Good day, and thank you for standing by. Welcome to Instacart's First Quarter 2024 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, 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 representing 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 have allowed shoppers to 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. 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 our 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 and a relentless focus on profitable growth, and we're executing well on our vision to build the technologies that are transforming the grocery industry. 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 that 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 the very few tech companies that could make a successful public market debut last year.

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 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. 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 in 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, which means having the best selection combined with high-quality service all at the price and speed customers want; 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 earning 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 factors. 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 two 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. 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.

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 stimulating 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 and be at an all-time high since the pandemic on found rate and fill rate. 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. 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 on 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, CPGs, loyalty programs, or weekly flyers, and really working with retailers on optimizing their pricing so that the customer buying online feels maximum value. 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 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?

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 overhauled our 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, and to drive more engaged customers. 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. 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. You might see that pay off over the longer term rather than in the 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 the 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 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. Within this construct, we remain very confident that we still have the winning customer value proposition and some critical advantages. We have the best selection, with 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. Again, we know that speed matters enormously in this market. We really have the best value with Instacart+, now $99 a year, which is twice as valuable with the addition of restaurants and does not require an extra subscription. 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're 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. We think this is something that's going to be incredibly accretive to the Instacart user. On your more specific question on which type of usage 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. 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. 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 in restaurants. 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 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. That's why we're focused on it, and that's why we 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. 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 because we started with grocery, but it's the part that continues to grow, and we continue to expand with large grocers like Kroger and Albertsons. 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 on 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. Looking at that business, looking at the take rate, if you could perhaps maybe update us on the roadmap 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. 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 few years. That said, what's changed in the last few quarters is that ad growth has lagged GTV growth, and we haven't seen ads fully catch up yet. However, our conviction around the long-term model is very strong. The reason we have this conviction is that we continue to add more partnerships to measure the performance of our ads and optimize that. 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 letter with our partnership with Circana. We continue to launch new objectives and optimization capabilities like new-to-brand objectives and targeted ROAS this quarter. All these capabilities are really contributing to giving brands confidence that we have a channel through which they can see high returns, high sales leads, and 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 partnerships with Google, recently with NBCU and 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' websites, whether that's Props, Schnucks, and many more. That's also a way to continue growing the ad business. Finally, expanding this ad business inside the store with Caper, where we are ramping up advertising initiatives. So overall, we feel very confident about our ad performance. 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? 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 how you flip from a headwind to a tailwind over into Q2?

Thanks for the question, Doug. So on cohorts, what I'd say is that everything we’ve said about cohort dynamics remains true. Our mature cohort declines continued to improve this quarter, and new cohorts are bigger than pre-pandemic. What I would note, though, is that the strong Q1 performance we saw benefited all of our cohorts. 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 lines with 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. The impact was strongest in Q4. 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. I think of the EBT SNAP benefit in Q2 as effectively offsetting the impact that we had in Q1 from leap day, which is about a 1 percentage point 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? We do appreciate that it's not essential to the success of your business, but it's an FAQ. 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. 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' businesses because we drive growth for them. As for the contracts, I would say they are 1 to 2 years, and they all have different timing. It's not as if there is a cliff coming up at any point. 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 ends up being very small baskets, the items added after a restaurant order, like a bag of chips and a can of Pepsi, which is very different from what they can do on our platform, which is really everything from small baskets to large baskets. We continue to invest in our technology with grocers. We have a relationship even when they're not exclusive. We're very open. We power their owned and operated business, do pickup with them, EBT SNAP, and virtual convenience. In terms of partnerships 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 represents 85% of U.S. gross retail being on Instacart. 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, particularly when it comes to fulfillment advantages. The scale at which we operate gives us significant advantages over any retailer wanting to do that themselves. That's why you're seeing even the largest guys, the Krogers of the world, really relying on us for fulfillment because we can do that at competitive economics and with quality that's top notch. 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. We think of it this way: we have 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 have churned. All of these audiences are incredibly critical for advertisers, especially in a world where cookies are going away. Other platforms are hungry for high-quality third-party data. Through our first-party data, we can do these partnerships where advertisers can take our audiences and leverage that on other platforms to make their advertising on these platforms more performant. That's very exciting. In addition to that, some of these brands decide to point directly to Instacart because they know that people will convert better when they land on a page where the ads allow them to buy and get the product in their hands within an hour. So it's a full funnel approach that we have with Google, The Trade Desk, NBCU, and that's why we're excited to continue deepening these partnerships. In terms of materiality, I would say it is still small because it's a new initiative that requires new infrastructure and new relationships. Often, the people that we talk to in order to get these budgets are different than the ones allocating spend on Instacart because they usually focus on spending on other platforms. It takes time to build these new relationships and add new optimizations, but we’ve done that in the past with our own platform, and we know the process.

Our next question comes from Ronald Josey with Citi.

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 talked about a decade of operating data, and I wanted to understand the strategic moats you have as a result of that, both for the consumers and your retail partners because I think that's something discussed often. Also, I have a question around quality, specifically receipt analysis and the benefit of LLMs. Could you discuss the benefits gained from that?

Absolutely. The reason I mentioned operating data in the letter is that we often talk about having the best prediction models, which are incredibly important. But even if someone duplicated all of our models, if they didn't have the 10 years of operating data, the models wouldn't be that accurate. You're only as smart as the data you collect. What we've done is amass a large pool of data on the consumer and inventory sides. On the consumer side, it includes 11 to 12 years of large basket data of everything that customers want to buy, preferences, and substitution patterns, crucial for out-of-stock situations. On the shopper side, having data allows us to predict shelf inventory. With 600,000 shoppers navigating grocery aisles and partnering with retailers for catalog files and balance-on-hand data, we can predict what's on the shelves with accuracy. Others even use our out-of-stock predictions to optimize operations. This technology allows us to get items in consumers' baskets quickly. Once we know what's on the shelves, we need to help shoppers find those items. That's why we have planograms, aiding shoppers in finding items efficiently and increasing found rates. Receipt data allows us to provide real-time feedback to shoppers, ensuring they complete orders accurately. This combination gives us leadership, resulting in found rates and fill rates that are currently at an all-time high since the pandemic. We're proud of this system and will continue improving upon it.

Our next question comes from Thomas 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. Beyond that, could you talk about your view of the consumer and the range of outcomes you're contemplating for this year?

Yes, thanks. On affordability, we obsess over it, and that's why you're seeing results like our savings increasing 20% year-over-year to $4.75 on items per order. We track this closely to ensure that when customers come to the platform, we give them various ways to get a deal. Productizing deals involves many different products: loyalty programs, retailer-funded deals to attract customers, digitizing weekly flyers to provide consumers access to deals they want, and CPGs funding specific deals on their products along with affordable delivery options like pickup and 'No Rush.' All these add to making our service more affordable, which is reflected in our demographics now mapping closely to the U.S. population. We are proud of this shift as it indicates that we are aligning with the entire total addressable market. Regarding the consumer, we've seen a resilient consumer. Lower-income consumers are stretching their budgets and planning more for grocery shopping, so we want to make it easy for them to get the best deals, combine multiple retailers for different deals, and see us as a solution for their needs while meeting the consumers wherever they want to shop. This has been our focus.

Our next question comes from Steven Fox with Fox Advisors.

Just one question from me on the Uber relationship. From a financial standpoint, how would you expect it to ramp? What should we think about in starting to see some financial benefits from it? Would it be mainly focused on better subscriber growth or user growth that translates into your business? My understanding from this morning's call is that Uber would use their own couriers to advertise in your channel. Can you give us a sense of how we should think about this helping your business or earnings over the next 2 to 6 quarters?

Yes, absolutely. We're not going to guide specifically here because we have not even launched the service yet. But I can tell you at a high level that we are getting an affiliate fee from Uber on orders we send them. The deal is positive unit economics day one for us, which is exciting. However, we’re also going to invest to ensure the service's success and adoption. We're not solely focusing on restaurant business; we aim to make Instacart a more engaging app with higher Instacart+ subscriptions. We aim to drive adoption in a way that strengthens the overall business.

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 carts. What are grocers looking for in terms of proof points to expand deployments? Are they looking at an ROI calculation, or are these in more experimental proof-of-concept stages at this point? What would be a reasonable expectation for when we could think about deployment to maybe 5% of stores? Is that something that could happen in a 3-year time frame? Is that realistic? Do hardware costs need to come down meaningfully for 5% penetration?

In terms of what grocers are looking at, it's the same factors we've been obsessing over: do consumers love the product? The answer so far is yes, based on our feedback. Consumers are actively seeking stores with these carts deployed. We've seen evidence that those who use carts tend to have larger baskets, which is a big driver for grocers wanting to adopt them for better customer engagement and competitive differentiation. We expect to have thousands of carts deployed by the end of the year across pilots with the largest grocers and anticipate that scaling will depend on the success of initial deployments. Cost is important too, and we will work to lower hardware costs, but that is not the primary barrier to deployment as we are also exploring advertising as a revenue source within Caper.

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 the company's GTV in 2022. Given the economics are similar on marketplace and enterprise, since you're agnostic to where the demand comes from, I'm wondering how enterprise is evolving. Are more grocers entering the online space and required to adopt your technological tools to compete against Whole Foods and others? Do you see this rising tide lifting every boat, and even though an order might not occur on the marketplace, do you win economically with enterprise tools?

Great question. You're right. We remain agnostic between marketplace and white label, which actually makes us a strategic partner for grocers. They prefer orders through their platforms. We've seen the growth of white label roughly in line with the marketplace for years. We're seeing a deepening of our relationships, where, in the past, it might have just been powering their storefront or fulfillment. Now we're powering more aspects for them. The recent deal with Save Mart is an example of powering everything from their storefront to tomorrow's strategies. This integrated approach is driving mutual growth as our relationships deepen at every level.

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 on 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 how the evolution of supply growth looks like going forward given the higher penetration among customers and grocers.

We've always had strong supply, and we continue to have waitlists for shoppers in many cities with high satisfaction levels, with 80% of shoppers saying they would recommend this work to someone else. Our attractiveness for shoppers is a big advantage. What we're doing is better matching shopper supply with demand, as seen in our recent expansion of delivery radius that provided 80% of customers with access to at least one new retailer. We're also driving efficiencies via batching and optimizing time-to-deliver orders, which is helping transaction revenue and allowing us to reinvest in the business, all while increasing shopper earnings. This is a dual focus that drives exciting outcomes.

Our next question comes from Mark Zgutowicz with The Benchmark Company.

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 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 growing well into the double digits. However, a few large brands have pulled back spend for specific reasons, which can impact our growth. For example, we see large alcohol brands pulling back in their spend due to issues in that category. We’re concentrated with larger brands, meaning challenges faced by a few can impact platform growth significantly. It’s a big priority to diversify our ad business, so we are less impacted when large brands face challenges in their businesses. I think this will come from both adding new brands to the platform and increasing spend from existing brands.

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 hear some of your goals and plans maybe in the short and long term, anything different you'd like to do.

Thanks, Stefanos, and thanks for the congratulations. I don't 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. That translates into focusing on finding attractive opportunities for investment and growth, creating a strong offering portfolio that serves many consumers—a goal to drive operating leverage and deliver improving profitability over time. Lastly, I'll comment on the large share repurchase program I helped execute, where about $750 million of buyback was done by the end of Q1. I can leverage over 10 years of operating experience to deepen Instacart's competitive position given the strong lead we have, and I want to ensure we remain in the lead.

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