(Bloomberg) -- Indonesia’s GoTo Group reported a narrower quarterly loss after handing over its e-commerce business to TikTok to accelerate cost reductions.

The company, which competes with Singapore’s Grab Holdings Ltd. in ride-hailing and food delivery, reported a 102 billion rupiah ($6.3 million) adjusted loss before interest, taxes, depreciation and amortization for the three months through March. That compares with a loss of 898 billion rupiah a year earlier, a pro-forma number adjusted for the deal over the e-commerce unit.

GoTo is focusing on the bottom line as user growth cools and competition from Grab and smaller regional rivals weighs on margins. To improve its profitability, the Indonesian internet leader relinquished control of loss-making e-commerce arm Tokopedia to ByteDance Ltd.’s TikTok in a $1.5 billion deal.

As part of the pact, Jakarta-based GoTo will get regular payments from TikTok. For the full year, GoTo reiterated it expects to break even on an adjusted Ebitda basis.

GoTo is yet to reach profit on a net income basis, despite thousands of job cuts and large reductions in marketing spending. Its shares are down more than 80% since its 2022 initial public offering in Jakarta.

Growth has slowed from the triple-digit pace of past years, underscoring stiff competition and shaky consumer spending. First-quarter net revenue, which strips out incentives to driver and merchant partners and promotions to users, rose 63% on a pro-forma basis to 3.1 trillion rupiah.

What Bloomberg Intelligence Says

GoTo broke even in 4Q for the first time since its 2022 listing and aims to be profitable in 2024, which is likely since it sold 75% of the high-cash-burn Tokopedia to TikTok in 1Q. GoTo’s fees from Tokopedia — about 40 bps on gross transaction value based on disclosed figures for 3Q — should largely flow through to Ebitda. Earnings will also be boosted by the rising scale of its most profitable segment, on-demand services, as well as cross-selling with its 22%-owned Bank Jago.

-Nathan Naidu, analyst

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While the TikTok deal and the cost cuts are set to ease pressure on GoTo’s finances, the difficult market has prompted the company and its competitors to consider aggressive options. GoTo and Grab this year revived discussions about a merger of their core businesses, Bloomberg News reported, a union that could allow them to reduce spending to attract users.

--With assistance from Norman Harsono.

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