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GRAB.OQ - Q4 2021 Grab Holdings Ltd Earnings Call

EVENT DATE/TIME: MARCH 03, 2022 / 1:00PM GMT

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MARCH 03, 2022 / 1:00PM, GRAB.OQ - Q4 2021 Grab Holdings Ltd Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Ming-HokngMaa Grab Holdings Limited - President

Peter Oey Grab Holdings Limited - CFO

Anthony Tan Grab Holdings Limited - Co-Founder, Chairman & CEO

Vivian Tong Grab Holdings Limited - Head of U.S. Investor Relations

C O N F E R E N C E C A L L P A R T I C I P A N T S

Alicia Yap Citigroup Inc., Research Division - MD & Head of Pan-Asia Internet Research

Mark Goodridge Morgan Stanley, Research Division - Equity Analyst

Mark Stephen F. Mahaney Evercore Inc. - Senior MD & Head of Internet Research of Evercore ISI

Navin Killa UBS Investment Bank, Research Division - Analyst

Pang Vittayaamnuaykoon Goldman Sachs Group, Inc., Research Division - Research Analyst

Piyush Choudhary HSBC, Research Division - Telecoms Analyst, South East Asia

Ranjan Sharma JPMorgan Chase & Co, Research Division - Analyst

Thomas Chong Jefferies LLC, Research Division - Equity Analyst

P R E S E N T A T I O N

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to Grab Holdings Fourth Quarter 2021 Earnings Conference Call.

(Operator Instructions)

I would now like to turn the conference over to your speaker host, Vivian Tong, Head of U.S. Investor Relations.

Vivian Tong - Grab Holdings Limited - Head of U.S. Investor Relations

Good day, everyone, and welcome to Grab's Fourth Quarter 2021 Earnings Presentation. This is Vivian Tong, Head of U.S. Investor Relations at Grab. And joining me today are Anthony Tan, Chief Executive Officer; Ming Maa, President; and Peter Oey, Chief Financial Officer.

During the call today, Anthony will discuss our key business updates, and Peter will share detailed insights with you on our fourth quarter and full year 2021 financial results. Following prepared remarks, we'll open up the call for questions where Anthony, Peter and Ming will respond to Q&A.

As a reminder before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties and including those mentioned in our Form F-1 registration statement and other filings with the SEC.

The discussion today also contains operating metrics and non-IFRS financial measures. The comparable IFRS financial measures are included in this quarter's earnings materials. For more information and additional disclosures on recent business performance, please refer to our earnings press release and supplemental presentation for a detailed fourth quarter and fiscal year 2021 financial review, which can be found on our IR website. Should you have any questions after this presentation, please reach out to [e-mail].

And with that, I will turn the call over to Anthony to deliver opening remarks.

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MARCH 03, 2022 / 1:00PM, GRAB.OQ - Q4 2021 Grab Holdings Ltd Earnings Call

Anthony Tan - Grab Holdings Limited - Co-Founder, Chairman & CEO

Thank you so much for joining our first-ever earnings call as a public company. We had our best year yet in 2021, and I'm so proud of Grabbers and what we've been able to accomplish. Thank you to all our Grabbers around the globe in all their contribution in driving Southeast Asia forward. I also want to express our deep appreciation to our driver and merchant partners who continue to deliver day in and day out.

Before diving into the details of our performance for this year, I'd like to spend a moment on the Grab story. Hooi Ling and I co-founded Grab in 2012 with a mission and that mission is to drive Southeast Asia forward by creating economic empowerment for everyone. And since then, we've evolved into a single everyday, everything super app that is enabling millions of people each day to order food, groceries, hail a ride, pay for purchase and access financial services like lending, insurance and more, all in 1 app and we are just getting started. And during 2022, we continue to be intensely focused on our 3 key priorities: Firstly, we are focused on winning the hearts and minds of more users across the region by introducing the benefits of the Superapp to more users by being hyper local in how we serve the region and by delivering even better user experiences and better service levels. This will further solidify our category leadership in Southeast Asia.

Secondly, we'll continue to invest in the growth of our key business segments. We're addressing massive market opportunities and see tremendous headroom for growth in our user base and opportunity to drive greater wallet share from our existing users. And third and final, we will continue to reduce our cost to serve. We want to be the most capital-efficient provider in the market, and this is where our Superapp product strategy provides us with this advantage.

With this backdrop, let's dive into the results for the year. We had another record year for Grab with tremendous year-over-year growth that saw us achieve a total GMV of USD 16.1 billion, exceeding our GMV guidance for the year. We also delivered against our adjusted EBITDA guidance as we continue to progress on our path to profitability. This was in spite of a difficult COVID environment where lockdowns were markedly harsher in Southeast Asia in 2021.

GMV grew 26% year-over-year in the fourth quarter to $4.5 billion. As of the fourth quarter, our MTUs are at the highest point since COVID lockdowns began. Our data also shows that in 2021, our users are spending 31% more on our platform compared to the year before. These results bear testament to the resilience and the growing relevance of the Superapp and effectiveness of our Superapp product strategy.

It demonstrates our ability to grow even in an uncertain environment. On mobility, while we're not completely out of the COVID woods yet, we're progressing strongly towards full recovery. We saw fourth quarter mobility GMV, up by 45% quarter-on-quarter. We're also seeing mobility GMV in the first 2 months of the year, growing modestly year-on-year as well. Consumers are eager to be out and about again, and we've observed greater nuance in how governments are responding to Omicron compared to the previous infection waves. Countries like Malaysia and Singapore have gradually loosened restrictions in spite of rising cases.

And while countries like Indonesia and the Philippines have introduced or reintroduced tighter restrictions in the first 2 months of the year. We're more optimistic about a recovery than we were in 2021. And we are investing to position our supply base strongly to capture the demand rebound ahead.

Turning to deliveries. It is clear to us that deliveries are becoming more and more integral to everyday life. Even through waves of loosening restrictions, our deliveries business has continued to perform strongly. Not only are we seeing our user base grow, users are ordering more frequently and they're spending more per order. Average order values have gone up by 41% in 2021 compared to 2019 before the onset of COVID. On a whole, GMV for our deliveries business expanded by 56% year-over-year in 2021.

For Financial Services, we continue to see strong momentum. The fourth quarter was another record quarter for us. And our total payments volume for 2021 was $12.1 billion, a 37% increase year-over-year. We're seeing good growth in products like buy now, pay later with fourth quarter TPVs being 5x higher than the year before. I'm also excited about our Digibank opportunities. The Grab- Singtel Digibank joint venture is getting ready to launch in Singapore this year. We're awaiting results in our Digibank license application in Malaysia, which the regulator has stated they expect to announce within March. We also recently acquired a 16.26% stake in Bank Fama in Indonesia, which we intend to use as a launch pad for our Indonesia digi banking ambitions.

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MARCH 03, 2022 / 1:00PM, GRAB.OQ - Q4 2021 Grab Holdings Ltd Earnings Call

A quick point on enterprise and new initiatives. We continue to expand our existing advertising and mapping offerings. While still a small and very young segment, the growth prospects are very exciting and we will continue to sharpen our value proposition with the expanding partner and client base that we are progressively building.

In our advertising business, for example, we have tripled the number of merchants on our ads platform between the fourth quarter of 2020 and the fourth quarter of 2021. I want to point out that the fourth quarter was a quarter of reinvestments for Grab and we expect some of this to continue into the first and second quarter. There are 3 drivers for this. First, we're preemptively investing to recalibrate driver supply to capture a strong recovery in mobility demand.

Similar to what was observed in other parts of the world, our driver supply base moderated down amid lower mobility demand in the third quarter. We're investing to pull drivers back even as we continue to find ways to increase your productivity on our platform. Not only are we seeing our driver pool grow, the utilization rates went up by 19% year-over-year in the fourth quarter and the average earnings per hour grew by 16%.

Second, we're strategically investing to maintain category leadership in Southeast Asia. According to Euromonitor, we remain the #1 category leader across our core verticals in 2021. We're 3.9x larger than the next largest competitor in ride-hailing, 2.1x larger in online food delivery and 1.3x larger in payments. The growth opportunity in Southeast Asia is tremendous across our verticals, and we're not the only ones who recognize this. Players in some markets have at times increased their promotion spend significantly. We will continue to invest as appropriate to maintain our lead. And while we have a fortress balance sheet to support this, we aim to do it in an efficient, judicious and disciplined manner.

As the category leader, we continue to lead in capital efficiency across the categories in which we operate. Let me share 2 quick examples. In Singapore, we retained a comfortable lead in category share for mobility while spending an estimated 4x less on promotions per ride in the fourth quarter compared to one of our competitors. This represents a 4:1 advantage in capital efficiency that Grab has.

In food deliveries, despite competition, we maintained category leadership in the region while driving greater efficiencies from our incentive spend across our core markets.

For example, on a per order basis across competitive markets such as Indonesia, Malaysia, Thailand and Vietnam, we estimate that our GMV to cost ratios are 25% to almost 100% more efficient than competitor averages. This demonstrates that our platform and Superapp product strategy affords us greater efficiencies in our incentive spend. Not only because of advantages from our Superapp flywheel, but also because of consumer loyalty and preference towards Grab.

Year-on-year, we are seeing the number of cross-vertical users grow. Users who use more than 2 or more Grab services have now reached 56% of our user base, up from 49% a year ago. Your retention rates are higher and they're spending more on our platform. This, in turn, drives higher customer lifetime value and greater efficiency in incentive spend. Third, we continue to invest into tech infrastructure and talent to support the pursuit of our long-term growth opportunities.

We're scaling up our cloud infrastructure, investing more in mapping out Southeast Asia in AI, analytics and in our ads platform. With all these investments, I want to emphasize that we don't expect these levels of investments to persist in the long run. With Southeast Asia still in the early stages of online adoption across our key categories, we see significant headroom for our TAM to increase. We're confident that the investments we are making are important, foundational and ones that we expect will pave the way for sustainable future growth.

I do also want to underscore that we continue to be laser focused on our path to profitability. Mobility continues to deliver best-in-class segment adjusted EBITDA margins. And across all our segments, we've seen our adjusted EBITDA margins improve year-over-year. Peter will share more on our margins and how we are thinking about the medium to long term.

Looking ahead, I expect 2022 to be another watershed year for Grab and for a few reasons. First, we're aiming to launch our very first Digibank in Singapore this year. Second, we will continue to pursue large opportunities in deliveries across both offline and online demand for prepared meals and groceries. So when our consumers are hungry for anything, whether it's a restaurant meal or home-cook dinner or just something to snack on, we want Grab to instinctively come top of mind for them.

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MARCH 03, 2022 / 1:00PM, GRAB.OQ - Q4 2021 Grab Holdings Ltd Earnings Call

Third, we'll continue to focus on the recovery of mobility. This is where we have a proven track record of 9 quarters of segment adjusted EBITDA profitability to date. As we march towards profitability, mobility will continue serving as a solid foundation for our other verticals and focus areas. I have deep conviction in our Superapp product strategy as our right to win and we'll continue to aim for the best product experience for our consumers in the market.

It is key to how we drive loyalty to our platform while reducing our cost to serve. We continue to stay true to our mission of driving economic empowerment across all of Southeast Asia and remain steadfast in executing our strategy.

I'll now turn the call over to Peter for a review of the financials.

Peter Oey - Grab Holdings Limited - CFO

Thanks, Anthony. Before I turn to the financial update, I wanted to update you about Grab's inclusion in the MSCI world index earlier this week on March 1. This month is another significant milestone for Grab, which will enhance our trading liquidity and improve our visibility to global investors.

Now turning to the financials. We ended 2021 with a strong fourth quarter and full year 2021 results, exceeding our expectations on top- line and meeting our guidance on our bottom line. The fourth quarter was our strongest quarter to date as GMV grew 26% year-over-year to $4.5 billion, driven by deliveries growth of 52% year-over-year. GMV for the year finished at $16.1 billion, a year-over-year increase of 29% and Deliveries GMV of $8.5 billion, growth of 56% for the same period.

Mobility GMV in the fourth quarter grew 45% over the third quarter. While we're still away from mobility recovering to pre-COVID levels, we are optimistic on mobility's future growth based on this quarter's strong recovery progress. Mobility GMV for the year finished at $2.8 billion.

Overall, across all our segments, we're seeing improvements in commission rates, which is defined as Grab's commissions before incentives as a percentage of GMV. Deliveries commissions are up from 17.5% to 18.2%. Mobility commissions are up from 21.7% to 23.8%, and financial services commissions up from 1.8% to 2.4%. Revenue on an IFRS basis for 2021 grew by 44% year-on-year to $675 million from $469 million. This marks our highest revenue achieved in the fiscal year. For the fourth quarter, revenue did decline to $122 million from $219 million year-on-year.

Now this was primarily due to the strategic investments made in higher driver incentives to meet the strong demand from lockdown reopenings in the third quarter across all markets and also higher consumer incentives in deliveries as we invested in our category leadership and acquiring new MTUs to our platform.

We made positive strides in improving our EBITDA margins in 2021. Segment adjusted EBITDA margins for 2021 as a percentage of GMV improved from negative 2% to negative 1%. Adjusted EBITDA margins for the group as a percentage of GMV also improved from negative 6% to negative 5% as we improved commission rates and scaled operating leverage at segment level.

For the fourth quarter, segment adjusted EBITDA declined to $113 million loss from $49 million loss in the fourth quarter of 2020, driven by the investments in incentives as I alluded to earlier. Focusing on segment adjusted EBITDA for deliveries, our margins improved from a negative 3.9% to negative 1.5% from 2020 to 2021. And we see core food deliveries being closer to breakeven, achieving segment adjusted EBITDA margin of negative 1% for 2021 compared to negative 4.5% in 2020. As for mobility segment adjusted EBITDA margin for 2021, we achieved 12.4% of GMV compared to 9.5% in 2020.

Turning to regional costs. This remains stable at approximately 4.4% as a percentage of GMV in 2021 relative to 2020. In 2021, we made key investments in scaling further our cloud infrastructure as well as critical talent to support growth of the existing business lines and new initiatives of the platform. Our IFRS loss for the fourth quarter was $1.1 billion, which includes $311 million non-cash interest expense related to Grab's convertible, redeemable preference shares that ceased upon Grab's public listing as well as $328 million related to one-time public listing related expenses.

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