Furthermore, the local tech giant expects transaction growth to slow down in the upcoming quarters as it shifts its focus to cutting costs and serving "profitable consumers".

Analysts expressed the view that the company’s quest for profitability will not be easy and would become the "great test of leadership" for the digital platform.

GoTo CEO Andre Soelistyo said the firm was trying to improve its bottom line by identifying the most valuable users for its business.

"By concentrating our resources on retaining and engaging users who are more profitable, we're able to spend more efficiently and capture better user margin," Andre said in an earnings call on Monday.

The result appears to show in last year’s growth in the company’s take rate, which is the monetization ratio in comparison with gross transaction value (GTV).

However, GoTo said its GTV growth would slow down in the first half of this year. Thus, it would stop revealing GTV and gross revenue for this year.

"But we're confident that the growth will recover in the second half, as we continue to scale a variety of foundational products that deliver more value and convenience to the consumers," said Jacky Lo, GoTo's chief financial officer, during the earnings call.

GoTo's stock dropped more than 4 percent in the first trading hour on Tuesday before recovering to a price of Rp 110 per share by the end of the day, 1.85 percent above the opening price of Rp 108, in a rising stock market.

Read also: GoTo aims to hit profitability milestones earlier than expected

Yorlin Ng, chief operating officer at Singapore-based venture outfit Momentum Works, said the growth rate of GoTo's on-demand segment would stabilize as people returned to pre-pandemic activities. However, there would be more potential in its e-commerce and fintech businesses.

"For example, Shopee's consumer credit business has contributed significantly to Sea Group's bottom line during the last few quarters. There is no reason why GoTo, with rich customer data, strong use cases and access to relatively low-cost capital, can't pull off the same," Yorlin explained to The Jakarta Post on March 14.

Striving for cost efficiency

GoTo forecast that its adjusted EBITDA, its operating income minus deductions for interest expenses, taxes, depreciation, amortization, share-based compensation costs and other nonrecurring items, would improve to between minus Rp 5.3 trillion and minus Rp 4.6 trillion this year. The firm says it expects the profitability metric to turn positive in the fourth quarter of 2023.

It recorded an adjusted EBITDA loss of Rp 16 trillion last year, just 3 percent less than the loss suffered in the preceding year.

GoTo announced on March 10 that it would lay off 600 employees, which came shortly after the company cut its headcount by 1,300 in November last year.

The lay-offs, including other efficiency efforts in the fourth quarter of last year, enabled the company to save around Rp 200 billion in fixed operating expenses in each of the first two months of this year, the firm said in a statement.

GoTo also said it had saved Rp 2.8 trillion in promotional and marketing expenses in the last quarter of 2022 compared with the same period of 2021.

Read also: Tech investors now want EBITDA, not growth at all costs: JP Morgan

Momentum Works' Yorlin said the "drastic adjustment" at GoTo would be a great test of leadership for its management.

The efficiency drive had to be done in a way that did not see GoTo cede market share to Grab and Shopee, she said. Aside from those major competitors, TikTok Shop was aggressively challenging all the incumbents in the e-commerce sector.

"GoTo will need to act decisively before any further erosion of market share," Yorlin explained.

Tesar Sandikapura, head of the Indonesian Digital Empowering Community (IDIEC), expressed pessimism that GoTo would find the right balance to hit profitability quickly.

"[The cash-burning process] has been going on for the past five to seven years, and GoTo [seems to] have just realized that it needs to achieve profitability right now. I think it's already quite late," Tesar told the Post on March 15.

Challenging cash position

Momentum Works' Yorlin also said that GoTo had the weakest cash position among the three regional internet giants and would probably need more decisive measures to achieve self-sufficiency.

In the third quarter of 2022, GoTo had Rp 31.52 trillion in cash and cash equivalents, which compares with $5.33 billion and $7.3 billion, respectively, for Grab and Sea Group.

However, an analysis from MNC Sekuritas that was released on March 17 states that GoTo, Grab and Sea Group possess a similar cash runway based on the net cash liquidity approach.

According to GoTo the $1.9 billion in cash and cash equivalents it had at the end of last year is sufficient for it to get to a positive operational cash flow without additional funding.

If things went south, Yorlin said, GoTo could maybe improve its cash position by issuing convertible bonds. According to her, the strategic value of GoTo's assets should not be underestimated, as strategic investors might want a piece of the company.

"Such bonds might not be cheap, but if secured, they will help the company sail through the winter," Yorlin stated.

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