The legal division of cloud-based accounting software developer Reckon (ASX: RKN) will gain access to the US market following a merger with an Albuquerque-based startup.
The deal will see Reckon Legal Group bolster its current offering by bringing Zebraworks' cloud-based workflow management platform for legal firms under its umbrella, while also providing access to its partners' clients.
Founded by the team that developed legal business management solution ProLaw, Zebraworks is a recently formed startup developing a workflow and practice management system on an automated, cloud-based platform targeted at mid-sized law firms looking to grow.
The US startup's platform has synergies with Reckon's legal business, which provides software-based information workflow solutions to legal firms globally.
Currently, Reckon Legal Group's solution is used by five of the top 10 legal firms globally, and has recently been expanded to include scan and print solutions.
"We have given serious consideration to the future strategy for the Legal Group and we now are excited to see this come to fruition," says Reckon Group CEO Sam Allert.
"We have seen the success of our focus on our new products, scan and print workflow, and it is exciting to be adding a very experienced team, with a new cloud practice management suite, as well as creating further distribution for our APS cloud modules.
"We look forward to executing on the potential of the merged entity in a substantial global market."
Reckon Limited will own 70 per cent of the merged entity and Zebraworks shareholders (mostly key members of the management team) will own the remaining 30 per cent.
All of the Zebraworks IP and other assets will be rolled into the merged entity.
Reckon Limited has committed to funding the growth of the merged entity, subject to performance, and with an absolute cap of USD$3 million. If required, a further loan of USD$2 million could be made available.
"The USA legal practice management industry is a highly attractive marketplace for the combined business to pursue and provides Reckon Ltd with the opportunity expand the smallest part the group and make it more relevant," says Reckon.
"The initial modules of the Zebraworks platform have been developed and a comprehensive development schedule has been established with further modules to be progressively released over the next few years."
Subscription model makes Reckon resilient
With 94 per cent of Reckon's revenue now coming in on a recurring basis thanks to its subscription-based business model the company says it has been strong during the COVID-19 pandemic period.
Group revenue during the first six months of 2020 increased by 2 per cent over the prior comparative period, and net debt reduced by $6 million.
Cloud revenue has continued to grow strongly, up by 23 per cent, and now represents 52 per cent of this division's available revenue as desktop customers continue to move to the cloud. The number of cloud users now has reached 87,000, with growth of 41 per cent over PCP.
"We have continued our focus on growth, and particularly growth with our new cloud products," says Allert.
"Our strategies of developing new products to upgrade existing clients too as well as increasing our addressable market continues to show success.
"We are extremely excited about the next 12 months in terms of further cloud releases."
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