Q4 2021 Grab Holdings Ltd Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to grab Holdings fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press. The Star then the one key on your touched on Jonathan.
If you recall offered assistance. Please press Star then zero.
I would now like to turn the conference over to your Speaker host Vivian <unk> head of Investor head of U S Investor Relations.
Good day, everyone and welcome to <unk> fourth quarter 2021 earnings presentation.
This is Vivian Tom head of U S Investor Relations at grab and joining me today are Anthony Chan Chief Executive Officer, Meanwhile, President and Peter <unk>, Chief Financial Officer.
During the call today, Anthony will discuss our key business updates and Peter will share detailed insights with you on our fourth quarter and full year 2021 financial results.
Following prepared remarks, we will open up the call to questions for Anthony Peter and they will respond to Q&A.
As a reminder, before we begin today's discussion contains forward looking statements about the company's future business and financial performance.
These comments are based on our predictions and expectations of today.
Actual events and results could differ materially due to a number of risks and uncertainties.
<unk> mentioned in our form S. One registration statement and other filings with the SEC.
The discussion today also contains operating metrics and non <unk> financial measures.
The comparable <unk> financial measures are included in this quarter's earnings materials.
For more information and additional disclosures on recent business performance. Please refer to our earnings press release and supplemental presentation for a detailed fourth quarter and fiscal year 2021 financial review, which can be found on our IR website.
Should you have any questions. After this presentation. Please reach out to Investor relations at <unk> Dot com.
And with that I will turn the call over to Anthony to deliver opening remarks.
Thank you so much for joining the call first ever earnings call as a public company.
We had our best year, yet in 2031.
I'm, so proud of drivers and what we've been able to accomplish.
Thank you to all our progress around the globe in all of your contribution and driving <unk> forward.
I also want to express our deep appreciation to our driver and margin partners, who continue to deliver.
In and day out.
Before diving into details of our performance for this year I'd like to spend a moment on the graph story.
With Lincoln I co founded <unk> in 2012 with ambition and that mission is to drive <unk> forward by creating economy Apollon for everyone.
And since then we've evolved into a single everyday everyday Super App.
Ably millions of people each day to order food groceries heal awry April purchase and access financial services like lending insurance and more.
All in one app.
And we're just getting started.
During 2022, we continue to be intensely focus on our three key priorities. Firstly, we will focus on winning the hearts and minds of more uses across the region by introducing the benefits of zebra to more users.
Hyperlocal and how we serve the region and by delivering even better user experiences and better service levels.
This will further solidify our category leadership in Southeast Asia.
Secondly, we will continue to invest there of growth of our key business segments, while addressing massive market opportunity and see tremendous headroom for growth in our user base and offshore to drive greater wallet share from our existing users and third and final we will.
Continued to reduce our cost to serve we wanted to be the most capital efficient provider in the market and this is where our super app toward our strategy provides us with disadvantage.
Drop then dive into the results for the year.
We had another record year for <unk> with tremendous year over year growth that saw us achieve a total GMB of $16 1 billion U S dollars exceeding our <unk> guidance for the year, we also delivered against.
The EBITDA guidance as we continue to progress on our path to profitability. This was in spite of a difficult COVID-19 environment with Lockdowns will market the harsha in southeast Asia in 2021.
<unk> grew 36% year over year in the fourth quarter to $4 5 billion.
As of the fourth quarter of <unk> at the highest point since Covid lockdowns begin.
Our data also shows that in 2021, all users are spending 31% more on our platform compared to the year before these.
These results Bear Testament.
And the growing relevance of the supra.
<unk> of our Super App product strategy.
It demonstrates our ability to grow even in an uncertain environment.
On mobility, while we're not completely out of the Colgate Woods, yet we're progressing strongly towards full recovery, we saw fourth quarter mobility GMB up by 45% quarter on quarter, while also seeing mobility GMB. The first two months of the year growing modestly year on year as well.
Sure.
Consumers are eager to be out and about again and we've observed greatest new ones and how governments are responding to omi card compared to the previous infection waves.
Countries, like Malaysia, and Singapore have gradually loosen restrictions in spite of rising cases, and while countries like Indonesia, Philippines have introduce or reintroduce tighter restrictions in the first two months of the year, we're more optimistic about a recovery and reward in 2021, and we are investing to position all of it.
Supply base strongly to capture the demand rebound ahead, turning to deliveries. It is clear to us that deliveries are becoming more and more integral to everyday life, even through ways of loosening restrictions. Our deliveries business has continued to perform strongly not only in.
We are seeing our user base grow users ordering more frequently and spending more per order.
Average order values have gone up by 41% in 2021 compared to 2019 before the onset of Covid on the whole GMB for deliveries business expanded by 56% year over year in 2021.
For financial services, we continue to see strong momentum the fourth quarter was another record quarter for us and our total payment volume for 2021 was $12 1 billion, a 37% increase year over year, we're seeing good growth in prototype buy now pay later with.
Fourth quarter, Ppv's being buybacks higher than the year before.
I'm also excited about our DZ bank opportunities the <unk> joint venture is getting ready to launch in sustainable this year, while waiting results in a <unk> license application in Malaysia, which the regulator has stated they expect to announce in March. We also recently acquired a $16 two 6%.
Bank, Bottomline, Indonesia, which we intend to use as a launch pad for Indonesia, DG banking ambitions.
A quick point on enterprise and new initiatives, we continue to expand our existing advertising and mapping offerings, while still a small and very young segment.
Both prospects are very exciting and we will continue to sharpen our value proposition for the expanding partner and client base that we are progressively building.
Advertising business for example, we have tripled the number of merchants on our ads platform between the fourth quarter of 2020, and the fourth quarter of 2021.
I want to point out that our fourth quarter was a quarter of re investments for granted and we expect some of this to continue into the first and second quarter.
The three drivers for this first we're pre MTV investing to recalibrate driver supply to capture the strong recovery in mobility demand similar to what was observed in other parts of the world our drivers supply base moderated down amid lower mobility demand.
Third quarter.
We're investing to pull drivers back even as we continue to find ways to increase productivity on our platform.
Not only are we seeing our driver pool grow utilization rates went up by 19% year over year in the fourth quarter and the average earnings per hour grew by 16%.
Second we're strategically investing to maintain category leadership in southeast Asia.
According to Euromonitor, we remained the number one category leader across our core verticals in 2021.
We're at three nine times larger than the next largest competitor and ride hailing two one times larger than online food delivery and one three times larger in payments.
The growth opportunity in southeast Asia is tremendous across all verticals and we're not the only ones who recognize this players in some markets have at times increased promotion spend significantly.
We will continue to invest as appropriate to maintain aldi and while we have a fortress balance sheet to support this we aim to do it.
Efficient judicious and disciplined manner.
As the category leader, we continue to lead in capital efficiency across the categories in which we operate let me share two quick examples.
In Singapore, we retained a comfortable lead in Calgary Scheffel mobility, while spending at an estimated four times less on promotions put right in the fourth quarter compared to one of our competitors. This represents a 421 advantage in capital efficiency that grab pass.
In food delivery.
Despite competition we may.
Maintaining category leadership in the region, while driving greater efficiencies from our incentives spend across all core markets. For example on a per order basis.
Cross competitive markets, such as Indonesia, Malaysia, Thailand, and Vietnam, we estimate that our <unk> cost ratios.
5% to almost 100% more efficient than competitor averages.
This demonstrates that our platform and Super App product strategy affords us greater efficiencies in our incentive spend.
Not only because of the advantages from our Super App flywheel, but also because of consumer loyalty and preference towards scrap.
Year on year, we are seeing the number of cross vertical users grow users who use more than tool more grab services have now reached 56% of our user base up from 49% a year ago.
Your retention rates are higher and they're spending more on our platform.
This in turn drives higher customer lifetime value and greater efficiency in incentive spend.
Third we continue to invest into tech infrastructure and talent to support the pursuit of our long term growth opportunities with scaling up our cloud infrastructure.
Investing more in mapping on southeast Asia in AI, and analytics and AD platform with all of these investments I wanted to emphasize that we don't expect these levels of investments to persist in the long run.
Southeast Asia still in the early stages of online adoption across all key categories, we see significant headroom for Tam to increase we're confident that the investments we are making.
Morten foundational and ones that we expect will pave the way for sustainable future growth.
I do also want to underscore that we continue to be laser focus on our path to profitability mobility continues to deliver best in class segment, adjusted EBITDA margins and across all our segments. We've seen our adjusted EBITDA margins improved year over year.
<unk> will share more on our margins on how we're thinking about the medium to long term.
Looking ahead I.
<unk> 2022 to be a watershed.
Watershed year for growth and for a few reasons.
We're aiming to launch our very first <unk> bank in Singapore This year.
Second we will continue to pursue large option needs in deliveries across both offline and online demand for prepared meals and groceries.
So when our consumers are hungry for anything whether it's a restaurant meal a home cooked in just something to snack on one graph to dig deeply come top of mind for them.
Third.
We will continue to focus on a recovery of mobility.
This is where we have a proven track record with nine quarters of segment adjusted EBITDA profitability to date.
As we March towards profitability mobility will continue serving as a solid foundation for auto verticals and focus areas.
I have deep conviction in our Super App product strategy as our right to win and we will continue to put our best product experience for consumers in the market.
It is key to how we drive loyalty to our platform, while reducing our cost to serve.
We continue to stay true to our mission of driving economy empowerment across all of <unk> Asia and remain steadfast in executing our strategy.
I'll now turn the call over to Peter for a review of the financials.
Thanks Anthony.
Before I turn to the financial update.
I wanted to update you about grafts inclusion in the MSCI index earlier this week on March for Us.
This marks another significant milestone for grant.
Which will enhance our trading liquidity and improve our visibility to global investors.
Now turning to the financials.
We ended 2021 with a strong fourth quarter and full year 2021 results exceeding our expectations on top line and meeting our guidance on our bottom line.
The fourth quarter was our strongest quarter to date as GMB grew 26% year over year to $4 5 billion.
Driven by deliveries growth of 52% year over year.
<unk> for the year finished at $16 $1 billion year over year increase of 29% and deliveries GMB of $8 5 billion growth of 56% with the same period.
Mobility GM being the fourth quarter grew 45% over the third quarter.
While we still away from ability of recovering to pre COVID-19 levels. We are optimistic on mobility as future growth based on this quarter's strong recovery progress.
Mobility GMB for the finish of $2 8 billion.
Overall across all our segments, we're seeing improvements in commission rates, which is defined as <unk> commissions before incentives as a percentage of GMP.
Deliveries commissions are up from 17, 5% to eight.
18, 2%.
Mobility commissions are up from 21, 7% to 23, 8%.
In financial services commissions up from one 8% to two 4%.
Revenue on an IRS basis for 2021 grew by 44% year on year to $675 million from $469 million.
This marks our highest revenue achieved in the fiscal year.
But the fourth quarter revenue declined to $122 million from $219 million year on year.
Now this was primarily due to the strategic investments made in higher driver incentives to meet the strong demand from a lockdown, we openings in the third quarter across all markets.
And also higher consumer incentives in deliveries as we invested in our category leadership and acquired in U M to use throughout platform we.
We made positive strides in improving our EBITDA margins in 2021.
Segment, adjusted EBITDA margin for 2021, as a percentage of GMB improved from negative 2% to negative 1%.
Adjusted EBITDA margins for the group as a percentage of GMB also improved from negative 6% to negative 5%.
We improved commission rates and scale operating leverage at segment level.
For the fourth quarter segment, adjusted EBITDA declined to $113 million loss from $49 million loss in the fourth quarter of 2020.
Driven by the investments and incentives as I alluded to earlier.
Focusing on segment adjusted EBITDA for deliveries our margins improved from a negative three 9% to negative one 5% from 2022 2021 and.
And we see coal food deliveries being closer to breakeven achieving segment adjusted EBITDA margin of negative 1% for 2021 compared to negative four 5% in 2020.
As for mobility segment adjusted EBITDA margin for 2021, we achieved 12, 4% of GMB compared to nine 5% in 2020.
Turning to regional costs.
These remain stable at approximately four 4% as a percentage of <unk> in 2021 relative to 2020.
In 2021, we made key investments in scaling further our cloud infrastructure as well as critical talent to support growth of the existing business lines and new initiatives off the platform.
<unk> loss for the fourth quarter was $1 $1 billion, which includes $311 million noncash interest expense related to grants convertible redeemable preference shares.
Upon the <unk> public listing as well as $328 million related to one time public listing related expenses.
For the full year 2021, <unk> loss was $3 6 billion, which includes $1 $6 billion of noncash interest expense related to convertible redeemable preference shares.
And $353 million related to onetime public listing related expenses.
We continue to maintain a fortress balance sheet with $9 billion of cash liquidity.
End of the fourth quarter, including our $2 billion term loan B facility.
Our net cash liquidity was $6 8 billion.
As of the end of the fourth quarter.
As we look into 2022 and the first quarter.
Currently expect some slight disruptions through our mobility business with some of the minor lockdowns, we've seen in certain cities southeast Asia reaches higher levels of Omicron cases in February and March.
We are continuing to strengthen our driver supply to anticipate strong mobility demand recovery.
For deliveries, we expect the momentum to continue as we double down on strategic initiatives like grocery deliveries.
Finally for financial services, we are focusing on ensuring a successful launch of DG Bank, Singapore sometime in 2022.
With that context, but the first quarter, we expect to see deliveries GMB of $2 4 billion to.
The $2 $5 billion.
Mobility GMB of $760 million to $800 million.
And financial services TPB of $3 1 billion.
The $3 2 billion.
From the second quarter to the fourth quarter of 2022, we expect group GMB growth for each quarter to accelerate to 30% to 35% year on year subject to the Covid recovery.
Now looking beyond 2022, we see a path to profitability in spite of deliveries as we expect deliveries as a segment to reach segment adjusted EBITDA breakeven by the end of 2023.
With core food delivery breakeven by the first half of 2023.
This is complemented with a best in class mobility margins of 10% plus.
We are targeting long term segment adjusted EBITDA margins as a percentage of GMB for mobility of 12% and deliveries of 3%.
In conclusion, we are pleased with our strong performance this last quarter and 2021.
We will continue to compete in a more capital efficient manner, while at the same time driving the flywheel of the Super App ecosystem that continues to spin faster.
With this we remain optimistic about the recovery and growth opportunities ahead of us.
Thank you very much for your time.
We will now open up the call to questions.
Ladies and gentlemen to ask a question at this time you will need to press. The Star then the one key on your Touchtone telephone.
To withdraw your question you May press the pound key.
In interest of time, we ask that you. Please limit yourself to one question and one follow up please standby will be compile the Q&A roster.
Now first question coming from the line of Alicia Yap with Citigroup. Your line is open.
Hi, Thank you good evening management, thanks for taking my questions.
Congrats on this first earnings call as a public company. My question is related to the delivery basis first of all so beyond the natural structural increase in the penetration.
What about some of the proactive mesh that you will be using a push for more market share in the coming quarter.
As you continue to explore.
Opportunity to acquire or invest some offline supermarket chain like the one in Malaysia.
And the follow up question is on competitive landscape. So how would you balance between your target by end of 2023, my sister market shaking given the rising intensity of the competitive landscape would you foresee.
You would not need to spend more if the competition become.
Thank you.
Hey, Alicia this is Megan thanks, so much for the question, let me talk a little bit about how we think about growing penetration within the delivery market and I'll hand, it over to Peter to talk about some of the growth versus profitability, especially at this I think very largely.
Speaking, there's really two areas that we're really pushing on too.
We deepened our category position.
The first is really continuing to lower our cost to serve so the more.
Fishing, we'd become every single order the more we unlocked in markets for a broader set of consumers. So I think Anthony mentioned, our advantages and cost to serve.
In certain markets like Thailand for every dollar that we are investing into the market, we're generating about 97% higher <unk> than our competition.
<unk> deliveries. So again it is about stretching our dollars stretching our balance sheet and ensuring we have the lowest cost producer. The second area I would highlight is really laterally as we think about expanding the business and really future proofing.
Covid recovery expanding from food to Mark fresh groceries, I think the penetration rates that Anthony talked about earlier at 1% for groceries is really just an indication for help unlock the market is and what the potential could be if we develop the right products.
Thank you.
Thanks, Alicia let me give you an update on competition. So I won't comment on what competitors are doing but let me tell you. How we are maintaining our leading category position. So competition here has always been robust.
That's what makes it really fun.
Some of our peers have increased their spending to try and drive additional growth. We will continue to defend and building on number one category position and part of that includes some high investments.
But we think of this in a very targeted judicious manner. If you refer to our earnings presentation, you'll see actually the capital efficiency of our spend is much better than our peers.
Just take for example, mobility in Singapore, even with that increased competition because of all Super App scale, we're estimating for.
401 capital advantage and therefore believe we are very well positioned to protect leap.
Two very targeted promotional campaigns, while still financially outperformed the overall category.
And if you look at it as not just mobility, but also for food deliveries, it's a highly competitive category, but despite that we are still able to drive greater efficiencies from our incentive spend across our core markets. One example, where I just came in the market in Thailand.
For every dollar we spend we can almost get two X the GMB relative to our peers.
Our share remains strong in categories with this massive headroom for growth for example in grocery delivery.
Only 1% penetration today.
Sure.
<unk> has been 1% Peter talked about at 51% of food delivery. This means that.
What does it represent.
Customers number one choice so.
We are seeing that even as our peers take some share.
From the competitors.
By targeting low <unk> strategies very different so we are in a strong position to respond to market dynamics with this balance sheet that Peter talked about we have a 401 capital advantage. Despite the heavy competition, we're maintaining our market share across very large categories now let me put it out.
There, we are going to be judicious and recalibrating, our supply will drive the supply and we are incredibly confident in our ability to defend our territory.
Felicia if I can just add on a little bit here also you asked a question around incentives and spend.
Look at just the profitability unit economics about deliveries business. We cited that delivery segment adjusted EBITDA improved from three 9% in 2020 to negative one 5% in 2021. So that's a big step up in terms of improvements and if you look at the food delivery business.
EBITDA margin improved from negative $4 five to negative 1%. So we have a path to continue to improve our unit economics about business, especially on deliveries and how we're doing that in a couple of things you heard that our commission rates are up.
And about 200 basis points up year on year on a deliberate business, but also just the average order value. If you look at our order value today when deliveries it's up 41% from.
From 2019 to 2021 <unk> also if you look at our deliveries business, it's up 30% plus year over year. So we've got the leavers to actually continue to improve our unit economics of our business, but as Anthony said, we're going to continue also to invest in category leadership with the market is so big and we're going to continue to make.
And the economics also improve at the same time, so I hope that's helpful to you.
Okay very helpful. Thank you.
Our next.
<unk> coming from the line of Mark Mahaney from Evercore ISI. Your line is now open.
Okay. Thanks, two questions. Please you talk about this acceleration in growth during the year to 30% to 35%, leaving aside what happens with Covid Omicron could you talk about what factors would cause those growth rates to come in better or worse than expected and then on the delivery side can you just talk about <unk>.
Date, the success, you've had in expanding beyond food groceries and convenience just a way that we can track.
Youre expansion beyond core food deliveries just in terms of consumer demand. Thank you very much.
Sure Hey, Mike. Thanks, I'll take the first one here and I will get Anthony Let me also just timing on how we're thinking about deliveries.
Yes.
Guidance for the Q2 to Q4.
Expressing that.
G&A acceleration to be between 30% to 35%. So whats you asked a question about what's upside.
I think as we think about a deliberate business the two factors the delivery business.
We've got also the graph supermarket that we heavily investing on and.
As you see.
I'll grab mark business as a whole has been tremendously growing.
And that's going from strength to strength, if you look at our growth alone Ahmad.
Three of the 300% on a year over year basis.
So you've got that lever that we're pulling that you can also on supermarket and if we can mobility mobility just getting started if you look at the quarter on quarter growth is 45% for our mobility business and we've got ability also.
The economy opens up here in southeast Asia as people are starting to travel in southeast Asia as airports are starting to open up here will be cautiously optimistic in terms of how the government will react to the rising cases, but so far what we've seen we seem to be seeing some good traction on our mobility business.
Hey, Mike Let me just follow up on your second question regarding some expansion metrics.
On outside of food and.
Two critical.
The first thing is.
Our expansion verticals are still quite young.
And we are looking at some significant opportunities to expand both in March.
Supermarkets were not bringing specific metrics, but I think you can get an indication of how the cross sell is occurring.
Peter and Anthony talked about our MCU spend growing by 41% from 2019 to 2021.
Part of this is obviously increased baskets within food delivery itself. There's a lot of this is also coming from cross selling to larger baskets in the grocery basket Mark Baskin.
Gives you a little bit of a sense for where we had the last thing I'll mention is when you look at our new customer acquisitions within March very.
A very high percentage call it about 80% or more comes from our food vertical and so you'll see the top of the funnel coming from our new rides or food.
At the top and then really finally down to some of our their expansion verticals here.
Thank you Anthony Thank you Peter.
Yes.
And our next question coming from the line of <unk> <unk> with UBS. Your line is open.
Alright. Thank you. Thank you for the opportunity.
If I can please two questions here first of all.
On the financial services side.
Our guidance that we've provided.
For the first quarter.
Doesn't play a bit of slowdown I was just wondering how much of this could be the result of the <unk> merger.
And generally if you could just talk a little bit about the impact of that in terms of the.
The magnitude and the timeframe over which you expect that to play out.
And then secondly, you talked about did you bank in Singapore, Indonesia is there a strategy around did you banking other markets beyond Malaysia, and obviously, I mean, Thailand, Philippines and Vietnam. Thank.
Thank you.
Great Sean.
Thanks for your question, let me just kick it off around the TPB question that you asked and also just around go to all off Anthony just to speak a little bit about that that's something that's been paying very close attention to and.
So on the TPB.
I don't have call earlier, we did achieve record TPB for our business, our financial services with a $12 billion in 2021.
If you break that down.
And.
On and off platform also we see tremendous growth in the on platform growth with over 50% year over year, but if you look at also just outside of Indonesia al.
Financial services business grew by over 100%, that's something off platform side. So there is some good momentum that we're seeing for our financial services business now.
It is also tracking close to how the mobility trends coming back if you recall third quarter was quite severe in terms of lockdowns for us. So as the economy comes back up as mobility comes back up and people are moving around also our merchants on getting back online. We're actually you are riding on the back of that.
So were seeing fairly good traction coming out of the off platform business is relevant on platform for gmg business.
On the Taco PDP.
What we've seen is the PPV from total beer has been on a decline for some time and that was actually for the expected when <unk> announced a merger so it didn't catch us by surprise at all.
What we see is opportunity to grow meaningfully with other partners that we have onboard now open ecosystem.
Thankfully we've had this open ecosystem since day, one and that has been core to our strategy.
But <unk> has been a large supportive oval oval became a leading number one wallet.
Because the one partner, but because we have multi partners and I'll talk about them number one we feel about it no moderate and Nomura I think Peter alluded to which is now 19000 cash in cash out.
That is massive network, we talk about the partners with Big E Commerce platforms, like Nevada, J D. Dot IV buccal op, great online partnerships. So there will be short term impact from the merger on overall.
And where we see total began moving the Goto, we don't believe just fundamentally changes.
The long term opportunity for <unk>.
And let me just touch on a few comments around our digital bank, you're absolutely right.
Poorer slated for launch this year, we have an application process in Malaysia, and then we did recently investments we think pharma.
So very attractive markets from a digital banking perspective.
As it relates to thinking about expansion outside of those three core markets.
We really view digital banking is just another very core segment and our cross vertical strategy. So how do you make banking and <unk>.
As ordering right and as long as you provide the best product experience and theres going to be a lot of very attractive cross selling opportunities both within our super App as well as the partners that we work with maybe country. So I think that's a very good example, we obviously have a very large ecosystem.
Partner, there and Tech also has a very large digital ecosystem.
That creates.
Opportunity for us to really think about developing very vibrant digitally.
It will bank ecosystem soon.
We don't have any other countries to announce today, maybe you can really look across our country by country to see will be strong and it is strong ecosystems and design at candidates and we will look at.
Thank you.
And our next question coming from the line of Mark Goodridge with Morgan Stanley . Your line is open.
Hi, guys. Thanks for the time I just had one question specifically looking at your steady state margins.
Highlighting steady state margins in the intermediary business is about 3%.
And that's obviously pre some of those corporate overhead. So if we sort of allocate that in as well that's probably closer to 2%. My question is is that when we look at some of that Youll global peers, they're talking at that steady state margins in med delivery business closer to five 6%. So my question is why is grab law.
Is there any structural reason why you guys cannot get up to those.
Mid single digit levels.
Keith.
Hey, Mark let me take that one.
Look I think the way, we think about our delivery business is still very early days for us wholesale and if you look at it its on its fourth year now of its journey.
And we're still growing as you can tell just from the numbers we've been through today.
And if you look at where we are heading in terms of our margin. We made improvements already on a year on year basis, as we think about longer term deliveries business actually is quite mixed as you can tell we've got food with Walmart. We got supermarket, We've got express Courier service. So we got a mixture of delivery services.
I'm not going to comment on our on our peers or.
Others, our competitors, but if you look at the delivery mix. It is a mix of business and Thats critical and what we are continuing to improve is couple of things. One is a free delivery, which is a very core for us and then we're going to continue to improve the unit economics of that business and we've already seen that year over year basis that I quoted earlier.
Already nearly breakeven.
And then if you look at Al supermarket, which is still at very early days still room for improvement there in terms of margin. So we'll continue to tweak and fine tune the margins of our business as we go medium term to long term, we feel confident that the 3% we feel pretty good about it likely there'll be upside potentially we will continue to work.
On it as we continue to grow that topline also at the same time.
Thanks Peter.
Thanks Mark.
And our next question coming from the line of Pam <unk> with Goldman Sachs. Your line is open.
Thank you very much.
Thank you.
Two questions.
Okay.
Talk about how have been reopening.
Great.
The overhang.
Yeah Corey.
Okay. Good.
Finally coming back to work.
Randy.
Thanks Catherine.
Momentum at later this year.
Yes.
And from that driver.
They're seeing that going on currently is that correct.
Hi, Peter is right and Fargo them off from that.
The reversal in CT rate card.
And the fifth series from colon, alright sample foot delivery.
Thank you Amit.
Hum.
Yes.
That's my question number one question.
Question number two is forgotten for mobility.
This concludes our TMT slipped into Africa.
That's very helpful.
That question is how should we think about this trend going forward.
Yesterday after the Houghton correctly opening in just.
Yeah, right. So you have to spend more.
Are there to get back to both reduce non driver on the platform.
But how confident are you without a coach through im sorry back to the margin.
Well the long term focus.
Hi, Paul Thanks, So much let me talk about Covid recovery.
Now.
Honestly it would be presumptuous of me or anyone to give.
A specific timeline given how unpredictable COVID-19 has been.
What we can say is the eagerness for people to go out and about again. So every time, we've seen restrictions loosen, we see a strong bounce back in mobility.
Coming out of hard Lockdowns in Q3, Q4 mobility GMB was up by 45% and we also see deliveries and we will talk more about deliveries I know that was your other question as well.
We're also watching the impact of omicron, especially in this region.
And that's also how certain countries have responded to it a bit different.
Some have introduced minor movement restrictions like in Indonesia, while.
Others have pushed forward and said look COVID-19 is endemic and just opening borders so.
We are observing that.
People are getting more and more excited to go out with.
Seeing waves of loosening of restrictions all the good news is even with the loosening of restrictions our deliveries are really here to stay we've actually seen it go from strength to strength a year on year. So what I can say about deliveries is there has been a structural shift actually in <unk>.
Human behavior.
In our favor actually and we don't see this even in a time when the world normalizes. So overall I would say we are cautiously optimistic.
Optimistic what is important.
Our long term fundamentals remain intact, we stay extremely focused on our merchant partners, our driver partners and our consumers and we know that our business has proven to be resilient, even through the toughest time of Covid.
Thank you a question around mobility EBITDA, but then package. It I think you asked around expectations for 2022 and also how we're spending this year.
Can you just continuing what Anthony just mentioned earlier mobility is coming back and we saw that in the fourth quarter, 45% quarter on quarter growth people are getting them, even leaving around again, which is great to see a portable I just starting to come back up again, but also at the same time, we've got to calibrate our driver supply and then Bruce will making investments in the fourth quarter.
On driver supply and it's going to take about one to two quarters for us to get to equilibrium for demand and supply to match together and hit the marketplace at the end of the day. So we're going to continue to invest on driving supply as the demand comes back up.
About margin you had a question can we get back to 12% Here's what I will say you've seen is the nine quarters now.
Profitability for the mobility business and this quarter last quarter Q4, we did.
12, 4% of GMB.
So we are seeing a track record of improving unit economics of our business now when you pull the levers that we need to be in based on a drive of supply to make sure that our consumers are getting the best and the fastest ride at the most optimal price at the same time at the same time also we've got to think about a great deal.
Thats out there and we're going to continue making sure that the earnings also also being maintained or increased if you look at what we've done over the last year or up 19%.
On a year over year basis, So we will balance that to make sure that the marketplace is healthy and at the same time also improving the unit economics that you've seen us demonstrate.
For the quarter when it comes to mobility. So hope that's helpful to you.
The other thing I'll just quickly jump in.
What we've seen in consumer behavior shift because of Covid is.
Grabs and grabs supermarket has really been appreciated by our consumers are really pleased with the uptake of <unk> segment actually grew by almost 350%.
Year on year between FY, 'twenty and FY 'twenty one.
So we also see I think Meg alluded to at 80% of our Grandma consumers coming from our food delivery services. So what that tells US is a super App product strategy is working and we strongly believe in our ability to expand and do so efficiently without significantly increasing CAC or customer.
Physician costs.
For us we will focus on.
Delivering the best product experience, knowing this new consumer behavior and retain and capture this new segment of customers.
Thank you very much.
And our next question coming from the line of Piyush.
With HSBC your line is now open.
Yeah, Hi, Thanks, a lot for the <unk>.
Can you tell us what is driving a softer outlook for <unk> in the first quarter in both mobility and delivery.
In mobility your guidance is suggesting a decline by minus 2% are Mexico and growth of 4% and in delivery also decline of almost 2% to probably a growth of two six so any color on what's driving that guidance will be useful and if I may.
What do you think mobility GMB will be back to pre COVID-19 levels because in first quarter of March 2022.
You used to make around one three.
$3 billion of GMB, a quarterly JMP.
When do you think that can be achieved.
Okay.
Thanks for your question.
But I think the way to think about our first quarter is.
There is some seasonal effect into the fourth quarter is traditionally our strongest quarter.
And Q1 is filled with holiday season here in Southeast Asia as you know, whether it's Chinese new year or are there. Other also festive season celebrated across this region. So we baked that into our model. The second thing I would say is around mobility as you've heard from Anthony earlier that we are seeing some.
Minor disruptions in mobility as Covid cases are on the rise in these countries across southeast Asia now there is still rising so we're taking a more cautious approach and seeing in terms of mobility, where there could be some minor disruptions now stepping back out of that.
<unk> two <unk>.
Our business overall, especially mobility, we feel confident.
And increasing quarter on quarter, we already saw January and February up on a year over year basis, and a quarter on quarter basis.
We feel confident in terms of improving on the delivery side on the deliveries.
Lung down deliveries, just continuing to pump and thats, great because why they've got a couple of things happening there. We've got modest supermarket chugging, along really nicely firing all cylinders. We've got also a food delivery business also going very very strong hence why I think we feel confident as we were in my guidance for the Q2 to <unk>.
Q4 for us to accelerate our growth from 30% to 35% when GMB.
And your second question about mobility coming back to pre Covid when is that.
The way, we see it as is.
If the government continues to loosen things up.
If the government continues to make sure that airports are opening up.
People are coming back to work.
Mobility is going to come back we're seeing it already we started in the fourth quarter and it's just a matter of time now.
Now we've got to make sure we've got enough drivers supply out there to meet those high demand and we think by the end of this year.
At the end of this year, we'll probably see.
<unk> C to pre COVID-19 levels, but we're getting close to pre COVID-19 levels. So thats helpful.
Yes, and can I just clarify your delivery guidance does that include the <unk> acquisition.
So can you just repeat that question again.
Yes on the delivery guidance.
Is your acquisition of Jaguar offer is that already built into the guidance.
So Janet growths that we closed only at the end of January .
So we're baking in two months worth of the GMB and their revenue.
So we're still in a period of integration with those folks.
We're excited and what we've seen so far in terms of what they can do.
44 stores now and growing so yes, those numbers are built in.
Thank you.
Thanks Nish.
And our next question coming from the line of from John Sharma from Jpmorgan. Your line is open.
Hi, good evening and thank you for the presentation two questions from my side Firstly.
On the delivery side do you see any consolidation opportunities in southeast Asia will do.
Evaluate these opportunities are there.
Or do you think that the other largest platform. So you don't need to acquire or merge with someone else.
Secondly on the.
The investments needed to drive further growth in deliveries.
One of the opportunities do you see as is investing in dark stores or buying more civil market chains are.
Overdue.
Explore strategic partnerships. Thank you.
Thank you again.
A little bit about.
M&A and then perhaps more broadly speaking in the strategy.
If you look at the category position here within the food delivery space, we are more than double the size of number two and so there is.
Obviously, some countries longer tail numbers in Q3 four five.
But by and large the forecast that we are underwriting the path of.
Profitability that we expected the overall segment does not rely on M&A two to achieve business figures, it's all basically organic.
Elements.
Having said that if there are opportunities that come available and it makes sense and is accretive for our shareholders and again continues to lower our cost to serve than we will of course look at opportunities.
As they arise.
I think your second question was then around.
Just trying to quantify it it was really around M&A strategy.
Sorry, if I can repeat like my question is what are the other investments that you need to make.
To drive further growth in deliveries.
Thinking in terms of dark stores buying more supermarket chain strategic partnerships.
So the deposits that you could share.
Sure thing.
I would say the first thing we always look at it as really investing into our tech platform. That's always been a core number one.
Anything that improves the product experience is really where we wanted to be making investments. So I think a lot about our advertising platform and get past some of our geo capabilities and we're putting in place to meet the overall delivery experience and literally the experience from from the door.
As possible there are areas that we'll continue to invest organically.
Now we gave us the dark stores and there is going to be a natural mix of call. It first party versus third party assets within <unk>.
The markets and I think it's really is a balance between.
Really having the best customer experience in the case of <unk> versus having the best diversity in the catalog of products.
So we will continue to experiment and optimize country by country.
And because we will be here.
Thank you.
And our last question coming from the line of Thomas Chong with Jefferies. Your line is open.
Hi, Good evening, Thanks management for taking my questions.
My question is about the enterprise and new initiative in particular, when we talk about the appetite.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Thanks, Brian .
Okay.
Okay.
Thanks, so much.
Appreciate it.
Let me talk about the ads opportunity for us a key competitive advantage of our ads platform and <unk> alluded to this is our booth.
We can.
Close the loop.
With our payments grab pay and especially with the ability to send goods sales fulfillment tech so merchants really valued it because they are not just getting millions of eyeballs.
All it is not just about click true right more importantly, it's getting Dr goods.
Good day care about in the hands of customers and because they can do this in India that assurance because we're working with the largest fulfillment army of drivers in the region as a result of that our advertising services, so much and partners.
What we are seeing is a much and partners are willing to pay higher commission rates and I think Peter also alluded to the commission rates.
Another competitive advantage is as we think about how we close the loop what we see it from a merchant's perspective is that tracking to add dollars much better because of <unk> because of that sales fulfillment conversion rate.
So the results have been very promising what we're seeing is actually the number of merchants had tripled on our ads platform from the fourth quarter of 2020 into the fourth quarter of 2021 now.
Now we also see.
That there are other types of budgets you name it whether it's the Dyson the Nike that some some of the other big global names, but a bulk of our contributions come from the deliveries margins.
No.
<unk> is still very much early days for us and as Ming said, we'll continue doubling down on investing and focusing and growing with this technology to help our margin partners grow their sales.
Thank you.
I'm showing no further questions at this time I would now like to turn the call back over to Peter Lee for any closing remarks.
Well. Thank you everyone for taking the time to join our call today.
Appreciate all the questions. If you have any questions just feel free to reach out to our investor relations team, albeit at our investor relation website. Once again. Thank you I appreciate it bye bye.
Thank you so much.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
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