(Bloomberg) -- Indonesia’s GoTo Group reported a quarterly profit on an adjusted basis, a step in its yearslong effort to cut costs and prove to investors it can make money.
The company, which battles stiff competition from Singapore’s Grab Holdings Ltd. in ride-hailing and food delivery, reported a 137 billion rupiah ($8.7 million) adjusted earnings before interest, taxes, depreciation and amortization for the three months through September. That compares with a pro-forma loss of 559 billion rupiah a year earlier.
GoTo reiterated Wednesday it expects to break even on an adjusted Ebitda basis for the full year. Third-quarter net revenue, which strips out incentives to driver and merchant partners and promotions to users, more than doubled on a pro-forma basis to 3.9 trillion rupiah.
The company has cut jobs and exited businesses as user growth cools and competition from Grab and smaller regional rivals weighs on margins. To improve its profitability, the Indonesian internet leader relinquished control of loss-making e-commerce arm Tokopedia to ByteDance Ltd.’s TikTok in a $1.5 billion deal. It also shut down its operations in Vietnam in September to focus on reaching profitability in its main operations in Indonesia and Singapore, while expanding in areas such as consumer loans.
Still, GoTo has yet to reach positive net income, despite thousands of staff cuts and large reductions in marketing expenditure. Since Patrick Walujo took over as chief executive officer last year, the company has moved closer to profitability — yet its shares remain down about 80% since its 2022 initial public offering.
GoTo’s gross revenue fell 21% to 4.7 trillion rupiah for the September quarter, in large part because of the Tokopedia sale. On a pro forma basis, which excludes the assets sold off, GoTo reported a 34% increase in revenue for the quarter and a net loss of 655 billion rupiah, narrowing from 1.55 trillion a year earlier.
What Bloomberg Intelligence Says
GoTo appears on track to break even on an adjusted Ebitda basis for the full year amid lower cash burn, largely driven by the sale of its e-commerce business to ByteDance’s TikTok. Additional support could come from deeper integration with e-commerce partner TikTok Shop, which is expected to pay GoTo fees we calculate at 40 bps, based on Tokopedia’s gross-transaction-value (GTV). Losses in GoTo’s on-demand-services segment could narrow further, providing more support to improve the bottom line over the next few quarters.
-Nathan Naidu, analyst
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While the TikTok deal and the cost cuts are set to ease pressure on GoTo’s finances, the difficult market has prompted the company and its competitors to consider aggressive options. GoTo and Grab this year revived discussions about a merger of their core businesses, Bloomberg News reported, a union that could allow them to reduce spending to attract users.
(Updates with net income and gross revenue from the sixth paragraph)
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