PT GoTo Gojek Tokopedia Tbk (GoTo), the largest digital ecosystem in Indonesia, has on Monday announced its adjusted losses before interest, taxes, depreciation and amortization improved by 52 percent year-over-year to Rp 3.1 trillion ($201.89 million) in the fourth quarter of 2022.

This marked its four consecutive quarters of improvement, driven by a solid performance from the on-demand services segment, GoTo said in a statement.

According to GoTo, its gross revenue also grew 19 percent year on year to Rp 6.3 trillion over the same period, in line with guidance.

The group’s net loss stands at approximately Rp 19.5 trillion for the quarter, and Rp 40.4 trillion for the year, increasing from Rp 10.2 trillion in 4Q21 and Rp 25.9 trillion in the financial year 2021.

The group said its on-demand services benefitted from continued improvement in mobility services as transport fully recovered to pre-pandemic levels and showed healthy growth despite increases in fuel prices and higher tariffs.

This was partially offset by a normalization in food deliveries due to economic reopening, bringing about more offline consumer spending.

The firm expects this normalization trend to continue in food orders over the coming quarters.

“We have made considerable progress on our accelerated path to profitability, with particularly strong results in the fourth quarter,” said GoTo Chief Executive Officer Andre Soelistyo.

He said the scaling back of incentives and product marketing spend has not come at the expense of revenue growth, thanks to a sharpened focus on key monetization drivers that target high-quality, profitable users.

“This, along with a disciplined approach to costs, is powering our profitability push,” he said.

While expecting growth to moderate in the short term, he said the group will continue to focus on building the foundational product infrastructure that will drive sustainable, profitable growth over the long term.

“As we look ahead, the first two months of 2023 show even faster progress, meaning we are on track to reach positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) within the fourth quarter of 2023,” he said.

It is noted that the group continued to advance its cost optimization strategy across the business during the quarter.

Growth in monetization, coupled with rationalization in incentives and promotional spending, resulted in fourth quarter group contribution margin improving year on year by 254 basis points to reach -0.4 percent of total gross transaction value (GTV), which also grew by 18 percent year on year to Rp 162 trillion.

Notably, the on-demand services segment became contribution margin positive for the fourth quarter of 2022, a full quarter ahead of guidance.

“Throughout 2022, growth was resilient in spite of macroeconomic headwinds, while we continued to manage our costs by embedding structural efficiencies throughout the company,” said Jacky Lo, GoTo Group Chief Financial Officer.

According to him, the group’s goal is to drive cost savings and expense reductions, which have already yielded faster than expected profitability improvements.

“We are very encouraged by the results to date and our confidence is underpinned by our solid cash position, which is sufficient to allow us to reach positive operating cash flow as we near our profitability targets this year,” he said.

It is noted that the group had Rp 29 trillion of cash on hand as of the end of the fourth quarter of 2022, plus a credit facility of approximately Rp 4.65 trillion, of which Rp 1.5 trillion has been utilized.

GoTo’s cash position and balance sheet are therefore solid and sufficient to reach positive operating cash flow without any additional external funding.

As the group prioritizes high quality users, some slowing of GTV is expected over the coming quarters.

However, GoTo remains very optimistic on its long term growth opportunities, given its sizable addressable market and continued digital penetration opportunities.

The company continues to invest in and develop foundational products that will enable it to further grow its high quality consumer base in a sustainable way and drive engagement over the long term, while leveraging its unique ecosystem that captures a full range of consumer spending.

GoTo has restructured its fulfillment and first party (1P) e-commerce delivery business and moved it under GoTo logistics to enable more effective organization.

The focus for GoTo logistics will be on reducing the cost-to-serve by moving toward aggregated logistics that mainly serve the E-commerce business.

The company currently expects the group contribution margin positive within the first quarter of 2023.

It also foresees the group to achieve positive group adjusted EBITDA within the fourth quarter of 2023.

Its full year 2023 group adjusted EBITDA is projected to be between Rp -5.3 trillion to Rp -4.6 trillion.

The GoTo ecosystem consists of on-demand services (mobility, food delivery, and logistics), E-commerce (third party marketplaces + official stores, instant commerce, interactive commerce, and rural commerce), and financial technology (payments, financial services, and technology solutions for merchants) through the Gojek, Tokopedia, and GoTo Financial platforms.

GoTo accelerates profitability timeline, with adjusted EBITDA expected to turn positive in 4Q, 2023