GoTo Gojek Tokopedia PT Tbk

IDX:GOTO

Earnings Call Transcript 2023-Q1

[Reggy Susanto, Head of Investor Relations]

Hello, everyone. This is Reggy Susanto, Head of Investor Relations and welcome to the PT GoTo Gojek Tokopedia First Quarter 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. Joining us today from GoTo Group's senior management are Andre Soelistyo, President, Director, Group CEO and Co-Founder; and Jacky Lo, Group CFO. Following the management's prepared remarks, we'll open up the call for questions.

We would like to highlight that the information presented today has been prepared solely as results based on unaudited consolidated selected financial information for the 3 months ended March 31, 2023. Furthermore, as a reminder, today's discussion may contain forward-looking statements about the company's future business and financial performance. These comments are based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including as a result of the factors described in cautionary statements and risk factors included in the company's earnings release and regulatory filings to the OJK and IDX, by which any forward-looking statements made during this call are qualified in their entirety. This call also includes the discussion of certain non-Indonesian financial accounting standard measures such as gross revenues, contribution margin and adjusted EBITDA. We believe these measures can enhance investors' understanding of our business performance when used as a complement to Indonesian financial accounting standards disclosures.

During this earnings call, we will be going through our results of operations and earnings presentation which can be found on our website. 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 Andre.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Thank you, Reggy and hello, everyone and thank you for joining our call today. Last quarter, I spoke about our focus on accelerating towards positive operating cash flow generation. And today, I'm happy to report extensive progress on this front.

In first quarter of 2023, we reached a key milestone, positive group contribution margin, while adjusted EBITDA, our proxy for operating cash flow improved 67% year-on-year and 49% quarter-on-quarter to negative IDR1.6 trillion. This signals that we are halfway towards achieving positive adjusted EBITDA in Q4 of this year as per our guidance. This progress is a testament to the single-minded focus of our management team and everyone at the company as we reduce our variable and fixed costs while growing our revenues as we drove transactional efficiency by focusing on high-quality usage throughout our ecosystem.

For today, I'd first like to provide an update on our profitability journey, including how meaningful cost reductions are creating value for our organization. I will then provide some color on growth and how we are finetuning our business, so that it is prime for future ecosystem expansion.

As I mentioned, group contribution margin turned positive in this first quarter, in line with our guidance. Each of our core businesses is delivering healthier results and showing that they can be independently profitable. To dig a bit deeper into that, e-commerce turned CM positive in first quarter of 2023 following the same trajectory as on-demand services in fourth quarter of 2022. GoTo Financial also turned CM positive in Q1 of '23, although we expect fluctuations here as we continue to invest in this space over future quarters. As of Q1, we've also consolidated our logistics and fulfillment services, forming a fourth reporting segment, GoTo Logistics which I will provide more details on in a few moments.

In first quarter, we implemented our strategy by optimizing e-commerce C2C and B2C merchant commissions, while at the same time, continuing to reduce our incentives and product marketing spend, resulting in a reduction in associated costs of 39% year-over-year. Despite these changes, our merchants stayed loyal to our platform with a number of active merchants on the platform remaining stable. This demonstrates the value of our ecosystem and the merit of our value-added services, bringing to the merchants.

With respect to fixed costs which we have been progressively reducing since the second half of last year, we have so far reviewed and identified cost-saving opportunities across more than 15,000 line items with the aim of creating a leaner, stronger foundation from which to grow. And as a result of these combined efforts, we decreased recurring cash OpEx in Q1 by around IDR460 billion or 17% quarter-over-quarter.

With regard to people costs which form around 60% of our recurring cash OpEx, the full effects of the head count reduction we announced in November of 2022 resulted in around IDR210 billion of savings from our personnel cost base or a 13% improvement from the previous quarter. Savings from the more recent reduction announced in March will be reflected from May onwards. For non-personnel costs which form around 40% of our recurring cash OpEx in the first quarter, we have either cut various expense line items that are not fundamental to our core value proposition or found ways to generate the same outcomes at a lower cost.

One of the most significant areas of improvement is within our technology organization. Our engineering team has been continuously developing tools and processes that have allowed us to fundamentally streamline IT costs now and over the coming months and years. This has already stated to show results with a 19% quarter-on-quarter reduction in IT expenses in Q1 of this year.

Now turning to our product-led growth strategy. As we outlined on our last call, our efficiency improvements will result in slower GTV and transaction growth and we have seen this begin to happen in Q1. Slower growth is driven by the conscious decision we have made to read out low-quality subsidy-driven transactions as we calibrate our business for a future in which every user can be profitable. Significant progress is being made, as shown in the fact that revenue growth outpaced GTV growth.

The number of high-quality profitable users remained stable in Q1 and constituted more than 70% of total users, despite adverse seasonality impact and the significant reduction in incentives. GTV per profitable user grew quarter-on-quarter, comprising more than 70% of our overall GTV in the first quarter. While the contribution margin per profitable user also grew by around 5% quarter-over-quarter.

As we continue to reduce costs, future growth will be driven not by subsidies but by the development of foundational products and services that lower our cost to serve and really add value to customers' lives as we position ourselves to take the full advantage of Indonesia's fast-growing total addressable market over the long term.

I've spoken previously about products such as Moda Hemat [ph] which offer economical options to consumers, we might otherwise not have reached. Early results have been promising with our Hemat offering already contributing to mid- to high single-digit order penetration within our transported food offerings in Indonesia as the end of the first quarter, despite being launched only a few months ago. This gives us confidence that we're on the right track and there is much more to come as much of our product innovation will be released later in the year, acting as a growth accelerant for our business over the coming quarters.

For Q1, there are 2 developments I'd like to touch on. Firstly, how we are investing in our supply chain to structurally reduce our costs and improve user experience via GoTo Logistics. And secondly, how we are building our lending business. The scale of Indonesia coupled with the breadth and complexity of our company, meaning we have always had a wide range of fulfillment and delivery solutions within our ecosystem.

Tokopedia delivers to 99% of districts across the country, providing a range of options from premium, instant and same-day offerings to regular lower cost deliveries. Tokopedia also provides fulfillment services to third-party merchants which involves holding their inventories in our hubs and providing order management services. And at the same time, Gojek provides dedicated same day and instant delivery services to e-commerce platforms, supporting both point-to-point as well half-to-point delivery methods.

Given this large and compact spectrum of activity, it makes sense for us to bring Tokopedia's fulfillment unit and Gojek's e-commerce same-day delivery unit under one segment called GoTo Logistics. Doing this will enable us to look at logistics holistically, making it easier to identify opportunities to make our processes more efficient and across platform basis. One of our key aims is to reduce e-commerce delivery costs for consumers, especially in Jakarta and other Tier 1 cities through aggregation with our fulfillment centers at the core of hub-and-spoke distribution networks around the country, covering areas of dense demand. The overarching goal is to realize economies of scale to drive down costs while also improving speed and reliability of deliveries for buyers and merchants. Part of the reason for creating GoTo Logistics is to make it easier to identify components of our fulfillment and delivery processes that are not core to our broader strategy. Such inefficiencies are evident in the GoTo Logistics negative bottom line currently.

The new structure provides us with a clear baseline from which to implement our strategy, making it easier for us to focus on recalibrating our operations in core geographical areas while streamlining ecosystem costs. Ultimately GoTo Logistics represent a unique opportunity to leverage our large captive volumes, fulfillment footprint and delivery capabilities to create a best-in-class end-to-end service that will ultimately translate into economic savings that we can pass on the consumers to drive growth.

We're excited to say that early results have proven our GoTo Logistics thesis. With enhanced batching and routing capabilities, we're able to provide conventional next-day delivery services at around 30% of lower costs compared with similar services provided by third-party logistics providers. We will continue to scale up this in-house delivery capability, making delivery affordability as a key part of our e-commerce value proposition.

Now, turning to lending. Consumer lending drives the payment flexibility of our on-demand services and e-commerce platforms which increases consumer loyalty and spend in our ecosystem as well as driving platform monetization. For example, e-commerce consumers, on average, spend around 25% more after they first use GoPayLater Cicil [ph] based on observations on earlier borrowing cohorts. Given the multiplier effects that it brings to our ecosystem, we will accelerate consumer lending this year while being very prudent in managing risk.

We have generated outstanding loans of around IDR831 billion from our consumer lending business as of the first quarter of 2023, reflecting a growth rate of 40% quarter-over-quarter. Moreover our data capabilities mean that we are able to continuously enhance our credit scoring model which enables us to manage risk effectively. This result in a quality loan portfolio with average loans disbursed across all of our consumer lending products, generating positive contribution margin. We will continue to strengthen our strategic partnership with [indiscernible] as we work together to further develop GoTo consumer lending value proposition.

Before I hand the call over to Jacky, I'd like to reiterate that our fundamentals are showing strong improvement. As we advance towards profitability, we will continue to focus on high-quality users and cost controls while prudently investing in products and infrastructure to support our long-term vision. This may result in slower GTV growth in Q2 as we calibrate for our higher quality usage. This trade-off is a calculated one as it supports our near-term goal of positive adjusted EBITDA in the fourth quarter as well as our long-term goal of resiliency. We will focus on reaccelerating growth over future quarters.

I will now turn the call over to Jacky to review our group and business segment performance. Jacky, over to you.

[Jacky Lo, Chief Financial Officer]

Thank you, Andre. Good day, everyone and thank you for joining us on today's call.

For the first quarter of 2023, our group GTV increased 6% year-on-year to IDR149 trillion. Our overall take rate grew by 29 basis points and group gross revenue was up IDR750 billion or 14% year-on-year to IDR6 trillion. As we indicated last quarter, slower GTV and transaction growth is expected throughout the first half of this year as we accelerate our plans to reach profitability in the immediate term while focusing on growing our high-quality user base. We hit positive group contribution margin in the first quarter which is in line with our guidance. Group contribution margin reached a level of 0.4% of GTV, reflecting an improvement of 224 basis points year-on-year.

As Andre discussed, our leap to positive contribution margin was largely driven by a reduction in incentives and product marketing of 39%, reflecting total quarterly savings of IDR2.6 trillion year-on-year. Group adjusted EBITDA improved by 67% year-on-year and 49% quarter-on-quarter to negative IDR1.6 trillion or negative 1.1% of GTV, meaning we are on track to turn adjusted EBITDA positive in the fourth quarter and start generating positive operating cash flow shortly thereafter. We are confident we can get there without external funding. Our cash and cash equivalents of IDR26.8 trillion at the end of the first quarter, along with IDR3.15 trillion remaining in our IDR4.65 trillion credit facility provide us with ample cushion.

Before moving on to segment highlights, I would like to go over the improvement we made to our segment disclosure which provide greater visibility on our business structure. First is the introduction of logistics segment under GoTo Logistics which Andre has spoken about. We have provided segment results for 2022 that have been aligned with the current segment presentation. These numbers are not significantly different for on-demand services and e-commerce when compared to previous presentations.

Secondly, we'll be reporting segment adjusted EBITDA and corporate costs for the first time starting this quarter. Again, we are providing 2022 numbers for comparison purposes that have been aligned with the current segment presentation. The reconciliation between segment loss from operations and segment adjusted EBITDA can be found in our earnings presentation on our website.

In the first quarter of 2023, recurring cash OpEx debt sits at the corporate level totaled IDR310 billion or 14% of total group recurring cash OpEx. We allocated IDR139 billion of such corporate cost to compute segment loss from operations and segment adjusted EBITDA for each of our operating segments.

With that, I will now walk through each of our core segments. In on-demand services, our primary focus is on improving monetization through the refinement of commissions and fees. In transport, this translates into improving commission rates while implementing tiered platform fees. This has resulted in gross revenue of IDR3 trillion, an increase of 12% year-on-year, despite GTV declining to IDR13.7 trillion or a decrease of 5% year-on-year. It's mainly driven by heightened GTV for food deliveries during the Omicron lockdown period last year as well as our profit focused strategy to prioritize high-quality rather than incentive-driven usage. We expect GTV to moderate further in Q2 as we continue to focus on this strategy.

Monetization improvements from our commission adjustments have also paid off. As mentioned, as of February, we increased the commission rate in Singapore from 10% to 15%, contributing to an overall take rate increase of 324 basis points year-on-year. Going forward, we will continue scaling our profitable economy products alongside value-added and premium services, all of which account for 10% of transport orders in the first quarter, up from 4.8% in the prior quarter and 3% in the first quarter of last year.

For food deliveries, our platform setup allows us to vary fees based on the individual consumer or merchant as well as the purchasing occasion. Combining this with incentive and product marketing rationalization, we achieved a reduction in incentives and product marketing as a percentage of GTV of 347 basis points year-on-year, continuing the trend of improvements delivered throughout 2022. On a blended basis, we reduced on-demand service incentives and product marketing by 30% year-on-year which is equivalent to around IDR900 billion in quarterly savings. As a result, our on-demand service segment improved its profitability in the first quarter with contribution margin changed 3.8% of GTV and 881 basis points improvement year-on-year.

During the first quarter, food deliveries also turned contribution margin positive, showing the increasing health within our on-demand services business and the resilience of our high-quality users, even as offline options increased in the reopened economy. This building block helped us to achieve adjusted EBITDA of negative 1.8% of GTV for our on-demand services, an improvement of 976 basis points year-on-year.

Looking at e-commerce, GTV moderated to IDR63 trillion, showing a year-on-year decline of 3.6%. But if we take a step back, we can see the first quarter of 2022 is a challenging comparative as the rise of the Omicron variant propelled e-commerce tailwinds. GTV was also impacted by the de-prioritization of Mitra Tokopedia, our noncore B2B marketplace offering with the effects appearing in this quarter.

Excluding the impact from this business, Tokopedia GTV remained largely flat year-on-year despite challenging macroeconomic trends and significant rationalization on promotion spend. We are making excellent progress in driving monetization while maintaining our sizable market share. Gross revenue was IDR2.3 trillion, showing a year-on-year increase of 21%. e-commerce take rates improved by 72 basis points year-on-year and reached 3.6% of GTV in the first quarter. We continuously improved our merchants' app functionalities, enabling merchants to get meaningful competitive insights and marketing tools to drive sales. This has allowed us to generate higher C2C and B2C commission rates starting in the first quarter of 2023.

Our take rate from advertising also continued to grow quarter-on-quarter following the implementation of dynamic ad slots in search which prioritize search relevance and local products and therefore increased ads relevance and provide a better user experience. We will continue to introduce innovative technology that drives ads relevance and conversion rates to support continued monetization growth. The e-commerce business turned contribution margin positive for the full quarter for the first time at 0.3% of GTV, improving by 223 basis points year-on-year. Even without the movement of fulfillment unit into the logistics segment, contribution margin would still have been positive in this quarter. This improvement is supported by a more personalized and targeted promotion algorithm, enabling us to reduce incentives and product marketing spend by 44% year-on-year, equivalent to IDR1.2 trillion in quarterly savings.

Following the improvement in contribution margin and our disciplined approach to cost, adjusted EBITDA for e-commerce was negative 0.8% of GTV for the first quarter, improving by 232 basis points year-on-year. We continue to focus on increasing penetration of GoPayLater products on Tokopedia to drive payment flexibility. We are improving our user targeting and have created a machine learning model for more effective targeted communications and promotions to consumers who are most likely to benefit from PayLater services. Together with GoTo Logistics, we are driving initiatives to reduce the cost of logistics by leveraging our hub-and-spoke infrastructure and in-house delivery capabilities.

Now regarding financial technology, GTV reached IDR91.5 trillion in the first quarter, maintaining positive growth of 18% year-on-year. Gross revenue grew by 25% year-on-year to IDR424 billion. While contribution margin improved by 47 basis points as a percentage of GTV year-on-year to IDR19 billion. We are making strong progress towards profitability while maintaining growth with lower incentives per user. In fact, we improved incentives and product marketing by 54% year-on-year, while minimal -- with minimal revenue impact.

Adjusted EBITDA for FinTech was negative 0.6% of GTV in the first quarter, improving by 41 basis points year-on-year. In line with our strategy to focus on existing high-quality growth, we have seen the quality of GoPay users improving with average spend per user in the quarter increasing by more than 30% year-on-year. All of this, combined with the expansion of the lending business discussed by Andre earlier, means GoTo Financial is well positioned as a foundational driver of future growth and profits. Having said that, we expect potential quarter-to-quarter fluctuations in margin as we continue to invest in this space.

On to GoTo Logistics. First quarter gross revenue for GoTo Logistics was IDR580 billion and adjusted EBITDA was negative IDR156 billion, an improvement of 37% year-on-year. The revenue for this segment mainly includes revenue from our in-house next day, same day and instant delivery services as well as revenue from our fulfillment businesses encompassing handling and storage fees and revenue from e-commerce enabler services. The cost for these segments mainly include fulfillment operation costs, charges from third-party delivery partners in our 4PL [ph] delivery model and driver cost within in-house delivery. We are investing in growing our last-mile delivery capability, enabling us to serve premium, instant and same-day delivery and conventional delivery. This year the focus will be to streamline and reconfigure key areas while making structural improvements within both the fulfillment and delivery units to create long-term efficiency.

Fulfillment is still in the early stages and this year focus is on improving assortment mix and inventory turnover rate to enhance unit economics. We are keeping fulfillment capital expenditure low through leasing as opposed to buying or building our own warehouses. We'll also scale our conventional next day capability in a relatively asset-light manner, leveraging existing hub and spoke infrastructure as much as possible. This should allow us to continue reducing losses without significantly increasing capital expenditures for the rest of the year.

In closing, we would like to reiterate our guidance timeline in which we expect to reach positive adjusted EBITDA within the fourth quarter of 2023. And for the full year 2023, we continue to project group adjusted EBITDA to be between negative IDR5.3 trillion and negative IDR4.6 trillion.

With that, we will now like to open the call to your questions. Reggy, over to you.

[Reggy Susanto, Head of Investor Relations]

[Operator Instructions] Our first question comes from the line of Pang Vittayaamnuaykoon from Goldman Sachs.

[Pang Vittayaamnuaykoon, Goldman Sachs]

Just a quick question -- a few questions from my side. Number one, on the GMV outlook. In the statement, you mentioned that you are looking for second quarter GMV to continue to trend lower. Can we have more color on how this will look like on a per segment basis which one will lead the weakness and which one we'll see a little bit of the better momentum. How will this translate to your full year GMV outlook as well? That's question number one.

Question number two, related to e-commerce GMV that we see this quarter. Can we have more color on how it looked like on an order and AOV basis? You mentioned that this is based on your conscious decision to win off low-quality orders. Can we understand if the exercise is largely done? Or are we going to see more now train coming in, in the next few quarters as well, the increase in take rate that we see this quarter, where is it coming from? And how much more can we expect this to go? And lastly, update in terms of the competitive landscape as well? Do you see any changes post yourself turning focus into profitability?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Thanks, Pang. This is Andre. I'll start with your -- well, lots of questions. Let me try to actually answer this one by one and I might need Jacky's help on some of this as well. On the first question on GMV outlook, I think generally, I would start with saying that I think we need to acknowledge that through the combination of the following, it's actually resulted in this slower and moderated growth which we have obviously guided the analysts and investors in the previous quarters. So the first is acknowledging that macro situation does change and that change with a lot of the inflation adjustments -- economy is opening up which means that there's actually more competition towards off-line activities and also some of the price hikes that we've seen in various items, especially on the fuel price. So there's actually that coupled with some of the adjustments with the market where a lot of the platforms, if you may, digital platforms, also reduces incentive that created a little bit more significantly moderated growth from a market perspective. So to note on that as well, we -- based on a lot of the data that we have from a competitive intelligence and market share perspective, despite this moderated growth in Q1, in many aspects of our product and use cases, we're still continuing to preserve our market positioning which means that the market itself is a little bit slower, if you may, to begin with.

Now in addition to that, as mentioned, during the scripted call, a lot of this decision is also a very conscious decision because in order for us to actually really understand the way that we divide the user perspective and user lens and our ability to actually see the trajectory of each of the users become profitable. We need to change a lot of the way we incentivize and subsidies and experiment with many different things to actually create an outcome that is positive but it's less, much less need for subsidy and incentive. And I think the results have been great. I think we spoke about the fact that our high-quality users and profitable users continue to rise up, continue to actually transact more and continue to become more and more profitable in the system, while the conscious decision is that there are many users in the system that actually stayed because of the over incentivization. And I think with this kind of trajectory, as mentioned, Q2 will continue to be a moderated growth. But as mentioned as well in the second half of the year with the various experiments and investments that we are doing on the different foundation of products, we do see that our ability to start to accelerate growth again can actually be done through this kind of activities.

One of the things that I am really, really obsessed about is really to reduce the cost to serve so that a lot of our use cases can be capturing the segment of affordability. A lot of our investment in the past is to really focus on the best-in-class operation but sometimes it comes with obviously heavier operating costs as well. Now we've seen that with the experiment and a lot of the market study that we have, it doesn't mean that lower segment users cannot be profitable or high quality. It means that we have to change the way that we organize so that the cost to serve can actually be manageable. A lot of this actually, for instance, resulted in a lot of investment in the logistics piece because many of our transactions are delivered, either it's food or e-commerce. So that's why go to logistics with a lot of the things that we're doing is super, super important.

The other thing that we do is also to think about how we really build our overall app experience. So for the affordability segment, certain pieces of the capabilities, including like machine learning models, a lot of the infrastructure and engineering platforms that we use might not need to be necessary in order to actually capture the affordability segments. And some of these experiments has actually already been done in ODS, as mentioned during the remarks earlier, we actually experimented with Moda Hemat economical order in English. And the result is actually really, really strong. It actually has already captured about 10% of transportation orders in Q1 of this year. And obviously, this gives us confidence that we're in the right trajectory. So this -- I'm talking about it more from a qualitative perspective. But maybe, Jacky, if you have any additional points to add on in terms of more quantitative, feel free to add.

[Jacky Lo, Chief Financial Officer]

Yes Andre, I think -- Pang, thank you for your question. As mentioned on the last earnings call, we stopped providing guidance on the top line. But I think directionally, we shared before, first half, we'll be focusing on, like, profitability and building the foundational products. So that will be like moderations and also because of the lapping last year's Omicron tailwind. Yes. But I think second half, we do expect it will be go back to like the growth that we have seen in the past. So -- but as I said, we don't provide like quantitative guidance in terms of top line. Yes. So I hope that answers your question, Pang.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

To your second question on e-commerce. So order and AOV. So AOV actually maintain it consistency. There's no significant fluctuations on a quarter-over-quarter basis. And the decision to actually without lower quality, we'll continue to actually be done in [indiscernible], while we're actually obviously investing in foundational capabilities to actually push for growth again. One of the things that's super, super key for our e-commerce product is definitely on logistics because at the end of the day, a lot of the costs, especially on cost to subsidize, it's really on subsidizing the delivery to actually entice more and more users to actually transact more online versus off-line. And I think delivery cost is actually really, really important. And this is -- again, there's actually 2 strategies that comes within this. First, as mentioned during the conversation around GoTo Logistics, the strength of Tokopedia today is really on hyperlocal.

So we are, yes, our coverage today is stronger in Tier 1 and Tier 2 CDs. That also means that our ability actually aggregate a lot of the orders and reduce the whole end-to-end supply chain to reduce the overall delivery cost is actually going to be more prevalent for us versus the other competitors who are more focused on Tier 2 and 3 CDs. And this is actually the main strategy that is very, very key because not only by doing that through our fulfillment and also last-mile delivery capabilities. So we will continue to invest. Not only we can actually reduce the cost by aggregation. But I think more importantly, that the speed and reliability will actually continue to be enhanced because of that as well. And that's actually not only, again, saving new costs but also increasing the service experience and therefore, there's actually multiple kind of hopefully multiplier effects coming to this as well.

But in general, it doesn't mean that we're only focused on last-mile hyperlocal intracity delivery. We're working with our third-party logistic provider partners as well to continue to actually reduce the overall cost to deliver for even intracity and intra-island -- sorry, intercity and interisland as well. And this actually will be a key to actually unlock the market. The conviction comes because, again and again, if we look at the e-commerce penetration in Indonesia, it is still at the lower level compared to many, many comparable countries, China, India and many others. But today, it's really about the heavy lifting on what is really key on building that operational capability. And in one of the key aspects in addition to many other things, is on the logistics as mentioned.

So on the competitive landscape, we have not seen many, many kind of different changes on -- compared to like Q4. As you know, Shape continues to focus on profitability. There's a social commerce player which continues to actually invest. But I think a lot of the kind of normalization in terms of their take rates and charging mechanics to merchants continue to rise up as well. So there's actually a little bit more normalization that we've seen on that. Yes. So we haven't seen anything dramatic in the competitive front. Hopefully, I answered a lot of your questions but I know that you have lots of questions. And hopefully, we can actually cover that in greater details post the earnings call.

[Jacky Lo, Chief Financial Officer]

Thank you, Pang.

[Reggy Susanto, Head of Investor Relations]

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

[Adrian Joezer, Mandiri Sekuritas]

Just 2 questions from me. The first one is actually as regards to, if you can actually provide more colors as regards to the e-commerce take rates, incremental improvement to 3.6% because I think it was mentioned in the call that if you exclude the prioritization of Mitra Tokopedia, then the DTC e-commerce should be roughly about flat year-on-year. So if I calculate, if I assume that Mitra Tokopedia has a take rate of about 1% to 2%, that means your e-commerce take rate. If we assume that Mitra Tokopedia remains there, it'll roughly be about at 3.5% which is only increasing by about -- I mean, 0.1 percentage point quarter-on-quarter. So if you can actually provide us with some color as regards to the DMD mix as we move into Q1 2023. So that's the first question.

And the second question, I think I'm interested to know more about the logistic cost per order in as of first quarter 2023 for the e-commerce? And how has this been trending in terms of the quarterly trend for the past 4 quarters? And also related to that, if you can actually provide us any guidance on the CapEx for GoTo Logistics for 2023?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Thanks, Adrian. Jacky, do you mind answering the first question on take rates?

[Jacky Lo, Chief Financial Officer]

Sure, yes. Adrian, if you look at the take rate for e-commerce, on a blended basis, it was 3.6%, right? So quarter-on-quarter, it went up about 40 basis points and year-on-year, it's about 72 basis points. If you just look at our -- the commission rate for physical goods, as a percentage of physical goods GTV is actually went up about 60 bps. So that was from the C2C as well as B2C commission rate increase in the first quarter. And so assets continue to be roughly about 1% of the overall contribution of the take rate, yes. But so overall, the increase is coming from the commission side.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

And Adrian, can I clarify a second question on what do you mean with the logistics cost per order?

[Adrian Joezer, Mandiri Sekuritas]

Yes. Sorry, I mean, for the -- I mean you mentioned about the delivery costs being an important component to incentivize consumers to shop online rather than off-line. So just wondering the average consumers payment for the log its -- I mean maybe for the logistic costs or you call it the last mile cost that we -- the customers pay on your platform?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Yes. So we'll get back to you on like specific but just to give you a color. Obviously there's free delivery or what we call the [indiscernible]. It's being called BO program in Tokopedia. And I think in other platforms, it has similar kind of different names to a similar construct where consumers are able to actually -- depending on different tiers of their loyalty to get quota on BO programs. There is a cap on minimum transactions and that actually needs to be met to actually get the quota and then the was also the maximum quarter in terms of the BO program itself. Now despite that, it is actually a BO or free delivery program, Adrian. But in reality, the cost is borne by multiple kind of stakeholders versus by the third-party logistics providers which provides commission to the transaction. And then the second is actually most recently, we decided to actually charge BO programs to the merchant as well.

So merchants who are participating, it is an option by the merchants to actually participate. And when they participate, they are subject -- or they are part of the BO or free delivery program. But on every transaction that actually consumes free delivery, there's actually additional around 3% to 4% extra commission to actually compensate against the spend. So I think net cost to us continue to dramatically reduce. While the payment that consumer made from a quantum perspective, it does decrease because of the different quotas that is actually either reduce or increase depending on the spending or the limit in terms of the spend. But to actually quantify that into like exact rupiah, I need to get back to you.

[Reggy Susanto, Head of Investor Relations]

Our question comes from the line of Aria Jahja from Macquarie.

[Aria Jahja, Macquarie]

So my first question is in regards to take rates for the ODS and FinTech. It looks like the take rates were weaker on a quarter-on-quarter basis. So just wondering if there's any opportunity to improve this further. I understand that for the e-commerce, there are clear drivers on the higher take rates but I just want to get a better understanding on the ODS and FinTech for this year. That's my first question.

[Jacky Lo, Chief Financial Officer]

And Ariya, when you say the take rate for ODS was weaker. I think you are comparing last quarter's announced numbers, right? But if you recall, we actually moved the B2C delivery units to GoTo Logistics. So that has roughly about like 2.5% impact on the take rate on demand service. So if you do an apples-to-apples comparison, like by excluding this B2C, like delivery from the on-demand service take rate, quarter-on-quarter, actually, the take rate improved, I think, by about 110 basis points. And year-on-year, it's over 320 basis points. So we are still continuously improving the take rate. Specifically, I think for both food and transport, we have very strong quarter-on-quarter improvement in the take rate. As we shared during the prepared remarks, some of the initiatives like the tier platform fee we are doing like dynamic pricing during key hours for food delivery. All this helps to continue to drive the take rate for both transport and food.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Yes. But I think, Aria, I think we also need to acknowledge that the for online services, as mentioned many quarters ago, the take rate kind of monetization have started since 2, 3 years ago. So it does have obviously gone level where it's comparable to the global standard group peers as well. But as Jacky mentioned, it doesn't mean that the improvement is not there but definitely it would be smaller in terms of percentage compared to the e-commerce nor the FinTech part of the equation.

Now to your question on GTF, as mentioned, I think for payments, because we cover both consumer and merchant payments. The take rate is much more regulated by the Central Bank so that the capability like the e-commerce on demand segment to actually continue to increase is not very much as clear as a lot of the take rate increase actually comes from 2 areas. Number one is, as mentioned, the more that we actually convert and size up our loan book converting the payments from just normal payments to consumer lending back products such as PayLater [indiscernible] or PayLater Cicil. The improvement on take rate will start to actually be meaningful. And as mentioned, I think this Q1, there's quite a meaningful growth or be it. It's still coming from a smaller base. But I think starting from second half, we'll see more and more kind of a significant contribution that actually start blending up the take rate of GTF in a more meaningful manner coming from the FinTech business.

And then the second is actually on value-add services as well because the opportunity to actually leverage on payments to actually provide merchant value-added services such as targeted promotion that targeted advertising is also existing for payments business. And this is actually something that we're also working on at the same time. But I think the most meaningful kind of contribution will start to come in because of size of growth that we see in our loan book for FinTech.

[Reggy Susanto, Head of Investor Relations]

Our next question comes from the line of Varun Ahuja from Credit Suisse.

[Varun Ahuja, Credit Suisse]

I have got 3 questions. First, on the FinTech side, if I remember, you manned around IDR83 billion was the loan which is around US$6 million. So is this largely consumer loan book? And what is the plan to grow this because the loan book size obviously looks a little bit relatively lower compare to PSC. Is it -- have any plans to your plans to go big on merchant lending also is going to be still a consumer loan book that you're looking at it? So if you can elaborate a little bit more color, how do you plan to grow through it and whether the current IDR56 million is through your balance sheet or you're still partnering with banks? And so if anything more details really helpful.

Number 2, if you look at your FinTech GTV, both on a quarter-on-quarter basis despite the decline in both on-demand and e-commerce, it has grown strongly, it showing that your payment processing or your off-line side of GTV is doing relatively better. So what's the plan to monetize that better in terms of, if you give any color? What are you -- how are you looking at that part of the business to contribute to the FinTech side? That's number two. Yes, I think that's about it.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Thanks, Varun. On your first question, the loan book of IDR830 billion is only consumer. But we have actually a merchant lending product, both in food and also Tokopedia that actually is quite sizable. So -- but this year, I think while merchant lending is actually A value proposition that we offer to our merchants. But I think from a priority perspective, we're focusing a lot in like really expanding our consumer loan product. And then to give you a perspective there are 3 main products in consumer lending versus end of month payment or what we call PayLater [indiscernible]. The second one is installment or PayLater Cicil. And the last one is what we call GoPay [indiscernible] which is a cash loan product that actually experiment in the Gojek app but it will actually expand into the multi-apps as well for all users to actually utilize.

Yes, it looks a little bit smaller compared to maybe some of the peers that you are benchmarking. But noting that we just started our GoPayLater Cicil product in Tokopedia back in October of last year. So this is despite that has just been a few months of expanding the product itself. And obviously, as we progress and now we have a lot more confidence in looking at the user conversion. Also the cohorts in terms of the loan repayment, where we have much more confidence to actually put this across the board.

Now I think I have to answer your second question but it's also linked to the first one. I think the opportunity for consumer lending doesn't stop just in Gojek and Tokopedia app. Well, because of the penetration of the lending product in Tokopedia and Gojek is still relatively small compared to our payment volume or payment penetration itself. And it allows us to actually have large capital volumes that we can actually covert. But the operation for our consumer lending is also on our offline and also online, what we call the open loop merchants. As you know, we have both Mitra's, Mitra's does cover payment processing for online merchants, such as Ikea.com, Uniqlo and many others and many e-commerce platforms and digital platform as well. But we also have off-line capabilities to acquire payments for offline merchants.

The products that we are building for consumer lending will eventually be able to be used for payments and these offline and online merchants as well which means that you think about it as -- is like a credit card product. You can use your credit card product all across merchants who are accepted, not just in a captive closed-loop platform. This is actually a very important key and one of the key differentiator because we are a payment platform that is actually quite holistic and not just focus to become the wallet for close-loop but our open-loop, our off-line and online third-party merchants acceptance is also very high. And this is actually an opportunity for us to expand this even further in a significant way.

[Reggy Susanto, Head of Investor Relations]

Our next question comes from the line of Ranjan Sharma from JPMorgan.

[Ranjan Sharma, JPMorgan]

Two questions from my side. Firstly, I mean, just for the Mitra Tokopedia GMV that you talked about, the GMV is still down like 7% versus fourth quarter. I know there's going to be some seasonality but it seems like GMV is declining. So if you can share more color around the nature of GMV which is which GoTo is shedding? And secondly, if -- let's say, the GMV remains under pressure in the next few quarters and not just the second quarter. Will it be possible for GoTo to increase e-commerce take rates?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Jacky, can you actually maybe answer the question on the numbers first and then maybe I can give additional color on seasonality.

[Jacky Lo, Chief Financial Officer]

Yes, sure. I think for e-commerce, you talked about GTV is down about 3.6%, right? But if you exclude the impact from Mitra Tokopedia, it was mostly flat year-on-year or quarter-on-quarter -- year-on-year, sorry. So that was like attributable to like lapping last year's Omicron obviously and also our decisions to like focus on the high-quality users. So all this actually resulted in the negative GTV growth. But I think if you strip out Mitra Tokopedia, I think most of it will be flat. And we expect like there will be continuous moderation in Q2 because of the continuous lacking from last year's over tailwind and also our focus on profitability in the first half. Yes. But I think heading into the second half, we do expect it will be gradually recovering in terms of top line growth for e-commerce.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Yes. So I think just generally, additional data point, as mentioned, I think Q1, definitely, from a seasonality perspective is weak because Q4 is festive combined with a lot of different holidays and towards the end of the year. And obviously, the impact on Hari Raya or Idul Fitri happens in April. So this is actually more going to be seen in Q2 instead of Q1. In addition to that but I think we also have to acknowledge that a lot of the changes we've made in terms of the incentivization and stuff did have a shop in the system. And obviously, as discussed, there are users who are low quality, in our opinion, that actually got readout throughout the system and that actually resulted in some of the kind of pressure that you mentioned, Ranjan. But again, this is actually a conscious decision in a sense that without this, we couldn't recalibrate our -- the way that we actually optimize in the past, because of the high competitiveness in the e-commerce platform, a lot of performs and to actually double triple-stack subsidy offering.

A user can actually get free delivery plus cash back plus something else which is -- definitely is actually really, really heavy and it's actually not going to be able to actually create a positive unit economics product. So a lot of these changes have been made and the market is also equally a rationale. And therefore, what we've seen in this Q1 is also a bit of a shock in the system, after a lot of adjustment is being made over the last few quarters by the multiple platforms as well. But as mentioned, we are quite confident in being able to actually really focus on growing again because now the levers is much clearer. The control on the logistical cost is very important. It is very complex in execution, yes. But as company needs to grow up, that they couldn't rely on like this kind of theory kind of metrics anymore that this is actually the time to differentiate who can actually do it and who cannot and that actually determine who are able to actually get the technical growth going forward.

Now to your question about -- because of the pressure and potential growth and so on and so forth, is it possible to increase take rates. The answer is yes, because of two reasons. Number one, despite that maybe transactional GTV is a little bit moderated. But I think the value of a C2C e-commerce platform is also becoming a discovery base. So a lot of merchants actually spend adds dollar to capture a lot of the intent to engage. And that's how apps product became quite successful in our part of the equation. The volume of the visits and also the throughput, the first funnel continues to be strong and the session become more and more high quality and then better engaging in terms of conversion rate as well. And that's why from a ads revenue, it continues to actually generate higher and higher growth as well in our system and this has continued to be our investment.

So one of the key value to increase in terms of take rate is on ads. But having said that, I also still believe that Indonesia compared to many peers in different countries or from a C2C marketplace take rate, it still remains to be on the lower side in terms of take rate. So yes, there is an opportunity. As mentioned, every year, we see a lot of that opportunity and review whether we can actually do another one. So this obviously will be done on a yearly and yearly basis and something that we will continue to actually explore and evaluate.

[Reggy Susanto, Head of Investor Relations]

Our last question comes from the line of Reena Verma Bhasin from Deutsche Bank.

[Reena Bhasin, Deutsche Bank]

Can you hear me?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Yes, we can. We can hear you, Reena.

[Reena Bhasin, Deutsche Bank]

Just a couple of quick questions. One is Jacky mentioned that your GMV growth should start to look better as you move beyond the second quarter. Is there any kind of basis to that? And are you just talking in seasonal terms? Or are you talking year-on-year, please? My second question is about your corporate cost. Just from the standpoint of your having most of your operations in a single country, it just seemed to be very, very high. And if you could comment on why such a large cost base seems justifiable. And the third question is on the spinoff of your segment into logistics as a separate one. I'm sorry, you've talked about it in fourth quarter and this quarter. But it's not clear to me what the rationale is. And all companies in your space having the same kind of supply chain and what really is driving you to kind of make segment disclosures separately?

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

Jacky, can you probably take the first question?

[Jacky Lo, Chief Financial Officer]

Yes, I'll take the first 2 questions. And yes Andre, you can the last one. So Reena, I think the -- when we talk about the GMV or GDP recovery in the second half, it's more on a quarter or quarter sequential in that sense. So -- but I mean, like I said, we don't provide like full year top line guidance right now or by quarter. But when I -- I get that comment it's more on a sequential quarter-to-quarter improvement. And then on your comment on corporate costs, if you look at the actual cash corporate cost, it's about IDR310 billion. Out of our total cash OpEx that's 14%. So from our perspective, that's actually quite low given we a public company as well. So and but obviously, we continue to be very disciplined to identify additional savings opportunities like we have been consolidating all these different supporting functions as you know. So and also, we are leveraging like the IT side to be more efficient. So hopefully, that's going to give us some additional upside in terms of the cost optimization. But overall, like cash OpEx at the corporate level is only about 14% of the total.

[Andre Soelistyo, President, Co-Founder & Chief Executive Officer]

And I want to add on -- I think whenever we speak about it seems to be very high. Ideally, if you can provide more data points where you compare that against because I think a lot of the color is actually really important to really understand because some of our peers who also reported corporate costs as Jacky mention in our side is 14%. And by the way, that's not just people because there's actually multiple other costs, including our professional fees, our payments. So auditors, et cetera, et cetera, I think rental, head office and stuff that is included in that as well. So it's actually fully baked in, not just on personnel. But I think the 14% is compare to like 70% of headquarter costs in some of our peers. So again, it's just less -- let's be very, very precise in like the comparison so that we're not trying to debate on something that is much more subjective if you may. But happy to actually maybe follow up and maybe post earning on some of your observation here.

On the last question on GTL spin off. Well, the spin off decision is clear. But the reason why it becomes a reporting is because of the auditor, well, I mean, it is by compliance that a certain segment that is above certain percentage needs to be reported as a separate segment and because of the size of the assets and the revenue that we have to disclose the earnings assets, its own separate segment.

[Reggy Susanto, Head of Investor Relations]

Thank you, Rina. With that, we have reached the end of the question-and-answer session and we conclude our conference call for today. Thank you for participating. You may all disconnect.