cBrain: A Scalable Software Play for the Public Sector

cBrain is a Danish software company that helps governments work more efficiently through digitalization. Its F2 platform allows public institutions to manage cases, documents, approvals, permits, and citizen services using a standardized software solution instead of expensive custom-built systems. After becoming the leading platform for Danish government ministries, cBrain has successfully expanded to government organizations across multiple continents. As governments around the world look for faster, cheaper, and less risky ways to modernize their operations, cBrain aims to become a global leader in software for the public sector. The question remains: Does this government software specialist deserve a spot in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.

For full disclosure, I should start by mentioning that at the time of writing this analysis, I do not own any shares in cBrain. If you would like to see the stocks in my portfolio or copy my portfolio, you can do so on eToro, You can find instructions on how to do this here. I don't own any stocks in competitors of  cBrain either. Thus, I have no personal stake in  cBrain. If you want to purchase shares (or fractional shares) of cBrain, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started with investing with as little as $50.

The Business

cBrain was founded in 2002 in Denmark and specializes in developing software exclusively for governments and public institutions. The company’s mission is to help governments digitize administrative processes, improve efficiency, and accelerate the delivery of public services. Unlike many traditional software providers that rely on large custom development projects, cBrain has built a standardized software platform called F2 that is specifically designed for government organizations. F2 is a Commercial Off-The-Shelf (COTS) platform that enables public institutions to manage cases, documents, workflows, approvals, citizen services, registries, and large-scale administrative operations through a single integrated system. Today, cBrain supports more than 100 government organizations across five continents and has established a strong presence not only in Denmark but also in countries such as Germany, France, the United Kingdom, the United States, the United Arab Emirates, and several African nations. The foundation of cBrain’s business model is the F2 platform, which was developed over more than two decades in close collaboration with Danish government ministries. During this period, cBrain spent more than 600.000 hours designing and refining the platform to address the specific requirements of government organizations. Unlike traditional enterprise software that often requires extensive customization and consulting services, F2 is designed to be ready for use out of the box. The platform can be configured to meet individual legal, organizational, and process requirements without modifying the underlying software code. This allows governments to implement digital solutions much faster while reducing costs, complexity, and implementation risks. The F2 platform offers a broad range of capabilities that support virtually all core government functions. It provides integrated case management and workflow tools that help public employees manage applications, approvals, permits, inspections, grants, and regulatory processes. It also includes self-service solutions for citizens and businesses, registries that manage information about citizens and organizations, mass-operation functionality that enables governments to process large numbers of cases simultaneously, and open APIs that allow integration with other software systems. More recently, cBrain has integrated artificial intelligence capabilities into the platform to further automate workflows and improve productivity. The platform also includes no-code and low-code configuration tools, allowing government organizations to adapt processes without requiring extensive technical expertise. A key aspect of cBrain’s business model is its focus on recurring software revenue. Software sales account for the majority of total revenue, and most software revenue comes from subscriptions tied to long-term government contracts. This creates a highly predictable revenue stream and reduces dependence on large one-time implementation projects. While the company still generates revenue from implementation and support services, the increasing contribution from subscriptions provides greater stability and scalability. Because governments typically use administrative systems for many years once implemented, cBrain benefits from long customer relationships and recurring demand for software licenses, maintenance, upgrades, and additional functionality. cBrain’s competitive moat is primarily built on its government specialization, standardized software platform, accumulated domain expertise, switching costs, and strong customer references. The company’s most important advantage is its exclusive focus on government organizations. While many software vendors attempt to serve both private and public sector customers, cBrain has spent more than twenty years developing software specifically for the needs of government institutions. This deep specialization has allowed the company to build functionality that reflects how governments actually operate, including compliance requirements, case management procedures, transparency obligations, citizen interactions, and regulatory workflows. Replicating this knowledge would require competitors to invest significant time and resources while also gaining similar practical experience working alongside government organizations. Another important competitive advantage is the F2 platform itself. Unlike traditional government IT projects that often involve extensive customization, F2 is built as a fully integrated standard software platform that can be configured without altering the underlying code. This approach allows cBrain to deploy solutions significantly faster than many competing alternatives while reducing implementation risks and project complexity. Governments often struggle with IT projects that run over budget, experience delays, or fail to deliver expected outcomes. By offering a proven platform that can be configured rather than custom-built, cBrain provides a compelling value proposition that lowers both costs and risks for customers. The company also benefits from substantial switching costs. Government institutions manage enormous amounts of information, documentation, workflows, and historical records. Once these processes have been digitized and embedded within the F2 platform, migrating to another system becomes both costly and operationally challenging. Employees become familiar with the platform, workflows are tailored to the organization’s requirements, and large volumes of data are integrated into daily operations. These factors create strong incentives for customers to remain with cBrain over long periods of time. cBrain’s extensive experience within Denmark further strengthens its competitive position. Denmark is widely recognized as one of the most digitally advanced governments in the world, and F2 has become the dominant platform across Danish ministerial departments and many public agencies. These successful deployments serve as powerful references when cBrain expands internationally. Governments considering large-scale digital transformation projects often seek proven solutions with demonstrated success, and cBrain can point to a long track record of delivering measurable productivity improvements and successful implementations within one of the world’s leading digital governments. The company’s growing library of reusable government workflows also represents a competitive advantage. Through the F2 Toolchain and Process Library, cBrain has created reusable process templates that can be deployed across different customers and countries. This allows the company to leverage previous implementations rather than starting from scratch with every project. Over time, this creates a powerful flywheel where each new implementation enhances the platform’s capabilities and expands the library of reusable solutions, making future deployments faster and more efficient. Finally, cBrain benefits from scale advantages within its niche. As more governments adopt the platform, the company can spread development costs across a larger customer base while continuously improving the software. Regular updates, integrated AI capabilities, expanding process libraries, and growing international references further strengthen the attractiveness of the platform. Because cBrain’s software is purpose-built for government and supported by decades of accumulated expertise, it occupies a unique position within a market that has historically been dominated by expensive custom-built systems and fragmented point solutions. These advantages create a strong competitive moat that should support cBrain’s ability to grow and maintain its position as governments around the world continue their digital transformation efforts.

Management

Per Tejs Knudsen serves as the CEO and founder of cBrain, a position he has held since establishing the company in 2002. He earned a degree in Civil Engineering from the Technical University of Denmark in 1982 and later completed a Graduate Diploma in Business Administration with a specialization in accounting from Copenhagen Business School in 1988. Throughout his career, Per Tejs Knudsen has combined a strong technical background with entrepreneurial and business expertise, allowing him to build and scale software companies over several decades. Before founding cBrain, Per Tejs Knudsen established PPU Software in 1983, which later became Maconomy A/S. Under his leadership, Maconomy developed into one of Denmark’s leading software companies and was successfully listed on the Copenhagen Stock Exchange in 2000. The experience gained from building and scaling Maconomy provided Per Tejs Knudsen with deep insight into enterprise software development, product strategy, and international expansion. Following his departure from Maconomy, he founded cBrain in 2002 with the ambition of creating a fundamentally different approach to software for government organizations. cBrain was listed on the Copenhagen Stock Exchange in 2006 and has since grown into one of Denmark’s leading software companies focused exclusively on the public sector. A defining aspect of Per Tejs Knudsen’s leadership has been his conviction that governments should adopt standardized software platforms rather than rely on large custom-built IT projects. This philosophy became the foundation of cBrain’s F2 platform. While many public sector IT projects have historically been characterized by high costs, long implementation periods, and significant execution risks, Per Tejs Knudsen believed that governments could achieve better outcomes through configurable standard software. This vision has shaped cBrain’s strategy from the beginning and remains central to the company’s long-term growth ambitions today. Under Per Tejs Knudsen’s leadership, cBrain developed F2 in close collaboration with Danish government ministries and public institutions. The platform eventually became the dominant electronic case and document management solution across Danish ministerial departments and later expanded into agencies, municipalities, and international markets. Today, cBrain serves government organizations across five continents, demonstrating the scalability of the software model that Per Tejs Knudsen envisioned more than two decades ago. Beyond his responsibilities at cBrain, Per Tejs Knudsen remains actively involved in the Danish technology and academic communities. He serves on the advisory board of the Department of Applied Mathematics and Computer Science at the Technical University of Denmark and is a member of the university’s representative board. He is also a member of the Danish Academy of Technical Sciences and Dansk IT. These engagements reflect his longstanding interest in technology, innovation, and education and help maintain close ties between cBrain and the broader Danish technology ecosystem. Per Tejs Knudsen is also a significant shareholder in cBrain through his holding company, Putega Holding ApS. As both founder and major shareholder, his interests are closely aligned with those of other shareholders. This ownership structure provides a strong incentive to focus on long-term value creation rather than short-term financial targets. Throughout his career, Per Tejs Knudsen has demonstrated a willingness to invest patiently behind a long-term strategy, particularly in the continued development of the F2 platform and the company’s international expansion efforts. One aspect of Per Tejs Knudsen that stands out is his track record of building successful software businesses from the ground up. Few executives can point to founding and taking two separate software companies public while remaining actively involved in creating long-term shareholder value. His combination of technical expertise, entrepreneurial experience, and deep understanding of government digitalization has played a crucial role in shaping cBrain’s unique position within the software industry. Given his extensive experience, significant ownership stake, and long-term vision for standardized government software, Per Tejs Knudsen appears well positioned to continue leading cBrain through its next phase of international growth.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. cBrain has achieved a ROIC above 10% in seven out of the past ten years. While I would prefer to see the company consistently generate ROIC above 10%, it is encouraging that cBrain has delivered ROIC above 13% in each of the past six years and exceeded 20% in three of the last five years. The company’s profitability has clearly improved since 2020, suggesting that its business model has become increasingly scalable as recurring software revenue has grown and the F2 platform has matured. Several characteristics of cBrain’s business model help explain why ROIC improved significantly after 2020. First, cBrain operates an asset-light software business. Once the F2 platform has been developed, the cost of serving additional customers is relatively low, allowing revenue growth to translate into higher profitability. This is particularly true for subscription revenue, which now accounts for the majority of software sales and provides highly attractive margins. Second, cBrain benefits from a standardized software platform rather than a custom development model. Because the company can reuse the same core platform across customers, it avoids many of the inefficiencies that often accompany project-based consulting businesses. As more government institutions adopt F2, development costs can be spread across a larger customer base, improving returns on capital over time. Another important factor is the company’s growing international presence. Over the past several years, cBrain has expanded beyond Denmark and demonstrated that the F2 platform can be deployed successfully in multiple countries. As the company gains more international customers, it can leverage the significant investments already made in developing the platform. This creates operating leverage because incremental revenue often requires far less capital than was needed to build the platform initially. The decline in ROIC from 22,2% in 2024 to 13,4% in 2025 appears to be largely related to investments made to support the company’s next growth phase rather than a deterioration in the underlying business model. During 2025, cBrain increased investments in market development and organizational capabilities as part of its 2026–2028 growth plan. Management has been expanding its international sales efforts and strengthening the organization to support future growth. These investments increase costs in the short term before the associated revenue materializes, which naturally puts pressure on profitability and ROIC. In addition, international government projects can be somewhat lumpy, and lower international revenue in 2025 compared to 2024 likely contributed to the weaker return on capital. Looking ahead, I believe ROIC has the potential to improve again. The underlying characteristics that drive high returns remain intact. cBrain continues to benefit from an asset-light business model, recurring subscription revenue, low capital expenditure requirements, and a highly scalable software platform. Management expects revenue growth of 10% to 15% in 2026 despite the investments made during 2025, suggesting that the company is beginning to harvest the benefits of these initiatives. If cBrain succeeds in accelerating international adoption of the F2 platform while maintaining its high software mix and subscription revenue base, ROIC could gradually move back toward the levels achieved in 2023 and 2024. While I do not expect ROIC to increase in a straight line every year given the timing of government contracts and growth investments, the long-term outlook for capital efficiency remains attractive due to the scalability of the software platform and the recurring nature of the business.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. cBrain has delivered an impressive record of equity growth. The company has increased its equity every year except for 2018, when it remained unchanged. Since 2020, equity has grown by more than 10% annually every year, and the absolute level of equity has tripled from 106 in 2020 to 318 in 2025. This consistent growth is particularly encouraging because it reflects the company's ability to retain earnings and compound shareholder value over time while still paying dividends. The primary reason for this strong equity growth is cBrain's highly profitable business model. The company generates attractive margins and requires relatively little capital to support growth. Unlike many traditional software or consulting businesses that need significant investments in physical assets, cBrain's main asset is its F2 software platform. Once the platform has been developed, additional growth requires relatively limited incremental capital. As a result, a large portion of the company's profits can be retained on the balance sheet, contributing directly to equity growth. Another important factor is the increasing share of recurring software subscription revenue. Subscription revenue now accounts for the majority of software sales and provides stable and predictable cash flows. Because government customers typically sign long-term agreements and remain customers for many years, cBrain benefits from a steady stream of earnings that can be reinvested into the business or retained on the balance sheet. This recurring revenue model creates a strong foundation for long-term equity growth. The acceleration in equity growth after 2020 is also consistent with the improvement in profitability and ROIC during the same period. As the F2 platform matured and gained wider adoption both in Denmark and internationally, cBrain was able to generate higher earnings without requiring a proportional increase in invested capital. This combination of strong profitability and low capital intensity naturally leads to faster growth in shareholder equity. The slower growth of 10% in 2025 compared to the exceptionally strong increases seen in 2021 through 2024 does not appear concerning. Management deliberately increased investments in international expansion, sales capabilities, and organizational development as part of its 2026–2028 growth strategy. These investments reduced short-term profitability but were made to support future growth. While they temporarily slowed the pace of equity accumulation, they should strengthen the company's long-term competitive position if successful. Looking ahead, I believe cBrain is well positioned to continue growing equity over time. The company benefits from an asset-light business model, recurring subscription revenue, strong cash generation, and a growing international opportunity. Unlike companies that rely heavily on acquisitions or require substantial capital investments to grow, cBrain can largely fund its expansion through internally generated cash flow. Equity growth will likely fluctuate from year to year depending on the timing of government contracts and investments in future growth initiatives, but the underlying drivers remain favorable. As long as cBrain continues to expand its customer base, grow subscription revenue, and maintain disciplined capital allocation, I would expect shareholder value to continue increasing over the long term.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. cBrain has consistently generated positive free cash flow throughout the past decade, which is an encouraging sign for any company. While free cash flow has been somewhat volatile from year to year, the overall trend has been positive. Free cash flow reached DKK 82 million in 2025, making it the second-highest level in the company’s history and nearly double the level achieved in 2024. The company has also delivered impressive free cash flow margins over time, frequently exceeding 30%, which highlights the attractive economics of its software business model. One of the main reasons cBrain generates strong free cash flow is its asset-light business model. The company primarily sells software rather than physical products and therefore requires relatively limited capital investments to support growth. Once the F2 platform has been developed, additional customers can be added without significant incremental costs. This allows a large portion of earnings to be converted into cash. The growing contribution from recurring subscription revenue further strengthens cash generation because subscription contracts provide stable and predictable cash flows while requiring limited ongoing investment. The volatility in free cash flow is largely explained by the nature of cBrain’s customer base rather than weaknesses in the business itself. Government contracts can be large and unevenly distributed across periods, which affects when revenue is recognized and when cash is received. As a result, cash generation can fluctuate from year to year even when the underlying business continues to perform well. This helps explain why free cash flow has varied over time despite relatively stable profitability and a consistently growing subscription revenue base. The strong increase in free cash flow during 2025 was primarily driven by stronger cash generation from the underlying business. The company delivered solid profitability while continuing to benefit from a growing base of recurring subscription revenue. At the same time, cBrain spent less on investments than in the previous year. The combination of stronger cash generation and lower investment spending allowed a larger share of earnings to flow through to free cash flow, resulting in one of the strongest free cash flow performances in the company’s history. Looking ahead, I believe cBrain is well positioned to continue growing its free cash flow over time. The company benefits from several attractive characteristics, including recurring subscription revenue, high margins, low capital intensity, and a scalable software platform. Management expects revenue growth of 10% to 15% in 2026 despite continuing investments in international expansion and organizational development. If these investments translate into additional government customers and higher subscription revenue, free cash flow should continue to increase over the long term. Investors should expect some volatility because government customers can vary the timing of large projects and software implementations from one year to the next. However, the overall direction should remain positive as the business scales. cBrain primarily uses its free cash flow in three ways. First, it reinvests in the business through continued development of the F2 platform, international expansion, and organizational growth. Second, it rewards shareholders through dividends. The board proposed increasing the dividend by 56% in 2025 to DKK 1.00 per share, demonstrating management’s confidence in the company’s cash-generating ability. Third, cBrain uses part of its cash flow to strengthen the balance sheet through debt repayments. In 2025, the company repaid DKK 22 million of borrowings while continuing to invest in future growth. This balanced approach allows cBrain to fund expansion, reward shareholders, and maintain a strong financial position at the same time. And while the free cash flow yield suggests that the stock is still trading at a premium valuation, it also suggests that cBrain is trading at its most attractive valuation in more than a decade. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to assess whether a business has a manageable level of debt that can be repaid within a three-year period, calculated by dividing total long-term debt by earnings. Upon analyzing cBrain’s financials, the company currently has just 0,6 years of earnings in debt, making this a non-issue for investors. It is also worth noting that the debt is primarily related to mortgages on company-owned buildings rather than borrowings used to fund operations or acquisitions. Additionally, management has demonstrated a commitment to reducing debt over time, as seen through the repayment of loans associated with these properties. Given cBrain’s strong cash generation, low debt level, and disciplined approach to capital allocation, I do not expect debt to be a concern for cBrain in the future.

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Risks

Competition is a risk for cBrain because the company’s core advantage is built around offering a standardized software platform specifically designed for government institutions. While this has helped differentiate cBrain from traditional IT vendors that rely on custom-built solutions, management itself acknowledges that the market is gradually moving toward standardization. As governments around the world continue their digital transformation efforts, more software providers are likely to develop similar commercial off-the-shelf platforms for the public sector. This could reduce the uniqueness of cBrain’s offering and increase competitive pressure over time. Historically, many government IT projects have been developed as custom solutions that are expensive, time-consuming, and often difficult to maintain. cBrain recognized this challenge early and built the F2 platform as a standardized alternative that could be configured rather than custom-built. This first-mover advantage has helped the company establish a strong position, particularly in Denmark. However, if the broader public sector software market evolves in the same way as many other software markets, standardized platforms may become the norm rather than the exception. As a result, cBrain could face increasing competition from companies offering similar solutions. One source of competition could come from large enterprise software companies. Firms such as Microsoft, Oracle, SAP, Salesforce, and ServiceNow already serve governments around the world and possess significantly greater financial resources, larger development teams, and broader international sales networks than cBrain. If these companies decide to focus more aggressively on government-specific workflow and case management solutions, they could leverage their existing customer relationships and global presence to compete directly with cBrain. Governments may prefer working with larger vendors that can provide multiple services under a single contract, including software, cloud infrastructure, cybersecurity, and technical support. Competition could also come from major IT consulting firms and government contractors. Companies such as Accenture, CGI, Capgemini, and other large public sector technology providers already have deep relationships with government agencies and extensive experience delivering digital transformation projects. If they develop more standardized software platforms of their own, they may be able to combine these products with their existing consulting and implementation capabilities, making them formidable competitors during procurement processes. Another risk is that advances in low-code and no-code development tools are making it easier and cheaper to build configurable software platforms. Technologies that once required years of development can now be created much faster than in the past. This lowers barriers to entry and increases the likelihood that new competitors will emerge with solutions targeting the same government workflows that cBrain currently serves. Increased competition could affect cBrain in several ways. Governments may have more vendors to choose from, which could make it harder for cBrain to win new contracts. Greater competition could also create pressure on pricing, forcing the company to offer lower prices or invest more heavily in product development and sales efforts. While cBrain benefits from strong references, deep government expertise, and a proven platform developed over more than two decades, there is no guarantee that these advantages will be sufficient to maintain its current position indefinitely.

Macroeconomic and geopolitical risks are a risk for cBrain because the company’s growth depends heavily on governments continuing to invest in digital transformation projects. While cBrain’s software helps public institutions improve efficiency and reduce administrative costs, these projects are ultimately funded through government budgets. During periods of economic uncertainty, political instability, or geopolitical tensions, governments may choose to prioritize other spending areas and delay investments in digitalization. One of the biggest risks is that governments face many competing demands for public spending. In recent years, many countries have increased spending on defense, energy security, healthcare, and social programs in response to geopolitical tensions and economic challenges. Continued conflicts in Europe, rising geopolitical uncertainty, or weaker economic growth could cause governments to allocate a larger share of their budgets toward these priorities rather than investing in new digital transformation initiatives. As a result, projects that could benefit cBrain may be postponed, reduced in scope, or cancelled altogether. Political uncertainty can also affect demand for cBrain’s solutions. Government software projects are often large initiatives that require long planning periods and approval from multiple stakeholders. Elections, changes in government leadership, or shifts in political priorities can delay decision-making and procurement processes. Even when digitalization remains a long-term objective, changing political agendas may postpone projects and slow the signing of new contracts. Another challenge is that cBrain is increasingly focused on international expansion. While this provides significant growth opportunities, it also exposes the company to a broader range of political and economic environments. Some countries may experience budget constraints, political instability, regulatory changes, or administrative delays that make it more difficult to secure new contracts. As a result, cBrain’s growth may become more sensitive to global economic and geopolitical developments as its international business expands. Macroeconomic and geopolitical risks can also lead to longer sales cycles. Governments tend to be cautious buyers even during stable periods, and uncertainty often makes public institutions even more conservative when committing to large projects. This can result in slower decision-making and delays in contract awards, which may temporarily reduce growth even if the long-term need for digitalization remains intact.

Cyber attacks are a risk for cBrain because the company develops software that is used by government institutions to manage critical administrative processes, sensitive information, and important public services. Governments rely on cBrain’s F2 platform for activities such as case management, document handling, permits, grants, inspections, and communication with citizens. Because these functions are essential to the operation of public institutions, they can become attractive targets for cybercriminals, organized groups, and even state-sponsored actors. The risk is particularly significant because cBrain serves the public sector. Government agencies often hold large amounts of sensitive information relating to citizens, businesses, and public administration. A successful cyber attack could result in unauthorized access to confidential data, disruption of critical government operations, or attempts to manipulate information stored within government systems. Even if cBrain itself is not the primary target, attackers may view software vendors as a potential entry point into government networks and systems. Cyber threats have also become increasingly frequent and sophisticated in recent years. Governments around the world have experienced growing numbers of cyber attacks targeting public infrastructure, administrative systems, and sensitive data. Because cBrain provides mission-critical software to government institutions, the company operates in an environment where the threat level remains elevated. As digitalization increases, the importance of cybersecurity grows alongside it, making continuous investment in security capabilities essential. A successful cyber attack could affect cBrain in several ways. One of the most important risks is reputational damage. Trust is a critical factor when governments select software providers, and reliability and security are often among the most important considerations in procurement decisions. If cBrain were associated with a major cybersecurity incident, existing customers could lose confidence in the company’s solutions, while potential customers might become more hesitant to adopt the F2 platform. This could make it harder to win new contracts and expand internationally. Cyber attacks can also create direct financial costs. Following a security incident, cBrain could face expenses related to investigations, system recovery, security upgrades, legal proceedings, and additional compliance requirements. In some cases, customers may require compensation or demand contractual remedies if a breach causes operational disruptions. These costs could reduce profitability and divert resources away from product development and growth initiatives. Another risk is operational disruption. If a cyber attack temporarily affected the availability or functionality of cBrain’s systems, government agencies could experience delays in handling cases, processing applications, or delivering services to citizens. Even short interruptions could have significant consequences because many public institutions rely on these systems for their daily operations. Such incidents could damage customer relationships and increase scrutiny from government authorities.

Reasons to invest

The transition to standardized government software is a reason to invest in cBrain because the company is positioned at the center of what management believes is a major structural shift in how governments purchase and implement software. For decades, public sector organizations have relied on large custom-built IT systems that often take years to develop, require extensive consulting services, and frequently exceed budgets or fail to deliver the expected results. However, governments around the world are increasingly seeking faster, more cost-effective, and lower-risk alternatives. This is creating growing demand for Commercial Off-The-Shelf (COTS) software, which can be configured to meet specific needs without requiring extensive custom development. cBrain’s F2 platform was built specifically to address this challenge. Unlike traditional government IT projects that are developed from scratch for each customer, F2 is a standardized platform that can be configured without changing the underlying software. This approach allows governments to deploy solutions more quickly, reduce implementation risks, and lower overall costs. As more governments look to modernize their administrative systems while facing budget constraints and shortages of skilled IT professionals, cBrain’s value proposition becomes increasingly attractive. Management compares the current transformation in government software to the shift that occurred in the private sector when integrated ERP systems replaced fragmented point solutions. Before ERP systems became widespread, companies often relied on separate software applications for accounting, inventory management, human resources, and other functions. Over time, integrated platforms became the preferred solution because they improved efficiency, reduced complexity, and lowered costs. cBrain believes a similar transition is now occurring within government software, where integrated standard platforms are beginning to replace both custom-built systems and isolated software applications. The size of the opportunity is substantial. Management estimates that the global market for government software exceeds $50 billion and believes that the transition toward standardized software represents one of the largest untapped software opportunities available today. Governments at national, regional, and local levels continue to invest heavily in digital transformation, creating a large and growing market for companies that can provide effective solutions. If cBrain succeeds in establishing itself as a leading provider of standardized government software, the company could capture only a small portion of this market and still achieve significant growth. One reason cBrain may be particularly well positioned to benefit from this trend is its first-mover advantage. The company has spent more than twenty years and over 600.000 development hours building the F2 platform in close collaboration with government institutions. This has allowed cBrain to create a solution specifically designed around how governments actually operate. While many software vendors are only beginning to focus on standardized government platforms, cBrain already has a proven product, a large installed base, and customer references spanning multiple continents. Another attractive aspect of this opportunity is the scalability of the business model. Once the F2 platform has been developed, cBrain can deploy the same core software across multiple customers and countries. Each new implementation adds to the company's experience and expands its library of reusable workflows and configurations. This creates a virtuous cycle where previous deployments make future deployments faster and more efficient. As adoption increases, cBrain can grow revenue without needing to increase costs at the same rate, which should support both profitability and returns on capital over time.

New customer wins are a reason to invest in cBrain because they demonstrate that the company’s F2 platform can be successfully deployed across different government institutions, countries, and use cases. While cBrain already has a strong position in Denmark, where all ministries and more than 75 public organizations use F2, the long-term opportunity depends on the company’s ability to win new customers and expand into new market segments. Recent customer wins suggest that cBrain is succeeding in this effort and that the platform can be replicated far beyond its original Danish customer base. One of the most important developments in 2025 was the signing of Aarhus Municipality, Denmark’s second-largest city. Initially, the platform will support approximately 5.000 users, with the potential to expand to as many as 20.000 users over time. This contract is particularly significant because it opens a new market segment for cBrain. Historically, the company has been strongest within ministries and government agencies, but the Aarhus project positions F2 as a platform for municipalities and local governments as well. If successful, the project could serve as a reference for other cities both in Denmark and internationally. The company also continues to demonstrate the versatility of the F2 platform through a growing number of use cases. During 2025, cBrain delivered a new national Danish hunting license system serving approximately 200.000 users and completed a digital grant management solution supporting Denmark’s largest-ever reforestation grant program. These projects show that F2 can support everything from citizen self-service and registries to case management, payments, permits, and large-scale administrative processes. The broader the range of successful implementations becomes, the larger the company’s potential addressable market. International customer wins are equally encouraging. The F2 platform is now used by government organizations across five continents, including Germany, the United Kingdom, the United States, the United Arab Emirates, Kenya, Ghana, Guyana, Romania, and Thailand. A particularly notable example is Deutsche Rentenversicherung in Germany, where the platform went live for more than 4.500 users. These implementations provide evidence that the administrative best practices embedded within F2 can be adapted to different countries, languages, and regulatory environments. This reduces concerns that cBrain’s success is limited to Denmark and supports management’s ambition of becoming a global leader in standardized government software. Each successful customer implementation also strengthens cBrain’s ability to win future contracts. Governments tend to be cautious buyers and often prefer solutions that have already been proven elsewhere. Every successful deployment provides another reference customer and increases confidence among potential buyers. This creates a virtuous cycle where each new customer makes it easier to attract the next one. Denmark’s position as the highest-ranked country in the United Nations Global E-Government Index for eight consecutive years further strengthens this advantage, as governments around the world increasingly look to replicate successful digitalization models. Management is also building a pipeline of potential large customers while expanding into selected market segments such as paperless ministries and environmental permitting. At the same time, the company is increasingly working with partners to expand its reach without significantly increasing organizational complexity. This strategy should allow cBrain to scale more efficiently and reduce its dependence on a small number of large contracts. Importantly, management has indicated that only limited revenue from future large customer wins is included in its short-term forecasts because government sales cycles are long and difficult to predict. As a result, significant contract wins could provide meaningful upside to future growth. If cBrain continues to attract new customers, expand into new market segments, and replicate its Danish success internationally, customer wins could become an important driver of growth for many years to come.

Innovation is a reason to invest in cBrain because the company continuously improves and expands the capabilities of its F2 platform in ways that strengthen its competitive position and increase the value it can deliver to government customers. While many software companies serving the public sector rely heavily on customized projects, cBrain has spent more than two decades building a standardized platform that can evolve and improve over time. This allows the company to introduce new functionality across its customer base while maintaining the scalability and efficiency of a software product business. One of the most important recent innovations is the development of the F2 ServiceBuilder. This is a no-code configuration tool that allows customers and partners to configure workflows and processes without modifying the underlying software. Traditionally, adapting government software to new requirements often required extensive consulting work and custom development. With the F2 ServiceBuilder, governments can make changes more quickly and with greater flexibility while still benefiting from a standardized platform. This makes the F2 platform more attractive to customers while also creating new opportunities for cBrain to expand its business within existing accounts. The F2 ServiceBuilder is also strategically important because it supports cBrain’s partner-led growth strategy. Rather than relying solely on its own employees to implement solutions, cBrain can increasingly work with external partners that use the ServiceBuilder to configure and deploy F2. This allows the company to scale its reach without needing to increase its workforce at the same pace. As a result, innovation is not only improving the product but also helping create a more scalable business model. Another important area of innovation is artificial intelligence. During 2025, cBrain completed the full AI enablement of the F2 platform, making AI a native part of the software rather than a separate add-on. AI capabilities are now embedded directly into workflows and case management processes, helping government organizations automate repetitive tasks, improve productivity, and enhance decision-making. This is particularly relevant because public institutions around the world are under increasing pressure to improve efficiency while managing limited budgets and labor shortages. What makes cBrain’s AI approach especially interesting is its focus on sovereignty and security. Many AI solutions rely on external providers and cloud-based services, which can create concerns around data privacy and control. cBrain has designed its AI capabilities so they can run on-premise, allowing governments to maintain full control over their data, processes, and AI prompts. This aligns well with the requirements of many public institutions, where data security and sovereignty are often among the most important considerations when adopting new technology. Innovation at cBrain also extends beyond individual product features. Over time, the company has built a growing library of reusable workflows, processes, and solutions that can be deployed across different government organizations. Each successful implementation expands the platform’s capabilities and makes future deployments faster and more efficient. This creates a self-reinforcing cycle where innovation improves the product, which attracts more customers, which in turn provides additional opportunities to refine and expand the platform. The company’s commitment to innovation is further reflected in its ongoing investments in product development. Management has established dedicated teams focused on large strategic customers while continuing to invest in technology and platform improvements. This ensures that cBrain can adapt to changing customer needs while maintaining its position at the forefront of standardized government software.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 2,20, which is from 2025. I have selected a projected future EPS growth rate of 15%.  Finbox expects EPS to grow by 29,3% over the next five years, but 15% is the highest number I use. Additionally, I have selected a projected future P/E ratio of 30, which is twice the growth rate. This decision is based on cBrain's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be DKK 66,00. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy cBrain at a price of DKK 33,00 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 89, and capital expenditures were 7. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 5 in our calculations. The tax provision was 13. We have 19,6 outstanding shares. Hence, the calculation will be as follows: (89 – 5 + 13) / 19,6 x 10 = DKK 49,49 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With cBrain's Free Cash Flow Per Share at DKK 4,18 and a growth rate of 15%, if you want to recoup your investment in 8 years, the Payback Time price is DKK 65,98.

Conclusion

I believe cBrain is an intriguing company with strong management. The company has built its moat through its government specialization, standardized software platform, accumulated domain expertise, switching costs, and strong customer references. ROIC has historically been volatile but has remained high over the past six years, which is a trend that is expected to continue. Free cash flow reached its second-highest level ever in 2025 and is expected to continue growing over time. Competition is a risk for cBrain because the market for standardized government software is expected to attract more competitors over time, reducing the uniqueness of the F2 platform. Large software companies and IT service providers with greater resources, broader customer relationships, and global reach could develop similar solutions, making it harder for cBrain to win new contracts, maintain pricing power, and sustain its current growth trajectory. Macroeconomic and geopolitical risks are a risk for cBrain because governments may delay or reduce spending on digital transformation projects during periods of economic uncertainty, political instability, or geopolitical tensions. As governments prioritize areas such as defense, healthcare, and energy security, cBrain could face longer sales cycles, delayed contract awards, and slower growth, particularly as the company expands internationally. Cyber attacks are a risk for cBrain because its software is used by government institutions to manage sensitive information and mission-critical public services, making both the company and its customers attractive targets for cybercriminals and state-sponsored actors. A successful attack could damage cBrain’s reputation, disrupt government operations, lead to significant financial costs, and make it more difficult to win new contracts in the future. The transition to standardized government software is a reason to invest in cBrain because governments are increasingly moving away from costly custom-built IT systems toward standardized software platforms that are faster, cheaper, and less risky to implement. With more than two decades of experience developing the F2 platform specifically for government institutions, cBrain is well positioned to benefit from this structural shift and capture a share of a large and growing global market. New customer wins are a reason to invest in cBrain because they demonstrate that the F2 platform can be successfully deployed across different government institutions, countries, and use cases, validating the company’s growth strategy beyond its strong position in Denmark. Each new customer strengthens cBrain’s reference base, opens new market opportunities, and creates a virtuous cycle that can make it easier to win future contracts, providing significant long-term growth potential. Innovation is a reason to invest in cBrain because the company continuously enhances the F2 platform through innovations such as the F2 ServiceBuilder and embedded AI capabilities, making the platform more valuable, scalable, and attractive to government customers. These innovations strengthen cBrain’s competitive position, support growth within its existing customer base, and enable the company to expand globally without increasing costs at the same rate as revenue. Overall, I believe cBrain is a high-quality company with a differentiated position in an attractive niche, and buying shares at DKK 49 could prove to be a rewarding long-term investment.

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