Grab - Earnings Call - Q1 2021

Transcript

Speaker 0

Okay. Good day, everyone. Welcome to Grab's first quarter twenty twenty one financial results webcast. My name is Ken Lek, Head of Asia Investor Relations at Grab. And on the call today, we have Anthony Tang, Chief Executive Officer Ming Ma, President and Peter Ui, Chief Financial Officer.

During this call, we will discuss our business updates, which will include key highlights contained in our Form f four registration statement that we have filed with the US SEC at about 06:30AM eastern time today in connection with our proposed business combination with Ultomira Growth Corp, as well as an update on Grab's proposed board of directors upon the consummation of the transaction. We will also share detailed insights with you on our twenty twenty one q one results, provide an update on our public listing process, and finally, commentary on the COVID situation in Southeast Asia alongside measures we are taking as a company to alleviate the pandemic. As a reminder, before we begin, today's discussion contains forward looking statements about the company's future business and financial performance. These comments are based on our predictions and expectations as of today. Actual events and results could differ materially due to a number of risks and uncertainties, including those mentioned in our Form F4 registration statement and other filings that we have filed with the SEC.

The discussion today also contains non IFRS financial measures. The comparable IFRS financial measures are included in this quarter's earning materials. Please refer to our earnings release presentation after this call available on our IR website for more information. Should you have any questions, please reach out to investor. Relationsgrab dot com.

Without further ado, I'd like to hand the call over to Anthony Tan who will open with his opening remarks.

Speaker 1

Good day everyone, and thanks so much for joining us today at our inaugural first quarter twenty twenty one earnings call. Before I begin, I'd like to take a moment to talk about COVID. Now this pandemic has been a really trying time for everyone. Our thoughts and prayers have all lost loved ones through the pandemic. Since the pandemic hit our region in Southeast Asia, we've leaned in even more into our mission to create economic empowerment for everyone.

And you may ask how? We've partnered extensively with governments across the region to ensure critical essential services continue to run safely for the public. We've accelerated vaccination efforts. We've helped affected businesses go online, and we've even grown a gig economy that provides a soft landing for those whose livelihoods have been impacted. As a war against COVID rages on, we're committed we're committed to continuing these efforts in support of everyone in the Grab ecosystem so that collectively, we can emerge from this pandemic stronger together.

Now diving into our key business highlights. As you'll see in our f four, based on an independent analysis conducted by Euromonitor, we were the category leader in Southeast Asia in 2020 by GMV in each of our segments last year with 50% category share in online food delivery, 72% share in ride hailing, and 23% share in the e wallet market. As compared to our next closest competitor across our relevant markets, we were also 2.5 times larger in the online food delivery segment, 4.8 times larger in the ride hailing segment, and 1.6 times larger in the e wallet segment. This year, the q one results are clear. It solidifies our super app strategy as a winning one.

According to App Annie, Grab continues to be the most downloaded app with the highest average number of smartphone monthly active users among mobility and delivery apps in Southeast Asia across both iOS and Google Play combined. Both our cumulative downloads from launch and average smartphone monthly active users base in q one twenty twenty one are also more than two x larger than the second largest mobility and delivery app in the region. We've also delivered a strong set of financial results in q one, which reaffirms our conviction of our super app strategy and market leading position across our key verticals. We achieved steady top line growth despite COVID's impact on our business. We achieved this by focusing on how we out serve our drivers, merchant partners, and consumers in these trying times.

A key highlight in the quarter was the outperformance of our deliveries business, which grew 96 year on year in segment adjusted net sales, ANS, as a result of an increase in both the number of transactions and order values. Not only did our food delivery and logistic offerings grow strongly, but also our grocery deliveries. Grocery deliveries is a fast growing offering that we are very excited about. Let's talk about the numbers. Our adjusted net sales reached an all time high of $5.00 7,000,000 and grew by 39% year on year, which demonstrates the resilience of our business amidst a major pandemic.

And our GMV per monthly transacting user increased by 31% year on year as we continue to deepen engagement with consumers across our Super App ecosystem. The second quarter of the year, we've witnessed continued resilience and performance of our Super App platform. We remain laser focused on building a long term sustainable business. We will continue to drive Southeast Asia forward by creating a common empowerment for everyone. And to do that, we will double down to invest in building and scaling marketplaces that creates economic empowerment for everyone.

Lastly, I'm also very excited to present our new board of directors who will assume their roles upon the completion of our business combination with AGC. We will have six directors on the board, including myself. Independent directors will comprise a majority of our board with four out of six directors being independent directors. Dara, Shin, and Oliver will continue serving their roles, and I'm very grateful to have their continued guidance and support. We welcome to the board two new additions, my cofounder Ling and Rich Barton.

Rich is one of the most established entrepreneurs in the world, founding businesses like Expedia, Glassdoor, and Zillow, where he now serves as CEO and director. He also serves on the boards of Netflix, Cool Rate Retail, and AGC. Ling, my cofounder, is also COO at Grab and serves on the boards of Singapore government's EDB or Economic Development Board and a fintech company, Wise. We are so blessed and honored to have this group of directors guide us forward in our next phase of growth. That's it for me.

Over to you, Peter.

Speaker 2

Thanks, Anthony. I'll be taking you through our first quarter twenty twenty one results in detail. Despite a slow COVID nineteen recovery across Southeast Asia in the first quarter, we are pleased to report a strong set of results, which reaffirms our super app strategy. We continue to demonstrate resilience and recorded top line year on year growth across our consolidated business, especially when you take into consideration that this was compared against the 2020, which was largely a pre COVID environment. Our GMV grew by 5% on a year on year basis to reach $3,600,000,000, and our adjusted net sales reached an all time high of $507,000,000 and grew by 39% year on year, supported by a meaningful increase in our deliveries business, offsetting weakness in mobility from the tightening of lockdown measures.

GMV per monthly transacting user increased by 31% year on year as users transacted more on the platform, highlighting the strength of Grab's super app synergies across our business segments. Our total segment adjusted EBITDA of $35,000,000 saw a marked improvement by $231,000,000, And we achieved our strongest quarter for group adjusted EBITDA of negative a $111,000,000. This was an improvement of $233,000,000 year on year. The strong q one results exceeded internal targets, and we have confidence in our business as we go into q two with deliveries performing strongly. Our overall performance should remain strong in spite of the volatility caused by renewed lockdowns and restrictions due to COVID.

With the mix of our deliveries and mobility segment varying depending on the state of the reopening of economies in Southeast Asia. For our IFRS financials, our revenues reached a record $216,000,000 in the quarter, and our net losses also narrowed to $652,000,000. As of the March 2021, we had $4,900,000,000 of cash and cash equivalents, an increase of $1,400,000,000 from $3,500,000,000 as of the end of last year. This was primarily due to the closing of our first term loan b facility of $2,000,000,000 at the January 2021. Do note that the cash and cash equivalents have not taken into consideration the consummation of a proposed business combination with Altimeter Growth Corporation.

Upon the completion of our business combination, we expect to receive an additional $4,400,000,000 in net cash proceeds. I'll now dive deeper into each segment. Let's start with deliveries. We continue to see strong growth in deliveries, generating GMV of $1,700,000,000 in the first quarter. This represents a strong 49% year on year improvement from a GMV of $1,100,000,000 in the 2020, supported by an increase in both the number of transactions and order values as we saw a strong upsurge in new monthly transacting users coming on onto the delivery segment of the past year.

Adjusted net sales for the delivery segment was $293,000,000, a 96% year on year increase. We take rates improving due to the ongoing shift towards deliveries and the attractiveness of our platform to our merchant progress, as well as the introduction of platform fees that we are reinvesting to make our platform safer and secure for our consumers and driver partners. Revenue was $53,000,000, a $152,000,000 increase year on year. Segment adjusted EBITDA for deliveries was close to breakeven at negative $4,000,000. The year on year improvement can be attributed to the continuing improved unit economics of our food delivery business, primarily driven by better optimization of consumer promotions.

We're continuing to scale GrabMark significantly. And I've seen an increasing take up trend by our consumers. GrabMark's GMV increased by 21% over q four twenty twenty and more than 36 times compared to q one twenty twenty. While it is still early days for GrabMark, we have also seen strong adoption from our merchant partners and recently announced regional partnerships with Watsons, an international health and beauty retailer, as well as Don Don Donkey, a popular specialty retail market for affordable Japanese food and products. In May 2021, we also launched Grab Supermarket in Singapore as part of our strategic expansion of GrabMark following the initial launch of Grab supermarket in Malaysia in December 2020.

We've partnered with HAL, a local supermarket chain in Singapore. And through this new service, we're able to deliver a comprehensive supermarket selection of over 10,000 products with next day delivery by our very own driver partners to consumers in Singapore. Onto our mobility segment. Due to the ongoing impact from the COVID nineteen pandemic and renewed lockdowns and restrictions, Mobility's q one twenty twenty one GMV declined by 36% year on year to $808,000,000. Adjusted net sales was a $167,000,000, a 14% year on year decline with the decline mitigated by the introduction of platform fee as we as we continue to invest ensuring safety and quality of service for our driver partners and consumers.

Revenue increased by $22,000,000 to a $145,000,000. Segment adjusted EBITDA for mobility improved to a $115,000,000 driven by better optimization of passenger incentives. We continue to be segment adjusted EBITDA in mobility positive in all of all our core markets. We anticipate that the demand for mobility services in Southeast Asia will continue to experience volatility as the reemergence of new COVID nineteen cases has impacted our markets, leading to reimposed restrictions. In February, we launched a vaccination program focused on increasing vaccine access and education for our driver partners and the passengers.

We plan to subsidize COVID nineteen vaccinations for our active driver partners who are not covered by national vaccination schemes. We will continue to partner with governments to raise public health awareness and vaccine distribution. For our financial services segment, the segment achieved its highest quarterly TPV so far in the 2021, demonstrating year on year growth of 18% on a pre inter co basis. This was supported by the strength in payments TPV from both on grab and off grab use cases. Financial services saw adjusted net sales increased by 31% year on year to 23,000,000, while revenue increased by $29,000,000 year on year to $8,000,000.

Segment adjusted EBITDA improved by $39,000,000 year on year to negative $78,000,000. Loans dispersal by the OnGraph platform increased by over 45% year on year as we continue to improve credit scoring models and launch newer lending products in the 2021. Insurance offerings demonstrated strong growth, and gross written premiums more than tripled year on year as mobility related insurance product sales increased. One major highlight for this for our financial services segment is our partnerships with Stripe and Adyen. Through the collaboration, Grab is able to onboard more merchant partners and provide our consumers with additional acceptance points where GrabPay is accepted, including more ecommerce and online shopping options.

In addition, Grab is able to integrate its buy now, pay later service with Adyen merchants, allowing Grab's consumers to access Adyen's entire existing merchant base in Singapore and Malaysia. And these collaborations clearly create a win win situation for both Grab and our partners. For instance, Zilara, the Southeast Asian online fashion and lifestyle destination company reported a 20% increase in new shoppers and a 15% increase in users using GrabPay to complete approaches after they were introduced this deferred payment method by Adyen. The online retailer has also seen an increase in sales as shoppers who use GrabPay later had larger basket sizes, more than 30% larger in some countries compared to those who use Grab wallets. Another example is Carousel, one of the region's largest and fastest growing classified marketplace platforms.

They saw an increase in online transaction of nearly 20% after making GrabPay available as a payment method by Stripe in Malaysia. In particular, Carousel has seen a significant growth in sales from younger demographics by GrabPay through items such as apparel as well as a lifestyle technology products. Lastly, for our enterprise services segment, GMV in q q one twenty twenty one more than tripled to reach 26,000,000, leveraging on the strength of our deliveries business, enterprise services experienced a strong acceleration in GMV growth. Adjusted net sales improved to $25,000,000 while revenue grew to $10,000,000. Segment adjusted EBITDA also turned positive at $2,000,000 due to scale efficiencies.

I will now provide an update on our public listing process as well as providing additional clarity on our fiscal year 2019 and 2020 audited financials. First, we're pleased to announce that we have filed a registration statement on format four with the US Securities and Exchange Commission in connection with Grab's proposed business combination with Altimeter Growth Corp. Second, we've also renamed adjusted net revenue to adjusted net sales. There is no material change to the definition or numbers apart from adjusting the metric to take into consideration the revised accounting treatment for over rewards revenue that we previously shared in our SEC filing on 06/09/2021. Third, as you may recall from our PIPE investor presentation, our revenue under IFRS accounting was net of excess driver and merchant incentives.

This is because we run the business by viewing our driver and merchant partners as our customers, deriving almost all of our revenues from them. Following our consultation with the SEC, an alternate judgment has been made that our consumers should also be considered as our customers. What this means is that our consumer incentives are being moved from being a sales and marketing cost item to a contra revenue item. A few things I wanna highlight here. First, GMV has not changed from what we presented during the PIPE investor presentation process.

Adjusted net sales, which is gross billing, less driver and merchant based incentives also has not changed materially with the exception of the OBO adjustments that I referred to earlier. Second, with the change of how consumer incentives is now presented as a contra revenue item, IFRS revenues have gone down proportionate to consumer incentives with a concurrent offset in cost from our sales and marketing expense line. Third, in our PIPE investor presentation, we reported IFRS revenues of $1,200,000,000 for 2020. After shifting consumer incentives as a contra revenue item, 2020 IFRS revenues is now $469,000,000. Fourth, there is no change to adjusted EBITDA, balance sheet, or cash flow since this is purely a change in presentation and the economics of our business have not changed.

I do wanna reiterate that adjusted net sales remains a key metric that we use to measure top line growth of our business. It is how we manage our business. We see excess merchant driver incentives as discretionary in nature based on Grab's strategic choices and consumer incentives as a marketing tool that Grab can use strategically to stimulate demand. To wrap up my section, we're pleased to report a strong set of the first quarter results which reaffirms our super app strategy. The strong quarter one results exceeded internal targets.

And in the second quarter, we saw the continuing resilience and strong performance of our business combined with discipline, operational execution. With that, I would like to pass on the time to me.

Speaker 3

Thanks, Peter. Now over the past few months, we have unfortunately witnessed a reemergence of COVID cases across our entire region. Most governments have locked down the large major cities and imposed tighter movement restrictions and social distancing measures as cases continue to climb. Indonesia has now overtaken India as the new epicenter in Asia. Vaccination rates have been relatively slow with most countries outside of Singapore recording vaccination rates well below fifty percent as of July.

To serve our communities and our partners who have been affected, we've had the honor to collaborate on different initiatives with government agencies across the entire region. And we'll talk a lot more about this. But broadly speaking, our efforts have centered around, one, facilitating vaccination efforts two, supporting local health care and three, helping businesses go online. Now in spite of the reemergence, our business remains resilient, and our GMV and adjusted net sales continue to grow. If we look back to the 2020, our GMV and revenues have recovered from the lows that we saw back in April 2020.

Our fourth quarter generally tends to be our seasonally strongest quarter because of festivals and other school holidays. And in q one twenty twenty one, in spite of reemergence in various countries at different times, the diversification of our platform from both a geographic and a segment perspective resulted in fairly stable GMV performance over the quarter. Now we did witness weaker mobility volumes in q one, but this was offset by a strong uptick in deliveries with GrabMark proving to be one of the bright spots within the delivery segment. Now broadly speaking, the lockdown measures remain largely in place even to this day. But similar to the 2020, we do expect mobility revenues to recover when these lockdown measures ease and when vaccination rates improve.

And this is something that we're closely monitoring leading into the second half of the year. Now we wanted to deep little bit dive deeper into our ESG efforts because this is so core to our mission to drive Southeast Asia forward by creating economic empowerment. We believe that the health of our business is inextricably linked to the welfare of our communities, and we remain absolutely committed to our double bottom line, which means delivering both financial performance and building thriving communities where our partners have sustainable income opportunities while protecting our environment. In late June, we announced our first ESG report, which highlights some of the initiatives that we're taking and also covers key material topics in accordance with global reporting initiative standards. Key highlights here include data on our social economic impact, including the $7,100,000,000 earned by our driver merchant partners in 2020, as well as our initiatives to protect the environment through the $200,000,000 or more that we've invested in electric and hybrid vehicles since 2016.

Now while we are pleased to report the progress that we've made in 2020, we're also very mindful that there is still so much more to be done here. The lockdowns have put our driver and merchant partners into very difficult situations to say the least, and this has really challenged us to expand our offerings and innovate on our business model. In 2020, we expanded our deliveries and mobility business to give our partners broader opportunities to earn incomes. In fact, we created income opportunities for over 370,000 drivers who signed up with us last year. And if we think about what does this mean going forward, we believe this will only reinforce and improve the service quality of our platform for merchants and consumers.

We've also launched initiatives to bring small businesses online, increased engagement with social sellers, and work with governments to digitize traditional industries, including web markets and small food stores. And as a result, approximately 600,000 small businesses joined our GrabFood and GrabMart platforms last year. In fact, when we did a survey in March, we discovered that one in three of our Grab Food merchant partners went online for the first time through Grab. Now since the start of the pandemic, we've also committed over $40,000,000 to partner relief efforts and have launched a variety of initiatives with governments to support our communities. And it's not just us.

Last year, consumers purchased over 470,000 meals for our driver partners, our employees donated over 300,000 worth of allowances. So a deep thank you to everyone who contributed. We were we were just absolutely touched, and it it really is these these daily acts of kindness that inspire us at Grab. We're also very grateful for the opportunity to collaborate with various government agencies, and we believe our government relationships are stronger than ever. In Indonesia, we've set up drive through vaccination centers with Good Doctor and have facilitated the vaccinations of over a 140,000 driver partners and members of the public.

In Malaysia, we partner with the Ministry of Finance and state governments to distribute financial aid to our driver and delivery partners. In Thailand, we partnered with public hospitals and the Red Cross to transport food and medicine. And with new COVID nineteen cases still rising, we'll continue to partner closely with governments to solve real problems in the fight against the virus. We'll conclude today's webcast by highlighting three key callouts. First, we remain as committed as ever to supporting our communities through this difficult period and to achieving our double bottom line, which means delivering both financial performance and making a positive social impact.

Second, we've delivered a strong set of results in the first quarter, which reinforces our conviction in our super app strategy. And third, we remain on track to close our proposed business combination with Altimeter Growth Corp by the end of this year. So thank you very much for your time today and for dialing into our earnings presentation. This concludes our q one twenty twenty one earnings webcast. Thank you.