Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grab Holdings Inc (GRAB, Financial) achieved new all-time highs in On-Demand GMV, group monthly transacting users, and group revenues.
- The company delivered its 10th consecutive quarter of group adjusted EBITDA improvement.
- Grab Holdings Inc (GRAB) achieved its second quarter of positive adjusted free cash flow, with expectations for full-year 2024 to be positive.
- The launch of Superbank in Indonesia and robust growth in Digibank deposits and lending disbursals reflect strong financial services performance.
- The company continues to drive cost discipline, with regional corporate costs declining 14% year-on-year.
Negative Points
- Foreign exchange translational impacts led to a divergence between headline and constant currency growth rates, affecting GMV and revenue growth.
- Mobility segment adjusted EBITDA margins declined due to product mix and investments in new product rollouts.
- Incentive spend as a proportion of On-Demand GMV increased to 10.1% in Q2 from 9.7% in Q1, indicating higher promotional costs.
- The competitive landscape remains intense, requiring continuous investment in affordability and reliability to maintain market leadership.
- Stock-based compensation expenses remain high, impacting overall profitability despite headcount optimization.
Q & A Highlights
Q: Could you share some color on what you are seeing in the second half of the year in terms of macro, competitive, and industry perspectives? Are you seeing improving signs in your market, which gives you the confidence to meet the upper end of your guidance items?
A: The US dollar strengthening did impact our headline growth in Q2, but it has weakened by around 4% quarter-to-date, turning headwinds into tailwinds for Q3. The macro outlook in Southeast Asia is strong, with robust foreign direct inflows and upgraded GDP forecasts. Tourism is growing, particularly from Europe and India, although China is still behind pre-COVID levels. Our markets remain competitive, but we maintain category leadership. Our strategy leverages scale and consistent investment in product and tech to drive improvements in reliability and affordability. We expect sequential GMV growth for both Deliveries and Mobility, as well as group adjusted EBITDA growth in the second half.
Q: Can you explain the dip in Mobility EBITDA margin quarter-on-quarter and provide some color on how these margins will trend in the coming quarters?
A: The dip in Mobility EBITDA margin was due to our intentional strategy to drive affordability and attract new users. Mobility GMV grew 25% year-on-year on a constant currency basis, led by transaction volumes growing 38% year-on-year and MTUs growing 26% year-on-year. This strategy led to a reduction in segment adjusted EBITDA margins in Q2, but we expect EBITDA to improve sequentially in Q3 and Q4. We remain committed to our long-term margin expectations of 9% plus for Mobility.
Q: How does Grab plan to defend against potential disruptions from new entrants and partnerships in the On-Demand service market?
A: We work with all major social media partners to drive top-of-funnel user acquisition and reduce CAC. We are confident that consumers prefer Grab's in-app experience due to our reliability and affordability, driven by our scale and deep functionality. Our unique features like the largest driver partner network, GrabMaps, and the SuperApp ecosystem make it hard for social media players to replicate our strategy. We do not expect social media players to impact our long-term margins and growth prospects.
Q: Could you provide an update on the progress of your premium offerings like corporate and airport pickups?
A: Our premium offerings, such as GrabPremium, generate over twice the revenue per ride compared to standard rides, attracting more limos and luxury cars to our platform. Advanced booking ride-hailing products have been relaunched, driving higher driver earnings and attracting travelers and executives. Travelers account for about 20% of our premium mobility MTUs regionally, with average basket sizes 1.5 times higher for tourists. We expect considerable growth from premium offerings in the next two quarters.
Q: What has led to the increase in incentive spends in the On-Demand segment?
A: The increase in incentive spends was largely associated with supporting new product launches in both Mobility and Deliveries. Competitive activity remains consistent, and the product mix has shifted due to the earlier launch of Saver products compared to premium offerings. We expect premium launches to gain more traction in the second half, balancing the product mix.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
