Letter from George Lucas to Customers

George Lucas sent out a letter to customers today that outlined some of the company's achievements in CY21. All positive and all things the market already knows but worth highlighting one specific part of the letter:

"Second, it has not just been about FUM and Active Customers, although it is worth noting that in calendar 2021 FUM grew 70.8%, while Active Customers in Indonesia and Malaysia grew 202.3% and 155.7%, respectively – all strong numbers. But having the Australian business operating cashflow positive also was a critical target for us. Having done so, we are one of the few Wealth Fintechs globally to be in this position –an achievement the team can be proud of."

These numbers show the growth of the business and the drive of the management team. It's also great to have the Australian business operating cashflow positive, as this gives investment in the business a little more security.

Happy to continue to be an investor in this business and interested to see what they can do in 2022.

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DISC: Held.

Spaceship vs. Raiz

These two companies compete in the same space and my thoughts on both have changed significantly in the past 6 months. I decided to start an account with both portfolios just to get a feel for both, since I am invested in Raiz and Spaceship is the competitor.

Six months ago I thought Spaceship was the better choice as a micro-investing app. There were no fees and the active nature of the portfolio was showing great performance. You could see the individual companies that were being invested in, the bull case for them, as well as the risks as Spaceship saw them. It was super easy to set up an automatic transfer into the account and the whole process seemed a lot less intricate as compared to Raiz.

In the last couple of months Spaceship has bought in fees and I've seen the performance of the Universe Portfolio be pretty flat over this time period too. Obviously with the companies that the Universe Portfolio is invested in you have to expect periods of underperformance, but in the sort of environment we are in at the moment with talks of inflation and other economic pressures, Raiz may actually have an advantage in how they set up their portfolios. With exposure to more diverse markets like housing and bonds, it makes the Raiz portfolios more resilient in my opinion. This is not to say that Raiz will outperform Spaceship, just that I prefer the way the pre-designed portfolios are constructed.

Another feature I quite like about Raiz is their Raiz Kids function, allowing you to simply start to save a little bit of money to give to your kids later on in life. Add this to a bunch of other functions that make saving and investing simple, I think Raiz is the winner in my mind. Spaceship has most of these other features as well but one they don't have is Raiz Rewards, allowing you to get money back for purchases through different websites, straight back into your Raiz Invest account. This is a killer feature for those who shop a lot online and gives the ability to earn a little more saving to slowly accrue over time.

I continue to be a happy Raiz investor (in their stock), but I've now cashed out of both my Raiz and Spaceship accounts. Where I am at in my investing journey is a little beyond the micro-investing stage now and so my money is better used elsewhere on ETFs and actual stocks.

DISC: Held.

Spaceship expands their features.

Probably Raiz's biggest competitor is Spaceship in Australia. Raiz has always had more features than Spaceship while spaceship has always been simpler and a more minimalist app experience.

Recently they have been adding new features. Recently they added the ability to have multiple portfolios within the app and today I got a notification explaining a new addition to their features called 'Boost'.

Raiz's advantage in my opinion in still its small amount of crypto offering, appealing to the younger crowd, as well as the ability to get money back for shopping. Will be interesting to see how Spaceship changes going forward with Raiz in a growth phase especially in South East Asia.

DISC: Held

Raiz Invest Hits $1 Billion Funds Under Management in Australia 

Raiz Invest today announced its total Funds Under Management (FUM) in Australia has surpassed $1 billion off the back of continued customer engagement, which has seen average balances grow to nearly $3,000 per customer, as well as continued customer growth.

Great news and they have reached the milestone earlier than originally expected. The continued growth in Australia is complemented by the continued growth in South East Asia. Will be interesting to see how balances are affected through the transition period of borders opening and people possibly wanting to spend some savings on travel.

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DISC: Held.

September 2021 - Key Metrics

Raiz has released some of it's key metrics for the month of September. Great results all over but especially in the increase in Active Customers. Australian Active Customers were up around 1% MoM, but still up 27% YoY so tracking really well. Active Customers in Indonesia increased ~13% MoM and ~6% in Malaysia. FUM for Australia were up 0.3% and tracking nicely to hit $1 billion by EOY. Interesting that the company didn't mention metrics for FUM in Southeast Asia. Obviously it is a key metric for tracking the company's performance. Could they be trying to hide less than stellar results in this area?

All in all positive results, especially with the slight downturn in the market over the past month.

DISC: Currently hold.

Raiz expanding operations into surveys for cash.

Interesting email I received from Raiz today in regards to them offering web surveys. They explain that you can make more money doing web surveys versus mobile surveys. Thought it was a great little avenue to go down, especially since it seems like their customer base would be perfect for a survey based business. Customers who are money conscious, a lot of students who would jump at the chance to take surveys for money, and a way for people to see their portfolios increase. Good way for the company to make extra money as well. Will have to try it out and report back to you all about the types of surveys they are putting up and how this compares to competitors like Octopus Group who claim to pay the highest rates in Australia. Raiz have said that "$600,000 has been earned from Raiz surveys since inception", which is no small feat. Would have to have been doing it for a little while to pay out that sort of money.

DISC: Currently hold.

Board and Leadership Update

There seems to have been a lot of backroom talks and finally Raiz has released an update to their announcement dated 1 September 2021 in relation to the request from BBH-GL Nominees Pty Ltd to call a meeting of shareholders pursuant to section 249D of the Corporations Act 2001 (Cth). Two of the current Non-Executive Directors will step down in 4 to 6 weeks and Brendan Malone has been appointed the Joint Group CEO alongside Mr Lucas. He will continue to hold the Managing Director's role. His focus will be the Australian and New Zealand parts of the business while George Lucas looks after the expansion into the international markets outside of ANZ. 

I think this is the best outcome one could have hoped for. Mr Lucas and Mr Malone has a close working relationship and are the two best people to oversee the growth of Raiz going forwards, in my opinion. George Lucas obviously has a strong vision for the company and it has served well up to this point. His passion for the business and the lengths he is willing to go to to make sure of it's success and growth is a great sign. I have every confidence that Raiz will hit their target of reaching $1 billion of Funds under Management by 31 December 2021 with these two in-charge and the board can get back to focussing on the business rather than internal politics.

Key takeaways:

• The Board has unanimously resolved to appoint Brendan Malone as Joint Group CEO effective immediately.
• Mr Lucas will continue in his role as Managing Director as well as Joint Group CEO.
• George will focus on the growing international markets outside of ANZ, while Brendan will have responsibility for Australia and New Zealand.
• Brendan has also been appointed to the Board as an Executive Director, effective immediately.
• On the condition that these changes were agreed and announced to market, the 249D notice will be withdrawn, and current Non-Executive Directors, Kevin A Moore and Nina Finlayson, agreed to step down as Directors in four weeks and six weeks, respectively.
• Kevin has also decided to step down as Chair of the Board, effective immediately.
• An independent Non-Executive Director, David Gordon, has been appointed in the interim to act as Chair of the Board.

DISC: I hold.

Another Very Strong Month - August 2021 Metrics.

Raiz has released their August results today and all things are pointing in the right direction with customer numbers growing, as well as FUM. 

The growth strategy for Raiz at the moment is clearly heavily focused on the Southeast Asian expansion. This is going really well, however there is still the risk of covid that surrounds the operations at the moment and heading into the Christmas period. Obviously another risk that is pretty prevalent at the moment is the disagreement between the CEO and three of the board members, where George Lucas (CEO) is attempting to remove these members from the board.

While I believe these risks could affect business in the short term, I do believe that George Lucas has the right vision for the company and I still trust in his ability to push for and achieve strong growth in both Australia and Southeat Asia.

Key takeaways:

• Ahead of schedule to reach target of $1 billion FUM by 31 December 2021.
• FUM growth of 6.9% in August to $967.4 million.
• Two new ETFs released for Raiz's Custom Portfolio option (ASX:VSO and ASX:VEFI) to meet demand for access to small-cap and ethically themed investments.
• More customers are signing up to the Custom Portfolio, illustrating an improvment in financial literacy, as well as increasing engagement with Raiz's online educational content.
• Strong growth in Indonesia and Malaysia, with Indonesia's Active Customers up 11.3% to 144,269.

Link to the full announcement.

DISC: held in RL and SM.

Change in Company Secretary. 

Raiz has announced that Elizabeth McGregor has resigned and that Andrew Palfreyman has been appointed as the Company Secretary to replace her. 

Andrew is a corporate lawyer specialising in equity capital markets and commercial transactions. His experience is pretty solid and looks like a great addition to the team.

Here is his LinkedIn profile, but I believe it may be missing a few things. This link gives some further info in regards to his admission to the Supreme Court of NSW in 2018 etc. 

DISC: Held. 

A Statement from the Board in Regards to Yesterday's Announcement. 

The board released a statement after the close today that addresses the recent filing and attempt to remove three members from the board. Essentially it lays out all the achievements that the company has made over FY21 and what the direction of the board and management team are for the company. It's very vague as to exactly what issues there are between board members and why exactly George Lucas and his representatives want three members removed. 

In the statement/letter they keep referring to "regulatory and governance frameworks". It also states that: "The interpretation of  these frameworks  has  led  to  conflict  in  the boardroom." So they are being quite vague and without a letter from George Lucas specifically telling us what issue he is having with these three members, we probably won't really know what is going on. The way I read it is that the other members of the board have an idea as to how they will grow and develop in the new markets internationally that George Lucas doesn't agree with on a regulatory and governance level. 

The good news is that it does seem as though it is an issue that the board members and management (apart from George Lucas) think can be worked out and moved past with a strong vision for the company. Hopefully they can work out their differences and get back to putting all their effort into the expansion and growth of the company, however if they can't and this issue is distracting from running the business then it may end with three board members being removed. 

Hopefully we hear more as investors before the meeting and vote. 

DISC: I hold. 

To add to @mmff's recent straw related to an announcement this morning:

It seems as though George Lucas, the company's Founder, Managing Director and CEO, is trying to remove three board members from the company by way of a surprise resolution at a shareholder meeting.

The three people they are trying to remove are:

1. Kevin Moore - Non-Executive Chairman
2. Kelly Humphrey's - Non-Executive Director 
3. Nina Finlayson - Non-Executive Director 

Obviously trying to remove your Chairman is not a good look, and trying to remove your Chairman as well as two more board members looks even worse. Kevin Moore was only hired in December last year, and all three of these board members have significant experience that would be valuable to the company. But that value can only be achieved by the board working cohesively. 

Could it be that George Lucas has a vision for his company and these members don't share in that vision? Could it be back room politics and George Lucas is worried about people trying to remove him from the board and therefore making the first move? 

It's interesting to note that together, these three members own only 0.35% of the company, which is a tiny amount and George Lucas or others may feel as though they don't have enough skin in the game or are too busy with their other ventures to provide Raiz with the direction they need as they expand and become a larger company across Asia in particular. 

Of course this is all speculation on my behalf. I continue to trust George Lucas' vision for the company and believe he is the right person for the job. Until given more information I will assume this is a smart move on his behalf as I have trusted him to this date and there are other members in the management team that still provide immense value on top of George Lucas. It will be interesting to hear what information is released by the company in the coming days or weeks. 

DISC: currently hold. 

It has been a stellar year for Raiz Invest (RZI). They have continued their expansion into South-East Asia, which in my opinion the results are yet to be fully seen. They saw almost all of their key metrics increase substantially and their advertising has been really pulling in customers.  

There was also a reorganisation of the leadership team with George Lucas being appointed as the Group CEO and Brendan Malone appointed as the Australian CEO. Both these guys seem like very solid members to be a part of the growth strategy of Raiz.  

I am a big fan of how Raiz has their app and company set up from a business perspective. Firstly they charge either a monthly or yearly fee to their customers depending on location. This allows for annual or monthly recurring revenue. The second thing that I think is extremely compelling about Raiz is their Raiz Rewards program. It is what sets them apart from someone like Spaceship, and allows them to get advertising revenue. The Raiz Rewards program is also a major strength to their business because customers who are already loyal to the brands offered through that, are attracted to the app. This increases the number of members on the platform and in turn this attracts more brands. It is a cycle that has worked to build Raiz's member numbers dramatically. Plus this rewards program increases the loyalty of their members the same way a Woolworths Rewards program does for their business. 

I remain very bullish for Raiz as it expands it's operations, continues to gain members in already established and new markets, as well as the fact it has a strong balance sheet totalling $19.4 million.  

Investment highlights:

• Group revenue up 37% year on year (YOY) to $13.4m 

• A consolidated loss of $258,000 attributed to shareholders after add backs, see annual report for details 

• Global Active Customers up 87% YOY to 456,927 

• Australian funds under management (FUM) up 76% YOY to $799.6 million 

• Superannuation FUM up 53% YOY to $106.6 million 

• Micro Investing Platform segment revenue up 40% YOY to $11.4m 

• Revenue Per Customer (run rate) in Australia up 32% YOY to $62.0  

Operational highlights: 

• Officially launched the Raiz App in Malaysia in conjunction with our joint venture partner 

• Introduced Custom Portfolios and the onboarding of self-managed superannuation funds (SMSFs) in Australia 

• Launched Raiz Home Ownership assisting first home buyers on their journey to own a home 

• Expanded the Indonesia platform by introducing Syariah compliant funds and capital protected funds 

• Agreed to acquire Superestate, which will provide Raiz with the capability to offer residential property as an asset class both inside and outside of superannuation (completed 29 July 2021)  

Corporate 

• Reorganised the Raiz leadership team, with George Lucas appointed as Group CEO and Brendan Malone was appointed as CEO Australia. 

• Alex Gao appointed to leadership team as CFO effective 1 July 2021 

• Raised $10.4 million via an institutional Placement and Share Purchase Plan 

• As of 30 June 2021, Raiz has a strong balance sheet with cash, cash equivalents and term deposits totalling $19.4 million 

Full announcement can be found here.

Investor's presentation can be found here.

DISC: currently a holder on Strawman and in RL. Looking to acquire more on any substantial pullback from current prices. 

Raiz portfolios continue to outperform the benchmarks. 

Raiz is continuing to provide a good product for young, passive investors looking to dip their toes into investing. Their ability to create portfolios that outperform the benchmarks gives them an attractiveness, that when added to their marketing strategy, is seeing growth in people signing up, as well as continual increases in FUM (which are now at $799 million as at 30 June). 

I am positive that they will continue to grow and their expansion into Asia Pacific is going well. They now have offices in Malaysia and Indonesia as well as plans to expand into Thailand and Vietnam.