CART - NASDAQ

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’ll be a question-and-answer session. [Operator Instructions] Please be advised that today’s call is being recorded. I would now like to hand the conference over to Rebecca Yoshiyama, Vice President of Investor Relations, Capital Markets and Treasury. Please go ahead.

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. 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 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 in our last Form 10-Q filed with the SEC. We assume no obligation to update these statements after today’s call except as required by law. In addition, we’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. A reconciliation between these GAAP and non-GAAP financial measures is included in our Shareholder Letter, which can be found on our Investor Relations website. Now, I’ll turn over the call to Fidji, for her opening remarks.

Thanks, Rebecca, and 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. 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. 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’re delivering on this promise. First, for our customers, we’re laser focused on becoming an even bigger part of their everyday lives. In the past year, we launched new service options like Super Saver and Free Pickup, expanded family accounts to all users and can continuously optimize our marketing and incentive programs. 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. Our efforts have paid off. We’ve grown the overall number of people who use Instacart in the past year and drove quarterly users to on order monthly and monthly users to order weekly at faster rates year-over-year. In addition to growing order frequency, we also offer more value to our Instacart+ members who are growing faster than monthly users and remain our most loyal and engaged audience. 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. With grocery prices increasing over 25% since 2019, the need to innovate and enable savings for customers has never been greater. That’s why we’ve built industry-leading solutions such as EBT SNAP Acceptance, loyalty program integrations and digital flyers each of which now covers over 80% of our GTVs. 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. Recently, Kroger introduced same-as-in-store pricing on items featured in their weekly ad and Schnucks and Heritage Grocers Group both moved to price parity chain-wide and across all items too. The solution we build don’t just benefit the more than 1,800 retail banners on our marketplace, but also the approximately 600 enterprise storefront that we power. Thanks to our investments in our enterprise solutions, we’ve driven double-digit percentage point increases in growth for the majority of retailers following that upgrade to our latest storefront technologies. And we are onboarding more new retailers to our enterprise solutions than in the past. 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. 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. 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. 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 $1 billion annual run rate on our platform in Q4. 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. We now have over 220 Carrot Ads partners who contribute more inventory to our network and therefore allow us to deliver even greater performance for advertisers. This results in a virtuous cycle of growth, performance and scale. And while this was always our strategy, it’s really great to see it start to build momentum. Pulling all of this together, our innovation is driving growth across the board. 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. Years after restaurant delivery platforms followed us into the space, we’re still the clear category leader. 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. 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 players. 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. 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. 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. By executing on this strategy, we’re confident in our ability to extend our category leadership position, deliver short-term and long-term profitable growth for Instacart and our stakeholders and transform the industry at large. I couldn’t be more excited about what’s ahead. And with that, I’ll turn it over to Emily, to talk about our financials.

Thank you, Fidji. 2024 was a great year for Instacart and the investments we’re making have us well-positioned to deliver more profitable growth in 2025 and beyond. Now, let me provide a bit more color on our most recent financial results and outlook. 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. Transaction revenue grew 10% year-over-year as we continue to drive shopper efficiencies and reinvested in affordability initiatives. Advertising and other revenue also increased by 10% year-over-year, driven by strong performances from emerging brands and many large brand partners. This combined with operating expense leverage resulted in solid profitability across key metrics. GAAP net income of $148 million increased by $13 million year-over-year, even after lapping a sizable tax benefit in the prior year quarter. Adjusted EBITDA of $252 million exceeded the high-end of our guidance range and was up 27% year-over-year. Operating cash flow of $153 million decreased year-over-year due to fluctuations in working capital. We finished 2024 with cash and similar assets of $1.5 billion compared to $2.3 billion the year prior. 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. Overall, our Q4 results were underpinned by our strong operating fundamentals. Order growth is being fueled by monthly user growth and higher order frequency. We continue to see deeper penetration of Instacart+ 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. 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. 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. 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. 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. Now, for our Q1 outlook. We expect Q1 GTV to be between $9 billion and $9.15 billion representing year-over-year growth of 8% to 10% 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. 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. We’re also guiding to Q1 adjusted EBITDA of $220 million to $230 million. We expect our year-over-year growth in adjusted EBITDA to be primarily driven by ongoing adjusted operating expense leverage as well as advertising and other revenue growth outpacing our anticipated GTV growth in the period. We also expect adjusted EBITDA to decline quarter-over-quarter, primarily due to typical seasonality in advertising and other revenue. We remain committed to delivering steady annual adjusted EBITDA expansion even as we maintain an aggressive approach to reinvesting in growth initiatives. We also take a disciplined approach to stock-based compensation. 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 grants. With that, we will open up the call for live questions. Operator, you may begin.

[Operator Instructions] Our first question comes from Doug Anmuth with J.P. Morgan. Your line is open.

Great. Thanks so much for taking the questions. Could you talk more about some of the key investment areas that you’re thinking about for ‘25, especially some of the 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 carrying through like incremental margins that you’re seeing in 1Q through the year or something different than that? Thanks.

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, this remains the core area that we want to continue investing in. On the selection side, Restaurants is obviously a part of that, that has helped us increase selection on our platform, but we are doing that in grocery as well. So, it’s really both. I’ve talked a lot about affordability. We still believe that this is an absolutely critical thing for us to continue leaning into in order to continue accelerating online adoption and we like what we’re seeing with all of the solution that we’ve developed from EBT SNAP in the earlier years to digital flyers more recently. You can expect to see us continue to develop more and more of such solutions in the future. Another thing that is a top priority as I’ve talked about is our enterprise solutions as a whole. Caper is certainly one of them and we’re very excited about what we’re seeing with Caper in terms of sales lift that Caper is generating at retailers where it’s rolled out. We’re seeing double-digit increases in basket size 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. But, our enterprise solutions are bigger than Capers. 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 preferment, 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 with 13 new retailers coming on 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 these technologies at a time where grocer needs them more than ever. And then finally, it’s less on the topline, but let’s not forget our 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 as revenue projected to grow faster than our GTV guide in Q1. So, very excited about that. I’ll turn it over to Emily on the second part of the question.

Thanks Doug, for the question. So, as it relates to adjusted EBITDA, what we’re committing to is to continue to 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 normal cyclical seasonality that you see in the overall ads business. And also to allow us the flexibility to reinvest when we see opportunity to drive long-term profitable growth. But as you saw, obviously in the last year in 2024, we’re able to expand EBITDA meaningfully on both of those metrics and we expect to continue to do that, although on a somewhat more moderate pace going forward.

Thank you, both.

Thank you. Our next question comes from Eric Sheridan with Goldman Sachs. Your line is open.

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.

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 product, higher value of Instacart+ and that’s exactly what we’re seeing. And in fact, we are seeing this halo effect on grocery strengthening over time, which is really, really exciting. And so, we’re not breaking these things out because, in fact, when people engage more with the platform, whether that’s , adopting a new use case like restaurants or some of our new verticals or whether it’s spending more on grocery, it usually has a halo effect on all of their other behaviors. And as a result, that increase is the case for continuing to lean into deepening the adoption of these new use cases. We are very pleased with what we’re seeing in restaurants, but it’s still very early in terms of penetration of our user base and adoption. We are excited about all the potential ahead and so we expect continued growth from both of those segments and more importantly for the combination of them.

Thank you.

Thank you. Our next question comes from Nikhil Devnani with Bernstein. Your line is open.

Hi, thank you for taking my question. I wanted to ask two, please. First, around the reduction in free delivery thresholds for Instacart+, how do we think about the economics of these incremental orders? 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? And then my second question, the Coles, Australia partnership is quite interesting. While it might be expensive to build consumer facing platforms internationally, do you see an opportunity 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.

Thanks for the questions, Nikhil. I’ll start with the second one. On Coles, we’re really excited to have, started to deploy Caper Carts with Coles in Australia. As a reminder, we also deployed Caper Carts in Austria with ALDI where we’re very pleased with the results. And, to your broader question, we very much agree with the stake, 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 have 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 reaching out to us to pilot Caper and as part of that discover the rest of our solutions. I want to call out that it’s sold very early in the process and we’re still very focused on the U.S. where there’s still a lot of opportunity to go tap into and we don’t want to get distracted. But internationally is going to be, we think a driver of growth in the future for enterprise solutions given how performance is being in the U.S. On your second question on the reduction in minimum basket, what we’re seeing so far is an increase in order frequency, an increase in total GTV, and higher Instacart+ adoption without seeing any impact on bigger basket orders. So for that reason, we are very excited about, what we’re seeing with this change, and that’s why we’re leaning into it. 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 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 the growth.

Thank you, Fidji.

Thank you. Our next question comes from Ron Josey with Citi. Your line is open.

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 lower delivery fees, but then the Kroger partnership on same pricing, there’s couponing now on the site. We’d love to hear how these aspects are 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. I wanted to hear about the impact of marketing spend, and if you’ve seen any benefits from the ad thus far? Thank you.

Great. I’ll take the first question. So, on the affordability front, we continue to make a lot of progress. In the past year alone, we have helped customers save about $1.2 billion in savings through all of the initiatives that we’ve put together. And we are continuing to see more and more adoption of these initiatives. As I mentioned in my introduction, with EBT SNAP, 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 all of the positive externalities that Emily has talked about in terms of improvement in order frequency, the 2024 cohort being the strongest we’ve seen in recent years. We think that there’s very much a link between all of our affordability efforts and the strength in our underlying fundamentals, especially as we enter 2025. There is still a lot more to do though. We all know that the more retailers we can move to, same prices online as the store, the better. And we are pleased with the progress here. We are pleased to see Schnucks moving to in-store prices, same thing with Heritage Grocers, pleased to see Kroger do that on their weekly flyer. And we have more and more tools that we’re making at their disposal like our other side pricing optimization, to show them the business case of moving to price parity and help them figure out how to do that while preserving their margins. And so we’re excited about what we’re seeing, but still continuing to lean into these solutions and developing more like the $10 minimum baskets that you heard about. Emily?

Yes. Thanks Ron, for the question. So, in terms of overall marketing spend, the way that we think about, frankly our marketing portfolio, but even more broadly than that is, when we decide to invest in something, we’re really looking at how are we funding that from the existing portfolio. So, I would think about Super Bowl in that same light where we decided to invest in a Super Bowl opportunity that means that we think there is better opportunity there than elsewhere in our portfolio. So, I don’t think about it as incremental spend in that sense. Super Bowl ads are kind of designed more for brand awareness, driving brand favorability and of course we’re in the early days of looking at the impact. But so far we’re very pleased with what we’ve seen.

All right. Thank you, Emily. Thank you, Fidji.

Thank you. Our next question comes from Ross Sandler with Barclays. Your line is open.

Great. One on advertising and then the obligatory AI question. So first on advertising, so the environment for CPG looks a little bit mixed here in 2025. How would you guys characterize your pipeline between large CPG and emerging brands? And do you think this new category share of digital shelf-space metric is going to help with future budget allocations to Instacart? And Emily, I think you said ads would grow faster than GTV for, was that for the full-year or for 1Q? And then I’ll follow-up with the AI second. Thanks a lot.

Great. So, on the ad growing faster than our GTV guide, this is for Q1. On your broader point, 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. 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 towards product. In terms of what, is going to generate more budget, it’s really a mix of things. The metric you called out, which we released this quarter, which is like share of digital, shelf-space, is a very helpful metrics for our brands to really understand if they’re spending enough to show up when customers are looking for these types of products. 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 product. And that explains why 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 lean in. We have sales lift measurement, which shows 15% increase in sales. We have integration with Circana, which are showing across several brands increase in in-stock sales, so really improving 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 of sponsored recipes products, whether that’s free gifts, whether that’s for occasions pilot. 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, 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.

That’s great. And if I can squeeze one more in on AI. So, you guys mentioned, how you’re using AI to track store inventory and substitution and ultimately reduce the error rates of ordering. So, could you just elaborate on that? And then, how meaningful of an impact of that kind of thing have on overall customer retention and ultimately, I guess, profitability for the business?

Yes. So 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 beta. Just to give you a sense of scale, in 2024, we have made 300 million replacements with 95% satisfaction rate. 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. 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 help 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 system, 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. And we’re going to augment that in the future with what I mentioned in the letter, which is a technology for shoppers to scan the aisles of the grocery store and through computer vision, having, the ability to extract even more data, even more often on, what’s currently on the shelves. You ask whether that drives customer retention. I can tell you it 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 continue to release new technologies whether that be the thing I just talked about or integrating with retailers electronic shelf tags for pick-to-light to continue getting these numbers up because we swept the basis points on these metrics.

Thank you.

Thank you. Our next question comes from Jason Helfstein with Oppenheimer. Your line is open.

Thanks. Just one question, Fidji. So GTV and order growth for the fourth quarter and first quarter outlook is solid, 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. So I guess the question is like, 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. So first off, we do expect as another revenue to grow faster than our GTV guide in Q1. So that’s a strong signal of going in the direction that you’re mentioning. 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, we feel very good about our position within that because we have leading performance and therefore we attract a very good share of these budgets. But it’s worth remembering that we are in a macro environment where specific food and beverage with budgets are still challenged. 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, 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% of GTV. So, for between all of these things, we feel very good about our ad business, but also worth remembering that we are still operating under a challenge macro.

Thank you.

Thank you. Our next question comes from James Lee with Mizuho Securities USA. Your line is open.

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.

Thanks for the question. Our shopper supply is very healthy. In fact, we still continue to have a waitlist 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 tenure shoppers, which has a direct impact on the quality of these orders. So, that’s why we care so much about tenure because with the more tenure you have, usually, the higher quality of orders you can deliver. And so we feel very good about our retention. It’s also worth remembering that our demographics are very different from the demographics 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-third of our shoppers being females, more than 50% of them being parents. 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.

Thank you. Our next question comes from Michael Morton with MoffettNathanson. Your line is open.

Hi. Thank you so much for the question. I was wondering if we could maybe talk a little bit about take rate quarter-over-quarter and just also thinking about the seasonality compared to last year. Could you talk about some of the drivers behind it, where you’re investing, some of the impacts of the fee structure, contra revenue and you have restaurants flowing through the business. And then there’s a lot of moving parts with inflation and grocery and you were talking about the macro environment. Could you maybe talk about the performance for AOVs of the core grocery business year-over-year? Thank you.

Sure. So, I believe when you’re mentioning take rate, you’re referring to transaction revenue. So, I’ll speak to that, but let me know if that’s not okay, great. So, when we’re thinking about transaction revenue, we’ve been operating as a percentage of GTV 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. Now, why does it fluctuate? There is a number of different factors within transaction revenue, everything from 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 are not intending to drive transaction revenue up into the right. Because a lot of the decisions when we talked about earlier in the call actively managing our business, a lot of the decisions that we’re making involve choices that we’re making regarding reinvesting in the business and reinvesting specifically in transact revenue. 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 the impact of additional IC plus benefits. So, we’ve talked a lot today about the $10 minimum basket. Now as I said, these will fluctuate within quarters depending on where we’re reinvesting. It also depends on where we’re investing across the P&L. So, in the past, I’ve talked about trade-offs 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 hit sales and marketing in a different quarter. Overall, as I talked about, our goal is to drive 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. Sorry, there was a second question on the macro environment in terms of AOV in core grocery. So, 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 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. 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. As a result of all of that, we do expect that orders will grow faster than GTV in Q1.

Thank you.

Thank you. Our next question comes from Brian Nowak with Morgan Stanley. Your line is open.

Thanks for taking my questions. I have two. The first one actually goes back, Emily, to your last point about sort of the trade-offs you make and kind of the investments that you’re making. Could you just sort of talk to us a little bit about the 2025 budgeting process 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 the growth versus profitability framework for 2025? And then the second one, just on the pressure from the restaurant AOVs, can you just help us how large is restaurant as a percentage of GTV in the fourth quarter, so we can kind of get an understanding for the core versus the restaurant impact? Thanks.

Sure. So, starting with the 2025 budgeting process, as we talked about earlier, one of the somewhat constraining factors is that we’ve committed to and are committed to continuing to show and prove out the economics of our business. So, it’s obviously done a great job of that in the past, having expanded adjusted EBITDA very meaningfully in 2024 on both an absolute and percentage basis. So, we want to continue to do that. Above and beyond that, we are continuing to grind down costs in our business become very efficient across every line in the business. And you’ve seen that obviously adjusted OpEx meaningfully expanding on a year-over-year sorry, the margins getting much better on a year-over-year basis. So, we’ll continue to look at ways to sort of grind down costs and that allows us to free up incremental dollars to reinvest in the business. Now above and beyond that, we’re really looking at our full portfolio of options. Now that includes investing in things like marketing and paid marketing. We’re looking very actively week-to-week, month-to-month at what are the returns of those dollars? Do we like those returns? And we do that within the context of a five-year NPV, 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+ membership. So, there’s really sort of a holistic view of everything that we can be doing. How do they line up to the priorities of driving selection, affordability, speed, quality that we’re trying to drive in the business. And those are not static. So of course, we have a 2025 plan, but as things are working better in some cases, we’ll lean in, other things that maybe aren’t working as well, we’ll certainly pull back. So, I think of it as a very active management process that we have throughout the year. 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 something that obviously factors into our overall 2025 budgeting process. From a restaurant percentage GTV perspective, we really don’t break out restaurants because as Fidji mentioned earlier, there is this real flywheel effect that comes back to grocery. It was really the thesis of the deal, which we saw it play out from the beginning and we’re seeing it strengthen over time. So, we really think about this as a set of offerings, a platform that we have for our users, where we want them to come, use restaurants and then have that create a situation where they’re then purchasing more grocery orders and more grocery GTV. What I would say is that restaurant adoption is still very early. So, we do see much more runway to continue to go throughout 2025 and beyond.

Thank you. Our next question comes from Justin Patterson with KeyBanc. Your line is open.

Great. Thanks for taking the question. This is Miles Jakubiak on for Justin. First, just one on Caper Carts. It seems like early learnings there have been really positive. So curious how quickly you guys think that you can ramp the implementation of Caper Carts to a meaningful amount? And what are the main sticking points to getting that meaningfully ramped? And then just one on the 1Q guide, it seems like guidance implies some pretty strong order volume growth, especially comping 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 Caper. 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 fit 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 on gamification capabilities or increasing engagement with that. So, we’re really excited about what we’re seeing on the consumer side. On the retailer side, that translates into an increase in basket size and therefore sales, as a result of that customer excitement. And that means that retailers are definitely leaning into the results of these pilots and being excited by what they’re seeing. 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 new revenue stream that’s an increase in advertising. And on that advertising business line, we rolled out Caper Carts this quarter and what we’re seeing is an engagement with Caper Carts that’s in line with online engagement, which is very exciting and shows us that there is a real potential there for advertising, for brands, but also as a result for creating a revenue stream for retailers and for ourselves. In terms of ramp, we have thousands of cost commitments in the works right now with retailers, that’s across retailers big and small. So we are very excited about what we’re seeing. That being said, it’s worth remembering that, these are physical products that you need to deploy across thousands of stores, make sure that operationally it lands very well, make sure that the stores are ready and trained to receive that. The good news is that this is our 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 US. 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-digit increase in sales, you have integrated with retailers operations and you are showing them an additional revenue stream. It’s a product that has the potential to be exceptionally sticky and allowing us to address the 87% of grocery sales that haven’t moved online yet. The last thing I’ll add, which I think is exciting, is that we also started testing the ability to tell users about reordering their cost online from the cost. And when you think about moving people from offline to online and making them multichannel customers, keep our cost are going to be a fundamental touch points in our ability to do that, and make it very easy for someone who’s an in store customers to reorder their baskets online and vice versa. So, excited about what we’re seeing still early days.

From a guidance and order volume growth perspective, what I’d say is if you go back a couple of quarters, a majority of our growth was being driven a majority of our orders growth was being driven by MAU growth. 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. Now Q4 was the first quarter where orders growth outpaced GTV growth and that’s something we expect to see going into Q1. So, I think the way that I would describe it is that part of that is continuation of the trend that we saw from restaurants in the back half of 2024. And then we’re layering on the impact of small baskets order frequency that we’re starting to see in the first part of this year. Now the other thing I would just mention is that, where we see the most adoption of both restaurants and also small baskets is going to be with our Instacart+ members, because these are benefits where specifically they get outsized benefit. And these are our most engaged users. So, you see that again show up in that order frequency metric.

Thanks for the help.

Thank you. Our next question comes from Shweta Khajuria with Wolfe Research. Your line is open.

Thanks a lot for taking my question. I guess my question is on advertising development through the year. So, if you were to point to perhaps two to three key investments that you are excited about and focused on to drive that ad revenue growth, what would you point to? Is it the technology, the ad tech stack, partnerships with brands keeping macro aside? Thanks a lot.

Yes. Thanks for the question, Shweta. I would say it’s four big things. One is performance. Second is scale. Third is diversification. And fourth is innovation. So, I’ll go through them one by one. On performance, I’ve touched on it, but I will continue hammering that because that is fundamentally always the most important thing. And so we’re very proud of having the leading ROAS, leading CTR of multi retailer platforms that’s continuing to demonstrate that and improve that with more capabilities remains the number one way in which you attract advertising budget. Second one is scale and by that I mean not just scale on our marketplace, but scale also through Carrot Ads, and that’s a big area of investment for us. We now have 220 retailers, with ads we power on their own properties. That’s a number that’s growing. And we also beyond that wants to have, a business offline with Caper ads, as I just mentioned, as well as many partnership with Meta, 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 was a proliferation of them. It doesn’t make sense for brands to go to hundreds of different retail media platforms, and they want to turn to us as the aggregator for these platforms, that can really be the hub for all of that. And we’ve had a lot of success doing that, again, because we have leading performance, leading demand, leading technology that gives us a perfect rationale for more retailers to come and join our platform. We have seen that with Thrive, for example, 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. And so again, scale is absolutely critical and Carrot Ads is a huge area of opportunity and investment for us. 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 there’s a big opportunity to continue to diversify our advertiser base. 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 are not usually, surfacing. So, for example, through sponsored recipes, you are able to advertise your salsa when someone is looking for chips, and that’s an opportunity for advertisers to capture more demand that they wouldn’t have gotten with existing formats and we’re really industry leading on these new formats. 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, great results with our new measurement capability like share of digital shell. And so it’s really a combination of all of these innovations that not only set us up immediately better, but also lays the groundwork for more growth in the future as we give advertisers more reasons to spend with us.

Okay. Thanks, Fidji.

Thank you. Our next question comes from Justin Post with Bank of America. Your line is open.

I was wondering if you can give us an update on your subscriber growth or percentage of GTV from subscribers? And then any update on the Walmart relationship testing in the U.S.? Thank you.

Yes. So, majority of our GTV is still coming from Instacart+ member. And as I said at the beginning, while we don’t update on specific subscriber members, the growth of Instacart+ members has outpaced the growth of our monthly active orders and that means we’re seeing deeper penetration of Instacart+ as well as very strong engagement from members. So, we really like what we’re seeing and that’s a direct result of having created a lot more value inside Instacart+ 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+ account, all of these things have contributed to the strength we’re seeing in Instacart+. So, we feel very good about that. As for Walmart, as you know, we have 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. 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 our decision not ours and nothing to report on that side.

Thank you.

Thank you.

Thank you. Our next question comes from Steven Fox with Fox Advisors LLC. Your line is open.

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. 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 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.

Thanks, Steven. 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. 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 cohorts 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. I feel very good about our existing users also increasing all the 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 the Instacart+ penetration continuing to deepen as we’ve just talked about and share data around. 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. So, we feel like these advantages are incredibly defensible and should continue to contribute to our success in the long run. And 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 to do that and to continue leading into our role as 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.

Thank you.