STRONG ride-hailing recovery narrowed the net loss for South-east Asian tech giant Grab to US$547 million for the second quarter ended June, compared to the year-ago loss of US$768 million.

The New York-listed company has also slashed costs, with reduced incentives and the closure of its delivery-only warehouses, or “dark stores”, in 3 markets.

Revenue for the quarter surged 79 per cent to hit an all-time high of US$321 million, including contributions from its recently-acquired Malaysian retail chain Jaya Grocer. This came on the back of a 30 per cent growth in gross merchandise value (GMV) to US$5.1 billion, driven by a recovery in the mobility business and continued growth in on-demand delivery.

With the revenue surge, Grab is accelerating the breakeven timeline for the core food deliveries and overall deliveries segments by 1 and 2 quarters respectively, to the first quarter of 2023 and Q2 2023. It is also narrowing its 2022 revenue guidance to come in between US$1.25 billion and US$1.3 billion, from its previously announced range of US$1.2 billion to US$1.3 billion. However, the company is lowering its GMV estimate to 21 to 25 per cent growth year-on-year, down from the previous guidance of 30 to 35 per cent.

In an earnings call on Thursday (Aug 25), Grab’s chief financial officer Peter Oey said that the tempered GMV outlook is due to an expected moderation in deliveries, as dining out resumes across the region, as well as forex headwinds. He also cited Grab’s renewed focus on “high-quality GMV” users who are less sensitive to incentives.

The company said it is focused on slashing costs. “We have slowed down our pace of hiring, streamlined certain functions and reduced other overhead expenditure. As a management team, we are focused on spending wisely and continually reinforcing a lean cost culture without compromising our focus on driving sustainable growth,” said Oey.

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Grab has also closed its dark stores in Singapore, Vietnam and the Philippines, while continuing to operate them in Indonesia. Oey noted that the impact of this move is not reflected in Q2, but will be in the second half of the year.

Ride-hailing, deliveries shine

On a segment basis, strong ride-hailing demand lifted Grab’s mobility revenue 37 per cent to US$161 million, thanks to a surge in international and domestic travel and a resumption of office and leisure commutes. This sent the segment’s adjusted Ebitda up 40 per cent to US$125 million.

The deliveries segment likewise saw strong growth, with revenue near-tripled to US$134 million. This was driven by contributions from Jaya Grocer, as well as a 47 basis point decline in total incentives as a percentage of GMV. The segment, however, widened its adjusted Ebitda loss to US$34 million, from the US$20 million loss a year ago. Deliveries GMV of US$2.5 billion also came in below the guidance range, impacted by softer demand and forex movements. Over in the nascent financial services segment, revenue near-doubled to US$13 million, while the adjusted Ebitda loss stood at US$115 million, 37 per cent wider than the year-ago US$85 million loss. This was mainly due to Grab’s continued investments in its upcoming digital bank with Singtel.

The company’s enterprise and new initiatives unit, which includes its newly-launched GrabMaps business, posted a 30 per cent rise in revenue to US$14 million, with US$5 million in adjusted Ebitda. This came as the GrabAds business more than doubled its small merchant advertising base.

Looking ahead, Grab is focused on raising high-quality transactions to “drive growth sustainably”, said its CEO Anthony Tan. “What does this mean? We will focus on profitable, loyal customers who have higher net average order value transactions (and) orders with better unit economics… How do we do this? With just doubling down on product innovation to engage consumers,” he added.