Grab and Go: How Super Apps Are Changing the Game

Peter Oey (00:00):

What we are able to see through this particular AI initiative is that merchant are actually earning more on that platform and they're spending more also on our platform through advertising. Actually 24% advertising spend higher if they're using our merchant bot today.

Ann Berry (00:15):

Elon Musk wants X two B one. Mark Zuckerberg wants WhatsApp to get there too. So what is it? Well, it's a super app, an all-in-one platform that combines multiple services like messaging, ride hailing, food delivery payments, and shopping into one single app. Now if you're in the US and haven't heard of super apps, it's a pretty good reason. Regulations limit industry consolidation, privacy concerns make the data sharing. These apps are built on more difficult and a strong banking system has made digital wallets less essential in the US than in other regions so far. But even if you don't use super apps today, they are shaping the future of tech. With giants like Uber pushing for expanded app features and as digital payments and AI powered services grow, elements of super apps could start working their way into US platforms. Now in markets like China, Southeast Asia and Latin America, super apps are already transforming how people shop, pay and get around.

(01:07)
One of the major super apps in Southeast Asia is grab originally a ride hailing app. Grab now provides mobility, delivery and financial services across over 500 cities in Singapore, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam. In 2022, grab even launched GXS Bank, a digital bank backed by Singtel to serve underbanked populations in Malaysia and Singapore. All driving grabs growth to 44 million monthly transacting users. Now grab went public in the US in December, 2021 and at the time it was the largest ever company to close a SPAC merger with a nearly $40 billion valuation. Its share price did drop 20% on its first day of trading and is down about 60% since its debut on the nasdaq burdened by ongoing losses that reached $145 million for four year 2024. Despite hitting a profitable quarter, one of two since its IPO now grabs core businesses, mobility and deliveries.

(02:00)
Did see steady growth with revenue increasing 19% for the full year. While its digital, GXS bank reached total deposits of $1.2 billion. Today we spoke to grab CFO, Peter Oie about how super apps really work, whether they can make money and why retail investors should be paying attention to Southeast Asia. Let's get into it. We need to dig into this definition of a super app, so give us the numbers, give us the highlights, just how super a Super app is grab, really talk us about, talk us through how many users you have and how many different features on average each of those users is engaging with.

Peter Oey (02:35):

In Southeast Asia in Grab, we have 44 monthly transacting users. So roughly, to give you a bit of context, Southeast Asia has roughly about 675 million people, of which 50% are in the age of 30, but they're very, very smartphone savvy. Actually 25% of Southeast Asians are Gen Z, so the super app concept, the super app product is actually quite, but for them actually it's quite normal to use. So I might take a right hailing service in the morning, I'm hungry during lunchtime, I would then order a food, bring it in, or I need to get my grocery going. Also, I would then schedule a grocery shopping delivery through the app and then on the way home I might go and pick up dinner and I can use the Grab app also for a pickup or I can also just pay using Grab app, digital payment wallet called Grab Pay. So you can see all the different connection of the products all within one app.

Ann Berry (03:38):

And Peter, of that 44 million monthly actives, roughly how many times a day are each of those users using the app?

Peter Oey (03:46):

Yeah, so the majority of our user base users, two or more services in Grab today. So they might be using a right handling and then a food delivery, a payment, or another form of delivery services. And what's the beauty of our products is that transportation is a core service that Grab offers public transportation system in Southeast Asia and outside of Singapore it's not the best and the government's been doing a lot of work to improve that, but we've also a lot added a lot of transportation services that's critical to the Southeast Asian population, whether it's a two wheel service, a three wheel service or a four wheel service. And we also form these in terms of last mile services for these people. So the engagement of our products, it's actually quite high because it is a transportation service. Now also on the food delivery side, also people, a lot of our consumers also because people love going just eating out in Southeast Asia versus cooking in our product and delivery also gets used quite high. So if you look at the 44 monthly transacting users that we have today, the lifetime value of those user pages keeps on increasing because they're actually accessing multiple services in our platform today.

Ann Berry (05:05):

Let's talk about that lifetime value of the user. Peter, you had strong earnings, strong earnings last month. Strong earnings came out in February and it was very interesting to watch the Wall Street response to that. A number of analysts did come out and reiterate by or they upgraded grab. There were some though who were a little bit nervous about the report that you spent 20% more on consumer incentives in 2024 reaching a total spend of just over a billion dollars versus more organically generated growth on new consumer leads. Would it be fair to say that because you can see the lifetime value of a consumer increase, you can afford to spend more money on incentives today and that profit will come down the line? Or are you really seeing more competitiveness now in certain elements of the services that you provide?

Peter Oey (05:54):

The way to think about our incentives is a lever that we use to really help product adoption. That's been a core focus area as we bring out more services in our super app. The way we would ask customers to try those products is through these incentives. A great example of that when we released a product in our grab right hailing is the premium services, which is more of the bigger cars or the nicer cars. Think of it like a bit like the Uber black or the uber comfort type of services in the United States. To actually get those products out the door and get adoption is we would incentives we would use Ask customers to try it, we would incentivize some of those rides upfront so the circular can get a taste of it. So we use incentives primarily to do two things. One is product market adoption and secondly is to balance the supply.

(06:53)
So we might need more drivers in that use case for an example of more grab premium rights that we need to have. So we use that as a balancing act also for the health of the marketplace. And what you've seen is our incentives actually, if you look up on a year over year basis, it's actually been coming down and as a percentage of GMV, which is a better gauge actually of the way incentives are deployed, it's relatively flat on a year over year basis. And if you look at delivery, especially our unit economics actually has improved by 90 basis points on a year over year basis. So I always encourage our investor base to look at incentives as a lever that we would fluctuate between quarter and quarter, but really to drive market adoption versus doing basic promotions because it's not really our most cost effective way and we do not use that to really just price war. We use it for effectively product market, go to product market to get adoption in the marketplace.

Ann Berry (08:02):

So let's talk about how that translates into profitability. Peter, you did have a profitable quarter last year. One of the overhangs for Grab has been the market wanting to see a path to cashflow generation. What is the outlook for getting there on a sustained basis? When do you expect sustained profitability to kick in?

Peter Oey (08:20):

So to reframe just our profitability profile, last year we did $313 million full year bid A and we generated $136 million of adjusted free cashflow in the business. It was our first year last year of posting a full 12 months of free cashflow in the business and we feel confident in continuing to sustain that. Actually, if you look at our guidance for 2025, we guided 440 to $470 million of adjusted EBITDA for 2025, which is roughly about a 40 to 50% actually in our EBITDA. And free cashflow will be generating out of that EBITDA also. So we feel very confident and we have the unit economics of the business to continue to grow our dollar EBITDA as well as to grow our dollar free cashflow and improve margin. Also at the same time, because we do have operating leverage in the business as the platform scales, as we bring in more users, the marketplace dynamics actually functions a lot more robust and that lowers cac.

Ann Berry (09:26):

How about ai? Peter, I hear you on operating leverage. So as your revenue grows, certain amounts of your cost base are fixed, so you'd expect to see that uplift in your EBITDA or profitability, but in terms of driving core, call it gross margin growth, talk to us about how AI can play a part.

Peter Oey (09:46):

Yeah, the way we see AI is actually in two lenses. The first lens is what can we do for our customers and what can we do for our partners? These are our drivers and our merchants. And the other lens that we take is what can we do for grab the grabs or the employees of grab themselves? How do we improve their productivity? So let me go through the first lens, which is more the customers as well as for our partners today. Our viewpoint on using AI is how do we make their lives easier? How do we also improve their earnings also for our partners at the same time? A good example of that for the customer side is the way we use voice activation for just the very day of you want to order a ride, you want to order or for delivery, you can use voice activations that without really hitting or hitting a tile or trying to use your fingers to scroll, et cetera.

(10:43)
We want to make it easier for the customer to be able to interact with our product. On the partner side, a great example of that is we've deployed an agent, a digital agent for our merchants. So these are your food restaurants. We have over 6 million food merchants on our platform today, and there's just no way a human, a account manager can service millions of these merchants on our platform today. It will not be cost effective. So in order to help them, we've deployed a digital agent, we call 'em the merchant bot, and this merchant bot interacts with these food merchants, see if you actually they are human. And what we've able to see through this particular AI initiative is actually the merchant are actually earning more on that platform and they're spending more also on our platform through advertising actually 24% advertising spend higher if they're using our merchant bot today.

(11:42)
Another great example is for our drivers. Our drivers also need some sort of ai. So we've rolled out what we call a ride guide, think of it like a copilot where they are effectively being guided by a digital agent on their phones to be able to navigate through their daily basically routing. So we're able to use smart AI features to help them to be more efficient so they can earn more also on the platform. Now also it's exciting also what's happening internally in grab here, just to share a little bit of a story. Last year we did a sprint, what we call a GI sprint for nine weeks. All we did in grab was really drive experimentation throughout the whole company wide globally. And it was exciting because we got to see and experiment AI and use multiple tools at the same time. Also, one of the great thing coming out of that is if you look at today, our engineers, roughly about 60% of our engineers today use some sort of a code AI assist in their daily jobs. Today in finance in my area today we are using a couple of AI experimentation that now it's in full production in helping our jobs a lot easier like bank reconciliation. We could actually automate that using AI actually that we can continue to train it.

Ann Berry (13:11):

Peter, given how much your users are engaging with Grab and given the different categories they touch because of the suite of services you offer, I've got to imagine the amount of user data that you are accumulating is pretty impressive. How are you able to use AI to create, for example, deeply personalized ads so that each app user really has an experience that you can monetize on the ad side as well? Talk to us about that.

Peter Oey (13:40):

Yeah, it's really actually interesting to watch because one of the things that we have is a financial services segment within the super app itself, both on a banking, full retail banking, digital banking, as well as we have a non-bank financial services through digital wallets, digital payments, micro loans, et cetera. And you mentioned data because really in the financial services data is critical. So we're able to use the multiple touch points that these customers are using, whether they're using a rain handling or a food delivery or they're going to a restaurant using grab pay, et cetera. Those are data points that we capture and we are understanding these customers much, much more better, and we're able to actually credit score these customers because we have their transactions on our platform. And if you look at the drivers that we have on our platform also, we know how much they earn, we know where they go, we know their effectiveness also, and we're able to also profile these drivers and credit score these drivers to be able to offer these financial services product, whether it's lending insurance or payments or what's a different aspect of products. Also they could be using a lending product, one of ours, right? All these different data points gives us actually an edge into how we can learn our customers to personalize the offer that we give to these customers.

Ann Berry (15:05):

Just listening to you lay that all out, Peter, the thing that kept bouncing into my mind was growth. Everything you described, you could see a growth vector potentially coming out of it.

Peter Oey (15:15):

Yeah, so if you look at where we've been focusing a lot is in three things. One is the southeast Asia that we're in today is still from our perspective, still has untouched cities. So we've added for an example, close to about a hundred cities in the last two years. So we were in eight countries and 800 cities in Southeast Asia. Now if you step back Southeast Asia, the population has over 20,000 islands as thousands of cities. So we still are able to grow into those cities, especially around the T two and the T three cities of Southeast Asia. So just growing through cities has been critical for us and we're going into a city, we deploy their mobility services and our delivery services. The second one that we've been focusing is the fact that we have a super app today is how do we offer more products and services?

(16:09)
So the laddering of services that we have has been really critical. So one is how do we tap for those who are a little bit more price sensitive, less affordability. We've deployed products which are a lot more catered for that customer segment. And we also have customers who is willing to pay more for certain rides or certain food delivery or certain services. So we've made those products available also. So we've laddered those products to make it more the breadth and the depth for us to service. So that's the second part of just the breadth and the breadth and the depth of our product. The third is we've added new segments into our business. We've added, for an example, the banks that we talked about financial services, we've added supermarket delivery for an example. So these different elements also have added growth in that business because if overall, if you step back Southeast Asia today, and most people may not know this is that 60% of Southeast Asians are underbanked or underserved today. So six out of 10 don't have access to financial services product. They've been crowded out effectively because there are unable to get a loan because they don't have a credit score for an example, and we're able to step in into the shoes of these user base to help them.

Ann Berry (17:27):

How about acquisitions? Peter, you've been rumored for years to be considering merging with GoTo Group. That's a business in Indonesia, big on demand service available there, tough unit economics. Is acquisition led growth something that you are focused on?

Peter Oey (17:47):

The way I think about capital allocation, which m and a is definitely one of 'em, and just to step back is there is really three pillars that I looked at. The first pillar is around organic growth and we've spoken a lot about that. It's always a priority for the company because that's the highest yield that I can get when it comes to m and a, the hurdle rate is much higher and the standard is that we have to get over is much higher because the risk is riskier. And also there is a lot of synergies that we have to extract out of an m and a. And thirdly, the third pillar is around give really we have access cash. How do we actually create shareholders value by retaining the capital back to our shareholders Now on the m and a front for us, and we've been quite very selective in terms of how we deploy capital there.

(18:37)
Now, Indonesia, yes, there's a lot of rumors going around and these rumors keeps on popping up on an annual basis. We see Indonesia as a very core market for us. It's a critical market. It's over 300 million people in Indonesia. So it's a massive market and we feel we're still underpenetrated there. So if you look at actually the growth of Indonesia last quarter grew a 10% Q on Q, which is faster than our overall group growth. So it's a profitable market for us. So we're going to continue to double down actually in Indonesia in just product, the three things talked about more cities, more products, and more segments.

Ann Berry (19:16):

Let's switch gears, Peter, just as we start to round out the show and talk about life as a public company executive in the structure that you are in. You're sitting in Singapore right now talking to us. Thank you. I know it's evening time in Singapore. Why did Grab decide to go public in the US at

Peter Oey (19:36):

The end of the day? Where is the capital market? Where is the liquidity of the market? And we felt strongly that it's in the US and if you look at the investor base that we've been able to attract actually pre going public and post public centers all around in the us and we felt that that's where the heart of the capital market is and we made the right decision and we pursued the US market. Yes, we had other choices in other countries, but really the US is where we feel that we can actually, from a shareholders return perspective and delivering shareholders value, we can actually be listed in.

Ann Berry (20:18):

Are you finding that institutional investors are pretty sophisticated and understand Southeast Asia? Do you find that retail investors understand Southeast Asia? Where are you spending your time getting people up to speed and what some of the complexities and opportunities are in the region?

Peter Oey (20:31):

There's definitely a lot more education needed for the US institutional or even the US retail also in really understanding the Southeast Asian market itself. So I do spend a bit of time on the road meeting these investors, meeting new investors, also doing a lot of conferences to really help educate also the opportunity in Southeast Asia. It's an emerging market for sure, and people are starting to realize that this emerging market is truly emerging. I mean, you look at the vastness of the population opportunities. If you look at the growth rate of Southeast Asia, it's growing faster than the rest of the world. It's growing roughly 20, 25 at 5% versus what the other rest of the world is at 3%. It's a 200 billion digital economy. It's huge opportunity here. And the more that I can explain to the investor base of the opportunity in Southeast Asia and where we come in as grab where we're only saving one out of 20 in Southeast Asia, it's a great opportunity. And tech actually in Southeast Asia is just continuing to evolve. Also, talent is getting better. There's more investments coming from the big players like AWS, Microsoft, Oracle, Salesforce last week just announced a billion dollar commitment investment into Singapore to help advance its Salesforce agent. So there's a lot of excitement in Southeast Asia itself, and my job is to also educate the investor community.

Ann Berry (22:07):

Let's round out Peter with some rapid fire questions. If you are ready, buckle up and we'll get going. Which company other than your own, do you look up to? You're not allowed to say grab, you have to pick someone else.

Peter Oey (22:23):

SpaceX,

Ann Berry (22:25):

If you had the choice personally, which single new feature would you want to see added to grab next?

Peter Oey (22:33):

So we have two wheel, three wheel and four wheels. I think we need eight wheels on 12 wheels, mobility service

Ann Berry (22:40):

Or at some point space rocket. If we could tie into a space at some point in future. Future, exactly. And last question, if you could only order one food delivery on grab for the rest of your life, what would it be?

Peter Oey (22:54):

So I'm a big fan of Noodles and Soup and there's this dish in Southeast Asia called laa, L-A-K-S-A as one of my favorite because it's just rich in flavor.

Ann Berry (23:10):

Peter ey, chief financial officer of Grab. Thank you so much for joining us. Come back. Lots going on. Would love to hear how it's all evolving.

Peter Oey (23:18):

Thank you very much. It's been a pleasure.

Ann Berry (23:20):

Wow. I'm Anne Barry. Thank you for tuning into After earnings, the show that brings you up close and personal with the executives behind the world's most interesting publicly traded companies. If you learn something today, don't forget to like, subscribe, and share with your friends and come back to join us with upcoming episodes featuring CEOs and CFOs from Hasbro and Roblox.