Why GoTo’s shares jumped following Q1 results, while Bukalapak and Blibli are flat

When it rains, it pours.

Three listed Indonesian tech companies – GoTo, Bukalapak, and Blibli – released their earnings for the first quarter of 2023 over the last two working days of April.

Markets seem to have reacted well to GoTo’s results, which were released on April 27. As of May 4, its share price was up 9%. However, share prices of Bukalapak and Blibli, which reported their earnings on April 28, have remained relatively unchanged.

Their performance tells the story of how Indonesia’s digital economy is performing so far this year.

Quality, not quantity

All three companies facilitated a higher value of transactions on their respective platforms in Q1 2023 compared to the same period a year before.

For ease of comparison, we use gross transaction value (GTV) for GoTo – which measures the value of paid transactions of products and services on the platform, inclusive of refunds – and total processing value (TPV) for Blibli and Bukalapak, which measures the value of payments net of reversals.

As the largest platform, GoTo saw the slowest year-on-year growth at 6%, while transactions on Blibli expanded by 78% off a much smaller base. Bukalapak fell in between, with its TPV increasing by 19%.

One factor driving Blibli’s strong TPV growth may be the strong recovery in Indonesia’s travel industry as the firm operates an online travel agency.

Despite the positive year-on-year figures, all platforms saw a quarter-on-quarter decline in transaction volumes, with GoTo down by 8%, Bukalapak off by 3%, and Blibli seeing a 14% drop.

Some of this is seasonal: The fourth quarter is typically busier than the first, as consumers are out and about during the holiday season.

However, there were other factors at play.

For example, GoTo attributed the decline in GTV to a reduction of “low-quality transactions” on its ecosystem as well as the deprioritization of its Mitra Tokopedia B2B marketplace offering, which it described as “non-core.”

Bukalapak president Teddy Oetomo / Photo credit: Bukalapak

Similarly, in the results briefing accompanying the release of its financial statements, Bukalapak president Teddy Oetomo attributed the slowdown to a deliberate effort to limit traffic generation features to its remittance service and other verticals as it focuses on bringing its Mitra business into a contribution margin-positive position.

GoTo impresses on revenue

All three companies saw healthy year-on-year topline growth in Q1 2023. GoTo had the most impressive result, with its net revenue up by 123% from US$102 million to US$227 million.

No surprises, then, that GoTo had the best improvement in its take rate (net revenue as a percentage of GTV or TPV) from a year before, doubling from 1.1% to 2.2%. Meanwhile, Bukalapak’s take rate inched up to 2.5% from 2.3%, while Blibli’s fell from 31.5% to 21.4%.

GoTo’s performance can be chalked up to three I’s – increments, innovation, and incentives.

Gross revenue for GoTo’s on-demand services grew by 12% year on year, driven by an increase in the commission rate on Gojek rides – from 10% to 15% – in Singapore. The change took effect on February 1.

Photo credit: Poetra.RH / Shutterstock

Meanwhile, the super app’s ecommerce gross revenue saw a year-on-year increase of 21% as a result of new features. These include an improved merchant app that provides competitive insights and marketing tools to drive sales, as well as dynamic ad slots that increase ad relevance.

Done well, advertising can provide ecommerce platforms with an additional revenue stream while driving sales for merchants, resulting in higher commissions.

However, GoTo’s triple-digit percentage growth in revenue would not have been possible without a significant reduction in incentives to customers. These fell by 29% compared to the same period a year ago, contributing an extra US$74 million to net revenue (which, for GoTo, is gross revenue less customer incentives).

Of course, there are limits to how much commissions can be increased and incentives culled.

In Singapore, market leader Grab takes a maximum of 20% in commissions from drivers, so there might still be some room for Gojek to raise its commission rate.

But it is more sustainable for GoTo to rely on an expansion in GTV and the introduction of more innovative solutions to grow its net revenue.

Impact of employee cuts

The three tech companies all saw narrower EBITDA losses in the first quarter of 2023 compared to a year ago. That’s no surprise since efficiency and rationalization has been the name of the game this past year.

On a relative basis, GoTo made the biggest improvement, since its EBITDA loss as a percentage of GTV was only a third of what it was from a year ago. In comparison, Bukalapak and Blibli both managed to halve their EBITDA loss as a percentage of TPV over the same period.

Where did these cost savings come from?

According to GoTo’s latest financials, sales and marketing expenses declined by almost 50%, or around US$114 million, between Q1 2022 and Q1 2023.

A retrenchment exercise last November, where around 12% of its headcount was shed, also resulted in a 13% improvement in its personnel cost base, the company said during its earnings call.

We might expect that an additional round of cuts announced in March, which affected 600 employees, will have a proportionally similar impact on its employee costs, which will be reflected from May onward.

Bukalapak also made steep cuts to its selling and marketing expenses as well as its general and administrative expenses, with these down 54% and 61%, respectively, on a year-on-year basis.

Meanwhile, Blibli’s general and administrative expenses and selling expenses went up in absolute terms, but the company’s strong TPV growth meant that they fell as a percentage of TPV.

Bukalapak, the king of cash

While GoTo has the highest amount of cash on its balance sheet, Bukalapak has the most buffer when accounting for the fact that its EBITDA losses (as a proxy for cash flows) are a fraction of GoTo’s.

Blibli has the least room for error, with only US$133 million on its balance sheet. However, CFO and co-founder Hendry asserted that the firm’s cash, along with available credit facilities, “should be sufficient” to allow it to carry out its business strategies.

A Blibli Store in Jakarta / Photo credit: Blibli

However, despite the cash cushion, analysts have scrutinized Bukalapak’s use of capital, especially in relation to its acquisition of a majority stake in price comparison platform iPrice Group and its expansion of its Mitra business into the Philippines.

In response, Oetomo said in Bukalapak’s earnings call that when making acquisitions, the company compares the price of the acquisition to how much it would cost to build the business in-house as well as the time it would take to do so.

While iPrice is a Malaysian company, most of its business is in Indonesia, which can help generate traffic to Bukalapak’s secondhand gadget business, Oetomo added.

Bukalapak’s expansion into the Philippines, meanwhile, is part of a trial done with a handful of employees to test if the Mitra model could be applied to other countries.

Despite the proximity of Indonesia and the Philippines, Oetomo noted that there were “idiosyncratic differences” between both countries.

What comes next

Although GoTo, Bukalapak, and Blibli can loosely be described as ecommerce companies with a focus on Indonesia, they are also involved in different businesses. This divergence should become even more apparent with time.

Investors in GoTo should pay attention to what the company is doing on the logistics front, having spun out GoTo Logistics as a separate unit that combines its fulfillment business with Gojek’s same-day delivery service.

The company says that it has lowered costs by 30% from improvements in batching and routing capabilities, which can be passed on to consumers to drive further growth.

Another feature GoTo highlighted was its consumer lending business, through which it has disbursed around US$60 million in loans. Consumers who use its GoPayLater Cicil service also spend 25% more, the company says. Rising consumer lending can build a virtuous circle of increased spending on GoTo’s on-demand and ecommerce services.

As for Bukalapak, its focus will continue to be on specialty verticals such as secondhand gadgets and its Mitra business.

Going forward, the company will consider expanding into verticals where Bukalapak “can dominate” without relying on the use of subsidies but instead on supply-side factors such as sourcing advantages, Oetomo says.

An example of this is in-game digital products through Itemku, a marketplace portal Bukalapak acquired in 2021.

While GoTo’s deprioritization of its Mitra business has reduced competition for players like Bukalapak, the latter will still have to compete with local distributors and make continuous improvements to its supply chain.

While it’s early days yet, success in the Philippines could also see the Mitra model being brought to other countries where such warungs dominate.

Blibli, meanwhile, says it will focus on its omnichannel strategy across its 142 consumer electronics stores and 70 premium supermarket outlets. It has also launched a loyalty program for users of both its ecommerce and online travel platforms.

With so much going on in Indonesia’s tech scene, investors and analysts can expect to be kept busy in the years ahead.

Currency converted from Indonesian rupiah to US dollar: US$1 = 14,694 rupiah.


Simon Huang

Exploring the impact business and technology will have on Southeast Asia

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