MoneyTalks: Taylor Collison bullish on Reckon's legal sector strategy, slaps Outperform rating

Taylor Collison rates Reckon Outperform
Reckon’s tailwind will come from the legal sector, says the broker
Taylor also reckons that Reckon has financial stability out to FY25

Broker Taylor Collison has put an Outperform recommendation on Reckon (ASX:RKN), with no specific price target.

Reckon is a $56m market-capped company that provides software solutions designed to simplify accounting, bookkeeping, and business management for small to medium-sized enterprises (SMEs).

Their range of products includes cloud-based accounting software (Reckon One) and desktop accounting solutions (Reckon Accounts).

Reckon also provides specialised software solutions for the legal sector through its product called BillingQ. This software is designed to streamline billing workflows and enhance operational efficiency within legal practices.

Taylor believes that Reckon has made clever strategic moves in 2024 that could benefit investors, particularly in the legal space.

The company has integrated its BillingQ with major legal platforms like Aderant and Elite, promising future revenue growth in this sector. This expansion is crucial as it targets a significant market of over 46,000 legal firms in North America.

These integrations have been showcased at industry conferences, indicating strong market readiness. The upcoming ILTACON conference in mid-August, for instance, is expected to further bolster Reckon’s visibility and adoption within the legal community.

Aderant and Elite are key players in legal practice management, serving a substantial portion of BillingQ’s customer base.

So, the integration not only enhances Reckon’s product offerings but also underscores its role as a value provider in the legal tech sector rather than just a competitor.

“We believe this should continue to highlight the value proposition for customers, though our primary focus remains on Legal as the short-term growth driver,” said a note from Taylor Colllison.

Keeping its fees low vs Xero

Reckon has recently outlined its Total Addressable Market (TAM) and Serviceable Addressable Market (SAM) in the legal sector, highlighting significant growth opportunities.

Reckon is targeting medium to large law firms in North America, emphasising quick installation and faster sales processes for its BillingQ software. This strategy aims to boost revenue by enhancing efficiency alongside their Document Workflows product.

In the small business accounting space, Taylor believes that Reckon One stands out with its competitive pricing strategy.

As competitors like Xero announce price increases, Reckon One maintains a compelling 36% discount in comparable plans.

This pricing advantage could attract and retain small business customers seeking cost-effective solutions amidst rising industry costs, says Taylor.

“Xero (ASX:XRO) recently announced price rises in Australia for the second time in 12 months, effective 1 July,” said the broker.

“We see the increased disparity between RKN pricing and its peers as a net positive for attracting and retaining its core small business customers seeking value.”

Looking at the financials, Reckon has also shown resilience with steady revenue projections and improved EBITDA margins.

This stability, coupled with its expansion efforts, reinforces confidence in its ability to deliver sustainable growth over the medium term.

“We retain our Outperform recommendation,” says Taylor Collison.

The below table shows Taylor’s predictions for Reckon’s top line revenue and EBITDA out to FY25.

A = Actual
E = Estimate  

The views, information, or opinions expressed in the interview in this article are solely those of the broker and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.