Maplebear Inc. Q3 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to Instacart's Third Quarter 2023 Financial Results Conference Call. 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. Please go ahead.

Thank you, Gigi, and welcome everyone to Instacart's Third Quarter 2023 Earnings Call. On the call with me today are Fidji Simo, our Chief Executive Officer; and Nick Giovanni, our Chief Financial Officer. Shortly, we will open up the call for live questions. During today's call, we will make forward-looking statements related to our business plans and strategy, future performance and prospects, including our expectations regarding Q4 and full year 2023 financial results and future profitability, financial and operating targets, business and industry trends, market opportunities and potential share repurchases. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. You can find more information about these risks and uncertainties in our financial perspectives for our initial public offering filed with the SEC on September 20, 2023, and in our Form 10-Q for the quarter ended September 30, 2023, that we will file with the SEC. We assume no obligation to update these statements after today's call, except as required by law. In addition, we will also discuss certain non-GAAP financial measures. These non-GAAP financial measures have limitations and should not be considered in isolation from or as a substitute for our GAAP results. A reconciliation between these GAAP and non-GAAP financial measures is located in our shareholder letter, which can be found on our Investor Relations website. This conference call is being webcasted and will be available for audio replay on our Investor Relations website in a few hours. Now I'll turn the call over to Fidji for opening remarks.

Thank you, Rebecca, and hi, everyone. Welcome to our very first public earnings call. I hope you all had a chance to read our shareholder letter, which includes lots of information about our third quarter results. For more than 10 years, we have been investing in purpose-built technologies that can solve a wide array of complex challenges in grocery. We are the clear leader among digital-first platforms in online grocery with a winning combination of selection, quality, value, and convenience. Our strengths are evident across our business: the breadth and depth of our retailer integrations, the quality of the experience and accuracy of our orders, the size of our baskets, the increased order frequency and spend from our customers over time, not to mention our healthy unit economics. We have a massive head start and we are getting better every single day with every order. A significant advantage is our unmatched selection and deep integration with retail partners. We partner with more than 1,400 retail banners across more than 80,000 locations that collectively represent more than 85% of the U.S. grocery market. For us, it's about more than just putting our partners' catalog online. It's about becoming their strategic partner across their entire digital transformation. For example, we build and power many retail e-commerce storefronts and pickup businesses. We support operations at our brick-and-mortar stores and so much more. Another advantage is our highly engaged customer base. Instacart has become an important part of our customers' lives, to the point where people count on us for their weekly grocery shop and many other use cases. When looking at annual cohort data from 2017 to 2022, on average, our monthly active orders start by using Instacart 2.1 times a month and spend $226 a month in year 1. By year 6, they order 3.9 times a month and spend $480 a month. On average, this means our customers spend more than $100 per order, which is a key element to unlocking profitable unit economics along with our next advantage, which is our massive scale in groceries. Over the last 12 months, we completed more than 265 million orders. This gives us the experience and data needed to unlock efficiencies unique to grocery, and that you can only unlock once you reach that scale, from our best-in-class search engine and replacement algorithms to our batching technologies to our wayfinding inside the store and much more. This, in turn, allows us to improve customer and shopper satisfaction while minimizing our fulfillment costs. Finally, advertising. Our advertising and other revenue operates at a nearly $900 million run rate today. As we continue to scale our ads business, we're also working to drive better results for all our stakeholders, creating new and more effective ways for brands to connect with consumers and generating more sales for our retailers out of their existing locations. Because advertising helps us fulfill orders more profitably, we're able to maintain lower customer and retailer fees as a percentage of GTV. To put this in perspective, our fees are generally about half as much as those charged in restaurant delivery. All of these advantages explain why the Instacart experience remains vastly superior. Based on third-party data, we continue to be the clear leader among digital-first platforms in online grocery, with more than 50% share of small baskets under $75 and more than 70% share of large baskets over $75. When we look at new customer activations in online grocery, our large basket activations are more than five times higher than new entrants, which leads to our new activation GTV being multiples higher. Once a customer is onboarded to a platform, we closely track the conversion rate of small-basket customers to large-basket customers, and our rate is more than five times higher than these other players as well. These are all critical distinctions because approximately three quarters of online grocery, and likely even more of the profits, sit in large baskets of $75 and above. While our business continues to be impacted by several macro headwinds, our competitive advantages put us in a much better position to navigate this period and come out stronger. We remain relentlessly focused on profitable growth. We're staying disciplined and are managing the things we can control to ensure we continue delivering strong earnings and operating cash flow. Today, we have approximately $2.2 billion of cash and similar assets and recently established a new $500 million share repurchase program to opportunistically buy back shares. Overall, I'm unwavering in my long-term view on the future of online grocery adoption. I'm confident that our competitive advantages will allow us to further expand our category leadership. We are focused on executing our profitable growth strategy; transforming the world's largest retail category will take time, but we believe we have all of the ingredients to generate long-term value for our partners, teams, and shareholders. Thank you for your support and being on this journey with us. Now I'll turn the call over to Nick to provide more of an update on our financials.

Thank you, Fidji. In Q3, we delivered a solid quarter, and our business fundamentals continue to improve. Now let me provide a bit more color on our Q3 results and our future outlook. I'll start with GTV and orders. In Q3, year-over-year GTV growth improved for a second consecutive quarter. GTV from our mature cohorts collectively declined, but the rate of decline continued to improve compared to Q1 and Q2. Our largest 2020 and 2021 COVID cohorts no longer represent the majority of our total GTV as we've layered on new customers in 2022 and 2023. In Q4, we expect year-over-year GTV growth to remain in the 5% to 6% range and the composition of this growth to continue to be driven more by orders growth than AOV growth as the impact of inflation wanes year-over-year. Our philosophy on GTV guidance is to share what we expect will happen based on the trends that we are seeing in the business so far in Q4, which are consistent with the past two quarters. We are not providing guidance that we expect to exceed. Now on to transaction revenue. As we expect, we saw transaction revenue as a percent of GTV rebound from 6.8% in Q2 to 7.2% in Q3. In Q4, we expect transaction revenue as a percent of GTV to remain flat quarter-over-quarter. As a reminder, our long-term target for transaction revenue is 6.5% to 7.5% of GTV. Now for Advertising & Other revenue. Our Q3 performance was much stronger than expected, primarily driven by higher advertiser spending in back-to-school and fall football campaigns. In Q4, we expect Advertising & Other revenue to grow sequentially with seasonality. We expect roughly $20 million of sequential advertising and other revenue growth compared to $6 million from Q1 to Q2 and $16 million from Q2 to Q3. As a reminder, for the past few quarters, our ad and other investment rate has expanded year-over-year by approximately 30 to 50 basis points, which is much higher than the 20 basis points that we aim for on an annualized basis. This has largely been due to the ramp-up of shoppable display and shoppable video launches in the second half of 2022. As a result, for the next few quarters, it is still our expectation that Advertising & Other investment rate will expand less than 20 basis points year-over-year as we compare against these periods. Over time, we continue to expect steady expansion towards our long-term target for Advertising & Other revenue, which is 4% to 5% of GTV. Achieving our targets for transaction revenue and Advertising & Other revenue would bring our long-term target for total revenue to 10.5% to 12.5% of GTV and GAAP gross profit target to 8% to 10% of GTV. Turning to adjusted operating expenses, we generally expect the same trends we saw in Q3 to persist in Q4 as a percent of GTV, but I would call out the following. First, adjusted ops and support typically increases sequentially in Q4 due to seasonality in shopper onboarding. Second, we will be prepared to spend more on adjusted sales and marketing if we see the right opportunities to drive long-term growth throughout the quarter. Our long-term target for adjusted operating expenses is 4.5% to 5% of GTV. Putting all this together, we expect to expand the Q4 adjusted EBITDA quarter-over-quarter and year-over-year to a range of $165 million to $175 million. This is an increase compared to the $163 million we generated in Q3 2023 and the $133 million we generated in Q4 2022. It also demonstrates ongoing progress towards our long-term adjusted EBITDA target of 4% to 5% of GTV. Finally, we will remain disciplined on share dilution and expect to return to GAAP profitability in the full year 2024. We have already taken steps to manage stock-based compensation and lower dilution, but expect it will take several quarters for the stock-based comp expense related to pre-IPO awards to normalize, given they are expensed using the accelerated attribution method. We remain committed to being profitable on an adjusted EBITDA basis even after deducting the net value of equity we grant each year, and this framework, which we are on track to achieve this year, is expected to position us to return to GAAP profitability for the full year in 2024. Overall, we believe our fundamentals are solid and we have delivered improving growth throughout the year at higher levels of profitability. Together with our partners, we believe we can continue to lead the digital transformation of the grocery industry. We're excited about the future and appreciate your support as shareholders. With that, we'd like to open it up for live questions. Operator, you may begin.

Our first question comes from Eric Sheridan from Goldman Sachs.

Maybe if I can go back to asking something that would be a big picture question. We continue to get asked by investors about the broader competitive landscape and how you think about your opportunity set and competitive positioning between the small basket and large basket size elements of the broader online grocery landscape. I'd love to revisit your broader thoughts there.

Eric, as I mentioned, I think it's incredibly important to understand that three quarters of the industry is in large baskets and even more of the profit. We are the market leader in both small basket and large baskets, with 50% share of the category in small basket, and more than 60% share and more than 70% share in large baskets. What we're seeing is that we have built an incredibly defensible business by having this deep integration with grocers by uploading their entire selection online and making it available to people at the highest quality and accuracy over the course of 10 years, which has allowed us to capture the weekly shop, a core use case basket of more than $75 that are very defensible. The grocery industry is an attractive market for new entrants. We expect competition to continue to try to enter that market. But when we do enter that market, especially with new entrants, they are really focused on small baskets, and we have a much greater ability—more than five times—to convert small-basket customers into large-basket customers and also five times greater ability to attract large baskets. Large basket means that you have more fulfillment efficiencies, and it also means that you have more advertising opportunities, and that's really where you are seeing the strength of our unit economics shine because we are able to have such a strong share in that part of the market.

Our next question comes from the line of Colin Sebastian from Baird.

I guess, also a bigger picture question for me. Given that there are four sides to your marketplace, I'm curious how well balanced do you think the supply side is with stores and shoppers versus the demand side from consumers and advertisers? If there's one area or multiple areas that need more focus? Or are those in pretty good balance right now?

Great question. Thank you. Let me break it down. On the shopper side, supply is extremely healthy. We continue to have a waitlist of shoppers in many cities, and we are seeing high satisfaction among our shoppers. Eighty percent of our shoppers would recommend shopping on Instacart and say that Instacart offers good earning opportunities. So on that side, we feel very good. On the retailer side, we have 80,000 stores on the platform, giving us a significant selection advantage. We still have more room to grow in attracting the rest of the market, the long tail of the market. But we certainly have a lot of supply already, with 85% of the market represented on Instacart. From that perspective, I think growth will come more from deepening our integration with grocers and offering more services like virtual convenience, SNAP, and everything you have seen us roll out in the last couple of years, rather than just expanding the number of stores. On the advertiser side, we have 5,500 advertisers on the platform. That number continues to grow. There aren't really any ad-scale brands that sell on the platform that aren't already advertising with Instacart. So here again, a lot of the game is about continuing to attract more emerging brands and deepening the investment rate from our advertisers by showing them the platform's value. I left the consumer side for last because I think that is where we have the most room for growth. This is an industry that is still only 12% penetrated online. A lot of our focus and some of what you're seeing in terms of investment in sales and marketing and customer incentives are geared towards accelerating online adoption. As a clear category leader, we see it as our responsibility to do that. If more consumer demand were to come, we would be able to handle that with the other sides of our marketplace. That's really what we're most focused on.

Our next question comes from the line of Nikhil Devnani from Bernstein.

Congrats on the IPO. When you think about some of your largest partners, some of them have the scale, potentially even the ambition to bring more of their grocery solution in-house or even use other partners over time. How do you think about positioning Instacart to minimize the risk of that? And how do you ensure that you're both integral to these large partners and also retain positive economics for yourself in the process?

When you consider the percentage of sales that we represent for our partners, we represent 5% of their total sales. That’s a very large number. Even with our larger partners, that can be in the low teens. We are already a strategic partner deeply integrated with their business. You mentioned this idea of partners having the scale to do that on their own. It took us 100 million orders to reach positive unit economics. Scale matters enormously in order to deliver this business profitably and efficiently. The reason our large partners choose to continue our relationship with us year after year is that we offer them a service that is efficient for their own profit and loss and allows them to keep the service as affordable as possible for their customers, driving growth. We feel very good about that, and it's why you're seeing us focus on fulfillment efficiencies, knowing that it is a strong competitive advantage and why our partners partner with us for this service.

Our next question comes from the line of Douglas Anmuth from JPMorgan.

You indicated that you'd be prepared to spend more on sales and marketing if you see the right opportunities to drive long-term growth. Just curious if that represents any change to your recent thinking or perhaps any kind of shift in how you think about returns threshold. And then secondly, the slower ad growth in Q4 and Q1, could you just talk a little bit more about some of the dynamics there as you're lapping the shoppable launches and how you'll work to offset those impacts?

Thanks for the questions, Doug. First, on sales and marketing, there is no change to our philosophy. We continue to invest where we see the opportunity to acquire customers that have a high lifetime value, and we'll do so as long as we see the ability to attract new customers and grow substantially. There has been no change; we just wanted to highlight that as we see those opportunities, we will remain consistent with that philosophy, which might lead to us spending more in Q4. Regarding the ads business, our expectations for the level of ad revenue in Q4 and Q1 remain unchanged. However, we want to point out that Q3 was exceptionally strong, and we didn't expect the sequential increase from Q3 to Q4 to be as robust due to the outperformance in Q3. As it relates to what we'll do to get the advertising business back on track, I'll turn it over to Fidji to discuss the long-term growth in the ads business.

In terms of long-term growth, there are essentially four levers. One is getting our current advertisers to spend more, which comes from continuing to roll out innovations in terms of format. In addition to shoppable display and video, we have rolled out Stock Up and Save and Plan, and we intend to continue innovating that. The second lever is to get more emerging brands to advertise on Instacart. Emerging brands tend to spend more as a percentage of GTV in general because they want measurable solutions, which is what we offer. The third lever is deepening penetration in categories that have high investment rates, for example, alcohol, personal care, and pets tend to have much higher investment rates than other selections. Continuing to deepen online penetration in these categories will naturally raise the investment rates. The fourth, but smaller lever, is investing in off-site through Carrot Ads, where we take our entire ads platform and make it available on our retailers' owned and operated properties, enabling them to create a retail media business on their own, as well as through recent launches with the Trade Desk and Roku.

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

Fidji, just one big picture question, and then Nick, more of a housekeeping. So the big picture is on the topic of advertising. One of the questions we heard during the IPO was that while your ad business is great, and it's a nice differentiator in the market, there's a natural tension that exists that the larger you get, the more vendor dollars are moving away from your retail grocery partners. How would you address that topic? And then, Nick, on the transaction take rate, a nice little uptick—this is 7.2% quarter-on-quarter. What were the primary drivers of that improvement versus last quarter?

Thanks, Ross. To address your concern, I mentioned earlier with Carrot Ads that we have taken all our ads technology and sales and are making it available to grocers on their own properties; they can benefit from everything we've built to create a retail media business of their own. We've done this with Sprouts and others, which results in a win-win where we align our ad business growth with our retail partners. Your question implies a finite budget, but we’re seeing that because we're able to demonstrate the performance of advertising online, CPGs are unlocking more ad dollars to go into our channel and retail media in general. If you look at the rest of the advertising industry, this trend has emerged in e-commerce, and now that retail media platforms are making advertising as measurable as e-commerce advertising, we're starting to see similar trends in CPG advertising, which is promising.

Regarding your second question, Ross, we were pleased with transaction revenue this quarter. Year-over-year, we saw about 80 basis points of improvement in fulfillment efficiencies, offset by about 40 basis points that we reinvested into customer incentives. Quarter-over-quarter, we saw about a 40 basis point improvement in retailer revenue because the one-time events that occurred in Q2 did not recur in Q3.

Our next question comes from the line of Michael Morton from MoffettNathanson.

I'm sure you're going to get a lot of advertising questions. Sorry to follow up on that, but I would love to learn a little bit more about what inning you see your advertising product in for the large enterprise. You guys had a great presentation talking about the ability with your shopping carts to measure in-store transactions and the perfect closed-loop system for incrementality. That seems to be the big question for CPG brands, right—incrementality. I would love to hear your thoughts going forward on that. Does that kind of allow you to unlock fixed ad budgets towards in theory, unlimited ad budgets as measurement improves?

As I mentioned, the last two years have been a journey of rolling out increasingly more measurement capabilities and optimization capabilities. Initially, we focused only on measuring ROAS, which is very strong. During the quarter, we released more case studies demonstrating strong ROAS. We also rolled out measurement for sales lift specifically. Average self-lift studies show that advertising on Instacart yields a 15% sales lift, which is meaningful for brands. We're continuing to roll out sales lift measurement across more formats and to more brands because that should be the ultimate measurement they use to decide to invest and continue the trend of increased spending. We think using our in-store solutions, especially with Caper Carts, provides a great opportunity to blend online advertising strength with in-store advertising because Caper Carts feature a screen for very measurable, personalized advertising, enhancing both online and offline experiences.

Our next question comes from the line of Ron Josey from Citi.

I have two. Fidji, you spoke quite a bit about the technology integration with your partners. In the letter, I think you talked about found fill rates continuing to improve. Could you talk to us a little bit more about the integration and what's driving those found fill rates improvement? Perhaps this is not just the integration with your partners, but also better efficiencies at Instacart. And then, Nick, I wanted to understand a little bit more. You mentioned a 40 basis point sequential investment in customer incentives. Can you talk to us about the results you're seeing from those incentives and perhaps on incentive spend going forward?

On found rates and fill rates, we're excited that we are now at the highest level of found rates and fill rates since the pandemic began. This improvement is a result of both deep integration with partners and machine learning and AI we've deployed to enhance quality. For example, some partners share their inventory data with us, helping us better predict stock availability on shelves. Additionally, we have 600,000 shoppers in 80,000 grocery stores capturing data on product availability, reinforcing our algorithms' training regarding what's on shelf. Some of our retailers even use this data to enhance their operations, which benefits our collective efficiency. Found rates also include replacements. We made 75 million replacements just in Q3 alone, with 95% satisfaction on those replacements. This demonstrates our scale and constant improvement through machine learning to provide high-quality services. We're continuously seeking to enhance our performance.

On your second question concerning incentives, what I meant was a year-over-year efficiency gain of about 80 basis points in transaction revenue. We reinvested about 40 basis points of that into consumer incentives, part of our strategy to make the service more affordable. Quarter-over-quarter, incentives were flat, and we like incentives as they target specific customer behaviors—like generating new activations through referrals or reviving lapsed users with coupons. We approach incentives similarly to paid marketing, investing according to our five-year LTV guardrails.

Our next question comes from the line of Jason Helfstein from Oppenheimer.

Can I ask about Instacart Plus, any color on growth rates or how that has gone in the quarter? Have you been leaning more into that or not based on what you've been seeing from customer conversion? And then secondly, just a follow-up on advertising, specifically regarding the Trade Desk integration. How could that be meaningful once it scales? Could you clarify where that fits into your ad stack?

Regarding the Trade Desk, we're excited about this partnership. It allows us to utilize Instacart's first-party data along with programmatic buys through the Trade Desk. Many of our brand partners have been asking about this. It represents a larger vision we have in terms of scaling off-site advertising. However, in the short term, we don't expect it to be a material revenue driver. We want to continue building off-site advertising gradually through partnerships and consider the Trade Desk integration as a way to evaluate that progress.

Related to Instacart Plus, as of June, we had 7.7 million subscribers and 5.1 million paid Instacart Plus subscribers. We haven't disclosed these metrics quarterly, but we continue to see growth trending in line with orders and ongoing strength in Instacart Plus penetration, which represents more than half of the activity on our platform.

Our next question comes from the line of Justin Post from Bank of America.

Great. Two questions. First, could you talk a little bit about the grocery pipeline, both new partners and, more importantly, deepening the relationships with existing partners? How do you feel about that over the next year? And then Nick, you mentioned you're at 7.2% transaction take rates, kind of in the upper half of the range for the long term. Could you discuss the drivers as you look out the next 12 months, both positive and negative on take rates?

Concerning the grocery pipeline, as noted in our shareholder letter, we're onboarding new partners, including significant ones like Giant Eagle this quarter, which we're excited about. In terms of deepening our relationships, we continue rolling out various business lines. For instance, virtual convenience with partners like Wakefern, pickup services with Kroger, and powering delivery for Hy-Vee enhance our partnerships significantly. This effort represents a compelling opportunity for partners, and we expect to continue this work in the coming quarters. Additionally, we've recently launched SNAP with BJ's, which we anticipate will be a tailwind for us as we onboard new partners into the SNAP program. Although SNAP benefits faced cuts this year, we expect that to become a tailwind again next year.

Regarding transaction revenue, the primary driver of our transaction revenue as a percent of GTV historically has been efficiencies related to batching—meaning that it costs us less per order because we can increase the number of orders a shopper fills simultaneously. We expect to see continued efficiencies in batching. However, we don’t channel all of that to the bottom line; we reinvest some into consumer incentives and service offerings like No Rush delivery, providing customers with options that benefit both sides.

Our next question comes from the line of Andrew Boone from JMP Securities.

I wanted to ask about grocery delivery elasticity. Do you have any thoughts to share there? Are you making progress on grocers offering in-store fees? What are you seeing in that regard during discussions with grocers?

On grocery delivery elasticity, we've observed that since inflation rose last year, most customer segments have become more price-sensitive. However, within those segments, some people value price over convenience, and for them, we have an offering called priority delivery, which charges extra for deliveries made in less than 15 minutes. Conversely, for those prioritizing price over convenience, options like No Rush delivery work, allowing customers to save money in exchange for longer delivery times. Our aim is to tailor offerings along the price-to-convenience scale to meet the preferences of all customer segments. Regarding in-store fees, out of 1,400 retail banners on our platform, 425 are at price parity with their stores. We’re seeing that the three largest grocers at price parity are growing faster than the rest of the platform. We're encouraging grocers to adopt an omnichannel strategy and offer the same value online as offline, as omnichannel customers typically spend 2 to 4 times more than in-store-only customers for the grocers seeking to gain market share.

Our next question comes from the line of Bernie McTernan from Needham & Company.

A follow-up question on the integrations where you have access to inventory data with retailers. Is that just with enterprise partners or is it broader? Is that data exclusive? Do you think your competitors could have access to it over time as well? A follow-up on the previous question: what percentage of customers generally come to Instacart for the first time purchasing smaller AOV baskets versus larger ones?

We aim to establish integrations with as many partners as possible, but many retailers lack the sophistication for deep integration. Therefore, it varies, typically skewing towards enterprise partnerships. To reiterate, part of our strength in found and fill rates derives from combining retailer and shopper data with real-time shelf access. The depth of integration surpasses what competitors can achieve since we integrate not just with inventory systems, but also retailer CRM and POS systems. Such integrations require considerable time to execute, especially for retailers with limited IT resources, granting us a significant advantage due to our grocery focus over the past decade. Regarding customer types, transaction data shows that 75% of grocery spend in North America is from large baskets. Instacart leads the market with over 70% share of customer transactions in that category, while small baskets also play a role, constituting a fill-in use case for customers conducting weekly shops.

About small and large basket customers: though we don’t disclose the mix of activations in those tiers, we observe through third-party data that our large basket activations are more than five times higher than new entrants, with conversion from small basket to large basket also outpacing competitors. Hence, we're well-positioned to cater to both segments effectively.

Our next question comes from the line of Benjamin Johnson from Piper Sandler.

I was just wondering if you could discuss the progress you made on increased matching during the quarter, and how you plan to balance increased shopper efficiency with order quality in the long run.

We continue to improve our batch rate and have done so consistently while ensuring that order quality remains high. Our current order quality is the best since we reached mega scale. Balancing the four sides of our marketplace—opportunities for shoppers, keeping fees low for consumers and grocers—is key for us. Batching is a crucial differentiator; it is about the density of large basket orders at the same store. This balance allows us to reinvest efficiencies into consumer incentives and develop new service offerings like No Rush delivery.

Our next question comes from the line of Deepak Mathivanan from Wolfe Research.

One big picture question and another one on exclusives. As we look ahead beyond Q4 into 2024, can you talk about a few factors that could help the GTV growth rate, currently mid-single digits? Is it more dependent on macro factors, or are there notable initiatives you see that could drive acceleration? Second, could you discuss the exclusive agreements you have with some retail partners? There's concern in the investment community that exclusives could hurt your value proposition in the near term. Can you provide updates on the timeline and what happened in the past when you lost those exclusives?

Regarding the reacceleration of GTV, we’re pleased to see some reacceleration from Q1 to Q2 and Q2 to Q3. Continued growth depends on two factors: one, ongoing selection, affordability, quality, and convenience, which made us the category leader; and two, some macro factors easing up. We hope our mature cohorts stabilize—improving from double digits in H1 to single digits in Q3 helps. Additionally, a significant headwind this year has been the 30% cut to SNAP benefits. We foresee SNAP becoming a tailwind, as we've been pioneers in bringing SNAP to platforms online. Regarding exclusivity, I want to clarify that exclusivity is not our strategy. Retailers grow with us by partnering because we offer the best service at competitive prices. If retailers choose to diversify their operations, they still deepen relationships with us because we drive more growth for them. It's also slightly counterintuitive: when retailers stay non-exclusive, they typically align with us on higher fees, allowing our revenue and profitability to grow even when they venture elsewhere.

Our next question comes from the line of Mark Kelley from Stifel.

Quickly going back to the advertising side. When I see announcements like the one with the Trade Desk and other third-party verification companies, particularly the Trade Desk focusing on off-site, is there an opportunity to potentially add incremental demand partners outside the API partners that you already have, such as larger-scale DSPs like the Trade Desk? Does that make sense for your business? Lastly, with the buyback in place, could you remind us of the capital allocation priorities?

On the advertising side, we're working on scaling the off-site ad opportunity safely while maintaining the value of our data. The partnership with the Trade Desk signifies just the beginning of this journey. We have no new announcements at this time, but we're exploring opportunities to grow this area due to the significant value of our data for brand partners. Nick, over to you for the capital allocation question.

Regarding capital allocation, we currently have over $2.2 billion in cash. The business continues to generate cash, and we are significantly investing in R&D to support innovation for our partners and in sales and marketing to grow our business. We can balance these investments while opportunistically repurchasing shares to ensure we manage shareholder capital responsibly.

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