Grab Holdings Ltd Q4 FY2023 Earnings Call

Hello, all, and thank you for joining us today. My name is Lydia, and I'll be your conference operator for this session. Welcome to Grab's Fourth Quarter and Full Year 2023 Earnings Results Call. After the speakers' remarks, there will be a question-and-answer session. I'll now turn it over to Douglas Eu to start the call.

Good day, everyone, and welcome to Grab's fourth quarter and full year 2023 earnings call. I'm Douglas Eu, Head of Asia Investor Relations at Grab. 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 who will provide operational highlights, and Peter will share details of our fourth quarter and full year 2023 financial results. Following prepared remarks, we will open the call to questions. During this call, we will be making forward-looking statements about future events, including our future business and financial performance. These statements are based on our current beliefs and expectations. Actual results could differ materially due to a number of risks and uncertainties as described on this earnings call in the earnings release and in our Form 20-F and our filings with the SEC. We do not undertake any duty to update any forward-looking statements. We will also be discussing non-IFRS financial measures on this call. These measures supplement but do not replace IFRS financial measures. Please refer to the earnings materials for a reconciliation of non-IFRS to IFRS financial measures. For more information, please refer to our earnings press release and supplemental presentation available on our IR website. And with that, I will turn the call over to Anthony to deliver his remarks.

Thank you for joining us today. 2023 was a pivotal year for Grab. We set out to achieve a number of big milestones and we delivered on our key goals. Our mobility business, which was severely impacted by the pandemic exceeded pre-COVID levels as we exited 2023. This was done through focused product investments into our key affordability initiatives and targeting traveler demand. In deliveries, we drove a reacceleration of our deliveries GMV, executing upon three consecutive quarters of sequential growth post-COVID normalization. In the fourth quarter of 2023, deliveries GMV reaccelerated to grow 13% year-on-year setting us up strongly for 2024. At the same time, deliveries segment adjusted EBITDA margins expanded by over 160 basis points year-on-year as we continued to drive marketplace efficiencies and grow our category leadership position across all our core markets amid reductions in incentive spend. And finally at a group level, we achieved our bottom line goals. We turned group adjusted EBITDA profitable since the third quarter of 2023 and also achieved adjusted free cash flow and positive net profit for the first time in the fourth quarter of 2023. These outcomes were achieved by driving intense scrutiny and discipline on costs while innovating relentlessly to deliver top line growth. Our net profit benefited from an accounting accrual reversal. More importantly, our adjusted EBITDA continued to grow quarter-on-quarter. This showcases our ability to deliver strongly on the bottom line, which we are committed to improving in the coming years. Importantly, we took strides towards profitable growth while staying true to our mission of empowering everyday entrepreneurs. During the year we generated over $11 billion of earnings for our driver and merchant partners, which is an all-time high. And our average driver earnings per transit hour also grew by 14% year-on-year while also onboarding over 700,000 new merchants in the year itself. We achieved this by driving win-win solutions such as hyper-batching and just-in-time allocations, all of which enabled us to improve the productivity of our driver partners, enhancing their earnings potential while reducing our cost to serve. For Grab, improving lives and livelihoods is not just the right thing to do, but also makes financial sense for us. Only by helping our communities to thrive can we also thrive alongside them. Looking ahead to 2024, this is a year where we will build on our foundations and double down on the following key priorities. First, we will deepen our engagement with all our users by focusing on value creation through product innovation. One such initiative is GrabUnlimited, the largest on-demand paid loyalty program in Southeast Asia. We are confident that we will be able to drive further uplift to customer lifetime value by stepping up cross-selling initiatives and service differentiation for our users, which will lead to improved usage frequency and retention rates. We've already demonstrated this in 2023 via the cross-sell of GrabUnlimited to our supermarket Jaya Grocer in Malaysia, which resulted in net new MTUs on to the Grab platform. We've also seen strong traction with our Malaysian digital bank GXBank, which was launched in the fourth quarter of 2023. This is the first digital bank out of the five licenses granted in Malaysia to launch. GXBank has seen more than 100,000 customer signups in just the first two weeks, of which 39% of depositors were existing Grab users. Our loans disbursement for GXS Singapore also grew quarter-on-quarter and over 80% of GXS customers don't have ecosystem linkages to Grab. Second, we'll continue to expand the top of our funnel by increasing our appeal to travelers, harnessing strategic product partnerships such as with WeChat or Alipay or expanding our product portfolio to provide not just affordable solutions but also high-value offerings. I'm particularly excited about one of our new launch products Family Accounts. This feature allows users to add their loved ones to a group account, enabling users to share payment methods with potentially new to Grab users, for example, family members or elderly parents while allowing them to keep track of each other's rides for peace of mind. We'll further leverage generative AI to drive productivity enhancements. For example, we have now developed our own in-house LLM powered marketing tool, which has enabled us to reduce content generation time from 99 hours to just 90 minutes, while raising output quality. Furthermore, our pilots also show an improvement in click-through rates as compared to content generated manually. This not only drives significantly greater throughput but also enables us to stay lean and disciplined from a cost management perspective. Savings can then be reinvested into more technology to drive greater long-term growth for the platform. This is only one of the many GAI initiatives that we are currently working on that we are proud to share with you today. Now, from this three, we won't stop here. As a leader of this company, I'm constantly looking for ways to deliver greater impact and bolder growth by investing and incubating brand new tech lab initiatives. When successful, these initiatives will be transformative for Grab. Our leaders have all been empowered to drive this step change for us to reap the fruits of this labor in the subsequent years. In executing such initiatives, we'll be strategically patient but tactically impatient and always remain good stewards of capital. As part of this push, we expect these initiatives to accelerate revenue growth rates in the mid-term after 2024 building on the solid foundations we are establishing this year. Peter, our CFO will elaborate later. Finally, on creating shareholder value, we see a clear path to steady group adjusted EBITDA growth and to improve upon our adjusted free cash flow generation in the years to come. With the progress that we have made on profitability with a strong balance sheet in place, we are announcing two capital market-related activities today that have been approved by our Board of Directors. Firstly, we plan to repay our remaining Term Loan B debt facility, which we expect will save us around $50 million in interest expenses annually. Secondly, we are announcing our inaugural share repurchase program of up to $500 million, which Peter will share more on later. In closing, we are incredibly excited about what Grab will embark on in the years to come. Southeast Asia is a fertile ground for us. We're now the largest on-demand platform in the region at a scale that is over three times larger than our next closest competitor and yet, there's still a lot for us to achieve for our partners in this region. Having operated in the region for over a decade, we're now best positioned to deploy our significant local knowledge, data insights, scale and technology to solve the region's many complex problems including accelerating financial inclusion for the underbanked. We will also remain relentless in innovation to unlock new possibilities for our users and partners while ensuring we continue to focus on growing our bottom line and shareholder value over the long-term. I'll now hand over to Alex, who will cover our fourth quarter operational highlights in more detail.

Thank you, Anthony. Our fourth quarter results demonstrate our commitment to driving both top line growth and bottom line improvements, while deepening market penetration across the region. Over the next few minutes, I will share our operational highlights and the underlying drivers of these results starting with Deliveries. We saw robust demand growth for Deliveries with both MTUs and GMV at record highs, driven by improving year-on-year spend per user across our 2000 to 2022 user cohorts. Our pre-COVID cohorts are spending well over two times relative to their initial year and even cohorts that started during or after the COVID lockdowns are showing higher spend relative to their initial year. Everything that we do is about making ourselves the number one choice for our users and partners in Southeast Asia. In order to achieve this, we continue to improve the affordability and reliability of our delivery services, as we reduced our costs to serve so effectively that we were able to expand our profitability at the same time. Our teams have executed strongly on this front and we have made meaningful improvements in several of our efficiency metrics such as batching and trips per transit hour. Almost 40% of our Deliveries orders were batched in the fourth quarter, growing by around 10 percentage points year-on-year. Average delivery fees for batched orders were 8% lower than unbatched orders supporting our push for greater affordability. Adoption of Saver deliveries, a key focus in 2023 also hit 23% of all delivery orders. As we expected, Saver users recorded average frequency levels that were 1.6 times higher than non-Saver users during the fourth quarter. In Singapore, where Saver was launched much earlier than our other markets, eight out of 10 Saver orders are now batched. Looking ahead, we see further opportunities to improve our efficiency while expanding our product portfolio to maximize value and convenience for a wider range of users. We have begun to roll out several hyper-batching product initiatives that not only improve batching rates but also maximize basket size per trip, while providing users with more affordable delivery fees. For our users who want their food faster, we also offer priority deliveries. In contrast to Saver, priority deliveries have higher delivery fees relative to standard and they generate adjusted EBITDA margins which are much higher than standard deliveries on a per order basis. Priority deliveries is still in its early days as it comprises only 6% of orders and we are confident we can continue to grow adoption of this product. GrabUnlimited, the largest paid on-demand loyalty program in Southeast Asia now is proving to be an important engagement and attention driver for our loyal users. The program continues to account for one-third of Deliveries GMV and subscribers exhibited healthier spend levels and retention rates relative to non-subscribers. We see opportunities to improve customer lifetime value on GrabUnlimited by driving up cross-sell rates, particularly to Mobility and Financial Services as well as to introduce more non-monetary exclusive benefits for our most loyal subscribers. Looking ahead, I'm confident that our Deliveries top and bottom lines will continue to grow healthily in 2024. While our Deliveries business performance is typically impacted by seasonal factors in the first quarter, I do want to call out that Deliveries demand has held up resiliently so far this year and we expect GMV to be relatively stable now on a quarter-on-quarter basis. We also anticipate year-on-year growth rates in the first quarter to remain north of 12% and for demand to grow sequentially in the second quarter. So let me take a step back and examine the overall food competitive landscape. The competitive moats that we have built have enabled us to remain in pole position as the regional category leader across Southeast Asia with a scale advantage that's now more than two times larger than our next largest competitor. In 2023, we drove year-on-year category leadership expansion across every one of our core markets and at the same time, we have improved Deliveries segment adjusted EBITDA margins by over 160 basis points to 3.6% and are profitable in every one of our core markets on a segment adjusted EBITDA basis. Looking forward, we also see headroom for segment adjusted EBITDA margins for Deliveries to expand by a further 100 basis points to 200 basis points over the medium-term. The success of this organic strategy means that we must hold a correspondingly high hurdle rate when assessing inorganic opportunities. While as a matter of policy we do not comment on rumors, we understand that Delivery Hero has issued a statement overnight indicating that they have terminated discussions with regard to a potential sale of their Foodpanda business in certain Southeast Asian markets. Consistent with that statement, Grab can also confirm that it is not pursuing any acquisition of that business. Now moving on to Mobility. Our Mobility business recorded strong year-on-year GMV growth. We also exceeded our guidance with GMV surpassing pre-COVID levels as we exited 2023. This growth came on the back of strong demand as we focused our efforts to further drive growth in domestic ride hailing and on capturing the return of traveler demand as it started to ramp up throughout 2023. We previously shared that the traveler segment is a key focus for us. Compared to domestic users travelers are generally less price sensitive and on average spend nearly twice as much as domestic users. We are pleased to see that our efforts to capture this set of users has yielded good results. Year-on-year Mobility traveler MTUs and spending grew 67% and 68%, respectively during the quarter. In 2024, we still see headroom to continue targeting international traveler demand to provide further upside to our Mobility business. Notably, official stats estimate that inbound travelers across several of our core markets are still at only around 70% of pre-COVID levels with governments projecting further growth in inbound travel this year. In addition, we continue to aid drivers in improving their productivity and earnings potential on our platform, while also reducing our cost to serve to improve the affordability of our services. Our efforts to optimize driver supply and enhance driver efficiencies to meet demand continue to bear fruit. During the fourth quarter, monthly active driver supply grew 11% year-on-year with total online hours growing 20% year-on-year and this resulted in the proportion of surge to Mobility rides further reducing by 589 basis points year-on-year. Correspondingly, average frequency per Mobility user grew 11% year-on-year and in tandem with higher volume led to improvements in ride hailing driver utilization rates and a 14% year-on-year increase in average driver earnings per transit hour. As we look ahead to 2024, we expect growth rates for Mobility to remain strong. We usually see seasonal softness in the first quarter, but with our efforts in place to drive demand, we expect Mobility demand to be stable sequentially. And structurally similar to Deliveries, we see plenty of headroom to increase total users and enhance frequency levels by expanding and deepening our product portfolio across our key affordability and high-value initiatives. One of these key affordability initiatives was the relaunch of Move It our two-wheel ride hailing app in the Philippines, which has seen daily rides grow phenomenally by over 30 times in less than eight months. It was such a proud moment when earlier this week we met many of the new drivers who have joined us in Manila and were so happy for the opportunity to earn a good living on the Grab platform. In fact, when I arrived at the center at around 10:00 P.M., there were still hundreds of new drivers arriving to sign up. Beyond our affordability initiatives, we see ample opportunities to roll out and expand newer products such as GrabCar Premium which will enable us to tap into newer user segments such as corporate travel demand. Moving on to Financial Services. Revenues here more than doubled year-on-year and grew 12% quarter-on-quarter on the back of higher contributions from our ecosystem payments and lending businesses. Total loans disbursed in 2023 grew 57% year-on-year to reach $1.5 billion and we ended the quarter with $326 million of loans outstanding underpinned by the expansion of ecosystem lending in GrabFin and the new FlexiLoan volumes from GXS Bank in Singapore. This is even while we maintained NPL ratios at low single digits. Customer deposits across our Digibank stood at $374 million at the end of 2023 as we are still managing our deposit balances underneath the regulated deposit cap in Singapore. Segment adjusted EBITDA losses narrowed year-on-year driven by higher revenues from lending and from payments where we further streamlined our cost base in GrabFin as we focused our strategy on on-platform payments. We also continue to see solid traction across our Digibank as Anthony highlighted earlier. Finally, on our Enterprise and New Initiatives segment, year-on-year revenues more than doubled, while segment adjusted EBITDA grew by 378%. During the fourth quarter, our advertising business reached several all-time highs. Advertising revenues scaled to 1.5% of total Deliveries GMV and reached an annualized run rate of nearly $160 million, while segment adjusted EBITDA margin as a percentage of revenue is nearly 80% in this very profitable business. We deepened the penetration of our advertising self-service platform among our merchant partners, while improving monetization rates. We saw monthly active advertisers joining our self-service platform grow by 54% year-on-year to 115,000, while active advertisers consistently demonstrated higher retention rates than non-advertisers. And average spend by active merchants who adopted self-serve advertising tools also increased 129% year-on-year underscoring the value we deliver to our merchant partners who try our advertising platform. While advertising penetration is still relatively nascent today, we see plenty of upside to drive demand for our advertising services and value for our merchant partners and other top brands. So, in closing, we are happy with the progress that we've made in expanding our top line, while driving operational efficiencies to improve our bottom line. There is still significant headroom for growth going forward, both in terms of driving frequency uplifts, user stickiness, and adding new users and partners to our platform. And with that let me turn the call over to Peter.

Thanks, Alex. We closed out 2023 on a strong footing. In the fourth quarter, revenue grew 30% year-on-year to reach $653 million, while full year revenue grew to $2.36 billion. This is above the top end of the revenue guidance that we revised up in the last quarter. The strong revenue growth was driven by all segments of our business. On a year-on-year basis, in the fourth quarter, Mobility revenue was up 26% as we continued to see strong demand from domestic users and international travelers across the region. Deliveries revenues grew 20% as we continued to grow GMV while reducing incentive spend. Financial Services revenue doubled in the fourth quarter and we improved payment monetization and increased lending contributions. Additionally, Enterprise revenues, consisting primarily of advertising, more than doubled year-on-year to hit an annualized revenue run rate of around $160 million. This was attributable to increased ads monetization and ads demand from our merchant partners. On GMV, our on-demand segments of Mobility and Deliveries saw fourth quarter GMV growth of 18% year-on-year. Mobility GMV grew strongly by 28% year-on-year, exceeding pre-COVID levels as we exited 2023. Deliveries GMV achieved its third consecutive quarter of growth, with a reacceleration in growth to 13% year-on-year. This was supported by strong underlying demand trends with Deliveries MTUs hitting a record high, coupled with increasing levels of GMV per Deliveries MTU. Moving on to segment adjusted EBITDA. Total segment adjusted EBITDA doubled year-on-year to $228 million in the fourth quarter. This growth can be attributed to all segments of the business. Deliveries segment adjusted EBITDA grew to $96 million in the fourth quarter, with segment adjusted EBITDA margins expanding by over 160 basis points to 3.6%. Mobility segment adjusted EBITDA grew 20% year-on-year to $182 million, with margins at 12.3%. Financial Services segment adjusted EBITDA narrowed 13% year-on-year to a negative $81 million. The reduction in losses was driven primarily by lower overhead expenses and higher revenues from lending and payments in our GrabFin business that more than offset higher cost of funds and also higher Digibank related costs. Notably, payment cost of funds represented 26% of our Financial Services segment cost structure in the fourth quarter. Finally, for the Enterprise segment, adjusted EBITDA grew by 378% year-on-year for the fourth quarter. As a percentage of revenues, margins expanded to 79% consistent with our efforts to improve the monetization of our ad services and increased self-serve ads penetration across our merchant base. Regional corporate costs for the fourth quarter improved 13% year-on-year to $193 million. The year-on-year improvements are attributed to reductions across both variable and fixed cost bases. Total headcount reduced 18% year-on-year as we continued to recognize greater efficiencies across the organization. While cloud costs and direct marketing expenses declined 32% and 16%, respectively, year-on-year in the fourth quarter. As a result of the strong top-line growth and the greater focus on profitability, we continue to grow group adjusted EBITDA to $35 million in the fourth quarter, a year-on-year improvement of $146 million. Separately for the first time, we reported a quarterly positive adjusted free cash flow of $1 million in the fourth quarter. We also reported for the first time, a net profit of $11 million in the fourth quarter. I do want to call out that while we reported a net profit in the fourth quarter, we benefited from the reversal of an accounting accrual that was no longer required. As we look ahead to 2024, we remain committed to growing our business sustainably anchored on generating profitable growth and free cash flow. As Alex mentioned, our business performance is subject to seasonal factors. In the first quarter, we expect on-demand GMV to be stable on a quarter-on-quarter basis, with demand and supply being impacted by the Lunar New Year festivities and Ramadan. Nevertheless, we expect year-on-year growth rates for on-demand GMV to be healthy and to see a sequential rebound of GMV in the second quarter and continued growth during the year. From a margin perspective, we expect Mobility margins to be maintained at around 12% plus and Deliveries margins to be 3% plus through 2024. As we look beyond 2024 however, we see headroom for margins to expand by a further 100 basis points to 200 basis points for Deliveries in the midterm, as we continue to build out new product features that enhance our operational efficiencies as well as drive greater marketplace optimization. We will aim to provide an update on our longer-term margins during our first quarter results call. Separately in Financial Services, we expect losses to sequentially narrow heading into 2024, coming down from peak losses in the fourth quarter of 2023. On our forward guidance for 2024, we estimate revenues to come within the range of $2.7 billion to $2.75 billion, representing a year-on-year growth of 14% to 17% and for adjusted EBITDA to be at $180 million to $200 million. In the medium term, we anticipate revenue growth beyond 2024 to accelerate as we are incubating and scaling up a series of tech-led products and initiatives that Alex and Anthony spoke about. We expect these initiatives to drive strong growth across our core products and services and also see meaningful upsides in contributions from our digital banks, advertising, and our high value offerings as key examples. As for our adjusted free cash flow for 2024, we expect this to improve substantially year-on-year as we grow profitability and drive cash flow generation. However, I do want to point out that the trajectory of our quarterly adjusted free cash flow levels could fluctuate, due to seasonal factors and the timing of payments for certain expenses such as bonus payments and capital expenditures. Finally, we expect to be highly disciplined on costs and to continue driving operating leverage in the business. Centralized regional expenses, which accounts for approximately half of our regional corporate costs, is expected to grow broadly in line with inflation much lower than our revenue growth. Turning now to our balance sheet and liquidity position. We continue to maintain a strong liquidity position, ending the year with $6 billion of gross cash liquidity up slightly from $5.9 billion in the prior quarter. Our net cash liquidity was $5.2 billion at the end of the year, flat from the prior quarter. I would like to also take some time to share our updated capital allocation framework, with the objective of driving long-term sustainable value creation for our shareholders. First, we will have a high hurdle rate when it comes to deploying our capital, and we'll have a balanced approach to investing for organic profitable growth and be very highly selective on inorganic opportunities. Secondly, we will continue to be efficient in our working capital needs and continue to maintain a strong balance sheet with ample liquidity. Third, where there is excess capital on our balance sheet, we will look to return it to our shareholders. In line with this capital allocation framework, our Board of Directors has approved an inaugural share repurchase program of $500 million and the full repayment of the outstanding balance of our Term Loan B, with the principal and accrued interest amount of $497 million as of the end of 2023. We are announcing our first share repurchase program now as we are in the fortunate position of having a very strong balance sheet while retaining sufficient cash to fund the growth of our business. This underscores our commitment to driving shareholder value creation and only the highest return on investment opportunities when deploying our cash. This also benefits by offsetting dilution resulting from issuing of shares as part of our employee stock compensation plans. As for the repayment of the Term Loan B, we expect this to create significant interest expense savings for Grab of approximately $50 million per year. Finally, as we look ahead to 2024 and beyond, I would like to provide an update on our financial reporting that we will move towards beginning from our first quarter of 2024 results. We will be revising the composition of our operating segments, which reflects a change in how we plan to evaluate and manage the performance of our businesses and to also enhance our segment's financial disclosures to be more comparable with peers. From the first quarter of 2024, we will be allocating the relevant portions of advertising revenues and costs currently in our Enterprise segment, cost of funds, currently in our Financial Services segment, and regional corporate costs to the respective segments of our business. Secondly, consistent with our strategic focus on ecosystem transactions, and lending for GrabFin and our digital banks, we will be enhancing disclosures around our lending and banking business which we have seen since our third quarter results, while discontinuing the reporting of GMV for our Financial Services segment as we de-prioritize off-platform transactions. We'll share additional color on these reporting changes during our next earnings call. In closing, Grab delivered a strong set of results in 2023, where we continued to grow across our top and bottom lines. As we look into 2024, we will continue to manage the business with three key financial guardrails. First, by continuing to generate sustainable adjusted EBITDA growth; second, driving towards sustained positive adjusted free cash flow; and third, continuing to drive operating leverage in the business. Before ending the call, Anthony, Alex, and I would like to thank fellow Grabbers, our users, and partners for their contributions and support. Without it, these results and strong performance in 2023 would not have been possible. Thank you very much for your time. And we will now open up the call to questions.

Thank you. Our first question comes from Pang Vitt of Goldman Sachs. Your line is open. Please go ahead.

Hi. Good afternoon, management and thank you very much for the opportunity. First of all, congratulations on your first profitable quarter and announcing a positive surprise in the $500 million share buyback. On this point, can you share with us more on this repurchase program you announced? What will be the pace of this? And how do you plan to utilize this program for the rest of the year? That's question number one. Question number two, we understand that Foodpanda, as you mentioned, has terminated discussion with regards to a potential sale in Southeast Asia. On this point, could you share potential color with us on why this asset was not of your interest? And how does this potentially impact the competitive landscape in Southeast Asia going forward?

Hey, Pang. This is Peter. Let me take the first one around the $500 million buyback and I'll ask Alex to address your second question around Foodpanda. The announcement of the first repurchase program, we view this as an ideal opportunity to look at investing in the long-term upside in our business, and also, we coupled this with the $5.2 billion net cash liquidity position. Now, as to the pace of how we deploy the capital, we will be efficient in how we're using that and a lot of that, Pang, will be influenced by the dynamic market itself. We will be very cautious in how we're deploying this cash in the market, but we are committed to the Board mandate for the share buyback program. We'll continue to update the market as we proceed with the program.

Hi Pang. It's Alex here. Let me talk about the Foodpanda situation. As we were indicating in our comments, in food deliveries we are more than double the size now of the next largest competitor in Southeast Asia. We've been able to translate that scale into significant efficiency advantages. The cost to serve that Anthony was talking about and hyper-batching the just-in-time allocation, all of these things work better at higher volumes with higher density. That means we've been able to drive affordability, which in turn drives growth and improves our competitive position even better. So, increasing contribution potential in all markets, increasing margin in all markets, and we've even shared today that we expect our long-term margins in Deliveries to go up by another 1% to 2% higher than the 3% plus that we've mentioned in the past as our long-term target. That reflects our confidence that we can continue with this organic strategy, driving growth and driving improved margin while offering better services for our consumers. Therefore, the threshold for any inorganic use of shareholder funds has to be very high in comparison to that. In the end, any asset that we would acquire would have to be available at a very attractive price to cross that bar. I think that's all I should say.

Thank you. Our next question comes from Venugopal Garre of Bernstein. Please go ahead. Your line is open.

Hi Grab management. Thanks a lot for the opportunity. So two questions from me; firstly, I remember last year you had started with an EBITDA loss guidance of about $275 million to $325 million and eventually you ended up reporting a loss of only $20 million. So I want to understand that while you've given a guidance of about $180 million to $200 million of profit this year on EBITDA level, if I annualize your fourth quarter EBITDA, that itself is $140 million. So you're not really looking for guidance which is materially different from what you've delivered in the fourth quarter in terms of run rate. I just wanted to understand that given a broadly positive outlook in the medium term as well on almost all your segments, why are we being a bit conservative on guidance? What is it that's something that we should watch out for if at all? And if the prices emerge, which are the areas you think the prices could emerge? That's my first question. Second one is a smaller one largely on the Financial Services sector. While we were anticipating some increase in losses sequentially given that you had noted the Malaysia launch. Could you just quantify the impact, if at all, more importantly for us to understand how the losses would shape up especially through the year? Is it going to be elevated for a while before it comes down or is it going to be a swift improvement? Thank you so much.

Hi, Venu. Let me address the first one around the EBITDA. As Anthony and Alex mentioned, we are in 2024 focusing on deepening our product moats and incubating a number of product and tech investments, particularly around operational efficiency improvements that we expect to see revenue growth acceleration beyond 2024. For this year, as we alluded to in the remarks, we are keeping our margins on Deliveries and Mobility fairly stable at the 3% and 12% plus respectively. Now, we do see opportunities for our Deliveries margin to expand in the mid-term by around 100 to 200 basis points, which you'll see as part of the EBITDA expansion in 2025 and beyond. However, given where we are today and the line of sight that we have from a guidance perspective, this is where we are committed at this point in time. As we continue rolling out these new product features, which we're very excited about, we will continue to update our EBITDA guidance.

Thanks for the question, Venu, on Financial Services. Yes, you're right; the increase in the EBITDA losses in the fourth quarter as we had indicated was because of the Malaysia launch, the launch of GXB in Malaysia, which has been very successful. As Anthony stated earlier, we gathered 100,000 new accounts in just the first two weeks, but there were launch related expenses in the fourth quarter. We took in deposits, which is great, but we can't redeploy those deposits into income-generating lending products until we launch the loan products, which is upcoming in this coming quarter. Regarding GrabFin costs, those remain relatively stable. You asked for some underlying factors elsewhere. Our GrabFin costs remained stable quarter-on-quarter despite improvements in revenues. Within that, we've got the cost of funds for our payments business, which supports the on-demand platform payments, that is approximately $30 million in the quarter, representing about 26% of the total Financial Services segment cost structure. So, hopefully this helps you understand the underlying costs of the business. I want to call out that we see payments as one of our core moats because having our own payments infrastructure will significantly lower the payment cost for Grab. We expect that payment cost to now because it's under our own control to remain stable as a percentage of our on-demand GMV in 2024. The last part of your question; Q4 does represent the peak of the quarterly losses for the Financial Services segment for Grab. Going forward, we will see the revenue kicking in from the loan book. We are already lending in Singapore. We've got GFin also performing well with its high velocity low ticket ecosystem lending. Additionally, as regulatory caps are lifted, the Singapore business can start to scale more aggressively.

Our next question comes from Sachin Salgaonkar of Bank of America. Please go ahead. Your line is open.

Hi. Thank you for the opportunity. I have two questions. The first question, perhaps a follow-up to Venu's question, but I want to ask that in a slightly different format. So if you look at what you guided for adjusted EBITDA and revenue it does imply an adjusted EBITDA margin anywhere between 7.3% to 7.5% at the high end. Your last reported adjusted EBITDA margin was close to around 5%. So in a way, we are looking for a 200 bps improvement in margin. If the mobility margin is around 12%, and delivery margin around 3%, does a large part of the improvement also predominantly driven by the Financial Services losses going down or is it also the delivery margin of 3% less implying maybe 100 bps improvement from that? That's question number one. Question number two, wanted to understand a bit more color on the centralized regional expense you guys are talking about. I understand in the next quarter you're going to give details, but anything this quarter you guys want to provide in terms that will help us quantification going into the next quarter? The related question is; based on my understanding, roughly 30% of your costs are largely linked to GMV. So as in how GMV increases, we should see an increase in these expenses in a pretty hefty manner, right? I just wanted to understand how one should look at the regional cost expense going ahead.

Okay, Sachin, I'll address those questions. First, I want to highlight that there's operating leverage in the business. Many of the product initiatives we're implementing are also creating operational efficiencies. Some of this may impact segment margins, while some can affect our corporate cost structure. We have observed improvements in this area. We noted that the margins for Mobility and Deliveries will be approximately 12% and over 3%, respectively. Regarding GFin, you're correct; the Financial Services segment will also see enhancements in its cost structure and will begin to generate revenue as we start scaling loans in this sector. You'll observe operating leverage through efficiencies, and the GFin segment will also see improvements. As for our regional corporate costs, they are increasing at about 4% year-over-year, which is notably lower than our GMV growth rate. To address your second question on centralized regional corporate costs, those are rising in accordance with inflation, as mentioned earlier. There are variable and fixed components within the regional corporate costs. The costs associated with cloud services and direct marketing will vary with the pace of our business growth. We are continuing to see efficiencies in both cloud services and marketing, and with the reductions in those cost structures in 2023, we will ensure they are optimized efficiently. As a percentage of GMV, those costs will remain stable, but in absolute dollar terms, they will grow alongside our on-demand business. The fixed cost structure, however, will align closely with inflation.

Our next question is from Piyush Choudhary of HSBC. Please go ahead. Your line is open.

Hi. Thanks a lot for taking the questions, and congrats to Anthony and the entire team on a good set of results and announcing the share buyback. Two questions. Firstly, how do you expect MTU growth going forward across segments? In the fourth quarter, we saw good growth in MTU. Is it driven by gaining market share or are you able to expand the total addressable market with new solutions? And if you can call out, how much is seasonally driven due to travel and tourism in the region? Secondly, on the deliveries segment, can you talk a little bit about your margin range across various countries? I would imagine that there is a big difference between deliveries margin and there could be room for improvement over there in some of the countries where you have more intense competition. So why are we saying deliveries margin will remain more constant year-on-year? Wouldn't that mix or improvement in those countries help to lift margin even in 2024?

Piyush, thanks for your questions. I'll take the first one on the MTU growth and then hand to Peter for the second one. Yeah, we see opportunity on the MTU side from the mobility recovery. Clearly the traveler segment is not fully recovered since pre-COVID. As I mentioned in my remarks earlier, most external estimates suggest that it's only around 70% so far. On the deliveries, we're starting to see the effect of the affordability initiatives that we flagged to you earlier last quarter. We can see that it does drive new users using the platform and also frequency, which will give us an MTU boost as well. We are very keen on that as a hyper-growth driver. Additionally, we think that we're barely tapped into the premium segment, the corporate premium segment; as we mentioned in our remarks, there will be some fantastic new offerings coming up for that segment. So we hope that that will be a high margin and high growth opportunity for our MTUs going forward. Peter?

Yeah. Piyush, I would also add from an MTU perspective, we're also driving engagement in our business. It's crucial that we can add MTUs, but also ensure these users are constantly engaging with our platform. We finished the quarter at 38 million and we see opportunities to grow that even further in 2024. It's equally important that they are constantly returning to the platform and using it. That's part of our growth factors in 2024, but that's also going to come from product features that we're investing in the business, and tied to that actually is your question around margins. Now you asked about country-specific margins. We only see our business as a portfolio. We don't focus solely on the countries, but we see it across the board, across all the countries. In Deliveries margin, we've seen a margin improvement of over 500 basis points over the last two years. This is a year that we will continue to consolidate and make investments into these new product initiatives that will drive engagement as well as broaden the total addressable market. We've worked hard last year in affordability with growth at the total addressable market and we finished with record GMV. We're going to push this year also to ensure that we bring in new user bases, and that these user bases are sticky, leading to further revenue growth accelerations and margins for our Deliveries business in 2025 and 2026. We're thinking about this carefully. Where there is upside in margins, we'll capture those margins, but for us, making sure that we see revenue growth acceleration this year, especially in 2025 and 2026.

The next question comes from Ranjan Sharma of JPMorgan. Your line is open.

Hi. Good evening, and thank you for the presentation. I have two questions. Firstly, regarding the buybacks, could you clarify how you determine the reference share price for privately negotiated transactions? My second question pertains to your overall cost base. Could you provide insights into what percentage of your costs are denominated in U.S. dollars and Singapore dollars? Thank you.

Ranjan, on the buyback, it's hard for us to quantify. Buybacks are influenced and led by the market dynamics at the end of the day. The mandate that the Board has given us has provided us full flexibility in how we deploy that capital. We'll see how the market dynamics play out, whether through block trades or trades that we do in the open market, all of which is influenced by the market price itself. It's difficult for us to say because we can't control the market. What I can offer is our commitment to being efficient in how we use that cash for those buybacks for the highest return for our shareholders. Regarding your second question about costs in USD and SGD, we're predominantly a USD-denominated business. What we do with our cash will primarily be concentrated in USD. We naturally hedge our business, being a diversified portfolio when it comes to countries. We ensure that from an FX perspective, we're not significantly exposed.

Our next question comes from Alicia Yap of Citigroup. Please go ahead.

Hi. Thank you. Good evening, management. Thanks for taking my question. I have two quick questions. First is, just wondering how much of the FX fluctuation that you have baked into your 2024 revenues and EBITDA guidance? And then second on follow-up on your comments about the inorganic versus the organic growth. Just wondering in what type of situations or what kind of synergies that you are looking for that will trigger you to think about inorganic opportunity potentially, if it arises? Thank you.

Hi, Alicia. Let me take those two questions. In the FX part of your question, we've obviously built in buffers to account for movements in FX. We must be prudent as we can't read the forward FX rates. We've included some conservatism in our foreign exchange projections, and I believe that's appropriate. We can't predict where the rates will be in the next 12 months. As for inorganic versus organic growth, Alex has mentioned that we have a very high hurdle rate when it comes to inorganic opportunities. We're very focused on ensuring that organic growth remains our highest priority. We are investing in those products to drive engagement, user base growth, and revenue growth because that truly deepens our competitive moat in today's business environment.

The next question is from Jiong Shao of Barclays. Please go ahead.

My question is; Peter, you mentioned a couple of times about the reacceleration in growth in 2025 and beyond. So usually the law of large numbers suggests that growth rates tend to decelerate or moderate as you get bigger. But I was hoping you could elaborate a bit more on why you expect growth rates in 2025 and beyond to be higher than in 2024, other than the advertising and fintech contributing more. My second question is about travelers. I think Alex mentioned a couple of times that travelers are now only back to 70% of pre-COVID levels and some of the new stats we have seen from Chinese New Year for travelers seem pretty good. I was wondering if you could talk about how significant the Chinese travelers are to your Mobility business. Any color or numbers you can share on the trends you have seen during this holiday period a couple of weeks ago would be helpful.

Thank you for the question, Jiong. I’ll discuss our growth and our expectations for a reacceleration in 2025. Our team is very confident in our capacity to drive revenue growth, particularly in the mid-term, which is why we set ambitious goals for not only 2024 but also for the future. Looking back at 2022 and 2023, we established internal targets that many felt were unrealistic; however, we demonstrated that we are the most efficient platform in terms of cost to serve in the region by a significant margin, and we will continue to prove this. We promised to finish 2023 with Mobility GMV exceeding pre-COVID levels, and we accomplished that by concentrating on the affordability segment, which performed well. We also predicted a return to GMV growth for Deliveries, achieving a 13% year-on-year increase in Q4 and maintaining sequential growth for three quarters due to our focus on GrabUnlimited and Saver initiatives, which allowed for price differentiation. We are also pleased to have exceeded our EBITDA targets ahead of schedule. Currently, we are fostering growth through various initiatives. One initiative is advertising, where we see substantial potential. We've noticed increased penetration among both large direct clients and smaller long-tail clients, and although we've made progress, our penetration is still relatively low compared to other markets, leaving us with significant opportunities. Moreover, we've observed that the return on advertising spending continues to create more earning opportunities for our merchant partners. Another area, as Alex mentioned, is banking, where we're optimistic about revenue growth as our loan book scales. We’re happy with our GFin team’s ability to manage costs effectively even as loan growth increases. Furthermore, Peter has indicated an upside for Deliveries margin of approximately 100 to 200 basis points, which we believe will persist as we invest further in technology and product development. These are all examples that strengthen our outlook for growth acceleration even beyond 2024.

Thanks for your question, Jiong. Yes, let me address the question about Chinese travelers. In fact, Chinese travelers are now more significant than they were before COVID, largely driven by our extensive efforts targeting them. We’ve integrated with WeChat, Ali, and trip.com. We have in-app translation as well. This has boosted our awareness within Chinese traveler segments, positively impacting our numbers. However, I recently met with the Asia head of a large global hotel chain, and he mentioned that they're experiencing much more domestic Chinese travel than pre-COVID as a proportion and less international travel. Thus, there's still room for growth as China's economy starts to recover and as consumers begin to travel internationally. But right now, it appears they are disproportionately traveling domestically based on feedback from our partners.

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