Grab Holdings Ltd. brought forward its profitability target after posting a narrower loss in the second quarter, buoyed by extensive cost cuts at the ride-hailing and food-delivery company.
(Bloomberg) — Grab Holdings Ltd. brought forward its profitability target after posting a narrower loss in the second quarter, buoyed by extensive cost cuts at the ride-hailing and food-delivery company.
The US-traded stock rose 9.1% to $3.64 in New York after Grab said on Wednesday it expects to break even in the third quarter, rather than the fourth quarter as previously projected. The company also said its adjusted full-year loss before interest, taxes, depreciation and amortization will be $30 million to $40 million, rather than the loss of $195 million to $235 million it forecast in May.
Adjusted loss on that basis shrank to $20 million in the second quarter, Grab said, versus analysts’ average estimate for a loss of $64.6 million. Revenue rose 77% to $567 million, topping estimates and dispelling some fears that rising inflation and a gloomy economic outlook would damp customer spending.
Grab is among Southeast Asian internet giants that are treading a fine balance between spending on growth and focusing on profitability. Investors rewarded GoTo Group last week after it cut its 2023 loss projection, while punishing Sea Ltd. after it reported disappointing revenue and outlined plans to increase investment in e-commerce.
While Grab leads Southeast Asia’s ride-hailing and delivery markets, it has yet to reach profitability as it spends on growth and competition from rivals such as Indonesia’s GoTo weighs on prices. The company, which had been one of Southeast Asia’s hottest startups, has struggled since it went public via a merger with a US blank-check company less than two years ago. Its shares have fallen about 70% since.
Grab, working to reverse years of losses, said in June it’s cutting more than 1,000 jobs in its biggest round of layoffs since the pandemic, in a sign of growing pressure from investors for the internet firm to slash expenses further. Rivals Sea and GoTo eliminated thousands of jobs last year.
Grab’s gross merchandise value, or the total value of goods and services it provides, grew 4% to $5.24 billion in the second quarter. While that’s down from double-digit rates in the past years, growth accelerated from 3% pace in the previous quarter.
Users of the company’s subscription program, GrabUnlimited, rose by 43% from a year earlier. Subscribers spent 3.8 times more on food orders than other users, accounting for almost a third of Grab’s deliveries GMV.
What Bloomberg Intelligence Says:
Grab pulling forward its breakeven goal to 3Q from 4Q, along with 2Q revenue and adjusted Ebitda that were 4% and 70% above consensus, underscores the potential of GrabUnlimited. These subscribers generate average spending 3x that of non-subscribers and could deliver a $50-$90 million boost to the 2023 bottom line, we believe.
-Nathan Naidu, analyst
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Chief Executive Office Anthony Tan has said the job reductions weren’t a “shortcut to profitability.” He’s said the company was on track become profitable even without the cuts.
(Updates with New York share trading.)
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