GoTo takes a knife to costs, but market remains unconvinced

GoTo, Indonesia’s biggest digital ecosystem, announced its third-quarter results for 2022 on Monday.

The company, formed by the merger of on-demand services company Gojek and ecommerce platform Tokopedia in May 2021, has been investing in three goals: achieving sustainable growth, accelerating its path to profitability, and bolstering product growth with ecosystem synergies.

During GoTo’s earnings call this quarter, CEO Andre Soelistyo said the company has made “significant progress on all three fronts,” particularly in its efforts to hit profitability.

This is evident in GoTo’s gross revenue growth, which saw a 30% year-on-year (YoY) uptick to 5.9 trillion rupiah (US$376 million). Gross revenue represents the total value attributable to GoTo from each transaction, without any adjustments for incentives paid to partners or promotions to consumers.

See also: GoTo Group’s financial health in 4 charts

Adjusted EBITDA loss also improved by 11% on an annual basis to US$236 million.

However, adjusted EBITDA loss for the nine months ended September 30, 2022 came in at US$811 million, 27% higher compared to the same period in 2021.

That could be why the company’s share price was down 6.7% a day after the results were released, on top of a 5.4% slide from the previous day.

Here are our key takeaways from the results and earnings call.

Cost-cutting not fully reflected

GoTo’s contribution margin – a key profitability metric – improved faster than anticipated.

At the group level, contribution margin rose by 43% YoY, beating guidance. Since the previous quarter, the improvement in contribution margin was driven largely by growth in gross revenue and a reduction in incentives.

Contribution margins are expected to continue their upward trajectory. As Soelistyo noted, the company is well positioned to push forward its “group and segment contribution margin breakeven timeline by one or two quarters.”

Investing in innovation

On-demand services rebound

Stable ecommerce growth

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