GoTo’s 2023 Q2 results and declining GTV

On Tuesday (15 August), GoTo released its Q2 earnings, on the same day as Sea Group. Despite reporting negative growth in GTV and revenue compared to Q1 2023, share prices barely fluctuated.

Here are some of our thoughts on GoTo’s Q2 results. For a better comparison with other tech platforms, do refer to our “Apples to Apples: Benchmarking Shopee, Grab, GoTo and other major tech platforms” and “Apples to Apples 2.0: Benchmarking Major Tech Platforms Updated With Q4 And FY 2022 Results” reports:

1. In the latest earnings report, GoTo painted a much clearer picture of its business structure and key strategies to integrate its different businesses to create a proper ecosystem. We feel that the structure, illustrated below, makes a lot of sense and is a good evolution from its previous incarnations:

But of course, whether or not GoTo is able to make this work in a truly synergistic way really depends on their execution. 

2. In the second quarter of 2023, GoTo continued its cost cutting measures throughout the organisation – following the mass layoffs announced in Q1 2023 (with General & administrative expenses dropping by 72.4% QoQ in Q2 2023).

Another key measure taken by GoTo (like many competitors in the region) was to further dial-back on giving out incentives, cutting sales & marketing expenses to IDR 1,253 Billion, a 48.1% drop YoY.

The group also combined Tokopedia’s fulfilment unit and Gojek’s ecommerce same-day delivery unit under GoTo Logistics (GTL) to optimise cost of deliveries. “GoTo Logistics currently supports around one-fifth of Tokopedia deliveries”, while Shopee Xpress handles more than 40% of Shopee’s orders.

Amidst the slow (or negative) growth and increasing competition in on-demand and ecommerce, GoTo needs to look at other means of cutting costs in order to achieve positive adjusted EBITDA by Q4 2023. 

3. Overall, GoTo’s Q2 top lines seem rather bearish as the group reported a drop in both group GTV and revenue compared to the previous quarter. The group GTV of IDR 143.7 Trillion (US$ 9.3 Billion) shows a 3.7% drop QoQ (quarter over quarter). To put that in perspective – GTV from Q1 to Q2 in 2022 grew by 7.5%.

The net revenue of IDR5.8 Trillion (US$ 377 Million) is a 3.3% drop QoQ, whilst in 2022 there was a 5.8% growth from Q1 to Q2.

4. Previously, we mentioned GoTo’s struggled with its on-demand services – ride-hailing business is relatively small in Indonesia, and the food delivery market in Indonesia contracted in 2022. This is also reflected in the Q2 results, with 3.6% QoQ drop in GTV and 3.3% drop in revenue.

A debate amongst investors is amongst the large population of Indonesia, how much percentage would have sufficient income to be willing to pay for on demand services regularly. GoTo’s larger regional rival Grab last reported monthly transacting users (MTC) at 33.3 million – in Q2 GoTo reported annual transacting users (ATC) at 53 million (a 8.6% drop QoQ). To see how the relationship between ATC, MTC and other user metrics, refer to Apples to Apples: Benchmarking Shopee, Grab, GoTo and other major tech platforms.

It seems GoTo is determined to expand the base.  To achieve that, GoTo launched Mode Hemat – a ride-hailing and food delivery options for budget customers. Mode Hemat offers cheaper ride-hailing options for shorter trips (less than 10km), as well as more affordable food delivery costs (with longer delivery times). We do not yet have enough information to predict whether these will be meaningful contributors to GoTo’s results.

5. GoTo’s ecommerce arm, Tokopedia, also seems to be struggling with growth this quarter. Tokopedia recorded a GTV of IDR 58.7 Trillions (US$ 3.8 Billion), a QoQ decrease of GTV by 6% in Q2. In comparison, Tokopedia registered a 3.4% QoQ GTV growth in Q2 2022.

6. As we mentioned in our thoughts on Sea’s Q2 results, ecommerce platforms in the region are being challenged by TikTok Shop, which is targeting to triple its Southeast Asia GMV. Many are asking – did TikTok Shop take the market share away? Do look out for our TikTok Shop report launching next week.

We’re also seeing more and more concrete evidence that Temu is indeed entering Southeast Asia, which will further intensify the competition in the region. Although we are very sceptical that Temu will choose to tackle the Indonesia market any time soon, given the consumption power and political/regulatory hurdles (SHEIN exited).  Check out our “Who is Temu” report for more insights on Pinduoduo’s global venture.

7. There is nothing really notable in the numbers of GoTo’s digital financial services arm GoTo Financial. One thing interesting is that they recently launched GoPay as a separate app – to “amass a broader and more inclusive user base beyond the Gojek and Tokopedia platforms”.

As an independent e-wallet, Gopay has the flexibility to (1) focus on providing a good e-wallet/ payment experience (2) build more (financial) features compared to previously when it was embedded in the GoTo app. With GoPay going in the ranks of OVO, LinkAja and Dana – ShopeePay remains the only mainstream wallet in Indonesia that is embedded (in the parent ecosystem app).

With reduced burn – due to cost cutting measures – GoTo has managed to extend its runway to 13 quarters (when looking at gross cash) and 12 quarters (for net cash). But, GoTo still has significantly less cash than its regional competitors and has yet to become self-sustaining.

It will be interesting to see how GoTo will juggle between trying to achieve its profitability targets without sacrificing too much growth (as they seem to be doing now), especially as competition intensifies in the region.

We will also be issuing a new version of Apples to Apples 3.0 once every platform company (Sea, Grab, GoTO, Uber, Doordash, Delivery Hero, Zomato, Meituan) covered there has released their Q2 results. Stay tuned!

If you are curious about TikTok Shop and its impact on the ecommerce landscape in the region, keep a lookout for our upcoming TikTok shop report. You can also join our exclusive online briefing “In focus: TikTok Shop” on 24 August 2023, 10am to 11am SGT.