Prepared remarks
Ladies and gentlemen, thank you for being here today. My name is Faith, and I will be your conference operator for this session. Welcome to Grab's Second Quarter 2025 Earnings Results Call. I will now hand it over to Douglas Eu to begin the call.
Good day, everyone, and welcome to Grab's second quarter 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 are a supplement but do not replace IFRS financial measures. Please refer to the earnings materials for 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.
Thanks, Doug. Grab delivered yet another strong set of results in the second quarter with group MTUs scaling to another all-time high. Meanwhile, on-demand GMV accelerated to 21% year-on-year in U.S. dollars growth or 18% year-on-year growth on a constant currency basis. These top line trends, combined with our continued cost discipline, delivered our 14th consecutive quarter of adjusted EBITDA growth, while trailing 12 months adjusted free cash flow expanded to $229 million. This performance was powered by product and tech-led innovations, which drive our ecosystem flywheel faster and enable us to outserve everyday entrepreneurs across Southeast Asia. Growth continues to be demand-led with on-demand transactions outpacing GMV as we increase our focus on rolling out more affordable services and expanding the addressable market with more price-sensitive users. We also continued to scale up our financial services business prudently with total loan disbursals across GrabFin and our digital banks reaching close to $3 billion on an annualized run rate basis in the second quarter.
At the same time, credit risks remain within our risk appetites. Looking ahead to the second half, Grab remains well positioned with our investment solidifying our resilience in the face of potential macroeconomic uncertainties. As such, we expect to sustain this growth momentum to accelerate on-demand GMV growth rates relative to 2024. We will also maintain discipline on costs to drive profitable growth and free cash flow generation. With that, I now open the call for questions.
Questions and answers
Your first question comes from Pang Vittayaamnuaykoon from Goldman Sachs.
Congratulations on a good quarter and strong growth accelerations. Two questions from me. Number one, with the uncertainty in the macro environment and what's happening in Thailand and Indonesia as well as Trump tariffs being implemented and negotiated, how are you thinking about the outlook for Grab and for the countries you operate in? Are you seeing any weakness in consumption right now? That's number one. Number two, in Mobility, number of transactions was 23% with significantly outpacing growth in MTUs. What strategies have you successfully implemented to drive this increase in frequency of usage? How should we anticipate this trend evolving in the future?
Thanks, Pang. Great question. And you're right, it is top of mind, the macro environment, for all of us. Good news, Pang, is we have been leaning into affordability since 2023 with our first initial product launches of affordability like Saver delivery, Saver transport rides, which now has become even more critical with the ongoing uncertainty in a global macro landscape. Nonetheless, we believe we are very well positioned on this front, Pang, because of our product-led investments that continue to solidify our resilience. As you saw from the slides we shared, it drove the ecosystem flywheel faster, and it really positions us as a countercyclical company. Over the past two years, we have enhanced affordability. We've enhanced the reliability of our services, and that further deepens user engagement and retention and brings new users to the Grab ecosystem. You saw this with the all-time high of MTUs.
You saw this with another quarter of profitable growth and how our growth has reaccelerated to 21% year-on-year. Now, moving forward, we'll continue our track record of working very closely with government and regulators to ensure that our partners and users can navigate this period of uncertainty well. For example, in Indonesia, we participated in the pilot phase of Makan Bergizi Gratis, which is the free nutritious meal program, very important for the Indonesian government. As part of this initiative, we delivered nutritious meals to over 1,500 students across seven elementary schools across many parts in Indonesia, and we collaborated with nine local MSME merchants in these areas to provide healthier meals, but also fostered greater brand loyalty among our student customer segment. You talked about Thailand as well. In Thailand, we are actively working with the government to support the tourism sector.
That's very important, especially during this time for Thailand. We established a private-public tourism task force to contribute to the grand tourism year 2025. This builds on the existing partnership we've had with the tourism authority and transport authority and airports authority in Thailand. So looking ahead, we are confident that our strategy of focusing on using partners with a very user- and partner-centric lens for product development will continue to drive sustainable and profitable growth for the business. And this you will continue to see, and that's why we are confident to say that our expectations for on-demand GMV growth in 2025 will accelerate from that of 2024 levels and our adjusted EBITDA in the second half being substantially stronger than that of the first half.
Okay. Thanks, Anthony. Pang, let me take the second part of the question about Mobility. Because we know there's untapped growth potential in Southeast Asia, we did choose to reinvest the benefits of our scale economies to drive broader accessibility and increase platform usage this half. As a result, as you said, we saw this growth of 23% year-on-year in Mobility transactions, which we think is a good return for our Mobility flywheel because it attracts new user cohorts and improves retention. Overall, Mobility MTUs grew 16%, and GMV still continued to grow strongly at 19% year-on-year, 16% constant currency. And of course, in our case, because we are multi-vertical as an ecosystem, the benefits of having new users come in extend to the broader Grab ecosystem as then we can cross-sell into Deliveries and Financial Services. So it's a broader benefit for us than it would be for a single vertical player.
There's not been much trade-off on profitability. If you look at the numbers, we still grew EBITDA profitability on an absolute dollar basis year-on-year and quarter-on-quarter. And we're still growing our higher-margin high-value rides, which now have reached double-digit as a percentage of Mobility GMV this quarter. So that helps us to balance off on a margin basis. So the margin this quarter was 8.7% for Mobility, very close already to our steady-state margin target of 9% plus. We think this is a very sustainable strategy going forward, and we'll continue to lean into growth.
Our next question comes from Alicia Yap of Citigroup.
Congrats on the solid quarter. Two questions. First, on the delivery business. Just wondering, given the growth of the GrabFood for One, the Shared Saver, all will result in potentially lower blended AOV. Will this volume have lower margins? So if excluding the contribution from the advertising revenue, can you walk us through how you balance between the faster volume driver of the GMV growth versus the lower ASP and the margin trend? Second question, with the launch of your autonomous vehicle shuttles in Singapore recently, how soon do you think a commercial rollout of the AV vehicles in your market across Southeast Asia will take? Any updates also on the partnership front to boost your innovations in this space?
Alicia, this is Alex again. Let me take the question on Deliveries growth and margin. We really believe that ASEAN has still so much upside in digital consumption. So on the Deliveries side, we also decided to invest into product-led growth. Deliveries GMV accelerated to 19% year-on-year on a constant currency basis because of these product-led initiatives. So there was user acquisition from those affordable products that you mentioned. It's been strong. But we've also seen strong growth from what we think of as viral products such as Dine Out, Family Accounts, Group Orders. Those are proving very effective and attracting new users through network effects and shared experiences. So we've got a combination of those viral products and the affordable products bringing in new MTUs. The GMV from all of these new product initiatives that we announced at GrabX earlier this year is growing three times faster than the existing products and now accounts in total for one-third of Deliveries GMV.
In addition, as you well know, we've got GrabUnlimited, which is now the largest paid loyalty program in Southeast Asia, driving almost five times higher spend and three times higher order frequency for its members. We've reached new record highs in paid subscriber count there. So that's also a big impact on the health of our ecosystem. And then finally, I'd just like to mention one of the other products that was launched at GrabX, which is GrabMore, which enables users of food to bundle food and grocery orders into a single transaction. That's helped us drive higher growth rates for GrabMart this quarter than for our core business, which is another quarter where that's been the impact. So there's lots of upside on GrabMart also. So overall, you mentioned Saver. It's contributed 34% of Deliveries transactions in Q2. That's versus a number of 28% for the prior year for comparison. So it has grown in terms of the number of transactions.
However, if you look year-on-year, our segment margins have continued to expand 34 basis points, in fact, from 1.5 last year to 1.8 this quarter. So we are able to still improve margin despite the fact that the affordable products are accounting for a higher percentage of transactions. So what I would say is that margins will move from quarter to quarter. But overall, we still managed to grow absolute EBITDA in this segment by 50% year-on-year. Medium term, I think we can expect the margins as we scale the business to reduce the delivery cost and improve monetization, particularly through the growth of advertising, which this quarter reached 1.7% GMV penetration. We believe that we will reach margins of 4% plus in steady state. So there's no change in our longer-term outlook. Thanks.
On the AV question, Alicia, thank you so much, and you're absolutely right, very top of mind for us. In fact, we are leaning heavily into the AV opportunity, or what we think of as the driverless AV opportunity across Southeast Asia. We are in a prime position to support the AV transition over the next few years. We have a very significant role to play via a hybrid fleet, hybrid meaning both driverless and drivers of fleet. When you think about our right to win, we believe we have (1) strong relationships with AV players as well as OEMs across the world, (2) our scale and network across the region which allows us to provide the best-in-class utilization rates, (3) brand trust and a long track record of safety and working constructively with regulators and governments to ensure community safety, and (4) we have built our own mapping tech with rich local data sets that provides millions of real-world driving hours, user pickup, drop-off points, patterns, traffic flows, heat maps across highly complex Southeast Asian-specific urban environments.
This gives us a strong position. We are also planning several pilots. Earlier this month, we announced A2Z, a partnership with a Korean full-stack AV manufacturer. We announced the first autonomous electric shuttle bus in Singapore. In the Philippines, we are working with regulators closely and property developer Megaworld to launch a pilot study on drone-powered commercial delivery. We want to take this seriously, as we think about the communities we serve, always focused on safe, affordable, convenient services for our customers. Looking ahead, you can expect to hear new partnerships with more global AI and driverless AV partners. We will continue to explore potential high-value, new job opportunities that this sector could create for the communities we serve.
Your next question comes from the line of Divya Gangahar from Morgan Stanley.
So my first question is just getting some more details on competition by market and segment. Specifically, if you can comment maybe on the Mobility GMV growth was a bit slower in the second quarter versus first quarter, and the trip fares were down about 4%. Which market specifically are we seeing some slowdown in? If you can help us contextualize the trip fares being down 4% and how to think of it going forward? Also, Vietnam, specifically, if you have any comments on a new player entering food delivery, if you're seeing any more competition there. So that's my first question. My second question is on capital allocation, especially after the raise of the $1.5 billion CD. I mean beyond the obvious M&A that has been on and off for a long time, what are the other segments that this capital can be deployed into? Do you have any updated thoughts on buybacks?
Divya, Alex here. Thanks for your questions. Let me take the first part. We have chosen to lean into reinvesting the scale economies from our ecosystem back into volume. So the AOV drop of 4% in Mobility is something that we have decided upon ourselves rather than being driven by competitive activity. We think the returns have been good. So a transaction growth of 23% means that we're creating a future growth pipeline. The reason we've taken this stance is because of the potential in Southeast Asia. A lot of the growth has come from new users and higher frequency in Tier 1 cities. We are also growing in some of the smaller cities using the auto adaptive technologies we've developed, which means that we can manage small cities without having team members present. This gives us lots of cost efficiencies. Our strategy is to continue to drive top-line growth. The margin trade-offs, as I mentioned earlier, are not considerable.
We think that it's a good trade-off to make, and therefore, it's sustainable. Market by market, there's always competitors in each market and the market dynamics for different competitors go up and down. Overall, we are about 3x to 3.5x larger than the next largest competitor in the region. Our scale economies are quite considerable, which is why we've been reinvesting in AI and other capabilities, allowing us to pass on greater savings to consumers compared to smaller competitors.
Divya, on your capital allocation question, our stance has always been consistent. We take a very prudent approach to capital allocation. We want to create and generate shareholder value on a long-term basis. If you look at where we've been deploying our capital, it's really fueling the growth of our business through organic growth. That's top priority for us, and you're seeing that playing out in this result, fueled by the previous deployment of capital towards all the product innovations and tech innovations we've been doing. With M&A, we're always on the lookout. With a strong balance sheet and the recent capital raise, it gives us that strategic flexibility. The bar is higher when compared to organic growth that we continue to prioritize. In terms of buyback, we completed the $500 million buyback. It was done concurrent with the recent convertible note that we raised. There's no plans for new buyback programs at the moment. That's something we will continue to explore with our Board.
Your next question comes from the line of Piyush Choudhary from HSBC.
Congrats on a good set of results. Two questions please. Firstly, on Deliveries segment, what's the outlook of consumer incentive spending as it remains at around 7% of GMV in Q2? Alex, you talked about the midterm margin outlook, but should we expect the pace of margin expansion in the Deliveries segment to be slower going forward due to these new product launches and a focus on driving user engagement? Second question on Mobility. If you can share what's the contribution mix between premium rides and affordable rides. How has that proportion changed over the last year because that dynamics have an impact on the margins?
Thanks, Piyush. So first one on the Deliveries product investment, yes, we'll continue to see opportunities there for further product investment. I can tell you that in terms of the medium term, for the next two quarters of this year for Deliveries, we do expect the margin to improve from the current quarter. We see sequential improvement in margin for the rest of this year. Advertising penetration will contribute to that. Typically, third and fourth quarters are big quarters for advertising. As you can see from our results, both the self-serve ad channel penetration and the sales force-sold directly to enterprise larger clients continue to grow. We're very bullish about what Grab has to offer as a retail media network to advertisers given our first-party data. We are committed to the 4% steady-state margins in the longer run as well. So just confirming all of that. Moving to Mobility, the mix between Saver and Premium.
Saver now is about one-third of Mobility transactions. We're continuing to scale that, particularly in the lower-tier cities, but we're still seeing growth in numbers of users, attracting new users into Tier 1 cities and higher frequency in both. We're consciously focusing on affordability to drive frequency and growth of new users into the ecosystem. However, on the Premium end, we're also continuing to grow at the same time. It's not just the affordability segment that is growing, Premium now is in double digits as a percentage of transactions. We expect that to continue to grow. We've done a lot of work with airports around the region to get better access into airports, allowing us to balance that margin between affordable products and high-value products for less price-sensitive users. I can reiterate that we are committed to the 9% steady-state Mobility margins, which, as you're probably aware, would remain industry-leading.
Your next question comes from Jiong Shao of Barclays.
First, I have a follow-up about autonomous driving, specifically regarding robotaxis. I know you mentioned the trial for the shuttle bus in Singapore. Considering what Uber is doing globally with robotaxis and what DiDi is doing in China, could you share your plans for robotaxis in the region? My first question is about regional costs. Peter, could you provide your expectations for regional costs for the second half of this year? I have another question about GrabMart. Can you discuss your long-term projections for the total addressable market for GrabMart compared to traditional food delivery? Also, can we anticipate long-term margins for the Mart business to be close to the 4% target?
Thanks, Jiong. So I'll take the AV one. Good news is we are leaning heavily into the AV opportunity or what we think of as the driverless AV opportunity across Southeast Asia. We are in a prime position to support the AV transition over the next few years. We have a significant role to play via a hybrid fleet, meaning both driverless and driver-operated fleets. When you think about our right to win, we have (1) strong relationships with AV players and OEMs, (2) our scale and network across the region provide the best-in-class utilization rates, (3) brand trust and a long track record of safety and working constructively with regulators to ensure community safety, and (4) we've built our own mapping technology with local datasets that provide millions of real-world driving hours, user pickup/drop-off points, patterns, traffic flows, heat maps across complex Southeast Asian urban environments. We are planning several pilots. Earlier this month, we announced A2Z, a partnership with a Korean full-stack AV manufacturer. We announced the first autonomous electric shuttle bus in Singapore. In the Philippines, we are working with regulators to launch a pilot study on drone-powered commercial delivery. We want to ensure we are looking seriously at how to expand pilots across the region. Nothing to announce today, but you can foresee announcements in the next few weeks.
Jiong, on your question around regional corporate costs, the increase in the second quarter, which is roughly about a 9.5% Q-on-Q increase in regional corporate costs, is pretty much in tandem with the strong on-demand GMV growth momentum in the second quarter. If you look at the on-demand GMV, it was growing at 21% on an actual currency, but our regional corporate costs were growing at 9.5%. It is actually growing much slower than our top line. We're driving operating leverage. The costs that increase Q-on-Q are variable costs. We're looking at more cloud costs, software costs, as you would expect from just the volume growth driving transactions. Overall, regional corporate costs will probably be around a 10% to 12% increase on a year-on-year basis. What's important is driving operating leverage. I would expect about 100 to 150 basis points of margin improvement in terms of regional corporate costs as a percentage of revenue. So hopefully, that gives you a bit of color on corporate costs.
Thanks, Peter, and thanks, Jiong, for the question. I'm glad you've asked us about GrabMart because this is an area where the TAM is potentially much larger than the food delivery market in the longer run. Online groceries is still barely penetrated in Southeast Asia, probably less than 5% penetrated. In this context, many countries in Southeast Asia have low penetration of modern retail offline business. The user experience is not great. The chance to leapfrog with a digital Mart experience is strong. Mart currently accounts for less than 10% of our Deliveries business but is already growing faster than food deliveries at about 1.5 times the growth rate. The MTUs for Mart are hitting all-time highs this quarter, reflecting the potential of the digital experience. We're taking a partnership-first approach. We own Jaya Grocer and just purchased Everrise in Malaysia, so we have an offline/online experience. We're on track to reach 15% online penetration of GMV, which is great and shows what can be done. That would be an industry-leading number. We anticipate that the long-term margins for the Mart business will be close to the 4% target.
I just wanted to ask about the advertising revenue. You got that $236 million run rate, I think, in that 45% growth. Just talk about the sustainability of that growth, and then think about or talk about the long-term ceiling or marker for where advertising as a percentage of GMV could go.
Thanks, Mark. Yes. You can see the advertising business has doubled a couple of times over the last few years. We're growing super fast, with exponential growth. One factor is that the number of advertisers trying Grab as a retail media network for the first time continues to grow. We are still at less than 50% penetration of our merchant base in terms of those that have tried us, so there's still upside in expanding this penetration. The retention of those who try us is high, leading to an exponential impact. The average return on advertising sales is 8x, making it attractive to advertisers. We see the potential of advertising penetration to GMV in various markets reaching 2%, 3%, or even 4%. This indicates more opportunity for growth in this area.
My first question is about Deliveries and the margins. If I exclude the ad revenues, it seems that the delivery EBITDA without ads is a bit softer. I understand that you're making a lot of growth investments and witnessing significant expansion in your monthly transacting users and new services. However, should we consider the possibility that the underlying Deliveries EBITDA without ads could start to increase? Or will the focus in the near to midterm remain on growing the business instead of fully monetizing it? On fintech, I've noticed tremendous growth in the loan portfolio. Can you clarify where these loans are being made?
Thanks, Ranjan. Yes. On the Deliveries, we see considerable upside in penetration and volume in Southeast Asia in the medium term. We think that our current strategy, leaning into growth and reinvesting the economies from our scale is sustainable. We haven't had to make trade-offs in margin. We see advertising upside as combined with the margin of the business. Scale itself for the Deliveries segment, including Mart, is an important driver of value for advertisers. Moving to your second question on Financial Services. We expect to hit a $1 billion loan book by the end of the year, currently at about $700 million. We're confident we can exceed $1 billion because of our strong product lineup for GrabFin, our fintech arm, and the digital banks. We have personal lending products for all three banks. We also have BNPL available through GrabFin in multiple markets. Furthermore, we acquired Validus business in Singapore, which has been rebranded GXS Capital to finance SMEs with a well-managed risk profile. We expect half-on-half growth of 32% in the first half and to reach 41% in the second half due to our strong product lineup and increasing faith in our underwriting and distribution systems.
Ranjan, just to add on the Deliveries margin. If you look at the countries we operate in today, many are already in the range of 4% to 5% Deliveries margin, consistent over many quarters. We have work to do in closing the gap in certain other countries, which we're focused on. We're also balancing the under-penetration of Deliveries, which Alex spoke about, with fueling growth on the top line. We're confident in our ability to get to margin improvement in Deliveries while not sacrificing the growth.
We're going to wrap up the call here. Thank you very much, everyone, for dialing in. Anthony, Alex, and I really want to express our appreciation to all our drivers and our merchant partners, as well as our customers, users, and shareholders for continuing to trust in Grab. Thank you also to the Grab team for a great quarter, and we look forward to delivering a strong second half. Together with our IR team, Doug, Ken, and I will be on the road over the next few weeks, attending various IR conferences across the U.S., Hong Kong, and Singapore. If you wish to meet up, please reach out to any of us here. We would love to see you in person and catch up then. Thank you for this morning. And for those dialing in from a different time zone, we appreciate it, and we'll talk over the next few weeks. Thank you. This concludes Grab's Second Quarter 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect.