Prepared remarks
Ladies and gentlemen, thank you for joining us today. My name is Faith, and I will be your conference operator for this session. Welcome to Grab's Fourth Quarter and Full Year 2024 Earnings Results Call. After the speaker's remarks, there will be a question-and-answer session. I will turn it over to Douglas Eu to start the call.
Good day, everyone, and welcome to Grab's Fourth Quarter and Full Year 2024 Earnings Call. I'm Douglas Eu, Director, Investor Relations and Strategic Finance at Grab. And joining me today are Anthony Tan, Chief Executive Officer; Alex Hungate, President and Chief Operating Officer; and Peter Oey, Chief Financial Officer. During this call, we will be making forward-looking statements about future events, including our future business and financial performance. These statements are based on our current beliefs and expectations. Actual results could differ materially due to a number of risks and uncertainties as described on this earnings call in the earnings release and in our Form 20-F and other filings with the SEC. We do not undertake any duty to update any forward-looking statements. We will also be discussing non-IFRS financial measures on this call. These measures supplement, but do not replace IFRS financial measures. Please refer to the earnings materials for a reconciliation of non-IFRS to IFRS financial measures. For more information, please refer to our earnings press release, remarks and supplemental presentation available on our IR website. And with that, I will turn the call over to Anthony to deliver his opening remarks before we open it up for questions.
Thank you, Doug. Fourth quarter was our strongest quarter ever, closing out 2024 on a strong note as we relentlessly executed on our product and tech-led initiatives. This drove an acceleration in our on-demand GMV to 20% year-on-year. Product initiatives launched in 2024, and targeted at improving the affordability and reliability of our on-demand services resulted in a new record of transacting users on Grab. Today, we have achieved strong product market fit with features such as Saver Rides and Priority Deliveries across all our markets. The strong top-line growth, coupled with ongoing cost discipline across our business units, has enabled us to continue scaling the platform in a profitable manner. We achieved our first full year of positive group adjusted EBITDA of $313 million, coming in at the upper end of our upgraded guidance, and positive full year adjusted free cash flow of $136 million, which improved by $370 million year-on-year.
Building upon the strong foundations we've laid in 2024 to scale our platform, we see plenty of headroom to further serve the millions of users and partners across Southeast Asia this year. We will continue to evolve our product strategy to harness the power of our ecosystem. As a result, we expect to maintain our on-demand GMV growth momentum in 2025. And concurrently, we will take a balanced approach to drive a continued expansion of our adjusted EBITDA and adjusted free cash flow while also being highly disciplined on our use of cash. With that, we now open the call for questions.
Questions and answers
Our first question comes from Pang Vitt from Goldman Sachs.
Congratulations as well for another great set of results. Two questions from me. Firstly, just wanted to have a better understanding about your product mix shift. Saver is already one-third of your deliveries and 26% of the mobility transactions. How should we expect the mix shift to transform over the years? And how will this impact your margins, especially in mobility, where we start to see your margins now dipping to 8.4%? That's question number one. Question number two, on FinTech. We see that the loan book grew to $536 million. Revenue also grew nicely to $74 million. However, EBITDA losses were slightly higher on a quarter-on-quarter basis. Help us understand where you are spending more? And when will we see the inflection point towards profitability?
Okay. Thanks, Pang, for the questions. This is Alex. Let me answer both of those. So first of all, on the dip in margins and deliveries this quarter, as you know, we don't operate the business on a short-term margin optimization basis, but we are trying to drive absolute EBITDA and free cash flow growth. So you will see these kinds of fluctuations in our segment margins from quarter to quarter. And then sometimes incentives go up or down in order to make sure that the marketplace health is in the best possible state and that we're really driving improvements for our consumers. What's key though is that on a full year basis, if you look back, deliveries margins did expand by 70 basis points year-on-year, and the mobility margins also remained stable. And obviously, you've seen now this acceleration in growth, which is a big objective for us. As we look forward to 2025, while trying to address your question on mix, we will continue to grow this momentum, and you will see us focus equally on the high end of our price ladder as we do on affordability to make sure that we keep that balanced approach to margin growth as well as overall GMV growth.
I could also take this opportunity to reconfirm our commitment that the long-term steady-state delivery margins will be 4% plus, in line with the prior guidance that we've given. And then the mobility margin is 9% plus. So we're still very confident that that's where this business will end up. In terms of some of the growth drivers for our high-value services to better serve that segment and to make sure that we keep the margins balanced, I think our partner strategy is very important for that. We have supply partners like Blue Bird in Indonesia, grocery partners, examples of SM and Robinsons in the Philippines, brand partners like Coke, where we've done the Coke&Go initiatives to drive benefits for consumers together, and we've got a great set of partners for the banks in each of the three markets, Singtel and others, totally blue chip with great customer bases for us to expand our ecosystems.
Maybe I'll turn to your second question now, which is on the financial services loan book and the increase in costs as we grow. Firstly, just to recap for everyone on the call, we've got two different businesses within the Financial Services segment. We've got the Digibank and we've got the GFin. So on the Digibank lending first, the loan products were launched very recently in the fourth quarter. And so we're really growing those fast and scaling while within the credit risk appetite that we've set out. We expect the Digibank to continue to see an increase in direct costs with these new launches. Firstly, the Flexiloans in Malaysia is just launching for the first time for consumers and then the MSME products for small businesses also just launching in Malaysia and Singapore. So we're supporting those launches currently, and that obviously brings some increase in direct expenses. But probably more significantly, as you understand, with the loan growth at this rate, for example, GXS in Singapore doubled their loans year-on-year.
We need to build up balance sheet provision. So we're running these expected credit losses through the expense lines of the P&L as we grow. As those credit models develop, we’ll be able to enhance profitability. As we’ve confirmed before, financial services overall will be profitable by the second half of next year, and the banks overall will be profitable by the fourth quarter of next year. On the GFin side, it’s already providing good risk-adjusted returns on capital. In fact, comfortably above Grab's own cost of capital. So that's a strongly performing business with good returns that we'll continue to leverage across our ecosystem. Hopefully, that's helpful to give you some context on the way financial services is growing and continuing to improve.
Our next question comes from Venugopal Garre from Bernstein.
I have two questions. First one is a question on management's guidance philosophy entering into this year. Now we've seen in prior years that we have demonstrated a track record of beating and raising your numbers through the year. And of course, the implication of that is that you typically start with a softer guide at the start of the year. Now my question is that while this time around your guidance for sales and EBITDA is pretty much in line with consensus, and of course, I'm ignoring Bloomberg's incorrect reporting on sales guidance versus estimates. Do you really see this juncture as a room for upside to your guidance? And what have you broadly baked into the assumptions? So that's the first question. The second question that I would like to ask is a bit more medium to long-term in nature. If I want to take a step back and look at the bigger picture, how do you plan to balance your priorities and the capital allocation between various initiatives, which I guess I put out there for you. Specifically, I would like to sort of discuss autonomous vehicles versus, say, the specified innovation M&A as well as your expansion into Digibank. So how would you balance between these probably exciting but relatively more resource-intensive banks?
Peter responded to Venu regarding guidance philosophy. He mentioned that the 2025 EBITDA guidance indicates a growth of 40% to 50% compared to 2024 levels, while the forecasted revenue growth is between 19% and 22%. This represents strong top-line growth, especially as 2024 revenue came in at approximately 21% on a constant currency basis. Peter explained that since going public 2 to 3 years ago, the management team has adopted a conservative approach to guidance, particularly for EBITDA and revenue. They factor in potential uncertainties when providing estimates at the start of each year, noting seasonal influences such as Ramadan and Lunar New Year, which significantly impact the first quarter. January has been strong so far, but it is still early to make definitive conclusions. Peter emphasized that adjustments to guidance will be made as the year progresses and business outcomes become clearer, ensuring a balanced focus on driving top-line growth while maximizing adjusted EBITDA and free cash flow, which they are committed to growing in 2025. He then invited Alex and Anthony to address the second part of Venu's question regarding priorities and capital allocation.
Yes. Thanks, Peter. I totally agree, Peter. And hey, Venu. First of all, regarding what Peter shared, I think we are very bullish. There is plenty of headroom to drive organic growth in Southeast Asia specifically in mobility, food, and groceries. The addressable market is still significantly under-tapped. We've shown and proven we've had an all-time high of 44 million MTUs, representing about 17% growth year-on-year, but we are still only serving 1 in 20 Southeast Asians. We are actually just scraping the surface in terms of users that we can outserve across this region. So what does that mean for us? We are going to double down on the core because the core is still expected to grow strongly. And on top of this, we are also looking at the new growth areas. Specifically, you called out AV or autonomous ride-hailing. For me, personally, AI and robotics are top of mind. As you know, when large language models were first released, we leaned in very early last year to drive GenAI adoption across the organization.
On AVs, we've been watching this space closely and are very excited about the long-term opportunity related to this technology. We believe we are in prime position in supporting the AV transition over the next few years with a hybrid AV human fleet. We have strong relationships with players around the world as well as OEMs. We have the highest utilization across the whole region. We have a long track record of working hand in hand with regulators and governments to ensure passenger and driver safety. We are also proactively thinking about how we can play a part in upskilling our driver partners as part of this shift because that is core to our mission and an important aspect of our strategy. As we've shown before, we've collaborated with global partners like Mastercard and Microsoft to upskill workers, our driver partners, and equip them for a more tech-enabled future. We do anticipate a longer road to mainstream AV adoption in Southeast Asia, due to differences in road infrastructure and regulations, but we are very excited about this space. We are actively pursuing several partnerships and will look to share more updates in the coming weeks.
Thanks, Anthony. On the question of allocation towards organic growth, particularly in Indonesia, we're very happy with the acceleration of our on-demand GMV overall as a group. In Indonesia, in particular, on-demand GMV grew 10% quarter-on-quarter, so faster than our overall group average. It was an important focus for us in 2024, and Indonesia will remain a key focus for us to serve our drivers and merchants in 2025. I mentioned the partnership with Blue Bird earlier. We're also expanding our EV fleet with BYD. We're adding more drivers and more merchants in the quarter. The online earnings for those drivers per hour and the average deliveries merchants earnings have also increased. So we have a very healthy and fast-growing marketplace. We continue to invest not just in Indonesia but across the region on some of our tech advantages like mapping, hyper-batching, and just-in-time allocation. These are difficult for competitors to replicate. So we're doubling down on organic opportunities in Indonesia and across the region.
Venu, just to add to Alex, from an inorganic perspective, we have a very high bar when it comes to evaluating inorganic opportunities. We assess these opportunities on a case-by-case basis, but our bar is very high. Key synergies and value addition are instrumental. Our capital allocation policy has always been consistent. Organic growth comes first, followed by high-bar M&A opportunities. When there is excess capital, we return it to our shareholders. We're deploying this capital allocation framework, and 2025 is no different for us.
Our next question comes from Alicia Yap from Citigroup.
Congrats on the solid set of results. I have two questions. First is can you share the updates on the cross-selling of the delivery business with Food and Mart? Can you compare and contrast the AOV for users that use both versus users who only use food delivery? And how do you anticipate the increase in the AOV and wallet spend growth of users on your platform over the next couple of years? Second question is, can management elaborate on how you foresee AI further enhancing your cost optimization efforts and the demand generation capabilities? Specifically, what is management's view on China's DeepSeek model versus your experience working with OpenAI as your lighthouse partner?
Thanks for your questions, Alicia. Let me take the first one on the ecosystem and cross-sell, which is at the core of our strategy. You're right, cross-sold users continue to show improving uplifts quarter-on-quarter. Users who transacted in both Food and Mart have average spend that is four times higher, and frequency uplifts are 2.5 times higher. This linkage is vital to our strategy and gives us an advantage versus single vertical competitors in on-demand. The retention rate is also twice as high than Food-only users. As we continue to grow our efficiencies, the ecosystem doesn't end with on-demand. The growth of financial services is also giving us opportunities. Grocery deliveries are faster than food delivery growth for the second consecutive quarter. The penetration of groceries is still very low in our ecosystem, and we intend to continue to enhance this with strong partnerships market by market.
What we've done with Jaya in Malaysia demonstrates what can be achieved to grow online deliveries as a share of overall revenue. The tech we've developed in Malaysia is now being shared with partners like SM in Robinsons in the Philippines and Transmart in Indonesia, driving this exceptional growth. For the first time, we're looking at selling Mart-to-Food as new users enter our ecosystem from partnerships. On the financial services side, as indicated in some of the slides sent out this morning, there are excellent acquisition opportunities. Ninety percent of GXBank customers in Malaysia came from Grab, and the acquisition cost is minimal. The speed at which we've gathered deposits and opened new accounts – we’re now up to 4 million new accounts across the three banks – is very encouraging. It showcases the strength of our ecosystem and the brand in low customer acquisition and cross-sell potential.
If I can jump in regarding GenAI – specifically, you mentioned OpenAI and DeepSeek among our cost optimization efforts. Alicia, we have prominently leaned into GenAI since the onset. OpenAI has chosen us as their first lighthouse partner in Southeast Asia, and we've built a robust partnership to solve complex problems benefiting our ecosystem users and partners. We also work with other multimodal foundational models globally. One example of our AI usage is in our merchant AI assistant. Today, this assistant addresses significant pain points, particularly for long-tail merchants lacking account managers. They seek insights to boost sales and better target users. We've developed a self-serve chatbot leveraging GenAI that provides merchants with precise recommendations, such as identifying top-selling menu items and enhancing customer packaging. As a result, we've observed a 24% increase in ad spend among merchants engaging with our AI assistant, compared to those who do not.
We've also seen sales uplift among those merchants. All our merchant partners are strongly encouraged to utilize this solution for robust sales generation. To summarize, we will continue to invest heavily in GenAI, exploring new solutions driving higher sales and productivity. 2025 is anticipated to be the year of agentic AI, and we foresee greater personalized solutions for our ecosystem partners rolling out.
Our next question comes from Mark Mahaney from Evercore.
Okay. Two questions, please. First, MTU net adds were relatively high. Just talk about the source of where you're bringing in new users and what you can tell about their engagement levels versus prior cohorts? And then I'll ask about consumer incentives. They have jumped up, both on mobility and delivery sides as a percentage of GMV, to pretty high levels, especially versus the last year or two. What I'm trying to understand is if that is something structural or consumer incentive spend in advance or alignment support of the newer products you're rolling out on the value side, high end, low end? So just talk about how we should think about those consumer incentives if they are to support relatively new product launches and should step down in intensity or whether we are structurally at a higher level.
Mark, let me take the incentive questions, and I’ll ask Alex to chime in on the MTU front, as it’s a key focus area for Alex, and we're seeing good results from that. On the incentives, you’ll see that our incentives, mobility and deliveries move up and down quarter to quarter. That's deliberate, intentional, and in line with our expectations. A lot drives product adoption in our business. You referred to MTU growth as an example of this. We drive frequency in terms of our products. As you know, we don't operate to short-term margin percentages but focus on dollar EBITDA and free cash flow, reinvesting in those areas to drive product adoption. The incentives fluctuate. If you step back, our mobility incentives and margins have remained stable on a year-over-year basis at 8.6%. Our deliveries margin for the full 12 months was also up by 90 basis points. We use this lever as a critical factor, especially for product adoption.
Yes, Mark, you're right. The MTU growth acceleration is a focus for us. A primary driver is our affordability products, for both deliveries and mobility. One-third of the new MTUs this quarter were new or reactivated users, largely due to our affordable products. We're balancing this with high LTV users, particularly travelers, a significant driver of new MTUs who spend more than two times of what domestic users would spend. Product holdings of two or more remain more than two-thirds of our users. The product-led strategy rather than incentives is what's enabling faster MTU growth. Although we require incentives for new products, we've been launching significant new products, such as group orders and family accounts, which can lead to viral growth. That’s a quarter-to-quarter feature rather than a structural change.
Our next question comes from Jiong Shao from Barclays.
I have two questions. Firstly, I have a follow-up on what Peter mentioned earlier about the guides. Peter, you said you started off the year with something conservative and the base case is beat and raise. That's what we like to hear. Your guidance indicated that while you didn't guide on GMV, you only guided on revenue, it appears to signify an acceleration in growth in '25 vis-a-vis '24, and your GMV revenue has indeed accelerated over the last two quarters. I want to confirm that's still the expectation for accelerating growth in both Food and Ride to continue in 2025 vis-a-vis '24. That’s my first follow-up. I have two separate questions later.
Sure, Jiong. We are seeing good momentum on on-demand GMV growth, and that momentum is intentional on our part. As we've discussed with MTUs, for an example, we're also watching the dollar EBITDA and free cash flow that we can generate. We expect on-demand GMV growth momentum to continue going into 2025. Alex discussed our product features and investments earlier. We saw a very strong exit in Q4, which sets us up nicely for 2025.
My first question relates to the autonomous driving robotaxi and electric vehicles mentioned in your press release, particularly the access to 50,000 BYD EVs. I know Anthony touched on these topics earlier as well. I would like to understand a couple of things. First, with the use of electric vehicles, which don’t use gas, how does this impact your margins? Will it make a difference for your long-term EBITDA margins in your rides and mobility business? Secondly, regarding the robotaxi, while focusing on autonomous driving, it's worth noting that driver costs are relatively low in Asia. How does this influence your strategy? Does it make sense to deploy robotaxis in Southeast Asia or China? I would like to hear your thoughts on this.
Jiong, this is Alex. Firstly, EVs. We're a triple bottom line company wanting to encourage cleaner transportation. We are also seeing that it reduces driver running costs, which is essential. Our objective is to continually push the price reliability boundary daily, improving slightly. This allows us to capture larger shares of the overall transportation market in Southeast Asia successfully. One of the drivers is the cost of ownership of the vehicles for our drivers. EV prices have decreased rapidly over the past couple of years, unlocking better affordability. The infrastructure in Southeast Asia continues to improve, with many governments supporting these initiatives. So we want to encourage EVs and work with partners like BYD. On AV, unit economics will also improve over time. We know that the supply chain for AVs is built on the supply chain for EVs, so the improving unit costs will also apply to AVs eventually.
I’ll add to Alex. He’s right, Jiong. The key is that AV is not just about autonomous vehicles. We've envisioned a hybrid fleet complemented by human drivers. This symbiotic approach is beneficial, especially in regions poorly served by human drivers. These are ripe areas for AV introduction, which could enhance fulfillment rates and customer satisfaction.
Okay. Great. My second question is about Singapore. We saw the news recently about a corporate tax rebate. More interestingly, these vouchers for families and individuals living in Singapore. Could you elaborate on some of those incentives? How long will they last throughout the year? Do you think this affects Grab's business? A few years ago, Singapore was a sizable part of your business, contributing 40% or more. What is Singapore's current contribution to Grab's overall revenue?
Jiong, great question. The budget just came out recently, and we’re still evaluating it. I commend the Singapore government for how they support the economy and everyday Singaporeans. The vouchers and tax rebates are positive for merchants we operate with in Singapore today. We want to see more merchants in Singapore that we can support. This is beneficial for everyday Singaporeans and allows us to enhance transport and food services. Overall, Singapore is thriving and advancing, and we're aligned with the government in many areas. We believe with the services we have, including the banks, we’re set to continue growing in Singapore.
Two questions from me. First, could you elaborate on mobility margins? Product mix is definitely one reason, as we noticed that Saver rides are 300 basis points higher. But are there other factors affecting mobility margin in Q4? Secondly, corporate costs fell another 13% year-on-year in Q4. Despite tremendous growth in orders, could you comment on the outlook for 2025 and if you can continue seeing similar savings?
Thanks, Divya. Let me take the first question on the mobility business. We are very focused on growing affordability, which has helped us expand MTUs and improve frequency across all cohorts, demonstrating this good strategy. We launched new capabilities in this area, such as family accounts for mobility, expected to help with frequency and retention. We also focus on high-value rides and partnerships like Blue Bird. There are always competitive factors in various markets; however, I can confirm that we remain the competitive choice leader for mobility across all our markets. Overall, we maintained or grew our competitive position. Our multi-vertical approach allows us significant cross-sell benefits, scale advantages, and the ability to continue investing in new technology like AI amortized across a larger user base. Our mobility growth outlook looks strong. I reiterate that our mobility business will reach 9% plus margins in the steady state.
Divya, as you noted, we've made immense progress optimizing our cost base as we exit 2024. The Q4 results reflected a reduction in variable costs and staff costs. For 2025, while we expect variable costs such as cloud and marketing costs to increase naturally, we anticipate offsetting these with operating leverage from continued volume growth. We expect efficiency gains as a percentage of revenue to continue, but we foresee corporate costs increasing in absolute dollar terms due to investments in on-demand GMV growth and technology such as AI and IoT. Our projection for group EBITDA to revenue margins in 2025 expects an improvement of around 200 to 300 basis points, driven by operating leverage.
My question is about our advertising monetization. Given our focus on technology and AI, can management share about the percentage of our merchants using our advertising solution? How is their performance versus those without advertising? The second question is about our 2025 guidance, particularly regarding foreign exchange trends. Should we expect two sets of year-on-year growth numbers that consider local currency versus U.S. dollars on a quarterly basis?
Thomas, it’s Alex. Advertising is one of the significant drivers of our long-term delivery margin targets and is increasingly contributing to mobility as well. The penetration of GMV for advertising improved to 1.7% in Q4 from 1.4% in the previous year, indicating continued traction. A big driver of this is the increase in our merchant base using demand generation tools, as merchant penetration significantly increased over the year. The retention of these merchants on the advertising platform is about 75%. Return on advertising sales ranges between 5 and 8 times, based on merchant size and brand strength. Yet, merchant penetration is less than half, suggesting room for continued growth. We’ll keep driving penetration and improving the self-serve tools available for our extensive merchant base to grow their business on the Grab platform.
Thomas, regarding FX and guidance, we are experiencing year-over-year headwinds of about 30 basis points, with a Q-on-Q basis headwind of roughly 140 basis points year-to-date. For 2025 guidance, we're using our prevailing spot rate to determine our outlook for full-year GMV and revenue. We will continue to monitor the spot rate as it fluctuates, which influences our guidance discussions. Great. Thanks very much. Thanks, everyone, for listening and investing time with us today. In closing, Anthony, Alex and I would like to express our sincere appreciation to all our drivers and merchant partners. We had a great 2024. All of that was not accomplished without the support from our drivers around Southeast Asia and the merchant partners we serve. Thank you very much, and also to our customers, who continue to passionately use our products. Thank you again to our shareholders for their continued trust in Grab and to the entire Grab team for their efforts backing the growth of our business over the past year. The IR team and I will be attending various IR conferences across the U.S. West Coast and Asia in the coming weeks. We’d love to meet with anyone who wishes to engage with us. Thank you again, everyone, and have an awesome day. Until next quarter.
This concludes Grab's Fourth Quarter and Full Year 2024 Earnings Results Call. Thank you for your participation. You may now disconnect.