Startups & Tech

Grab posts higher revenue but wider losses in Q2, faces speedbumps

Published Tue, Sep 14, 2021 · 08:07 AM

GRAB reported higher revenue but also higher losses for its second quarter, and cut its full-year projections for several key metrics on Tuesday.

But the company, which is preparing to list via a merger with a US special purpose acquisition company (SPAC), is up against some challenges. It could face speedbumps if regulations to protect gig economy workers are enacted in Singapore, but even that might take a backseat to the fierce competition it is up against in Indonesia, where rivals are amassing significant war chests.

Grab on Tuesday posted a net loss of US$815 million for the three months ended June 30, exceeding the US$718 million net loss recorded a year earlier. This was largely due to a rise in interest expense from its reedemable convertible preference shares. Revenue rose to US$180 million.

The bulk of revenue came from the mobility segment, where revenue jumped 128 per cent to US$118 million. The deliveries segment was up 92 per cent to hit US$45 million, while the company’s financial services contributed US$6 million.

As at end-June, Grab had US$5.3 billion in cash and cash equivalents, up from US$3.7 billion as of end-2020. Total outstanding debt was US$2.1 billion. This was primarily due to the closing of Grab’s first senior secured term loan facility of US$2 billion at the end of January.

For the second quarter, adjusted net sales - an alternative measure of performance not prescribed by International Financial Reporting Standards - stood at US$550 million. Gross merchandise value - or the total value of transactions on Grab's platforms - was US$3.9 billion. Grab also said its net loss as a percentage of its GMV has since narrowed to 21 per cent, from 30 per cent a year earlier.

A NEWSLETTER FOR YOU

Monday, 3.30 pm

Garage

The hottest news on all things startup and tech to kickstart your week.

Angus Mackintosh, an analyst at CrossASEAN Research, pointed out that Grab’s consolidated GMV is now 119 per cent of pre-Covid-19 levels, which is a “positive sign”.

“Profitability is looking better on a number of metrics, which is promising,” he said. Mr Mackintosh acknowledged that Grab’s net loss has widened, but added this was mainly due to non-cash items.

Meanwhile, Grab has cut its full-year forecast for 2021, expecting to report group-level adjusted net sales of US$2.1 billion to US$2.2 billion for the full year, a step down from the US$2.3 billion it initially projected in April. It also expects full-year GMV of US$15 billion to US$15.5 billion, trimmed from an earlier forecast of US$16.7 billion.

The Singapore-based company said it remains “cautious of the renewed uncertainty of movement restrictions in South-east Asia”, and anticipates an extension of partial and complete lockdowns in several of the countries in which it operates.

“While mobility volumes may remain weak going into Q3 with all the lockdown measures in place, this has been more than offset by the sustained momentum in our deliveries business,” said co-founder and chief executive Anthony Tan in an investor webcast on Tuesday. He added that the company is well positioned to capture the recovery and mobility demand once lockdown restrictions ease.

But as competition heats up and players in South-east Asia amass more firepower, Grab must continue to “invest heavily in research and development”, said Su Lian Jye, a principal analyst at global tech market advisory firm ABI Research.

He added that these investments should go towards emerging technology such as artifical intelligence and last-mile delivery. Grab can also look to continuously improve its user experience and optimise its existing operation. “That’s the best way to differentiate itself from its regional peers”, he said.

CrossASEAN’s Mr Mackintosh echoes a similar view: “(Grab) needs to keep its strategic direction right, given that rivals Sea and GoTo are building up their war chests.”

Meanwhile, Grab would do well to also take heed of impending moves towards better protection for gig workers.

Drivers are a key part of Grab’s workforce, and its ride-hailing and food delivery arms could face further challenges if Singapore turns to more robust regulations for platform workers.

In Parliament on Tuesday, Senior Minister of State for Manpower Koh Poh Koon said a newly formed advisory committee will focus on ensuring a “more balanced relationship” between platforms and their workers. During his National Day Rally speech this year, Prime Minister Lee Hsien Loong had said some of these platform workers lack basic job protections such as workplace injury compensation, union representation and employer Central Provident Fund contributions.

Lawmakers overseas are already starting to design guidelines to include such protections for workers, but Grab might find itself needing deeper pockets and fatter margins for this. ABI Research's Mr Su told BT that if the reclassification of gig workers as employees were to happen, it will “significantly impact” Grab’s financials.

Grab will then need to fork out health insurance benefits, minimum wage, paid leave, and even overtime pay for its workers. There is little power it has to reverse that, he added.

Earlier in April, Grab had highlighted in its regulatory filings that if its drivers were reclassified as employees, there may be “adverse business, financial, tax and legal consequences for the company”. The higher costs it may have to shoulder for its workers may also have an impact on employment.

READ MORE: