Grab Holdings Ltd Q1 FY2022 Earnings Call

Ladies and gentlemen, thank you for joining us today. My name is Michelle, and I will be your conference operator for this session. Welcome to Grab’s First Quarter 2022 Earnings Presentation. After the speakers’ remarks, there will be a question-and-answer session. I will now turn it over to Vivian Tong to start the call.

Good day, everyone, and welcome to Grab’s first quarter 2022 earnings presentation. I’m Vivian Tong, Head of U.S. Investor Relations at Grab and joining me today are Anthony Tan, Chief Executive Officer; Ming Maa, President; Peter Oey, Chief Financial Officer; and Alex Hungate, Chief Operating Officer. During the call today, Anthony will discuss our key business updates and Peter will share details of our first quarter 2022 financial results. Following the prepared remarks, we'll open up the call to questions, where Anthony, Peter, Ming, and Alex will provide responses for the 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, including those mentioned in our form S-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 material. For more information and additional disclosures on recent business performance, please refer to our earnings press release and supplemental presentation for a detailed first quarter 2022 financial review, which can be found on our IR website. Should you have any questions after this presentation, please reach out to investor.relations@grab.com. And with that, I will turn the call over to Anthony to deliver his opening remarks.

Thank you, everyone, for joining us today. I’m pleased to report a strong set of results in the first quarter. We outperformed our GMV and TPV guidance for deliveries, mobility, and financial services segments, while improving our group level and delivery segment margins at the same time. Our results are a testament to the resiliency of Southeast Asia’s economy. The region's governments have been more cautious in lifting COVID restrictions compared to other parts of the world, but in March, we observed a shift in some countries to oppose pandemic footing where travel restrictions and capacity limits eased significantly. We are optimistic that our business will continue to strengthen as more countries pivot from dealing with COVID-19. Looking ahead, we are laser-focused on meeting our profitability targets and growing sustainably. We have three main levers to achieve this. First, we're driving toward profitability through disciplined cost management. We have started optimizing our fixed cost base and are managing our spend closely. Second, we'll continue focusing on winning the hearts and minds of more users across Southeast Asia. We will leverage technology, partnerships, and our superapp strategy to grow our user base in an efficient manner that leads to greater consumer engagement and retention. Lastly, we will continue to position our core segments for recovery and growth to capture the vast opportunities across them. By doing this, we aim to build a resilient, future-proof business that delivers long-term value to our shareholders. With this backdrop, let us dive into our first quarter performance. In the first quarter, our mobility segment rebounded with GMV up 9% quarter-on-quarter despite the Omicron overhang in the first two months of the year. We saw signs of recovery coming out of the quarter as countries like Singapore, Indonesia, and the Philippines loosen COVID-related travel restrictions in March. In the period from February to April, our mobility GMV increased 32%. Airport rides, which have higher margins and higher order values, rose to 6% of GMV, the highest level since the start of the pandemic. On the supply side, in the first quarter, we reached the highest number of active drivers since the second quarter of 2020. We increased our average monthly active drivers by 220,000 from the third quarter of 2021 to the first quarter of 2022. While these are positive indications that our efforts to restore driver supply are bearing fruit, our active driver base in March 2022, the majority of whom do both deliveries and mobility jobs, was 76% of the December 2019 level. This indicates an existing gap in meeting mobility demand that is rebounding sharply. I want to take some time to address this gap in our driver supply. In 2021, COVID-19 variants from Delta to Omicron caused many countries across Southeast Asia to loosen and tighten restrictions in fits and starts. This impacted our active driver supply as some drivers temporarily left capital cities during the lockdowns to return to their hometowns, while others moved onto odd jobs in other industries. In the fourth and first quarters, we've had to acquire more drivers to meet the increased demand rapidly coming back online. To rebuild our driver supply we have three main strategies. First, we're running targeted campaigns in each market to reactivate dormant drivers. Second, we're widening our acquisition funnel and making it more efficient. For example, we have ramped up assisted onboarding in some countries to complement our self-serve model to increase driver conversion. Finally, we continuously innovate on our superapp platform, so we are the best platform for drivers to earn an income. For example, we launched an enhanced shifts feature for Singapore drivers that led to higher driver earnings and productivity for them in selected zones while meeting demand in supply-crunch areas. We also launched cross-vertical batching in a few cities to allow our drivers to do back-to-back jobs across different verticals, improving their earnings by reducing idle time. In the first quarter, average driver earnings per hour increased by around 9% year-on-year while utilization rates improved. Of course, the reduction in driver idle time also helps improve our overall cost to serve. Looking ahead, we are focused on rebuilding our driver base to capture the strong mobility demand recovery. We expect the mobility supply to stabilize in the second half of the year with driver incentives as a percentage of GMV tapering in that period. Separately, we're closely monitoring the impact of fuel inflation on our drivers’ earnings. We’ll continue to look for ways to support them through surcharges, fuel discounts, and fair adjustments to mitigate its impact on our driver supply. Moving on to deliveries. Deliveries continue to register another quarter of strong GMV and revenue growth on the back of food and grocery strength, as well as contributions from Jaya Grocer. We managed to grow both our top line and improve our unit economics quarter-on-quarter. This gives us confidence in our sustainable growth strategy for deliveries. In the first quarter, we focused on forging strong partnerships with local merchants to give users more reasons to transact with Grab. We believe this helps us form a natural moat while improving user retention on our deliveries platform. Over the first quarter, the number of active merchants rose 34% year-on-year, while average earnings per active merchant increased 9% year-on-year. For groceries, we began to integrate Jaya Grocer stores onto our groceries marketplace in Malaysia. We plan for the integration to be fully completed in the second half of the year. Meanwhile, GrabPay has been integrated into all Jaya Grocer stores in the quarter. In the first quarter, Jaya Grocer became the largest GrabPay merchant in the country by TPV, all within a super quick two-month period post-acquisition. Looking ahead, we are focused on improving our unit economics at an accelerated pace by catering our incentives and driving organic growth. We will do this by ensuring users have the best product experience and the widest merchant selection on Grab. We also plan to sustainably grow our deliveries business in under-penetrated outer cities and towns in five of our eight markets to meet strong customer demand in those areas. For financial services, we continue to see strong momentum in payments and we made great progress in lending. In the quarter, TPV of our Buy Now Pay Later product grew 5x between Q1 2021 and Q1 2022. Overall loans dispersed, which includes Buy Now Pay Later loans, grew 3 times in the same period. We achieved this while keeping our NPL ratio steady at low single digits. Looking ahead, we plan to expand the Buy Now Pay Later product into more markets and deepen lending penetration within our ecosystem. This will allow us to grow financial services to meet the needs of an underserved market while growing sustainably. In the quarter, OVO continued to execute on its open ecosystem strategy, forging new large partnerships, including a global short-form video sharing app and launching its first recurring payment partnership with a global subscription streaming service. Finally, I’m also excited about our digital bank opportunities. Our digital banking joint venture with Singtel, known as GXS Bank, was selected to receive a full digital bank license in Malaysia in April. There were 29 total applicants and three full bank licenses were granted. We were one of the three that passed the high bar set by Malaysia’s Central Bank. We are tremendously grateful for this opportunity to serve Malaysians, where one in two are currently considered underbanked or unbanked. Winning the Malaysia Digital Bank License allows us to create a regional digital bank footprint in a cost-efficient manner. We plan to leverage the same technology stack for our digital banks in Singapore and Malaysia and our Indonesia bank investment to sustainably scale access to financial services across the region. We also aim to launch a Singapore Digital Bank currently in internal pilot in the second half of the year. A quick point on enterprise and new initiatives: GMV and revenues grew strongly year-over-year, driven by advertising contributions. In the quarter, our GrabAds advertiser base jumped 7x, compared to the same period a year ago, as we continue to onboard Grab merchants onto our self-serve ads platform to provide them search and display advertising options to grow their sales in our app. This is another example of our superapp strategy in motion. Aside from being a superapp for consumers, we are also a superapp for merchants where we cross-sell services to them and create a virtuous cycle that benefits our merchant partners and allows them to perform well. When they perform well, so do we, and through GrabAds, we give them the tools to grow their businesses. To conclude, we'll continue to double down on our superapp strategy. We have a laser focus on growing sustainably, so we can win many more hearts in Southeast Asia and drive toward our profitability targets. I'll now turn the call over to Peter to deliver a review of the financials.

Thanks, Anthony. We had a strong start to the year with our core segments' first quarter 2022 GMV and TPV outperforming the high end of our guidance range. GMV grew 32% year-over-year to $4.8 billion, driven by both higher average spend per user and continued growth in our MTUs year-on-year. For our segments' GMV and TPV performance, we saw strong growth in our delivery segment with GMV growing 50% year-over-year to reach $2.6 billion, while financial services TPV scaled to $3.6 billion in the first quarter. Mobility GMV was $834 million in the first quarter and grew by 3% year-over-year and 9% over the fourth quarter, due to the Omicron impact over the first two months of the year. Looking ahead, we are optimistic about a gradual mobility recovery and we will continue to spend efficiently and judiciously to grow our driver base to support demand coming back online. As Anthony mentioned, we expect the mobility supply to stabilize in the second half of the year with driver incentives as a percentage of GMV tapering in that period. Overall, across all our segments, we are seeing improvements in commission rates. Year-on-year, deliveries commissions are up from 18.2% to 19.9%. Mobility commissions are up from 22.6% to 23.4%, and financial services commissions are up from 2.1% to 2.5%. The year-on-year improvement in deliveries and mobility commission rates was driven by product and country mix. Financial services commissions also improved based on high contributions from our lending business. Revenues on an IFRS basis for the first quarter grew by 6% year-on-year to $228 million and grew by 87% quarter-on-quarter. Year-on-year revenue growth was driven by a strong pickup in revenue in the delivery segment, which includes revenue contributions from Jaya Grocer, and continued growth in our financial services and enterprise revenues. These revenue growth drivers more than offset the year-on-year decline in revenues from our mobility segment. Segment adjusted EBITDA margins declined year-on-year from 1% in the first quarter of 2021 to negative 1.6% in the first quarter of 2022. Our mobility segment adjusted EBITDA declined to $82 million in the first quarter of 2022 from $115 million in the same period last year. The delivery segment adjusted EBITDA declined to a $56 million loss in the first quarter of 2022 from a $4 million loss in the same period last year. Our financial services segment adjusted EBITDA declined to a $102 million loss from a $78 million loss from the same period last year. As we mentioned in the prior quarter, we made a decision to boost our active driver supply base to capture the strong underlying demand growth from re-openings, which caused our segment adjusted EBITDA margins to decline on a year-over-year basis. However, I do want to point out that we’ve managed to improve our segment adjusted EBITDA margins quarter-on-quarter by around 100 basis points as we continue to drive greater discipline in managing our incentives. For example, our delivery segment adjusted EBITDA margins improved quarter-on-quarter from negative 3.5% to negative 2.2%, a 130 basis points improvement. Our cold food delivery segment EBITDA margins also saw improvements quarter-on-quarter from negative 2.8% to negative 10.7%, a 110 basis points improvement. We also saw our financial services segment EBITDA margins as a percentage of TPV improve quarter-on-quarter from negative 3.2% to negative 2.8%, a 40 basis points improvement. Looking ahead, we will continue to remain focused on growing sustainably by allocating our capital efficiently and tapering down our incentive spend. Our group adjusted EBITDA margins followed a similar trend. We ended the first quarter with adjusted EBITDA margins of negative 6%, a decline from the prior year period of negative 3.1%, but improvement of 80 basis points from the fourth quarter of 2021. Our regional costs for the first quarter of 2022 increased to $212 million from $146 million last year, but remained stable at roughly 4% as a proportion of GMV. The regional cost increase was primarily driven by investments in product development and cloud infrastructure, along with our increasing talent pool, and compliance and other ancillary expenses related to being a newly listed public company. I want to assure you that, as Anthony mentioned, we are very focused on our overall cost management and on driving greater internal efficiencies. We will continue to optimize our fixed cost base and be disciplined in hiring and other expenses as we focus on growing our business sustainably. The IFRS loss for the first quarter was $435 million, representing an improvement from a loss of $666 million in the prior year period. This is primarily due to the elimination of non-cash interest expense of Grab’s convertible redeemable preference shares, which was no longer incurred when we became a public company. Turning to our balance sheet and liquidity position, which continues to be strong. We ended the first quarter with $8.2 billion of cash liquidity, including our $2 billion term loan B facility. Our net cash liquidity was $6 billion as of the end of the first quarter. Our cash liquidity declined by $754 million from the end of the fourth quarter, mainly due to net cash outflow from operating activities and the acquisition of Jaya Grocer. We will maintain a disciplined stance in how we allocate and deploy our capital. The strength of our balance sheet is not something that we take for granted. As we look ahead for the second quarter and the rest of the year, we expect to see deliveries GMV of $2.55 billion to $2.65 billion, mobility GMV of $950 million to $1 billion, and financial services TPV of $3.5 billion to $3.6 billion. Our path to profitability plans remain on track and it's a key focus for our management team. In the second quarter, we expect to see continued improvement in the mobility business with COVID-related travel restrictions easing across the region. For mobility, we expect margins to recover back towards our long-term target of 12% on GMV as our active driver base and mobility demand rebounds. We also expect mobility supply to stabilize in the second half of 2022 and for mobility driver incentives as a percentage of GMV to taper in that period. In deliveries, we expect demand to remain firm, but we anticipate some seasonal impact on demand levels given the observation of Ramadan, a month of fasting and prayer for Muslims in April, impacting primarily Indonesia, Singapore, and Malaysia. For deliveries, we reiterate our expectations for the segment to reach breakeven by the end of 2023, with core food delivery breakeven by the first half of 2023. We expect our long-term segment adjusted EBITDA margin as a percentage of GMV to come in above 3%. Now, this is higher than the 3% guidance that we presented in the prior quarter. We have achieved margins higher than 3% in some of our markets in the past and believe we can adapt the learnings from those markets to optimize our overall segment adjusted EBITDA margins. I do also want to note that our long-term deliveries margin excludes contributions from advertising, which is currently captured in our enterprise and new initiative segment. For financial services, we will also continue to drive greater adoption of our wallet and continue to expand our Buy Now Pay Later product. Looking at the full year, we expect group GMV in fiscal year 2022 to grow between 30% to 35% year-on-year and we expect to generate revenue of approximately $1.2 billion to $1.3 billion. Our revenue guidance includes contributions from Jaya Grocer along with our expectations to taper our incentive spend. We expect our group revenues, excluding Jaya, to grow by no less than 50% in fiscal year 2022. In conclusion, we are pleased with our performance in the first quarter, which sets us up nicely to continue executing for the rest of the year. We'll continue to focus on optimizing our cost structure, exercising capital discipline and tapering our incentive spend sequentially as we push ahead on our path to profitability. Thank you very much for your time, and we will now open up the call to questions.

Ladies and gentlemen, we will now begin the question-and-answer portion of the call. Joining us for this session are Anthony Tan, Chief Executive Officer; Peter Oey, Chief Financial Officer; Ming Maa, President; and Alex Hungate, Chief Operating Officer. Our first question comes from Alicia Yap at Citigroup. Your line is open.

Hi. Good evening, management. Thanks for taking my questions. I have a question on the delivery business. Just wondering for Q2 guidance itself, if we exclude Jaya Grocer, what kind of growth rate should we be expecting for organic growth? And then, in terms of if management can also comment, if there’s any change in the competitive landscape for the delivery business, especially in any country that you are seeing facing more aggressive subsidy by the competitors or any areas that kind of stand out in the recent quarter that we should be paying more attention to any change in the landscape itself? Thank you.

Hi, Alicia. Hi, this is Peter, and let me take the first one. Anthony will take the second one. So, on the Q2 deliveries GMV guidance, we don’t break out the Jaya piece. We don’t break out normally all the different sub-verticals within a segment of our business. But if you look at deliveries, it’s still growing and very stable. We did see some seasonal impacts in the first quarter as we came off a strong fourth quarter, but deliveries overall are very stable. It grew at 5% as you saw from a quarter-on-quarter basis and if you look from February to March, it grew at 11% from our business and also from December to March at 7%. So, we're seeing good momentum despite the very strong comeback of mobility in our business and we're going to see continued growth in the deliveries business overall.

Thanks, Alicia. I'll take the competition question, especially regarding deliveries. In this quarter, we actually gained share in deliveries against regional food delivery players in all of our markets and improved our unit economics. So, we expect that total incentives as a percentage of GMV will continue to taper as we look ahead. Our focus is our laser focus in driving organic growth through better user experience, and of course, what users really appreciate is a wider selection. We believe we have one of the widest, if not the widest out there. In terms of when we think about competition, we think about how we out-serve our users and partners, and we do this by capturing the higher basket size user demand across different modalities, whether it's ready-to-eat food, whether it's at a restaurant or self-pickup or other forms. As a result, we actually drive substantial business for our merchant and driver partners. Hence, many of these partners choose us as their main platform. By doing this, it means we bring the largest merchant discovery and more user delight. So, all-in-all, there's always going to be competition in the market. What is key for us is to enhance our right to win by capitalizing on the strengths of our business. We will just keep executing effectively heads down as we taper down our incentive spend.

Okay, thank you.

Our next question comes from Navin Killa with UBS. Your line is open.

Hi, good evening, and thank you for the opportunity. I actually had two questions. First of all, on the deliveries business, I just wanted to understand, I guess, the broad breakdown between food, groceries, and parcels. And even if we can't have any specific numbers, I guess overall, how the mix will evolve and what that would mean for commissioning it directionally? And I guess the reason for this question is because I would imagine, as groceries get bigger, the commission rates potentially could decline, but we have obviously managed to grow that. So, I wanted to understand that a little bit more. And then secondly, in terms of cash, you obviously mentioned the strong balance sheet and the fact that you don't take it easy, I guess between the cash burn in the business, plus I guess some of the inorganic acquisitions that we need to do to expand, I guess either your physical business or the financial business, how do we look at the balance between those various, kinds of sources of cash or all sources of utilization of cash?

Sure. Let me address the first one around our deliveries mix. We do not break out the specific percentages between food, our express business, or our supermarket mart business. What I would say is the food business still comprises the majority of our delivery segment itself. At the same time, we are seeing good growth in terms of our mart and supermarket. If you look at the – and just to give some numbers around there, we saw growth of over 150% when it comes to mart and supermarket on a year-on-year basis and continues to grow double-digit on a quarter-on-quarter basis. It's still very early days for us when it comes to mart and supermarket, and we’re optimistic. Also, with the integration of Jaya, we're learning a lot and applying a lot of those learnings through our mart and supermarket infrastructure at the same time. In terms of how that applies to commission rates, our commission rate continues to improve as you heard earlier; our deliveries were up 190 basis points. If you look on a quarter-on-quarter basis, it was up 170 basis points, even if we extract the Jaya piece out, we continue to see commission rates very strong at the same time. So, if you look at from a mixed standpoint, we look at our portfolios to improve our unit economics. On the cash piece, you mentioned that the financial services piece was inorganic. We actually see our financial services and digital bank as organic businesses. It's part and parcel of our ecosystem. It's part of our superapp strategy. It's important that we allocate capital there also as part of that. Now, if you look at just in terms of how we think about M&A activities, we have a very high bar when it comes to M&A activities, two critical lenses that we look at. One is: does it improve our unit economics of our business? Does it improve the path to profitability of our business? And it's a very high bar for us to look at. Now, we're very focused on organic growth. We’ll continue to be very focused on all the segments of our business; mobility is coming back strongly, delivery continues to be stable, financial services continues to grow also, and those organic growths will allocate the right capital to them, but at the same time we're keeping an eye on our margins as we want to ensure that our margins continue to improve sequentially.

Peter, if I can, sorry just follow up. I guess what I meant by inorganic in financial services side was not necessarily the cash that you need to spend to grow the digital banks and all, but more acquisitions that again have been discussed in the press. There is more of a question of what goes organically into growing the businesses versus acquisitions that you might have to do to scale up those businesses?

Yes. Hey, Navin, this is Ming. First of all, I would just point out that our general policy is to avoid commenting on any market rumors out there, but I would take it up to, if you think about the inorganic opportunities, there are two points I would highlight: as Peter mentioned, we take a very conservative stance around M&A. The bar is very high. Cash is king for us. So, we are only looking at opportunities that are very compelling to us. Now, what would those look like? Generally, those will look like situations where we can either accelerate our path to profitability or meaningfully improve the unit economics within our marketplace and within our ecosystem. Obviously, absent those two criteria, we're going to be very, very disciplined around M&A.

Our next question comes from Mark Mahaney with Evercore. Your line is open.

If I can just ask you a question please on the mobility segment, could you talk about rider trends quantitatively or qualitatively in terms of trip frequency, trip fare amounts, the number of users relative to what you experienced in pre-COVID back in 2019? Thank you.

Thanks so much. I really appreciate the question. With regards to mobility, specifically in Q1, we achieved this mobility growth even despite the impact of Omicron in the first two months. We see clear evidence of a gradual recovery coming out of Q1 as many restrictions are lifted in March. So, Mark, we just reported that mobility GMV is up 9% Q-on-Q. Now, exiting the quarter, we actually see demand recovery with mobility GMV up by 32% from February to April. We're pretty pleased there; even then I have to admit, we still have plenty of headroom to grow. Mobility in March 2022 is only 57% of pre-COVID levels. We expect the mobility segment to stabilize in H2, and with regard to driver incentives as a percentage of GMV to taper in that same time period. And with that being said, we expect mobility segment adjusted EBITDA margin to recover back to 12%. Our team is laser-focused on mobility supply to capture this demand quickly coming back online, and I'm sure if you come across Southeast Asia, we see it. Alex and I, our COO, have traveled across 13 cities in the past 14 to 15 weeks and we've seen demand coming back strongly. So, we are going to execute strongly on that front to ensure we take advantage of this mobility recovery in a very disciplined way.

Thank you very much.

Our next question comes from Pang Vittayaamnuaykoon with Goldman Sachs. Your line is open.

Thank you very much for the opportunity here. I have a question around the mobility business: how have rising inflation and fuel costs impacted your business overall? Post your fare increases in Vietnam and Singapore, is there any impact on demand? And also together with the mobility business, if you can help us comment on competitive dynamics here, that would be very helpful. Thank you.

Sure. Let me take the question on inflation. We are closely monitoring the situation, but so far, we've actually not seen headwinds to demand from higher inflation rates. What is more evident and observable is actually higher fuel prices. We've slightly increased fares in Singapore and Vietnam, but have yet to see a material impact on mobility demand. In fact, we're seeing demand still growing faster than supply. Generally, we are quite positive about mobility demand. From January to March as well, as we shared, our mobility GMV is growing as we bring down partner and consumer incentive spend during the same period. We believe it's still too early to comment on any structural change in consumer behavior due to these inflationary pressures, but we remain confident in the resilience of our everyday services, whether it's mobility or deliveries in this new endemic phase.

And on the competitive dynamic?

And I'll just add: Singapore is a surcharge and not a fare increase. So, just to be clear. On competition, the reality is that competition is not new to us. We've shown time and again that we can execute our competition more efficiently because of the cost benefits from our superapp ecosystem. We maintained our leadership category position in mobility and deliveries in the quarter according to Euromonitor. Notably, we actually increased our lead relative to the next largest regional food delivery competitor. We can only do this because of the leadership that has led us to benefit from reducing our total group incentive spend compared to Q4. That means we are being more efficient with our incentive spend compared to peers while the business continues to grow. Looking ahead, we see total incentives as a percentage of GMV come down. Through cross-vertical batching for our drivers because of our superapp strategy, we see better supply side unit economics because drivers can earn more while we are improving our incentives. We've seen whether it's average earnings per transit hour increased by 9% year-on-year, we've seen utilization rates improve in the same period, even though we've tapered down incentives as a percentage of GMV. We believe it’s about building better experiences for our users and partners, and that's what we're going to keep doubling down on – more superapp and reducing our cost to serve.

Pang, also I'll just add that in terms of incentives, we're seeing overall competitors tapering down on incentives in mobility, which is a great sign because the market is rationalizing and has been more constructive at the same time. That's also helpful for us and something we're keeping a very close eye on as we continue to ensure our supply base grows to meet all-in demand. Hope that’s helpful.

Our next question comes from Ranjan Sharma with JPMorgan. Your line is open.

Hi, good evening, and thank you for the presentation. Two questions from my side. Firstly, if you can just give more color on the revenue guidance of $1.2 billion to $1.3 billion: in that guidance, how much are you expecting incentives to come down versus last year? The second question is, if you can also talk us through the changes in the cost that you’re seeing because if the cost of revenues is up by 30%, GMV expense is up by 90%, and R&D is up by 60%, what's driving these cost numbers up? Thank you.

Sure. So, on the revenue guidance part, the revenue guidance which we're giving up for the first time, $1.2 billion to $1.3 billion, is largely driven by a few things. Let me break it up for you. One, it's driven by top line growth, definitely. We're expecting a strong top line GMV growth of 30% to 35% for the fiscal year. We’re also seeing some, as you can tell from the growth of commission rates that we've seen from the prior period. The other piece includes the contribution from Jaya. And the fourth component is the reduction of the incentives. Now, we don't break out all the different components of that, but you can get a good feel in terms of where that's coming in. Another data point I would give out is we expect our group revenues, excluding Jaya, to grow no less than 50% for fiscal year 2022. In terms of cost, your other question, our cost structure overall came in from a percentage of GMV and I’m focusing on our regional cost structure, roughly about 4% in terms of costs. Now, it's something that we are watching very closely and the cost increase was primarily driven by investments in product development. We also invested in our cloud infrastructure, along with increasing our talent pool and some compliance and ancillary expenses related to being a newly listed public company. Looking ahead though, we are very focused on overall cost management. A lot of initiatives are actively running across the globe in driving greater internal efficiencies, and we see regional costs as a percentage of GMV coming down this year. We are already making some good early starts here in the second quarter, and we are working very hard on all fronts here to ensure we're optimizing every penny and every dollar in every department.

Great, thank you.

Our next question comes from Venugopal Garre with Bernstein. Your line is open.

Hi, thank you for the opportunity. So, couple of questions. First on the delivery segment now after a 50% sort of a growth in the first quarter on GMV, your midpoint of guidance looking at close to about 23% YoY growth. Now, this is factoring in the 1P business as well. So, I wanted to understand that is it more a situation where your base is catching up because of which you're going to see slightly slower momentum compared to what we used to see in the last two years? Or is it more to do with the specific strategy around what you want to target in the delivery segment? Now, just a part of that question also is that, while you have I think given a broad indication of what Jaya would be because you've mentioned that revenue guidance even, excluding Jaya would be at least 50%, so that sort of ballpark gives an idea, probably close to $200 million GMV for the year? If you don’t want to give a quarter number, at least could you give us an idea of how overall 1P business would be in terms of numbers or Jaya at the time of acquisition? So, that’s my first question.

I think there were a lot of questions within that question, Venu. And I want to hit your question right, so could you repeat it? You had a question around deliveries, and in terms of the 23% year-over-year, what’s driving that coming from the first quarter? Got it. Okay. And then your second question was regarding the revenue guidance: is that correct? The revenue of $1.2 billion to $1.3 billion? So, let’s address that first.

Yes, yes. And the second question was just to understand how much is 1P in that? Because you also mentioned that excluding Jaya, we would still expect at least 50% growth. So, I could probably calculate based on your guidance that Jaya would be at least $200 million. Now, I'm pretty sure you don't want to give the numbers for this year, but at least at the time of acquisition, what was there on an analyzed business would be good to know?

Yes, in terms of Jaya, we're not breaking it out in terms of Jaya numbers itself. From a revenue guidance perspective, we don't give a quarterly revenue guidance also. We are only giving full-year revenue guidance itself. A good way to think about it is around our revenue excluding Jaya on a full-year basis to grow no less than 50% this year. So, that gives you a good feel of which 1P is, I would say, insignificant. Around deliveries, your other question about the guidance, like I said, it's growing and there's good growth in that business itself. Again, 1P is not a big piece; it's insignificant to us. Our delivery business primarily comes from the marketplace that we've continued to develop. That’s reflected in our improvement in our margin as well as reflected in our improvement in commission rate. So far, I think we feel pretty good around where we are with our deliveries GMV guidance. Again, there are some seasonality factors into our deliveries. April was a month of Ramadan for us here in Southeast Asia, which has a seasonal impact that we're considering, but overall, stepping back, it's growing and stable.

Got it. And if I could a second on the mobility segment. My fuel cost increases vary from country to country, right, depending on the various strategies of each country itself. Now, the fare increases that we have done, especially in terms of surcharges. Firstly, I wanted to understand that I'm assuming it fully covers the, sort of fuel price impacts. And the second thing within that is, at least based on my observation in Singapore, fares themselves seem to have gone up a lot. So, I'm an active user of the platform, so I wanted to understand that is it because of driver supply challenges continuing specifically in Singapore because it's a large market for you. And if that is the case that fundamentally is there a good enough strategy to have overall fares go up because it will presumably help your unit economics as well?

Yes, I'll take that question, Venu. Thanks so much. Basically, how we think about is, number one, be the most reliable platform. I think that’s part of our Grab way of service to consumers and being the most reliable out there. Number two is then, how do we actually keep fares affordable even as you mentioned in a supply-constrained environment? For us, as we think about it this way: even though demand outstrips supply, when we do our internal benchmarking of prices versus some of our peers, we’re actually better and cheaper. We look at this in terms of P25, P50, P75 across the segment. On some - again some of our peers we are actually more affordable. So, and then third, what we're seeing is, yes, there’s one side as a consumer; the other side that is just as important is on the driver side. We remain the best earning platform for drivers. Even recently when Alex and I were interviewing many drivers, we conducted small group sessions and drivers who were driving for our peers even today, they left because of some issues that reached our policies, but they told us if you take us back, we will gladly come back because we know that from an earnings perspective, this is still the best earning platform even though we have been driving and really being very cost-conscious.

Thanks, thanks a lot.

Our next question comes from Thomas Chong with Jefferies. Your line is open.

Thanks management for taking my questions. My question is about the advertising business: can you comment about the future monetization potential? And secondly, regarding digital finance, can we talk about our long-term strategies and opportunities on partnership expenses? Thank you.

So, maybe I'll take the first question on advertising and the monetization of advertising. What we are seeing actually is a very strong growth in GrabAds. In fact, if you compare just the same time period, we've seen 7x growth over the same period a year ago. We also saw that Grab merchants who are using our self-serve advertising platform: this essentially provides them search and display ad options to grow their sales. We are onboarding more because, in 2021, we see GrabAds has proven very effective, especially for small merchant partners that delivered 600% return on every dollar spent to this tool in 2021. So, our focus is to continue enhancing GrabAds value proposition to our merchants because we believe when they grow and perform, so do we sustainably.

And let me take that question on the long-term strategy for financial services and the partnership expansion strategy. Financial services plays an important role in helping us grow and expand our marketplace. We know that users of GrabPay have a 2.7x increase in engagement as compared to cash users and a 4.5% increase in spend, and a 1.3% increase in retention. So, it's a very healthy way of us to grow our user base and keep the spend growing as well for those users. Now, we are adding new services like embedded insurance and lending, which have higher margins, so that GrabPay users start converting to higher margin products. That helps support the health and growth of our marketplace. As we add digital banks, we can use the extraordinary depth of information we have about our users to improve credit underwriting, better collections, and obviously low-cost distribution of those products as well. The unique thing about having a digital banking license, of course, is that you can start together deposits which reduces your cost of funds. So, you can see that overall, we see a combination of digital bank licenses and the very strong fintech capabilities that we've developed as a way of helping our users to grow in our marketplace and adding new users to that marketplace.

Hi, thank you for the opportunity. I have a few questions. First, I just wanted to double-check on this entire take rate on deliveries, which increased from 17.5 to 19.3: is this largely driven by Jaya, or were there certain underlying factors also?

It's basically about product mix and a country mix. Sorry, Jaya has a component to it, but overall, there is also a country mix for us.

Okay. And can you help give a bit more clarity in terms of which countries are stronger as compared to others?

We don't break out the countries, but all our countries are trying to optimize their take rate. We're conscious that there are also other demand-side and supply-side factors from a marketplace perspective. We're trying to balance that, but it's too early to tell whether Jaya can play a significant part in our take rate continually improving or stabilizing.

Got it. My second question is regarding corporate cost. I understand you guys mentioned that this is mainly on product development talent pool. If that's the case, should one look at it as a percentage of GMV or should it generally be largely a fixed cost?

The way you look at regional costs is generally a percentage of GMV. It's a good way for us just to benchmark it. And again, yes, you’re right. We continue to make investments in product development, and tied to that is our Talent Pool. If you look at the majority of our regional cost structure, it's product development, data science, all related to creating the product for us, which is critical. Having said that, we want to ensure the product continues to evolve as a platform as we continue to grow our top line as well.

Okay. You didn’t ask this question; I just wanted to understand that you know should it grow in sync with the GMV, and I do understand some cost control? So, in simple terms, would the gap between adjusted EBITDA and reported EBITDA continue to widen on the back of this higher corporate cost?

Yes. From a dollar perspective, our regional costs will continue to come down, and that's important for us. It's essential to maintain that benchmark, so I would say that you can look at it as a percentage of GMV.

Got it. And my last question is, when we look at the currency movements for the last three months, everything has obviously moved. I understand you guys report in U.S. dollars while the underlying currencies are local. So, is it possible to give us some kind of a translational impact on the back of your guidance for what you're seeing given the strong currency movements?

Yes. We’re watching the currency and the strengthening of the dollar. We’ve taken in some of those movements in currency that have been happening in the last month or two and baked it into our guidance.

Alright, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Peter Oey for any closing remarks.

Well, thank you very much everyone for coming at this time just to listen. We had a great quarter and we're off to a great start as we enter into Q2 already. So, thank you very much and we'll talk again next quarter. Thank you.

This concludes Grab’s first quarter 2022 earnings presentation. Thank you for your participation. You may now disconnect your line.