PT GoTo Gojek Tokopedia Tbk (GoTo), the largest digital ecosystem in Indonesia, has reported losses in the second quarter and it is on track for profitability.

GoTo said in a statement on Tuesday that the firm’s adjusted losses before interest, taxes, depreciation, and amortization narrowed to 1.2 trillion rupiah ($78.25 million) in the second quarter, driven by improved monetization and ongoing incentive optimization.

“Our commitment to reaching positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year remains on course, however, breaking even is not the end goal – we must go on to deliver sustainable and profitable growth,” said Patrick Walujo, GoTo Group Chief Executive Officer.

According to him, this will require sharper execution with the utmost urgency as well as increasing the firm’s total addressable market.

“Having built a strong presence among the convenience consumers, we intend to expand our consumer base, without the use of unsustainable incentives, among budget consumers who prioritize value for money,

“We are developing a long-term strategy for achieving this, and in the meantime we will continue to operate with absolute cost discipline as we pivot our product mix towards the mass market,” he said.

Meanwhile, GoTo Group Chief Financial Officer Jacky Lo said the firm has progressed against its key profitability metrics for the sixth consecutive quarter as it further dialed-back unproductive incentive and product marketing programs, while maintaining its focus on profitable users.

“Revenues were up year-on-year as a result of growing monetization across our businesses, with our group take rate reaching 4.1 percent – a year-on-year increase of 40 basis points,” he said.

According to him, the firm continued to maintain tight cost discipline and reaffirm its guidance to reach positive adjusted EBITDA within the fourth quarter of this year.

“Due to our better than expected progress, we are revising our full year 2023 group adjusted EBITDA guidance to between -4.5 trillion rupiah and -3.8 trillion rupiah,” he added.

According to the statement, GoTo gross revenue for the second quarter increased by 6 percent year on year to 5.8 trillion rupiah amid continued incentive and product marketing cost reductions of 43 percent year on year, resulting in savings of 2.7 trillion rupiah for the quarter.

Meanwhile, the group’s contribution margin remained positive for the second consecutive quarter at 0.73 percent of gross transactional value (GTV), increasing 207 basis points year on year and 30 basis points quarter on quarter to reach 1 trillion rupiah.

The group’s cash position and balance sheet remain solid, with 25.4 trillion rupiah of cash and cash equivalents and a credit facility of approximately 4.65 trillion rupiah.

The company remains confident that it will reach positive operating cash flow without any additional external funding.

Going forward, GoTo expects to capture additional growth in broad user demographics in a more cost effective manner across the expansive Indonesian market by leveraging its unique ecosystem that spans the full range of consumer spending.

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

It has also revised its full year 2023 group adjusted EBITDA to be between -4.5 trillion rupiah and -3.8 trillion rupiah, from the previously expected range of -5.3 trillion rupiah and -4.6 trillion rupiah, owing to the significant progress made in the first half.

According to the statement, economy-focused products and Gojek’s multimodal product, continued to generate new users while successfully reactivating dormant users, in line with its core growth strategy to expand its total addressable market (TAM) by catering to budget consumers.

The company’s analysis showed that the market potential of on-demand Services can double if it expands its reach to fully accommodate budget consumers.

It will therefore focus on addressing this segment through products that offer additional appeal, flexibility and quality – specifically GoFood Hemat, GoCar Hemat and GoTransit Multimodal.

In the e-commerce segment, it said strong progress has been made in monetization as commission adjustments implemented earlier in the year have taken effect.

It said the ongoing collaboration with GoTo Logistics (GTL) will enable further reductions in overall logistics costs and more efficient shipping subsidies over the coming quarters.

Looking ahead, GTL also seeks to further reduce consumers’ logistics costs by scaling up its in-house delivery service and fulfillment capacity and leveraging its in-house allocation engine to direct orders to the most efficient third-parties, where applicable.

GoTo also said the recent launch of the GoPay app will enable the firm to amass a broader and more inclusive user base beyond the Gojek and Tokopedia platforms, ultimately also serving as an effective tool for rolling out financial services to new users.

It said GoTo’s cash loan product has also become more accessible with its recent launch on Tokopedia.

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 closer to profitability as net loss down 41 percent y-o-y in 1Q