Grab Holdings Ltd’s (NASDAQ:GRAB) is focusing on expanding its total addressable market by reinvesting in product launches and incentives. This strategy impacted its on-demand segment margins in its recent financial results for the second quarter of 2024 (2QFY2024).
The company reported an on-demand gross merchandise value (GMV), which measures the total value of all goods and services sold through Grab’s platform, at US$4.4 billion. This marks a 5% increase quarter-on-quarter (QoQ) and a 13% increase year-on-year (YoY). The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a measure of profitability that excludes certain expenses, was US$64 million, a 3% increase QoQ.
While its GMV and adjusted EBITDA met expectations, the margins in the on-demand services, which include mobility and deliveries segments, were weaker due to reinvestments aimed at driving growth. For instance, the mobility segment’s EBITDA margin was 8.1%, slightly lower than expected due to changes in product mix and higher incentives for new products like its “Saver” transport rides. The “Saver” deliveries saw better adoption, accounting for 28% of the deliveries segment transactions in 2QFY2024.
On the company’s financial services segment, it showed strong growth driven by increased contribution from lending products. The segment’s EBITDA loss narrowed to US$24 million in 2QFY2024. Customer deposits in Grab’s digital bank grew significantly to US$730 million, and the loan portfolio reached US$397 million, a 9% increase QoQ and 71% increase YoY.
User Growth and Future Projections
The company reinvestment plans are bearing fruit, with monthly transacting users (MTU) reaching an all-time high of 40.9 million in 2QFY2024, up 6% QoQ and 17% YoY, showing growth acceleration over the past several quarters.
Grab expects sequential growth in GMV and adjusted EBITDA for these segments in the second half of 2024 (2HFY2024F). The company also expects margins to improve in the coming quarters as premium offerings gain better traction.
Grab has maintained its full-year 2024 (FY2024F) guidance of US$2.70 billion to US$2.75 billion revenue and US$250 million to US$270 million adjusted EBITDA. The company also anticipates achieving positive adjusted free cash flow for FY2024F, having more cash coming in from its operations than it needs to cover its operating expenses and capital expenditures.
While the company continues to balance market share expansion with profit growth, there are risks, including potential macroeconomic headwinds and increased competition, which could impact demand and margins.
Reference
CGS International Company Note | Grab Holdings | Aug 15, 2024
Grab Reports Second Quarter 2024 Results | Grab Holdings
Grab Q2 2024 Earnings Call | Aug 2024
Disclaimer: ProsperUs Manager of Content Hailey Chung doesn’t own shares of the mentioned company.
