Earnings Call Transcript - GRAB Q3 2022

Operator, Operator

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

Vivian Tong, Head of US Investor Relations

Good day, everyone, and welcome to Grab's Third Quarter 2022 Earnings Presentation. I'm Vivian Tong, Head of US Investor Relations at Grab. And joining me today are Anthony Tan, Chief Executive Officer; Peter Oey, Chief Financial Officer; and Alex Hungate, Chief Operating Officer. During today, Anthony will discuss our key business updates, and Peter will share details of our third quarter 2022 financial results. Following prepared remarks, we'll open the call to questions where Anthony and Peter will respond to the Q&A. As a reminder, today's forward-looking statements about the 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 F-1 registration statement 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 materials. For more information and additional disclosures on recent business performance, please refer to our earnings press release and supplemental presentation for a detailed third quarter 2022 financial review, which can be found on our IR website. Should you have any questions after this presentation, please reach out to investor.relations@grab.com. And with that, I will turn the call over to Anthony to deliver his opening remarks.

Anthony Tan, CEO

Thank you, everyone, for joining us today. I'm pleased to report a strong set of third quarter results. On a year-on-year basis, group revenue was up over 140% and loss for the period improved substantially, both year-on-year and quarter-on-quarter. Monthly transacting users also grew 30% year-on-year, accelerating from 12% and 10% in the previous two quarters. In the quarter, we achieved an important milestone. Greater optimization of our incentive spend has resulted in our delivery segment adjusted EBITDA positive for the first time, three quarters ahead of our guidance. We also crossed our 10 billionth ride and deliveries mark in July, just five years after we managed 1 billion rides. We achieved these results by innovating, reducing our cost to serve, and staying focused on growing and retaining high-quality users. As we look to scale our ecosystem profitably, we're also committed to adapting our product portfolio to meet the needs of various consumer segments in this broad-based market. Looking ahead, we're keenly monitoring the macroeconomic uncertainty, inflation, currency fluctuations, and recessionary risks post challenges to most businesses, but we remain optimistic about Southeast Asia's growth prospects that are underpinned by a rising tide of digitalization and an expanding consumer class. I'll now give an overview of our performance before turning it over to Peter, who will give details on our outlook and financials. In the quarter, revenue in GMV for mobility recorded strong growth, doubling from the same period a year ago on robust demand and recovering driver supply. We're heartened by the demand recovery trends we see in many of our markets. Economies have opened, travel has resumed, and people are heading back to offices. Fulfillment rates, a measure of how well we match demand and supply on our platform was near pre-COVID levels. The improvement in fulfillment rates is a result of our efforts to improve driver supply and productivity. Since the start of the year, we streamlined the onboarding process for drivers to allow them to start driving on Grab quicker. We're also improving outreach to potential driver partners and making it easier for them to lease cars by partnering with car rental companies. This groundwork is essential to accelerating the momentum in our mobility business. With our mobility supply at 80% of where we were pre-COVID, there's still headroom for us to capture the strong demand recovery coming back online. Looking ahead, we'll continue to innovate on our mobility services to meet the needs of our consumers and invest in platform enhancements to speed up driver partner onboarding and improve productivity. For example, we rolled out affordable mobility solutions to meet consumer needs. In the Philippines, we re-launched Grab Share, an on-demand carpooling service. And in Indonesia, we launched an affordable short-distance two-wheel mobility service. For our deliveries business, we saw solid growth despite the normalization of food delivery demand and our continued focus on cultivating and retaining high-quality users. In the quarter, revenue for deliveries tripled compared to the same period a year ago as we optimized our incentive spend and launched product enhancements to reduce our cost to serve. We maintained our category leadership position in food delivery despite tapering incentives. We saw our food business and delivery segment reached adjusted EBITDA breakeven in the third quarter, three quarters ahead of schedule for deliveries and two quarters ahead for food. This key milestone puts us on a stronger footing to pursue long-term growth opportunities within the delivery segment and sets us well on track to reach our target of 3% plus for margins. In food delivery, we will continue to capture and retain high-quality users by offering them a wide variety of merchants and a superior app experience. At the same time, we are building out different services and launching product enhancements to cater to users seeking affordable options. For non-food deliveries, we are building a portfolio approach towards our grocery segment. In some markets like Malaysia, where we found a fit with our acquisition of Jaya Grocer, we can offer an end-to-end grocery retail experience within our app. In other markets, we are exploring partnerships. For example, we recently announced a partnership with Trans Retail, one of Indonesia's largest grocery retailers. Lastly, we believe our combined deliveries offerings together with our mobility services allow us to offer attractive ecosystem-wide subscription plans. In the quarter, we saw positive traction for Grab Unlimited, our ecosystem-wide subscription program. Looking ahead, we see steady performance of our delivery segment even as food delivery demand continues to normalize in a post-COVID world. We are confident that our strategy of adapting our offerings to cater to the different consumer segments allows us to cater to a broad-based market, which will enable us to continue to drive profitable growth. Moving on to Financial Services. Revenue growth for overall Financial Services grew by 44% year-on-year, driven by higher contributions from our lending business. As we discussed during our Investor Day, our focus on ecosystem transactions has started to bear fruit. Our Financial Services segment adjusted EBITDA improved 9% quarter-on-quarter. Stripping out Digibank costs, GrabFin segment expenses in the third quarter declined by 4% quarter-on-quarter. Loan disbursements for the quarter rose 121% year-on-year as we ramped up our ecosystem lending, such as loans to driver partners while maintaining a low single-digit NPL ratio. Our focus on ecosystem supportive Financial Services and driving off-platform transactions that have positive margins will allow us to improve this segment's overall margins and revenue. I also would like to give an update on our Digibanks. At the end of August, the GXS Bank conducted a soft launch in Singapore with a small pool of users. The GXS Bank is the first of the three Digibanks we plan to launch in the region by the end of 2023. We are optimistic that these three Digibanks, one in Singapore, one in Malaysia, and one in Indonesia, will augment our Financial Services offerings and grow financial inclusion in Southeast Asia. Lastly, I want to go over our enterprise segment. In the third quarter, our enterprise revenue rose 113% year-on-year, driven by gains in our advertising business. During our Investor Day in September, we spoke about the importance of enabling merchants through our ecosystem by helping them come online or grow their business. Advertising sits at the heart of this by giving merchants access to data-driven targeting tools. We can help them get better returns from their advertising. This, in turn, helps them do better as a business, which brings in more revenue for us. Those merchants are getting four to seven times returns on their advertising spend on Grab in the third quarter this year. This makes Grab an effective performance advertising tool that helps businesses grow. As we look ahead, we remain confident in the mobility business recovery, and we see a continued stabilization of our deliveries business. Achieving segment adjusted EBITDA breakeven for food and deliveries puts the wind in our sails, as we continue to drive for profitable growth. I'll now turn the call over to Peter to deliver a review of the financials.

Peter Oey, CFO

Thanks, Anthony. We're pleased to report a strong set of results this quarter. Revenues grew 143% year-on-year or 156% on a constant currency basis to reach $382 million, an all-time high. We saw strong revenue growth across all our segments. Our mobility revenues doubled year-on-year, underpinned by the recovery in ride-hailing demand, while deliveries revenue more than tripled on the back of contributions from Jaya and overall GMV growth, as well as lowered incentives as a percentage of GMV. Financial Services and our enterprise segment recorded revenue growth of 44% and 113%, respectively. For GMV for the third quarter, we recorded growth of 26% year-on-year to reach $5.1 billion, also an all-time high. Our reported GMV for mobility and deliveries, along with our Financial Services, TPV, were also in line with our third quarter guidance. Notably, our top line results were further impacted by foreign exchange translations given the stronger US dollar. Hence, on a constant currency basis, our GMV grew by 32% year-on-year. On a quarter-on-quarter basis, group GMV and deliveries recorded constant currency growth of 4% and 2%, respectively. For our commission rates, we saw an overall increase year-on-year. Deliveries commissions were up from 18.2% to 21.2%, Financial Services commissions up from 2.5% to 2.9%, while mobility commissions remained relatively flat from 23.8% to 23.2%. Year-on-year, movements in deliveries and mobility commission rates were driven by shifts in product and country mix, while Financial Services commissions improved on the back of higher contributions from our lending business. For our third quarter, segment adjusted EBITDA margins improved by 174 basis points year-on-year and 131 basis points on a quarter-on-quarter basis. A key driver of this was our reduction on incentives as a percentage of GMV, which declined to 9.4% from 11.4% in the same period last year. And as a result, we are also pleased to achieve overall deliveries and food deliveries adjusted EBITDA breakeven for this quarter. Now, these are three quarters and two quarters ahead of our guidance, respectively. Delivery segment adjusted EBITDA margins exhibited a strong improvement year-on-year from negative 0.9% to a positive 0.4%, a 128 basis point improvement. For our mobility segment, adjusted EBITDA margins improved year-on-year from 12% to 12.5%, a 41 basis point improvement and in line with our expected steady state assumptions. For Financial Services, adjusted EBITDA declined 38% year-on-year, while as a percentage of TPV, it shifted from negative 2.4% to negative 2.7% due to higher expenses in our digital banking business unit. However, on a quarter-on-quarter basis, Financial Services segment adjusted EBITDA improved 9% with GrabFin segment expenses declining by 4%. This came as a result of our strategic initiatives to focus on ecosystem transactions and streamline our GrabFin cost base that we shared during our recent Investor Day. Turning to group adjusted EBITDA. Our margins improved from a negative 5.3% in the third quarter of 2021 to negative 3.2% in the third quarter of 2022. This represents an improvement of 209 basis points year-on-year. We also reported strong improvements in group adjusted EBITDA margins of 145 basis points from the prior quarter. Our regional corporate costs for the third quarter of 2022 were $208 million, a 3% reduction from the prior quarter. As a percentage of GMV, regional corporate costs declined to 4.1% from 4.2% in the last quarter and from 4.4% in the third quarter last year. We continue to maintain focus on optimizing our cost base and on driving greater internal efficiencies. As a management team, we are fully aware of the macroeconomic challenges that companies are experiencing globally. Since the start of this year, we have initiated a number of actions to reduce fixed costs in our core segments and to be more strategic on our incentive spend. In deliveries, we have closed Grab Stores and Grab Kitchens in several markets, and for Financial Services, we are focusing on platform to drive contribution positive transactions. For regional costs, we will aim to better optimize our cost structure by limiting discretionary spending while reinvesting process towards R&D and tech development to support the ecosystem. We began pausing or slowing hiring in various corporate departments. We've also been disciplined to optimize costs in non-headcount overheads. Our direct marketing spend in our regional costs, for example, declined by 28% quarter-on-quarter. Overall, we remain confident in our trajectory and ability to meet the second half 2024 breakeven target. As for our IFRS loss, we reported a third quarter loss of $342 million, representing a 65% improvement from our loss of $988 million in the prior year period. In addition, through reducing our adjusted EBITDA losses, the reduction in our IFRS loss was due to the elimination of non-cash interest expense of Grab's convertible redeemable preference shares, which was no longer incurred when we became a public company. We would also like to highlight that our IFRS loss of $342 million includes $166 million of non-cash expenses below our adjusted EBITDA line. Of this, $42 million was from the revaluation of Grab's equity investments, which are mark-to-market each quarter, and $90 million was from stock-based compensation. Turning to our balance sheet, our liquidity and cash position continue to be strong and robust. We ended the third quarter with $7.4 billion of gross cash liquidity. Cash liquidity declined by $291 million from the end of the second quarter of 2022, predominantly attributed to adjusted EBITDA losses for the third quarter and also the repayment of borrowing and interest payments. Our net cash liquidity was $5.3 billion as of the end of the third quarter. We will maintain a prudent stance in how we allocate and deploy our capital, in line with our capital allocation framework that we outlined during Grab's Investor Day. Cash preservation is top of mind. As such, our Board of Directors has approved the repurchase of up to $750 million of our outstanding Term Loan B that was issued in January 2021. The repurchase is expected to create significant interest expense savings for Grab. With $5.3 billion of net cash liquidity as of the third quarter, we expect to have ample net cash buffer upon reaching our expected group adjusted EBITDA breakeven in the second half of 2024. Turning now to guidance. Given that Grab's reporting currency is US dollar, significant movement against the US dollar throughout 2022 has driven foreign exchange headwinds. On a year-on-year basis, foreign exchange is expected to be a $260 million headwind to GMV in the fourth quarter. As a result of this, we encourage investors to evaluate our top-line performance on a constant currency basis alongside the IFRS numbers. Given this backdrop, we are providing more granularity than typical to contextualize our fourth quarter and 2022 GMV guidance. As we look ahead to the fourth quarter, we expect to see continued FX impacts. As such, we expect deliveries GMV in the fourth quarter to grow 5% to 10% year-on-year on a constant currency basis, factoring in roughly six percentage points FX headwind in the fourth quarter based on exchange rate forecast. This translates to deliveries GMV of $2.4 billion to $2.5 billion. For mobility, we expect GMV in the fourth quarter to grow 54% to 60% year-on-year on a constant currency basis. This translates to GMV of $1.1 billion to $1.15 billion. We expect to see continued improvement in the mobility segment with the normalization of ride-hailing demand as economies reopen. For deliveries, we will continue to drive high-quality GMV transactions while maintaining a healthy marketplace. We remain bullish on our long-term thesis for deliveries and expect profitability to improve while we track towards our steady-state margin assumptions of 3% plus. Notably, several of the markets we operate in today are either near or above 3% margins. For Financial Services, we expect TPV to grow 12% to 15% year-on-year on a constant currency basis translating to $3.6 billion to $3.7 billion. This represents a decline on a quarter-on-quarter basis, but is consistent with our refocus on driving the ecosystem and focusing only on contribution positive transactions. As such, we do expect GMV to be softer in the fourth quarter for Financial Services, but for revenues to continue to improve and overall segment adjusted EBITDA losses to reduce sequentially. Looking at the full year 2022, we are confident that revenue can outperform our initial guidance range of $1.25 billion to $1.3 billion, and as such, we are raising our guidance to be at $1.32 billion to $1.35 billion. This translates to 105% to 110% year-on-year growth on a constant currency basis, as we continue to focus on optimizing our incentive spend. We also reiterate our expectations to grow revenues by a strong 45% to 55% year-on-year in 2023 on a constant currency basis. We are also raising our adjusted EBITDA expectations in the second half of 2022 to a $315 million loss from a $380 million loss previously, which implies a 40% half-on-half adjusted EBITDA improvement. In terms of fiscal year GMV for 2022, we expect GMV growth to be 22% to 25% year-on-year from 21% to 25% previously. On a constant currency basis, our GMV growth estimate is also now at 26% to 29% year-on-year. In conclusion, we delivered a strong set of numbers in the third quarter. Anthony and I want to thank Grabbers for their hard work in making these results possible, and we want to express our deep appreciation for our driver and merchant partners. Achieving breakeven in the overall delivery segment and food deliveries business in the third quarter is a critical milestone for Grab. While there is still a lot of work ahead of us, we are confident that our strong balance sheet, cost discipline, and strategies will enable us to grow our segments sustainably. Thank you very much for your time, and we will now open up the call to questions.

Operator, Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer portion of the call. Joining us for this session will be Anthony Tan, Chief Executive Officer; Peter Oey, Chief Financial Officer; and Alex Hungate, Chief Operating Officer. Our first question today comes from Pang from Goldman Sachs. Please go ahead; your line is now open.

Pang Vittayaamnuaykoon, Analyst

Good evening, everyone, and thank you very much for the opportunity. Two questions from me. Firstly, in terms of EBITDA improvement. Congratulations management on driving a lot of this cost out from all your segments in the past few quarters with now, group EBITDA improved quite healthily and delivery is now breaking even also three quarters ahead of what you guided in terms of schedule. On delivery specifically, what is now the next KPI you are looking to achieve in the near term? Are we going to push more for further margin improvement now, or will you drive more in terms of growth going forward in the near term? And related to that as well, in terms of your group EBITDA breakeven, why are you not bringing forward your group EBITDA breakeven target forward, given that your delivery is already breaking even now? Second question is around fintech. We have seen cash burn improve quite nicely quarter-on-quarter, despite your growth push into the digital bank. Are we already past the peak in terms of cash burn for your fintech business? And what can we expect further in terms of growth and profitability in the next few quarters?

Alex Hungate, COO

Thanks, Pang. This is Alex. I'm going to take the first part of your first question, and Peter will take the second part, and then I'll take the Financial Services question after that. First of all, I want to say thank you, frankly, to all of our team for delivering the deliveries EBITDA breakeven, nine months ahead of schedule. We're all thrilled with that. There's a lot of hard work that went into it. The way that we've managed to optimize incentives and really focus on the stronger propositions for supermarket with best-in-class customer experience there. And then the marked proposition focusing much more on impulse buying and instant delivery occasions, where we know that customers are less price-sensitive, that's allowed us to reach profitability. Now, we need to grow and continue to improve margins at the same time. So it's about profitable growth. It's not one or the other. We continue to do both. We still have in our line of sight, the 3% plus margins that we had indicated we want to shoot for in deliveries overall. And so we're marching towards that as our next step. Peter, do you want to talk about the group EBITDA breakeven?

Peter Oey, CFO

Yeah. Sure, Pang. On your question about group EBITDA breakeven timeline, as Alex mentioned, deliveries profitability was a very critical milestone for us. And we're just getting started here, and we're going to continue to accelerate the profitability timeline for deliveries to get to that steady state margin. That's a key focus area for us. We're also very focused Pang, on making sure our cost base also continues to be optimized as a business. Now your question, is there room for upside for that timeline for the second half of 2024? Yes, there is upside. And see potential for that to accelerate. But where we are today, we are maintaining guidance for now, and we can continue to focus on – continuing to focus on the deliveries, acceleration margin, as well as just continuing to refine the business and continue also to have that profitable growth that we saw this quarter again.

Alex Hungate, COO

Thanks, Peter. And then on your question on the GFG, are we past the peak cash burn? Well, we did manage to reduce the burn rate for GFG overall by 9% in the quarter. So that's the result of the rationalization of the products that we described at Investor Day to focus on platform, where we know our customers best, and where we have the strongest customer value proposition. And we've also consolidated costs. So that rationalization of products and the reduction of some management overheads has allowed us to reduce costs by 4% for GFin. At the same time, we've grown our lending quite a bit, 121% year-on-year. And of course, that's helped us to grow revenue and improve margin as well. We'll continue that mix of strategy going forward. And that will mean that the GFin burn will reduce sequentially going forward. On the Digibanks, we're approaching 2023 when we'll launch all three of the banks. So this year, Singapore, as Anthony mentioned earlier, but we'll be adding Indonesia and Malaysia. So as indicated at Investor Day, you should expect the next few quarters for our investment in the build of the tech stack for the Digibanks to continue to require some higher investments. But after that – that will begin to – that EBITDA burn from the banks will continue – will start to decline. And as we indicated at Investor Day, you should expect that the combination of all three banks will be breakeven by 2026.

Pang Vittayaamnuaykoon, Analyst

Thank you.

Alex Hungate, COO

Thanks for your question, Pang.

Operator, Operator

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

Venugopal Garre, Analyst

Hi. Thanks a lot for the opportunity and congratulations on a good quarter. Two questions from me. Firstly, on the mobility segment, very clearly, not just in Asia, but at a global level, this is one of the probably the most important and interesting market, which is recovering to see in the entire tech space. I wanted to understand in the context of the sort of GMV growth targets that you have especially for the near-term, sort of a 4% sequential midpoint Q-o-Q growth. Is that more thinking of taking a conservative view preserving profitability? And does it mean that you're willing to trade off market share for profitability, or is it what is the situation in terms of market growth as well? So that's my first question. And secondly, I wanted to sort of also touch base on the sort of cost structure side of things. Now on an overall overhead basis, when we look at some of the broader peer group, not just in Asia, but globally, they seem to be a fairly aggressive effort towards reducing overheads, which is a combination of both operating site changes as well as employee cuts, which has been fairly brutal in some places. I want to understand that when you look at the cost structure, especially overhead, something like $200 million, the regional cost basically on a quarter-on-quarter basis, which is roughly $800 million for the year, is there any potential for you to cut down that materially to arrive at a slightly early breakeven at an EBITDA level? Thank you.

Alex Hungate, COO

Thanks, Venu. Yes, let me take the first question again. I think Peter would want to take the second one. We are not trading off our category position for profitability. So we've maintained our category leadership in the region despite the optimization of incentives that you've seen over the last few quarters. We're positioning supply ahead of the demand recovery. So in Q3, the number of monthly DAX driving for us increased by 4% quarter-on-quarter and 31% year-on-year. So our active DAX population is now 80% of what it was pre-COVID. So that's ahead of the demand recovery in COVID. No one knows for sure what that amount recovery will look like but I can assure you, we're keeping track in terms of category position. One of the things we want to do proactively to grow the TAM is to introduce more affordable services, like Grab Share and Grab home mart in Indonesia, which allow us to target, for example, student populations that might be more cost sensitive but who don't mind sharing a ride together from campus. So these services are being introduced progressively across the region, and they will help us to grow the addressable market by making those services more affordable. Peter, do you want to take the...

Peter Oey, CFO

Yes. In response to your question about overhead, as a public company, we have consistently maintained a disciplined approach to our spending. I mentioned a couple of quarters ago that we have actively managed our expenditure, particularly concerning the regional costs you highlighted. Since the start of this year, we have slowed our hiring rate and streamlined certain functions. Some departments have even reduced their headcount, and we will continue to be cautious about our hiring decisions, including choosing not to replace positions that have been vacated through natural attrition. We have observed headcount reductions in various departments, and we will keep refining our approach, which is an ongoing priority for management. Additionally, we have reviewed other cost areas; for instance, our direct marketing expenses fell by 28% quarter-on-quarter in the third quarter. As we look ahead to Q4 and 2023, we will maintain this careful and disciplined methodology. We plan to further decrease regional headcount while continuing to streamline and assess our participation strategy, coupled with natural attrition. We will persist in cutting back on non-essential and non-discretionary expenses such as travel and entertainment, office expansions, and capital expenditures. We understand the importance of our cost structure to our investors, and we remain committed to optimizing it.

Venugopal Garre, Analyst

Thank you.

Peter Oey, CFO

Thanks, Venu.

Operator, Operator

Thank you. Our next question comes from Alicia Yap from Citi. Please go ahead, Alicia. Your line is now open.

Alicia Yap, Analyst

Thank you. Good evening, management. Thanks for taking my questions. Congrats on the solid bit and also the better guidance. I have two questions. First of all, as we further optimizing the spending and also scale back the low-quality subsidy, what could be the attractive ways that we could further drive the cross-selling service adoption by our users? So how are you going to balance between driving the adoption of higher numbers of service frequency versus your profitability target? Would that be any kind of short-term sacrifices in the top-line growth? And then the second question very quickly follow up, given you have the share buyback program that you just announced, but then your cash position is also still pretty good. And so just wondering, would there be any consideration from potential M&A opportunity if there is a good candidate that comes along, especially, with many private peers maybe their valuations also come down recently? If it's true, then in what business segment that you will be more proactively looking into? Thank you.

Alex Hungate, COO

Thanks, Alicia. I'll address the first question and then turn it over to Peter. You are correct. We believe there are more effective methods for cross-selling than simply offering incentives and promotions to consumers, particularly by integrating new services at critical points in the customer journey. Ensuring that these services are seamless and incorporated into the user experience is the most effective way to cross-sell. Examples include scenario insurance, ride cover, or buy now pay later options at the time of payment. Currently, 62% of our users are utilizing two or more of our services, which is an increase from 56% in the same quarter last year. We will continue to focus on this. Additionally, we are heavily invested in improving our Net Promoter Score, aiming for customers to be inclined to purchase additional services from Grab, and I’m happy to report that this score increased quarter-on-quarter as well. These two factors can help us decrease reliance on incentives while still improving our cross-selling ratio. Service frequency is crucial for us, and Grab Unlimited significantly enhances this. Customers who use Grab Unlimited engage with our services three times more frequently than those who do not. We evaluate this based on overall contribution per user instead of transaction margins. The data we have indicates that Grab Unlimited positively impacts the overall contribution by user, and we are optimistic as we expand it across the region. Last quarter, 19% of delivery GMV came from Grab Unlimited subscriptions; now, it’s over a quarter of delivery GMV. This strategy is vital for building loyalty and frequency among high-value customers. Additionally, we have programs like the Signatures program, offering exclusivity with select merchants on our platform, which are key players in each city that users want to order from. Their exclusivity with us helps drive higher frequency. Regarding long-term profitability beyond deliveries and mobility, we're also focusing on expanding financial services, particularly in lending and on-platform payments. Finally, our advertising business has seen rapid growth this quarter and remains a high-margin area that we are keen to develop further as we move into 2023. Peter, I'll let you take it from here.

Peter Oey, CFO

Yes. Alicia, on your question around M&A opportunities, et cetera, we're very focused on organic growth. That's really top of mind for management, driving that, and you see that in another quarter of solid performance from us. So we're going to continue to focus on that. And also, we always take a prudent stance on how we deploy our capital. We mentioned that during Investor Day on our capital allocation framework. Cash preservation is critical for us. And our bar on M&A is extremely high also. So we'll continue to focus on organic growth. We'll continue also to make sure our balance sheet remains very strong. Our cash position continues to remain strong. And again, we are so laser focused on getting to profitability as a group, and we're going to continue to make sure that we get there as quickly as possible.

Alicia Yap, Analyst

Thank you.

Peter Oey, CFO

Thanks, Alicia.

Operator, Operator

Thank you. The next question comes from Piyush Choudhary from HSBC. Please go ahead. Your line is now open.

Piyush Choudhary, Analyst

Thank you very much. I appreciate the management's presentation and congratulations on the results. I have a couple of questions. First, regarding the Mobility segment, you mentioned improvements in the driver supply situation. Could you provide more details on which markets are still experiencing supply issues, particularly those that are likely below the 50% average you pointed out? My second question is about the Delivery segment. Can you give us an update on your partnership with Trans Retail in Indonesia and the progress of the integration? Lastly, regarding cash flows, you mentioned $160 million in investments this quarter related to acquisitions and interests in associates. Could you elaborate on those initiatives? Thank you.

Alex Hungate, COO

Thank you, Piyush. I'll address the first two questions about mobility and then the Trans Retail partnership. You're correct that there are a few markets facing tight driver supply. One of those is the Philippines, where we are experiencing procedural challenges with the issuing of licenses, and we're working on improving these processes with the authorities. The other market with tight driver supply is Singapore. It's not due to a lack of drivers wanting to work; in fact, we have a backlog of drivers eager to join. The challenge lies in the limited number of vehicles available, as this is strictly regulated in Singapore. This limitation has created an imbalance between supply and demand, which is increasing vehicle costs and the certificate of entitlement, posing a barrier for drivers trying to purchase or rent cars. To address this, we are focusing on enhancing our drivers' earnings by leveraging artificial intelligence to improve their efficiency throughout the day. I'm happy to report that driver earnings in Singapore have increased quarter-on-quarter, even with a reduction in incentives, which is a positive indicator for the future. Peter, would you like to address the next question?

Peter Oey, CFO

Sure. Regarding the $160 million mentioned in the CFI line, it's divided into three main areas. First, we're continuing to invest in our digital bank in Indonesia. Second, as part of our partnership with Trans Retail, we've made an investment in Trans. Lastly, we've also completed a small acquisition in Malaysia, which is primarily related to our merchant capabilities. So, we're mainly focused on our digital bank in Indonesia and our partnership with Trans Retail.

Alex Hungate, COO

Yes. Your last question was about Trans Retail, so let me address that. Our strategy is to implement the technology we are developing for Jaya in Malaysia to enable gray store operations in the Trans Retail network across Indonesia. We believe this offers a cost advantage for online groceries, as it utilizes existing assets. The Trans Mart hypermarts have the necessary space for gray store operations, where staff handle picking in-store. This allows us to share inventory, supply chains, and facilities between online and offline customers, leading to improved asset turnover. Therefore, this approach is a solid way to achieve sustainable growth in the Indonesian supermarket sector.

Piyush Choudhary, Analyst

Thanks a lot.

Operator, Operator

Thank you. The next question comes from Mark Mahaney from Evercore. Please go ahead. Your line is now open.

Unidentified Analyst, Analyst

Great. Thank you. This is Jan Lee for Mark Mahaney. Thanks for the question. I guess I have a couple of high-level questions. One is on just the mobility recovery, obviously, benefiting from reopening. But aside from this, are you seeing any more kind of permanent shifts or new mobility use cases that are sticking post-COVID versus pre-COVID? And the second is just read on the macro impact, because you mentioned introducing some more affordable services. Are you seeing macro insensitivity from consumer demand either on mobility or either food or grocery delivery? And also, Grab ads, obviously growing very healthily. Any anticipation on the merchants macro sensitivity in the next few quarters? Thanks a lot.

Alex Hungate, COO

Certainly. Let me address the mobility recovery. The demand during the recovery is quite similar to what we experienced before COVID. However, one notable difference is the absence of Chinese tourists and business travelers, who represent a significant portion of our usage in certain markets, like Thailand, where airport rides are especially profitable. A key factor for our growth in mobility moving forward will be the easing of travel restrictions for Chinese travelers, which is important for shareholders and analysts to note. Apart from that, the demand patterns remain largely unchanged. Anthony, would you like to address the macroeconomic question?

Anthony Tan, CEO

Yes. Thanks, Jan Lee. So on the macro impacts, a few things. I think number one, on inflation. We do see higher fuel and food and wood costs, which obviously affects our driver and merchant partners. There's also some weakening of some of our local currencies against a stronger dollar. Now for us, the important part is remaining nimble and agile, especially, during times when it's uncertain, and we adapt quickly as the macroeconomic situation evolves. Now you talk about how – number one it being extremely prudent with managing our costs as we are committed to profitable growth. Peter talked about revenue more than doubled while loss for the quarter substantially improved. Our incentives came down, as you saw, to 9.4%, even while as Alex shared, overall customer satisfaction went up, and then the delivery segment, adjusted EBITDA turned positive, three-fourth above – ahead of guidance. Now going back, we are very, very focused on thinking how do we address this sensitivity, especially, as we drive for more affordable services for our users and partners. We talked about it with whether it's our delivery time windows where users can choose for our deliveries that drives lower cost and lower price. That's win-win-win for everyone. We see it with other options, for example, as we increase onboarding, which means fulfillment rates have improved and surge has come down as well. So these are ways in which we are also making sure. I would also share what Alex reiterated on Grab Share in the Philippines. These are ways that we continue to drive mobility costs down. That will be win-win for the driver, the customer, and for us.

Alex Hungate, COO

Thanks, Jan. Our return on advertising spend on the Grab ads platform is very high, often exceeding three times, and in some instances, we even see six times returns. The current macroeconomic situation is not affecting our demand for Grab ads. We aim to introduce auction pricing for our ads platform, which we believe will enhance pricing as demand increases. We're also seeking ways to expand inventory while maintaining a good customer experience. Additionally, with four million merchants on our platform, we have barely begun to tap into the potential of ads. Our objective is to leverage our new self-serve ads platform to reach smaller merchants, enabling them to benefit from the advanced targeting techniques used by larger businesses. We anticipate that these strategies will contribute to our advertising growth moving forward. Our revenue growth of over 100% year-on-year is promising, but we feel we are just at the beginning of this opportunity.

Operator, Operator

Thank you. The next question comes from Ranjan Sharma from JPMorgan. Please go ahead. Your line is now open.

Ranjan Sharma, Analyst

Hi. Good evening and thank you for the presentation. Two questions from my side. Firstly, on the loan that you are repurchasing, what is the rate on that, please? And second question is one of your competitors is expressing a view that they might look to exit some countries in Asia. But I think based on what you're saying is that you're not necessarily a purchase of these assets, right, or could you look at acquiring assets of someone who might be leaving the country? Thank you.

Alex Hungate, COO

So Ranjan, we took the TLB in January 2021 with a rate of LIBOR plus 450. Regarding your second question about competitors exiting, we're very focused on our organic growth. We see many opportunities in all segments of our business. Our priority is to continue serving our consumers, merchants, and drivers organically. In terms of capital allocation, we have a strict framework at Grab, emphasizing cash preservation, and we will be very cautious in how we deploy our capital.

Ranjan Sharma, Analyst

Thank you.

Operator, Operator

Thank you. The next question comes from Thomas Chong from Jefferies. Please go ahead, Thomas. Your line is now open.

Thomas Chong, Analyst

Thanks. Hi. Thanks management for taking my questions. My first question is about the competitive landscape. I think given that all the players are rationalizing the investment focus on ROI on their strategies, are we seeing any changes in the competitive landscape in the medium-term? And my second question is about our user experience on how we can do more to add value to use merchants and drivers partner. What do you think is the number one priority that we need to do in 2023 in order to differentiate us from peers? Thank you.

Alex Hungate, COO

Thanks, Thomas. This is Alex. Let me take that. Yes, there is a lot of news about competitors rationalizing and potentially leaving markets as some questions pointed out. If this trend continues, it should lower the competitive intensity going forward. One advantage of the increased cost of capital is that competitors need to be rational, and some of them may survive in the face of intense competition. So if this keeps up, we may see reduced competitive intensity in the future. User experience is a key focus for us. One opportunity we're currently exploring with our data scientists is the acquisition and onboarding funnels, looking for ways to make small improvements that could significantly impact our bottom line by reducing acquisition costs, improving retention, and increasing the frequency of repurchases. We are fortunate to work with talented data scientists who can help with this fine-tuning, along with creative marketers who can influence consumer behavior. I'm glad you brought this up; it's something we, as a management team, discuss often regarding how we can enhance the customer experience and improve our sales processes. Thank you for recognizing that; it's an important, yet often overlooked, aspect of what contributes to a successful company's implementation.

Thomas Chong, Analyst

Thank you.

Operator, Operator

Thank you. The next question comes from Jiong Shao from Barclays. Please go ahead. Your line is now open.

Jiong Shao, Analyst

Thank you very much for taking my questions. I have two questions. First is on a longer-term perspective. I was wondering if you can share with us some of your thoughts on how we should think about CAGR growth for both mobility and delivery, let's say, for the next three years to help us understand longer-term opportunities for Grab? My second question is somewhat near-term is that if I look at your OpEx for the quarter, it came down sequentially in all three line items. How we should think about going forward in terms of either absolute dollars or as a percentage of GMV or revenue? How we should think about going forward how that will trend, which obviously will affect profitability? Thank you very much.

Peter Oey, CFO

Hi, Jiong, let me address those questions. From a long-term growth perspective, we are continuing to see growth in our revenue, and we are committed to a 45% to 55% revenue increase on a constant currency basis for 2023. We remain optimistic about the mobility sector, although we still have some way to go to reach pre-COVID levels. Alex mentioned earlier the various use cases we are observing, and we are meeting demand by increasing our supply in mobility. We are hopeful that the Chinese borders will open up soon. We are confident about our delivery services, especially in grocery delivery, where we believe we are just beginning to explore the potential of our non-local commerce. Looking at our long-term business prospects, our organic growth remains strong, and we will continue to enhance engagement on our platform while sticking to our commitment of 55% revenue growth in 2023. Regarding your question about operational expenses, we will keep optimizing our cost structure by reviewing all line items, including headcount and non-headcount expenses. We will be cautious in deploying our capital and our hiring strategy. You will notice that we will reduce regional headcount this year and continue to focus on reducing associated costs, aiming for profitability by the second half of 2024 as a top priority.

Jiong Shao, Analyst

Thank you very much for your thoughts.

Anthony Tan, CEO

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

Peter Oey, CFO

Thank you, everyone, just for taking the time today. If you have any questions, please feel free to reach out to our Investor Relations team or visit our Investor Relations website. Talk to you next quarter. Thank you, everyone.

Operator, Operator

Thank you. This concludes Grab's Third Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.