November 29, 2022

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Indonesia’s GoTo reports a larger nine-month loss

3 min read

Motorcyclists ride past a billboard advertising GoTo’s IPO on Friday, April 8, 2022 in Jakarta, Indonesia. GoTo, formed by Gojek’s merger with e-commerce pioneer Tokopedia, has raised $1.1 billion in one of the world’s biggest stock debuts of the year and is set to list in Jakarta on April 11.

Dimas Ardian | Bloomberg | Getty Images

Indonesia’s GoTo group said its nine-month accumulated losses jumped year-on-year, although quarterly losses shrank as the company cut costs.

GoTo has accumulated a loss of 20.32 trillion rupiah ($1.29 billion) between January and September, far more than the 11.58 trillion rupiah loss reported a year ago.

Shares of GoTo are down 6% Tuesday morning and 48% since listing.

For the third quarter, GoTo reported an adjusted EBITDA loss of 3.7 trillion rupiah (about US$235 million), about 11% down from the adjusted EBITDA loss of 4.2 trillion rupiah reported a year ago. That’s also 10% lower than the Rp. 4.1 trillion EBITDA loss reported for the second quarter and marks the third consecutive quarter of shrinking losses. EBITDA is a measure of profitability that shows earnings before interest, taxes, depreciation and amortization.

“As we have outlined in previous quarters, our strategy is built around three core areas: first, a focus on sustainable, high-quality growth; second, accelerating our path to profitability; and third, product-led growth supported by our ecosystem synergies. GoTo Group CEO Andre Soelistyo said during Monday night’s earnings conference call.

“We have made significant progress on all three fronts, with a particularly strong performance in accelerating our path to profitability,” he added.

GoTo Group is the result of a merger between two of Indonesia’s biggest tech companies – ride-hailing, grocery delivery and payments giant Gojek and e-commerce marketplace Tokopedia. The group went public in April with a listing of $1.1 billion.

GoTo said on-demand services, including ride-hailing and meal delivery, generated positive contribution margin in September, “several months ahead of schedule.” Contribution Margin measures profitability by showing the total amount of available revenue after variable costs.

GoTo said the demand for back-to-office and back-to-school has helped drive this improvement in mobility services.

“The improved margins have not come at the expense of revenue growth,” Soelistyo said.

“Throughout the third quarter, we reduced incentives, eliminated ad spend for cohorts of unprofitable users, further reduced product marketing spend and developed a structural cost savings program as we prepare our company for the future,” said Jacky Lo, CFO of the GoTo Group.

Further cost reductions expected

Global macroeconomic uncertainties due to rising inflation and interest rates have forced tech companies including GoTo, Grab and Sea Limited to double their costs.

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During Monday night’s conference call, GoTo management promised further cost cuts and forecast that a “significant portion” of the savings would be realized in the first quarter.

According to Soelistyo, the company also reduced average monthly cash burn by 13% to Rs 1.3 trillion in the third quarter, compared to Rs 1.5 trillion in the second quarter.

Last Friday, GoTo said it would reduce its headcount by 12% — or about 1,300 jobs. According to media reports, other Southeast Asia-based companies including Sea Limited and Foodpanda have also laid off employees this year.

“As a result of this, along with additional staff-related cost-cutting measures, we expect annual savings of between Rs. 915 billion and Rs.

With these cost-saving measures, GoTo expects to accelerate the group’s Adjusted EBITDA breakeven by three to four quarters, about 12 to 15 months after reaching its contribution margin breakeven, Soelistyo said during the earnings call.

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