Summary
At the end of Q3, cBrain is stronger than ever. The half-year accounts for the first half of 2020 showed record revenue with significant growth in relation to both sales of subscriptions and exports. This momentum has been maintained in Q3, and as a result cBrain has for the second time in the autumn raised its expectations for the financial year 2020. At the same time, cBrain continues to see a solid inflow of new orders, which bodes well for both the end of the year and the next years.
cBrain's business and growth plan
cBrain's primary customer group is the public sector, and cBrain helps public authorities and other large organizations digitize their business-critical workflows and processes, based on the company's standard F2 software.
cBrain has spent 15 years and more than 300,000 hours developing F2. A digital platform that differs from the start by being designed and built for public administration. Ready for operation, without the need for either special programming or a lot of consulting hours. It started in 2005 when cBrain, in close collaboration with a number of Danish ministries, mapped the administrations’ routines and workflows. This led to the development of F2 and the model of digital governance that is still the basis of F2 today.
Digital solutions for the public sector represent one of the largest markets in the world, and the market is growing, not least because the public sector is in the midst of a digital transformation, where traditional paper-based management is being replaced by a digital-based bureaucracy. But public digitization is characterized by long-term, often delayed and expensive IT projects. This is due to an outdated approach to software development, where most of cBrain's competitors are still building tailored solutions, typically based on software components and modules that are customized and integrated.
With F2, cBrain has developed and proven what very few have believed was possible. A fully integrated standard software platform with all the features a government needs in management, including a built-in process engine that can be configured without restrictions to support and automate all types of professional processes.
F2 makes it possible to avoid the large and long-term IT projects, because it requires far fewer consulting hours to deliver F2 than tailor-made solutions, while at the same time the solutions become much more flexible and easy to maintain. The results of the customers can be documented in the form of measurable results, including savings, happy users, increased productivity, and better citizen services.
F2 has therefore triumphed, and cBrain has achieved a very strong position in the Danish domestic market where more than 75 Danish authorities, including 13 out of the 18 Danish ministries, have now introduced F2 as their digital platform. Twice, the Danish Digitalization Award has gone to authorities, based on F2 projects, and internationally cBrain is growing rapidly, with customers in Germany, England, France, the USA and the Emirates.
All customers, both Danish and international, run on exactly the same platform, simply using different language tables. At the same time, cBrain releases and offers 1-2 new versions of F2 per year, and when a customer upgrades, which typically happens once a year, the customer is always upgraded to the latest version.
It gives cBrain a completely unique reference position, and it shows the strength of F2. An international user club with 100 customers, all running on exactly the same platform, and constantly upgrading to the latest version.
Expectations for the financial year
As a result of the development in Q3, cBrain on 20 October raised its expectations for revenue growth of 18-20% and earnings before tax (EBT) of 10-12% for the financial year 2020.
In connection with the accounts for the first half of the year, cBrain stated that the total turnover of subscriptions, including cloud services, license maintenance and support, had increased by 30% in the first half of 2020 compared to the first half of 2019. This also meant that sales of subscriptions had increased to 48% of the total revenue in the half-year accounts.
The good development has been maintained in Q3 2020, where continued high growth in subscription sales gave rise to the second upward adjustment in the autumn. cBrain can thus note with satisfaction that the growth in subscription sales has been maintained at the same level in Q3 as in the first two quarters of the year.
The turnover of subscriptions increases when new customers go into operation with F2, i.e.. a new subscription, or when existing customers extend its use of F2. As examples of this are if the customer expands its use of F2 with more users and / or acquires one or more add-on modules.
Therefore, when cBrain adjusts its expectations, it is due to a faster delivery and commissioning as well as a faster spread of F2 than previously anticipated. cBrain sees i.e. this as an expression of the fact that the public sector, which is cBrain's primary customer group, has an increasing focus on digitization and rapid implementation of new solutions.
At the beginning of the year, cBrain announced an expectation of revenue growth of 12-15% for the financial year 2020. On 17 August, cBrain raised this to an expectation of revenue growth of 16-18%, which on 20 October was raised to revenue growth of 18 -20%.
The increased sales of subscriptions only affect costs to a very limited extent. This means that the increased turnover of subscriptions is directly reflected in earnings, which is why expectations for earnings have also been raised.
Thus, at the beginning of the year, cBrain announced an expectation of earnings before tax (EBT) of 7-10% for the financial year 2020. On 17 August, cBrain raised this to an expectation of earnings before tax (EBT) of 8-11%, and on October 20, this was upgraded to an expectation of earnings before tax (EBT) of 10-12%.
Solid entry of new orders
cBrain continues to see a solid influx of new orders, both in Denmark and internationally, which bodes well for both the end of the year and the next few years.
In August, cBrain announced that the company had entered into an agreement to supply F2 as a case and document management system to the new Home Travel Agency in Denmark. F2 is delivered to the agency as a cloud service (Software-as-a-service), which i.e. enables fast delivery.
Of course, cBrain welcomes the new agreement. The continued progress in Denmark is important for cBrain's exports because the export is based on the Danish reference customers and the Danish authorities' success with digitization. It can be stated that the delivery has already been completed and that the Home Travel Agency has started operating the new solution.
cBrain has also announced that the Ministry of Finance of the Emirates expects to award cBrain a contract covering the delivery and implementation of a new subject system. The award is based on a tender that has been completed over the summer, and it is a delivery that is significantly larger than the previous projects that cBrain has delivered in the region.
cBrain is already well on its way to delivering the solution to the Ministry of Finance. This is a project that is under high time pressure, and cBrain has therefore been asked to start the delivery, even though the contract had not yet been officially awarded.
Germany constitutes cBrain's largest export market today. Here, cBrain has succeeded in entering as a supplier to one of the major authorities in the German central administration, with representation in all German states. The authority thus represents a great potential for cBrain as a supplier of additional solutions, both to the authority's many departments and as a digital platform within new subject areas.
cBrain continues to see a very good development in Germany and continues to expand its office in Berlin with new employees. In the first half of 2020, cBrain has announced 4 new agreements with the customer, of which 3 are for a double-digit million amount. These are framework agreements that will be delivered over the coming years, and with these orders, cBrain is approaching a breakthrough in the German market.
Despite recent orders, cBrain has so far only provided solutions to a few departments of the German authority. cBrain therefore hopes to be able to announce new orders in Germany as F2 continues to spread among the customer.