January 31, 2023

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Indonesia’s GoTo Group reported its nine-month accumulated loss widened from a year earlier, even as the company cut costs to narrow quarterly losses.

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GoTo accumulated a loss of 20.32 trillion rupees ($1.29 billion) between January and September, far higher than the 11.58 trillion rupees loss reported a year earlier.

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

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For the third quarter, GoTo reported an adjusted EBITDA loss of 3.7 trillion rupees (about $235 million), down about 11% from an adjusted EBITDA loss of 4.2 trillion rupees posted a year ago. This is also 10% lower than the EBITDA loss of Rs 4.1 trillion reported for the second quarter and marks the third consecutive quarter of declining losses. EBITDA is a measure of profitability that reflects earnings before interest, taxes, depreciation and amortization.

“As we’ve noted in previous quarters, our strategy is built around three core areas: first, focusing on sustainable, high-quality growth; second, accelerating our path to profitability; and third, fueling product-based growth by leveraging the synergies of our ecosystem.” said Andre Soelistyo, CEO of Gotou Group, during the earnings call on Monday night.

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

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

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GoTo said that 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 total amount of revenue available after variable costs.

GoTo said demand for back-to-office and back-to-school helped improve mobility services.

“The margin improvement has not come at the cost of top line growth,” Soelistyo said.

Jackie Low said, “During the third quarter, we reduced incentives, eliminated promotional spending on unprofitable user groups, further reduced product marketing spending and continued to develop a program of structural cost savings, as We prepare our business for the road ahead.” Goto Group CFO.

More cost cutting expected

Global macro uncertainties from rising inflation and interest rates have forced tech companies including Goto, Grab and C Ltd to double down on trimming costs.

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

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

Last Friday, GoTo said it would reduce its workforce by 12% — or about 1,300 jobs. Other companies based in South East Asia including C Ltd and FodpandaAccording to media reports, this year the employees have also been retrenched.

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“As a result of this, as well as cost reduction measures related to additional people, we expect annual savings of between 915 billion rupees and 965 billion rupees, resulting in significantly improved opex next year,” Lo said.

With these cost savings measures, GoTo expects it to grow group adjusted EBITDA by three to four quarters, roughly 12 to 15 months, after contribution margin breaks-even, Soelistyo said during the call.