Reckon Limited maintained steady revenue and EBITDA in constant currency during the first half of FY26, while NPAT rose 6%, driven by strong growth in its cloud products Reckon One and Billing Workflows alongside strategic AI investments.
- 23% revenue growth in Reckon One cloud subscriptions
- 97% subscription revenue growth in Billing Workflows
- 6% increase in net profit after tax to $5 million
- Net debt reduced to $1.5 million from $5.4 million
- 2.5 cents per share fully franked dividend declared
Cloud Transition Accelerates Reckon One Growth
Reckon Limited (ASX:RKN) has delivered a solid first half result for FY26, with its flagship cloud accounting platform Reckon One driving a 23% revenue increase and a 19% rise in average revenue per subscription. This growth comes as the Business Group intensifies efforts to migrate legacy customers onto Reckon One’s cloud-based codebase, a transition that has introduced some deferred revenue timing effects but positions the company for long-term subscription stability.
Subscription revenue now makes up 93% of the Business Group’s total revenue, which remained broadly stable at $25.4 million despite a slight 3% decline overall. The EBITDA margin held firm at 55%, reflecting the business’s strong cash-generating capabilities amid ongoing investment in product development.
Legal Group Billing Workflows Surges in US Market
The Legal Group, operating under the Zebraworks brand, continues to expand its footprint in the lucrative US legal sector. Subscription revenue from its cloud-based Billing Workflows product nearly doubled with 97% growth in constant currency, contributing to a 5% increase in total Legal Group revenue to $6.2 million. The division now serves approximately 6,400 attorneys, up from 4,800 a year earlier, though this remains a fraction of the estimated 175,000 attorney serviceable addressable market in North America.
Strengthened sales teams and new integrations with major financial management systems such as Elite 3E and Aderant are driving this momentum. Zebraworks counts 12 of the top 20 global law firms and 40% of the AmLaw 200 among its clients, underscoring its strong market position.
AI Investments Deliver Efficiency and Innovation
Reckon’s strategic investment in artificial intelligence is yielding tangible benefits, particularly in accelerating product development. The company reports approximately 30% efficiency gains in development processes, which have been reinvested into innovation rather than cost-cutting. The Legal Group’s DataQ AI, launched in FY25, represents Reckon’s first AI-powered client-facing tool, while ongoing collaboration with Amazon Web Services aims to fast-track AI-enabled features across Reckon One and other products.
Upcoming AI-driven enhancements include onboarding assistants for SME customers and automated compliance notifications, signalling Reckon’s commitment to embedding AI as a core enabler of customer experience and operational excellence.
Financials Reflect Stable Earnings and Strong Cash Flow
Group revenue for the half was $31.9 million, down 3% on the prior corresponding period but stable on a constant currency basis. EBITDA rose slightly to $14.2 million, while net profit after tax grew 6% to $4.5 million, or 18% on an adjusted basis excluding currency effects and prior government stimulus.
The company’s net debt position improved markedly, falling to $1.5 million from $5.4 million at the end of 2025, helped by the final $1.25 million instalment payment for the Cashflow Manager acquisition. Reckon declared a fully franked dividend of 2.5 cents per share, maintaining its policy of one high-yield dividend annually.
Migration Challenges and Deferred Revenue Timing
The accelerated migration of legacy customers to Reckon One has caused a $0.6 million adverse movement in deferred revenue due to differences in licensing and support models between legacy and cloud products. While this impacts short-term revenue recognition, management views it as a transitional effect aligned with their cloud-first strategy.
With Reckon One now accounting for roughly 22% of the subscription revenue base, the company is focused on closing the gap between legacy and cloud functionality, aided by AI-driven development speed-ups that have brought Reckon One closer to parity faster than expected.
Bottom Line?
Reckon’s cloud-first pivot and AI integration are driving solid growth and efficiency, but deferred revenue shifts and the scale-up of US legal market penetration will be key to watch.
Questions in the middle?
- How quickly can Reckon complete migration of legacy customers to Reckon One without further deferred revenue impacts?
- Will AI innovations translate into sustained revenue growth beyond development efficiencies?
- Can the Legal Group significantly expand Billing Workflows penetration in the vast US attorney market?