Grab Q2 2022 Q&A Session Transcript

Q&A（Question-and-Answer Session）is a session after the company's prepared remarks where institutional investors and analysts ask management questions. In this dialogue, you may find some valuable information that might affect the stock price in the following weeks.

Now let's look at some key points from $Grab Holdings(GRAB)$ Q2 2022 Q&A Session Transcript

Q:Could you talk a little bit more about the path to reducing incentives going forward? And maybe a little bit more on what's allowing you to do that? Is that there's just less competitive intensity? Have you reached enough scale and the operational metrics are good enough that drivers and providers, flyers, whatever, don't need as much incentives as they do in the past?

So just spend a little bit more on whether it's competitive, structural or scale factors that are allowing those incentives to come down and continue to come down. And then could you also just talk about this kind of low-quality GMV. How big is that in the deliveries segment? And it sounded like you're talking about lower quality consumers. So maybe just a little bit more of an explanation of what's a lower quality GMV, consumer versus one that's higher quality?

A:Let me address the incentives firstly, and I'll get to on the quality of GMV segment, how we're thinking about it. So on the incentives, you're right. We've been bringing our incentives down. In this quarter here -- in the second quarter, our incentives was 10.3% as a percentage of GMV, and that's down from 11.6% from the previous quarter.

And if you look at the fourth quarter, we were at 13%. So we've come a long way, close to 300 basis points, as a percentage of GMV, improving our incentives. What's causing -- what's driving that also? It's just we're getting better at it, Mark, to be honest with you. We're actually looking at the platform as a whole, we're making product enhancements as a whole also at the same time. And structurally, also the market is rationalizing at the same time.

So it's all those building blocks that's coming together that's making our incentive spend, a lot more efficient also and also enables us to bring it down in the second quarter, and we'll continue to bring it down also in the second half of this year.

Now in terms of -- as we -- you asked a question about GMV, how we think quality users, how we're thinking about it is -- and it's something also that we've been working from the beginning of this year, it's all about targeting the right user base into our top of the funnel. And what I mean by high-quality GMV users is we are targeting users who are less sensitive to incentives. It ties back to earlier question about incentives.

And why that's important to us, Mark, is because we see opportunities for more ability to cross-sell those users. The data shows that the users that were able to cross-sell has higher retention and higher spend. And if you look at the second quarter, 62% of our users use 2 or more offerings, and that's up from 56% at the end of last year. we're continuing to drive more cross-selling and those users that we are targeting are a lot more -- their lifetime value is extending higher.

So that's why we are very, very specific in targeting those users want to drive greater engagement. And part of that actually, Mark is the grab unlimited, which is the subscription product also that we're beginning to pilot also. It ties in together with those user base.

Q:So could management share with us specifically which countries that you are seeing more significant slowdown in the user demand post the economy reopening? And among the food delivery and grocery delivery, so is the demand for grocery decline more? Or is it mainly come from food delivery?

And kind of within the food delivery, so do you have like color or details on what type of restaurant or what kind of cuisine that we are seeing the biggest impact?

A:I'll talk a bit more about deliveries, especially on growth. I won't go into specific cuisine types, but I'll just share -- what we are seeing with some of the growth trends and consumer behavior is dining out has taken place. And we actually anticipate some softening of the food delivery demand. And that's why we lowered our GMV estimates to 25% to 29% on a constant currency basis.

Now we are optimistic on the long-term potential of our diversified deliveries business, given the huge market opportunity and the relative use of our grocery segment. If you look just as an example, our mart business is only about two years old. And mart -- GrabMart grew close to 200% year-on-year.

On more about the consumer behavior changes -- how we think about it is what levers do we have within deliveries to meet these user needs. One lever we've been thinking about and we've been acting on is just diversification.

For example, customers want to save money. By not only ordering food delivery, they may -- actually show a preference to order groceries to cook for themselves, and we have that on our platform. We've also actually introduced differentiated delivery time windows to let users choose a time that has a cheaper delivery fee when we have cheaper off-peak supply.

We are seeing this despite of the headwinds optimistic on the long-term opportunities in the delivery space, and we will continue to invest and innovate on our product offerings to adapt to these consumer preferences.

Q:Firstly, can you share or talk about what prompted you to exit the dark store operations in Singapore, Vietnam and Ferris [ph] What were the key learnings for the company from operating these dark stores?

And secondly, on the financial services, could you talk a little bit about the profitability or EBITDA time going forward, given we are going to launch Digibank in Singapore and then Malaysia, Indonesia, and any kind of ideal long-term EBITDA been targets which you can share for financial services?

A:On your first question on doctors we realize that the customer experience of receiving groceries is a really key thing for us to drive, but we realize also that we can drive some of that through partnerships in sort markets. And of course, in the case of Malaysia through owning a grocer, Jaya Grocer, directly.

The reason for this is because the infrastructure, the supply chain and the points of presence around the cities are already there for the partners and for our own Jaya Grocer stores as well. And we believe this is a better cost structure for delivering 1P groceries in the longer run. I know there are some players out there who are building dark store networks.

But from our experience, we took the decision that we thought that the existing infrastructure leveraged through gray store technology was a better a better formula for long-term cost leadership. On financial services, we are creating value from our own platform payments and lending.

We want to continue to grow that. What we're finding though is the off platform is trickling down the results, and you can see some of that in the second quarter numbers. So going forward, we are actually going through all those off-platform transactions and trying to bring them to neutral or better transaction economics.

But if we can't do those, then we will actually end up limiting the off-platform and just growing those areas on platform, we know we can create value. Clearly, the reason we can create value is because we've got the lowest possible distribution costs. We've got an exceptional data advantage for our credit models where we've seen from our history over the last more than a year that we can outperform with our credit models.

And of course, we also certainly have a collections advantage where we're lending to [indiscernible] who are getting income from our platform. So we believe that those advantages also can be extended to the digital banks and the digital banks, of course, have the key advantage of being able to gather deposits as well. and therefore, reducing cost of funds.

So it's a very similar strategy for our existing nonbank financial operations as we will have for our future banking operations. That means that we can maximize the relationship with the customer. We can maximize the trust that the customer has in Grab.

And hopefully, that will drive us to having a quicker breakeven and return from those Gigibank build-outs than others who are starting without any ecosystem to work with. In terms of more details, I'm not going to share those with you today. But as Anthony mentioned earlier, we will be actually having an Investor Day, where we hope to give a few more details in terms of the strategy for financial services overall. I hope you can join us for that.

The above Q&A are highlights that are edited for brevity.Click here for the full Grab Q2 2022 Earnings Call Transcript.​​​​​​​

If you want to know more details,youcan click here to re-watch the  Grab Q2 2022 Earnings Conference Call​