Yahoo Finance GoTo’s Loss Narrows Sharply After TikTok Deal Boosts Bottom Line
(Bloomberg) -- GoTo Group reported a narrower quarterly loss after the Indonesian company handed its e-commerce business over to TikTok to shave costs and focus on its main ride-hailing service.
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The company, which competes with Singapore’s Grab Holdings Ltd. in ride-hailing and food delivery, reported a 48 billion rupiah ($2.9 million) adjusted loss before interest, taxes, depreciation and amortization for the three months through June. That compares with a pro-forma loss of 885 billion rupiah a year earlier.
GoTo is focusing on the bottom line 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.
As part of the pact, Jakarta-based GoTo gets regular payments from TikTok. The deal contributed a net 157 billion rupiah in fees for the second quarter. For the full year, GoTo reiterated it expects to break even on an adjusted Ebitda basis.
Growth is starting to bounce back to the triple-digit pace of past years, despite stiff competition and shaky consumer spending.
Second-quarter net revenue, which strips out incentives to driver and merchant partners and promotions to users, rose 115% on a pro-forma basis to 3.5 trillion rupiah after it convinced more people to spend on its budget friendly products. The company also said it is embarking on an AI push, and released its first feature — a voice assistant — earlier this month.
Still, GoTo has yet to reach profit on a net income basis, despite thousands of job cuts and large reductions in marketing spending. Since Patrick Walujo took over as chief executive last June, the company has moved closer to profitability — yet its shares have roughly halved.
What Bloomberg Intelligence Says
GoTo’s continued integration with its e-commerce partner TikTok’s 100 million active Indonesian users should help it sustain strong momentum in gross transaction value in 2Q, fueling GoTo’s passive e-commerce fee income, about 40 bps on GTV. The company’s bread-and-butter on-demand services segment — comprising ride-hailing and food delivery — could see a revenue pickup as the company reinvests in new products, such as its economic “Hemat” product line to acquire new users, utilizing resources that were freed up after it sold its high-cash burn e-commerce unit, Tokopedia to TikTok. These put GoTo on track for its group adjusted Ebitda to break even for full-year 2024.
GoTo could be included in the local exchange’s Watchlist Board if foreign investors bow out, thereby sapping liquidity.
-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.
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