Maplebear Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 15 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to Insta Card's First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to Rebecca Yoshiyama, VP of Investor Relations, Capital Markets and Treasury. Please go ahead.

Speaker 1

Thank you, Josh, and welcome, everyone, to Instacart's Q1 2024 Earnings Call. On the call with me today are Fiji Simo, our Chief Executive Officer Nick Giovanni, our current Chief Financial Officer and Emily Reuter, our current Vice President of Finance and incoming Chief Financial Officer. After brief prepared remarks, we will open up the call for live questions with Siji and Emily. During today's call, we will make forward looking statements related to our business plans and strategy, future performance and prospects, including our expectations regarding financial results, partnerships, equity, issuances and share repurchases. These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated.

Speaker 1

You can find more information about these risks and uncertainties, including those related to the classification of shoppers on our platform, in our last Form 10 ks filed with the SEC.

Speaker 2

We assume no obligation to update

Speaker 1

these statements after today's call except as required by law. In addition, we will also discuss certain non GAAP financial measures, which have limitations and should not be considered in isolation from or a substitute for our GAAP results. A reconciliation between these GAAP and non GAAP financial measures is included in our shareholder letter, which can be found on our Investor Relations website. Now, I'll turn the call over to Sijie for her opening remarks.

Speaker 2

Thanks, Rebecca. Hi, everyone. I hope you had the chance to read our shareholder letter, which highlights our strong start to 2024 and how we're continuing to raise the bar across all the most important dimensions of groceries. As the largest online grocery marketplace in North America, we provide 98% of families with access to delivery and pickup from over 1500 retail banners, will represent more than 85% of U. S.

Speaker 2

Grocery sales. On top of the best selection, 45% of our orders are accepted by shoppers who are already at or within a mile of the store, which means your first item is often being picked out faster than it might take you to get out the front door. Our shoppers also have the advantages of experience and our technology. With shopper tenure on the platform at an all time high, constant improvements to our models and in store tools like planograms, shoppers can complete orders faster and with more accuracy. Simply put, no other marketplace offers a leading customer experience we provide at the scale and competitive cost we deliver it at.

Speaker 2

And now by partnering with Uber, we're giving people more of what they're looking for. By bringing on hundreds of thousands of restaurants to Instacart overnight, we're creating an unmatched combination of grocery and restaurant options for Instacart customers. The Instacart app can now serve more of our customers' food needs and our Instacart Plus membership becomes twice as valuable with no delivery fee on grocery and restaurant orders over $35 By giving our customers more reasons to turn to Instacart, we believe we'll also be able to drive more sales and growth opportunities for retail and brand partners, which remains our top priority. Overall, I'm excited for what's ahead for Instacart in 2024 and beyond. We have a strong operating foundation, a relentless focus on profitable growth and we're executing well on our vision to build the technologies that are transforming the grocery industry.

Speaker 2

So it is with great confidence that we announced Emilie Reuter as our next Chief Financial Officer. Nick will retire at the end of Q2 and Emily's role is effective immediately after we file our Form 10 Q, which is expected later this week. As Nick and I discussed the best CFO profile for our future business, I wanted someone with a depth of operating experience in a complex marketplace business similar to our own. We found out and more in Emily and she's been contributing enormously since he joined in January. Emily is undoubtedly the best CFO to help drive Instacart's future.

Speaker 2

I want to thank Nick for his exceptional contributions over the past few years. Introducing a new level of financial rigor across the company, Nick helped transform our business into one that delivers strong profitable growth and was one of very few tech companies that could make a successful public market debut last year. Now I'll turn the call over to Nick to provide a few remarks.

Speaker 3

Thank you, Fiji. It has been an incredible three and a half years and I'm very proud of what we've accomplished together at Instacart. The level of execution and teamwork required to create a sustainable, profitable and growing company and then to take it public after the longest tech IPO drought in history was one of the most satisfying experiences I've had in my career. Instacart is in a great position as the clear leader with strong operating fundamentals. And after working closely with Emily over these past several months, I'm certain that our team, our partners and our shareholders cannot be in better hands.

Speaker 3

It has been a pleasure engaging with all of our investors and analysts over the past few years. Thank you all. And with that, I'll step off the call and turn it over to Emily.

Speaker 4

Thank you, Fiji and Nick. Since joining Instacart in January, I've become even more bullish on the company's future. I joined Instacart because of its clear leadership position within online grocery and its impressive vision for the future of grocery technology. I'm now even more confident in our ability to capture our share of the massive market opportunity ahead. My confidence is driven by a few things.

Speaker 4

The depth of our technology integrations as well as the breadth of our long standing retailer and brand partnerships. Our ability to deliver a great customer experience. This means having the best selection combined with high quality service, all at the price and speed customers want it. Our cost to serve advantage underpinned by our ability to fulfill multiple big basket grocery orders from the same store at the same time. This allows us to generate efficiencies from batching, while also giving shoppers more earnings opportunities.

Speaker 4

And finally, we aren't just focused on delivering results for the next few quarters or years. We're investing in technologies that will shape the future of grocery and grow the pie for all our stakeholders. I could not be more excited to work with our teams to drive even more profitable growth for Instacart as we work to further extend our lead across all of these dimensions. I also want to thank Nick for his support over these past few months and Fiji for her inspiring and collaborative partnership from day 1. Now let me provide more color on our financial results and outlook.

Speaker 4

Q1 was an exceptionally strong quarter for us with both GTV and adjusted EBITDA beating the high end of our guidance ranges. On one hand, our outperformance on GTV was driven by a continuation of trends we've been discussing. This includes improving cohort dynamics consistent with what we've said in the past, which is our mature cohort declines continue to improve and our new cohorts continue to be bigger than pre pandemic cohorts. It also includes a lessening year over year EBT Snap headwind, which had the biggest impact in Q4 and a smaller impact in Q1, primarily because of the successful EBT Snap launches with Kroger and Costco. On the other hand, our year over year GTV growth in Q1 also benefited from a number of one time things.

Speaker 4

This included just over 1 percentage point of growth from Leap Day in addition to stronger than expected seasonality as Q1 2024 was an exceptionally bad winter season, especially compared to the prior year quarter. After taking all of these factors into consideration, as well as what we've seen so far in this quarter, we arrive at our Q2 GTV guidance of $8,000,000,000 to $8,150,000,000 representing 7% to 9% year over year growth. This growth outlook is a bit lower than Q1, primarily because we don't expect the benefit of inclement weather. While Q2 growth will not have the benefit of leap day, we largely expect this to be offset by EBT Snap moving from a modest year over year headwind to a tailwind from Q1 to Q2. Overall, our Q2 GTV outlook represents a sustained step up versus the 5% year over year growth we delivered in 2023.

Speaker 4

We are also guiding to strong Q2 adjusted EBITDA of $180,000,000 to $190,000,000 and are well on track delivering adjusted EBITDA expansion in full year 2024 on both an absolute and percent of GTV basis. One important thing to note about our adjusted EBITDA outlook is it reflects our ability to manage multiple levers across our P and L to drive leverage. In Q2, we expect advertising and other revenue to grow largely in line with what we experienced over the past 2 quarters. This means our adjusted EBITDA as a percentage of GTV is expected to grow year over year, primarily driven by transaction revenue and adjusted OpEx leverage. We are also continuing to take a disciplined approach to equity management.

Speaker 4

We continue to expect net dilution to be in the low single digits before any share repurchases. And in 2024, we are committed to making sure that the net value of equity we grant employees this year is less than the adjusted EBITDA we delivered in 2023. We are confident in our ability to execute and generate more shareholder value over time. This is why we cumulatively repurchased approximately 27,000,000 shares for $751,000,000 by the end of Q1. As of March 31, we had $249,000,000 of remaining share repurchase capacity and plan to continue opportunistically repurchasing shares.

Speaker 4

Overall, our business is performing well and our operating fundamentals are solid. We remain relentlessly focused on making our service better, deepening our leadership position and innovating with new technologies like CAPER and our partnership with Uber. While we don't expect these new growth initiatives to materially impact our financials in Q2, we believe that they have the potential to drive more value to consumers and growth to our retail and brand partners over time. We also expect all of this will help us drive more profitable growth and progress towards our long term financial targets over time. We're excited about the future and we appreciate your support as shareholders.

Speaker 4

With that, Fiji and I are here to take your questions. Operator, you may now begin.

Operator

Thank you. Our first question comes from Eric Sheridan with Goldman Sachs. You may proceed.

Speaker 5

Thanks for taking the question. And Nick, thanks for all the assistance and help over the years. And Emily, best of luck in the role going forward. Maybe I'll ask sort of a 2 parter. In terms of the building blocks of GTV growth, as you think medium to longer term, can you unpack how you're thinking about the broader consumer demand on the platform, the input of sort of continued supply growth more broadly and how to think about simulating rising utility amongst your user base as we think about sort of longer objectives around GTV against broader industry growth?

Speaker 5

Thank you so much.

Speaker 2

Thanks, Eric, for the question. So we are still very excited about the long term growth that we anticipate in a market that is still moving online and still deeply underpenetrated online. What we see as the building blocks of that long term making us succeed today and allowing us to have this leadership position. Number 1 is selection. We continue to have leading selection and we're in fact continuing to increase the selection, not just in grocery, but now also adding a new use case with restaurants where we're able to add hundreds of thousands of restaurants overnight, which will create a new use case for the app.

Speaker 2

Quality is absolutely critical. You can see in the latter more details on how we continue to improve that and be at an all time high since the pandemic on sound rate and fill rate. And we have a real leadership position there with not only a very healthy shop of supply, but shoppers that are highly qualified and at the highest of their tenure right now. We also see speed being a critical advantage, which again is tied to our shopper supply with 45% of shoppers being at the store or within a mile of the store. And that means that we can deliver these orders faster than anyone and we know that speed matters enormously in this market.

Speaker 2

The last one is affordability. That remains the thing that we need to keep working out to continue expanding the time and we are hard at work on it through a multi pronged approach where we are adding a lot of different savings, whether it's from retailers, from CPGs, loyalty programs, weekly flyers and really working with retailers on optimizing their pricing so that the customer that buys online field, they are getting maximum $4.75 saved on items per order, which is up 20% year over year. So these components aren't changing. They are what's going to drive long term growth and every quarter you're going to hear us talk about how we're making progress on all of them to really activate the growth. Now at the macro level, we have also talked about the fact that mature cohorts improving quarter after quarter as we saw again this quarter is definitely a big driver of long term growth as well as new cohorts continuing to get bigger, which is certainly what we've seen in 20 20 3 and 20 9, 20 24 compared to pre pandemic.

Speaker 2

So we feel very well set up for the long term.

Operator

Thank you. One moment for questions. Our next question comes from Nikhil Divnani with Bernstein. You may

Speaker 6

proceed. Hi. Thank you for taking the question. I wanted to ask about reinvestment, please. It looks like your transaction revenue stepped up a bit sequentially and sales and marketing was sort of flattish as a percent of GTV sequentially as well.

Speaker 6

Given you beat the guidance pretty comfortably on EBITDA, did you look at the possibility of reinvesting some of that excess profit to support growth for the rest of the year? I guess why not go on the front foot more? Was it simply a lack of ROI on some of that investment or did other factors come into play as well? Thank you.

Speaker 2

So I want to be clear that we actually did reinvest to support growth. And that's not always seen in the sales and marketing line. Sometimes it's seen in the incentive line, which is contra revenue. And the reason we have been able to reinvest to support growth while having high confidence that this will return is because we have really over hold our incentive system in the last year to be able to really target the right incentives to the right customers. And so what you're seeing us do is actually reinvest heavily into the business to continue to support that growth.

Speaker 2

That may not appear in the numbers immediately because we take a long term view to these reinvestments. And so some of these incentives or marketing might be driven at long term retention, like for example, getting you to adopt 1 more retailer or 1 more category or buying from a club, all of which are predictors of long term retention and higher LTV. And so you might see that payoff over the longer term rather than in quarter, but we are very much investing in the business and don't feel limited in our ability to invest.

Speaker 6

Great. Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Ross Sandler with Barclays. You may proceed.

Speaker 7

Hey, Fiji. Just a couple

Speaker 8

of questions on these partnerships. So I guess first, maybe we can clear the air on the Amazon elephant in the room. You guys work with Whole Foods in Canada. It sounds like Amazon is going to go another push here with their new pricing mechanism for Prime in the U. S.

Speaker 8

I guess, what's your view on that? And is there any reason why at some point in the future, non exclusive or whatever, you couldn't go back to working with Whole Foods? That'd be first question. And then the second one is on the Uber partnership. I guess just how big do you think this could be?

Speaker 8

And do you think that restaurant ordering will be just folks that are IC Plus members who kind of order a la carte from food delivery apps? Or do you think there's like a high overlap of DashPass subscribers that might come over and use Instacart now? Thanks a lot.

Speaker 2

Thanks, Ross. So on Amazon specifically, I would say Amazon has experimented with many different pricing structures over the years. We have been testing these add on subscription for some time. And within this construct, we remain very confident that we still have the winning customer value prop and some critical advantages. We have the best selection, 1500 retail partners, reaching 98% of households.

Speaker 2

We know how much selection matters in this market. That's a key advantage. We also have a key advantage on speed. As I said, 80% of our orders are on demand, half of which are priority, whereas in the case of Amazon, you have to schedule orders for in advance. And we know again that speed matters enormously in this market.

Speaker 2

And we really have the best value with Instacart Plus being $99 a year, now twice as valuable with the addition of restaurants and not requiring an extra subscription. So we feel really good that under any construct from this competitor, we will be able to continue gaining share as we have in the past. We work with them in Canada. We are pleased with the results. There's no reason why we wouldn't be able to expand to Whole Foods, but that's our decision, not ours.

Speaker 2

We would be thrilled to work with them, but that's for them to decide. Now on the Uber side, I'm really excited about the partnership. I think this is adding enormous selection overnight at positive unit economics, which as you know, is really hard to pull off when you enter a completely new category. So we think this is something that's going to be incredibly accretive to the Instacart user. And on your more specific question on which type of usage do we see, we actually see that we have a lot of incremental audiences that Uber does not have, especially in families, especially in the suburbs, which is a big part of why this partnership is also valuable to them.

Speaker 2

And we are going to be aggressively wanting to convert these customers into restaurant customers. We know that our customers already go to other apps to order restaurants. That's why we decided to prioritize entering this category. And I think with the value proposition of Instacart Plus, which is not increasing in price despite adding all restaurants and free delivery above $35 from both grocery and restaurants. We have a very strong value proposition here with leading selection in grocery and leading selection in restaurants.

Speaker 2

So we're really excited about our ability to attract new users and convert our existing users to become restaurant customers as well and as a result make them more engaged.

Operator

Thank you. One moment for questions. Our next question comes from Jason Helfstein with Oppenheimer. You may proceed.

Speaker 9

Thanks for taking the questions. Just two questions. So you had some comments about expanding to Pickup. Just how do you think about like what are the savings that a customer gets when they do pick up? And do you think this better positions you to compete with Walmart, obviously, for unlike grocery?

Speaker 9

And the second question, just to Uber, can the economics work to expand the partnership so that they would actually offer your grocery offering on their app? So open ended question on that. Thank you.

Speaker 2

Thank you. So on pickup, pickup is a big part of our affordability strategy because it is a cheaper option for people who value price over convenience. And so that's why we're focused on it and that's why we actually made it free this quarter to use pickup. So to your point on the savings, it's a great option for people who may not have the time to get inside the store and want to benefit from those time savings, but don't want to pay the cost of delivery. And we see that it is in fact a different customer because 75% of pickup orders are incremental.

Speaker 2

Now pickup is a smaller part of our overall business, in big part because we started with grocery, but it's a part that continues to grow and we continue to expand with large grocers like Kroger, Albertsons, many more to continue to grow the pickup business. So we're excited about it, but it is a smaller part of our overall business. As for your question on Uber and grocery, to be clear, this partnership was very focused about us entering restaurants. We are still going to compete in grocery and we continue to have leading category chef in grocery. So this is something that we're excited to continue

Operator

further. Thank you. One moment for questions. Our next question comes from Colin Sebastian with Baird. You may proceed.

Speaker 3

Great. Thanks. And Nick, all the best to you on your next steps. And Emily, welcome and congrats. Looking at the advertising revenue opportunity, this seems like still an area that's a significant opportunity as you engage with more CPG and brand advertisers.

Speaker 3

And so looking at that business, looking at the take rate, if you could perhaps maybe update us on the roadmap there, any specific platform enhancements or products this year that we should pay attention to and ultimately, Fiji, your vision for advertising on the platform? Thank you.

Speaker 2

Absolutely. So we still have very high conviction on our long term targets, which are that advertising would reach 4% to 5% of GTV over time. It will not be linear. If you look at the last couple of years, advertising has grown very fast over the last couple of years. And so that's something that has changed in the last few quarters, mostly as we've told you before, because ad growth lags GTV growth and we haven't seen ads fully catch up yet.

Speaker 2

But our conviction around the long term model is very strong. The reason we have this conviction is because we continue adding more and more partnerships to measure the performance of our ad and optimize those ads and the results always come back showing that we are an incredible place for advertisers to place our dollars. You have seen that probably in the letter with our partnership with Turkana. We continue to launch new objectives and optimization capabilities, like for example, new to brand objective and target ROAS this quarter. And so all of these capabilities are really contributing to giving brands confidence that we have a channel by which they're going to see high return, high sales leads, high incrementalities.

Speaker 2

In terms of what to pay attention to in addition to these measurements, improvements, targeting, etcetera, which is really our bread and butter, we have extended the strength of our ad platform beyond the world of the InfoCout app. You have seen us do partnership with Google recently, and the use of trade desk where we are taking the data and the strength of our targeting and our audiences and applying it to, advertising platforms outside of Instacart. We have taken a similar approach with Carrot Ads where we power ads on our retailers' websites with all that Sprouts, Schnucks, many more. And that's also a way to continue growing the ad business. And then finally, expanding this ad business inside the store on Kaper with Kaper ads, which is obviously small right now given that we have hundreds of cars out there.

Speaker 2

But as we ramp up to 1,000 of cars, this is something that will get a lot bigger, especially as you look to 2025. So overall, like we feel very confident about the performance of our ad. Some initiatives take time, but we feel good about our trajectory.

Speaker 3

Okay. Thanks, Vijay.

Operator

Thank you. One moment for questions. Our next question comes from Doug Anmuth with JPMorgan. You may proceed.

Speaker 5

Thanks for taking the questions. Emily, can you provide me more color on what you're seeing across cohorts and if you see a timeframe for mature cohorts, those declines to flatten out? And then, thinking that you can help us understand around the benefits of the new partnerships with Kroger and Costco on EBT Snap and on quantifying just as you flip from a headwind to tailwind over into 2Q? Thanks.

Speaker 4

Thanks for the question, Doug. So on cohorts, what I'd say is that everything that we've said about cohort dynamics remains true. So mature cohort declines continue to improve in the quarter and new cohorts are bigger than pre pandemic. What I would note though is that the strong Q1 performance that we saw benefited all of our cohorts. And so for that reason, I would expect that there was some acceleration and improvement in Q1 that we don't expect to repeat in Q2 given those one time impacts.

Speaker 4

So overall, I think the underlying trends continue to move along the same trends with the one time impact in Q1. As it relates to the benefit of the new partnerships on EBT, overall, what I'd say is that the year over year headwind improved from Q4 to Q1. So the impact was strongest in Q4. And in Q1, the launches of Kroger and Costco helped mitigate that impact. As we move into Q2, we do expect to lap the expiration of those benefits, But the overall impact is modest.

Speaker 4

The way that I think about it is that the EBT SNAP benefit in Q2 would effectively offset the impact that we had in Q1 from Leap Day, so about 1 percentage point of growth.

Speaker 5

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Michael Morton with MoffettNathanson. You may proceed.

Speaker 7

Good evening. Thank you for the question. 2, if I could, they're related. Could you speak to the defensibility and contract length of some of the largest and exclusive relationships? It's a question that we frequently get from the investor base.

Speaker 7

Any clarity there? And we do appreciate that it's not essential to the success of your business, but it's a FAQ. And related to partnerships, I would love to know how you think longer term when it comes to working with the likes of Walmart and Amazon. Research shows that they're taking share in grocery and could be taking share from your core customer base on the grocery side. And a lot of times they like to pull things in house eventually.

Speaker 7

So is there any risk that you're feeding the beast and bridging them to their own sustainable solutions? Thank you so much.

Speaker 2

Thanks for the question. So on contract length and exclusivity, first off, I just want to remind everyone that exclusivity is not a strategy. The strategy is fundamentally to be the partner choice by being very embedded in grosses business because we drive growth for them. As for the contracts, they are, I would say, 1 to 2 years and they all have different timing. So it's not as if there is a cliff coming up at any point.

Speaker 2

And what we usually see is that when retailers go non exclusive and go to other platforms, what happens is that they continue to grow with us, invest more in the relationship. And the use case that happens on other platforms is quite different from our own. It ends up being And so very different from what they can do on And so very different from what we can do on our platform, which is really everything from small baskets to large baskets. And so we continue to invest in our technology with grocers. We have a relationship even when they're not exclusive.

Speaker 2

Well, very often we power their own and operated business. We power their fulfillment. We do pickup with them. We do EBT snap. We do just your convenience.

Speaker 2

The list goes on. And it's obviously a much more strategic relationship than just sitting on the marketplace. So that's very much how we think about this. In terms of partnership and long term working with competitors, I would say what we obsess over is always adding the best possible selection for customers and that's what got us to have a selection that represents 85% of U. S.

Speaker 2

Grocery sales being on Instacorp. And so that's why we want to work with every grocer. However, when you talk about competitive advantages, we think our competitive advantages are very strong. And in particular, when it comes to fulfillment advantages, the scale at which we operate gives us very significant advantages over any retailer wanting to do that themselves. And that's why you are seeing even the largest guys, the programs of the world, etcetera, really relying on us for fulfillment because we can do that at economics that are highly competitive at a scale that is incredibly competitive with quality that's top notch.

Speaker 2

And as a result, we can grow their business rather than doing that themselves and not growing as fast as they would if they relied on our technology. So we want to make it always the smartest choice for them to partner with us and that's exactly what has happened to date.

Speaker 7

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Andrew Boone with JMP Securities. You may proceed.

Speaker 3

Thanks so much for taking my question. The NBCUniversal partnership is very interesting. Can you talk about the potential of off platform advertising and what you need to do to unlock more budget as well as more partners? Thanks so much.

Speaker 2

Thanks for the question, Andrew. So the way we think about it is that we have really unique customer data that can help advertisers identify audiences, for example, who would be new to their brand, who is an engaged customer that may that used to be engaged, but may have churned. All of these audiences are incredibly critical for advertisers, especially in a world where cookies are going away and other platforms are really hungry for high quality third party data. And so we are able through our first party data to do these partnerships where advertisers are able to take our audiences and leverage that on other platforms to make their advertising on other platforms more performance. And so that's very exciting.

Speaker 2

In addition to that, some of these brands decide to point directly to because they know that people are going to convert better if they land on a place where the ads allow them to buy and get the product inside their hands within an hour. So it's really a full funnel approach that we have with Google, The Trade Desk and VCU. And that's why we're really excited to continue deepening these partnerships. Now in terms of materiality, I would say it is still small because it's a new thing and it requires a new infrastructure and a new muscle. Very often, the people that we talk to, to go get these budgets are different people than the people that are allocating spend on Instacart, because they are just allocating spend on other platforms that are more maybe awareness driven or other objectives.

Speaker 2

So it takes a bit of time to sell this and build these new relationships, add the new tools to make these services easier to access, optimization capabilities. But we've done that in the past with our own platform. We know exactly the playbook. That's the playbook we're applying to this year. And we hope to see the results of that in 2025.

Speaker 3

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Ron Josey with Citi. You may proceed.

Speaker 10

Great. Thanks for taking the question. Maybe as a quick follow-up to one of your prior questions, Piyush, I wanted to ask about just the comments in the letter around operating data. I think

Speaker 11

you have you talked about

Speaker 10

a decade of operating data. And I wanted to just understand the strategic moats that you have as a result of that, both for the consumers and your retail partners, because I think that's something that's often discussed. And to that, maybe another question around, I think the comments on the call around quality or in the letter around quality, specifically around receipt analysis and the benefit of LLMs. Just talk to us about

Speaker 7

the benefits that you gained from that. Thank you.

Speaker 2

Absolutely. Thanks for the question. The reason I talked about operating data in the letter is because very often we talk about having the best prediction models and things like that, which is incredibly important. I want to be clear. But even if someone literally duplicated right now all of our prediction models, If they didn't have the 10 years of operating data, the model wouldn't be that accurate.

Speaker 2

You're only as smart as the data you collect. And so what we've done is really a mass, a large pool of data both on the consumer side and on the inventory side. On the consumer side, it's 11 to 12 years of large basket data of everything that customers want to buy, everything that they substitute, which is critical because that allows us if an item is not on the shelf to substitute it with something that they prefer. Lots of data about the types of products that are complementary to others so that we can surface the best product recommendation and also surface the best ad recommendation. So all of that contributes to a richness of consumer data.

Speaker 2

That means that when you have invested in Instacart, you have placed a couple of orders. It's really hard to go to another platform because you would have to rebuild your entire basket, rebuild all of your habits, rebuild all of your preferences. And we have all of that for you. And that's why you're seeing in the letter me mention that 75% of our customers have purchased an item from their buy it again list because again, this is data we have on all of the purchase history. Now on the kind of the shutoff side and inventory side, it is also really critical to have data that allows us to predict what's on the shelves.

Speaker 2

And so again, because we have 600,000 shoppers roaming the aisles of grocery stores and we partner with retailers to get, not only their catalog files, but their balance on hand data in some cases, we are able to create a system by which we can predict quarter after quarter what's going to be on the shelves with more accuracy, given that we have developed all of these technologies tell us what's exactly on the shelf right now. And as I've mentioned in previous calls, the biggest compliment that we have on our technology is that some retailers and CPGs are actually using our out of stock predictions to optimize their operations because we know what's on the shelves much more in real time with much more accuracy than retailers and CPGs themselves. And so we see them using our data to optimize their operations. Then once you have kind of predicted what's on the shelves, you also need shoppers to find the items inside the store. And that's why we have planograms for that represent 75% of orders on the platform, so that when the shoppers arrive in the store, they are unable to find the item with max efficiency and be able to increase the found rate.

Speaker 2

And then finally, I mentioned receipt data in the letter because once you're done completing this order and you found the items, sometimes it happens that shoppers could make mistake and with receipt data, we're able to tell them in real time now because we can analyze receipts better. Hey, actually you missed this item. Hey, you might have switched this item into a different order and allow them to self correct on the spot. And so the combination of all of these technologies is really what gives us massive leadership and results in found rates and fill rates that again are at an all time high since the pandemic. So we're really proud of this system and continue to improve upon them quarter after quarter.

Speaker 7

That's great. Thank you, Fiji.

Operator

Thank you. One moment for questions. Our next question comes from Tom Champion with Piper Sandler. You may proceed.

Speaker 11

Good afternoon. I'd love to hear you talk a little bit about affordability and how you're productizing deals within the platform and the product. And I guess, maybe beyond that big picture, could you talk a little bit about your view of the consumer and the range of outcomes you're contemplating for this year? Thank you.

Speaker 2

Yes, thanks. So on affordability, we obsess over it and that's why you are seeing results like our savings increasing 20% year over year to 4.75 dollars on items per order. And that's a metric we track really carefully because we want to make sure that when customers come to the platform, we give them a different products that you have to build to do that. One is loyalty programs. A lot of retailers also have a lot of deals with our loyalty programs.

Speaker 2

And quarter after quarter, we integrate with the loyalty programs of more and more retailers, which allows us to surface more deals. We have retailer funded deals where they're going to offer, for example, dollars 10 off a particular order to attract customers to them. So that's also a platform that we've built recently and allows retailers to actually put their own funds to attract delivery customers. We are also digitizing the weekly flyer. If you look offline, a lot of people end up looking at the weekly flyer in a paper form before they go to the store to kind of figure out what are the deals that they want to not forget when they get to the store.

Speaker 2

We're digitizing that that people benefit from that experience. And then finally, we also have CPGs that are coming in and funding specific deals on the specific product. And we have a format called stock up and save, which is actually an ad format where CPGs can come and like basically give a deal for people to buy more of that particular product and get a discount for higher quantities. We also look at savings in terms of delivery options and providing more affordable delivery options, light pickup and no rush. So that's the people who value price over convenience can have the great benefits of our service as well.

Speaker 2

And so all of these adds up to really making it feel like the service quarter after quarter becomes more affordable. And that is reflected in the fact that if you look at our demographics, a couple of years ago, it was we were very highly concentrated in some affluent demographic, whereas right now we actually map to U. S. Population pretty closely. And that's something where we're very proud about because that means that we align with the entirety of the TAM.

Speaker 2

And then finally, you asked me for my view on the consumer. I would say we've seen quite a resilient consumer. I would say on the lower end, we certainly see that people with lower income are trying to stretch their budget, trying to make their dollars go faster and therefore they do a lot more planning when they think about grocery shopping. And as a result, we want to make it as easy as possible for them to get the best deals to be able to shop multiple retailers if they want to combine different deals and really see us as a place that helps them meet their budgets and their family needs in the best possible way and really meeting consumers however they want to shop. So that's been really the focus.

Speaker 11

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Steven Fox with Fox Advisors. You may proceed.

Speaker 3

Hi, good afternoon. Just one question from me on the Uber relationship. I guess, from a financial standpoint, how would you expect it to ramp and what should we think about in starting to see some financial benefits from it? Would it be mainly focused on seeing better subscriber growth or user growth that translates into your business? My understanding from this morning's call is that Uber would basically be using their own couriers and be able to advertise on their space within your channel.

Speaker 3

So can you just sort of give us a sense directionally how we should think about this helping your business or earnings over, say, the next 2 to 6 quarters? Thanks.

Speaker 2

Yes, absolutely. We're not going to obviously guide specifically here because we have not here because we have not even launched the service. But I can tell you at a high level, we are getting an affiliate fee from Uber on orders that we sent to them. The deal is positive unit economics day 1 for us, which we're excited about, but we're also going to be investing on top of that to ensure success of the service and adoption. But we're not really looking at the restaurant business specifically.

Speaker 2

What we're really looking at is how this deal can help our business overall by making Instacart an even more engaging app, a more frequent use case, by getting us more Instacart Plus subscribers. And so we're going to really be looking at all of these metrics and in fact driving adoption in a way that actually strengthens the entire business, not just get us a restaurant business, but really get us a more engaged customer across all of our services. So that's what we're excited about. And we'll in terms of ramp up, we'll have to launch to see that.

Speaker 3

Great. I appreciate that clarification. Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Rob Sanderson with Loop Capital Markets. You may proceed.

Speaker 12

Good afternoon. Thank you for taking my question. Many of my near term questions have been asked and answered, but I wanted to ask about Smart Carts. What are grocers looking for in terms of proof points to expand deployments? Like are they looking at ROI calculation?

Speaker 12

Are these just more experimental proof of concept stages at this point? And what would be a reasonable expectation for when we can think about deployment to maybe 5% of stores? Is that something that could happen like in a 3 year timeframe? Is that realistic? And does the hardware cost have to come down meaningfully to think about things like 5% penetration?

Speaker 12

Thank you.

Speaker 2

Thanks Rob for the question. So in terms of what grocers are looking at, it's exactly the same as the things we've been obsessing over, which is do consumers love the product and is that changing their behavior? And the answer so far based on what we've seen is a resounding yes. We have seen consumers absolutely love using the carts. We hear a lot of anecdotes saying that consumers are like seeking the stores that have cart deployed.

Speaker 2

We've certainly seen that from Snacks. Snacks also gave us a data point that I put in the letter saying that people who use the cart end up having larger baskets than other carts. And that is a very big driver, as you can imagine, of, grocers wanting to adopt that because that allows them to a higher basket size of consumer that can skip checkout and have an experience that is a lot more engaging and can create competitive differentiation for them. So we've been really obsessed over the consumer reaction, very encouraged by it and that's why you're seeing us, pull more fuel on paper and seeing retailers are very excited to deploy that. In terms of ramp up, I would say, we as you've seen in the letter, we are in many pilots with the largest grocers, whether it's Kroger, Wakefern, Sobeys, Schnecks, the list goes on.

Speaker 2

And so we expect to have thousands of costs deployed by the end of the year. And then I think it really depends on kind of how those deployments go, but it could scale to many more. We are not guiding to a specific timeline because there are a lot of unknowns. But we think that we have everything that we need to be able to scale this cost. In terms of cost, we will work to get the hardware cost down in the future, no doubt.

Speaker 2

But that's not really the main blocker to deployment. I would say that's a big part of the business model for Kapor is going to come from advertising. And that's another reason why retail is not really excited about caper carts because it becomes a completely new incremental line of business for them of adding advertising inside the store on the screen of K Pop Carts and a source of revenue for us that can justify putting more of the cards out there.

Speaker 3

Thank you, Fiji.

Operator

Thank you. One moment for questions. Our next question comes from Ross Compton with Macquarie. You may proceed.

Speaker 13

Hi, Suji. In your S1, you estimate that the enterprise segment drove an estimated 20% of company GTV in 2022. And I think what's really interesting is your model, given the economics are similar on marketplace and enterprise, you're agnostic to where the demand comes from. I was wondering if you would share how enterprise is evolving and whether as more grocers kind of enter the online space and are required to adopt your technological tools to kind of compete against Whole Foods and others. Do you see this kind of rising tide lift all boats?

Speaker 13

And even though an order might not occur on marketplace, you kind of win economics on the enterprise tools? Thank you.

Speaker 2

Thanks, Ross. Great question. You're right, we remain agnostic between marketplace and white label and that actually makes us a really strategic partner for grocers because as you can imagine, in the case of grocers, they would prefer an order to go through their own and operated platform. And so the fact that we are a partner at the table that wants to grow their own as much as we want to grow our marketplace is a very strong competitive advantage for us. We have seen growth of white label to be roughly in line with marketplace.

Speaker 2

That's remained consistent for a few years. What we are seeing, and I mentioned in the latter, is a deepening of our enterprise relationship with grocers, where in the past, it might have been just powering the storefront or just powering their fulfillment. And now we are actually powering more and more things for them, whether it's foodstorm or we power the catering business, whether it's paper carts, where we now enter the store. And what we really value is that all of these products are completely integrated. And so if you look at the deal we just announced with Save Mart, where we'll be going to power everything for them from the storefront solution to K Pop Carts to FoodStorm to Carrot ads, it's a great example of our enterprise strategy really winning the day because you now can surface ads, again, not just on our marketplace, but surface ads on storefront flows, surface ads on paper cart.

Speaker 2

If selling market is using our paper cart, you can get people to reorder their installed basket online. So the fact that we power both K Pop Carts and their storefront is incredibly helpful. You can order catering from the K Pop Card. So again, the fact that we have foodstorm catering integrated with Keeper Card is another integration that they love. And so when they come to us, it's not for point solutions, it's now for a completely integrated product suite, that they get to benefit from end to end instead of having to integrate with 10 different vendors who may be may have disjointed solutions.

Speaker 13

Great. Thank you very much.

Operator

Thank you. One moment for questions. Our next question comes from Justin Post with Bank of America. You may proceed.

Speaker 3

Hi, this is Stephen McDermott on for Justin Post. In your shareholder letter, you touched about driving supply through increasing the delivery areas of customers. I was just wondering if you could flesh out some of those efficiency improvements that allowed that and kind of how the evolution of supply growth looks like going forward kind of given the higher penetration among customers or among grocers? Thank you.

Speaker 2

Yes. Thank you. We've always had a very strong supply and we continue to have waitlist for shopper in many cities and very high satisfaction of shoppers with 80% of shoppers saying that they would recommend this work to someone else and 80% of seeing that in Secours offers well paid opportunities. So the fact that we have such attractiveness for shoppells is certainly helping us. Then in addition to that, what we are doing is better matching the shopper supply we do have with the demand that comes onto the platform.

Speaker 2

And a good example of that is the expansion of the delivery radius that we did in Q1, where we allowed 80% of customers to have access to at least 1 new retailer by expanding these delivery radius, because we have shoppers that are okay and excited to drive longer distances. What you're seeing also is that we are continuing to drive sharper efficiencies, batching and time to deliver all those and that's what has helped transaction revenue and allowed us to reinvest in the business. And we are doing that while also increasing shopper earnings. And so that's really what we continue to obsess over. It's becoming a lot more efficient, which allows us to reinvest in the business, but also giving shoppers more learning opportunities.

Speaker 2

And the fact that we've been able to drive both of these outcomes is really exciting.

Operator

Our next question comes from Mark Skutowicz with The Benchmark Company. You may proceed.

Speaker 13

Hi guys, this is Alex on for Mark. Thanks for taking the question. Regarding opportunities to reaccelerate advertising growth from a high level, how would you characterize the relative reliance on net new active brand additions versus improving same client spend? I'm just curious how this dynamic has trended year to date. Thank you.

Speaker 2

That's a great question. The thing I can tell you is, we have thousands of brands that are growing well into the double digits. But we also have a few large brands that have pulled back spend for reasons that are very specific to their own business. And these few brands can have too meaningful of an impact on our overall growth rates. To give you an example, we see certain large alcohol brands that have pullback spends because of everything that's happening in the alcohol category.

Speaker 2

And because we are still concentrated in the large brands, we are seeing this impact kind of outsized on our platform. And so it's a really big priority for me to continue diversifying the ad business, so that we can see less impact when some large brands face challenges in their own business. I do think that a lot of it is going to come from adding new brands to the platform. But I also think that we have many brands, both large and small that are still under indexed in terms of ad spend on the platform compared to the performance we drive. And that's why I've been so focused on measurement and proving the performance because we need to be able to go to these brands with absolutely clear data that if they invest more, we will drive more sales.

Speaker 2

And now that we have all of these proof points, this is going to be a very big focus of the year of continuing to convince existing brands that are not advertising enough as well as new brands to come onto the platform. So very big priority.

Speaker 13

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Bernie MacTiernan with Needham. You may proceed.

Speaker 14

Hi, this is Stefanos Crist calling in for Bernie. Thanks for taking our questions. Emily, congratulations on the new role. Would love to just hear some of your goals and plans, maybe over the short and long term, anything different you'd like to do? Thanks.

Speaker 4

Thanks Bernie and thanks for the congratulations. So I don't really think about it as doing things differently. I think like Nick, focused on creating the most valuable company and generating long term free cash flow per share. So that's really translated into me focused on finding attractive opportunities for investment and growth. That's also creating a strong portfolio of offerings that serve a broad swath of consumers and meeting them where they are in terms of their consumer journey, but also focus on driving operating leverage and delivering improving profitability over time.

Speaker 4

Profitability over time. I think lastly, I'll comment on we've executed a pretty large share repurchase program, which I've helped execute over the last few months and we've driven $750,000,000 of share repurchase by the end of Q1. I think the other thing I'll focus on is just how I'll be able to do that. I think if you look at my background, I'm able to leverage 10 plus years of operating experience in a market where obsessing over deepening our leadership position was critical. I've seen very highly competitive markets.

Speaker 4

I've seen what it looks like to deepen those competitive positions. I've also seen what it looks like to lose ground. So I'm very focused on that, particularly as Instacart has an incredible lead, and I want to make sure we remain positioned to deepen that lead. So I'm partnering closely with Fiji and the team to ensure that happens. Doing all that, obviously, investing in those right opportunities, while continuing to drive profitability.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Key Takeaways

  • Instacart announced a partnership with Uber that adds hundreds of thousands of restaurants to its app, creating a unified grocery-and-restaurant marketplace and doubling the value of Instacart Plus.
  • The company beat high-end guidance in Q1 with GTV and adjusted EBITDA outperformance driven by stronger cohort dynamics, successful EBT SNAP rollouts, a leap-day boost and unusually severe winter weather.
  • For Q2, Instacart is guiding $8.0–8.15 billion in GTV (7–9% year-over-year growth) and $180–190 million in adjusted EBITDA, reflecting a step-up in sustained profitable growth versus 2023.
  • Instacart repurchased approximately 27 million shares for $751 million through Q1, with low single-digit net dilution expected and a commitment to keep 2024 equity grants below 2023 EBITDA.
  • On the operations side, 45% of orders are picked by shoppers already at or within a mile of the store, while shopper tenure and in-store tools like planograms have driven record speed and accuracy at scale.
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Earnings Conference Call
Maplebear Q1 2024
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