GoTo Gojek Tokopedia PT

Hello, everyone. This is Reggie Susanto, Head of Investor Relations. Welcome to the PT GoTo Gojek Tokopedia TBK First Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. On today's call, Patrick Walio, President Director and Group CEO, and Jackie Lo, Group CFO, will deliver prepared remarks. Following their commentary, we will open up the call for questions and be joined by Thomas Husted, our Vice President Director and President of Financial Technology, Hans Patuo, our Chief Operating Officer, Catherine Hindra Suchahio, our President of On-Demand Services, and Melissa Siska-Juminto, Director of the company. We would like to highlight that the information presented today has been prepared solely based on unaudited, consolidated, selected financial information for the three months ended March 31, 2024. As a reminder, today's discussion may contain forward-looking statements about the company's future business and financial performance, as well as certain non-Indonesian financial accounting standard measures as complements to the Indonesian financial accounting standards disclosures. Before using and or relying on these measurements and forward-looking statements, Please take note of our disclaimer and cautionary statements disclosed in our earnings presentation and press release. During the earnings call, we will review the results of our operations and earnings presentation, which can be found on our website. Our reporting currency is the Indonesian rupiah, and we will denote the U.S. dollar equivalent by applying an exchange rate of 15,853 rupiah to one dollar, based on the middle rates published by Bank Indonesia as of the end of March 2024. We will refer to pro forma figures to facilitate like-for-like sequential and year-on-year comparisons of our performance following the closing of our recently announced agreement with TikTok and the upcoming deconsolidation of GoToLogistics. These pro forma figures assume that Tokopedia and GoToLogistics were deconsolidated on January 1st, 2023. Further, in the on-demand segment, we have changed our business model for certain delivery businesses from an agency model to a principal model, while also including a number of additional items in our GTV figure to bring our reporting in line with that of regional and international peers. We will discuss this further in the financial section. We will also refer to core GTV, which excludes our merchant payment gateways. For more information and additional disclosures on our recent business and financial performance, please refer to our earnings press release and supplemental presentation, which can be found on our IR website. With that, I will turn the call over to Bob Patrick.

Thank you, Reggie. Hello, everyone, and thank you for joining us today. During our last call, I set out for the foundational changes we made to our business in 2023 as we met our target to achieve positive adjusted EBITDA in the fourth quarter. Now, as we look ahead to 2024, we must build on that foundation by accelerating growth and investing for the future. We will do this by growing our user base, expanding our wallet share among existing users, reducing operating costs, and strengthening our partnership with TikTok. In Q1, top-line growth was healthy with Performa, CoreGTV, and growth revenue up by 32% and 80% year-on-year, respectively. Group Performa adjusted EBITDA turned slightly negative to R102 billion of US$6.4 million. This is due to our ramping up of investments in fintech, as well as seasonal slowness on the on-demand services in January and February. These factors were expected and we remain on track to hit adjusted EBITDA breakeven for the full year. On a year-on-year basis, our former adjusted EBITDA losses were reduced by 89%. While results in January and February are soft, primarily due to seasonality, we have been reinvesting into our business with a focus on product innovation rather than incentives. We are already seeing promising results, particularly in March and April, driven by user growth, BNPL in e-commerce, and accelerated integration and payments adoption on TikTok. The improving performance in May and April is a strong indication that we will grow faster for the rest of the year as our investments take shape. I will now turn to each of our business segments. On January 31st, we closed our deal with TikTok, immediately turning our e-commerce segment cash flow positive. Since then, our management has been working closely with TikTok across different areas. We are pleased that the partnership is off to a good start and are confident that it will strengthen over time. Tokopedia's performance in the first quarter was better than expected. We booked approximately 110 billion rupiah or 7 million US dollars in e-commerce service fee in February and March. And we expect this to increase as our partnership depends over future quarters. I am also happy to share that the combined Tokopedia entity is now in full compliance with the relevant regulations, having fulfilled of provisions set by the Ministry of Trade during the transition period. All e-commerce activities on TikTok are now being carried out on Tokopedia's electronic systems, and this has been implemented in a way that ensures users can shop seamlessly on the TikTok app. Moving on to our FinTech business. The GoPay app continues to gain traction among users, having been downloaded more than 20 million times by the end of March, according to Google Play and iOS console, driving the growth of our user base. We continue to grow our user consumer lending business prudently, which has led to strong growth in our FinTech Core GTV and gross revenue of 40% and 57% year-on-year, prospectively. Our loan book increased 43% quarter-on-quarter and more than three-fold year-on-year to 2.7 trillion rupiah or 170 million US dollars with similar NPL to last quarter. Around 75% of the loan book is channeled through Bankiago. Integration with TikTok is progressing well and there are three main updates I'd like to highlight. First, improvements made in January to our BNPL product led to increased penetration on the Tokopedia platform. We saw strong performance in March, where loans dispersed grew by close to 60% month-on-month. Second, we have worked with the TikTok team to make it easier for users to link their GoPay account with the TikTok app's embedded e-commerce platform, which is now called Shop Tokopedia. This was completed in mid-March, increasing GoPay's penetration. Third, as we mentioned last quarter, we are jointly developing a BNPL product with TikTok, which we will aim to launch on Shop Tokopedia in a few months. This will allow us to penetrate into new user segments and provide users with more flexible payment options as we strive to earn our status as TikTok's primary partner in Indonesia. The strong growth we are seeing in payments and lending mean that our fintech segment is on track to become adjusted EBITDA positive by the end of 2025, subject to stable macroeconomic conditions. Turning to on-demand services, Investment into product innovation and user growth initiatives have started showing results. In March, we saw significant month-on-month and year-on-year user growth, which has continued into April. In Q1, GTV was stable year-on-year and down quarter-on-quarter due to seasonal slowness in January and February. GTV in Indonesia was positive year-on-year, While in Singapore, we recently launched a partnership with the local taxi firm, Comfort Delcro, which will mutually strengthen our driver supply, a critical tool for driving growth. Gross revenues saw a positive year-on-year growth, driven by value-added services. While ODS is a key profit contributor to the group, we will defend its position as the market leader in Indonesia by making appropriate investments in product, innovation, and marketing for long-term gains. We aim to grow faster from Q2 onwards and by continuing to invest according to our strategy. This includes, first, expanding our user base by attracting new customers through affordable offerings and continuous product improvements. Second, deepening wallet share by continuing to increase usage frequency and retention. Our boost in subscriptions will form part of this, along with our product mix offering premium, regular, and affordable services. And third, improving our value-added services. This includes our advertising business, which grew 15% quarter-on-quarter, with penetration as a percentage of FoodGTV also increasing. For GoTo Logistics, as Jackie will discuss in more detail, we stopped reporting GoTo Logistics as a segment this quarter due to the upcoming divestment of a number of its businesses associated with Tokopedia in second quarter. I will now turn the call over to Jackie to review our business performance for the period. Jackie, please go ahead.

Thank you, Patrick. Good day, everyone. Let me start by addressing a few matters regarding our operating and financial presentation in this quarter. First, following the closing of the TikTok transaction and the upcoming deconsolidation of GoToLogistics, we have prepared pro forma operating and financial figures at the group level to facilitate like for like sequential and year on year comparisons of our performance. The pro forma analysis assumes that Tokopedia and go-to logistics have been deconsolidated since January 1st, 2023. Additionally, we have included as reported operating and financial results in the appendix of our presentation for reference. Second, to bring our reporting in line with that of regional and international peers, we made two changes within on-demand services in this quarter. One, we changed our business model for delivery services from an agency model to a principal model in January, 2024. Under the principal model, we record the delivery fee paid by our users as gross revenues and the cost of delivery paid to the driver partners as cost of revenue. This model allows us to offer more competitive delivery fees while being more targeted in providing incentives. Two, we revised the GTV definition for on-demand services to also include any additional fees such as tolls and tips. We have provided restated 2023 GTV figures in our presentation. As discussed, in the first quarter, both performer group core GTV and gross revenue saw significant double-digit uplift year-on-year. At the same time, adjusted EBITDA remained in line with our plan, putting us on track to meet our target to maintain adjusted EBITDA break-even for 2024. At the group level, performer GTV was up 20% year-on-year, while core GTV increased 32% year-on-year, and gross revenues grew 18% year-on-year, while our tick rate remains stable. In terms of cost, pro forma incentives and product marketing spend decreased by 31% year-on-year, while recurring cash fixed costs declined by 25% year-on-year. Also, reported recurring cash corporate costs were 218 billion rupiah, or $13.8 million in this quarter. a decrease of 30% year-on-year and 8% quarter-on-quarter. Performa Group adjusted EBITDA for the first quarter stood at negative 102 billion rupiah or 6.4 million US dollars, with losses reduced by 89% year-on-year. Adjusted EBITDA turned negative in the quarter from positive in the previous quarter due to the ramp-up of investments in fintech, as well as seasonality in on-demand services in January and February. I'll now take you through our financial performance by segment. In on-demand services, GTV was flat year-on-year, despite a 38% year-on-year reduction in incentives and product marketing. Specifically, Indonesia GTV grew 3% year-on-year in the first quarter, As mentioned, we reinvest into product innovation and user growth initiatives, which have started showing results in March and April. Growth revenues grew 12% year-on-year in the quarter. We assume the aforementioned change in business model started on January 1st, 2023. Growth revenue grew 4% year-on-year on a like-for-like basis. Recurring cash fixed costs declined 17% year-on-year, mostly from cost optimization efforts throughout last year. On-demand services was adjusted EBITDA positive at 166 billion rupee, or 10.5 million US dollars. An uplift of 412 billion rupee, or 26 million US dollars year-on-year. Turning to fintech. GTV increased 21% year-on-year, while core GTV shows stronger growth at 40% year-on-year, driven by improvements in lending and consumer payments. Our consumer lending loan book grew 43% quarter-on-quarter and three-fold year-on-year to 2.7 trillion rupiah, or 170 million US dollars. Growth revenue grew 57% year-on-year in the first quarter, with tick rates increasing by 14 basis points. In terms of cost, incentives and product marketing increased by 21% year-on-year, as we made investment into fintech business to drive customer acquisitions in the GoPay app and lending. Adjusted EBITDA loss was 248 billion rupiah, or 15.6 million U.S. dollars. reduced by 52% year-on-year, mainly driven by significant improvement in contribution margin and an 18% year-on-year decline in recurring cash fixed costs. In the e-commerce segment, as a result of the closing of the TikTok transaction at the end of January, we began recording PT Tokopedia as an associate company from February 1st. As Patrick mentioned, we recorded approximately 110 billion rupiah or 7 million US dollars of e-commerce service fee, net of value added tax in February and March. Driving positive segment adjusted EBITDA of 127 billion rupiah or 8 million US dollars in Q1. GoToLogistics consists of a number of delivery and fulfillment businesses. We have entered into a conditional sell and purchase agreement to divest ownership of the delivery and fulfillment businesses under GoToLogistics that support Tokopedia. Upon closing of these transactions, GoToLogistics will be deconsolidated from the group. To summarize, our financial profile is in excellent condition and continues to improve. As of March 31st, we have 23 trillion rupiah or 1.5 billion US dollars in cash, cash equivalents, and short-term time deposits. This balance is unchanged from the position following the deconsolidation of Tokopedia on February 1st, as we mentioned on our last quarter's earnings call. Looking ahead to Q2, we are aiming to accelerate our growth by reinvesting profit upside back into the business, while ensuring we are still in line to achieve adjusted EBITDA break even for the full year. With that, we will now like to open the call to your questions.