This is the actual recording from GoTo’s public exposure on 8 Dec 2022.
The meeting happened on Zoom and was a mix of Bahasa Indonesia and English. There was live translation of the Bahasa during the meeting, which has been transcribed below.
Emcee: GoTo had a strong third quarter financial performance where in the third quarter of 2022, gross income has grown 22% year on year and gross tr
ansaction value or GTV for the same period grew by 33%. GoTo has also been on the right track towards profitability. The management of GoTo will further explain the main strategy and priorities of our company, including the products and innovation in GoTo’s main line of business.
Board of directors at the meeting – Melissa Siska Juminto, Hans Patuwo, Jacky Lo, Anthony Vijaya
Key management at the meeting – Patrick Cao (President GoTo), R.A. Koesoemohadiani (Corporate Secretary), Mr. Regi Susanto (Head of Strategy Partner)
Melissa (Board of Director) :
First and foremost, we would like to reiterate that amidst challenging global macroeconomic and market uncertainties situation, the company has recorded 30% increase in growth revenue compared to Q3 2021. Our key focus is to grow a sustainable business in order to accelerate our path to profitability.
We’ll continue to strengthen our market leadership in Indonesia and expand user engagement within our ecosystem by investing in our product, brand, and infrastructure. Our efforts will be focused on our core business segments and high quality consumers. We are confident that with our scale and position as market leader, we will remain strong while we improve monetization, rationalize incentive spending and optimize efficiency. We believe that the GoTo ecosystem consisting of integrated products and solutions is our key strength. Synergies within the ecosystem enable to provide unique and efficient services to our customers. We will continue to enhance the synergies to achieve sustainable growth while continuously reducing operational costs and ensuring that our business is conducted in an efficient way in order to accelerate our path to profitability.
These efforts have resulted in solid growth in our core business segments. In the next section, we will elaborate on our growth and performance metrics which we will be presented by our chief financial Officer, Jacky Lo along with our head of strategy partnership Regi Sutanto.
Jacky Lo (Director):
In Q3 2022, we recorded GTV of Rp 161 trillion and revenue of Rp 5.9 trillion. These two performance indicators grew by more than 30% compared to the same period last year. Our GTV of Rp 161 trillion exceeded our guidance range, which was between Rp 151 and 156 trillion. Our growth revenue of Rp 5.9 trillion was at the upper end of the guidance range, which was between 5.7 and 6 trillion.
These gains were made despite our incentive reductions and growing macroeconomic pressure on consumers’ budgets. We believe that this was achieved as a result of our product focus on high quality users, which has helped us maintain customer engagement and remain resilient. This is a sound strategy and customers can clearly see the benefits that our product and service innovation brings.
The growth of our ecosystem is reflected not just in our topline numbers, but also in other important performance indicators. For example, the number of transacting users in our ecosystem in the past 12 months, up to September 2022, reached 67 million, or a 20% growth compared to the same period in the previous year. When this number is compared to the GTV previously mentioned, we can see that the average transaction of value per unique user over the course of a year amounted to Rp 9 million. This figure is 18 higher than the previous year. In Q3 of this year we also recorded higher spending and transaction frequency of customers in our ecosystem.
GoTo’s digital ecosystem handles 693 million orders throughout the third quarter of 2022, amounting to 28% year on year growth. Our GTV, growth revenue, number of transaction users, average transaction value and order volume all show how our focus on quality growth has positively impacted the company’s performance. By being an important part of the life of millions, we continue to be a trusted source as a provider of innovative products and services that meet customers daily needs. By doing so, we create economic opportunities for our partners and add value to our shareholders and other stakeholders.
In addition to focusing on quality topline growth, we are also prioritising efficiency with initiatives that help to reduce costs, grow our margins, and accelerate our path to profitability. Our efficiency initiatives cover the rationalization of incentives, streamlining of product marketing, and closer integration within our ecosystem segments to optimize operational costs. These efforts have made a positive impact on two important financial indicators:
First, contribution margin. One of our key profitability metrics, which can be explained as net revenue minus variable costs. As you can see from the screen, our contribution margin for the third quarter of 2022 is minus Rp 1.2 trillion. This number showed a 43% improvement compared to the same period in 2021 and an improvement of 41% compared to the previous quarter.
The same improvement can be seen in our adjusted EBITDA. Our ability to manage our OPEX this quarter, combined with the uplift in our contribution margin, resulted in adjusted ADA improving by 11%, year on year, and 10% Q-o-Q.
The progress we have made on our adjusted EBITDA reflects concerted efforts by the team to streamline recurring non-personal tasks.
Let’s go into details, starting with on demand service. So on-demand service was a key contributor in driving the company’s growth in the third quarter of 2022. As a result of improvements in mobility service, GTV for on demand service grew to 15.7 trillion in Q3 2022 representing a growth of 24% year on year. The company expects this upward trend to continue into fourth quarter. Growth Revenue for on demand service in the third quarter grew 31% year year outpacing GTV growth. The increase in gross revenue was driven by improved monetization through higher take rate from renegotiated merchant commissions and from platform fees.
Our ecommerce segment likewise recorded strong GTV growth of 15% year on year during the Q3 2022. Gross revenue growth over the period also continued to exceed that of GTV amounting to 27% year on year. The year on year growth was driven by our revised C2C commissions team implemented in June, Introduction of consumer platform fees is in August, and strong adoption of value added services such as ads and logistics resulting in improved monetization.
And moving on to the financial service segment, we remain focused on depending GoPay penetration across the ecosystem and improving the quality of users in the third quarter. This resulted in a 78% year on year increase in GTV and a 48% year on year increase in gross revenue. Strong performance in our operating companies means we are confident in providing full year guidance of GTV of between Rp 613 to 619 trillion, and gross revenue between Rp 22.6 to 23 trillion.
GoTo continues to build on its effort to acquire more loyal customers through product innovation by leveraging synergies across our ecosystem, or commonly what we see such as GoPay Coins is a good example of this.
Whenever our customers transact, within an ecosystem, whether it’s hailing a Ride on Gojek, ordering food on Gofood, making e-commerce purchase on Tokopedia, or paying bills with GoPay, today they can be rewarded with GoPay coins, which can be used anywhere within the GoTo ecosystem. This program has encouraged the customers to return and to transact more with us.
By the end of the third quarter of 2022, about 21% of active transacting users had used GoPay coins. These results have shown the increase in GoPay coins, resulting in more people using multiple go to products, giving us confidence in GoPay Coins’ effectiveness in encouraging cross-platform usage.
We also introduced a subscription model, namely GoTo Plus on Tokopedia within a short period of time. GoTo Plus has achieved over 50,000 subscribers based on our preliminary data. Subscribers transact and spend more than five times higher compared to non-subscribers to date. The other product innnovations that we have recently launched in response to evolving customer’s needs such as GoTo Hemat which provides a more affordable transport option for customers in several Indonesian cities.
We also introduced Gofood Hemat, which offers free food delivery within a certain radius to customers who are prepared to wait slightly longer. In June this year, we have launched Go Transit in partnership with Kereta Commuter Indonesia or KCI. In order to make KCI ticket purchases easier through Gojek applications. Since its launch, GoTransit has become Indonesia’s number one choice for online ticket purchases, amounting to 74% of all KCI digital ticket sales as of the end of September 2022.
All of these examples has illustrated our commitment in GoTo improve the daily lives of our consumers by providing them with goods and services they need in the most convenient way possible. The growth and adoption figures that we have shared are proof that our customers likewise recognize the benefits of our ecosystem and their continued support will underscore the company’s continued growth and our path to profitability.
The risk factors
Key risk factors that may affect the operational and financial performance that was presented previously, as well as impact the share price include
- macroeconomic conditions
- capital market conditions
The business has experienced unprecedented times from covid-19 and currently we are facing continued geopolitical, macroeconomic and capital markets uncertainty that has impacted customers’ confidence.
We still cannot predict when these things will improve, and like many other companies, we are not immune to the potential impact. Nevertheless, we will continue to move forward and remain committed to quality sustainable growth towards an accelerated path to profitability.
GoTo is committed to the implementation of environmental, social and governance or ESG practices that are on par with the global industry ESG standards. The result of our company ESG efforts throughout the third quarter of 2020 include the launch of GoTo Hijau, the company’s first ecommerce guideline to support merchants in their effort to transition to more sustainable business practices by reducing packing materials.
And operational post electrum, an EV ecosystem, joint venture between GoTo and DBS Energy Utama, which has already run 4 million kilometers of electric motorcycle rides exceeding the original target of 1 million kilometers that was set until the end of 2022. GoTo also has received an AA rating from MSCI for the company’s ESG performance.
This makes us an industry leader in the action against climate change and has put us in the top quarter of information security, data privacy, and human resource management.
The ESOP and consultant as stated in the company’s IPO Prospectus, our shares option program is managed by one of our shareholders. GoTo People for Fund or GPF, makes grant share options to eligible participants. Share options are rewarded as performance bonus, for years of service or for service rendered.
Everyone’s share option issued by GPF can be exercised for 1 series A share of the company. This program will be conducted in stages and will continue until all shares options, which can be administered by GPF have been allocated to participants with a target date, not exceeding the year 2050. As of December 1st, 2022, there was 9,761 participants who have received their options and 3,440 participants who have submitted a request to exercise their options. From those who have submitted their request, as of December 2nd, 2022, there was 2,585 participants who have successfully exercised their options and received the company’s share from GPF.
Company’s corporate exchange: Company had previously received approval to issue additional shares based on non pre-emptive guides or NPR in accordance with the POGK.
For entities that apply multiple floating shares – the company will be able to conduct an NPR of a maximum of 10% of the total issued and paid up capital of the company. Therefore in accordance with regulations, the total shares that can be issued by the company is a maximum of 118, 436, 392, 950 series A shares or 10% of the total issued and paid up capital of the company. The company may implement the NPR anytime until June 2023.
As of now, the company is exploring opportunities keeping in mind the macroeconomic factors and capital market sentiments.
Why does your share price continue to decline in GoTo? How will you improve the market confidence given such a situation?
Sharp price fluctuations, like those of all publicly listed companies are driven by multiple factors. Including, but not limited to macroeconomic conditions, capital markets, conditions, competition and company performance. With the recent lock-up expiry, there’s an increase in the number of free flow shares in the market, which has triggered an increase in the number of shares being traded.
Some possible reasons include early investors who entered at a lower share price, realizing returns, or other liquidity needs. Many of these variables are outside the control and knowledge of the company. The company continues to focus on driving sustainable product-led growth, increasing engagement from quality users, and increasing efficiencies to accelerate our path to profitability.
In addition, the company continues to engage with new potential investors, especially leading up to our potential global index inclusion in the first half of 2020. We believe that with these efforts combined GoTo to deliver long-term value to all our shareholders.
We read that there was GoTo share that was sold at two rupiah. Is that true? Is that part of the implementations of ESOP program and why is it, so cheap?
That two rupiah price is called Strike Price or the implementation price that has to be created by the participants of ESOP program in order to buy shares. That has become their rights based on the share options that they are eligible.
The ESOP program is a program that has been implemented by many corporates, and it is relating to the performance of individuals and also the corporate program, and has been explained in the perspective of our IPO company and after the lock-up period over the participants can exercise their rights for their option of shares by buying or to create the option share that they have.
And. In this case, they will get the share of the corporates and they will become the shareholders of the company with the same rights as other retail shareholders. It is important to note that implementation of this share option by ESOP participants does not automatically means that they can sell their shares.
What is the commitment of the investors leading investors of Goto after this lockup?
Goto has a comprehensive shareholder base. As I mentioned earlier, it’s not uncommon for shareholders to see liquidity post lockup expiring, particularly if they are earlier stage investors. Although we cannot speak on behalf of investors, we believe that in general they continue to believe in the fundamentals and future growth opportunities of GoTo.
As we convey previously, the company continues to record solid improvements in performance. Our duty as a management team is to ensure that the company remains focused on pursuing quality growth, striving to ensure operational efficiency, all to accelerate our path to profitability.
Are there strategic actions to accelerate your current profitability?
So as discussed, Q3 earnings, both contribution margin and adjusted EBITDA, they show strong improvement quarter on quarter and also year on year.
We are focused on making good progress on profitability. So, if you look at on-demand service, it reached contribution margin positive in September, 2022. So that’s, two quarters ahead of guidance. So we expect this trend on contribution margin and just the EBIDA will continue and, uh, we are seeing great progress in Q3 and that trend we expect to continue into the future quarter.
As you can see in the results for this period, we are making major improvement, both to the top line as well as cost optimization and at the same time driving efficiencies across the organization. All these levers, they are simultaneous and we plan to continue progressing both. Now primary focus is on quality users and also improving our cost control measures with the goal of achieving long-term sustainable growth.
On the top line, we have increased our revenue through our focus on product-led high-quality users. We have done this amid a lot of macro obstacles. So in initiatives such as like increased monetization, stronger value and services, incentive optimization, product innovation, all this actually puts customer engagement across multiple products.
Why are GoTo employees salaries burdens are big in the report? The last report for 10,541 employees got a burden of 11.2 trillion.
Thank you for the question. Please allow me to clarify – most or more than half of the compensation that we provide for the last nine months ended in the September 13th and the 22 is in the form of stock basis allocation, as you all know, we did IPO in 2022 and most parts of the IPO process we provide share allocation for the employees.
The burden of the conversation in this share is not a cash item. This compensation-based share is general, is a program compensation based on the performance.
We have also done some measurements to manage funding that relate to human resources, implemented control to recruitment and limited non-essential business travel, also to conduct organization efficiency.
And the results of these measurements will be seen in the following quarter. Besides, by having employees efficiency impacted into 1,300 people or 12% of the total of our employees, this decision is a hard decision for us. However, we need to do it to build a more healthier business. Performance in the future will kill evaluating and to optimize other operational.
According to your calculation, what’s the company’s estimated capital required to continue running the business for the next few years? Will Goto require external financing or fundraising or will the cashflow be sufficient until the business becomes self sustaining in terms of cash flow to continue running the business for the next few years?
Given the decisive actions we have taken to improve margins and set ourselves on a course for long term financial sustainability, we believe our balance sheet is sufficiently healthy to take us to profitability. So we expect to be able to accelerate our group adjusted EBITDA, and we’ll look to provide more detailed guidance on this topic in the future.
But you can see in our Q3 results, uh, we are heavily managing expenses. So the average monthly cash burden in the third quarter was reduced by about 13% compared to the previous quarter, and about 20%, lower compared to the first quarter. So we’ll continue our disciplined approach to reducing operating expenses, which we are confident will result in continuous sequential improvement in our monthly cash burn.
We may also consider divesting some of our non-core assets and also investment portfolio. And, we’ll not make any new investments that do not contribute to the acceleration of our profitability. So in addition, subject to market conditions, we can always leverage our June AGMs approval or non-preemptive issuance of up to 10% of the issued and paid-up capital of the company.
What is GoTo’s strategy to continue record positive performance after being placed in the new economy board of Indonesia stock exchange?
We appreciate the action from Indonesia Stock Exchange in presenting the new economy board for corporates, which improves the growth of the digital economy and in creating new products for innovative services and to improve productivity and economic growth, as well as for social benefits and also higher growth rate.
And as previously explained, with this new economic board, GoTo will become part of the emittance that has been established by the Indonesia Stock Exchange and we have met all the criteria of the main board and also the new economic board. There is no difference between both, but GoTo is still part of the index of the main board.
And basically this change is part of the technical matters and the strategy of our company in the future will remain the same as presented by our management. And we continue to focus to encourage our sustainable business growth through our innovative products and quality services. And to improve engagement with the past, with the customers and to improve the efficiency and also to accelerate our steps towards profitability.