Summary
cBrain's growth plan is based on the sale of F2 to public authorities. It is cBrain's assessment that the COVID-19 crisis does not diminish the need for digitization in the public sector, but rather will increase and accelerate demand in several areas.
cBrain has so far managed to maintain continued high productivity, with employees working virtually from home. Customers are serviced at an unchanged level, and project deliveries are largely in line with plans, generally replacing physical meetings, workshops, training and presentations with virtual meetings, workshops, training and presentations.
cBrain is off to a good start in 2020 and so far, the COVID-19 crisis has had no significant impact on cBrain's business.
cBrain continues to note a generally good level of activity on the sales side. Therefore, based on an unchanged market potential and a continued high level of activity, both in terms of sales and delivery, cBrain maintains its growth plan and announced expectations for the year, corresponding to expected revenue growth of 12-15% and earnings before tax (EBT) of 7-10%.
cBrain stands as an extremely robust company with considerable security in relation to future revenue. Almost half of the revenue consists of subscriptions, the majority of which are based on long-term contracts with public authorities. At the same time, at the beginning of 2020, cBrain had assets for a total of DKK 121 million and no long-term debt or overdraft, while cash and cash equivalents amounted to approx. 40% of the company's annual costs.
cBrain maintains its growth plan
cBrain's growth plan is based on sales and delivery of F2, with a particular focus on public authorities. F2 is a standard product that can be adapted to the needs of the individual authority without programming, including supporting professional processes and citizen services.
More than 50 Danish authorities, including 14 out of 20 ministries, have today introduced F2 as their digital platform for production. At the same time, according to United Nations, Denmark ranks as the world's leading nation within E-Government. This, combined with the strong domestic position, gives cBrain a unique basis for export, and so far, cBrain has succeeded in entering Germany, England, France, the Emirates and the United States.
F2 can be configured so that the standard software supports many different needs. From paperless ministerial service to individual professional processes in a board or municipality, including self-service, case management, management information, knowledge sharing, compliance, etc.
Until now, the public sector has been in particular demand for digitalization in order to improve productivity, quality and citizen services, but now digitalization is also seen as important infrastructure that can ensure the robustness of the authorities. It is therefore cBrain's assessment that the COVID-19 crisis does not reduce the need for digitalization in the public sector, but rather will increase and accelerate demand in certain areas.
It is clear, not least in connection with the COVID-19 crisis, that the high level of digitalization and digital citizen services in Denmark means that the Danish authorities have generally managed to maintain their services, even though the public authorities had to send their employees home and work virtually.
Thus, based on our own insight into public administration in other countries, it is cBrain's assessment that the digital maturity of the Danish authorities has given Danish society a number of significant advantages over other countries, which for example, still have many citizen services still based on paper.
cBrain's growth plan is based on marketing and reusing the good experiences that cBrain has built up through its efforts to help the Danish authorities digitize. It is CBrain's assessment that this need and demand will not diminish in the coming years.
At the same time, the Corona crisis probably means that many authorities internationally will increase their focus on implementing a digitally based, robust and efficient service of citizens, as well as an efficient paperless internal organization. Here Denmark stands strong both as a reference and for inspiration.
cBrain therefore estimates that the Corona crisis does not affect the conditions for the company's international growth plan or its implementation strategy.
In the first quarter, cBrain announced new orders in both Denmark and Germany
In the first quarter, cBrain announced a new agreement with the Ministry of Business, which has chosen to implement F2 in the ministry's department.
The agreement is important for cBrain both in Denmark and in relation to cBrain's exports. The agreement cemented cBrain's position as a supplier to the Danish authorities. In Denmark, 2/3 of all ministries have now chosen the standard system F2 as a digital platform for use in case management and ministerial service in the Department, while more than 50 Danish authorities have introduced F2.
In addition, cBrain has announced a new order in Germany. Here, cBrain has succeeded in becoming a supplier to one of the major authorities in the German central administration, and over the last 2 years cBrain has won a number of tenders from the relevant authority. The authority is headquartered in Berlin and has branches in all German states.
cBrain provides professional systems to the German authority, which are configured and set up based on cBrain's F2 standard software. Although cBrain has yet to deliver solutions to some of the smaller departments, in 2019 the authority became one of cBrain's largest standalone customers in terms of revenue.
The authority therefore represents a great potential for cBrain if cBrain manages to sell additional solutions for use by the authority's many other departments and different professional systems.
It is therefore also very gratifying that cBrain announced another order with the customer. It supports cBrain's ability to exploit this potential.
Due to the positive development in Germany, through 2019, cBrain has expanded its office in Berlin, where approx. 10 employees providing F2-based solutions to the authority. The latest order has given rise to a further expansion of the office.
Activities related to sales and delivery continue unchanged
cBrain can note so far that sales activities and dialogue with the Danish customers generally remain unchanged. This applies to both sales of solutions to new customers and existing customers.
There has been a short-term slowdown in connection with customers who want to upgrade to the latest version of F2. Typically, because the IT department of the customers has wanted to postpone upgrading for a shorter period, so that they could focus internally on servicing the employees who have moved home and are working virtually. But already this seems to be changing, and this slowdown has not had a significant impact on cBrain's business.
Internationally, we have succeeded in maintaining projects and deliveries as planned. In particular, it is noted that all projects in Germany continue as planned, despite the fact that physical meetings have now been replaced by virtual meetings. In the Emirates, we succeeded in delivering and completing a project after lock-down, teaching was conducted virtually (otherwise in Arabic), and in the US, cBrain has just been granted a milestone in the delivery, despite the general shutdown in Washington DC.
Internationally, however, it seems to take a little longer for the authorities internally to adapt to work from home and virtually. This puts pressure on the authorities, which in the short term affects some of the sales activities. On the other hand, the authorities are now demanding new digital solutions for fast delivery, for example in connection with utilities.
So far, the organization is working virtually
Following the government's announcement on the evening of Wednesday, March 11, cBrain initiated its contingency plan, and as of Thursday morning, all employees were working virtually from home.
This shift has largely not affected our activities. cBrain also follows the government's recommendations and expects to open the offices again only when the government recommends this.
cBrain already had good experience working virtually before the Corona crisis, with much of the international work already being virtual based. The shift in which all employees work from home therefore means in practice that Danish customers are now served in the same way that cBrain utilizes when cBrain sells and delivers internationally.
Product development with increased focus on the virtual workplace
F2 is foundationally designed to support the transition from paper-based to digital bureaucracy, and many organizations have introduced F2 precisely for the purpose of supporting this transition.
The current situation in which government employees work from home increases the need for both authorities and employees to work even more paperless.
cBrain has therefore prioritized and promoted product development, which has a special focus on features that further support the virtual workplace, including among other things. technologies in the field of artificial intelligence and robotics.
The changed priority means that cBrain expects shortly to announce a functional extension to the current F2 Version 7, which was originally scheduled for release in connection with F2 Version 8.
cBrain is extremely robust due to subscriptions and high solvency
cBrain stands as an extremely robust company, both in relation to future revenue and financial strength.
cBrain decided a number of years ago, as part of the company's growth plan, to convert sales from selling software licenses to selling subscriptions in the form of cloud services.
This reorganization is now fully implemented.
This means that almost half of the revenue consists of subscriptions, the majority of which are based on long contracts with public authorities. At the same time, cBrain can note a very high customer loyalty. Thus, it is very rare for cBrain to lose a customer.
At the start of 2020, cBrain had assets for a total of DKK 121 million and no long-term debt or overdraft facilities, while cash and cash equivalents amounted to approx. 40% of the company's annual costs.
This means that cBrain has a high equity ratio, in the form of an equity ratio, which at the beginning of 2020 was 76%. At the same time, cBrain has the financial strength to maintain its growth plan without the need for either loans or other external financing.
cBrain maintains its expectations
Production and deliveries are maintained as expected in the first quarter, which is why both revenue and earnings are in line with the company's internal budgets and plans.
This, combined with an unchanged market potential and a continued high level of activity, both in terms of sales and delivery, means that cBrain maintains both its growth plan and announced expectations for the year, corresponding to expected revenue growth of 12-15% and earnings before tax. (EBT) of 7-10%.
This also means that the company maintains the continued organizational development that is planned in connection with the company's plan for 2020.