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

Good morning, and welcome to the 2022 AGM for Raiz Invest Limited. My name is Stuart Grimshaw, and I'll be chairing today's meeting. I'd like to begin by acknowledging the traditional custodians of the land in which we meet today, the Gadigal people of the Eora Nation and the traditional custodians of the other lands for which people are joining the meeting virtually today and their connections to land, sea and community. I pay my respects to their elders past and present and extend that respectable Aboriginal and Torres Strait Islander people joining the meeting today. It is now 11:00 a.m. and there being a quorum present, I declare the meeting open for business. I confirm that the meeting has been properly constituted. In opening the 2022 AGM, I'd like to introduce the Board and the management team of Raiz Invest Limited who are in attendance. Brendan Malone, Managing Director and CEO; Kelly Humphreys, Non-Executive Director; Philippa Taylor, Non-Executive Director; Harvey Kalman, Non-Executive Director. Also with us today are Tim Aman from media, the company's auditors and Michael Austin, the Company's Secretary. This AGM is being held as a hybrid meeting. The virtual component of this meeting is being held by the Computershare online meeting platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can listen to an audio webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Shareholders and proxy holders can submit questions at any time. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the end of the meeting. Kindly include the agenda item number to which your question relates as well. Please note that your questions maybe moderated or we receive multiple questions on one topic, amalgamated together. Due to time constraints, we may run out of time to answer all your questions. If this happens, we'll answer them in due course via e-mail or posting responses on our website. All questions should be addressed to me as the Chair. I'll deal with the question personally or ask someone who is better placed to respond. We will do our best to answer any relevant question raised. To allow shareholders time to vote, I now declare the poll open. Online voting is now open and will remain open until I declare closed at the end of the formal business. Your votes must be submitted prior to the poll being closed for its counting. The agenda for today's meeting will be as follows: a brief overview from myself as Chair, followed by a presentation from our CEO, Brendan Malone, and then we'll deal with the formal matters to be considered at today's AGM. At the conclusion of the formal matters, I will open the floor to questions. Turning out to the year we've just had, there have been many macro challenges and internal changes. The external challenges have impacted the company, the community, our families and indeed us as individuals. We see many things occur. The continuation of COVID as well as us emerging from its restrictions, the advent of the Russian-Ukraine war, growing tensions between China and the U.S., invasive data hacks involving the unsolicited recent people's personal information, reemergence of inflation and its impacts on the daily costs of essential goods and services on families, associated rising interest rates that attempts to curb inflationary pressures, equity in our crypto market volatility. It's been a year that no one foresaw and the uncertainty around what's next still exists within the markets. Liquidity remains strong, but uncertainty has kept much of this liquidity on the sidelines. In terms of internal changes, there have been a few at our Board level. I would like -- first like to thank and acknowledge the former Chair of the company, Harvey Kalman. Harvey was the Chair for relative short period of time. But in that time, he was able to oversee Board renewal as well as a restructuring of the management team, both not insignificant achievements. At all times, he is interested in the future well-being of shareholders and the company was [indiscernible]. Harvey has now assumed the role of Chair of the Audit Committee, which we thank him for. Joining the Board this year is Philippa Taylor, who has been appointed into the role of Chair of the Remuneration, Nominations and Culture Committee. Philippa has a long history in the Board, ran human resource issues and has extensive career experience, specifically in this area. Philippa is a welcome addition to the Board and to the company. It's also important to recognize the contribution of George Lucas, who will be leaving the company at the end of this calendar year. George established Raiz in 2014 after persevering to find a solution for smaller investors to invest in Australian equity market. He found that solution by partnering with Acorns in the U.S. and the rest of Raiz's history. Without George's passion and drive, the company could not have achieved what we have, over $1 billion in FUM as well as over 650,000 active customers across three countries. We all wish George well in his next venture, which we are sure they will also be very successful. The company has faced many challenges this year, and Brendan will give you a great sense of where we are and what is ahead of us. The Board is intensely aware of the share price diminution that has occurred this year, and we believe it is far below where it should be. You have our assurances and commitment and we are working hard to restore the value that we see existence come. There have been significant disruptions to the sector, and we appreciate your commitment and support to the company. The success of any company relies on its Board, many parties, but in particular, I would like to thank firstly our customers for trusting us with their savings. Our people are integral to our success and our fellow directors and importantly, you, our shareholders. Brendan, I'll now hand over to you.

Thank you, Chair for the introduction, and good morning, fellow shareholders, key stakeholders, our members and staff. I would like to thank all Raiz shareholders for the continued investment and support in Raiz Invest Limited. I am honored to be here today to take you through a presentation of the company, which provides reflection on our company's achievements in the 2022 financial year and FY '23 year-to-date update and our priorities moving forward. Raiz Invest Limited is the market-leading multi award winning micro-investing and fintech platform with operations in Australia and Southeast Asia. We have achieved this through living and breathing our mission and purpose every day. With a simple mission empower everyone to save and invest, Raiz provides mobile investment products to unlock the financial freedom for our customers. Today, we are supporting over 670,000 customers to meet their savings and invest goals by breaking down these barriers to investing through hands-on experience with financial education, financial inclusion and financial literacy. Building a business from the ground up has ensured the foundations are strong and built correctly. At Raiz, we focus on these foundations, which include capital management, the effective cash utilization management, products and innovation, innovative new products exceeding our customers' expectations. And of course, our customers, advocating customers growth, retention and improved product delivery driving an improved -- an improvement in conversion and also reducing our share. There is also a risk in compliance with regulatory changes, cybersecurity and the best practices that we can enforce. And people and culture, we develop and empower stretch and retain our high-performing and diverse team. From these solid foundations, we can build Raiz into a true market leader for our customers and shareholders. Our business model is simple, incredibly cost-effective and scalable. We have a business model that works with multiple revenue streams and highly engaged customers. We will continue to deliver sustainable growth as we have seen over the recent years with FY '22 being no exception. I'll run through some notable highlights, which include on the revenue side. Total revenue for the Raiz group was up 39.5% year-on-year to $18.7 million. The Raiz micro investing platform revenue was up 52.2% year-on-year to $17.4 million, and the Raiz annual recurring run rate was up 21.5% year-on-year of $14.7 million. Revenue per customer or the annualized run rate for our Australian business was up 8.2% year-on-year to $55.90. On the bottom line, on a statutory basis, we reported a consolidated loss of $5.2 million after adding back the cost of the employee share options and amortization and depreciation expenses. However, on a normalized basis, we had a consolidated loss of $3.9 million after adding back the employee share options amortization depreciation, but also the contra noncash expense we had with Channel 7 for the year. On our customers and funds under management, global active customers were up 42% -- 42.8% year-on-year to 652,000. Australian active customers were up 6.1%. The Indonesian customers were up 114.9% year-on-year. And the Malaysian active customers were up 66.3% to 109,000. The global cost of acquisition per customer was $13.10 for the year. Global funds under management was up 18.1% year-on-year to $954 million with superannuation was up 74.6% year-on-year to $186 million, including the acquisition of Superestate in the financial year. On the operational side, we completed the acquisition of Superestate, listing FUM and providing Raiz with the capability to offer residential property as an asset class inside and outside of superannuation, which I'm very pleased to say it's about to be released. Continued enhancements to our customized portfolio choices over the year, including rolling out customized portfolios to our Southeast Asian operations. Our Raiz Rewards platform has an upgrade and was relaunched with more in-store card-linked rewards. Raiz Rewards is currently being rolled out to both Indonesia and Malaysia. And there was our Raiz Kids product, which was enhanced and relaunched in the year. We are now in the final phase of rolling this feature out to both Indonesia and Malaysia. Raiz did perform strongly in the financial year 2022 despite volatile markets, especially in the final quarter, as the pandemic, geopolitical tensions, rising interest rates and inflationary pressures took their toll on investor sentiment. All these factors were evident in the three regions where Raiz operates, Australia, Indonesia and Malaysia, yet all three showed significant gains. These challenging market conditions continue today. Accordingly, we have made several comments over the past months around Raiz's group strategy. We have done very well over the years to not only maintain our #1 position in the Australian market, but to also continue to grow and develop products in Australia. Building scale in Raiz's home market is critical to the future success of the business. We know the opportunity remains significant. With the population in Australia of circa 25.4 million, an adult population around 19.3 million and an estimated 8.9 million Australian investors surveys by the ASX have indicated, over 900,000 people will intend to commence investing in the next 12 months. Raiz has the real opportunities to continue to grow its Australian business. With this significant opportunity in the Australian market, the Board and management have refocused on innovative product development and have a robust strategy with an achievable roadmap to continue to be relevant to the financial services journey required through the life of everyday Australians. As previously mentioned, we have several new products coming. The Raiz Property Fund in Australia offering a diversified residential property investment options to our members. Significant enhancements and investment options to our customized portfolios and improved user experience through the entire end product range. Then there's Raiz Super and Super and Superestate Superannuation product offerings, which will be enhanced and improved as a result of valuable customer feedback. Raiz Rewards as mentioned, now has over 800 merchants on the platform and soon to be on the 500 in-store card linked offers going live in time for this festive season. In 2022, we did see the relaunch or upgrade of our Raiz Kids offering, which has been a great success with over 16,700 kids accounts opened and over $8 million of fund being invested on the platform as at 30th of September 2022. We continue to be the market leader, and this was illustrated in June at the FinTech Australia Awards that saw Raiz awarded The Excellence in Wealth Management, including PFM, Personal Financial Management and Robo Award. Raiz continue to be recognized for providing innovative, cost-effective and high-quality products in the wealth asset -- wealth and asset management solutions. In line with the renewed focus on the Australian business, we are evaluating local strategic partnerships that will help accelerate market penetration of our Southeast Asian operations. The focus is on finding the right local partners who can help to monetize our extensive customer base in these countries. And how do we do this? We find the right local partners for each geography, just like Acorns originally did with us in Australian business. With the strategic plan and proactive redefined strategy, we have a plan and decisions are being made. As we finalize these plans, further announcements we made by the end of the calendar year about the role Raiz will play as a company in Southeast Asia. Fellow shareholders, we are focused on our priorities as we execute on the restructure of the operations whilst we continue to drive innovation in wealth management. We will deliver a sustainable growth in our core market. We will deliver improved unit economics. We will deliver a reduction in our global cost base. We have a clear strategy with a significant growth opportunity and a clear path to group profitability. We continue to grow our Australian core business with improved products. We continue to get to know our customers better and deliver what they require. Through this intimate understanding of our customers, we understand the customer lifetime financial services journey, which will improve the stickiness and longevity of our customer base. We have a track record of consistent and disciplined delivery of our strategy. This assists us in building a great brand and strong reputation with sustainability and longevity. To this, we turn our attention to the cost base. We have a world-class financial services cost of acquisition, which we will maintain. We have worked through a strategic review to highlight our capital deployment options to make sure the return on investment is valid. As mentioned in our September quarter Appendix 4C, we have eliminated annualized costs of over $2.3 million from our 2022 cost base with further reductions still to come. As we look to the remainder of the financial year 2023 with excitement, we will continue to execute on our strategy, building on the momentum we have achieved to date. The October 2023 month-end metrics were released earlier this month and we recorded -- we had record reported FUM and active customer numbers at this time. This momentum continues through the month of November, and I look forward to updating the market in early December. We are focused on delivering the right customer product at the right time. This does not only benefit our customers but also drive the long-term shareholder value creation. As Stuart has mentioned, the Board is intensely aware of the share price movement over the past 12 months, and we believe it is far below where it should be. I would like to reinforce Stuart's comment, you have our assurances and commitment that we are working hard to restore the value so that the share price will reflect the value and the potential that we know exists in our company. We have to plan, decisions are being made, and we have a time line to execute. We have set horizons. Our short-term goals that are focused on capital deployment and structure, provide clear strategy and message with product development and prioritization. I am confident we will deliver the right outcomes for our customers and shareholders and really make Raiz a great success well into the future. I would like to thank shareholders for their continued support. I'm always available for questions at any time. Also thank you to the Board for the continued support, mentorship and guidance over the past 12 months, to our customers for their continued loyalty, product requests and feedback, which is invaluable. Lastly, our awesome dedicated team and staff across all our offices who are a pleasure to work with, your dedication and relationships with our customers drives our business and with the energy you guys have around the office is truly impressive. That is the end of my formal presentation. Thank you once again, and I'd like to hand back to the Chair, Stuart, to go through the AGM's formal items of business, and I look forward to any shareholders' questions later.

Thanks, Brendan. We'll now move into the poll business as set out in the Notice of Meeting. Notice at the end of general meeting that is made available to all Raiz's members on or about the 25th of October and has to be taken as read. Noting all resolutions will be conducted by poll. For the purposes of the poll, I appoint [Mary] as a party of Computershare, the company's share registry, who have examined and prepared some of the proxy forms received to act as Returning Officer and to conduct the poll. As mentioned, online voting is now open and will remain open until the poll is declared closed. Your votes must be submitted prior to the poll being closed for its counting. Shareholders in attendance that are entitled to vote the poll are all shareholders, representatives, attorneys of shareholders and proxy holders on opening that. If you're attending in more than one of those capacities, you will have been issued with as many voting cards as you have separate capacities. If anyone believes they are entitled to vote in this poll in any capacity and does not have a voting card in respect thereof, please raise your hand now and a member of our share registry team will assist you. And if over time, we'll ask that you might vote on the resolution on the voting card, if you're a shareholder, and wish to cast your vote for resolution, please place a mark either the for, against or abstain box next to that resolution. If you're a proxy holder, some of the votes which you are entitled has been attached to the voting card. The summary of votes includes discretionary votes [indiscernible] yours to cast at your discretion. If you wish to cast the discretionary votes, please place the mark on the corresponding for, against or abstain boxes. The summary that folks does not have any discretionary votes, you do not need to mark your voting card and will simply need to hand it to the Returning Officer at the end of the resolutions. After all resolutions have been read and voted on, please place in one of the ballot boxes that we set in the room. Are there any questions related to the voting process? Proxy has been submitted, then all those ballots we've launched have been accepted. 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 in the notice of Annual General Meeting, we will now proceed with the resolutions -- financial statement, excuse me. The first item of business is to receive the company's annual financial report for the year ended June 30, 2022. The financial report and the reports of the Directors and the Auditors are laid before the meeting. There will be no vote on this item that has a discussion item only. The company's auditor for the 2022 year, Tim Aman of BDO Audit Proprietary Limited is present to take questions relevant to the conduct of the audit and the preparation and content of the independent auditor's report. Shareholders are invited to ask questions online, which will be addressed at the end of the meeting. We'll now proceed with the resolution. So then the first one is the adoption of the remuneration report. To consider and therefore wish to pass with or without making the Resolution 1. That, the purpose of Section 250 R(2) of 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 June 30, 2022. The proxies received in relation to this resolution are shown on the screen. Those physically in attendance, please mark your voting instruction on your voting card. I'd like shareholders can vote on this resolution via the online voting portal once you submit your vote, you should see a green tick confirming that the vote has been received. I will now put the motion. Resolution 2, election of Philippa Taylor as Director. Resolution 2 is as follows: to consider and, if thought fit, to pass with or without amendment resolution 2, that being that Philippa Taylor, a Director appointed as an additional Director and holding office until the next general meeting of the company after appointment in accordance with the company's constitution and ASX Listing Rule 14.4, be elected as a Director of the company effective immediately. The proxies received in relation to this resolution are also on screen, which you can see. I now put the motion. Those physically in attendance, please mark your voting instruction on your voting card. Online shareholders can vote on this resolution via the online voting portal. Once you submit your vote, you should see the green tick confirming the vote has been received. As the next resolution relates to myself, I hand the Chair over to Philippa Taylor.

Thank you, Chair. Resolution 3 is the election of Stuart Grimshaw as Director. To consider and, if thought fit, pass with or without amendment resolution 3 that Stuart Grimshaw, a Director appointed as an additional Director and holding office until the next general meeting of the company after his appointment in accordance with the company's constitution and ASX Listing Rule 14.4, be elected as a director of the company effective immediately. The proxies received in relation to this resolution are on the screen as shown. I now put the motion. Those physically in attendance, please mark your voting instructions on your voting card. Online shareholders can vote on this resolution via the online voting portal. Once you submit your vote, you should see a green tick confirming that the vote has been received. I now hand the chair back to Stuart.

Thanks, Philippa. Resolution 4, which is the reelection of Kelly Humphreys as Director is as follows: to consider and, if thought fit, to pass with or without amendment resolution 4, that being the Kelly Humphreys a Director who retires by rotation in accordance with the company's constitution and ASX Listing Rule 14.4 and being able to offer herself for reelection as a Director of the company effective immediately. The proxies received in relation to this resolution are on screen and I'll put the motion. Those physically in attendance, please mark your voting instruction on your voting card. Online shareholders can vote on this resolution via the online voting portal. Once you submit your vote, you should see green tick confirming that the vote has been received. Resolution 5, ASX Listing Rule 7.1A approval Future issues of securities. To consider and, if thought fit, to pass with or without amendment Resolution 5 is a special resolution. That, for the purposes of ASX Listing Rule 7.1A and for 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 described in ASX Listing Rule 7.1A.2. and otherwise, on the terms and conditions set out on the explanatory statement, which accompanies forms part of this Notice of Meeting. Proxies received in relation to this resolution are shared on screen. I now put the motion and you're getting used to these moments by now, I think. Those physically in attendance, please mark your vote and instruction on your voting card. Online shareholders can vote on this resolution via the online voting portal. Once you submit your vote, you should see green tick confirming that the vote has been received. Resolution 6, approval to increase the maximum aggregate amount of Non-Executive Director fees. To consider and, if thought fit, to pass with or without amendment resolution 6 which is that for the purposes of ASX Listing Rule 10.17 and for all other purposes, the maximum aggregate amount of remuneration that being paid to company's Non-Executive Directors in any financial year is increased by $143,000 -- from $407,000 to $550,000 effective immediately. The proxies received in relation to this resolution are results screened. I now put this motion. Those physically in attendance, please mark your voting instruction on your voting card. You will get a green tick if you're online, if you can put it in there. I'll just cut for that one. As the next resolution relates to myself, I hand the chair over to Philippa Taylor.

Thank you, Chair. Resolution 7 is the approval of issue of loan funded share to Stuart Grimshaw, Director of the company. Resolution 7 is as follows: to consider, and if thought fit, to pass with or without amendment resolution 7, that for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes, the shareholders of the company approved the issue and allotment of loan funded fully paid ordinary shares under the long-term equity incentive plan to Stuart Grimshaw, Director of the company, and otherwise on the terms and conditions set out in the explanatory statement, which accompanies and forms part of this notice of meeting. The proxies received in relation to this resolution are as shown on the screen. I now put the motion. Those physically in attendance, please mark your voting instructions on your voting card, and you will see a green tick. Once you have done so confirming that your vote has been received. I now hand the chair back to Stuart.

Thanks, Philippa. Resolution 8 is as follows, to consider and, if thought fit, to pass with or without amendment resolution 8, which is fit for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes of the shareholders of the company approved and issued the allotment of loan funded fully paid ordinary shares of the long term, equity incentive plan to Harvey Kalman, Director of the company, and otherwise on the terms and conditions set out in the explanatory statement, which accompanies and forms part of this Notice of Meeting. The proxies received in relation to this resolution are also on screen at the moment. I now put the motion. Those physically in attendance, please mark your voting instruction on your voting card. Online shareholders, I was going to say, probably know what to do by now, but I'll read it a anyway. You can vote on this resolution via the online portal. Once you submit your vote, you should see green tick confirming the vote has been received. Resolution 9 is as follows, to consider and, if thought fit, to pass with or without amendment resolution 9. That, for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes, the shareholders of the company approve the issue and allotment of loan funded fully payable ordinary shares under the long-term equity incentive plan to Kelly Humphreys, Director of the company. And otherwise, on the terms and conditions set out in the explanatory statement which forms in the company's part of its Notice of Meeting. The proxies received in relation to this resolution are as on screen. I now put the motion. Those physically in attendance, please mark your voting instruction on your voting card. Online shareholders can vote on the resolution via the portal. Once you submit, you'll see the green tick confirming the vote has been received. Resolution 10 is as follows: To consider and, if thought fit, to pass with or without amendment that for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes, the shareholders of the company approve the issue and allotment of loan funded fully paid ordinary shares and the long-term equity incentive plan to Philippa Taylor, Director of the company and otherwise on the terms and conditions set out in the explanatory statement which accompanies and forms part of this Notice of Meeting. Proxies received in relation to this resolution are shown on screen. I now put the motion. Those physically in attendance, please mark your voting instruction on card. Online shareholders can vote on the resolution via the portal. Once submitted, you should see a green tick to signify that your vote has been received. Resolution 11 is as follows, to consider and, if thought fit, to pass with or without amendment, that, for the purpose of Section 208 of the Corporations Act, ASX Listing Rule 10.14 and for all other purposes, the shareholders of the company approve an issue allotment of 175,000 incentive options under long-term equity incentive plan to Kelly Humphreys, Director of the company. Otherwise on the terms and conditions set out in the explanatory statement, which accompanies and forms part of the Notice of this Meeting. Proxies received in relation to this resolution are shown on screen. I now put the motion. Physically in attendance, please mark voting instruction on your voting card. Online shareholders can vote via the portal. Once you submit, you see a green tick confirming it's been received. Resolution 12 is as follows: to consider and, if thought fit, to pass with or without amendment. Resolution 12 as a special resolution. That, for the purpose of Section 136 of the Corporations Act and for all other purposes, approval is given that the constitution of the company is amended in the manner set out in explanatory statement with effect from the conclusion of the meeting. Proxies received in relation to this resolution are shown on screen. I now put the motion. Those in attendance, please mark the voting instruction on your voting card. Online shareholders can vote via the voting portal online. Once you submit the vote, green tick confirming you've been received. I know everyone's routed at this particular point in time, that concludes the resolutions as we voted on today, probably good enough for my voice. As though we're conducting a poll on all resolutions, and I note the poll was already open. At this point, we'll open the forum for questions put by shareholders.

Sure. I think we'll take questions from the floor to begin with, if there are any.

Okay, any online?

We haven't received any questions from the online text function. And so we're just going to throw over to the moderator online to see if there's any phone call questions sort of coming.

There are no phone questions at this time.

Okay. Thanks, Michael. Thanks, Darcy. For all shareholders voting online, please now ensure that they have submitted their votes. I will allow another minute before the poll is closed. If you have any questions in relation to the submission of online votes, please send them through the Q&A function now. For those shareholders attending physically, I allow invite Barry to collect the voting cards. I declare the poll closed. The results of the poll will be announced in the ASX once they're available. This ends the formal part of the meeting. I'd like to wish everyone a very safe and happy Christmas, and we look forward to seeing you next year. So thanks very much for your attendance. Thank you.