GoTo hits operational profit in Q4, plans share buyback

INDONESIA’S biggest tech company GoTo reached a profitability milestone in its fourth quarter ended Dec 31, 2023, after adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) turned positive at 77 billion rupiah (S$6.6 million).

The latest Q4 results marked the eighth consecutive quarter of improvement in adjusted Ebitda, a metric favoured by loss-making tech companies. This came after GoTo slashed costs and shook up its operations to convince investors of its long-term potential. A year ago, adjusted Ebitda was negative, at minus 3.1 trillion rupiah.

The company on Tuesday (Mar 19) said it was planning a share buyback of up to US$200 million, which is subject to regulatory and shareholder approval. It expects to achieve adjusted Ebitda breakeven for the full year 2024.

“We believe that initiating a buyback will be prudent, given there’s significant value in our stock, our cash position is strong, and we have confidence in our ability to continue to improve our cash flow,” GoTo chief executive Patrick Walujo said in an earnings call.

GoTo’s Q4 net revenue rose 26 per cent to 4.3 trillion rupiah, beating street estimates of 4.1 trillion rupiah. The group partly attributed the better results to targeting larger segments of the market, and improvements in the consumer lending business.

Fourth-quarter net loss deepened to 80.9 trillion rupiah from 19.5 trillion rupiah a year ago, while full-year net loss widened to 90.5 trillion rupiah from 40.4 trillion rupiah.

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A 78.8 trillion rupiah goodwill reversal was booked due to the Tokopedia and TikTok transaction, which resulted in the loss of control of Tokopedia from Feb 1, 2024.

GoTo in December struck an e-commerce deal with ByteDance’s TikTok in order to halt Tokopedia’s slide in market share. TikTok will invest more than US$1.5 billion in a joint venture that it will control, without additional dilution to GoTo.

During the fourth quarter, GoTo’s spend on incentives and product marketing fell 33 per cent, which it said resulted in savings of 1.7 trillion rupiah.

Cash recurring fixed costs decreased 39 per cent, while recurring cash corporate costs fell 42 per cent.

The group’s on-demand services segment also hit positive adjusted Ebitda, at 239 billion rupiah. While gross revenue was mostly flat at 3.2 trillion rupiah, contribution margin rose from 205 billion rupiah to 822 billion rupiah.

GoTo derives contribution margin by deducting the cost of revenue, a portion of sales and marketing expenses, and other expenses from net revenue.

Gross transaction volume (GTV) rose 4 per cent quarter on quarter to 14 trillion rupiah, after initiatives such as a more affordable transport product were implemented.

Gross revenue for e-commerce increased 9 per cent to 2.4 trillion rupiah, while adjusted Ebitda turned from negative 1.2 trillion rupiah to positive 223 billion rupiah. GTV, however, fell 8 per cent.

Gross revenue for GoTo’s fintech business, a key priority for the group’s top-line growth, rose 26 per cent to 605 billion rupiah in Q4.

Lending and consumer payments drove the growth. GoTo’s consumer lending loan book increased 32 per cent from the preceding quarter to 1.9 trillion rupiah.

More than 70 per cent of GoTo’s loan book was channelled by Bank Jago, up from under 60 per cent in Q3. GoTo is also planning to launch “buy now, pay later” loans with TikTok and working with BFI Finance on vehicle financing, its management said during the earnings call.

Shares of GoTo listed on the Indonesia Stock Exchange fell 1.37 per cent, or one rupiah, to close at 72 rupiah on Tuesday, before the results were released.