Home/ Companies / Indonesia’s Tech Champion GoTo to Struggle With Stoplights in 2023

Indonesia’s ride-hailing and e-commerce company GoTo Group is racing toward profitability—but perhaps not fast enough for suddenly risk-averse investors.

GoTo, Indonesia’s largest technology company, posted an adjusted loss before interest, tax, depreciation and amortization for the fourth quarter of 3.1 trillion Indonesian rupiah, equivalent to $201.89 million. That was less than half what it lost a year earlier, mainly thanks to aggressive cost cutting and a new focus on high-quality profitable users.

The company reiterated that it expects to become profitable on an adjusted basis by the fourth quarter of 2023, and anticipates a 60%-65% reduction in cash burn this year.

Still, the company’s shares fell 7% Monday even before it reported results. The stock has now plummeted 72% since its public listing in April last year.

All of this leaves the company in a tough spot. GoTo’s aggressive new focus on profitability—especially as consumers are losing their appetite for spending more broadly—will probably leaveit vulnerable to higher outlays by the competition. But it might have no choice given how ugly the market mood has become and gathering clouds over the global economy. The company says it will react to competition in a sustainable manner.

Growth still held up reasonably well last quarter: gross transaction value rose 18% on the year and the company’s contribution margin improved. But the outlook is clearly getting darker.

GoTo is present across more different business lines in Indonesia than its rivals and is therefore seen as a proxy for the Indonesian digital economy overall.

Residents of Indonesia, Southeast Asia’s largest economy, hit the brakes on spending last year, according to President Joko Widodo, who last month asked people to save less money and spend more. A possible global recession could hit Indonesia hard: commodity exports such as coal are still an important driver of growth.

GoTo says it expects a further slowdown in the first half of this year before gross transaction value growth revives in the second half.

The bigger problem may be costs. Nirgunan Tiruchelvam, an analyst with Aletheia Capital, reckons that operating expenses would have to be cut by over 25% for the company to become free cash flow positive in 2024. Defending market share, and regaining growth momentum in the second half of 2023, might prove difficult if the company does indeed keep cutting costs so aggressively.

GoTo is hardly alone in its new focus on profitability—other Southeast Asian tech companies such as Sea Ltd. are making a similarly sharp tack.

Given the darkening global financial outlook, and worries over Indonesia’s growth specifically, a little caution makes sense. But prudence is a tough watchword for young tech companies in fast-growing, competitive markets. GoTo has a tough balancing act ahead of it in 2023.

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