All right, good morning, everyone. Welcome to the 2024 Nasdaq Conference. I'm Brian Nowak from Morgan Stanley, the head of US Internet Research. We're really thrilled to have Emily Reuter from Instacart with us to talk through everything that is going on in online grocery and Instacart in general. So thanks so much for having us. Thanks for having me. Let me start with the disclosures. All important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website, www.morganstanley.com/researchdisclosures. Some of the statements made today by Instacart may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Instacart undertakes no obligation to update them. Please refer to Instacart's most recent Form 10-K or 10-Q for a discussion of the risk factors that may impact actual results. So you've been in the role seven months now. I know you've been doing a lot of meetings and marketing in the U.S. and in Europe. I want to sort of start with, in the seven months, what have sort of been one or two of the biggest learnings you've had about the business, and sort of what is underappreciated when you do all these investor meetings about the Instacart opportunity? Sure. Well, I mean, I think first it starts with the opportunity, which continues to be really enormous. So starting with a very large TAM and being the leading player in the digital-first space, obviously, is an incredibly great starting point. I think in terms of maybe what I underappreciated coming into the role or what I hear in terms of misconceptions, there's probably two big things. I think the first is really around the importance of the retailer relationship. So obviously, Instacart has relationships with 1,500 retailers across the U.S. and Canada. And now, I think a lot of times that gets misconstrued as, hey, all it takes is to flip on a retailer. A retailer can decide to go to another party. But the reality is these are relationships that we've nurtured over the course of over a decade. And that means that we're able to invest in technology and products and services that scale across 1,500 retailers in a way that an individual retailer couldn't or a competitor can't today. The depth of integrations that we have with retailers. This allows us to do what we do best, which is execute orders with a tremendous amount of accuracy. That's everything from inventory integrations to understand what's on the shelf to point-of-sale integrations, loyalty integrations that help drive customer savings. And these are things, again, that really take time and take relationships because getting on a retailer's IT roadmap is in and of itself a hurdle. So I think that depth of integration, the breadth of those retailer relationships is very unique. I think I observed it really right out of the gates on day one company to company in terms of really how the BD team itself is organized. It's really designed to be a white-glove service, which is very different from a sales team that's onboarding the 100,000th restaurant in the U.S. So a little bit of a different feel to how we interact with retailers relative to sort of other kind of adjacent industries. So that's probably the biggest misconception. In terms of other things that I've come to observe in my seat, I would say is really around the levers that we have within the P&L to both reinvest but also to drive profitability. What I mean by that is if you look over the course of the last couple of quarters, but even the last couple of years, the company has been able to really continue to improve profitability at the same time as we've been reinvesting. So where are we driving dollars from? You've seen it really from places like shopper efficiency, as well as obviously Adjusted OpEx leverage. And then you see us reinvesting across the board, whether that's in affordability, incentives, in marketing, in newer initiatives like restaurants and Caper. So that ability to be flexible and adjust depending on what we're seeing in the market, I think, has been surprising in a positive way. Great. There's a lot there I want to sort of dig into. Maybe before we do that, let's talk a little bit about sort of the competitive landscape. I think one of the most common questions that I get from investors is, how does Instacart continue to compete, drive growth profitably when you have Amazon going after grocery, Walmart going after grocery, DoorDash, Uber? There's so many online grocery players going after this big TAM because it is so important. So maybe in the competitive situation, how do you think about sort of points of differentiation that'll enable you to keep driving more users and frequency in this highly competitive space? Sure. I mean, I think first and foremost, one thing to acknowledge here is that the competitive situation is not new, and so it has been something that many of these players have been very interested in going after for coming on five years now or more in some cases. So I think with that context, it's important just to recognize that we've been able to operate in this environment at the same time as we've been able to continue to have far and away a leading position in the digital-first space amongst large baskets, which is the vast majority of the online grocery market today, so we've been operating in this world for quite some time. I think to address your question around differentiation, I think it differs depending on who you're necessarily talking about in the ecosystem. When it comes to sort of what I'll call restaurant-first players that are coming into grocery, really it comes back to some of the things we talked about earlier, which is the breadth and depth of those retailer integrations, our ability to actually execute on these orders. It is incredibly hard to get you what you want in a timely manner. And that's something we excel at. Our found and fill rate is the best it's ever been. Our ability to drive replacements for you that are satisfactory is at 95%. And there are, on average, more than one replacement per order. So that's something that's a capability that we've built over the years that is hard-earned, meaning billions of data points, understanding your preferences, understanding preferences as a whole, and helping the shopper pick something that's going to ultimately be to your satisfaction. That is really hard to do. I think you hear other players actually starting to acknowledge that after years and years of not being able to really break into these larger baskets. So I think from a restaurant-first player, I think about it through that lens, through more of the retailer, pre-existing retailer, I think the advantage is a bit different. Those are players that really have much more limited selection. So this is where our 1,500 retailers comes into play. We know from our data that selection really matters to consumers. On average, our consumers over their lifetime shop at five retailers. And our Instacart Plus members shop at nearly double that. So we know that in addition to your weekly shop at your local grocery store, you also may shop at a club retailer. You may have individual retailers that you use for specialty occasions. People come to Instacart, obviously, for the quality and the speed, but also that selection. That is very, very different than if you're going to a single store that will work for some subset of the population. We very strongly believe it doesn't work for everyone. The last thing is speed. We are in a position now where almost half of our orders are accepted by a shopper that is already in the store or within a mile of the store. That means that before you put your device back down on the counter, the shopper has already started your order. In many cases, we are shopping faster than you'd be able to do by yourself. That's a pretty different value proposition than, say, next day or later in the day. And if you look at our order composition, 80% of our orders are for what we call on demand. That is about half of those are priority. Priority means it's a slightly extra fee. They're not batched orders. So it's really directly to you. The median delivery time for priority orders is 50 minutes. And a quarter of those are in under 30 minutes. So this is really, again, faster than you could do yourself. The remainder of those are for sort of the next delivery slot. And again, very different product concept than later in the day, next day. We also provide those services. We want to have the full spectrum of services. But we know that for many customers, the on-demand component is a critical feature. Super interesting. I think the point on the replacement, the percentage of time you have a replacement in the order is always so interesting to me because it's almost like humans, for whatever reason, we're holding online grocery to a higher standard than we would if we were in the store ourselves. If I was in the store and I wanted to get white Gatorade and they didn't have it, I would choose red and be fine with it. But when your customer orders white and then you get a message saying, "I only have red," you have an issue. So maybe talk about that a little bit. How has your improvement to get more visibility on inventory that's available sort of helped you drive better efficiency and completion rates and just better courier productivity? Sure, so inventory is a notoriously difficult problem. Even the retailers have difficulty knowing what's on the shelf. They may know what's in the store, but as a customer, there's a big difference between what's in the back and what's actually on the shelf, and so by combining the data that we get from retailers and some data we're getting multiple times a day, but imagine we get a data feed at 8:00 A.M., we know that by 11:00 A.M., that's no longer relevant. There's been lots of people come through the store, and so when you come on to order at 11:00 A.M., what we're doing is taking the data, and then we're layering on our data on top of that to predict what is the most likely scenario, so for example, you have a certain type of milk. We're going to tell you at the point of order, it's most likely out of stock. And so there's two things that can happen in that situation. You can decide milk is critical to whatever I'm making tonight for dinner. I don't know what you're making. And so either maybe you could choose a different retailer, or you can be very specific about changing to a different brand or something that's acceptable to you. But we'll trigger that decision for you. So it'll pop out and say, "Hey, this is likely low in stock." You can have three options. I no longer want it. Just don't pick the item if it's not available. I want a specific brand. So then you can choose. Or, you know what? I'm a laid-back kind of guy. You do the choosing for me. What that means is when the shopper comes to that point in time, they can make that decision really quickly versus you can imagine a stressful situation. What does Brian like? What do I do? Sometimes they're going back and forth with the consumer to try to make a decision. That's time. That's obviously money. So it really shortens the period of time from an execution standpoint. Also, you're a happier customer. At the end of the day, it also very likely removes the potential for a refund or an appeasement, which is where things can get really expensive. Across the board, this really helps customer experience and cost. It's really helpful. OK. Let's talk about some of the initiatives aimed to bring on more of the price-sensitive segment. I think you've really sort of focused on this in the last three to six months. So maybe talk to us about which initiatives you have that brought on more of the price-sensitive customers, anything you're sharing numerically about the success. And then how did those customers act? Or what is sort of the cohort behavior of those more price-sensitive customers so far? Sure. Maybe first I'll give some context on why we're talking about price-sensitive customers. I think first and foremost, we know people come to Instacart primarily because of convenience. But we also know that the number one reason people don't use Instacart is because of affordability. And so that is why it's a big area of focus for us. It's something that's been a focus for a long period of time. Maybe we're talking about it more specifically recently. But it spans a number of different initiatives. There's not one silver bullet to fixing affordability. So just to give some flavor for the kinds of things that sort of ladder up to affordability, it kind of starts with the price that you see on the websites. And for us, our retailers control pricing. So oftentimes, the prices could be marked up relative to in store. We work with the retailers on that to some extent. And one way that we do that is through our Eversight technology. This is a company and a technology we bought a couple of years ago. But this can help retailers both achieve their objectives. Let's say they want to achieve a 5% markup across the board. It helps vary that pricing by product so that the most price-sensitive products are going to be potentially lower markup. Maybe you mark up more on less price-sensitive products. They can achieve their objectives. From a consumer standpoint, the price perception improves. And that can actually really drive positive outcomes for everyone. So price and affordability, it's both actual affordability. It's also a perception of affordability. And that addresses the latter. Within the former, we've been doing a lot of things across loyalty integration as an example. Loyalty integration is when we are able to provide the same benefits that you get if you have your loyalty card in store. You swipe at the checkout. You get the discounts that are available for in-store customers. We now bring those online. That's really important for a lot of customers. It's one of the many things that has added up to $5.35 of savings in the last quarter. That's up 18% year-over-year, so it's those kinds of initiatives that ultimately really do cut back at its cents and then ultimately dollars and really adding up meaningfully over time. Flyers is another component of this, so flyers, people are very used to over the last 100 years getting these flyers. It's newspaper with weekly specials. We've digitized that. Now, that has two impacts. One, again, you feel like you're getting the same savings as you are in store because you are. But it also allows retailers to potentially provide discounts in a more targeted way. So maybe the retailer doesn't want to discount the entire inventory or reduce the markup across the board. But we can be more specific and targeted in how we do it through the use of digital flyers. So that's something we're also excited about. So generally speaking, I think affordability will continue to be a focus for ours. It also shows up on the pricing side, meaning you've seen us launch free pickup. We've launched lower-cost delivery options. I sort of made a nod to this earlier around we do have lower-cost options for later in the day. We have free delivery for next-day delivery. So we do serve those customers. And we see one in five new customers actually adopting one of those lower-cost delivery options. So we know there's traction there. But frankly, it's not just individual consumers that only select certain types of delivery. Even across our repeat customers, 2/3 of customers are using more than one of our delivery options. So it may be one week you're in a rush. You're going to go for priority. Another week, you're sitting at home. You don't necessarily care. You're going to go for a lower-cost option. So we know that people mix and match depending on a particular use case on a particular day. Got it. OK. Let's talk about advertising. The branded and CPG advertising markets right now are very interesting and confusing to me. So in the United States, what we hear from a lot of the big brands as of now and Dara Mohsenian, who covers these companies, they talk about pulling back on digital advertising, trying to figure out the right price advertising mix, and then two weeks ago in Barcelona, we heard the European branded companies, Unilever, Nestlé, even WPP, the agency talked about the brand environment, CPG is actually stronger, so there's a dichotomy in the U.S. versus Europe. I don't know what it all means yet. I'm trying to figure it out, but maybe from your perspective, I know there's been a lot of moving pieces with your largest advertisers throughout the course of the year. What have you sort of seen? What are the latest trends that you're seeing with your biggest advertisers spend on the platform? Yeah. You know, it's interesting because I think it mirrors some of what you just said. It's certainly not widespread where we see large advertisers across the board in a negative situation. In fact, it's quite the opposite. I think it's more of a tale of two cities where we have spots where individual advertisers are pulling back. And we can really look and tie that back to challenges that those particular advertisers are having in their own business. You see it in their earnings. You see it in their competitive situation. And then you see it reflected for us. But to be clear, we're talking about where our advertising business is today. If a large advertiser pulls back $1 million, $2 million, or $3 million, not very much in the context of their advertising budget, that's meaningful from a growth perspective for us today. At the same time, though, we see many other large advertisers leaning in and growing their business faster than our overall ads business. And we also see our longer tail of advertisers growing much faster than our overall advertising business. And so we see a lot of really bright spots. But when it comes to having certain large advertisers pull back and then having an impact, ultimately to us, what that says is we need to diversify our advertising base. That means continuing to grow the breadth of our advertising base, the depth we have with each of those advertisers so that we're more resilient to those. Because we should expect that, of course, businesses will go through different cycles. We'll have that. We have historically been a bit too concentrated. So we're actively working on that. Got it. I know the management team certainly has experience from digital ad platforms and how to build diversified advertiser bases. So maybe talk to us about sort of the blocking and tackling involved with how do you bring on more of these smaller advertisers and sort of expand the advertiser base by 1x, 3x, 5x, 10x the next 10 years? Yeah. No, it's a great point. I mean, we have that experience, which gives us a lot of confidence that we know exactly what to do. So we're now really in execution mode. So that's the good news. The question is just really about what are the blocking and tackling we need to do. What I would say is there's sort of two key components. The first is on ad sales. Now, I bring that up because it's a bit of a different sales motion when you're talking about large advertisers where you're going to be thinking about this more as a white glove type of sales motion versus as you get to smaller brands and longer tail, it's going to be more of a lighter touch ad sales model. So sort of different type of salesperson. And we've been investing in those people really throughout the year. If you go back to our Q1, we did a restructuring. We talked a lot about the fact that the restructuring wasn't just for cost savings. It was really for being able to redeploy resources in our more highly strategic areas. Ad sales was one of those areas. Caper was another one. But just to go back to ad sales, that has been an area of focus for us. The other piece of the puzzle, though, is around the technologies that we need to build or the self-serve, maybe tooling is a better word, for these small advertisers to be able to interface with our platform. Today, it takes too long and it's too cumbersome for a small brand to be able to launch and edit a campaign on Instacart. That's, for example, something we're really working on. So that's quite literally editing tools. It's measurement tools. It's all the things that you would expect and you see on other platforms, and again, why we feel very good that we know where the TAM is. It's just a matter of the investments and being able to get there. We've started to see some of this come to fruition. We've built our ad space from 5,500 brands to 6,000 brands over the last several quarters, and so we know what we're doing is working, and so we'll just continue down that path. Got it. OK. Let's talk about the Uber partnership, another company and area I know that the management team has expertise in. So maybe for everyone in the room, just sort of first remind us how the Uber Eats partnership works and then sort of the early traction, sort of early signal that you're seeing from an incremental user or incremental volume perspective. Great. So the Uber Eats partnership really is about providing a restaurants option to our existing customers because we knew that many of our customers were already ordering online restaurant delivery, which meant they were going to competitive apps. Or we also knew that many of our customers actually weren't ordering restaurants. And so we thought it was something we could bring to the table as well as improve the Instacart Plus membership value proposition. So it was something we were really excited about and determined that providing that through a partnership model really made the most sense versus an alternative like us trying to go and enter the restaurant industry by ourselves. And so we launched the restaurant partnership with Uber in June of this year. It went nationwide in the U.S. mid-June. So it's still early days. The way that it works is that within the app, there is a tab for restaurants. It's very native, meaning you're not popping out to the Uber Eats application. You really are staying within the context of the Instacart app. You're able to actually place the order. You can track the order afterwards while you're in the app. But once you're sort of on that interface, that really is from then on going to be executed and handled by Uber Eats itself, meaning they will handle the order. They handle the payments. They handle the delivery. From an economic standpoint, Uber does pay us what we think of as an affiliate or a referral fee on a per order basis, which hits our transaction revenue. We're really pleased with what we've seen to date. Again, very early. But the thesis when we launched the partnership was really around driving engagement with our app and ultimately driving engagement with our grocery business. So the data that we're looking at and starting to see that positive early signal from is really around our customers, one, adopting restaurants. So they're using the product. So that's good to see. And they're coming back and using restaurants more frequently. But most importantly, they're coming back and ordering grocery more frequently. And they're spending more on grocery. So the second part of what I said is really the important piece because that is the thesis of the deal and really what we're trying to drive. So you'll see us invest in grocery sorry, in restaurants specifically. You'll also see us invest in grocery because we want to see this flywheel. And we think that that exists. We are investing against that partnership. Are there any sort of geographic or demographic cohorts that the Uber Eats partnership helps you penetrate further? Is there anything there from a younger, older demographic, suburbs versus cities? Anything from that perspective? Or is the user base sort of similar? I think there are some nuances to the user base. I think one thing. It was on their last quarter call. I can't remember the exact timing. Uber did acknowledge that the basket sizes that we're driving from our partnership are about 20% larger than the baskets on their business as a whole. One of the things that that indicates to us is that our user base does have a slightly different composition. We believe that that is related to the fact that typically we have families that are oriented. You see that in the large basket size that we have on the grocery side. We think that then translates over into the restaurant business in terms of a more family orientation. Earlier in the discussion, you talked about sort of investing to grow but still growing profitably. I think if we look at sort of your take rate ex advertising, I know there's a lot of moving parts going on in there, and so it's actually been impressive, some of the operational efficiency that's come through in that line, so maybe talk to us about in that take rate, where have you made the most progress, and as you look into 2025, where are the areas where you can still drive more operational efficiency in the take rate ex advertising? Sure. It might be helpful to sort of level set for folks a couple of the things that are within transaction revenue. Because as you said, there's a lot of puts and takes. The biggest components on the positive side within transaction revenue are going to be retailer take rate. That's what we get from our retailers and consumer revenue. So that's the different fees that we charge customers, whether that's delivery fees, service fees, Instacart Plus, et cetera. There's some payment revenue as well. On the negative side, the biggest component of this is how much we pay our shoppers. The second is going to be incentives and promotions and then appeasement and refunds. So to the extent that we can manage on the cost side, that will obviously be helpful as you look at that overall transaction revenue take rate. Now, if you look at the last couple of quarters, you would have observed that we've been in the upper half of our long-term target range for transaction revenue. So our range is 6.5%-7.5%. We've sort of been within the sort of low 7%-7.3% last quarter. Now, what has been going on behind the scenes has really been a dramatic continued grinding out of improvement across shopper pay primarily. So getting really efficient in terms of how we actually execute orders. So to be specific there, what does that mean? Two main things. One is the batching of orders. So shoppers are shopping multiple batches at once. We can pay them less on a per order basis because they're making more combined. And they're getting tips across two orders. So that batch rate's really important. But the other thing that's really important is just how quickly they move through the store. So I mentioned earlier on substitutions. If you've already made a substitution, that helps. We have planograms or effectively internal maps of the store with product placement down to the SKUs on the shelf. That means that we can tell the shopper exactly where to go to move through the store incredibly quickly. So it's not you looking around and hoping you find a product. It's very targeted in terms of where we're telling you to go. In many of our retailers, we have bypass checkout. That means no waiting in line. That saves you minutes. So this is a game of shaving off seconds as the shopper moves through the store. That drives a lot of efficiency. And we think we have more room to go there. Bringing this back to transaction revenue, as we have been driving these savings, we're then reinvesting in the business. Now, as I mentioned earlier, there's a whole host of ways we can do that within transaction revenue. To name a few that we've been talking about, one is around incentives and promotions. And you saw us really about a year ago this time start to lean in more heavily into incentives and promotions because we got more sophisticated around our ability to do that in a more targeted and impactful way. And so you saw us invest in that. It doesn't show up in transaction revenue because, again, we're sort of recycling those savings. But you also see us investing in these affordability initiatives. So when we launch things like free pickup or free next day delivery, again, this is all sort of puts and takes within transaction revenue. Got it. All right. Well, Emily, thank you very much for your time. We can't wait to see how the business goes over the course of the year. Yeah. Thanks so much. Thanks so much. Thanks so much. You, it all got better. Tell me so I can hear it's not just me. Say it out loud. I'll be right here listening. I can see it all. The longer we stay together, the mountains are falling. As long as we stay together, I can see it all. As long as we stay together, as long as we stay together. When it feels so right, it's always worth the fight, and it feels so right. I know it's worth the fight. When When it feels so right, and it feels so right. So right. Yeah, it feels so right. I can see it all. The longer we stay together. Good morning. We're going to kick off our next session here. My name is Devin McDermott. I head North American Energy Research here at Morgan Stanley. I'm very happy to have Kaes Van't Hof, the CFO of Diamondback, here with us. Kaes, thanks so much for joining us. Yeah, great to be here. Thanks for having us. So first, to kick things off, just to set the stage for investors here that may not be familiar with Diamondback. So I was wondering if you could just give a few-minute overview of the business and the company's history to set the stage. Yeah. You know, listen, Diamondback, I would say, is probably one of the poster children for shale growth in the U.S. We went public in 2012 with a $500 million market cap.