PT GoTo Gojek Tokopedia Tbk (GOTO) Earnings Call Transcript & Summary

Hello, everyone. This is Reggy 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 Walujo, President Director and Group CEO; and Jacky 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 Patuwo, our Chief Operating Officer; Catherine Hindra Sutjahyo, 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 the unaudited consolidated selected financial information for the 3 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 IDR 15,853 to $1 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 announced agreement with TikTok and the upcoming deconsolidation of GoTo Logistics. These 4 figures assume that Tokopedia and GoTo Logistics were de-consolidated on January 1, 2023. Further, in the On-Demand segment, we have changed our business model for certain [indiscernible] 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 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 gateway. 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, Reggy. 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 the foundation by accelerating growth and investing for the future. We will be growing our user base, expanding our well share among existing users, reducing operating costs and strengthening our partnership with the TikTok. In Q1, top line growth was healthy with Puma core GTV and gross revenue up by 32% and 18% year-on-year, respectively. Group pro forma adjusted EBITDA turned slightly negative to IDR 102 billion or USD 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, pro forma 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 31, 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 IDR 110 billion or USD 7 million in e-commerce service fee in February and March, and we expect this to increase as our partnership depends of the future quarters. I am also happy to share that the combined Tokopedia entity is now in full compliance with the relevant regulations, having fulfilled our provisions set by the Ministry of Trade during the transition period. All e-commerce activators 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 be [indiscernible] on users, having been downloaded more than 20 million times by the end of March, according to Google Play and iOS Console, driving test of our user base. We continue to grow our user consumer lending business [indiscernible] which has led to strong growth in our FinTech core TV and gross revenue of 40% and 57% year-on-year, respectively. Our loan book increased 43% quarter-on-quarter and more than tripled year-on-year to IDR 2.7 trillion or USD 170 million with similar NPL to last quarter. Around 75% of the loan book is channeled to Bank Jago. Integration with TikTok is progressing well, and there are 3 main updates I'd like to highlight. First, improvements made in January to our product, BNPL product, led to increased penetration on the Tokopedia platform. We saw strong performance in March where loans disbursed 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 a TikTok apps 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 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 has 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 ComfortDelGro, which will mutually strengthen our driver supply, a critical tool for driving growth. Gross revenues saw 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 use frequency and retention. Our pools and subscriptions will form part of this along with our product mix, offering premium, regular and portable services and that improving our value-added services. This includes our advertising business, which grew 15% quarter-on-quarter with penetration as a percentage of GTV also increasing. For GoTo Logistics, as Jacky will discuss in more detail, we start 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 Jacky to review our business performance with the period. Jacky, 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 GoTo Logistics, 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 GoTo Logistics having deconsolidated since January 1, 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 2 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 revenue 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 teams. We have provided restated 2023 GTV figures in our presentation. As discussed in the first quarter, both pro forma 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 breakeven for 2024. At the group level, pro forma 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 take rate remained stable. In terms of costs, Pro forma incentives and product marketing spend decreased by 31% year-on-year, while recurring cash fixed cost declined by 25% year-on-year. Also reported recurring cash corporate costs were IDR 218 billion or USD 13.8 million in this quarter, a decrease of 30% year-on-year and 8% quarter-on-quarter. Pro forma group adjusted EBITDA for the first quarter stood at negative IDR 102 billion, or USD 6.4 million, 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 our demand services in January and February. I will now take you through our financial performance by segment. In On-Demand services, GTV was flat despite 38% year-on-year reduction in incentives and product marketing. Specifically, Indonesia GTV grew 3% year-on-year in first quarter. As mentioned, we reinvest into product innovation and user growth initiatives, which have results in March and April. Gross revenues grew 12% year-on-year in the quarter, and we assume aforementioned change in business model started on January 1, 2023, gross 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 IDR 166 billion or USD 10.5 million, an uplift of IDR 412 billion or USD 26 million year-on-year. Turning to FinTech. GTV Increased 21% year-on-year, while core GTV showed 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 threefold year-on-year to IDR 2.7 trillion or USD 170 million. Gross revenue grew 57% year-on-year in the first quarter, with takerates increasing by 14 basis points. In terms of costs, incentives and product marketing increased by 21% year-on-year as we make investment into FinTech business to drive customer acquisitions in the GoPay app and lending. Adjusted EBITDA loss was IDR 248 billion or USD 15.6 million, 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 1. As Patrick mentioned, we recorded approximately IDR 110 billion or USD 7 million of e-commerce service fee, net of value-added tax in February and March, driving positive segment adjusted EBITDA of IDR 127 billion or USD 8 million in Q1. GoTo Logistics consists of a number of delivery and fulfillment businesses. We have entered into a conditional sale and purchase agreement to divest ownership of the delivery and fulfillment businesses and the GoTo Logistics that support Tokopedia. Upon closing of these transactions, GoTo Logistics will be deconsolidated from the group. To summarize, our financial profile is in excellent condition and continues to improve. As of March 31, we have IDR 23 trillion or USD 1.5 billion in cash, cash equivalents and short-term time deposits. This balance is unchanged from the position following the deconsolidation of Tokopedia on February 1, 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 breakeven for the full year. With that, we would now like to open the call to your questions.

Thank you, Jacky. [Operator Instructions] First question comes from Henry Wibowo of JPMorgan.

Can you hear me?

Yes, Henry, we can hear you.

Sorry. Thanks, Patrick, Jacky and Reggy for the presentation and congrats on the strong results, especially back in growth mode. I have 3 questions, if you don't mind. Number one, I think, generally, how would you see the purchasing power in first quarter between, say, the mass market and the mid-upper segment? And how is this impacting your business? Secondly, on e-commerce business, will Tokopedia prioritize growth or profitability in the next 12 months. I think this is a topic of discussion with the investors community given that company just raised merchant fees, but at the same time, I think there's a goal to achieve market leadership in the medium term. And lastly, when you expect the completion of the GoPay later within Shop Tokopedia app? And just a bit on e-commerce addition, is there a different experience between shopping and Tokopedia.com versus Shop Tokopedia right now?

Thank you, Henry. I hear you correctly, there are 3 parts of your question. The first part is about purchasing a which I will address and then there's a question about e-commerce that I will ask my colleague, Melissa to answer. And then there is a question about the integration of GTF GoTo financials and shop, which I will ask Tom to address. Now on your first question about purchasing power, we see the consumer behavior on our platforms to continue to be robust. As we shared with you earlier, e-commerce grows quite fast. We definitely do not see any impact on purchasing power of any indication of purchasing power declines in the ag month. In ODS, we monitor the affluent mass affordable markets very closely. And we see that spending on both segments actually increase. And in GTF, as you -- we have all seen growth also continues to be strong. So we don't see any sign of weakening purchasing power in any of the consumer segment on ours. I'll ask Melissa answer the questions about e-commerce.

Yes. Thank you, Patrick. Thank you, Henry, for the question. So today, I think as also earlier mentioned within the earlier segment Tokopedia combined entities performance in Q1, it's actually way better than expected. And as we also have reported, GoTo had recorded approximately IDR 110 billion, which is roughly USD 7 million in e-commerce service fee for February and for March. And this should increase as the partnership depends over future quarters, and it's really only the beginning. As you also may be very aware, Indonesia's e-commerce landscape has always been very competitive. However, our commitment remains the same, which is to provide the best experience for our users and also to continue to grow together with our merchants to become #1 leading e-commerce platform in Indonesia combined together. So we'll continue to grow and focus towards growth and of course, committed towards innovating as well as improving experience for both users and merchants.

Great. Henry, this is Tom. I run the Fintech business. So let me handle your third question, which is in regards to the integration process, which I think this is a good news. We closed the transaction with Tokopedia and TikTok on the 31st of January. And since that time, the team has been laser focused on completing the tech integration such that we are in 100% compliance with all of the government regulations, and we're thrilled that is now done. So on the FinTech side, we're now starting to focus on the integration of BNPL into Shop Tokopedia and I'm sure this will come up again later in questions. and we are now on track for achieving this, I'd say, over the next few months. And I think once that's in place, that will give us the next leg up on the lending growth. And obviously, as covered in the previous remarks, we've got strong lending growth, and we expect that to accelerate over the rest of the year. And in general, I would say if we step back, we've seen, despite having only been closed the deal for, I guess, a little bit over 3 months we have seen very strong integration, right? So the GoPay now is readily available and Shop Tokopedia, and we completed that process mid-March. So that was, call it, 2 months after closing. So it feels look in general, everything is moving in the right direction, specifically in regards to the integration between GoTo financial and Shop Tokopedia.

I think you have 1 question, right? That was on the difference between the shopping experience in Tokopedia versus Shop Tokopedia. Melissa, maybe if you can help answer that one.

Yes. Thank you also for the question. So and in regards to the defenses. I think the focus of our teams who have been completing tech integration related towards compliance and which we have now finished, and we will have also received formation from the government through the Ministry of Trade that we are already fully compliant. And our next focus, it's actually towards what Tom mentioned, which is to integrate deeper Tokopedia as well as GoPay and some of their products. And as we also look into how we will differentiate that forward, we actually do have a separate -- quite different user profile amongst the 2 platforms, Tokopedia as well as TikTok. So I will focus currently to maintain the respective strengths, characteristics of the 2 largely distinct platforms. So Tokopedia will definitely deepen and focus a lot more towards being more urban as well as shelf-based type of behavior and experience, while Shop Tokopedia will be a much more country spread content-driven as TikTok's embedded e-commerce platform. So we'll remain different and, again, be relevant to the separate segments.

Our next question comes from the left Ferry Wong of Citi.

Yes. Thanks, Reggy. Okay, congratulation management for the back to the growth model for Q2. Yes, I have 3 questions. Number 1 is basically, yes, we have seen that there is a significant take rate increase being done at the Tokopedia platform. Can you share a background on that? And what do you expect basically going into the 2024 and onwards. Second, on the ODS duty fee, this is basically flat on a year-on-year basis in the first quarter. And we think that you need to grow ODS GDP by around -- roughly around the 20% over the next 3 quarters to achieve your target of mid-teen growth. How confident are you to achieve this? And what will be your strategy? Are you going to invest a lot more in terms of plan up your investment and spending, those kind of things? Yes. And then the third question is still on the ODS. How is the competitive landscape on the ODS because while we've seen that [indiscernible] has increased their promotional efforts and they basically give a bit more promotion. And also, they are concerned that you are losing market shares as the ODS GTV is flat and your competitors is indicating higher growth than yours. Are you expecting further intensifying condition landscape and widening losses in the upcoming quarter? But basically with higher top line growth.

Maybe Mel, can you take the first question? And this is about that they create increase on our e-commerce platform.

Yes. Sure, Pat. Thank you again, Fair the question. So we get to your question on take rate, actually, along with the take rate increase, we have also made adjustments towards our features. So the first objective of these changes is to democratize and make our features much more accessible to all of our merchants, our features and benefits as well as our market pay tools, our app tools for our sellers to be more widely available and all sellers can actually then experience. The [indiscernible] to have them grow their sales. And the second objective is definitely to make adjustment to improve the performance of our sellers as well as our profitability as well in the long run. So with this take rate increase, our goal is to also reinvest back and grow our merchants together and the sales of our merchants together, again, alongside together with all of the different features that we will make it available and open for them to grow their business. And our new commission structure will actually start this coming May 1, 2024. Through the new structure, sellers will be able to leverage all the various features and the goal is to focus to develop their business to the next level and go to service fee should be impacted much more positively as we commit to [indiscernible] the most leading e-commerce player in Indonesia. I hope that answers your question, [indiscernible].

And Cath, why don't you take the 2 other questions about ODS.

Thank you for the question. So let me start with this, yes, as you mentioned, right, it's flat year-on-year, but some growth here, Indonesia specifically has been growing on a year-on-year basis. But one thing I would like to highlight here the year-on-year was flattish because if you remember, in the first quarter of 2023, especially in January and February last year, we haven't set our incentivization yet. So to share a little bit of number. So if you compare this profitability number, on quarter -- first quarter last year versus first quarter this quarter, the pace as significant. The same quarter last year, we are negative IDR 246 billion. And this quarter, we are recording IDR 166 positive billion. This is more than IDR 400 billion swing on a year-on-year basis. Having said that, as mentioned, we have seen a strong growth of investment on our user growth initiatives have started showing a very good result in March and continued in April as well especially in terms of our user base. This is a very strong and positive note, we see it because, as we all know, user growth -- user base is always the leading indicator of what is coming forward. So we actually are very well positioned for the Q2 fast growth. One more thing I would like to highlight here is like we will on [indiscernible] in since we started sharing last quarter and this quarter again, there are two-pronged approach on our strategy, as we outlined. The first 1 is deepening the wallet share of our user base. This as Pat mentioned during the earnings earlier, right, talking about the subscription as well as the product mix of the premium, regular and affordable product mix to deepen the user frequency and retention. Secondly, definitely, we will continue to focus on our user growth, using mostly our affordable offering. This is to enable us to open the next segment of users. On your question on the ramping up the investment, we will defend our position as the market leader in Indonesia by making appropriate investment both in our product innovation as well as long-term gains, which linked to your second question here. You noticed that our neighbor, as I call it, they continue to push the aggressiveness. Yes. On this one, as we all know, of course, the market is competitive. But based on our data in Indonesia, we still maintain our market leadership. This is [indiscernible] we are comparing this tire to make sure that it's really a like-for-like Indonesia versus Indonesia kind of data. So our -- we maintain our market leadership, as I mentioned, on GTV. And then I've been looking at it by increasing year-on-year basis on this one. And would like to reiterate 1 more time, right? We will continue, and we will focus to defend this market leadership by making the appropriate investment on our side. I hope to answer the question.

Our next question comes from the line of Ryan Winipta of IndoPremier.

Yes. Thank you, Reggy, and congratulations to management for getting back to the growth mode. I have 4 questions from my side. The first one, I think just trying to circle back to between like flat profitability and growth for GoTo. How should we expect the balance between the 2 going into some quarter [indiscernible] and onwards. Can you also give us some color on what kind of factors that could go back to strategic decision making, both external and also into factors. And the second question that I have is just trying to understand in terms of the time line for the share buyback round of around -- and obviously, there are the areas that you are seeing for to trigger the buyback? And the third question that I have is regarding the consolidation of the GoTo Logistics. Just wanted to clarify does that mean there's no logistics-related business at all that sits under the GoTo as of now? And my fourth and last question, I think, is related to the partnership with ComfortDelGro in Singapore. How will this partnership will impact the numbers also in terms of like the GDP growth and so forth? And whether this partnership with ComfortDelGro will mean that you are going to pursue more growth aggressively in Singapore? That's all for me.

Thank you, Ryan. The perception, I think it's about the balancing between profitability and growth and how we should be looking at second quarter and onwards. No, what we are seeing is that the market still has a lot of potential. This is market where penetration of our services is still relatively low compared to our neighboring countries to our peers, right? So we still see a lot of growth upside. And what we want to do is that we want to take leadership and it's of the segment that we are operating, and we are making long-term investments. But in doing so, we believe that there are 2 things that we need to focus on. Number 1 is our cost, our unit cost. We continue to make sure that our continued -- our unit cost is the lowest in the market. This is not relating to the market day or incentive cost that we may choose to accelerate or decelerate from time to time but this core operating cost relating to technology or relating to our core operations. And we believe that this has a room [indiscernible] cost basis. And our aim is to be the lowest cost player in the market. And the second thing is a foundation. We want to make sure that we deliver the best product that our consumers enjoy in every segment that we are operating, right? At the same time, we will be cost discipline. So as we mentioned in the last quarter, we aim to achieve adjusted EBITDA profit breakeven for the full year, and we will make investments as appropriate in its of our business segment. And therefore, we feel that it's that we don't provide quarter-by-quarter guidance. I think you should be looking more into our growth level, our product innovation, unit cost because those are the things that matter for long-term gains of the company. So I think they also had a nice factors like seasonality and whatnot that you consider. But I cannot stress strong enough that we are aiming for long-term gains, while maintaining financial discipline across the board. Moving on to your question about share buyback. I will let Jacky to take that question.

Yes, Ryan. So as you know, both of our Board of Directors and our Board of Commissioners, they actually have approved the USD 200 million share repurchase program and we plan to seek regulatory and shareholders' approval at the upcoming Annual General Meeting of Shareholders, and we will follow all the measures required by applicable regulation, and our Board of Directors and our Board of Commissioners will review our back program periodically, and we will make amendments on a basis.

Thank you, Jacky year-over-year. I think the next question is about the facilitation of GoTo Logistics. Maybe I can first explain what is in GoTo Logistics today. So it was a business that relates to servicing to Tokopedia, the delivery and the full operations relating to Tokopedia will go back to Tokopedia. The second part of the business that are not related to. And this is the B2B part of the business, meaning the delivery business that services B2B customers, right? This will stay with GoTo. If you are familiar with the GoSend product, if you are sending a package as a consumer to another consumer, that is -- that has never been part of GoTo Logistics. That is always part of our ODS business, and it will stay with us. I think I would just like to again explain that the part that is coming -- staying with us is the B2B part of delivery business. And then -- and I think your last question is about our partnership with CDG. So maybe Cath can answer that.

Thanks, Pat. Thanks, Ryan, for the question. Indeed, it's perfect for the question of CDG. Actually, we just went live our integration with CDG today itself. This is -- we are so excited about this one. As you all know, a simpler market, it's very much supply the success of it is very much rely on the supply side of the business. And this partnership with CDG mutually strengthened both us and CDG as well by combining the supply -- support of that. So this capability is definitely a key to Singapore, especially transports business. We believe this will be a very, very critical component for us to, as mentioned, growth going forward to this. Yes. Thank you so much.

Our next question comes from the line of Adrian Joezer of Mandiri Sekuritas.

Thank you, Reggy, and thank you, Greg, and the rest of the management team for the opportunity to ask questions. I have 3 questions from my side. So the first 1 is actually just to follow up a bit on the e-commerce side. Just wondering how do you actually ensure the minimalization impact to -- between the 2 platforms when you actually increase the investment going forward. And also, at the same time, can you comment a bit as regards to when will we see the user integration process actually being completed between the Tokopedia also the TikTok Shop platform. And the second question is as regards to the On-Demand services. I would like to get some color as regards to what was the growth -- kind of growth of GP being achieved in March and April? And the segments that drive growth incrementally. And at the same time, I think will follow on to this question is, actually, I would want to look into what is your current view as regards to sustainable level of GDP growth, net revenue take rate and also the adjusted EBITDA take rate for the next 2 to 3 years, assuming that the same level of market share [indiscernible] with your competitor reminds the same at current level? And the last question is regards to the FinTech side. Wondering as regards to -- I mean, you mentioned that the NPL stays the same in the first quarter, but we have started asset quality risk arising in some other banks and also non-bank financial companies by the increasing the cost of credit guidance for 2024. So had actually started seeing this risk materializing on your end? And if this becomes the same trend, I mean you lead to some sort of like a risk in your ambition to achieve a stronger loan growth, but you have to dial back that to the rest of the year?

Thank you, [indiscernible]. I hope I can remember to answer your questions. But lastly, I have exome. I didn't use them all down. Catherine, you can take the ODS questions. And then I think there's a question about e-commerce that Melissa can take, and then the rest is about FinTech will answer. But maybe there's also a question about GTV growth -- GTV growth, right on sustainable GTV growth in the next 3 years. And while market share remains the same. Maybe I'll answer that quite quickly and I'll pass it on to my colleagues. I think GTV growth, we always look at it from segment by segment. So ODS, e-commerce and FinTech, I think e-commerce, as we all know, is still a very large industry is still growing very fast. I think all of our business indicates that is going to continue to grow. And it's a matter of like how much market that Shop Tokopedia will command in 2 to 3 years. And we think that it is well positioned to be a market leader in that segment, right? And then in ODS, we also see the market potential still a lot bigger. I will let Cath to address that. And in FinTech as well. I will have Tom address that. So it's really on a segment-by-segment basis. But Cath, why don't you take other questions about ODS first.

Sure. Thanks, Pat. Thanks, Adrian. Yes. Thank you for the question. I'll address the ODS first before passing it to Mel and Tom. So on the GTV growth first, right, one part of your question. As Pat mentioned, we do believe that headroom of growth is still significant, right? If I may double click a little bit on that. It's -- if you're comparing with the other market, more developed one for the on-demand services, we are not only seeing a potential significant growth on the user penetration, but also there are still also some room for us to for deepening on the user level as well, is specifically talking about the Fintech right?. So this is to combine the penetration, we believe this will still give us a multi-kind of like a significant headroom for both that is the first one. I know you're asking a little bit about March and April, let me address that a little bit. Yes. So as mentioned in March and then followed in April as well, actually all of our products being the 2-wheel transport, 4-wheel transport and protection growth. This is not [indiscernible], but also year-on-year. And please note, especially March and April, we also have the fast month and [indiscernible], which is, of course, will impact the number, but we still show growth regardless of that seasonality in March and April. But at least your question in term of like how well -- how do we see the sustainable kind of like level of the economics and stuff, right? Just to highlight here, our economics, especially is similar to our peers. While we keep on driving our cost on transaction on the cost basis, right? As Pat mentioned, we are looking at our cost in a very fundamental way. And we believe we are the lowest cost player, this is 1 of our key [indiscernible] well, and we'll continue to press on that one. So our cost structure will help us expanding our user base, especially on the more affordable segment will become 1 of our key strategic differentiator on this one. One last thing I would like to add here, as a note, all of RDS costs are fully loaded, including corporate costs directly on the ODS segment. Yes, that's on the ODS, I'll pass it to Melissa [indiscernible]

Yes -- thank you for that. So I think that earlier, I also mentioned in regards to cannibalization that it is actually very minimal because on the Tokopedia so as Tokopedia side, we do not -- so we do have very different user segments. Tokopedia, it's also shop based type of experience, which hence attracts a lot more convenience in users. And on the Shop Tokopedia side, it's a lot more content driven, which attracts 1 segment of category as well. So we do see this to joint collaboration becoming a lot value-adding and [indiscernible] building a more holistic experience for our users on both sides. And in regards to your question on integration, our focus is to definitely help our merchants to operate their shop on both sides of the platform much more easier and much more conveniently. And hence, the focus is to unify our supply side first because this would definitely help merchant to operate their shops more easily and as well as enjoy the different features across the both platforms and be able to grow the businesses, and things on the user side will gradually be much more -- the integration of the user side will be much more in the later quarters. But as earlier mentioned as well, our goal is not to make a different segments more so be much more relevant towards the market and the needs of all the different users within Indonesia itself. So we'll focus a lot more into supply side and again, continue to deepen each of our strength in regards to user side going forward.

Great. I think that leads to the fintech questions. So Adrian, thanks for the questions. And let me just recap. I think you had 2 questions, okay. The first was on loan quality and the second was on loan growth. So both good subjects. Let me take the loan quality question first. Just stepping back, I think the as part of our overall process and go to financial, we are closely monitoring the other consumer lending businesses in Indonesia. And at this point, we are aware that some of these businesses are seeing an increase in both rejection rates and credit losses. Now I think we're a bit of a different situation, and I'm happy to report that at this point in time, we have not seen any deterioration in credit or approval process in GTF. And I'd say that's probably due to 2 key factors. I think, first, I'd say, overall, we have a good internal process. Right. So this includes designing a detailed credit scoring model and also adhering to a strict underwriting criteria process. And then we typically use these tools and monitor all the market factors and look at the historical portfolio and the performance of that portfolio and then we make then we make adjustments on how we run the business. So that feels like it's working at this point. Secondly, and I think this is probably a big differentiator between us and maybe some of the other folks in the market now is that if you look at our lending book, it's still very small relative to the opportunity that we see in front of us. And this was a tactical decision that we made in 2023, and we decided to keep our lending growth relatively slow over that time period. So we're coming off of a very small base. So our growth numbers are looking good, but aggregate exposure is still quite manageable. And part of the reason that we did that is we really wanted to get confidence in both our systems and our internal tests. We're feeling very confident. Of course, we're -- this is a business where we have to be very cognizant about what's going on in the market and we'll continue to monitor. So that's -- that was the first part of your question on the quality. Now let me turn to the second part, which was the loan growth. When we look at the numbers, I'd say, overall, we're pleased. As I said, we've started to ramp up the business now. We grew the loan book by 43% in the first quarter, and that was while maintaining good credit quality -- we haven't seen any abnormalities at this point on the credit quality. And then were fortunate to end the quarter with a loan balance of IDR 2.7 trillion, which is about 3x on a year-over basis. That being said, I do want to highlight, there's a little bit of seasonality in the first quarter. Typically, what we see is in the lead [indiscernible] bottom, we typically see an increase in lending balances. So when we look forward on the second quarter, we certainly expect growth still, but it will probably come at a somewhat slower pace. So I'm encouraged on this. And I think if we step back and we look at the Go-To ecosystem, I'd say we're fortunate that we have a bunch of embedded markets for this business. Just kind of going through it, we have a captive GoJet consumer segment where now Delta, I think others have reported that we're developing a vehicle financing program for our drivers that at some point, we'll move out to consumers as well. We're off for cash loans on an open basis for the GoPay app. We also have our legacy BNPL business on the telco platform. And then finally, as we are in joint development with Shop Tokopedia to offer the BNPL product on their platform in the near future. And I feel like with all of these options, we're going to be able to safely grow this lending business for many more -- many quarters to come. And on the BNPL with Shop Tokopedia specifically. I think this is something we're all really excited -- and because there's a new product acceleration. And then finally, we did have a segment in a discussion about or about FinTech and where we're going to land from an adjusted EBITDA positive. I'm pretty sure I confident that we'll have that done by the end of next year. So kind of end of 2025. And of course, the lending strategy has ported that projection. So it's subject to market conditions and make sure that things kind of stay status quo. Hope that good helps. Back to you.

Maybe our last question comes from the line of Ari Jahja of Macquarie.

[indiscernible] good to see growth acceleration. Part today. First, on the enlarged Tokopedia, considering the better-than-expected service fee, do you mind sharing insights on core GDP growth trajectory and product mix there so far? And secondly, on the ODS business model change from agency to principal besides alignment with peers, any other factors that drove this decision? And then lastly, on -- can you please elaborate on further cost cuts on the on year-to-date basis on year basis in light of the EBITDA breakeven items?

Speaking, we are not in a position to give detailed operational updates of e-commerce because it is operated by our partner, but maybe I can hand it over to Melissa to answer some of this fact.

Yes. Thank you and the question. So I think as to what I mentioned, you are not label deposit. But that being said, our performance has been very strong in the quarter, actually a lot better than expected in regards to how Ramadan have performed on both sides, to Tokopedia as well as Tokopedia. This is also only the beginning of a much deeper integration going forward. So please do, I mean, expect that we will still definitely remain committed into innovation as well as future integrations to deepen and again, enrich experiences for our users and merchants. Thank you...

And about the changes in the business model. I will let Jacky answer that question.

Yes, Erik, thank you for the question. So the primary reason for -- or the vest service to change the operational model, especially for the delivery business. As [indiscernible] mentioned, it's more to combine with the regional and also international players. So as you point out, there's more like a change in the composition of financial statements. So we mentioned to receive customers that will be realized as revenue and the amount we paid to the driver part that as cost of revenue. But overall, there's no impact on profitability.

Okay. There's a question about the cost. I think [indiscernible]. I think cost cutting has become a business, as you showed us, we continue to look at our cost basis on a continuous basis. We have also identified significant potential. We are planning the execution of it. But unfortunately, we are not incision to disclose at this moment.

Thank you, Ari. With that, we have reached the end of the question-and-answer session, and we conclude our conference call today. Thank you, everyone, for participating.