NASDAQ:GRAB Grab Q3 2024 Earnings Report $4.76 -0.02 (-0.42%) Closing price 04:00 PM EasternExtended Trading$4.78 +0.02 (+0.42%) As of 08:00 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Grab EPS ResultsActual EPS$0.01Consensus EPS N/ABeat/MissN/AOne Year Ago EPS-$0.02Grab Revenue ResultsActual Revenue$716.00 millionExpected Revenue$705.40 millionBeat/MissBeat by +$10.60 millionYoY Revenue GrowthN/AGrab Announcement DetailsQuarterQ3 2024Date11/11/2024TimeAfter Market ClosesConference Call DateMonday, November 11, 2024Conference Call Time7:00PM ETUpcoming EarningsGrab's Q1 2025 earnings is scheduled for Wednesday, May 21, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Grab Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 11, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for joining us today. My name is Sierra, and I will be your conference operator for this session. Welcome to Grab's 3rd Quarter 2024 Earnings Results Call. After the speakers' remarks, there will be a Q and A session. I will now turn it over to Doug Wisshieux to start the call. Speaker 100:00:18Good day, everyone, and welcome to Grab's Q3 2024 Earnings Call. I'm Doug Wissiew, Director, Investor Relations and Strategic Finance at Grab. And joining me today are Anthony Tan, Chief Executive Officer Alex Hungate, Chief Operating Officer and Peter Oey, Chief Financial Officer. During this call, we will be making forward looking statements about future events, including our future business and financial performance. These statements are based on our current beliefs and expectations. Speaker 100:00:41Actual results could differ materially due to a number of risks and uncertainties as described in this earnings call, in the earnings release and in our Form 20 F and other filings with the SEC. We do not undertake any duty to update any forward looking statements. We will also be discussing non IFRS financial measures on this call. These measures supplement, but do not replace, IFRS financial measures. Please refer to the earnings materials for a reconciliation of non IFRS to IFRS financial measures. Speaker 100:01:06For more information, please refer to our earnings press release, remarks and supplemental presentation available on our IR website. And with that, I will turn the call over to Anthony to deliver his opening remarks before we open it up for questions. Speaker 200:01:18Thank you so much for joining us today. Q3 2024 was a strong quarter for us. Investments we have made or been making across the business drove an acceleration of our on demand GMV growth year on year. We continue to leverage our platform scale to drive profitable growth with group adjusted EBITDA more than tripling year on year to reach another record high of $90,000,000 and our 11th consecutive quarter of adjusted EBITDA improvement. Monthly transacting users, a leading indicator of future platform growth also recorded its 6th sequential quarter of growth growing 16% year on year to $42,000,000 for the quarter. Speaker 200:02:05On the back of these strong results, we remain confident about Grab's growth potential and believe that we are in pole position to capture the opportunities of growing high value transactions and strengthening domestic demand. And we are committed to doing this while ensuring profitable growth and sustainable free cash flow generation, improving operating leverage and enhancing shareholder returns. As always, I would like to convey our sincere gratitude to our fellow grabbers, our customers and partners for their contributions and support in driving these results. With that, I open the call for questions. Operator? Speaker 300:02:47Thank you. Operator00:02:49We will now start the Q and A portion of the call. Our first question today comes from Phong Zhik with Goldman Sachs. Your line is now open. Speaker 300:03:08Hi, good morning management and congratulations on strong quarters. Two questions from my side. Number 1, we've seen a meaningful pickup in your growth rates, particular in your delivery business, growing 16% year on year in constant currency term and also a very nice pickup in margin as well. Do you expect this growth to sustain and what incremental initiatives are you putting in place to drive this in Q4 and also especially going into next year 2025? That's question number 1. Speaker 300:03:42Question number 2, could you also share the latest update on competitive landscape, especially in Indonesia? Have you seen material change to market share as we've seen your main competitors spend more in recent months? Do you expect this to impact your margins going forward? Speaker 400:04:01Thanks very much, Pang. This is Alex. I'll take those questions. So first of all, we are seeing strong growth momentum in October November to date, particularly the push for affordability and high value services for customers, so part of the laddering strategy that we've talked about before. And then Grab Unlimited continues to grow strongly to our loyalty program has hit another all time high. Speaker 400:04:26I guess one key call out that we focused on in some of the slide materials that we sent out earlier is the food to mart cross sell. So, mart has been growing 1.7x faster than food in the quarter, And then we're getting almost 5x higher order frequency amongst users who transact in both food and mart with more than 2x higher retention rate as well. So we expect that cross sell to continue to be a strong source of growth for deliveries. The other thing that we're doing is that we are helping merchants to attract customers to dine out at the store in addition to the traditional role that we've done in helping them with food deliveries. And that's driving strong GMV growth. Speaker 400:05:10And of course, we've got a lot of available TAM there because in most restaurants, the majority of the TAM majority of the revenue that the merchant is trying to manage is people coming into the store. So that allows Grab to play an important role there. And with the strong growth in advertising revenues that you've seen, that helps us to monetize that with the merchant. Mobility is also pacing strongly as you saw, so 30% year on year GMV growth from high value mobility rides. So these are the new services that we've launched, particularly advanced booking, which is very popular with both travelers and executives. Speaker 400:05:50And we think that, that has a lot of upside. It's a newer set of products than our affordability products, and therefore, gives us a lot of scope to grow TAM there. It's high margin, and it can produce higher driver earnings. So it's a very good healthy new source of growth for our marketplace. And then finally, on the bank side, we're optimistic. Speaker 400:06:16As of November, we now have lending products in all three markets. So it's the first time that we've been able to lend in all three markets in addition to lending through GFIN, which has been our traditional way of lending. You would have noticed in our prepared remarks, I just want to emphasize actually that the trading update maintaining our prior expectations of driving another quarter of sequential growth in both on demand segments heading into the Q4. So that will set us up strongly for 2025. The second question was about competition, especially in Indonesia. Speaker 400:06:53Okay. So while Grab Indonesia is enjoying good sustainable growth, for us, Indonesia started to be positive EBITDA more than a year ago, as you recall. And since then, we've grown Indonesia's EBITDA, Indonesia's revenue and Indonesia's GMV both year on year and quarter on quarter. So it's a good progress financially across all fronts. We have noticed an increased spend from our competitor in Indonesia, as you noted in your question. Speaker 400:07:24I think the reliability of our services and the new services that we've launched are getting good traction with customers. You can see that very clearly in the data. So overall, order frequency is up year on year in Indonesia, while retention rates have remained roughly stable. So that means that the lifetime value of our Indonesian customer base is improving. In particular, the deliveries, average order frequency has accelerated strongly quarter on quarter. Speaker 400:07:53So that's even while competitors are spending a lot more than us, we are able to generate that great traction with our customers. And because of our regional scale, where you'll recall we're about 4 times larger than our next biggest competitor in the region, we are getting better operating leverage across our cost base. So we don't comment on category position country by country, but I can confirm that we're still approximately 4 times larger than our next largest competitor in the region. So then just to wrap up, on EBITDA, we do remain committed to driving that profitable growth. And so this quarter is a strong proof point for that. Speaker 400:08:37Our intent is to continue to grow absolute EBITDA. So based on the updated EBITDA guidance that we've shared today of between $308,000,000 $313,000,000 for the full year 2024, this implies another strong quarter of EBITDA generation in the Q4. Thanks, Pan. Speaker 500:08:59Thank you. Operator00:09:02Our next question comes from Mark Mahaney with Evercore. Your line is now open. Speaker 600:09:07Okay, thanks. Two questions please. One on the incentives, could you just talk about the outlook for incentive spend going forwards? Are you at a point now where that should be coming down sort of consistently as a percentage of GMV or is that something that that's just set as to whether that's a reasonable expectation or not or you want to continue to be able to pull in and pull out as necessary on that metric? And then on the MTU growth, any color on the sources Speaker 700:09:36of that Speaker 600:09:36MTU growth? So help us think about how sustainable that kind of mid teens growth? It looks like it's been consistent the last couple of quarters. Is there are there good reasons to think that it should be consistent going forward over the next year? Thank you very much. Speaker 400:09:51Thanks, Mark. Let me pick up those questions. So on incentives, as you know, over several years, our incentive percentage GMV has been coming down. So you're right, the overall trend is there. And that's because we are able to get more and more efficiency. Speaker 400:10:07And of course, we're using a lot of AI targeting now that we didn't have a few years ago too. So there's a lot to be optimistic about in terms of the overall trajectory of incentives. From quarter to quarter, it can go up and down. And I think particularly when we launch new products, as we have been doing at quite a steady pace these last two quarters, for omni, for example, where we want to generate sustained consumer behavior to look to the Grab app for their dining out choices, as well as traditionally what they've done for delivery. The change in consumer behavior does require incentives. Speaker 400:10:47And similarly, when we launch something like advanced booking to get consumers to use the app in a different way ahead of the time at which they want to make the ride, that also requires changing consumer behavior. So we will use incentives from time to time to generate the momentum behind these new ways of interacting with the app. But those will peak at different times and then also come off. So those are not long term. The MTU growth is encouraging. Speaker 400:11:19We found that the affordability push or the bottom of the ladder of the laddered pricing strategy that we have is driving a lot of first time users into the marketplace. And then obviously, it's our marketing objective to capture them and keep them coming back and drive retention. And I think the big upside for MTUs that we see is frequency, because if you look at our annual transacting users, it's a very large multiple of both our monthly and our daily transacting users. So a lot of our job is to, yes, bring new users in with affordability, but then to ride up the frequency curve with them to bring them from annual into monthly, from monthly into daily. And so there's tremendous upside for us. Speaker 400:12:02At the moment, our monthly transacting users is only about 5% of the Southeast Asia population. And then the annual transacting users is something like 15%. So still lots and lots of upside to go for us with this affordability strategy that we have. And then, of course, plenty of opportunity to continue to drive good margin because of the laddered strategy where we have growing premium customer base as well. Speaker 600:12:32Thank you very much. Operator00:12:36Our next question comes from Ron Jon Charnal with JPMorgan Singapore. Your line is now open. Speaker 700:12:44Hi, good morning and thank you for the presentation and congratulations on the results. Two questions from my side. Firstly, on the MTUs, great to see the traction in building momentum there. Do you have a sense on what the target market could be in Southeast Asia? What the profitable number of MTUs could be for the industry over the next few years? Speaker 700:13:12The second question is on your free cash flows and buybacks. Now that you have $5,800,000,000 of net cash liquidity, plus you have a highly free cash flow generating franchise. Can we expect further increase to the buyback program? Thank you. Speaker 400:13:31Thanks, Anjan. Let me take the first one and then Peter will take the second one on the free cash flow and buyback. I started to get into answering your question a bit earlier on the question on the response to Mark. Our monthly transacting users is around 5% of the total population in Southeast Asia. So we're lucky to be in a region which has lots of upside, lots of growth ahead of it. Speaker 400:13:56I think notwithstanding what's happening in the U. S, I think Southeast Asia has been one of the regions which has benefited from the so called decoupling. We expect that to continue. We've got strong leadership in a lot of political leadership in a lot of the markets and a lot of optimism in those markets. So at 5% on MTUs and only something like 15% on ATUs, we think that there's considerable upside, not just in the short term, but importantly, the long term with this young population. Speaker 400:14:31So we'll continue to engage with them. The brand is strong. You can see from the positive uptake of our financial services offerings that the Grab brand seems to be attractive, not just in the on demand space, but in some of its significant adjacencies too. And so the new financial services offerings will also help us drive MTUs in a whole new dimension. Speaker 800:14:56Arunjan, on your question around cash and buyback, let me just also clarify that on the net cash liquidity, when you look at that number, it does include deposits, the bank deposits. And the prepared remarks and also in our earnings, we had over $1,000,000,000 of deposits that we generated from the 2 banks. But also remember there also excludes loans and we have restricted cash also as part of it. So just taking that into the mix, when you look at our net cash liquidity, we did generate free cash flow in the business in the Q3 also at the same time. We generated about $138,000,000 with just the free cash flow in the business and roughly $76,000,000 if you look at it from a trailing 12 months. Speaker 800:15:37So it's working what we're doing from a capital from a cash generation business. As you remember, we've always had a 3 pronged strategy when it comes to our bottom line, which is 1, deriving adjusted EBITDA, check second, positive free cash flow, check And also we from a net income perspective also we're in this beginning journey of getting there. Now how did that translate to buyback to your other part of the question? Maybe the way to answer that is just to refresh the capital allocation framework, because that's how I think about it. And what's that, it's really a 3 strategy from our perspective. Speaker 800:16:13One is organic growth, organic investment is critical for us. And you're seeing that being played out. 3rd quarter is a really great prime example where the investments that we're making in product set that Alex talked about earlier is seeing the traction both from a top of the funnel, but also we're seeing it in frequency and retention. And that drives lifetime value for us as a business. So, we're going to continue to make those investments in the organic side of the business as the highest priority for us. Speaker 800:16:46We'll look at other opportunities inorganically. However, those opportunities will be at a very high bar for us and that will continue also. Now, when we do have excess liquidity, we will look at opportunities to return them to our shareholders. Now, on our buyback program today, we're only about $190,000,000 roughly about $190,000,000 out of the $500,000,000 mandate that we have today. So we still have some ways to go. Speaker 800:17:13So we're going to continue to execute that. And as opportunities come up in the future, if those opportunities are the right ones, we'll revisit our buyback program. But at this stage, we're committed to the $500,000,000 and we still have about another $300,000,000 to go to complete that buyback program. Next question please operator. Operator00:17:39Our next question comes from Jiyoung Xiao with Barclays. Your line is now open. Speaker 900:17:45Thank you very much. Congrats on the very strong results. Two questions as well. Firstly, I would love to learn a bit more about your FinTech business. I know you started with Digibanking Singapore lending out loans to make money and now all 3 DigiBanks are offering credit products now. Speaker 900:18:11Could you sort of elaborate a bit on the borrower's profile, like who borrow from you? What kind of the typical terms? And expand a bit, please, on the acceleration in growth rate from this business next year. I believe you highlight that before. It's probably one of the most important drivers for revenue reacceleration. Speaker 900:18:38And so my second question is on the delivery margins. It's great to see you have made a lot of progress, I think 50 basis points increase sequentially, if I'm not mistaken, to 1.8%, but that's still quite a bit below 4% with could you elaborate a bit on what kind of growth trajectory for your advertising business maybe? You noted earlier about in store monetization, again, as some of us know that your Chinese peer is doing great job there in China. Could you talk about how do you plan, when do you plan to monetize the install part of the delivery business? Thank you very much for and sorry for the long questions. Speaker 400:19:28No, thanks, John. That's great. Let me start by talking about financial services. Just explain a little bit about the lending in particular, which is the focus of your question. So you could see the strong loan dispersals in the quarter, 38 percent year on year, 13% quarter on quarter. Speaker 400:19:44So we're now at $565,000,000 in the 3rd quarter. So if you approximately annualize that $2,200,000,000 So the pace of the lending is going up and that's because we are layering now the lending through the banks on top of the existing GFIN business which where the lending already had a healthy underlying growth rate. Let me start with the G Fin business to understand so you can understand that a bit better because that's a long standing business. So primarily lending to partners and users across all of the markets. So it's ecosystem based where we are benefiting from the deep insights we have into the user behavior on the ecosystem with a very sophisticated large language model based lending model, which now ingest something like 120 different variables from the ecosystem, make lending decisions. Speaker 400:20:42So it's a very different, much more multidimensional type of database than traditional banks would use. That allows us to lend to people like drivers and other gig workers who traditionally have not been well served by banks. So many of them are either unbanked or underbanked because they don't have traditional payslips. And that's very much in line with our mission as an organization to support them. The penetration of the driver lending by GFIN is good, but the models are improving all the time, so we can continue to lend on a risk adjusted basis. Speaker 400:21:18And the risk adjusted returns overall from GFIN are comfortably above the cost of capital for the group. The penetration of lending to merchants is relatively low at the moment. So that's an area where we have a lot of upside. And when Peter answers the second part of your question, you'll see that we have more and more services that are targeted at the merchant and helping them being successful. And the good thing about us as a data science company is that as we provide more and more services to merchants, that gives us more and more variables for our merchant lending model, which helps us to, with the same risk appetite start to lend to more and more merchants across all of our countries. Speaker 400:22:02So that's the GFIN lending model, performing well, growing well, producing good risk adjusted returns. The recent addition on top of that, which is why you're seeing the acceleration of lending is that we're also being able to lend through the banks. The banks are also focused on people who are underbanked or unbanked. And that population is very large in Southeast Asia. By some external studies, we estimate like 2 thirds of the population of Southeast Asia are either unbanked or unbanked or underbanked. Speaker 400:22:35And because we again, we have very low cost of distribution to them, they're existing users of Grab and therefore they have an affinity with the brand. And because we see a lot of information from them, for example, what they're doing on Pay Later, whether they're commuting to work, where they live, all these kinds of things we can impute from the behaviors that we see. We are able to lend to them. The 1st lending product, which is now live in all markets, including Malaysia as of this month, November, is the flexi loan product, distributed very cost effectively. And then with flexible repayment terms from the point of view of the consumer, it has an extremely high NPS, something like 65. Speaker 400:23:25So most banks are hovering at around 0 for NPS. So a product with 65 NPS is quite unusual for banking, and so that makes us very successful in terms of the uptake. We are very carefully whitelisting users for that product using the data models. And that means that we will maintain a very careful look in terms of risk appetite. But overall between GFIN and the banks, our non performing loan ratio is still around 2%. Speaker 400:24:02So that's extremely good performance from those credit models. Then on obviously to fund that, the benefit of having a banking license is we get access to very low cost deposits. And what we've been delighted with since the launch of all three banks is our ability to attract those deposits. We've been able to bring in deposits much faster and with less cost than we had even planned. So you've seen that the positive momentum across GXS Bank in Singapore and GXS Bank and GX Bank in Malaysia, where customer deposits have grown 50% quarter on quarter, so over $1,000,000,000 now in the Q3. Speaker 400:24:46And then SuperBank, which is the Indonesian bank, which only just launched in July, hit 2,000,000 accounts by October, by last month. So a really tremendous uptake. So we are able to raise deposits at a very low cost. And therefore, because of the focus we have on data science and the lending model, you can see very clearly that we can continue this very positive data flywheel for lending. Peter, do you want to? Speaker 800:25:12Yes, sure. Yes. John, on your question around deliveries margin, you asked about the trajectory. If you look at our deliveries business, you're seeing this evolution actually across all the different products that we've introduced in the last over the last 12 months especially. It's been very intentional and part of this, John, is to drive a few things. Speaker 800:25:36We're driving the top of the funnel and pushing the number of transactions we each meant that our users are using our delivery products. The more products that we are offering them, the more that we can offer more variety and also drives transaction. A great example of that is Saver, Saver deliveries, which now accounts for about a third of our deliveries transaction today and it was about 14% same period last year. The other part that we're also driving is also frequency. Frequency is really important for us. Speaker 800:26:09So, we're doing that in a couple of things just to give you some examples. So, for example, in our ability for our subscribers, which is a really important part of our deliveries business, a third of our deliveries today are coming from subscribers. The level of frequency there is way higher than what you're seeing in other parts of our business today. Today, if you look at if you're a GRAB unlimited subscriber, you're spending 4 times more and your frequency is 3 times higher. We're also doing a lot of selling between our food and our mart business also and that's driving frequency. Speaker 800:26:47If you're both a Grab Mart and a Grab Food user in the deliveries, your frequency is 5x higher than if you're just using food only. All this is also leading to retention. So, you've got frequency then that drives also retention for us, which is really critical. And now if you're a subscriber, our retention there is 2 times higher, which is very similar to also that you're seeing from our Grab Food and Grab My cross sell also. So, I'm highlighting these examples because these are critical components for us in driving engagement in our deliveries business, but also at the same time also continuing the monetization. Speaker 800:27:27You had a question around monetization. These are all things that are stacking up in terms of monetizing our users through all these different products that we have. And this is a critical part in also driving segment margin also. Well, we are committed for the business is to continue to drive absolute dollar EBITDA in our deliveries margin and also to our long term margin targets. You will see quarter to quarter for us making investments in our deliveries business because we are driving all these different elements whether it's engagement, frequency, retention also and this is really important as we continue to grow our deliveries business. Speaker 800:28:083rd quarter was a very important quarter for us. It saw our GMV acceleration in our deliveries business. It grew 16% on a year over year basis. We added more users than before also in our deliveries business. And also you saw our segment margin also hitting 1.8% versus last quarter at 1.5%. Speaker 800:28:29So hitting all the right things and we're going to continue this momentum in our deliveries business. Speaker 400:28:35Yes, that's great. And I'll just build on that for the advertising part. So yes, advertising revenue is increasing. So I remember only a few quarters ago, we celebrated crossing $100,000,000 Now we're $185,000,000 in revenue for advertising. And the percentage of deliveries GMV has increased from 1.4% in the prior quarter to 1.6%, and that's up from 1.1% in the prior year period. Speaker 400:29:03So you can see really strong momentum. A lot of that is driven by self serve advertising capabilities. We are continuing to make it easier for merchants to both target on our platform and also get good line of sight of the results. And for self serve, we have a cost per order form of advertising. In other words, you don't pay unless you actually get orders through the platform. Speaker 400:29:28And that's very popular with the smaller merchants because they're typically less sophisticated in terms of how to think about cost per click and some of the other model. I was just in Indonesia 2 weeks ago in Monado, and they had I met with a burger chain entrepreneur, and all of his advertising was done through Grab, both for delivery and for the dining in, which was really powering great success. And he had also taken a loan through the platform. This guy didn't have any account management, so he had actually been proposed the loan, I presume through a white listing process by us on the back end and taken down the loan in order to order the beef to manage his working capital for his supply chain for beef, which was obviously his most expensive ingredient, And that was allowing him to grow even faster and open more outlets. So, I think self serve is really, really a key part of our strategy because many of our merchants are small and many of them are in far flung places like Sulawesi. Operator00:30:37Our next question comes from Sajan Sal Gunkar with Bank of America. Your line is now open. Speaker 1000:30:43Hi, thank you for the opportunity. I have two questions. First question, I wanted to last few quarters, Grab is growing in the range of 9% to 12%. And given the fact that we are now looking to make an MTU push with the focus on first time users, should we see it accelerating? For example, an emerging market like India has a GMV growth on food at 20%. Speaker 1000:31:14So is that something what the Southeast Asia could eventually go to? So that's question number 1. Question number 2, a couple of your peers are talking about the consumption slowdown and impact on that. I just wanted to understand how you guys are looking at it? Thanks. Speaker 800:31:30Maybe I'll take the second one first around consumption slowdown. If you look at Southeast Asia, it's still under penetrated as Sachin. I'll quote a third party report that was put out last week And what they're saying is over the next 5 years in Southeast Asia digital economy, both the mobility and deliveries is growing at double digit CAGR growth. And we're very bullish actually on Southeast Asia. We're not seeing any slowdown in terms of top of the funnel for us. Speaker 800:31:59If anything, we're seeing an acceleration of that. Part of that also is the new product sets and all the things that we just talked about earlier during the call. So we feel that from a consumption perspective, from a macro perspective also, it's looking strong for Southeast Asia. Our demand looks great at the moment and October is strong for us. We see Q4 is a very strong season for us on tourism. Speaker 800:32:25We think tourism increasing in Southeast Asia also at the same time. So all these things are pointing for us at least anyway from our perspective a strong Southeast Asian economy as we continue to penetrate what is a very under penetrated market for us both in all the products that we have today. Speaker 200:32:45Yes, I'll just jump in there. Like what Peter said, we're actually very optimistic about the long term growth outlook, especially for the region given strong inbound tourism. Just recently, we were with the Prime Minister of Thailand and the cabinet ministers, several of them. And we could see, I mean, it's like the movie Everybody Loves Raymond. This one is Everybody Loves Thailand. Speaker 200:33:10And there's a lot of people coming in and we are really blessed to see that strengthening of inbound tourism that's supporting our growth. We also see it not just with our own numbers, but we also see across reports. If you look at the domestic being Google report, it's still very nascent right now on the penetration levels. And we actually, if you look at it, the report, it actually expects double digit growth of CAGRs to be achieved between 2024 to 2,030 on both mobility and food deliveries to your question. So we are super focused to capture this growth. Speaker 200:33:56Alex talked about the affordable, the high value offerings on demand. Alex talked about the advertising and the omni components and also the financial services across our ecosystem. So our take is we actually see and are very optimistic about this region's long term growth outlook. Speaker 900:34:26Thank you. Just a quick follow-up Speaker 1000:34:27of Dhir. Despite under penetration, we are seeing a growth on full GMV in the range of 10% to 12%. Is that a steady state growth or we should expect a 15% growth for the industry going ahead? Speaker 800:34:41Sachin, we're not guiding to what growth rate in terms of all across all our business today. What you are seeing is an acceleration of growth in our deliveries business. We did 16% on a year on year on a constant currency basis and it was 14% on a year on year growth we recorded in the prior quarter. And if we continue to execute with all the product sets that we talked about driving frequency, driving order value also where we continue to make sure that the customers are getting what they want from a price perspective as well as from a product selections perspective and we're able to continue to cross sell our customers also. We feel good that the delivery systems will continue to grow sustainably. Speaker 800:35:23So that's where we focus and making sure that the customers also and our merchants also benefiting from all these product investments that we're making. Speaker 400:35:35Yes. And Sachin, just to jump in, in terms of our trading updates, October 1st part of November, we are seeing an acceleration in the deliveries GMV growth. So, we'll keep pushing with the strategy that Peter and Anthony just laid out. Speaker 1000:35:50Perfect. Thanks a lot. Operator00:35:54Our next question Speaker 800:35:54is from Operator00:35:55Felicia Yap with Citigroup. Your line is now open. Speaker 500:36:00Hi. Thank you. Good morning, management. Thanks for taking my questions and also congrats on the solid results and also the guidance. Two questions. Speaker 500:36:10First is that, understand the growth in mark is faster than food, like 1.7x faster. So it is the main driver on the cross selling. So wondering, do you anticipate the faster growth in March right now could eventually also help to increase the faster growth in food in coming months? So for example, where in maybe in one quarter in the future, could we actually see the frequency and order volume growth in food growing faster than mark? So that's the first question. Speaker 500:36:44And second question is a follow-up on the incentives. So we saw that the incentives, especially on a consumer front, is actually increasing at a faster rate. Understand, I think Alex mentioned earlier, some of that is actually necessary when you have the new product launch and all that to drive, obviously, user awareness and also the conversion. So just wondering, on the back, some of these incentives potentially could actually scale back in the future quarters. If that is the case, it actually could actually translate into a very strong margin improving trends in the coming quarters. Speaker 500:37:26So just wondering, would you consistently roll out some new products that you actually wanted your margin improvement at a more steady stage or we actually could see in 1 quarter if the scale backs more than you expected, then you actually see a jump in the EBITDA margin? And lastly, is that anything on the improvement in AI and technology in driving the efficiency is actually helping you improving in the margin? Thank you. Speaker 400:37:58Thanks Alicia. Yes, some really good questions there. The food and mart users have a 5 times higher order frequency than just food users. And that's the key effect that we're going for as we push the cross sell into mart. So not only does it drive the March GMV standalone, but it also drives the flywheel where we're getting users in the app much more frequently. Speaker 400:38:26And then that allows us to then push the consumer behavior to use the app for dining out as well. So you can see actually our strategy is to have much higher user frequency, much higher share of mind for the year, and that helps us to drive GMV across all three of those initiatives. So the food business, the market business, and then finally the dining out part of the business. Incentives to drive that consumer behavior, particularly into the dining out choices that consumers are making, That's very important for us. And you're right, it has resulted in a little bit of an increase quarter on quarter and year on year on incentive. Speaker 400:39:11We are also in the process of integrating CHOP, which is the food reservation system that we bought that was present in Singapore, Thailand and Indonesia. That's a key part of our platform because if you think about the user journey, they go into the app, they look at the different deals and choices they have for dining out. They then need to make a reservation and before they go to the restaurant. So it's a perfect gap filler and time to market for us. And we can with our footprint, we can actually expand the reservation footprint across multiple countries now using our existing sales teams to sign up the merchants. Speaker 400:39:57So that's also part of the data flywheel that we're generating for high frequency food usage. And I think Peter, you wanted to follow-up? Speaker 800:40:07Yes. Let me address, Alicia, your question around incentives. I think there was an earlier question from Mark also on this point. But the way to think about incentives is, it's a lever for us. And quarter to quarter, these incentives, whether it's on the consumer side, whether it's on the partner side, will move up and down. Speaker 800:40:26And in the last if you remember last quarter in Q2, we had a discussion around mobility margins also and I made a statement that we are investing into the mobility high value rights, all the new products and what you're seeing in the Q3 is some of those coming into play on those product sets. So, we'll continue to make those investments, Alicia. We feel it's right. Again, we're driving a long term business here. We're driving again frequency. Speaker 800:40:53We're driving retention, we're driving engagement across all our product portfolio, which is really critical. And you will see those movements in a quarter on quarter on quarter perspective from incentives. We'll make those investments also not just incentives, we'll make them up and down the P and L line. And these investments into this new product is really important because it really drives scale. It really drives also efficiency at the same time. Speaker 800:41:18Now, while I'm saying all that also, we're also keeping a very close eye unit economics of our business. And the unit economics translate especially around the margin. So we will see where there's opportunities to improve margins, we will definitely improve those margins. And you've seen this in the deliveries margin moving from where it was same time last year was 1.1% and now we're at close to 1.8 percent for the last and then we improved from 30 basis points from a quarter on quarter perspective. So, we'll take a better balanced approach in really growing the top line engagement and frequency, but also in driving profitability at the same time. Speaker 200:42:01I'll just add to what Peter shared on the AI front. In fact, we've been doing machine learning and AI since the very beginning. We have over 1,000 AI ML models in production, one of the highest in the region and it touches every part of our product. So we are actually very, very excited about Gen AI, whether it's about margins, whether it's about growing and improving efficiency as Peter mentioned. In fact, with GAI, we actually see a step change on development, whether it's developing product development velocity, so specifically. Speaker 200:42:43So if you look at the Army 9th that we built with LLMs, we can handle a wide variety of tasks versus just having very specialized models. So one, for example, the food knowledge graph where we actually use LLM for labeling, that just drives higher and higher efficiency. Another example is where we're using GAI to unlock new frontiers of productivity. In the past, for example, our sales enabled team would spend a full day just working on slides for their key customer accounts. And today we can get that done in minutes. Speaker 200:43:24So we're very, very excited. If you just look at mystique, we talked about this before, our Gen AI copywriting tool that helps improve conversion by 2x increasing engagement by 50% amongst users. So lots and lots of these examples that goes along all across Grab that will continue to drive greater cost synergies while ensuring a better customer experiences. Operator00:43:56Our next question comes from Divya Nikhafia with Morgan Stanley. Please proceed. Speaker 1100:44:03Thank you very much. The first question I had is just on the mobility margin. I mean, we've seen that improve and you've attributed it to better mix. You did comment earlier on Indonesia, but I'd be keen to hear your comments on the competitive landscape, especially related to Singapore, Vietnam and Thailand, where we have seen new players come up. Could you just comment on how you see your market shares in those markets and if there's any risk from competition in these markets to the margins? Speaker 1100:44:31The second question is related maybe a little bit to what you just talked about. On overall group corporate costs, Grab has done really well this year. We've managed to reduce that by 10%, 11%. I'd like to hear your thoughts going into 2025. Do you think that we have scope to reduce this further either through AI or is it going to be more operating leverage driven and any call outs on cost inflation that we should be looking out for next year? Speaker 1100:44:56Thanks. Speaker 400:44:58Okay. Thanks, Divya. Let me take the first question on competition. You're right, there have been a couple of announcements of new competitors in the region in the last quarter. Similarly, we've had Jericho announce sorry, we've had Rojik announce that they're pulling out of the Vietnam market. Speaker 400:45:18So the region is competitive. It's always been competitive with people coming in and out. I think the key part of our strategy and the reason why you've seen the improving margins plus the strong growth is that we've got very high operating leverage. So we're in a position where we're using our scale to push out the reliability and affordability frontier all the time. So the AI that Anthony was talking about helps us to optimize even faster and we are doubling down our investment in making sure that we improve services and reliability for our customers at the same time as we make the rides more affordable and at the same time make sure our drivers take home more earnings. Speaker 400:46:04So when you are large, you can do that much more efficiently. And you can see not just in Southeast Asia, where we are 4 times bigger than our next biggest competitor, but also in almost every other part of the world that the returns to scale to the largest player are there in these platform businesses. We are aware and we monitor very closely whenever there are new entrants into the market. There's always a number of small players in every market. But we have found particularly now that we have the variable commission model for drivers, we are in a very strong position to be able to fine tune the market, make sure those the supply does remain loyal to Grab and that makes it hard for the new entrants to gain traction from the point of view of attracting driver supply. Speaker 800:47:01On your question around regional corporate costs, I mean, you know we've seen that we've done a lot of work around optimizing the business and we'll continue to do that. In operating, making sure that we continue to have operating leverage is critical in this business. So we're going to continue to drive that. In terms of copper cost though, you will see from a dollar perspective an uptick and you saw that in the Q3 and that's tied to volume also because as the business continues to grow, we're seeing traction at the top of the funnel. We're seeing the number of orders also increasing also. Speaker 800:47:40There are variable pieces in the regional corporate costs. If you remember, the 40% of our corporate regional corporate costs are tied to variable. Those variable actually will move up also as the volume picks up at the same time. And from a fixed cost perspective also, there'll be certain times when we will make certain additional investments such as what Anthony talked about around Gen AI, which has been a critical part in driving productivity and also efficiency in the business today. So we want to make sure that we do have operating leverage. Speaker 800:48:15That's really important. I tend when I look at regional corporate costs, I look at versus rather than dollar, I look at as a percentage of revenue to make sure that we are continuing to drive efficiency in our business and making sure that that level of leverage continues also in the outer years. So I hope that gives you a bit of color how I think about regional copper costs. Operator00:48:44Thank you. This concludes Graf's 3rd quarter 2024 earnings conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallGrab Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Grab Earnings HeadlinesGrab Holdings Limited (GRAB): Among the Best Food Delivery Stocks to BuyApril 27 at 5:00 PM | finance.yahoo.comSmash-and-grab thieves hit Oakland 7-Eleven twice in 24 hoursApril 27 at 4:58 PM | msn.comMassive dollar overhaul underway in D.C.?Trump's plan to save the U.S. Dollar The U.S. Dollar is crashing, and our reserve currency status is now in serious jeopardy leaving some to wonder – is this being done by design? 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There are 12 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for joining us today. My name is Sierra, and I will be your conference operator for this session. Welcome to Grab's 3rd Quarter 2024 Earnings Results Call. After the speakers' remarks, there will be a Q and A session. I will now turn it over to Doug Wisshieux to start the call. Speaker 100:00:18Good day, everyone, and welcome to Grab's Q3 2024 Earnings Call. I'm Doug Wissiew, Director, Investor Relations and Strategic Finance at Grab. And joining me today are Anthony Tan, Chief Executive Officer Alex Hungate, Chief Operating Officer and Peter Oey, Chief Financial Officer. During this call, we will be making forward looking statements about future events, including our future business and financial performance. These statements are based on our current beliefs and expectations. Speaker 100:00:41Actual results could differ materially due to a number of risks and uncertainties as described in this earnings call, in the earnings release and in our Form 20 F and other filings with the SEC. We do not undertake any duty to update any forward looking statements. We will also be discussing non IFRS financial measures on this call. These measures supplement, but do not replace, IFRS financial measures. Please refer to the earnings materials for a reconciliation of non IFRS to IFRS financial measures. Speaker 100:01:06For more information, please refer to our earnings press release, remarks and supplemental presentation available on our IR website. And with that, I will turn the call over to Anthony to deliver his opening remarks before we open it up for questions. Speaker 200:01:18Thank you so much for joining us today. Q3 2024 was a strong quarter for us. Investments we have made or been making across the business drove an acceleration of our on demand GMV growth year on year. We continue to leverage our platform scale to drive profitable growth with group adjusted EBITDA more than tripling year on year to reach another record high of $90,000,000 and our 11th consecutive quarter of adjusted EBITDA improvement. Monthly transacting users, a leading indicator of future platform growth also recorded its 6th sequential quarter of growth growing 16% year on year to $42,000,000 for the quarter. Speaker 200:02:05On the back of these strong results, we remain confident about Grab's growth potential and believe that we are in pole position to capture the opportunities of growing high value transactions and strengthening domestic demand. And we are committed to doing this while ensuring profitable growth and sustainable free cash flow generation, improving operating leverage and enhancing shareholder returns. As always, I would like to convey our sincere gratitude to our fellow grabbers, our customers and partners for their contributions and support in driving these results. With that, I open the call for questions. Operator? Speaker 300:02:47Thank you. Operator00:02:49We will now start the Q and A portion of the call. Our first question today comes from Phong Zhik with Goldman Sachs. Your line is now open. Speaker 300:03:08Hi, good morning management and congratulations on strong quarters. Two questions from my side. Number 1, we've seen a meaningful pickup in your growth rates, particular in your delivery business, growing 16% year on year in constant currency term and also a very nice pickup in margin as well. Do you expect this growth to sustain and what incremental initiatives are you putting in place to drive this in Q4 and also especially going into next year 2025? That's question number 1. Speaker 300:03:42Question number 2, could you also share the latest update on competitive landscape, especially in Indonesia? Have you seen material change to market share as we've seen your main competitors spend more in recent months? Do you expect this to impact your margins going forward? Speaker 400:04:01Thanks very much, Pang. This is Alex. I'll take those questions. So first of all, we are seeing strong growth momentum in October November to date, particularly the push for affordability and high value services for customers, so part of the laddering strategy that we've talked about before. And then Grab Unlimited continues to grow strongly to our loyalty program has hit another all time high. Speaker 400:04:26I guess one key call out that we focused on in some of the slide materials that we sent out earlier is the food to mart cross sell. So, mart has been growing 1.7x faster than food in the quarter, And then we're getting almost 5x higher order frequency amongst users who transact in both food and mart with more than 2x higher retention rate as well. So we expect that cross sell to continue to be a strong source of growth for deliveries. The other thing that we're doing is that we are helping merchants to attract customers to dine out at the store in addition to the traditional role that we've done in helping them with food deliveries. And that's driving strong GMV growth. Speaker 400:05:10And of course, we've got a lot of available TAM there because in most restaurants, the majority of the TAM majority of the revenue that the merchant is trying to manage is people coming into the store. So that allows Grab to play an important role there. And with the strong growth in advertising revenues that you've seen, that helps us to monetize that with the merchant. Mobility is also pacing strongly as you saw, so 30% year on year GMV growth from high value mobility rides. So these are the new services that we've launched, particularly advanced booking, which is very popular with both travelers and executives. Speaker 400:05:50And we think that, that has a lot of upside. It's a newer set of products than our affordability products, and therefore, gives us a lot of scope to grow TAM there. It's high margin, and it can produce higher driver earnings. So it's a very good healthy new source of growth for our marketplace. And then finally, on the bank side, we're optimistic. Speaker 400:06:16As of November, we now have lending products in all three markets. So it's the first time that we've been able to lend in all three markets in addition to lending through GFIN, which has been our traditional way of lending. You would have noticed in our prepared remarks, I just want to emphasize actually that the trading update maintaining our prior expectations of driving another quarter of sequential growth in both on demand segments heading into the Q4. So that will set us up strongly for 2025. The second question was about competition, especially in Indonesia. Speaker 400:06:53Okay. So while Grab Indonesia is enjoying good sustainable growth, for us, Indonesia started to be positive EBITDA more than a year ago, as you recall. And since then, we've grown Indonesia's EBITDA, Indonesia's revenue and Indonesia's GMV both year on year and quarter on quarter. So it's a good progress financially across all fronts. We have noticed an increased spend from our competitor in Indonesia, as you noted in your question. Speaker 400:07:24I think the reliability of our services and the new services that we've launched are getting good traction with customers. You can see that very clearly in the data. So overall, order frequency is up year on year in Indonesia, while retention rates have remained roughly stable. So that means that the lifetime value of our Indonesian customer base is improving. In particular, the deliveries, average order frequency has accelerated strongly quarter on quarter. Speaker 400:07:53So that's even while competitors are spending a lot more than us, we are able to generate that great traction with our customers. And because of our regional scale, where you'll recall we're about 4 times larger than our next biggest competitor in the region, we are getting better operating leverage across our cost base. So we don't comment on category position country by country, but I can confirm that we're still approximately 4 times larger than our next largest competitor in the region. So then just to wrap up, on EBITDA, we do remain committed to driving that profitable growth. And so this quarter is a strong proof point for that. Speaker 400:08:37Our intent is to continue to grow absolute EBITDA. So based on the updated EBITDA guidance that we've shared today of between $308,000,000 $313,000,000 for the full year 2024, this implies another strong quarter of EBITDA generation in the Q4. Thanks, Pan. Speaker 500:08:59Thank you. Operator00:09:02Our next question comes from Mark Mahaney with Evercore. Your line is now open. Speaker 600:09:07Okay, thanks. Two questions please. One on the incentives, could you just talk about the outlook for incentive spend going forwards? Are you at a point now where that should be coming down sort of consistently as a percentage of GMV or is that something that that's just set as to whether that's a reasonable expectation or not or you want to continue to be able to pull in and pull out as necessary on that metric? And then on the MTU growth, any color on the sources Speaker 700:09:36of that Speaker 600:09:36MTU growth? So help us think about how sustainable that kind of mid teens growth? It looks like it's been consistent the last couple of quarters. Is there are there good reasons to think that it should be consistent going forward over the next year? Thank you very much. Speaker 400:09:51Thanks, Mark. Let me pick up those questions. So on incentives, as you know, over several years, our incentive percentage GMV has been coming down. So you're right, the overall trend is there. And that's because we are able to get more and more efficiency. Speaker 400:10:07And of course, we're using a lot of AI targeting now that we didn't have a few years ago too. So there's a lot to be optimistic about in terms of the overall trajectory of incentives. From quarter to quarter, it can go up and down. And I think particularly when we launch new products, as we have been doing at quite a steady pace these last two quarters, for omni, for example, where we want to generate sustained consumer behavior to look to the Grab app for their dining out choices, as well as traditionally what they've done for delivery. The change in consumer behavior does require incentives. Speaker 400:10:47And similarly, when we launch something like advanced booking to get consumers to use the app in a different way ahead of the time at which they want to make the ride, that also requires changing consumer behavior. So we will use incentives from time to time to generate the momentum behind these new ways of interacting with the app. But those will peak at different times and then also come off. So those are not long term. The MTU growth is encouraging. Speaker 400:11:19We found that the affordability push or the bottom of the ladder of the laddered pricing strategy that we have is driving a lot of first time users into the marketplace. And then obviously, it's our marketing objective to capture them and keep them coming back and drive retention. And I think the big upside for MTUs that we see is frequency, because if you look at our annual transacting users, it's a very large multiple of both our monthly and our daily transacting users. So a lot of our job is to, yes, bring new users in with affordability, but then to ride up the frequency curve with them to bring them from annual into monthly, from monthly into daily. And so there's tremendous upside for us. Speaker 400:12:02At the moment, our monthly transacting users is only about 5% of the Southeast Asia population. And then the annual transacting users is something like 15%. So still lots and lots of upside to go for us with this affordability strategy that we have. And then, of course, plenty of opportunity to continue to drive good margin because of the laddered strategy where we have growing premium customer base as well. Speaker 600:12:32Thank you very much. Operator00:12:36Our next question comes from Ron Jon Charnal with JPMorgan Singapore. Your line is now open. Speaker 700:12:44Hi, good morning and thank you for the presentation and congratulations on the results. Two questions from my side. Firstly, on the MTUs, great to see the traction in building momentum there. Do you have a sense on what the target market could be in Southeast Asia? What the profitable number of MTUs could be for the industry over the next few years? Speaker 700:13:12The second question is on your free cash flows and buybacks. Now that you have $5,800,000,000 of net cash liquidity, plus you have a highly free cash flow generating franchise. Can we expect further increase to the buyback program? Thank you. Speaker 400:13:31Thanks, Anjan. Let me take the first one and then Peter will take the second one on the free cash flow and buyback. I started to get into answering your question a bit earlier on the question on the response to Mark. Our monthly transacting users is around 5% of the total population in Southeast Asia. So we're lucky to be in a region which has lots of upside, lots of growth ahead of it. Speaker 400:13:56I think notwithstanding what's happening in the U. S, I think Southeast Asia has been one of the regions which has benefited from the so called decoupling. We expect that to continue. We've got strong leadership in a lot of political leadership in a lot of the markets and a lot of optimism in those markets. So at 5% on MTUs and only something like 15% on ATUs, we think that there's considerable upside, not just in the short term, but importantly, the long term with this young population. Speaker 400:14:31So we'll continue to engage with them. The brand is strong. You can see from the positive uptake of our financial services offerings that the Grab brand seems to be attractive, not just in the on demand space, but in some of its significant adjacencies too. And so the new financial services offerings will also help us drive MTUs in a whole new dimension. Speaker 800:14:56Arunjan, on your question around cash and buyback, let me just also clarify that on the net cash liquidity, when you look at that number, it does include deposits, the bank deposits. And the prepared remarks and also in our earnings, we had over $1,000,000,000 of deposits that we generated from the 2 banks. But also remember there also excludes loans and we have restricted cash also as part of it. So just taking that into the mix, when you look at our net cash liquidity, we did generate free cash flow in the business in the Q3 also at the same time. We generated about $138,000,000 with just the free cash flow in the business and roughly $76,000,000 if you look at it from a trailing 12 months. Speaker 800:15:37So it's working what we're doing from a capital from a cash generation business. As you remember, we've always had a 3 pronged strategy when it comes to our bottom line, which is 1, deriving adjusted EBITDA, check second, positive free cash flow, check And also we from a net income perspective also we're in this beginning journey of getting there. Now how did that translate to buyback to your other part of the question? Maybe the way to answer that is just to refresh the capital allocation framework, because that's how I think about it. And what's that, it's really a 3 strategy from our perspective. Speaker 800:16:13One is organic growth, organic investment is critical for us. And you're seeing that being played out. 3rd quarter is a really great prime example where the investments that we're making in product set that Alex talked about earlier is seeing the traction both from a top of the funnel, but also we're seeing it in frequency and retention. And that drives lifetime value for us as a business. So, we're going to continue to make those investments in the organic side of the business as the highest priority for us. Speaker 800:16:46We'll look at other opportunities inorganically. However, those opportunities will be at a very high bar for us and that will continue also. Now, when we do have excess liquidity, we will look at opportunities to return them to our shareholders. Now, on our buyback program today, we're only about $190,000,000 roughly about $190,000,000 out of the $500,000,000 mandate that we have today. So we still have some ways to go. Speaker 800:17:13So we're going to continue to execute that. And as opportunities come up in the future, if those opportunities are the right ones, we'll revisit our buyback program. But at this stage, we're committed to the $500,000,000 and we still have about another $300,000,000 to go to complete that buyback program. Next question please operator. Operator00:17:39Our next question comes from Jiyoung Xiao with Barclays. Your line is now open. Speaker 900:17:45Thank you very much. Congrats on the very strong results. Two questions as well. Firstly, I would love to learn a bit more about your FinTech business. I know you started with Digibanking Singapore lending out loans to make money and now all 3 DigiBanks are offering credit products now. Speaker 900:18:11Could you sort of elaborate a bit on the borrower's profile, like who borrow from you? What kind of the typical terms? And expand a bit, please, on the acceleration in growth rate from this business next year. I believe you highlight that before. It's probably one of the most important drivers for revenue reacceleration. Speaker 900:18:38And so my second question is on the delivery margins. It's great to see you have made a lot of progress, I think 50 basis points increase sequentially, if I'm not mistaken, to 1.8%, but that's still quite a bit below 4% with could you elaborate a bit on what kind of growth trajectory for your advertising business maybe? You noted earlier about in store monetization, again, as some of us know that your Chinese peer is doing great job there in China. Could you talk about how do you plan, when do you plan to monetize the install part of the delivery business? Thank you very much for and sorry for the long questions. Speaker 400:19:28No, thanks, John. That's great. Let me start by talking about financial services. Just explain a little bit about the lending in particular, which is the focus of your question. So you could see the strong loan dispersals in the quarter, 38 percent year on year, 13% quarter on quarter. Speaker 400:19:44So we're now at $565,000,000 in the 3rd quarter. So if you approximately annualize that $2,200,000,000 So the pace of the lending is going up and that's because we are layering now the lending through the banks on top of the existing GFIN business which where the lending already had a healthy underlying growth rate. Let me start with the G Fin business to understand so you can understand that a bit better because that's a long standing business. So primarily lending to partners and users across all of the markets. So it's ecosystem based where we are benefiting from the deep insights we have into the user behavior on the ecosystem with a very sophisticated large language model based lending model, which now ingest something like 120 different variables from the ecosystem, make lending decisions. Speaker 400:20:42So it's a very different, much more multidimensional type of database than traditional banks would use. That allows us to lend to people like drivers and other gig workers who traditionally have not been well served by banks. So many of them are either unbanked or underbanked because they don't have traditional payslips. And that's very much in line with our mission as an organization to support them. The penetration of the driver lending by GFIN is good, but the models are improving all the time, so we can continue to lend on a risk adjusted basis. Speaker 400:21:18And the risk adjusted returns overall from GFIN are comfortably above the cost of capital for the group. The penetration of lending to merchants is relatively low at the moment. So that's an area where we have a lot of upside. And when Peter answers the second part of your question, you'll see that we have more and more services that are targeted at the merchant and helping them being successful. And the good thing about us as a data science company is that as we provide more and more services to merchants, that gives us more and more variables for our merchant lending model, which helps us to, with the same risk appetite start to lend to more and more merchants across all of our countries. Speaker 400:22:02So that's the GFIN lending model, performing well, growing well, producing good risk adjusted returns. The recent addition on top of that, which is why you're seeing the acceleration of lending is that we're also being able to lend through the banks. The banks are also focused on people who are underbanked or unbanked. And that population is very large in Southeast Asia. By some external studies, we estimate like 2 thirds of the population of Southeast Asia are either unbanked or unbanked or underbanked. Speaker 400:22:35And because we again, we have very low cost of distribution to them, they're existing users of Grab and therefore they have an affinity with the brand. And because we see a lot of information from them, for example, what they're doing on Pay Later, whether they're commuting to work, where they live, all these kinds of things we can impute from the behaviors that we see. We are able to lend to them. The 1st lending product, which is now live in all markets, including Malaysia as of this month, November, is the flexi loan product, distributed very cost effectively. And then with flexible repayment terms from the point of view of the consumer, it has an extremely high NPS, something like 65. Speaker 400:23:25So most banks are hovering at around 0 for NPS. So a product with 65 NPS is quite unusual for banking, and so that makes us very successful in terms of the uptake. We are very carefully whitelisting users for that product using the data models. And that means that we will maintain a very careful look in terms of risk appetite. But overall between GFIN and the banks, our non performing loan ratio is still around 2%. Speaker 400:24:02So that's extremely good performance from those credit models. Then on obviously to fund that, the benefit of having a banking license is we get access to very low cost deposits. And what we've been delighted with since the launch of all three banks is our ability to attract those deposits. We've been able to bring in deposits much faster and with less cost than we had even planned. So you've seen that the positive momentum across GXS Bank in Singapore and GXS Bank and GX Bank in Malaysia, where customer deposits have grown 50% quarter on quarter, so over $1,000,000,000 now in the Q3. Speaker 400:24:46And then SuperBank, which is the Indonesian bank, which only just launched in July, hit 2,000,000 accounts by October, by last month. So a really tremendous uptake. So we are able to raise deposits at a very low cost. And therefore, because of the focus we have on data science and the lending model, you can see very clearly that we can continue this very positive data flywheel for lending. Peter, do you want to? Speaker 800:25:12Yes, sure. Yes. John, on your question around deliveries margin, you asked about the trajectory. If you look at our deliveries business, you're seeing this evolution actually across all the different products that we've introduced in the last over the last 12 months especially. It's been very intentional and part of this, John, is to drive a few things. Speaker 800:25:36We're driving the top of the funnel and pushing the number of transactions we each meant that our users are using our delivery products. The more products that we are offering them, the more that we can offer more variety and also drives transaction. A great example of that is Saver, Saver deliveries, which now accounts for about a third of our deliveries transaction today and it was about 14% same period last year. The other part that we're also driving is also frequency. Frequency is really important for us. Speaker 800:26:09So, we're doing that in a couple of things just to give you some examples. So, for example, in our ability for our subscribers, which is a really important part of our deliveries business, a third of our deliveries today are coming from subscribers. The level of frequency there is way higher than what you're seeing in other parts of our business today. Today, if you look at if you're a GRAB unlimited subscriber, you're spending 4 times more and your frequency is 3 times higher. We're also doing a lot of selling between our food and our mart business also and that's driving frequency. Speaker 800:26:47If you're both a Grab Mart and a Grab Food user in the deliveries, your frequency is 5x higher than if you're just using food only. All this is also leading to retention. So, you've got frequency then that drives also retention for us, which is really critical. And now if you're a subscriber, our retention there is 2 times higher, which is very similar to also that you're seeing from our Grab Food and Grab My cross sell also. So, I'm highlighting these examples because these are critical components for us in driving engagement in our deliveries business, but also at the same time also continuing the monetization. Speaker 800:27:27You had a question around monetization. These are all things that are stacking up in terms of monetizing our users through all these different products that we have. And this is a critical part in also driving segment margin also. Well, we are committed for the business is to continue to drive absolute dollar EBITDA in our deliveries margin and also to our long term margin targets. You will see quarter to quarter for us making investments in our deliveries business because we are driving all these different elements whether it's engagement, frequency, retention also and this is really important as we continue to grow our deliveries business. Speaker 800:28:083rd quarter was a very important quarter for us. It saw our GMV acceleration in our deliveries business. It grew 16% on a year over year basis. We added more users than before also in our deliveries business. And also you saw our segment margin also hitting 1.8% versus last quarter at 1.5%. Speaker 800:28:29So hitting all the right things and we're going to continue this momentum in our deliveries business. Speaker 400:28:35Yes, that's great. And I'll just build on that for the advertising part. So yes, advertising revenue is increasing. So I remember only a few quarters ago, we celebrated crossing $100,000,000 Now we're $185,000,000 in revenue for advertising. And the percentage of deliveries GMV has increased from 1.4% in the prior quarter to 1.6%, and that's up from 1.1% in the prior year period. Speaker 400:29:03So you can see really strong momentum. A lot of that is driven by self serve advertising capabilities. We are continuing to make it easier for merchants to both target on our platform and also get good line of sight of the results. And for self serve, we have a cost per order form of advertising. In other words, you don't pay unless you actually get orders through the platform. Speaker 400:29:28And that's very popular with the smaller merchants because they're typically less sophisticated in terms of how to think about cost per click and some of the other model. I was just in Indonesia 2 weeks ago in Monado, and they had I met with a burger chain entrepreneur, and all of his advertising was done through Grab, both for delivery and for the dining in, which was really powering great success. And he had also taken a loan through the platform. This guy didn't have any account management, so he had actually been proposed the loan, I presume through a white listing process by us on the back end and taken down the loan in order to order the beef to manage his working capital for his supply chain for beef, which was obviously his most expensive ingredient, And that was allowing him to grow even faster and open more outlets. So, I think self serve is really, really a key part of our strategy because many of our merchants are small and many of them are in far flung places like Sulawesi. Operator00:30:37Our next question comes from Sajan Sal Gunkar with Bank of America. Your line is now open. Speaker 1000:30:43Hi, thank you for the opportunity. I have two questions. First question, I wanted to last few quarters, Grab is growing in the range of 9% to 12%. And given the fact that we are now looking to make an MTU push with the focus on first time users, should we see it accelerating? For example, an emerging market like India has a GMV growth on food at 20%. Speaker 1000:31:14So is that something what the Southeast Asia could eventually go to? So that's question number 1. Question number 2, a couple of your peers are talking about the consumption slowdown and impact on that. I just wanted to understand how you guys are looking at it? Thanks. Speaker 800:31:30Maybe I'll take the second one first around consumption slowdown. If you look at Southeast Asia, it's still under penetrated as Sachin. I'll quote a third party report that was put out last week And what they're saying is over the next 5 years in Southeast Asia digital economy, both the mobility and deliveries is growing at double digit CAGR growth. And we're very bullish actually on Southeast Asia. We're not seeing any slowdown in terms of top of the funnel for us. Speaker 800:31:59If anything, we're seeing an acceleration of that. Part of that also is the new product sets and all the things that we just talked about earlier during the call. So we feel that from a consumption perspective, from a macro perspective also, it's looking strong for Southeast Asia. Our demand looks great at the moment and October is strong for us. We see Q4 is a very strong season for us on tourism. Speaker 800:32:25We think tourism increasing in Southeast Asia also at the same time. So all these things are pointing for us at least anyway from our perspective a strong Southeast Asian economy as we continue to penetrate what is a very under penetrated market for us both in all the products that we have today. Speaker 200:32:45Yes, I'll just jump in there. Like what Peter said, we're actually very optimistic about the long term growth outlook, especially for the region given strong inbound tourism. Just recently, we were with the Prime Minister of Thailand and the cabinet ministers, several of them. And we could see, I mean, it's like the movie Everybody Loves Raymond. This one is Everybody Loves Thailand. Speaker 200:33:10And there's a lot of people coming in and we are really blessed to see that strengthening of inbound tourism that's supporting our growth. We also see it not just with our own numbers, but we also see across reports. If you look at the domestic being Google report, it's still very nascent right now on the penetration levels. And we actually, if you look at it, the report, it actually expects double digit growth of CAGRs to be achieved between 2024 to 2,030 on both mobility and food deliveries to your question. So we are super focused to capture this growth. Speaker 200:33:56Alex talked about the affordable, the high value offerings on demand. Alex talked about the advertising and the omni components and also the financial services across our ecosystem. So our take is we actually see and are very optimistic about this region's long term growth outlook. Speaker 900:34:26Thank you. Just a quick follow-up Speaker 1000:34:27of Dhir. Despite under penetration, we are seeing a growth on full GMV in the range of 10% to 12%. Is that a steady state growth or we should expect a 15% growth for the industry going ahead? Speaker 800:34:41Sachin, we're not guiding to what growth rate in terms of all across all our business today. What you are seeing is an acceleration of growth in our deliveries business. We did 16% on a year on year on a constant currency basis and it was 14% on a year on year growth we recorded in the prior quarter. And if we continue to execute with all the product sets that we talked about driving frequency, driving order value also where we continue to make sure that the customers are getting what they want from a price perspective as well as from a product selections perspective and we're able to continue to cross sell our customers also. We feel good that the delivery systems will continue to grow sustainably. Speaker 800:35:23So that's where we focus and making sure that the customers also and our merchants also benefiting from all these product investments that we're making. Speaker 400:35:35Yes. And Sachin, just to jump in, in terms of our trading updates, October 1st part of November, we are seeing an acceleration in the deliveries GMV growth. So, we'll keep pushing with the strategy that Peter and Anthony just laid out. Speaker 1000:35:50Perfect. Thanks a lot. Operator00:35:54Our next question Speaker 800:35:54is from Operator00:35:55Felicia Yap with Citigroup. Your line is now open. Speaker 500:36:00Hi. Thank you. Good morning, management. Thanks for taking my questions and also congrats on the solid results and also the guidance. Two questions. Speaker 500:36:10First is that, understand the growth in mark is faster than food, like 1.7x faster. So it is the main driver on the cross selling. So wondering, do you anticipate the faster growth in March right now could eventually also help to increase the faster growth in food in coming months? So for example, where in maybe in one quarter in the future, could we actually see the frequency and order volume growth in food growing faster than mark? So that's the first question. Speaker 500:36:44And second question is a follow-up on the incentives. So we saw that the incentives, especially on a consumer front, is actually increasing at a faster rate. Understand, I think Alex mentioned earlier, some of that is actually necessary when you have the new product launch and all that to drive, obviously, user awareness and also the conversion. So just wondering, on the back, some of these incentives potentially could actually scale back in the future quarters. If that is the case, it actually could actually translate into a very strong margin improving trends in the coming quarters. Speaker 500:37:26So just wondering, would you consistently roll out some new products that you actually wanted your margin improvement at a more steady stage or we actually could see in 1 quarter if the scale backs more than you expected, then you actually see a jump in the EBITDA margin? And lastly, is that anything on the improvement in AI and technology in driving the efficiency is actually helping you improving in the margin? Thank you. Speaker 400:37:58Thanks Alicia. Yes, some really good questions there. The food and mart users have a 5 times higher order frequency than just food users. And that's the key effect that we're going for as we push the cross sell into mart. So not only does it drive the March GMV standalone, but it also drives the flywheel where we're getting users in the app much more frequently. Speaker 400:38:26And then that allows us to then push the consumer behavior to use the app for dining out as well. So you can see actually our strategy is to have much higher user frequency, much higher share of mind for the year, and that helps us to drive GMV across all three of those initiatives. So the food business, the market business, and then finally the dining out part of the business. Incentives to drive that consumer behavior, particularly into the dining out choices that consumers are making, That's very important for us. And you're right, it has resulted in a little bit of an increase quarter on quarter and year on year on incentive. Speaker 400:39:11We are also in the process of integrating CHOP, which is the food reservation system that we bought that was present in Singapore, Thailand and Indonesia. That's a key part of our platform because if you think about the user journey, they go into the app, they look at the different deals and choices they have for dining out. They then need to make a reservation and before they go to the restaurant. So it's a perfect gap filler and time to market for us. And we can with our footprint, we can actually expand the reservation footprint across multiple countries now using our existing sales teams to sign up the merchants. Speaker 400:39:57So that's also part of the data flywheel that we're generating for high frequency food usage. And I think Peter, you wanted to follow-up? Speaker 800:40:07Yes. Let me address, Alicia, your question around incentives. I think there was an earlier question from Mark also on this point. But the way to think about incentives is, it's a lever for us. And quarter to quarter, these incentives, whether it's on the consumer side, whether it's on the partner side, will move up and down. Speaker 800:40:26And in the last if you remember last quarter in Q2, we had a discussion around mobility margins also and I made a statement that we are investing into the mobility high value rights, all the new products and what you're seeing in the Q3 is some of those coming into play on those product sets. So, we'll continue to make those investments, Alicia. We feel it's right. Again, we're driving a long term business here. We're driving again frequency. Speaker 800:40:53We're driving retention, we're driving engagement across all our product portfolio, which is really critical. And you will see those movements in a quarter on quarter on quarter perspective from incentives. We'll make those investments also not just incentives, we'll make them up and down the P and L line. And these investments into this new product is really important because it really drives scale. It really drives also efficiency at the same time. Speaker 800:41:18Now, while I'm saying all that also, we're also keeping a very close eye unit economics of our business. And the unit economics translate especially around the margin. So we will see where there's opportunities to improve margins, we will definitely improve those margins. And you've seen this in the deliveries margin moving from where it was same time last year was 1.1% and now we're at close to 1.8 percent for the last and then we improved from 30 basis points from a quarter on quarter perspective. So, we'll take a better balanced approach in really growing the top line engagement and frequency, but also in driving profitability at the same time. Speaker 200:42:01I'll just add to what Peter shared on the AI front. In fact, we've been doing machine learning and AI since the very beginning. We have over 1,000 AI ML models in production, one of the highest in the region and it touches every part of our product. So we are actually very, very excited about Gen AI, whether it's about margins, whether it's about growing and improving efficiency as Peter mentioned. In fact, with GAI, we actually see a step change on development, whether it's developing product development velocity, so specifically. Speaker 200:42:43So if you look at the Army 9th that we built with LLMs, we can handle a wide variety of tasks versus just having very specialized models. So one, for example, the food knowledge graph where we actually use LLM for labeling, that just drives higher and higher efficiency. Another example is where we're using GAI to unlock new frontiers of productivity. In the past, for example, our sales enabled team would spend a full day just working on slides for their key customer accounts. And today we can get that done in minutes. Speaker 200:43:24So we're very, very excited. If you just look at mystique, we talked about this before, our Gen AI copywriting tool that helps improve conversion by 2x increasing engagement by 50% amongst users. So lots and lots of these examples that goes along all across Grab that will continue to drive greater cost synergies while ensuring a better customer experiences. Operator00:43:56Our next question comes from Divya Nikhafia with Morgan Stanley. Please proceed. Speaker 1100:44:03Thank you very much. The first question I had is just on the mobility margin. I mean, we've seen that improve and you've attributed it to better mix. You did comment earlier on Indonesia, but I'd be keen to hear your comments on the competitive landscape, especially related to Singapore, Vietnam and Thailand, where we have seen new players come up. Could you just comment on how you see your market shares in those markets and if there's any risk from competition in these markets to the margins? Speaker 1100:44:31The second question is related maybe a little bit to what you just talked about. On overall group corporate costs, Grab has done really well this year. We've managed to reduce that by 10%, 11%. I'd like to hear your thoughts going into 2025. Do you think that we have scope to reduce this further either through AI or is it going to be more operating leverage driven and any call outs on cost inflation that we should be looking out for next year? Speaker 1100:44:56Thanks. Speaker 400:44:58Okay. Thanks, Divya. Let me take the first question on competition. You're right, there have been a couple of announcements of new competitors in the region in the last quarter. Similarly, we've had Jericho announce sorry, we've had Rojik announce that they're pulling out of the Vietnam market. Speaker 400:45:18So the region is competitive. It's always been competitive with people coming in and out. I think the key part of our strategy and the reason why you've seen the improving margins plus the strong growth is that we've got very high operating leverage. So we're in a position where we're using our scale to push out the reliability and affordability frontier all the time. So the AI that Anthony was talking about helps us to optimize even faster and we are doubling down our investment in making sure that we improve services and reliability for our customers at the same time as we make the rides more affordable and at the same time make sure our drivers take home more earnings. Speaker 400:46:04So when you are large, you can do that much more efficiently. And you can see not just in Southeast Asia, where we are 4 times bigger than our next biggest competitor, but also in almost every other part of the world that the returns to scale to the largest player are there in these platform businesses. We are aware and we monitor very closely whenever there are new entrants into the market. There's always a number of small players in every market. But we have found particularly now that we have the variable commission model for drivers, we are in a very strong position to be able to fine tune the market, make sure those the supply does remain loyal to Grab and that makes it hard for the new entrants to gain traction from the point of view of attracting driver supply. Speaker 800:47:01On your question around regional corporate costs, I mean, you know we've seen that we've done a lot of work around optimizing the business and we'll continue to do that. In operating, making sure that we continue to have operating leverage is critical in this business. So we're going to continue to drive that. In terms of copper cost though, you will see from a dollar perspective an uptick and you saw that in the Q3 and that's tied to volume also because as the business continues to grow, we're seeing traction at the top of the funnel. We're seeing the number of orders also increasing also. Speaker 800:47:40There are variable pieces in the regional corporate costs. If you remember, the 40% of our corporate regional corporate costs are tied to variable. Those variable actually will move up also as the volume picks up at the same time. And from a fixed cost perspective also, there'll be certain times when we will make certain additional investments such as what Anthony talked about around Gen AI, which has been a critical part in driving productivity and also efficiency in the business today. So we want to make sure that we do have operating leverage. Speaker 800:48:15That's really important. I tend when I look at regional corporate costs, I look at versus rather than dollar, I look at as a percentage of revenue to make sure that we are continuing to drive efficiency in our business and making sure that that level of leverage continues also in the outer years. So I hope that gives you a bit of color how I think about regional copper costs. Operator00:48:44Thank you. This concludes Graf's 3rd quarter 2024 earnings conference call. Thank you for your participation. You may now disconnect.Read morePowered by