Grab Holdings Ltd Q1 FY2023 Earnings Call

Thank you all for being here today. I’m Emily, your conference operator for this session. Welcome to Grab's First Quarter 2023 Earnings Results Call. I will now hand it over to Vivian Tong to begin.

Good day, everyone, and welcome to Grab's first quarter 2023 earnings call. I'm Vivian Tong, Head of U.S. Investor Relations at Grab, and joining me today are Anthony Tan, Chief Executive Officer; Alex Hungate, Chief Operating Officer; and Peter Oey, Chief Financial Officer. During the call today, Anthony will discuss our key strategic and business achievements, followed by Alex will provide operational highlights, and Peter will share details of our first quarter 2023 financial results. Following the prepared remarks, we will open the call to questions where Anthony, Peter, and Alex will respond to the Q&A. As a reminder, today's discussion contains forward-looking statements about the company's future business and financial performance. These statements are based on our beliefs and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties including macroeconomic, industry, business, regulatory, and other risks, which are described in our Form 20-F for the year ended December 31, 2022, and other filings with the SEC. We do not undertake any obligation to update any forward-looking statements. The discussion today also contains non-IFRS financial measures, which should be considered together with rather than a substitute for IFRS financial measures. A reconciliation of non-IFRS to IFRS financial measures is 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 2023 financial review, which can be found on our IR website. And with that, I will turn the call over to Anthony to deliver his opening remarks.

Thank you for joining us today. We kicked off 2023 with a solid set of results for the first quarter. Consistent with our focus to drive sustainable growth, Grab's year-on-year performance was strong with revenues more than doubling and adjusted EBITDA losses being reduced by 77%. With five consecutive quarters of adjusted EBITDA improvements under our belt, we remain disciplined in executing our strategy, accelerating our path to profitability, and extending our category leadership across mobility and food deliveries. As we look ahead towards the rest of the year, we expect continued growth off the back of four key trends that we are seeing. Firstly, we're seeing encouraging user trends. Monthly transacting users on our platform are growing at a healthy pace. We remain focused on building more innovative and affordable products and services that will allow us to sustainably serve a greater segment of Southeast Asia. Secondly, mobility demand continues on a positive trajectory, with travelers returning to Southeast Asia and demand picking up domestically. We've rolled out a series of product enhancements and partnerships to capture a greater share of the high-value traveler market and are optimistic about further recovery in the tourism segment, especially with China's reopening. Thirdly, despite seasonal headwinds impacting deliveries in the first quarter, we strengthened the profitability of our largest segment. Our focus on offering the best range of choice, affordable options, and value from our GrabUnlimited subscriptions program positions us well for the rest of the year. Finally, the demand for financial services within our ecosystem remains very healthy. We're seeing greater lending activity with the rollout of several credit products across various markets, including GXS Bank in Singapore, and this is all being done in a risk-prudent manner. I also want to share my thoughts around AI, which has always played a key role on our platform. We were early adopters of data science in the region and our unique and high-frequency data set enables us to build highly effective tools that boost our competitive advantage. An example of how we're using AI is demonstrated by our use of Heat Maps. In our early years, these Heat Maps helped to create more income opportunities for our driver partners. And today, they're even more robust. Combined with other AI tools, these Heat Maps are also used for better fulfillment of our on-demand services. This has helped to reduce surge pricing, create more efficient trips, and increase driver earnings. We're also using large language models to translate content and are piloting several initiatives to drive higher cost savings. We are excited to leverage generative AI to further boost productivity. We anticipate that it will play an increasingly important role for us to deliver better user experiences and drive greater cost efficiencies across our platform. We're confident that our strength as a platform and understanding the Southeast Asian landscape should enable us to unlock more growth opportunities across the region. We will continue to set the bar high for ourselves and execute with cost discipline and focus to become Southeast Asia's largest and most efficient on-demand platform that enables local commerce, mobility, and access to financial services. I'll now hand over to Alex to cover our first quarter operational highlights in more detail.

Thank you, Anthony. I'll dive deeper into the business and operational highlights by segment, starting with mobility. Mobility displayed strong year-on-year revenue and GMV growth in the first quarter. Demand remains strong with mobility MTUs in the first quarter, increasing 28% year-on-year and 3% quarter-on-quarter, fueled by a return of international travelers to the region, as well as further normalization of local commutes across our markets. Notably, airport rides increased by 133% year-on-year and 7% quarter-on-quarter with ample room to recover further as we were still only at 69% of pre-COVID levels. We've rolled out tech and product enhancements to support international travel demand including Chinese, Japanese, and Korean versions of the app, menu translations, and image-based guides to pick up points for more than 4,000 venues across Southeast Asia. We've partnered with other leading consumer apps such as WeChat, AliPay, Ctrip, Kakao and Booking.com to make Grab services available through those apps when tourists enter the region. Our ongoing efforts to rebuild and optimize our driver supply base have also continued to yield positive results in service quality, including reduced average passenger wait time and a lower proportion of rides with surge pricing quarter-on-quarter. Driver metrics have also improved year-on-year in parallel. Active driver supply is up 10%, and both total active driver online hours and active driver earnings per transit hour are up by 14%. As a result of these initiatives in the first quarter of 2023, we extended our category leadership in ride-hailing across the region over the prior quarter. Over the rest of this year, we expect to see a continued increase in demand from travelers and local commuters. At the same time, we will push deeper into every market by offering affordable mobility options across the region, including relaunching Grab share. Now let's review our deliveries business. As expected, we saw some softness in GMV for the first quarter due to seasonal impacts. This was the first Chinese New Year since the onset of the pandemic where restrictions were lifted, which means a lot more in-person social gathering, replacing some of the food delivery demand during the lockdowns. The Ramadan fasting period also began towards the end of the first quarter as compared to last year when it began in the second quarter. Moving past these seasonal headwinds, we're expecting deliveries GMV to pick up. There are several key drivers for this. Firstly, we believe that our focus on improving platform affordability should attract more users to our platform. For example, we have rolled out features such as Saver across more markets, which enables us to improve batching while offering a lower delivery fee option for users in exchange for a slightly longer delivery time. Secondly, we continue to drive up user engagement and stickiness with GrabUnlimited. Overall, in the first quarter, GrabUnlimited users accounted for over a quarter of deliveries GMV. Engagement levels also continued to be healthy, with GrabUnlimited users continuing to spend 3.7 times more on food deliveries than nonsubscribers in the first quarter. We are also focused on platform efficiency to continue reducing our cost to serve. Improving driver partner productivity is important in this regard, and we have managed to increase batching and trips per transit hour on a year-on-year basis. Average driver wait time at merchants has also reduced 36% year-on-year. We have lowered deliveries incentive spend as a percent of GMV by over 470 basis points year-on-year to reach an all-time high of 2.6% of segment-adjusted EBITDA margins. Despite this steep reduction in incentives, we were able to strengthen our category position across all our markets this quarter. This is because as the largest food delivery platform in Southeast Asia, we are able to harness efficiency gains from our scale, and we'll continue to optimize this to gain greater scale advantages going forward. Next, on Financial Services. During the quarter, we posted strong revenue growth driven by lower consumer incentives and higher contributions from our lending business. Loan disbursements during the quarter grew 45% year-on-year as we executed on our strategy to lend to our ecosystem, where we feel that we can manage credit costs well. Consistent with this, credit costs continue to be well controlled in the quarter. We also improved our adjusted EBITDA for financial services. In particular, we recorded a further reduction in Grab Fin's operating expenses by 19% on a year-on-year basis and 10% on a quarter-on-quarter basis. This is building on the 11% quarter-on-quarter reduction in Grab Fin's operating expenses that we achieved in the prior quarter. GXS in Singapore launched the Flexi loan product, the bank's first lending product which provides our customers with flexible repayment options tailored to their financial needs. Deposits at GXS are right below the initial deposit cap set by the Singapore Central Bank regulator so we are working closely with them to increase this cap. We are also working closely with the Malaysian and Indonesian Central Bank regulators. And I can confirm that we remain on track to launch our Digi banks in both countries later this year. Lastly, within the enterprise segment, we continue to build out our advertising self-service platform to reach more merchants and to improve the monetization of our ads business. In the first quarter, we have seen the total number of active advertisers joining our self-service platform grow 33% year-on-year as we move to capitalize on this large opportunity. As we look to the rest of 2023, we continue to stay focused on accelerating our path to profitability and driving sustainable growth for the long term. During the quarter, we demonstrated our ability to harness our scale advantage to improve efficiency while improving adjusted EBITDA margins and strengthening our category leadership. In the upcoming quarters, we will continue to pursue further opportunities as we scale the business to drive greater efficiency gains. I will now turn the call over to Peter to review the first quarter financial results.

Thanks, Alex. We delivered a healthy set of results this quarter, setting a good pace for the rest of the year and remaining on track towards achieving group adjusted EBITDA breakeven in the fourth quarter of 2023. Revenues in the first quarter grew by 130% year-on-year or 139% on a constant currency basis and 5% quarter-on-quarter to reach $525 million. The strong revenue growth came from all segments of our business. For mobility, revenues grew 72% year-on-year and 3% quarter-on-quarter to $194 million underpinned by the continued growth of international and domestic ride-hailing demand. For deliveries, revenues grew by 203% year-on-year and 3% quarter-on-quarter to $275 million as we further optimize our incentive spend and saw higher contributions from Jaya Grocer. As a reminder, there was a change in business model in the prior quarter in certain delivery offerings in one of our markets, which is not reflected in the first quarter of last year. Financial Services revenue for the quarter grew 233% year-on-year to $38 million from $11 million in the same period last year and grew 38% from $28 million in the previous quarter. The improvement was attributed to continued growth in ecosystem lending and greater optimization of incentives. For enterprise and new initiatives, revenues improved 29% year-on-year in the first quarter to reach $18 million as we focus on driving profitable transactions within our advertising business. Turning over to Group GMV. We recorded year-on-year growth of 3% or 7% on a constant currency basis to reach $5 billion in the first quarter. On a segment level, Mobility GMV continues to grow strongly, increasing 46% year-on-year or 51% on a constant currency basis as we track towards pre-COVID levels by the end of 2023. Deliveries GMV was $2.3 billion and declined 9% year-on-year or 4% on a constant currency basis, and as Alex mentioned, we are comparing against the first quarter of 2022 base, where deliveries demand was supported by COVID restrictions, and we are fasting during the Ramadan period only commenced in the second quarter. We expect deliveries GMV growth to pick up sequentially in the second quarter of 2023 as we move past the seasonal headwinds and drive further sequential growth in the second half as we improve engagement through GrabUnlimited and provide more affordable options. Moving on to segment adjusted EBITDA. We reported total segment adjusted EBITDA of $150 million in the first quarter, a substantial improvement from a loss of $75 million in the prior year period. Segment margins improved 459 basis points year-on-year and 78 basis points quarter-on-quarter. A key driver of this improvement was the reduction of total incentives as a percentage of GMV, which declined from 11.6% in the prior period to 7.9% this quarter. In deliveries, first quarter segment adjusted EBITDA was $60 million, while segment adjusted EBITDA margins reached an all-time high of 2.6% of deliveries GMV. This is an expansion of 476 basis points year-on-year and 58 basis points quarter-on-quarter. The improvement in margins was driven by further incentives optimization. In addition, several of our core markets have now exceeded 3% segment adjusted EBITDA margins, giving us confidence as we track towards achieving our steady-state margin target of 3% plus for the segment. In Mobility, segment adjusted EBITDA grew 85% year-on-year to $152 million in the first quarter. First quarter segment adjusted EBITDA margins was 12.4%, improving from 9.8% in the prior period, but declining quarter-on-quarter from 13.2% as we reinvested incremental margins to enhance platform efficiency and expand into more affordable use cases. More importantly, at 12.4%, our margins in the first quarter are in line with our steady-state margin target of 12%. For Financial Services, segment adjusted EBITDA improved to negative $17 million, representing a 32% year-on-year improvement. As a percentage of TPV, first quarter margins for Financial Services improved 93 basis points year-on-year to negative 1.9% as we continue to streamline our cost base across GrabPay businesses with operating expenses reduced by 19% year-on-year and 10% quarter-on-quarter. For the first quarter of 2023, group adjusted EBITDA losses were $66 million, representing a year-on-year improvement of $221 million. Group adjusted EBITDA margins also improved 464 basis points year-on-year. We remain confident in our trajectory towards achieving group adjusted EBITDA breakeven in the fourth quarter of this year. For the first quarter, regional corporate costs were $216 million as compared to $212 million in the prior year period and improved on a quarter-on-quarter basis as compared to $223 million in the prior quarter. Overall headcount across our core segments and corporate functions have fallen sequentially now over the last two quarters. We will continue to be very focused on reducing regional corporate costs and driving cost efficiencies across our organization. As Anthony mentioned, we're also in the early days of exploring AI productivity tools, which we believe have the potential to unlock further efficiencies and reduce costs in our business over time. Moving on to IFRS loss. We reported a first quarter loss of $250 million, representing a 43% improvement from a loss of $435 million in the same period last year due to improving profitability on the group adjusted EBITDA basis. First quarter IFRS loss of $250 million includes $172 million of non-cash expenses below the adjusted EBITDA line. Of this, $103 million was from share-based compensation and $37 million from revaluation of Grab's equity investments, which are mark-to-market each quarter. Turning to our balance sheet. Our liquidity and cash position continue to remain strong. We ended the first quarter with $5.8 billion of gross cash liquidity. Cash liquidity declined from $6.5 billion at the end of the prior quarter, with a substantial portion of the cash outflow attributed to the additional $600 million prepayment of our Term Loan B during the first quarter. Our net cash liquidity was $5 billion at the end of the first quarter as compared to $5.1 billion in the prior quarter. As we look to the rest of 2023, we remain focused on our path to profitability while driving sustainable growth. With Mobility GMV reaching another post-COVID high in March and demand continues to be strong in April. We anticipate sequential growth to continue on a quarter-on-quarter basis. We maintain our expectations for Mobility GMV to reach pre-COVID levels by the fourth quarter of this year while maintaining steady state segment adjusted EBITDA margins of 12%. In Deliveries, we will continue to balance growth and profitability while driving towards our steady-state segment adjusted EBITDA margins of 3% plus. Notably, Deliveries transactions have rebounded strongly in the back end of April, following the Ramadan fasting period, and this has been sustained into the early part of the month of May. Overall, this gives us confidence that Deliveries will continue recovering into the second quarter of the year. We are also tracking well towards improving our group adjusted EBITDA and achieving group adjusted EBITDA breakeven in the fourth quarter of this year. With all segments performing strongly on adjusted EBITDA in the first quarter, this has given us the confidence to revise up our full-year group adjusted EBITDA target to a loss of between $195 million and $235 million. This is an improvement from our previous guidance of negative $275 million to $325 million. In conclusion, our performance in the first quarter gives us confidence in our ability to deliver on our 2023 commitments over the coming quarters. Once again, Anthony, Alex, and I would like to thank Grabbers for their hard work in making these results possible. We would also like to express a deep appreciation for our driver and merchant partners who continue to inspire us to deliver the best product quality in all of our markets. 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; and Alex Hungate, Chief Operating Officer. Our first question today comes from Pang Vit with Goldman Sachs. Please go ahead. Your line is open.

Good evening, and congratulations on a good set of numbers. And Anthony, congratulations on the arrival of your baby Aaron as well. Two questions from me, please. Firstly, I noticed from market trends that your market share for on-demand has improved considerably in the quarter, I think especially in Indonesia. Your top line holding up stronger than peers. Can you share with us what have you done differently than your peers here? Also, are you able to provide more color on the strong growth trends you were seeing in April and May from Mobility and Deliveries. That's question number one. Question number two, on your upgraded guidance on adjusted EBITDA. Can we understand what had changed in the quarter that allows management to see an improvement in EBITDA burn versus prior guidance? How do you plan to achieve this? And what does your guidance imply for segmental EBITDA across Mobility and Deliveries? Can you also walk us through our quarterly EBITDA trend even if you use the high end of your full-year guidance and expect you to basically reach EBITDA breakeven by fourth quarter, we have to assume more quarter-on-quarter loss for second quarter and third quarter. So, a little bit of the bridge here would be helpful. And lastly, corporate costs, how do you expect that to trend after we saw a $7 million improvement Q-on-Q here in what is particularly your quarter with improvement and promotion as well.

Thanks for your question, Pang. There's a lot to deal with. So, I'll start and Peter will continue. During the quarter, we spent a significant amount of effort investing in improving driver supply. Our fulfillment rates also improved across all our countries. As a result, we actually saw the number of active drivers on our platform increase 10% year-on-year, while retention rates have remained healthy. Overall trips also for transit hour has improved, providing more income for our driver partners. As we continue to offer more affordable services across our markets, we've also managed to reduce the proportion of surge Mobility rides. I know probably good news for Pang, that results in strong demand uplift. As a result, we see that our MTU for Mobility in the first quarter increased 28% year-on-year. Now we've also expanded our products to capture a wider range of the market. For example, GrabUnlimited and also Jaya loyalty program for our Malaysian supermarket, that drives up more user engagement, more stickiness at a lower cost. Just to share some quick numbers. Our GrabUnlimited users spend actually 3.7 times more than non-Unlimited users. And GrabUnlimited now comprises more than a quarter of delivery GMV. Now the second thing, talking about affordability options, such as saver for Deliveries that we've launched across our markets or Grab share for mobility, that has been quite successful with price-sensitive customers. And then third, we've actually rolled out premium offerings such as GrabCar Executive, which I hope many of you will try, and that provides a high-quality service to business executives across the region. Now I remember you also asked a question about growth. On growth, we're actually encouraged by the rebound we are seeing. Now coming out of the Ramadan fasting period, that has seen continued growth even into the early weeks of May. On Mobility, we're expecting a very busy summer ahead of us with further rebound in tourism as well as increase in business demand. We're also slated to launch in the Philippines, our two-wheel services as part of our affordability push. And we also maintained our expectations on Mobility GMV to return to pre-COVID levels by the end of this year. On Deliveries, we saw a strong bounce back, as I just now in demand post-Ramadan in April. And in the early weeks of May, we're seeing continued growth. Going to the second half, we aim to sustain this momentum, hosting laser focus on driving towards adjusted EBITDA breakeven in the fourth quarter. So, we will continue to innovate. We will continue to reduce our cost to serve. We'll continue to leverage our scale to improve our affordability and serve more users in the region.

Okay. I'll take the second part of your question. And I think you had three parts. One was around what changed that allows us to see the improvement in EBITDA. So, I'll address that first, which I'll dovetail in terms of our future, how do we think about future quarters about EBITDA, and I'll handle your original corporate costs in the final piece. So, we've now delivered, as you can tell, Pang, five consecutive quarters of adjusted EBITDA improvements. And you saw our first quarter results, which are very strong from an adjusted EBITDA. And that gave us a lot of confidence and also very encouraged to see how the business is trajectory for the remaining of this year. We're very laser-focused as Anthony and all you've listened to our prepared remarks in making sure that our Deliveries business. Our margin and EBITDA continues to grow, and we reached 2.6% all-time high. We're very committed to achieve the 3% plus that we've always been mentioning in previous calls, and we are inching closer and closer, as you can tell, in getting to that 3% Deliveries margin. You also saw improvements in our financial services. In the first quarter and a meaningful improvement in segment EBITDA and a ton of work has been going into our financial services in terms of operating costs. We to share you a bit of number here. If you look at our graph in business, our nonbank business, our OpEx reduction was 10% quarter-on-quarter, and that's on the back of what we delivered last quarter, which is 11% quarter-on-quarter reduction. So, again, all these elements that we have gives us confidence in terms of how we think about the future quarter of 2023. Now to your question, how do we think about the future quarters? We do bake in some degree of conservatism in the guidance that I've given out. We're only in the first half of the year. And we're seeing some good traction, as Anthony just mentioned, in terms of what we're seeing in Deliveries as well as continuing strong demand in our Mobility business. And we'll continue to make sure that we can achieve and outperform what we're committing here in terms of guidance. But again, it's still early. There could be time to time when we make certain investments to make sure that our marketplace continues to be healthy. So, that hope addresses the EBITDA. So, let me tackle now the regional copper cost question, which I think, if I remember, it was around how do we think about the future quarters of regional costs. Yes, we did see an improvement in regional corporate customer on a quarter-on-quarter basis. And we are continuing to look for opportunities, Pang, in terms of how we can get more efficient in terms of our cost structure. I shared in the call that we've continued to bring our headcount down with two consecutive quarters now. We're seeing some really good traction in terms of our variable cost structure coming down year-over-year, and there's a ton of work that's done by our Grabbers across the board in looking at a cost and how we can be more optimized. So, we're going to continue to look for opportunities. And again, it's a journey that we're on. And each quarter, we're continuing to chip away at it, and we're not stopping. So, we're going to continue to look for that opportunity, which ties back to our target to get to the breakeven of the fourth quarter this year, which we're committed to.

Hi, and good evening, Management. Thanks for taking my question. Congrats on the solid results. I have two more medium- to longer-term questions. First is related to GrabPay and the Digi banks. Can management share with us, what are some milestones that you would hope to achieve? For example, in one year, three years, and five years timeline in terms of some of the important metrics that you are using to measure your performance, for example, the MTU, monetization per user, the take rate, the EBITDA margin improvement? So, any comments or color you could provide would be helpful in terms of the one year, two years, and five years? Second question is on Mobility. I think these business segments will always encounter various regulatory requirements, for example, the rider's income, rider's welfare, consumer safety, all these but in the event, if the operating cost is ramping up, what is Grab as a whole, as a company, right to think about ways to mitigate the operational risks and also offset any margin pressure there is? Thank you.

Thank you, Alicia. This is Alex. I'll address both of those questions. Regarding the Digi banks, as we mentioned during our Investor Day, our strategy is to enhance our ecosystem with these banks, which we believe enables us to better control risk and credit costs throughout various market cycles. This approach puts us in a stronger position compared to operating as a separate bank outside of an ecosystem. Consequently, we anticipate reaching break-even sooner than a stand-alone bank. Additionally, our acquisition costs are lower since these customers are already part of Grab. As we noted at Investor Day, we aim to break even on our Digi bank operations by the end of 2026, marking a three-year target. Given that we will launch our Malaysian and Indonesian banks in the second half of 2023, it's still early for the Digi banks as we've only launched in Singapore so far, and our growth has been restricted by the deposit cap, where we are operating just below that limit. However, we are monitoring key operating metrics during this time, particularly Net Promoter Scores and engagement measures around transaction patterns. In the longer term, our five-year vision is not to become the largest bank in the market. Instead, we are concentrating on supporting our ecosystem. The size of the bank will correlate with the gross merchandise value and monthly active users of the ecosystem, and we believe we can generate attractive returns due to improved risk management and lower customer acquisition costs. I hope this gives you a better understanding of our current position, our three-year outlook, and our five-year goals. Now, regarding the second question about regulation, you are correct. Regulatory uncertainty related to the gig economy has been a significant issue in the region for years, as it has been in other areas. We have worked closely with regulators across different countries to lead efforts on driver welfare and consumer safety, which are the two key issues you mentioned. Over time, we have shown that we can generate substantial income opportunities for millions of our partners in the region. As we indicated earlier, in the first quarter, the earnings per transit hour for our driver partners increased by 14% year-on-year, which is crucial for drivers and also significant for regulators as these income opportunities support local economies. Our primary focus is on that aspect. Additionally, we already provide several welfare and non-monetary benefits, including financial services and upskilling courses that we've offered to over 1 million driver partners through the Grab Academy. We also provide work-related accident insurance at no cost. We believe we are leading in this area, creating a win-win situation that boosts our driver retention and helps us maintain a sustainable driver population over time. Addressing your question about potential cost increases due to regulation, we remain confident in our ability to achieve our steady-state margins of 12% for Mobility and over 3% for Deliveries. This confidence stems from our position as the category leader in every market, which allows us to leverage our density for greater affordability that competitors can’t match. In summary, we feel well-equipped to handle any additional costs that may arise. We will continue collaborating with regulators to maintain a healthy marketplace and strive for greater scale benefits, enabling us to perform well despite any fluctuations. Importantly, we are affirming our belief that the steady-state margins of 12% for Mobility and 3% for Deliveries are achievable, even with any potential regulatory changes.

Thanks a lot for the opportunity, and congratulations on steadily narrowing the losses. Two questions from my side. Firstly, group MTUs have been stable quarter-on-quarter at around $33 million. So what efforts are being taken to drive growth in MTU? And can you provide us an update on the expansion to new cities to drive this MTU growth? Secondly, in digital Financial Services, can you give us color on out of the total operating cost, how much is variable and how much is fixed? I'm trying to understand what is the room for either cost to come down or business with the same fixed cost can support much higher level of revenue opportunities. So, is there a lot of operating leverage opportunity here? So your thoughts here and outlook for this segment would be appreciated. Thank you.

Thanks so much. I appreciate it. On the first question on MTUs. MTUs actually grew year-on-year to $33.3 million in the first quarter. Now we are actually optimistic on growing our user base on the back of improving the affordability of our Deliveries services and our Mobility services, and alongside the continued recovery we are seeing in tourism demand and in driver supply. So that also supports the Mobility business growth. Now looking ahead, there's still a lot of potential to grow the total addressable market given, one, the sizable online population in the region, and yet if you look at our core services, that is still largely underpenetrated. The fundamentals also are strong with a large expanding and growing population and a rising middle class and one that is rapidly digitalizing. Today, Grab only sells one in 20 people every month. So, this means there's still plenty of room for us to grow. Now how do we think about growing MTUs we actually have a multipronged approach to widen our reach across the region. First, we are evolving our products and services to appeal to a broader range of users. Second, we're penetrating into cities, and I talked about it just now with whether it's Saver, whether it's Grab Share, things like that. Second, we're also penetrating in the cities with new services, and that actually took a backseat during the pandemic. So, this is especially important for outside of the capital cities. So, what we call OTC expansion. The third is we're also increasing our product offerings within the Financial Services segment that Alex talked about to serve our ecosystem partners. So, when we talk about increasing demand, we don't really think about for especially increasing demand for affordable services. It's not just about lowering prices, but growing in a category that we also grow the bottom line. So how do we do that? Innovation is absolutely key to do that. So, we innovate using our technology to lower the cost to serve so that we can actually take that cost savings and pass it on to the customer. So, Grab continues to have plenty of growth opportunities; we're in pole position to capture that large total addressable market given the power of our ecosystem and the scale. And we will execute this multipronged approach I just talked about to grow their user base.

Thanks, Anthony. Piyush, why don't I take the second question on the financial services. Just to recap, the strategy for the payments business is to push down the fixed costs while growing volume. And actually, there's some evidence in the numbers over the last couple of quarters that we've been able to achieve that. So, this quarter, the cost for Grab Fin came down 10% quarter-on-quarter, and then that built on an 11% reduction in the prior quarter. So, you can see that we are driving down those fixed costs even while the financial transaction volumes are going up. Net-net, if you look across the banks and GrabFin together, about 50% of the costs are fixed at this time and about 50% of variable supporting, for example, the 45% year-on-year increase in loan disbursements that we've had in this quarter. Now the proportion of fixed costs actually is going down. So, a lot of those quarter-on-quarter reductions that I just quoted were taken out of that fixed cost piece. So, we are getting more operating leverage, and that's a key part of the strategy. Maybe, Peter, you want to comment on the profitability profile.

Yes. Piyush, the way to think about it is that we've made significant progress in profitability for our Financial Services segment since the first quarter. We have a couple of bank launches scheduled for the second half of this year, one in Malaysia and one in Indonesia. As we prepare for these launches, there will be associated costs. We anticipate that the peak financial services cost structure will occur in Q2 and Q3. Overall, we expect relatively stable EBITDA loss, balancing the contributions from our Grab Fin business and our Digi bank business. We do not foresee worsening losses after these two investment quarters for the Digi bank launch, while costs for Grab Fin are expected to decrease.

I just want to ask one question about the incentives. This disclosure you provide is great about the incentives per segment, and there's a very clear pattern of them coming down as a percentage of GMV. I assume that will continue to be the case. Is there a natural steady-state level that you think that those overall incentives can come down to? Is there one of the segments that indicates where incentives can kind of base out and just help us think about how low can they go. Thank you.

Hi, Mark, this is Peter. Let me take that one. Yes, incentives have been coming down, especially in Deliveries; we saw another improvement of roughly about 70 bps from a quarter-on-quarter as a percentage of GMV. I think where we are today, there's still opportunities in Deliveries for us to continue to optimize. Now we're balancing that also, Mark, as we think about the marketplace and also looking at potential opportunities where we can also gain and improve our category position. So, we're keeping a close eye on our continuing leadership as well as we're continuing to also stimulate further growth in our Deliveries business, but we are committed in getting to that 3% margin that we've stated plus that we've stated multiple times now. So, it's that delicate balance that we'll continue to manage. Mobility, what we did see is a little bit of uptick in terms of incentives, about 60 bps on a quarter-on-quarter, and we reinvested that into the marketplace. We are seeing very strong demand in the Mobility at the moment. And Mobility, if looking at the past three quarters, if you look at from Q2 to where we are last four quarters, we've been hovering around that 7% as an incentive as a percentage of GMV. I think we're comfortable so far what we're seeing in terms of that level of incentives. Again, the balancing act in the marketplace. Again, the number of drivers that we have on the road and the demand that we're seeing, there will be time to time where we might flex a little bit more in incentives to make sure that the driver supply can meet the healthy consumer experience with our demand. But what you're seeing today is in deliveries, further opportunities, and Mobility will continue to hover around the 7% mark.

Congrats for a good set of numbers. I have a couple of questions. One would be great to understand from you the competitive landscape, both in Mobility and delivery, and how that has changed in the last few months? And second, I'll perhaps go back to the guidance. Given the fact that your run rate at GMV on Deliveries and Mobility appears to be good. And even if you assume your continuing run rate at the loss reduction continues, then one gets a clear sense that your guidance is conservative, especially the breakeven at 4Q. And you did mention the fact that when you give guidance, you talked about conservative, but just wanted to understand any particular reasons you guys are looking at it? And maybe a related question to that is any range of investment you guys could provide us from investments in Digi bank for this year and next year? Thanks.

Thank you, Sachin. This is Alex. I'll address the first question. Our main priority is on our consumers, not our competitors. There’s been a consistent theme tonight about our commitment to increasing affordability while enhancing reliability. This strategy has proven effective in the first quarter, enabling us to strengthen our leadership position further. We intend to intensify these efforts. Unlike our competitors, we benefit from a scale that provides us with operational efficiencies, allowing us to maintain affordability and profitability. Concurrently, we've managed to reduce incentives and increase margins this quarter. That is our primary focus. It's evident that competitive spending on incentives, previously funded by shareholder capital, is dwindling, which creates a favorable environment for us regarding incentives. We've successfully reduced deliverer's incentives by 500 basis points year-on-year, which indicates a supportive context for rapid improvement. Nevertheless, our core focus remains on delivering excellent service with reliability at affordable prices. This approach will help us expand our addressable market in Southeast Asia, where we currently serve only one in 20 potential customers. Therefore, rather than concentrating on taking market share from competitors, we are focused on growing the market through better affordability and service.

Sachin, I'll address your next question regarding our EBITDA guidance. I understand you're inquiring about the cautious approach we take. Yes, there is a conservative element in the guidance, which reflects our management philosophy. It's important for us to provide flexibility to our business and leaders to maintain a healthy marketplace. This allows us to respond to the need for additional drivers, for example, and offer support to our merchants and consumers. A healthy marketplace is critical, and our leadership in that market is equally significant. We manage those factors. Over the past five quarters, we have consistently demonstrated our ability to influence these elements, and while we know what we want to achieve in terms of delivery and margins, we always keep that in view. I hope this clarifies our approach and our future direction. It's still early in the year, and this is our first quarter earnings report, with three more quarters ahead of us. However, we feel positive about the business thus far. Regarding your third question about DigiBank, we do not disclose specifics about our investment levels. We navigate this carefully, especially since it's a joint venture with Singtel. Our capital deployment for digital banks is handled with caution. As Alex mentioned, we aim to break even within the next three years for our DigiBank venture. In the next six months, we will allocate capital as needed with our joint venture partner, ensuring that every dollar invested yields the returns we seek in the future. This is our approach to DigiBank investments.

Hi, thank you for the opportunity. I actually had three questions. If I look at your peak rates for both delivery and mobility, they seem to have declined quarter-on-quarter. I just wanted to understand, are there any particular kind of strategic initiatives that you took? Or how should we look at this going forward? Secondly, on the Delivery business, medium-term margin target of 3%, you're obviously tracking well ahead of that. I guess my question is, how do you look at that number itself? Do you think there is upside to that? And I guess the reason I'm asking this is because when I look at mobility, when your margin kind of went above the target levels, we have seen you kind of reinvest back to drive growth. Would it be fair to assume that that's how you'd probably take the Delivery business as well? And the last question I had, if you could share with us your loan book for the Financial Services. Thank you.

Sure. Let me address those three questions. First, regarding take rates, particularly in Mobility and Deliveries, the commission rates show that Deliveries have remained relatively stable. It decreased slightly to 30 basis points, standing at 23.8% in the fourth quarter and approximately 23.5% in the first quarter of this year. Mobility also held steady at 23.4% from quarter to quarter. When looking at the net tech rate from a revenue perspective, Deliveries showed a slight increase of 40 basis points, while Mobility fell about 50 basis points. This shift in Mobility can be attributed to our reinvestment in the marketplace, as we experienced strong demand in the first quarter. It was essential for us to reinvest in our driver supply to maintain a healthy marketplace, especially for consumers. This balance may fluctuate based on marketplace conditions and our desire to maintain strong leadership in our categories. For your second question about Deliveries, our margin is at 3%. In many of our core markets, the margins are currently tracking above 3%, which boosts our confidence and provides a template for expansion into other countries approaching the 3% mark. We are committed to sustaining a 3% margin as a business. Similar to Mobility, there may be occasions where we choose to reinvest some of those margins back into the marketplace—be it on the merchant side, driver side, or consumer side—to ensure a balanced marketplace. In the first quarter, we did not need to take that approach; we achieved an all-time high in delivery margins. Overall, we've stated several times that we're dedicated to maintaining margins above 3% and will manage that balance in the coming quarters.

Maybe just to add on to what Peter was saying. I think when we talk about Plus, strategically, we're thinking about the advertising upside. The advertising business is still very small, still early days. But you can see year-on-year the way we've managed to drive much higher margin. So, generating in this quarter now $8 million. So still small, but that's an $8 million contribution to the bottom line. So, when we think about growing the Deliveries business and reinvesting into growth, one of the reasons for that is we want to have a good scale advertising platform with sufficient reach to really grow the very profitable advertising business in the future.

Yes. And Navin, on your last question about the share loan book, we don't disclose that number. But you heard from the prepared remarks that our loan disbursements were up 45% year-on-year. And what's key here is our credit cost is at a very healthy level. And also, our non-performing loans are also at a very low level also. So, we're balancing the risk as well as also making sure we're feeding into our ecosystem for our lending business. Thank you, everyone, for taking the time to join our call today. We appreciate everyone's time. And if you have any questions, please feel free to reach out to our Investor Relations team or visit our Investor Relations website. Thank you. We'll speak again in Q2. Thank you.

This concludes Grab's first quarter 2023 earnings conference call. Thank you for your participation. You may now disconnect.