24-8-2023 (SINGAPORE) Ride-hailing and food delivery giant Grab announced on Wednesday that it expects to achieve its first quarterly profit sooner than previously projected. The Singapore-based company attributes this positive outlook to a series of cost-cutting measures and a surge in demand for its core services.
Grab, listed on the Nasdaq composite, now anticipates breaking even on a group level in the July-September 2023 quarter, surpassing its previous target of achieving profitability in the final quarter. The news has already resulted in Grab’s share price surging by over 10% during early trading in New York.
During an earnings call, CEO Anthony Tan expressed optimism about the company’s long-term growth prospects and emphasized their commitment to sustainable business operations and growth.
Furthermore, Grab expects to narrow the adjusted EBITDA loss for the year to $30 million to $40 million, a significant improvement compared to the initial forecast of a $195 million to $235 million loss.
Grab’s improved financial outlook follows the company’s report of a $148 million loss for the April-June quarter, a notable decrease from the $572 million loss incurred during the same period last year. This demonstrates Grab’s focus on achieving sustainable growth and reflects the challenges faced by tech stocks in the region amid investor sell-offs and rising interest rates.
Group revenue witnessed a substantial increase of 77%, amounting to $567 million. The core ride-hailing business experienced a remarkable 28% rise in gross merchandise value (GMV) due to a strong recovery in traveler demand. The deliveries segment also saw growth with a 4% increase in GMV, attributed to the success of a monthly subscription program that attracted more frequent users.
Grab’s revenue is presented net of incentives provided to drivers, merchants, and consumers. In an effort to optimize costs, Grab has reduced incentive payouts to users and shifted focus towards cultivating relationships with loyal customers who generate higher transaction volumes. Consumer incentives for the second quarter amounted to $245 million, marking a 21% decline from the previous year, while partner incentives narrowed by 17% to $175 million.
Despite these adjustments, Grab experienced a surge in monthly transaction users, reaching an all-time high of 34.9 million, signifying a 7% increase from the previous year.
Chief Operating Officer Alex Hungate expressed confidence in Grab’s future prospects, stating, “Over the rest of this year, we expect to drive a continued increase in demand from travelers and local commuters.” The company aims to restore mobility GMV to pre-COVID levels by the end of this year.
To navigate the challenging business landscape, Grab has implemented a series of cost-cutting measures since last year. These measures include suspending most hiring activities, implementing salary freezes for senior managers, and reducing travel and expense budgets.
In June, Grab announced plans to reduce its workforce by over 1,000 jobs, equivalent to 11% of its total employees. This strategic move aims to manage costs effectively and ensure the provision of affordable services in a highly competitive environment.
