out to a valuation of With the same mentality that start- gaining adoption from a wide range nearly 300 times forward earnings. ups embrace, RingCentral tries to of users. Zoom’s growth doesn’t Any shortfall in actual results could retain a customer focus while preclude RingCentral from expand- prompt a big drop for the stock. also expanding its addressable ing as well, but RingCentral needs market to include clients of all sizes. to find more ways to differentiate Employees love that approach, its platform to avoid direct compar- Why We Like RingCentral giving RingCentral 4.6 stars out isons with the better-known Zoom. Today of 5 on Glassdoor and awarding The coronavirus pandemic has Shmunis a 96% approval rating. forced RingCentral to adjust how it Shmunis has been adept at navigat- Shmunis has also kept his expects clients to use its platform. ing this increasingly competitive financial future intimately tied to For instance, with more people environment, and the culture he’s RingCentral. He has a roughly 7% working from home, RingCentral built at RingCentral puts it in a stake in the company, but because hasn’t had as many people using its strong position to take advantage he holds shares with preferential desktop phone service. However, of opportunities as they arise. voting rights, he has more than 30% offsetting those declines have been RingCentral’s strategic partnerships control over the company. Even at higher use of the RingCentral app give it access to new clients that its age 59, Shmunis remains dedicated on their laptops and mobile devices. competitors lack, and that should to the strategic vision he helped lay As long as RingCentral’s platform keep the company growing well into out for RingCentral. remains available for all types the future. With so many employers of devices, much of the shifting looking to expand their capacity demand should merely substitute to let employees work remotely, one vehicle for another rather than RingCentral should have the wind at result in an outright loss of business. its back for the foreseeable future.

top stocks for the remote workforce 19 Key Info: RingCentra�

About the company Leadership

MARKET CAP $23.0 billion TENURE Vlad Shmunis has been CEO since he founded RingCentral in 1999. SECTOR Technology FOUNDED → IPO 1999 → 2013 OWNERSHIP Shmunis holds a 7% stake in RingCentral, with HEADQUARTERS Belmont, California a recent value of around $1.5 billion. Because of RingCentral’s dual-class share structure, Shmunis has more than 30% voting control of Financials the company. NET MARGIN (5.9%)

3-YEAR COMPOUND ANNUAL GROWTH SALES 33.9% EARNINGS n/a RingCentral’s net loss increased from$4.2 million in 2017 to $53.6 million in 2019.

CEO Vlad Shmunis

20 top stocks for the remote workforce S�ack NYSE: WORK

The Big Picture designed to integrate Slack with Why We Like Leadership every imaginable enterprise cloud The COVID-19 pandemic has service. Leveraging these integra- Butterfield is a seasoned tech upended nearly all aspects of daily tions, CEO Stewart Butterfield entrepreneur, having also been a life, including how and where peo- believes that Slack’s interoperabil- co-founder of Flickr, the popular ple get work done. Organizations ity positions the service as a value photo-sharing site from the early have been aggressively transition- multiplier, streamlining productiv- days of the internet. Interestingly, ing as many employees as feasible ity by making internal workflows Butterfield’s greatest successes to working remotely in order to more efficient and effective. were born from failures in trying combat the disease’s spread. That Slack utilizes a familiar free- to launch online multiplayer video has created a surge in demand for mium model, offering a free tier games. Both Flickr and Slack were companies that facilitate remote of service that allows users to test released after those projects failed work, such as Slack [NYSE: WORK]. out the platform. Once a user is to take off. The enterprise collaboration hooked, word-of-mouth referrals The ability to quickly pivot away platform was already wildly popular drive bottom-up adoption within from an unsuccessful idea toward a before the coronavirus outbreak, organizations that convert to paid previously unforeseen opportunity but the crisis has made Slack even tiers that offer more features and is a crucial skill in the tech industry. more indispensable as millions of capabilities. Butterfield has demonstrated this businesses attempt to maintain In early 2020, Butterfield also capability — and, perhaps more productivity amid unprecedented shared some insights into how the importantly, has been able to follow uncertainty. wholesale shift to remote work due up those initial pivots with strong to COVID-19 has driven a surge of execution and leadership. usage and engagement. Businesses Why Slack Works are creating new Slack workspaces at a breathtaking pace — skyrocket- Risks Slack is much more than just a ing by “hundreds of percent” within messaging platform. The service a matter of weeks — which is As the saying goes, “Imitation is the has evolved into a comprehensive contributing to a dramatic acceler- sincerest form of flattery.” A few enterprise collaboration platform ation in paid customer growth. In years ago, enterprise software jug- that supplants legacy forms of a remote work environment, Slack gernaut Microsoft [NASDAQ: MSFT] communication like email. is absolutely mission-critical to set out to compete with Slack, Interoperability is a key compet- companies desperately trying to launching its Teams app, which itive differentiator for the platform: navigate the disruptions caused by largely replicates many of Slack’s Slack has an expansive directory the coronavirus pandemic. most popular features (includ- with hundreds of thousands of ing the look and feel of the user third-party and custom apps interface). By bundling Teams with

top stocks for the remote workforce 21 Stock Chart: S�ack

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Office 365, which many enterprise Why We Like Slack Today customers are already paying for, Microsoft can aggressively under- While COVID-19 has caused a cut Slack while offering a compara- massive shift to working remotely, ble “good-enough” alternative. that trend might not be temporary. Teams represents one of Slack’s Many companies are now starting greatest competitive threats, but to recognize the benefits and the company has been able to viability of remote work. Now defend its position admirably by that so many organizations are justifying its value proposition starting to invest in the underlying to organizations. In fact, most of infrastructure to enable working Slack’s largest customers also use remotely, many are expected to Office 365, and the fact that those continue that shift even after the enterprises are willing to pay more virus is defeated. for Slack is a testament to the The unfortunate crisis has company’s competitive advantages inadvertently accelerated that and pricing power. trend, which bodes well for Slack’s Still, Microsoft is a worthy rival future as a core pillar of remote with deep pockets and a long time work. horizon, so investors will need to keep an eye on the ongoing compe- tition between Slack and Microsoft.

22 top stocks for the remote workforce Key Info: S�ack

About the company Leadership

MARKET CAP $17.4 billion TENURE Stewart Butterfield has been CEO since he co-founded Slack in 2009. SECTOR Technology FOUNDED → IPO 2009 → 2019 OWNERSHIP Butterfield owns 7.5% of the shares HEADQUARTERS San Francisco outstanding, but through a combination of supervoting shares and irrevocable voting proxy on shares held by other investors, Financials Butterfield wields 42.1% of the total voting NET MARGIN (90.0%) power. All insiders collectively control 70.1% of the voting power. 3-YEAR COMPOUND ANNUAL GROWTH SALES 69.0% EARNINGS n/a Slack’s net loss widened from $140 million in fiscal 2018 to $568 million in 2020, although much of 2020’s loss was attributable to stock-based compensation expenses recognized in connection with going public via direct listing. CEO Stuart Butterfield

top stocks for the remote workforce 23 Smartsheet NYSE: SMAR

The Big Picture your company should expand its addition of new customers has work-from-home policy (sound been tepid. When you collaborate with poignant?). There are lots of stake- Those last two figures are co-workers, you all need to holders to consider: HR, employees, particularly impressive. With each be looking at the same data. their families, and the ripple effects passing year, existing customers Historically, that’s meant having an on operations. You pay that $14 fee are spending over 30% more Excel spreadsheet projected on a to help you organize what you learn. (dollar-based net retention) with conference room screen — with all By the time you finish, you’re Smartsheet. Case in point: When stakeholders sitting together. gushing about how much the fourth quarter of 2018 came But the spreadsheet has never Smartsheet helped during the to a close, there were a scant 65 captured everything; it sometimes process. Management takes note. customers with annual contracts leaves out that key data point Before you know it, everyone in of at least $100,000. Today, there shared in email or something your the company is sharing data via the are 350. colleague mentioned on Slack platform. And additional tools — This means that the software [NYSE: WORK]. Smartsheet [NYSE: like Control Center and Dynamic is becoming deeply ingrained in SMAR] has developed software to View — are layered on top. operations. That creates a second- collect all of that “unstructured” For Smartsheet, each additional ary moat to go along with in-house data and make it easily digestible. user and tool adds recurring network effects: high switching And in the midst of the COVID- monthly revenue. There are costs. 19 pandemic, the importance of powerful in-house network effects All of that adds up. Revenue has this software is only accelerating. at play: Once a certain number of more than doubled since 2018. But Sitting around the conference employees are on the platform, it we believe Smartsheet is just get- table might become a relic of the makes no sense not to have every- ting started: The total addressable past. It’s never been more import- one using Smartsheet. market for the company is expected ant to share data remotely — and It’s an oversimplification, but to grow to $31.5 billion by next year. Smartsheet is one company that’s this classic “land-and-expand” Current subscription revenue of making it happen. strategy is how the company has $244 million is a drop in the bucket achieved stellar growth over the — less than 1% of that opportunity. last three years — even when the Why Smartsheet Works

ANNUALIZED Smartsheet often gets its foot in FISCAL 2018 FISCAL 2019 FISCAL 2020 GROWTH the door innocuously. It might be a Customers 74,116 78,959 83,901 6% single person or small team paying Average annualized a simple $14 per month for help on contract value per customer $1,640 $2,454 $3,643 49% a project. For instance, let’s say you’ve Dollar-based net retention rate 130% 134% 135% n/a been tasked with deciding whether

24 top stocks for the remote workforce Stock Chart: Smartsheet

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Why We Like Leadership Risks Why We Like Smartsheet Today After finishing his football career Nowhere is the investment risk at Dartmouth, Brent Frei decided more evident than that the On the surface, Smartsheet might to stick around campus and help company is bleeding cash despite look expensive, trading for a strato- coach the team for one more year. its torrid growth. Over the past spheric 25 times sales. At the same He couldn’t have known it at the year, free cash flow has come in at time, it has two rapidly expanding time, but it was a life-altering negative $23 million, much of it due moats. Trading for just under $7 decision. to massive spending on sales and billion today, and with such an That’s because his longtime marketing. enormous opportunity in front of business partner, Mark Mader, With more than $550 million in it, we won’t quibble about price. was just arriving on campus as a cash on the balance sheet and no Smartsheet will be a long-term freshman athlete. Together, they long-term debt, we aren’t too con- winner as COVID-19 accelerates our founded Smartsheet in 2005. Today, cerned. But we need to see Mader conversion to remote work. Frei sits on the board while Mader guiding Smartsheet to positive cash serves as CEO. Combined with the flows in the not-too-distant future. rest of insiders, they own 10.2% of Smartsheet also has to contend the company. with big names like Microsoft We love that level of skin in the [NASDAQ: MSFT] and Alphabet’s game. If the company falters, those [NASDAQ: GOOG, GOOGL] Google running it will suffer right along- for simple solutions to data and side us shareholders. We also love collaboration. We think Smartsheet the culture Mader has nurtured: is differentiated enough that it will Employees give the company 4.1 continue to win customers, but stars on Glassdoor, with Mader we’ll be watching for continued earning a 94% approval rating. acceleration of over-$100,000 annual contracts for proof.

top stocks for the remote workforce 25 Key Info: Smartsheet

About the company Leadership

MARKET CAP $6.9 billion TENURE Mark Mader co-founded Smartsheet and has been CEO since 2006. SECTOR Technology FOUNDED → IPO 2005 → 2018 OWNERSHIP Insiders, led by Mader and co-founder Brent HEADQUARTERS Belleview, Washington Frei, own 10.2% of shares outstanding.

Financials

NET MARGIN (35.4%)

3-YEAR COMPOUND ANNUAL GROWTH SALES 56.0% EARNINGS n/a Smartsheet’s loss has narrowed by 71% over the CEO Mark Mader past two years to $0.85 per share.

26 top stocks for the remote workforce Zoom Video Communications Nasdaq: ZM

The Big Picture employees to maintain some level The company’s detailed cus- of face-to-face communication. tomer metrics are equally impres- One of the biggest paradigm shifts The platform can be used on both sive. The number of customers with occurring as a result of the global mobile and desktop devices and more than 10 employees grew by pandemic is the acceleration of supports collaboration — as few as 61% last year, while those contrib- remote work. Employers around two and as many as 500 people can uting $100,000 in trailing-12-month the world have had to adjust on the work together at a time. revenue jumped 86%. Meanwhile, fly to work-from-home models to In the past few months, we’ve Zoom’s existing customers are protect workers from the corona- gotten a glimpse of just how much expanding their relationships and virus. This massive culture change Zoom could grow over the next spending more money. The compa- presents challenges in the way decade. The platform has grown ny’s net dollar expansion rate was employees communicate. In-person from 10 million daily meeting more than 130% for the seventh meetings have become largely participants at the end of 2019 successive quarter, which indicates impossible, and communication via to more than 300 million by late a 30% increase in the amount of email loses a lot in translation. April — and that could be just the revenue generated by existing users. That’s where Zoom Video beginning. Zoom is competing in a large Communications [NASDAQ: Employers have discovered and growing market. The company ZM] comes in. It allows people to the convenience and cost savings cites IDC research that estimates connect using video, voice, and potential of the work-from-home its addressable market will grow chat, and provides the ability to model. It’s highly likely that, even to $43 billion by 2022. To get a seamlessly share content. We think as the coronavirus threat subsides, sense of the sheer magnitude of the trend will continue long after at least some workers will continue the opportunity, compare that to the pandemic is a distant memory. to telecommute, and many employ- the $623 million in revenue Zoom ers will make Zoom an indispens- generated in fiscal 2020. able part of the arrangement. At its current growth rate, Zoom Why Zoom Works Even before the pandemic, could easily surpass $1 billion in Zoom was prospering from the revenue this year, a clear indication Zoom is an all-in-one platform for growing trend toward video­ the company is on the path to video, audio, web conferencing, and conferencing. In fiscal 2020, which success. instant messaging. The easy-to-use ended in January, revenue rose 88%, cloud-based service has become the despite stiff competition. Unlike default solution that allowed many many newly public companies, Why We Like Leadership employees to make the transition Zoom is already profitable, even to working remotely, allowing as it continues to scale its top-line Founder and CEO Eric Yuan supervisors, co-workers, and growth. started Zoom after a long-distance

top stocks for the remote workforce 27 Stock Chart: Zoom Video Communications

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relationship with his girlfriend left staff appears to be working: 96% consequences of the rapid growth him longing for a better way to of employees would recommend over the past several months and communicate. The 10-hour train the company to a friend, and Yuan the risks that come with it. In the trips across the Chinese country­ boasts a 98% approval rating on early days of the COVID-19 pan- side planted the seed for what Glassdoor. demic, as new users flocked to the would eventually become Zoom. Finally, Yuan’s interests are platform in droves, hackers and While there are plenty of com- squarely aligned with those of others with malicious intentions petitors, Yuan’s focus on happiness shareholders. He owns 16% of the gained unauthorized access to sets Zoom apart. The burgeoning shares, which represents 34% of the unsecured meetings and class- entrepreneur left his previous posi- voting power. rooms, using racism, pornography, tion because he wasn’t content, and and obscenities to disrupt the he was determined that the busi- proceedings in a practice that has ness he founded would be different. Risks been dubbed “Zoom-bombing.” One of the company’s core Investors can take heart at the values is “care.” In a letter that The company’s unprecedented breadth of Zoom’s response to accompanied the company’s IPO growth has attracted the attention these challenges. Yuan released a filing, Yuan famously said, “Our of deep-pocketed competitors. missive in early April apologizing focus is to keep both our customers Rivals include Cisco’s [NASDAQ: for falling short of users’ privacy and our employees happy,” and this CSCO] WebEx, Microsoft’s and security expectations and isn’t just lip service. In the com- [NASDAQ: MSFT] Teams and Skype, detailing the actions the company pany’s early days, Yuan personally and Alphabet’s [NASDAQ: GOOGL, was taking to address the problem. contacted every customer who GOOG] Google Hangouts. Even These included educating users canceled to understand why they Facebook [NASDAQ: FB] is getting about existing security features, left. into the game with Messenger freezing the development of new Yuan has also said that “if your Rooms to support multiuser video features, and redirecting its entire employees are not happy, nothing chat. research and development team to else at your company will go well.” That’s not all. Shareholders and securing the platform and enhanc- His focus on the happiness of his users alike have already seen the ing security. Zoom also acquired

28 top stocks for the remote workforce secure messaging and file-sharing Why We Like Zoom Today platform of choice for its ease service Keybase to help achieve of use and the ability to access it its goal of embedding end-to-end Videoconferencing was already across a multitude of devices. With encryption into its platform. experiencing rapid adoption before more employees working remotely This illustrates just how seriously the pandemic brought Zoom into than ever before, Zoom scaled to Zoom is taking this issue, and rightly the public spotlight. As the world meet the unprecedented demand so. Getting privacy and security was turning on a dime, Zoom was and has met its challenges head-on. right will be critical for the company there to lend a helping hand. In a We believe this bodes well for to continue its rapid growth and market with plenty of competing Zoom’s success far into the future. succeed in the coming years. options, Zoom emerged as the

Key Info: Zoom Video Communications

About the company Leadership

MARKET CAP $49.0 billion TENURE Eric Yuan has been CEO since he founded Zoom in 2011. SECTOR Technology FOUNDED → IPO 2011 → 2019 OWNERSHIP Yuan owns 39% of the Class B shares of HEADQUARTERS San Jose, California common stock and controls 34% of the total voting power. The 13 directors and executive officers own 59% of the Class B shares and Financials have 52% of the voting power.

NET MARGIN 4.0%

3-YEAR COMPOUND ANNUAL GROWTH SALES 102.0% EARNINGS 234.0%

CEO Eric Yuan

top stocks for the remote workforce 29 Zsca�er NASDAQ: ZS

The Big Picture Why Zscaler Works popular Office 365 application suite. However, Zscaler isn’t depen- Imagine that Netflix [NASDAQ: Zscaler offers its cloud security dent on Microsoft for its growth. NFLX] had attempted to launch platform through a software-as- The increased adoption of software- its video streaming service with a-service model. Customers don’t defined wide-area networks is thousands of DVD players. The have to invest a lot of money up another important growth driver. company’s streaming service front as they do with many other The SD-WAN market should grow wouldn’t have scaled well and network security solutions. by a compound annual growth rate would almost certainly have been The company’s technology and of more than 40% over the next riddled with problems. business model has proved to be few years as companies implement Many corporate IT teams are attractive to organizations seek- SD-WANs to lower costs and finding themselves in this kind of ing to improve and simplify their simplify their networks. scenario, especially with the COVID- network security. Zscaler has more One key thing to watch is a 19 pandemic resulting in large than 3,900 customers, including growing adoption rate of Zscaler’s percentages of their workforces over 400 of the Forbes Global 2000. secure transformation bundle, the needing secure access to corporate Zscaler’s platform is ideal for company’s all-inclusive package for systems so they can work from the remote-work environment. corporate customers. Customers home. Virtual private networks The company built its solutions that go with it will rely more worked OK for securing access for from the ground up to connect heavily on Zscaler for their corpo- small numbers of remote workers. any device on any network to any rate network security needs and But those VPNs don’t scale well application running on any cloud, will be less likely to switch to rival enough to support a large number and it does all of this while simulta- products. By the end of 2019, 43% of employees working remotely. neously delivering fast and reliable of Zscaler Internet Access total Zscaler [NASDAQ: ZS] solves access. annual recurring revenue stemmed this problem. The company’s cloud But Zscaler’s technology isn’t from secure transformation bundle security platform enables fast and just for remote workers. Customers subscriptions, up from 35% at the secure access to all of a customer’s can also use its platform for staff end of 2018. internal and external apps. And at their headquarters and branch it can scale up to handle all the offices. users who need to work remotely. The company has a solid growth Why We Like Leadership No VPNs necessary. No security runway thanks to its connection nightmares. with Microsoft [NASDAQ: MSFT]. What kinds of leaders do we really Zscaler is the only security ven- like? CEOs who are founders. dor certified by Microsoft for the Executives with great track records.

30 top stocks for the remote workforce Stock Chart: Zsca�er

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Leaders with a compelling vision. Risks Why We Like Zscaler CEOs with skin in the game. CEO Today Jay Chaudhry checks all of these One risk for Zscaler is that it isn’t boxes. profitable yet. It’s not likely to Chaudhry founded Zscaler in generate profits within the next few Although the risks for Zscaler are 2007. But it wasn’t his first time years as it continues to increase real, we think the company has building a tech company. He had spending as it expands. As a result, what it takes to be successful over previously started four other the company will probably have to the long run. It’s targeting a huge companies focused on internet borrow money or issue new shares $20 billion market that’s growing security. All of them were success- in the future to fund operations. rapidly as organizations move their ful and were eventually sold to big Another risk relates to Zscaler’s apps and data to the cloud. Its plat- corporations. SaaS business model. A downside form is better than the competition In 2019, Chaudhry described to this model is that there’s a on several key fronts, including his vision in an interview with chance that customers won’t renew scalability, ease of deployment, and Bloomberg, saying, “My obsession their subscriptions. total cost of ownership. is really to make sure that the Probably the biggest risk for Perhaps another rival will internet and cloud are a safe place Zscaler is competition. The eventually launch a product that’s for everyone to do business.” company faces several deep- on par or better than Zscaler’s That’s exactly what Zscaler is pocketed rivals that could launch platform. But we think it’s even attempting to do. competing solutions that are more likely that competitors will As for skin in the game, superior to Zscaler’s platform. attempt to preserve market share Chaudhry and his family trust own for their legacy network security 21% of Zscaler’s outstanding shares. products, giving Zscaler an endur- ing competitive advantage. With a market cap that’s still only around $10 billion, the stock should have a tremendous opportunity to grow over the next decade and beyond.

top stocks for the remote workforce 31 Key Info: Zsca�er

About the company Leadership

MARKET CAP $9.9 billion TENURE Jay Chaudhry has been CEO since he founded Zscaler in 2008. SECTOR Technology FOUNDED → IPO 2008 → 2018 OWNERSHIP Insiders own 23.8% of Zscaler’s outstanding HEADQUARTERS San Jose, California shares.

Financials

NET MARGIN (12.0.%)

3-YEAR COMPOUND ANNUAL GROWTH SALES 55.2% EARNINGS n/a

CEO Jay Chaudhry

32 top stocks for the remote workforce Disclosures John Mackey, CEO of Whole Foods Market, an Tom King owns shares of Amazon. Amazon subsidiary, is a member of The Motley Abi Malin owns shares of Alphabet (C shares), Fool’s board of directors. Suzanne Frey, an Amazon, and Facebook. executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an Jim Mueller, CFA, owns shares of Accenture, employee of LinkedIn, a Microsoft subsidiary, is Alphabet (A shares), Alphabet (C shares), Amazon, a member of The Motley Fool’s board of directors. and Zoom Video Communications. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and Benjamin Ra owns shares of Facebook, Slack, and sister to its CEO, Mark Zuckerberg, is a member of Zoom Video Communications. The Motley Fool’s board of directors. Karl Thiel owns shares of Alphabet (A shares), Andy Cross owns shares of Adobe Systems, Alphabet (C shares), and Facebook. Alphabet (A shares), Facebook, and Microsoft. The Motley Fool owns shares of Accenture, Maria Gallagher owns shares of Slack. Alphabet (A shares), Alphabet (C shares), Amazon, Box, DocuSign, Facebook, Microsoft, Slack, Tom Gardner owns shares of Alphabet (A shares), Smartsheet, Zoom Video Communications, and Alphabet (C shares), Facebook, Zoom Video Zscaler. Communications, and Zscaler. The Motley Fool has a disclosure policy. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. Company information as of May 14, 2020; market cap and stock charts as of May 22, 2020. Vicki Hutchison owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Box, Facebook, Slack, Smartsheet, Zoom Video Communications, and Zscaler. Top Stocks For the Remote Workforce