Saturday, 20 April 2024

Grab posts $11M profit in Q4 2023

5 min read

Grab Holdings announced a 30% year-on-year growth to $653 million in revenue and $11 million profit in the fourth quarter of 2023.

Anthony Tan, group CEO and co-founder of Grab, said: “2023 was a pivotal year for us. We generated over $11 billion of earnings for our partners, achieved strong topline growth as we exited the year with mobility GMV (gross merchandise value) above pre-COVID levels and deliveries GMV growth re-accelerating, while also reaching adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) profitability in the year.”

“We will continue to execute towards sustainable and profitable growth in 2024, as we deepen engagement with our users through affordable and high value offerings, grow our financial services business, while continuing to outserve our driver- and merchant-partners,” Tan said.

Peter Oey, chief financial officer of Grab, said: “We reported a strong set of results in the fourth quarter, recording our eighth consecutive quarter of adjusted EBITDA improvements. As we execute on our strategies in 2024, we expect to drive continued improvements in adjusted EBITDA and adjusted free cash flow. In the medium term, we see between 100 to 200 basis points of upside to our segment adjusted EBITDA margins for deliveries, as we continue to drive growth in on-demand GMV and accelerate year-over-year revenue growth rates beyond 2024. With our robust balance sheet position, we are pleased to announce that our board of directors has authorised our first share repurchase programme of up to $500 million and the repayment of the outstanding balance of our Term Loan B.”

Revenue grew 30% year-over-year (YoY) to $653 million in the fourth quarter of 2023, attributable to revenue growth across all our segments and further reductions in incentives. Total GMV grew 9% YoY, and 8% YoY on a constant currency basis, primarily attributed to growth in mobility and deliveries GMV, with group monthly transacting users (MTU) growing 12% YoY. Notably, on-demand GMV grew 18% YoY and 3% quarter-over-quarter (QoQ). Foreign exchange currency fluctuations negatively impacted our results during the quarter. On a QoQ basis, group revenue and GMV grew 6% and 2% respectively, and 9% and 4% on a constant currency basis, respectively.

During the quarter, total incentives were further reduced to 7.3% of GMV, compared to 8.2% for the same period in 2022, as we continued to improve the health of our marketplace. Profit for the quarter was $11 million compared to a net loss of $391 million in the prior year period, primarily due to the improvement in group adjusted EBITDA, fair value changes in investments, and lowered share-based compensation expenses. The profit in the fourth quarter also benefited from the reversal of an accounting accrual no longer required.

Group adjusted EBITDA was $35 million for the quarter compared to negative $111 million for the same period in 2022, as we continued to grow GMV, while improving profitability on a segment adjusted EBITDA basis and lowering our regional corporate costs. Group adjusted EBITDA margin was 0.6% for the quarter, an improvement from -2.2% in the fourth quarter of 2022 and from 0.5% in the third quarter of 2023.

Regional corporate costs for the quarter were $193 million, improving from $223 million in the same period a year ago. Cash liquidity totaled $6.0 billion at the end of the fourth quarter, compared to $5.9 billion at the end of the prior quarter. Our net cash liquidity was $5.2 billion, at the end of the fourth quarter, unchanged from $5.2 billion in the prior quarter.

Net cash used in operating activities was $26 million in the fourth quarter of 2023 compared to $23 million in the same period in 2022, primarily driven by an increase in income taxes paid, which was partially offset by an improvement in cash used in operations.

Adjusted free cash flow was $1 million in the fourth quarter of 2023, with improving adjusted EBITDA offsetting working capital changes, capital expenditures and other operating cash expenses. Adjusted free cash flow is defined as net cash flows from operating activities less capital expenditures, excluding changes in working capital related to loans and advances to customers, and deposits from the digital banking business.

Revenue for the full year grew 65% YoY, or 67% YoY on a constant currency basis, to $2,359 million, above our guidance of $2.31 billion to $2.33 billion. Growth was attributed to growth across all our segments, continued incentive optimisation and a change in business model for certain delivery offerings in one of our markets. Assuming the change in business model had occurred in 2022, full year 2023 group revenue growth would have been 40% YoY and deliveries revenue growth would have been 30% YoY.

Full year group GMV grew 5% YoY, or 7% YoY on a constant currency basis to $20,983 million, driven by continued growth in mobility and deliveries. On-demand GMV grew 12% YoY, or 14% YoY on a constant currency basis to $15,592 million.

Loss for the year was $485 million, a 72% improvement YoY, primarily due to the improvements in group adjusted EBITDA, reduction in fair value losses on investments, and lower interest expenses and share-based compensation expenses. Non-cash expenses included $304 million in share-based compensation expenses, $145 million of depreciation and amortisation and $38 million in fair value changes on investments.

Full year group adjusted EBITDA was negative $22 million, an improvement of 97% compared to negative $793 million in 2022, and performed in line with our guidance of negative $25 million to negative $20 million.

Net cash from operating activities was $86 million in 2023 as compared to net cash used in operating activities of $798 million in 2022, with the improvement driven by a decline in loss before income tax, as well as an increase in deposits from customers in the banking business.

Adjusted free cash flow was negative $234 million in 2023, compared to negative $825 million in 2022, mainly driven by improvements in net cash from operating activities.

Deliveries revenue grew to $321 million in the fourth quarter of 2023 from $268 million in the same period in 2022, and by 80% YoY for the full year 2023. The strong growth was primarily attributed to a reduction in incentives as a percentage of GMV, GMV growth, and a change in business model of certain deliveries offerings in one of our markets. Assuming the change in business model had occurred in 2022, full year 2023 deliveries revenue growth would have been 30% YoY.

Deliveries GMV grew 13% YoY, or 12% YoY on a constant currency basis to $2,648 million in the fourth quarter of 2023, underpinned by an increase in spend per user, and growth in deliveries MTUs which reached an all-time high during the quarter. On a full year basis, deliveries GMV grew 4% YoY, and 5% YoY on a constant currency basis.

In 2023, we continued to drive greater affordability of our services, and increased adoption rates of Saver deliveries, which offers users a lower delivery charge, in exchange for a longer delivery time, and improving batching rates. In the fourth quarter of 2023, Saver deliveries now account for 23% of deliveries transactions, and Saver users had average order frequencies in food deliveries that were 1.6 times higher than users who have never used Saver.

Deliveries segment adjusted EBITDA as a percentage of GMV expanded to 3.6% in the fourth quarter of 2023 from 2.0% in the same period in 2022. For the full year 2023, deliveries segment adjusted EBITDA was $313 million, improving from negative $35 million in 2022, amid further optimisation of incentives spend, improved operational efficiencies and GMV growth.

Mobility revenues grew strongly and rose 26% YoY, or 24% YoY on a constant currency basis, in the fourth quarter 2023, and grew by 36% YoY, or 37% YoY on a constant currency basis, for the full year 2023. The growth was mainly attributed to our efforts to improve supply across the region, which enabled us to capture the increase in tourism ride-hailing demand, and the growth in domestic demand.

Mobility GMV rose 28% YoY, or 27% YoY on a constant currency basis, during the quarter and grew 32% YoY, or 33% YoY on a constant currency basis, on a full year basis. Growth during the quarter was mainly driven by an increase in mobility MTUs and average order frequency. Mobility segment adjusted EBITDA as a percentage of GMV was 12.3% in the fourth quarter of 2023 and 12.5% for full year 2023.

During the quarter, we continued to optimise our existing driver supply and enhance driver efficiency to meet the strong demand growth levels. In the fourth quarter of 2023, monthly active driver supply increased by 11% YoY, while earnings per transit hour of driver-partners on our platform increased 14% YoY. Our efforts to improve supply have resulted in surged mobility rides as a proportion of total rides reducing by 6% YoY.

Revenue for financial services doubled to $56 million in the fourth quarter 2023, from $28 million in the same period in 2022, and grew by 159% YoY or 162% YoY on a constant currency basis for the full year 2023. The strong YoY growth was primarily attributed to improved monetisation of our payments business, higher contributions from our lending business, and lowered incentive spend.

Financial services GMV declined 14% YoY during the quarter, or 13% YoY on a constant currency basis, and by 11% YoY or 9% YoY on a constant currency basis for the full year, consistent with our focus on driving ecosystem transactions.

Segment adjusted EBITDA for the quarter improved 13% YoY, and 29% YoY for the full year, as we further streamlined overhead expenses in our GrabFin cost base to achieve operational efficiencies. Cost of funds, a variable cost that supports the payment platform, was higher YoY due to increased transaction volumes. Cost of funds represented 26% and 29% of our financial services segment cost structure in the fourth quarter and full year 2023, respectively. Segment adjusted EBITDA declined QoQ to negative $81 million, mainly attributed to the launch of our digibank in Malaysia, GXBank, while costs in GrabFin remained stable despite the increased cost of funds expenses associated with the growth in on-demand transactions.

Loans disbursed to our ecosystem partners continued to grow. For the full year 2023, total loan disbursements grew 57% YoY to reach $1.5 billion, while total loans outstanding amounted to $326 million as of 31 December 2023. Customer deposits in GXS Bank and GXBank, our digital banks in Singapore and Malaysia respectively, stood at $374 million as of December 31, 2023.

In November 2023, GXBank was the first digibank to launch in Malaysia. In the span of two weeks following the launch, over 100,000 depositors opened an account with GXBank, with 79% of GXBank depositors being existing Grab users.

Revenue from enterprise and new initiatives grew 124% YoY, or 122% YoY on a constant currency basis for the fourth quarter of 2023, and by 86% YoY, or 87% YoY on a constant currency basis for the full year 2023, mainly driven by growing contributions from advertising. During the fourth quarter, the total number of monthly active advertisers who joined our self-serve platform increased 54% YoY while average spend by monthly active advertisers on our platform increased 129% YoY, as we continued to deepen advertising penetration among our merchant-partners.

Segment adjusted EBITDA grew by 378% YoY in the fourth quarter of 2023, and by 267% YoY for the full year, primarily attributed to the increase in revenue.

Grab’s board of directors has authorised a share repurchase programme, under which Grab may repurchase up to $500 million worth of its outstanding class A ordinary shares. The proposed repurchases may be made from time to time through open market transactions at prevailing marketprices, privately negotiated transactions, block trades and/or through other legally permissible means, or any combination thereof, depending on market conditions and the trading price of the company’s class A ordinary shares, among other factors, and in accordance with applicable rules and regulations. The company's board of directors will review the share repurchase programme periodically, and may amend the terms and size of the programme. The company intends to fund the repurchases with excess cash after allocating and potentially allocating for investments to drive growth. The share repurchase programme does not obligate the company to acquire any particular amount of class A ordinary shares.

Grab’s board of directors has also approved the full repayment of our outstanding Term Loan B. This loan facility was issued in January 2021, with a five-year tenor and a principal amount of $2 billion. As of 31 December 2023, $497 million in principal amount and accrued interest was outstanding under our Term Loan B. The repayment is expected to create significant interest expense savings.

Re-disseminated by The Asian Banker

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