What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-02-24 · 293 added, 261 removed, 339 unchanged (62% of the section changed)

7 unchanged sentences

We refer to our “users” and our “customers” interchangeably throughout this Annual Report to refer to individuals who hold accounts on our platform.

The FINRA definition of “customer” under Exchange Act Rule 15c3-3 means any person from whom or on whose behalf a broker or dealer has received or acquired or holds funds or securities for the account of that person.

However, because we do not earn consideration from users (other than Robinhood Gold Subscribers and debit card users), users are not “customers” as defined in ASC 606, Revenue from Contracts with Customers.

Accordingly, our users do not meet the definition of “customer” for purposes of the accounting rules.

See Note 1 to our consolidated financial statements in this Annual Report.

Table of Co ntents

Glossary Terms

• Automated Customer Account Transfer Service (ACATS) :

A system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another.

• Churned Account:

An account is considered “Churned” if it was ever a New Funded Account whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding certain Company-initiated Credits) drops to or below zero for at least 45 consecutive calendar days.

Negative balances typically result from Fraudulent Deposit Transactions (as defined below) and unauthorized debit card use, and less often, from margin loans.

• Company-initiated Credits:

Company-initiated Credits are amounts that are deposited into a Robinhood Account by the Company with no action taken by the user.

Examples of Company-initiated Credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.

• Daily Average Revenue Trades (DARTs) :

We define DARTs for any asset class as the total number of revenue generating trades for such asset class executed during a given period divided by the number of trading days for such asset class in that period.

• Fraudulent Deposit Transactions:

Occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount.

• Margin Book:

We define Margin Book as our period-end aggregate outstanding margin loan balances receivable (i.e., the period-end total amount we are owed by customers on loans made

for the purchase of securities, supported by a pledge of assets in their margin-enabled brokerage accounts).

• New Funded Account:

We define a New Funded Account as a Robinhood Account into which the user makes an initial deposit, money transfer or asset transfer, of any amount during the relevant period.

• Notional Trading Volume:

We define Notional Trading Volume for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executed in that asset class over a specified period of time.

• Resurrected Account:

An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated Credits) rises above zero.

• Robinhood Account :

We define a Robinhood Account as a unique log-in that provides the account user access to any and all of the Robinhood products offered on our platform.

Key Performance Metrics

• Net Cumulative Funded Accounts (NCFA) :

We define Net Cumulative Funded Accounts as New Funded Accounts less Churned Accounts plus Resurrected Accounts.

• Monthly Active Users (MAU) :

We define MAUs as the number of unique Robinhood Accounts who meet one of the following criteria at any point during a specified calendar month:

a) executes a debit card transaction, b) transitions between two different screens on a mobile device while logged into their Robinhood Account or c) loads a page in a web browser while logged into their Robinhood Account.

A user need not satisfy these conditions on a recurring monthly basis or have a funded account to be included in MAU.

MAU figures in this Annual Report reflect MAU for the last month of the relevant period presented.

We utilize MAU to measure how many customers interact with our products and services during a given month.

MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement.

Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.

• Asset Under Custody (AUC) :

We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis.

Net Deposits and net market gains (losses) drive the change in AUC in any given period.

• Net Deposits:

We define Net Deposits as all cash deposits and asset transfers received from customers, net of reversals, customer cash withdrawals, and other assets transferred out of our platform (assets transferred in or out include debit card transactions, ACATS transfers, and custodial crypto wallet transfers) for a stated period.

• Average Revenues Per User (ARPU) :

We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period.

With respect to the year ended December 31, 2022, as compared to the year ended December 31, 2021:

• we generated total net revenues of $1.82 billion compared to $959 million, for year-over-year growth of 89%;

• we incurred a net loss of $3.69 billion, which included aggregate costs of $3.62 billion associated with share-based compensation and the change in fair value of our convertible notes and warrants, compared to net income of $7 million;

◦ Share-based compensation expense totaled $1.57 billion compared to $24 million.

For the year ended December 31, 2020, share-based compensation expense all related to stock options (no expense relating to restricted stock units was recognized because a vesting condition had not been met as our IPO had not yet occurred).

◦ The net loss for the year ended December 31, 2021 also included total expense of $2.05 billion associated with the change in fair value of convertible notes and warrant liability issued in February 2021.

• our Adjusted EBITDA (non-GAAP) was $34 million compared to $155 million;

• we had Net Cumulative Funded Accounts of 22.7 million compared to 12.5 million, for year-over-year growth of 81% ;

• we had Monthly Active Users (MAU) of 17.3 million in December 2021 compared to 11.7 million in December 2020, for year-over-year growth of 48%;

• we had Assets Under Custody (AUC) of $98 billion compared to $63 billion , for year-over-year growth of 56%;

• we had Average Revenues Per User (ARPU) of $103 compared to $109 , for a year-over-year decrease of 5%.

For definitions of “Net Cumulative Funded Accounts”, “MAU”, “AUC” and “ARPU” please see “—Key Performance Metrics.” Adjusted EBITDA is a non-GAAP financial measure.

• we generated total net revenues of $1.36 billion compared to $1.82 billion, for a year-over-year decrease of 25%;

• we incurred a net loss of $1.03 billion, or -$1.17 per share, compared to net loss of $3.69 billion, or -$7.49 per share;

net loss in 2021 included expense of $2.05 billion associated with the change in fair value of convertible notes and warrant liability issued in February 2021;

• operating expenses were $2.37 billion compared to $3.46 billion, for a year-over-year decrease of 31%;

◦ share-based compensation (“SBC”) expense totaled $654 million compared to $1.57 billion, for a year-over-year decrease of 58% .

SBC expense for the year ended December 31, 2021, was primarily related to the cumulative one-time expense recognized upon our IPO.

SBC expense for the year ended December 31, 2022 included $77 million net reversals of previously recognized expense in connection with both the April 2022 Restructuring and August 2022 Restructuring;

• our Adjusted EBITDA (non-GAAP) was negative $94 million compared to positive $33 million ;

• we had NCFA of 23.0 million compared to 22.7 million, for a year-over-year increase of 1% ;

• we had MAU of 11.4 million in December 2022 compared to 17.3 million in December 2021, for a year-over-year decrease of 34%;

• we had AUC of $62.2 billion compared to $98.0 billion , for a year-over-year decrease of 37%;

• Net Deposits were $18.4 billion compared to $27.1 billion , for a year-over-year decrease of 32%, which translates to a growth rate of 19% relative to AUC for the year ended December 31, 2021;

• we had ARPU of $60 compared to $103 , for a year-over-year decrease of 42%.

Adjusted EBITDA is a non-GAAP financial measure.

For more information about Adjusted EBITDA, including the definition and limitations of such measure, and a reconciliation of net income (loss) to Adjusted EBITDA, please see “—Non-GAAP Financial Measures.”

Recent Developments

Restructurings

In 2020 and the first half of 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus.

From the beginning of 2020 to the end of 2021, we grew net funded accounts from 5.1 million to 22.7 million and revenue from $278 million in 2019 to $1.82 billion in 2021.

To meet customer and market demands, we grew our headcount from 700 at the end of 2019 to nearly 3,900 at the end of the first quarter of 2022.

This rapid headcount growth led to some duplicate roles and job functions with more layers and complexity than

were optimal.

As a result, we completed two restructurings, detailed below, and significantly reduced our hiring in 2022.

April 2022 Restructuring.

On April 26, 2022, we announced a reduction in force involving approximately 330 employees, representing approximately 9% of our full-time employees at the time.

August 2022 Restructuring.

On August 2, 2022 we announced an additional reduction in force involving approximately 780 employees, representing approximately 23% of our full-time employees at the time, the planned closure of two offices, and related matters.

These actions were part of a Company reorganization into a GM structure under which GMs have started to assume broad responsibility for our individual businesses.

As we continued to execute the August 2022 Restructuring, our lower headcount led us to evaluate our real estate portfolio.

On September 30, 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.

See Note 6 - Restructuring Activities and Note 13 - Common Stock and Stockholders' (Deficit) Equity to our consolidated financial statements in this Annual Report for further information relating to these restructurings.

Termination of Ziglu Stock Purchase Agreement

On April 16, 2022, we entered into a definitive stock purchase agreement to acquire all outstanding equity of Ziglu.

Advances of $12 million made to Ziglu during the year were accounted for as non-marketable equity securities under the fair value alternative, considering the securities lacked a readily determinable fair value.

In February 2023, we notified Ziglu of the termination of the stock purchase agreement.

Due to this and other factors, we have adjusted the carrying value of our investment in Ziglu to zero as of December 31, 2022.

See Note 18 - Subsequent Events to our consolidated financial statements in this Annual Report for further information.

COVID-19 Update

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus referred to as “COVID-19” to be a global pandemic.

In response to the pandemic, we enabled nearly all of our employees, to work remotely and restricted business travel.

In the fourth quarter of 2021, we elected to become a “Remote First” company, allowing a large segment of our employees to have no assigned location or regular in-office requirement.

When this program is fully implemented, following the cession of COVID-19 exemptions, some teams will need to live within a commutable distance to an office location for regulatory and business reasons, and a small segment of our workforce will still need to come into the office.

All employees will have access to our offices throughout the country and, as vaccination rates among the population have increased, we have started to allow some employees to voluntarily return to work in our corporate offices.

The timing of any full return for those employees who will eventually be

Table of Co ntents

required to come into the office has not been determined and will be impacted by developments related to the pandemic, such as the severity and transmission rate of the virus and its variants.

At the onset of the COVID-19 pandemic, we saw substantial growth in our user base, retention, engagement, and trading activity metrics, and over the course of the pandemic we saw periodic all-time highs achieved by the equity markets generally.

During this period, market volatility, stay-at-home orders, and increased interest in investing and personal finance, coupled with low interest rates and a positive market environment, especially in the U.S.

equity and cryptocurrency markets, helped foster an environment that encouraged an unprecedented number of first-time retail investors to become our users and begin trading on our platform.

However, we have seen the growth of our user base in recent periods slow compared to the accelerated growth we experienced in 2020 and the first half of 2021.

For example, the pace of growth in new funded accounts slowed considerably in the second half of 2021 compared to the first half of 2021.

Additionally, to the extent that government stimulus measures enacted in response to the pandemic contributed to an increase in customer engagement, that benefit may not have continued as those stimulus measures have expired.

For example, we saw Monthly Active Users decline from 21.3 million in June 2021 to 17.3 million in December 2021.

The COVID-19 pandemic also resulted, in part, in inefficiencies or delays in our business, operational challenges, additional costs related to business continuity initiatives as our workforce had to transition suddenly to working remotely, and increased vulnerability to cybersecurity attacks or other privacy or data security incidents.

The extent of the continuing impact of COVID-19 on our business, financial condition, and results of operations will depend largely on future developments, including the duration of the pandemic, actions taken to contain COVID-19 or address its impact, our ability to adapt to the long-term distributed “Remote First” workforce model we have adopted, the impact on capital and financial markets, and the related impact on the financial circumstances of our customers, all of which are highly uncertain and difficult to predict.

The COVID-19 pandemic has resulted, in part, in inefficiencies and delays in our business, operational challenges, additional costs related to business continuity initiatives as our workforce continues to work remotely, and increased vulnerability to cybersecurity attacks or other privacy or data security incidents.

The extent of the impact of any COVID-19 resurgence or emergence of similar public health threats on our business, financial condition, and results of operations will depend largely on future developments, including the duration of COVID-19 resurgence or similar public health threat and actions taken to contain or address their impact, their impact on capital and financial markets, and the related impact on the financial circumstances of our customers, all of which are highly uncertain and difficult to predict.

Key Performance Metrics

1 unchanged sentence

Year Ended December 31,

(in millions except ARPU) 2019 2020 2021

Net Cumulative Funded Accounts (1)

2020 2021 2022

Monthly Active Users (MAU) (2)

NCFA (1) (in millions)

12.5 22.7 23.0

Assets Under Custody (AUC) (3)

MAU (in millions)

11.7 17.3 11.4

Average Revenues Per User (ARPU) (4)

AUC (2) (in billions)

$ 63.0 $ 98.0 $ 62.2

Net Deposits (in billions)

$ 31.0 $ 27.1 $ 18.4

(1) A Robinhood account is designed to provide a user with access to any and all of the products offered on our platform.

We define “Net Cumulative Funded Accounts” as New Funded Accounts less Churned Accounts plus Resurrected Accounts (each as defined below).

A “New Funded Account” is a Robinhood account into which the account user makes an initial deposit or money or asset transfer, of any amount, during the relevant period.

An account is considered “Churned” if it was ever a New Funded Account and its balance (measured as the fair value of assets in the account less any amount due from the user and excluding certain Company-initiated credits) drops to or below zero for at least 45 consecutive calendar days.

Negative balances typically result from Fraudulent Deposit Transactions (as defined below) and, less often, from margin loans.

Examples of credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.

“Fraudulent Deposit Transactions” occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount.

For more information about Fraudulent Deposit Transactions, see “—Key Components of our Results of Operations—Operating Expenses—Operations” below.

Table of Co ntents

The following table describes the annual changes within Net Cumulative Funded Accounts:

ARPU (in dollars)

$ 109 $ 103 $ 60

________________

(1) The following table describes the annual changes within NCFA:

Year Ended December 31,

(in millions) 2020 2021 2022

Beginning Net Cumulative Funded Accounts 3.3 5.1 12.5

Beginning NCFA 5.1 12.5 22.7

New funded accounts 8.0 12.2 1.3

1 unchanged sentence

Churned accounts (0.9) (2.5) (1.2)

Ending Net Cumulative Funded Accounts 5.1 12.5 22.7

(2) We define MAU as the number of Monthly Active Users during a specified calendar month.

A “Monthly Active User” is a unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month.

A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU.

Figures in the table reflect MAU for the last month of each period presented.

We utilize MAU to measure how many customers interact with our products and services during a given month.

MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement.

Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.

(3) We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis.

Ending NCFA 12.5 22.7 23.0

(2) The following table sets out the components of AUC by type of asset:

Year Ended December 31,

(in millions) 2019 2020 2021

(in billions) 2020 2021 2022

Equities $ 53.0 $ 72.1 $ 45.8

3 unchanged sentences

Receivables from users (3.5) (6.5) (3.1)

Assets Under Custody $ 14,135.6 $ 62,978.5 $ 98,006.9

Net Deposits and net market gains drive the change in AUC in any given period.

We define “Net Deposits” as all cash deposits and asset transfers received from customers net of reversals, customer cash withdrawals, and other equity and cash amounts transferred out of our platform (including in connection with debit card transactions and account transfers in or out of our platform through the ACATS system) for a stated period.

The following table describes the annual changes within Assets Under Custody:

AUC $ 63.0 $ 98.0 $ 62.2

The following table describes the changes within AUC:

Year Ended December 31,

(in millions) 2019 2020 2021

(in billions) 2020 2021 2022

Beginning AUC $ 14.1 $ 63.0 $ 98.0

Net Deposits 31.0 27.1 18.4

Net market gains (losses) 1,480.3 17,808.5 7,622.5

Net market losses 17.9 7.9 (54.2)

Ending AUC $ 63.0 $ 98.0 $ 62.2

(4) We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period.

Non-GAAP Financial Measures

2 unchanged sentences

In addition to total net revenues, net income (loss), and other results under GAAP, we utilize non-GAAP calculations of adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”).

Table of Co ntents

notes and warrant liability, (vi) significant legal and tax settlements and reserves, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results.

Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) share-based compensation, (v) change in fair value of convertible notes and warrant liability, (vi) significant legal and tax settlements and reserves, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results.

This non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for or superior to financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

1 unchanged sentence

We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance.

Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.

Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses,

evaluate performance, and perform strategic planning and annual budgeting.

The following table presents a reconciliation of net income (loss), which is the most directly comparable GAAP measure, to Adjusted EBITDA:

Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Net income (loss) $ 7 $ (3,687) $ (1,028)

5 unchanged sentences

Change in fair value of convertible notes and warrant liability — 2,045 —

Impairment of Ziglu equity securities (2)

Restructuring charges (3)

Significant legal and tax settlements and reserves

— 101,600 54,910

Q4 2022 Processing Error (4)

Adjusted EBITDA (non-GAAP) $ 154 $ 33 $ (94)

(1) For the year ended December 31, 2022, share-based compensation benefited from restructuring-related net reversals of previously recognized expense was $77 million in connection with both the April 2022 Restructuring and August 2022 Restructuring (see Note 13 - Common Stock and Stockholders' (Deficit) Equity, to our consolidated financial statements in this Annual Report for further information).

(2) Partially as a result of the termination of the stock purchase agreement, which occurred in February 2023, the advances made to Ziglu accounted for as non-marketable equity securities were impaired to a carrying value of zero.

(3) Restructuring charges for the year ended December 31, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring and primarily consisting of $45 million of impairment and $9 million of accelerated depreciation, in each case relating to office closures, and $51 million of cash charges for employee-related wages, benefits and severance.

See Note 6 - Restructuring Activities, to our consolidated financial statements in this Annual Report for further information.

(4) Q4 2022 Processing Error:

Delays in notification from third parties and process failures within Robinhood’s brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmos Health, Inc.

(“COSM”), a NASDAQ-listed company, on December 16, 2022, allowed customers, for a limited time, to execute trades selling more shares than they held in their accounts.

This caused a temporary short position in that ticker symbol which Robinhood covered out of corporate cash within the same trading day.

The resulting loss of $57 million is recorded within brokerage and transaction in the consolidated statement of operations.

Key Factors Driving Our Performance

9 unchanged sentences

We intend to continue to invest in our platform capabilities and regulatory and compliance functions to support new and existing customers and products that we believe will drive our growth.

As our customer

Table of Co ntents

base and platform functionalities expand, areas of investment priority will likely include product innovation, educational content, and technology and infrastructure improvements.

As our customer base and platform functionalities expand, areas of investment priority will likely include product innovation, educational content, and technology and infrastructure improvements.

We believe these investments will contribute to our long-term growth.

We expect to continue increasing headcount throughout 2022, though at a lesser rate than in 2021.

These additional employees will be staffed on projects to enhance platform capabilities, drive product innovation, and further augment regulatory and compliance functions.

Customer Interest in Investing and Saving

1 unchanged sentence

• Seasonality .

Our business can be subject to seasonal fluctuations due to such factors as retail interest in investing, overall number of market participants and trading volumes, varying numbers of trading days from quarter-to-quarter, and declines in trading activity around holidays.

Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on equity and cryptocurrency valuations and trading activity.

5 unchanged sentences

As financial markets grow and contract, our customers’ investing, saving, and spending behaviors are affected.

Our operating history has coincided with a period of general macroeconomic growth in the United States, particularly in the U.S.

equity and cryptocurrency markets, which has previously stimulated growth in overall investment activity on our platform;

we could also be impacted by any slowdowns in growth or downturns in the U.S.

equity and cryptocurrency markets.

• Macroeconomic Events .

Customer behavior is impacted by the overall macroeconomic environment, which is influenced by elements beyond our control, including economic and political conditions, inflation, tax rates, the ongoing COVID-19 pandemic, unemployment rates, and natural disasters.

We have seen periods both of general macroeconomic growth and slowdown in the United States, particularly in the U.S.

equity and cryptocurrency markets, which stimulated and contracted growth in overall investment activity on our platform .

Macroeconomic Events and Conditions

Customer behavior is impacted by the overall macroeconomic environment, which is influenced by elements beyond our control, including economic and political conditions (such as the Russian invasion of Ukraine), inflation, tax rates, fluctuations in interest rates, the COVID-19 pandemic or the emergence of any similar public health threats, unemployment rates, and natural disasters.

Additionally, macroeconomic conditions have an impact on asset values, which are an input into the transaction-based revenues we earn on equities and cryptocurrencies, and interest rates set by the U.S.

Federal Reserve, which significantly impacts interest revenues.

Finally, inflation can and will results in increased costs to operate our business, including potential increases in supplier costs,/ employee compensation and benefits expenses.

For more information about how market trends and macroeconomic events can adversely impact our results of operations, see “Risk Factors—Risks Related to Our Business.”

2 unchanged sentences

Transaction-based revenues consist of amounts earned from routing customer orders for options, cryptocurrencies, and equities to market makers.

When customers place orders for options, cryptocurrencies, or equities on our platform, we route these orders to market makers and we receive consideration from those market makers.

With respect to equities and options trading, such fees are known as payment for order flow (“PFOF”).

When customers place orders for options, cryptocurrencies, or equities on our platform, we route these orders to market makers and we receive

consideration from those market makers.

With respect to equities and options trading, such fees are known as PFOF.

With respect to cryptocurrency trading, we receive “Transaction Rebates.” In the case of equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded;

1 unchanged sentence

For options, our fee is on a per contract basis based on the underlying security.

In the case of cryptocurrencies, our rebate is

Table of Co ntents

a fixed percentage of the notional order value.

In the case of cryptocurrencies, our rebate is a fixed percentage of the notional order value.

Within each asset class, whether equities, options or cryptocurrencies, the transaction-based revenue we earn is calculated in an identical manner among all participating market makers.

3 unchanged sentences

Net interest revenues consist of interest revenues less interest expenses.

We earn and incur interest revenues and expenses on securities lending transactions by lending shares that we hold as collateral for margin loans extended to our users.

We also earn interest revenues on margin loans to users, as well as on our segregated cash, cash and cash equivalents, and deposits with clearing organizations.

We earn interest revenues on margin loans to users, corporate cash and investments, segregated cash and cash equivalents, deposits with clearing organizations, and Cash Sweep.

We also earn and incur interest revenues and expenses on securities lending transactions.

We incur interest expenses in connection with our revolving credit facilities.

Other Revenues

Other revenues primarily consist of Robinhood Gold subscription fees, proxy rebate revenues, and ACATS fees for facilitating the transfer of part or all of their accounts to another broker-dealer.

Other revenues primarily consist of Robinhood Gold subscription fees, as well as proxy rebates, proxy revenues, and ACATS fees charged to users for facilitating the transfer of part or all of assets in their accounts to another broker-dealer.

Operating Expenses

Commencing with the filing of this Annual Report, we have revised sub-categories within our operating expenses to better reflect the business as considered by management.

Prior period amounts have been reclassified to conform to the current presentation.

Brokerage and Transaction

Brokerage and transaction costs primarily consist of broker-dealer transaction expenses (such as fees paid to centralized clearinghouses and regulatory fees), market data expenses, cash and share-based compensation and benefits as well as allocated overhead for employees engaged in clearing and brokerage functions, and cash management transactions expenses (such as network fees and card processing fees).

Brokerage and transaction costs primarily consist of broker-dealer transaction expenses (such as fees paid to centralized clearinghouses and regulatory fees), market data expenses, cash and share-based compensation and benefits as well as allocated overhead for employees engaged in clearing and brokerage functions, and Robinhood Cash Card transactions expenses (such as network fees and card processing fees).

A large portion of our brokerage and transaction costs are variable and tied to trading and transaction volumes on our platform.

2 unchanged sentences

Operations costs consist of customer service related expenses, including cash and share-based compensation and benefits as well as allocated overhead for employees engaged in customer support, and costs incurred to support and improve customer experience (such as third-party customer service vendors).

Operations costs also include our provision for credit losses and fraud in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and chargebacks for unauthorized debit card use.

Operations costs also include our provision for credit losses and fraud in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and chargebacks for unauthorized

debit card use.

The provision for credit loss is equal to the unsecured receivable balance owed by users, i.e., the difference between the amount due from users and the fair value of the assets in the users’ accounts.

We seek to reduce Fraudulent Deposit Transactions and unauthorized debit card usage by

Table of Co ntents

deploying and iterating on machine learning models that identify high risk users and transactions on our platform.

We seek to reduce Fraudulent Deposit Transactions and unauthorized debit card usage by deploying and iterating on machine learning models that identify high risk users and transactions on our platform.

In addition, upon identifying high risk users and transactions, we seek to prevent further losses by introducing friction into the user experience (for example, by not offering the identified customer access to instant funds) or implementing restrictions to mitigate the risk of these transactions (such as temporarily restricting withdrawals).

1 unchanged sentence

The provision for credit losses also includes losses related to our margin lending and proxy rebate activities.

Marketing costs primarily consist of marketing incentive expenses associated with the Robinhood Referral Program, as well as digital marketing, brand marketing, and creative services costs for creation, production, and placement of advertisements and marketing content.

Marketing costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for employees engaged in the marketing function.

Marketing costs also include digital marketing, brand marketing, and creative services costs for creation, production, and placement of advertisements and marketing content, as well as marketing incentive expenses associated with the Robinhood Referral Program.

Other marketing costs include cash credits we offer to customers, which primarily relate to remediation for losses experienced by our customers due to service interruptions on our platform and reimbursement of direct losses incurred by our customers from allegedly unauthorized account activity.

Marketing costs also include cash and share-based compensation and benefits as well as allocated overhead for employees engaged in the marketing function.

Under the Robinhood Referral Program, we credit referring and referred customers with a stock reward, with the potential value of each share ranging from $5 to $200.

Each stock reward is selected randomly from our previously purchased inventory of settled shares held exclusively for this program.

This inventory is comprised of shares of stock of issuers that are widely held among our customers’ accounts (i.e., held by at least 5,000 customers).

The 20 stocks that are available to choose from are selected by choosing the two largest S&P 500 companies, within the top 10 sectors, based on market cap.

Referring customers can earn more than one reward through the Robinhood Referral Program, by making multiple referrals, subject to a maximum of $1,500 in total rewards earned annually per customer.

From time to time, we offer multiple stock rewards per referral.

Stock rewards are also available to customers who sign up through paid marketing channels.

In order for rewards to be earned by the referring and referred customer, the referred customer must fulfill certain conditions stated in their promotion, such as linking his or her bank account to our platform.

After the referred Robinhood account is approved, each customer must claim his or her stock reward in the Robinhood app within 60 days of notification thereof, at which point the stock is deposited to such customer’s Robinhood account.

In order for rewards to be earned by the referring and referred customer, the referred customer must fulfill certain conditions stated in their promotion, such as linking their bank accounts to our platform.

After the referred Robinhood account is approved, each customer must claim their stock reward in the Robinhood app within 60 days of notification thereof, at which point the stock is deposited to such customer’s Robinhood account.

Customers do not provide any cash consideration for the stock reward.

1 unchanged sentence

General and administrative costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for certain executives and employees engaged in legal, finance, human resources, risk, and compliance.

General and administrative costs also include legal expenses, settlements and penalties, business insurance, and other professional fees.

Table of Co ntents

General and administrative costs also include legal expenses, other professional fees, settlements and penalties, and business insurance.

Results of Operations

The following table summarizes our consolidated statements of operations data:

(in thousands) Year ended December 31,

(in millions) Year Ended December 31,

2020 2021 2022

12 unchanged sentences

Other expense (income), net — (1) 16

Income (loss) before income tax (107,587) 13,830 (3,684,432)

Provision for (benefit from) income taxes (1,018) 6,381 2,000

Income (loss) before income taxes 13 (3,685) (1,027)

Provision for income taxes 6 2 1

Net income (loss) $ 7 $ (3,687) $ (1,028)

2 unchanged sentences

Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Brokerage and transaction $ — $ 7 $ 5

4 unchanged sentences

Total share-based compensation expense $ 24 $ 1,572 $ 654

The 2019 and 2020 amounts exclude the effect of share-based compensation for awards with performance-based conditions because the qualifying event, our IPO, had not occurred and, therefore, could not be considered probable.

The 2020 amounts exclude the effect of share-based compensation for awards with performance-based conditions because our IPO had not occurred and, therefore, could not be considered probable.

Upon our IPO in 2021, we recognized $1.01 billion of share-based compensation.

For more information, see “Share-based compensation” in Note 1 to our consolidated financial statements in this Annual Report.

Table of Co ntents

For more information, see “Share-based compensation” in Note 1 - Description of Business and Summary of Significant Accounting Policies, to our consolidated financial statements in this Annual Report.

Comparison of the Years Ended December 31, 2022 and 2021

A discussion of our results for fiscal year 2020 compared to fiscal year 2019 can be found in our IPO prospectus, filed with the SEC on July 30, 2021, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations — Comparison of the Years Ended December 31, 2019 and 2020." We do not believe the reclassification of the sub-categories within operating expenses has materially affected the continuing relevance of any of this discussion and any changes that would be necessary to reflect the revised subcategories are not material to an understanding of our business.

A discussion of our results for fiscal year 2021 compared to fiscal year 2020 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations — Comparison of the Years Ended December 31, 2020 and 2021" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022.

Transaction-Based Revenues

Year Ended December 31,

(in thousands, except for percentages) 2019 2020 2021 2019 to 2020

(in millions, except for percentages) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

1 unchanged sentence

Options $ 440 $ 690 $ 488 57 % (29) %

Cryptocurrencies 9,487 26,708 419,382 182 % 1,470 %

Cryptocurrencies 27 420 202 NM (52) %

Equities 251 287 117 14 % (59) %

Other — 2,155 6,335 NM 194 %

Other 2 5 7 150 % 40 %

Total transaction-based revenues $ 720 $ 1,402 $ 814 95 % (42) %

5 unchanged sentences

Total transaction-based revenues 75 % 77% 60%

Comparison of Years Ended December 31, 2021 and 2020

Transaction-based revenues increased by $682.2 million primarily driven by a 81% increase in Net Cumulative Funded Accounts which resulted in higher daily average revenue trades in cryptocurrencies, options, and equities.

We define “daily average revenue trades” as the total number of revenue generating trades executed during a given period divided by the number of trading days in that period.

Our daily average revenue trades for cryptocurrencies increased significantly from 0.1 million to 1.2 million.

The number of users placing cryptocurrency trades increased 455% while the average notional volume traded per trader was up 83%.

In late December 2021, for the first time during the periods presented, we updated our pricing agreements with crypto market makers.

Our rebate, which is subject to change from time to time, slightly more than doubled with these changes.

We also added another venue to increase capacity and further improve competition for customer orders.

Our daily average revenue trades for options increased by 34% from 0.6 million to 0.8 million.

The number of users placing option trades increased 43% while the number of options contracts traded per trader was up 1%.

Our daily average revenue trades for equities increased by 38% from 2.2 million to 3.1 million.

The number of users placing equity trades increased 75% while the average notional volume traded per trader was down 30%.

Table of Co ntents

Transaction-based revenues decreased by $588 million primarily driven by the market environment which had a negative impact on the number of traders and Notional Trading Volumes in all asset classes.

Options DARTs decreased from 0.8 million to 0.6 million.

Additionally, the number of users placing option trades decreased 42% while the average number of options contracts traded per trader was up 33%.

Crypto DARTs decreased from 1.2 million to 0.3 million.

Additionally, the number of users placing cryptocurrency trades decreased 61% and the average Notional Trading Volume traded per trader decreased 43%.

The decrease was partially offset by a higher rebate rate from crypto market makers (initial increase was effective in late December 2021 and a further increase was effective in May 2022).

Equities DARTs decreased from 3.1 million to 1.6 million.

Additionally, the number of users placing equity trades decreased 47% and the average Notional Trading Volume traded per trader decreased 5%.

Net Interest Revenues

Year Ended December 31,

(in thousands, except for percentages) 2019 2020 2021 2019 to 2020

(in millions, except for percentages) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Net interest revenues:

Securities lending $ 6,380 $ 98,165 $ 137,153 NM 40 %

Margin interest $ 67 $ 132 $ 177 97 % 34 %

Interest on segregated cash and securities 36,281 13,401 4,023 (63) % (70) %

Other interest revenue 9,865 3,972 4,181 (60) % 5 %

Interest on corporate cash and investments 2 1 103 (50) % NM

Securities lending, net 98 136 89 39 % (35) %

Interest on segregated cash and cash equivalents and deposits 14 4 57 (71) % NM

Cash Sweep, net 1 3 22 200 % 633 %

Interest expenses related to credit facilities (5) (20) (24) 300 % 20 %

1 unchanged sentence

Percentage of total net revenues:

Securities lending 2% 10% 8%

Margin interest 7% 7% 13%

Interest on segregated cash and securities 13% 2% —%

Other interest revenue 4% 1% —%

Interest on corporate cash and investments —% —% 7%

Securities lending, net 10% 7% 7%

Interest on segregated cash and cash equivalents and deposits 2% 1% 4%

Cash Sweep, net —% —% 2%

Interest expenses related to credit facilities —% (1)% (2)%

Total net interest revenues 19% 14% 31%

Comparison of Years Ended December 31, 2021 and 2020

Net interest revenues increased by $79.5 million primarily due to higher interest revenues earned on margin loans to users and through securities lending activities, partially offset by increased interest expense related to our revolving credit facilities and lower interest revenue earned on segregated cash and securities.

Interest revenue earned on margin borrowings increased by $65.0 million due to an increase in both the number of margin borrowers and the average per-user margin balance.

Average margin receivables outstanding increased from $1.99 billion due from 125 thousand average users to $4.91 billion due from 218 thousand average users.

Robinhood users must be Robinhood Gold subscribers in order to enable margin borrowing in their accounts.

The first $1,000 in margin borrowed by each user is not charged interest.

Additional margin borrowed was charged at a 5% annual rate until December 2020 when we lowered this rate to 2.5%, where it will remain until March 2022, at which point it will be increased to 3%.

Net interest revenues earned from securities lending transactions increased $39.0 million as we grew our securities lending program, which benefited from growth in margin borrowings.

These increases were partially offset by an increase of $15.3 million in interest expenses, which includes commitment and unused fees related to credit facilities in connection with the April 2021 Credit Facility (see Note 11 to our consolidated financial statements in this Annual Report for further information) and a decrease of $9.4 million in interest revenue earned on segregated cash and securities balances due to the decrease in the Federal Reserve's benchmark target rate to near zero.

Table of Co ntents

Net interest revenues increased by $168 million primarily due to higher interest revenues earned from corporate cash and investments, segregated cash and cash equivalents and deposits, margin interest, and Cash Sweep, partially offset by lower interest revenues earned through securities lending.

Increased net interest revenues were driven by the higher interest rate environment due to the rise in the federal funds rate, which is an input to our floating margin rate calculation and impacts the interest rate we receive on investable assets.

Net interest revenues earned from investments and corporate cash, segregated cash and cash equivalents and deposits increased by $102 million and $53 million.

Interest revenues from margin interest also increased by $45 million due to the higher rate while our Margin Book balance declined year-over-year.

These increases were partially offset by a $47 million decrease in net interest revenues earned from securities lending transactions due to lower demand for hard-to-borrow securities.

The following table summarizes interest-earnings assets, the revenue or expense generated by these assets, and their respective annualized yields (computed based on average balance over the quarter):

(in millions, except for annual yield) Margin Book (1)

Cash and deposits (2)

(off-balance sheet) (3)

Total interest-earning assets Securities lending, net Interest expenses

related to credit facilities

Net interest revenue

Year ended December 31, 2022

December 31, 2022 $ 3,089 $ 9,530 $ 5,837 $ 18,456

December 31, 2021 6,467 10,600 2,095 19,162

4,778 10,065 3,966 18,809

Revenue/(expense) $ 177 $ 160 $ 22 $ 359 $ 89 $ (24) $ 424

Annual yield (5)

3.70 % 1.59 % 0.55 % 1.91 % 2.25 %

Year ended December 31, 2021

December 31, 2021 $ 6,467 $ 10,600 $ 2,095 $ 19,162

December 31, 2020 3,351 6,544 1,827 11,722

4,909 8,572 1,961 15,442

Revenue/(expense) $ 132 $ 5 $ 3 $ 140 $ 136 $ (20) $ 256

Annual yield (5)

2.69 % 0.06 % 0.15 % 0.91 % 1.66 %

Year ended December 31, 2020

December 31, 2020 $ 3,351 $ 6,544 $ 1,827 $ 11,722

December 31, 2019 642 3,186 59 3,887

1,997 4,865 943 7,805

Revenue/(expense) $ 67 $ 16 $ 1 $ 84 $ 98 $ (5) $ 177

Annual yield (5)

3.36 % 0.33 % 0.11 % 1.08 % 2.27 %

(1) Margin Book is the aggregate outstanding margin loan balances receivable.

(2) Includes cash and cash equivalents, cash segregated under federal and other regulations, deposits with clearing organizations and investments.

(3 ) Cash Sweep is an off-balance-sheet amount.

Robinhood earns a net interest spread on Cash Sweep balances based on the interest rate offered by the partner banks less the interest rate given to users as stated in our program terms.

(4) Average balance rows present a simple average of the ending balances as of each of the indicated dates for the relevant period.

(5) Annual yield is calculated by annualizing revenue/expense for the given period then dividing by the applicable average asset balance.

Other Revenues

Year Ended December 31,

(in thousands, except for percentages) 2019 2020 2021 2019 to 2020

(in millions, except for percentages) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

1 unchanged sentence

Percentage of total net revenues 6 % 9 % 9 %

Comparison of Years Ended December 31, 2021 and 2020

Other revenues increased by $94.6 million primarily due to an increase in subscription revenue of $43.9 million driven by an increase in paid subscribers to Robinhood Gold from 0.9 million to 1.3 million.

Additionally, ACATS fees charged to users for facilitating the transfer of their account to another broker-dealer increased by $25.8 million and proxy rebate revenue increased by $22.9 million as a result of the growth in our user base.

Other revenues decreased by $37 million compared to the prior year, mainly driven by the decreases in ACATS fees and subscription fees as a result of a decrease in paid subscribers to Robinhood Gold from 1.3 million to 1.1 million.

Operating Expenses

Year Ended December 31,

(in thousands, except for percentages) 2019 2020 2021 2019 to 2020

(in millions, except for percentages) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

13 unchanged sentences

Total operating expenses 98 % 191 % 175 %

Table of Co ntents

Brokerage and Transaction

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Q4 2022 Processing Error $ — $ — $ 57 NM NM

Broker-dealer transaction expenses 55 48 31 (13)% (35) %

1 unchanged sentence

Employee compensation, benefits, and overhead, excluding share-based compensation 7 14 20 100% 43 %

Cash management transaction expenses 815 3,942 11,574 384% 194 %

Robinhood Cash Card transaction expenses 4 12 9 200% (25) %

Share-based compensation — 7 5 NM (29) %

1 unchanged sentence

Total $ 114 $ 158 $ 179 39% 13 %

Comparison of Years Ended December 31, 2021 and 2020

Brokerage and transaction costs increased by $41.3 million primarily due to an increase in market data expenses of $11.6 million and an increase in cash management transaction expenses of $7.6 million, which were in line with the growth in our user base.

Share-based compensation expense increased $7.3 million as vesting conditions were met upon our IPO and other employee compensation, benefits, and overhead increased $7.3 million as we continued to grow our brokerage teams to support the growth of our user base and platform.

Other brokerage and transaction costs also increased due to higher bank charges of $5.3 million and regulatory fees of $4.5 million.

These increases were partially offset by decreases in broker-dealer transaction expenses, primarily due to a $15.7 million decrease in clearing fees as a result of a reduction of certain of these fees effective in June 2021 offset by a $8.5 million increase in losses attributable to the market price fluctuations that impacted fractional shares transactions.

Brokerage and transaction costs increased by $21 million primarily due to the $57 million Q4 2022 Processing Error, offset by a $17 million decrease in broker-dealer transaction expenses primarily driven by lower trading volume and a reduction of certain of these expenses effective in June 2021, and a $13 million decrease in other brokerage and transaction costs primarily due to lower bank charges as a result of more favorable pricing from our banking counterparties.

Technology and Development

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Share-based compensation $ 9,499 $ 18,025 $ 609,306 90% NM

Employee compensation, benefits, and overhead, excluding share-based compensation $ 104 $ 284 $ 367 173% 29 %

Share-based compensation 18 610 212 NM (65) %

Cloud infrastructure services 67 267 175 299% (34) %

2 unchanged sentences

Total $ 215 $ 1,234 $ 878 474% (29) %

Comparison of Years Ended December 31, 2021 and 2020

Technology and development costs increased by $1.02 billion primarily due to an increase in share-based compensation expense of $591.3 million as vesting conditions were met upon our IPO and an increase in o ther employee compensation, benefits, and overhead of $178.9 million as we also continued to grow our engineering, data science, and design teams to support the growth of our user base and develop new products.

Additionally, we experienced increases in costs for cloud infrastructure service of $199.5 million due to infrastructure expansion necessary to meet increased capacity requirements for our platform, and costs for software and tools of $39.9 million to support the growth of our headcount.

Table of Co ntents

Technology and development costs decreased by $356 million primarily due to a decrease in share-based compensation expense of $398 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021.

The April 2022 Restructuring and August 2022 Restructuring resulted in net reductions of $38 million in share-based compensation expense.

Additionally, we experienced lower costs in cloud infrastructure services of $92 million primarily due to cost optimization efforts focusing on improvements in utilization of cloud infrastructure and lower overall activity.

These decreases were offset by an increase of employee compensation, benefits, and overhead of $83 million as our engineering and data science average headcount increased in the first half of the 2022 compared to 2021 to continue to support our platform and develop new products.

These expenses also included $18 million due to severance expenses related to the April 2022 Restructuring and August 2022 Restructuring .

Finally, we incurred an increase of $42 million in software and tools primarily driven by amortization of internally developed software and other software services utilized in delivering our products.

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Employee compensation, benefits, and overhead, excluding share-based compensation $ 36 $ 125 $ 144 247% 15 %

Provision for credit losses and fraud 11,108 61,313 107,054 452% 75 %

Customer experience 28 98 78 250% (20) %

Provision for credit losses and fraud 61 108 42 77% (61) %

Share-based compensation — 20 8 NM (60) %

1 unchanged sentence

Total $ 135 $ 368 $ 285 173% (23) %

Comparison of Years Ended December 31, 2021 and 2020

Operations costs increased by $235.2 million primarily due to an increase in employee compensation, benefits, and overhead of $90.6 million as we increased the number of our dedicated customer support professionals.

Costs related to third-party customer support vendors for customer experience increased $68.8 million as we continued to make investments to support our growing user base.

Provision f or credit losses and fraud increased $45.7 million mainly driven by increased unauthorized debit card usage and an increase in loss incurred per account related to Fraudulent Deposit Transactions.

Additionally, we recognized an increase in share-based compensation expense of $20.2 million as vesting conditions were met upon our IPO.

Operations costs decreased by $83 million primarily due to a decrease in our provision for credit losses and fraud losses of $66 million as a result of decreased user transactions and our strengthened process to identify high risk users and prevent Fraudulent Deposit Transactions and unauthorized debit card use.

Additionally, we experienced a decrease in customer experience costs of $20 million, primarily due to decrease in costs related to third-party customer support vendors as we consolidated our third-party customer support centers due to the overall decrease in user transactions.

Furthermore, we experienced a decrease in share-based compensation expense of $12 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021.

These decreases were offset by an increase in employee compensation, benefits, and overhead of $19 million, primarily due to $12 million severance expenses related to the April 2022 Restructuring and August 2022 Restructuring.

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Marketing incentives $ 29,187 $ 80,826 $ 120,706 177% 49 %

Digital marketing 55,744 35,398 50,576 (36)% 43 %

Share-based compensation 86 614 49,731 614% NM

Employee compensation, benefits, and overhead, excluding share-based compensation $ 8 $ 37 $ 26 363% (30) %

Brand marketing 20,717 28,992 24,224 40% (16) %

Digital marketing 36 49 21 36% (57) %

Creative services 12 23 14 92% (39) %

Brand marketing 29 24 14 (17)% (42) %

Marketing incentives 81 121 11 49% (91) %

Share-based compensation — 50 4 NM (92) %

Other marketing 20 21 13 5% (38) %

Total $ 186 $ 325 $ 103 75% (68) %

Included in marketing incentives are costs associated with the Robinhood Referral Program, which are comprised of the fair value of awards earned in the current period, changes in estimate of unclaimed awards earned in the current and prior periods, fair value adjustments of shares held to support the program, and reversals related to awards that expire unclaimed.

The fa ir value adjustments of shares held to support the program were immaterial for the periods presented.

Marketing costs decreased by $222 million partially due to a decrease in marketing incentives of $110 million, substantially all of which was due to lower costs associated with the Robinhood Referral Program, which was in line with the slower growth in our user base.

The expense recognized related to the Robinhood Referral Program is comprised of the fair value of awards earned in the current period, changes in estimate of unclaimed awards earned in the current and prior periods, fair value adjustments of shares held to support the program, and reversals related to awards that expire unclaimed.

The fa ir value adjustments of shares held to support the program were

immaterial for the periods presented.

The following table summarizes the Robinhood Referral Program liability activity for the periods indicated:

Table of Co ntents

Years ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Beginning balance, January 1 $ — $ 1 $ —

4 unchanged sentences

Ending balance, December 31 $ 1 $ — $ —

Comparison of Years Ended December 31, 2021 and 2020

Marketing costs increased by $141.6 million partially due to an increase in share-based compensation expense of $49.1 million as vesting conditions were met upon our IPO.

Marketing incentives increased $39.9 million and substantially all of which was due to higher costs associated with the Robinhood Referral Program .

Other employee compensation, benefits, and overhead increased $29.5 million as w e continued to increase our marketing personnel headcount to support the growth of our business.

In addition, there were increases in digital marketing expenses of $15.2 million and creative services costs of $10.3 million primarily related to advertising spend leading up to our IPO.

Additionally, share-based compensation expense decreased by $46 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021.

Digital marketing, brand marketing, and creative services decreased by $28 million, $10 million and $9 million, respectively.

We invested significantly in marketing costs to raise brand awareness in 2021, which were reduced as our brand became more well established.

General and Administrative

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

2 unchanged sentences

Legal expenses 56 101 76 80% (25) %

Settlements and penalties 1,409 105,506 70,349 NM (33) %

Other professional fees 30 54 53 80% (2) %

Impairment — — 45 NM NM

Business insurance 4 25 41 525% 64 %

Settlements and penalties 106 70 24 (34)% (66) %

Other 15 40 21 167% (48) %

Total $ 295 $ 1,371 $ 924 365% (33) %

Comparison of Years Ended December 31, 2021 and 2020

General and administrative costs increased by $1.08 billion primarily due to an increase in share-based compensation as vesting conditions were met upon our IPO including $501.2 million related to executive compensation arrangements (see Note 12 to our consolidated financial statements in this Annual Report for further information).

Other employee compensation, benefits, and overhead increased by $116.9 million as w e continued to increase our general and administrative personnel to support the growth of our business.

L egal expenses increased $45.1 million primarily related to certain legal matters, partially offset by a reduction in settlements and penalties of $35.2 million.

See Note 16 to our consolidated financial statements in this Annual Report for further information.

Table of Co ntents

General and administrative costs decreased by $447 million primarily due to decreases in share-based compensation of $460 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021, including $323 million related to executive compensation arrangements (see Note 13 - Common Stock and Stockholders' (Deficit) Equity, t o our consolidated financial statements in this Annual Report for further information ).

The April 2022 Restructuring and August 2022 Restructuring resulted in net reductions of $34 million in share-based compensation expense.

We also experienced a decrease of $46 million in costs associated with settlements and penalties (see Note 17 - Commitments & Contingencies, t o our consolidated financial statements in this Annual Report for further information ) and $25 million in legal expenses.

These decreases were partially offset by impairment of $45 million related to the August 2022 Restructuring (see Note 6 - Restructuring Activities, t o our consolidated financial statements in this Annual Report for further information).

Employee compensation, benefits, and overhead also increased by $43 million , as our general and administrative personnel average headcount increased in the first half

of the 2022 compared to 2021 to continue to support our business.

This expense included $15 million of severance expenses related to the April 2022 Restructuring and August 2022 Restructuring .

Change in Fair Value of Convertible Notes and Warrant Liability

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Change in fair value of convertible notes and warrant liability — 2,045 $ — NM NM

Comparison of Years Ended December 31, 2021 and 2020

Change in fair value of convertible notes and warrant liability was due to the mark-to-market adjustment of the convertible notes and warrants we issued in February 2021.

Upon completion of our IPO, the aggregate outstanding principal and accrued interest of the convertible notes converted into 137.3 million shares of Class A common stock and the warrants became equity-classified, which resulted in the warrant liability being reclassified to additional paid-in capital .

Upon completion of our IPO, the aggregate outstanding principal and accrued interest of the convertible notes converted into Class A common stock and the warrants became equity-classified, which resulted in the warrant liability being reclassified to additional paid-in capital .

There will be no additional mark-to-market adjustments related to the convertible notes or warrant liability.

See Note 7 to our consolidated financial statements in this Annual Report for further information.

Provision for (Benefit from) Income Taxes

See Note 8 - Investments and Fair Value Measurement, to our consolidated financial statements in this Annual Report for further information.

Provision for Income Taxes

Year Ended December 31,

(in thousands) 2019 2020 2021 2019 to 2020

(in millions) 2020 2021 2022 2020 to 2021

% Change 2021 to 2022

Provision for (benefit from) income taxes $ (1,018) $ 6,381 2,000 (727)% (69)%

Comparison of Years Ended December 31, 2021 and 2020

Provision for income taxes decreased by $4.4 million primarily due to the income tax benefit recognized from the partial release of our valuation allowance resulting from the recognition of net deferred tax liabilities in connection with the Say Technologies acquisition, and offset by the change in valuation allowance on our remaining U.S.

federal and state deferred tax assets and by our current federal and state taxes payable.

Provision for income taxes $ 6 $ 2 1 (67)% (50)%

Provision for income taxes decreased by $1 million primarily due to a favorable provision to return true up adjustment in certain tax jurisdictions upon the completion of our 2021 U.S.

income tax returns, and offset by the change in valuation allowance on our remaining U.S.

federal and state deferred tax assets and by our current state taxes payable.

Liquidity and Capital Resources

Source and Uses of Funds

We expect to use our available cash, cash equivalents, and investments, including potential future borrowings under our revolving lines of credit and potential issuance of new debt or equity, to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities and further build our business, and for general capital needs (including capital requirements imposed by regulators and SROs and cash deposit and collateral requirements under the rules of the DTC, NSCC, and OCC).

Based on our current level of operations, we believe our available cash, available lines of credit, and cash provided by operations will be adequate to meet our current liquidity needs for the next 12 months.

Sources and Uses of Funds

Our principal sources of liquidity are cash flows generated from operations, and our cash, cash equivalents, and investments.

Other sources of future funds may include potential borrowing capacity under our revolving lines of credit and potential issuance of new debt or equity.

Our liquidity needs are primarily to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities and further build our business, and for general capital needs (including capital requirements imposed by regulators and SROs and cash deposit and collateral requirements under the rules of the DTC, NSCC, and OCC).

Based on our current level of operations, we believe our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months.

Cash, Cash Equivalents, and Investments

1 unchanged sentence

Our investment portfolio comprises highly liquid available-for-sale securities, including asset-backed securities, commercial paper, corporate bonds, and government bonds.

Table of Co ntents

Convertible Debt and IPO

In January and February 2021, we received gross proceeds of $3.55 billion from the issuance of two tranches of convertible notes and related warrants.

The convertible notes were converted into Class A common stock upon the completion of our IPO.

On August 2, 2021, we closed our IPO of our Class A common stock and on August 31, 2021, we sold additional shares of Class A common stock pursuant to the option granted to the underwriters.

The total net proceeds received were approximately $2.05 billion after deducting underwriting discounts, commissions, and offering expenses payable by us.

We used a portion of the net proceeds we received in the IPO to repay borrowings made under our revolving lines of credit (which borrowings were utilized to fund tax withholdings due prior to the IPO closing as a result of RSU settlements in connection with the pricing of our IPO).

Revolving Lines of Credit

As of December 31, 2022, we had a total of $2.91 billion in committed revolving lines of credit.

See Note 11 to our consolidated financial statements in this Annual Report for further information.

The following table summarizes our short- and long-term material cash requirements as of December 31, 2021:

See Note 12 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report for further information.

The following table summarizes our short- and long-term material cash requirements for contractual obligations as of December 31, 2022:

Payments Due by Period

(in thousands) Total 2022 2023-2024 2025-2026 Thereafter

(in millions) Total 2023 2024-2025 2026-2027 Thereafter

Operating lease commitments $ 190 $ 30 $ 56 $ 36 $ 68

2 unchanged sentences

Total $ 1,227 $ 339 $ 546 $ 274 $ 68

________________

(1) Non-cancelable purchase commitments are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.

They primarily relate to commitments for cloud infrastructure service and business insurance.

In addition to lease and purchase commitments, we have a committed financing agreement with a contractual term of 30 days and a daily minimum commitment of $25 million.

In addition to lease and purchase commitments, we have a committed financing agreement with a contractual term of 30 days and a daily minimum commitment of $25 million and another with a contractual term of 21 days with a daily minimum commitment of $35 million.

See "Securities Borrowing and Lending" in Note 1 - Description of Business and Summary of Significant Accounting Policies, to our consolidated financial statements in this Annual Report for further information.

Regulatory Capital Requirements

2 unchanged sentences

RHS and RHF compute net capital under the alternative method as permitted by the SEC Uniform Net Capital Rule.

Table of Co ntents

The tables below summarize the net capital, capital requirements and excess net capital of RHS and RHF as of periods presented:

December 31, 2022

(in thousands) Net Capital Required Net Capital Net Capital in Excess of Required Net Capital

(in millions) Net Capital Required Net Capital Net Capital in Excess of Required Net Capital

RHS $ 2,503 $ 66 $ 2,437

RHF 231 0.25 231

In January and February 2021, we received gross proceeds of $3.55 billion from the issuance of two tranches of convertible notes and related warrants, of which an aggregate of $2.0 billion was contributed to RHS in February 2021.

Pursuant to the SEC Uniform Net Capital Rule , capital contributed to RHS is included in its net capital calculation and may not be withdrawn for one year from the time of contribution.

This restriction lapsed in February 2022, however, no capital has been returned to the parent company as of the date of filing of this Annual Report.

The following table summarizes our cash flow activities:

Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Cash provided by (used in):

2 unchanged sentences

Financing activities 1,276 5,203 —

Cash provided by and used in operating activities consisted of net income (loss) adjusted for certain non-cash items including change in fair value of convertible notes and warrant liability, share-based compensation expense, provision for credit losses, depreciation and amortization, and the effect of changes in operating assets and liabilities.

Cash used in operating activities decreased $33 million.

The decrease consisted of net loss adjusted for certain non-cash items and the effect of changes in operating assets and liabilities.

Cash used in operating activities resulting from net loss adjusted for certain non-cash items increased by $230 million.

This was primarily due to lower net loss partially offset by the effect of non-cash items adjustments that provided cash and only occurred in 2021 such as the mark-to-market adjustment of convertible notes and warrants of $2.05 billion and the cumulative one-time SBC expense recognized upon our IPO of $1.57 billion as compared to the SBC expense in 2022 of $654 million.

Adjustments for non-cash items in 2022 also included a $45 million impairment of long-lived assets related to the August 2022 Restructuring.

Cash used in operating activities resulting from changes in operating assets and liabilities decreased $263 million.

The decrease was primarily driven by a decrease in receivables from users, net of $6.75 billion, partially offset by an increase of $2.35 billion for payable to users, net, an increase of $3.55 billion for securities loaned, and an increase of $517 million in securities borrowed.

Net operating assets and liabilities at any specific point in time are subject to many variables, including variability in user activity, the timing of cash receipts and payments, and vendor payment terms.

For the year ended December 31, 2021, cash flows used in operating activities was $884.8 million, primarily due to a net loss of $3,686.4 million, adjusted for the add back of non-cash expenses of $3,719.8 million, consisting primarily of change in fair value of convertible notes and warrant liability of $2,045.7 million, share-based compensation expense of $1,570.4 million, provision for credit losses of $78.3 million, and depreciation and amortization of $25.5 million.

Additionally, there was a cash outflow due to changes in operating assets and liabilities of $918.1 million, primarily due to an increase in receivables from users, net, of $3,361.9 million, driven by an increase in margin receivables due to growth in our user base offset by an increase in collateral received for securities loaned of $1,729.9 million and an increase in payables to users of $578.5 million driven by an increase in customer cash held in line with the growth in our user base.

For the year ended December 31, 2020, cash provided by operating activities was $1,876.3 million partially due to a net income of $7.4 million, adjusted for the add back of non-cash expenses of $95.5 million, consisting primarily of provision for credit losses of $59.1 million, share-based compensation expense of $24.3 million, and depreciation and amortization of $9.9 million.

Additionally, the cash generated from operating activities increased due to a net inflow from changes in operating

Table of Co ntents

assets and liabilities of $1,773.3 million, primarily due to increases in payables to users of $3,532.1 million and securities loaned of $1,247.1 million, partially offset by an increase in receivables from users, net of $2,772.0 million, driven by increases in customer cash held, securities loaned, and margin receivables in line with the growth in our user base.

For the year ended December 31, 2019, cash provided by operating activities was $1,260.1 million, primarily due to net loss of $106.6 million, adjusted for the add back of non-cash expenses of $43.4 million consisting primarily of share-based compensation expense of $26.7 million, provision for credit losses of $11.1 million and depreciation and amortization of $5.4 million.

Additionally, the cash generated from operating activities increased due to a net inflow from changes in operating assets and liabilities of $1,323.3 million, primarily due to increases in payables to users of $802.8 million and securities loaned of $674.0 million, driven by increases in customer cash held and securities loaned in line with the growth in our user base.

For the year ended December 31, 2021, cash flows used in investing activities were $237.9 million, which primarily consisted of $125.4 million used for business acquisitions, net of cash acquired.

Additionally, cash flows used in investing activities included $63.2 million in purchases of property, software, and equipment, $27.2 million for the purchase of investments, and $20.5 million in capitalization of internally developed software.

For the years ended December 31, 2020 and 2019, cash flows used in investing activities were $32.3 million and $12.3 million, which primarily consisted of $24.4 million and $7.3 million in purchases of property, software, and equipment and $7.9 million and $5.2 million in capitalization of internally developed software.

For the year ended December 31, 2021, cash flows provided by financing activities were $5,203.4 million, which primarily consisted of proceeds from the issuance of convertible notes and warrants of $3,552.0 million and proceeds of $2,052.4 million from issuance of common stock in connection with our IPO, net of offering costs, partially offset by taxes paid related to net share settlement of equity awards of $422.1 million.

We also drew and repaid $1,968.3 million on our credit facilities.

For the years ended December 31, 2020 and 2019, cash flows provided by financing activities were $1,275.9 million and $375.4 million, which primarily consisted of $1,267.3 million and $372.7 million in proceeds from issuance of redeemable convertible preferred stock, net of issuance costs.

We also drew and repaid $937.7 million and $137.0 million on our credit facilities.

Cash used in investing activities decreased $178 million in 2022 compared to 2021, which was primarily driven by $125 million used in business acquisitions, net of cash acquired in 2021, and to a lesser extent a reduction in expenditures related to the purchases of property and equipment and the capitalization of internally developed software.

Cash used in investing activities in 2022 was partially offset by cash provided by investing activities of $42 million resulting from sale of investments.

We did not have any cash flows from financing activities in 2022 compared to cash flows provided by financing activities of $5.20 billion in 2021, which was primarily driven by the issuance of convertible notes and warrants totaling $3.55 billion as well as proceeds from issuance of common stock in connection with our IPO, net of offering costs totaling $2.05 billion.

Critical Accounting Estimates

3 unchanged sentences

We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results.

For additional information, see Note 1 to our consolidated financial statements in this Annual Report.

Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available.

For additional information, see Note 1 - Description of Business and Summary of Significant Accounting Policies, to our consolidated financial statements in this Annual Report.

Although we believe that our estimates, assumptions, and judgments

are reasonable, they are based upon information presently available.

Actual results might differ significantly from these estimates under different assumptions, judgments, or conditions.

1 unchanged sentence

We allocate the fair value of purchase price to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase

Table of Co ntents

price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

The excess of the fair value of purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.

18 unchanged sentences

Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized.

We account for uncertain tax positions, including net interest and penalties, as a component of income tax expense or benefit.

We account for uncertain tax positions, including net

interest and penalties, as a component of income tax expense or benefit.

We make adjustments to these uncertain tax positions in accordance with applicable income tax guidance and based on changes in facts and circumstances.

To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact to our consolidated financial statements and operating results.

Table of Co ntents

Share-based Compensation

4 unchanged sentences

The time-based service condition for our awards is generally satisfied over four years.

We record share-based compensation expense for Time-Based RSUs on an accelerated attribution method over the requisite service period.

For Time-Based RSUs granted pre-IPO, we record share-based compensation expense on an accelerated attribution method over the requisite service period, as these awards include a performance-based vesting condition.

The performance-based condition for our pre-IPO grants was satisfied upon the occurrence of the IPO in 2021, at which point we recorded a cumulative one-time share-based compensation expense determined using the awards’ grant-date fair value.

Share-based compensation related to the remaining time-based service after the IPO is recorded over the remaining requisite service period.

No performance-based conditions exist for our post-IPO grants.

No performance-based conditions exist for our post-IPO grants, and therefore for grants of Time-Based RSUs issued post-IPO, we record share-based compensation expense on a straight line basis over the requisite service period.

Market-Based RSUs

2 unchanged sentences

The time-based service condition for these awards generally is satisfied over six years.

The performance-based conditions are satisfied upon the occurrence of a qualifying event, as described above.

The performance-based conditions are satisfied upon the occurrence of an IPO.

The market-based conditions are satisfied upon our achievement of specified share prices.

For market-based awards, we determine the grant-date fair value utilizing a Monte Carlo valuation model, which incorporates various assumptions including expected stock price volatility, expected term, risk-free interest rates, expected date of a qualifying event, and expected capital raise percentage.

We estimate the expected term based on various exercise scenarios, as these awards are not considered “plain vanilla.” We estimate the expected date of a qualifying event based on our expectation at the time of measurement of the award’s value.

We estimate the expected term based on various vesting scenarios, as these awards are not considered “plain vanilla.” We estimate the expected date of an IPO based on our expectation at the time of measurement of the award’s value.

We record share-based compensation expense for market-based equity awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable to be satisfied.

7 unchanged sentences

• the prices paid for common or convertible preferred stock sold to third-party investors by us and prices paid in secondary transactions, including any tender offers;

Table of Co ntents

• the rights, preferences and privileges of our redeemable convertible preferred stock relative to those of our common stock;

19 unchanged sentences

Factors considered include the number of different buyers and sellers, transaction volume, timing relative to the valuation date, whether the transactions occurred between willing and unrelated parties, and whether the transactions involved investors with access to our financial information.

Application of these approaches involves the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events.

Application of these approaches involves the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses and

future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events.

Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.

Following the completion of our IPO, there is an active market for our Class A common stock, so we no longer apply these valuation approaches.

Table of Co ntents

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements in this Annual Report.

See Note 2 - Recent Accounting Pronouncements, to our consolidated financial statements in this Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis