Grab Holdings Ltd posted its first-ever adjusted profit, a milestone for the decade-old Southeast Asian ride-hailing and food delivery company working to convince investors of its earnings potential.
Following Grab’s announcement that its adjusted earnings before interest, taxes, depreciation, and amortization for the quarter ending in September reached US$29 million, the company’s shares saw a 3.1% increase in New York trading. Analysts, on average, had anticipated earnings of $9.5 million.
Since its establishment in 2012, the Singapore-based company has rapidly expanded throughout Southeast Asia, incurring increasing losses due to substantial spending on driver and user acquisition amidst fierce competition from rivals like GoTo Group and Sea Ltd. In response to slowing growth, Grab has shifted its focus to profitability and cost control, announcing in June its intention to trim over 1,000 jobs.
“Trends across Grab’s mobility and delivery segments are showing clear signs of improvement,” said Mark Mahaney, an analyst at Evercore ISI. “Further acceleration” is expected this quarter, he said.
The quarter saw a 61% increase in revenue, reaching $615 million. This growth rate has decelerated from the triple-digit rates observed in previous years, reflecting a trend where customers in the region are reducing spending to manage the impact of heightened inflation and interest rates.
The expansion of Grab’s customer base is accompanied by a slower-paced increase in demand. This is attributed to consumers becoming less inclined to pay for the convenience of ride-hailing and food delivery services amid a challenging macroeconomic climate.
Achieving profitability, even on an adjusted basis, represents a significant milestone in Grab’s endeavor to demonstrate to investors its capability to generate profits. Despite Grab’s leadership in Southeast Asia’s ride-hailing and delivery markets, it has not yet attained positive net income, as it continues to allocate funds to counter competition from rivals like Indonesia’s GoTo.
One of Grab’s upcoming objectives is to attain positive free cash flow, as stated by Chief Financial Officer Peter Oey in an interview. He anticipates this goal to be realized by the conclusion of 2024. Additionally, he mentioned that the gross merchandise value at Grab’s mobility business, representing the total value of goods and services sold, is expected to return to pre-pandemic levels by the end of this year.
Grab also announced a revised adjusted full-year loss projection of $20 million to $25 million, which is a reduction from the previously forecasted range of $30 million to $40 million in August. Concurrently, the platform achieved a record high in the number of monthly transacting users, reaching 36 million.
Grab, once regarded as one of Southeast Asia’s most promising startups, has witnessed a decline of approximately two-thirds in its shares since its public listing via a US blank-cheque company in late 2021. Nevertheless, there has been stabilization in share performance this year, attributed to narrowed losses, thereby surpassing its key regional competitors.
Last year, competitors Sea and GoTo cut thousands of jobs. In response, Grab expanded its offerings, incorporating subscriptions into its ride and delivery services as part of its strategy to attract a broader user base.
