Grab's Q3 net loss widens to almost US$1 billion, revenue slips ahead of US listing as pandemic hits ride-hailing

PANDEMIC restrictions weighed on Grab’s ride-hailing business, causing its revenue to drop 9 per cent to US$157 million for the third quarter ended September. 

This comes ahead of Grab’s plan to list in the US. The company is on track to close its merger with Nasdaq-listed special-purpose acquisition company Altimeter Growth Corp in Q4, it announced in its Thursday earnings release. 

Amid the fall in revenue, Grab sank further into the red. On an adjusted Ebitda basis, its loss for the quarter stood at US$212 million, deepening 66 per cent from a year ago. 

Including non-cash items, Grab’s net loss stood at US$988 million, 59 per cent more than the year-ago loss of US$621 million. 

The Q3 non-cash items of US$748 million included some US$443 million in interest expenses from Grab’s convertible redeemable preference shares, which will cease upon listing. Another US$217 million was attributed to stock-based compensation and fair-value losses on investments.

Grab’s Q3 revenue drop comes even as its gross merchandise value (GMV) has grown 32 per cent to US$4 billion. Its revenue for the latest quarter is 3.9 per cent of GMV, down from 5.6 per cent a year ago and 4.6 per cent in Q2. 

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While mobility and other core business segments posted weaker results, deliveries showed strong revenue growth. 

“Our diversified business has cushioned the impact of Covid-19 on our topline, and we remain resilient amid lockdowns,” said chief financial officer Peter Oey in an earnings call. 

Ride-hailing takes a hit Grab’s mobility business had a weaker showing, with revenue falling 26 per cent to US$88 million. Adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation)  in the segment fell 26 per cent to US$64 million.

Out of Grab’s eight markets, six were hit by tighter movement curbs, said chief executive Anthony Tan. The impact was especially pronounced in Vietnam, where “mobility GMV was at or close to zero” for the majority of Q3. 

“These measures constrained where our driver-partners could go and were often introduced with extremely short notice. This inevitably placed a strain on our operating performance. Thankfully, since the government eased restrictions in October, we’ve seen a sharp and rapid bounce back,” he said. 

Grab’s mobility GMV has since risen 26 per cent in the first month of Q4, compared to the first month of Q3. Tan is confident of further recovery, as more countries adopt endemic measures and ramp up vaccinations. 

Financial services, enterprise units see revenue fall Like ride-hailing, the financial services business, which includes Grab Financial Group, posted a weaker bottom line. Adjusted Ebitda deepened to a US$76 million loss, compared to the US$58 million loss a year ago. This was even as segment revenue was up 11 per cent to US$14 million. 

Grab’s adjusted Ebitda margin for the financial-services business remains negative was at -2.4 per cent of total payments' volume – although an improvement from -2.7 per cent a year ago. 

“We continue to see a tremendous amount of headroom to grow penetration rates for financial services in this region, especially as the economies reopen,” said Oey. 

Under Grab’s enterprise business and new initiatives, revenue fell 37 per cent to US$7 million; adjusted Ebitda was US$1 million, down US$4 million. This was due to reinvestments into the merchant base, Grab said. 

Strength in deliveries The bright spot in Q3’s earnings was the deliveries business, where revenue rose 58 per cent to US$49 million. Losses narrowed slightly, with an adjusted Ebitda loss of US$22 million, an improvement of US$1 million. 

The segment’s adjusted Ebitda margin, as a percentage of GMV, stood at -0.9 per cent. This marks an improvement from the -1.6 per cent margin a year ago. 

“Our deliveries margins remain stable, despite an increasingly intense competitive environment. Overall, we are pleased with the growth and deliveries and continue to observe very strong trends in December,” said Oey.

Grab continues to invest in its young grocery delivery business, GrabMart, which saw GMV grow 380 per cent year-on-year. It has added new major retail chains to GrabMart across the region.

The company is also expanding parcel deliveries. In November, it announced a partnership with Lazada to enable sellers to provide same-day delivery services for their consumers in Singapore via GrabExpress. 

Cautious outlook Looking ahead, Tan is cautiously optimistic. “With recovery in sight, and the gradual reopening of economies providing tailwinds to our business, we are doubling down on investments that will help us capture a greater share of the opportunities in front of us and open up new addressable markets for Grab, such as groceries,” he said. 

Grab is next set to file another amended F-4 filing with the US Securities and Exchange Commission. In the meantime, shares of Altimeter Growth have rallied, rising over 28 per cent in the past five trading days, to close at US$15.16 on Wednesday (US time). 

As of end-September, Grab had cash liquidity of US$5.2 billion, inclusive of time deposits, marketable securities and restricted cash. Its debt stands at US$2.2 billion, mainly due to the US$2 billion term loan facility closed in January.