Singapore-based tech group Grab said it expects to deliver its first profit sooner than it had forecast after cutting earnings-draining incentives for the first time since its high-profile stock market listing.
In an earnings call on Thursday, CEO Anthony Tan said the ride-hailing and food-delivery platform will bring forward its profitability target after narrowing its annual loss to USD 1.74 billion in 2022, a 51% improvement from a year earlier.
The Nasdaq-listed company now expects to break even on a group level in the final quarter of 2023 on an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) basis, sooner than its previous target of the second half of 2024, on the back of stronger results.
In 2022, group revenue more than doubled to USD 1.43 billion as the reopening of Southeast Asian economies lifted its ride-hailing segment. Revenue from delivery services surged 349%, driven by contributions from the acquisition of a Malaysian high-end supermarket chain.
“We achieved these results by focusing on capturing the rebound in mobility demand, optimizing our costs, reducing our cost-to-serve, and innovating on products and services that drive stickiness and engagement within our ecosystem,” Tan said.
Grab forecasts its 2023 revenue to come in between USD 2.2 billion and USD 2.3 billion, up 54% to 60% on the year.
After its stock market debut in December 2021, Grab was no exception to a broad sell-off by investors shifting away from high-growth yet money-losing companies as interest rates rose and the risk of an economic slowdown grew. Its share price is down more than 70% since its initial public offering.
Grab responded by pivoting from continuous expansion of services on its “superapp” to a sharper focus on improving its core ride-hailing and delivery businesses, after years of reliance on heavy incentives to retain market share.
In September, Grab announced steps to improve transaction frequency and user engagement through the expansion of the monthly subscription program called GrabUnlimited. This move is meant to cut dependence on incentives and better compete with rivals like Indonesia’s GoTo.
Grab incentives totaled USD 1.97 billion in 2022, up 10% on the year. Though still significant, payouts to partners and consumers during the October-December period shrank 20% and 35%, respectively — the first year-on-year decreases since the company went public.
The Southeast Asian tech group has also taken on a series of cost-cutting measures since last year, including a freeze on most hiring, salary freezes for senior managers, and cuts in travel and expense budgets.
“Going into 2023, we will continue to optimize our regional corporate costs to accelerate our path to profitability,” Chief Financial Officer Peter Oey said.
Shares in Grab were down more than 8% during morning trading.
Tong Yen Hee, associate professor of accounting at Singapore’s Nanyang Technological University, said “Grab may have to take deeper cost-cutting measures, such as job cuts, to accelerate their sustainable profitable growth strategy,” as recurring corporate costs remained flat despite its focus on reductions.
Tong added that investors will remain tough on Southeast Asian tech companies like Grab amid the uncertain economic outlook arising from high interest rates and persistent inflation. “In such an environment, investors will demand higher and timelier returns on their investment, which means they want to see tech companies turn profitable more quickly and to remain profitable in the long run,” he said.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.