Grab narrows Q2 loss to US$135 million, expects earlier Ebitda breakeven
TRANSPORT and food-delivery operator Grab posted a US$135 million net loss for the second quarter ended Jun 30, narrowed from the loss of US$547 million in the same period a year ago.
The improved bottom line was a result of lower fair-value losses on investments, net interest expenses and share-based compensation expenses. It also arose from the company’s efforts to slash incentives for its platform workers and consumers, in a bid to turn profitable.
With the positive Q2 showing, the company is targeting to achieve group adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) breakeven by Q3 this year. This was moved forward from the previous Q4 target.
Grab is looking towards the second half of the year with “confidence and optimism”, said chief executive Anthony Tan in an earnings call on Wednesday evening.
The news sent Grab shares up 9.1 per cent to US$3.64, as of 10.27pm (Singapore time).
Revenue for Q2 rose 76.6 per cent year on year to US$567 million, buoyed by growth across all segments. Gross merchandise value (GMV) in the deliveries segment in particular hit a record high of US$2.6 billion.
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Meanwhile, Grab cut incentives for its platform workers and consumers by 17 per cent and 21 per cent, respectively. Total incentives stood at 8 per cent of Grab’s GMV in Q2, down from 10.4 per cent in the year-ago period.
The company additionally reduced other costs, with sales and marketing expenses down 12.5 per cent to US$63 million. General and administrative spending was down 15.4 per cent to US$137 million. Staff costs fell 6 per cent with lower headcount, following its layoffs in June.
Grab’s Q2 bottom line also included non-cash share-based compensation expenses of US$65 million, and a US$50 million restructuring charge, mostly due to the layoff exercise in June.
For the six months ended Jun 30, Grab’s net loss stood at US$378 million, less than half the year-ago net loss of US$970 million. Revenue nearly doubled in the same period to US$1.1 billion.
With the earlier breakeven target, Grab has also revised its forecast for adjusted Ebitda loss in FY2023 to fall between US$30 million and US$40 million, from the previously forecast loss of between US$195 million and US$235 million.
The FY2023 revenue forecast range remains unchanged, at US$2.2 billion to US$2.3 billion.
Segment results
Grab’s deliveries segment, which includes food and parcel delivery, more than doubled its Q2 revenue to US$292 million, with an adjusted Ebitda of US$69 million.
The revenue surge was due to a business-model change in one of its markets in Q4 2022, where Grab moved from being an agent arranging delivery to being the principal service provider.
The subscription programme GrabUnlimited was another factor cited by Grab chief operating officer Alex Hungate in Wednesday’s earnings call. Subscribers accounted for about a third of the deliveries GMV in Q2 and spent 3.8 times more on food deliveries than non-subscribers.
“GrabUnlimited subscribers also had average retention rates that were approximately two times higher than non-subscribers over the first half… Looking ahead to the third quarter, we expect to drive further GMV growth to achieve yet another quarterly record high,” Hungate said.
Meanwhile, Grab’s mobility unit grew Q2 revenue by 29 per cent to US$208 million, with adjusted Ebitda up 31 per cent to US$163 million.
The post-Covid travel rebound has been positive for the business, said Hungate; he added that Grab is seeing “meaningful traction” from its partnerships with WeChat Alipay and Kakao.
He also expects benefits from the company’s bid to acquire Singapore taxi operator Trans-cab, such as the opportunity to tackle the rising cost of vehicle ownership in the city-state.
While a certificate of entitlement (COE) is required to own a vehicle in Singapore, taxi operators do not need to bid for them, but instead pay a market-determined premium.
Leveraging the taxi licence “will allow us to keep on doubling down on affordability”, Hungate said.
Grab’s financial services unit, which includes its digital banking joint venture GXS Bank, tripled its Q2 revenue to US$40 million. The adjusted Ebitda loss narrowed to US$75 million, from a US$115 million loss a year ago. Total loan disbursements grew by 47 per cent.
The company’s enterprise and new initiatives unit, which includes its nascent advertising business, near-doubled Q2 revenue to US$27 million, with US$15 million in adjusted Ebitda.
Hungate expressed optimism on further growth in advertising, where Grab has served brands such as Amazon Singapore, which ran a campaign for its Black Friday sales.
Overall, Tan said that Grab remains optimistic on its long-term prospects. “South-east Asia is still under-penetrated across our products and services, and we see plenty of headroom to serve,” he said.
Grab had US$2.3 billion in cash as at Jun 30, and US$772 million in loans and borrowings.
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