Reckon Group (ASX:RKN) today reported its half year earnings to 30 June 2020, delivering steady profitability that demonstrates organisational resilience in a year shaped by global economic disruption.
The Group’s capacity for future growth is further underscored by a merger with US start-up Zebraworks, a software-as-a-service (SaaS) practice management provider for mid-sized legal firms.
Steady growth delivered in extraordinary times
Despite widespread economic disruption caused by COVID-19, Reckon’s revenue for the first half of 2020 was up by 2% over the previous corresponding period.
Cashflow continually improved in the year, enabling a debt reduction of $6 million and a fully franked final dividend of 3 cents per share (2019: 3 cents). Quality of revenue continues to improve for Reckon, with subscription representing 95% of available revenue for the Group.
Overall, total Group revenue closed at $39.8 million and EBITDA stood at $17.1 million.
US acquisition sees Legal Group become Nqueue Zebraworks
Reckon’s reliable growth in the first half of 2020 is underscored by its announcement of a 70% stake in US company Zebraworks, which saw the Group’s Legal division merge with the start-up on 1 August 2020 to form Nqueue Zebraworks.
Reckon has committed US$3 million to funding Nqueue Zebraworks’ growth up to the end of 2023, subject to performance, with a further loan of US$2m which could be made available if required.
Reckon Group CEO Sam Allert praised the Zebraworks team for its successful track record in developing and distributing legal practice management software to the US legal industry.
“Zebraworks’ proven team will help Reckon execute on our considered future strategy for the Legal Group, which is to harness our significant tech expertise to grow our footprint in the legal practice management industry, both in the US and globally.
We are excited to execute on the potential for Nqueue Zebraworks in what is a substantial global market,” said Mr Allert.
Nqueue Zebraworks is expected to leverage the Legal Group’s existing infrastructure in the US and expand on this as the business grows over the coming years.
Cloud and mobile strategy fuels growth
Reckon’s steady profitability in the first half of 2020 was driven by the Business Group’s robust performance.
A 41% increase in cloud users powered a 23% growth in cloud revenue, which in turn drove a 6% overall revenue increase for the division, continuing a strong growth trend from the second half of 2019.
Reckon’s focus on cloud and mobile has delivered the launch of two new products, providing long-term sustainable revenue opportunities.
The Business Group launched a new paid payroll app for mobile in May 2020 which already has more than 2,000 users, with more mobile apps planned for launch throughout the second half of the year.
The paid payroll app’s strong launch comes off the back of a free payroll app introduced in May 2019 which has seen 35,000 users processing over 520,000 pay runs since going live.
For the Accountants Group, the release of a major Cloud Workflow module, with further modules to follow over the coming year, is expected to widen the addressable market for the division and power future growth opportunities – particularly with evolving workstyles accelerating the adoption of cloud-based digital collaboration tools for remote workers.
Reckon Group CEO Sam Allert said the first half of 2020 saw Reckon prove the resilience and efficiency of its team, business infrastructure and business interruption processes.
“We have experienced an eventful six months and are seeing the fruits of a clear, multi-year strategy – one which has shaped a business with the resilience, agility and expertise to weather storms while continuing to reliably deliver growth and profitability for shareholders.
The next six months and beyond will be a critical time as the world grapples with continued economic uncertainty, but we’ve shown that our solid fundamentals, coupled with our vision, can and do continue to deliver through tough times,” Allert said.