GoTo Gojek Tokopedia PT

Hello, everyone. This is Joel Ellis, Head of Investor Relations. Welcome to the PT GoTo Gojek Tokopedia TBK fourth quarter and financial year 2024 earnings conference call. Please be advised that today's conference is being recorded. On today's call, Patrick Waluyo, President Director and Group CEO, and Simon Ho, Group CFO, will deliver prepared remarks. Following the commentary, we will open up the call for questions and be joined by Thomas Kastet, our Vice President Director and President of Financial Technology, Hans Patuo, our Chief Operating Officer, and Catherine Hindra Suchayo, our President of On Demand Services. We would like to highlight that the information presented today has been prepared solely based on unaudited, consolidated, selected financial information for the three-month period ended December 31, 2024 and 2023. We have also submitted and published our consolidated, audited financial statements as of and for the 12 months ended December 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 standard 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 presentations, which can be found on our website. Our reporting currency is the Indonesian rupiah, and we will denote the US dollar equivalent by applying an exchange rate of 16,162 rupiah to one US dollar based on the middle rates published by Bank Indonesia as of the end of December 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 announced agreement with TikTok and a deconsolidation of GoToLogistics. These pro forma figures assume that Tokopedia and GoToLogistics were deconsolidated on January 1, 2023. 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 Patrick.

Thank you, Joel. Hello, everyone, and thank you for joining us today as we share our Q4 and full year 2024 results. Throughout 2024, we remain focused on finding fresh and effective ways to win the intense battle for the Indonesian consumer. As a result, Gotoh delivered its strongest year ever in 2024, reaching all-time highs for GTV, revenue, adjusted EBITDA, and margins, with consistent quarter-on-quarter improvement across each of these key metrics. Our fintech business also continued on its record-breaking run. We expanded our loan book to a new high while also closing the year with the highest number of monthly transacting users and GoPay app transactions we have ever seen. This progress meant we surpassed our target to achieve group level adjusted EBITDA breakeven for the year, posting 386 billion rupiah or 24 million US dollars. At the same time, our fintech segment became adjusted EBITDA positive in the fourth quarter as per our guidance. Our ecosystem strategy and our culture of continual innovation are at the foundation of our performance. By innovating both operationally and at the product level, we are able to deliver more targeted and personalized services that match customer needs. This approach enhances customer experience, strengthens merchant partnerships, and boosts revenue. For example, in ODS, we deepen our penetration of both food express delivery and higher value mobility services, empowering users to choose what matters most to them, time or cost. At the same time, GoPay, in its first full year as a standalone app, gained millions of users, while BNPL and lending integration boosted mass market reach. Its service strengthens our ecosystem, creating synergy that fosters multi-product adoption and deeper user engagement while improving user acquisition efficiency. This ecosystem synergy has driven increased usage of our services with monthly transacting users up 16% over the course of the year and 22% year-on-year in Q4 alone. This in turn has supercharged our top line with Group Core GTV hitting an all-time high of 79 trillion rupiah of 4.9 billion US dollars, growing 66% year-on-year in Q4 and 58% over the full year. Gross revenue also hit all-time highs, reaching 5 trillion rupiah or 307 million US dollars, an increase of 28% year-on-year in Q4 and 30% over the full year. We are innovating across the business to lower unit costs and boost efficiency in areas like delivery, incentives, and cloud computing, while our large language model, Sahabat AI, is poised to deliver a significant cost advantage across many enterprise use cases. Disciplined cost management has driven down recurring cash fixed costs as a percentage of GTV and revenue year-on-year in 2024. Taken together, these measures bolster operating leverage and reinforce our path to sustained profitability. I will now move on to our business units, starting with FinTech. In 2024, our fintech business transitioned from a driver of ecosystem growth to a driver of both growth and profitability. Notably, the success of planning initiatives propelled the segment to positive adjusted EBITDA in Q4, a full year ahead of previous guidance. This success was due to two key innovations, the standalone GoPay app, as well as the expansion of our consumer loan offerings. Turning first to the GoPay app. Since launch, the app has proven to be a powerful tool for user acquisition and deeper customer engagement, driving a 35% year-on-year increase in the number of monthly transacting users across the fintech business to 20.2 million as of the fourth quarter. Ultimately, the standalone GoPay app serves as both a front door for new customers and a growth catalyst for our ecosystem of financial products. By launching a lighter standalone GoPay app tailored to a broader user base, we significantly expanded our audience. As a result, average monthly transactions per user climbed by 18% year-on-year in Q4, as customers increasingly use GoPay as their primary digital financial tool. Moving on to consumer loans. Our loan book expanded by 172% year on year in Q4, driven in large part by the growth of users across our ecosystem. This loan book growth has been driven prudently as our ecosystem data, which provides deep insight into our users, allows us to price risk effectively and maintain stable delinquency rates, even as our lending portfolio continues to scale its quarter. Another advantage that we have is low acquisition cost for new borrowers. as these users are already part of our ecosystem. This significantly reduces our marketing spend compared to those typically required by non-ecosystem lenders. The result is a lending business that not only grows quickly, but does so with strong margins and manageable risk. The structural advantage has contributed significantly to our FinTech business's profitability and we will continue to drive the responsible growth of our loan book over the course of 2025. Moving now to on-demand services. In Q4, our on-demand services strengthened market leadership, achieving robust top-line gains in both transport and food delivery. This strong performance produced a record-breaking quarter of adjusted EBITDA, which reached 267 billion rupiah or $17 million, underscoring our ability to balance both growth and profitability. We successfully optimized incentive spending in 2024, driving a 28% year-on-year increase in ODS contribution margin to 3.4 trillion rupiah, or $209 million, an improvement of 61 basis points year-on-year as a percentage of GTV. As margin sequentially improved in the fourth quarter, we ended the year with real momentum, fueled by operational excellence across our ODS business. A key driver of our success has been ongoing product innovation and the optimization of our product mix. We continue to refine our offerings so customers can choose to save time or save money, including expanding premium services in both food delivery and mobility. Express food delivery orders, for example, contributed 28% of total food GTV in the fourth quarter just one year after launch. We have optimized the Goalcake app to deliver more targeted services across our user base. These improvements ensure that we are providing the right service to the right user at the right time. And as a result, we are seeing more users than ever engaging with a wider variety of our products. In addition to revenue growth from premium offerings, our margin expansion has been driven by several product innovations. I will highlight three of them here. Firstly, our special delivery fleet program assigns driver partners to operate exclusively within high demand areas. leveraging advanced data analytics, algorithms, and order backing to channel a higher volume of orders their way. This approach reduces delivery costs, which is passed on to consumers, boosts driver partners' income, and improves our profitability. Secondly, our advertising business is becoming a more significant driver of profitability. In 2024, advertising revenue rose 92% year-on-year, transforming what was once an early-states offering into a significant revenue stream. This momentum carried through to the fourth quarter, as the advertising business's share of Food GMV rose from 1.1 to 1.6% within just 12 months. These gains reflect our deliberate investments in ad relevance, self-serve tools, and merchant partnerships. We expect the advertising segment to continue growing faster than our already solid Fuji MP trajectory, and our expectation is to move the business significantly closer to global benchmarks over the next three years. Thirdly, merchant-funded promotions have been significantly enhanced through our ongoing product innovations, enabling more detailed targeting and segmentation so merchants can reach the right customers. This creates real value for merchants while also delivering more relevant offers to users, elevating the overall customer experience. As a result, we have seen rising merchant participation and willingness to invest in promotions with merchants' total spend increasing by 190% year-on-year in 2024. We are working especially hard to improve the return on investments for merchants. increasing their propensity to participate in funding promotion. This strategy leads to a reduction of our own incentive spending while maintaining strong returns for merchants. At the group level, technology remains central to our ability to scale and enhance our business. In line with this focus, AI will increasingly shape our ecosystem, enhancing user interactions, helping merchants to operate more efficiently, and redefining how people experience our services. At the heart of this evolution is Sahabat AI, an open source, large language model developed primarily in Bahasa Indonesia, along with other local languages to address local needs. Launched in November 2024 through a partnership with Indosat, NVIDIA, AI Singapore, and multiple Indonesian institutions, including Kompas Gramedia and the University of Indonesia. Sahabat.ai has demonstrated very strong results in numerous benchmark tests for Indonesian language-specific tasks, showing high accuracy when reading and interpreting local text compared with global AI models. We plan to leverage Sahabat.ai for a range of applications. Currently, we are experimenting with chatbots and optical character recognition, or OCR, for merchant menus both aimed at enhancing customer experience and simplifying merchant onboarding. Ultimately, we see developing our own AI capabilities as a strategic advantage, reducing costs, improving user experiences, and fostering local tech talent over the long term. Our transition to Alibaba Cloud and Tencent Cloud announced in September 2024 exemplifies how we are refining our technology infrastructure to reduce costs and enhance data sovereignty. The migration is on track and set for completion within Q3 and will reduce our cloud expenses by more than 50% compared to pre-migration levels, with the financial impact beginning to be realized in Q4 2025. Looking ahead, our team remains focused on Cree growth drivers that will strengthen our top line and drive margins while maintaining our market-leading position in Indonesia. There's significant headroom for margin improvement, and we anticipate an upward trajectory over the course of 2025. In FinTech, our GoPay app will continue to fuel expansion by bringing millions of new users into our ecosystem. while our lending book is set to exceed 8 trillion rupiah or 495 million U.S. dollars by the end of the year. By leveraging risk ecosystem data and prudently deploying risk-based pricing, we will scale our lending portfolio while maintaining strong risk-adjusted returns, driving further EBITDA growth. In on-demand services, we are driving top-line growth and margin improvement by targeting high spending segments and optimizing incentive spending. Meanwhile, we have enhanced margins on our affordable products. We serve as a panel for new users who can later transition to higher value offerings across our ecosystem. By optimizing our product mix while managing promotional costs more effectively, we have positioned ourselves for sustained revenue and earnings growth as we move into 2025. In summary, 2024 was a landmark year for Gotoh, during which we demonstrated the strength of our integrated ecosystem and our commitment to operational excellence. Our strategy is working. As a result, we are today providing ambitious new profitability guidance for 2025, as we expect adjusted EB debt to be in the range of 1.4 to 1.6 trillion rupiah or 87 to 99 million US dollars for the full year. Thank you for joining us today. I will now hand over to Simon who will provide a review of our financial performance.

Thank you, Patrick. It's a pleasure to speak with everyone today and thank you all for joining our call. We ended 2024 on a high note with robust revenue growth, disciplined cost management, and our first full year of positive adjusted EBITDA. In Q4, group gross revenue grew by 28% year on year, contributing to a 30% increase for the full year. Meanwhile, we reduced recurring cash fixed costs by 3% year on year, demonstrating our commitment to efficiency. As a result, Group-adjusted EBITDA reached 386 billion rupiah, or 24 million US dollars for the full year. And in Q4, it surged 348% year-on-year to 399 billion rupiah, or 25 million US dollars. This strong financial foundation places us on solid footing to continue executing our strategies in 2025. We maintain a strong cash balance. As of December 31st, 2024, we had 21 trillion rupiah or 1.3 billion US dollars in cash, cash equivalents and short-term time deposits. Returning value to our shareholders remains a top priority. And as of the end of February, 2025, we had repurchased around 23.6 billion shares amounting to approximately 1.5 trillion rupiah or 91 million US dollars. Additionally, we completed the cancellation of Treasury shares in November as expected, reducing the number of Series A shares in circulation by approximately 10.3 billion shares. In e-commerce, our service fee revenue in the fourth quarter from Tokopedia was 204 billion rupiah or 13 million US dollars, excluding VAT. The net total amount was 183 billion rupiah or 11 million US dollars. This brings the total service fee revenue for the year to 622 billion rupiah or 38 million US dollars, excluding VAT. Looking ahead, Leveraging the foundation established in 2024, we are well positioned to drive top-line growth while maintaining disciplined cost management to further accelerate profitability throughout 2025. Finally, before we open the call to questions, I'd like to address the Indonesian government's guidance regarding holiday bonuses for driver partners. As a homegrown Indonesian technology company, GoTo recognizes that driver partners are the foundation of its business, and their well-being is directly tied to the sustainability of the company. GoTo generates significant income for driver partners, amounting to a total average of 1.5 trillion rupiah per month. while the Indonesian government acknowledges that driver partners are not employees, GoTo fully supports its guidance to provide an additional holiday bonus during Hari Raya to driver partners who are productive and high performing. The company will manage the additional costs within its existing plans. With that, we would now like to open the call to your questions. Joe, please go ahead.