Instacart: Double-Digit Revenue Increase In First Earnings Since IPO

Instacart (listed as MapleBear Inc.) reported revenue gains amid elevated operating expenses in its Q3 earnings report released after markets closed yesterday.

The ecommerce delivery platform recorded revenues of $764 million for the quarter ending September 30, a 14% improvement from the same period last year. Adjusted EBITDA was $163 million, up 120% year-over-year.

Total operating expenses were $3 billion dragging down the company’s net income to a -$2 billion loss, primarily driven by a $2.6 billion stock-based compensation expense as a result of the company’s initial public offering.

“Transforming the world’s largest retail category will take time,” CEO Fidji Simo said in prepared statements. “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.”

The company reported it had about $2.2 billion of cash and similar assets and had recently established a $500 million share repurchase program to increase shareholder value.

Instacart announced its gross transaction value (GTV), which is calculated through the price of goods sold with relevant fees, taxes and tips, was up 6% to $7.4 billion. Though GTV performance from the company’s mature cohorts (subscribers from 2021 or earlier) declined YoY, the rate of the decline improved compared to Q2 and was “more than offset” by new customer activations.

CFO Nick Giovanni said that the business’ performance in Q3 “was much stronger than expected,” driven by higher advertiser spending through back-to-school and football campaigns.

Advertising was a main focus during the call, particularly during the question-and-answer portion where numerous analysts asked about how the company is devoting resources to this part of the business and its plans for scaling its ad-based revenue.

Currently, Instacart boasts about 5,500 advertisers on the platform and expects that number to grow sequentially in the future. Advertising and other revenue accounting for $222 million, a 19% increase YoY.

Instacart’s leadership team drilled into the idea that as the company grows its customer base and gathers more data on larger basket sized consumers, it will open up more advertising opportunities from manufacturers and retailers using that fulfillment data.

“A lot of the game is continuing to attract more emerging brands but also, in a big part, is deepening the investment rate from our advertisers by continuing to show them the value of the platform,” Simo said.

The ecommerce company is continuing to invest in sales and marketing to drive more online adoption. As the platform demonstrates the value of its advertising business to CPG brands, it is “unlocking more ad dollars,” Giovanni said, proving that the retail marketplace and advertising businesses work hand-in-hand to grow the company.

At the time of publication, Instacart’s share price was down over 9% Thursday, trading at about $24.70 per share.