CART - NASDAQ

Good day, and thank you for standing by. Welcome to Instacart's First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Rebecca Yoshiyama, VP of Investor Relations, Capital Markets and Treasury. Please go ahead.

Thank you, Josh, and welcome, everyone, to Instacart's First Quarter 2024 Earnings Call. On the call with me today are Fidji Simo, our Chief Executive Officer; Nick Giovanni, our current Chief Financial Officer; and Emily Reuter, our current Vice President of Finance and incoming Chief Financial Officer. After brief prepared remarks, we will open up the call for live questions with Fidji and Emily. During today's call, we will make forward-looking statements related to our business plans and strategy, future performance and prospects, including our expectations regarding financial results, partnerships, equity, issuances and share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. You can find more information about these risks and uncertainties, including those related to the classification of shoppers on our platform in our last Form 10-K filed with the SEC. We assume no obligation to update these statements after today's call, except as required by law. In addition, we will also discuss certain non-GAAP financial measures, which have limitations and should not be considered in isolation from or 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. Thanks, Rebecca. Hi, everyone. I hope you had a chance to read our shareholder letter, which highlights our strong start to 2024 and how we're continuing to raise the bar across all the most important dimensions of groceries. As the largest online grocery marketplace in North America, we provide 98% of families with access to delivery and pickup from over 1,500 retail banners who represent more than 85% of U.S. grocery sales. On top of the best selection, 45% of our orders are accepted by shoppers who are already at or within a mile of the store, which means your first item is often being picked out faster than it might take you to get out the front door. Our shoppers also have the advantages of experience and our technology. With shopper tenure on the platform at an all-time high, constant improvements to our models and in-store tools like planograms, shoppers can complete orders faster and with more accuracy. Simply put, no other marketplace offers the leading customer experience we provide at the scale and competitive cost we deliver it at. And now by partnering with Uber, we are giving people more of what they're looking for. By bringing on hundreds of thousands of restaurants to Instacart overnight, we're creating an unmatched combination of grocery and restaurant options for Instacart customers. The Instacart app can now serve more of our customers' food needs, and our Instacart+ membership becomes twice as valuable with no delivery fee on grocery and restaurant orders over $35. By giving our customers more reasons to turn to Instacart, we believe we'll also be able to drive more sales and growth opportunities for our retail and brand partners, which remains our top priority. Overall, I'm excited for what's ahead for Instacart in 2024 and beyond. We have a strong operating foundation of relentless focus on profitable growth, and we're executing well on our vision to build the technologies that are transforming the grocery industry. So it is with great confidence that we announce Emily Reuter as our next Chief Financial Officer. Nick will retire at the end of Q2, and Emily's role is effective immediately after we file our Form 10-Q, which is expected later this week. As Nick and I discussed the best CFO profile for our future business, I wanted someone with a depth of operating experience in a complex marketplace business similar to our own. We found out and more in Emily, and she's been contributing enormously since she joined in January. Emily is undoubtedly the best CFO to help drive Instacart's future. I want to thank Nick for his exceptional contributions over the past few years. By instituting a new level of financial rigor across the company, Nick helped transform our business into one that delivers strong profitable growth and was one of very few tech companies that could make a successful public market debut last year. Now I'll turn the call over to Nick to provide a few remarks.

Thank you, Fidji. It has been an incredible 3.5 years, and I'm very proud of what we have accomplished together at Instacart. The level of execution and teamwork required to create a sustainable, profitable and growing company and then to take it public after the longest tech IPO drought in history was one of the most satisfying experiences I've had in my career. Instacart is in a great position as the clear leader with strong operating fundamentals. And after working closely with Emily over these past several months, I'm certain that our team, our partners and our shareholders cannot be in better hands. It has been a pleasure engaging with all of our investors and analysts over the past few years. Thank you all. And with that, I'll step off the call and turn it over to Emily.

Thank you, Fidji and Nick. Since joining Instacart in January, I've become even more bullish on the company's future. I joined Instacart because of its clear leadership position with an online grocery and its impressive vision for the future of grocery technology. I'm now even more confident in our ability to capture our share of the massive market opportunity ahead. My confidence is driven by a few things: the depth of our technology integrations as well as the breadth of our long-standing retailer and brand partnerships; our ability to deliver a great customer experience. This means having the best selection combined with high-quality service all at the price and speed customers wanted; our cost serve advantage, underpinned by our ability to fulfill multiple big basket grocery orders from the same store at the same time. This allows us to generate efficiencies from batching while also giving shoppers more earnings opportunities; and finally, we aren't just focused on delivering results for the next few quarters or years. We're investing in technologies that will shape the future of grocery and grow the pie for all our stakeholders. I could not be more excited to work with our teams to drive even more profitable growth for Instacart as we work to further extend our lead across all of these dimensions. I also want to thank Nick for his support over these past few months and Fidji for her inspiring and collaborative partnership from day one. Now let me provide more color on our financial results and outlook. Q1 was an exceptionally strong quarter for us with both GTV and adjusted EBITDA beating the high end of our guidance ranges. On one hand, our outperformance in GTV was driven by a continuation of trends we've been discussing. This includes improving cohort dynamics consistent with what we've said in the past, which is our mature cohort declines continued to improve, and our new cohorts continue to be bigger than pre-pandemic cohorts. It also includes a lessening year-over-year EBT SNAP headwind, which had the biggest impact in Q4 and a smaller impact in Q1, primarily because of the successful EBT SNAP launches with Kroger and Costco. On the other hand, our year-over-year GTV growth in Q1 also benefited from a number of onetime things. This included just over 1 percentage point of growth from leap day in addition to a stronger-than-expected seasonality as Q1 2024 was an exceptionally bad winter season, especially compared to the prior year quarter. After taking all of these factors into consideration as well as what we've seen so far in this quarter, we arrived at our Q2 GTV guidance of $8 billion to $8.15 billion, representing 7% to 9% year-over-year growth. This growth outlook is a bit lower than Q1, primarily because we don't expect the benefit of inclement weather. While Q2 growth will not have the benefit of leap day, we largely expect this to be offset by EBT SNAP moving from a modest year-over-year headwind to a tailwind from Q1 to Q2. Overall, our Q2 GTV outlook represents a sustained step-up versus the 5% year-over-year growth we delivered in 2023. We are also guiding to strong Q2 adjusted EBITDA of $180 million to $190 million and are well on track to delivering adjusted EBITDA expansion in full year 2024 on both an absolute and percent of GTV basis. One important thing to note about our adjusted EBITDA outlook is it reflects our ability to manage multiple levers across our P&L to drive leverage. In Q2, we expect advertising and other revenue to grow largely in line with what we experienced over the past 2 quarters. This means our adjusted EBITDA as a percentage of GTV is expected to grow year-over-year, primarily driven by transaction revenue and adjusted OpEx leverage. We are also continuing to take a disciplined approach to equity management. We continue to expect net dilution to be in the low single digits before any share repurchases. And in 2024, we are committed to making sure that the net value of equity we grant employees this year is less than the adjusted EBITDA we delivered in 2023. We are confident in our ability to execute and generate more shareholder value over time. This is why we cumulatively repurchased approximately 27 million shares for $751 million by the end of Q1. As of March 31, we had $249 million of remaining share repurchase capacity and plan to continue opportunistically repurchasing shares. Overall, our business is performing well and our operating fundamentals are solid. We remain relentlessly focused on making our service better, deepening our leadership position and innovating with new technologies like Caper and our partnership with Uber. While we don't expect these new growth initiatives to materially impact our financials in Q2, we believe that they have the potential to drive more value to consumers and growth to our retail and brand partners over time. We also expect all of this will help us drive more profitable growth and progress towards our long-term financial targets over time. We're excited about the future, and we appreciate your support as shareholders. With that, Fidji and I are here to take your questions. Operator, you may now begin.

[Operator Instructions] Our first question comes from Eric Sheridan with Goldman Sachs.

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

Thanks, Eric, for the question. So we are still very excited about the long-term growth that we anticipate in a market that is still moving online and still deeply underpenetrated online. What we see as the building blocks of that long-term growth are kind of the same things that are making us succeed today and allowing us to have this leadership position. Number one is selection. We continue to have leading selection. And we are, in fact, continuing to increase the selection not just in grocery but now also adding a new use case with restaurants. We were able to add hundreds of thousands of restaurants overnight, which will create a new use case for the app. Quality is absolutely critical. You can see in the letter more details on how we continue to improve that and be at an all-time high since the pandemic on found rate and fill rate. And we have a real leadership position there with not only a very healthy shopper; supply but shoppers that are highly qualified and at the highest of their tenure right now. We also see speed being a critical advantage, which, again, is tied to our shopper supply with 45% of shoppers being at the store -- within a mile of the store. And that means that we can deliver these orders faster than anyone, and we know that speed matters enormously in this market. The last one is affordability. That remains the thing that we need to keep working out to continue expanding the TAM, and we are hard at work on it through a multipronged approach, where we are adding a lot of different savings whether it's from retailers, from CPGs, loyalty programs, weekly flyers and really working with retailers on optimizing their pricing so that the customer that buys online feel like they are getting maximum value. And you're seeing us make progress on that as well with $4.75 saved on items per order, which is up 20% year-over-year. So these components aren't changing. They are what's going to drive long-term growth. And every quarter, you're going to hear us talk about how we're making progress on all of them to really activate the growth. Now at a macro level, we are -- we have also talked about the fact that mature cohorts improving quarter after quarter, as we saw again this quarter, is definitely a big driver of long-term growth as well as new cohorts continuing to get bigger, which is certainly what we've seen in '23 and now in '24 compared to pre-pandemic. So we feel very well set up for the long term.

Our next question comes from Nikhil Devnani with Bernstein.

I wanted to ask about reinvestment, please. It looks like your transaction revenue stepped up a bit sequentially, and sales and marketing was sort of flattish as a percent of GTV sequentially as well. Given you beat the guidance pretty comfortably on EBITDA, did you look at the possibility of reinvesting some of that excess profit to support growth for the rest of the year? I guess why not go on the front foot more? Was it simply a lack of ROI on some of that investment? Or did other factors come into play as well?

So I want to be clear that we actually did reinvest to support growth, and that's not always seen in the sales and marketing line. Sometimes it's seen in the incentive line, which is contra-revenue. And the reason we have been able to reinvest to support growth while having high confidence that this will return is because we have really overhold of an incentive system in the last year to be able to really target the right incentives to the right customers at the right time to drive long-term value, to drive habituation, to drive more engaged customers. And so what you're seeing us do is actually reinvest heavily into the business to continue to support that growth. That may not appear in the numbers immediately because we take a long-term view to this reinvestment. And so some of these incentives or marketing might be driven at long-term retention, like, for example, getting you to adopt one more retailer or one more category or buying from a club, all of which are predictors of long-term retention and higher LTV. And so you might see that pay off over the longer term rather than in quarter. But we are very much investing in the business and don't feel limited in our ability to invest.

Our next question comes from Ross Sandler with Barclays.

Fidji, just a couple of questions on these partnerships. So I guess, first, maybe we can clear the air on the Amazon elephant in the room. You guys work with Whole Foods in Canada. Sounds like Amazon is going to go another push here with their new pricing mechanism for Prime in the U.S. I guess what's your view on that? And is there any reason why, at some point in the future, not exclusive or whatever, you couldn't go back to working with Whole Foods? That would be first question. And then the second one is on the Uber partnership. I guess just how big do you think this could be? And do you think that restaurant ordering will be just folks that are IC+ members who kind of order a la carte from food delivery apps? Or do you think there's like a high overlap of DashPass subscribers that might come over and use Instacart now?

Thanks, Ross. So on Amazon specifically, I would say Amazon has experimented with many different pricing structures over the years. We have been testing this add-on subscription for some time. And within this construct, we remain very confident that we still have the winning customer value prop and some critical advantages. We have the best selection, 1,500 retail partners, reaching 98% of households. We know how much selection matters in this market. That's a key advantage. We also have a key advantage on speed. As I said, 80% of our orders are on demand, half of which are priority, whereas in the case of Amazon, you have to schedule orders far in advance. And we know, again, that speed matters enormously in this market. And we really have the best value with Instacart+ being $99 a year, now twice as valuable with the addition of restaurants and not requiring an extra subscription. So we feel really good that under any construct from this competitor, we will be able to continue gaining share as we have in the past. We work with them in Canada. We are pleased with the results. There is no reason why we wouldn't be able to expand to Whole Foods, but that's their decision, not ours. We would be thrilled to work with them, but that's for them to decide. Now on the Uber side, I'm really excited about the partnership. I think this is adding enormous selection overnight at positive unit economics, which, as you know, is really hard to pull off when you enter a completely new category. So we think this is something that's going to be incredibly accretive to the Instacart user. And on your more specific question on which type of usage do we see, we actually see that we have a lot of incremental audiences that Uber does not have especially in family, especially in the suburbs, which is a big part of why this partnership is also valuable to them, and we are going to be aggressively wanting to convert these customers into restaurant customers. We know that our customers already go to other apps to order restaurants. That's why we decided to prioritize entering this category. And I think with the value proposition of Instacart+, which is not increasing in price despite adding all restaurants and free delivery above $35 from both grocery and restaurants, we have a very strong value proposition here with leading selection in grocery and leading selection in restaurants. So we're really excited about our ability to attract new users and convert our existing users to become restaurant customers as well and as a result, make them more engaged.

Our next question comes from Jason Helfstein with Oppenheimer.

Just 2 questions. So you had some comments about expanding to pickup. Just how do you think about like what are the savings that a customer gets when they do pickup? And do you think this better positions you to compete with Walmart for online grocery? And the second question just to Uber. Can the economics work to expand the partnership so that they would actually offer your grocery offering on their app? So open-ended question on that.

So on pickup. Pickup is a big part of our affordability strategy because it is a cheaper option for people who value price over convenience. And so that's why we're focused on it, and that's why we actually made it free this quarter to use pickup. So to your point on the savings, it's a great option for people who may not have the time to get inside the store and want to benefit from those time savings but don't want to pay the cost of delivery. And we see that it is, in fact, a different customer because 75% of pickup orders are incremental. Now pickup is a smaller part of our overall business in big part because we started with grocery, but it's the part that continues to grow, and we continue to expand with large grocers like Kroger, Albertsons, many more to continue to grow the pickup business. So we're excited about it, but it is a smaller part of our overall business. As for your question on Uber and grocery, to be clear, this partnership was very focused about us entering restaurants. We are still going to compete in grocery. And we continue to have leading category share in grocery, so this is something that we're excited to continue further.

Our next question comes from Colin Sebastian with Baird.

Nick, all the best to you on your next steps. And Emily, welcome and congrats. Looking at the advertising revenue opportunity, this seems like still an area that's a significant opportunity as you engage with more CPG and brand advertisers. And so looking at that business, looking at the take rate, if you could perhaps maybe update us on the road map there? Any specific platform enhancements or products this year that we should pay attention to and ultimately, Fidji, your vision for advertising on the platform?

Absolutely. So we still have very high conviction on our long-term targets, which are that advertising would reach 4% to 5% of GTV over time. It will not be linear. If you look at the last couple of years, advertising has grown very fast over the last couple of years. And so that's something that has changed in the last few quarters, mostly as we've told you before, because ad growth lagged GTV growth, and we haven't seen ads fully catch up yet. But our conviction around the long-term model is very strong. The reason we have this conviction is because we continue adding more and more partnership to measure the performance of our ad and optimize that, and the results always come back showing that we are an incredible place for advertisers to place their dollars. You have seen that probably in the latter with our partnership with Circana. We continue to launch new objectives and optimization capabilities like, for example, new-to-brand objective and target ROAS this quarter. And so all of these capabilities are really contributing to giving brands confidence that we have a channel by which they are going to see high return, high sales lead, high incrementality. In terms of what to pay attention to, in addition to these measurement improvements, targeting, et cetera, which is really our bread and butter, we have extended the strength of our ad platform beyond the world of the Instacart app. You have seen us do partnership with Google, recently NBCU, The Trade Desk, where we are taking the data and the strength of our targeting and our audiences and applying it to advertising platforms outside of Instacart. We have taken a similar approach with Carrot Ads, where we power ads on our retailers' website, whether that's [ Props ], Schnucks, many more. And that's also a way to continue growing the ad business. And then finally, expanding [ this ad ] business inside the store on Caper with Caper Carts, which is obviously small right now given that we have hundreds of carts out there. But as we ramp up to 1,000, of course, this is something that will get a lot bigger, especially as you look to 2025. So overall, like we feel very confident about the performance of our ad. Some initiatives take time, but we feel good about our trajectory.

Our next question comes from Doug Anmuth with JPMorgan.

Emily, can you provide any more color on what you're seeing across cohorts and if you see a time frame for mature cohorts, those declines to flatten out? And then anything that you can help us understand around the benefits of the new partnerships with Kroger and Costco on EBT SNAP and on quantifying just as you flip from a headwind to tailwind over -- into 2Q?

Thanks for the question, Doug. So on cohorts, what I'd say is that everything that we've said about cohort dynamics remains true. So our mature cohort declines continued to improve in the quarter, and new cohorts are bigger than pre-pandemic. What I would note, though, is that the strong Q1 performance that we saw benefited all of our cohorts. And so for that reason, I would expect that there was some acceleration and improvement in Q1 that we don't expect to repeat in Q2 given those onetime impacts. So overall, I think the underlying trends continue to move along the same trends with the onetime impact in Q1. As it relates to the benefit of the new partnerships on EBT, overall, what I'd say is that the year-over-year headwind improved from Q4 to Q1. So the impact was strongest in Q4. And in Q1, the launches of Kroger and Costco helped mitigate that impact. As we move into Q2, we do expect to lap the expiration of those benefits. But the overall impact is modest. The way that I think about it is that the EBT SNAP benefit in Q2 would effectively offset the impact that we had in Q1 from leap day, so about 1 percentage point of growth.

Our next question comes from Michael Morton with MoffettNathanson.

Two if I could. They're related. Could you speak to the defensibility and contract length of some of the largest and exclusive relationships? It's a question that we frequently get from the investor base. And any clarity there? And we do appreciate that it's not essential to the success of your business, but it's FAQ. And related to partnerships, I would love to know how you think longer term when it comes to working with the likes of Walmart and Amazon. Research shows that they're taking share in grocery and could be taking share from your core customer base on the grocer side. And a lot of times, they like to pull things in-house eventually. So is there any risk that you're feeding the beast and bridging them to their own sustainable solutions?

Thanks for the question. So on contract length and exclusivity, first off, I just want to remind everyone that exclusivity is not our strategy. The strategy is fundamentally to be the partner of choice by being very embedded in grocers' business because we drive growth for them. As for the contracts, they are, I would say, 1 to 2 years, and they all have different timing. So it's not as if there is a cliff coming up at any point. And what we usually see is that when retailers go nonexclusive and go to other platforms, what happens is that they continue to grow with us, invest more in the relationship, and the use case that happens on other platforms is quite different from our own. It ends up being very small baskets, the thing that you add after a restaurant order, like a bag of chips and a can of Pepsi, and so very different from what they can do on our platform, which is really everything from small baskets to large baskets. And so we continue to invest in our technology with grocers. We have a relationship even when they're not exclusive. We are very open. We power their owned and operated business. We power their fulfillment. We do pickup with them. We do EBT SNAPs. We do virtual convenience. The list goes on, and it's obviously a much more strategic relationship than just sitting on a marketplace. So that's very much how we think about this. In terms of partnership and long-term working with competitors, I would say what we obsess over is always having the best possible selection for our customers, and that's what got us to have a selection that represent 85% of U.S. gross retail being on Instacart. And so that's why we want to work with every grocer. However, when you talk about competitive advantages, we think our competitive advantages are very strong and in particular, when it comes to fulfillment advantages, the scale at which we operate gives us very significant advantages over any retailer wanting to do that themselves. And that's why you are seeing even the largest guys, the Krogers of the world, et cetera, really relying on us for fulfillment because we can do that at economics that are highly competitive, at the scale that is incredibly competitive, with quality that's topnotch, and as a result, we can grow their business rather than them doing that themselves and not growing as fast as they would if they relied on our technology. So we want to make it always the smartest choice for them to partner with us, and that's exactly what has happened to date.

Our next question comes from Andrew Boone with JMP Securities.

The NBCUniversal partnership is very interesting. Can you talk about the potential of off-platform advertising and what you need to do to unlock more budget as well as more partners?

Thanks for the question, Andrew. So the way we think about it is that we have really unique customer data that can help advertisers identify audiences, for example, who would be new to their brand, who is an engaged customer that may -- that used to be engaged but may have churned. All of these audiences are incredibly critical for advertisers especially in a world where cookies are going away. And other platforms are really hungry for high-quality third-party data. And so we are able, through our first-party data, to do these partnerships where advertisers are able to take our audiences and leverage that on other platforms to make their advertising on other platforms more performant. And so that's very exciting. In addition to that, some of these brands decide to point directly to Instacart because they know that people are going to convert better because they land on a page where the ads allow them to buy and get the product inside their hands within an hour. So it's really a full funnel approach that we have with Google, The Trade Desk, NBCU, and that's why we're really excited to continue deepening these partnerships. Now in terms of materiality, I would say it is still small because it's a new thing and it requires a new infrastructure and a new muscle. Very often, the people that we talk to, to go get these budgets are different people than the people that are allocating spend on Instacart because they're just allocating spend on other platforms that are more maybe awareness driven or other objectives. So it takes a bit of time to sell this in, build these new relationships, add the new tools to make these services easier to access, optimization capabilities. But we've done that in the past with our own platform. We know exactly the playbook. That's the playbook we're applying to this year, and we hope to see the results of that in 2025.

Our next question comes from Ron Josey with Citi.

Maybe as a quick follow-up to one of your prior questions, Fidji. I wanted to ask about just the comments in the letter around operating data. I think you have -- you talked about a decade of operating data. And I wanted to just understand the strategic moats that you have as a result of that, both for the consumers and your retail partners because I think that's something that's often discussed. And to that, maybe another question around, I think, the comments on the call around quality -- or in the letter around quality, specifically around receipt analysis and the benefit of LLMs. Just talk to us about the benefits that you gained from that.

Absolutely. Thanks for the question. The reason I talked about operating data in the letter is because, very often, we talk about having the best prediction models and things like that, which is incredibly important. I want to be clear. But even if someone literally duplicated right now all of our prediction models, if they didn't have the 10 years of operating data, the model wouldn't be that accurate. You're only as smart as the data you collect. And so what we've done is really amass a large pool of data, both on the consumer side and on the inventory side. On the consumer side, it's 11 to 12 years of large baskets data of everything that customers want to buy, everything that they substitute, which is critical because that allows us, if an item is not on the shelf, to substitute it with something that they prefer. Lots of data about the types of products that are complementary to others that we can surface the best product recommendation and also surface the best ad recommendation. So all of that contributes to a richness of consumer data. That means that when you have invested in Instacart, you have placed a couple of orders, it's really hard to go to another platform because you would have to rebuild your entire basket or rebuild all of your habits, rebuild all of your preferences. And we have all of that for you. And that's why you're seeing, in the letter, we mentioned that 75% of customers have purchased an item from the Buy It Again list because, again, this is data we have on all of their purchase history. Now on the kind of the shopper side and inventory side, it is also really critical to have data that allows us to predict what's on the shelves. And so again, because we have 600,000 shoppers roaming the aisles of grocery stores and we partner with retailers to get not only their catalog files but their balance-on-hand data, in some cases, we are able to create a system by which we can predict quarter after quarter what's going to be on the shelves with more accuracy, given that we have developed all of these technologies to tell us what's exactly on the shelves right now. And as I've mentioned in previous calls, the biggest compliment that we have on our technology is that some retailers and CPGs are actually using our out-of-stock predictions to optimize their operations because we know what's on the shelves much more in real time, with much more accuracy than retailers and CPGs themselves. And so we see them using our data to optimize their operations. Then once you have kind of predicted what's on the shelves, you also need shoppers to find the items inside the store. And that's why we have planograms for -- that represents 75% of orders on the platform, so that when the shoppers arrive in the store, they are able to find the item with max efficiency and be able to increase the found rate. And then finally, I mentioned receipt data in the letter because once you're done completing this order and you found the items, sometimes it happens that shoppers could make a mistake. And with receipt data, we're able to tell them in real time now because we can analyze with receipts data, "Hey, actually, you missed this item. Hey, you might have switched this item into a different order," and allow them to self-correct on the spot. And so the combination of all of these technologies is really what gives us massive leadership and results in found rates and fill rates that, again, are at an all-time high since the pandemic. So we're really proud of this system and continue to improve upon them quarter after quarter.

Our next question comes from Tom Champion with Piper Sandler.

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

Yes. Thanks. So on affordability, we obsess over it, and that's why you are seeing results like our savings increasing 20% year-over-year to $4.75 on items per order. And that's a metric we track really carefully because we want to make sure that when customers come to the platform, we give them a variety of ways to get a deal. And so when you're talking about productizing deals, there's actually a variety of deals, and it's a lot of different products that you have to build to do that. One is loyalty programs. A lot of retailers offer a lot of deals to their loyalty programs. And quarter after quarter, we integrate with the loyalty programs of more and more retailers, which allows us to surface more deals. We have retailer-funded deals where they are going to offer, for example, $10 off a particular order to attract customers to them. So that's also a platform that we've built recently and allows retailers to actually put their own funds to attract delivery customers. We are also digitizing the weekly flyer. If you look off-line, a lot of people end up looking at the weekly flyer in a paper form before they go to the store to kind of figure out what are the deals that they want to not forget when they get to the store. We're digitizing that so that people benefit from that experience. And then finally, we also have CPGs that are coming in and funding specific deals on their specific product. And we have a format called Stock Up and Save, which is actually an ad format, where CPGs can come and like basically give a deal for people to buy more of that particular product and get a discount for higher quantities. We also look at savings in terms of delivery options and providing more affordable delivery options like pickup and No Rush. So that's the people who value price of our convenience can have the great benefit of our service as well. And so all of these adds up to really making it feel like the service quarter after quarter becomes more affordable, and that is reflected in the fact that if you look at our demographics, a couple of years ago, it was -- we were very highly concentrated in terms of affluent demographic. Whereas right now, we actually map to U.S. population pretty closely. And that's something we're very proud about because that means that we align with the entirety of the TAM. And then finally, you asked me for my view on the consumer. I would say we've seen quite a resilient consumer I would say, on the lower end, we certainly see that people are -- with lower income are trying to stretch their budget, trying to make their dollars go faster, and therefore, they do a lot more planning when they think about grocery shopping. And as a result, we want to make it as easy as possible for them to get the best deals, to be able to shop multiple retailers if they want to combine different deals and really see us as a place that helps them meet their budgets and their family needs in the best possible way and really meeting consumers however they want to shop. So that's been really the focus.

Our next question comes from Steven Fox with Fox Advisors.

Just one question from me on the Uber relationship. I guess from a financial standpoint, how would you expect it to ramp? And what should we think about in starting to see some financial benefits from it? Would it be mainly focused on seeing better subscriber growth or user growth that translates into your business? My understanding from this morning's call is that Uber would basically be using their own couriers to be able to advertise on their space within your channel. So can you just sort of give us a sense directionally how we should think about this helping your business or earnings over, say, the next 2 to 6 quarters?

Yes, absolutely. We're not going to obviously guide specifically here because we have not even launched the service. But I can tell you, at a high level, we are getting an affiliate fee from Uber on orders that we send to them. The deal is positive unit economics day 1 for us, which we're excited about, but we're also going to be investing on top of that to ensure success of the service and adoption. But we're not really looking at the restaurant business specifically. What we're really looking at is how this deal can help our business overall by making Instacart an even more engaging app, a more frequent use case by getting us more Instacart+ subscribers. And so we're going to really be looking at all of these metrics and in fact, driving adoption in a way that actually strengthens the entire business, not just get us a restaurant business but really get us a more engaged customer across all of our services. So that's what we're excited about, and we'll -- in terms of ramp-up, we'll have to launch to see that.

Our next question comes from Rob Sanderson with Loop Capital Markets.

Many of my near-term questions have been asked and answered, but I wanted to ask about smart cards. What are grocers looking for in terms of proof points to expand deployments? Like are they looking at an ROI calculation? Or are these just more experimental proof-of-concept stages at this point? And what would be a reasonable expectation for when we could think about deployment to maybe 5% of stores? Is that something that could happen like in a 3-year time frame? Is that realistic? And does the hardware costs have to come down meaningfully to think about things like 5% penetration?

Thanks, Rob, for the questions. So in terms of what grocers are looking at, it's exactly the same as the things we've been obsessing over, which is do consumers love the product. And is that changing their behavior. And the answer so far, based on what we've seen, is a resounding yes. We have seen consumers absolutely love using the carts. We hear a lot of anecdotes saying that consumers are like seeking the stores that have carts deployed. We've certainly seen that in Schnucks. Schnucks also gave us a data point that I put in the letter saying that people who use the cart end up having larger baskets than other carts, and that is a very big driver, as you can imagine, of grocers wanting to adopt that because that allows them to have a higher basket size, have consumers that can skip checkout and have an experience that is a lot more engaging and can create competitive differentiation for them. So we've been really obsessed over the consumer reaction, very encouraged by it, and that's why you're seeing us really pour more fuel on Caper and seeing retailers very excited to deploy that. In terms of ramp-up, I would say we -- as you've seen in the letter, we are in many pilots with the largest grocers, whether it's Kroger, Wakefern, Sobeys, Schnucks, the list goes on. And so we expect to have thousands of carts deployed by the end of the year. And then I think it really depends on kind of how those deployments go, but it could scale to many more. We are not guiding to a specific time line because there are a lot of unknowns. But we think that we have everything that we need to be able to scale these carts. In terms of cost, we will work to get the hardware cost down in the future, no doubt. But that's not really the main blocker to deployment. I would say that a big part of the business model for Caper is going to come from advertising. And that's another reason why we tell we're really excited about Caper Carts because it becomes a completely new incremental line of business for them of having advertising inside the store on the screen of Caper Carts and a source of revenue for us that can justify putting more of the cost out there.

Our next question comes from Ross Compton with Macquarie.

Fidji, in your S-1, you estimate that the enterprise segment drove an estimated 20% of company GTV in 2022. And I think what's really interesting is your model, given the economics are similar on marketplace enterprise, you're agnostic to where the demand comes from. I was wondering if you would share how enterprise is evolving where there's more grocers kind of into the online space and are required to adopt your technological tools to kind of compete against Whole Foods and others. Do you see this kind of rising tide lift all boats and even though an order might not occur on marketplace, you kind of win economics on the enterprise tools?

So great question. You're right. We remain agnostic between marketplace and white label. And that actually makes us a really strategic partner for grocers because, as you can imagine, in the case of grocers, they would prefer an order to go through their owned and operated platform. And so the fact that we have a partner at the table that wants to grow their O&O as much as we want to grow our marketplace is a very strong competitive advantage for us. We have seen growth of white label to be roughly in line with marketplace. That's remained consistent for a few years. What we are seeing, and I mentioned in the letter, is a deepening of our enterprise relationship with grocers, where, in the past, it might have been just powering the storefront or just powering their fulfillment. And now we are actually powering more and more things for them, whether it's FoodStorm where we power their catering business, whether it's Caper Carts, where we now enter the store, and what they really value is that all of these products are completely integrated. And so if you look at the deal we just announced with Save Mart, where we're really going to power everything for them from their storefront solution to Caper Carts to FoodStorm to Carrot Ads. It's a great example of our enterprise strategy really winning the day because you now can surface ads, again, not just on our marketplace but surface ads on storefront [ tools ], surface ads on Caper Carts. If [ someone is ] using our Caper Carts, you can get people to reorder their in-store basket online. So the fact that we power both Caper Carts and their storefront is incredibly helpful. You can order catering from the Caper Carts. So again, the fact that we have FoodStorm catering, integrated with Caper Carts is another integration that they love. So when they come to us, it's not for point solutions. It's now for a completely integrated product suite that they get to benefit from end to end instead of having to integrate with 10 different vendors maybe -- may have these [ joint cheap ] solutions.

Our next question comes from Justin Post with Bank of America.

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

Yes. Thank you. We've always had very strong supply, and we continue to have waitlist for shoppers in many cities and very high satisfaction of shoppers with 80% of shoppers saying that they would recommend this work to someone else and 80% of them saying that Instacart offers well-paid opportunities. So the fact that we have such attractiveness for shoppers is certainly helping us. Then in addition to that, what we are doing is better matching the shopper supply we do have with the demand that comes onto the platform. And a good example of that is the expansion of the delivery radius that we did in Q1, where we allowed 80% of customers to have access to at least one new retailer by expanding these delivery ranges because we have shoppers that are okay and excited to drive longer distances. What you're seeing also is that we are continuing to drive shopper efficiencies via batching and time-to-deliver orders and that's what has helped transaction revenue and allowed us to reinvest in the business. And we are doing that while also increasing shopper earnings. And so that's really what we continue to obsess over. It's becoming a lot more efficient, which allows us to reinvest in the business. But also giving shoppers more earning opportunities, and the fact that we've been able to drive both of these outcomes is really exciting.

Our next question comes from Mark

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

That's a great question. The thing I can tell you is we have thousands of brands that are growing well into the double digits. But we also have a few large brands that have pulled back spend for reasons that are very specific to their own business, and these few brands can have too meaningful of an impact on our overall growth rate. To give you an example, we see certain large alcohol brands that have pulled back spend because of everything that's happening in the alcohol category. And because we are still concentrated in the large brands, we are seeing this impact kind of outsized on our platform. And so it's a really big priority for me to continue diversifying the ad business so that we can see less impact when some large brands face challenges in their own business. I do think that a lot of it is going to come from adding new brands to the platform. But I also think that we have many brands, both large and small, that are still under indexed in terms of ad spend on the platform compared to the performance we drive. And that's why I've been so focused on measurement and improving the performance because we need to be able to go to these brands with absolutely clear data that if they invest more, we will drive more sales. And now that we have all of these proof points, this is going to be a very big focus of the year of continuing to convince existing brands that are not advertising enough as well as new brands to come onto the platform, so very big priority.

[Operator Instructions] Our next question comes from Bernie McTernan with Needham.

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

Thanks, Bernie (sic) [ Stefanos ], and thanks for the congratulations. So I don't really think about it as doing things differently. I think like Nick, focused on creating the most valuable company and generating long-term free cash flow per share. So that's really translated into me focused on finding attractive opportunities for investment and growth. That's also creating a strong portfolio of offerings that serve a broad swath of consumers and meeting them where they are in terms of their consumer journey but also focused on driving operating leverage and delivering improving profitability over time. I think, lastly, I'll comment on we've executed a pretty large share repurchase program, which I've helped execute over the last few months, and we've driven $750 million of share repurchase by the end of Q1. I think the other thing I'll focus on is just how I'm able to do that. I think if you look at my background, I'm able to leverage 10-plus years of operating experience in a market where obsessing over deepening our leadership position was critical. I've seen very highly competitive markets. I've seen what it looks like to deepen those competitive positions, and I've also seen what it looks like to lose ground. So I'm very focused on that, particularly as Instacart has an incredible lead, and I want to make sure we remain positioned to deepen that lead. So I'm partnering closely with Fidji and the team to ensure that happens, doing all that obviously, investing in those right opportunities while continuing to drive profitability.