Instacart's Forward Momentum in Q2
Instacart reported what Chairman CEO Fidji Simo called “strong” Q2 2024 results, including 10% year-over-year growth in GTV (gross transaction value), its third straight quarter of positive GAAP net income, and considerable gains in adjusted EBITDA and operating cash flow.
“Our performance reinforces our leading position as the largest online grocery marketplace in North America and highlights our best-in-class customer experience underpinned by industry-leading delivery speed and order quality,” noted Simo in an Aug. 6 earnings call.
CFO Emily Reuter expanded on this topline information, noting that the GTV growth comprised order growth of 7% and average order value growth of 3%. Reuter attributed the quarters higher basket size – the key driver of Instacart’s outperformance – to such factors as new customer cohorts reaching bigger basket sizes faster, existing customers making larger purchases over time, and a higher mix of club orders.
She also noted that Q2 advertising and other revenue growth of 11% year over year outperformed expectations, primarily driven by growth from emerging brands on the platform, with the number of active brands now at more than 6,000. This growth more than offset the pullback in spend that Instacart continues to see from certain large brand partners facing challenges in their business, according to Reuter. The company additionally delivered strong profitability results across the board, for which she credited the company’s robust operating fundamentals and “ability to manage multiple levers across our P&L to drive leverage.”
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She also provided guidance that the composition of GTV growth would continue to be driven more by orders than basket size, reflecting ongoing strength in Instacart’s core service and a modest growth contribution from restaurant orders. Additional guidance included Q3 adjusted EBITDA of $205 million to $215 million. The primary driver of the company’s anticipated year-over-year growth in adjusted EBITDA as a percentage of GTV is ongoing adjusted operating expense leverage, according to Reuter, who noted that Instacart would keep increasing shopper efficiencies in transaction revenue while reinvesting in such opportunities more affordable service options and consumer incentives. The company also expects advertising and other revenue to grow year over year, largely in line with GTV guidance, she added.
“Overall, our business is performing well,” said Reuter on the earnings call. “Our operating scale and critical advantages continue to have us well positioned to strengthen our lead as the largest online grocery marketplace in North America and generate more shareholder value over time.”
As proof of Instacart’s forward momentum, she pointed to the fact that in Q2, the company completed its initial $1 billion of share repurchases and authorized a new $500 million buyback program. As of June 30, it had cumulatively repurchased 36.5 million shares, representing more than 10% of its fully diluted shares outstanding at the end of 2023, and had $425 million of remaining repurchase capacity.
San Francisco-based Instacart partners with more than 1,500 national, regional, and local retail banners. The grocery tech company facilitates online shopping, delivery and pickup services from more than 85,000 stores across North America on the Instacart Marketplace.
