Maplebear Inc (CART) 2024 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to Instacart second quarter 2024 financial results conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to Rebecca Yoshiyama, VP of Investor Relations, Capital Markets and Treasury. Please go ahead.

Thank you, Gigi, and welcome, everyone, to Instacart second quarter 2024 earnings call. On the call with me today are Fidji Simo, our Chief Executive Officer; and Emily Reuter, our Chief Financial Officer. During today's call, we will make forward-looking statements related to our business plans and strategy, developments in the grocery industry and our future performance and prospects, including our expectations regarding financial results and partnerships.

These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated. And you can find more information about these risks and uncertainties in our last Form 10-Q filed with the SEC We assume no obligation to update 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 as 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 over the call to Fidji for her opening remarks.

Thanks, Rebecca, and hi, everyone. I hope you had a chance to read our latest shareholder letter. We posted strong Q2 results, including 10% year-over-year growth in GTV, our third consecutive quarter of positive GAAP net income and impressive gains in adjusted EBITDA and operating cash flow. Our performance reinforces our leading position as the largest online grocery marketplace in North America and highlights our best-in-class customer experience, underpinned by industry-leading delivery, speed and order quality.

Across all dimensions, our deep integrations with retail is built over the last 12 years of an enduring strategic advantage that continues to pay off. We continue to deepen our selection advantage by offering multiple services like pickup, virtual convenience, EBITDA catering and more that all require deep integrations within retailers systems.

Our quality is unmatched because we understand retailers' inventory dynamics better than anyone through billions of data points that help us figure out what's on the shelf or what's the process replacement is. And by linking with retailers loyalty programs, digitizing the circulars, integrating the complex offers and powering the price optimization algorithms we can also make our service more affordable to consumers in ways that have incredibly hard to replicate.

These advantages don't just apply to our marketplace, but also extend to our enterprise platform, which is one of the most underappreciated parts of our growth strategy. So I thought I'd spend some time today explaining this in more depth to show how the scale of our retailer integrations, the foundations of our marketplace and white-label storefronts work together in a virtuous cycle and position us well for the future.

In 2023, we completely rebuilt our white-label e-commerce storefront solution from the ground up by creating a shared architecture with our marketplace, our enterprise storefont partners cannot immediately benefit from the latest features and technologies that we add to Instacart on their own and operated apps and websites.

Most retailers can't match of pace of innovation on their own so by integrating with us, they get continuous improvement that drive growth with minimal cost and effort. These investments are showing up in our results as we rapidly onboard more storefront retailers who are eager to sell in-store customers into omnichannel customers.

About one in five Instacart orders are placed on our enterprise platform. And as we continue to expand of white label volume it also benefits our whole ecosystem by increasing the density of orders that we serve in every store, we can best position shoppers to offer faster on-demand delivery windows. We can also batch more orders together, which is a key to unlocking our best-in-class unit economics in grocery.

We are constantly looking for more ways to pass on these cost savings to customers and retailers while reinvesting in new initiatives to make our technology and service better. So the virtuous cycle can go on. There is a lot more runway to grow marketplace and enterprise platform online for sure, but even if we double or triple online grocery penetration, more than two-thirds of grocery shopping will still be in-store.

And that's why our enterprise technologies now go beyond e-commerce with a suite of in-store technology. Just today, we announced our first-ever international launch of our AI-powered Caper Cart in partnership with ALDI in Austria as well as our ALDI US, launching Carrot Tags and an in-store mode inside our app. We're also expanding our FoodStorm ordering kiosks pilot with Sprouts and Schnapps will be our first retail partner to roll out Carrot Tags in electronic shelf-labeled, software chain-wide.

The beauty of all of our in-store technologies is that we connect directly with Storefronts and with each other, so it's really a seamless experience for customers to buy from retailers online and in-store. For example, customers can reorder online what they bought with their Caper Carts in one tap, or bring their online shopping list to the screen of Caper Carts to avoid forgetting ingredients in the store.

This is increasingly important to retailers who are moving away from complex and fragmented point solutions and towards technology partners that can offer a simple and seamless customer experience across all of their channels.

Scaling our marketplace and enterprise offerings both online and in-store is also critical to our strategy because it's laying the foundations of a massive one-stop-shop omnichannel retail media network. While it may seem like new retail media networks of putting up less than right, right now, we know that brands have limited time and resources and they will ultimately want to work with platforms that have scale across all channels.

And this is exactly what Instacart ads will shine because of our leading scale, performance, measurement data and product capabilities. With us, CPGs can reach audiences across our marketplace, retailers owned and operated sites through Carrot ads as well as other destinations like Google Shopping ads, Meta, The Trade Desk and YouTube, where they can place ads pointing to Instacart and leveraging Instacart data.

And in the future, this will also include in-store ads on Caper Carts screens, which can take the very best of online advertising and bring it to the store to people was already in the aisles. Overall, we can tell, I'm incredibly excited by the momentum we are building across our marketplace, enterprise and advertising platform.

We're placing really ambitious that that will enable us to extend our lead as the leading online grocery marketplace and cements our position as one of the largest omnichannel retail media networks. As we execute on these growth strategies, I'm confident in our ability to generate more shareholder value over time and further our vision of building the technologies that can power every single grocery transaction.

Now I'll pass the call over to Emily for an update on our financials.

Thank you, Fidji. It's great to see the momentum we're having across so many areas of the business, growing our core service and investing against our longer term bets all while staying disciplined on our financial performance.

Now let me provide a bit more color on our financial results and outlook. Q2 was a really strong quarter for us with both GTV and adjusted EBITDA beating the high end of our guidance ranges. We delivered GTV growth of 10% year-over-year, comprising orders growth of 7% and average order value growth of 3%. Order growth was in line with our expectations.

While basket size was the key driver of our outperformance, there were a few different factors that drove our basket size higher in the quarter, including new customer cohorts, reaching bigger basket sizes, faster existing customers, making larger purchases overtime and a higher mix of club orders.

Q2 advertising and other revenue growth of 11% year-over-year also outperformed our expectations. This was primarily driven by growth from emerging brands on our platform as we've steadily grown the number of active brands to more than 6,000. This growth more than offset the pullback in spend. We continue to see from certain large brand partners experiencing challenges in their business.

We also delivered strong profitability results across the Board, which continues to reflect our strong operating fundamentals and our ability to manage multiple levers across our P&L to drive leverage. This includes our third consecutive quarter of positive GAAP net income of $61 million, which was down quarter over quarter, primarily due to ongoing noise in SBC following our IPO in September 2023 and the $95 million of restructuring and executive related reversals we experienced in Q1 2024. After we lap our IPO quarter, we anticipate SBC will begin to normalize while continuing to expect higher levels of SBC in Q2 due to seasonality.

In the quarter, we also generated adjusted EBITDA of $208 million, up 89% year over year and operating cash flow of $244 million, up 42% year over year. Looking ahead, we are guiding to Q3 GTV of $8.1 billion to $8.25 billion, representing year-over-year growth of 8% to 10%. Our guidance expects the composition of GTV growth to continue to be driven more by orders than basket size.

It also reflects ongoing strength in our core service and a modest growth contribution from restaurant orders. We are also guiding to Q3 adjusted EBITDA of $205 million to $215 million. The primary driver of our anticipated year over year growth in adjusted EBITDA as a percentage of GTV is ongoing adjusted operating expense leverage.

Similar to prior quarters, we expect to continue driving software efficiencies and transaction revenue while reinvesting in opportunities like more affordable service options and consumer incentives. We also expect advertising and other revenue to grow year over year largely in line with our GTV guidance. Overall, our business is performing well.

Our operating scale and critical advantages continue to have us well positioned to strengthen our lead as the largest online grocery marketplace in North America and generate more shareholder value over time. This is why in Q2 we completed our initial $1 billion of share repurchases and authorized a new $500 million buyback program.

As of June 30, we cumulatively repurchased $36.5 million shares, representing more than 10% of our fully diluted shares outstanding at the end of 2023 and had $425 million of remaining repurchase capacity. We have a lot of momentum to build on across all aspects of our business and remain focused on driving more profitable growth.

With that, we will open up the call for live questions. Operator, you may begin.

(Operator Instructions)

Colin Sebastian, Baird.

Thanks. Good afternoon and appreciate the questions. I guess first off, given the momentum we're seeing in your business, the last couple of quarters, really, I'm curious in terms of how you're dividing resources around customer acquisition retention, the use of some of the incentives for consumers and balancing that with some of the more traditional customer acquisition marketing spend. If you could comment maybe on how you're thinking about those resources?

And then secondly, just on the competitive environment, given a lot of the attention on that as that evolves, if you're seeing any change in the competitive environment, that would be helpful as well. Thank you.

Thanks, Colin. I'll take both of those. On the first one, we continue to be extremely focused on accelerating online grocery adoption. And that does mean that we have heavy focus on new customer acquisition and continue to be pleased by what we're seeing there. At the same time, we also want to create habituated customers because we know that when we have decreased the customer, we end up getting that entire grocery month which is incredibly valuable.

And we have a portfolio of marketing tactics, incentive tactics that will allow us to do both attract new customers as well as habituated them. We released the (inaudible) as you may assume the latter, but we have 25 million annual customers, and that's a really great opportunity for us to turn these infrequent customers who purchase on average 11 order of the year with us into much more habituated customers that look more like a typical monthly active orders.

And we are doing that not just through incentives, but also through promoting Instacart+ to connecting these users to all of our affordability options that we can build a habit as well as introduce new use cases like restaurants which we are seeing drive both new user new customer acquisition as well as had deterioration of existing users. We do all of that based on a five-year NPV and we continue to invest as long as we see those returns.

Now on your second question on the competitive environment, we are not seeing much change to the environment. As a reminder, we have the leading category share, 50%-plus share of small basket, 70%-plus share of large basket of about $75, which is incredibly important because large baskets represent 75% of the industry and even more of the profit.

We continue to see that we are approximately 5x better than new entrants at activating large baskets. And that means that we bring multiples of GTV into the industry compared to these players. And we also see that we're about 5x better at turning a small basket customers into a large basket customers than this new entrants. So, you know, we continue to see extreme strength with our leading selection of leading service, and that's translating into this category share, and this ability to really excel in large baskets.

Eric Sheridan, Goldman Sachs.

Thank you. Maybe I can ask a two-parter, if it's okay on the broader advertising environment. There's been a lot of mixed data points on the health of CPG advertisers and the way they're sort of processing budgets in a post inflation or lapping inflation world. We'd love to get your perspective on the broader CPG landscape and how it impacts your views about your advertising opportunities in the back part of the year?

And the second part of the question would be you continue to push forward on a lot of innovation on advertising solutions and maybe talk a little bit about the product roadmap as we think about, again the end of this year, but more broadly over the medium term horizon. Thanks so much.

Thanks, Eric. So what we're seeing on the CPG side is quite consistent with what I talked about last quarter. We are seeing some large brands struggle in that business broadly and therefore, pull back on advertising. In general were not the first advertising platforms that the pullback from because work so measurable and highly performance that were not the first ones to be cut and it tends to be a lot more widespread.

However, the thing that is really exciting for us is that the growth that we're seeing in emerging brands on our platform now at 6,000 emerging brands has more than offset the pullback that's working with our brand, and that's very in line with the strategy I talked about last quarter of really diversifying the business and continuing to lean into the strengths of emerging brands while also continuing to deliver a great result for our brands as well.

And in terms of innovation, on our platform, we continue to innovate on our marketplace with new ad formats. This quarter, we just announced recipes occasions and bundles, which have a great example of innovation where CPGs themselves have told us that they would love to do merchandising online that we really cannot do in the aisles of a store.

For example, if someone is searching for spinach, having an advertiser be able to promote a recipe for spinach lasagna. And therefore, with our past advertisers, they can earn their way into this particular query and advertise that, or if you're a soda brand, advertising next to hot dogs so that you have the perfect summer pairing for barbecues.

This is a great example of the ad format innovation we continue to drive and are excited about. We also continue to push on measurement capabilities. We think that we have incredible performance and the more we can demonstrate that, whether it's through partnership with Circana with others on the better, it's going to be for our geology to show that to our advertisers.

And then we'll also medium term to your point, innovated on what we're doing outside of our marketplace. We power ads on a 100-plus retailers on and operated websites. We launched new retail power media partnerships with Meta and YouTube is the future of what an advertising on Caper Carts that will allow us to have ads inside the store and therefore have a real portfolio of our different advertising tools, both on our platform and outside of our platform that can make us a real one-stop shop for CTG.

So that's really laying the foundation for building a really great retail media network and that gives us enormous confidence long term add another revenue target of 4% to 5% of GTV.

Nikhil Devnani, Bernstein.

Hi, thanks for taking my question. I wanted to ask about a couple of your recent partnerships. So first on the Uber Eats commentary is encouraging. Could you please elaborate on what you're seeing and how we should think about the ramp in order growth and GTV? There seems like there's an explicit contribution embedded in your Q3 outlook?

And then with respect to your Chase partnership, it also looks like DoorDash is now the exclusive grocery partner here for those current cardholders. So how much of a headwind is this going to be to your growth going forward and how do you aim to counteract this challenge? Thank you.

Thanks, Nikhil. I'll start with Uber Eats. We're extremely pleased with the partnership with Uber and the early results. For context, we fully rolled out restaurants nationwide in mid-June, and we see our strategy paying off. By partnering with Uber, we're ramping restaurant adoption at a much faster pace than we've seen any new entrants be able to accomplish in grocery after years and billions of dollars in investment.

We're really excited about the ramp working and the adoption working. This early data also confirms our belief that restaurants can help our entire ecosystem by attracting new customers to Instacart, by increasing order frequency for existing customers, by driving adoption of Instacart+. All of that has been confirmed by early data, and that's why longer term, we really believe that restaurants can create a flywheel that helps grow our entire business, including groceries.

Now, on the Chase partnership, I would encourage you to fact check what you heard, because as you may see online, we published a blog post yesterday that shows the depth of our existing partnership with Chase. Clearly, we have a deep grocery partnership with them. The thing that has changed, just to explain to you the changing strategy, is that we had an embedded benefit partnership on some part of their core portfolio, but what we saw is that actually two-thirds of the redemption happened in year one.

So, you tend to really get a lot of the value of these partnerships in year one. And then we saw that because we have such a superior service, these people converted into being Instacart+ customers and retained with us because they see the value of Instacart. So, there isn't much point in continuing to pay for ongoing benefits when you have highly retained users.

And instead, what we want to focus on is actually directing this energy towards new users, new customer acquisition, because as a category leader, that's really the number one priority for us. And that's why you'll see what we announced with Chase yesterday, we are directing our investments towards offers for a much broader part of their portfolio, and especially their cobranded cards that we hadn't previously touched, and putting an offer in front of their customers of 10% cashback, which we think is going to allow us to tap into a fundamental new audience.

So, we're very pleased with the results of the Chase partnership to date, and we're very excited about this next phase of the partnership that should really allow us to focus on new customers.

Justin Post, Bank of America.

Great. Thanks for taking my question. I want to ask about AOVs. It looks like it flipped to positive, quite positive this quarter, and you're looking for growth next quarter. How much of that is just market versus you're able to drive it with suggestions and product offers, which was actually to be helping your grocers, and kind of what's your outlook for AOVs over the next year? Thank you.

Thanks, Justin, for the question. This is Emily. I'll take that one. So, in terms of Q2 specifically, in terms of what's driving AOV, there was a couple of different factors. It is more of an outcome of what's happening in the market versus something that we try specifically to influence. So, what happened in Q2, we do have new customer cohorts that are reaching bigger baskets faster than prior cohorts.

So, that does influence the overall AOV. In addition, as has always happened, existing customers continue to make larger purchases over time. So, that weights the overall AOV picture. And then lastly, we did have a higher mix of club orders in the period. We don't guide specifically to AOV or the composition of GTV on a go-forward basis, but that gives you a bit of color as to what happened in Q2.

And, Justin, I will add that the mix of club orders increasing is an intentional thing. As we've mentioned in the past, we definitely want to direct some of our incentives towards customers adopting clubs because we see that when you adopt clubs, you're more likely to retain over time. And as a result, that has been a big part of our incentive strategy. I will highlight that clubs are doing exceptionally well on Instacart right now. In particular, with Costco, we recently launched EBT SNAP with them. We upgraded them to our new Storefront Pro website, which is working incredibly well. They sell Instacart+ membership on their site. We sell Costco membership on ours. So, really, the depth of the partnership is showing up in higher club adoption.

Andrew Boone, JMP Securities.

Thanks so much for taking my questions. You added Home Depot and Sally Beauty in a quarter. Can you talk about your supply with non-grocery merchants? How do you feel about that and what are your plans to grow it, as well as what's the consumer response as you guys continue to add selection there? Thanks so much.

Thanks, Andrew. We continue to be pleased with what we're seeing here, both with existing non-grocery retailers, as well as new ones that we're onboarding. What we find very often is that because people are used to placing large baskets in grocery, they are primed to place large baskets with these other retailers as well. That has been a very big benefit for them and for us as well.

It is an incremental use case that allows us, once again, to take some of the more infrequent customers and either have them discover Instacart through these retailers, especially during seasonal events like Valentine's Day and things like that, where you're coming to Instacart for last-minute purchases that are not necessarily in the grocery category.

That allows us to attract new customers to our ecosystem and convert them into grocery customers or take grocery customers and increase their frequency with these new use cases. This is also adding to the strength of Instacart+ because when you buy Instacart+ now, you're not just getting grocery, you're getting restaurants, you're getting a lot of other verticals in beauty, in home improvement, et cetera. And so, when you look at this whole picture, on average, customers on Instacart shop from five-plus retailers on our marketplace and Instacart+ members shop at twice as many retailers and non-grocery categories are a contributor to that.

Shweta Khajuria, Wolfe Research.

Thank you for taking my questions. Could you please talk about cohort behavior? You mentioned that in your letter. Could you provide a little bit more color on how the magnitude of the improvement you are seeing in the cohorts and how should we think about it in the back half of this year? And then, the second question is on enterprise growth.

In the past, you've mentioned that generally speaking, enterprise growth has grown in line with the rest of the platform. What would you need to do or see for it to accelerate at a clip faster than the overall platform? Thank you.

Sure. I can start with the cohort question. Thanks for the question. First of all, I just want to take a step back and it relates, obviously, the performance of the cohorts, but the business is performing really well and that obviously is an indication of the health of the underlying cohorts. It delivered 10% year-over-year growth in Q2 and we're excited about the Q3 guide.

Now, if we look backwards to 2023, we talked a lot about specific cohort trends because they were a significant headwind to 2023 growth. Really, the COVID cohorts in particular, the decline as folks that came to the platform for very specific COVID-related use cases churned off the platform.

Now, at this point, all of our cohorts were really pleased to see both mature and new are healthy. Their behaviors have really normalized. For that reason, the specifics of any individual cohort really aren't as important. As I said before, as a company, we think about cohorts as an output, not really as an input. What I mean by that is we don't have any strategy around 2019 cohort or 2022 cohort.

What we are focused on is deepening engagement with our existing and infrequent customers. We talked about or Fidji talked about earlier the 25 million people that used Instacart in the last year. We're really excited about the strategies we're seeing start to work on deepening engagement with the full spectrum of different customers we see in that 25 million.

That means we obviously have high single-digit millions that use Instacart monthly, but we also have people that we're trying to get from 5 times a year to monthly, from 1 time a year to 6 times a year. There's a lot of work doing around engagement with those cohorts. In addition, as Fidji mentioned earlier, we are continuing to attract new users. We're still bringing in GTV from new cohorts that are higher than pre-pandemic. Overall, just really pleased with the picture.

I'll take the question on enterprise. You are correct. We are seeing strong growth in both marketplace and enterprise. We are seeing overall momentum with enterprise, as I mentioned. Really, what I'm looking at is our ability to onboard more retailers to our enterprise products faster.

For example, we onboarded 30 retailers in H1 to our (inaudible) products. That's faster and more retailers than what we've been able to do in the past because we have revamped our system. Therefore, when we do that and you get a retailer to shift from their particular solution to an Instacart solution, this is straight up incremental GTV, which is definitely contributing to growth.

The other thing I will call out is that these businesses are not separate. That's what I was mentioning in my introduction. Our enterprise business helps our marketplace business grow in many ways because if you're a retailer and you really want an integration on your enterprise website, like integrating with SNAP, like integrating with catering, like doing pickup, it becomes incredibly easy to apply all of these integrations seamlessly to marketplace.

That contributes to the growth of marketplace. We have really seen a virtuous cycle between these two things. We don't think of it as one needs to go faster than the other. Instead, we think of it as like, let's integrate more-and-more deeply with retailers so that both our marketplace and our enterprise business grow fast.

Ross Sandler, Barclays.

I'm just following up on that 25 million comment on top of funnel, how the 25 million are growing compared to the monthly active meaning like is the top of funnel growing faster, slower. How does that look a year ago? And I guess, how are you guys evolving incentive program to bring people down that funnel?

And then the second question is just on the on of Instacart ads opportunity, the retail media, you've mentioned a bunch of social media sites that you're deeper integrating with. How big is that opportunity in front of you for offsite ads?

Yeah. Let me start with the 25 million. We don't report on specific numbers here, but it is certainly growing year over year. We like what we're seeing here in our ability to continue habituating these users, as Emily mentioned, and as I mentioned earlier. I think what it's going to take to really habituate these users is not just the incentives that we mentioned, but also introducing new use cases like restaurants, which are high frequency, and that we are seeing these users as well as power users really adopt.

Also connecting these users to all of our affordability initiatives so that these users start realizing that you can actually get your entire grocery habit moved to Instacart at a very competitive price. We're doing that through loyalty integration, digitizing circulars, optimizing pricing with retailers. All of that compounds to really adding a service that people realize you can use weekly and really adopt a weekly shop, which is fundamentally the end stage for us.

On your question on retail-powered media, it is still nascent for us. It would be a fairly negligible impact on current advertising revenue. However, it is a fairly significant piece of our path to getting to our target of 4% to 5% of GTV. These things take time to ramp because usually you have to connect to different stakeholders at the CPGs that are different between the one that plays ads on Google and Meta than the one that plays ads on Instacart.

It's a new sales motion. It's a sales motion that we need to put in place with partners. It takes a little bit of time to ramp up, push the results, and expand, but we are very pleased with what we're seeing in the early days in terms of performance.

That's giving us extreme confidence in continuing to expand this, continuing to prioritize that. If you look at the last year, we have added partnership after partnership from Google to YouTube to Meta to NBCU to the Trade Desk, really because we see the potential that this line of business could have for us long term.

Tom Champion, Piper Sandler.

Hi, thanks. This is Jim on for Tom. Thanks for taking the question. So just a follow-up on ads. We've seen the active brand partners move to 6,000 from, call it, 5,500, I guess as we think about that 4% to 5% goal do you see the larger opportunity being ARPU or the number of advertisers on the platform? Thanks.

It's going to be a mix of both. What we are seeing is that there's still quite a large opportunity in onboarding more brand partners. In fact, what we did in the last quarter is increase our emerging brand team, both on the sales side with really great ROI, as well as on the product side to make the product much easier to onboard onto.

That's why you're seeing this increase in number of partners advertising. We think we're very far from having tapped the full market there. But we are also seeing that when these partners come onto the platform, they start to spend, see the results, and then expand their spends and really discover the value of Instacart across the entire funnel.

Many of them might start with sponsored products and realize that we also have shoppable displays. And so over time, we really want to make sure that they use all of our capabilities and expand our ARPUs. So definitely lots of opportunities there with emerging brands. I will call out as well that there is still lots of opportunity to deepen and expand with large players as well.

We have called out the fact that some large players are pulling back even the challenges in their business. But that shouldn't mask the fact that some large players are really doubling down with us, investing a lot more and seeing the results. We're seeing real performance driving increasing investment. That's why you're seeing us focus not just on new formats and new partnerships, but also continuing to develop our measurement capabilities because we have the best proof points to put in front of advertisers to demonstrate that they should be investing more and that it's good ROI to do so.

Bernie McTernan, Needham.

Great. Thanks for taking questions. Maybe just to follow-up to the conversation around advertising and offering a portfolio of advertising solutions to different CPG companies. If we're thinking about providing Facebook or YouTube, what's the benefit for the CPG operator to using one retail media network to access all these other platforms? Is it the data that you provide is better or just trying to think about what's from their point of view? Thank you.

Yes, that's exactly right. I would say is of two very critical benefit, one ease of data, and that goes both for targeting because you can go on one of those platforms and target customers based on their activity on Instacart, but also use that data for closed-loop measurement, meaning that, a lot of first-party data has kind of disappeared and has left at least platforms our less sophisticated measurement capabilities, whereas by partnering with us, they are able to prove that the ads that are being shown on these platforms actually leads to a purchase in many cases, within an hour of seeing the ad.

We think this is incredibly powerful to have data both on the targeting side and the measurement side and a primary reason why advertisers are sure to use your solution. In addition to that, the other thing that we offer is pointing us towards an Instacart brand page.

If you look at CPG ads regularly, like sometimes you don't really have a clear destination of the point to a website for you cannot buy a product, whereas you point your CPG ad to an Instacart page, it means that the customer can go from looking at the ad on Facebook, like landing on Instacart, buying the product right there, and having the product in their hands in an hour.

That's a really, really magical customer experience and loop that you can create as an advertiser, and so we act both as a great destination as well as a data and measurement partner to increase the performance of the ad by measuring them and optimizing them.

Jason Helfstein, Oppenheimer & Company.

Thanks to -- year to date, GTV is up 11% year over year. I think most of us are still like 6% GTV in our models for the next two years. Barring any change in economic conditions, which obviously is a big if is there any reason why growth should slow given what sounds like pretty impressive commentary around cohort.

And just a second follow up. Any additional color you can provide on Instacart+ activity in second quarter, perhaps contribution to GTV or just any other color? Thank you

I'll take Instacart+, and Emily can take the first question. On Instacart+, we are very pleased with what we're seeing. We are seeing growth in Instacart+ members, but we're also seeing faster growth in Instacart+ members than all regular monthly active orders, which translates into deeper penetration of Instacart+ within our customer base.

So we're really excited about that. We think that it's because the value of Instacart+ continues to grow and increase over time with the addition of restaurants, with the partnerships that are striking, with Peacock, with New York Times, and more, and that's really translated into the growth that we're seeing. We don't report on specific numbers, but we can confirm that Instacart+ is still the majority of all GTVs, and that's something that continues to grow.

Thank you (multiple speakers)

There is another part of that question. I'll jump in sorry. Thanks, Jason, for the question. As it relates to GTV, as you mentioned, GTV up really strongly this year. We're really pleased with the momentum that we've had in the first half of 2024. I would remind everyone that in Q1, we did have a number of one-time benefits, the combination of the benefit of Leap Day in February, as well as some one-time seasonal benefits from bad weather, so that does factor into the overall picture.

As we look forward, we're very pleased with our Q3 guidance. As you mentioned, two quarters of double-digit growth. As we look into Q3, we're pleased to have double-digit growth in the high end of the range. But as we've said in the past, when we think about our guidance ranges, really what we're doing is looking at the data that we're seeing on the ground day-to-day.

We obviously, as any business does, look at the upsides and downsides and try to give our best view of the range of outcomes. That's the philosophy that you're seeing play out here again. We feel good about the guidance range that we've given based on what we're seeing in the data today.

Longer term, we don't comment beyond next quarter, but what we have said is we really want to see that continued momentum in all of the data, whether that's the cohort dynamics that you mentioned, the acquisition dynamics we've talked about already, the continued engagement of existing customers. So, not going to comment on the longer term view at this point in time.

Mark Kelley, Stifel.

Great. Thanks very much. Good afternoon. I wanted to go back to the advertising business really quickly. You've got Microsoft just shut down their retail media business. I'm just curious if that's kind of a near term opportunity that you think you might be able to go after.

And then the second one, as you focus more on growth or establishing a footprint outside of the US. Can you remind us, is there any geographic specific investments that you think you need to make or if you think the product that you have right now is something that will resonate with markets outside the US. Thank you.

Thanks. So, on the advertising question, I'm not commenting on Microsoft specifically, but I would say that we have a product that is really designed to take our entire advertising stack and make it available to other parties, whether that's retailers or other players in the market that want to stand up a retail media business.

This news is also a very clear signal that standing up these businesses and doing that at scale is really hard. We have done that successfully. We have made the investment over the course of many years. And now we're incredibly excited about the fact that we can take these investments and add scale by offering these to our retailers and to other sites, and allow them to create an immediate new line of business while also expanding our scale and really becoming a one-stop shop.

So, I would say the fragmentation of these markets does help us because CPGs are going to want to deal with fewer platforms that are really at scale. And I think we're going to see more and-more retailers and smaller retail media networks want to benefit from the scale we bring to the table and want to partner with us on both technology and demand. So, we're excited about that.

On international growth, we are very focused on the North American market because there's a massive opportunity there. The market is still only 13% penetrated online, while the clear category leader. So, we really want to focus on driving deeper penetration there. However, in the same way that Caper Carts are generating a lot of excitement with US grocers, we are starting to see international grocers like ALDI in Austria be excited about the capabilities that Caper Carts can bring and, in general, our overall suite of In-Store products.

And so, opportunistically, we are definitely looking at retailers that might be interested in deploying these technologies inside their store because we think that these technologies could very easily expand from the US to international markets, especially as all retailers are dealing with a digital transformation, not just online, but in their store as well.

Ron Josey, Citi.

Great. Thanks for taking the question. Because you wanted to go back and I think you might have gotten the part of this question earlier, So it's a different way of asking it. I wanted to go back to the comment on the 25 million customers who have used Instacart in the past year. I'd love to hear your thoughts on how the behaviors of these users have evolved over the past year, and I know many have come back.

And what are the tools the team has launched at Instacart and like there and like the incentives platform has led to improving repeat rates based on the data that you're seeing. So that's one question on the 25 million.

And Emily, I wanted to get to take rates. They've expanded sequentially for the third consecutive quarter. I'd love to hear about the drivers here in terms of driving these improvements? Is it the delivery process changes that the team has made? Is that the incentive updates? Once again, we talk there, or maybe store relationships. Any details on take rates would be helpful. Thank you.

Ron, we're definitely seeing good trends in this growing 25 million number, and as you know, we have been very focused on habituation. I mentioned in past quarters about our new incentive platform, which has made it much easier for us to deploy incentives towards the habituation formula that we know works, whether it's adoption of Instacart+, whether that's adoption of clubs, whether that's putting new retailers and new verticals in front of these customers, whether that's launching restaurants with great success.

All of this is giving us a lot of confidence in our ability to get these users to improve their frequency over time. As a reminder, we mentioned that these yearly active orders are already placing 11 orders a year with us.

So, it really is a matter of getting them to realize that the weekly shop is something that they can afford every week, connecting them to all of the ways in which they can afford that, and then also making them discover the higher frequency use cases like restaurants so that we can see this kind of compounding frequency for them.

So, it's a massive opportunity, because I think in the past we primarily talked about our power users that were monthly active orders, but we have a much bigger top of the funnel that we can habituate and that's a big opportunity now that we have the tools in place to do so.

Great. And I'll jump in on the second question about take rates. So you're right we have we have extended take rates for the last couple of quarters, but I would note that last quarter was a pretty modest expansion at the rounding makes it look a bit sharper than it actually was. And that continues to be a lot of the same trends we've been seeing for the last couple of quarters.

So first on the positive side, it really continuing to see the shopper efficiencies in terms of the payments that we make to shoppers to make deliveries. And that's driven by our order density at the end of the day being able to drive batch rates, which really only results from multiple large batches happening at the same store at the same time.

And this kind of goes back to Fidji's point earlier, this is sort of our marketplace being reinforced by the white-label storefronts that drive this this level of order density. So continuing to see benefits there and we expect that to continue. And at the same time, we have decided to take much of that efficiency and reinvest it in other parts of the business.

We have talked about incentives in the past. And we continue to invest in targeted incentives, but we're also investing in our product portfolio. So we mentioned some of the range of different affordability options that we're leaning into like saver options that allow folks to schedule delivery later in the day or pickup options being free. And that shows up also in take rates.

Now the last thing I'll say is I've said this previously we're really pleased with where we are from a transaction revenue standpoint. We are in the top half of our long-term range already. And so for that reason, you really don't expect transaction revenue to purely be up.

And to the right, we expect this could move around over time, and that's really driven by the fact that there are a number of decisions that we're making in our day-to-day month-to-month in terms of how we're running the business, meaning we may lean more heavily into incentives in one quarter because we're seeing better return that's going to show up in transaction revenue versus a leaning more heavily into something like paid marketing, which shows up in sales and marketing.

As I mentioned earlier, leaning into certain price options shows up in transactions, but these are choices that we're making across the portfolio. And so that's why at the end of the day, you may see transaction revenue move around over time.

Michael Morton, MoffettNathanson.

Thank you, for the question. Two, if I could. One following up on Nicole's question earlier. I appreciate the call out for the Chase kind of cashback blog post yesterday. But we'd love to know if you could maybe contextualize or size for us, for Instacart+ members. How many of those are self-paying or then how many are Instacart+ members as part of a partnership?

That would maybe be some helpful commentary. And then big picture on the Caper Carts. It sounds like the holy grail of closed loop advertising, right? You show someone an impression, then you can see they put it in their cart and they pay for it. What are some of the restricting factors to rolling these out as fast as possible? In theory, you'd want to have them in every grocery store in the country tomorrow. So, would love to learn some more about that. Thank you.

Thanks, Michael. On Chase, just want to make sure I understand the question, but I would say partnerships in general is a lever for us to drive Instacart+ adoption, but that's by no means the biggest driver. As I mentioned earlier, we're seeing very strong adoption of paid IC+ memberships. And that's really across the board, across all of our tactics.

And partnership is just one of the levers, but not a big one. And so, just wanted to clarify that. In terms of your question on Caper Carts and ads, we completely agree with you that it really represents the holy grail of advertising and being able to take the best of online ads and really bring them to the store and have full closed loop measurements.

Advertisers are very excited about it, and we want to roll that out as fast as possible. We see a lot of retailer excitement as well as consumer excitement when these are rolled out. We see higher average basket sizes. We see high NPS score of above 70. So, we're really excited by what we're seeing. At the same time, it's operationally heavy to roll out a lot of carts in a retailer store.

You have to partner with them to integrate with our point-of-sale system, integrate with all of your loyalty systems. The good news is that we have a massive head start for having done that for our marketplace, for having done that when we power their own and operated sites. So, it accelerates our ability to deploy these carts into their IT systems and therefore into their stores way faster than if we hadn't done all of these enterprise integrations.

But it still requires new incremental integration that you have to do with our physical stores, as well as training of their sales team and all of these things. So, to give you a sense, this year, we're going to go from hundreds of carts in deployment to thousands of carts deployed and expect to continue scaling that fast next year.

And we think that we will rapidly gain the scale that we need for that to be very interesting for advertisers to advertise on. So, we're really excited about that. We're seeing high demand from retailers, both large and small. I mentioned a couple in the letter. And it's really just a matter now of really doing these rollouts, making sure that the rollouts go well in a couple of stores to start with, and then expand with these retailers across all of their stores.

Walter Piecyk, LightShed Partners.

Thanks. I apologize if you addressed this earlier, but the first question is just on the AOV. If you could just drill down and talk about what was the impact of the sequential growth there. Was there any type of price increases on the groceries themselves? And if there were decreases, what was more than offsetting that maybe higher tips.

I mean, just anything you can give in terms of greater color on AOV. And then just the second question, I know Uber is kind of early? Do you expect there to be noticeable impact in next quarter's results from the from the Uber relationship?

Great. I can jump in. Thanks for the question on AOV. So a couple of things that we highlighted on AOV as it relates to Q2 specifically were a couple of different factors. So some of them are just really broad-based and not necessarily specific to what's going on an individual item basis. But I'll get to that in a moment. So first is just that our new customer cohorts are actually reaching bigger basket sizes faster.

So as they blend in, that is resulting in higher AOVs overall. Our existing customers are also continuing to make larger purchases over time, which is a trend that we've always seen, and that blends in. And then lastly, that we do have a higher mix of club orders, and club AOV is higher overall. So that will blend in. In terms of sort of the broader picture, though, we are continuing to see price per item on an individual basis peaking and number of items troughing, meaning that we don't believe that this is really an inflation or individual item price-specific phenomenon.

As I mentioned earlier, club items, club AOVs are higher, and that's largely because club item prices are higher, not because they're more expensive, but because the scale of the items you might be getting are a bit bigger. So overall, that's really what we're seeing. And for that reason, going forward, we're not commenting on the specifics of what we expect to see, the composition of GTV in Q3.

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