Indonesia’s GoTo reports wider nine-month loss

Motorcyclists travel past a billboard advertising GoTo’s initial public offering in Jakarta, Indonesia, on Friday, April 8, 2022. GoTo, formed through the merger of Gojek with e-commerce pioneer Tokopedia, raised $1.1 billion in one of the worlds biggest stock debuts this year and is slated to list in Jakarta April 11.

Dimas Ardian | Bloomberg | Getty Images

Indonesia’s GoTo Group reported its nine-month accumulated losses surged from a year ago, even as quarterly losses shrank as the company cut costs.

GoTo 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.

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

For the third quarter, GoTo reported an adjusted EBITDA loss of 3.7 trillion rupiah (about $235 million), about 11% smaller than the 4.2 trillion rupiah adjusted EBITDA loss posted a year ago. That’s also 10% narrower than the 4.1 trillion rupiah 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 mentioned in previous quarters, our strategy is built around three core areas: firstly, focusing on sustainable, high-quality growth; secondly, accelerating our path to profitability; and thirdly, product-led growth bolstered by our ecosystem synergies,” said Andre Soelistyo, GoTo Group CEO, during the earnings call Monday night.

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

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

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

GoTo said return to office and back-to-school demand helped drive that improvement in mobility services.

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

“Throughout the third quarter, we reduced incentives, eliminated promotional spend on cohorts of unprofitable users, further reduced product marketing spend and continued to develop a program of structural cost savings as we equip our business for the road that lies ahead,” said Jacky Lo, GoTo Group CFO.

More cost cuts expected

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

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During the earnings call Monday night, the GoTo management promised further cost cuts and predicted a “significant part” of the savings would be realized in the first quarter.

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

Last Friday, GoTo said it would reduce 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, as well as additional people-related cost reduction measures, we expect to save between 915 billion rupiah and 965 billion rupiah annually, which will result in substantial improvement to opex next year,” said Lo.

With these cost saving measures, GoTo expects it can accelerate group adjusted EBITDA breakeven by three to four quarters, roughly 12 to 15 months, following contribution margin breakeven, said Soelistyo during the call.