cBrain takes lead within AI for government
Company Announcement no. 07/2024
cBrain takes lead within AI for government
Copenhagen, April 24, 2024
cBrain (NASDAQ: CBRAIN) entered 2024 on the back of continued
strong organic growth and solid earnings, reporting full-year 2023
results showing a 27% growth year-over-year and EBT (earnings
before tax) of 34%.
The first months of 2024 show continued business development in
line with plans, winning new customers and projects in both Denmark
and internationally. Consequently, cBrain maintains its
expectations for 2024, forecasting full-year revenue growth of
20-25% and EBT (earnings before tax) of 24-30%.
First quarter 2024 has been exciting for cBrain. While executing
the growth plan, with a continued focus on F2 Climate Software as
an international door opener and developing the F2-for-Partners
concept, cBrain has in parallel developed a new F2 standard module
for government Artificial Intelligence (AI), called F2 AI
Assistant.
F2 AI Assistant has been developed in close collaboration with
Danish government authorities. On April 15th, cBrain released a new
version of F2, which includes the F2 AI Assistant module. This
release marks a significant milestone for cBrain and strongly
supports the growth plan.
By delivering fully integrated, ready-to-use AI functionality
specifically trained for government purposes and built to run
on-premises, the release of the new F2 AI module positions cBrain
as a front-runner and a leading supplier of AI for government. F2
AI Assistant is the first product within a new product line of
AI-based F2 software modules, and the F2 AI Assistant module
thereby initiates a new line of business and AI based projects.
The cBrain growth plan
cBrain differentiates itself from its competitors by delivering
solutions based on standard, off-the-shelf software, designed as a
single, fully integrated platform and specifically built for
government use.
All customers run on the exact same software, they automatically
upgrade to new F2 versions on a regular basis, and due to highly
efficient integrated configuration tools, the F2 standard software
can be configured to meet individual customer requirements without
any changes to the standard software.
The adoption of standard software represents a disruptive and
game-changing approach, which offers government entities
substantial business benefits through cost reductions, faster
delivery, and accelerated digital transformation. cBrain thereby
challenges one of the largest global industries, referred to as
government digitization, and faces a significant business
opportunity.
cBrain capitalizes this opportunity by executing an ambitious
international growth plan. Extending the long-term growth plan,
cBrain added specific areas of focus for the period 2023-2025. This
includes investing in "F2 Climate Software," which serves as a door
opener and accelerator for export and investing in the
"F2-for-Partners" concept, which allows cBrain to further scale its
business.
The growth plan is based on organic growth, and cBrain delivers
solid growth and earnings with a strong positive cash flow.
Revenue is driven by standard software
In Denmark, most revenue is derived from long-term framework
contracts through which government authorities rent the F2 standard
software. Software subscriptions are based on capacity, which is
calculated based on number of F2 users and modules.
Internationally, revenue typically follows a traditional split
between software licenses and software maintenance
subscriptions.
More than 50% of total cBrain revenue is based on software
subscriptions. Total software revenue, which is based on software
licenses and software subscriptions, accounts for approximately 80%
of total revenue.
Due to the percentage of subscriptions based on long-term
government contracts, the cBrain business is based on a solid
foundation. However, as subscriptions are based on the actual
capacity usage, which is measured across the user base by the end
of each quarter, subscriptions can vary significantly over
time.
Consequently, cBrain’s revenue forecast is based on existing
long-term contracts and projects, estimated subscription
development, and estimated inflow of new projects from either
existing customers or new customers.
cBrain forecasts revenue growth of 20-25%
By end of first quarter 2024, cBrain have invoiced revenue and
signed orders which by now show a total revenue for 2024, which is
slightly higher than total revenue for 2023. This is in line with
expectations, and it puts cBrain in a comfort zone, already today
knowing that the company will deliver growth and positive earnings
in 2024.
For the year 2024, cBrain has forecasted full-year revenue
growth of 20-25%. The actual estimates and pipeline confirm the
estimated growth of software subscriptions as well as a continued
inflow of new customers and projects. Consequently, cBrain
maintains the full-year revenue forecast growth of 20-25%.
cBrain forecasts EBT (earnings before tax) of
24-30%
cBrain continues to invest in growth. This increases costs, and
as part of the 2024 plan cBrain has allocated substantial
investments for organizational development and to support
international market opportunities in e.g. Germany and the USA.
Consequently, cBrain forecast earnings before tax margin (EBT
margin) of 24-30% in 2024.
So far cBrain has only activated a smaller part of these
investments.
This includes continued investments into building a position in
the US, with a special focus on climate software that support
environmental permitting, and building a stronger market position
in Germany, leveraging the award as company of the year, which
cBrain was recently awarded by the German-Danish Chamber of
Commerce. Additionally, investments have be made to establish a
subsidiary in Kenya, and to support the newly established joint
venture in Chennai, Tamil Nadu, India.
cBrain continues to win new projects and
customers
In Denmark, cBrain has a broad base of customers who continue to
initiate new projects.
In first quarter, The Danish Working Environment Authority
completed the first phase of a large digital transformation project
and went live on a new F2 based digital platform, which among other
functionalities support case processing and work environment
inspections. With this project cBrain has extended the customer
base by a large agency, and cBrain has got a customer reference
within a new field which can be used internationally.
In first quarter, cBrain initiated a large project with the
Danish Environmental Protection Agency. Based on the F2 platform,
the aim is to digitally administrate and support circular economy
within the field of waste management. The phase of the project has
to be delivered by the end of 2024.
In Germany, cBrain continues to work on several projects with
Deutsche Rentenversicherung Bund. Due to these projects, which
demonstrates that Danish government experiences can be reused to
accelerate government digital transformation in Germany, cBrain was
named Danish Company of the Year by the German-Danish Chamber of
Commerce. Based on this cBrain has now initiated a market
development project in Germany, working with German-Danish Chamber
of Commerce and the Royal Danish Embassy in Germany, to build a
stronger position and expand in Germany.
In Ghana the cBrain partner, Omni Strategies, has won a public
tender in Ghana to deliver an F2 based solution for the National
Communication Authority (NCA) in Accra. Using the F2 Service
Builder, the standard F2 platform will be configured to support
facilities management within the NCA, encompassing the digitization
of processes related to building and fleet management.
In the United States cBrain has contracted with local
authorities in California to deliver a digital solution to support
the GRASS-C (Growing Responsible and Socially Sustainable Cannabis)
certification program. Cannabis has been legalized in more than
half of U.S. states and territories for recreational or medical
use, and GRASS-C is a tiered market-incentive certification program
for environmentally responsible cannabis production in
California.
The GRASS-C agreement represents the next step in California. It
extends the catalogue of climate software solutions, which has
previously been delivered for the Resource Conservation Districts
in California, and it is the first solution which is delivered in
the United States based on the F2 Service Builder. The first phase
of the GRASS-C project has an expected delivery time of only 8
weeks. This demonstrates how cBrain's F2 standard software can help
governments around the world to significantly reduce risk and time
spent on digitalizing mission-critical processes.
F2 AI Assistant initiates a new line of
business
The new F2 AI Assistant module has been developed in close
collaboration with Danish government authorities, including working
the Danish Ministry of Digital Government and Gender Equality as
well as the Danish Environmental Protection Agency.
The release of the new module represents an important milestone
for cBrain, and it strongly supports the growth plan.
F2 AI Assistant is the first product within a new product line
of AI-based F2 software modules. F2 AI Assistant was released on
April 15th, in parallel with the release of a new version of the F2
platform. The F2 AI Assistant module is offered as an extension
module to standard F2, designed and built fully integrated software
within the F2 platform.
Government customers can thereby acquire and immediately start
using the F2 AI Assistant module as soon as they have upgraded to
the new F2 version. Several customers have already ordered the new
AI module, and cBrain sees this as a new line of business.
By releasing F2 AI Assistant cBrain takes a lead within
the field of AI for government
AI offers huge potential for government, including improvements
in productivity, work quality, and better citizen services.
However, government organizations across the world struggle to
deploy AI due to concerns regarding the handling of personal data
and information security issues.
F2 AI Assistant operates on premise, designed for government,
and based on a large language model (LLM) which has been trained
for government usage. Due to technical architecture and
functionality, F2 AI Assistant thereby offers government
organizations a fast track to leverage AI while eliminating
numerous issues related to personal data and security.
F2 AI Assistant offers F2 users government-specific
functionality out-of-the-box. Initially this includes text summary,
drafting news articles, translation services, theme-based
rewriting, correcting documents, and drafting memos. This is
offered as a fully integrated part of the F2 standard user
interface, and it thereby supports and helps government case
workers and managers, directly within the context of their daily
work routines.
It is a major challenge and a showstopper for government
organizations, who want to deploy AI, that normally AI is offered
as an external service. To utilize AI, government organizations
thereby have to share data outside their controlled
environment.
In contrast, the F2 AI Assistant runs on premise, and users are
thereby offered AI functionality without taking any data out if the
F2 system. This is essential to government AI usage, as it
eliminates the many concerns related to the handling of personal
data and information security issues.
By offering government organizations AI functionality, which is
designed for government use cases, based on a government trained
large language model specifically, and running on premise, cBrain
has taken a lead as supplier of AI for government.
Further developing the F2 AI Assistant
The F2 AI Assistant module is technically based on an open
architecture, which makes it easy to add more features.
As the first customers deploy the first version of the F2 AI
Assistant module, cBrain gains government AI usage experience which
will form the basis for developing and adding further functionality
to the F2 AI Assistant module.
F2 for Environmental permitting based on
customer-specific AI
In parallel with the F2 AI Assistant module, cBrain has
developed an AI engine which makes it possible to e.g. offer
natural language semantic search into customer specific data. This
makes it possible to offer in-depth support for specific government
work areas, which is not possible to support by using general
purpose AI functionality.
cBrain is working with a number of different governments, using
this technology to support customer individual working areas while
training the AI engine on customer specific data.
This includes building an AI engine with a natural language
interface which is trained to support environmental assessment.
Environmental permitting is a key global challenge, for government
as well as industries, in the need for meeting climate objectives
and new energy sources. By extending the F2 Climate Software for
permitting with AI functionality, cBrain is taking a lead as
supplier of government solutions within this field.
Best regards
Per Tejs Knudsen, CEO
Inquiries regarding this Company Announcement may be
directed to
Ejvind Jørgensen, CFO & Head of Investor Relations, cBrain
A/S, ir@cbrain.com, +45 2594 4973
- Company announcement no. 2024-07 (Q1 announcement)
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