Our thoughts on Grab’s 2022 Q3 earnings

Last week, Grab announced their 2022 Q3 earnings. Overall it is a very positive set of results, with both revenue and profitability improving significantly year over year. Triple digit growth in revenue YoY is something that is not very usual in 2022’s macro landscape. 

Overall the results seem to be consistent with the (simplified) strategy announced during Grab’s investor day in September. 

Some specific thoughts: 

1. Deliveries achieving segmented profitability on adjusted EBITDA basis 3Qs ahead of guidance is very positive news. Meituan was a case in point: before food delivery segment profitability investors were worried about a ‘black hole’ of money, but after that the delivery network was viewed as enabling infrastructure for many things to come; 
2. Deliveries profitability in Q3 is achieved actually on flat GMV growth between Q2 and Q3 – through a combination of reduction of incentives (from US$380m to US$347.1m) and increase of commission rates (20.8% to 21.2%); 
3. The market landscape for food deliveries also evolved quite a bit in 2022 – we will cover that in more detail in the upcoming 3rd annual instalment of Food Delivery Platforms in Southeast Asia report in January; 
4. Grab’s ride-hailing profitability is attracting opportunistic newcomers including Russia’s InDrive, Bolt and perhaps more, trying to chip away some market share. Some investors from outside Asia seem to be still willing to invest in ride hailing upstarts – but whether these companies can achieve significant scale and market share in the region is a big question mark; 
5. Grab’s monthly transacting users count has been steadily increasing over the last 5 quarters, reaching 33.5 million in Q3 2022. That’s less than 6% of the combined population of Southeast East Asia’s 6 largest economies. This penetration is low compared to China’s levels, Southeast Asia’s transactional platform penetration is still at low levels, where further growth will come gradually over the years;
6. Financial services is the only segment where loss is widening – a key reason is probably the digital bank investment (GXS bank is launched to its employees as well as those of Grab and Singtel); off Grab platform payment is still growing, the initiative to de-prioritise this segment (Shopee announced the same thing for ShopeePay) will probably mean on platform payment will grow faster moving forwards;
7. The company recorded a quarterly cash reduction of US$291m. With its current net cash level of US$5.3b, the company can last 4.5 years without raising additional cash – this should be more than enough until it reaches positive free cash flow.

As we mentioned in a previous commentary. What Grab needs to do is already very clear, the key is still relentless execution to drive efficiency in all areas.