Singapore-based ride-hailing and food delivery giant Grab has posted impressive revenue growth and narrowed losses in its latest earnings report, indicating a strong rebound in mobility demand in Southeast Asia. The company exceeded its revenue guidance for 2022, with revenue for the fourth quarter of 2022 growing by an impressive 310% to reach $502 million, up from $122 million a year ago. Grab’s full-year revenue was also up by 112% to $1.43 billion, exceeding guidance of $1.32 billion to $1.35 billion.
The company attributes its success to its focus on optimizing costs, reducing its cost-to-serve, innovating on products and services, and capturing the rebound in mobility demand. According to Anthony Tan, Grab’s co-founder and group CEO, the company achieved these results by innovating on products and services that drive stickiness and engagement within its ecosystem.
While Grab’s mobility business is currently at about 74% of pre-COVID levels, the company expects levels to return to normal by the fourth quarter of this year. As Peter Oey, Grab’s Chief Financial Officer, explained in a recent CNBC interview, “Lockdowns were being released in the second half of last year. We have seen a lot more traffic. People are going back to work, people are starting to travel, et cetera.”
Grab is also bringing forward its group adjusted EBITDA breakeven guidance to the fourth quarter of 2023, half a year earlier than its previous guidance, indicating its commitment to sustainable growth and profitability.
Grab’s adjusted EBITDA for the quarter was negative $111 million, down from a negative $305 million a year ago. Meanwhile, losses for the quarter also narrowed by 64% to $391 million from $1.1 billion a year ago, and full-year losses came in at $1.7 billion, down 51% from $3.5 billion in 2021.
Grab is gearing up to capitalize on opportunities in Southeast Asia, such as launching an updated version of GrabShare in the Philippines or partnering with WeChat to provide enhanced services to Chinese travelers. As Alex Hungate, Grab’s Chief Operating Officer, explained in the earnings call, “Our advantage is to be hyper local.”
Deliveries also rebounded for Grab, with deliveries revenue increasing to $268 million in the fourth quarter of 2022, up from $1 million in the same period in 2021. The increase was due to contributions from Malaysian mass-premium supermarket chain Jaya Grocer, which Grab acquired a year ago, as well as incentive cuts and a licensing requirement in one market leading to a change in business model of certain deliveries offerings.
Grab said that it transitioned from “being an agent arranging for delivery services provided by drivers, to being contractually responsible for the delivery services provided to users.” The change contributed $68 million in deliveries revenues in the quarter, said Grab. Without factoring the business model change, revenue growth would have been 255% year-over-year and 14% quarter-over-quarter.
Grab, along with Sea Limited and GoTo, has pledged to stem losses and embark on cost-cutting measures. The company has already seen incentives drop to 8.2% of gross merchandise volume in the fourth quarter from 9.4% in the previous quarter. As Oey explained, “We will continue to cut incentives and look at areas of discretionary spending, whether it is facilities, travel, entertainment or cloud costs.” The firm also expects cloud costs to be reduced by 5% to 10% year-on-year, driven by efforts to optimize processing speeds and improve network costs.
Grab has also frozen hiring across most of its regional functions, which it expects will reduce headcount and regional corporate costs in 2023. Meanwhile, Grab has shortened drivers’ waiting time by 27% year-on-year, and drivers are earning 13% more on a year-over-year basis.
Grab aims to capitalise on Southeast Asia opportunities, such as launching an updated version of GrabShare in the Philippines and partnering with WeChat to provide enhanced services to Chinese travellers. Grab is focused on growing the business sustainably while delivering margin improvement, with a delicate balance between reinvestment in other areas and executing its playbook to achieve profitability by the end of this year. Grab expects revenue for 2023 to range between…