Reckon’s Cloud Growth and Acquisition Strategy Face Next Test in Competitive Market
Reckon Limited delivered a robust half-year performance in HY25, driven by strong cloud revenue growth and a key acquisition that expanded its SME client base. The company also declared a fully franked dividend, underscoring confidence in its ongoing strategy.
- HY25 revenue of $33 million, up 16% year-on-year
- EBITDA rose 21% to $14 million, NPAT increased 35% to $4 million
- Reckon One cloud revenue grew 26%, Legal Group subscription revenue up 18%
- Acquisition of Cashflow Manager added 20,000 SME clients and contributed $3.1 million revenue
- Fully franked 2.5 cents per share dividend declared for September 2025
Strong Half-Year Financial Performance
Reckon Limited (ASX – RKN) has reported a solid set of results for the half year ended 30 June 2025, with revenue reaching $33 million, a 16% increase over the prior corresponding period. Earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 21% to $14 million, while net profit after tax (NPAT) surged 35% to $4 million. These figures reflect Reckon’s successful execution of its cloud-first strategy and strategic acquisitions.
The company’s subscription-based revenue model continues to underpin growth, with 94% of total revenue now recurring. Reckon’s EBITDA margin remains strong at 53%, and after accounting for development costs, the adjusted EBITDA margin stands at 34%, highlighting efficient cost management alongside investment in product innovation.
Cloud Growth and Acquisition Drive Expansion
A standout contributor to Reckon’s performance is the Reckon One cloud platform, which recorded a 26% revenue increase year-on-year. This growth is complemented by an 18% rise in subscription revenue from the Legal Group, which services law firms with practice management and workflow solutions, particularly in the US market.
In January 2025, Reckon completed the strategic acquisition of the Cashflow Manager business, adding approximately 20,000 new SME clients and 1,000 accounting and bookkeeping partners. This acquisition contributed $3.1 million in revenue and $1.4 million in EBITDA during the half. Reckon plans to support Cashflow Manager’s existing clients while encouraging migration to Reckon One, aiming to consolidate its cloud offerings and enhance customer lifetime value.
Legal Group’s US Market Momentum
The Legal Group continues to expand its footprint in the lucrative US legal software market, servicing some of the largest law firms globally. The group’s subscription revenue grew 18%, supported by a fully subscribed US$4.5 million funding round at a pre-money valuation of US$20 million completed in December 2024. This capital injection is earmarked for further cloud-based product development, including billing workflows integrated with leading financial management systems.
Client case studies illustrate strong adoption of Reckon’s billing and payment solutions, with notable firms automating billing processes and enhancing payment experiences. This momentum bodes well for future upselling opportunities and deeper market penetration.
Balance Sheet and Shareholder Returns
Reckon maintains a clean balance sheet with net debt of $4.8 million as of 30 June 2025, up from $2.9 million at the end of 2024, reflecting the Cashflow Manager acquisition. The company has a $25 million bank facility to support ongoing growth initiatives.
Reckon declared a fully franked dividend of 2.5 cents per share, payable in September 2025, signaling confidence in its cash flow generation and commitment to returning value to shareholders.
Looking Ahead
Reckon’s continued investment in cloud product development and client migration from legacy desktop solutions positions it well to capture further market share in both the SME and legal sectors. The company’s dual focus on organic growth and strategic acquisitions appears to be delivering tangible results, setting the stage for sustained momentum in the second half of 2025.
Bottom Line?
Reckon’s HY25 results underscore a successful cloud transition and acquisition strategy, but the next challenge will be sustaining growth amid intensifying competition.
Questions in the middle?
- How effectively will Reckon migrate Cashflow Manager clients to Reckon One over the coming years?
- What impact will ongoing investment in Legal Group’s cloud workflows have on profitability?
- Can Reckon maintain its strong subscription growth in the face of competitive pressures in the SME and legal software markets?
