Raiz Invest Limited (5HK.F) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Raiz Invest Limited Annual General Meeting. [Operator Instructions] I would now like to hand the conference over to Mr. Tony Fay, Chair. Please go ahead.

Thank you, and good morning, ladies and gentlemen. Welcome to the 2020 Annual General Meeting for Raiz Invest Limited. My name is Tony Fay. I'm the non-Executive Chairman of the company. Given the significant health concerns attributed to the COVID-19 pandemic, in addition to guidelines and restrictions issued by Australian State and Commonwealth governments, the company considers that it is appropriate to hold the 2020 AGM virtually in a manner that is consistent with the temporary modifications to the Corporations Act introduced by the Commonwealth Treasurer. It is now 11:00 a.m. and there being a quorum present, I declare the meeting open. I confirm that the meeting has been properly constituted. In opening the 2020 AGM, I would like to introduce my fellow Directors, non-Executive Director, Nina Finlayson; non-Executive Director, David Gordon; non-Executive Director, Kelly Humphreys; and our Manager Director and Group CEO, George Lucas. Also with us here today are Elizabeth McGregor, the company secretary; Brendan Malone, the CEO of Raiz Australia Limited; Tim Aman from BDO Audit Proprietary Limited, the company's auditor; and Kevin Moore, who will be joining the Board as a non-Executive Chairman on the 1st of December. Being a teleconference, we are unfortunately unable to meet with you in person today, but I'd like to thank those shareholders who are joining us on the call. Shareholders may ask questions via the teleconference. At each item of business, I will ask the teleconference moderator to announce shareholders with questions. During the formal meeting, please ask specific -- questions specific to the items of business or resolution. There will be an opportunity for general questions about the company after the close of the formal meeting. The agenda for today's meeting will be as follows. I will give the Chairman's address. We will then proceed to the formal matters to be considered at today's AGM. After the formal meeting, Kevin Moore will introduce himself. George Lucas will then provide the CEO update. And finally, there will be an opportunity for general questions and discussion. I'll now move on to the Chairman's address. When we have the benefit of hindsight and look back on 2020, I believe it will be the year when Raiz came of age. For despite the harsh economic headwinds caused by this pandemic, and the business and social dislocation it has left in its wake, we've had a strong financial 2020. Success in the face of adversity is proof positive that Raiz is well positioned for the future in Australia and Southeast Asia. Our Australian operations, as measured by the key indicators active customers, funds under management, product range and revenue, all showed strong gains. As of 30 June, we had $13.1 million in cash and term deposits. In Southeast Asia, our business in Indonesia and Malaysia are up and running, with active customers and revenue growing rapidly. All this in a year of global pandemic and a world recession. In this economic and public health environment, what we have -- have achieved is quite remarkable, speaking volumes about the sustainability of the long-term corporate strategy and the ability of management and staff to implement it. Of course, achieving this outcome was not -- has not been easy, especially considering the enormous economic health and social consequences of COVID-19. From the outset, the safety of the extended Raiz family has been paramount. For staff, we have been working flexible working arrangements, allowing them to work remotely or in our offices with appropriate social distancing and hygiene measures. Globally, we have experienced no COVID cases amongst our staff. We've gone to enormous lengths to keep our customers abreast of what is happening, whether it be about Raiz or, more generally, about the economic impact of the pandemic. We appreciate some of you are directly suffering, so we are indebted to you for choosing to remain loyal to Raiz. I want to assure you that loyalty is not misplaced and will be reciprocated with dedicated service and innovative products. Last year, Raiz's active paying customers increased by 15.1% year-on-year to more than 233,000, driven by the company's high customer engagement and educational tools and underpinned by a deep understanding of millennials and their financial needs via valuable insights for proprietary research. The growth in funds under management to more than $453 million, an increase of 30.6% year-on-year has been led by existing end customers increasing their investment savings, new products, new customers and market movements. We are particularly proud and pleased for our customers that in one of the most volatile investment periods in history, our investment portfolios outperformed the relevant Chan West industry performance benchmarks for the 2 years to 30th of June 2020. For this period, all portfolios had positive returns, with the Emerald portfolio that standout at 4.33% against a benchmark that is down 0.5%. In the first 3 months of 2021, we expect to launch new products in Australia that will provide greater opportunity for customers to save and invest as well as making the platform more appealing to those with larger account balances. There will be an option to either choose an existing Raiz portfolio or to access a portfolio that can be customized from a suite of 14 exchange traded funds and bitcoin. In addition, self-managed super funds will have access to the app, where previously only individual accounts could be accommodated. These are exciting innovations that I expect led significantly to our funds under management. Southeast Asia is genuinely exciting. Although COVID-19 has ruled out travel to the region, we have benefited from the strong relationships forged in Indonesia and Malaysia. With offices established in Jakarta and Kuala Lumpur, licensing in place, a software stack that meets the needs of the individual markets and enthusiastic teams in place the rollout of products will continue apace. We are also confident Indonesia and Malaysia will provide the blueprints for our push into other Southeast Asian markets. At a Board level, we welcome Kelly Humphreys as a non-Executive Director in April. Kelly replaced Kieran Moore who resigned to focus on her increasing work commitments. I'd like to take this opportunity to thank Kieran for her significant contribution. As announced on November 12, I've decided to resign from the Board. The past 4 years have been extremely gratifying, helping oversee the birth of the business that has begun -- that has grown to be Australia's largest mobile-first financial services platform. I'm very pleased that Kevin Moore, an experienced company Director and Chairman, has agreed to join the Board as Chairman from December 1. Kevin is a digital marketing specialist who brings multinational board and governance experience to Raiz. And I have no doubt that he is the right person to lead the company in its next exciting growth phase. At the executive level, we have promoted Brendan Malone to the role of CEO, Australia. He report to George Lucas in his new role of group CEO with all country heads reporting -- country CEOs reporting to him. This move will allow George to spend more time overseeing the Southeast Asian operations to personally drive growth there. I'd like to thank George who has kept a steady hand on the tiller during this tumultuous period, his fellow executives and all the Raiz team who have shown great resilience and adaptability in rapidly changing circumstances. At all times, their focus has remained on delivering to our clients in a responsible, ethical and innovative way. I wish George, Brendan and the whole Raiz team all the best and thank them for the opportunity to work with them over the past 4 years. Finally, I'd like to thank our shareholders and our Raiz customers for their continued support and wish them a safe, healthy and prosperous New Year. That concludes my comments, and we'll now move to the formal business as set out in the notice of meeting. The notice of Annual General Meeting was provided to all registered members on or about the 19th of October 2020 and is to be taken as read. Voting on all resolutions will be conducted by poll. Shareholders who have already submitted a vote by proxy should note that your votes will already be counted towards the poll. You do not need to launch another vote unless you wish to change your proxy transaction -- sorry, your proxy instruction. Shareholders who have not submitted a vote by proxy and wish to vote on the resolutions being put to the meeting today can do so by following the instructions provided in the notice of meeting. There is a link in the notice of meeting to the Lumi online voting portal and instructions on how to vote. I'll shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear on the online voting portal. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select 1 of the options. There is no need to hit submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. Voting exclusions apply and is set out in the notice of meeting. All undirected proxies or open votes that have nominated the Chairman of the meeting as their proxy will be cast in favor of each resolution. For the purposes of the poll, I appoint Caitlin Robinson of Computershare Investor Services, the company's share registry, who examined and prepared summaries of the proxy forms received to act as returning officer and to conduct the poll. I now declare the poll open. The polling icon will soon appear on the online for -- voting portal. Please submit your votes at any time after the last resolution. I will give you a warning before I move to close voting. After the votes have been counted and audited, the results of the poll will be announced to the ASX and will also be published on the company's website. We will now proceed to the business and resolution set out in the notice of Annual General Meeting. Our first item of business is to receive and to consider the annual financial report of the company for the financial year ended 30th of June 2020, together with the declaration of the director's report, the remuneration report and the auditor's report for that financial year. There will be no vote on this item, and it's a discussion item only. The company's auditor for the 2020 financial year, Tim Aman of BDO Audit Proprietary Limited, is available to take questions on the conduct of the audit, content of the audit report, accounting policies adopted by the company and the independence of the auditor in carrying out the audit. I now invite shareholders to comment or ask questions about the financial report or the reports of the directors and auditor. Once again, I remind shareholders to defer questions on other items until we come to that item of business or for the general discussion following the formal business. Moderator, are there any questions or comments from shareholders?

[Operator Instructions] There are no questions at this time.

Thank you. We'll now proceed to the resolution set out in the notice of Annual General Meeting. Resolution 1 is the adoption of the remuneration report. Resolution 1 reads as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution. That, for the purpose of Section 250R(2), the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the company's annual financial report for the financial year ended 30th of June 2020. The vote on this resolution is advisory only and does not bind the directors or the company. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to these resolutions are as follows: for, 16,789,974; against 20,271. The open proxies are 625,386; and 29,684, abstain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 2 is the reelection of Nina Finlayson as a non-executive director. To consider and, if thought fit, to pass the following resolution as an ordinary resolution. That Ms. Nina Finlayson, a director who retires by rotation in accordance with the company's constitution, and being eligible offers herself for reelection as a director of the company, effective immediately. I'll now ask Nina to say a few words.

Thanks, Tony. My name is Nina Finlayson. I've been a director of Raiz Invest Limited, the company listed on the stock exchange in 2018. During my time on the Board, the company has achieved impressive growth, including launching a superannuation product in Australia and services in Indonesia and Malaysia. My background in marketing and market research gives me a valuable viewpoint for Raiz Board discussions. I'm continually conscious of the importance of the customer point of view and the role of the brand in building engagement and loyalty amongst their user base. My background also gives me the ability to contribute strongly to the strategic discussions at the Board level. I have been and continue to be impressed by the ability of the Raiz executives to execute the agreed strategy in a timely and appropriate manner. I believe the recent executive restructure will further assist the growth of the business and create new opportunities for the company and its shareholders. Thanks for your time today.

Thank you, Nina. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 28,611,590; against, 11,800; open proxy, 625,386; and 79,041, abstain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 3 is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution. Mr. David Gordon, a director who retires by rotation in accordance with the company's constitution, and being eligible offers himself for reelection as a director of the company effective immediately. I'll now ask David to say a few words.

Thank you, Mr. Chairman. Hello. My name is David Gordon. I've been the Director of Raiz [indiscernible] and before that was a founder director of industry and company that worked arm and arm with Raiz. I have a Bachelor of Business from the UTS and as a CPA for over 13 years. I've established a number of accounting firms, financial planning firms and AFSLs over my career, to all being sold at substantial gains. It's been a pleasure working with executives team over that period and look forward to working with the team in the future. Thank you.

Thank you, David. Are there any questions on this resolution, moderator?

[Operator Instructions] There are no questions at this time.

Thank you. The proceeds received in relation to this resolution are as follows: for, 27,653,997; against, 19,748; open, 635,386; and 1,018,686, abstain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 4 is as follows: to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That Ms. Kelly Humphreys, a director appointed as an additional director and holding office until the next Annual General Meeting of the company after her appointment in accordance with the company's constitution, be elected as a director of the company effective immediately. I'll now ask Kelly to say a few words.

Thank you, Tony. Good morning, everyone. My name is Kelly Humphreys, and I joined the Raiz Board earlier this year. I had a background in insurance and financial services across a range of operations and business development growth. My career included delivering a number of significant strategic projects and dealing with complex regulatory issues. My experience enables me to contribute for discussions and to help deliver confidence in the effectiveness of our strategy, risk management and our approach to regulatory compliance. Before joining the Raiz board, I really like what I've seen and heard about the company. The app [ of Raiz ] engaged my millennial daughter to become a successful saver after years of being a successful spender. I'm very proud to be a member of the Board. Raiz has done great things in a very short time, and I look forward to working alongside my fellow directors and supporting George and the management team to consolidate and build on this success into the future. Thank you.

Thank you, Kelly. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There were no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 28,612,851; against, 3,920. The open proxy, 630,975; and 80,071, abstained. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 5 is as follows: to consider, and if thought fit, to pass the following resolution as a special resolution. That, for the purposes of ASX Listing Rules 7.1A and for all other purposes, the shareholders approve the issue of equity securities up to 10% of the issued capital of the company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rules 7.1A.2 and otherwise, on terms and conditions set out in the Explanatory Statement, which accompanies and forms part of the notice of meeting. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 28,482,244; against, 140,575; open proxy, 625,386; and 79,612, abstain. I now put the motion. Shareholders could vote on this resolution via the online voting portal. [Voting]

Resolution 6 is as follows: to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That, for the purpose of ASX Listing Rule 7.2, exception 13(b), sections 257B(1), 259(2) and 260C(4) of the Corporations Act and for all other purposes, the shareholders of the company approve the adoption of the company's long-term equity incentive plan on the terms and conditions set out in the Explanatory Statement, which accompanies informs part of this notice of meeting. Moderator, are there any questions from shareholders for this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. Proxy proceeds in relation to this resolution are as follows: for, 16,480,612; against, 74,598; open proxy, 625,386; and 16,811, abstain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 7 is as follows: to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That, for the purposes of ASX Listing Rule 10.14 in and for all other purposes, the shareholders of the company approved the issue and allotment of 500,000 options to George Lucas, Director of the company, or his nominee, and otherwise on the terms and conditions set out in the Explanatory Statement, which accompanies this -- accompanies and forms part of this notice of meeting. Moderator, are there any questions?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 17,784,380; against, 110,514; open proxy, 625,386; abstain, 14,331. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Resolution 8, the appointment of auditor. Resolution 8 is as follows: to consider, and if thought fit, to pass the following resolution as an ordinary resolution. That, for the purposes of section 327B(1) of the Corporations Act and for all other purposes, BDO Audit Proprietary Limited ACN 134 022 870, having been nominated by shareholders and consented in writing to act as auditor for the company, be appointed as auditor of the company, effective immediately. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 28,698,351; against, 4,080; open proxy, 625,386; and 0, abstain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

Move to resolution 9, renewal of proportional takeover provisions. Resolution 9 is as follows: to consider, and if thought fit, to pass the following resolution as a special resolution. That, for the purposes of section 136 of the Corporations Act and for all other purposes, the proportional takeover provisions of the company's constitution be readopted in the form of the document tabled at this meeting and signed by the Chair for the purposes of identification, effective immediately. Moderator, are there any questions from shareholders on this resolution?

[Operator Instructions] There are no questions at this time.

Thank you. The proxies received in relation to this resolution are as follows: for, 28,617,908; against, 67,692; open proxy, 625,386; and 16,831, abstain stain. I now put the motion. Shareholders can vote on this resolution via the online voting portal. [Voting]

That concludes the resolutions to be voted on today. As noted, we are conducting a poll on all resolutions. I note that the poll is already open. Could all shareholders voting online, please now ensure they have submitted their votes. I'll allow a few seconds before the poll is closed. I'll now declare the poll closed. The results of the poll will be announced to the ASX once they are available. That ends the formal part of the meeting, which I now declare closed. We'll now hear from Kevin Moore and afterwards, from George Lucas. Thank you all for your attendance at the AGM and for your continued support of Raiz Invest. Kevin, I'll hand over to you now.

Thank you, Tony. I guess by way of background, in late 2016, the medical CEO of the company I was chairing showed me an app on his phone, it was called Acorns. And Andy, who was a digital native, proudly explained how we found it and how it worked, saving and rounding into an investment account with exposure to market, not just another savings account, but it's placed to grow with your automated savings, or via smartphone. I downloaded the app and was an immediate fan. On the change of branding to Raiz, I, digital immigrant, proudly explained to my wife how I found an app called Raiz, how it worked, saving and rounding its investment account with exposure to markets. Not just another savings account, no, I placed to go my automated savings all by my smartphone. She said, "Yes, I've got that app on my phone. I've set up the 3 grandkids with their own kid's accounts." How much have you got in your Raiz account? The answer was significantly less than she had. Four years on, I'm not just a fan of the app, but also the brand and the management team based upon what they've achieved over 4 short years. Significantly widening its truly digital mobile-first investment tool to hundreds of thousands of young and some young-at-heart investors, building $500 million of funds under management, on mobile phones and are expanding to Southeast Asian market, even with the challenges of global pandemic. I'm humbled to have been offered the Chair of the company I respect. As incoming Chair, I extend my thanks to all stakeholders. To Tony Fay, who has worked alongside George Lucas, as Chair and in seeing our business for the first 4 years following an IPO is never easy. To George, Brendan and the leadership team at Raiz, for building a robust financial technology business that continues to grow fast. And the Board of Directors for your support to date into the future. But mostly to the shareholders for believing in your company and supporting the tangible implementation of the management team's vision for your company. I look forward to meeting with many of you [ physically ] in the coming months. Thank you. George, I hand over to you now.

Thanks, Kevin. Thanks, everyone, for joining today. Just to give a brief update on the operation since we last reported in June, I guess, at end of June. So our growth continues. And in some ways, it picked up, we now, in active customers have increased nearly 25%, and we have over 305,000 active customers using the platform. We've also seen an increase in our funds under management in Australia. We now have over $560 million of fund under management here. So that's an increase of about 12% since June, the end of June. Our Super also continues to -- the amount we have invested or funds under management in Super also continues to increase, and we've seen that go up about 9% to over $77 million. And we still see great customer engagement with the average balance since the end of June, growing by over 11% to over $2,100. So even though we've gone through quite tough times in October, so market's quite tough times in September and October with all the uncertainty around the U.S. election, et cetera, we continue to grow in line, if not faster, than we have in the previous 3 months. From a strategy point of view, in Australia, we need to continue to grow our active customers, and we also focus in Australia on growing revenue per customer. And we do this by the introduction of new products and services. And one of the most recent examples of the introduction of the Sapphire portfolio. And the Sapphire portfolio had a different pricing structure to our normal portfolios, where not only the people pay the subscription fee, but they pay asset under management or a fee based on the size of the account from dollar one. So that's one of the ways, for example, that we increase the revenue per customer. And the reason we do this is to generate and increased lifetime value of each customer for us. And so we've -- I'll talk a little bit in a second, but we've got new products coming, which will also help increase that revenue per customer. In Asia, we're just really kicking off. The Malaysian business launched in May and -- sorry, in July. So for their its restore and start-up phase, where it's just go grow the active customer base and build a platform and the network effects, which come with growing a large customer base. But at the same time, we're also looking at adding new products, especially in Indonesia, but also in Malaysia. And as well as rolling it out. We've also done work and looking at rolling it out into other countries like Thailand and Vietnam. So breaking on that a little bit. In Australia now, we have over 230,000 active customers with over 900,000 sign-ups. As I said, the Sapphire portfolio as a way of increasing this revenue per customer, it now has over $33 million of fund under management and 17,500 people using it. We're looking to introduce custom portfolios where people will be able to create their own portfolios from [ 4K ] and ETFs and bitcoin, and that will have a different fee structure and the current fee structure is just one of our standard portfolios. And that will be another way that we can use increases revenue per customer as well as introducing the onboarding of sales managed super funds where we hope that the FUM that we received from that will be larger than just an individual customer. In Indonesia, it really gone up and running and kicked off when in July, we introduced a fee. It's slightly different fee structure there where it's per transaction and we get roughly $0.30 for every transaction or a deposit coming into the platform. We now have over 52,000 sign-ups in Indonesia, and it's growing quite rapidly, and 163,000 startups. We've just worked with Manulife and it was only -- it was officially announced yesterday, where we delivered a Syariah compliant fund into the Indonesian market, which is obviously a must for the largest Muslim country in the world. And we're in discussions with others to deliver more products into that market, which will hopefully increase engagement this year. Malaysia also has done above expectation. We have 23,000 plus active customers there in Malaysia now with over 107,000 sign-ups. The joint venture that we -- we're very grateful to go to the joint venture with PNB, and we've done that in a very short time. We only launched Malaysia at the end of July. The -- the fee structure is very similar to Australia in Malaysia. But obviously at a lower rate. So we charge RM 1.5 to bring it per month, which is roughly AUD 0.50. And then when they get to account balances over -- I mean, RM 6,000, we start charging a 30 basis point fee. And as I said, this is very much in start-up mode, and we're getting more better and better marketing there, and we are just increasing at the moment, like in any media, just trying to acquire customers to get on the platform. So at the moment, even though it is quite difficult with the COVID situation, we're very happy with the way that Indonesia and Malaysia are tracking along. But to prepare, because these businesses have grown very fast Indonesia and Malaysia, what we've begun to do is restructuring of management, which has led to Brendan becoming CEO of Australia. And I've moved up a level to group CEO with all the country heads reporting into me. And very shortly, I'll be going overseas when I get the visa approval from Indonesia and base myself in Indonesia for a little while. And also in Malaysia to help just with the growth there and make sure that we achieve what we plan to achieve. So really, what we're doing in a strategy point of view is really not much different than what we outlined in 2018. Well, it's pretty much exactly what we outlined in 2018 when we outlined our strategy in the perspectives that we listed with. So we know we're very cash flow conscious here in Australia. We're already cash flow positive, and we're going to maintain this cost discipline while growing. So that it's not just about growing the active customer base. It's also about growing the revenue and growing the positive -- getting to [ NPAT ] as quickly as possible, I guess, is the best way to see it. That also means we're very focused on lifetime value of the customer or increasing the revenue per customer. And we're going to continue to develop these new products both here for Australia and Southeast Asia to help push up the revenue per customer as we go along. So that's really for me. So I guess the next thing to do is open it up for questions, if you have any questions.

[Operator Instructions] There are no questions at this time.

Thank you. That concludes today's teleconference. Thanks, everyone, for your attendance.

Thank you, everyone.