PT GoTo Gojek Tokopedia Tbk (GoTo), the largest digital ecosystem in Indonesia, said its net loss fell 41 percent year on year to 3.9 trillion rupiah ($265 million) in the first quarter of 2023, driven mainly by higher revenues and reduced incentives and product marketing spend.

GoTo said in a statement on Thursday that the improvements in operating losses were partially offset by non-operating items such as normalization of foreign exchange (forex) and fair value adjustment of financial instruments.

The group also reported earnings before interest, taxes, depreciation, and amortization (EBITDA) improvement of 67 percent year on year to -1.6 trillion rupiah in the first quarter, driven by solid performances from the on-demand services and e-commerce segments.

“We continued to make considerable progress toward profitability in the first quarter of 2023, with adjusted EBITDA improving by 67 percent year-on-year and 49 percent quarter-on-quarter, meaning we are halfway towards becoming adjusted EBITDA positive within the fourth quarter,” GoTo Group Chief Executive Officer Andre Soelistyo says.

According to him, the firm focus on high-quality, profitable consumers along with a disciplined approach to costs has significantly increased its efficiency and gives it a glimpse of what the future looks like for GoTo.

“As we continue to implement our strategy, slower gross transaction value (GTV) growth is expected in the near term, as we reduce low quality transactions on our ecosystem, although we will continue to focus on building the foundational product infrastructure that will drive sustainable growth for our company over the longer term,” he adds.

It is noted that in the first quarter, the company continued to optimize monetization and reduce costs across the organization.

Its gross revenue grew 14 percent year on year to 6 trillion rupiah, while incentives and product marketing costs were reduced by 39 percent year on year.

The group’s contribution margin also turned positive at 0.4 percent of GTV, increasing 224 basis points year on year to reach 636 billion rupiah.

“Improved revenue growth and incentive rationalizations have made the group contribution margin positive in the first quarter – a key milestone for our company as we seek to drive profitability within the business units,” said Jacky Lo, GoTo Group Chief Financial Officer.

According to him, the strict management of the group’s fixed cost structure is also driving profitable outcomes, significantly reducing its operational expenditure (OpEx) base and reducing its cash burn.

“As we look ahead, maintaining cost discipline is central to our longer term strategy, as a lower cost base will provide us with additional flexibility to allocate capital for the acceleration of growth in the future,” he added.

GoTo’s cash position and balance sheet remain solid in the first quarter.

With 26.8 trillion rupiah of cash and cash equivalents and a credit facility of approximately 4.65 trillion rupiah, of which 1.5 trillion rupiah had been utilized as of March 31, 2023, the company remains confident that it will reach positive operating cash flow without any additional external funding.

By further prioritizing high-quality users, GoTo expects GTV growth to slow in the second quarter.

The shift in its user base towards more profitable users along with the streamlining of costs and the driving of further efficiencies across the organization are expected to yield sustainable profitability over the long term, particularly as the company focuses on re-accelerating growth over future quarters.

Leveraging its unique ecosystem that spans a full range of consumer spending, GoTo expects to capture additional growth in a more cost effective manner across the expansive Indonesian market.

The company currently expects to achieve positive group adjusted EBITDA within the fourth quarter of 2023.

Full year 2023 group adjusted EBITDA is projected to be between -5.3 trillion rupiah and -4.6 trillion trillion rupiah.

Indonesia’s GoTo posts narrower adjusted loss on better on-demand services