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(Bloomberg) -- Indonesia’s GoTo Group reported its third straight quarterly profit on an adjusted basis, a step forward in its bid to curb costs and drive sales in a tough ride-sharing and delivery market. Adjusted earnings before interest, taxes, depreciation and amortization were 393 billion rupiah ($23.4 million) for the first quarter, after a pro forma loss of 101 billion rupiah a year earlier, GoTo said in a statement on Tuesday.
Net revenue, which strips out incentives to driver and merchant partners and promotions to users, rose 37% on a pro forma basis to 4.2 trillion rupiah. The Indonesian internet leader has been making strides in its yearslong effort to cut costs and prove to investors it can make money.
The company has cut jobs and shuttered business units as user growth cools and competition from Singapore’s Grab Holdings Ltd. and smaller regional rivals weighs on margins. In a move that would upend the regional market, Grab is weighing a takeover of GoTo at a valuation of more than $7 billion.
While the regulatory hurdles are considerable, both companies have accelerated talks for a combination, Bloomberg News reported. Shares of GoTo are down about 70% since it went public in Indonesia in 2022. Still, they’ve gained more than 30% over the past 12 months as the company’s earnings improved, in line with the stock performance of main rival Grab.
As part of its cost-cutting drive, GoTo relinquished control of loss-making e-commerce arm Tokopedia to ByteDance Ltd.’s TikTok in a $1.5 billion deal.
It also shut down operations in Vietnam last year to focus on reaching profitability in its main operations in Indonesia and Singapore, while expanding in areas such as consumer loans. The company reaffirmed it expects to post adjusted Ebitda of as much as 1.6 trillion rupiah for the full year.
GoTo — like its suitor Grab — has been pushing into new growth areas in mobility and delivery as well as areas such as consumer loans. To help drive user spending, it has launched more affordable and premium options for rides and delivery, as well as features which allow people to transfer money as gifts. Growth has cooled significantly from triple-digit rates in years past as competition intensified and consumers curbed spending in a tough economy.
What Bloomberg Intelligence Says Strong prospects for fintech and on-demand services likely pave the way for GoTo’s solid net-profit trajectory, having achieved its first full-year of positive adjusted Ebitda in 2024. The fintech segment, which broke even in 4Q, is expected to drive at least 20% of Ebitda this year, with the loan book likely to achieve the goal of 8 trillion rupiah ($475 million) vs. 5.
2 trillion rupiah currently, fueled by high-margin buy-now-pay-later loans to TikTok shoppers. On-demand services should remain the main profit driver amid a ramp-up of faster, premium-food delivery services and advertising from merchants. -Nathan Naidu, analyst Click here for research More stories like this are available on bloomberg.
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