Grab returns to profit in Q3, raises 2024 revenue forecast

GRAB on Tuesday (Nov 12) reported third-quarter earnings that showed it turning back to being profitable. The company also raised its forecast for the full-year 2024 revenue on expectations of strong growth.

It reported profit of US$15 million for the third quarter, a turnaround from a loss of US$99 million the year before. The profit was due to improvements in group-adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda), as well as an increase in net finance income and lower share-based compensation expenses, said the company.

That compared against a Bloomberg poll of nine analysts which estimated a loss of US$27.1 million for net income under generally accepted accounting principles.

Shares of US-listed Grab soared more than 12 per cent in after-hours trading.

Its revenue grew 17 per cent year on year to US$716 million in Q3 on growth across all segments, beating estimates of US$696.6 million, per a Bloomberg poll of 18 analysts. It was 20 per cent on a constant currency basis.

“Q3 2024 was a strong quarter for us, as investments we made across the business drove an acceleration of our on-demand GMV (gross merchandise value) growth,” said Grab chief executive Anthony Tan.

Group-adjusted Ebitda was US$90 million for the quarter, an improvement of 224 per cent year on year compared with US$28 million previously.

“With the strong momentum we are seeing across the business heading into the end of the year, we expect to deliver sequential on-demand GMV growth in the fourth quarter and are raising our full-year 2024 group revenue and group-adjusted Ebitda outlook,” said Tan.

Grab expects its revenue for fiscal year 2024 to be in the range of US$2.76 billion to US$2.78 billion, compared to its previous guidance of US$2.7 billion to US$2.75 billion. The new guidance represents an increase of between 17 and 18 per cent year on year.

“We remain bullish on the long-term growth outlook of South-east Asia, and are firing on all cylinders to capture the strong user demand trends,” he added.

Deliveries

Deliveries revenue for the firm grew 13 per cent year on year, or 16 per cent on a constant currency basis, to US$380 million in Q3 from US$335 million. Grab’s efforts in Mart, where it delivers groceries and other non-food products from merchants, resulted in the segment growing 1.7 times faster than food delivery for the quarter, said Alex Hungate, president and chief operating officer of Grab.

“We’re getting almost five times higher order frequency amongst users who transact in both food and Mart, with more than two times retention rate as well. We expect that cross-sell to continue to be a strong source of growth for deliveries,” he added.

Incentives

Incentive spending as a percentage of GMV has been trending downwards, with the absolute number rising due to growing GMV. Artificial intelligence targeting has been raised as a reason why Grab has been more efficient with its incentives.

But Hungate does caution that incentives might spike or dip depending on whether there are new products launched. Changing customer behaviour to look to the Grab app for a new product or offering will require incentives.

“We will use incentives from time to time to generate momentum behind these new ways of interacting with the app,” he said.

The 16 per cent growth in monthly transacting users to 41.9 million in Q3 2024 from 36 million in Q3 2023 has been attributed to the affordability push, with Grab offering products such as Saver delivery at a lower price for a longer wait. This has driven a lot of first-time users to Grab, with the company aiming to capture and keep these users coming back.

The key now is to drive these users from annual to monthly to daily transactions on the app.

“At the moment our monthly transacting users is about 5 per cent of the South-east Asia population, and annual transacting users is about 15 per cent, so (there is) still lots of upside to go for us with this affordability strategy,” said Hungate.

There is also about another US$300 million left in Grab’s US$500 share buyback programme announced in February during the Q4 2023 results, with about US$190 million spent so far. Should inorganic opportunities arise, the company will revisit the programme.

Grab’s digital bank

On the digital bank front, Grab now has US$1.1 billion in deposits in GXS Bank and GXBank as at Sep 30, from US$362 million a year prior. The growth has been attributed to the increased number of deposit customers and the launch of Boost Pocket in GXS, a term-deposit product. Loans for the financial services segment grew 38 per cent to US$567 million in Q3 2024, from US$410 million in Q3 2023.