Q4 2024 Maplebear Inc Earnings Call
Welcome to CoNabilitY Emergency Room!
Speaker Change: Good day and thank you for standing by. Welcome to Instacart's fourth quarter and full year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during this session, you will need to press 1-1 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: I would now like to hand the conference over to Rebecca Yoshiyama, Vice President of Investment Relations, Capital Markets, and Treasury. Please go ahead.
Rebecca Yoshiyama: Thank you, Operator, and welcome everyone to Instacart's fourth quarter and full year 2024 earnings call. On the call with me today are Fidji Simo, our Chief Executive Officer, and Emily Reuter, our Chief Financial Officer.
Speaker Change: During today's call, we will make forward-looking statements related to our business plans and strategy, developments in the grocery industry, and our future performance and prospects, including our expectations regarding financial results and shareware purchases.
Speaker Change: These four looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. 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.
Speaker Change: In addition, we'll also discuss certain non-GAAP financial measures, which have limitations and should not be considered in isolation from, or as a substitute for, our GAAP results.
Speaker Change: A reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter which can be found on our investor relations website. Now I'll turn over the call to Fidji for her opening remarks.
Fidji Simo: Thanks Rebecca and hello everyone. I hope you had a chance to read my shareholder letter where I highlighted our strong finish to 2024 and the positive momentum we're carrying into 2025.
Fidji Simo: As a category leader in a massive and underpenetrated market, we're not just focused on leading in terms of share of sales, but also by setting the pace for innovation and growth. And for us, these things go hand in hand.
Fidji Simo: The more we innovate, the more indispensable our platform becomes for customers, retailers, and brands. Let me share a few recent examples of how we are delivering on this promise.
First, for our customers.
Fidji Simo: In the past year, we launched new service options like SuperSaver and FreePickup, expanded family accounts to all users, and continuously optimized our marketing and incentive programs.
Fidji Simo: Additionally, our continued momentum with restaurants and the rollout of our industry-leading $10 minimum basket has given customers more reasons to choose Instacart, whether that's for delivery from hundreds of thousands of restaurants nationwide or incremental top-up grocery orders.
Fidji Simo: Now for our retail partners. We're committed to helping them better meet their customers' needs no matter where or how they choose to shop.
Fidji Simo: With grocery prices increasing over 25% since 2019, the need to innovate and enable savings for customers has never been greater.
Fidji Simo: That's why we've built industry-leading solutions such as EBITDA acceptance, loyalty program integrations, and digital flyers, each of which now covers over 80% of our GTVs.
Fidji Simo: We also continue to encourage grocers to move to price parity with their stores, as we've seen that the ones that do have grown much faster on our platform.
Fidji Simo: Recently Kroger introduced same as in-store pricing on items featured in their weekly ad and Schnacks and Heritage Grocers Group both moved to prosperity chain wide and across all items too.
Fidji Simo: The solutions we build don't just benefit the more than 1,800 retail banners on our marketplace, but also the approximately 600 enterprise storefronts that we power.
Fidji Simo: Thanks to our investments in our enterprise solutions, we've driven double-digit percentage point increases in growth for the majority of retailers following their upgrade to our latest storefront technologies.
Fidji Simo: and we are onboarding more new retailers to our enterprise solutions than in the past.
Fidji Simo: In fact, in 2024, we launched 30 net new retailer sites, more than double the year before. By empowering retailers to grow their businesses, we're expanding our scale and making our technology and service even stronger and more efficient.
Fidji Simo: And finally, for brands, we're helping brands tackle their biggest challenges while positioning ourselves as a one-stop shop for seamless multi-channel advertising.
Fidji Simo: At the heart of this is performance. By leveraging our suite of innovative ad products, powerful ML models, advanced targeting and measurement tools, our performance remains best-in-class across a number of key metrics like ROAS, click-through rates, and sales lift.
Fidji Simo: This is exactly what brands are looking for when deciding where to allocate their ad budgets, which is why we've grown to over 7,000 active brand partners on our platform who collectively spent north of a billion dollar annual run rate on our platform in Q4.
Fidji Simo: This leading technology and performance, plus the breadth and depth of our ad demand, is why we get to attract more and more retailers who want us to power ads on their own properties, which allows us to gain even more scale.
Fidji Simo: We now have over 220 caret ad partners who contribute more inventory to our network and therefore allow us to deliver even greater performance for our advertisers.
Fidji Simo: This results in a virtuous cycle of growth, performance, and scale. And while this was always a strategy, it's really great to see it start to build momentum.
Fidji Simo: Pulling all of this together, our innovation is driving growth across the board.
Fidji Simo: What's particularly exciting is that this momentum is fueled by our solid unit economics and critical advantages, giving us a unique ability to capitalize on the massive opportunity in front of us in ways that our competitors simply can't.
Fidji Simo: Years after restaurant delivery platforms followed us into space, we're still the clear category leader.
Fidji Simo: Among digital first platforms, we are leading in share of sales by far in small baskets and even more so in large baskets, with greater than 70% share in baskets of $75 and up.
Fidji Simo: We continue to activate the most new customers to online grocery, in particular with large baskets, where we're multiples higher than the next biggest player.
Fidji Simo: All of these results in Instacart capturing the most GTV from new customers placing their first grocery, convenience and alcohol order on a digital first platform.
Fidji Simo: And after customers start using Instacart, we're about five times better at converting small basket customers to large basket customers than other marketplaces too.
Fidji Simo: So overall, we are continuing to find new opportunities to make our business even more efficient, which allows us to maintain a disciplined but aggressive approach to reinvesting in growth.
Fidji Simo: By executing on this strategy, we're confident in our ability to extend our category leadership position, deliver short and long-term profitable growth for Instacart and our stakeholders, and transform the industry at large.
Fidji Simo: Now, let me provide a bit more color on our most recent financial results and outlook.
Fidji Simo: In Q4, we closed the year strong. We delivered GTV at the high end of our guidance range, growing 10% year over year. This performance consisted of an 11% increase in orders, driven by growth in both users and order frequency, partially offset by a 1% decline in average order value driven by restaurant orders.
Fidji Simo: Transaction revenue grew 10% year-over-year as we continue to drive shopper efficiencies and reinvested in affordability initiatives.
Fidji Simo: Advertising and other revenue also increased by 10% year over year driven by strong performances from emerging brands and many large brand partners.
Fidji Simo: This, combined with operating expense leverage, resulted in solid profitability across key metrics.
Fidji Simo: Gap net income of $148 million increased by $13 million year-over-year even after lapping a sizable tax benefit in the prior year quarter.
Fidji Simo: Adjusted EBITDA of $252 million exceeded the high end of our guidance range and was up 27% year-over-year.
Fidji Simo: Operating cash flow of $153 million decreased year-over-year due to fluctuations in working capital.
Fidji Simo: We twinnish 2024 with cash and similar assets of $1.5 billion compared to $2.3 billion the year prior.
Fidji Simo: In Q4, we also bought back $5 million worth of shares, bringing our cumulative repurchases in 2024 to 46 million shares for approximately $1.4 billion, and had $312 million of buyback capacity remaining to opportunistically repurchase shares in 2025 and beyond.
Fidji Simo: Overall, our Q4 results were underpinned by our strong operating fundamentals.
Fidji Simo: Order growth is being fueled by monthly user growth and higher order frequency. We continue to see deeper penetration of Instacart Plus members among our overall user base, and the engagement of our members has been strong, especially as we've launched new use cases like restaurants and $10 minimum baskets.
Fidji Simo: From a cohort perspective, we continue to bring in more new users and GTV in 2024 than we did pre-pandemic. In fact, our 2024 cohort delivered the strongest engagement we've seen in recent years.
Fidji Simo: At the same time, our existing cohorts are stable and existing users continue to increase their order frequency and spend per user over time, including in the last year.
Fidji Simo: All of this is incredibly encouraging and gives us even more confidence to reinvest the efficiency we continue to drive across our business into many of the growth initiatives Fidji discussed earlier on the call, and more.
Fidji Simo: We have an incredible opportunity to leverage our critical advantages to innovate in ways that will accelerate online grocery adoption, unlock more growth for our partners, extend our category leadership, and generate more value for Instacart and our shareholders.
Fidji Simo: Now, for our Q1 outlook, we expect Q1 GTV to be between $9 and $9.15 billion, representing year-over-year growth of 8 to 10 percent and reflecting our strong start to the year. It also includes a just-over-one-percentage-point headwind from lapping leap day in the prior year period.
Fidji Simo: We also expect average order value to decline year over year, primarily driven by restaurant orders and our new $10 minimum basket feature, resulting in orders growth outpacing GTV growth in the period.
Fidji Simo: We also expect adjusted EBITDA to decline quarter over quarter, primarily due to typical seasonality in advertising and other revenue.
Fidji Simo: We remain committed to delivering steady annual adjusted EBITDA expansion even as we maintain an aggressive approach to reinvesting in growth initiatives.
Fidji Simo: Based on a stock price in line with recent trading levels, we are targeting 2025 stock-based compensation to be less than $425 million, with Q1 being the lowest quarter of SBC, followed by an anticipated step-up in Q2 due to the timing of our annual refresh grant.
Fidji Simo: With that, we will open up the call for live questions. Operator, you may begin.
Speaker Change: As a reminder, to ask a question, you will need to press star 11 on your telephone. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from Doug Anmuth with J.P. Morgan. Your line is open.
Doug Anmuth: Great. Thanks so much for taking questions. Fidji, can you talk more about some of the key investment areas that you're thinking about for 25, especially some of the
Doug Anmuth: In-store solutions, you called out caper carts, and then Curious, you highlighted restaurants as well. So if you could talk about those. And then, Emily, perhaps just when you're thinking about steady annual adjusted EBITDA margin expansion, can you help us understand how you'd frame that? And does that mean?
Doug Anmuth: Carrying through like incremental margins that you're seeing in one cue through the year or something different than that. Thanks
Speaker Change: Thanks, Doug. On our key investment areas, it's important to remember that we still continue to primarily invest in our core. And you have seen that throughout 24, where we have made our core stronger across selection, affordability, convenience, speed, and continue to do that. So when you look at 2025, again, these remain the core areas that we want to continue investing in. In the selection, on the selection
Speaker Change: You can expect to see us continue to develop more and more of such solutions in the future.
Speaker Change: Another thing that is a top priority, as I've talked about, is our enterprise solutions as a whole. Kapor is certainly one of them and we're very excited about what we're seeing with Kapor in terms of sales lift that Kapor is generating at retailers where it's rolled out. We're seeing double digit increases in basket size.
Speaker Change: at a lot of the retailers that we're in pilots with, which is really strengthening the business case for broader rollout. So we're very excited about that.
Speaker Change: But our enterprise solutions are bigger than Kapor. That includes our storefront technologies, our fulfillment technologies. And as I said in my intro, we have seen a lot of strength there thanks to past investments in making these technologies even more performant, which has driven accelerated growth for retailers that have upgraded to these new technologies, as well as growth from new retailers onboarding on these technologies even faster than in the past
Speaker Change: 13 new retailers coming onto this technology is more than double what we've done in the past. So we're really excited by the momentum in enterprise. You can expect us to continue to invest in this technology at a time where grocers need them more than ever.
Speaker Change: And then finally, it's less on the top line, but let's not forget innovation in advertising. As you've probably seen in the letter, we have innovated massively in the last year across new formats, new measurement capabilities, new metrics, incorporating AI into our products. And that remains a big area of investment for us, that is paying off with ads revenue projected to grow faster than our GTV guide in Q1. So very excited.
Speaker Change: about that. I'll turn it over to Emily on the second part of the question.
Emily Reuter: Thanks Doug for the question. So as it relates to adjusted EBITDA, what we're committing to is to continue expand EBITDA on an absolute and margin basis on an annual basis. So there will be some noise, potentially quarter to quarter. Obviously, we talked about Q1, the impact from advertising seasonality, which is, you know, normal cyclical seasonality that you see in the overall ads business, and also to allow us the flexibility to reinvent.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
For more information, visit www.FEMA.gov
Thank you both.
Speaker Change: Thank you. Our next question comes from Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thank you so much. Maybe I could just ask one question. Looking back to the progress you made in 2024, how do you see the platform set up for a mixture of grocery driven and non-grocery driven growth with respect to the contribution to GTV as you see what you're seeing in terms of how users might be using the platform differently or changing behavior or the acceptability of a wider array of supply on the platform from a commerce standpoint? Thank you.
Eric Sheridan: Thanks, Eric, for the question. So what we're seeing is strength across really both sides of that equation, grocery and non-grocery side. The thing that I really want to call out is the reason we added restaurants on the platform is not just to create an additional restaurant use case, but because we had a thesis that it would also increase our grocery business by creating more stickiness of the overall.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Thank you.
Speaker Change: Thank you. Our next question comes from Nikhil Devnani with Bernstein. Your line is open.
Nikhil Devnani: Do you expect the smaller baskets to be loss leaders to better retain customers and drive LTV? Or do the economics work on a standalone basis if someone is placing a $10 or $20 order with free delivery?
Speaker Change: And then my second question, the Kohl's Australia partnership is quite interesting.
Speaker Change: While it might be expensive to build consumer facing platforms internationally, do you see an opportunity, excuse me, to be a global enterprise solution for more grocery stores in more countries, even if you're not operating a consumer facing marketplace in those regions? Thank you.
Speaker Change: Thanks for the questions, Mikael. I'll start with the second one. On call, so we're really excited to have started to deploy Kapor Karts with calls in Australia. As a reminder, we also deployed Kapor Karts in Austria with Aldi, where we're very pleased with the results.
Speaker Change: And to your broader question, we very much agree with his take, which is that we have a set of enterprise solutions that have really proven to drive great results for retailers in the U.S., and there's absolutely no reason why these enterprise solutions wouldn't also benefit international retailers. We are starting to see some traction internationally, as you're calling out, with retailers really
On your second question on the reduction in minimum basket,
Speaker Change: What we're seeing so far is an increase in order frequency, an increase in total GTV and higher Instacart Plus adoption without seeing any impact on bigger basket orders. So for that reason we are very excited about you know what we're seeing with this change and that's why we're leaning into it.
Speaker Change: We're able to do this at economics that we like because we have been able to batch some of these orders given that we have high order density of orders within those stores. And again, like this minimum, you know, basket size is industry leading because we are the ones that have the scale to do that at economics that can be competitive with more runway to go to continue optimizing as we continue to get.
all down growth.
Thank you, Fidji.
Speaker Change: Thank you. Our next question comes from Ron Josie with Citi. Your line is open.
Ron Josie: Great, thanks for taking the question. I had a question for Fidji and then one for Emily on cost. So, on affordability, Fidji, I just wanted to understand or hear your thoughts on the investments that Instacart has made to improve overall affordability. Obviously, we just talked about low delivery fees, but then the Kroger partnership on same pricing, there's couponing now on the site. I would love to hear how these...
Ron Josie: aspects or perhaps core drivers of order growth. So one is on affordability progress. And then Emily, just on guidance here, we all saw the Super Bowl ad, that was fun. Congrats. Wanted to hear about the impact of marketing spend and if you've seen any benefits from the ad thus far. Thank you.
Speaker Change: And we are continuing to see more and more adoption of these initiatives. As I mentioned in my introduction, whether it's CBT staff, loyalty, or digital flyer, each of them are now at more than 80% of GTV coverage, which is really exciting. And the more we do that, the more we see, you know, all of the positive externalities that Emily has talked about in terms of improvement in order frequency, the 2024 cohort.
Speaker Change: being the strongest we've seen in recent years. We think that there's, you know, very much a link between all of our affordability efforts and the strengths in our underlying fundamentals, especially as we enter 2025.
https://www.kenhub.com
English
Speaker Change: Super Bowl ads are, you know, kind of designed more for brand awareness, you know, driving brand favorability. And of course, we're in the early days of looking at the impact, but, but so far, very pleased with what we've seen.
Thank you, Emily. Thank you, Gigi.
Speaker Change: Thank you. Our next question comes from Ross Barclays. Your line is open.
All right. Great.
One on advertising.
and then the obligatory AI question.
Speaker Change: So, first on advertising, so the environment for CPG looks a little bit mixed here in 2025. How would you guys characterize...
Speaker Change: your pipeline between large and large CPG and emerging brands. And do you think this new category share of digital shelf space metric is going to help with
Speaker Change: future budget allocations to Instacart. And Emily, I think you said ads would grow faster than GDV for, was that for the full year or for 1Q? And then I'll follow up with you in a second.
Speaker Change: Great. So on the As Growing Faster Than Our GTD Guide, this is for Q1.
on your water point.
Speaker Change: So, as you know, we have talked for the last year about our efforts to diversify our advertiser base and attract more of them to our platform, and these diversification efforts are absolutely working.
Speaker Change: We now have 7,000 active brands on the platform. We are seeing extreme strength in emerging brands, and so we're very pleased with how that's gone. It's worth calling out, since you mentioned large brands, that we also have many large brands leaning in and actually capturing share by leaning into our ad product.
in terms of what is going to generate more budget.
Speaker Change: It's really a mix of things. The metric you called out, which we released this quarter, which is like shelf space, is a very helpful metric for brands to really understand if they're spending enough to show up when customers are looking for these types of products.
Speaker Change: and that's making them realize that if you pull back on spend then naturally you're not going to be there when customers are looking for this category of products and that explains why you know when brands pull back they tend to lose share when they lean in they tend to gain share and so that's a helpful metric to kind of contextualize that and help brands really understand those mechanics but it's part of a broader suite of things that are getting them to
Speaker Change: measurement, which shows 15% increase in sales. We have integration with Circana, which are showing across several brands increasing in-store sales, so really proving the incrementality of our ads, and that's incredibly important. And then also continuing to innovate with more formats, more reasons for brands to spend, whether that's our sponsored recipes products, whether that's free gifts, whether that's our occasions pilots.
Speaker Change: All of these are new format innovations that are giving brands more opportunities to show up in maybe searches they wouldn't have shown up in the past.
Speaker Change: and giving them more reasons to lean into Instacart. So we're pleased with what we're seeing. The strategy is clearly working. The diversification is happening, and we feel as a result in a much stronger position than we were in the past.
Speaker Change: That's great. And if I can squeeze one more in on AI. So you guys mentioned how you're using AI to track
Yeah, so
Speaker Change: First off, we use AI in everything that we do across the business. This is just one of the many examples, but we did call out in the letter in particular this quarter, having made improvements to our replacements by training on 10 times more data.
Speaker Change: Just to give you a sense of scale, in 2024, we have made 300 million replacements with 95% satisfaction rate.
Speaker Change: that is kind of mind-blowing scale and that's why we are able to have such accuracy on finding a replacement that you like and getting to that level of satisfaction.
Speaker Change: So it's a combination of great AI, but that great AI needs to be powered by a lot of data points. And that's where our scale and our leading market position really helps.
Speaker Change: in delivering these results. And that applies to replacement, but that also applies to your point on managing inventory in general, where we not only integrate with retailers on their inventory management systems, but also take into account all of the shopper data that we get from shoppers telling us what's on the shelf and not on the shelf, which is much more real time than what we get from retailers.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Speaker Change: You asked whether that drives customer retention. I can tell you it absolutely absolutely does. Quality is critical to moving the grocery industry online and every point of found rate and fill rate matters enormously to drive retention and I'm proud that we've been able to increase both found rate and fill rate for 10 consecutive quarters. We are now at very high levels and despite that we
Thank you.
Emily Reuter: Thank you for watching. Please subscribe to my channel. I'm your host, EmMily.
Speaker Change: Thank you. Our next question comes from Jason Helfstein with Oppenheimer. Your line is open.
Okay, just one question.
Fidji Simo: Fidji, so GTV and order growth for the fourth quarter and first quarter outlook is solid.
Speaker Change: But we're struggling to understand why the company can't grow advertising faster. I think most people would look at these numbers and think you're losing share to the larger retail media platforms.
Speaker Change: So I guess the question is, what is the unlock to get advertising growth to 15 to 20% over some kind of medium term, or is this like an unrealistic expectation, or however you want to take the question. Thank you.
Thank you.
Rebecca Yoshiyama, Emily Maher, Emily Reuter
Speaker Change: First off, you know, we we do expect to add another revenue to grow faster than our GTD guide in Q1. So, you know, that's that's a strong signal of going in the direction that you're mentioning.
Speaker Change: I think fundamentally when you compare us to other retail media platforms, it's worth remembering that many of these retail media platforms have many other sources of demand than just food and beverage. And as we discussed in the prior question, the macroeconomic environment on food and beverage is still challenged. So, you know, we feel very good about our position within that because we have leading performance and therefore we attract, you know, a very good share of these budgets.
but it's worth remembering that we are in a microenvironment.
Specific Food and Beverage Budget Offsale Challenge.
Speaker Change: Now, I don't think that stays like that, and I think the way to continue to drive accelerated growth in the future is to continue leaning into our performance, which is why you're seeing us release more and more ways to measure and demonstrate that performance to advertisers, continue to lean into innovation, which is why you're seeing us release new formats that give more reasons to advertisers to spend with us.
Speaker Change: continue to lean into diversification because we see emerging brands growing much much much faster than the large guys and that's what makes us continue to be very confident in our long-term target range of ads being between 4 to 5 percent of GTV. So for between all of these things we feel very good about our business but also worth remembering that we are still operating under a challenge macro.
Thank you.
Speaker Change: Thank you. Our next question comes from James Lee with Mizzou GeoCities USA. Your line is open.
James Lee: Great. Thanks for taking my questions. My question is regarding shopper supply trends. Can you maybe talk about the supply and demand dynamics there? Any impact on tighter immigration controls here? Thank you.
James Lee: Thanks for the question. Our shopper supply is very healthy. In fact, we still continue to have a wait list in most cities. And so that makes us feel very good about that. We continue to have extremely good retention of shoppers. And in fact, now the majority of our orders are delivered by almost 10 year shoppers, which has a direct impact on the quality of these orders. So that's why we care so much about 10 year because
Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Speaker Change: of, let's say, ride-sharing or restaurant delivery, because the job is different. It's much more spent inside the store. So we tend to see about two-thirds of our shoppers being females, more than 50% of them being parents.
Speaker Change: And so for all of these reasons, we feel very good about our supply dynamics and the ability to continue ramping up our supply to serve additional demand.
Thank you.
Speaker Change: Thank you. Our next question comes from Michael Morton with Moffitt Nathanson. Your line is open.
For more information, visit www.FEMA.gov
Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Speaker Change: The performance for AOVs of the core grocery business year over year. Thank you.
Rebecca Yoshiyama, Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Maher
Speaker Change: So when we're thinking about transaction revenue, you know, we've been operating as a percentage of DTV in the upper half of our long term target range, and really consistently over the last year, and even before then, we've talked about being very happy where we are, and actually talked about the fact that we expect this to fluctuate over time.
Speaker Change: Now, why does it fluctuate? There's a number of different factors within transaction revenue, everything from, you know, retailer revenue, that's the revenue we get from our retail partners, customer revenue, payment revenue. And then that's offset on the negative side by how much it costs us to deliver each order. So a shopper pay, it's offset by coupons, incentives, things like that. And it's also offset by appeasements and refunds. So there's a lot going on within transaction revenue. And that's specifically why we've said in the past, we do not intend
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Maher
Speaker Change: So within transaction revenue, we've continued to drive efficiencies with shopper pay, and that's allowed us to reinvest in initiatives like affordability. So that's things like we talked about offering customers the best pricing, lowering delivery cost options for people who maybe need lower price point options. Those are things like no rush and super saver and pickup that we talked about earlier. It also involves ramping new use cases. So restaurants, the impact of restaurants would be captured there. And then it also factors in
Speaker Change: It also depends on where we're investing across the P&L. So in the past, I've talked about tradeoffs we make between investments we make in sales and marketing as an example. So we may choose to spend more in incentives in one quarter and more in regular way, sort of paid marketing that hits sales and marketing in a different quarter. Overall, as I talked about, our goal is to drive
Speaker Change: Steady annual adjusted EBITDA progression and we want to maintain that flexibility to operate the business where we see the best return on every dollar spent.
Speaker Change: Oh, sorry, there was a second question on the macro environment in terms of AOV in core grocery. So as I talked about...
Speaker Change: As I talked about earlier, in Q4, a broader AOV was down on a year-over-year basis due to restaurants. The other thing that I would note, and we talked about this a year ago, is that on a quarter-over-quarter basis, we do have some impact of smaller orders in the lead-ups to holidays. So think about this as, you know, in the day or two leading up to Thanksgiving or Christmas when people are doing smaller fill-in orders. So there is a small seasonality impact as well.
Speaker Change: From a Q1 perspective, we'll continue to see that impact from restaurants where, of course, restaurant orders are smaller AOV in general, even though our restaurant orders are meaningfully higher than the industry, but we'll also start to see the impact of the $10 minimum basket.
Thank you.
Speaker Change: Thank you. Our next question comes from Brian Nowak with Morgan Stanley. Your line is open.
Speaker Change: Thanks for taking my questions. I have two. The first one actually goes back to Emily to your last point about sort of the trade-offs you make and kind of the investments that you're making.
Speaker Change: Could you just sort of talk to us a little bit about the 2025 budgeting process?
Speaker Change: and how you think about constraints to faster top line growth. Are there areas where you could lean in more at lower incremental margins to drive more growth? Are there areas where you're pulling back just so we can kind of understand that the growth versus profitability framework for 2025?
Thank you. Thank you. Thank you.
Speaker Change: Rebecca Yoshiyama, Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Speaker Change: Now, above and beyond that, we're really looking at our full portfolio of options. Now, that includes investing in, you know, things like marketing and paid marketing. We're looking, you know,
Speaker Change: very actively week to week, month to month, that what are the returns of those dollars? Do we like those returns? And we do that within the context of a five-year NTV, obviously looking for faster returns than that, but giving ourselves the flexibility to invest in things that will return over the long-term. We then look at opportunities, as I mentioned, within transaction revenue, and that can be, how do we think about our fee structures? So we talked about $10 minimum basket as something we're adding to Instacart Plus membership.
Rebecca Yoshiyama: Rebecca Yoshiyama, Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Rebecca Yoshiyama: The last thing I'll say on that is there are also longer term bets, as you know, that we're making in the business. So something like caper, as an example, is a part of the business that we've already been investing in for some time. So that's not new incremental cost, necessarily, but, but something that obviously factors into our overall 2025 budgeting process.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Thank you. Thank you. Thank you.
Operator: Thank you. Our next question comes from Justin Patterson with KeyBank. Your line is open.
Operator: Great, thanks for taking the question. This is Miles Jakubiak for Justin. First, just one on Kapor Karts. Seems like early warnings there have been really positive. So, curious how quickly you guys think that you can ramp the implementation of Kapor Karts to a meaningful amount.
Speaker Change: And what are the main sticking points, sticking points to getting that meaningfully wrapped?
and then just one on the one cue guide.
Speaker Change: It seems like guidance implies some pretty strong order volume growth.
Speaker Change: especially copying the leap year, extra day within there. So wondering if you could just provide some more context on what's driving that and if there's anything with the fee changes or restaurant business that we should keep in mind there. Thank you.
Thanks, Miles. I'll take the first question on Keeper.
Unknown Speaker 0.0.0. Okay. Thank you. Unknown Speaker 0.0.0. Okay.
Speaker Change: We are seeing very good results from the pilot across a variety of aspects. One that is obviously the most important one is do customers love the product? And we are seeing extremely strong product market share there. Customers are telling us that it makes their shopping experience more fun, that it allows them to discover more products and engage with coupons and discounts.
Speaker Change: It's also worth noting that as part of rolling out of CAPER, we also share ad revenue with retailers on those costs, and that creates an additional revenue stream for retailers. So on top of an increase in sales that is in the double-digit range with many grocers, you also have an additional, you know, new revenue stream that's an increase in advertising.
Speaker Change: And on that advertising business line, we rolled out KepaRads this quarter. And what we're seeing is an engagement with KepaRads that's in line with online engagement, which is very exciting and shows us that there is real potential there for advertising, for our brands, but also as a result for creating a revenue stream for retailers and for ourselves.
Speaker Change: So, what we have seen here is that this is all bread and butter. This is what we know how to do very well. We've done very similar things when we rolled out the pickup business across the U.S., so we know how to do that, but it does take a little bit of time because it's very operational. But then once you've done that, and you are showing these double digits increasing sales, you are integrated with retailers' operations, and you are showing them an additional revenue stream, it's a product that has the potential to be exceptional.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Maher
Speaker Change: The last thing I'll add, which I think is exciting, is that...
Speaker Change: We also started testing the ability to tell users about reordering their cart online from the cart. And when you think about moving people from offline to online and making them multi-channel customers, Kapor Carts are going to be a fundamental touchpoint in our ability to do that and make it very easy for someone who's an in-store customer to reorder their basket online and vice versa. So excited about what we're seeing still early days.
Speaker Change: From a guidance and order volume growth perspective, what I'd say is if you go back a couple quarters, a majority of our growth was being driven, a majority of our orders growth was being driven by malgrowth. And so what we started to see in Q3 and Q4 was that order frequency was starting to grow. And that does align with around the time that we launched our restaurants integration. And so that is a factor that's at play.
Fidji Simo, Unknown Executive, Rebecca Yoshiyama, Emily Reuter, Emily Maher
Thanks for the help.
Speaker Change: Thank you. Our next question comes from Shweta Kajuria with Wolf Research. Your line is open.
Keeping macro aside. Thanks a lot.
Yes, thanks for the questions, Shweta.
I would say it's.
Speaker Change: with more capabilities remains the number one way in which you attract advertising budget.
Speaker Change: Second one is scale, and by that I mean not just scale on our marketplace, but scale also through care of ads, and that's a big area of investment for us. We now have 220 retailers whose ads we power on their own properties. That's a number that's growing. And we also, you know, beyond that, want to have a business offline with Kapor Ads, as I just mentioned, as well as many partnerships with Medag.
Speaker Change: Google, Roku, The Trade Desk, NBCU, that allow us to also power ads on these ad platforms with our data. And that gives us massive scale and really makes us the one-stop shop for brands. And what we're hearing from brands is that they love the performance and measurability of retail media. They do not like the fragmentation of retail media and the fact that there's a proliferation of them.
Speaker Change: which we launched in Q4 and the results have exceeded our expectations. We just signed Hy-Vee as an additional partner. We expanded with Schnucks where our retail media revenue together increased by 7x.
Speaker Change: And so, again, scale is absolutely critical and Caritabs is a huge area of opportunity and investment for us.
Speaker Change: The third axis I talked about was diversification. Again, that's because attracting more new advertisers is obviously a level of growth, but that's also because we're seeing high investment rates among these advertisers, and we think that's a big opportunity to continue to diversify our advertiser base.
Speaker Change: And then lastly, innovation. I won't repeat all of them, but you see us innovating in new formats, especially formats that allow advertisers to advertise in aisles that they are not usually surfaced in. So for example, through sponsored recipes, you are able to advertise your salsa when someone is looking for chips.
Speaker Change: And that's an opportunity for advertisers to capture more demand that they wouldn't have gotten with existing formats and were really industry leading on these new formats.
Speaker Change: We sponsor recipes, for example, we're seeing 35% new to brand sales, which is really important for brands to attract new customers, and 70% of impression coming from aisles that are not the typical aisle of that advertiser. So very strong results there, very strong results with our new AI landing pages, which are generating a 20% increase in sales for the campaign with Celsius, for example.
Okay, thanks Fidji.
Justin Post: Thank you. Our next question comes from Justin Post with Bank of America.
Rebecca, your line is open.
Justin Post: I was wondering if you can give us an update on your subscriber growth or percentage of GTV from from subscribers and then any any update on the Walmart relationship testing in the U.S. Thank you.
Justin Post: Yeah, so the majority of our GTV is still coming from Instacart Plus members and as I said at the beginning, while we don't update on specific subscriber numbers, the growth of Instacart Plus members has outpaced the growth of our monthly active orderers and that means we're seeing deeper penetration of Instacart Plus as well as very strong engagement from members. So we really like what we're
Justin Post: That's a direct result of having created a lot more value inside Instacart Plus over the last year. Obviously, through the addition of hundreds of thousands of restaurants, through the addition of the $10 minimum basket, partnership with New York Times and Peacock, the ability to add more members of your family to your Instacart Plus account, all of these things have contributed to the strength we're seeing in Instacart Plus, so we feel very good about that.
Justin Post: As for Walmart, as you know, we are rolled out in several hundred stores with Walmart in the U.S., in addition to a full rollout with Sam's Club, as well as a full rollout with Walmart in Canada.
Justin Post: We continue to see that we are highly incremental to their own business and for that reason we think the results are highly positive. However when it comes to an expansion of course we would love to expand with Walmart but that's their decision not ours and nothing to report on that side.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from Stephen Fox with Fox Advisors LLC. Your line is open.
Stephen FOX: Hi, thanks for taking my question. I just had one big picture question and apologize if this under appreciates the complexity of your business, but you've highlighted a ton of different initiatives that seem to generally be having success.
Stephen FOX: and I know they're in different stages, but it seems like as you move on that there's an opportunity to accelerate the business further from as some of these mature. I guess I was wondering how you would sort of, you know,
Stephen FOX: maybe calm that idea or maybe support that idea if we were thinking out maybe over the next 12 to 24 months for some even better top line growth. Thanks.
Speaker Change: Thanks, Stephen. So, as you know, we don't guide beyond Q1, but what I can tell you is that I personally look at the leading indicators of our business.
Speaker Change: and the leading indicators are typically, are we increasing the number of users we're attracting to the platform? The answer is a strong resounding yes. In fact, the 2024 cohort was larger than the 2019 cohort and was also the strongest engagement that we've seen in recent years. So in terms of new user acquisition and retention, I feel very good about that.
Speaker Change: I feel very good about our existing users also increasing order frequency over time thanks to all the new use cases that we've created as well as our affordability initiatives. I feel very good about Instacart Plus penetration continuing to deepen as we've just talked about and shared data around.
Speaker Change: I feel very good about the competitive environment where we continue to have category leadership and continue to see that we are far ahead of competition on the core fundamentals of the business, obviously selection, but also quality, which is very, very hard to get to the level we're at, and we continue to get even better. And so we feel like these advantages are incredibly defensible and should continue to contribute to our success in the long run.
Speaker Change: because we have these strong operating fundamentals, that gives us even greater confidence in our ability to reinvest in growth and lean into our role as category leader, which is to accelerate the move of the industry from offline to online. We know it's an industry that has moved slower than certainly anyone wished. And we see that as our role to accelerate that adoption. We feel that we have all of the ingredients in place.
Speaker Change: to do that and to continue leading into our last category leader in ways that competitors just can't match. So for all of these reasons, I feel very good about our future.
Great, that's very helpful. Thank you.
Speaker Change: Thank you. Thank you. That's all the time we have for questions. This concludes today's conference call. Thank you for participating. You may now disconnect.
Music Music Music Music Music Music
[music]
Music Music Music Music Music Music
Speaker Change: Brian Con grandchildren Phone number Parents short video anniversary Thanks Thanks Thanks Want to be part of something? Do it. more. connected.