Robinhood Markets Inc
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
HOOD$80.91+3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001783879-24-000233
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001783879-24-000296
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 108 current paragraphs.
75 unchanged; 27 reworded; 6 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 21 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
•total operating expenses decreased 10% to $486 million compared to $540 million;
Current report
◦SBC expense decreased 5% to $79 million compared to $83 million;
Current report
•ARPU increased 31% to $105 compared to $80; and
Current report
•Gold Subscribers increased 65% to 2.19 million compared to 1.33 million;
Current report
Operations costs increased by $9 million and $21 million for the three and nine months ended September 30, 2024, primarily due to increases of $6 million and $30 million of provision for credit card losses.
Current report
Provision for income taxes decreased by $7 million for the three months ended September 30, 2024 primarily due to the decrease in our current U.S. federal and state taxes payable as a result of an increase in excess tax benefits from share-based compensation, offset by the change in valuation allowance on our U.S. federal and state deferred tax assets.
Removed paragraphs (8)
Previous report
•operating expenses increased 6% to $493 million compared to $466 million;
Previous report
◦SBC expense decreased 21% to $86 million compared to $109 million;
Previous report
•ARPU increased 35% to $113 compared to $84; and
Previous report
•Gold Subscribers increased 61% to 1.98 million compared to 1.23 million;
Previous report
Recent Developments
Previous report
Share Repurchase Program
Previous report
On May 28, 2024, we announced that our board of directors approved the Repurchase Program authorizing the Company to repurchase up to $1 billion of our outstanding Class A common stock. Refer to Note 11 - Common Stock and Stockholders' (Deficit) Equity to our unaudited consolidated financial statements in this Quarterly Report for more information.
Previous report
Operations costs increased by $10 million and $12 million for the three and six months ended June 30, 2024, primarily due to increases of $13 million and $19 million in provision for credit losses and fraud mainly driven by $14 million and $24 million of provision for credit losses related to Robinhood Credit, partially offset by $2 million and $4 million decreases in expenses related to Fraudulent Deposit Transactions as we continued to strengthen our process to identify high risk users and prevent these transactions on our platforms. These increases were also partially offset by decreases of $4 million and $6 million in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency.
Reworded paragraphs (27)
Previous wording
Data as of and for the three and six months ended June 30, 2023 and 2024 has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.
Current wording
Data as of and for the three and nine months ended September 30, 2023 and 2024 has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.
Previous wording
•Funded Customers: We define a Funded Customer as a unique person who has at least one account with a Robinhood entity and, within the past 45 calendar days (a) had an account balance that was greater than zero (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) or (b) completed a transaction using any such account.
Current wording
•Funded Customers: We define a Funded Customer as a unique person who has at least one account with a Robinhood entity and, within the past 45 calendar days (a) had an account balance that was greater than zero (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) or (b) completed a transaction using any such account. Individuals who share a funded joint investing account (which launched in July 2024) are each considered to be a Funded Customer.
Previous wording
•Investment Account: We define an Investment Account as a funded individual brokerage account or a funded individual retirement account (“IRA”). As of June 30, 2024, a Funded Customer can have up to three Investment Accounts - individual brokerage account, traditional IRA, and Roth IRA.
Current wording
•Investment Accounts: We define an Investment Account as a funded individual brokerage account, a funded joint investing account, or a funded individual retirement account (“IRA”). As of September 30, 2024, a Funded Customer can have up to four Investment Accounts - individual brokerage account, joint investing account (which launched in July 2024), traditional IRA, and Roth IRA.
Previous wording
•total net revenues increased 40% to $682 million compared to $486 million;
Current wording
•total net revenues increased 36% to $637 million compared to $467 million;
Previous wording
•net income was $188 million, or diluted EPS of $0.21, compared to $25 million, or $0.03 diluted EPS;
Current wording
•net income was $150 million, or diluted EPS of $0.17, compared to a net loss of $85 million, or diluted EPS of -$0.09;
Previous wording
•our Adjusted EBITDA (non-GAAP) increased 99% to $301 million compared to$151 million;
Current wording
•Adjusted EBITDA (non-GAAP) increased 96% to $268 million compared to$137 million;
Previous wording
•Funded Customers increased 4% to 24.2 million compared to 23.2 million, and Investment Accounts increased by 1.4 million to 24.8 million;
Current wording
•Funded Customers increased 4% to 24.3 million compared to 23.3 million, and Investment Accounts increased by 1.5 million to 25.1 million;
Previous wording
•AUC increased 57% to $139.7 billion compared to $88.8 billion driven by continued Net Deposits and higher equity and cryptocurrency valuations;
Current wording
•AUC increased 76% to $152.2 billion compared to $86.5 billion, driven by continued Net Deposits and higher equity and cryptocurrency valuations;
Previous wording
•Net Deposits were $13.2 billion, an annualized growth rate of 41% relative to AUC at the end of the first quarter of 2024, compared to $4.1 billion, an annualized growth rate of 21% relative to AUC at the end of the first quarter of 2023. Over the past twelve months, Net Deposits were $33.0 billion, a growth rate of 37% relative to AUC at the end of the second quarter of 2023;
Current wording
•Net Deposits were $10.0 billion, an annualized growth rate of 29% relative to AUC at the end of the second quarter of 2024, compared to $4.0 billion, an annualized growth rate of 18% relative to AUC at the end of the second quarter of 2023. Over the past twelve months, Net Deposits were $39.0 billion, a growth rate of 45% relative to AUC at the end of the third quarter of 2023;
Previous wording
Comparison of the Three and Six Months Ended June 30, 2023 and 2024
Current wording
Comparison of the Three and Nine Months Ended September 30, 2023 and 2024
Previous wording
Transaction-based revenues increased by $134 million and $256 million for the three and six months ended June 30, 2024, primarily driven by increases of $50 million and $138 million in cryptocurrencies, $55 million and $76 million in options, and $15 million and $27 million in equities.
Current wording
Transaction-based revenues increased by $134 million and $390 million for the three and nine months ended September 30, 2024, primarily driven by increases of $38 million and $176 million in cryptocurrencies, $78 million and $154 million in options, and $10 million and $37 million in equities.
Previous wording
Cryptocurrencies revenues increased as a result of an 81% and 85% increase in the average Notional Trading Volume traded per trader and a 22% and 35% increase in the number of users placing cryptocurrency trades. In addition, cryptocurrencies revenues benefited from a higher rebate rate from crypto market makers (an increase was effective in May 2024).
Current wording
Cryptocurrencies revenues increased as a result of a 57% and 77% increase in the average Notional Trading Volume traded per trader and a 31% and 32% increase in the number of users placing cryptocurrency trades. In addition, cryptocurrencies revenues benefited from a higher rebate rate from crypto market makers (an increase was effective in May 2024).
Previous wording
Options revenues increased due to a 28% and 20% increase in the number of users placing option trades and a 38% and 32% increase in Options Contracts Traded. For the three months ended June 30, 2024, we also experienced higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates. Options revenues was reduced by $8 million due to match incentives paid to our customers (Refer to Note 3 - Revenues to our unaudited condensed consolidated financial statements in this Quarterly Report for more information).
Current wording
Options revenues increased due to a 23% and 20% increase in the number of users placing option trades and a 47% and 37% increase in Options Contracts Traded. In addition, we experienced higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates. Option revenues decreased by $17 million and $25 million due to match incentives paid to our customers (Refer to Note 3 - Revenues to our unaudited condensed consolidated financial statements in this Quarterly Report for more information).
Previous wording
Equities revenues increased primarily driven by a 31% and 27% increase in the average Notional Trading Volume traded per trader and a 19% and 16% increase in the number of users placing equity trades. In addition, we experienced higher equity rebate rates due to increased spreads in securities pricing.
Current wording
Equities revenues increased primarily driven by a 41% and 32% increase in the average Notional Trading Volume traded per trader and a 14% and 15% increase in the number of users placing equity trades. The increase was partially offset by lower equity rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates.
Previous wording
Net interest revenues increased by $51 million and $97 million for the three and six months ended June 30, 2024. These increases were driven by growth in most of our interest-earning assets balances and the higher short-term interest rate environment due to the rise in the federal funds rate, which positively impacted the interest rate we receive on these assets. These increases were offset by decreases in interest revenues earned from corporate cash and investments driven by lower cash and cash equivalents balances.
Current wording
Net interest revenues increased by $23 million and $120 million for the three and nine months ended September 30, 2024. These increases were driven by growth in our total interest-earning assets balance. These increases were offset by decreases in interest revenues earned from corporate cash and investments driven by lower cash and cash equivalents balances and lower short-term interest rate environment. In September 2024, the Federal Reserve lowered interest rates by 50 basis points, which will negatively impact our net interest revenues and adversely impact our customers’ returns on their cash deposits.
Previous wording
(2)Credit card, net consists of i) an off-balance sheet amount representing customer principal amounts funded by Coastal Bank under the Program Agreement. Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue; ii) an on-balance sheet amount representing purchased credit card receivables by the Credit Funding Trust, on which we collect interest, that is included in receivables from users, net on the unaudited condensed consolidated balance sheets. As of June 30, 2024,$191 million was off-balance sheet and$21 million was on-balance sheet. Refer to Note 10 - Financing Activities and Off-Balance Sheet Risk to our unaudited condensed consolidated financial statements in this Quarterly Report for more information.
Current wording
(2)Credit card, net consists of i) an off-balance sheet amount representing customer principal amounts funded by Coastal Bank under the Program Agreement. Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue; ii) an on-balance sheet amount representing purchased credit card receivables by the Credit Card Funding Trust. Robinhood Credit collects interest from customers that carry balances and pays interest on the amount funded through the Credit Card Funding Trust, with the difference in those amounts resulting in net interest revenues. As of September 30, 2024,$202 million was off-balance sheet and$107 million was on-balance sheet. The balance for June 30, 2023 is based on Robinhood Credit’s acquisition date of July 3, 2023. Refer to Note 10 - Financing Activities and Off-Balance Sheet Risk to our unaudited condensed consolidated financial statements in this Quarterly Report for more information.
Previous wording
Other revenues increased $11 million and $20 million for the three and six months ended June 30, 2024 as a result of increased Gold subscription revenues of $8 million and $14 million due to an increase in Gold Subscribers.
Current wording
Other revenues increased $13 million and $33 million for the three and nine months ended September 30, 2024 as a result of increased Gold subscription revenues of $8 million and $22 million due to an increase in Gold Subscribers. For the nine months ended September 30, 2024, other revenues also increased by $6 million from Sherwood Media LLC (“Sherwood Media”) advertising revenue, which was launched during the second quarter of 2023.
Previous wording
Brokerage and transaction costs increased by$1 million for the three months ended June 30, 2024 and remained flat for thesix months ended June 30, 2024. Increases of$6 million inother brokerage and transaction costs for both periods due to higher expenses related to our instant withdrawals feature driven by higher activities were partially offset bydecreases of$6 million and$14 million in broker-dealer transaction expenses as we began to pass option trading fees onto users starting in the fourth quarter of 2023.
Current wording
Brokerage and transaction costs remained flat for both the three and nine months ended September 30, 2024. Other brokerage and transaction costs increased by$5 million and $15 million due to higher expenses related to our instant withdrawals feature driven by higher activities. Additionally, employee compensation, benefits, and overhead increased by$1 million and $4 million driven by increased average headcount to continue support brokerage business. These increases were offset bydecreases of$8 million and$22 million in broker-dealer transaction expenses as we began to pass option trading fees onto users starting in the fourth quarter of 2023.
Previous wording
Technology and development costs increased by $2 million for the three months ended June 30, 2024 and decreased by $1 million for the six months ended June 30, 2024. The increases in cloud infrastructure expenses of $11 million and $22 million to meet increased capacity requirements for our platforms to support higher trading volumes were partially offset by decreases in employee compensation, benefits, and overhead of $9 million and $14 million and SBC of $4 million and $14 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.
Current wording
Technology and development costs increased by $3 million and $2 million for the three and nine months ended September 30, 2024 primarily due to increases in cloud infrastructure expenses of $9 million and $31 million to meet increased capacity requirements for our platforms to support higher trading volumes. These increases were partially offset by decreases in employee compensation, benefits, and overhead of $7 million and $21 million and SBC of $3 million and $17 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.
Previous wording
Marketing costs increased by $39 million and$80 millionfor the three and six months ended June 30, 2024, primarily due to higher expenses in digital marketing of $25 million and $46 million and brand marketing of $5 millionand$16 million, as we increased our investments in paid marketing channels to promote our brand, products, and services.
Current wording
Marketing costs increased by $31 million and$111 millionfor the three and nine months ended September 30, 2024, primarily due to higher expenses in digital marketing of $15 million and $61 million, brand marketing of $3 millionand$19 million as well as other marketing of $5 million and$15 million, as we increased our investments in paid marketing channels and other marketing initiatives to promote our brand, products, and services. In addition, employee compensation, benefits, and overhead increased by$4 million and$8 million driven by increased average headcount to support increased marketing initiatives.
Previous wording
General and administrative costs decreased by $25 million and $554 millionfor the three and six months ended June 30, 2024, primarily due to decreases in other SBC of $21 million and $63 million attributed to stock awards becoming fully vested in prior periods. The decrease for the six months ended June 30, 2024, was also due tothe 2021 Founders Award Cancellation of $485 million which occurred during the first quarter in 2023 anda$10 million decrease in legal expenses associated with certain historical regulatory matters.
Current wording
General and administrative costs decreased by $97 million and $651 millionfor the three and nine months ended September 30, 2024, primarily due to decreases of $94 million and$95 million insettlements and penalties and$8 million and$18 million in legal expenses associated with certain historical regulatory matters. In addition, other SBC decreased by $1 million and $64 million attributed to stock awards becoming fully vested in prior periods. The decrease for the nine months ended September 30, 2024 was also due tothe 2021 Founders Award Cancellation of $485 million which occurred during the first quarter in 2023.
Previous wording
Provision for income taxes increased by $6 million and $9 million for the three months and six months ended June 30, 2024 primarily due to the growth of the business and the change in valuation allowance on our U.S. federal and state deferred tax assets offset by our current taxes payable.
Current wording
Provision for income taxes increased by $2 million for the nine months ended September 30, 2024 primarily due to the increase in our current U.S. federal and state taxes payable as a result of business growth, offset by the change in valuation allowance on our U.S. federal and state deferred tax assets.
Previous wording
As of June 30, 2024, our cash and cash equivalents were $4.52 billion, which included a $750 million liquid investment portfolio of available-for-sale securities. Held-to-maturity investments maturing within one year can also be a source of liquidity and were $503 million as of June 30, 2024. See Note 6 - Investments and Fair Value Measurement, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
Current wording
As of September 30, 2024, our cash and cash equivalents were $4.61 billion, which included a $750 million liquid investment portfolio of available-for-sale securities. Held-to-maturity investments maturing within one year can also be a source of liquidity and were $527 million as of September 30, 2024. See Note 6 - Investments and Fair Value Measurement, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
Previous wording
Cash provided by operating activities decreased $1.77 billion. While we had higher net income, this was partially offset by a decrease in non-cash add-backs driven by higher SBC expense in 2023 as a result of the 2021 Founders Award Cancellation. The decrease was further driven by changes in operating assets and liabilities that had a negative impact on our cash provided by operating activities. These changes primarily included an increase in securities segregated under federal and other regulations resulting from the purchase of U.S. Treasury securities of $547 million and an increase in receivables from users, net balances of $1.43 billion driven by higher margin balance due to lower rates offered in May 2024.
Current wording
Cash provided by operating activities increased $1.02 billion primarily driven by increased net income of $1.07 billion, partially offset by a decrease in non-cash add-backs driven by higher SBC expense in 2023 as a result of the 2021 Founders Award Cancellation. Further, changes in operating assets and liabilities had a positive impact on our cash provided by operating activities. These changes primarily included an increase in securities loaned due to continuous growth in our securities lending program. The increase was offset by an increase in receivables from users, net due to higher customer margin balance, driven by increased customer activities.
Previous wording
Cash used in investing activities decreased $423 million compared to the prior period. The change was primarily driven by a decrease of $273 million from fewer purchases of held-to-maturity investments and an increase of $197 million related to proceeds from maturities of held-to-maturity investments.
Current wording
Cash used in investing activities decreased $397 million compared to the prior period. The change was primarily driven by a decrease of $182 million from fewer purchases of held-to-maturity investments and an increase of $272 million related to proceeds from maturities of held-to-maturity investments.
Previous wording
Cash used in financing activities increased $68 million compared to the prior period primarily driven by an increase in taxes paid related to net share settlement of equity awards of $94 million partially offset by $17 million in borrowings under our Credit Card Funding Trust to purchase credit card receivables.
Current wording
Cash used in financing activities decreased $452 million compared to the prior period primarily driven by a $511 million decrease in funds spent on common stock repurchases and $95 million in borrowings under our Credit Card Funding Trust to purchase credit card receivables. The decrease was partially offset by an increase of $146 million in taxes paid related to net share settlement of equity awards.
Previous wording
There have been no material changes to our critical accounting estimates during the six months ended June 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our 2023 Form 10-K.
Current wording
There have been no material changes to our critical accounting estimates during the nine months ended September 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our 2023 Form 10-K.