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

• Based on the most recent earnings report, Grab saw its full-year 2022 revenue and H2 2022 Adjusted EBITDA to beat guidance.
• The company announced that it is bringing forward its breakeven guidance for the group’s Adjusted EBITDA 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 expects to break even in the second half of 2024. Since then, the company’s chief financial officer, Peter Oey, has accelerated Grab’s efforts to become profitable rather than invest in growth. Opportunities include capturing mobility demand recovery, optimizing costs, reducing service costs, and innovating products and services.

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

According to the company opinion, revenue increased 310% to $502 million in the fourth quarter of 2022, compared to $122 million a year earlier. Adjusted EBITDA for the full year was negative $793 million, an improvement of 6% compared to negative $842 million for 2021. Adjusted EBITDA for the second half of 2022 was negative $272 million, ahead of ours Forecast of minus $315 million.

Full-year revenue was $1.43 billion, up 112% from $675 million in 2021, beating guidance of $1.32 billion to $1.35 billion. The results also show that Grab saw strong 78% year-over-year growth in mobility revenue and deliveries in the last quarter of last year.

“Our 2022 and fourth quarter results demonstrate our commitment to accelerating our path to profitability. In the fourth quarter, we delivered 310% year-on-year revenue growth while improving our Group and Delivery segment Adjusted EBITDA margins and maintaining leadership in regional categories in our Mobility and Food Delivery businesses,” Anthony Tan, Group Chief Executive Officer and co-founder of Saite Grab.

Grab also said during the earnings call that it is bringing forward its breakeven guidance for the group’s Adjusted EBITDA to the fourth quarter of 2023, six months earlier than its previous guidance. In short, Grab intends to break even by the end of this year. “We’ve achieved these results by focusing on capturing the recovery in mobility demand, optimizing our costs, reducing our service costs, and innovating in products and services that foster resilience and engagement in our ecosystem.” , Tan added.

He emphasized that Grab will remain focused on driving sustainable growth and improving the efficiency of our ecosystem. Losses for the final quarter of 2022 also narrowed 64% to $391 million from $1.1 billion a year earlier. Losses for the full year were $1.7 billion, down 51% from $3.5 billion in 2021.

Grab on the road to profitability

In conversation with CNBC Ahead of the call, Grab’s chief financial officer, Peter Oey, shared that the company saw a lot more traffic after lockdowns ended in the second half of last year. “People are going back to work, people are starting to travel and so on.” Oey said Grab will continue to cut incentives and look at areas of discretionary spending, be it facilities, travel, entertainment or cloud costs.

As a reminder, the tech giant has pledged to rein in losses and implement cost-cutting measures. “We are making sure we can sustainably grow the business and also achieve margin improvements while continuing to reinvest in other areas. So it’s a delicate balance that we strike,” Oey said in the company’s statement. The earnings report shows that stimulus fell to 8.2% of GMV in the fourth quarter, down from 9.4% in the previous quarter.

“We will continue to trim incentives and look at areas of discretionary spending, whether it’s facilities, travel, entertainment or cloud costs,” Oey said CNBC, adding that the company expects cloud costs to decrease by 5% to 10% year over year, driven by efforts to optimize processing speeds and improve network costs. Another accomplishment Oey shared that was a big lever for Grab is that the company reduced driver wait time by 27% year over year.

“This is another big lever for us to improve our service costs. Drivers are making 13% more year over year.” For this fiscal year, Grab expects revenue of between $2.2 billion and $2.3 billion and an adjusted loss of just $275 million, also better than analyst estimates.

Bloomberg Intelligence Analyst Nathan Naidu believes that Grab’s decision to bring forward its group-adjusted Ebitda target by a year in order to break even underscores its strong market leadership, which has enabled a reduction in incentive spend without impacting user retention, itself if this is at the expense of top line growth. “The company now looks likely to break even in Q4’23 instead of the original H2’24 thanks to further tweaking of incentives, which accounted for 8.2% of GMV in Q4 versus 13% pre-Q4 one year; an ongoing recovery in ride booking volume; and increasing profitability on deliveries.”

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