PT GoTo Gojek Tokopedia Tbk (GoTo), the largest digital ecosystem in Indonesia, on Monday announced that the firm has reported significant drop in third quarter losses, driven by improved monetization and disciplined management of operating expenses.
The firm said in a statement that it reported adjusted losses before interest, taxes, depreciation and amortization 942 billion rupiah ($59.30 million), a significant drop from last year’s 3.69 trillion rupiah.
Meanwhile, the group’s gross transaction value (GTV) for the quarter also increased by 5 percent quarter on quarter as the company’s product innovations began to take effect despite increasing competition.
The group’s gross revenue for the quarter improved by 1 percent year on year to 6 trillion rupiah amid continued incentive and product marketing cost reductions of 36 percent year on year, resulting in savings of 2.1 trillion rupiah for the quarter.
The group’s contribution margin also remained positive for the third consecutive quarter at 0.75 percent of GTV, increasing 149 basis points year on year and 2 basis points quarter on quarter to reach 1.1 trillion rupiah.
“The group’s GTV has returned to positive quarter-on-quarter growth following two quarters of sequential decline, driven by improvements in our E-commerce and On-Demand Services businesses,
“This is the result of our broader strategy to expand our total addressable market through the development of mainstream products and services that are particularly relevant for price-conscious consumers,” said Patrick Walujo, GoTo Group Chief Executive Officer.
According to him, the synergies across the firm’s ecosystem give the firm a real advantage within a competitive environment that remains intense.
“We will maintain tactical flexibility as we defend our market leading position, while continuing to prioritize the long term investment that our strategy is built upon,” he added.
Meanwhile, GoTo Group Chief Financial Officer Jacky Lo said that as GTV returned to sequential growth in the third quarter, the firm also recorded continuous improvements in contribution margin and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
According to him, this was underpinned by a reduction in operating expenses as the firm eliminated redundancies and leveraged its technology to reduce costs.
He said the firm continues to progress on its path to profitability, with its on-demand services unit reaching adjusted EBITDA positive before the allocation of corporate costs in the third quarter.
“Having said that, there is now increasing competition risk in the market, which we expect to continue,
“We will respond to this prudently, as we aim to find the right balance between growth and profitability,” he added.
GoTo expects to capture additional growth in broad user demographics more cost-effectively across the expansive Indonesian market by leveraging its unique ecosystem that spans the full range of consumer spending.
The company currently expects positive group adjusted EBITDA within the fourth quarter of 2023.
Its full-year 2023 group adjusted losses before interest, taxes, depreciation and amortization will be between 4.5 trillion rupiah and 3.8 trillion rupiah.
It is noted that GoTo maintains a solid cash position and balance sheet with 25.2 trillion rupiah in cash, cash equivalents and short-term time deposits as of September 30, 2023.
Its net cash burn has declined significantly by 76 percent year on year and the company therefore has more than enough capital to sustain its business and execute its current plan.
This is why the firm also announced that it no longer intends to execute on the international initial public offering (IPO) that was disclosed in the company’s IPO.
Should the company decide to carry out an international IPO in the future, it will seek a new approval from shareholders in accordance with the relevant laws and regulations.
The GoTo ecosystem consists of on-demand services (mobility, food delivery, and logistics), E-commerce (third party marketplaces and 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 continued to scale its economy-focused on-demand products, while also launching its pioneering GoRide Transit service.
These offerings are drawing in new customers and reengaging inactive users, in line with the Company’s core strategy to broaden its addressable market by catering to cost-conscious consumers.
In the E-commerce segment, the firm invested in its core consumer group to drive long-term growth and momentum for 2024 by leveraging merchant co-funding programs and reactivating select marketing and promotions.
Simultaneously, the company is working to increase its appeal among budget consumers by providing more products that resonate with this demographic, as well as reducing delivery costs by leveraging GoTo Logistics (GTL)’s in-house logistics capabilities.
GoTo launched four new products and features during the third quarter – the GoPay App, Cash loans on Tokopedia, Cash loans on the GoPay App, and GoPay Tabungan (Savings) by Bank Jago.
This accelerated product pipeline supports GoTo’s ability to amass a broader and more inclusive user base beyond the Gojek and Tokopedia platforms, including those who are unbanked and underbanked.
It also supports the company’s focus on its lending business, which has seen significant growth throughout 2023, with the scaling up of high-margin cash loans a key priority.
The integration of Tokopedia’s fulfillment division and Gojek’s e-commerce delivery division within GTL continues to result in increased in-house delivery in high-density areas, coupled with aggregate third-party deliveries elsewhere at the lowest possible cost per order.
As a result, GTL has successfully lowered delivery expenses for both customers and sellers and further reduced shipping subsidy costs.
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