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

Hello, everyone. This is Joel Ellis, Head of Investor Relations. Welcome to the PT GoTo Gojek Tokopedia Tbk Second Quarter 2026 Earnings Conference. Please be advised that today's conference is being recorded. On today's call, Hans Patuwo, our President, Director and Group Chief Executive Officer; and Simon Ho, Group Chief Financial Officer, will deliver prepared remarks. Following their commentary, we will open up the call for questions and be joined by Catherine Hindra Sutjahyo, our Deputy Chief Executive Officer and Vice President, Director; and Sudhanshu Raheja, our Group Chief Operating Officer, along with members of GoTo's Board of Directors. We would like to highlight that the information presented today has been prepared solely based on unaudited consolidated selected financial information for the 3-month period ended June 30, 2026. 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 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 17,856 to USD 1 based on the middle rates published by Bank Indonesia as of the end of June 2026. We will also refer to adjusted free cash flow, which is adjusted operating cash flow minus capital expenditures. 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 Hans.

Thank you, Joel. Hello, everyone, and thank you for joining us today. Q2 was a very eventful quarter, and we look forward to unpacking it in today's call. First, let me start with our bottom line results. In the second quarter of 2026, GoTo delivered a net income of IDR 252 billion. This is our second consecutive quarter of net profit and up 47% quarter-on-quarter. Furthermore, adjusted EBITDA more than doubled year-on-year, exceeding IDR 1 trillion for the first time. Both On-Demand and FinTech businesses are profitable. And for the first time, the adjusted EBITDA of our FinTech segment exceeded that of On-Demand Services. Moving on to top line performance. We continue to grow at double digits across all top line metrics. Annual transacting users reached 71 million, up 19% versus a year ago. Core GTV surged 83% to IDR 164 trillion and net revenue rose 31% year-on-year to IDR 5.7 trillion. Driven by this performance, we are keeping our full year group adjusted EBITDA guidance unchanged at IDR 3.2 trillion to IDR 3.4 trillion. Within this outlook, we are increasing our FinTech guidance by IDR 0.3 trillion to become IDR 1.7 trillion to IDR 1.8 trillion. At the same time, we are lowering our On-Demand Services guidance by an equivalent amount from IDR 1.7 trillion to IDR 1.8 trillion to become IDR 1.4 trillion to IDR 1.5 trillion. This reduction in our On-Demand Services guidance is driven by the newly introduced 8% commission cap. Now before I go to our business unit performance, I would like to address this commission change as well as our recent share price performance, which I'm sure is on everyone's minds. Turning first to the 8% commission cap. Let us start by sharing the facts. The commission cap was first announced by President Prabowo on May 1. Subsequently, during a press conference on June 23, the Deputy Speakers of Indonesia's House of Representatives stated that this 8% commission cap would apply to 2-wheel passenger transportation services and that it will go into effect on July 1. One week later, the Minister of Transportation issued Ministerial Decree #532 of 2026. This decree, which regulates 2-wheel passenger transportation service, serves as the legal basis for implementing the 8% commission cap on July 1 for our GoRide product, a product which contributes to roughly 7% of group net revenue. Since then, we have smoothly completed implementation of the 8% commission structure and achieved full regulatory compliance while keeping consumer, driver and transaction volumes stable and growing. This change, however, created an adverse adjusted EBITDA impact of approximately IDR 300 billion, which then led us to reduce our full year outlook for On-Demand Services by a matching amount. I want to share that we continue to engage constructively with various government and ministries to ensure that we collectively achieve an appropriate balance that protects driver partners, benefits consumers and safeguards the long-term health of the entire ecosystem. I will address our share price next, which has been at the IDR 50 floor for almost 3 months. To provide some context, 2026 has been challenging for the overall Indonesian equity market, which is down about 30% year-to-date. Going back to our Q1 results announcement on April 28, that featured our first-ever net profit and was positively received by the market, and our share price saw encouraging gains in the days that followed. However, the subsequent declaration of the 8% commission cap on May 1 placed downward pressure on our stock, triggering a decline to its current position at the IDR 50 floor. As management, we believe that this does not accurately reflect the true value of our company. Although it is still early, the 8% commission cap has been enacted and our decision to uphold our group earnings guidance underscores our ability to navigate this transition effectively. We anticipate that stakeholder confidence will strengthen as predictability returns, and we remain fully committed to transparently communicating the outcomes of these strategic shifts. Also, we requested and received shareholder approval for a new buyback program during our Annual General Meeting of Shareholders in June. Under this program, the company is authorized to repurchase shares up to a maximum of IDR 3.5 trillion between now and June 2027. That being said, we are choosing to be prudent by avoiding a rushed implementation of these repurchases. We are carefully assessing the optimal time frame for execution to guarantee that the buyback delivers the maximum amount of impact. In the immediate term, our plan is to cancel 32 billion units of treasury shares, which represents around 2.7% of all outstanding shares. This requires formal shareholder approval, and we will go through the usual regulatory process. To conclude on this subject, I would like to reiterate our commitment to disciplined capital allocation and that we are continuing to work towards solutions to the share price issue. Now on to business unit performance, starting with On-Demand Services. With the new 8% commission framework still taking shape for much of the second quarter, we chose to prioritize margin and bottom line over volume growth. This resulted in a record bottom line performance. On-Demand Services margin improved from 2.0% a year ago to 2.8%. Specifically, for our Mobility business, margins expanded significantly to 5.0%, up from 3.0% a year ago, a direct result of prioritizing bottom line amidst an uncertain quarter. Delivery margin also rose to 2.1% from 1.8% in the prior year. Overall, On-Demand Services adjusted EBITDA rose 41% year-on-year to IDR 464 billion, and net revenues also rose 20% year-on-year to IDR 3.6 trillion. The trade-off, however, was headline GTV, which reached IDR 16.7 trillion, up 2% year-on-year. Now that there is greater clarity on 8% commission cap, we are shifting our emphasis back towards growth, which will manifest in the Q3 results. We are also pleased to report that our mass market segment strategy is beginning to yield positive results. In deliveries, for instance, the number of transactions expanded by 8% year-on-year. This trend is driven by lower average order value orders typical of mass market transactions. Now rather than relying on increased discounting, this performance is being driven by technology. For example, in our pilot city, pooling increased fivefold, albeit from a lower base, and driver trips per hour rose by 15%. We are currently expanding this model to additional cities and are encouraged by the initial outcomes. Concurrently, we remain committed to serving our affluent consumer base. GoFood Express maintains its strong growth trajectory with transactions and GTV increasing by 44% and 46% year-on-year, respectively. And throughout all of On-Demand Services, the total number of our very high spending users grew 21% year-on-year. Moving forward, we expect transaction volumes to continue to outpace GTV growth. This is as our investments in product capabilities underpin our growth in the mass market segment. We are glad to be seeing early results and observed the positive momentum from June extending into July. Turning now to FinTech. Substantial growth was recorded across all performance metrics. Adjusted EBITDA experienced a 447% year-on-year surge, hitting IDR 481 billion as we continue to benefit from operating leverage. Net revenue expanded 53% year-on-year, exceeding IDR 2 trillion. Monthly transacting users expanded by 29% year-on-year to 28.8 million. Transactions climbed 91% year-on-year to 2.4 billion, demonstrating stronger user engagement. And Core GTV reached IDR 157 trillion, reflecting also a 91% year-on-year increase. In lending, our loan book expanded by 58% year-on-year, reaching IDR 11 trillion, while at the same time, preserving the quality of our credit risk. Even so, we have opted for a prudent approach and have implemented preemptive measures to tighten our lowest quality risk cohorts. Our structural approach to lending is unchanged. We lend almost exclusively to existing users in our ecosystem, whom we can assess accurately, and the short tenor of our loans allow us to adjust quickly as conditions evolve. To conclude, this was an eventful quarter. And as the new commission structure settles in, there may be more adjustments ahead. We do, however, have a clear plan. Both business segments are also growing profitably and our core fundamentals continue to strengthen. If I may, conditions such as this built more disciplined companies, and we fully intend to come through this period stronger. Thank you so much. I will now hand it over to Simon.

Thank you, Hans. Moving on to our financial results. I will be focusing on year-on-year comparisons for the second quarter of 2026. We kept our momentum going in the second quarter, bringing in robust top line and profitability. At a group level, net revenue grew 31% to IDR 5.7 trillion or USD 317 million, thanks to solid performance across each part of our business. Our cash recurring fixed costs grew 17%, a much lower pace than net revenue. By combining the solid revenue growth with better operating efficiency, our adjusted EBITDA jumped 137% to just over IDR 1 trillion or USD 57 million. These operational gains flowed through to our bottom line, resulting in our second consecutive quarter of net profit at IDR 252 billion or USD 14 million. Now let's look at how our specific segments performed. In On-Demand Services, we delivered strong profitability gains. Net revenue for ODS increased 20% to IDR 3.6 trillion or USD 201 million in the second quarter, driven by 20% growth across both the Mobility and Delivery segments. This growth was due to product mix changes and rationalization of incentives as we prepared for the implementation of the 8% commission rate. This resulted in the increase of ODS adjusted EBITDA by 41% to IDR 464 billion or USD 26 million. Moving to FinTech. The business had another great quarter. Net revenue rose 53% to IDR 2.1 trillion or USD 116 million. This was driven by strong user growth, rising payment transactions and the continued growth of our loan book. As a result, FinTech adjusted EBITDA reached IDR 481 billion or USD 27 million, an increase of more than 5x. In e-commerce, the service fees from Tokopedia increased by 32% to IDR 263 billion or USD 15 million. To wrap up, our solid results this quarter reflect strong operational execution and financial discipline. We remain confident in our full year outlook and our ability to deliver long-term value. With that, I will turn the call back to Joel.

Thank you, Simon and Hans. We will now open up the call for questions.

[Operator Instructions] First question is from Ari Jahja from Macquarie.

Well done GoTo team for the strong results. So I have 3 questions today. First, related to the 8% commission cap, which has been in place for almost 1 month now. So beyond the 2-wheeler business, do you expect 4-wheeler to be impacted by this new regulation? And similarly, do you anticipate food delivery to be affected? And does your guidance include the 4-wheeler and food delivery as well? Then the second question is that on the margins and unit economics. How do you see that coming along for the 2-wheeler? And can you remind us how much the 2-wheeler business is contributing to the overall mix? Third and last on net profit. So good to see the continued uptick there. How should we think about the sustainability heading into the second half of the year? So I'll stop here.

Thank you so much for your questions. Look, first, we are very glad that the implementation of 8% went very smoothly. Consumers, drivers, transaction numbers remain stable and in certain areas, continue -- in fact, continue to grow. So we are quite pleased and glad about the smooth implementation and transition. Now regarding your question about regulations, particularly on the 4-wheel and food deliveries part. As of right now, the presidential regulation is still being developed. And I think it's quite difficult for me to speculate on what will be in the final product. We are in discussions with various parties in government and various ministries, and we certainly hope that it remains contained to the 2-wheel transportation product. So speaking on the basis of legality as of today, the Transport Ministry regulation applies only to 2-wheels transportation, right, and currently still excludes 4-wheels and all deliveries. Now and with regards to the question around margins, look, margins for our 2-wheeler transportation, GoRide business, has certainly deteriorated. These are still early days, right? Unit economics is negative, and we are still waiting for the dust to settle, and we will be looking to make adjustments to improve unit economics over time. And we have various levers to do that, for example, around pricing and other components like platform fees and surge timings, et cetera. So today, GoRide is about 7% of group net revenues. And I think for now, the goal is to prioritize smooth transition, make sure that we are compliant to regulations. And now that that has become a lot clearer, we will then move on to evaluating ways to improve the unit economics of GoRide, including evaluating cost-saving opportunities across ODS. Now I think the last question, maybe, Simon, you can help with that.

Thanks, Ari, for the question. On your question about net profit sustainability, obviously, I can start off to say that we're really, really glad to have reported the second consecutive quarter of net profits ever in the history of the company. We'd like to believe that we can continue to be net profit positive for the rest of the year. But in reality, there are items in our P&L that are beyond management's control. For example, the performance of Tokopedia, which we own 25%. And you see in our financial statements, there's also foreign currency impacts and also performance of some of the equity investments in our investment portfolio. I'd like to guide you to take a look at an alternative metric, which is disclosed in our financial statement. This one is called operating profit. Operating profit excludes these impacts, obviously, measures the operating performance from a pure GAAP accounting perspective. On our operating profit in the first half, we generated IDR 782 billion positive in operating profit, and we do expect operating profit to stay positive in the second half of the year. I hope this gives some color to that outlook, Ari.

[Operator Instructions] Our next question will come from Ferry Wong at Citi.

Congrats on your second quarter results. Yes, I have 2 questions. First, this is with regards to your buyback program. You have the authorization of IDR 3.5 trillion buyback programs, but you haven't seen -- we haven't seen any execution on that front. Could you walk us through management current thinking and the timing in terms of execution? And secondly, in terms of the trading liquidity in the market, are you thinking about doing some sort of corporate action, i.e., like doing a reverse stock split? Yes, maybe you can help to address that. Second question, could you discuss on how the current macroeconomic headwinds affecting your FinTech asset quality? Are you seeing any sign of stress in your portfolio, maybe between the cash loan and BNPL?

Thanks for your question, Ferry. Maybe, Simon, can you help us with this?

Yes. Thanks, Ferry. On the share buyback, as Hans called out during his prepared remarks, we are overall taking a prudent approach at this point and don't want to be rushed into share repurchases given the volatility that we've seen out there. I'd also call out the number of uncertainties that we do see on the horizon. Of course, the top of mind topic is the 8% commission rate. We just implemented this beginning this month. And we would like to give it some time to run in and stabilize. And despite obviously some clarity on the 2-wheeler transportation front, we also need to be confident that this is indeed the full scope of 8%. Now another uncertainty on our minds, of course, is the global macro outlook. Of course, the renewed uncertainty in the Middle East, global oil prices has started to become volatile again, and it's really unclear today how this will -- or when this will improve. And when we take a look at the domestic economy in Indonesia, we have seen obviously some softening during the second quarter. And you'll see that over the past several months, consumer confidence has been declining. The retail sales index have started to contract on a year-on-year basis since April. Inflation is up. Interest rates have gone up about 100 basis points and energy and currencies are moving in an unfavorable direction. I think we need to be ready for a risk of further slowdown in the second half. And hence, in the prepared remarks, you've heard about how that we've taken a more prudent stance on consumer lending as well. Now with all this in mind, we do want to err on the side of prudence and ensure we have enough liquidity and flexibility in this environment. And as mentioned, in the immediate term, our plan is to cancel the 32 billion of treasury shares, which amounts to about 2.7% of outstanding shares. Now if we move on to the other part of your question, you mentioned about reverse stock split. We do recognize that this is one possible option. However, in Indonesia, this is not a straightforward regulatory process. There have not been many precedents. In fact, over the past 15 years, there's only been a handful. And these are mostly smaller companies. And of course, the share prices for almost all of these precedents have performed very badly afterwards. As a result, the perception by the public here is quite negative on reverse stock splits. While we're not entirely dismissing this option, we are wary of this negative public perception. And it's also at a time when the market sentiment is very weak. And as we know, foreign investors have also been retreating. So I think overall, we are still evaluating all our options on this topic.

Thanks very much for your question, Ferry. We do appreciate it.

Sorry, there's one more question...

Yes.

About the FinTech asset quality?

Yes.

So Ferry, let me just wrap up on this one as well. We have seen more recently some early signs of deterioration in the broader market, and this is consistent with the softer macro environment. And as we mentioned, we moved early with proactive risk actions. And as a result, you see that our overall delinquency rates and NPLs remain stable, similar to earlier quarters. This stability, I think, reflects some of the deliberate tightening that we've made, and that includes tightening underwriting for lower scoring cohorts. We've also become more selective in approvals and also in limit management as well. At the same time, to be a bit more conservative, we've also increased our provision coverage to build an additional buffer, which is also why you will see that the cost of credit has also risen. The fundamental setup of our loan book also acts as a built-in safeguard through some of the -- through the short tenors that we have, the small ticket sizes and the rapid portfolio turnover in just a matter of months. And this gives us the flexibility to adjust to rapidly shifting conditions if we need to. And just to reiterate, of course, we delivered a 58% loan book growth year-on-year. And alongside this, our credit quality metrics have remained stable, particularly amidst the softening macro environment. And this all shows that the model is working as designed.