Q4 2022 Grab Holdings Ltd Earnings Call
Pleased to report that on a year on year basis group revenue rose over 300%.
While we reduced our losses by 64% from the same period a year ago. We also saw two consecutive quarters of positive segment adjusted EBITDA margins for deliveries, which expanded two 2% of deliveries of <unk> in the fourth.
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Mobility also rebounded strongly and continues to generate steady cash flows.
Our 2022 results would not have been possible without the hard work of all grabbers and millions of drivers and merchant partners operated with resilience and agility to deliver the best possible service to our consumers.
With 2022 firmly in the rearview mirror, we look towards 2023 with confidence and optimism.
While there will be macro economy uncertainties ahead.
We are laser focused on accelerating our path to profitability and growing our ecosystem in a way that is sustainable and resilient.
We're also optimistic on a recovery of tourism in the region and how that can benefit our business and ultimately our actions in 2022, and our plans for 'twenty to entry make us confident that we can achieve group breakeven on an adjusted EBITDA basis in the fourth quarter of 2020.
<unk> this.
This is much earlier than our prior guidance of achieving group breakeven in the second half of 2024.
In the long run we remain convicted in southeast Asia's growth story.
There is growing consumption in the region a population that creates on demand digital services and governments, we recognize digitalization as an engine of economy growth and we will open to co, creating new ways of serving our communities together.
I'll now hand over to Alex who will cover our fourth quarter operational highlights.
Thank you Anthony.
I'd like to start by sharing the business and operational highlights for mobility.
Which recorded strong year on year revenue and GNP growth in the fourth quarter.
This growth came on the back of a strong recovery in demand with post COVID-19 reopening continuing across the region.
In addition to our own efforts to increase supply to keep pace.
We saw a particularly strong rebound in airport rides contributing to our mobility segment.
In the quarter airport rides registered growth of 244% year on year and 14% quarter on quarter.
Overall, our mobility GMT is now back to 74% of pre COVID-19 levels in the fourth quarter of 2022.
So there is still plenty of headroom for growth.
In the quarter, we continued to focus on bringing new drivers onto the platform.
And improving the productivity of our existing drivers.
We did this primarily in two ways.
First we made our onboarding journey, even more seamless, making it easier for driver partners to join us.
This resulted in a 71% year on year increase in the number of drivers on boarded in the fourth quarter relative to the same period a year ago.
Second our efforts to improve productivity such as our new shifts option for drivers also bore fruit we.
We saw a driver wait times that merchants being reduced by 27% year on year and 12% quarter on quarter.
Our grabbed navigation App within grabbed maps has also shown strong results base.
Based on data from drive our partners, who have utilized grabbed navigation across several such as last year, we saw a 7% improvement in the trends at our full mobility and a 3% improvement in fulfillment rates.
We also launched an updated version of grab share in the Philippines and recently in Singapore.
To provide more affordable mobility options for our users while optimizing supply in.
In addition, we will continue to work with governments to increase our pool of drive apartments.
For example, this month, the Philippines government announced that they would be opening up 100000 more to wheel and in full wheel licenses for all interested transportation network companies in the country.
Looking ahead, we are positioning <unk> to benefit from the broader southeast Asian reopening, especially from the rebound in the tourism sector.
For example, we recently launched a partnership with Wechat to provide enhanced services to Chinese travelers.
And we rolled out pre installation packages for China based Android phones, which enables users to download the grab app prior to arriving in southeast Asia.
So we are hopeful that the rebound in tourism arrivals to the region will drive stronger demand for our mobility services.
Moving into our delivery business.
In the fourth quarter, we continued to focus on the profitability of our delivery segment, resulting in strong year on year and quarter on quarter margin improvement.
Deliveries posted segment adjusted EBITDA margins at 2% in the fourth quarter.
This puts out delivery segment firmly on the path to achieving a steady state margin assumption of 3% plus.
At the same time, we maintained our category leadership in food deliveries.
With our focus on driving high quality transactions.
Lowering our cost to serve and continuously improving our quality of service for our users.
During the quarter, we continued to rollout our grab unlimited subscriptions with more targeted incentives to augment user spending habits.
Grab unlimited is now available in all six of our core markets accounting for more than a quarter of our deliveries GNP in the fourth quarter.
Grab unlimited subscribers transaction spend over three times more than non subscribers for food deliveries.
This is a promising start for grab unlimited and over time, we see more opportunities to evolve. This subscription program as we deepen and broaden our relationship with our subscribers.
As a result of these initiatives, we managed to reduce our deliveries incentive spend to 12 percentage PMT in the fourth quarter from 18% a year ago.
In our non food delivery business, we are focusing on delivering the best value proposition for our customers in a sustainable way.
In Malaysia, where we own giant grocer, we have continued to enhance our groceries marketplace to bring the convenience of on demand grocery delivery to more consumers in Malaysia.
In the second half of 2022, we also exited dark stores and grabbed kitchen operations in most countries.
While these closures had an impact on GNP and the fourth quarter. We also managed to reap significant cost savings from the move.
Which improved our overall deliveries profitability.
Looking ahead, we will continue to improve our delivery segment profitability without sacrificing our category leadership position in food delivery.
Next onto financial services.
In the quarter, we posted strong revenue growth on the back of higher contributions from our lending business and lower incentives.
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Our strategic refocus we initiated in the second half of 2022 to primarily serve grabs ecosystem is already showing results.
<unk> cost base fell year on year and on a quarter on quarter basis.
Our lending business continues to grow and serve more drive our merchant partners.
In the fourth quarter, the value of loans disbursed rose, 57% year on year.
Last month, we also announced strategic payment partnerships in Vietnam and the Philippines.
These partnerships integrate our partners E wallets onto our platform, giving users more payment choices, while optimizing our cost of funds in those countries.
For <unk> Bank, we have some promising signals from our limited launch in Singapore.
This initial period, we can only operate within the 50 million Singapore dollar deposit limits set by the regulator in Singapore.
Also on a positive note we are not far from this deposit limit already with no acquisition cost to date.
We were also pleased to see strong ecosystem linkages with 80% of <unk> users linking <unk> accounts to grab or through a partner E wallet.
Beyond deposits GSS is expanding into lending soft launching our credit product to grab Angie excess ecosystem employees earlier in January 2023.
These developments and Singapore are encouraging signs as we prepare for the launch of our Indonesian and Malaysian TG banks later this year.
Lastly, our enterprise segment continues to grow with segment adjusted EBITDA growing double digits year on year. This year. Our teams continue to build out our appetizing self service platform I will.
I'll allow more merchants to enjoy our ad offerings.
We believe our advertising platform together with the breadth of our ecosystem could help many small merchants grow faster by reaching new customers.
Over time, this will incrementally accelerate our ads business growth and margin contribution to our overall business.
In closing for 2023 to Echo Anthonys opening remarks, we are focused on accelerating our path to profitability and driving sustainable growth for the long term, while maintaining category leadership in mobility and food delivery.
With a disciplined stance on cost.
Driving product innovation, and strengthening cross vertical vintages to reduce our cost to serve.
We are confident we can get to group breakeven ahead of schedule.
I will now turn the call over to Peter.
To review fourth quarter and 2022 financials.
Thanks, Alex.
We are pleased to report another strong set of results to close out 2022 on a high node.
We exceeded our guidance for both revenues for the full year and adjusted EBITDA for the second half.
We grew our <unk> by 24% for 2022, which is in line with our guidance range of 22% to 25% year over year.
Revenues in the fourth quarter grew strongly by 310% to $502 million and grew 346% on a constant currency basis.
Full year revenues grew by 112% to $1 4 billion.
Our 125% growth on a constant currency basis.
Both our fourth quarter and full year reported revenues were record highs for the company the.
The strong revenue growth came from all segments of our business.
For mobility revenues grew 78% in the fourth quarter and 40% in 2022 underpinned by the continued recovery in ride hailing demand and our efforts to improve supply across the region.
For deliveries revenues grew strongly from contributions from J, a grocer and lower incentives as a percentage of GMB.
There was also a change in business model for certain delivery offerings in one of our markets to address certain licensing requirements.
Where we transitioned from being an agent.
Ranging for delivery services to our principal model.
To note if the model change had not taken place in the fourth quarter, our fourth quarter group revenues would be $434 million with full year group revenues of $1 $3 7 billion implying.
Implying growth of 255% and 102% respectively.
Revenues for financial services for the fourth quarter came in at $28 million from a negative $1 million in the same period last year.
And it grew 166% on a full year basis attributed to greater optimization of our incentive spend and our increased focused on lending.
For enterprise and new initiatives revenues grew 10% in the fourth quarter and 37% in 2022 on the back of a stronger contribution from advertising.
Turning over to <unk> for the fourth quarter, we recorded growth of 11% to reach $5 billion.
And for the full year 2022, GMB grew 24% to reach around $20 billion.
On a constant currency basis, our fourth quarter <unk> grew 20%, while full year GMB grew 30%.
We saw strong year over year growth in mobility, <unk> and financial services TPB in the fourth quarter coming in line and above our guidance ranges respectively.
Deliveries <unk> in the fourth quarter came in softer than guidance range with <unk> declining 4% year on year.
But he grew 5% on a constant currency basis.
The softness came as a result of our continued focus to drive a more sustainable and profitable delivery business as we substantially improved our segment EBITDA margins quarter on quarter.
Notably we continued to maintain our category leadership position and food deliveries, while reducing consumer incentive spend.
Moving onto segment adjusted EBITDA.
We reported total segment adjusted EBITDA of $112 million in the fourth quarter and $65 million for the full year.
In the fourth quarter margins improved 477 basis points year on year, and 131 basis points quarter on quarter.
A key driver of this was the reduction of incentives as a percentage of GMB, which declined to eight 2% from 13% in the same period last year.
In deliveries segment, adjusted EBITDA was $47 million in the fourth quarter and negative $35 million for the full year.
Fourth quarter margins in deliveries expanded by 550 basis points year on year, and 163 basis points quarter on quarter to reach 2% of deliveries GMB.
This was a substantial improvement after achieving breakeven in the prior quarter driven by greater optimization of incentive spend.
Our mobility segment, adjusted EBITDA was $152 million in the fourth quarter and $494 million for the full year.
Fourth quarter margins improved year on year by 312 basis points to 13%.
Going forward, we continue to maintain a steady state margins of 12% from mobility.
We will aim to reinvest incremental margins to grow into underpenetrated cities and improved platform efficiency.
Our financial services segment, adjusted EBITDA was negative $93 million in the fourth quarter and improved 16% year on year.
For the full year segment, adjusted EBITDA was negative $415 million.
As a percentage of TPB fourth quarter margins for financial services improved from negative 3% to negative 2% as we continued to streamline our cost base for graphene and to focus on driving ecosystem transactions.
Group adjusted EBITDA in the fourth quarter was negative $111 million.
While the <unk> group adjusted EBITDA was negative $793 million.
Group adjusted EBITDA margins in the fourth quarter improved by 454 basis points year on year, and 94 basis points quarter on quarter.
Which sets us up on the right path towards achieving group adjusted EBITDA breakeven.
For the fourth quarter, our regional corporate costs was $223 million as compared to $192 million in the same period, a year ago and $208 million in the prior quarter.
Our regional corporate costs for the full year was $858 million for 2022 as compared to $717 million.
In 2021.
On a year on year basis regional corporate costs in the fourth quarter were relatively flat, excluding a nonrecurring benefit reported in the fourth quarter of 2021.
The quarter on quarter increase was predominantly driven by increases in seasonal Derek marketing costs and professional fees.
Direct marketing costs on increased due to seasonally higher spend in the fourth quarter during the festive period.
For professional fees the increase was due to higher expenses associated with being a publicly listed company such as Sox related compliance and one off systems implementation costs to improve automation.
Going into 2023, we will continue to optimize our regional corporate costs to accelerate our path to profitability.
There are a series of cost optimization initiatives being implemented across our organization as we used a greater cost and capital discipline and cutting back on discretionary spending.
For example, we anticipate cloud costs reduced by 5% to 10% year on year, driven by our efforts to optimize processing speeds and improve network costs.
<unk> also implemented a series of zero based budgeting on a number of our operating expense line items, including travel and professional fees.
We've also frozen hiring across most of our regional corporate functions, which is consistent with our efforts to slow down the pace of hiring across our organization.
As such we anticipate head count under a regional corporate cost to be lower in 2023.
Moving onto our <unk> loss, we reported a fourth quarter loss of $391 million.
Representing a 64% improvement from a loss of $1 $1 billion in the same period last year.
The reduction in our <unk> losses was due to improving profitability on our group adjusted EBITDA basis.
Coupled with the elimination of non cash interest expense of <unk> convertible redeemable preference shares which was no longer incurred when we became a public company.
Our fourth quarter <unk> loss of $391 million includes $263 million of non cash expenses below adjusted EBITDA line.
Of this $119 million was from the revaluation of grips 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 continues to be strong and robust.
We ended the fourth quarter with $6 5 billion of gross cash liquidity.
Cash liquidity declined from $7 4 billion at the end of the prior quarter.
A substantial part of the cash outflow attributed to the repurchase of our term loan b for an aggregate consideration of $738 million in November .
Our net cash liquidity was $5 1 billion as of the end of the fourth quarter as compared to $5 3 billion in the prior quarter.
With $5 $1 billion of net cash liquidity, we expect to have sufficient net cash buffer of well of the $3 billion, even after accounting for the capital required for our DG bank upon reaching our expected group adjusted EBITDA breakeven timeline as.
As we look ahead to 2023, we will continue to be focused on accelerating our path to profitability, while driving sustainable growth in mobility, we expect a year on year growth trajectory to remain strong and healthy.
With economies continue to reopen coupled with a recovery in tourism demand and it meets our push to expanding to other tier cities, we expect mobility GMB to reach pre COVID-19 levels by the fourth quarter of 2023.
While deliveries we remain bullish on our long term prospects and are committed to operating a business focused on driving sustainable growth, while solidifying our category leadership position.
We believe now that we have a more sustainable deliveries business in place and a clear trajectory towards attaining our long term expectations of deliveries segment adjusted EBITDA margins of 3% plus.
I do also want to note that seasonally we expect our on demand GMB, which combines our mobility and deliveries GMB.
Performance stronger in the second half as compared to the first half with the latter being impacted from activities, such as Chinese new year and Ramadan.
For financial services, we expect <unk> to moderate down in 2023, consistent with our refocus on driving ecosystem transactions and increasing profitable transactions such as lending.
As such we expect revenues to grow healthily and pushed segment adjusted EBITDA losses to stabilized quarter on quarter, Despite increasing investment costs as we aim to launch in Malaysia, and Indonesia BG banks this year.
For group revenues, we expect full year revenues up $2 2 billion to $2 3 billion in 2023.
This is an implied 54% to 60% year on year growth on a headline basis.
And excluding the change in business model, our revenue growth estimates for 2023 remain in line with our prior guidance of 45% to 55% year on year on a constant currency basis.
Unprofitability, we estimate our 2023 group adjusted EBITDA loss to be in the range of negative $275 million to negative $325 million.
This represents a $468 million to $518 million year on year reduction in adjusted EBITDA losses.
With the year on year improvements in group adjusted EBITDA, we are bringing forward our <unk>.
Group adjusted EBITDA breakeven timeline.
We now expect breakeven to be in the fourth quarter of 2023 from our initial guidance of the second half of 2024.
In conclusion, we.
We delivered another strong quarter, where we perform on the top and bottom line and we executed on a positive profitability exploration goals.
As always Anthony Alex and I want to thank gravitt's for their hard work in making these results possible and we want to express our deep appreciation for our driver and merchant partners.
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 continue to grow our segments sustainably.
Thank you very much for your time, and we will now open up the call to questions.
Thank you.
Ladies and gentlemen, with the question and answer pushed up the call joining us for the question answer session will be Anthony <unk>, Chief Executive Officer, Peter <unk>, Chief Financial Officer and Chief.
Chief operating officer.
Please press star followed by one to ask a question in the economy for your question.
The first question today comes from the line of Penguin from Goldman Sachs. Please go ahead. Your line is now open.
Sure. Thank you.
Thanks for the opportunity congratulations on a great quarter on strong guidance on rapidly respond.
2023 few questions from me number one macro question Anthony how can you do the trade off between growth and profitability right. Now can you, perhaps can't Atlantic mine term, often lethal effective have control of that.
Technically we see strong TMT growth on constant currency basis, but curious of how some of these training will evolve as we move into 2023 and beyond.
Two on mobility, how has that Timothy supply chain issue recently.
I think has now improved strongly towards that in 2% for a quarter.
Looking to maintain it at this level.
Normalized back to 12% if it's the latter Christmas Ham or context on why is this the case.
Lastly can be also have some color Adam.
I don't think that expand for corporate cost in the quarter, what drove that increase and how should we think about this cost item is call. It 2023.
Thank you very much.
Now on our approach on profitability versus growth.
Our aim is to drive sustainable growth and we believe we have demonstrated that in our results.
As we have shown in Q4, <unk> grew 20% at constant currency and revenue grew more than 300% year on year, while loss for the quarter are substantially improved.
<unk> also moved our group adjusted EBITDA breakeven timeline forward to Q4 of this year.
While we are proud of these achievements, we must never lose sight of the long term potential of southeast Asia.
One of the key signals that we monitor.
Is our category position and we are clearly customers number one choice.
Continue to drive towards becoming southeast Asia's largest and most efficient on demand platform that enables local commerce and mobility.
Now as shown by the past two quarters, we not only grew top line rapidly, but also improve bottom line significantly and gain category position, particularly for delivery.
We have different products and services from premium to affordable targeted at different user segments.
An example of our product for value conscious customers at save a delivery, we introduced saver delivery option across several markets.
It gives consumers a lowest delivery fees and some of our markets. While also improving batching the rates of our operations.
Now on the second part.
<unk> about leave us.
Talk about the levers that we have one we drive down our cost to serve two we monetize more effectively with affordable products. So for deliveries we've rolled out a feature to reduce wait time of delivery partners.
Merchants when collecting their food.
This has resulted in a 27% reduction in wait times year on year in Q4 2022.
And then as an example on efficiency is grabbed navigation that improves the efficiency of our platform, we've seen a 7% improvement in trips, but transit our mobility and the tree percent improvement in fulfillment rates.
So all in all growth is important but we intend to grow profitably and sustainably we are driving towards becoming salaries Asia's largest and most efficient on demand platform.
Okay. Thanks, very much Anthony let me take that question on mobility, So mobility supply in most of our countries showed strong recovery with the exception of Singapore, where the cost of vehicles is still very high one.
One market, where there was a big breakthrough in this last quarter with the Philippines, where we're grateful that the government just announced that they will increase the number of two wheel and four way licenses is by 100000.
Which is a massive breakthrough.
Very pleased that that will unlock the supply shortage in Philippines.
Overall, we continue to improve our onboarding processes to make it easier for driver partners to join in fact, how drive driver partners onboard it increased to 71% year on year. So this quarter in.
And second we're trying to make our existing drive as much more productive. So we've introduced shifts to drivers, which is turning out to be very popular and.
We're leveraging grabbed mats as Anthony was saying in his remarks.
So wait times for 27% year on year, and 12% quarter on quarter for food deliveries.
The grab maps navigation has helped a lot.
In terms of productivity as well with the improvement of 7% and trips for trends at Alpha mobility, and 3% improvement in fulfillment rates.
Overall drive our earnings per transit hour, which is a really key draw for new drivers to come into the industry increased 13% year on year.
And driver retention is at 87% in the fourth quarter.
And 74% of our two real drivers are now doing both deliveries and mobility in the quarter.
And then finally, we have also relaunched affordability products like grab share in Singapore, and the Philippines. It's a carpooling service that enables us to improve the productivity of our existing fleet, while offering affordability to new segments.
Okay, Let me take that.
Uh huh.
One of your question around just the continuation of Alex on mobility margin and I think you also had a question around regional costs.
So on the 12% margin Buffalo mobility.
Our expectation is we're going to continue to maintain this margin at the current 12% steady state.
This is also we got to make sure we're going to continue to grow at <unk>. In this segment. We've got a lot of tailwind ahead of us here.
We get back to pre COVID-19 levels by the fourth quarter of this year and we've also got supply recovery that we're working at the same time also so we feel that the margin around 12% is our sweet spot.
Now as I said in my prepared remarks, we will.
We are reinvesting any incremental margins that we that we can achieve from a mobility business and that's important as we look at how we can continue to grow our product offerings into under penetrated cities that we haven't touched all we want to continue to expand in those cities. There's also a lot of work that we have.
Working around just accelerating our strategy to improve batching allocations, all those product efficiencies that we want to continue to lower our cost to serve.
12%, we feel is the sweet spot.
Your question around regional corporate costs.
In terms of how what drove this increase and how should we think about it for 2023.
So the quarter on quarter increase in the fourth quarter was predominantly driven by seasonal increases.
Theres a couple of things there one was around direct marketing costs.
Again this is very much related to the festive period of Q4, so usually we do see an increase in marketing cost during that fourth quarter and also the second part is we did see an increase in professional fees and part of that is related to being a publicly listed companies as we get ready for year.
And as well as our first <unk> first year of Sox compliance.
Now how do we think about 2023, so looking into 2023, our philosophy is continuing to be disciplined and also judicious in how we manage our costs in that business. Today has it been a ton of work on that front since last year, and we're going to continue that discipline and our COO.
Cost structure.
If you look at actually on our head count since September 2022, eventually trended down and our overall group head Count and also we've announced a number of cost discipline measures internally.
I called out a few of those in my prepared remarks, whether it's cloud cost computing, that's going to come down by 5% to 10%. We expect and also others zero base line item that we are budgeting implemented across the organization. So.
Part of that profitability acceleration to get to the fourth quarter as we've committed to our investors part of this is making sure. Our costs also continues to be optimized and also continuing we have operating leverage in our business.
Thank you.
Thank you.
Thanks question today comes from the line of <unk> Garg from Bernstein. Please go ahead. Your line is now live.
Hi, Thanks, a lot for the opportunity and particularly maturation for number of quarters.
Pretty good guidance.
I have three questions I think first of all a part of it you already answered, but I was pretty curious to know that.
Well the revenue.
The guidance is really strong.
To an extent can you explain to us how would you sort of shape up across segments. I think more importantly, we also curious to know what they are.
At this stage.
The second question is on for delivery.
We've already reached about 2% of <unk>.
Now.
Guidance is about 3% plus for the long term. So how do we sort of see this trend sort of shaping up especially over the next.
12 to 18 months.
Totaling at least one question I just wanted to clarify is this model change which is happening for deliveries.
Did it have an impact on EBITDA or is it just the same.
Sales revenue items sitting in cost as well.
Thanks.
Thanks, Peter Let me, let me take all of those questions I'll take them one by one let me start from the top around your question around how do we think about the GMB growth.
We don't break out obviously by segment, our revenue, but what I'll do is I'll provide a bit more color in terms of our GMB. So let me start by saying that we expect that on demand GMB. The continued to grow year over year right. As we look at now the two different big buckets here lets start with mobility.
We believe that the mobility business will continue to be another solid and strong growth year over year for us, we say that because we're still having experiencing the tailwind coming out of the Covid lockdowns from last year.
If you look at where we are today as of the end of December we were roughly about 74% of our pre covet levels. When it comes to <unk>. If you look at mobility. If you look at where airport rides as today as of the end of last year. We only have 65% in April right is a really critical piece of our business, we starting to see more China tourism.
Masa coming across southeast Asia.
Now of course also coming off a very strong comp in 2022, so we won't be seeing obviously the rate of growth that we saw it compared to 2022 of 2021. So just bear that in mind also the basically just much bigger now, but we feel that with all of those all of those activities and demand.
And coming into southeast Asia.
We feel very optimistic and very bullish that our mobility business, where we will see another strong growth year over year.
Now the second bucket is around deliveries here, what I will say is that we really focus on vendor on really driving sustainable growth Anthony mentioned part of that in his earlier question that he answered from Pang really how do we continue sustainable growth and also driving EBITDA margins the.
Towards that 3% plus that we all aiming for here at the same time also we are going to be very focused on making sure. Our category leadership position like what you saw in 2022 continues to be maintain and also retained to be the number one and that's been a very critical part of our.
Copy here and grab you saw how business grew last year in deliveries you source of how incentives came down but yet also we executed on category leadership position so within those two mix.
Going to be very focused in making sure <unk> business grows sustainably what you will see though is some seasonal impact.
As you think about the first half versus the second hub, we should be seeing a stronger in the second half just because of all the festive season that you see in the first half.
In a traditional typical cycle within southeast Asia with all the Chinese new year as well as Ramadan.
So hopefully that gives you a bit of color into how we think about mobility and deliveries GMB.
Second question was around the food delivery segment adjusted EBITDA, 3%.
We feel that right now where we are the new app delivery business is in a very very strong position. We've got strong CP category position, we've driven margin improvement on a quarter on quarter on a year over year basis.
And we have a very clear trajectory towards our long term expectation of 3% plus margin.
We're actually very encouraged if you look at today the majority of our six core markets have achieved deliveries profitability knee or higher than the 3% to date, which is actually a very big sign for us and a very strong signal that we have the old level all the different building blocks for us to.
Get to the 3% now I'm not committing to a timeline for you all to our investors. While we are very laser focus is getting the as quickly as possible, making sure that the marketplace is very healthy at the same time, so balancing the three sided marketplace as well as making sure our category position remains very strong and we are the <unk>.
Peter.
So hopefully that gives you a bit of color on the 3%, where we're hitting on how we can get there.
Your last question is around the business model change for delivery. So let me.
Out of the gate, saying that there is no impact on EBITDA whatsoever on this business model change.
<unk> basically a presentation between gross versus net from on the revenue and the cost of sales line.
There was a licensing requirement in our one of our countries that we operate in today and to make sure that we are.
In compliance with those licensing requirements. The principal an agent model change of which from an accounting standpoint that has to follow.
And that is basically just a presentation between revenue and cost of sales with no impact whatsoever to EBITDA.
But no I've answered all your questions.
Yes.
Thanks, a lot.
Thanks Vanessa.
The next question today comes from the line of Alicia Yap from Citi. Please go ahead. Your line is now open.
Hi, Thank you good evening.
Hey management. Thanks for taking my questions I have two questions first one is related to your <unk> strategy and also.
The growth expectation in the coming quarters, so with our strategic shift to focus more on the <unk>.
Platform usage, what is your go to market strategy to encourage higher transaction usage and product adoption by the graph users. So can management share with US also what is your expectation after revenue contribution potentially could come from the digital banks at the end of this year.
The second question is on the delivery business, obviously with that to see that EBITDA margin improving gradually.
Any plans to step up the spending in user subsidy more effectively to actually drive the balance between potentially faster volume growth and also maintaining.
Having the improved margin trends.
<unk>.
Thanks, Alicia Alex Let me take your question on graph and Youre right about the focus on the <unk> platform as we said at the Investor Day last autumn.
<unk> refocused does allow us to use the benefits from our ecosystem the data benefits the distribution advantages.
Deemphasizing unprofitable off platform transaction. So we're leveraging our embedded ecosystem use cases to drive higher transit transaction frequency and adoption and.
And we don't have to rely on consumer incentives. So we've shown that we can do that over the last several quarters and that remains our strategy. We remain confident that we can do this through embedding the use cases.
In fact for digital payments, we plan to reduce our spend on consumer incentives because we're going to be moving.
From the off platform digital payment use cases, and making sure that we move to at least cost neutrality, all better off platform.
A good example, actually of what we've done in Vietnam with zero pay and also with GE cash in Philippines, both of which as you probably know a leading E wallet in their respective countries.
That will help us to provide a more seamless payment experience to more users in each country and then also to tap into a larger user base, even while we reduced incentive costs.
We're focusing on the value add from lending and insurance, which are also very important use cases.
Grabbed fin lending continues to grow in fact, the value of loans disbursed rose, 50%, 57% year on year and revenues improved as you saw and then just as we promised at the Investor day, we have reduced <unk> costs as well so excluding DG bank <unk>.
<unk> cost reduced 4% year on year, and 11% quarter on quarter, So a real big acceleration of cost reduction for <unk> in this recent quarter.
And then on tissue bank growth, we're not disclosing any specific numbers on the banks at this stage, but we are pleased with the early positive signals from the limited launch in Singapore as I shared in my remarks earlier.
And I can confirm that we're still on track to launch our Indonesia, Malaysia, Japan later this year.
And maybe at least just to add onto Alex here around how do we think about revenue growth for <unk> financial services business, especially around our graphene.
I can say is we do expect to see strong revenue growth year over year and a lot of that's driven by what Alex just referred to a lot around our ecosystem lending and also we've got the banks coming online and especially in the second half of this year for our Malaysia as well as in Indonesia.
The Singapore side as you heard from our prepared remarks already operational and under deposits already operational deposit product and we've got a lending product also currently in pilot phase at the moment.
The other point I do want to probably add on to this is that on an EBITDA basis.
As you we expected EBITDA to stay relative relatively flat on a quarterly throughout 2023.
You just heard from Alex that we've driven a lot of cost out of it.
Out of a drop in business and we saw some really nice uptick in cost reduction now so we're going to continue to do that in graphene, which will partially be offset by the launch of our digi banks across the three markets.
Yes.
Your second part of the question was around deliveries you.
You asked about what about EBITDA margins is there any is there any plans to increase subsidies.
The way, we think about it is there.
The way I'd say, its a healthy marketplace that we need to make sure we maintain in our food delivery and <unk> deliveries in general.
We are going to continue to drive down the cost to serve that's really important for us the good driving efficiency in the marketplace with our drivers as well as with our merchant.
And you've seen some of the waiting time improvements that we quoted earlier and Thats part of our lowering our cost to serve at the same time also Alicia we are going to drive volume growth, while improving margins at the same time. So we don't see it as a trade off between profitability and growth, but we don't have to use subsidy as one of the lever.
There's multiple levers that we can use we don't we do not have to step up our subsidy spend to get that growth going at the same time also and you saw that also in in last G, where we continue to make sure our category position in food delivery, what's very very important which is very critical to us we were still maintaining.
And also retaining as number one while we also increase our subsidies and we improved margins and we also reached a stigma profitability while at the same time. So we these playbooks playing nicely will continue to use. This I think we also will be focusing on we show is that consumers want affordability.
And also not specifically subsidies so as Alex mentioned also we've got the same as Anthony mentioned save a delivery option answer that we introduced just an example of how we can actually bring affordability to the consumers in southeast Asia. So and there is a lot of other product innovations that we're working on also to make sure that we can continue.
The growth in our delivery business.
I see thank you thanks Peter.
Thanks.
The next question today comes from the line of Sarah <unk> from Credit Suisse. Please go ahead. Your line is now open.
Yeah. Thanks for the opportunity I've got two questions.
First one going back to the delivery business. If you look at <unk> 14 is expected to be.
Strong quarter because of soft.
Obviously if activity yearend.
<unk> had some marketing promotions also going into the quarter. So if you look at seasonally also during the quarter corporate reduction.
I believe we've got multiple fixed corporate and corporate business.
<unk> <unk> dnb.
But it is a possibility.
Honestly the take rates are going to come down on a quarter on quarter flat on a quarter on quarter with it. So any of you didn't why sequentially, but the weakness there.
I understand the focus on profitability and expansion in margin, but is there any market due to intuitive.
Anything we should.
Good.
So I understand how much it has impacted anything that you can share that.
And.
Sticking to.
How should we think about some immediate liquidity.
Hopefully completely look stupid, if there could be a gain a software focus on profitability, but beyond that.
Thank you Andrew.
Faster than GDP growth, how should we think about any color.
But secondly.
On your <unk>.
If you can provide a breakup fee.
<unk>.
And looking for if you do end up breaking up between them. So I think it's the right way to get it.
The breakup between mobility and <unk>, if you look at the <unk>.
Solid look at MTT is a flat quarter on quarter basis. So how should we think about future growth is it is it more driven by higher frequencies or Houston being lot more users.
Thank you.
Thanks, Darrin, let me take your first question on deliveries so in the fourth quarter here, we made a conscious decision to focus on the profitability of our delivery segment.
So deliveries GMB in the fourth quarter grew on a constant currency basis by 5% and then.
22% for the full year year on year. So we did trade off growth to drive a more sustainable and profitable deliveries business as we substantially improved the EBITDA margin quarter on quarter, plus 160 basis points, and then year on year of 550 basis points up to 2%.
The other thing in the fourth quarter was we did affect the closure of the dark stores and most of the Kraft kitchens. So that had an impact on <unk> growth in the fourth quarter.
Although of course, we did manage to reap some good cost savings from that which improved the margin position as well.
At the same time as Peter was saying earlier, we continued to extend our category leadership position. So we're happy with the tradeoffs that we made in the fourth quarter Peter.
Peter mentioned earlier in his remarks that we expect the <unk>.
First half to be relatively seasonally weaker than the second half in the coming year.
But the we are embarked on a number of initiatives, which we think will help on a.
Across the year grab on limited to improve engagement and stickiness in the giant grocer and trends retail partnerships will also help.
And then the piloting of dine in and takeaway, which will push us into the offline dining segment.
The dining in segment over time, that's a good mid to long term growth driver for us.
So we now believe that we have a sustainable deliveries business in place and we can head towards that 3% plus margin that Peter was talking about earlier.
And in fact, where we are at that margin, 3% or higher in the majority of our six core markets already.
You asked about the longer term perspective, we do believe that the potential is sizeable in the longer term. So the across those six core markets for us in southeast Asia Euromonitor estimates the combined online market size for ride hailing and food deliveries is about $35 billion by 2025.
And we are the category leader and we intend to remain the category leader in that in that marketplace.
So there's a long runway for growth as market penetration currently is still very low in fact, if you look at our end to use in Q4, it's still only a single digit penetration.
The total population in southeast Asia.
So on the MTA use of our own.
So <unk> actually grew 14% year on year, while we don't provide specific guidance for them to use we expect it to continue to grow on the back of Covid reopening and mobility recovery across our markets.
Honestly, there's still a lot of potential to grow Tam given the sizable online population in their region. Today grabbed serves one in 20 people in this region every month for US. This means that there's still plenty of room for us to grow.
We started in the mobility market and have significantly expanded our Tam over the last 10 years by expanding into deliveries financial enterprise services.
Today, we are a household trusted name with multiple competitive advantages, including the strong edge of being able to leverage a powder brand in our ecosystem.
Now Vern you also asked how would we grow them to use.
Have a multipronged approach to grow we are one penetrating into cities with new services and categories to increasing all financial services with our own growing ecosystem and three evolving our product and service offerings to appeal to different user types. So for example, burn we increased demand.
By providing affordable services, when we launched a new version of grab share in Philippines, and Singapore, where users can save on your fares when bookings are on demand Carpooling service and.
Another example to create new demand for corporates, we've developed.
Grab for business, a <unk> SaaS solution.
Which basically gives companies more control convenience and saves time and money for companies to offer employee services. So what other services like getting to and from the office safely of food delivery and offices.
So Graham has plenty of room to grow.
We're in pole position to capture the large Tam given the power of our ecosystem. So we will execute our multi pronged approach to grow our user base.
Thank you.
Thank you.
This concludes the question and answer session. So I'd like to turn the conference back over to Peter for any closing remarks. Please go ahead.
Thanks to everyone for making the time and just investing the time too.
So with all of your questions.
And thank you for supporting US and if you have any questions. Please feel free to reach out to our investor relations team or visit our Investor Relations website. Thanks, again, everyone and speak in the next quarterly call.
This concludes <unk> fourth quarter and full year 2022 earnings conference call. Thank you for your participation you may now disconnect your lines.
Yeah.
Yeah.
Okay.