Grab delivers first-ever profit

Grab delivers first-ever profit

Positive adjusted earnings a major milestone for Southeast Asian super-app operator

A Grab Food rider prepares to make a delivery. (Photo: Grab)
A Grab Food rider prepares to make a delivery. (Photo: Grab)

Grab Holdings Ltd posted its first-ever profit on an adjusted basis, a milestone for the decade-old Southeast Asian ride-hailing and food delivery company trying to convince investors of its earnings potential.

The company’s shares rose 3.1% in New York trading after Grab said that its adjusted earnings before interest, taxes, depreciation and amortisation reached US$29 million in the quarter through September. Analysts had expected earnings of $9.5 million on average.

The Singapore-based company has expanded swiftly across Southeast Asia since its founding in 2012, resulting in mounting losses as it spent to attract drivers and users amid intense competition from rivals such as GoTo Group and Sea Ltd. Slowing growth has prompted Grab to focus on profitability and cost control — it said in June that it would cut more than 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.

Revenue rose 61% to $615 million during the quarter, slowing from triple-digit growth rates in the years past as customers in the region curb spending to cope with elevated inflation and interest rates.

Demand is increasing at a slower pace as Grab’s customer base expands and as consumers are less willing to pay for the convenience of hailing a ride and getting food delivered to their door in a challenging macroeconomic climate.

Profitability, even on an adjusted basis, is a big step in Grab’s effort to prove to investors that it can make money. While Grab leads Southeast Asia’s ride-hailing and delivery markets, it has yet to reach positive net income as it is forced to keep spending to fend off rivals such as Indonesia’s GoTo.

Among Grab’s next targets is positive free cash flow, which it expects to achieve by the end of 2024, chief financial officer Peter Oey said in an interview. Gross merchandise value at Grab’s mobility business, or the total value of goods and services sold, is set to reach pre-pandemic levels by the end of this year, he said.

Grab also said its adjusted full-year loss would be $20 million to $25 million, smaller than the $30 million to $40 million it forecast in August. The number of monthly transacting users on its platform hit an all-time high at 36 million.

Shares of Grab, which had been one of Southeast Asia’s hottest startups, are down about two-thirds since it went public through a US blank-cheque company in late 2021. Still, they have stabilised this year as its losses narrowed, outperforming its main regional rivals.

Rivals Sea and GoTo eliminated thousands of jobs last year. Grab has also added products such as subscriptions to its ride and delivery services to attract more users.

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