Our thoughts on Grab’s 2022 Q4 and FY earnings

Last week, Grab announced their 2022 Q4 and FY earnings. Overall the numbers are positive – especially on the path to profitability which has been the top concern of the market since the current Fed rate hike cycle started. 

The market, however, responded with a 8% drop in Grab’s share price on the first trading day after the announcement. Well that is the market – it cheered a few weeks ago on Grab’s cost cutting measures, but sold when the results of some of these measures actually came in. 

Anyway, as usual here are some of our thoughts about the current set of financials. Momentum Academy has also recently published a complimentary report Apples to Apples: Benchmarking Shopee. Grab, GoTo and other major tech platform companies which will help you understand the metrics reported, and how they compare to those of Grab’s peers.

1. The metrics on profitability targets (instead of GMV growth which many commentators now call ‘vanity metric’) are positive and beyond expectations: 310% YoY revenue growth in Q4 (Grab reports only net revenue), narrowed losses, further improved adjusted EBITDA margin on deliveries etc. 

2. The company also announced an acceleration of group adjusted EBITDA breakeven target from H2 2024 to Q4 2023. It is interesting that GoTo, Grab’s major competitor in Indonesia, announced acceleration of adjusted EBITDA breakeven target to be Q4 2023 as well. GoTo previously only had a breakeven target on contribution margin level. Interesting to see the small competition there. You can refer to Momentum Academy’s Apples to Apples report for more details on adjusted EBITDA, contribution margin and other non standard metrics on profitability.

3. Grab’s cash liquidity has reduced from US$7.5b at the end of Q3 to US$6.5b at the end of Q4. A large part of that was due to the repurchase of part of its term loan. Its net cash liquidity has reduced by about US$200m – it seems the company has fair confidence about its profitability target and runway.
We have also seen that DeliveryHero Group, which runs Grab’s food delivery competitor Foodpanda in Southeast Asia, recently raised a new set of convertible notes to pay off existing convertibles. The interest rate of the new notes is higher compared to the paid off ones – but DeliveryHero now has less worry about its negative net cash liquidity.

4. Deliveries and Group Revenues benefited by US$68 million in Q4 2022 due to a business model change for certain delivery offerings in one of its markets. In this case, Grab changed from being an agent arranging for delivery services to being a principal (the delivery service provider contractually responsible for the delivery services provided to end-users).
For more about how this affects the revenue calculation, and the differences between different aspects of revenue recognition, do check out the Apples to Apples report.

5. Mobility revenue and GMV has increased by 78% and 50% YoY respectively, while commission rate dropped by 0.4% to 23.4%.  People who are on the ground especially in Singapore (the highest mobility AOV across all capital cities in Southeast Asia) have been feeling the effect of the increased demand and shortage of drivers (read: elevated prices).
Grab has been emphasizing that it is using multiple tactics to try to address this issue – including the relaunch of carpooling services in Singapore and the Philippines. 

6. The integration of Jaya grocery, an offline grocery chain in Malaysia that Grab had acquired in 2021, has also begun to contribute to the group’s financials. The margins of this integrated online/offline approach are probably better than pure deliveries – with more potential synergies. Grab also acknowledged before that in different countries, it would need different approaches to the “gray store” model – as long term Southeast Asia operators would know. 

7. Grab, along with its regional peers GoTo and SeaGroup, counts digital financial services as a core business segment. There are nuances amongst these businesses however making direct comparison difficult.
For example: GoTo Financial’s GTV contains payment volumes processed by MidTrans, a payment gateway acquired a while ago (which probably explains its relatively lower take rate); whilst SeaMoney no longer reports its TPV since Q3 2022. Grab, in the meantime, breaks its payment volume down into two parts: on Grab and off Grab. We have made a comparison of top line numbers, and take rates, in the Apples to Apples report. 

8. People have been arguing whether the “super app” strategy actually makes sense – i.e. whether there are synergies across the different verticals of services. We have, on the other hand, always been arguing that the key to success of platform business is volume, density and operational efficiency.
In this quarter, Grab has shown improvements in this regard: 33% of monthly transacting users (MTUs) using three or more offerings on the Grab platform in 2022, up from 27% in 2021; while 71% of two-wheeler drivers performed both food delivery and mobility jobs in 2022. Will there still be room for further improvement in these metrics? It is done to the execution.

9. Has anyone ever noticed how expensive it is to do a listing on NASDAQ? According to Grabs adjusted EBITDA breakdown, in Q4 2021 it spent US$328m on “share listing and associated costs”.
While this is definitely worth it for Grab (it raised more than US$4 billion during the PIPE round), the listing (and ongoing compliance) costs are what Web3 proponents are trying to resolve through the blockchain. Alas, as the interest in Web3 wanes in 2023, it will definitely take longer for anyone to build a Web3 alternative to the current equity markets.

For more details on detailed metrics on top line, revenues, profitability, users, cash liquidity and many more, you can download Momentum Academy’s  “Apples to Apples: Benchmarking Shopee, Grab, GoTo and other major tech platforms” report. 

It is important to note, however, the numbers, reported or derived, are not everything.There are many important factors to consider beyond metrics – notably Leadership, People, Organisation and Product.

If you would like to have this sharing and other insights for your leadership team, you are welcome to contact Momentum Academy ([email protected]).