Grab, the major ride-hailing platform in Southeast Asia, has reported its first profitable quarter. The company revealed in its Q4 earnings report that it garnered a profit of $11 million. This is a significant improvement from the $391 million loss it incurred during the same period last year.
This profit boost, the company explained, mainly resulted from better-adjusted Group EBITDA, changes in the fair value of investments, and a decrease in share-based compensation expenses.
The company’s revenue for the quarter reached $653 million, surpassing the estimates of $634.86 million by LSEG analysts. The annual losses for 2023 were significantly lower, reducing by 72% from $1.74 billion to $485 million compared to the previous year.
Apart from ride-hailing services, Grab also offers financial services like insurance and payments and delivery services for food, groceries, and parcels.
Grab’s CFO, Peter Oey, in his exclusive interview with CNBC, remarked that mobility demand exceeded pre-Covid levels as they exited 2023. He noted a considerable growth in tourism and a 13% year-on-year growth in deliveries. According to him, the company presently has more users on their platform, indicating strong momentum.
Grab, in an announcement made on Thursday, made public its intentions to launch its first-ever repurchase of Class A ordinary shares worth up to $500 million.
The company, founded in 2012, has largely been unprofitable over its years of operation, having accumulated billions in losses. Like many tech startups in their early stages, Grab prioritized growth over profitability, which resulted in substantial cash burn. However, with current global uncertainties slowing growth, the company is now compelled to direct its attention towards profitability and cost-effectiveness.
In its report, Grab revealed that it succeeded in further reducing total incentives, which are made up of partner and consumer incentives, to 7.3% of the total value of goods sold in the fourth quarter. This is a decrease from 8.2% in the previous year, exhibiting improvements in marketplace health.
To attract drivers and passengers, Grab has been extending the offer of incentives. However, these measures are now dwindling as the company looks to increase profitability.
When asked by CNBC about the possibility of Grab reaching a point where it no longer needs to incentivize people to stay on its platform, CFO Peter Oey stated that incentives would always be a crucial tool for the business. He explained that incentives are a means to ensure a sufficient supply of drivers and attract customers who are sensitive to price changes, implying that a world without any incentives is unlikely.
Grab has projected its 2024 revenue to fall in the range of $2.70 billion to $2.75 billion, proving less than LSEG analysts’ consensus of $2.8 billion. After the announcement, the firm’s shares saw a decline of 8.41% at Thursday’s close. Since its initial listing on the Nasdaq in December 2021 at $13.06 per share, Grab’s share price has suffered a steep fall, dropping by an incredible 75.8%.
