Q2 2024 Grab Holdings Ltd Earnings Call
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Ada: Ladies and gentlemen, thank you for joining us today. My name is Ada, and I will be your conference operator for this session.
Speaker Change: Welcome to Grubb's 2nd Quarter 2020 Full Earnings Results Call.
Speaker Change: After speaker's remarks, there will be a question and answer session. I will now turn it over to Douglas Eu to start the call.
Douglas Eu: Good day, everyone, and welcome to Grab's second quarter 2024 earnings call. I'm Douglas Eu, Director of Investment Relations and Strategic Finance at Grab. And joining me today are Anthony Tan, Chief Executive Officer, Alex Hungate, Chief Operating Officer, and Peter Oey, Chief Financial Officer.
Speaker Change: During the call today, Anthony will discuss our key strategic and business achievements, followed by Alex who will provide operational highlights, and Peter will share details of our second quarter 2024 financial results. Following the prepared remarks, we will open the call to questions.
Speaker Change: During this call, we will be making forward-looking statements about future events, including our future business and financial performance. These statements are based on our current beliefs and expectations.
Speaker Change: Actual results could differ materially due to a number of risks and uncertainties as described on this earnings call, in the earnings release, and in our Form 20-F and other filings with the SEC. We do not undertake any duty to update any forward-looking statements.
Speaker Change: We will also be discussing non-IFRS financial measures on this call. These measures supplement but do not replace IFRS financial measures.
Speaker Change: Please refer to the earnings materials for a reconciliation of non-IFRS to IFRS financial measures for more information please refer to our earnings press release and Supplemental presentation available on our website and with that I will turn a call over to Anthony to deliver his remarks
Doug: Peace, Doug.
Anthony: Thank you for joining us today. During the quarter, we focused on leveraging our platform scale to drive profitable growth. On-demand GMV, group monthly transacting uses, and group revenues hit new all-time highs.
Anthony: All our on-demand transactions actually grew strongly at 22% year-on-year. We also delivered our 10th consecutive quarter of group-adjusted EBITDA improvement, even as we invested into new products and faced foreign currency headwinds.
Anthony: This underscores our relentless focus on generating sustainable and profitable growth at scale in the long term.
Anthony: And as we balanced growth and cost discipline, we achieved our second quarter of positive adjusted free cash flow, giving us the confidence for adjusted free cash flow to turn positive for the full year of 2024.
Anthony: As a company, we're committed to deliver the best value and service quality for our platform users and partners.
Anthony: Our strategy to be product and tech-led has been key to unlocking platform growth. During the quarter, we rolled out more affordable and high-value offerings across mobility and deliveries to meet the diverse needs of our users.
Anthony: We also focus on providing more tailored solutions to our users. For example, family accounts, advanced booking, group orders, and dine-out deals are nascent products today but have begun to gain strong traction and bring greater convenience for our users.
Anthony: At the same time, Grab Unlimited, our subscriptions program, hit a new all-time high in total subscribers in a quarter.
Anthony: On the banks, we had a public launch of Suva Bank in June, our digital bank in Indonesia.
Anthony: With all the three digital banks now fully operational, together with GrabFin, our fintech platform, we are very excited about our opportunities to continue driving financial inclusion across the region.
Speaker Change: Our DGBank deposits, lending dispersals, and total customers across GrabFin and our DGBanks continue to demonstrate robust growth, reflecting the trust our users have placed in us.
Speaker Change: Deposits in GX Bank in Singapore and GX Bank in Malaysia grew substantially by over 50% quarter and quarter to $730 million.
Speaker Change: with total loan dispersals across GrabFin and our DG Banks hitting an analyzed run rate of $2 billion in the second quarter.
Speaker Change: The strong growth across our financial services platform is underpinned by the ability to leverage the scale of the Grab ecosystem.
Speaker Change: For DG Bank in Malaysia, for instance, approximately 1 in 2 GX Bank users transact on Grab with their GX Bank account.
Speaker Change: In less than a year since its public launch, GXBank has over 750,000 deposit customers, which include more than 500,000 GXBank debit card holders as of July 2024.
Speaker Change: Subank also crossed 1 million deposit customers in August, in less than two months following its public launch in June.
Speaker Change: As we look towards the second half of 2024 and beyond, we will embrace a three-pronged approach to continue outserving our users and ecosystem partners across the region.
Speaker Change: First, we will continue dedicating our efforts to scaling our ecosystem. We'll bullish on the long-term growth outlook of Southeast Asia with economists forecasting mid-term GDP growth rates in the region to be faster than the world average.
Speaker Change: and against a backdrop of stronger inbound tourism flows and strengthening domestic demand.
Speaker Change: To capture this growth, we will leverage all of our assets to our advantage, be it improving the selection of affordable or high-value offerings on our on-demand platform and driving cross-sell opportunities across our various services.
Speaker Change: second
Speaker Change: And as we have actually shared previously, we will continue to be AI-led in driving platform and profitable growth.
Speaker Change: By doing so, we'll solve the most impactful everyday problems in Southeast Asia in the fastest way possible to deliver value creation for our shareholders and generate sustainable free cash flow.
Speaker Change: At the same time, we are continuing our investment in degenerative AI to drive efficiency gains across our business and deliver innovative customer and partner experiences.
Speaker Change: For example, we have rolled out AI-powered dish descriptions in 5 out of 8 markets at scale.
Speaker Change: Our experiments have shown a significant improvement in checkout rates from our long-tail merchant partners that used AI-generated descriptions. This is but one of many examples of the way we are leveraging foundational AI capabilities and generative AI to continue to improve our marketplace.
Speaker Change: And finally, we'll continue to drive cost discipline across our business.
Speaker Change: Regional corporate costs in the second quarter declined 14% year-on-year.
Speaker Change: So our intention here is clear, by striving to build a lean and agile organisation, we will be in pole position to out-serve not only our ecosystem and users, but also improve shareholder returns by continuing to generate.
Speaker Change: Profitable Growth and Sustainable Free Cash Flow.
Speaker Change: Before I pass the time over to Alex, I'm also pleased to announce that we've published our latest ESG report demonstrating our steadfast commitment to delivering a triple bottom line business.
Speaker Change: We firmly believe that long-term success of our business is intricately linked to the welfare of the communities we serve and the health of our planet. And in this regard, thank you.
Speaker Change: My heart goes out to all those who are affected.
Alex: by Typhoon Gemi and other adverse weather events across the region. Grab's commitment during challenging times like this is to respond quickly in any way we can to help governments, our driver and merchant partners, as well as our users, and to play our part in supporting recovery post-calamity.
Alex: for our communities in the Philippines.
Alex: There was particularly a hot head by a typhoon. We activated our Custody Assistance Program to provide support to our partners affected by the severe weather.
Alex: Additionally, we utilize grab maps and real-time reports from our fleets to help our partners navigate safely to affected areas.
Alex: As GEMI has moved on, we are partnering organizations like Jollibee Food Group and McDonald's and Red Cross for our users to donate their Grab Rewards points towards recovery efforts. From our hearts, we are grateful for all these partners who came together quickly to serve our communities during and post a calamity.
Alex: I'll now hand over the time over to Alex who will cover our second quarter operational highlights in more detail.
Alex: Thanks, Anthony.
Alex: Over the next few minutes, I will share our operational highlights and the underlying drivers of these results.
Speaker Change: Starting with deliverance.
Alex: We generated strong deliveries growth in the quarter by improving the affordability and reliability of our services.
Jaya: with some significant tech and product initiatives along with strong growth from Jaya.
Jaya: On a year-on-year basis, Deliveroo's GMV grew 14% on a constant currency basis.
Jaya: as we drove food transactions growth by 11% year-on-year.
Jaya: Segment-adjusted EBITDA margins remain stable even as we invested in these new product rollouts.
Jaya: Saver Deliveries gained further traction, reaching 28% of Deliveries transactions from around 10% a year ago, creating meaningful uplifts for our ecosystem, with Saver users exhibiting average order frequency levels 1.9 times higher than non-Saver users.
Jaya: Saver also attracted new users to Grab, with 15% of new deliveries monthly transacting users joining the platform through Saver delivery.
Jaya: On currently at the high end of the pricing ladder, we grew adoption of priority deliverers to 7% of deliveries transactions.
Jaya: We see a lot more potential in this relatively crisis-sensitive segment.
Jaya: We particularly focus on innovating new ways to support large social gatherings and return to the office. For example, we revamped and relaunched group orders. We've seen group orders driving basket sizes that were two times higher than average grab food orders.
Jaya: And by enabling our users to connect seamlessly with each other on the platform, we're able to amplify new user growth.
Jaya: and leverage our scale to drive improvements in retention, basket sizes and batching rates. This allows us to pass on cost savings to users in the form of lower delivery fees, which in turn accelerates growth.
Jaya: We strive to be the partner of choice for Southeast Asia's most loved merchants. We've increased median earnings for our delivery's merchant partners by 15% year-on-year by making our powerful self-serve advertising platform available to merchants of all sizes.
Jaya: The total number of monthly active advertisers who joined our self-serve platform increased to 56% year-on-year to 168,000, while average spend by monthly active advertisers on our self-serve platform increased by 26% year-on-year.
Jaya: Revenue generated from our advertising business as a percentage of deliveries GMV was 1.5% in the second quarter. Recovering back to fourth quarter 2023 penetration levels despite the latter typically being the seasonally strongest quarter for advertising.
Jaya: From here, we see plenty of headroom for advertising penetration to grow further.
Speaker Change: Looking ahead to the rest of the year, we will continue to build our position as the leading on-demand platform in the region. And while the third quarter is typically impacted by adverse weather conditions in Southeast Asia, for example, Typhoon Gemi in the Philippines that Anthony just mentioned.
Anthony: We see demand levels in July remaining robust nonetheless.
Anthony: And as such, we expect it to drive sequential growth for our delivery segment, heading both into the third quarter and the fourth quarter of this year.
Speaker Change: Moving on to mobility now. New product rollouts and deepening adoption of our existing affordability and high value offerings powered mobility GMV to 25% year-on-year growth on a constant currency basis.
Speaker Change: Similar to the delivery segment, this strong GMV growth was led by increased transaction volumes which grew 38% year-on-year, while mobility NTUs also expanded by 26%.
Speaker Change: One of the new products that is driving this transaction and MTE growth is Saver ride hailing, which is now available in five markets.
Speaker Change: Saver offers more affordable options alongside our established GrabCar or GrabBike products.
Speaker Change: And while these products may involve some tradeoffs for passengers in the quality of the vehicles or the longer waiting times, they have enabled us to expand our addressable market, all while upholding our core value propositions of safety and reliability.
Speaker Change: Adoption of safety transport rides has increased to around a quarter of mobility transactions in the second quarter, from 15% in the same period last year, with 14% of group MTUs joining the Grab platform, transacting on a Saver mobility offering.
Speaker Change: Saver Transport Rides also drive loyalty and engagement uplifts. 8% of MTUs who joined the Grab platform through Saver Transport Rides were cross-sold to food in the same month.
Speaker Change: And in Indonesia, for example, users of our Saver Ride hailing model recorded frequency levels which were 1.9 times higher than non-Saver users.
Speaker Change: Similarly, Move It, our two-wheel offering in the Philippines that was relaunched last year, continues to display strong momentum.
Speaker Change: Today, MUVIT users comprise almost a third of mobility MTUs in the Philippines, underpinning the strong growth of mobility MTUs in the Philippines, which grew 92% year-on-year.
Speaker Change: We balance this growth of affordable ride-hailing solutions with high-value, differentiated services that further maximize convenience and reliability for the less price-sensitive users.
Speaker Change: Our high value offerings such as Grab Premium generated revenues per ride that were over two times higher than standard rides.
Speaker Change: One of such higher value products is the advanced booking ride hail product, which was relaunched earlier this year as a product where passengers have no doubt that the driver will be there waiting for them.
Speaker Change: This enabled us to drive over three times higher driver earnings per ride compared to our conventional mobility products.
Speaker Change: Similarly, we have focused on growing adoption of our premium end offerings to travellers and corporate users, which today comprise a smaller proportion of mobility volumes.
Speaker Change: The net effect of new product launches and changing product mix, such as the growth of Saverides and the invention of Move-it, did result in segment-adjusted EBITDA margins for mobility declining in the second quarter.
Speaker Change: This was in line with our expectations as we made a strategic decision in the quarter to prudently invest it to deepen market penetration and drive growth for the longer term.
Speaker Change: We remain committed to achieving our long-term segment-adjusted EBITDA margin guidance of 9% plus for mobility.
Speaker Change: Finally, in line with our mission, we also continue to improve productivity of drivers on our platform. During the quarter, we increased active driver supply while optimizing our existing driver supply to meet the strong demand growth.
Speaker Change: In the second quarter of 2024, monthly active driver supply increased by 13% year-on-year and 5% quarter-on-quarter, while quarterly active driver retention rates remained healthy at 90%.
Speaker Change: Our efforts to improve driver supply and efficiency resulted in an 11% percentage point reduction in the proportion of surged mobility rides year-on-year.
Speaker Change: Mobility fulfillment rates also improved sequentially given the strong demand levels and increased driver supply. We are confident on the long-term trajectory of our mobility business and see ample room for volumes and user penetration to grow as we continue to roll out new products and services.
Speaker Change: Going into the third quarter, mobility continues to pace strongly in spite of the adverse weather conditions and we expect to drive sequential growth in the coming quarters.
Speaker Change: Now finally, our financial services segment. This segment continues to grow fast, with revenues growing 61% year on year on a constant currency basis, while segment adjusted EBITDA losses narrowed by 44% year on year.
Speaker Change: We continue to scale up our lending business to serve ecosystem partners and users, where we have a strong underwriting, customer acquisition and collective advantage in relation to traditional banks and other fintech and digibank peers.
Speaker Change: Total loans dispersed in the second quarter grew 43% year-on-year to reach $500 million or an annualized run rate of $2 billion.
Speaker Change: And we end the quarter with a loan portfolio of $397 million, underpinned by the continued growth of ecosystem lending in GrabFin and growing FlexiLoan volumes from GXS Bank in Singapore.
Speaker Change: And remember, we have yet to launch our lending products in GXBank in Malaysia.
Speaker Change: We continue to maintain a prudent stance on credit risk, with 90-day non-performing loans stable at around 2%.
Speaker Change: And we're generating healthy, risk-adjusted returns on our loan portfolio, even after accounting for allowances for credit losses.
Speaker Change: Customer deposits across GXBank and GXS expanded to $730 million at the end of the second quarter, rising by 52% from $479 million in the prior quarter.
Speaker Change: The strong growth was driven by an increased number of deposit customers for GX Bank in Malaysia, as the bank continues to acquire more users from the Grab platform.
Speaker Change: In less than a year since its public launch, GXBank has over 750,000 deposit customers, which include more than 500,000 GXBank debit card holders as of July 2024.
Speaker Change: We have also serviced more customers in JXS Bank in Singapore as regulatory caps on deposits were raised again.
Speaker Change: Overall then, our financial services business continues to be a strong driver of ecosystem growth and cross-sell opportunities.
Speaker Change: As an example, I spoke earlier about the growth of our two-wheel offerings in the Philippines. So the expansion of Move-It has resulted in nearly...
Speaker Change: a two-times increase in our active driver supply pool year-on-year. So that enables us to drive cross-sell opportunities to other grab services such as lending. We saw Philippines driver cash advances hitting a new monthly record high in June.
Speaker Change: Concurrently, driver partners and merchant partners with active loans recorded higher transit hours and higher retention.
Speaker Change: Regionally, merchant partners with an active loan exhibit six-month retention rates that are 1.4 times higher than merchants without a loan. And driver partners with an active loan exhibited almost two times higher average earnings as compared to drivers without a loan.
Speaker Change: Going forward, our financial services business continues to be fast growing, and we see significant opportunities for further growth ahead across both our GrabFin and Digibank businesses.
Speaker Change: And in closing, we'll continue to scale our platform by leveraging product, tech-driven initiatives to maximize marketplace efficiencies, reliability, and convenience, enabling Grab to drive greater cost efficiencies across our business.
Speaker Change: We are dedicated to capitalizing on our scale advantage and our leadership in the mobility and food delivery sectors.
Speaker Change: to create value for all stakeholders, particularly the 41 million monthly transacting users currently on our platform. With that, let me turn the call over to Peter.
Peter: Thanks, Alex.
Peter: Before going into our results, it's important to highlight that Southeast Asia saw foreign exchange translational impacts.
Peter: that led to a divergence between our headline and constant currency growth rates.
Peter: As the Southeast Asian currencies weakened against the U.S. dollar year-on-year, this translated to an impact of 528 basis points on the year-on-year on-demand GMB growth rates.
Peter: and 549 basis points on revenue growth rates.
Peter: Now, withstanding these FX headwinds.
Peter: Our underlying demand in the region remains strong, as seen in the positive year-on-year GDP growth across Southeast Asia in the first half of 2024. This is driven by strong domestic demand and continued tourism recovery in the region.
Peter: Now turning to our Q2 financial results, let me start with revenues.
Peter: Group revenues in the second quarter grew 17% year-on-year, or 23% on a constant currency basis, to reach an all-time high of $664 million.
Peter: On a year-on-year basis, mobility revenue was up 19% or 23% on a constant-currency basis as we recorded strong growth in mobility MTU and transactions.
Peter: Our deliveries revenue grew 11% or 17% on a constant currency basis.
Speaker Change: Deliveries MTUs continue to grow as we drove top-line growth in food deliveries, advertising, and Jaya Grosso.
Speaker Change: Incentive spend as a purported delivery GMV was down 40 basis points year-on-year.
Speaker Change: and financial services revenue was up 54% or 61% on a constant currency basis driven growth by mainly from lending across Graffin and GXS Bank and further optimization of payments incentive spend
Speaker Change: Moving on to On Demand GMV. Year on year, second quarter On Demand GMV grew 13% or 18% on a constant currency basis to $4.4 billion.
Speaker Change: on a segment-level and year-on-year basis.
Speaker Change: Mobility GMB continues to grow strongly at 20% or 25% on a constant currency basis and Deliveroo's GMB growing by 9% or 14% on a constant currency basis to $2.9 billion.
Speaker Change: Segment-adjusted EBITDA for the quarter was $148 million.
Speaker Change: which grew by 84% year-on-year in the same period last year.
Speaker Change: Mobility, Segment, Adjusted Evida, grew 14% year on year, to $129 million.
Speaker Change: Mobility segment adjusted EBITDA margins were 8.2% in the second quarter of 2024 and declined from 8.6% in the same period last year.
Speaker Change: This is mainly driven by product mix and also consistent with our efforts to invest in rolling out new products and services.
Speaker Change: delivery segment adjusted EBITDA grew over four times to reach 42 million dollars
Speaker Change: while delivery segment adjusted EBITDA margins on GMV expanded by 110 basis points year-on-year to 1.5%, driven by lowered overhead expenses.
Speaker Change: greater optimization of our incentive spend as a percentage of delivery's GMV and also increased contributions from advertising.
Speaker Change: Our financial services segment adjusted EBITDA losses narrowed by 44% year-on-year to negative $24 million. The reduction in losses were attributed to the improved monetization of our lending products that drove higher revenues and reductions also in overhead expenses.
Speaker Change: Overall, we remain committed to achieve our long-term segment-adjusted EBITDA margin guidance of 9% plus for mobility and 4% plus for deliveries.
Speaker Change: and for the banks to break even by no later than the end of 2026.
Speaker Change: while at the same time also investing in new growth initiatives strategically across the business.
Speaker Change: On regional copper costs for the quarter came at $84 million compared to $98 million in the same period in 2023 and $91 million in the prior quarter.
Speaker Change: We focused on driving cost efficiencies across our organisation, with regional copper costs declining 14% year-on-year, coming from both fixed and variable cost components.
Speaker Change: Our commitment towards driving both top and bottom line improvements is demonstrated by our 10th quarter of sequential group-adjusted EBITDA growth.
Speaker Change: Group adjusted EBITDA was $64 million for the quarter, an improvement of $81 million from the same period last year.
Speaker Change: On net cash from operating activities, we recorded a positive $272 million cash inflow for the quarter, an improvement of $323 million year-on-year.
Speaker Change: This was attributed to reduction in losses before income tax combined with positive momentum in customer deposits for our banks.
Speaker Change: Adjusted free cash flow was $36 million in the second quarter and negative $67 million on a trailing 12-month basis.
Speaker Change: On a year-on-year basis, this represents an improvement of $56 million following increased profitability and a reduction in CapEx.
Speaker Change: As for our second quarter operating loss, on a year-on-year basis, it improved by $121 million to negative $56 million, attributable mainly to increase in revenue and lower restructuring expenses.
Speaker Change: IFR's net loss for the quarter improved by $79 million.
Speaker Change: to negative $68 million, largely driven by improvement in our operating losses, offset by increases in income tax expense and net foreign exchange loss of $53 million year on year.
Speaker Change: The IFRS loss of $68 million is inclusive of $153 million of non-cash expenses below the adjusted EBITDA line of this $82 million was from share-based compensation expenses.
Speaker Change: Moving on to our balance sheet and liquidity position.
Speaker Change: Gross cash liquidity stood at $5.6 billion at the end of the second quarter, which is an improvement of $267 million as compared to the prior quarter.
Speaker Change: with a substantial part of the cash inflow attributed to the growth in deposits from customers in GXS Bank and GX Bank, which increased to $730 million from $479 million from the prior quarter.
Speaker Change: Net cash liquidity similarly increased to $5.3 billion at the end of the second quarter compared to $5 billion at the end of the prior quarter.
Speaker Change: As to our authorized $500 million share repurchase program, we repurchased an additional 9.6 million shares in the aggregate principal amount of $34.6 million over the second quarter.
Speaker Change: Cumulatively, we have repurchased and retired 40 million shares in the aggregate principal amount of $131 million.
Speaker Change: as we look ahead to the second half of 2024.
Speaker Change: We expect to drive sequential on-demand GMV and group-adjusted EBITDA growth.
Speaker Change: We will continue to innovate and expand our product offerings across our platform to serve new users while improving the loyalty and engagement among our existing users.
Speaker Change: We expect revenue growth to accelerate beyond 2024 as such initiatives, along with the new contributions from the banks and advertising, both ramping up as they scale.
Speaker Change: On our guidance for 2024, we are maintaining our full year 2024 revenue guidance of $2.7 to $2.75 billion and an adjusted EBITDA guidance of $250 to $270 million.
Speaker Change: and we expect to land at the upper end of our Ibida guidance range.
Speaker Change: I also want to call out that a revenue growth outlook of 14 to 17 percent year-on-year assumes roughly 3.5 percentage point currency headwind.
Speaker Change: The total reported year-on-year growth.
Speaker Change: On overhead costs, we will continue to maintain discipline in managing our cost base.
Speaker Change: And then we expect regional copper costs to improve year on year.
Speaker Change: improving from our prior expectations for regional copper costs to remain stable.
Speaker Change: As for the full-year Adjusted Free Cash Flow, we remain committed to driving substantial improvement year-on-year and now expect to achieve positive Adjusted Free Cash Flow for the full year 2024.
Speaker Change: To conclude, we remain committed to growing our business sustainably, anchored on generating profitable growth and free cash flow while delivering top-line growth.
Speaker Change: It is also important for us to continue strategic investments on our product offerings and innovate in order to ensure our competitiveness and deliver value to our stakeholders in the long term.
Speaker Change: As always, Anthony, Alex, and I would like to express gratitude to our partners, our users, our shareholders, and to our grabbers for your continued trust and partnership.
Speaker Change: Thanks very much for your time, and now we'll open up the call to questions. Operator?
Speaker Change: Ladies and gentlemen, we will now start the questions and answers portion of the call. Please press star 1 to ask question, and we will call on you for your question. When asking questions, please limit to two questions per person.
Speaker Change: Your first question comes from the line of Pan Veitch at Goldman Sachs. Your line is open.
Speaker Change: [inaudible]
Speaker Change: Good evening and thank you very much for the opportunity. Also, congratulations on a solid quarter.
Pan Veitch: I note that your second quarter GMV and revenue were hampered as a result of the FX weakness against the U.S. dollar.
Speaker Change: If not for that, growth actually looked quite strong in the second quarter. Could you also share some color on what you are seeing in the second half of the year in terms of this macro competitive and also on the industry perspective? Are you actually seeing improving signs in your market which gives you the confidence to meet the upper end of your guidance items or even there's some room for you to potentially even beat on the guidance still? That's question number one. Question number two on mobility. Can you explain and provide more color on the dip in EBITDA margin quarter on quarter? What is the reason behind this and also could you also provide some color on how this margin
Speaker Change: will trend in the coming quarters. Thank you.
Speaker Change: Thanks, Pan. Great questions. Let me start, then I'll hand to Peter to just confirm the guidance.
Speaker Change: So yeah, you're right, the U.S. dollar strengthening did have a big impact on the headline growth in the second quarter.
Speaker Change: The good news is that so far this quarter, as you know, US dollar has weakened, I think around 4% quarter to date. So those headwinds from the second quarter are kind of turning into tailwinds for us here in the third quarter.
Speaker Change: The macro outlook looks strong in Southeast Asia, so foreign direct inflows and economies are at strong, robust levels. Singapore recently upgraded its GDP forecast as well for the full year 2024.
Speaker Change: And on the ground we're seeing tourism continuing to grow, particularly, you know, European visitors and then Indian visitors as well, although China is still behind where it was pre-COVID.
Speaker Change: And then your question on competition. I guess our markets have always been competitive, so there's no change there. We continue to maintain our category leadership.
Speaker Change: both in the region and in every market. So, our strategy is quite simple, we use this scale advantage along with our consistent investment in product and tech.
Speaker Change: to drive improvements in both reliability and affordability while growing profitability at the same time. As you've seen from our 10th quarter of improving profitability, that seems to be gaining traction at the same time as we're growing BP.
Speaker Change: Features like mapping, hyper-batching, and just-in-time allocation, they're all unique to Grab, so none of our competitors have that. And we believe that makes us consistently more reliable, as well as more affordable.
Speaker Change: Um...
Speaker Change: as well as obviously attracting consumers because of the reliability with the group MTUs now at an all time high. So it's very difficult for any local competitors in any of our markets to replicate that strategy because they simply don't have that scale and the technology to show sustainable profitability in the same way as we are.
Speaker Change: The trading update is positive. I hope that came across in comments in the prepared remarks. So demand for both deliveries and mobilities has been strong in the first half of this quarter, despite those difficult typhoon conditions that we referred to in several countries.
Speaker Change: So we do expect to drive sequential GMV growth for both deliveries and mobility as well as group-adjusted EBITDA growth.
Peter: And Peter, you want to talk about the guys? Oh yeah, so yeah, if any of you have heard Alex there, we are at the sequential GMV growth, both deliveries and mobility, as well as also in the financial services front. We're picking up traction there on our lending book.
Speaker Change: The banks are starting to scale. We're confident that on the EBITDA side we'll land at the upper end, which implies that our second half will be stronger than the first half. Let's not also forget that the free cash flow generating in the business
Speaker Change: is now in momentum, we expect just a free cash flow positive for the full year.
Speaker Change: So all these estimates are already baked in in all the competitive elements and the product investments plans that we make throughout the year. So we're feeling pretty good about how the second half will shape up for us with a lot of these investments that we've made in the first quarter and the second quarter translating into the second half.
Peng: Thanks Peter. And then Peng, your second question was on mobility margins, you know, the dip in this particular quarter and reasons behind this and trends in the next coming quarters.
Speaker Change: Our main observation on mobility is that there's a long runway for growth for mobility in Southeast Asia. So we're just literally scratching the surface, we believe. So we want to, we want to target
Speaker Change: With more affordability along with reliability, we want to target a growth of the TAM basically by continuing to attract new users. So we have been rolling out those innovative affordable new products.
Speaker Change: They are unlocking new users. So the strategy is working. So in the quarter, mobility GMV grew 25% year-on-year on that constant currency basis.
Speaker Change: Similar to the delivery segment.
Speaker Change: And then that growth was led by transaction volumes, which is what you'd expect, obviously, with an affordability strategy.
Speaker Change: So the transaction volumes grew even faster at 38 percent.
Speaker Change: year-on-year, and then the MTU is growing at 26% year-on-year. So the strategy is working is exactly what we had planned. So the net effect did lead to a reduction in segment adjusted EBITDA margins in the second quarter, but very much in line with our expectations.
Speaker Change: But we expect the EBITDA to improve sequentially from here.
Speaker Change: third quarter and fourth quarter, and we remain committed to our long-term margin expectations of 9% plus for mobility.
Speaker Change: i
Speaker Change: Operator, next question.
Operator: The second question comes from the line of Alicia Yep at Citigroup.
Speaker Change: Thank you very much.
Alicia Yep: Hi, good evening, management. Thanks for taking my questions. Two questions. First is, I wanted to get management comment on how we perceive
Alicia Yep: these potential disruptions of the on-demand service given the entrance and partnership of the short video platform with other on-demand peers. How will Grab plan to defend the threat and how will that impact the EBITDA margin if we need to fight back with more subsidy? Second is that if we can get some updates on, I know you roll out some products offering like the corporate, the premium cars, and also those airport pickups, any progress on that, and also any update on the TransGap acquisition. Thank you.
Speaker Change: Okay, thanks Alicia for those three questions.
Speaker Change: First one, yeah, we do work with all the major social media partners ourselves as well. We use it to drive top-of-funnel user acquisition and to reduce our CACs. There's a lot of optimization that we do as we go from one to the next to drive top-of-funnel.
Speaker Change: But we are confident that consumers do prefer Grab's in-app experience further down the funnel because, of course, that reliability and affordability that we offer due to our scale and the deep functionality in the Grab app, as you're aware,
Speaker Change: with the ability, for example, for the user to communicate with driver and merchant directly throughout.
Speaker Change: You know, and those product advantages, like the largest driver partner network in the region, we use Grab Maps across all the markets. About 90% of the drivers use Grab Maps to navigate.
Speaker Change: And then, of course, the Super App ecosystem, including the banks now, leveraging Grab Unlimited, our subscription program, and Grab Rewards to cross-sell.
Speaker Change: So that scale advantage along with that consistent investment in product and tech means that the in-app experience and the reliability and affordability is very hard for social media players to replicate.
Speaker Change: So, in our view, the social media players will not impact our long-term margins and gross prospects, and we're maintaining the outlook for those long-term margins.
Speaker Change: So, I hope we sound confident. It's not that we're complacent. We are monitoring very carefully, you know, what those interactions are between the social media players and other players in the industry.
Speaker Change: We think that the relationship we have with many of them allows us to optimise acquisition, provide the best possible combination of reliability and affordability once in our app.
Speaker Change: And then your next question was about the premium offering. Thanks for that. Yeah, we're very excited about the premium offerings. So high value rides, it really creates a win-win situation because the grab premium generates about twice.
Speaker Change: In fact, even more than twice the revenue per ride that the standard rides generate. So that's very beneficial for the driver partners and it's helping us to attract more limos, more luxury cars and drivers onto our platform. Typically in the past,
Speaker Change: Those platforms have stayed away from all of the on-demand platforms. But I think with this advanced booking ride-hailing product, which was just re-launched,
Speaker Change: They see that now as very appropriate for them in terms of ability to attract travelers and to attract executives and this is helping our supply at the high end.
Speaker Change: It's enabling us to drive over three times higher driver earnings per ride, so those individuals who own their own limos are actually now much more interested in driving with us.
Speaker Change: Travellers account for about 20% of our premium mobility MTUs regionally.
Speaker Change: And then the average basket size is about 1.5 times higher in both transport and food for tourists.
Speaker Change: So, we maintain our view that this traveler-tourist segment is extremely attractive for our services and we are deliberately targeting them at airports, as you can see from some of our out-of-home advertising.
Speaker Change: And what you may not see is we're also advertising digitally in the outgoing markets like India, North Asia, etc., coming into this region.
Speaker Change: It's still early days for our premium offerings. I'm glad you asked the question. The launches are a bit behind the launches that we did for Saver. So the Saver is reaching critical mass a bit earlier, but we do expect
Speaker Change: Considerable growth from the premium offerings for the next two quarters as they start to gain scale as well in the region.
Speaker Change: And then lastly on TransCab, I think probably most of you are aware the CCCS in Singapore decided not to clear our proposed acquisition.
Speaker Change: We had hoped to use it to accelerate new supply or to create more productivity from the taxi fleet that we were acquiring, so that would in fact essentially add supply to the Singapore market.
Speaker Change: But in the meantime, we've been actually working on supply enhancement in Singapore in many many different ways Most particularly obviously because through our technology where we're getting higher and higher productivity from the drivers in Singapore With a lot of a lot of new initiatives
Speaker Change: And then we've also been attracting new fleets to work with us in Singapore. So I think consumers will realize that they're still able to book taxes through the Grab app.
Speaker Change: We continue to be open to working with the other taxi companies. And in fact, we already work with TransCab. So we're basically taking in our stride and enhancing supply in other ways to compensate. So I think everything business as usual, we continue.
Speaker Change: Thanks for your time.
Speaker Change: Thank you. The next question comes from Sachin Sobhankar at Bank of America.
Sachin Sobhankar: Thank you for the opportunity. I have two questions. First question is on delivery a bit time margin.
Sachin Sobhankar: We see the last couple of quarters it's hovering in the range of 1.5, 1.6 versus let's say in 4Q it was high at 2.1%.
Sachin Sobhankar: I do understand there's a bit of a seasonality associated with that, but apart from that, anything else which is impacting it? And general thoughts on how we should look at the margin? Should we see a near-term improvement in this margin? Any changes to your long-term guidance out here?
Speaker Change: Second question is on your financial services. Clearly now all our Digibanks have been launched in all three countries. You do expect your second half to be better than first half. So in that context any change in terms of guidance and break-even in financial services?
Speaker Change: Let me take the questions on both of them here. On deliveries margin,
Speaker Change: We're continuing to invest in products at the same time. We've seen some, if you look from a quarter-on-quarter perspective, our margin slightly ticked up. If you look from a year-over-year basis, our margin for deliveries improved by about 110 basis points.
Speaker Change: So overall, I think we're making all the right decisions and investing into new products also in deliveries. We spoke a lot about mobility. We shouldn't forget about deliveries also.
Speaker Change: There's a ton of stuff that's going on in the delivery side.
Speaker Change: We've got also Dine Out features now prominent in our app, the users are using it.
Speaker Change: There's other initiatives also that were in the works. Our grocery delivery as well as our mud delivery continues to see good momentum.
Speaker Change: And so we'll continue to make those investments. So we'll continue to...
Speaker Change: continue to make those investments and also balance profitability at the same time. So, we continue to grow the EBITDA of our deliveries business. It's important that we do that and we feel pretty good in where we are today and you'll see sequential growth.
Speaker Change: in both.
Speaker Change: GMB revenue and our EBITDA dollars from that perspective. We're committed to the 4% plus.
Speaker Change: in terms of margins.
Speaker Change: You'll see margins.
Speaker Change: swing from one quarter to a quarter, some of that it could be just the product mix in the business and also how advertising comes in also.
Speaker Change: into the business. But where we are today, the margin for deliveries, we feel is in a good spot and we are shooting for that 4% plus from a long-term margin perspective.
Speaker Change: Second question around the banks itself. You saw all the statistics in the prepared remarks. What you saw there was the momentum that we're seeing in both Singapore and Malaysia and also including Indonesia in the deposit base.
Speaker Change: We're starting to see now momentum in our loans business, both across, especially our grab fin, as well as in our banks.
Speaker Change: And in my remarks...
Speaker Change: I alluded that we remain committed for our banks to break even by no later than the second half of 2026. And we've seen some good momentum in where the users are leveraging the banks within our graph ecosystem.
Speaker Change: Over 80% of our Grab users actually are leveraged in terms of the deposit holders.
Speaker Change: and those who are using the bank products today, there's a good 80% portion of them are Grab users.
Speaker Change: and that's healthy and that's what we want to see.
Speaker Change: and we're continuing to get more products out also for our banks and also as we drive the profitability to come for no later than 2026.
Speaker Change: Thank you.
Speaker Change: Thanks for tuning in.
Speaker Change: Next question, operator.
Speaker Change: The next question comes from Piyush Chowdhury at HSBC. Your line is open.
Piyush Chowdhury: Hi, thanks for the call. Two questions please. Firstly, could you talk a little bit about competitive landscape across both the ride-hailing and delivery segment? The reason to ask is what has led to increase in...
Speaker Change: Incentive Spence in on-demand segment, it goes to…
Speaker Change: in around 10.1% of GMB in 2Q versus 9.7 in first quarter.
Speaker Change: And that's the first question. Secondly, you have explained on the mobility margin drop, but what is the breakup of how much of the drop is due to new rollout of new product rollouts and how much is due to change in product mix?
Speaker Change: And how long will these investments into new product initiatives would persist in the mobility segment? Thank you.
Speaker Change: Thanks, Piyush. Yeah, you know, there's a lot of new launch activity going on in this.
Speaker Change: quarter, not just in mobility, but also deliverers. You know, Peter was referring to the Omni services that we've been launching.
Speaker Change: as well as SAVR there. And then we've got SAVR and advanced booking in the mobility space. So those incentives were largely associated with supporting those launches.
Speaker Change: The competitive activity is there, but it's always been there, as I was saying earlier. So we don't see any particular intensification of competitive activity.
Speaker Change: Thank you. Bye.
Speaker Change: The product mix is a factor. Obviously, the Saver launches went ahead of the premium launches, so that has changed the product mix in the short term. But like I was saying earlier, we are expecting the premium launches to get more traction in the second half, because they were launched only very recently.
Speaker Change: And I was going to add, Piyush, we don't break up the split up between what's new product and brand product mix because there are some seasonal impact in terms of what type of rides people take in different months.
Speaker Change: Also, there is also tourism that comes into it, as Alex mentioned earlier, the tourism market also attracts much of high-valued rides for us.
Speaker Change: So I think overall, what we're doing is a balance between new products and product mix.
Speaker Change: new products as well as incentives, also growing the supply base.
Speaker Change: also at the same time. We are anticipating a strong second half mobility business.
Speaker Change: We're ramping up our driver supply base.
Speaker Change: We're ramping up premium driver supply base also.
Speaker Change: as we anticipate the traveler segment also growing here in Southeast Asia.
Speaker Change: So from a margin perspective, we'll continue to be committed to the long-term margin of 9% plus for mobility. And we expect also to continue to drive EBITDA growth in our mobility business, especially in the second half versus the first half.
Speaker Change: Next question is from Ranjan Sharma. At J.P. Morgan, your line is open.
Ranjan Sharma: Good evening and thank you for the presentation.
Ranjan Sharma: and the opportunity. So I just have two questions. Firstly, on your stock price compensation,
Ranjan Sharma: I see the first half is running at a higher level compared to the first half of last year.
Ranjan Sharma: And even the court is running much higher than...
Ranjan Sharma: the quarterly rendering that you had from the second to third quarter, second to fourth quarter last year. Now when your headcount is getting optimized, like why is your stock price compensation running high if you can share more color around that?
Speaker Change: And secondly, the second question is on your free cash flows.
Speaker Change: Your guidance is maintained on EBITDA.
Speaker Change: So, but you've seen inflection and adjusted free cash flow, so if you can help us understand what is the moving part. Thank you.
Speaker Change: If you look at our stock-based compensation, if you look at the first half,
Speaker Change: And I'm going to compare it to the last half of last year. We're roughly about $8 million higher than last year. And there's always...
Speaker Change: timings when it comes to vesting periods. Yes, we do have a lowered head count.
Speaker Change: But if you also remember that the headcount that we made the re-adoption was in the second half.
Speaker Change: that was in June last year when we did the restructuring.
Speaker Change: So a lot of the benefits that you'll see will flow in the second half. So I don't think first half is a good comparison. What I'll say is that from a SBC perspective, as a percentage of revenue, it'll be lower.
Speaker Change: roughly about 200 to 300 basis points on a year-over-year basis. And it's a cost that we're all obviously watching very closely here. And on dilution, just to give another perspective on SBC, it's currently pacing at roughly about 2%
Speaker Change: and we're very judicious when it comes to that. Actually, if you include the shared buyback program, our dilution is roughly about 1.3%.
Speaker Change: And we're planning to actually deploy our shared buyback program more judiciously also to manage our overall shared dilution.
Speaker Change: Second question around free cash flow.
Speaker Change: Really, the difference between the delta between EBITDA and free cash flow or the components is really on working capital and CapEx itself.
Speaker Change: Yeah, so if you look at our CapEx in the first half, it's roughly running at about $50 million.
Speaker Change: And then the other part is working capital. Working capital in the second half is traditionally much more positive than the first half. And also the third component, probably it's a little bit more different than last year's taxes.
Speaker Change: So our income tax expense is higher than last year.
Speaker Change: But that's also natural just given the profitability profile of our business and just in certain countries.
Speaker Change: the way our NOLs are also being utilised and also certain entities are just achieving profitability much faster than the other countries from a tax perspective.
Speaker Change: The next question is from Mark Mahoney at Averco.
Mark Mahoney: Hey, thanks. I'll just ask one question. These group MTUs, I think they rose about $2.4 million sequentially. I think that's the biggest increase you've had in the last two plus years or something like that. So just go through what were the big inflection point drivers of the growth in group MTUs. Thank you.
Speaker Change: Hi Mark, thanks for the question. The biggest driver was the push for affordability. So we specifically made this decision to use our scale to drive affordability and that's allowed us to attract
Speaker Change: New users to the platform. So we're seeing 14% and 15% respectively, new users to deliveries and mobility through those Saver products first, and then we cross out from there. So that's been a big injection of new MTUs.
Speaker Change: And then the transaction volumes are coming up and therefore boosting into users as well. So we're getting higher frequency from existing users.
Speaker Change: and that's boosting MTU. So this was an intentional strategy. We flagged it at the start of this year and we talked about the new product launches that would underpin it.
Speaker Change: and we're delighted that we are seeing that NTU increase. In our view, this is a leading indicator for future revenue and profitability growth, so we think it's a good investment for us to make for shareholders.
Speaker Change: Thank you very much.
Speaker Change: Next question is from John Shaw at Barclays. Please go ahead.
John Shaw: Thank you for taking my question. My apologies for getting up a bit late. If I ask it, you already answered my apologies. I saw you had a nice improvement in regional cost this quarter.
Speaker Change: Could you talk about sort of your outlook?
Speaker Change: For the next two quarters as well, there was a nice reduction in quota of a quarter in Q2.
Speaker Change: That's on the regional cost. I know already you have talked about the sort of the competition or potential competition from TikTok, but I want to flip to the other side because obviously some of your peers only really have the
Speaker Change: business food delivery in one country in a way. Do you think the potential revenue opportunities or partner opportunities with TikTok in the
Speaker Change: other countries in the region where you have a very high market share. Thank you.
Speaker Change: Hey John, let me take the first one on regional corporate costs, and I'll turn it to Alex on competition. So on regional corporate costs, as you know, and I've been speaking this now for many quarters, we've been very focused in driving our cost structure down.
Speaker Change: And as we scale this business, we want to drive more operating leverage. Our original corporate cost was down 14% on a year-over-year basis for the second quarter.
Alex: And in terms of how we're thinking for the rest of the half here, what I did say earlier was that regional copper costs for the year 2024 will be lower than 2023.
Alex: And that gives you a bit of perspective how to model that for the rest of this year. Now, we see we're going to continue to find ways in optimizing our cost structure with this fixed or variable, because again, as we drive scale, we want to drive more operating leverage in the business.
Speaker Change: Let me answer the second question about the potential upside from the growth of social media in the region. It is true, actually. I think that the online commerce is growing as a category.
Speaker Change: And we work with all of the social media platforms as marketing partners to attract...
Speaker Change: Papa Funnel.
Speaker Change: The most direct impact that we would see outside of food delivery is our GrabExpress services. And GrabExpress, which is a last-mile delivery service, is growing. It's the largest instant delivery service in the region.
Speaker Change: And we do see Upside there as our merchant partners work with social media platforms and as we ourselves use it to attract users into the platform. Thanks for the question.
Speaker Change: Could I please follow up on both questions? One is that, Peter, do you have a comment about...
Speaker Change: I know in the past it may have talked about corporate cost to be kind of flattish next year, any update there. And back to the social media, I also want to follow up that, just curious if you already start discussion.
Speaker Change: about trials in terms of working with them. I know they have started trials in Indonesia with another company, as you probably know. Thank you.
Mr Xiong: Mr Xiong, we're not...
Mr Xiong: provide any guidance yet for next year. We'll do that in due time.
Speaker Change: We'll continue to optimize our costs. That's my commitment to the business. It's always been. And we'll find ways to do that. So what you'll see is, and you can see the trend of our corporate cost structure of our business.
Speaker Change: We'll continue to find ways to it, and again, this is not just fixed costs, right, you also got variable costs into those components, so again, we look for every opportunity where we can.
Speaker Change: And Johnnie, I won't comment on any specific discussions, as I'm sure you'll understand.
Speaker Change: But the way we work with the social media platforms is we use them for demand generation. And there are several very...
Speaker Change: large and successful platforms for us to choose from. So we work with all of them and we optimize our marketing efforts across them to make sure that we manage our acquisition costs accordingly. Thanks.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thank you for watching!
Speaker Change: Thanks everyone for your time.
Speaker Change: Thanks very much, guys, for listening to the call. I hope it was helpful. And if you have any questions, please address it to our investor relations team. We're more than happy to have more conversations with all of you. So thanks again for your time. Appreciate it, and talk next quarter.
Speaker Change: This concludes GREP's second quarter 2024 earnings conference call. Thank you for your participation. You may now disconnect.
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