Yahoo Finance Indonesia Tech Giant Brings Forward Profit Goal After Job Cuts
(Bloomberg) -- Indonesia’s GoTo Group brought forward its profitability targets by a year, joining other Southeast Asian tech giants in wooing investors with promises to reverse losses soon.
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GoTo said it expects adjusted earnings before interest, taxes, depreciation and amortization to turn positive in the fourth quarter of 2023. Its chief executive officer said in November on an earnings call that the ride-hailing and e-commerce firm expected to achieve that around late 2024 at the earliest.
Money-losing peers Grab Holdings Ltd. and Sea Ltd. are trying to convince investors of their long-term prospects in the face of a possible recession. Jakarta-based GoTo, which for years enjoyed rapid growth, has cut 12% of its workforce as layoffs rock tech firms around the world.
Path to Profitability
GoTo shares climbed as much as 5% to 127 rupiah in early trade on Friday. That compares with the average price target of 189 rupiah, according to estimates compiled by Bloomberg. The stock has fallen more than 60% since its April 2022 debut.
CEO Andre Soelistyo on Thursday outlined a plan to bring GoTo closer to achieving positive operating cash flow. The company won’t carry out further mass layoffs, he said, but didn’t rule out normal attrition as it reviews its cost structure.
GoTo doesn’t need extra fundraising to meet its profit goal, judging by its cash position and adjusted Ebitda loss run-rate, Mandiri Sekuritas analysts Adrian Joezer and Ryan Aristo wrote in a report with a buy rating on the stock.
The company will make changes to ride-hailing and e-commerce commissions, ensure its incentive spending is more targeted and develop higher margin services including new lending products. Last week, the company sidelined several key executives and switched up its board in its biggest management shakeup to date.
“We are going to accelerate our path to profitability,” Soelistyo said in an interview. He said GoTo now has an internal motto which translates as “every line item matters,” to emphasize its focus on containing costs.
GoTo said fourth-quarter gross transaction value rose 18% from a year earlier, while gross revenue was closer to the upper end of its forecast. The company is scheduled to report full earnings for the period in the coming weeks.
Like tech companies worldwide, GoTo faces increasing pressure to cut costs as it grapples with a potential global recession. Consumers are pulling back on spending as rising interest rates and prices weigh on their finances.
Formed via a merger of ride-hailing provider Gojek and e-commerce firm Tokopedia, GoTo raised $1.1 billion in one of last year’s largest initial public offerings. Early backers such as Alibaba Group Holding Ltd. and SoftBank Group Corp. were held to an eight-month lockup to support the stock price following the IPO.
Then the market soured. Southeast Asian food delivery spending grew at the slowest pace in at least four years in 2022, highlighting the challenges faced by GoTo and its rivals. Its plan to facilitate controlled stake sales by pre-IPO backers — aimed at avoiding a bigger selloff at once — fizzled.
--With assistance from Fathiya Dahrul.
(Updates with share reaction, analyst comments from fourth paragraph.)
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