Q4 2023 Maplebear Inc d/b/a Instacart Earnings Call

February 13, 2024

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Operator: Good day and thank you for standing by. Welcome to the Instacart's Fourth Quarter and Fiscal Year 2023 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. To ask a question during the session, you'll need to press star one on your telephone. Please limit yourself to one question and one follow up, so that we will have enough time to address everyone's question. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Rebecca Yoshiyama, Vice President of Investor Relations. Please go ahead.

Good day, and thank you for standing by walking through the <unk> fourth quarter and fiscal year 'twenty 'twenty financial results Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation, there'll be a question and answer session.

Speaker Change: To ask a question during the session you will need to press Star then one on your telephone.

Operator: Please limit yourself to one question and one follow-up so that we will have enough time to address everyone. Please be advised that today's conference call is being recorded. I will now hand the conference over to Rebecca Yoshiyama, Vice President of Investing. Thank you, Valerie, and welcome, everyone, to Instacart's fourth quarter 2023 earnings call. On the call with me today are Fiji Simo, our Chief Executive Officer, and Nick Giovanni, our Chief Financial Officer. In a moment, we will open up the call for live questions. 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 Q1 and full year 2024 financial results and potential share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. 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. These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for our GAAP results.

Please limit yourself to one question and one follow-up so that we will have enough time to address everyone. Please be advised that today's conference call is being recorded. I will now hand the conference over to Rebecca Yoshiyama, Vice President of Investing.

Please limit yourself to one question and one follow up so that we will have enough time to address everyone's questions.

Speaker Change: Please be advised today's conference call is being recorded.

Speaker Change: I'll now hand, the conference over to Rebecca, Yes, Llama, Vice President of Investor Relations. Please go ahead.

Rebecca Yoshiyama: Thank you, Valerie and welcome everyone, to Instacart's fourth quarter 2023 earnings call. On the call with me today are Fidji Simo, our Chief Executive Officer; and Nick Giovanni, our Chief Financial Officer. Shortly, we will open up the call for live questions. 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 Q1 and full year 2024 financial results and potential share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. 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 as after today's call, except as required by law. In addition, we'll also discuss certain non-GAAP financial measures. These non-GAAP financial measures 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 the call over to Fidji for her opening remarks.

Rebecca: Thank you Valerie and welcome everyone to <unk> fourth quarter 2023 earnings call on the call with me today are few D. C Mall, our Chief Executive Officer, and Nic Giovanni Our Chief Financial Officer. Shortly we will open up the call for live questions.

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 Q1, and full year 2024 financial results and potential share repurchases.

Rebecca: These forward looking statements are subjects to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements.

Rebecca: You can find more information about these risks and uncertainties in our last Form 10-Q filed with the SEC.

Rebecca: We assume no obligation to update these statements as after today's call.

Rebecca: Except as required by law.

In addition, we will also discuss certain non-GAAP financial measures. These non-GAAP financial measures 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.

Rebecca Yoshiyama: Our reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter, which can be found on our investor relations website. Al, I'll turn the call over to Fiji for her opening remarks. Thanks, Rebecca, and hi everyone.

Our reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter, which can be found on our investor relations website. Al, I'll turn the call over to Fiji for her opening remarks.

Speaker Change: Now I'll turn the call over to <unk> for her opening remarks.

Speaker Change: Thanks, Rebecca and hi, everyone. I Hope you had a chance to read our shareholder letter, which highlights why well the category leader and popular Vita in online groceries. I also provided color on our solid Q4 results and why we're set up for an even stronger 2024.

Fidji Simo: Thanks Rebecca and hi everyone. I hope you had a chance to read our shareholder letter, which highlights why we're the category leader and top innovator in online groceries. I also provided color on our solid Q4 results and why we're set up for an even stronger 2024. Our product experience is the best it has ever been with leading selection, quality and speed. For example, we recently rolled out EBT SNAP with Kroger and Costco, and we also launched Whole Foods on our marketplace in Canada. These new and expanded partnerships deepen our selection advantage with some of the largest grocers in North America. We also continued to improve on speed and order quality. In Q4, our fulfillment speed got faster even as we batched more orders. And at the same time, our sound and fill rates increased for the sixth quarter in a row. Over the past years, we've also overhauled our systems and established an even stronger formula for consumer habituation. This allows us to invest more in marketing and incentives in deliberate ways that we believe are more highly correlated with resurrection, activations and deeper engagement. As the industry leader, this will allow us to generate more value for our partners and accelerate online grocery adoption over the long-term.

Fiji Simo: I hope you had a chance to read our shareholder letter, which highlights why we're the category leader and top innovator in online growth. I also provided color on our solid Q4 results and why we're set up for an even stronger 2024. Our product experience is the best it has ever been, with leading selection, quality, and service.

Speaker Change: Our product experience easy bus he does it ever being with leading selection quality and speech. For example, we recently rolled out the EBIT snap with Kroger and Costco and we also launched whole foods all marketplace in Canada.

Fiji Simo: For example, we recently rolled out EBT SNAP with Kroger and Costco, and we also launched Whole Foods on our marketplace in Canada. These new and expanded partnerships deepen our selection advantage with some of the largest grocers in North America. We also continue to improve on speed and order quality. In Q4, our fulfillment speed got faster, even as we batch more orders.

Speaker Change: New and expanded falling up ships deep enough selection advantage with some of the largest losses in North America.

Speaker Change: We also continue to improve on speed and all the quality in Q4, all fulfillment speed got faster, even as we bought small dose and at the same time, our founder and fill rates increased for the sixth quarter in a row.

Fiji Simo: And at the same time, our found and fill rates increased for the sixth quarter in a row. Over the past year, we've also overhauled our incentive systems and established an even stronger formula for consumer habituation. This allows us to invest more in marketing and incentives in deliberate ways that we believe are more highly correlated with redirection, activations, and deeper engagement. As the industry leader, this will allow us to generate more value for our partners and accelerate online grocery adoption over the long term. These critical advantages, product enhancements, and marketing investment all contribute to our strong Q1 outlook, where we expect to deliver accelerating year-over-year GTV growth for a fourth consecutive quarter. In short, with every order we complete, we are getting better and smarter, which allows us to reinvest and generate even more orders.

And at the same time, our found and fill rates increased for the sixth quarter in a row. Over the past year, we've also overhauled our incentive systems and established an even stronger formula for consumer habituation. This allows us to invest more in marketing and incentives in deliberate ways that we believe are more highly correlated with redirection, activations, and deeper engagement. As the industry leader, this will allow us to generate more value for our partners and accelerate online grocery adoption over the long term.

Speaker Change: Although the posture. We've also overhauled often says this systems and established an even stronger formula for consumer arbitration, just allows us to invest more in marketing and incentives in deliberate ways. So that we believe are more highly correlated with resurrection activations and deeper engagements.

Speaker Change: Industry leader this will allow us to generate more value for partners and accelerate online grocery adoption over the long term.

Speaker Change: She is critical advantages product enhancements and marketing investment all contribute to our strong Q1 outlook well, we expect to deliver accelerating year over year GP growth for the fourth consecutive quarter.

Fidji Simo: These critical advantages, product enhancements, and marketing investment all contribute to our strong Q1 outlook, where we expect to deliver accelerating year-over-year GTV growth for a fourth consecutive quarter. In short, with every order we complete, we are getting better and smarter, which allows us to reinvest and generate even more orders.

Speaker Change: And this of course continues to be higher quality with the majority coming from <unk> rather than <unk>.

Speaker Change: In short with every although we compete we're getting better and smarter, which allows us to reinvest and generate even more orders.

Fidji Simo: This virtuous cycle, enabled by our scale and combined with our leadership position, makes it incredibly hard for any other player in the industry to replicate the experience we deliver. That's why we continue to deepen our lead over competitors. Based on third-party data, we increased our share of sales among digital platforms in Q4 and in 2023, with more than 50% of the share of small baskets under $75 and more than 70% of the share of large baskets over $75, while other players work on problems we solved five years ago while busy inventing the technologies that can transform the grocery industry over the next five years. For example, we know that the future of grocery shopping is omnichannel, which is why we're investing in new technologies like our Keeper car.

Fidji Simo: These critical advantages, product enhancements, and marketing investments all contribute to our strong Q1 outlook, where we expect to deliver accelerating year-over-year GTV growth for a fourth consecutive quarter. And this growth continues to be higher quality with the majority coming from orders rather than AOVs. In short, with every order we complete, we're getting better and smarter, which allows us to reinvest and generate even more orders. This virtuous cycle enabled by our scale and combined with our leadership position, makes it incredibly hard for any other player in the industry to replicate the experience we deliver. That's why we continue to deepen our lead over competitors. Based on supported data, we increased our share of sales amongst digital platforms in Q4 and in 2023, with more than 50% of share of small baskets under $75 and more than 70% share of large baskets over $75.

Speaker Change: Xetra cycle enabled by our scale and combined with our leadership position makes it incredibly hard for any other player in the industry to replicate the experience we deliver.

Speaker Change: That's why we continue to keep an old lead over our competitors.

Speaker Change: Based on third party data, we increased top chef of cells amongst digital platforms in Q4, and in 2023 with more than 50% of shelf small baskets and up $75 and more than 70% share of large buckets over $75.

Speaker Change: While other players work on problems, we sold five years ago, well be inventing the technologies that can transform the grocery industry. Although the next five years.

Speaker Change: For example, we know that the future of grocery is omni channel, which is why we're investing in new technologies like I'll keep our costs well.

Fiji Simo: We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize their operations over the coming year. And we're doing all of this while maintaining our relentless focus on profitable growth and our long-term financial targets. In order for Instacart to take on our most ambitious bets, we also need to streamline how we operate. Today, we made the tough decision to lay off approximately 250 of our talented team members.

Speaker Change: We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize our operation over the coming years.

Speaker Change: While doing all of this while maintaining a relentless focus on profitable growth and our long term financial targets.

Speaker Change: In order for me to call it to take on the most ambitious but we also need to streamline how we operate today, we made the tough decision to lay off approximately 250 of our talented team members.

Fiji Simo: This will allow us to reshape the company so we can focus on our most promising initiatives and execute more efficiently in a flatter organization. Additionally, with the departure of three of our execs, Asha, Varouj, and JJ, we're also taking the opportunity to streamline my management team and create more autonomous teams with all the levels they need to execute on our critical initiatives. We will be looking for a new CTO, but we do not expect to backfill the COO and Chief Architect roles.

This will allow us to reshape the company so we can focus on our most promising initiatives and execute more efficiently in a flatter organization.

Speaker Change: This will allow us to reshape the company. So we can focus on our most promising initiatives and execute more efficiently to a flatter organization.

Fidji Simo: Additionally, with the departure of three of our execs, Asha, Varouj, and JJ, we're also taking the opportunity to streamline my management team and create more autonomous teams with all the levels they need to execute on our critical initiatives. We will be looking for a new CTO, but we do not expect to backfill the COO and Chief Architect roles. Over the past few years, these leaders have developed a strong range of talents that I look forward to working with in more directions. I am confident that this will enable us to execute with even more focus and efficiency moving forward and want to thank all of our teams, especially those whose roles were impacted today, for getting us to this point. Overall, I'm proud of the performance we delivered in 2023, and I'm excited for how we're set up for an even better 2024. I believe we have an incredibly strong leadership position that, when combined with accelerating growth, will generate more shareholder value over time. Thank you for your support and being on this journey with us. Now, I'll turn the call over to Nick to provide more of an update on our finances. Thanks, Fiji.

Fidji Simo: While other players worked on problems we solved five years ago, we're busy inventing the technologies that can transform the grocery industry over the next five years. For example, we know that the future of grocery is omnichannel, which is why we're investing in new technologies like our Caper Cart. We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize their operations over the coming years. We're doing all of this while maintaining our relentless focus on profitable growth and our long-term financial targets. In order for Instacart to take on our most ambitious bets, we also need to streamline how we operate. Today, we made the tough decision to lay off approximately 250 of our talented team members. This will allow us to reshape the company so we can focus on our most promising initiatives and execute more efficiently to a flatter organization. Separately, with the departure of three of our execs, Asha, Varouj, and J.J., we are also taking the opportunity to streamline my management team and create more autonomous teams with all the levers they need to execute on our critical initiatives. We will be looking for a new CTO, but do not expect to backfill the COO and Chief Architect roles. Over the past few years, these leaders have developed a strong range of talent that I look forward to working with more directly. I am confident that this will enable us to execute with even more focus and efficiency moving forward and want to thank all of our teams, especially those whose roles were impacted today for getting us to this point. Overall, I'm proud of the performance we delivered in 2023, and I'm excited for how we're set up for an even better 2024. I believe we have an incredibly strong leadership position that, when combined with accelerating growth, will generate more shareholder value over time. Thank you for your support and being on this journey with us. Now, I'll turn the call over to Nick to provide more of an update on our financials.

Speaker Change: Separately with the departure of three or four execs Usher Varuzhan J D. While also taking the opportunity to streamline the management and create more autonomous teams with all the levers you need to execute on critical initiatives.

We will be looking for a new CTO, but do not expect to backfill.

Speaker Change: Ooh and chief architect role.

Speaker Change: Although the past few years. These leaders have developed a strong bench of talent that I look forward to walking with more directly.

Fidji Simo: Separately, with the departure of three of our execs, Asha, Varouj, and J.J., we are also taking the opportunity to streamline my management team and create more autonomous teams with all the levers they need to execute on our critical initiatives. We will be looking for a new CTO, but do not expect to backfill the COO and Chief Architect roles. Over the past few years, these leaders have developed a strong range of talent that I look forward to working with more directly. I am confident that this will enable us to execute with even more focus and efficiency moving forward and want to thank all of our teams, especially those whose roles were impacted today for getting us to this point. Overall, I'm proud of the performance we delivered in 2023, and I'm excited for how we're set up for an even better 2024. I believe we have an incredibly strong leadership position that, when combined with accelerating growth, will generate more shareholder value over time. Thank you for your support and being on this journey with us. Now, I'll turn the call over to Nick to provide more of an update on our financials.

Speaker Change: I am confident that this will enable us to execute with even more focus and efficiency moving forward and want to thank all of our teams, especially those whose roles were impacted today for getting us to this point.

Speaker Change: Overall I'm proud of the performance we delivered in 2023 and I'm excited for how we're set up for an even better 2024.

Speaker Change: I believe we have an incredibly strong leadership position that when combined with accelerating growth will generate more shareholder value overtime.

Speaker Change: Thank you for your support and being on this journey with US now I'll turn the call over to Nick to provide more of an update on our financials.

Nick Giovanni: Thanks Fidji. 2023 was a transformational year across our product, operations and financials. In Q4, we once again accelerated GTV growth and expanded profitability, all while investing in new initiatives to support our future growth. Let me provide a bit more color on our Q4 results and our future outlook, starting with GTV and orders. In Q4, we delivered GTV of $7.9 billion, up 7% year-over-year and above the high end of our guidance range. This outperformance was largely driven by stronger than expected orders growth, especially around the holidays. Our strong Q4 results generated positive momentum for us to start 2024. In Q1, we expect GTV to be $8 billion to $8.2 billion, representing year-over-year growth of 7% to 10% and our fourth consecutive quarter of accelerating GTV growth. While our business is typically strongest in Q4 and Q1 due to seasonality, and while this year, we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step-up in our anticipated growth compared to the 5% growth we delivered for full year 2023.

Nick: Thanks, Vijay 2023 was a transformational year across our product operations and financials in Q4, we once again accelerated GDP growth and expanded profitability all while investing in new initiatives to support our future growth, let me provide a bit more color on our Q4 results and our future outlook starting.

Nick Giovanni: 2023 was a transformational year across our product operations and financials. In Q4, we once again accelerated GTV growth and expanded profitability, all while investing in new initiatives to support our future growth. Let me provide a bit more color on our Q4 results and our future outlook, starting with GTV and orders. In Q4, we delivered GTV of $7.9 billion, up 7% year over year and above the high end of our guidance range. This outperformance was largely driven by stronger-than-expected order growth, especially around the holidays.

Nick: With GTP and orders.

Nick: In Q4, we delivered <unk> of $7 9 billion up 7% year over year and above the high end of our guidance range. This outperformance was largely driven by stronger than expected orders growth, especially around the holidays are strong Q4 results generated positive momentum for us to start 2024 in Q1.

Nick Giovanni: Our strong Q4 results generated positive momentum for us to start 2024. In Q1, we expect GTV to be $8 to $8.2 billion, representing year-over-year growth of 7% to 10% and our fourth consecutive quarter of accelerating GTV growth. While our business is typically strongest in Q4 and Q1 due to seasonality, and while this year we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up in our anticipated growth compared to the 5% growth we delivered for full year 2023. Now on transaction revenue. In Q4, transaction revenue was 7.1% of GTV compared to 7.2% in Q3 23 and Q4 22.

Our strong Q4 results generated positive momentum for us to start 2024. In Q1, we expect GTV to be $8 to $8.2 billion, representing year-over-year growth of 7% to 10% and our fourth consecutive quarter of accelerating GTV growth. While our business is typically strongest in Q4 and Q1 due to seasonality, and while this year we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up in our anticipated growth compared to the 5% growth we delivered for full year 2023.

Nick: We expect <unk> to be eight to $8 2 billion, representing year over year growth of 7% to 10% and our fourth consecutive quarter of accelerating GDP growth while.

Nick: While our business is typically strongest in Q4 and Q1 due to seasonality and while this year, we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up and our anticipated growth compared to the 5% growth we delivered for full year 2023.

Now on transaction revenue in Q4 transaction revenue was seven 1% of <unk> compared to seven 2% in Q3 23 in Q4 22, while we continue to drive fulfillment efficiencies in Q4, we found more opportunities to invest in consumer incentives and lease had contra revenue instead of marketing spend.

Nick: Which hits marketing expense incentives allow us to better target behaviors that we believe will lead to stronger customer acquisition Resurrection and habituation next for advertising and other revenue in Q4 AD and other revenue was up 7% year over year in line with our expectations and in Q1, we expect year over year growth for AD and other revenue to be <unk>.

Nick Giovanni: Now, on transaction revenue. In Q4, transaction revenue was 7.1% of GTV compared to 7.2% in Q3 2023 and Q4 2022. While we continue to drive fulfillment efficiencies, in Q4, we found more opportunities to invest in consumer incentives, and these hit contra revenue instead of marketing spend, which hits marketing expense. Incentives allow us to better target behaviors that we believe will lead to stronger customer acquisition, resurrection and habituation. Next, for advertising and other revenue. In Q4, ad and other revenue was up 7% year-over-year, in line with our expectations and in Q1, we expect year-over-year growth for ad and other revenue to be largely in line with Q4 2023. It's important to remember that advertising growth lags GTV growth, so while many of our brand partners are excited by our ongoing acceleration of GTV growth, it will take time before this is reflected in ad and other revenue.

Nick: In line with Q4, 'twenty three it's important to remember that advertising growth lags GTD growth. So while many of our brand partners are excited by our ongoing acceleration of GTD growth. It will take time before this was reflected in add another revenue.

Nick: Turning to adjusted operating expenses, we generated strong operating leverage in Q4 with adjusted operating expense as a percent of GTD decreasing to five 3% compared to six 1% in Q4 'twenty to.

Nick: Today, We also announced a restructuring plan, which we expect to result in a onetime charge of $19 million to $24 million. This charge will not impact our adjusted operating expenses because they are onetime in nature, but they will result in cash outlays on an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the <unk>.

Nick Giovanni: And in Q1, we expect year over year growth for ad and other revenue to be largely in line with Q4-23. But it's important to remember that advertising growth lags GTV growth. So while many of our brand partners are excited by our ongoing acceleration of GTV growth, it will take time before this is reflected in ad and other revenue. Turning to adjusted operating expenses, we generated strong operating leverage in Q4, with adjusted operating expense as a percent of GTV decreasing to 5.3% compared to 6.1% in Q4-22. Today, we also announced a restructuring plan that we expect to result in a one-time charge of $19-24 million. This charge will not impact our adjusted operating expenses because it is one-time in nature, but it will result in cash outlays.

And in Q1, we expect year over year growth for ad and other revenue to be largely in line with Q4-23. But it's important to remember that advertising growth lags GTV growth. So while many of our brand partners are excited by our ongoing acceleration of GTV growth, it will take time before this is reflected in ad and other revenue.

Nick: Balance of the year as we plan to reinvest anticipated cost savings in future growth, putting all this together in Q1, we expect adjusted EBITDA of $150 million to $160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long term growth for the for the full.

Nick Giovanni: Turning to adjusted operating expenses, we generated strong operating leverage in Q4, with adjusted operating expense as a percent of GTV decreasing to 5.3% compared to 6.1% in Q4-22. Today, we also announced a restructuring plan that we expect to result in a one-time charge of $19-24 million. This charge will not impact our adjusted operating expenses because it is one-time in nature, but it will result in cash outlays. On an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the balance of the year, as we plan to reinvest anticipated cost savings in future growth. Putting all this together, in Q1, we expect adjusted EBITDA of $150-$160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long-term growth. For the full year of 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year-over-year in both absolute dollar terms and as a percent of GTV. We also remain disciplined when it comes to our approach to equity dilution.

Nick Giovanni: Turning to adjusted operating expenses. We generated strong operating leverage in Q4, with adjusted operating expense as a percent of GTV decreasing to 5.3% compared to 6.1% in Q4 '22. Today, we also announced a restructuring plan, which we expect to result in a onetime charge of $19 million to $24 million. This charge will not impact our adjusted operating expenses because they are onetime in nature, but they will result in cash outlays. On an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the balance of the year as we plan to reinvest anticipated cost savings and future growth. Putting all this together, in Q1, we expect adjusted EBITDA of $150 million to $160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long-term growth.

Nick: Year 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year over year in both absolute dollar terms and as a percent of GTP. We also remain disciplined when it comes to our approach to equity dilution, we remain committed to being profitable on an adjusted EBITDA basis, even after deducting the net value of the equity we grant each year.

Nick: <unk>.

Nick: And in 2024, we expect net dilution to be low single digits before any share repurchases.

Nick: We also expect to deliver GAAP profitability and generate positive operating cash flow. We are confident in our ability to execute which is why we have increased our share repurchase program by an additional $500 million, bringing our share repurchase capacity to approximately $930 million as of February 9th our lockup expires when the market opens on Thursday February 15th and we.

Nick Giovanni: On an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the balance of the year, as we plan to reinvest anticipated cost savings in future growth. Putting all this together, in Q1, we expect adjusted EBITDA of $150-$160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long-term growth. For the full year of 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year-over-year in both absolute dollar terms and as a percent of GTV. We also remain disciplined when it comes to our approach to equity dilution.

Nick: Plan to Opportunistically repurchase shares overall, our business fundamentals are strong GDP growth has accelerated for three consecutive quarters and we are guiding to a fourth consecutive quarter of accelerating growth. In Q1, we are the category leader and we have increased our share compared to a digital first platforms in both small and large baskets and we're focused on driving profitable growth to <unk>.

Speaker Change: More value for our partners teams and shareholders over time with that we'll open up the call for live questions. Operator, you may begin.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question you will need to press star one one of your telephone please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Nick Giovanni: For the full year 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year-over-year in both absolute dollar terms and as a percent of GTV. We also remain disciplined when it comes to our approach to equity dilution. We remain committed to being profitable on an adjusted EBITDA basis even after deducting the net value of equity we grant each year. And in 2024, we expect net dilution to be low single-digits before any share repurchases. We also expect to deliver GAAP profitability and generate positive operating cash flow. We are confident in our ability to execute, which is why we have increased our share repurchase program by an additional $500 million, bringing our share repurchase capacity to approximately $930 million as of February 9th. Our lockup expires when the market opens on Thursday, February 15th, and we plan to opportunistically repurchase shares. Overall, our business fundamentals are strong, GTV growth has accelerated for three consecutive quarters, and we are guiding to our fourth consecutive quarter of accelerating growth in Q1.

Speaker Change: Our first question comes from the line of Douglas Anmuth.

Douglas Anmuth: Of JP Morgan Your line is open.

Douglas Anmuth: Thanks for taking the questions I wanted to first ask about cohort dynamics, perhaps you could provide a little color just on the.

Douglas Anmuth: The trends among the 2020, one cohorts and how you think about their contribution to the business and.

Speaker Change: Just as you see that.

JP Morgan: Maturation basically how the impact that's having on the on order growth. Thanks.

Speaker Change: Thank you so as we've mentioned all mature cohorts are continue to decline, but decline as improve now for three quarters in a row.

Speaker Change: And to 'twenty to 2020 'twenty, one cohort as we reported last quarter, we present represent less than 50%.

Speaker Change: <unk> so.

Speaker Change: All of that is encouraging, but we are not able to pinpoint when does this cohort.

Speaker Change: We would get to flat now when do you would potentially be talked to growth, but we're monitoring that very closely and we're encouraged by the fox otherwise in continuous improvement quarter after quarter off of itself quarter in a row. We're also very encouraged by is the fact that.

Operator: Overall, our business fundamentals are strong. GTV growth has accelerated for three consecutive quarters, and we are guiding to our fourth consecutive quarter of accelerating growth in Q1. We are the category leader, and we have increased our share compared to digital-first platforms in both small and large baskets, and we're focused on driving profitable growth to generate more value for our partners, teams, and shareholders over time. With that, we'll open up a call for live questions. Operator, you may begin. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.

Overall, our business fundamentals are strong. GTV growth has accelerated for three consecutive quarters, and we are guiding to our fourth consecutive quarter of accelerating growth in Q1.

Speaker Change: Continuing to add new cohorts that continue to perform well in fact, the 2023 cohorts in terms of new GCG was higher than the cohorts that we attracted pre pandemic in 2019, and so we continue to get contributions both from the mature cohort, but also from growth in new cohorts.

We are the category leader, and we have increased our share compared to digital-first platforms in both small and large baskets, and we're focused on driving profitable growth to generate more value for our partners, teams, and shareholders over time. With that, we'll open up a call for live questions. Operator, you may begin. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.

Nick Giovanni: We are the category leader, and we have increased our share compared to digital-first platforms in both small and large baskets. And we're focused on driving profitable growth to generate more value for our partners, teams and shareholders over time. With that, we'll open up the call for live questions. Operator, you may begin.

Speaker Change: Great. Thank you Peter.

Peter: Thank you.

Speaker Change: One moment please.

Speaker Change: Our next question comes from a lot of Ron Josey of Citi. Your line is open.

Ron Josey: Great. Thanks for taking the question Peter I wanted to ask a little bit more about priority orders now accounting for 38% of total and I think in the letter even talked about 25% are now delivering 30 minutes or less talk to us a little bit more about why do you think priority orders are growing.

Operator: Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. Please limit yourself to one question and one follow up. Please stand by while we compile our Q&A roster. Our first question comes from the line of Douglas Anmuth of JPMorgan. Your line is open.

Nick Giovanni: Please limit yourself to one question and one follow-up. Please stand by while we compile a Q&A list. Our first question comes from the line of Douglas and thanks for taking the questions. I wanted to first ask about cohort dynamics. Perhaps, Nick, you could provide a little color just on the trends among the 20 and 21 cohorts and how you think about their contribution to the business and, you know, just as you see that, maturation, basically the impact that's having on order growth. Thank you.

Please limit yourself to one question and one follow-up. Please stand by while we compile a Q&A list. Our first question comes from the line of Douglas and

Speaker Change: Counting for as many of total orders as possible and when we think about those delivering 30 minutes or less.

Speaker Change: Fair to think these are lower <unk>, so more frequent customers I guess that's question one and then Nick just on.

Douglas Anmuth: Thanks for taking the questions. I wanted to first ask about cohort dynamics. Perhaps, Nick, you could provide a little color just on the trends among the 2020 and 2021 cohorts and how you think about their contribution to the business. And just as you see that maturation, basically how the impact that's having on order growth? Thanks.

Speaker Change: Really interesting and good to hear GDP growth is expected to accelerating <unk> would love to hear more about the drivers there as we lap tougher EBIT snap comps, but also maybe insights on the incentives that might be working thank you.

Nick: Thanks, Ron so on priority older.

Speaker Change: We think that the growth in priority you all don't really reflects the fact that the number one reason that people are using so called convenience and priority older allows them to just gets their groceries delivered faster now.

Fidji Simo: So, as we've mentioned, our mature cohorts continue to decline, but the decline has improved now for three quarters in a row. And 2020 and 2021 cohorts, as we reported last quarter, represent less than 50% of our GTV. So all of that is encouraging. We are not able to pinpoint when these cohorts will get to flat, nor when they will potentially return to growth, but we're monitoring that very closely, and we're encouraged by the fact that we're seeing continuous improvement quarter after quarter for the third quarter in a row. We're also very encouraged by the fact that we're continuing to add new cohorts that continue to perform well. In fact, the 2023 cohort, in terms of new GTV, was higher than the cohort that we attracted pre-pandemic in 2019. And so we continue to get contributions, both from the mature cohort and also from the growth in new cohorts. Thank you, Peter. Thanks. One more.

Fidji Simo: Thank you. So, as we've mentioned, our mature cohorts continue to decline but the decline has improved now for three quarters in a row. And 2020 and 2021 cohorts, as we reported last quarter, represent less than 50% of our GTV. So, all of that is encouraging. We are not able to pinpoint when this cohort would get to flat nor when they would potentially return to growth but we're monitoring that very closely. And we're encouraged by the fact that we're seeing continuous improvement quarter-after-quarter for the third quarter in a row. We're also very encouraged by the fact that we're continuing to add new cohorts that continue to perform well. In fact, 2023 cohort in terms of new GTV was higher than the cohorts that we attracted pre-pandemic in 2019. And so we continue to get contributions both from the mature cohorts but also from the growth in new cohorts.

Speaker Change: We think that it sounds a lot that we can do without testing different levels of sheet, because we think of.

Speaker Change: I'll still well below our competitors to Osaka priority service that is so fast so that is something that we're going to continue testing with but we also want to reinvest some of that to develop options at all on all ends of the spectrum and what I mean by that is that on one end of the spectrum you have people value convenient cobalt price.

Speaker Change: And value priority delivery on the other end of the spectrum.

Speaker Change: Want the option for people with value price or convenience like no rush delivery and we want to invest in all of these options for that.

Speaker Change: We consume asking find value on audience based on what you've told us. The most in terms of what you mentioned on on kind of the value of these customers I would say the thing that's very unique about how we deliver from a lot of courses is that even for all delta have felt very soft we're still there.

Douglas Anmuth: Great. Thank you, Fidgi. Thanks. One more.

Douglas Anmuth: Great. Thank you, Fidgi.

Operator: Thank you. One moment, please. Our next question comes from the line of Ron Josey of Citi. Your line is open.

Fiji Simo: Our next question comes from the line of Ron Josie of Citi, Ilana. Great, thanks for taking the question. PJ, I want to ask a little bit more about priority orders now accounting for 38% of total, and I think in the letter even talked about 25% are now delivered in 30 minutes or less. Talk to us a little bit more about why you think priority orders are growing or accounting for as many of the total orders as possible. And when we think about those delivered in 30 minutes or less, fair to think these are lower AOV, so more frequent customers. I guess that's question one. And then Nick, just on, you know, really interesting and good to hear GTP growth is expected to accelerate in one. I would love to hear more about the drivers there as we lap tougher EBT snap comps, but also maybe insights on the incentives that might be working. Thank you. Thanks, Ron.

Our next question comes from the line of Ron Josie of Citi, Ilana.

Speaker Change: Drawing from their entire selection from.

Ron Josey: Great, thanks for taking the question. PJ, I want to ask a little bit more about priority orders now accounting for 38% of total, and I think in the letter even talked about 25% are now delivered in 30 minutes or less. Talk to us a little bit more about why you think priority orders are growing or accounting for as many of the total orders as possible. And when we think about those delivered in 30 minutes or less, fair to think these are lower AOV, so more frequent customers. I guess that's question one. And then Nick, just on, you know, really interesting and good to hear GTP growth is expected to accelerate in one. I would love to hear more about the drivers there as we lap tougher EBT snap comps, but also maybe insights on the incentives that might be working. Thank you. Thanks, Ron.

Ron Josey: Great. Thanks for taking the question. Fidji, I wanted to ask a little bit more about priority orders now accounting for 38% of total. And I think in the letter, you even talked about 25% are now delivered in 30 minutes or less. Talk to us a little bit more about why do you think priority orders are growing or accounting for as many of total orders as possible. And when we think about those delivered in 30 minutes or less, fair to think these are lower AOV so more frequent customers? I guess that's question one. And then Nick, just on really interesting and good to hear GTV growth is expected to accelerate in 1Q. Would love to hear more about the drivers there as we lap tougher EBT SNAP comps, but also maybe insights on the incentives that might be working? Thank you.

Speaker Change: So and so a lot of the priority all of those actually look very similar to the rest of the holdout in terms of adding to full assortment, adding meet introducing them and so from that perspective. We are we think that them continuing to grow as it is a good thing as long as.

Speaker Change: We can have option for everyone on the spectrum.

Speaker Change: And then as it relates to your question about the Q1 guide the drivers of the growth step up are broad based.

Speaker Change: Starts with acquiring new customers just to recall, we're still in the early stages of online grocery adoption as the leader we continue to attract many new customers. We also see improvement in our mature cohorts.

Speaker Change: Better able to resurrect them and engage them and Thats led to the year over year decline in the mature cohorts improving from Q1 to Q2 to Q3 to Q4, you also asked about EBT snap.

Fidji Simo: Thanks Ron. So, on priority order, we think that the growth in priority order really reflects the fact that the number one reason that people use Instacart is convenience, and priority order allows them to just get their groceries delivered faster. Now, we think that there's a lot that we can do with that. We are testing different levels of fees because we think our fees are still well below our competitors to offer a priority service that is so fast. So, that is something that we're going to continue testing with. But we also want to reinvest some of that to develop options that are on all ends of the spectrum. And what I mean by that is that on one end of the spectrum, you have people who value convenience over price and value priority delivery.

Fiji Simo: So on priority order, we think that the growth in priority order really reflects the fact that the number one reason that people using Instacart is convenience, and priority order allows them to just get their groceries delivered faster. Now we think that there's a lot that we can do with that. We're testing different levels of fees because we think our fees are still well below competitors to offer a priority service that is so fast. So that is something that we're going to continue testing with. But we also want to reinvest some of that to develop options that are on all ends of the spectrum. And what I mean by that is that on one end of the spectrum, you have people who value convenience over price and value priority delivery. On the other end of the spectrum, we want options for people who value price over convenience, like no rush delivery.

So on priority order, we think that the growth in priority order really reflects the fact that the number one reason that people using Instacart is convenience, and priority order allows them to just get their groceries delivered faster. Now we think that there's a lot that we can do with that. We're testing different levels of fees because we think our fees are still well below competitors to offer a priority service that is so fast. So that is something that we're going to continue testing with. But we also want to reinvest some of that to develop options that are on all ends of the spectrum. And what I mean by that is that on one end of the spectrum, you have people who value convenience over price and value priority delivery.

Speaker Change: Snap is not expected to see favorable comps in Q1, we called out that the main drivers of the headwind that we were experiences with EBT snap was one cut of benefits that happened at the end of Q1.

Speaker Change: Last year, and so you wouldn't expect to see a benefit until we lap that this year.

Speaker Change: Secondly, the other thing that drives the BT snap is launching new partners and the speed you just mentioned with Costco and <unk>, we've done that recently so.

Speaker Change: So we do expect that EBT the base of our EBT business can start to grow but that's not a key driver of the Q1 growth guidance.

Speaker Change: And Ron I think you had one last question on incentives and what was driving that.

Ron Josey: I just wanted to touch on that quickly, which is we massively overhauled of incentive system in the last year. So that we can target the right customers with the right incentive at the right time and really volatile habituation formula license that we know what drives we tend to get you to give you. Some examples we know that when you add the meeting.

Fidji Simo: On the other end of the spectrum, we want options for people who value price over convenience like no rush delivery. And we want to invest in all of these options so that every consumer can find value on Instacart based on what they value the most. In terms of what you mentioned on kind of the value of these customers, I would say the thing that's very unique about how we deliver from a lot of grocers is that even for orders that are very fast, we're still delivering from their entire selection, from their entire store. And so a lot of the priority orders actually look very similar to the rest of the orders in terms of adding the full assortment, having meet and produce in them. And so from that perspective, we think that them continuing to grow is a good thing, as long as we can have option for everyone on the spectrum.

Fiji Simo: And we want to continue to invest in all of these options so that every consumer can find value on Instacart based on what they value the most. In terms of what you mentioned about the kind of value of these customers, I would say the thing that's very unique about how we deliver to a lot of courses is that even for orders that are very fast, we're still delivering from their entire selection from, you know, their entire store. And so a lot of the priority orders actually look very similar to the rest of the orders in terms of adding the full assortment, adding, you know, meat and produce to them.

Ron Josey: <unk> to your baskets yoga and that we can with us longer when you add when you stopped buying from a club retailer like Costco you become a more recent customers. So a lot of the incentives that you're seeing a spend into all of incentives that are really meant to drive retention behavior not incentives that are meant to drive one.

Ron Josey: <unk> well discounting your groceries and you'll never going to come back. We don't do these kinds of incentives really focus on incentives that tried to deterioration.

Nick Giovanni: And so from that perspective, we think that them continuing to grow is a good thing, as long as, you know, we can have options for everyone on the spectrum. And as it relates to your question about the Q1 guide, the drivers of the growth step up are broad-based, and it starts with acquiring new customers. Just to recall, we're still in the early stages of online grocery adoption as the leader. We continue to attract many new customers. We also see improvement in our mature cohorts as we're better able to resurrect them and engage them. And that has led to a year-over-year decline in the mature cohorts, improving from Q1 to Q2 to Q3 to Q4. You also asked about EBT SNAP.

And so from that perspective, we think that them continuing to grow is a good thing, as long as, you know, we can have options for everyone on the spectrum.

Speaker Change: Thank you Susie Thank you Nick Super helpful.

Speaker Change: Thank you one moment please.

Nick Giovanni: And as it relates to your question about the Q1 guide, the drivers of the growth step-up are broad-based. It starts with acquiring new customers. Just to recall, we're still in the early stages of online grocery adoption as the leader, we continue to attract many new customers. We also see improvement in our mature cohorts as we're better able to resurrect them and engage them. And that's led to the year-over-year decline in the mature cohorts improving from Q1 to Q2 to Q3 to Q4. You also asked about EBT SNAP. EBT SNAP is not expected to see favorable comps in Q1. We called out that the main drivers of the headwind that we were experiencing with EBT SNAP was one the cut of benefits that happened at the end of Q1 last year. And so, you wouldn't expect to see a benefit until we lap that this year. And secondly, the other thing that drives EBT SNAP is launching new partners, and as Fidji just mentioned with Costco and Kroger, we've done that recently. So, we do expect that EBT - the base of our EBT business can start to grow, but that's not a key driver of the Q1 growth guidance.

Speaker Change: Our next question comes from the line of Justin Post of Bank of America. Your line is open.

Justin Post: Great I'll ask a couple I guess just high level can you talk about your supply I thought the whole foods deal was very interesting, but just where you are on supply and demand in the marketplace do you need more supply and how the pipeline looks maybe with traditional grocers or new categories. And then I think there are some questions on the <unk>.

Justin Post: Head count cuts as kind of a it's still a growth company maybe talk about is this just kind of a reorganization for growth or how would you big picture describe it. Thank you.

Speaker Change: Thanks, Justin So on selection, which is I think what you mean by supply. It's important to know that we are by far the category leader in terms of selection with about 80% of the coronary market.

Nick Giovanni: EBT SNAP is not expected to see favorable comps in Q1. We called out that the main driver of the headwind that we were experiencing with EBT SNAP was one, the cut in benefits. That happened at the end of Q1 last year.

Speaker Change: Being represented as an instant offer and yet we continue to add more and more retail banners. We have seen in the retail banners 85000 locations and we're continuing to expand both with some of the large retailers as well as mid market and and vouching grosses and.

Fiji Simo: And so you wouldn't expect to see a benefit until we doubled that this year. And secondly, the other thing that drives EBT SNAP is launching new partners. And as Fiji just mentioned with Costco and Kroger, we've done that recently. So we do expect that the base of our EBT business can start to grow, but that's not a key driver of the Q1 growth guide. And Ron, I think you had one last question on incentives and what was driving that. I just want to touch on that quickly, which is that we massively overhauled our incentive system in the last year so that we can target the right customers with the right incentive at the right time and really evolve the habituation formula so that we know what drives retentive behavior.

And so you wouldn't expect to see a benefit until we doubled that this year. And secondly, the other thing that drives EBT SNAP is launching new partners. And as Fiji just mentioned with Costco and Kroger, we've done that recently. So we do expect that the base of our EBT business can start to grow, but that's not a key driver of the Q1 growth guide.

Speaker Change: We had some holdouts with whole foods. It was one of them. So that's why we're really excited to see them come back on the platform.

Fidji Simo: And Ron, I think you had one last question on incentives and what was driving that. I just want to touch on that quickly, which is we massively overhauled our incentive system in the last year so that we can target the right customers with the right incentive at the right time and really evolve the habituation formula so that we know what drives retentive behavior. To give you some examples, we know that when you add meat and produce to your basket, you're going to retain with us longer. When you add - when you start buying from a club retailer like Costco, you become a more retentive customer. So, a lot of the incentives that you're seeing us spend into are incentives that are really meant to drive retentive behavior, not incentives that are meant to drive onetime GTV, where we're discounting your groceries and you're never going to come back. We don't do these kinds of incentives. We really focus on incentives that drive habituation.

Speaker Change: And we think that we can drive a lot of incremental value for the customers.

Speaker Change: But we're also really excited to deepen the type of selections that we also who's retailers out there already on the platform. So if you look at the big guys like Kroger Costco as they've been with us for many years, but we scale rollout new services with them like EBIT snap that allow us to not only makes up selection available.

Fiji Simo: To give you some examples, we know that when you add meat and produce to your basket, you're going to keep shopping with us longer. When you start buying from a club retailer like Costco, you become a more loyal customer. So a lot of the incentives that you're seeing us spend on are incentives that are really meant to drive retentive behavior, not incentives that are meant to drive one-time GTV where we're discounting your groceries and you're never going to come back. We don't do these kinds of incentives.

Speaker Change: But also make it available to more people.

Speaker Change: We just have this like snap.

Speaker Change: So I hope that Antonio.

Speaker Change: Your question in terms of head count.

Speaker Change: So I think that's important to realize is that we had already given.

Speaker Change: <unk> very.

Speaker Change: The discipline in terms of head count and I would say over the last two years, we had slowed down hiring we slowdown the Bachelor Patricia and we've raised our performance bulk so we had already.

Speaker Change: Manage head count pretty tight.

Fiji Simo: We really focus on incentives that drive the habituation. Thank you, Fiji. Thank you, Nick. Super helpful, one.

We really focus on incentives that drive the habituation.

Speaker Change: But for this particular change so it seems that we had in mind was really reshaping the company through streamlining certain areas and really we focus and double down in other areas of growth and so if you look at our big upcoming initiatives, whether it's growing keep off calls whether.

Ron Josey: Thank you, Fidji. Thank you, Nick. Super helpful.

Nick Giovanni: Our next question comes from the line of Justin Post of Bank of America. Your line is open. Great, I'll ask a couple. I guess just at a high level, can you talk about your supply? I thought the Whole Foods deal was very interesting, but just where you are on supply and demand in the marketplace. Do you need more supply and how the pipeline looks maybe with traditional grocers or new categories? And then I think there are some questions on the headcount cuts as kind of a still a growth company. Maybe talk about is this just kind of a reorganization for growth, or how would you, in the big picture, describe it? Thank you. Of course, thanks Justin.

Operator: Thank you. One moment, please. Our next question comes from the line of Justin Post of Bank of America. Your line is open.

Justin Post: Great, I'll ask a couple. I guess just at a high level, can you talk about your supply? I thought the Whole Foods deal was very interesting, but just where you are on supply and demand in the marketplace. Do you need more supply and how the pipeline looks maybe with traditional grocers or new categories? And then I think there are some questions on the headcount cuts as kind of a still a growth company. Maybe talk about is this just kind of a reorganization for growth, or how would you, in the big picture, describe it? Thank you. Of course, thanks Justin.

Justin Post: Great. I'll ask a couple. I guess just high level, can you talk about your supply? I thought the Whole Foods deal was very interesting. But just where you are on supply and demand in the Marketplace. Do you need more supply and how the pipeline looks maybe with traditional grocers or new categories? And then I think there are some questions on the headcount cuts as kind of still a growth company. Maybe talk about, is this just kind of a reorganization for growth or how would you, big picture, describe it? Thank you.

Speaker Change: It's a growing retail media and upside to us all of these new initiatives that hold a lot of promise oxitec that we wanted to be able to fund fleet and that means like really reshaping the organization and streamlining certain areas and so that's the context by which these layoffs should be interpreted.

Speaker Change: In <unk>, we are very committed to growth, we think that to us is a reorganization actually sets us up much better for doubling down on our most promising growth initiatives.

Speaker Change: Great. Thank you.

Speaker Change: Thank you one moment please.

Fidji Simo: Of course, thanks Justin. So on selection, which is I think what you mean by supply, it's important to know that we are by far the category leader in terms of selection, with about 80% of the grocery market being represented on Instacart, and yet we continue to add more and more retail banners. We have 1,500 retail banners, 85,000 locations, and we're continuing to expand both with some of the large retailers as well as mid-market and emerging grocers. And, you know, we had some holdouts. Whole Foods was one of them. So that's why we're really excited to see them come back on the platform, and we think that we can drive a lot of incremental value for their customers. But we're also really excited to deepen the type of selection that we offer with retailers that are already on the platform. So if you look at the big guys like Kroger and Costco, they've been with us for many years, but we still roll out new services with them, like EBC Snap, that allow us to not only make that selection available but also make it available to more people with a service like Snap. So I hope that answers your supply question. In terms of headcount, the thing that's important to realize is that we have already been very, very disciplined in terms of headcount. And I would say over the last two years, we have slowed down hiring. We slowed down the rate of attrition.

Fidji Simo: Thanks Justin. So, on selection, which is I think what you mean by supply, it's important to know that we are, by far, the category leader in terms of selection with about 80% of the grocery market being represented on Instacart. And yet, we continue to add more and more retail banners. We have 1,500 retail banners, 85,000 locations, and we're continuing to expand both with some of the large retailers as well as mid-market and emerging grocers. And we had some holdouts. Whole Foods was one of them so that's why we're really excited to see them come back on the platform. And we think that we can drive a lot of incremental value for their customers. But we're also really excited to deepen the type of selection that we offer with retailers that are already on the platform. So, if you look at the big guys like Kroger, Costco, they've been with us for many years but we still roll out new services with them like EBT SNAP that allow us to not only make their selection available but also make it available to more people with a service like SNAP. So, I hope that answers your supply question.

Speaker Change: Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is open.

Fiji Simo: So on selection, which is I think what you mean by supply, it's important to know that we are by far the category leader in terms of selection, with about 80% of the grocery market being represented on Instacart, and yet we continue to add more and more retail banners. We have 1,500 retail banners, 85,000 locations, and we're continuing to expand both with some of the large retailers as well as mid-market and emerging grocers. And, you know, we had some holdouts. Whole Foods was one of them.

Eric Sheridan: Thank you so much for taking the question maybe two if I can.

Eric Sheridan: Last quarter, we spoke about.

Eric Sheridan: Turning small basket shoppers into larger basket shoppers and some of the focus of the company and they wanted to know if we get an update on the way you're thinking about the evolution of shoppers from convenience smaller basket into more regular.

Speaker Change: Where utility and larger basket size over time, and how you're aligning investments against that potential transition and behavior and then Nick in terms of the shareholder return policy of the company. We get a question a lot from investors on how the balance will be struck between offsetting dilution while at the same time wanting to probably inquiry.

Nick: The liquidity of the stock and then you have a lockup exploration coming soon how do you think about the balance of that to strike across your broader goals of returning capital to shareholders. Thanks. So much.

Fiji Simo: So that's why we're really excited to see them come back on the platform, and we think that we can drive a lot of incremental value for their customers. But we're also really excited to deepen the type of selection that we offer with retailers that are already on the platform. So if you look at the big guys like Kroger and Costco, they've been with us for many years, but we still roll out new services with them, like EBC Snap, that allow us to not only make that selection available but also make it available to more people with a service like Snap. So I hope that answers your supply question. In terms of headcount, the thing that's important to realize is that we have already been very, very disciplined in terms of headcount. And I would say over the last two years, we have slowed down hiring. We slowed down the rate of attrition.

So Eric on on small baskets and large baskets.

Nick: We obviously.

Nick: The category leader in both small baskets and large baskets, 50% shelf full basket, 70% share of large baskets of coffee use case is the weekly shop, and that's incredibly important because that represents three quarters of the grocery market and even more of the profits, but we also know that in order to.

Fidji Simo: In terms of headcount, so the thing that's important to realize is that we had already been very disciplined in terms of headcount. And I would say over the last two years, we had slowed down hiring, we slowed down the backfill of attrition. We raised our performance bar. So, we had already managed headcount pretty tightly. But for this particular change, the thing that we had in mind was really reshaping the company to streamline in certain areas and really refocus and double down in other areas of growth. And so, if you look at our big outcome initiative, whether it's growing Caper Cart, whether it's growing retail media and offsite ads, all of these new initiatives that hold a lot of promise are things that we want to be able to fund fully, and that means like really reshaping the organization and streamlining in certain areas and so that's the context by which this layoff should be interpreted into. We are very committed to growth. We think that since reorganization actually sets us up much better for doubling down on our most promising growth initiatives.

Nick: Continue.

Nick: Dressing all of the groceries.

Nick: All our customers small baskets are also really important because that's kind of the shiel Shiel labs use case, where you may have like forgotten something we can show up all you may not have planned colposcopy down meal until we really want to address all of the use cases and that's why you have seen us really in the small baskets above a lot yes.

Fiji Simo: We raised our performance bar, so we had already managed headcount pretty tightly. But for this particular change, the thing that we had in mind was really reshaping the company to streamline in certain areas and really refocus and double down on other areas of growth. And so if you look at, you know, our big upcoming initiatives, whether it's growing paper cuts, whether it's growing retail media and offsite ads, all of these new initiatives that hold a lot of promise are things that we want to be able to And that means really reshaping the organization and streamlining in certain areas.

In particular through just real convenience, where we're able to deliver.

Nick: These are small baskets out of the stalled awful retailers offering a lot of selection as I was saying earlier, but we supposed upbeat and that's contributed to a deep share gains that.

Nick: We have been able to demonstrate in small baskets and so both are incredibly important to I think the thing that differentiates us from UN trends is that we are very strong at both and we are also very strong at converting a small basket test them up to a large basket customers, we do that five times better than you.

Fiji Simo: And so that's the context by which this layoff should be interpreted. We are very committed to growth. We think that reorganization actually sets us up much better for doubling down on our most promising growth. Thank you.

And so that's the context by which this layoff should be interpreted. We are very committed to growth. We think that reorganization actually sets us up much better for doubling down on our most promising growth.

Nick: Entrance and food delivery companies and that's a very key competitive advantage because it allows us to serve the entire market, but overtime also conduct mobile sky customers into so like most profitable weekly shop use case.

Justin Post: Great. Thank you.

Fiji Simo: Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line of... Thank you so much for taking the question, maybe two if I can. Fiji, last quarter we spoke about turning small basket shoppers into larger basket shoppers and some of the focus of the company there. I want to know if we get an update on the way you're thinking about the evolution of shoppers from convenient to smaller baskets into more regular, higher utility, and larger basket sizes over time and how you're aligning investments against that potential transition in behavior. And then Nick, in terms of the shareholder return policy of the company, we get a lot of questions from investors on how the balance will be struck between offsetting dilution while at the same time wanting How do you think about the balance of that to strike across your broader goals of sort of returning capital to shareholders? Thanks so much.

Operator: Thank you. One moment, please. Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is open.

Eric Sheridan: Thank you so much for taking the question. Maybe two, if I can. Fidji, last quarter, we spoke about turning small basket shoppers into larger basket shoppers and some of the focus of the company in there. I want to know if we get an update on the way you're thinking about the evolution of shoppers from convenience and smaller basket into more regular way utility and larger basket size over time and how you're aligning investments against that potential transition and behavior? And then Nick, in terms of the shareholder return policy of the company, we get a question a lot from investors on how the balance will be struck between offsetting dilution, while at the same time, wanting to probably increase the liquidity of the stock and then you have a lockup expiration coming soon. How do you think about the balance of that to strike across your broader goals of sort of returning capital to shareholders? Thanks so much.

Nick: And Eric on your question around <unk>.

Nick: Returning capital.

Nick: Announced a $500 million share repurchase authorization in November through February 9th while the lockup was still in place, we repurchased $70 million.

And we talked on the last call about wanting to be balanced while the flow was still very low in the aftermath of the IPO the float should increase when our lockup release comes off on the 15th.

Nick: So ahead of that we received authorization to increase by an additional $500 million our share repurchase authorization and we plan to be opportunistic in the market as volumes increase that's only part of how we manage dilution that starts with managing head count managing the equity that we give out to employees, we've introduced last year our cash.

Nick: QWERTY choice program, which allows us to reduce the amount of equity that we give in exchange for more cash and.

Nick: And we care very we care very deeply about making sure that we can.

Fidji Simo: So, Eric, on small baskets and large baskets, we obviously are a category leader in both small baskets and large baskets, 50% share of small baskets, 70% share of large baskets. Our core use case is the weekly shop, and that's incredibly important because that represents three quarters of the grocery market and even more of the profits. But we also know that in order to continue addressing all of the grocery needs of our customers, small baskets are also really important because that's kind of the fill-up use case where you may have like forgotten something in your weekly shop or you may not have planned for a particular meal. And so, we really want to address all of the use cases. And that's why you have seen us really invest in small baskets over the last few years, in particular, through industrial convenience where we're able to deliver these small baskets out of the stores of retailers offering a lot of selection, as I was saying earlier, but with faster speed.

Nick: <unk> dilution over time it isn't so our share our share return program is not just about offsetting dilution. It's about opportunistically repurchasing shares in addition to everything else that we do.

Nick: To manage dilution.

Great appreciate the color. Thank you.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Nikhil, the Bonnie Barclay of Bernstein. Your line is open.

Nikhil: Hi, there thanks for taking the question just a couple please so.

Nikhil: Given the breadth of selection you have already it seems that user growth is increasingly important to the G television equation going forward. So what kind of user growth do you think is feasible over the medium term and how would you characterize the contribution of new customers as well today versus in years. Prior so the extent to which new customers are still driving this.

GTD equation, even after kind of the Covid influx that we saw and then as a follow up when I look at the Q1 guide.

Nikhil: What would cause that adjusted EBITDA to step down given your top line is improving and you've taken some head count costs out as well. Thank you.

Fiji Simo: I think the thing that differentiates us from new entrants is that we are very strong at both, and we are also very strong at converting a small basket customer to a large basket customer. We do that five times better than new entrants and food delivery companies, and that's a very competitive advantage because it allows us to serve the entire market but, over time, also turn small basket customers into the most profitable weekly shop. And Eric, on your question around returning capital, we announced a $500 million share repurchase authorization in November. Through February 9th, while the lock-up was still in place, we repurchased $70 million, and we talked on the last call about wanting to be balanced while the float was still very low in the aftermath of the IPO. Now, the float should increase when our lock-up release comes off on the 15th, and ahead of that, we received authorization to increase by an additional $500 million our share repurchase authorization, and we plan to be opportunistic in the market as volumes increase. That's only part of how we manage dilution.

Fidji Simo: And that has contributed to the big share gains that we have been able to demonstrate in small baskets. And so, both are incredibly important. I think the thing that differentiates us from new entrants is that we are very strong at both, and we are also very strong at converting a small basket customer to a large basket customer. We do that five times better than new entrants and food delivery companies, and that's a very key competitive advantage because it allows us to serve the entire market but over time also convert more basket customers into like most profitable weekly shops use case.

Speaker Change: Thanks for the question so as it relates to to user growth. We definitely think that user growth is important and that means acquiring new customers and also re engaging customers.

Speaker Change: Shop less frequently in both of those things are.

Speaker Change: Are contributing to the improving growth that we've seen throughout 2023 and continuing with our guide for Q1 2024. So we talked about in 2023, the new cohort of customers that we activated was larger than the pre pandemic levels.

Speaker Change: And so thats, a very encouraging sign and something that.

Nick Giovanni: And Eric, on your question around returning capital, we announced a $500 million share repurchase authorization in November. Through February 9th, while the lock-up was still in place, we repurchased $70 million, and we talked on the last call about wanting to be balanced while the float was still very low in the aftermath of the IPO. Now, the float should increase when our lock-up release comes off on the 15th, and ahead of that, we received authorization to increase by an additional $500 million our share repurchase authorization, and we plan to be opportunistic in the market as volumes increase. That's only part of how we manage dilution, it starts with managing headcount, managing the equity that we give out to employees. We introduced last year a cash equity choice program, which allows us to reduce the amount of equity that we give in exchange for more cash. And we care very deeply about making sure that we can, you know, reduce dilution over time. So, our share return program is not just about offsetting dilution. It's about opportunistically repurchasing shares, in addition to everything else that we do to manage dilution. I appreciate the color, thank you.

Speaker Change: That that confirms our belief that we're very early in the online adoption of grocery. It was obviously interrupted by the pandemic and now that the pandemic is behind us and the steady adoption of groceries is something that will be a key driver of new customer growth. We're also getting better at engaging customers.

Speaker Change: From our mature cohorts and so mature cohorts shrank last year, but the size of the decline improved consistently from Q1 to Q2 to Q3 to Q4.

Speaker Change: And that's because our product is getting a lot better as C. G mentioned in the letter in her comments the product has never been better that's never had more affordability choices. It's never had better selection that's ever had better speed never had higher quality.

Speaker Change: That really helps but in addition to that we've revamped our incentive systems. So we're getting better at targeting customers to.

Nick Giovanni: It starts with managing headcount, managing the equity that we give out to employees. We introduced last year a cash equity choice program, which allows us to reduce the amount of equity that we give in exchange for more cash. And we care very, very deeply about making sure that we can, you know, reduce dilution over time.

Speaker Change: To make sure that we can engage with them and convert them to becoming habituated loyal instant card customers and Thats. One reason why you've seen transaction revenue ticked down a bit it's because incentives are going up we don't break down all of the components of transaction revenue, but it is not because retailer and consumer fees are lower because we are deciding to reinvest the.

Speaker Change: <unk> that we're gaining into incentives and you'll also note in Q4 that sales and marketing expense was down year over year. It doesn't mean, we're spending less on marketing, we're just choosing to spend it and incentives rather than paid marketing and will continue to evolve those choices as we go forward based on where we're seeing the best returns in the market.

Eric Sheridan: I appreciate the color, thank you.

Nick Giovanni: Our next question comes from the line of Nakeel Devani of Bernstein. Your line is open. Hi there. Thanks for taking the question. Just a couple, please.

Operator: Thank you. One moment, please. Our next question comes from the line of Nikhil Devnani of Bernstein. Your line is open.

Nikhil Devnani: Hi there. Thanks for taking the question. Just a couple, please. So, given the breadth of selection you have already, it seems that user growth is increasingly important to the GTV equation going forward. So, what kind of user growth do you think is feasible over the medium term? And how would you characterize the contribution of new customers as well today versus in years prior? So, the extent to which new customers are still driving this GTV equation even after kind of the COVID influx that we saw? And then as a follow-up, when I look at the Q1 guide, what would cause that adjusted EBITDA to step down, given your topline is improving and you've taken some headcount costs out as well? Thank you.

Nick Giovanni: So, you know, given the breadth of selection you have already, it seems that user growth is increasingly important to the GTV equation going forward. So what kind of user growth do you think is feasible over the medium term? And how would you characterize the contribution of new customers as well today versus in years prior? So the extent to which new customers are still driving this GTV equation, even after the kind of COVID influx that we saw. And then as a follow-up, when I look at the Q1 guide, you know, what would cause that adjusted EBITDA to step down, given your top line is improving and you've taken some headcount costs out as well? Thank you.

Speaker Change: As it relates to the guide for $150 million to $160 million year over year, you will see that transaction revenue was elevated in Q1 of last year.

Speaker Change: You can see over the course of the last three quarters.

Speaker Change: <unk>.

Speaker Change: It has dropped back down that's consistent with our strategy of how we want to reinvest in the business quarter.

Speaker Change: Quarter over quarter, there is a tough comp because of AD seasonality. This happens every Q4 to Q1.

Speaker Change: Thanks I appreciate it.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Ross Sandler of Barclays. Your line is open.

Speaker Change: Alright.

Speaker Change: Yeah.

Speaker Change: Sorry.

Ross Adam Sandler: One question on advertising and then one question on the whole foods.

Ross Adam Sandler: Nick Your advertising revenue line came in broadly with your expectations.

Ross Adam Sandler: Growth rates are coming down a bit and we've heard different things from different companies.

Nick Giovanni: Thanks for the question. So, as it relates to user growth, we definitely think that user growth is important and that means acquiring new customers and also reengaging customers who have shopped less frequently. And both of those things are contributing to the improving growth that we've seen throughout 2023 and continuing with our guide for Q1 2024. So, we talked about in 2023 the new cohort of customers that we activated was larger than the pre-pandemic levels. And so that's a very encouraging sign and something that confirms our belief that we're very early in the online adoption of grocery. It was obviously interrupted by the pandemic, and now that the pandemic is behind us, the steady online adoption of groceries is something that will be a key driver of new customer growth.

Ross Adam Sandler: Cater to CPG digital advertising in the fourth quarter. So I guess, where do you guys see in that area, both in <unk> and heading into <unk> and then the.

Ross Adam Sandler: The whole foods partnership is pretty interesting given we all know the reason why we have to break up many years back but what.

Ross Adam Sandler: What was the rationale for bringing them back online from I guess, the whole foods side and could that potentially play out in the U S. At some point.

Ross Adam Sandler: Any thoughts there thanks a lot.

Speaker Change: Thanks, Ross so on advertising.

Speaker Change: The drivers that Youre seeing are one we are lapping in Q4, the launch of shopper, both display and shippable deal a year ago, which was a big increase in advertising revenue. The second thing Youre seeing is that advertising.

Speaker Change: Revenue, usually lags GDP growth and what I mean by that is that.

Speaker Change: Advertisers make budget decisions today based on sales growth that we saw in prior quarters and so the slowdown that we're seeing in advertising is really a result of.

Nick Giovanni: It was obviously interrupted by the pandemic, and now that the pandemic is behind us, we're on the steady online adoption of groceries, something that will be a key driver of new customer growth. We're also getting better at engaging customers from our mature cohorts. And so mature cohorts shrank last year, but the size of the decline improved consistently from Q1 to Q2 to Q3 to Q4.

It was obviously interrupted by the pandemic, and now that the pandemic is behind us, we're on the steady online adoption of groceries, something that will be a key driver of new customer growth.

Speaker Change: <unk> growth that we saw last year. The good news, though is that we are seeing re acceleration of that growth.

Nick Giovanni: We're also getting better at engaging customers who - from our mature cohorts. And so mature cohorts shrank last year, but the size of the decline improved consistently from Q1 to Q2 to Q3 to Q4 and that's because our product is getting a lot better. As Fidji mentioned in the letter and in her comments, the product has never been better. It's never had more affordability choices, it's never had better selection, it's never had better speed, never had higher quality. And that really helps but in addition to that, we've revamped our incentive systems. So, we're getting better at targeting customers to make sure that we can engage with them and convert them to becoming habituated loyal Instacart customers.

Speaker Change: For three consecutive quarter and guiding for Fox, one and we fully expect that each of you continues to Reaccelerate advertising will also accelerate you mentioned some weakness amongst some advertisers we are seeing that in pockets, but it is not widespread and even when advertisers are struggling.

Nick Giovanni: And that's because our product is getting a lot better. As Fiji mentioned in the letter and in her comments, the product's never been better. It's never had more affordable choices. It's never had better selection. It's never had better speed, and it's never had higher quality.

And there'll be enough overall, we are not the first line to be cuts because they know that's all advertising.

Nick Giovanni: And that really helps. But in addition to that, we've revamped our incentive systems. So we're getting better at targeting customers to make sure that we can engage with them and convert them to become habitual, loyal Instacart customers. And that's one reason why you've seen transaction revenue tick down a bit. It's because incentives are going up. We don't break down all of the components of transaction revenue, but it's not because retailer and consumer fees are lower.

And that really helps. But in addition to that, we've revamped our incentive systems. So we're getting better at targeting customers to make sure that we can engage with them and convert them to become habitual, loyal Instacart customers.

Speaker Change: I will ask and.

Highly performance. So we don't tend to do the things that the cuts.

Speaker Change: Now moving to your second question on whole foods.

Speaker Change: We are we are very excited to bring them back.

Canada Wholefood did not offer delivery to consumer so we are an opportunity for them to launch the service in which an incremental customer.

Nick Giovanni: And that's one reason why you've seen transaction revenue tick down a bit. It's because incentives are going up. We don't break down all of the components of transaction revenue, but it's not because retailer and consumer fees are lower. It's because we're deciding to reinvest the efficiencies that we're gaining into incentives. And you'll also note in Q4 that sales and marketing expense was down year-over-year. It doesn't mean we're spending less on marketing, we're just choosing to spend it in incentives rather than pay marketing, and we'll continue to evolve those choices as we go forward based on where we're seeing the best returns in the market. As it relates to the guide for $150 million to $160 million, year-over-year, you will see that transaction revenue was elevated in Q1 of last year. You can see over the course of the last three quarters, it has dropped back down. That's consistent with our strategy of how we want to reinvest in the business. Quarter over quarter, there's a tough comp because of ad seasonality. This happens every Q4 to Q1.

Speaker Change: They are very focused on customer experience as we all are and given all of the great.

Speaker Change: <unk> that we've developed both in terms of quality speed, our ability to deliver at scale.

Nick Giovanni: It's because we're deciding to reinvest the efficiencies that we're gaining into incentives. And you'll also note in Q4 that sales and marketing expense were down year over year. It doesn't mean we're spending less on marketing. We're just choosing to spend it on incentives rather than paid marketing, and we'll continue to evolve those choices as we go forward based on where we're seeing the best returns in the market, as it relates to the guide for $150 to $160 million. Year over year, you will see that transaction revenue was elevated in Q1 of last year. But you can see over the course of the last three quarters, it's, it's, it has dropped back down.

Speaker Change: The we're excited to partner with us in Canada, and vice versa, nothing to announce about the U S. But we always take a long term view of this problem.

Speaker Change: Chapter and our goal is to provide as much value to whole foods and the customers as possible as we do with every single one of our retail partners.

Speaker Change: Thank you.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Colin Sebastian Baird. Your line is open.

Speaker Change: Thanks, Good afternoon I. Appreciate the question Peter you talked about improvements in operating Kpis like found in fill rates and batch rates and I think a lot of that is based on the data platform and the use of machine learning.

Speaker Change: If you could maybe talk about how much of additional improvement do you think is still embedded in the platform.

Speaker Change: With those initiatives and then related to that how much of a competitive advantage for a differentiator is that I think you indicated youre doing youre doing things five years ago that some of your digital competitors are now are now trying to achieve in the market. Thank you.

Nick Giovanni: That's consistent with our strategy of how we want to reinvest in the business. Quarter over quarter, there's a tough comp because of ad seasonality. This happens every Q4 to Q1.

Absolutely. So we already have very high phones rates and show rates and so.

Nick Giovanni: Thanks, I appreciate it. Thank you. One moment.

Nikhil Devnani: Thanks, I appreciate it.

Operator: Thank you. One moment, please. Our next question comes from the line of Ross Sandler of Barclays. Your line is open.

Speaker Change: They have been improving for the sixth consecutive quarter.

Operator: Thank you. Our next question comes from the line of Ross Sandler of Barclays, the line of... All right. All right.

Thank you. Our next question comes from the line of Ross Sandler of Barclays, the line of...

Speaker Change: But right now it's really a game of basis points, because we're already delivering with such high quality, but every basis point of improvement matters and we sweat the details to make sure that our customers get the exact all barrels that they wanted all the products on the shelves that we replace the product suite a highly satisfactory.

Ross Adam Sandler: Sorry - One question on advertising and then one question on the Whole Foods. Nick, your advertising revenue line came in broadly with your expectations. The growth rates are coming down a bit, and we've heard different things from different companies that cater to CPG digital advertising in the fourth quarter. So, I guess, what are you guys seeing in that area both in 4Q and heading into 1Q? And then the Whole Foods partnership is pretty interesting, given we all know the reason why we had to break up many years back. But what was the rationale for bringing them back online from, I guess, the Whole Foods side? And could that potentially play out in the US at some point, any thoughts there? Thanks a lot.

Operator: Yeah. I got it. One question on advertising and then one question on Whole Foods. Nick, your advertising revenue line came in broadly on your expectations, although the growth rates are coming down a bit.

Speaker Change: Replacements, and we do that through a variety of methods. One is all depth of integration with retailers. We get catalog data updated constantly we get the plan O Gram data, which allows us to show it.

Nick Giovanni: And we've heard different things from different companies that cater to CPG digital advertising in the fourth quarter. So I guess what are you guys seeing in that area, both in 4Q and heading into 1Q? And then...

Speaker Change: Inside of shopper up where the items are located inside the store so that shoppers can go and find them with some retailers. We go as far as integrating with electronic shelf tags like we do with snacks and Augie were from the show perhaps you can literally in light up the shelves at shelf to tell you exactly what the night then you go into.

Fiji Simo: The Whole Foods partnership is pretty interesting, given we all know the reason why we had to break up many years ago. But what was the rationale for bringing them back online from, I guess, the Whole Foods side, and could that potentially play out in the U.S. at some point? Any thoughts there? Thanks a lot.

Fidji Simo: Thanks Ross. So, on advertising, the drivers that you're seeing are, one, we are lapping in Q4 the launch of shoppable gift and shoppable video a year ago, which was a big increase in advertising revenue. The second thing you're seeing is that advertising revenue usually lags GTV growth. And what I mean by that is that advertisers make budget decisions today based on the sales growth that they saw in prior quarters. And so, the slowdown that we're seeing in advertising is really a result of the underwhelming GTV growth that we saw last year. The good news, though, is that we are seeing reacceleration of the GTV growth for 3 consecutive quarters and guiding to a fourth one and we fully expect that if GTV continues to reaccelerate, advertising will also reaccelerate.

Speaker Change: So that again, we increased the likelihood that shoppers are going to find these items in store and so that's like deep retailer integrations that are very defensible and very <unk>.

Speaker Change: Competitive advantage then you combine that with the fact that our shoppers.

Speaker Change: Is the Isles of grocery stores every day, so they know what's on the shelf often better than what we tell it no themselves and it has allowed us to really develop great predictive algorithms to understand what is going to be in stock and what's not and if you can talk what's a suitable replacement that's going to generate.

The good news, though, is that we are seeing a re-acceleration of that GDP growth for three consecutive quarters and guiding to a fourth one. And we fully expect that if GDP continues to re-accelerate, advertising will also re-accelerate.

Speaker Change: A positive experience and just to give you an idea.

Speaker Change: We make more than 75 million replacement a quarter with 80, 95% satisfaction and so the combination of deep retailer of integrations.

Fidji Simo: You mentioned some weakness among some advertisers. We are seeing that in pockets, but it is not widespread. And even when advertisers are struggling in their business overall, we are not the first line to be cut because they know that our advertising is very high viewers and is highly performant, so we don't tend to be the first thing that they cut. Now, moving to your second question on Whole Foods. We are very excited to bring them back. In Canada, Whole Foods did not offer delivery to consumers so we are an opportunity for them to launch the service and reach an incremental customer. They are very focused on the customer experience as we are and given all of the great experience that we've developed both in terms of quality, speed, ability to deliver at scale, they were excited to partner with us in Canada and vice versa. Nothing to announce about U.S., but we always take a long-term view of this partnership, and our goal is to provide as much value to Whole Foods and their customers as possible as we do with every single one of our retail partners.

Nick Giovanni: And even when advertisers are struggling in their business overall, we are not the first line to be cut because they know that our advertising has a very high ROAS and is highly performant. So we don't tend to be the first thing that they cut. Now moving to your second question about Whole Foods. We are very excited to bring them back.

Speaker Change: Data that we collect every day and predictive analytics model really allows us to deliver the superior experience that creates a very cheap Michigan competitive advantage.

Some of them to grow but I think we're already very much at the top of our game there and are continuing to chip away at.

Fiji Simo: In Canada, Whole Foods did not offer delivery to consumers, so we are an opportunity for them to launch the service and reach an incremental customer. They are very focused on the customer experience as we are, and given all of the great experiences that we've developed both in terms of quality, speed, ability to deliver at scale, they were excited to partner with us in Canada and vice versa. Nothing to announce about the U.S., but we always take a long-term view of this partnership, and our goal is to provide as much value to Whole Foods and their customers as possible, as we do with every single one of our retail partners. Thank you. Our next, on the line of Colin Sebastian, of Baird, Yolanda... Thanks. Good afternoon,

In Canada, Whole Foods did not offer delivery to consumers, so we are an opportunity for them to launch the service and reach an incremental customer. They are very focused on the customer experience as we are, and given all of the great experiences that we've developed both in terms of quality, speed, ability to deliver at scale, they were excited to partner with us in Canada and vice versa. Nothing to announce about the U.S., but we always take a long-term view of this partnership, and our goal is to provide as much value to Whole Foods and their customers as possible, as we do with every single one of our retail partners.

Speaker Change: The remaining 2% to make sure that.

Speaker Change: We are delivering the best possible experience and that's why customers and retailers Trust us with their business in one case and delivering that meets and approaches in another.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Jason <unk> of Oppenheimer. Your line is open.

Jason: Thanks two questions.

Jason: Just first.

Just can you elaborate on the point about advertising correlates more wood trailing G television not current quarter I think you made a point and second.

Thank you. Our next, on the line of Colin Sebastian, of Baird, Yolanda... Thanks. Good afternoon,

Ross Adam Sandler: Thank you.

Jason: Nick can you clarify the comment about.

Operator: Thank you. One moment, please. Our next question comes from the line of Colin Sebastian of Baird. Your line is open.

Jason: Our GTD growth would step up did you mean per quarter through the rest of 'twenty four or just broadly for all 24. Thank you.

Colin Alan Sebastian: I appreciate the questions. PG, you talked about improvements and operating KPIs such as those found in fill rates and batch rates. And I think a lot of that's based on the data platform and the use of machine learning. If you can maybe talk about how much additional improvement you think is still embedded in the platform with those initiatives and, related to that, how much of a competitive advantage or differentiator it is that you indicated. You know, you were doing things five years ago that some of your digital competitors are now trying to achieve in the market. Absolutely not.

Colin Alan Sebastian: Thanks. Good afternoon. Appreciate the questions. Fidji, you talked about improvements in operating KPIs like found in fill rates and batch rates. And I think a lot of that is based on the data platform and the use of machine learning. If you could maybe talk about how much of additional improvement do you think is still embedded in the platform with those initiatives? And then related to that, how much of a competitive advantage or differentiator is that? I think you indicated you were doing things five years ago that some of your digital competitors are now trying to achieve in the market. Thank you.

Speaker Change: So in advertising.

Speaker Change: So the way budgeting works is that Oh advertisers set budget this quarter.

Speaker Change: On the self performance as you saw in the past. So if we have been growing at a lower rate in the past that he sells growth that's a little bit more muted, they're going to allocate fuel budget in the upcoming quarters based on that but then when GCG grocery accelerates then you end up allocating more budget, we have actually.

Speaker Change: We see this trend play out in the past if you look back at all financial you will see that in Q2 of 'twenty. Two for example.

Fidji Simo: Absolutely. So, we already have very high found rates and fill rates. And so, they have been improving for the sixth consecutive quarter. But right now, it's really a game of basis points because we're already delivering with such high quality, but every basis point of improvement matters, and we really sweat the details to make sure that our customers get the exact order that they wanted or if products aren't on the shelves, that we replace the products with a highly satisfactory replacement. And we do that through a variety of methods. One is our depth of integration with retailers. We get their catalog data updated constantly. We get planogram data, which allows us to show inside of shopper app where the items are located inside the store so that our shoppers can go and find them. With some retailers, we go as far as integrating with electronic shelf tags like we do with SNAP and Aldi, where from the shopper app, you can literally light up the shelf to tell you exactly where an item is going to be so that again, we increase the likelihood that shoppers are going to find this items in-store.

Fiji Simo: So, we already have very high found rates and fill rates, and they have been improving for the sixth consecutive quarter. But right now, it's really a game of basis points because we're already delivering such high quality. But every basis point of improvement matters.

Speaker Change: We had actually a decreasing year over year investment grade because we were coming off of several quarters of fairly low GDP growth and then as soon as GTD, we accelerated advertising rates accelerated again in the following quarter and so that's what I meant by the trailing aspect of it.

Fiji Simo: And we really sweat the details to make sure that our customers get the exact order that they wanted, or if products aren't on the shelves, we replace the product with a highly satisfactory replacement. And we do that through a variety of methods. One example is our depth of integration with retailers. We get their catalog data updated constantly. We get planogram data, which allows us to show in our shopper app where the items are located inside the store so that our shoppers can go there and find them. With some retailers, we go as far as integrating with their electronic shelf tags, like we do with Schnapps and Aldi, where, from the shopper app, you can literally light up the shelf to tell you exactly what an item is going to be. So, again, we increase the likelihood that shoppers are going to find these items in store.

Speaker Change: Not uniform across the board that you have emerging brands for example, well a lot more flexible a lot more nimble in how to allocate budget. So the minute that they see that GTT is increasing and the sales are increasing.

Speaker Change: Double down and increase our advertising, but for larger companies that are planning on a quarterly basis, sometimes even on a on a half basis.

Speaker Change: It takes a little bit more time for them to digest the change in GTT, one way or another and reflects the advertising budget.

Then as it relates to the growth step up we are only guiding to Q1 and for Q1, we are guiding to GDP growth of 7% to 10% year over year and this compares to 5% for all of last year through the quarters of last year. It was two 6% growth in Q1, and five 6% growth in Q2, five 9% growth in Q3.

Speaker Change: Six 8% growth in Q4, and so what we're calling for now is the step up to 7% to 10% in Q1.

Fidji Simo: And so, that's like deep retailer integrations that are very defensible and a very deep competitive advantage. Then you combine that with the fact that our shoppers are in the aisles of grocery stores every day. So, they know what's on the shelves often better than what retailers know themselves. And it has allowed us to really develop great predictive algorithms to understand what's going to be in stock versus what's not going to be in stock, what's a suitable replacement that's going to generate a positive experience. And just to give you an idea, we make more than 75 million replacements a quarter with 95% satisfaction. And so, the combination of deep retailer integration, data that we collect every day and predictive analytics model really allows us to deliver the superior experience that creates a very significant competitive advantage. There's still some room to grow, but I think we are already very much at the top of our game there and are continuing to chip away at the remaining few percent to make sure that we are delivering the best possible experience. And that's why customers and retailers trust us with their business in one case and delivering their meat and their produce in another.

Thank you.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Michael Morton.

Michael Morton: Of Moffett Nathan Your line is open.

Michael Morton: Well. Thank you for the question I wanted to ask maybe run a little bit longer term.

Michael Morton: The industry structure.

Have like incumbents with the physical.

Michael Morton: Network building their own distribution businesses, but then also marketplaces competing with them to current who has the first mover and can do it with a larger scale, but I would love to know how do you see the actual picking aspect of fulfillment developing over the year as order density increases.

Do you think there are so many industry. They believe it's going to go to merchant Pip. So then kind of the whole foods model, there's just bags at the front of the store.

Today's economy workers picking up.

Michael Morton: Or does this continue on into current picker model, just any long term thoughts there would be great. Thank you.

Thanks for the question. So the reason the retailers' partner with us to do peaking and delivery is because we can do.

Speaker Change: Very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates gross for them and with high accuracy and high quality to really respect the relationships that they've dealt with our customers.

Fiji Simo: There's still some room to grow, but I think we're already very much at the top of our game there and are continuing to chip away at the remaining few percent to make sure that we are delivering the best possible experience. And that's why customers and retailers trust us with their business in one case and deliver their meat and their produce in another. Okay, thank you.

There's still some room to grow, but I think we're already very much at the top of our game there and are continuing to chip away at the remaining few percent to make sure that we are delivering the best possible experience. And that's why customers and retailers trust us with their business in one case and deliver their meat and their produce in another.

Speaker Change: We do that in a variety of ways. So the model, you're describing where some retailers might be doing to peaking and then.

Speaker Change: We do delivery like summer for our retailers are already using our own peaking up to stage that order for example for pick up and so again, we see our role is really developing all of the technologies to help support that industry and one of them is great technology.

Colin Alan Sebastian: Okay, thank you.

Operator: Thank you. One moment, please. Our next question comes from the line of Jason Helfstein of Oppenheimer. Your line is open.

Jason Helfstein: Thanks. Two questions. Just first, just can you elaborate on the point about advertising correlates more with trailing GTV, not current quarter? I think you made a point. And second, Nick, can you clarify the comment about how GTV growth would step up? Did you mean per quarter through the rest of '24 or just broadly for all of '24? Thank you.

Speaker Change: That retailers are integrated with their own system and are currently using inside desktop now we have also seen model thinking about like automated peaking and.

Nick Giovanni: And second, Nick, can you clarify the comment about how GTV growth would step up? Thank you. So in advertising, the way budgeting works is that advertisers set budgets this quarter based on the sales performance that they saw in the past. So if we have been growing at a lower rate in the past, they're seeing, you know, sales growth that's a little bit more muted. They're going to allocate fewer budgets in the upcoming quarters based on that. But then when GDP growth re-accelerates, they end up allocating more budgets. We have actually seen this trend play out in the past.

And second, Nick, can you clarify the comment about how GTV growth would step up? Thank you.

Fidji Simo: So, on advertising, the way budgeting work is that all advertisers set budget this quarter based on the sales performance that they saw in the past. So, if we have been growing at a lower rate in the past, have seen sales growth that's a little bit more muted, they're going to allocate fewer budgets in the upcoming quarters based on that. But then, when GTV growth reaccelerates, then they end up allocating more budget. We have actually seen this trend play out in the past. If you look back at our financials, you will see that in Q2 of 2022, for example, we had actually a decrease in year-over-year investment rate because we were coming off of several quarters of fairly low GTV growth. And then, as soon as GTV reaccelerated, advertising rate accelerated again in the following quarter. And so, that's what I meant by the trailing aspect of it. It's not uniform across the board. You have emerging brands, for example, who are a lot more flexible, a lot more nimble in how they allocate budget. So, the minute that they see that GTV is increasing and their sales are increasing, they double down and increase their advertising. But for larger companies that are planning on a quarterly basis, sometimes even on a half basis, it takes a little bit more time for them to digest the change in GTV one way or another and reflect that in the advertising budget.

Speaker Change: Kind of.

Having big warehouses wells are peaking happens outside of the network of stores and we are tracking that very closely but we are much less bullish on this model because what we have found is that for these models to work you need a lot of density of all the OCA and that means that as you know I'm kind of large warehouses and up.

Speaker Change: Being very far away from the customer and all of the costs that you saved in peaking you end up producing in cost of delivery because you have to drive to a customer that's much felt the whole way. We are also seeing that customers actually value speed and that's why you know I have emphasized speech. So much in my letter L. Because we know it.

Nick Giovanni: If you look back at our financials, you will see that in Q2 of 2022, for example, we had a decrease in the over-year investment rate because we were coming off of several quarters of fairly low GDP growth. And then as soon as GDP re-accelerated, advertising rates accelerated again in the following quarter. And so that's what I meant by the trailing aspects of it. It's not uniform across the board.

Speaker Change: <unk> conversion, we know it drives growth until you feel very far away from the customer you are not able to deliver with the speeds that weekend.

Speaker Change: <unk> dot from 85000 installs so all in all I would say that we strongly believe is that we have the winning model here.

Nick Giovanni: You have emerging brands, for example, who are a lot more flexible and a lot more nimble in how they allocate budgets. So the minute that they see that, you know, GDP is increasing and their sales are increasing, they double down and increase their advertising. But for larger companies that are planning on a quarterly basis, sometimes even on a half-yearly basis, it takes a little bit more time for them to digest the change in GDP one way or another and reflect that in their advertising budget.

Speaker Change: That's the model, that's most efficient most responsive to customer needs.

Speaker Change: And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they can find suitable for that business.

Speaker Change: Thank you so much.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Andrew Boone of JMP Securities. Your line is open.

Andrew M. Boone: Thanks, so much for taking my questions.

Nick Giovanni: And as it relates to the growth step-up, we are only guiding to Q1. And for Q1, we are guiding to GTV growth of 7% to 10% year-over-year. And this compares to 5% for all of last year. But through the quarters of last year, it was 2.6% growth in Q1 and 5.6% growth in Q2, 5.9% growth in Q3, 6.8% growth in Q4. And so, what we're calling for now is a step-up to 7% to 10% in Q1. Thank you.

Andrew M. Boone: Can you talk a little bit about the product roadmap for off platform advertising, where are you guys today and what can this look like over the next couple of years and then a bigger picture question on health more broadly can you talk about the potential for HSA and what that could mean for the business. Thanks. So much.

Nick Giovanni: But through the quarters of last year, it was 2.6% growth in Q1 and 5.6% growth in Q2, 5.9% growth in Q3, 6.8% growth in Q4. And so what we're calling for now is a step up to 7 to 10%. Our next question comes from the line of Michael Moore. Moffett, Nathanson, you're live.

But through the quarters of last year, it was 2.6% growth in Q1 and 5.6% growth in Q2, 5.9% growth in Q3, 6.8% growth in Q4. And so what we're calling for now is a step up to 7 to 10%.

Speaker Change: Thanks, Andrew so on and off platform marketplace advertising step one was taking a entire advertising infrastructure and making it available to retailers on the owned and operated properties true care with ads and.

Jason Hefstein: Thank you.

Operator: Thank you. One moment, please. Our next question comes from the line of Michael Morton of MoffettNathanson. Your line is open.

Michael Morton: Thank you for the question. I wanted to ask maybe 1 a little bit longer term just about industry structure. You have like incumbents with the physical network building their own distribution businesses but then also marketplaces competing with Instacart who is the first mover and can do it with a larger scale. But I would love to know, how do you see the actual picking aspect of fulfillment developing over the year as order density increases? Do you think - there are some in the industry that believe it's going to go to merchant pit, so then like kind of the Whole Foods model that's just bags in the front of the store and the economy workers pick it up? Or does this continue along the Instacart picker model? Just any long-term thoughts there would be great. Thank you.

Speaker Change: That's a growing part of the business, we are finding more and more retailers be interested in leveraging this technology.

Speaker Change: Because that allows them to standup of retail media network literally overnight and get a revenue a new incremental revenue line. So that was step one I would say step two is.

Speaker Change: Taking all of the vast.

Speaker Change: A set of data as a three album customer behavior, and leveraging that data to make advertising on other platforms more efficient and that's where we get the partnership with the trade desk, We recently announced the partnership with Google Our polymer.

Speaker Change: Partnership with Roku, where we can leverage he is incredibly valuable data that we have to make advertising on other platforms more efficient and that's something that we want to continue to develop with more platforms and scale with more advertisers and then I would say the last step is actually expanding all advertising south.

Fiji Simo: Just any long-term thoughts there would be great. Thank you. Thanks for the question. The reason retailers partner with us to do picking and delivery is because we can do that very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates growth for them. And with high accuracy and high quality to really respect the relationships that they build with our customers. We do that in a variety of ways.

Just any long-term thoughts there would be great. Thank you.

Fidji Simo: Thanks for the question. The reason retailers partner with us to do picking and delivery is because we can do that very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates growth for them. And with high accuracy and high quality to really respect the relationships that they build with our customers. We do that in a variety of ways. So the model you're describing, where some retailers might be doing the picking and then we do delivery, like some of our retailers are already using our own picking app to stage their order, for example, for pickup. And so, again, we see our role as really developing all of the technologies to help support that industry. And one of them is great picking technology that retailers have integrated with their own system and are currently using inside their store. Now, we have also seen models thinking about automated picking and kind of having big warehouses where the picking happens outside of the network of stores. And we are tracking that very closely, but we are much less bullish on this model because what we have found is that for these models to work, you need a lot of density of orders. And that means that these kinds of large warehouses end up being very far away from the customer.

Fidji Simo: Thanks for the question. So, the reason retailers for now with us to do picking and delivery is because we can do that very efficiently, which allows them to save on cost and pass on some of that cost to customers, which then creates growth for them, and with high accuracy and high quality to really respect the relationships that we deal with our customers. We do that in a variety of ways. So, the model you're describing where some retailers might be doing the picking and then with the delivery, like some of our retailers are already using our own picking app to stage their order, for example, for pickup. And so again, we see our role as really developing all of the technologies to help support that industry, and one of them is great picking technology that retailers are integrated with our own system and are currently using inside their store.

Speaker Change: <unk>.

Speaker Change: Beyond online and into the store and that's why we announced recently doesn't keep a call and obviously, it's very early we're just starting to rollout a lot of people call.

Speaker Change: But we think that if we all the advertising platform that allows an advertiser to reach customers, both online and in store and oven advertising products installed that knows exactly what's on your costs right now, which I'll Johan what you purchased in the past since your loyalty data we can build.

Fiji Simo: So the model you're describing, where some retailers might be doing the picking and then we do delivery, like some of our retailers are already using our own picking app to stage their order, for example, for pickup. And so, again, we see our role as really developing all of the technologies to help support that industry. And one of them is great picking technology that retailers have integrated with their own system and are currently using inside their store. Now, we have also seen models thinking about automated picking and kind of having big warehouses where the picking happens outside of the network of stores. And we are tracking that very closely, but we are much less bullish on this model because what we have found is that for these models to work, you need a lot of density of orders. And that means that these kinds of large warehouses end up being very far away from the customer.

Really incredible advertising platform again still early but that's really just huge held up well trading towards.

Speaker Change: And then on your question on the House and HSA FSA, we don't see it in Q4 as you know it's still very early but it's.

Fidji Simo: Now, we have also seen models thinking about like automated picking and kind of having big warehouses where the picking happens outside of the network stores. And we are tracking that very closely, but we are much less bullish on this model because what we have found is that for these models to work, you need a lot of density of orders. And that means that these kind of large warehouses end up being very far away from customer, and all of the costs that you save in picking, you end up losing in cost of delivery because you have to drive to a customer that's much further away. We are also seeing that customers actually value speed, and that's why I have emphasized speed so much in my letter because we know it drives conversion. We know it drives growth. And so if you're very far away from the customer, you are not able to deliver with the speed that we can in doing that from 85,000 stores. So, all-in-all, I would say that we strongly believe that we have the winning model here, the model that's most efficient, most responsive to customer needs. And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they find suitable for their business.

Speaker Change: Very much.

Speaker Change: Kind of reproducing the mental model of EDT snap, where if you look at snap snap is about a 130 billion of funds alluded into snap every year FSA HSA 65 billion of which 3 billion of those get for heated by American at the end of the year.

Fiji Simo: And all of the costs that you save in picking, you end up losing in cost of delivery because you have to drive to a customer that's much further away. But we are also seeing that customers actually value speed. And that's why I have emphasized speed so much in my letter because we know it drives conversion. We know it drives growth. And so if you're very far away from the customer, you are not able to deliver with the speed that we can do that from 85,000 stores.

Speaker Change: Because you know some of it is.

I'll use it and we think we can be a really good platform to remind them that they can use. These dollars. It's the same way, we do we snap by leveraging that FSA HSA called.

Speaker Change: Again, very early but something that we wanted to Kansas He's done because we have seen such success with snap.

We wanted to see if we can reproduce out with Oh.

FSA HSA.

Fiji Simo: So, all in all, I would say that we strongly believe that we have the winning model here, the model that's most efficient and most responsive to customer needs. And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they find suitable for them. Thank you so much.

So, all in all, I would say that we strongly believe that we have the winning model here, the model that's most efficient and most responsive to customer needs. And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they find suitable for them.

Thank you one moment please.

Speaker Change: Our next question comes from the line of Mark Kelly of Stifel. Your line is open.

Mark Patrick Kelley: Great. Thank you very much Nick a quick one for you just on.

Mark Patrick Kelley: Take rate.

Mark Patrick Kelley: So you think about the full year, obviously, you've got a couple of dynamics, where you're lapping that in Q1 of last year that you had where you were kind of towards the high end or at the high end of your long term range and then just thinking through the risks and taking those savings and thinking about marketing and incentives and things like that I guess, what's a good starting point for us.

Michael Morto: Thank you so much.

Operator: Thank you. One moment, please. Our next question comes from the line of Andrew Boone of JMP Securities. Your line is open.

Andrew M. Boone: Thanks so much for taking my questions. Can you talk a little bit about the product road map for off-platform advertising? Where are you guys today and what can this look like over the next couple of years? And then Fidji, a bigger picture question on Health more broadly. Can you talk about the potential for HSA and what that could mean for the business? Thanks so much.

Mark Patrick Kelley: About <unk>.

Mark Patrick Kelley: Take rates for our model and then just a quick one.

Speaker Change: You just brought up ads on <unk> I'm, just curious if you think.

Fiji Simo: And what could this look like over the next couple of years? And then Fiji, a bigger picture question on health more broadly. Can you talk about the potential for HSAs and what that could mean for the business? Thanks so much.

Speaker Change: Like are those budgets that are likely to come from.

Speaker Change: Retail media budgets are those like digital out of home budgets that you would.

Speaker Change: Might be able to capture I guess.

Speaker Change: How should we think about that and does that open up.

Speaker Change: <unk> opportunities.

Speaker Change: Side of what you just mentioned in the last answer thank you.

Fidji Simo: Thanks, Andrew. So, on off-platform marketplace advertising, step one was taking our entire advertising infrastructure and making it available to retailers on their owned and operated properties through Carrot Ads. And that's a growing part of the business. We are finding more and more retailers be interested in leveraging this technology because that allows them to stand up a retail media network literally overnight and get a new incremental revenue line. So, that was step one. I would say step two is taking all of the vast set of data that we have on customer behavior and leveraging the data to make advertising on other platforms more efficient and that's where we did the partnership with The Trade Desk. We recently announced a partnership with Google, a partnership with Roku where we can leverage this incredibly valuable data that we have to make advertising on other platforms more efficient. And that's something that we want to continue to develop with more platforms and scale with more advertisers. And then I would say the last step is actually expanding our advertising platform beyond online and into the store. And that's why we announced recently add on Caper Cart. And obviously, it's very early. We're just starting to roll out a lot of Caper Cart. But we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in store that knows exactly what's on your cost right now, which aisle you're on, what you purchased in the past and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're driving towards. Then on your question on Health and HSA/FSA. We launched it in Q4 as you know. It's still very early but it's very much kind of reproducing the mental model of EBT SNAP, where if you look at SNAP, SNAP has about $130 billion of funds loaded into SNAP every year. FSA/HSA $65 billion, of which $3 billion of those get forfeited by Americans at the end of the year because some of it is use it or lose it. And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA/HSA code. Again, very early but something that we wanted to plan this season because we have seen such success with SNAP that we want to see if we can reproduce that with FSA/HSA.

Speaker Change: Thanks for the question. So just on take rates I think you're referring to transaction revenue and add another revenue as a percentage of TV and we do not guide to those specifically for the full year. What we did say is that we do expect adjusted EBITDA to be up not only in dollar terms, but as a percentage of GTD year over year.

Speaker Change: One of the reasons, we said that is because we want to be able to make investments whether it's in the contra revenue line or the Opex line to drive most efficiently, especially having just overhauled our incentive systems and having seen good results and deploying more incentives when we decided to spend $1 in incentives instead of one dollar in performance marketing that makes.

Fidji Simo: And then I would say the last step is actually expanding our advertising platform beyond online and into the store. And that's why we announced recently add on Caper Cart. And obviously, it's very early. We're just starting to roll out a lot of Caper Cart. But we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in store that knows exactly what's on your cost right now, which aisle you're on, what you purchased in the past and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're driving towards. Then, on your question on Health and HSA/FSA. We launched it in Q4 as you know. It's still very early but it's very much kind of reproducing the mental model of EBT SNAP, where if you look at SNAP, SNAP has about $130 billion of funds loaded into SNAP every year. FSA/HSA $65 billion, of which $3 billion of those get forfeited by Americans at the end of the year because some of it is use it or lose it. And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA/HSA code. Again, very early but something that we wanted to plan this season because we have seen such success with SNAP that we want to see if we can reproduce that with FSA/HSA. Thank you. One moment, please. Our next question comes from the line of Mark Kelley of Stifel. Your line is open.

I would say step two is taking all of the vast set of data that we have on customer behavior and leveraging that data to make advertising on other platforms more efficient. And that's where, you know, we did the partnership with the trade desk. We recently announced a partnership with Google, and a partnership with Roku, where we can leverage the incredibly valuable data that we have to make advertising on other platforms more efficient. And that's something that we want to continue to develop with more platforms and scale with more advertisers.

Speaker Change: It look like our transaction revenue is lower but it makes it look like our sales and marketing expense is also lower and so net net it's driving value and it is just hitting in different places in the P&L. It's important to also just remember that the.

Speaker Change: The efficiencies that we're delivering and we did call out that we continue to gain efficiencies.

Speaker Change: <unk>.

Speaker Change: Also benefits.

Speaker Change: Transaction revenue, but then we have a decision about where to invest that and how to invest that to continue to grow the business. So we're not providing overall overall guidance, we're not changing our long term targets with respect to transaction revenue.

Operator: Thank you. One moment, please. Our next question comes from the line of Mark Kelley of Stifel. Your line is open.

Speaker Change: Reaching.

Speaker Change: Reaching six 5% to seven 5% of GTP or ads and other revenue, reaching 4% to 5% of GTT and we continue to believe that we can demonstrate real EBITDA leverage throughout the year.

Fidji Simo: And then, I would say the last step is actually expanding our advertising platform beyond online and into the store. And that's why we announced recently add on Caper Cart. And obviously, it's very early. We're just starting to roll out a lot of Caper Cart. But we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in store that knows exactly what's on your cost right now, which aisle you're on, what you purchased in the past and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're driving towards. Then, on your question on Health and HSA/FSA. We launched it in Q4 as you know. It's still very early but it's very much kind of reproducing the mental model of EBT SNAP, where if you look at SNAP, SNAP has about $130 billion of funds loaded into SNAP every year. FSA/HSA $65 billion, of which $3 billion of those get forfeited by Americans at the end of the year because some of it is use it or lose it. And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA/HSA code. Again, very early but something that we wanted to plan this season because we have seen such success with SNAP that we want to see if we can reproduce that with FSA/HSA.

Speaker Change: And on your question on add some keep her again.

Again important to realize that it's very early and it doesn't keep her a little bit of a different beast.

Fiji Simo: We're just starting to roll out a lot of Kapor Karts. But we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in-store that knows exactly what's on your cart right now, which aisle you're on, what you purchased in the past, and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're thriving towards. And then on your question on health and HSA-FSA, we launched it in Q4, as you know, it's still very early, but it's very much kind of reproducing the mental model of EBT-SNAP, where if you look at SNAP, SNAP has about 130 billion of funds loaded into SNAP every year, FSA-HSA is 65 billion, of which 3 billion of those get forfeited by Americans at the end of the year because, you know, some of it is use it or lose it.

They all really combining the best of online advertising, which is metro ability target ability, but then doing that in an in store environment and so like any new innovation in advertising.

Speaker Change: We are probably going to stop to see different.

Speaker Change: Advertisers take from different budgets to fund. These are again very early but what we're seeing is that advertisers are very excited about the combination of these capabilities you can imagine going through the store and you're dropping cookies into your call and dry ice cream can advertise to you that the ice.

Screen can be found in our high and then you can do an ice cream sandwich, We said Keith you already have in your call and based on your loyalty data, we might already know that you like ice cream chocolate ice cream. So we shouldn't directly to that it's it's a really incredible experience that we can unlock.

Fiji Simo: And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA-HSA comp. Again, very early, but something that we wanted to plant the seeds on because we have seen such success with SNAP that we want to see if we can reproduce that with FSA-HSA. Thank you. Our next question comes from the line of Mark Kelley of Stiefel, Yolanda. Great, thank you very much.

And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA-HSA comp. Again, very early, but something that we wanted to plant the seeds on because we have seen such success with SNAP that we want to see if we can reproduce that with FSA-HSA.

But it's still very early and.

Speaker Change: All that important thing to remember is that well doing just hand in hand with retailers. We are sharing revenue on that doesn't keep her what we are doing it as a way to also create a new advertising revenue stream for them.

Thank you. Our next question comes from the line of Mark Kelley of Stiefel, Yolanda. Great, thank you very much.

Speaker Change: And we'll want to continue to partner with them closely on making sure that these budgets are incremental to what they're offering.

Mark Patrick Kelley: Great. Thank you very much. Nick, a quick one for you just on take rates. As you think about the full year, obviously, you've got a couple of dynamics where you're lapping that big Q1 of last year that you had where you're kind of towards the high end or at the high end of your long-term range? And then just thinking through the RIF and taking those savings and thinking about marketing and incentives and things like that. I guess what's a good starting point for us to think about take rates for our model? And then, just a quick one for Fidji. You just brought up ads on Caper Cart. I'm just curious if you think, like are those budgets that are likely to come from, are those still retail media budgets? Are those like digital out-of-home budgets that you would might be able to capture? I guess, how should we think about that? And does that open up bigger opportunities outside of what you just mentioned in the last answer? Thank you.

Speaker Change: Perfect. Thank you very much.

Speaker Change: Thank you one moment please.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Deepak.

Deepak: Mathematics of Wolfe Research your line is open.

Deepak: Great. Thanks for taking the question can I ask a couple on the cohort trends can you provide additional color on the rate of decline of the Covid cohort three 2021 now with maybe earlier in 2023 at what point can we expect the drag from COVID-19 cohorts to be less and potentially.

Speaker Change: Some sort of like a stabilization level and then secondly can you also elaborate on the trends that you're seeing in 'twenty, two and 'twenty three cohorts in terms of the growth rates that we can think about the contribution from the newer cohorts. Thank you so much.

Speaker Change: Thanks for the question Deepak So just to give you. Some additional context, we mentioned that in the first half of last year 2023, the mature cohorts were declining.

Fiji Simo: I'm just curious if you think... uh, like, are those budgets that are likely to come from? Are those still retail media budgets? Are those like digital out of home budgets that you might be able to capture? I guess, you know, how should we think about that, and does that open up bigger opportunities outside of what you just mentioned in the last answer? Thanks for the question.

Speaker Change: Double digits and that in the second half of last year. They were declining single digits and I am sure that lots of folks who want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've that we've guided on we're very pleased with the consistent improvement that we demonstrated throughout the course of last year and then as it.

Nick Giovanni: Thanks for the question. So, just on take rates, I think you're referring to transaction revenue and ad and other revenue as a percent of GTV. And we do not guide to those specifically for the full year. What we did say is that we do expect adjusted EBITDA to be up not only in dollar terms but as a percentage of GTV year-over-year. And one of the reasons we said that is because we want to be able to make investments, whether it's in the contra revenue line or the OpEx line to drive most efficiently, especially having just overhauled our incentive systems and having seen good results in deploying more incentives. When we decide to spend $1 in incentives and spend $1 in performance marketing, that makes it look like our transaction revenue is lower, but it makes it look like our sales and marketing expense is also lower. And so net-net, it's driving value and it's just hitting in different places in the P&L. It's important to also just remember that the efficiencies that we're delivering, and we did call out that we continue to gain efficiencies in Shopper Pay, also benefits transaction revenue. But then we have a decision about where to invest that and how to invest that to continue to grow the business. So, we're not providing overall guidance. We're not changing our long-term targets with respect to transaction revenue reaching 6.5% to 7.5% of GTV or ads and other revenue reaching 4% to 5% of GTV. And we continue to believe that we can demonstrate real EBITDA leverage throughout the year.

Speaker Change: Relates to newer cohorts, so we haven't called out any different trends.

Speaker Change: Typically cohorts grow in the second year compared to the first and we've mentioned that the new cohorts that we're activating our larger than the pre COVID-19 cohorts.

Speaker Change: Thank you got it thanks, so much.

Speaker Change: Please.

Speaker Change: Our next question comes from the line of Steven Fox of Fox Advisors LLC.

Steven Fox: Hi, good afternoon.

Steven Fox: Just had two questions first a simple one.

Steven Fox: Any thoughts for the new year on free cash flow conversion of EBITDA and then secondly.

Steven Fox: If theres been a lot of discussion on the found in fill rates.

Steven Fox: Can you just sort of I guess, the one aspect I was curious about talk about how advantage you are versus some of the either existing or up and coming competitors in that and why technology tied to AI or electronic tags might not lead competitors to close the gap more quickly. Thank you.

Steven Fox: I'll answer the first question quickly on free cash flow. So we're very pleased that we've been able to demonstrate free cash flow growth operating free cash operating cash flow growth net income and adjusted EBITDA. We don't guide to conversion as it relates to free cash flow as a percent of adjusted EBITDA. It is impacted by things like launching.

Nick Giovanni: It's important to also just remember that the efficiencies that we're delivering, and we did call out that we continue to gain efficiencies in shopper pay, also benefit transaction revenue. But then we have a decision about where to invest that money and how to invest that money to continue to grow the business. So we're not providing overall guidance, we're not changing our long-term targets with respect to transaction revenue, reaching 6.5% to 7.5% of GTB, or as in other revenue, reaching 4% to 5% of GTB, and we continue to believe that we can demonstrate that real EBITDA leverage throughout the country. And on your question about ads on Caper, again, it's important to realize that it's very early, and ads on Caper are a little bit of a different beast because they are really combining the best of online advertising, which is measurability and targetability, but then doing that in an in-store environment.

It's important to also just remember that the efficiencies that we're delivering, and we did call out that we continue to gain efficiencies in shopper pay, also benefit transaction revenue. But then we have a decision about where to invest that money and how to invest that money to continue to grow the business. So we're not providing overall guidance, we're not changing our long-term targets with respect to transaction revenue, reaching 6.5% to 7.5% of GTB, or as in other revenue, reaching 4% to 5% of GTB, and we continue to believe that we can demonstrate that real EBITDA leverage throughout the country.

Steven Fox: New products, whether that be EBT, snap or alcohol or paper, but.

Steven Fox: But over time.

Steven Fox: And in the same direction and we believe adjusted EBITDA is a good proxy for operating cash flow that we generate.

Steven Fox: TJ do you want to touch on Yep.

TJ: So on your question very important to know that if you look at online grocery in general the number one reason for churn is.

TJ: <unk> costs. The second reason for churn is all the qualities and that's why all the quality. So critical to get right you want people to retain and continue all the ring with you and all the quality is even more critical to get right on so called the week he shops things like neat things like fruit juice, which is why it.

Fidji Simo: And on your question on ads on Caper, again, important to realize that it's very early and ads on Caper are a little bit of a different beast because they are really combining the best of online advertising, which is measurability, targetability but then doing that in an in-store environment. And so like any new innovation in advertising, we are probably going to start to see different advertisers take from different budgets to fund this. Again very early, but what we're seeing is that advertisers are very excited about the combination of these capabilities. You can imagine going through the store and you're dropping cookies into your cart and Dreyer's Ice Cream can advertise to you that the ice cream can be found in Aisle 5 and then you can do an ice cream sandwich with the cookies you already have in your cart. And based on your loyalty data, we might already know that you like chocolate ice cream, so we can direct you to that. It's a really incredible experience that we can unlock, but it's still very early. And the other important thing to remember is that we're doing this hand-in-hand with retailers. We are sharing revenue on ads on Caper. We are doing it as a way to also create a new advertising revenue stream for them, and we'll want to continue to partner with them closely on making sure that these budgets are incremental to what they're seeing.

TJ: My shoulder I'll, let al that we obsess over like so right now if you'll please.

TJ: We felt the ripeness of bananas, so that's why I vote.

Exactly what you want and that's really important to be able to move the industry online.

Fiji Simo: And so, like any new innovation in advertising, we are probably going to start to see different advertisers take from different budgets to fund this. Again, this is very early, but what we're seeing is that advertisers are very excited about the combination of these capabilities. You can imagine, you know, going through the store and you're dropping cookies into your cart, and Dreyer's ice cream can advertise to you that the ice cream can be found in aisle five, and then you can make an ice cream sandwich with the cookies you already have in your cart. And based on your loyalty data, we might already know that you like chocolate ice cream, so we can direct you to that. It's a really incredible experience that we can unlock, but it's still very early.

I've described previously all of the.

TJ: Integration that we have with retailers in order to be able to obviously is high.

TJ: Sounds right in show rates, whether its catalog integration plan O Gram integration collecting a lot of data.

TJ: Of replacement billions of data points on on what people prefer and all of that is contributing to a significant advantage you ask like what our AI. In particular is an advantage I would say we are absolutely using models on on.

TJ: I'll kick it off aspect, but much more importantly, if a competitor was coming into the market right now and was able to we produce all of our models are all night.

And the other important thing to remember is that we're doing this hand in hand with retailers. We are sharing revenue on ads on Caper. We are doing it as a way to also create a new advertising revenue stream for them, and we'll want to, you know, continue to partner with them closely on making sure that these budgets are incremental to others.

TJ: We didn't have 10 years of data that we have accumulated on exactly all of the inventory part of them to up to 85000 installed all of the preferred replacement for all of the different parts of the population. They wouldn't have all of that data is that powers all of our machine learning models and.

Mark Patrick Kelley: Perfect. Thank you very much.

Nick Giovanni: Our next question comes from the line of Deepak. Matt Savanen, Search Alarm, Great, thanks for taking the questions. Can I ask a couple on the cohort trends? Can you provide additional color on the rate of decline of the COVID cohorts pre-2021 now versus maybe earlier in 2023? At what point can we expect the drag from COVID cohorts to be less and potentially reach some sort of like a stabilization level?

Operator: Thank you. One moment, please. Our next question comes from the line of Deepak Mathivanan of Wolfe Research. Your line is open.

TJ: Allows us to really deliver a completely differentiated experience. So again, it's really the combination of deep integration with retail is lots of data great predictive analytics models that give us a readership central edge.

Deepak Mathivanan: Great. Thanks for taking the questions. Can I ask a couple on the cohort trends? Can you provide additional color on the rate of decline of the COVID cohort pre-2021 now with us maybe earlier in 2023? At what point can we expect the drag from COVID cohorts to be less and potentially reach some sort of like a stabilization level? And then secondly, can you also elaborate on the trends that you're seeing in 2022 and 2023 cohorts in terms of the growth rate so we can think about contribution from the newer cohorts? Thank you so much.

Speaker Change: Great. That's very helpful. Thank you.

Thank you.

Speaker Change: Our last question comes from a lot of markets because he could tell with the benchmark company. Your line is open.

Nick Giovanni: And then secondly, can you also elaborate on the trends that you're seeing in the 22 and 23 cohorts, you know, in terms of the growth rate, so we can think about the contribution from the newer cohorts? Thank you. Thanks for the question, Deepak. So just to give you some additional context, we mentioned that in the first half of last year, 2023, the mature cohorts were declining double digits, and that in the second half of last year, they were declining single digits. And I'm sure that lots of folks want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've guided on. We're very pleased with the consistent improvement that we demonstrated throughout the course of last year.

And then secondly, can you also elaborate on the trends that you're seeing in the 22 and 23 cohorts, you know, in terms of the growth rate, so we can think about the contribution from the newer cohorts? Thank you.

Speaker Change: Thank you so two questions one on user growth and the other one.

Speaker Change: Excuse me the first just curious how your customer acquisition strategy is evolving.

Speaker Change: Understanding that the.

Speaker Change: The secular growth in <unk>.

Speaker Change: Online grocery has been deliberate.

Nick Giovanni: Thanks for the question, Deepak. So, just to give you some additional context, we mentioned that in the first half of last year, 2023, the mature cohorts were declining double-digits and that in the second half of last year, they were declining single-digits. And I'm sure that lots of folks who want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've guided on. We're very pleased with the consistent improvement that we demonstrated throughout the course of last year. And then as it relates to newer cohorts, we haven't called out any different trends. Typically, cohorts grow in the second year compared to the first, and we've mentioned that the new cohorts that we're activating are larger than the pre-COVID cohorts.

Speaker Change: And there is only so much you can press here I'm just curious if you think about the returns youre seeing in customer acquisition, if the rate of improvement that you're seeing there suggests.

Speaker Change: Suggests at some point Youll see we will see a dollar investment accelerate here relative to G. D. TV and then separately on <unk>. Just curious if you could maybe break out what the puts and takes are headwinds tailwind or this year.

Speaker Change: Both inclusive and exclusive of the broader inflationary environment. Thank you.

Speaker Change: So on user growth, we go back to say Joe that this is a massive tam that's still vastly underpenetrated online just 12% online penetration while other categories have come out thought 25, 30% and while the category leader. So we see it as our responsibility to.

And then, as it relates to newer cohorts, we haven't called out any different trends that typically cohorts grow in the second year compared to the first. And we've mentioned that the new cohorts that we're activating are larger than the pre-co.

Speaker Change: The move of the market online.

Speaker Change: That is done through a variety of tactics marketing is one of them, but there are many other once we invest in partnerships. We probably you probably saw what we did with peacocks each quarter, we partnered with all retailers. So that's all retailers can also market to their customers because the very tail data showing that the omnichannel customer.

Thank you so much. Our next question comes from the line of Stephen Fox of Fox Advisory. Hi, good afternoon.

Deepak Mathivanan: Got it. Thank you so much.

Operator: Thank you, one moment, please. Our next question comes from the line of Steven Fox of Fox Advisors LLC. Hi, good afternoon.

Operator: Thank you, one moment, please. Our next question comes from the line of Steven Fox of Fox Advisors LLC.

Steven Fox: Hi, good afternoon. I just had two questions. First, a simple one. Any thoughts for the new year on free cash flow conversion, also EBITDA? And then secondly, on - there's been a lot of discussion on the found and fill rates. Can you just sort of - I guess the one aspect I was curious about, talk about how advantaged you are versus some of either existing or up-and-coming competitors and why technology tied to AI or electronic tags might not lead competitors to close the gap more quickly? Thank you.

Nick Giovanni: I just had two questions. First, a simple one. Any thoughts for the new year on free cash flow conversion, also VIVADA? And then secondly, there's been a lot of discussion on the found and fill rate. Can you just sort of, I guess the one aspect I was curious about, talk about how advantaged you are versus some of the existing or up-and-coming competitors and that, and why technologies tied to AI or electronic tags might not lead competitors to close the gap more quickly. I'll answer the first question quickly on free cash flow. So we're very pleased that we've been able to demonstrate free cash flow growth, operating free cash, operating cash flow growth, net income, and adjusted EBITDA. We don't guide to conversion as it relates to your free cash flow as a percent of adjusted EBITDA.

I just had two questions. First, a simple one. Any thoughts for the new year on free cash flow conversion, also VIVADA? And then secondly, there's been a lot of discussion on the found and fill rate. Can you just sort of, I guess the one aspect I was curious about, talk about how advantaged you are versus some of the existing or up-and-coming competitors and that, and why technologies tied to AI or electronic tags might not lead competitors to close the gap more quickly.

Speaker Change: Forex more valuable than in store only customers. So retailers have an incentive to get the customers to be omni channel. So we are really using all of these tactics to move the market online.

As it pertains to marketing specifically.

We tried to get more and more efficient with marketing every year and unlock new tactics and what you are hearing is this quarter is that we did shift some of our marketing investment to Walt incentives, because we have really unlocked the ability to deliver incentives.

Nick Giovanni: I'll answer the first question quickly on free cash flow. So, we're very pleased that we've been able to demonstrate free cash flow growth, operating cash flow growth, net income and adjusted EBITDA. We don't guide to conversion as it relates to free cash flow as a percent of adjusted EBITDA. It's impacted by things like launching new products, whether that be EBT SNAP or Alcohol or Caper. But over time, they trend in the same direction. And we believe adjusted EBITDA is a good proxy for the operating cash flow that we generate. Fidji, do you want to touch on that?

Speaker Change: Way that allows us to both acquire customers, but also retain them over time by incentivizing behaviors that can lead to a habituation and so we continue to invest in marketing based on long term goals not just expecting a return within the quarter, but really investing with a five year <unk>.

Nick Giovanni: It's impacted by things like launching new products, whether that be EBT, SNAP, alcohol, or caper. But over time, they trend in the same direction. And we believe adjusted EBITDA is a good proxy for operating cash flow. TG, do you want to touch on that?

Fidji Simo: Yes. So, on your question, very important to note that if you look at online grocery in general, the number one reason for churn is cost. The second reason for churn is order quality. And that's why order quality is so critical to get right if you want people to retain and continue ordering with you. And order quality even more critical to get right on the core of the weekly shops, things like meat, things like produce, which is why I wrote in my shareholder letter that we obsess over like the ripeness - your preferred ripeness of bananas, so that we're able to exactly what you want and that's really important to be able to move the industry online. I've described previously all of the deep integration that we have with retailers in order to be able to have this high found rate and fill rates, whether it's catalog integration, planogram integration, collecting a lot of data, millions of replacement, billions of data points on what people prefer and all of that is contributing a significant advantage. You ask like whether AI, in particular, is an advantage. I would say we have absolutely leading models on this particular aspect, but much more importantly, if a competitor was coming into the market right now and was able to reproduce all of our models overnight, they still wouldn't have the 10 years of data that we have accumulated on exactly all of the inventory patterns at 85,000 stores, all of the preferred replacement for all of the different parts of the population. They wouldn't have all that data that powers our machine learning models and allowed us to really deliver a completely differentiated experience. So, again, it's really the combination of deep integration with retailers, lots of data, great predictive analytics model that gives us a really substantial edge.

<unk> in mind, so that we can.

Speaker Change: Leverage the tenure of core data that we have.

Speaker Change: To give us some confidence in the retail or.

Speaker Change: Marketing.

Speaker Change: As it relates to <unk>, just as context in 2022 as inflation was increasing we saw basket sizes increase from 107 in Q1 to 111 in Q4 last year and 2023 basket size was relatively stable. It was $1 12 in Q1.

113 for Q2, Q3, and Q4, but as a result, comparing 2003 to 2022 you saw a decrease in <unk> growth year over year was at 5% in Q1, and 3% than 2% than 1% and Thats why for the last couple of calls we've been calling out that the GCB growth that we've been delivering at higher quality and by that we mean.

Fiji Simo: And that's really important to be able to move the industry online. I've described previously all of the deep integration that we have with retailers in order to be able to have this high find rate and sell rate, whether it's catalog integration, planogram integration, collecting a lot of data, millions of replacements, billions of data points on what people prefer. And all of that is contributing to a significant advantage. If you ask me whether AI in particular is an advantage, I would say we have absolutely leading models on this particular aspect.

Speaker Change: Driven more by orders growth.

Speaker Change: And so we continue to be focused on orders growth and accelerating orders growth we know that.

Speaker Change: It is impacted by some things that are outside of our control like inflation, we have seen inflation moderate we've witnessed four quarters in a row of relatively stable basket sizes. So hopefully that gives you the context that you are looking.

Fiji Simo: But much more importantly, if a competitor was coming into the market right now and was able to reproduce all of our models overnight, they still wouldn't have the 10 years of data that we have accumulated on exactly all of the inventory patterns at 85,000 stores, all of the preferred replacements for all of the different parts of the population. They wouldn't have all of that data that powers our machine learning models and allows us to really deliver a completely differentiated experience. So again, it's really the combination of deep integration with retailers, lots of data, and great predictive analytics models that give us a really substantial edge; it's very helpful. Thank you. Thank you. Our last question comes from the line of Mark Zietowicz of the Benchmark Company. Your line is open. Thank you.

But much more importantly, if a competitor was coming into the market right now and was able to reproduce all of our models overnight, they still wouldn't have the 10 years of data that we have accumulated on exactly all of the inventory patterns at 85,000 stores, all of the preferred replacements for all of the different parts of the population. They wouldn't have all of that data that powers our machine learning models and allows us to really deliver a completely differentiated experience. So again, it's really the combination of deep integration with retailers, lots of data, and great predictive analytics models that give us a really substantial edge;

Speaker Change: Yes, it does thanks very much.

Thank you.

Speaker Change: This concludes today's conference call. Thank you all participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: Yes.

Speaker Change:

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

it's very helpful. Thank you. Thank you. Our last question comes from the line of Mark Zietowicz of the Benchmark Company. Your line is open. Thank you.

Steven Fox: Great. That's very helpful. Thank you.

Thank you. Our last question comes from the line of Mark Zietowicz of the Benchmark Company. Your line is open. Thank you.

Operator: Thank you. Our last question comes from the line of Mark Zgutowicz of The Benchmark Company. Your line is open.

Speaker Change: Yeah.

Speaker Change: Hmm.

[music].

Mark Zgutowicz: Thank you. I just had two questions, one on user growth and the other on AOV. First, just curious how your customer acquisition strategy is evolving. Understanding that the secular growth in online grocery has been deliberate and there's only so much you can press here, I'm just curious if you think about the returns you're seeing in customer acquisition, if the rate of improvement that you're seeing there suggests, at some point, you'll see - we'll see a dollar investment accelerate here relative to GTV. And then separately on AOV, just curious if you could maybe break out what the puts and takes or headwinds, tailwinds are this year, both inclusive and exclusive of the broader inflationary environment? Thank you.

Nick Giovanni: I just have two questions, one on user growth and the other on AOB. Excuse me. But first, I'd just like to know how your customer acquisition strategy is evolving and the understanding that the, you know, secular growth in online grocery has been deliberate, and there's only so much you can push here. I'm just curious if the returns you're seeing in customer acquisition suggest that at some point, you'll see a dollar investment accelerate here relative to GTV. And then separately on AOV, I'm just curious if you could maybe break out what the puts and takes or headwinds and tailwinds are this year, both inclusive and exclusive of the broader inflationary environment. Thank you.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Yeah.

Speaker Change: [music].

Fidji Simo: So, on user growth, we go back to this idea that this is a massive stand that's still vastly underpenetrated online, just 12% online penetration, while other categories of commerce are at 25%, 30%. And we're the category leader so, we see that our responsibility to accelerate the move of the market online. That is done through a variety of tactics. Marketing is one of them but there are many other ones. We invest in partnerships. You probably saw what we did with Peacock this quarter. We partner with our retailers so that our retailers can also market to their customers because the very clear data showing that the omnichannel customer is 2 to 4x more valuable than the in-store-only customer. So, retailers have an incentive to get their customers to the omnichannel. So, we are really using all of these tactics to move the market online. As it pertains to marketing specifically, we try to get more and more efficient with marketing every year and unlock new tactics. And what you're hearing this quarter is that we did shift some of our marketing investments towards incentives because we have really unlocked the ability to deliver incentives in a way that allows us to both acquire customers but also retain them over time by incentivizing the behavior that leads to habituation. And so, we continue to invest in marketing based on long-term goals, not just expecting a return within the quarter, but really investing with a five-year LTV guardrails mine, so that we can leverage the 10 years of core data that we have to give us some confidence in the return of our marketing.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change:

Speaker Change: Yes.

Yeah.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Fiji Simo: Marketing is one of them, but there are many other ones. We invest in partnerships. You probably saw what we did with Peacock this quarter.

Fiji Simo: We partner with all retailers so that all retailers can also market to their customers because there's very clear data showing that the omni-channel customer is 2-4x more valuable than the in-store only customer. So retailers have an incentive to get their customers to the omni-channel. So we are really using all of these tactics to move the market online. As it pertains to marketing specifically, we try to get more and more efficient with marketing every year and unveil new tactics. And what you're hearing this quarter is that we did shift some of our marketing investments towards incentives because we have really unlocked the ability to deliver incentives in a way that allows us to both acquire customers but also retain them over time by incentivizing the behavior that leads to habituation.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Perfect.

Okay.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Speaker Change: Okay.

Speaker Change: Yes.

And so we continue to invest in marketing based on long-term goals, not just expecting a return within the quarter but really investing with five-year LTV guardrails in mind so that we can leverage the 10 years of core data that we have to give us some confidence in the return on our marketing.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Nick Giovanni: As it relates to AOV, just as context, in 2022, as inflation was increasing, we saw basket sizes increase from 107 in Q1 to 111 in Q4. Last year in 2023, basket size was relatively stable, it was 112 in Q1 and 113 for Q2, Q3, and Q4. But as a result, comparing 2023 to 2022, you saw a decrease in AOV growth year-over-year. It was at 5% in Q1 then 3% then 2%, then 1%. And that's why for the last couple of calls, we've been calling out that the GTV growth that we've been delivering is higher quality, and by that, we mean driven more by orders growth. And so we continue to be focused on orders growth and accelerating orders growth. We know that AOV is impacted by some things that are outside of our control like inflation. We have seen inflation moderate. We've witnessed 4 quarters in row of relatively stable basket sizes. So hopefully, that gives you the context that you're looking for.

Speaker Change: [music].

Okay.

Speaker Change: [music].

Speaker Change: Yes.

[music].

Speaker Change: Yes.

Speaker Change: [music].

Nick Giovanni: It was at 5% in Q1, then 3%, then 2%, then 1%. And that's why, on the last couple of calls, we've been calling out that the GTV growth that we've been delivering is higher quality. And by that, we mean driven more by orders growth. And so we continue to be focused on orders growth and accelerating orders growth. We know that AOV is impacted by some things that are outside of our control, like inflation.

Speaker Change: Okay.

Speaker Change: [music].

Nick Giovanni: We have seen inflation moderate. We've witnessed four quarters in a row of relatively stable basket sizes. So hopefully, that gives you the idea. Bye!

Operator: Yes, it does. Thanks very much. Thank you. This concludes today's conference call. Thank you all for participating. Thank you for watching!

Mark Zgutowicz: Yes, it does. Thanks very much.

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

Speaker Change: Okay.

Speaker Change: Yes.

Operator: Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Thank you for your support. Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Special thanks to ?? For SEO Social Media Turn on notifications with a bell mark enabled Good day and thank you, standing by, welcome to the Instacart's fourth quarter in fiscal year twenty, And the answer was all correct. At this time, all participants are on a listen only. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please limit yourself to one question and one follow-up so that we will have enough time to address everyone. Please be advised that today's conference call is being recorded. I will now hand the conference over to Rebecca Yoshiyama, Vice President of Investing. Thank you, Valerie, and welcome, everyone, to Instacart's fourth quarter 2023 earnings call. On the call with me today are Fiji Simo, our Chief Executive Officer, and Nick Giovanni, our Chief Financial Officer. In a moment, we will open up the call for live questions. 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 Q1 and full year 2024 financial results and potential share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements.

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Rebecca Yoshiyama: Please limit yourself to one question and one follow-up so that we will have enough time to address everyone. Please be advised that today's conference call is being recorded. I will now hand the conference over to Rebecca Yoshiyama, Vice President of Investing. Thank you, Valerie, and welcome, everyone, to Instacart's fourth quarter 2023 earnings call. On the call with me today are Fiji Simo, our Chief Executive Officer, and Nick Giovanni, our Chief Financial Officer. In a moment, we will open up the call for live questions. 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 Q1 and full year 2024 financial results and potential share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements.

Speaker Change: Sure.

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Rebecca Yoshiyama: 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. These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for our GAAP results. Al, I'll turn the call over to Fiji for her opening remarks. Thanks, Rebecca. And hi, everyone. I hope you had a chance to read our shareholder letter, which highlights why we're the category leader and top innovator in online growth. I also provided color on our solid Q4 results and why we're set up for an even stronger 2024. Our product experience is the best it has ever been, with leading selection, quality, and service. For example, we recently rolled out EBT SNAP with Kroger and Costco, and we also launched Whole Foods on our marketplace in Canada. These new and expanded partnerships deepen our selection advantage with some of the largest grocers in North America. We also continue to improve on speed and order quality. In Q4, our fulfillment speed got faster, even as we batch more orders. And at the same time, our found and fill rates increased for the sixth quarter in a row. Over the past year, we've also overhauled our incentive systems and established an even stronger formula for consumer habituation. This allows us to invest more in marketing and incentives in deliberate ways that we believe are more highly correlated with resurrection, activations, and deeper engagement. As the industry leader, this will allow us to generate more value for our partners and accelerate online grocery adoption over the long term. These critical advantages, product enhancements, and marketing investments all contribute to our strong Q1 outlook, where we expect to deliver accelerating year-over-year GTV growth for a fourth consecutive quarter. And this growth continues to be higher quality, with the majority coming from orders rather than AOT. In short, with every order we complete, we are getting better and smarter, which allows us to reinvest and generate even more orders.

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Fiji Simo: And at the same time, our found and fill rates increased for the sixth quarter in a row. Over the past year, we've also overhauled our incentive systems and established an even stronger formula for consumer habituation. This allows us to invest more in marketing and incentives in deliberate ways that we believe are more highly correlated with resurrection, activations, and deeper engagement. As the industry leader, this will allow us to generate more value for our partners and accelerate online grocery adoption over the long term. These critical advantages, product enhancements, and marketing investments all contribute to our strong Q1 outlook, where we expect to deliver accelerating year-over-year GTV growth for a fourth consecutive quarter. And this growth continues to be higher quality, with the majority coming from orders rather than AOT. In short, with every order we complete, we are getting better and smarter, which allows us to reinvest and generate even more orders.

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Fiji Simo: This virtuous cycle enabled by our scale and combined with our leadership position makes it incredibly hard for any other player in the industry to replicate the experience we deliver. That's why we continue to deepen our lead over competitors. Based on third-party data, we increased our share of sales among digital platforms in Q4 and in 2023, with more than 50% of the share of small baskets under $75 and more than 70% of the share of large baskets over $75. While other players work on problems we solved five years ago, we're busy inventing the technologies that can transform the grocery industry over the next five years. For example, we know that the future of grocery is omnichannel, which is why we're investing in new technologies like our Kepler car. We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize their operations over the coming years. We're doing all of this while maintaining our relentless focus on profitable growth and our long-term financial targets. But in order for Instacart to take on our most ambitious bets, we also need to streamline how we operate. Today, we made the tough decision to lay off approximately 250 of our talented team members. This will allow us to reshape the company so we can focus on our most promising initiatives and execute more efficiently in a flatter organization. Additionally, with the departure of three of our execs, Asha, Varouj, and JJ, we're also taking the opportunity to streamline my management team and create more autonomous teams with all the levels they need to execute on our critical initiatives. We will be looking for a new CTO, but we do not expect to backfill the COO and Chief Architect roles.

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Fiji Simo: For example, we know that the future of grocery is omnichannel, which is why we're investing in new technologies like our Kepler car. We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize their operations over the coming years. We're doing all of this while maintaining our relentless focus on profitable growth and our long-term financial targets. But in order for Instacart to take on our most ambitious bets, we also need to streamline how we operate. Today, we made the tough decision to lay off approximately 250 of our talented team members.

Speaker Change: Yeah.

Speaker Change: Good day, and thank you for standing by and welcome to the <unk> fourth quarter and fiscal year 2023 financial results Conference call. At this time, all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation, there'll be a question and answer session.

To ask a question during the session you will need to press star one on your telephone.

Please limit yourself to one question and one follow up so that we will have enough time to address everyone's questions.

Speaker Change: Please be advised that today's conference call is being recorded.

Speaker Change: I will now hand, the conference over to Rebecca Yoshi AMA, Vice President of Investor Relations. Please go ahead.

Rebecca Yoshi: Thank you Valerie and welcome everyone to <unk> fourth quarter 2023 earnings call on the call with me today are Phil <unk>, Our Chief Executive Officer, and Nic Giovanni Our Chief Financial Officer. Shortly we will open up the call for live questions.

Rebecca Yoshi: 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 Q1, and full year 2024 financial results and potential share repurchases.

Fiji Simo: Over the past few years, these leaders have developed a strong range of talents that I look forward to working with in more directions. I am confident that this will enable us to execute with even more focus and efficiency moving forward and want to thank all of our teams, especially those whose roles were impacted today, for getting us to this point. Overall, I'm proud of the performance we delivered in 2023, and I'm excited for how we're set up for an even better 2024. I believe we have an incredibly strong leadership position that, when combined with accelerating growth, will generate more shareholder value over time. Thank you for your support and being on this journey with us. Now I'll turn the call over to Nick to provide more of an update on our finances. Thanks, Fiji. 2023 was a transformational year across our product operations and financials. In Q4, we once again accelerated GTV growth and expanded profitability, all while investing in new initiatives to support our future growth. Let me provide a bit more color on our Q4 results and our future outlook, starting with GTV and orders. In Q4, we delivered GTV of $7.9 billion, up 7% year over year and above the high end of our guidance range. This outperformance was largely driven by stronger-than-expected order growth, especially around the holidays. Our strong Q4 results generated positive momentum for us to start 2024. In Q1, we expect GTV to be $8 to $8.2 billion, representing year-over-year growth of 7% to 10% and our fourth consecutive quarter of accelerating GTV growth. While our business is typically strongest in Q4 and Q1 due to seasonality, and while this year we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up in our anticipated growth compared to the 5% growth we delivered before year 2023. Now on transaction revenue. In Q4, transaction revenue was 7.1% of GTV compared to 7.2% in Q3 23 and Q4 22.

Rebecca Yoshi: These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements.

Rebecca Yoshi: You can find more information about these risks and uncertainties in our last Form 10-Q filed with the SEC.

Rebecca Yoshi: We assume no obligation to update these statements after today's call.

Rebecca Yoshi: Except as required by law.

Rebecca Yoshi: In addition, we will also discuss certain non-GAAP financial measures. These non-GAAP financial measures 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.

Speaker Change: Now I'll turn the call over to <unk> for her opening remarks.

Speaker Change: Thanks, Rebecca and hi, everyone. I Hope you had a chance to redox shareholder letter, which highlights why where the category leader and top innovator in online groceries. I also provided color on our solid Q4 results and why we are set up for an even stronger 2024.

Speaker Change: Our product experience is the best it has ever been with leading selection quality and speech. For example, we recently rolled out the EBIT snap with Kroger and Costco and we also launched whole foods on our marketplace in Canada.

Speaker Change: This new and expanded far enough ships deepened of selection advantage with some of the largest grocers in North America.

Speaker Change: We also continue to improve on speed and all the quality in Q4, our fulfillment speed got faster, even as we bought small dose and at the same time, our talent and skill rates increased for the sixth quarter in a.

Nick Giovanni: Our strong Q4 results generated positive momentum for us to start 2024. In Q1, we expect GTV to be $8 to $8.2 billion, representing year-over-year growth of 7% to 10% and our fourth consecutive quarter of accelerating GTV growth. While our business is typically strongest in Q4 and Q1 due to seasonality, and while this year we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up in our anticipated growth compared to the 5% growth we delivered before year 2023. Now on transaction revenue. In Q4, transaction revenue was 7.1% of GTV compared to 7.2% in Q3 23 and Q4 22.

Speaker Change: Ro.

Speaker Change: Although the past year. We've also overhauled often says this systems and established and even stronger formula for consumer Habituation, just allows us to invest more in marketing and incentives in deliberate weights that we believe are more highly correlated with resurrection activations and deeper engagement.

Speaker Change: The industry leader this will allow us to generate more value for partners and accelerate online grocery adoption over the long term.

Speaker Change: It is critical advantages product enhancements and marketing investment all contribute to our strong Q1 outlook, while we expect to deliver accelerating year over year GTT growth for a fourth consecutive quarter.

And this growth continues to be higher quality with the majority coming from <unk> rather than <unk>.

Nick Giovanni: While we continue to drive fulfillment efficiencies in Q4, we found more opportunities to invest in consumer incentives, and these hit contra revenue instead of marketing spend, which hits marketing expense. Incentives allow us to better target behaviors that we believe will lead to stronger customer acquisition, resurrection, and habituation. Next, for advertising and other revenue. In Q4, ad and other revenue was up 7% year over year, in line with our expectations. And in Q1, we expect year over year growth for ad and other revenue to be largely in line with Q4'23. But it's important to remember that advertising growth lags GTV growth. So while many of our brand partners are excited by our ongoing acceleration of GTV growth, it will take time before this is reflected in ad and other revenue. Turning to adjusted operating expenses, we generated strong operating leverage in Q4, with adjusted operating expense as a percent of GTV decreasing to 5.3% compared to 6.1% in Q4-22. Today, we also announced a restructuring plan that we expect to result in a one-time charge of $19-24 million. This charge will not impact our adjusted operating expenses because it is one-time in nature, but it will result in cash outlays. On an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the balance of the year, as we plan to reinvest anticipated cost savings in future growth. Putting all this together, in Q1, we expect adjusted EBITDA of $150-$160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long-term growth. For the full year of 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year-over-year in both absolute dollar terms and as a percent of GTV. We also remain disciplined when it comes to our approach to equity dilution.

Speaker Change: In short with every order, we compete we're getting better and smarter, which allows us to reinvest and generate even more orders.

Through a cycle enabled by our scale and combined with our leadership position makes it incredibly hard for any other player in the industry to replicate the experience we deliver.

Speaker Change: That's why we continue to keep an all lead over competitive.

Speaker Change: Based on third party data, we increased top chef of sales amongst digital platforms in Q4, and in 2023 with more than 50% of share of small baskets, and a $75 and more than 70% share of large baskets over $75.

Nick Giovanni: And in Q1, we expect year over year growth for ad and other revenue to be largely in line with Q4'23. But it's important to remember that advertising growth lags GTV growth. So while many of our brand partners are excited by our ongoing acceleration of GTV growth, it will take time before this is reflected in ad and other revenue. Turning to adjusted operating expenses, we generated strong operating leverage in Q4, with adjusted operating expense as a percent of GTV decreasing to 5.3% compared to 6.1% in Q4-22. Today, we also announced a restructuring plan that we expect to result in a one-time charge of $19-24 million. This charge will not impact our adjusted operating expenses because it is one-time in nature, but it will result in cash outlays.

Speaker Change: While other players work on problems, we sold five years ago, we are busy inventing the technologies that can transform the grocery industry. Although the next five yield.

Speaker Change: For example, we know that the future of grocery is omni channel, which is why we're investing in new technologies like I'll keep our costs well.

Speaker Change: We're also exploring more ways to further leverage our incredibly unique and vast data sets to help retailers and brands modernize our operation over the coming years.

Speaker Change: While doing all of this while maintaining a relentless focus on profitable growth and our long term financial targets.

Speaker Change: In order for <unk> taken our most ambitious but we also need to streamline how we operate today, we made the tough decision to lay off approximately 250 of talented team members.

Speaker Change: This will allow us to reshape the company. So we can focus on our most promising initiatives and execute more efficiently to a flatter organization.

Speaker Change: Separately with the departure of three or four <unk> Zacks Asaf <unk>. We are also taking the opportunity to streamline the management and create more autonomous teams suite, all the levers and need to execute on critical initiatives.

Speaker Change: We will be looking for a new CTO, but do not expect to backfill.

Speaker Change: Ooh and chief architect role.

Speaker Change: Over the past few years. These leaders have developed a strong bench of talent that I look forward to working with more directly.

Nick Giovanni: We remain committed to being profitable on an adjusted EBITDA basis, even after deducting the net value of equity we grant each year, and in 2024, we expect NEC dilution to be low single digits before any share repurchase. We also expect to deliver gap profitability and generate positive operating cash flow. We are confident in our ability to execute, which is why we have increased our share repurchase program by an additional $500 million, bringing our share repurchase capacity to approximately $930 million as of February 9th. Our lockup expires when the market opens on Thursday, February 15th, and we plan to opportunistically repurchase shares. Overall, our business fundamentals are strong. GTV growth has accelerated for three consecutive quarters, and we are guiding to our fourth consecutive quarter of accelerating growth in Q1. We are the category leader, and we have increased our share compared to digital-first platforms in both small and large baskets, and we're focused on driving profitable growth to generate more value for our partners, teams, and shareholders over time. With that, we'll open up a call for live questions. Operator, you may begin. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. Please limit yourself to one question and one follow-up. Please stand by while we compile a Q&A list. Our first question comes from the line of Douglas and JP Morgan, a lot of thanks for taking the questions. I wanted to first ask about cohort dynamics. Perhaps, Nick, you could provide a little color just on the trends among the 20 and 21 cohorts and how you think about their contribution to the business and, you know, just as you see that, maturation, basically the impact that's having on order growth. Thank you.

Speaker Change: Overall I'm proud of the performance we delivered in 2023 and I'm excited for how we're set up for an even better 2024.

Speaker Change: I believe we have an incredibly strong leadership position that when combined with accelerating growth will generate more shareholder value overtime.

Speaker Change: Thank you for your support and being on this journey with US now I'll turn the call over to Nick to provide more of an update on our financials.

Thanks D. G 2023 was a transformational year across our product operations and financials in Q4, we once again accelerated GDP growth and expanded profitability all while investing in new initiatives to support our future growth, let me provide a bit more color on our Q4 results and our future outlook starting.

Nick Giovanni: Overall, our business fundamentals are strong. GTV growth has accelerated for three consecutive quarters, and we are guiding to our fourth consecutive quarter of accelerating growth in Q1. We are the category leader, and we have increased our share compared to digital-first platforms in both small and large baskets, and we're focused on driving profitable growth to generate more value for our partners, teams, and shareholders over time. With that, we'll open up a call for live questions. Operator, you may begin. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.

Speaker Change: With GTP and orders.

Speaker Change: In Q4, we delivered <unk> of $7 9 billion up 7% year over year and above the high end of our guidance range. This outperformance was largely driven by stronger than expected orders growth, especially around the holidays are strong Q4 results generated positive momentum for us to start 2024 in Q1.

Speaker Change: We expect <unk> to be eight to $8 2 billion.

Speaker Change: Representing year over year growth of 7% to 10% and our fourth consecutive quarter of accelerating GDP growth.

Operator: Please limit yourself to one question and one follow-up. Please stand by while we compile a Q&A list. Our first question comes from the line of Douglas and JP Morgan, a lot of thanks for taking the questions. I wanted to first ask about cohort dynamics. Perhaps, Nick, you could provide a little color just on the trends among the 20 and 21 cohorts and how you think about their contribution to the business and, you know, just as you see that, maturation, basically the impact that's having on order growth. Thank you.

Speaker Change: While our business is typically strongest in Q4 and Q1 due to seasonality and while this year, we have the benefit of leap day in Q1, even after accounting for both of these factors, we expect an encouraging step up and our anticipated growth compared to the 5% growth we delivered for full year 2023.

Now on transaction revenue in Q4 transaction revenue was seven 1% of <unk> compared to seven 2% in Q3 dollars 23 in Q4 22, while we continue to drive fulfillment efficiencies in Q4, we found more opportunities to invest in consumer incentives and these had contra revenue instead of marketing spend.

Speaker Change: Which hits marketing expense incentives allow us to better target behaviors that we believe will lead to stronger customer acquisition Resurrection and habituation next for advertising and other revenue in Q4 AD and other revenue was up 7% year over year in line with our expectations and in Q1, we expect year over year growth for AD and other revenue to be Lara.

Nick Giovanni: So, as we've mentioned, our mature cohorts continue to decline, but the decline has improved now for three quarters in a row. And 2020 and 2021 cohorts, as we reported last quarter, represent less than 50% of our GTV. So all of that is encouraging. However, we are not able to pinpoint when these cohorts will get to flat, nor when they would potentially return to growth. But we're monitoring that very closely, and we're encouraged by the fact that we're seeing continuous improvement quarter after quarter for the third quarter in a row. We're also very encouraged by the fact that we're continuing to add new cohorts that continue to perform well. In fact, the 2023 cohort, in terms of new GTV, was higher than the cohort that we attracted pre-pandemic in 2019. And so we continue to get contributions, both from the mature cohort and also from the growth in new cohorts. Thank you, Peter. Thanks. Our next question comes from the line of Ron Josie of Citi, Ilana. Great, thanks for taking the question. PJ, I want to ask a little bit more about priority orders now accounting for 38% of total, and I think in the letter you even talked about 25% are now delivered in 30 minutes or less. Talk to us a little bit more about why you think priority orders are growing or accounting for as many total orders as possible? And when we think about those delivered in 30 minutes or less, it's fair to think these are lower AOV, so more frequent customers. I guess that's question one. And then Nick, just on, you know, really interesting and good to hear GTP growth is expected to accelerate in one direction. We'd love to hear more about the drivers there as we lap tougher EBT snap comps, but also maybe insights on the incentives that might be working. Thank you. Thanks, Ron.

In line with Q4 2003, it is important to remember that advertising growth lag CTV growth. So while many of our brand partners are excited by our ongoing acceleration of GTD growth. It will take time before this was reflected in add another revenue.

Speaker Change: Turning to adjusted operating expenses, we generated strong operating leverage in Q4 with adjusted operating expense as a percent of GTD decreasing to five 3% compared to six 1% in Q4 2002.

Speaker Change: We also announced a restructuring plan, which we expect to result in a onetime charge of 19% to $24 million. This charge will not impact our adjusted operating expenses because they are onetime in nature, but they will result in cash outlays on an ongoing basis, we do not expect the restructuring to materially change our adjusted operating expenses in Q1 or the Bally.

Nick Giovanni: But we're monitoring that very closely, and we're encouraged by the fact that we're seeing continuous improvement quarter after quarter for the third quarter in a row. We're also very encouraged by the fact that we're continuing to add new cohorts that continue to perform well. In fact, the 2023 cohort, in terms of new GTV, was higher than the cohort that we attracted pre-pandemic in 2019. And so we continue to get contributions, both from the mature cohort and also from the growth in new cohorts. Thank you, Peter.

Speaker Change: Of the year as we plan to reinvest anticipated cost savings in future growth, putting all this together in Q1, we expect adjusted EBITDA of $150 million to $160 million. This outlook includes seasonally lower advertising and other revenue and continued investments in marketing and consumer incentives to drive long term growth for the for the full year.

Speaker Change: 2024, we are not providing specific guidance, but we do expect adjusted EBITDA to increase year over year in both absolute dollar terms and as a percent of GTP. We also remain disciplined when it comes to our approach to equity dilution, we remain committed to being profitable on an adjusted EBITDA basis, even after deducting the net value of the equity we grant each year.

Fiji Simo: Thanks. Our next question comes from the line of Ron Josie of Citi, Ilana. Great, thanks for taking the question. PJ, I want to ask a little bit more about priority orders now accounting for 38% of total, and I think in the letter you even talked about 25% are now delivered in 30 minutes or less. Talk to us a little bit more about why you think priority orders are growing or accounting for as many total orders as possible? And when we think about those delivered in 30 minutes or less, it's fair to think these are lower AOV, so more frequent customers. I guess that's question one. And then Nick, just on, you know, really interesting and good to hear GTP growth is expected to accelerate in one direction. We'd love to hear more about the drivers there as we lap tougher EBT snap comps, but also maybe insights on the incentives that might be working. Thank you. Thanks, Ron.

Speaker Change: Sure.

Speaker Change: And in 2024, we expect net dilution to be low single digits before any share repurchases.

Speaker Change: We also expect to deliver GAAP profitability and generate positive operating cash flow. We are confident in our ability to execute which is why we have increased our share repurchase program by an additional $500 million, bringing our share repurchase capacity to approximately $930 million as of February 9th our lockup expires when the market opens on Thursday February 15th and.

Speaker Change: We plan to Opportunistically repurchase shares overall, our business fundamentals are strong GDP growth has accelerated for three consecutive quarters and we are guiding to a fourth consecutive quarter of accelerating growth. In Q1, we are the category leader and we have increased our share compared to a digital first platforms in both small and large baskets and we're focused on driving profitable growth to.

Speaker Change: Generally more value for our partners teams and shareholders over time with that we'll open up the call for live questions. Operator, you may begin.

Speaker Change: You.

Speaker Change: <unk> to ask a question you will need to press star one one of your telephone please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.

Fiji Simo: So on priority order, we think that the growth in priority order really reflects the fact that the number one reason that people use Instacart is convenience, and priority order allows them to just get their groceries delivered faster. Now, we think that there's a lot that we can do with that. We're testing different levels of fees because we think our fees are still well below competitors to offer a priority service that is so fast. So that is something that we're going to continue testing with. But we also want to reinvest some of that to develop options that are on all ends of the spectrum. And what I mean by that is that on the one end of the spectrum, you have people who value convenience over price and value priority delivery. On the other end of the spectrum, we want options for people who value price over convenience, like no rush delivery. And we want to continue to invest in all of these options so that every consumer can find value on Instacart based on what they value the most. In terms of what you mentioned about the kind of value of these customers, I would say the thing that's very unique about how we deliver to a lot of courses is that even for orders that are very fast, we're still delivering from their entire selection from, you know, their entire store. And so a lot of the priority orders actually look very similar to the rest of the orders in terms of adding to the full assortment, adding, you know, meat and produce to them. And so from that perspective, we think that them continuing to grow is a good thing as long as, you know, we can have options for everyone on the spectrum. And as it relates to your question about the Q1 guide, the drivers of the growth step up are broad-based. It starts with acquiring new customers. Just to recall, we're still in the early stages of online grocery adoption, and we continue to attract many new customers. We also see improvement in our mature cohorts, as we're better able to resurrect and engage them. And that's led to the year over year decline in the mature cohorts improving from Q1 to Q2 to Q3 to Q4. You also asked about EBT SNAP.

Speaker Change: Our first question comes from the line of Douglas Anmuth of.

Douglas Anmuth: Of Jpmorgan your line is open.

Douglas Anmuth: Thanks for taking the questions I wanted to first ask about cohort dynamics, perhaps you could provide a little color just on the.

Douglas Anmuth: The trends among the 2020, one cohorts and how you think about their contribution to the business and.

Speaker Change: As you see that.

Speaker Change: Maturation basically how the impact that's having on the on order growth. Thanks.

Speaker Change: Thank you so as we've mentioned all mature cohorts.

Speaker Change: Continue to decline, but decline as improved now for three quarters in a row.

Fiji Simo: But we also want to reinvest some of that to develop options that are on all ends of the spectrum. And what I mean by that is that on the one end of the spectrum, you have people who value convenience over price and value priority delivery. On the other end of the spectrum, we want options for people who value price over convenience, like no rush delivery.

And to 2020 in 2021 cohort as we reported last quarter, we present represent less than 50%.

Speaker Change: <unk> so.

Speaker Change: All of that is encouraging we are not able to pinpoint when does this cohort.

To get to flat now when do you would potentially be talked to growth, but we're monitoring that very closely and we are encouraged by the fact that we're seeing continuous improvement quarter after quarter off of a tough quarter in a row. We're also very encouraged by the fact that we're continuing to add new cohorts that continue.

Fiji Simo: And we want to continue to invest in all of these options so that every consumer can find value on Instacart based on what they value the most. In terms of what you mentioned about the kind of value of these customers, I would say the thing that's very unique about how we deliver to a lot of courses is that even for orders that are very fast, we're still delivering from their entire selection from, you know, their entire store. And so a lot of the priority orders actually look very similar to the rest of the orders in terms of adding to the full assortment, adding, you know, meat and produce to them.

To perform well in fact, the 2023 cohorts in terms of new GCG was higher than the cohorts that we attracted pre pandemic.

Speaker Change: 19, and so we continue to get contributions both from the mature cohort, but also from growth in new cohorts.

Great. Thank you Peter.

Speaker Change: Thank you.

A moment please.

Speaker Change: Our next question comes from a lot of Ron Josey of Citi. Your line is open.

Fiji Simo: And so from that perspective, we think that them continuing to grow is a good thing as long as, you know, we can have options for everyone on the spectrum. And as it relates to your question about the Q1 guide, the drivers of the growth step up are broad-based. It starts with acquiring new customers. Just to recall, we're still in the early stages of online grocery adoption, and we continue to attract many new customers. We also see improvement in our mature cohorts, as we're better able to resurrect and engage them. And that's led to the year over year decline in the mature cohorts improving from Q1 to Q2 to Q3 to Q4. You also asked about EBT SNAP.

Ron Josey: Great. Thanks for taking the question TJ I wanted to ask a little bit more about priority orders now accounting for 38% of total and I think in the letter you even talked about 25% are now delivering 30 minutes or less talk to us a little bit more about why do you think priority orders are growing.

Ron Josey: Counting for as many of total orders as possible and when we think about those delivering 30 minutes or less.

Speaker Change: Fair to think these are lower <unk>, so more frequent customers I guess that's question one and then Nick just on.

Nick: Really interesting and good to hear GTP growth is expected to accelerate in <unk> would love to hear more about the drivers there as we lap tougher EBT snap comps, but also maybe insights on the incentives that might be working thank you.

Nick: Thanks, Ron so on priority order.

Nick Giovanni: EBT SNAP is not expected to see favorable comps in Q1. We called out that the main driver of the headwind that we were experiencing with EBT SNAP was one, the cut of benefits that happened at the end of Q1 last year. And so you wouldn't expect to see a benefit until we reach that this year. And secondly, the other thing that drives EBT SNAP is launching new partners. And as Fiji just mentioned, with Costco and Kroger, we've done that recently. So we do expect that EBT, the base of our EBT business, can start to grow, but that's not a key driver of the Q1 growth guide. And Ron, I think you had one last question on incentives and what was driving that. I just want to touch on that quickly, which is that we massively overhauled our incentive system in the last year so that we can target the right customers with the right incentive at the right time and really evolve the habituation formula so that we know what drives retentive behavior. To give you some examples, we know that when you add meat and produce to your basket, you're going to stay with us longer. When you start buying from a club retailer like Costco, you become a more retentive customer. So a lot of the incentives that you're seeing us spend on are incentives that are really meant to drive retentive behavior, not incentives that are meant to drive one-time GVTV where we're discounting your groceries, and you're never going to come back. We don't do these kinds of incentives. We really focus on incentives that drive the habituation. Thank you, Fiji. Thank you, Mexico, one. Our next question comes from the line of Justin Post of Bank of America. Your line is open. Great, I'll ask a couple, just high level. Can you talk about your supply? I thought the whole foods deal was very interesting. But just where you are on supply and demand in the marketplace. Do you need more supply, and how does the pipeline look, maybe with traditional grocers or new categories? And then I think there are some questions about the headcount cuts as kind of a still a growth company. Maybe talk about is this just kind of a reorganization for growth, or how would you, in the big, big picture, describe it? Thank you. Thanks, Justin.

Speaker Change: We think that the growth in priority, although really reflects the fact that the number one reason that people are using so called convenience and priority order allows them to just get their groceries to live up faster now.

Speaker Change: Now we think that says a lot that we can do without testing different levels of sheet. Because we think opportunities are still well below competitors to offer a priority service that is so fast. So that is something that we're going to continue testing with but we also want to reinvest some of that to develop options at all.

Speaker Change: All ends of the spectrum and what I mean by that is that on one end of the spectrum you have people value convenient cobalt price and value priority delivery on the other end of the spectrum.

Nick Giovanni: I just want to touch on that quickly, which is that we massively overhauled our incentive system in the last year so that we can target the right customers with the right incentive at the right time and really evolve the habituation formula so that we know what drives retentive behavior. To give you some examples, we know that when you add meat and produce to your basket, you're going to stay with us longer. When you start buying from a club retailer like Costco, you become a more retentive customer. So a lot of the incentives that you're seeing us spend on are incentives that are really meant to drive retentive behavior, not incentives that are meant to drive one-time GVTV where we're discounting your groceries, and you're never going to come back. We don't do these kinds of incentives.

Want the option for people with value price of a convenience like no rush delivery and we want to invest in all of these options for that.

Speaker Change: We consume asking find value on audience Scott based on what you told us the most in terms of what you mentioned on on kind of the value of these customers I would say the thing that's very unique about <unk>.

Speaker Change: How we deliver from a lot of courses is that even for all delta about very southwest.

Speaker Change: Delivering from their entire selection from <unk>.

Speaker Change: Titus store and so a lot of the priority all of those actually look very similar to the rest of the hotels in terms of.

Speaker Change: Adding the full assortment, adding meet introducing them and so from that perspective, we are we think that them continuing to grow. It is a good thing as long as we can.

Fiji Simo: We really focus on incentives that drive the habituation. Thank you, Fiji. Thank you, Mexico, one.

Fiji Simo: Our next question comes from the line of Justin Post of Bank of America. Your line is open. Great, I'll ask a couple, just high level. Can you talk about your supply? I thought the whole foods deal was very interesting. But just where you are on supply and demand in the marketplace. Do you need more supply, and how does the pipeline look, maybe with traditional grocers or new categories? And then I think there are some questions about the headcount cuts as kind of a still a growth company. Maybe talk about is this just kind of a reorganization for growth, or how would you, in the big, big picture, describe it? Thank you. Thanks, Justin.

Speaker Change: Can I have option for everyone on the spectrum.

Speaker Change: And then as it relates to your question about the Q1 guide the drivers of the growth step up are broad based.

Speaker Change: Darts with acquiring new customers just to recall, we're still in the early stages of online grocery adoption as the leader we continue to attract many new customers. We also see improvement in our mature cohorts as we're better able to resurrect them and engage them and thats led to the year over year decline in the mature cohorts improves.

<unk> from Q1 to Q2 to Q3 to Q4, you also asked about EBT snap EBT snap is not expected to see favorable comps in Q1, we called out that the main drivers of the headwind that we were experiences with EBT snap was one cut of benefits that happened at the end of Q1.

Fiji Simo: So on selection, which is I think what you mean by supply, it's important to know that we are by far the category leader in terms of selection, with about 80 percent of the grocery market being represented on Instacart, and yet we continue to add more and more retail banners. We have 1,500 retail banners, 85,000 locations, and we're continuing to expand both with some of the large retailers as well as mid-market and emerging growth. And, you know, we had some holdouts. Whole Foods was one of them. So that's why we're really excited to see them come back on the platform, and we think that we can drive a lot of incremental value for their customers. But we're also really excited to deepen the type of selection that we offer with retailers that are already on the platform. So if you look at the big guys like Kroger and Costco, they've been with us for many years, but we still roll out new services with them, like EBT Snap, that allow us to not only make their selection available but also make it available to more people with a service like Snap. So I hope that answers your supply question. In terms of headcount, the thing that's important to realize is that we had already been very disciplined in terms of headcount, and I would say over the last two years we have slowed down hiring, we have slowed down the backfill of attrition, we have raised our performance bar, so we had already managed headcount pretty tightly. But for this particular change, the thing that we had in mind was really reshaping the company to streamline in certain areas and really refocus and double down on other areas of growth. And so if you look at, you know, our big upcoming initiatives, whether it's growing paper cuts, whether it's growing retail media and off-site ads, all of these new initiatives that hold a lot of promise are things that we want to be able to fund fully, and that means, like, really reshaping the organization and streamlining in certain areas. And so that's the context by which this layoff should be interpreted.

Speaker Change: Last year, and so you wouldn't expect to see a benefit until we lap that this year.

Speaker Change: Secondly, the other thing that drives the BT snap is launching new partners and the speed you just mentioned with with Costco and <unk>, we've done that recently so.

Speaker Change: So we do expect that EBT the base of our EBT business can start to grow but that's not a key driver of the Q1 growth guidance.

Speaker Change: And Ron I think you had one last question on incentives and what was driving that.

Ron Josey: I just wanted to touch on that quickly, which is we massively overhauled of incentive system.

Ron Josey: Last year, so that we can target the right customers with the right incentives at the right time and really evolve the habituation formula is that we know what drives retention if you could give me.

Ron Josey: Some example, we know that when you add the meat and produce to your baskets yoga and that we can with us longer when you add when you stopped buying from a club retailer like Costco you become a more retention of customers. So a lot of the incentives that you're seeing us spend into our incentives that are really meant to drive retention.

Fiji Simo: In terms of headcount, the thing that's important to realize is that we had already been very disciplined in terms of headcount, and I would say over the last two years we have slowed down hiring, we have slowed down the backfill of attrition, we have raised our performance bar, so we had already managed headcount pretty tightly. But for this particular change, the thing that we had in mind was really reshaping the company to streamline in certain areas and really refocus and double down on other areas of growth. And so if you look at, you know, our big upcoming initiatives, whether it's growing paper cuts, whether it's growing retail media and off-site ads, all of these new initiatives that hold a lot of promise are things that we want to be able to fund fully, and that means, like, really reshaping the organization and streamlining in certain areas. And so that's the context by which this layoff should be interpreted.

Not incentives that are meant to drive onetime <unk> discounts in your core series and Youll never going to come back. We don't do these kinds of incentives, we really focus on incentives that tried to deterioration.

Speaker Change: Thank you Susie Thank you Super helpful.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Justin Post of Bank of America. Your line is open.

Justin Post: Head count cuts.

Justin Post: It's still a growth company maybe talk about is this just kind of a reorganization for growth or how would you big picture describe it. Thank you.

Speaker Change: <unk> so on selection, which is I think what you mean by supply. It's important to note that we are by far the category leader in terms of selection with about 80% of the cautionary Muscat being.

Fiji Simo: We are very committed to growth. We think that this reorganization actually sets us up much better for doubling down on our most promising growth. Thank you. Our next question comes from the line of Eric Sheridan of Goldman Sachs, the line of... Thank you so much for taking the question, maybe two if I can. Fiji, last quarter we spoke about turning small basket shoppers into larger basket shoppers and some of the focus of the company there. I want to know if we get an update on the way you're thinking about the evolution of shoppers from convenience and smaller baskets into more regular utility and larger basket size over time and how you're aligning investments against that potential transition in behavior. And then Nick, in terms of the shareholder return policy of the company, we get a lot of questions from investors on how the balance will be struck between offsetting dilution while at the same time wanting to probably increase the liquidity of the stock, and then you have a locked-up expiration coming soon. How do you think about the balance of that to strike across your broader goals of sort of returning capital to shareholders? Thanks so much. So Eric, on small baskets and large baskets, we obviously are a category leader in both small baskets and large baskets, 50% share of small baskets, 70% share of large baskets. Our core use case is the weekly shop, and that's incredibly important because that represents three quarters of the grocery market and even more of the profits. But we also know that in order to continue addressing all of the grocery needs of our customers, small baskets are also really important because that's kind of the fill-up use case where you may have forgotten something in your weekly shop or you may not have planned for a particular meal. And so we really want to address all of the use cases, and that's why you have seen us really invest in small baskets over the last few years, in particular through virtual convenience And so both are incredibly important.

Eric Sheridan: Our next question comes from the line of Eric Sheridan of Goldman Sachs, the line of... Thank you so much for taking the question, maybe two if I can. Fiji, last quarter we spoke about turning small basket shoppers into larger basket shoppers and some of the focus of the company there. I want to know if we get an update on the way you're thinking about the evolution of shoppers from convenience and smaller baskets into more regular utility and larger basket size over time and how you're aligning investments against that potential transition in behavior. And then Nick, in terms of the shareholder return policy of the company, we get a lot of questions from investors on how the balance will be struck between offsetting dilution while at the same time wanting to probably increase the liquidity of the stock, and then you have a locked-up expiration coming soon. How do you think about the balance of that to strike across your broader goals of sort of returning capital to shareholders? Thanks so much.

Being represented as an instant offer and yet we continue to add more and more retail banners. We have 15 in the retail banners 85000 locations and we're continuing to expand both with some of the large retailers as well as midmarket and emerging grosses.

Speaker Change: <unk>.

Speaker Change: We had some hold outs with whole foods was one of them. So that's why we're really excited to see them come back on the platform.

Speaker Change: And we think that we can drive a lot of incremental value for their customers.

Speaker Change: But we're also really excited to deepen the type of selection that we offer who is retailers that are already on the platform. So if you look at the big guys like Kroger Costco's had been with us for many years, but we scale rollouts new services with them like EBIT snap.

That allow us to not only makes that selection available, but also make it available to more people. We just have this like snap.

Speaker Change: So I hope that Antonio.

Speaker Change: Your question in terms of head count.

Fiji Simo: So Eric, on small baskets and large baskets, we obviously are a category leader in both small baskets and large baskets, 50% share of small baskets, 70% share of large baskets. Our core use case is the weekly shop, and that's incredibly important because that represents three quarters of the grocery market and even more of the profits. But we also know that in order to continue addressing all of the grocery needs of our customers, small baskets are also really important because that's kind of the fill-up use case where you may have forgotten something in your weekly shop or you may not have planned for a particular meal. And so we really want to address all of the use cases, and that's why you have seen us really invest in small baskets over the last few years, in particular through virtual convenience And so both are incredibly important.

Speaker Change: So I think that's important to realize is that we had already.

Speaker Change: Very.

Speaker Change: The discipline in terms of head count and I would say over the last two years, we add slow down hiring we slowdown the backfill of attrition we've raised our performance bulk so we had already a man.

Speaker Change: Net headcount pretty tight.

Speaker Change: But for this particular change so the thing that we had in mind was really reshaping the company to streamline in certain areas and really refocus and double down in other areas of growth and so if you look at.

Speaker Change: A big upcoming initiatives.

Speaker Change: It's growing keep off calls whether it's the growing retail media and Offsite ads all of these new initiatives that hold a lot of promise oxitec that we wanted to be able to fund fleet and that means like really reshaping the organization and streamlining in certain areas and so that's the context.

Nick Giovanni: I think the thing that differentiates us from new entrants is that we are very strong at both, and we are also very strong at converting a small basket customer to a large basket customer. We do that five times better than new entrants and food delivery companies. And that's a very competitive advantage because it allows us to serve the entire market but, over time, also convert small basket customers into the most profitable weekly shop. And on your question around returning capital, we announced a $500 million share repurchase authorization in November. Through February 9th, while the lockup was still in place, we repurchased $70 million. And we talked on the last call about wanting to be balanced while the float was still very low in the aftermath of the IPO. Now, the float should increase when our lockup release comes off on the 15th. And so ahead of that, we received authorization to increase by an additional $500 million our share repurchase authorization, and we plan to be opportunistic in the market as volumes increase. But that's only part of how we manage dilution. It starts with managing headcount, managing the equity that we give out to employees. We introduced last year a cash equity choice program, which allows us to reduce the amount of equity that we give in exchange for more cash. And we care very, very deeply about making sure that we can, you know, reduce dilution over time.

Speaker Change: Yes.

Speaker Change: And they all should be interpreted in <unk>. We are very committed to growth we think that is.

Speaker Change: The organization actually sets us up much better for doubling down on our most promising growth initiatives.

Speaker Change: Great. Thank you.

Speaker Change: Thank you one moment please.

Speaker Change: Our next question comes from the line of Eric Sheridan of Goldman Sachs. Your line is open.

Eric Sheridan: Thank you so much for taking the question maybe two if I can.

Last quarter, we spoke about turning small basket shoppers into larger basket shoppers and some of the focus of the company and they wanted to know if we get an update on the way youre thinking about the evolution of shoppers from convenience and smaller basket into more regular.

Speaker Change: <unk> utility and larger basket size over time, and how you're aligning investments against that potential transition and behavior and then Nick in terms of the shareholder return policy of the company. We get a question a lot from investors on how the balance will be struck between offsetting dilution while at the same time wanting to probably increase the.

Nick Giovanni: And we talked on the last call about wanting to be balanced while the float was still very low in the aftermath of the IPO. Now, the float should increase when our lockup release comes off on the 15th. And so ahead of that, we received authorization to increase by an additional $500 million our share repurchase authorization, and we plan to be opportunistic in the market as volumes increase. But that's only part of how we manage dilution.

Nick: Liquidity of the stock and then you have a lockup exploration coming soon how do you think about the balance of that to strike across your broader goals of returning capital to shareholders. Thanks. So much.

So Eric on on small baskets and large baskets.

Nick: We obviously.

Speaker Change: Category leader in both small baskets and lost baskets, 50% shelf full basket at 70% share of large baskets.

Speaker Change: <unk> use case is the weekly shop, and that's incredibly important because that represents three quarters of the grocery market and even more of the profits, but we also know that in order to continue addressing all of the grocery or customers.

Speaker Change: Small baskets are also really important because that's kind of the shiel Shiel labs use case, where you may have like forgotten something.

Nick Giovanni: So our share return program is not just about offsetting dilution. It's about opportunistically repurchasing shares in addition to everything else that we do to manage dilution. I appreciate the color. Thank you. Our next question comes from the line of Nikhil Devani of Bernstein, your line of, "Hi there. Thanks for taking the question. Just a couple, please." So, you know, given the breadth of selection you have already, it seems that user growth is increasingly important to the GTV equation going forward. So what kind of user growth do you think is feasible over the medium term? And how would you characterize the contribution of new customers as well today versus in years prior? So the extent to which new customers are still driving this GTV equation, even after the kind of COVID influx that we saw. And then as a follow-up, when I look at the Q1 guide, you know, what would cause that adjusted EBITDA to step down, given your top line is improving and you've taken some headcount costs out as well? Thank you. Thanks for the question. As it relates to user growth, we definitely think that user growth is important. And that means acquiring new customers and also reengaging customers who have shopped less frequently. And both of those things are contributing to the improving growth that we've seen throughout 2023 and are continuing with our guide for Q1 2024. So we talked about in 2023, the new cohort of customers that we activated was larger than the pre-pandemic levels. And so that's a very encouraging sign and something that confirms our belief that we're very early in the online adoption of groceries. It was obviously interrupted by the pandemic.

Speaker Change: Sure. Paul you may not have planned pulp akihito meal, and so we really want to address all of the use cases and that's why you have seen us really in the small basket. It's above the last few years in particular through yesterday.

Nikhil Devani: Our next question comes from the line of Nikhil Devani of Bernstein, your line of, "Hi there. Thanks for taking the question. Just a couple, please."

Speaker Change: Yes, sure convenience, where we're able to deliver these small baskets out of the stores the awful retailers offering a lot of selection as I was saying earlier, but with faster speed and that's contributed to the beat share gains that.

Speaker Change: We have been able to demonstrate in small baskets and so both are incredibly important to I think the thing that differentiates us from UN trends is that we are very strong at both and we are also very strong at converting a small basket test them up to a large basket customers, we do that five times better than you.

Speaker Change: And trends in food delivery companies and Thats, a very key competitive advantage because it allows us to serve the entire market, but overtime also conduct mobile skype customers into so like most profitable weekly shops use case.

Nick Giovanni: Thanks for the question. As it relates to user growth, we definitely think that user growth is important. And that means acquiring new customers and also reengaging customers who have shopped less frequently. And both of those things are contributing to the improving growth that we've seen throughout 2023 and are continuing with our guide for Q1 2024. So we talked about in 2023, the new cohort of customers that we activated was larger than the pre-pandemic levels. And so that's a very encouraging sign and something that confirms our belief that we're very early in the online adoption of groceries. It was obviously interrupted by the pandemic.

Speaker Change: And Eric on your question around <unk>.

Speaker Change: Returning capital.

Speaker Change: <unk> announced a $500 million share repurchase authorization in November through February 9th while the lockup was still in place, we repurchased $70 million.

Speaker Change: And we talked on the last call about wanting to be balanced while the flow was still very low in the aftermath. The IPO the float should increase when our lockup release comes off on the 15th and so ahead of that we received authorization to increase by an additional $500 million our share repurchase authorization and we plan to be opportunistic in the market.

Speaker Change: As volumes increase that's only part of how we manage dilution that starts with managing head count.

Speaker Change: Managing the equity that we give out to employees. We've introduced last year, our cash equity choice program, which allows us to reduce the amount of equity that we give in exchange for more cash.

Nick Giovanni: And now that the pandemic is behind us, the steady online adoption of groceries is something that will be a key driver of new customer growth. We're also getting better at engaging customers from our mature cohorts. So mature cohorts shrank last year, but the size of the decline improved consistently from Q1 to Q2 to Q3 to Q4. And that's because our product is getting a lot better. As Fiji mentioned in the letter and in her comments, the product's never been better. It's never had more affordable choices. It's never had better selection. It's never had better speed, and it's never had higher quality. And that really helps. But in addition to that, we've revamped our incentive systems. So we're getting better at targeting customers to make sure that we can engage with them and convert them to become habitual, loyal Instacart customers. And that's one reason why you've seen transaction revenue tick down a bit. It's because incentives are going up. We don't break down all of the components of transaction revenue, but it's not because retailer and consumer fees are lower. It's because we're deciding to reinvest the efficiencies that we're gaining into incentives. And you'll also note in Q4 that sales and marketing expense were down year over year. It doesn't mean we're spending less on marketing. We're just choosing to spend it on incentives rather than paid marketing, and we'll continue to evolve those choices as we go forward based on where we're seeing the best returns in the market, as it relates to the guide for $150 to $160 million. Year over year, you will see that transaction revenue was elevated in Q1 of last year. You can see over the course of the last three quarters, it's it has dropped back down. That's consistent with our strategy of how we want to reinvest in the business. Quarter over quarter, there's a tough comp because of ad seasonality. This happens every Q4 to Q1.

Speaker Change: We care very we care very deeply about making sure that we can reduce dilution over time. It isn't so our share our share return program is not just about offsetting dilution. It's about opportunistically repurchasing shares in addition to everything else that we do.

Speaker Change: To manage dilution.

Speaker Change #100: Great appreciate the color. Thank you.

Speaker Change #101: Thank you one moment please.

Speaker Change #101: Our next question comes from the line of Nikhil <unk> of Barclays Bernstein. Your line is open.

Nikhil: Hi, there thanks for taking the question just a couple please so.

Nikhil: Given the breadth of selection you have already it seems that user growth is increasingly important to the GTD equation going forward. So what kind of user growth do you think is feasible over the medium term and how would you characterize the contribution of new customers as well today versus in years. Prior so the extent to which are new customers are still driving this.

Nikhil: GTD equation, even after kind of the Covid influx that we saw and then as a follow up when I look at the Q1 guide.

Nikhil: What would cause that adjusted EBITDA to step down given your top line is improving and you've taken some head count costs out as well. Thank you.

Speaker Change #102: Thanks for the question so as it relates to to user growth. We definitely think that user growth is important and that means acquiring new customers and also re engaging customers.

Nick Giovanni: It's because we're deciding to reinvest the efficiencies that we're gaining into incentives. And you'll also note in Q4 that sales and marketing expense were down year over year. It doesn't mean we're spending less on marketing. We're just choosing to spend it on incentives rather than paid marketing, and we'll continue to evolve those choices as we go forward based on where we're seeing the best returns in the market, as it relates to the guide for $150 to $160 million. Year over year, you will see that transaction revenue was elevated in Q1 of last year. You can see over the course of the last three quarters, it's it has dropped back down. That's consistent with our strategy of how we want to reinvest in the business. Quarter over quarter, there's a tough comp because of ad seasonality. This happens every Q4 to Q1.

Speaker Change #103: <unk> shop.

<unk> less frequently in both of those things are.

Speaker Change #104: Are contributing to the improving growth that we've seen throughout 2023 and continuing with our guide for Q1 2024. So we talked about in 2023, the new cohort of customers that we activated was.

Speaker Change #104: Larger than the pre pandemic levels.

Speaker Change #104: So thats, a very encouraging sign and something that.

Speaker Change #104: That confirms our belief that we're very early in the online adoption.

Speaker Change #104: Grocery it was obviously interrupted by the pandemic and now that the pandemic is behind us.

Speaker Change #104: The steady adoption of groceries is something that will be a key driver of new customer growth. We're also getting better at engaging customers, who for more mature cohorts and so mature cohorts shrank last year, but the size of the decline improved consistently from Q1 to Q2 to Q3 to Q4 and Thats because our product is getting a lot.

Speaker Change #104: As <unk> mentioned in the letter in her comments the product's never been better that's never had more affordability choices. It's never had better selection has ever had better speed never had higher quality.

Nick Giovanni: Thanks, I appreciate it. Thank you. One moment. Our next question comes from the line of Ross Sandler of Barclays, the line of... Yeah, I got it. Sorry. One question on advertising and then one question on Whole Foods. Nick, your advertising revenue line came in broadly on your expectations. The growth rates are coming down a bit, and we've heard different things from different companies that, you know, cater to CPG digital advertising in the fourth quarter. So I guess what are you guys seeing in that area, both in 4Q and heading into 1Q, and then... The Whole Foods partnership is pretty interesting, given we all know the reason why we had to break up many years ago. But what was the rationale for bringing them back online from, I guess, the Whole Foods side, and could that potentially play out in the U.S. at some point? Any thoughts there? Thanks a lot. Thanks, Ross. So on advertising, the drivers that you're seeing are, one, we are lapping in Q4 the launch of shoppable display and shoppable video a year ago, which was a big increase in advertising revenue. The second thing you're seeing is that advertising revenue usually lags GDP growth. And what I mean by that is that advertisers make budget decisions today based on the sales growth that they saw in prior quarters. And so the slowdown that we're seeing in advertising is really a result of the underwhelming GDP growth that we saw last year.

Speaker Change #104: That really helps but in addition to that we've revamped our incentive systems. So we're getting better at targeting customers.

To make sure that we can engage with them and convert them to becoming habituated loyal instant card customers and Thats. One reason why you've seen transaction revenue ticked down a bit it's because incentives are going up we don't break down all of the components of transaction revenue, but its not because retailer and consumer fees are lower because we have decided to reinvest the.

Ross Adam Sandler: One question on advertising and then one question on Whole Foods. Nick, your advertising revenue line came in broadly on your expectations. The growth rates are coming down a bit, and we've heard different things from different companies that, you know, cater to CPG digital advertising in the fourth quarter. So I guess what are you guys seeing in that area, both in 4Q and heading into 1Q, and then... The Whole Foods partnership is pretty interesting, given we all know the reason why we had to break up many years ago. But what was the rationale for bringing them back online from, I guess, the Whole Foods side, and could that potentially play out in the U.S. at some point? Any thoughts there? Thanks a lot.

Speaker Change #104: Francies that we're gaining into incentives and you'll also note in Q4 that sales and marketing expense was down year over year. It doesn't mean, we're spending less on marketing, we're just choosing to spend it and incentives rather than paid marketing and we will continue to evolve those choices as we go forward based on where we're seeing the best returns in the market.

Speaker Change #104: As it relates to the guide for $150 million to $160 million year over year, you will see that transaction revenue was elevated in Q1 of last year.

You can see over the course of the last three quarters.

Speaker Change #104: <unk>.

Speaker Change #104: It has dropped back down that's consistent with our strategy of how we want to reinvest in the business.

Speaker Change #104: Quarter over quarter, there's a tough comp because of AD seasonality. This happens every Q4 to Q1.

Speaker Change #105: Thanks I appreciate it.

Speaker Change #106: Thank you one moment please.

Speaker Change #106: Our next question comes from the line of Ross Sandler of Barclays. Your line is open.

Nick Giovanni: Thanks, Ross. So on advertising, the drivers that you're seeing are, one, we are lapping in Q4 the launch of shoppable display and shoppable video a year ago, which was a big increase in advertising revenue. The second thing you're seeing is that advertising revenue usually lags GDP growth. And what I mean by that is that advertisers make budget decisions today based on the sales growth that they saw in prior quarters. And so the slowdown that we're seeing in advertising is really a result of the underwhelming GDP growth that we saw last year.

Speaker Change #106: Alright.

Speaker Change #106: Sorry.

Ross Adam Sandler: One question on advertising and then one question on the whole foods.

Ross Adam Sandler: Nick Your advertising revenue line came in broadly with your expectations.

Ross Adam Sandler: Growth rates are coming down a bit and we've heard different things from different companies.

Ross Adam Sandler: Cater to CPG digital advertising in the fourth quarter. So I guess, what are you guys seeing in that area, both in <unk> and heading into <unk> and then.

Ross Adam Sandler: The whole foods partnership is pretty interesting given we all know the reason why we have the breakup many years back but what.

Ross Adam Sandler: What was the rationale for bringing them back online from I guess, the whole foods side and could that potentially play out in the U S. At some point.

Any thoughts there thanks a lot.

Nick Giovanni: The good news, though, is that we are seeing a re-acceleration of that GDP growth for three consecutive quarters and guiding to a fourth one. And we fully expect that if GDP continues to re-accelerate, advertising will also re-accelerate. You mentioned some weakness among some advertisers. We are seeing that in pockets, but it is not widespread. And even when advertisers are struggling in their business overall, we are not the first line to be cut because they know that our advertising has a very high ROAS and is highly performant. So we don't tend to be the first thing that they cut. Now moving to your second question about Whole Foods. We are very excited to bring them back. In Canada, Whole Foods did not offer delivery to consumers, so we are an opportunity for them to launch the service and reach an incremental customer. They are very focused on the customer experience, as we are, and given all of the great experiences that we've developed, both in terms of quality, speed, ability to deliver at scale, they were excited to partner with us in Canada and vice versa. Nothing to announce about the U.S., but we always take a long-term view of this partnership, and our goal is to provide as much value to Whole Foods and their customers as possible, as we do with every single one of our retail stores. Thank you. Our next, on the line of Colin Sebastian, of Baird, the line of... Thanks. Good afternoon,

Speaker Change #107: Thanks, Ross so on advertising.

Speaker Change #107: The drivers that Youre seeing are one we are lapping in Q4, the launch of shopper, both display and shippable video a year ago, which was a big increase in advertising revenue. The second thing Youre seeing is that advertising.

Speaker Change #107: Revenue, usually lags GDP growth and what I mean by that is that advertisers make budget decisions today based on the sales growth that we saw in prior quarters and so the slowdown that we're seeing in advertising is really a result of the <unk>.

Speaker Change #107: <unk> growth that we saw last year. The good news, though is that we are seeing re acceleration of that GDP growth.

Fiji Simo: In Canada, Whole Foods did not offer delivery to consumers, so we are an opportunity for them to launch the service and reach an incremental customer. They are very focused on the customer experience, as we are, and given all of the great experiences that we've developed, both in terms of quality, speed, ability to deliver at scale, they were excited to partner with us in Canada and vice versa. Nothing to announce about the U.S., but we always take a long-term view of this partnership, and our goal is to provide as much value to Whole Foods and their customers as possible, as we do with every single one of our retail stores. Thank you. Our next, on the line of Colin Sebastian, of Baird, the line of... Thanks. Good afternoon,

Speaker Change #107: For three consecutive quarter and guiding for Fox, one and we fully expect that Egypt continues to Reaccelerate advertising will also accelerate you mentioned some weakness among some advertisers we are seeing that in pockets, but it is not widespread and even when advertisers are struggling.

Speaker Change #107: Bell business overall, we are not the first line to be cuts because they know that's all advertising very I will ask and.

Speaker Change #107: Highly performance. So we don't tend to get the first thing that the caps.

Now moving to your second question on whole foods.

Speaker Change #107: We are very excited to bring them back.

Speaker Change #107: Canada whole foods did not offer delivery to consumer so we are an opportunity for them to launch the service in reaching incremental customer.

Colin Alan Sebastian: I appreciate the questions. PG, you talked about improvements in operating KPIs, such as those found in fill rates and batch rates. And I think a lot of that's based on the data platform and the use of machine learning. If you could maybe talk about how much additional improvement you think is still embedded in the platform with those initiatives. And then, related to that, how much of a competitive advantage or differentiator is that? I think you indicated that you were doing things five years ago that some of your digital competitors are now trying to achieve in the market. Absolutely not. So, we already have very high success rates and fill rates. And so they have been improving for the sixth consecutive quarter. But right now, it's really a game of basis points because we're already delivering such high quality. But every basis point of improvement matters. And we really sweat the details to make sure that our customers get the exact order that they wanted, or if products aren't on the shelves, we replace the products with a highly satisfactory replacement. And we do that through a variety of methods. One example is our depth of integration with retailers. We get their catalog data updated constantly. We get planogram data, which allows us to show in our shopper app where the items are located inside the store so that our shoppers can go there and find them. With some retailers, we go as far as integrating with their electronic shelf tags, like we do with Schnapps and Aldi, where, from the shopper app, you can literally light up the shelf to tell you exactly what an item is going to be so that, again, we increase the likelihood that shoppers are going to find these items in store.

Speaker Change #107: We are very focused on customer experience as we all know and you've got all of the.

Speaker Change #107: Great experience that we have developed both in terms of quality speed, our ability to deliver at scale.

Speaker Change #107: We're excited to partner with Paul now with Us in Canada, and vice versa, nothing to announce about the U S. But we always take a long term view of just following up chapter and our goal is to provide as much value to whole foods and <unk> customers as possible as we do with every single one of our retail partners.

Fiji Simo: So, we already have very high success rates and fill rates. And so they have been improving for the sixth consecutive quarter. But right now, it's really a game of basis points because we're already delivering such high quality. But every basis point of improvement matters. And we really sweat the details to make sure that our customers get the exact order that they wanted, or if products aren't on the shelves, we replace the products with a highly satisfactory replacement. And we do that through a variety of methods. One example is our depth of integration with retailers. We get their catalog data updated constantly. We get planogram data, which allows us to show in our shopper app where the items are located inside the store so that our shoppers can go there and find them. With some retailers, we go as far as integrating with their electronic shelf tags, like we do with Schnapps and Aldi, where, from the shopper app, you can literally light up the shelf to tell you exactly what an item is going to be so that, again, we increase the likelihood that shoppers are going to find these items in store.

Speaker Change #108: Thank you.

Speaker Change #109: Thank you one moment please.

Speaker Change #109: Our next question comes from the line of Colin Sebastian of Baird. Your line is open.

Colin Alan Sebastian: Thanks, Good afternoon I. Appreciate the question Peter you talked about improvements in operating Kpis like found in fill rates and batch rates and I think a lot of that is based on the data platform and the use of machine learning.

If you could maybe talk about how much of additional improvement do you think is still embedded in the platform.

Colin Alan Sebastian: With those initiatives and then related to that how much of a competitive advantage. A differentiator is that I think you indicated youre doing youre doing things five years ago that some of your digital competitors are now are now trying to achieve in the market. Thank you.

Speaker Change #111: Absolutely. So we already have very high found rates NCL rates and so.

Speaker Change #111: He has been improving for the sixth consecutive quarter.

Speaker Change #111: But right now it's really a game of basis points, because we're already delivering with such high quality, but every basis point of improvement matters, and we really sweat the details to make sure that our customers get the exact all barrels that they wanted all of the products on the shelves that we replace the product suite a highly satisfactory.

Fiji Simo: And so, that's deep retailer integration that is very defensible and a very deep competitive advantage. Then you combine that with the fact that our shoppers are in the aisles of grocery stores every day, so they know what's on the shelves often better than what retailers know themselves. And it has allowed us to really develop great predictive algorithms to understand what's going to be in stock versus what's not going to be in stock, what's a suitable replacement that's going to generate a positive experience. And just to give you an idea, we make more than 75 million replacements a quarter with 95% satisfaction. And so, the combination of deep retailer integration, data that we collect every day, and predictive analytics really allows us to deliver a superior experience that creates a very significant competitive advantage. There's still some room to grow, but I think we're already very much at the top of our game there and are continuing to chip away at the remaining few percent to make sure that we are delivering the best possible experience. And that's why customers and retailers trust us with their business in one case and deliver their meat and their produce in another. Okay, thank you. Thanks. Our next question comes from the line of Jason Health. Oppenheimer, you're on. Thanks. Two questions. First, can you elaborate on the point about advertising correlates more with trailing GTV, not just the current quarter? I think you made that point, and second, Nick, can you clarify the comment about... growth would step up? Did you mean per quarter through the rest of 24 or just broadly for, thanks.

Speaker Change #111: Replacements, and we do that through a variety of methods. One is all depths of integration with retailers. We get catalog data updated constantly we get the plan O Gram data, which allows us to show inside of shopper up where the items are located inside the store so that shoppers can go.

Speaker Change #111: And find them with some retailers we go as far as integrating with electronic shelf tags like we do with snacks and Augie were from the show perhaps you can literally in light of the shale or is it a shelf to tell you exactly what our night that he's going to be so that again, we increased the likelihood that shoppers are going to find these items in store and.

Fiji Simo: And so, the combination of deep retailer integration, data that we collect every day, and predictive analytics really allows us to deliver a superior experience that creates a very significant competitive advantage. There's still some room to grow, but I think we're already very much at the top of our game there and are continuing to chip away at the remaining few percent to make sure that we are delivering the best possible experience. And that's why customers and retailers trust us with their business in one case and deliver their meat and their produce in another. Okay, thank you. Thanks. Our next question comes from the line of Jason Health. Oppenheimer, you're on.

Speaker Change #111: So that's like deep retailer integrations that are very defensible very huge competitive advantage. Then you combine that with the fact that our shoppers.

Speaker Change #111: The Isles of grocery stores every day as soon as they know what's on the shelf often better than what we tell it no themselves and it has allowed us to really developed great predictive algorithms to understand what is going to be in stock loss and what's not going to be you can talk what's a suitable replacement that's going to generate.

Nick Giovanni: Thanks. Two questions. First, can you elaborate on the point about advertising correlates more with trailing GTV, not just the current quarter? I think you made that point, and second, Nick, can you clarify the comment about... growth would step up? Did you mean per quarter through the rest of 24 or just broadly for, thanks.

Speaker Change #111: A positive experience and just to give you an idea we are we make more than 75 million replacement a quarter with 80, 95% satisfaction and so the combination of deep retailer of integration.

Speaker Change #111: Data that we collect every day and predictive analytics model really allows us to deliver the superior experience that creates a very steep michigan competitive advantage, there's still some room to grow but I think we're already very much at the top of our game there and are continuing to chip away at.

Nick Giovanni: So, in advertising, the way budgeting works is that our advertisers set budgets this quarter based on the sales performance that they saw in the past. So, if we have been growing at a lower rate in the past, they're seeing sales growth that's a little bit more muted; they're going to allocate fewer budgets in the upcoming quarters based on that. But then, when GCD growth re-accelerates, then they end up allocating more budget. We have actually seen this trend play out in the past. If you look back at our financials, you will see that in Q2 of 2022, for example, we had a decrease in the over-year investment rate because we were coming off of several quarters of fairly low GCD growth. And then, as soon as GCD re-accelerated, advertising rates accelerated again in the following quarter. And so that's what I meant by the trailing aspects of it. It's not uniform across the board. You have emerging brands, for example, who are a lot more flexible and a lot more nimble in how they allocate budgets. So, the minute that they see that GCD is increasing and their sales are increasing, they double down and increase their advertising. But for larger companies that are planning on a quarterly basis, sometimes even on a half-yearly basis, it takes a little bit more time for them to digest the change in GCD one way or another and reflect that in their advertising budget. And as it relates to the growth step up, we are only guiding to Q1, and for Q1, we are aiming for GTV growth of 7 to 10% year over year. And this compares to 5% for all of last year, but through the quarters of last year, it was 2.6% growth in Q1 and 5.6% growth in Q2, 5.9% growth in Q3, 6.8% growth in Q4. And so what we're calling for now is a step up to 7 to 10%. Our next question comes from the line of Michael Moore. Moffett, Nathanson, Uline. Well, thank you for the question.

Speaker Change #111: The remaining 2% to make sure that.

Speaker Change #111: We are delivering the best possible experience and Thats why customers and retailers Trust us with their business in one case and delivering tell me tenda projects and another.

Speaker Change #112: Okay. Thank you.

Speaker Change #113: Thank you one moment please.

Our next question comes from the line of Jason <unk> of Oppenheimer. Your line is open.

Jason: Thanks two questions.

Jason: Just first.

Jason: Just can you elaborate on the point about advertising correlates more with trailing G television not current quarter I think you made a point in second.

Jason: Nick can you clarify the comment about.

Jason: <unk> growth would step up did you mean per quarter through the rest of 'twenty four or just broadly for all 24. Thank you.

Nick Giovanni: You have emerging brands, for example, who are a lot more flexible and a lot more nimble in how they allocate budgets. So, the minute that they see that GCD is increasing and their sales are increasing, they double down and increase their advertising. But for larger companies that are planning on a quarterly basis, sometimes even on a half-yearly basis, it takes a little bit more time for them to digest the change in GCD one way or another and reflect that in their advertising budget. And as it relates to the growth step up, we are only guiding to Q1, and for Q1, we are aiming for GTV growth of 7 to 10% year over year. And this compares to 5% for all of last year, but through the quarters of last year, it was 2.6% growth in Q1 and 5.6% growth in Q2, 5.9% growth in Q3, 6.8% growth in Q4. And so what we're calling for now is a step up to 7 to 10%. Our next question comes from the line of Michael Moore. Moffett, Nathanson, Uline. Well, thank you for the question.

Speaker Change #114: So in advertising.

Nick: So the way budgeting works is that Oh advertisers set budget this quarter.

Nick: On the self performance as you saw in the past. So if we have been growing at a lower rate in the past that he sells growth that's a little bit more muted, they're going to allocate fuel budget in the upcoming quarters based on that but then when GTD grocery accelerates then you end up allocating more budget, we have actually.

Nick: Do you see this trend play out in the past if you look back at our financial you will see that in Q2 up 22 for example.

Nick: We had actually a decrease in year over year investment right, because we were coming off of several quarters of fairly low GDP growth and then as soon as GTD, we accelerated advertising rates accelerated again in the following quarter and so thats, what I meant by the trailing aspect of it it's not uniform across the board.

Nick: <unk> that you have emerging brands for example, well a lot more flexible a lot more nimble in how they allocate budgets. So the minutes at this is that GTT is increasing and sales are increasing did double down and increase our advertising, but for larger companies that are planning on a quarterly basis, sometimes you got on that.

Nick Giovanni: I wanted to ask maybe one a little bit longer term, just about industry structure. You have incumbents with the physical network building their own distribution businesses, but then also marketplaces competing with Instacart, who is the first mover and can do it at the largest scale. But I would love to know, how do you see the actual picking aspect of fulfillment developing over the year as order density increases? Do you think that there are so many industries that believe it's going to go to merchant pick? So then, like the Whole Foods model, there's just bags in front of the store, and the gig economy workers pick them up. Or does this continue along the Instacart picker model? Just any long-term thoughts there would be great. Thank you. Thanks for the question. So the reason retailers partner with us to do picking and delivery is because we can do that very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates growth for them. And with high accuracy and high quality to really respect the relationships that they build with their customers, we do that in a variety of ways. So the model you're describing, where some retailers might be doing the picking and then we do delivery, like some of our retailers are already using our own picking app to stage their order, for example, for pickup. And so again, we see our role as really developing all of the technologies to help support that industry. And one of them is the great picking technology that retailers have integrated with their own system and are currently using inside their store. Now, we have also seen models thinking about like automated picking and, you know, kind of having big warehouses where the picking happens outside of the network of stores. And we are tracking that very closely, but we are much less bullish on this model because what we have found is that for these models to work, you need a lot of density of orders. And that means that these, you know, kind of large warehouses end up being very far away from the customer.

Nick: On a half basis.

Nick: It takes a little bit more time for them to digest the change in GTT, one way or another and reflects the advertising budget.

Nick: Then as it relates to the growth step up we are only guiding to Q1 and for Q1, we are guiding to GDP growth of 7% to 10% year over year. This compares to 5% for all of last year, but through the quarters of last year. It was two 6% growth in Q1, and five 6% growth in Q2, five 9% growth in Q3.

Nick: Six 8% growth in Q4, and so what we're calling for now is the step up to 7% to 10% in Q1.

Speaker Change #115: Thank you.

Speaker Change #116: Thank you my mom it please.

Speaker Change #116: Our next question comes from the line of Michael Morton.

Fiji Simo: Thank you. Thanks for the question. So the reason retailers partner with us to do picking and delivery is because we can do that very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates growth for them. And with high accuracy and high quality to really respect the relationships that they build with their customers, we do that in a variety of ways. So the model you're describing, where some retailers might be doing the picking and then we do delivery, like some of our retailers are already using our own picking app to stage their order, for example, for pickup.

Michael Morton: Of Moffett Nathan Your line is open.

Michael Morton: Well. Thank you for the question I wanted to ask maybe one a little bit longer term.

Michael Morton: Industry structure.

Have like incumbents with the physical.

Michael Morton: Network building their own distribution businesses, but then also marketplaces competing with them to current who has the first mover and can do it with the largest scale, but I would love to know how do you see the actual picking aspect of fulfillment developing over the year as order density increases.

Michael Morton: Do you think there are so many industry. They believe it's going to go to a merchant Pip. So then kind of the whole foods model, there's just bags at the front of the store.

Michael Morton: The gig economy workers picking up.

Michael Morton: Or does this continue along the Intercurrent picker model just any long term thoughts there would be great. Thank you.

Thanks for the question. So the reason retailers' fall now with us to do peaking and delivery is because we can do that very efficiently, which allows them to save on costs and pass on some of that cost to customers, which then creates gross for them and with high accuracy and high quality too.

Fiji Simo: And so again, we see our role as really developing all of the technologies to help support that industry. And one of them is the great picking technology that retailers have integrated with their own system and are currently using inside their store. Now, we have also seen models thinking about like automated picking and, you know, kind of having big warehouses where the picking happens outside of the network of stores. And we are tracking that very closely, but we are much less bullish on this model because what we have found is that for these models to work, you need a lot of density of orders. And that means that these, you know, kind of large warehouses end up being very far away from the customer.

Michael Morton: With respect to the relationships that they've dealt with our customers.

Michael Morton: We do that in a variety of ways. So the model, you're describing what some retailers might be doing to peaking and then would you.

Michael Morton: Delivery like some of our retailers are already using our own peaking up to CHF order for example for pickup and so again, we see our role is really developing all of the technologies to help support that industry and one of them is great technology.

Michael Morton: Retailers are integrated with our own stamina currently using inside desktop now we are also seeing you know more.

Fiji Simo: And all of the costs that you save in picking, you end up losing in cost of delivery because you have to drive to a customer that's much farther away. But we are also seeing that customers actually value speed. And that's why, you know, I have emphasized speed so much in my letter because we know it drives conversion, we know it drives growth. And so if you're very far away from the customer, you are not able to deliver with the speed that we can do that from 85,000 stores. So, all in all, I would say that we strongly believe that we have the winning model here, the model that's most efficient and most responsive to customer needs. And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they find suitable for them. Thank you so much. Thank you. Our next question comes from the line of Andrew. J.M. Thanks so much for taking my questions. Can you talk a little bit about the product roadmap for off-platform advertising? Where are you guys today? And what could this look like over the next couple of years? And then Fiji, a bigger picture question on health more broadly. Can you talk about the potential for HSAs and what that could mean for the business? Thanks so much. Thanks Andrew. So, on off-platform marketplace advertising, step one was taking our entire advertising infrastructure and making it available to retailers on their own and operated properties through carrot ads. And that's a growing part of the business. We are finding more and more retailers interested in leveraging this technology because that allows them to stand up a retail media network literally overnight and get revenue, a new incremental revenue line. So that was step one.

Michael Morton: Model thinking about like automated picking and kind.

Michael Morton: Kind of.

Michael Morton: Adding big warehouses, while the peaking happens outside of the network of stores and we are tracking that very closely but we are much less bullish on this model because what we have found is that for this model to work you need a lot of density of all the OCA and that means that you know.

Michael Morton: Kind of large warehouses end up being very far away from the customer and all of the costs that you saved in peaking you end up producing in cost of delivery because you have to drive to a customer that's much felt the whole way. We are also seeing that customers actually value speed and that's why I've emphasized.

Michael Morton: So much in my letter because we know it drives conversion we know it drives growth until you feel very far away from the customer you are not able to deliver with the pizza.

Andrew M. Boone: Thank you. Our next question comes from the line of Andrew. J.M.

Fiji Simo: Thanks so much for taking my questions. Can you talk a little bit about the product roadmap for off-platform advertising? Where are you guys today?

Michael Morton: Pizza Hut weekend.

Michael Morton: In doing that from 85000 installed so all in all I would say that we strongly believe is that we have the winning model here.

Michael Morton: Malo, that's most efficient most responsive to customer needs.

Michael Morton: And we are continuing to develop all of the technology that retailers need to embrace that model in all of the ways that they find suitable for that business.

Speaker Change #117: Thank you so much.

Fiji Simo: Thanks Andrew. So, on off-platform marketplace advertising, step one was taking our entire advertising infrastructure and making it available to retailers on their own and operated properties through carrot ads. And that's a growing part of the business. We are finding more and more retailers interested in leveraging this technology because that allows them to stand up a retail media network literally overnight and get revenue, a new incremental revenue line. So that was step one.

Speaker Change #118: Thank you one moment please.

Speaker Change #118: Our next question comes from the line of Andrew Boone of JMP Securities. Your line is open.

Andrew M. Boone: Thanks, so much for taking my questions.

Andrew M. Boone: Can you talk a little bit about the product roadmap for off platform advertising, where are you guys today and what can this look like over the next couple of years and then C. J a bigger picture question on health more broadly can you talk about the potential for HSA and what that could mean for the business. Thanks. So much.

Speaker Change #119: Thanks, Andrew so on and off platform marketplace advertising step one was taking our entire advertising infrastructure and making it available to retailers on their own and operated properties truecar with ads and.

Fiji Simo: I would say step two is taking all of the vast set of data that we have on customer behavior and leveraging that data to make advertising on other platforms more efficient. And that's where, you know, we did the partnership with the trade desk. We recently announced a partnership with Google, and a partnership with Roku, where we can leverage the incredibly valuable data that we have to make advertising on other platforms more efficient. And that's something that we want to continue to develop with more platforms and scale with more advertisers. And then I would say the last step is actually expanding our advertising platform beyond online and into the store. And that's why we announced ads on Kapor Koft recently. And, obviously, it's very early. We're just starting to roll out a lot of Kapor Koft, but we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in-store that knows exactly what's in your cart right now, which aisle you're on, what you purchased in the past, and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're thriving towards. And then on your question about health and HSA-FSA, we launched it in Q4, as you know, it's still very early, but it's very much kind of reproducing the mental model of EBT-SNAP, where if you look at SNAP, SNAP has about 130 billion in funds loaded into it every year. The FSA-HSA is $65 billion, of which $3 billion of those get forfeited by Americans at the end of the year because, you know, some of it is "use it or lose it." And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA-HSA comp. Again, very early, but something that we wanted to plan for the season because we have seen such success with SNAP that we want to see if we can reproduce that with FSA-HSA. Thank you. Our next question comes from the line of Mark Kelley of Stiefel, Yolanda. Great, thank you very much.

That's a growing part of the business, we are finding more and more retailers interested in leveraging this technology.

Because that allows them to stand up a retail media networks mutually overnight and get a rebate or new incremental revenue line. So that was step one I would say step two is ticking.

Taking all of the vast.

Speaker Change #119: A set of data is a three hour on customer behavior, and leveraging that data to make advertising on other platforms more efficient and that's where we get the partnership with the trade desk, We recently announced the partnership with Google.

Fiji Simo: We're just starting to roll out a lot of Kapor Koft, but we think that if we are the advertising platform that allows an advertiser to reach customers both online and in-store and have an advertising product in-store that knows exactly what's in your cart right now, which aisle you're on, what you purchased in the past, and your loyalty data, we can build a really incredible advertising platform. Again, still early, but that's really the future that we're thriving towards. And then on your question about health and HSA-FSA, we launched it in Q4, as you know, it's still very early, but it's very much kind of reproducing the mental model of EBT-SNAP, where if you look at SNAP, SNAP has about 130 billion in funds loaded into it every year. The FSA-HSA is $65 billion, of which $3 billion of those get forfeited by Americans at the end of the year because, you know, some of it is "use it or lose it."

Speaker Change #119: Partnership with Roku, where we can leverage he is incredibly valuable data that we have to make advertising on other platforms like she sent and that's something that we want to continue to develop with more platforms and scale with more advertisers and then I would say as a loss to us.

Speaker Change #119: That is actually expanding our advertising platform.

Speaker Change #119: Online and into the store and that's why we announced we shouldn't be done keep a call and obviously, it's very early we're just starting to rollout the lot of Cape I'll call.

Speaker Change #119: But we think that if we all the advertising platform that allows an advertiser to reach customers, both online and in store and advertising product install that knows exactly what's on your cost right now, which I'll Johan what you purchased in the past since your loyalty data we can build.

Speaker Change #119: Really incredible advertising platform again still early but that's really just huge held up well.

Speaker Change #119: Striving towards.

Speaker Change #119: And then on your question on the house and HSA FSA.

Fiji Simo: And we think we can be a really good platform to remind them that they can use these dollars the same way we do with SNAP by leveraging that FSA-HSA comp. Again, very early, but something that we wanted to plan for the season because we have seen such success with SNAP that we want to see if we can reproduce that with FSA-HSA. Thank you. Our next question comes from the line of Mark Kelley of Stiefel, Yolanda. Great, thank you very much.

We don't see it in Q4 as you know it's still very early but is there much.

Speaker Change #119: Kind of reproducing the mental model of EDT snap, where if you look at snap snap.

Speaker Change #119: <unk> is about a 130 billion of front loaded into snap every year FSA HSA 65 billion of which <unk> 3 billion of those get for heated by America ends at the end of the year because you know some of it is.

Speaker Change #119: And we think we can be a really good platform to remind them that they can use. These dollars. It's the same way we do we snap.

Mark Patrick Kelley: Nick, a quick one for you just on take: as we think about the full year, obviously, you've got a couple of dynamics where you're lapping that big Q1 of last year that you had where you're kind of towards the high end or at the high end of your long-term range. And then just, you know, thinking through the RIF and taking those savings and thinking about marketing and incentives and things like that. I guess what's a good starting point for us to think about take rates for our model? And then just a quick one: Fiji, you know, you just brought up ads on paper shopping carts. I'm just curious if you think, uh, like, are those budgets that are likely to come from? Are those still retail media budgets? Are those like digital out of home budgets that you might be able to capture? I guess, you know, how should we think about that, and does that open up bigger opportunities outside of what you just mentioned in the last answer? Thanks for the question. So just on take rates, I think you're referring to transaction revenue and another revenue, and we did not guide to those specifically for the full year. What we did say is that we do expect adjusted EBITDA to be up not only in dollar terms but as a percentage of GTV year over year. And one of the reasons we said that is because we want to be able to make investments, whether it's in the contra revenue line or the OPEX line, to drive the most efficient way, especially having just overhauled our incentive systems and having seen good results in deploying more incentives. When we decide to spend a dollar on incentives instead of a dollar on performance marketing, that makes it look like our transaction revenue is lower, but it makes it look like our sales and marketing expense is also lower.

Speaker Change #119: By leveraging that FSA HSA called again.

Speaker Change #119: Again, very early but something that we wanted to Kansas She's done because we have seen such success with snap.

Speaker Change #119: We wanted to see if we can reproduce out with Oh.

Speaker Change #119: FSA HSA.

Thank you one moment please.

Speaker Change #119: Our next question comes from the line of Mark Kelly of Stifel. Your line is open.

Mark Patrick Kelley: Great. Thank you very much.

Mark Patrick Kelley: A quick one for you just on take rate.

Mark Patrick Kelley: As we think about the full year, obviously, you've got a couple of dynamics, where you are lapping that in Q1 of last year that you had where you were kind of towards the high end or at the high end of your long term range and then just thinking through the risks and taking those savings and thinking about marketing and incentives and things like that I guess, what's a good starting point for us to think.

Nick Giovanni: I'm just curious if you think, uh, like, are those budgets that are likely to come from? Are those still retail media budgets? Are those like digital out of home budgets that you might be able to capture? I guess, you know, how should we think about that, and does that open up bigger opportunities outside of what you just mentioned in the last answer? Thanks for the question.

Speaker Change #120: Uh huh.

Speaker Change #120: Take rates for our model and then just a quick one.

Speaker Change #120: You just brought up ads on <unk> I'm, just curious if you think.

Speaker Change #120: Like are those projects that are likely to come from.

Speaker Change #120: Are those still retail media budgets are those like digital out of home projects that you would.

Speaker Change #120: Might be able to capture I guess.

Speaker Change #120: How should we think about that and does that open up bigger opportunities.

Fiji Simo: So just on take rates, I think you're referring to transaction revenue and another revenue, and we did not guide to those specifically for the full year. What we did say is that we do expect adjusted EBITDA to be up not only in dollar terms but as a percentage of GTV year over year. And one of the reasons we said that is because we want to be able to make investments, whether it's in the contra revenue line or the OPEX line, to drive the most efficient way, especially having just overhauled our incentive systems and having seen good results in deploying more incentives. When we decide to spend a dollar on incentives instead of a dollar on performance marketing, that makes it look like our transaction revenue is lower, but it makes it look like our sales and marketing expense is also lower.

Speaker Change #121: Outside of what you just mentioned in the last answer thank you.

Speaker Change #122: Thanks for the question. So just on take rates I think you're referring to transaction revenue and add another revenue as a percent of GTT and we do not guide to those specifically for the full year. What we did say is that we do expect adjusted EBITDA to be up not only in dollar terms, but as a percentage of GTD year over year.

And one of the reasons, we said that is because we want to be able to make investments whether it's in the contra revenue line or the Opex line to drive most efficiently, especially having just overhauled our incentive systems and having seen good results.

Speaker Change #122: Deploying more incentives when we decided to spend $1 incentives instead of a dollar in performance marketing that makes it look like our transaction revenue is lower but it makes it look like our sales and marketing expense is also lower and so net net that's driving value and it is just hitting in different places in the P&L. It's important to also just remember that the.

Nick Giovanni: And so net-net, it's driving value, and it's just hitting in different places in the P&L. It's important to also just remember that the efficiencies that we're delivering, and we did call out that we continue to gain efficiencies in shopper pay, also benefit transaction revenue. But then we have a decision about where to invest that and how to invest that to continue to grow the business. So we're not providing overall guidance, we're not changing our long-term targets with respect to transaction revenue, reaching 6.5% to 7.5% of GTV, or as in other revenue, reaching 4% to 5% of GTV. And on your question about ads on Caper, it's again important to realize that it's very early, and ads on Caper are a little bit of a different beast because they are really combining the best of online advertising, which is measurability and targetability, but then doing that in an in-store environment. And so, like any new innovation in advertising, we are probably going to start to see different advertisers take from different budgets to fund this. Again, this is very early, but what we're seeing is that advertisers are very excited about the combination of these capabilities. You can imagine, you know, going to the store and you're dropping cookies into your cart, and dryers ice cream can advertise to you that the ice cream can be found in aisle five, and then you can make an ice cream sandwich with the cookies you already have in your cart. And based on your loyalty data, we might already know that you like chocolate ice cream, so we can direct you to that. It's a really incredible experience that we can unlock, but it's still very early.

Speaker Change #122: The efficiencies that we're delivering we did call out that we continue to gain efficiencies and <unk>.

Speaker Change #122: Also benefits.

Transaction revenue, but then we have a decision about where to invest that and how to invest that to continue to grow the business. So we're not providing overall overall guidance, we're not changing our long term targets with respect to transaction revenue.

Speaker Change #122: Reaching.

Speaker Change #122: Reaching six 5% to seven 5% of GTP or ads and other revenue, reaching 4% to 5% of GTA V. And we continue to believe that we can demonstrate that real EBITDA leverage throughout the year.

Speaker Change #122: And on your question on add some keep her.

Speaker Change #122: Important to realize that it's very early and Adam keep her a little bit of a different beast because they all really combining the best of online advertising, which is metro <unk> target ability, but then doing that in an in store environment and so like any new innovation in advertising.

Fiji Simo: And so, like any new innovation in advertising, we are probably going to start to see different advertisers take from different budgets to fund this. Again, this is very early, but what we're seeing is that advertisers are very excited about the combination of these capabilities. You can imagine, you know, going to the store and you're dropping cookies into your cart, and dryers ice cream can advertise to you that the ice cream can be found in aisle five, and then you can make an ice cream sandwich with the cookies you already have in your cart. And based on your loyalty data, we might already know that you like chocolate ice cream, so we can direct you to that. It's a really incredible experience that we can unlock, but it's still very early.

Speaker Change #122: We are probably going to start to see.

Speaker Change #122: Different advertisers take from different budgets to fund these are.

Again, very early but what we're seeing is that advertisers are very excited about the combination of these capabilities you can imagine going through the store and you're dropping cookies into your call and dry ice cream can advertise to you that the ice cream can be found in our high and then you can do a nice clean.

Speaker Change #122: Sandwich, We said Keith you already have in your car and based on your loyalty data, we might already knows that you like ice cream chocolate ice cream. So we shouldn't directly to that it's it's a really incredible experience that we can unlock but it's still very early and.

Fiji Simo: And the other important thing to remember is that we're doing this hand in hand with retailers. We are sharing revenue on ads on Caper. We are doing it as a way to also create a new advertising revenue stream for them. And we'll want to, you know, continue to partner with them closely on making sure that these budgets are incremental to other. Perfect, thank you very much. Our next question comes from the line of Deepak. Matt Savanen, search, a lot of, Great, thanks for taking the questions. Can I ask a couple of questions on the cohort trend? Can you provide additional color on the rate of decline of the COVID cohorts pre-2021, now versus maybe earlier in 2023? At what point can we expect, you know, the drag from COVID cohorts to be less and potentially reach some sort of like a stabilization level? And then secondly, can you also elaborate on the trends that you're seeing in 22 and 23 cohorts, you know, in terms of the growth rate, so we can think about the contribution from the newer cohorts? Thank you. Thanks for the question, Deepak. So just to give you some additional context, we mentioned that in the first half of last year, 2023, the mature cohorts were declining double digits, and that in the second half of last year, they were declining single digits. And I'm sure that lots of folks want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've guided on. We're very pleased with the consistent improvement that we demonstrated throughout the course of last year.

Speaker Change #122: All that important thing to remember is that we're all doing is hand in hand with retailers. We are sharing revenue on atom keep her what we are doing it as a way to also create a new advertising revenue stream for them.

Speaker Change #122: And we'll want to continue to partner with them closely on making sure that these budgets are incremental to what's happening.

Speaker Change #123: Perfect. Thank you very much.

Deepak Mathivanan: Our next question comes from the line of Deepak. Matt Savanen, search, a lot of, Great, thanks for taking the questions. Can I ask a couple of questions on the cohort trend? Can you provide additional color on the rate of decline of the COVID cohorts pre-2021, now versus maybe earlier in 2023? At what point can we expect, you know, the drag from COVID cohorts to be less and potentially reach some sort of like a stabilization level?

Speaker Change #124: Thank you one moment please.

Speaker Change #124: Our next question comes from the line of Deepak.

Deepak: Mathematics of Wolfe Research your line is open.

Deepak: Great. Thanks for taking the question can I ask a couple on the cohort trend can you provide additional color on the rate of decline of the Covid cohort three 2021 now with maybe earlier in 2023 at what point can we expect the drag from COVID-19 cohorts to be less and potentially.

Deepak: Some started like a stabilization level and then secondly can you also elaborate on the trends that you're seeing in 'twenty, two and 'twenty three cohorts in terms of the growth rates. So we can think about the contribution from the newer cohorts. Thank you so much.

Nick Giovanni: And then secondly, can you also elaborate on the trends that you're seeing in 22 and 23 cohorts, you know, in terms of the growth rate, so we can think about the contribution from the newer cohorts? Thank you. Thanks for the question, Deepak. So just to give you some additional context, we mentioned that in the first half of last year, 2023, the mature cohorts were declining double digits, and that in the second half of last year, they were declining single digits. And I'm sure that lots of folks want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've guided on. We're very pleased with the consistent improvement that we demonstrated throughout the course of last year.

Speaker Change #125: Thanks for the question Deepak.

Speaker Change #126: So just to give you some additional context, we mentioned that in the first half of last year 2023, the mature cohorts were declining.

Speaker Change #127: Double digits and that in the second half of last year. They were declining single digits and I'm sure that lots of folks who want to know exactly when they'll get back to flat or when they will turn to growth, but it's just not something that we've that we've guided on we're very pleased with the consistent improvement that we demonstrated throughout the course of last year and then as it.

Nick Giovanni: And then, as it relates to newer cohorts, we haven't called out any different trends that typically cohorts grow in the second year compared to the first. And we've mentioned that the new cohorts that we're activating are larger than the pre-co. Thank you so much. Our next question comes from the line of Stephen Fox of Fox Advisory. Hi, good afternoon. I just had two questions. First, a simple one. Any thoughts for the new year on free cash flow conversion off of EBITDA? And then, secondly, there's been a lot of discussion on the find and fill rates. Can you just sort of, I guess the one aspect I was curious about, talk about how advantaged you are versus some existing or up and coming competitors and why technologies tied to AI or electronic tags might not lead competitors to close the gap more quickly? I'll answer the first question quickly on free cash flow. So we're very pleased that we've been able to demonstrate free cash flow growth, operating free operating cash flow growth, net income, and adjusted EBITDA. We don't guide to conversion as it relates to your free cash flow as a percent of adjusted EBITDA. It's impacted by things like launching new products, whether that be EBT, SNAP, alcohol, or caper. But over time, they trend in the same direction. And we believe adjusted EBITDA is a good proxy for operating cash flow. TG, do you want to touch on that?

Speaker Change #127: Relates to newer cohorts, so we haven't called out any different trends.

Speaker Change #127: Typically cohorts grow in the second year compared to the first and we've mentioned that the new cohorts that we're activating our larger than the pre COVID-19 cohorts.

Speaker Change #128: Thank you got it thanks, so much.

Please.

Speaker Change #128: Our next question comes from the line of Steven Fox of Fox Advisors LLC.

Steven Fox: Hi, good afternoon.

Stephen FOX: I just had two questions. First, a simple one. Any thoughts for the new year on free cash flow conversion off of EBITDA? And then, secondly, there's been a lot of discussion on the find and fill rates. Can you just sort of, I guess the one aspect I was curious about, talk about how advantaged you are versus some existing or up and coming competitors and why technologies tied to AI or electronic tags might not lead competitors to close the gap more quickly? I'll answer the first question quickly on free cash flow. So we're very pleased that we've been able to demonstrate free cash flow growth, operating free operating cash flow growth, net income, and adjusted EBITDA. We don't guide to conversion as it relates to your free cash flow as a percent of adjusted EBITDA.

Steven Fox: Just had two questions first a simple one.

Steven Fox: Any thoughts for the new year on free cash flow conversion of EBITDA and then secondly.

On if theres been a lot of discussion on the found in fill rates.

Can you just sort of I guess, the one aspect I was curious about talk about how advantage you are versus some of the either existing or.

Steven Fox: Up and coming competitors, and why technology tied to AI or electronic tags might not lead competitors to close the gap more quickly.

Steven Fox: Some new products, whether that be EBT snap or alcohol or paper.

Steven Fox: But overtime they trend in the same direction and we believe adjusted EBITDA is a good proxy for operating cash flow that we generate.

Steven Fox: TJ do you want to touch on Yep.

Fiji Simo: Yep. So on your question, it's very important to know that if you look at online grocery shopping in general, the number one reason for churn is cost. The second reason for churn is order quality. And that's why order quality is so critical to get right if you want people to retain and continue ordering with you. And order quality is even more critical to get right on the core of the weekly shop, things like meat, things like produce, which is why I was in my shoulder letter that we obsess over things like the ripeness, your preferred ripeness of bananas, so that we're able to deliver exactly what you want. And that's really important to be able to move the industry online. I've described previously all of the deep integration that we have with retailers in order to be able to have high sound rate and show rate, whether it's catalog integration, planogram integration, collecting a lot of data, millions of replacement billions of data points on what people prefer. And all of that is contributing to a significant advantage. If you ask whether AI in particular is an advantage, I would say we have absolutely leading models in this particular aspect. But much more importantly, if a competitor was coming into the market right now and was able to reproduce all of our models overnight, they still wouldn't have the 10 years of data that we have accumulated on exactly all of the inventory patterns at 85,000 souls, all of the preferred replacements for all of the different parts of the population. They wouldn't have all of that data that powers our machine learning models and allows us to really deliver a completely differentiated So again, it's really the combination of deep integration with retailers, lots of data, and great predictive analytics models that give us a really substantial edge; it's very helpful. Thank you. Thank you. Our last question comes from the line of Mark Zietowicz of the Benchmark Company. Your line is open.

On your question very important to know that if you look at online grocery in general the number one reason for churn.

TJ: <unk> costs. The second reason for churn is all the qualities and.

TJ: And that's why all the quality so critical to get right you want people to retain and continue ordering with you and all the quality is even more critical to get right on the call of the weekly shop things like <unk> things like fruit juice, which is why it wasn't my shareholder letter that we obsess over like so right now.

TJ: Please tell the ripeness of bananas, so that's why I vote.

Fiji Simo: And that's really important to be able to move the industry online. I've described previously all of the deep integration that we have with retailers in order to be able to have high sound rate and show rate, whether it's catalog integration, planogram integration, collecting a lot of data, millions of replacement billions of data points on what people prefer. And all of that is contributing to a significant advantage. If you ask whether AI in particular is an advantage, I would say we have absolutely leading models in this particular aspect.

TJ: Back to you what you want and that's really important to be able to move it.

TJ: Key industry online I've.

TJ: Previously all of the deep integration that we have with retailers in order to be able to address with hi <unk>.

Speaker Change #129: Right and shell rates, whether its catalog integration plan O Gram integration collecting a lot of data.

Speaker Change #129: AV replacement billions of data points on what people prefer and all of that is contributing to a significant advantage you ask like what our AI. In particular is an advantage I would say we are absolutely using models on on this particular aspect, but much more important.

Fiji Simo: But much more importantly, if a competitor was coming into the market right now and was able to reproduce all of our models overnight, they still wouldn't have the 10 years of data that we have accumulated on exactly all of the inventory patterns at 85,000 souls, all of the preferred replacements for all of the different parts of the population. They wouldn't have all of that data that powers our machine learning models and allows us to really deliver a completely differentiated So again, it's really the combination of deep integration with retailers, lots of data, and great predictive analytics models that give us a really substantial edge; it's very helpful. Thank you. Thank you. Our last question comes from the line of Mark Zietowicz of the Benchmark Company. Your line is open.

Speaker Change #129: If I could.

Speaker Change #129: Competitor was coming into the market right now and was able to we produce all of our models are all night still good enough. The 10 years of data that we have accumulated on exactly all of the inventory patterns of up to 85000 installed all of the pre filled replacement for all of the different parts of the population.

Speaker Change #129: They wouldn't have all of that data that powers all.

Machine learning models and allows us to really deliver a completely differentiated experience. So again, it's really the combination of deep integration with retailers lots of Ddos, great predictive analytics models that give us.

Speaker Change #129: Readership central edge.

Speaker Change #130: Great. That's very helpful. Thank you.

Speaker Change #131: Thank you.

Our last question comes from a lot of market Zika tablets at the benchmark company. Your line is open.

Mark Patrick Kelley: Thank you. I just have two questions, one on user growth and the other on AOB. Excuse me. But first, I'd just like to know how your customer acquisition strategy is evolving and the understanding that the secular growth in online grocery has been deliberate, and there's only so much you can push here. I'm just curious if you think about the returns you're seeing in customer acquisition, if the rate of improvement that you're seeing there suggests that at some point, you'll see a dollar investment accelerate here relative to GTV. And then separately on AOV, I'm just curious if you could maybe break out what the puts and takes or headwinds and tailwinds are this year, both inclusive and exclusive of the broader inflationary environment. Thank you. So on user growth, we go back to this idea that this is a massive time that's still vastly under-penetrated online, just 12% online penetration, while other categories of commerce are at 25-30%. And we're the category leader, so we see it as our responsibility to accelerate the movement of the market online. That is done through a variety of tactics. Marketing is one of them, but there are many other ones. We invest in partnerships. You probably saw what we did with Peacock this quarter. We partner with all retailers so that all retailers can also market to their customers because there's very clear data showing that the omni-channel customer is 2-4x more valuable than the in-store only customer. So retailers have an incentive to get their customers to the omni-channel. So we are really using all of these tactics to move the market online. As it pertains to marketing specifically, we try to get more and more efficient with marketing every year and unveil new tactics. And what you're hearing this quarter is that we did shift some of our marketing investments toward incentives because we have really unlocked the ability to deliver incentives in a way that allows us to both acquire customers but also retain them over time by incentivizing the behavior that leads to habituation.

Mark Patrick Kelley: Thank you so two questions one on user growth and the other one.

Lori Mark: Sure.

Zika tablets: Excuse me the first just curious how your customer acquisition strategy is evolving and the understanding that.

Speaker Change #134: The secular growth in online grocery has been deliberate.

Speaker Change #135: And there is only so much you can press here I'm just curious if you think about the returns youre seeing in customer acquisition.

Speaker Change #135: The rate of improvement that you're seeing there suggests.

Speaker Change #135: Suggests at some point Youll see we will see a dollar investment accelerate here relative to G. CTV and then separately on <unk> just.

Speaker Change #135: Just curious if you could maybe break out what the puts and takes are headwinds tailwind.

Speaker Change #135: <unk> this year.

Speaker Change #135: Both inclusive and exclusive of the broader inflationary environment. Thank you.

Fiji Simo: So on user growth, we go back to this idea that this is a massive time that's still vastly under-penetrated online, just 12% online penetration, while other categories of commerce are at 25-30%. And we're the category leader, so we see it as our responsibility to accelerate the movement of the market online. That is done through a variety of tactics.

Speaker Change #135: So on user growth, we go back to say Joe that this is a more.

Speaker Change #135: Massive Tam that's still vastly underpenetrated online just 12% online penetration while other categories have come out thought 25, 30% and while the category leader. So we see it as our responsibility to accelerate the move of the market online.

That is done through a variety of tactics marketing is one of them, but there are many other once we invest in partnerships. We probably you probably saw what we did with peacocks each quarter, we partner with our retailers. So that's all retailers can also market to their customers because the very tail data are showing that the omnichannel customer.

Fiji Simo: Marketing is one of them, but there are many other ones. We invest in partnerships. You probably saw what we did with Peacock this quarter.

Fiji Simo: We partner with all retailers so that all retailers can also market to their customers because there's very clear data showing that the omni-channel customer is 2-4x more valuable than the in-store only customer. So retailers have an incentive to get their customers to the omni-channel. So we are really using all of these tactics to move the market online. As it pertains to marketing specifically, we try to get more and more efficient with marketing every year and unveil new tactics. And what you're hearing this quarter is that we did shift some of our marketing investments toward incentives because we have really unlocked the ability to deliver incentives in a way that allows us to both acquire customers but also retain them over time by incentivizing the behavior that leads to habituation.

Forex more valuable than in store only customers. So retailers have an incentive to get the customer to be omni channel. So we are really using all of these tactics to move the market online.

Speaker Change #135: As it pertains to marketing specifically.

Speaker Change #135: We tried to get more and more efficient with marketing every year and unlock new tactics and what you are hearing is this quarter is that we did shift some of our marketing investment to Walt incentives, because we have really unlocked the ability to deliver incentives.

Speaker Change #135: Way that allows us to both acquire customers, but also retain them over time by incentivizing behaviors that can lead to a habituation and so we continue to invest in marketing based on long term goals not just expecting a return.

Fiji Simo: And so we continue to invest in marketing based on long-term goals, not just expecting a return within the quarter but really investing with five-year LTV guardrails in mind so that we can leverage the 10 years of core data that we have to give us some confidence in the return on our marketing. As it relates to AOV, just as context, in 2022, as inflation was increasing, we saw basket sizes increase from 107 in Q1 to 111 in Q4. Last year, in 2023, basket size was relatively stable; it was 112 in Q1 and 113 for Q2, Q3, and Q4. But as a result, comparing 2023 to 2022, you saw a decrease in AOV growth year over year. Was it 5% in Q1, then 3%, then 2%, then 1%? And that's why, on the last couple of calls, we've been calling out that the GTV growth that we've been delivering is higher quality, and by that, we mean driven more by orders growth. And so we continue to be focused on orders growth and accelerating orders growth. We know that AOV is impacted by some things that are outside of our control, like inflation. We have seen inflation moderate. We've witnessed four quarters in a row of relatively stable basket sizes. So hopefully, that gives you the context. Subs by www.zeoranger.co.uk Yes, it does. Thanks very much. Thank you. This concludes today's conference call. Thank you all for participating. You may now go.

Speaker Change #135: Within the quarter, but really investing with a five year LTV guardrails in mind, so that we can.

Speaker Change #135: The 10 year of core data that we have.

Speaker Change #135: To give us some confidence in the retail and all of our marketing.

Speaker Change #135: Marketing.

Speaker Change #135: As it relates to <unk>, just as context in 2022 as inflation was increasing.

We saw basket sizes increase from 107% in Q1 to 111 in Q4 last year and 2023 basket size was relatively stable. It was $1 12 in Q1 and $1 13 for Q2, Q3, and Q4, but as a result, comparing 2003 to 2022, you saw a decrease in AB growth year.

Speaker Change #135: Every year was at 5% in Q1, and 3% than 2% than 1% and Thats why for the last couple of calls we've been calling out that the GCB growth that we've been delivering is higher quality and by that we mean driven more by orders growth.

Fiji Simo: And that's why, on the last couple of calls, we've been calling out that the GTV growth that we've been delivering is higher quality, and by that, we mean driven more by orders growth. And so we continue to be focused on orders growth and accelerating orders growth. We know that AOV is impacted by some things that are outside of our control, like inflation. We have seen inflation moderate. We've witnessed four quarters in a row of relatively stable basket sizes.

And so we continue to be focused on orders growth and accelerating orders growth we know that.

Speaker Change #135: <unk> is impacted by some things that are outside of our control like inflation, we have seen inflation moderate we've witnessed four quarters in a row relatively stable basket sizes. So hopefully that gives you the context that you are looking.

Nick Giovanni: So hopefully, that gives you the context. Subs by www.zeoranger.co.uk Yes, it does. Thanks very much. Thank you. This concludes today's conference call. Thank you all for participating. You may now go.

Speaker Change #136: Yes, it does thanks very much.

Speaker Change #137: Thank you.

Speaker Change #138: This concludes today's conference call. Thank you all participating you may now disconnect.

Q4 2023 Maplebear Inc d/b/a Instacart Earnings Call

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