Indonesia’s GoTo reports largest nine-month losses

Bikers ride past a billboard advertising GoTo’s initial public offering in Jakarta, Indonesia on Friday, April 8, 2022. GoTo, a merger of Gojek with e-commerce pioneer Tokopedia, raised $1.1 billion dollars in one of the largest equity debuts in the world this year and is slated for listing in Jakarta on April 11.

Dimas Ardian | Bloomberg | Getty Images

Indonesia’s GoTo Group said its nine-month accumulated losses were up from a year ago, though quarterly losses eased as the company cut costs.

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

GoTo’s shares fell 6% Tuesday morning and 48% since its listing.

For the third quarter, GoTo reported an Adjusted EBITDA loss of Rs. registered a year ago. This is also 10% less than the Rs 4.1 trillion EBITDA loss recorded for the second quarter and marks the third consecutive quarter of declining losses. EBITDA is a measure of profitability that shows earnings before interest, taxes, depreciation and amortization.

“As we mentioned in previous quarters, our strategy is based on three main areas: first, focusing on high-quality and sustainable growth; second, accelerating our path to profitability; and third, a product-led growth underpinned by synergies from our ecosystem,” GoTo Group CEO Andre Soelistyo said on the earnings call Monday evening.

“We made significant progress on all three fronts, with a particularly strong performance as we accelerate our path to profitability,” he added.

GoTo Group is the result of a merger between two of Indonesia’s largest technology companies: Gojek, the giant food delivery and payment services, and e-commerce marketplace Tokopedia. The group went public with a $1.1 billion listing in April.

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

GoTo said back-to-office and back-to-school demand has helped drive improvements in mobility services.

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

“Throughout the third quarter, we reduced incentives, eliminated promotional spend for unprofitable user cohorts, further reduced product marketing spend, and continued to develop a structural cost savings program as we prepare our business for road ahead,” said Jacky Lo, chief financial officer of the GoTo group.

More cost cuts are expected

Global macro uncertainties from rising inflation and interest rates have forced tech companies including GoTo, Grab and Sea Limited to double down on cost-cutting.

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During Monday night’s earnings call, GoTo’s management promised more cost cuts and expected a “significant portion” of the savings to be realized in the first quarter.

The company also reduced its average monthly cash burn by 13% in the third quarter to Rs 1.3 trillion from Rs 1.5 trillion in the second quarter, according to Soelistyo.

On Friday, GoTo said it would cut its headcount by 12%, or about 1,300 jobs. Other companies based in Southeast Asia, including Sea Limited and Foodpanda, have also laid off workers this year, according to media reports.

“As a result of this, plus additional people-related cost-cutting measures, we expect to save between Rs 915 billion and Rs 965 billion annually, which will translate into a substantial improvement in opex next year.” Lo said.

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

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