As companies look to become more tech forward, cloud-based software are becoming must-haves. Thanks to that, accounting, payroll and legal solutions company Reckon (ASX: RKN) has seen an uplift in subscription revenue and a return of the dividend payout to shareholders.
Group revenue for H1 CY23 shot up by 4% to $28.2 million on H1 CY22. Its net profit stood at $3.8 million, representing a 16% uplift, due primarily to a lower effective tax rate as a result of the group’s R&D investments.
Reckon’s EBITDA was $11 million, a 3% increase, and it ended the half with strong cash flow of $3.8 million. The cash flow allowed the Company to pay down its debt of $2.7 million, thus reducing its net debt to $300k while also rewarding shareholders with a fully franked interim dividend of 2.5 cents per share.
During the Half Year, Reckon’s two core operating divisions—the Small Business Accounting and Payroll group (“Business Group”) and the Legal Practice Management and Workflow group (“Legal Group”)—delivered major growth.
Reckon Group CEO, Sam Allert, said, “We are very encouraged by Reckon’s performance for the half and the results clearly reflect that we are delivering to plan, which is to continue generating stable cash flows from our well-established Business Group, providing us the flexibility to invest in high growth opportunities such as our US and UK focused Legal Group.”
Reckon is an Aussie cloud-based tech company targeting two major segments: small businesses and legal firms. Since there are approximately three million small businesses across Australia and New Zealand, the Company plans on tapping into their potential.
Reckon’s range of cloud-based solutions for small and medium-sized enterprises (SMEs) is currently utilised by more than 109,000 clients, even though it opted to discontinue the free version of its Payroll app. The Group demonstrated notable progress, evident in a robust 6% increase in cloud-based subscription revenue, reaching $12 million. Collectively, revenues generated from subscriptions for both desktop and cloud-based offerings remain the primary revenue source, accounting for over 90% of the division’s overall earnings, which surged to $22.5 million.
On the other hand, the Legal Group recorded a notable 19% growth in subscription revenue, reaching $5.3 million. This success in the first half validates the Company’s strategy to expand its Practice Management and Workflow software in the lucrative US legal market, which houses 500 of the world’s largest firms and 46,000 mid-size firms. The Company currently serves five of the largest US law firms
Allert added, “The performance of our Legal Group is an obvious highlight and presents considerable upside opportunity for Reckon given the size of the addressable market in the US and UK, the quality and stickiness of the customers and the traction we are achieving with our technology. This is a direct result of our commitment to leverage R&D investments into an expanded and improved product offering, and is clearly yielding results.”
Alinda is a Business Reporter for The Sentiment
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