Q3 2022 Grab Holdings Ltd Earnings Call
[music].
Yeah.
Ladies and gentlemen, thank you for joining US today My name is Maxine combo and I will be your conference operators recession, welcome to grab that quarter 2022 earnings adults. After the Speakers' remarks, there'll be a question and answer session.
And now kind of Teva to Vivien tongue to stop the cool.
Good day, everyone and welcome to grabs third quarter 2022 earnings presentation, I'm Vivien call head of Investor Relations background and joining me today are Anthony Chan Chief Executive Officer, Peter <unk>, Chief Financial Officer, and Alex <unk>, Chief Operating Officer drew.
During the call today, Anthony will discuss our key business updates and Peter who will share details of our third quarter 2022 financial results.
Following prepared remarks, we will open the call to questions where Anthony Peter.
On to the Q&A.
As a reminder, today's.
Forward looking statements about.
Business and financial performance. These statements are based on our beliefs and expectations as of today actual events and results could differ materially due to a number of risks and uncertainties, including macroeconomic industry business regulatory and other risks, which are described in our form S. One registration statement and other filings with the SEC.
We do not undertake any obligation to update any forward looking statements. The discussion today also contains non <unk> financial measures, which should be considered together with rather than as substitutes for financial measures and reconciliation of non <unk> financial measures is 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 third quarter 2022, French review, which can be found on our IR website.
Should you have any questions. After this presentation. Please reach out to Investor relations background Dot com and with that I will turn the call over to Anthony to deliver opening remarks.
Thank you everyone for joining us today I'm.
I am pleased to report a strong set of third quarter results.
On a year on year basis group revenue was up over 140% and loss for the period improved substantially both year on year and quarter on quarter.
One new transacting users also grew 30% year on year.
Iterating from 12% and 10% in the previous two quarters.
In the quarter, we achieved an important milestone great.
Greater optimization of our incentives spend as resulted in our deliveries studying segment adjusted EBITDA positive for the first time.
Three quarters ahead of our guidance, we also crossed the $10 billion right and deliveries Marc in July just five years. After we managed 1 billion rights.
We achieved these results by innovating to reduce our cost to serve and staying focused on growing and retaining high quality users.
As we look to scale our ecosystem profitably, while also committed to adapting our product portfolio to meet the needs of the various consumer segments and this broad based market.
Looking ahead, we're keenly monitoring the macro economy uncertainty inflation currency fluctuations and recessionary risks posed challenges to most businesses.
But we remain optimistic about <unk> growth prospects that are underpinned by a rising tide of digitalization and an expanding consumer class.
I will now give an overview of our performance before turning it over to Peter who will give details on our outlook and financials.
In the quarter revenue in GM vivo mobility recorded strong growth doubling from the same period, a year ago on robust demand and recovering driver supply.
We're heartened by the demand recovery trends, we see in many of our markets economies have opened travel has resumed and people are hitting back to offices.
Fulfillment rates, a measure of how well, we manage demand and supply on our platform was near pre COVID-19 levels.
The improvement in fulfillment rates as a result of our efforts to improve driver supply and productivity.
Since the start of the year, we streamline the onboarding process for drivers to allow them to start driving on drive quicker.
Also improving outreach to potential driver partners and making it easier for them to lease caused by partnering with car rental companies.
This groundwork is essential to accelerating the momentum in our mobility business.
Our mobility supply, 80% of where we were pre COVID-19. There is still headroom for us to capture the strong demand recovery coming back online.
Looking ahead, we will continue to innovate on our mobility services to meet the needs of our consumers and invest and platform enhancements to speed up drive our partner on boarding and improved productivity. For example, we rolled out affordable mobility solutions to meet consumer needs in.
The Philippines, we relaunched grab share and on demand Carpooling service and in Indonesia, We launch an affordable short distance to wheel mobility service.
For our deliveries business, we saw solid growth despite the normalization of food delivery demand and our continued focus on cultivating and retaining high quality users.
In the quarter revenue for deliveries tripled compared to the same period, a year ago, as we optimize our incentive spend and launch product enhancements to reduce our cost to serve we maintained our category leadership position in food delivery despite tapering incentives.
We saw our food business and delivery segment reach adjusted EBITDA breakeven in the third quarter three quarters ahead of schedule for deliveries and two quarters ahead for food.
This key milestone puts us on a stronger footing to pursue long term growth opportunities within the delivery segment and sets us well on track to reach our target of three plus percent for margins.
And food delivery will continue to capture and retain high quality users by offering them a wide variety of merchants and a superior experience.
At the same time, we are building out different services and launching product enhancements to cater to use us seeking affordable options.
For non food deliveries, we are building a portfolio approach towards our grocery segment.
In some markets like Malaysia, where we found a fit with our acquisition of <unk>. We can offer an end to end grocery retail experience within our app in other markets. We're exploring partnerships. For example, we recently announced a partnership with <unk> retail one of Indonesia is larger.
<unk> grocery retailers.
Lastly, we believe our combined deliveries offerings together with our mobility services allows us to offer attractive ecosystem wide subscription plans.
In the quarter, we saw positive traction for grab on limited or <unk>.
Ecosystem wide subscription program.
Looking ahead, we see steady performance of our delivery segment, even as food delivery demand continues to normalize in a post COVID-19 world.
We are confident that our strategy of adapting our offerings to cater to different consumer segments allows us to cater to a broad based market, which will enable us to continue to drive profitable growth.
Moving on to financial services revenue growth for overall financial services grew by 44% year on year, driven by higher contributions from our lending business.
As we discussed during our Investor day.
Our focus on ecosystem transactions has started to bear fruit.
Our financial services segment, adjusted EBITDA improved 9% quarter on quarter.
Stripping out <unk> bank costs graphene segment expenses in the third quarter declined by 4% quarter on quarter.
Loan disbursements for the quarter rose, 121% year on year, as we ramped up our ecosystem lending such as loans to drive our partners, while maintaining a low single digit NPL ratio.
I'll focus on ecosystem supported financial services and driving off platform transactions that have positive margins will allow us to improve this segment's overall margins and revenue.
I also would like to give an update on our DG banks. The end of August the GSS Bank conducted a soft launch in Singapore with small pool of users that <unk> Bank is the first of the <unk>, we plan to launch in the region by end 2023.
We are optimistic that these tree DG banks, one in Singapore, one in Malaysia, and one in Indonesia will augment our financial services offerings and grow financial inclusion in southeast Asia.
Lastly, I want to go over our enterprise segment in the third quarter, our enterprise revenue rose, 113% year on year, driven by gains in our advertising business.
During our Investor day in September we spoke about the importance of enabling merchants through our ecosystem by helping them come online or grow their business.
Advertising sits at the heart of this by giving merchants access to data driven targeting tools, we can help them get better returns from the advertising.
<unk> done helps them do better as a business, which brings in more revenue for us.
Those margins are getting four to seven times returns on advertising spend on grabbing in third quarter. This year.
Gropp and effective performance advertising tool that help businesses grow.
As we look ahead, we remain confident in the mobility business recovery and we see a continued stabilization of our deliveries business.
Achieving segment adjusted EBITDA breakeven for food and deliveries puts the wind in our sales as we continue to drive for profitable growth I'll now turn the call over to Peter to deliver a review of the financials.
Thanks Anthony.
We're pleased to report a strong set of results this quarter.
Revenues grew 143% year on year or 156% on a constant currency basis.
It reached $382 million, an all time high.
We saw strong revenue growth across all our segments mobility revenues doubled year on year underpinned by the recovery in ride hailing demand, while deliveries revenues more than triple on the back of contributions from <unk> and overall <unk> growth as well as lowered incentives as a percentage of GMB.
Financial services in our enterprise segments recorded revenue growth of 44% and 113% respectively.
For <unk> for the third quarter were recorded growth of 26% year on year.
Reached $5 1 billion also at an all time high.
Our reported <unk> for mobility and deliveries along with our financial services TPB were also in line with our third quarter guidance.
Notably our topline results were further impacted by foreign exchange translations, given the stronger U S dollar.
Hence on a constant currency basis, <unk> grew by 32% year on year and on a quarter on quarter basis group GMB and deliveries recorded constant currency growth of 4% and 2% respectively.
For our commission rates, we saw an overall increase year on year on year.
Deliveries commissions were up from 18, 2% to 21, 2% financial services commissions up from two 5% to two 9% while the mobility commissions remained relatively flat from 23, 8% to 23, 2%.
Year on year movements in deliveries and mobility Commission rates were driven by shifts in product and country mix, while financial services commissions improve on the back of higher contributions from our lending business.
For our third quarter segment, adjusted EBITDA margins improved by 174 basis points year on year, and 131 basis points on a quarter on quarter basis.
A key driver of this was a reduction on incentives as a percentage of GMB, which declined to nine 4% from 11, 4% in the same period last year.
And as a result, we are also pleased to achieve overall deliveries and food deliveries adjusted EBITDA breakeven for this quarter.
Now these are three quarters and two quarters ahead of our guidance respectively.
Deliveries segment adjusted EBITDA margins exhibited a strong improvement year on year from negative 0.9% to a positive <unk>, 4%, a 128 basis point improvement.
For our mobility segment, adjusted EBITDA margins improved year on year from 12% to 12, 5% or 41 basis point improvement and in line with our expected steady state assumptions.
For financial services, adjusted EBITDA declined 38% year on year.
While as a percentage of TPB, it's shifted from negative two 4% to negative two 7% due to higher expenses in the digital banking business unit.
However, on a quarter on quarter basis financial services segment, adjusted EBITDA improved 9% with graphene segment expenses declining by 4%.
This came as a result of our strategic initiatives to focus on ecosystem transactions and streamline that graphene cost base that we shared during our recent investor day.
Turning to group adjusted EBITDA our margins.
Margins improved from a negative five 3% in the third quarter of 2021 to a negative three 2% in the third quarter of 2022.
This represents an improvement of 209 basis points year on year.
We also reported strong improvements in group adjusted EBITDA margins of 145 basis points from the prior quarter.
Our regional corporate costs for the third quarter of 2022 with $208 million, a 3% reduction from the prior quarter.
As a percentage of GMB regional copper cost declined to four 1% from four 2% in the last quarter and from four 4% in the third quarter last year.
We continue to maintain focus on optimizing our cost base and on driving greater internal efficiencies as a management team. We are fully aware of the macroeconomic challenges that companies are experiencing globally.
Since the start of this year, we have initiated a number of actions to reduce fixed costs in our core segments and to be more strategic on our incentive spend.
In deliveries, we've closed dark stores and grabbed kitchens in several markets and for financial services, we are focusing off platform to drive contribution positive transactions.
Our regional cost, we will aim to better optimize our cost structure by limiting discretionary spending while reinvesting proceeds towards R&D and tech development to support the ecosystem.
We began pausing or slowing hiring and various corporate departments. We've also been disciplined to optimize costs in non head count overheads.
Our direct marketing spin in our regional cost point example decline by 28% quarter on quarter.
Overall, we remain confident in our trajectory and ability to meet the second half 2020 for breakeven target.
Thus far our <unk> loss.
We reported a third quarter loss of $342 million.
Representing a 65% improvement from a loss of $988 million.
In the prior year period.
In addition to reducing that adjusted EBITDA losses, the reduction in our <unk> loss was due to the elimination of noncash interest expense of <unk> convertible redeemable preference shares which was no longer incurred when we became a public company.
We would also like to highlight that our <unk> loss of $342 million includes $166 million of non cash expenses below <unk> adjusted EBITDA line.
This $42 million was from the revaluation of reps equity investments, which are mark to market each quarter and $19 million was from stock based compensation.
Turning to our balance sheet, our liquidity and cash position continued to be strong and robust.
We ended the third quarter with $7 4 billion.
Of gross cash liquidity.
Cash liquidity declined by $291 million from the end of the second quarter of 2022.
Predominantly attributed to adjusted EBITDA losses for the third quarter and also the repayment of borrowing and interest payments.
Our net cash liquidity was $5 3 billion.
As of the end of the third quarter.
We will maintain a prudent stance and how we allocate and deploy our capital in line with our capital allocation framework that we outlined during <unk> Investor day.
Cash preservation is top of mind.
As such.
Our board of directors have approved the repurchase of up to $750 million of our outstanding term loan B that was issued in January 2021.
The repurchase is expected to create significant interest expense savings for grab.
With $5 $3 billion of net cash liquidity as of the third quarter, we expect to have ample net cash buffer upon reaching expected group adjusted EBITDA breakeven in the second half of 2024.
Turning now to guidance.
Given that grabs reporting currency is U S dollar significant movement against the U S dollar throughout 2022.
Driven foreign exchange headwinds.
On a year on year basis, foreign exchange is expected to be $260 million headwind to <unk> in the fourth quarter.
As a result of this we encourage investors to evaluate our top line performance on a constant currency basis alongside the <unk> numbers.
Given this backdrop, we are providing more granularity than typical to contextualize, our fourth quarter and 2022 GMP guidance.
As we look ahead to the fourth quarter, we expect to see continued FX impacts as such we expect deliveries to <unk> in the fourth quarter to grow 5% to 10% year on year on a constant currency basis.
Factoring in roughly six percentage points FX headwind in the fourth quarter based on exchange rate forecast.
This translates to deliveries GMB of $2 4 billion to $2 5 billion.
While mobility, we expect <unk> in the fourth quarter to grow 54% to 60% year on year on a constant currency basis.
This translates to <unk> of $1 1 billion to $1, one 5 billion.
We expect to see continued improvement in the mobility segment with the normalization of ride hailing demand as economies reopen.
While deliveries, we will continue to drive high quality GMP transaction, while maintaining a healthy marketplace. We remain bullish on our long term thesis for deliveries and expect profitability to improve while we track towards a steady state margin assumptions of 3% plus.
Notably several of the markets we operate in today.
The near or above 3% margins.
For financial services, we expect <unk> to grow 12% to 15% year on year on a constant currency basis translating to $3 6 billion to $3 7 billion.
This represents a decline in a quarter on quarter basis, but is consistent with our refocus on driving the ecosystem and focusing only on contribution positive transactions.
As such we do expect <unk> to be softer in the fourth quarter for financial services, but for revenues to continue to improve and overall segment adjusted EBITDA losses to reduce sequentially.
Looking at the full year 2022, we are confident that revenue can outperform our initial guidance range of 125 billion to $1 3 billion.
And as such we are raising our guidance to be at 132 billion.
<unk> three 5 billion.
This translates to a 105% to 110% year on year growth on a constant currency basis as we continue to focus on optimizing our incentive spin.
We also reiterate have expectations to grow revenues by a strong 45% to 55% year on year in 2023 on a constant currency basis.
We are also raising our adjusted EBITDA expectations in the second half of 2022 to a $315 million loss from a $380 million loss previously, which implies a 40% half on half adjusted EBITDA improvement.
In terms of fiscal year <unk> for 2022, we expect GMB growth to be 22% to 25% year on year from 21% to 25% previously.
On a constant currency basis.
ANV growth estimate is also now at 26% to 29% year on year.
In conclusion, we delivered a strong set of numbers in the third quarter.
Anthony and I want to thank grab is for their hard work in making these results possible and we want to express our deep appreciation for our driver and merchant partners.
Achieving breakeven in the overall delivery segment and food delivery business in the third quarter is a critical milestone for grab.
While there is still a lot of work ahead of US we are confident that our strong balance sheet cost discipline and strategies will enable us to grow our segments sustainably.
Thank you very much for your time, and we will now open up the call to questions.
Thanks Kim.
Gentlemen, we will now start the question and answer portion of CECO China.
Joining us for the question.
Anthony Tang Chief Executive Officer, Peter <unk>, Chief Financial Officer, and Alex Hernandez, Chief Operating Officer. Please press softness I wanted to ask a question I'll call on you for your question.
Our first question today comes from hanging from Goldman Sachs. Please go ahead. Your line is now open.
Hi, good evening, everyone and thank you very much for the opportunity two question from me Firstly in terms of EBITDA improvement congratulation management on driving a lot of cost out from all of your segments in the past few quarter with now group EBITDA in Peru, quite healthily and deliveries now breaking.
So the quantum of hate your guidance.
An interim scheduled on delivery specifically what is now that next kpis, you're looking to achieve in the near term.
<unk> going to push more for further margin improvement now all ready to drive income growth going forward in the near term and related to that as well in term of EBITDA breakeven why are we not thinking fall, let Johan <unk> EBIDTA breakeven pocket.
Given that you are delivering eight already breaking even now second question is around contact we have seen cash burn improved quite nicely quarter on quarter. Despite you outgrow pushed into that digital bank.
We already passed the peak in term of cash burden polyurethane business and what can we expect in term of growth and profitability into next two quarters.
Thanks, Paul This is Alex I'm going to take the first part of your first question and Peter will take the second part and then I'll take the financial services question after that.
First of all I want to I want to say, thank you frankly to all of our team for delivering the deliveries EBITDA breakeven nine months ahead of schedule.
We're all thrilled with that and there's a lot of hard work that went into it the way that we've managed to optimize incentives and really focus on the stronger propositions.
<unk> supermarket.
Best in class customer experience, there and then Mont proposition focusing much more on impulse buying and instant delivery occasions, where we know that.
The less price sensitive that's allowed us to to reach profitability now we need to grow and continue to improve margins at the same time. So it's about profitable growth, it's not one or the other we continue to do both.
We still have in our line of sight, the 3% plus margins that we had indicated we want to shoot for in deliveries overall and so we're marching towards that as our next step.
Peter do you want to talk about the group EBITDA breakeven, yes, Chopin when your question about group EBITDA breakeven timeline.
As Alex mentioned deliveries profitability was a very critical milestone for us.
And we're just getting started here and we're going to continue to accelerate the profitability timeline for deliveries to get to that steady state margin. That's a key focus area for us.
We are also very focused paying more on making sure. Our cost base also continues to be optimized as a business. Now question is there a room for upside for that timeline for the second half of 2024.
Yes, there is upside.
And we see potential for that to accelerate but where we are today, we are maintaining guidance for now and we will continue to focus on continuing to focus on the deliveries acceleration margin.
Well as just continuing to refine the business and continue also to have the profitable growth that we saw this quarter again.
Thanks, Peter and then on your question on the GST.
Are we past the peak cash burn.
Well, we did we did manage to reduce the burn rate for <unk> overall by 9% in.
In the quarter. So that's the result of the rationalization of the products that we described at Investor day to focus on platform, where we know our customers best and where we have the strongest customer value proposition.
And we've also consolidated costs, so that rationalization of products and the reduction of.
Some management overheads has allowed us.
To reduce cost by 4% for <unk>.
At the same time, we've grown our lending quite a bit of 121% year on year and of course, that's helped us to grow revenue and improve margin as well, we will continue that mix of strategies going forward and.
And that will mean that the <unk> and then will reduce sequentially going forward.
On the Digi banks, where.
We are approaching 2023, when we'll launch all three of the bank. So the sheer Singapore as Anthony mentioned earlier, but we will be adding Indonesia, Malaysia. So as indicated at Investor Day, you should expect in the next few quarters for our investment in the build of the tech stack for the banks to continue to require.
Some higher investments, but after that that will begin to.
They have been from the banks will continue will start to decline and as we indicated in Investor day, you should expect that the combination of all three banks will be breakeven by 2026.
Thank you.
Thanks for your question.
Thank you our next question comes from.
From Bernstein. Please go ahead. Your line is now open.
Hi, Thanks, a lot for the opportunity and congratulations on a good quarter two questions for me.
Firstly on the mobility segment.
Clearly not dyskinesia, but at a global level. This has went up.
The most important and interesting markets, which is recovering.
X space.
I wanted to understand in the context.
The sort of DMV growth targets that you have.
Especially for the near term sort of a 4% sequential midpoint Q.
<unk> growth.
Is that more thinking of taking a conservative view preserving profitability.
And does it mean that you are willing to trade off market shares floated profitability or is it what is the situation in terms of market growth as well.
That's my first question and secondly, I wanted to sort of also touch base on the sort of.
Cost structure side of things.
Now on an overall overhead basis, when we look at some of the broader peer group on dyskinesia, but globally, they seem to be a fairly aggressive effort toward reducing overhead.
Which is a combination of both.
Operating side changes as well as employee.
So which has been fairly brutal in some places I wanted to understand that.
When you look at the cost structure, especially overhead something like a $200 million of diesel costs basically on a on a quarter on quarter basis, which is roughly $800 million per day.
Is there any potential for you to cut down that materially too.
Alright.
Early breakeven at EBITDA level.
Thanks, <unk> yeah. So let me take the first question again, I think people would want to take the second one.
We are not trading off our category position full profitability. So we've maintained our category leadership in the region. Despite the optimization of incentives that you've seen over the last few quarters.
We are positioning supply ahead of the demand recovery.
So in Q3.
The number of monthly tax driving for us increased by 4% quarter on quarter and 31% year on year. So active tax population is now 80% of what it was pre COVID-19. So thats ahead of the demand recovery in Covid.
No one knows for sure what that demand recovery will look like.
But I can assure you we're keeping track in terms of catcher can position one of the things we want to do proactively to grow the Tam is to introduce more affordable services.
Like like grab share and grab Homer and Indonesia, which allow us to target for example, a student populations that might be more constant cost sensitive, but whom don't mind sharing a REIT together from campus.
So these services are being introduced progressively across across the region and they will help us to grow the addressable market by making those services more affordable.
Yes.
Peter do you want to take that yes in terms of the overhead question that you had.
As a as a public company, we've always been very disciplined in spending.
And I have reiterated this in a couple of quarters ago that since the beginning of this year, we've always we've taken proactive measures.
In maintaining the levels of spend especially around the regional cost that you called out.
Since the beginning of this year, we have slowed our pace of hiring and also we've streamlined certain functions actually certain departments have reduced the head count.
And we will remain judicious about our hiring and we're being very deliberate and also in choosing not to backfill some positions creator.
Created by natural attrition and also like I said, we have seen reductions in head count in certain departments. So we will continue to fine tune that.
It's getting to ongoing initiatives that management is very focused on.
It also looking at other lines of cost we called out that we've tightened direct marketing also in the third quarter direct marketing cost came down by 28% quarter on quarter and.
And as we think about Q4 and 2023, we will continue to adopt this prudent and disciplined approach.
We have a plan to bring down our regional head count by continuing with our approach of streamlining and reviewing our participation strategy and with natural attrition. So we will continue to reduce non essential and also non discretionary spend.
Tony.
Office expansions office Capex all of these are all that we are looking at as a management team. So we're we know that the cost structure is important to our investor base.
It's important to us that we've continued to optimize this.
Thank you.
Thanks Vinnie.
Thank you. Our next question comes from Alicia Yap from Stifel. Please go ahead Alicia Your line is now open.
Thank you.
Hey management, Thanks for taking my questions and congrats on the solid group and also with a better guidance.
Two questions first of all.
As we further optimizing the spending and also scaled back our loan quality subsidy.
What could be the attractive ways that we could further drive the cross selling.
Option by our users so.
How are you going to balance.
Between driving adoption of higher numbers that salvage frequency.
Your profitability target.
Any kind of short term secret.
Sacrifices in the topline growth.
And then the second question.
Quickly follow up given you have.
The share buyback program that you just announced by then.
Cash.
Positions with Posco steel trading.
And so just wondering would that be any.
Consideration potential M&A opportunity if that is a good.
Good candidates that come along especially with many present PFS, maybe that validation has also come down.
Thanks, Andy.
If it's true then and what is the sentiment that you will be more proactively looking into thank you.
Thanks, Felicia, let me take the first question and then hand, too and then hand to Peter Youre right actually we think that there are better ways of cross selling and then just.
Providing incentives and promotions to consumers in particular embedding.
The new services at the point of need and the customer journey, so that completely seamless.
And embedded in the customer flow is is ultimately the best way of cross selling so examples of that are things like <unk>.
Scenario insurance right cover or buy now pay later at a time of time of payment.
So 62% of our users are now using two or more of our services, which is an increase versus.
If the 6% in the same quarter last year. So we will continue to push on that.
The.
The other the other thing that we're very focused on as is our net promoter score. So we won't customers have a propensity to want to buy new services from <unk> and so we're very focused on keeping that on the increasing trend and I'm pleased to say that did go up quarter on quarter as well. So those two things I think can help us continue.
To reduce incentives and yet still keep that cross selling ratio that I described to you going up.
Service frequency is really important to us.
Grab on limited is one of the key ways in which we drive service frequency the frequency of grab unlimited customers is three times the frequency of non grab unlimited, we think about that.
A margin basis.
Transaction, but on a absolute contribution basis by by each user and we've.
The data that we have on grab on limited.
He's actually driving up the absolute contribution by us. So we are encouraged and we've been continuing to push it out across the region.
At the last quarter, we were 19% of deliveries GMB underneath grab on limited subscriptions and now we're at more than a quarter of the GNP for deliveries and that helps us build loyalty and build frequency with.
Potential value customers.
There are also.
Other programs like the signature program, where we.
<unk>.
We have exclusivity with merchants on our platform and these are cornerstone merchants in each city that everybody wants to order from because of our large scale they want to be exclusive with us and we facilitate that and that's a way of continuing to drive high frequency.
And then in terms of the longer term.
<unk> ability more generally beyond deliveries of mobility. We're also driving the growth of financial services and the push towards lending as I mentioned earlier and on platform payments.
And then finally, the ads business, which has grown very rapidly in the quarter with high margin continues to be something that we're very focused on growing quickly as we go into 2023 as well.
Hey, John I think youre going to handle the last part yes.
Alicia on your question around M&A opportunities et cetera.
Focus on organic growth, that's really top of mind for management driving that you see that in another quarter of solid performance from us. So we'll continue to focus on that and.
And also will we always take a prudent stance on how we deploy our capital we mentioned that during Investor day on our capital allocation framework.
Cash preservation is critical for us.
And our bar on M&A is extremely high also so.
So we will continue to focus on organic growth.
We will continue to also to make sure our balance sheet remains very strong our cash position continue to remain strong and again, we are so laser focused and getting to profitability as a group and we're going to continue to make sure that we get there as quickly as possible.
Thank you.
Thanks Felicia.
Thank you. The next question comes from.
<unk> from HSBC. Please go ahead. Your line is now open.
Thanks, a lot.
It's been from the presentation when congrats.
Couple of questions.
Lastly in the mobility segment, you had mentioned that the driver.
Penetration.
But can you give a little bit more detail on which market continuing to face.
Issues.
Each market.
No the average in April .
Hi, Mike.
Second question the delivery segment can you update us on your partnership with <unk> in Indonesia.
Progress of integration I missed one more up in the cash flow you have $160 million.
During the quarter.
In terms of.
Acquisitions.
Acquisition of interesting associate quickly elaborate onboard.
Thank you.
Thanks, Pierre So let me take the first two questions on mobility and then the trends retail partnership.
So youre right. There are a couple of markets where drivers supply is tight still.
One is the Philippines, where there's some.
Procedural issues around issuing licenses that were trying to.
Work through in terms of improving the processes with the authorities and the other market where.
The drivers of <unk> is still tight is Singapore, not because there are not people drivers who want to drive actually we have a backlog of drivers who want to drive the issue is the supply of vehicles in Singapore.
The number of vehicles in Singapore strictly capped and that has resulted in an imbalance between supply and demand, which is driving up the cost of vehicles.
Statistics certificate of entitlement.
And that is creating a barrier to the drive is being able to afford their own cars or even being able to rent cars as well.
So.
What we're working on there is improving the.
Earnings for our drivers by using.
Our artificial intelligence to help them get even more efficient during the day.
So I'm pleased to say that our driver earnings in Singapore have gone up quarter on quarter.
Despite the fact that we've been reducing incentives. So that's a good sign for the future Peter do you want take the Nixon Shaw.
Sure.
Sean on the $160 million that you called out in.
The <unk> line really it's continuing in three buckets, one is our continuing investment into digital bank in Indonesia.
And secondly, also where.
As part of our partnership with trends trends retail also we.
And the investment also in trends.
Clearly also we made a small acquisition in Malaysia.
More related to a merchant.
Ability.
A very small acquisition so mainly.
Banks Bank, Indonesia Digital bank and also our trends retail.
Yes.
Last question was on trends retail so let me pick that up.
Our plan there is to use the technology that we are building for China in Malaysia, two great store enable the trends retail network across Indonesia.
We believe as a cost advantaged position for online groceries, because it basically sweat the assets that already exist the trends the trends smart hypermarkets have space for us to do great store, where the picking is done by the staff in the store and then the same inventory the same supply chain in the <unk>.
Same premises.
Across online and offline customer basis, which gets you a much better asset turns so thats. The principle. The technology is the same technology that we are building for Giants that we can reuse that technology as well. So we think this is a good way to grow sustainably in the Indonesian supermarket space.
Yeah.
Thanks, a lot.
Thank <unk> next question comes from Mark Mahaney from Evercore. Please go ahead. Your line is now open.
Okay. Great. Thank you. This is Jan lean foreign Mark Mahaney. Thanks for the question I guess I have a couple of high level questions. One is on just the.
Mobility recovery, obviously benefiting from reopening but aside from this are you seeing any more kind of permanent shifts or a new mobility use cases that are sticking post COVID-19 versus pre COVID-19 and the second is just read on the macro impact because you mentioned introducing some more affordable services.
Are you seeing in the macro and sensitivity from consumer demand either on mobility or fluid our grocery delivery.
And also <unk>.
<unk>, obviously growing very healthily.
Anticipation on merchant macro sensitivity in the next few quarters. Thanks a lot.
Okay three questions. There, let me take the mobility recovery the nature of the demand on the recoveries is very similar to what we saw pre COVID-19. There is one area, which is missing if you like from the pre Covid patent, which is the Chinese tourists and Chinese business people.
This makes up in some markets like Thailand, the very high proportion of the use cases for the airport rides, particularly profitable and therefore, we are one of the catalysts for growth for us and mobility looking forward would be a relaxation of the travel and.
For Chinese.
So that's something I guess as shareholders and analysts that would be important for you too.
There are other.
Other than that I think the patents are quite similar.
Anthony I think you want to cover the macro question. Thanks, Jamie.
On the macro impacts so few things I think number one on inflation.
We do see higher fuel and food input costs.
Obviously affects our driver and merchant partners.
There is also some weakening of some of our local currencies against a stronger dollar.
For us the important part is remaining nimble and agile, especially during times when it's uncertain and we.
Adapt quickly as the macroeconomic situation evolves.
Now you talk about how.
Number one as being extremely prudent with managing our costs.
As we are committed to profitable growth.
Peter talked about revenue more than doubled while loss for the quarter substantially improved incentives came down as you saw to nine 4%.
Even while as Alex said overall customer satisfaction went up.
And then the delivery segment adjusted EBITDA and positive three quarters above ahead of guidance now going back.
We are very very focused on thinking how do we address this.
<unk>, especially as we drive for more affordable services for our users and partners, we talked about it with whereas our delivery time windows.
Where users can choose for our deliveries.
That drives lower cost and lower price.
Win win for everyone.
See it with other options for example.
As we increase Onboarding, which means fulfillment rates have improved and such has come down as well. So these are ways of which we are also making sure.
I would also say sure.
Alex reiterated on growing share in Philippines. These are ways that we continue to drive mobility costs down.
That will be win win for the driver the customer and for us.
Thanks, Tien Tsin, let me just pick up your question on grab ads.
Our return on advertising.
<unk> spend on the on the grab ads platform is really high is north of three times and sometimes.
In some cases, we're getting six times return.
So.
The macro situation with those kinds of returns the macro situation is not impacting our demand for grab ads.
What we're trying to do is introduce auction pricing for AD platforms that as we build demand.
We'll see hopefully an improvement in pricing as a result of growing demand through the auction clearing mechanism for the pricing.
Also.
Looking for opportunities to add inventory without impacting the customer experience and then finally, we have 4 million merchants on the platform. Our goal is we're just scratching the surface with the penetration of events as a capability. Our goal is to use our new self serve ads platform to start to go further down the long tail.
Some of the small guys can get access to the sophisticated targeting that the big guys already use.
I think all three of those things should help us with our ads growth going forward.
Improving.
Obviously, the the 100%.
Growth in revenue.
Year on year as strong, but we think that we're still only just scratching the surface of the opportunity here.
Yeah.
Thank you. The next question comes from Ryan Jones Sharma from Jpmorgan. Please go ahead. Your line is now open.
Hi, good evening and thank you for the presentation two questions from my side Firstly on.
On the loan that you're pushing what is the interest rate on that please.
And second question is one of your competitors is expressing.
Our view that the micro to exit some countries and RCN.
But I think based on what Youre seeing is that youre not necessarily a purchase of these assets right.
Or could you look at.
Acquiring assets from someone who might be leaving the country. Thank you.
So Ron Jon on the RTL B, we took the <unk> January 2021.
Tim on the structure was LIBOR plus 450.
In terms of.
Second question on competitors exiting.
I think we're.
I think Alicia similar question around M&A or opportunities, we're very focused on.
Organic growth, we see a lot of opportunities ahead of us and all in all segments of our business. So we're just going to be heads down focused on just looking at how we can continue to serve our consumers and also merchants and our drivers in an organic way.
Again.
Capital allocation, we have a very strict framework within graph here and cash preservation is critical and also it will be very prudent in how we deploy capital.
Thank you.
Thanks Roger.
The next question comes from Thomas Chong from Jefferies. Please go ahead Thomas Your line is now open.
Hi, Thank you management.
My questions. My first question is about the competitive.
I think given that.
Hum.
All the Payors rationalizing the investment and focus on our on their strategies.
Obviously any changes in the competitive landscape in the medium.
And my second question is about.
Our user experience or how we can do more.
<unk>.
Mergers and <unk> partner.
What do you think.
Is the <unk>.
Number one high quality that we need to do in any sense.
In order to differentiate us.
Thank you.
Thanks, Thomas This is Alex let me take that yes, there is a lot of news flow about competitors rationalizing and potentially exiting.
Markets as some of the quick question is referred to.
This should if this continues of course this should reduce the competitive intensity going forward.
One of the.
Upsides of the increased cost of capital.
When you when one does have a strong balance sheet is that.
Competitors have to get rational and they have and some of them can survive.
Faced with intense competition.
So.
If this continues indeed, we might have reduced competitive intensity in the future.
User experience is a really key topic for us.
One of the opportunities that we're looking at currently is with our data scientists is continuing to look at the acquisition funnel the onboarding funnel and looking for opportunities just to tweak. If we can just improve percentage point here or there the numbers the impact to the bottom line reduction and.
Cost improvement in retention and frequency of repurchase et cetera. These things.
Can they massive differences in terms of the bottom line. So there's a lot of work going on on our funnels, we're very lucky to be what was a very talented data scientists, who can actually help us to do that fine tuning and then some really creative market tiers, as well, who can help us to nudge the consumer behavior. So I am glad.
You raised the question, it's certainly something that we as a management team talk about all the time the customer experience how can we improve the funnel how can we improve the sell throughs.
So thanks for recognizing that that's an important but often.
Unsung part of what makes us successful company implement well.
Thank you.
Thank you. The next question comes from Sean <unk> from Barclays. Please go ahead. Your line is now open.
Thank you very much for taking my questions I have two questions first is on a longer term perspective I was wondering if you can share with us some of your thoughts on how we should think of a CAGR growth for both morbidity and it did every let's say for the next three years.
To help us understand at longer term.
Opportunities.
For grab my second question is somewhat near term is if I look at your Opex for the quarter.
It came down sequentially in all three line items.
How we should think about going forward.
In terms of either absolute dollars or.
As a percentage of <unk> revenue, how we should think about.
Going forward, how that would trend, which obviously will affect profitability. Thank you very much.
So John let me take those couple of questions. So on the long term perspective on growth itself.
Where do you see you saw that we are continuing to post growth.
Revenue lines and we're committed for.
2023 two.
We would grow revenue of 45% to 55% on a constant currency basis.
We are quite we remain bullish on the prospect of mobility also we still have ways to go in mobility coming back to get the pre COVID-19 levels.
So Alex talked about earlier about all the other use cases that we're seeing we're keeping up with demand increasing supply on the mobility front were fingers crossed the Chinese borders will open up also.
Deliveries will continue to be confident and also bullish in terms of what we can do with grocery delivery. We're just scratching the surface with al gross non local commerce. There. So and then as Alex also talked about so if you step back looking at just our long term prospect of our business today.
Organic growth remains to be robust we.
We're going to continue to continue to improve engagement on our platform itself and.
And we're committed on the 45% 55% revenue growth in 2023.
Now.
On the Opex line.
Your question around how should we think about this in absolute dollars.
To continue to optimize our cost structure, we're look we're everything.
We're looking at all line items head count and non head count items, we're going to be very prudent in terms of how we deploy our capital also in how we are looking at our hiring.
So youll.
Youll see that we continue to focus on this line item.
And we in 2023, you will see a reduction in regional head Count. We're also will continue to focused on associated costs with those head count also.
To come down so youll full focus on this line item and we will continue to get to that profitability of second half 2024, as a group as a main priority for us.
Thank you very much for your thoughts.
Thank you I will conclude our question and answer session I would like to turn the conference back over to please poll for any closing remarks.
Thank you everyone for taking the time today.
You have any questions. Please feel free to reach out to our investor relations team or visit our Investor Relations website talk to you next quarter. Thank you everyone.
Thank you. This concludes <unk> third quarter 2022 earnings conference call. Thank you for your participation you may now disconnect your line.
[music].
Okay.
Yes.