The Telework Trend Powers On... And This Company Is Set to Profit

The COVID-19 vaccine is here... and everything will be back to normal soon.

At least, that's what the market thinks.

A vaccine means we're closer to building immunity in a large part of the U.S. population. And only after that can we safely return to restaurants, gyms, sporting events, and concerts.

But despite the optimism, this won't happen immediately. The vaccine is currently available to front-line workers and those most at risk. It may not be available to the general public until the summer or even fall. And that means that the "stay at home" trend we've seen play out this year still has legs – especially when it comes to our work environment...

According to data from security firm Kastle Systems, only 22.9% of employees worked from offices in the week ended December 16. That's down from 24.4% in the week ended December 2. And it's well below the post-summer peak of 27.4%.

The Wall Street Journal reports that we won't see a sharp increase in people in the office until at least next summer. According to the WSJ, 65% of the population would have to be immune (through both vaccination and infection) before folks can return to work safely.

Even then, offices likely won't reach pre-pandemic occupancy levels...

In October, a survey from Enterprise Technology Research ("ETR") showed that 34.4% of corporate employees are expected to work from home in 2021. That's up from 16.4% of workers before the pandemic.

And today's company is set to benefit from this trend...

Zendesk (NYSE: ZEN) sells support software that helps companies – large or small – track customer interactions and address problems through support tickets and other tools. The customers could be consumers (external customers), or the software could be used by an IT department supporting employees (internal "customers").

Aptly named, Zendesk's software is designed to bring a sense of calm to the often chaotic world of customer service.

The company's most popular product is Zendesk Support, its cloud-based help-desk support software. Zendesk Support has around 84,000 paid customer accounts. Its second-most-popular product is Zendesk Chat, a live-chat software that has 40,600 paid customer accounts. The remaining 39,400 paid customers use Zendesk's other products, which include bundles of multiple products.

As "work from home" becomes the norm for many companies, remote help-desk support becomes even more critical. And in a world that's increasingly digital, customer engagement becomes trickier without a platform like Zendesk's.

But that's not all it does...

In the past several years, Zendesk has expanded its product suite beyond customer service to include sales.

In 2018, Zendesk launched Sunshine, a customer relationship management ("CRM") platform.

CRM software helps companies sell and market their products. These platforms can also integrate post-purchase customer service. So CRM was an adjacent market for Zendesk. It was only a matter of time before the company expanded into CRM software.

With Sunshine, Zendesk is taking on much larger enterprise software companies... which is both a challenge and a big opportunity.

Zendesk uses a Software as a Service ("SaaS") business model. This means that customers pay a monthly (or yearly) fee to have access to the software. Its subscriptions are typically priced on a per-user basis. In other words, customers pay based on how many customer-service agents will be using it.

SaaS software is cheaper and easier to get up and running. It attracts many more new customers. And good SaaS businesses tend to have high renewal rates, leading to a lot of recurring revenue.

That's exactly what Zendesk's data show...

The vast majority of Zendesk's customers renew their SaaS subscriptions. But what really supercharges SaaS growth is when customers add additional agents, upgrade to higher-priced plans, or purchase additional products.

Zendesk's net expansion rate was 112% in the third quarter. In other words, existing customers paid Zendesk 12% more than the first quarter of last year. Basically, far more customers are renewing and expanding their services than those who are not renewing. This allows Zendesk to continue growing its revenue.

The renewal rate being above 100% is a testament to the SaaS model and the usefulness of Zendesk's software. This rate should remain high as the company's software remains in high demand.

As workers remain in their home offices over the next nine months (and possibly even longer), their employers will continue to need to invest in software like that provided by Zendesk. That should push the stock price even higher.