Reckon's move to subscription model drives 17 percent cloud growth

Reckon has reported it has delivered 6 percent growth in revenue to AU$57 million for the first half of the 2016 financial year.

Reckon Group's continued investment in new markets and its focus on growing subscription numbers helped the company deliver a 6 percent growth in revenue to AU$57 million for the half year ending 30 June 2016.

"We have a leading product range in a number of territories and a solid subscription business. Our international expansion has been validated and is showing 11 percent underlying growth. Our results show that we are delivering on growing the size and quality of all our businesses," Reckon Group CEO Clive Rabie said.

The cloud accounting and legal software firm reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$18.5 million, down 8 percent from the previous corresponding period recorded last year.

Reckon pointed out its existing business EBITDA was 5 percent, however said AU$2.6 million was spent on sales and marketing initiatives for new markets in the half year, which it expects will provide revenue growth down the track.

Despite the lower EBITDA for the half year, the company said it remains on track to achieving its full year EBITDA guidance of AU$34 million to AU$36 million.

The company also outlined it spent AU$11.8 million on development, with more than 50 percent of that was put towards "new market" products.

Net profit attributable to members came in at AU$6.2 million, a reduction from AU$8.8 million reported year on year, which the company said was adversely impacted by investments in new markets, but to a lesser extent than originally anticipated. However, Reckon said the fall in net profit attributable to members disguised the fact the existing business achieved solid growth of 8 percent.

Within the company's business group, revenue reduced by 2 percent to AU$19.1 million due to final movements the business made transitioning to a subscription model where 78 percent of available revenue is now subscription based. Cloud product revenue continued to grow at 17 percent, representing 30 percent of the division's total revenue.

The business believes the launch of ReckonOne Payroll, launched in May, will continue to drive the momentum for its business division, having already increased the number of net new customers where overall cloud users now sit at 36,000.

The Document Management business saw revenue increase 45 percent to AU$7.3 million, where Reckon now has over 48,000 paying customers, and over 560,000 users sharing documents through its online portal. The company attributed the growth to its decision of merging the virtual cabinet and smart vault technologies onto one cloud platform.

"All areas of our business are performing well and we are seeing our revenue and customer volume continue to increase. In the first half we ramped up our geographic expansion for Document Management, launched Reckon One into the UK market and expanded on an already impressive customer list in Practice Management," Rabie said.