Grab is expecting its first profit this year. Here’s what its latest earnings report says

• Based on the latest earnings report, Grab saw its revenue for the whole of 2022 and adjusted EBITDA for the second half of 2022 exceeded guidance.
• The company said it is bringing forward its group adjusted EBITDA breakeven guidance to the fourth quarter of 2023, half a year earlier than its previous guidance.

Five months ago, Singapore-based Grab Holdings Inc told investors during an earnings presentation that the company was anticipating breaking even in the second half of 2024. Since then, the company’s Chief Financial Officer, Peter Oey, has been accelerating Grab’s efforts to become profitable instead of spending on growth. This has been achieved by capturing the rebound in mobility demand, optimizing its costs, reducing its cost-to-serve, and innovating products and services.

Based on the company’s latest earnings report released last week, Grab’s approach is proving to be effective. The Singapore-based ride-hailing and food delivery giant’s revenue for 2022 and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the second half of last year exceeded guidance.

According to the company’s statement, revenue for the fourth quarter of 2022 grew 310% to US$502 million, up from US$122 million a year ago. Full-year Adjusted EBITDA was negative US$793 million, an improvement of 6% compared to negative US$842 million for 2021. Adjusted EBITDA for the second half of 2022 was negative US$272 million, which was above their guidance of negative US$315 million.

Full-year revenue came in at US$1.43 billion, up 112% from US$675 million in 2021 and exceeding guidance of US$1.32 billion to US$1.35 billion. The earnings also show that in the final quarter of last year, Grab recorded strong year-over-year growth of 78% in the Mobility revenue and Deliveries segment.

“Our 2022 and fourth-quarter results demonstrate our commitment to accelerating our path to profitability. In the fourth quarter, we achieved revenue growth of 310% YoY, while improving our Group and Deliveries Segment Adjusted EBITDA margins and maintaining regional category leadership across our Mobility and Food Deliveries businesses,” Anthony Tan, Group Chief Executive Officer, and Co-Founder of Grab, said.

During the earnings announcement, Grab also declared that it is bringing forward its group-adjusted EBITDA breakeven guidance to the fourth quarter of 2023, half a year earlier than its previous guidance. In short, Grab intends to reach profitability by the end of this year. “We achieved these results by focusing on capturing the rebound in Mobility demand, optimizing our costs, reducing our cost-to-serve and innovating on products and services that drive stickiness and engagement within our ecosystem,” Tan added.

He highlighted that Grab will remain laser-focused on driving sustainable growth and improving the efficiency of its ecosystem. Losses for the final quarter of 2022 also narrowed by 64%, from US$1.1 billion a year ago to US$391 million. Full-year losses came in at US$1.7 billion, down 51% from US$3.5 billion in 2021.

Grab on its path to profitability

In an interview with CNBC ahead of the earnings call, Grab’s Chief Financial Officer, Peter Oey, shared that the company has seen a lot more traffic after lockdowns ended in the second half of last year. “People are going back to work, starting to travel, and so on,” Oey said. Grab will continue to cut incentives and look at areas of discretionary spending, such as facilities, travel, entertainment, and cloud costs.

To recall, the tech giant has pledged to stem losses and embark on cost-cutting measures. “We are making sure we can grow the business sustainably and also deliver margin improvement as we continue to reinvest in other areas. So it’s a delicate balance that we are making,” Oey said in the company’s statement. The earnings report shows incentives dropped to 8.2% of GMV in the fourth quarter from 9.4% in the previous quarter.

“We will continue to cut incentives and look at areas of discretionary spending, whether it is facilities, travel, entertainment or cloud costs,” Oey told CNBC, adding that the firm expects cloud costs to be reduced by 5% to 10% YoY, driven by efforts to optimize processing speeds and improve network costs. Another achievement Oey shared, which has been a big lever for Grab, is that the company has shortened drivers’ waiting time by 27% YoY.

“That’s another big lever for us in terms of improving our cost to serve. Drivers are earning 13% more on a YoY basis.” For this financial year, Grab expects revenue to range between US$2.2 billion and US$2.3 billion and an adjusted loss of as little as US$275 million, which is better than analysts had estimated.

Bloomberg Intelligence’s analyst Nathan Naidu reckons Grab’s decision to bring forward by one year its target for group adjusted Ebitda to break even underscores its strong market leadership, which has allowed scaling back incentive spending without compromising user retention, even if that’s at the expense of top-line growth. “The firm now looks likely to break even in 4Q23 instead of the original 2H24, thanks to further optimization of incentives, which were 8.2% of 4Q GMV vs. 13% one year ago; a continued rebound in ride-booking volume; and rising profitability in deliveries.”

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