What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-27 · 231 added, 341 removed, 291 unchanged (66% of the section changed)

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

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.

In addition to the measures presented in our consolidated financial statements, we use the following key performance metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

Before the fourth quarter of 2023, we referred to Funded Customers as Net Cumulative Funded Accounts.

As our business has grown and we have added additional account types (such as retirement accounts), we have relabeled this metric (and made conforming changes throughout other definitions) to clarify that it measures unique individuals (rather than accounts), although the calculation remains the same and does not affect amounts reported in prior periods.

Additionally, beginning in the fourth quarter of 2023, Robinhood Credit users are included in our calculation of MAU, although we are not restating amounts in prior periods as the impact to those figures was immaterial.

• 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.

• Assets 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.

Starting in January 2024, Net Deposits include dividend and interest inflows and Robinhood Gold subscription fees and margin interest

outflows, although we will not restate amounts in prior periods as the impact to those figures was immaterial.

• Growth Rate with respect to Net Deposits:

When used with respect to Net Deposits, “growth rate” provides information about Net Deposits relative to total AUC.

“Growth rate” is calculated as aggregate Net Deposits over a specified 12 month period, divided by AUC for the fiscal quarter that immediately precedes such 12 month period.

• Average Revenue Per User (“ARPU”) :

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

• 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.

We define MAUs as the number of unique persons who, using one or more accounts with a Robinhood entity, meet one of the following criteria at any point during a specified calendar month:

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

A person need not satisfy these conditions on a recurring monthly basis or be a Funded Customer to be included in MAU.

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

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

• Asset Under Custody (AUC) :

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

• Net Deposits:

• 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.

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 Customer:

A Funded Customer is considered “Churned” if it was ever a New Funded Customer whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) drops to or below zero and has not completed a transaction using any account with a Robinhood entity for at least 45 consecutive calendar days.

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

• 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 Customer:

We define a New Funded Customer as a unique person who became a Funded Customer for the first time during the relevant period.

• Notional Trading Volume:

• Options Contracts Traded:

We define Options Contracts Traded as the total number of options contracts bought or sold over a specified period of time.

Each contract generally entitles the holder to trade 100 shares of the underlying stock.

• Resurrected Customer:

A Funded Customer is considered “Resurrected” in a stated period if it was a Churned Customer as of the end of the immediately preceding period and its balance (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) rises above zero or it completes a transaction using its account.

With respect to the year ended December 31, 2023, as compared to the year ended December 31, 2022:

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

• we generated total net revenues of $1.87 billion compared to $1.36 billion, an increase of 37%;

• we incurred a net loss of $0.54 billion, or -$0.61 per share, compared to net loss of $1.03 billion, or -$1.17 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.

• operating expenses were $2.40 billion compared to $2.37 billion, an increase of 1%;

◦ SBC expense totaled $871 million compared to $654 million, an increase of 33% .

◦ SBC expense for the year ended December 31, 2023 included a $485 million charge related to cancellation of the 2021 Market-Based RSUs (the “2021 Founders Award Cancellation”).

◦ 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%.

• our Adjusted EBITDA (non-GAAP) was positive $536 million compared to negative $94 million ;

• we had 23.4 million Funded Customers compared to 23.0 million, an increase of 2% ;

• we had AUC of $102.6 billion compared to $62.2 billion , an increase of 65%;

• Net Deposits were $17.1 billion, which translates to a growth rate of 27% relative to AUC at the end of the fourth quarter of 2022, compared to $18.4 billion, which translates to a growth rate of 19% relative to AUC at the end of the fourth quarter of 2021;

• we had ARPU of $80 compared to $60 , an increase of 33%;

• we had MAU of 10.9 million in December 2023 compared to 11.4 million in December 2022, a decrease of 4% .

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

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

Key performance metrics for the relevant periods were as follows:

Year Ended December 31,

2021 2022 2023

NCFA (1) (in millions)

12.5 22.7 23.0

MAU (in millions)

Funded Customers (1) (in millions)

22.7 23.0 23.4

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$ 27.1 $ 18.4 $ 17.1

Growth Rate with respect to Net Deposits

43 % 19 % 27 %

ARPU (in dollars)

$ 103 $ 60 $ 80

MAU (in millions)

17.3 11.4 10.9

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

_______________

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

Year Ended December 31,

(in millions) 2021 2022 2023

Beginning NCFA 5.1 12.5 22.7

New funded accounts 8.0 12.2 1.3

Resurrected accounts 0.3 0.5 0.2

Churned accounts (0.9) (2.5) (1.2)

Ending NCFA 12.5 22.7 23.0

Beginning Funded Customers 12.5 22.7 23.0

New Funded Customers 12.2 1.3 1.1

Resurrected Customers 0.5 0.2 0.2

Churned Customers (2.5) (1.2) (0.9)

Ending Funded Customers 22.7 23.0 23.4

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

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Options 1.5 0.3 0.6

Cash held by users 7.9 8.8 10.8

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

Cash held by Customers 8.8 10.8 21.3

Receivables from Customers (6.5) (3.1) (3.4)

AUC $ 98.0 $ 62.2 $ 102.6

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Net Deposits 27.1 18.4 17.1

Net market losses 17.9 7.9 (54.2)

Net market gains (losses) 7.9 (54.2) 23.3

Ending AUC $ 98.0 $ 62.2 $ 102.6

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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”).

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.

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) SBC, (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.

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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.

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

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 Adjusted EBITDA, to the most directly comparable GAAP measure, net loss:

Year Ended December 31,

(in millions) 2021 2022 2023

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

Net loss $ (3,687) $ (1,028) $ (541)

Interest expenses related to credit facilities 20 24 23

Provision for (benefit from) income taxes 6 2 1

Provision for income taxes 2 1 8

Depreciation and amortization 26 61 71

EBITDA (non-GAAP) (3,639) (942) (439)

Share-based compensation (1)

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

Impairment of Ziglu equity securities (2)

Restructuring charges (3)

2021 Founders Award Cancellation — — 485

SBC excluding 2021 Founders Award Cancellation (1)

1,572 654 386

Significant legal and tax settlements and reserves

Restructuring charges (2)

Q4 2022 Processing Error (3)

Impairment of Ziglu equity securities (4)

Change in fair value of convertible notes and warrant liability

Adjusted EBITDA (non-GAAP) $ 33 $ (94) $ 536

(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.

_______________

(1) For the year ended December 31, 2022, SBC excluding 2021 Founders Award Cancellation benefited from restructuring-related net reversals of previously recognized expense of $77 million in connection with both the April 2022 Restructuring and August 2022 Restructuring (see Note 14 - Common Stock and Stockholders' (Deficit) Equity, to our consolidated financial statements in this Annual Report for further information).

(2) Restructuring charges for the year ended December 31, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring, 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

Growing Our Customer Base

Sustaining our growth requires continued adoption of our platform by new customers.

We will continue to introduce products and features to attract new customers and we will seek to increase brand awareness and customer adoption of our platform through broad-scale brand marketing and the Robinhood Referral Program (defined below).

Expanding Our Relationship with Existing Customers

Our revenue has generally increased over time as we have introduced new products and features to our customers and as our customers have increased their usage of our platform.

We aim to grow with our customers over time as they build and manage their wealth.

Our ability to expand our relationship with our customers will be an important contributor to our long-term growth.

Additionally, we strive to strengthen our relationships with our customers by responding to customer feedback not only through the introduction of new products, but also through improvements to our existing products and services.

Investing in Our Platform

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 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.

Customer Interest in Investing and Saving

Our results of operations are impacted by the overall health of the economy and retail investing and saving behaviors, which include the following key drivers:

• 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, declines in trading activity around holidays, and proxy and investor communications activity during proxy season.

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

• Consumer Behavior .

Consumer behavior varies over time and is affected by numerous conditions.

For example, behavior might be impacted by social or economic factors such as changes in disposable income levels, general interest in investing, and volatility in the stock and cryptocurrency markets.

There might also be high profile initial public offerings, or idiosyncratic events impacting single companies, that impact consumer behavior.

• Market Trends .

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

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.”

(3) $57 million for the year ended December 31, 2022 due to 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.

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

Key Components of Our Results of Operations

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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 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;

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

With respect to cryptocurrencies trading, we receive “Transaction Rebates.” In the case of options, our fee is on a per contract basis based on the underlying security.

For equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded;

that is, we receive a fixed percentage of the difference between the publicly quoted bid and ask at the time the trade is executed.

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

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.

We route equity and option orders in priority to participating market makers that we believe are most likely to give our customers the best execution, based on historical performance (according to order price, trading symbol, availability of the market maker and, if statistically significant, order size), and, in the case of options, the likelihood of the order being filled is a factor as well.

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

We route option and equity orders in priority to participating market makers that we believe are most likely to give our customers the best execution, based on historical performance (according to order price, trading symbol, availability of the market maker and, if statistically significant, order size), and, in the case of options, the likelihood of the order being filled is a factor as well.

For cryptocurrency orders, we route to market makers based on price and availability of the cryptocurrency from the market maker.

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Net interest revenues consist of interest revenues less interest expenses.

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 earn interest revenues on corporate cash and investments, margin loans to users, segregated cash and cash equivalents, deposits with clearing organizations, Cash Sweep, and carried customer credit card balances.

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

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Other Revenues

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.

Other revenues primarily consist of Robinhood Gold subscription fees, 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

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 Robinhood Cash Card 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, customer statements, cash compensation, SBC and employee benefits as well as allocated overhead for employees engaged in clearing and brokerage functions.

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

Technology and Development

Technology and development costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for engineering, data science, and design personnel who support and improve our platform and develop new products, costs for cloud infrastructure services, and costs associated with computer hardware and software, including amortization of internally developed software.

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.

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 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).

Due to the fraudulent nature of these transactions, recourse and collection of the funds is limited.

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

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.

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.

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.

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.

Technology and development costs primarily consist of cash compensation, SBC and employee benefits as well as allocated overhead for engineering, data science, and design personnel who support and improve our platform and develop new products, costs for cloud infrastructure services, and costs associated with computer hardware and software, including amortization of internally developed software.

Operations costs consist of customer service related expenses, including cash compensation, SBC and employee 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 primarily in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and credit card expected losses.

Marketing costs primarily consist of paid marketing channels such as digital marketing and brand marketing, as well as cash compensation, SBC, and employee benefits as well as allocated overhead for employees engaged in the marketing function.

Marketing costs also include incentive expenses associated with the Robinhood Referral Program.

General and Administrative

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, other professional fees, settlements and penalties, and business insurance.

General and administrative costs primarily consist of cash compensation, SBC, and employee 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 settlements and penalties, legal expenses, other professional fees, and real estate charges including impairments on our operating leases or lease improvements and lease terminations.

Results of Operations

14 unchanged sentences

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

Other expense (income), net — (1) 16

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

Other (income) expense, net (1) 16 (3)

Loss before income taxes (3,685) (1,027) (533)

Provision for income taxes 2 1 8

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

Net loss $ (3,687) $ (1,028) $ (541)

____________________

(1) Includes share-based compensation expense as follows:

(1) Includes SBC expense as follows:

Year Ended December 31,

5 unchanged sentences

General and administrative 885 425 640

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

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.

Total SBC expense

$ 1,572 $ 654 $ 871

Upon our IPO in 2021, we recognized $1.01 billion of SBC expense.

In 2023, we recognized $485 million of SBC expense related to the 2021 Founders Award Cancellation.

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.

4 unchanged sentences

(in millions, except for percentages) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Transaction-based revenues

Options $ 690 $ 488 $ 505 (29) % 3 %

Cryptocurrencies 27 420 202 NM (52) %

Cryptocurrencies 420 202 135 (52) % (33) %

Equities 287 117 104 (59) % (11) %

1 unchanged sentence

Total transaction-based revenues $ 1,402 $ 814 $ 785 (42) % (4) %

Percentage of total net revenues:

Transaction-based revenues as a % of total net revenues:

Options 38% 36% 27%

3 unchanged sentences

Total transaction-based revenues 77 % 60 % 42 %

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%.

Transaction-based revenues decreased by $29 million primarily driven by a $67 million decrease in Crypto and a $13 million decrease in Equities, offset by a $17 million increase in Options.

In addition, other revenue increased by $34 million primarily driven by increasing user activities in Instant Withdrawals.

Crypto revenues decreased primarily driven by a 29% decrease of number of users placing cryptocurrency trades and a 15% decrease in the average Notional Trading Volume traded per trader.

The decrease was partially offset by a higher rebate rate from crypto market makers.

Equities revenues decreased primarily driven by lower equity rebate rates due to reduced spreads in securities pricing.

In addition, the number of users placing equity trades decreased 16% while the average Notional Trading Volume traded per trader increased 12%

O ptions revenues increased primarily driven by a 26% increase in Option Contracts Traded .

However, we experienced lower option rebate rates due to reduced market volatility and the mix of ticker symbols traded as different ticker symbols pay different rebate rates.

The number of users placing option trades also decreased 18%.

Net Interest Revenues

1 unchanged sentence

(in millions, except for percentages) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Net interest revenues:

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

Interest on corporate cash and investments $ 1 $ 103 $ 288 NM 180 %

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

Margin interest 132 177 243 34 % 37 %

Interest on segregated cash and cash equivalents and deposits 4 57 210 NM 268 %

Cash Sweep, net 1 3 22 200 % 633 %

Cash Sweep 3 22 123 633 % 459 %

Securities lending, net 136 89 79 (35) % (11) %

Credit card, net — — 9 NM NM

Interest expenses related to credit facilities (20) (24) (23) 20 % (4) %

Total net interest revenues $ 256 $ 424 $ 929 66 % 119 %

Percentage of total net revenues:

Margin interest 7% 7% 13%

Net interest revenues as a % of total net revenues:

Interest on corporate cash and investments —% 7% 16%

Securities lending, net 10% 7% 7%

Margin interest 7% 13% 13%

Interest on segregated cash and cash equivalents and deposits 1% 4% 11%

Cash Sweep, net —% —% 2%

Cash Sweep —% 2% 7%

Securities lending, net 7% 7% 4%

Credit card, net —% —% —%

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

Total net interest revenues 14% 31% 50%

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)

Net interest revenues increased by $505 million.

The increase was primarily driven by growth in 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.

The following table summarizes interest-earning assets, the revenue generated by these assets, and their respective annual yields:

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

(off-balance sheet) (2)

Total interest-earning assets Securities lending, net Interest expenses

related to credit facilities

Net interest revenue

Credit card, net

(off-balance sheet) (3)

Total interest-earning assets Securities lending, net Interest expenses related to credit facilities Total net interest revenues

Year ended December 31, 2023

December 31, 2023 $ 3,458 $ 10,107 $ 16,352 $ 205 $ 30,122

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

December 31, 2022 3,089 9,530 5,837 N/A 18,456

3,302 9,979 11,348 197 24,826

1 unchanged sentence

Annual yield (5)

3.70 % 1.59 % 0.55 % 1.91 % 2.25 %

7.36 % 4.99 % 1.08 % N/A 3.52 % 3.74 %

Year ended December 31, 2022

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

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

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

4,519 9,931 2,920 N/A 17,370

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

Annual yield (5)

2.69 % 0.06 % 0.15 % 0.91 % 1.66 %

3.92 % 1.61 % 0.75 % N/A 2.07 % 2.44 %

Year ended December 31, 2021

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

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

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

5,432 10,137 2,109 N/A 17,678

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

Annual yield (5)

2.43 % 0.05 % 0.14 % N/A 0.79 % 1.45 %

_______________

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

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

1 unchanged sentence

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.

(3) Credit card, net is an off-balance sheet amount, which represents 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 intere st revenue.

Refer to Note 3 - Business Combinations to our consolidated financial statements in this Annual Report for more information.

(4) Average balance rows represent the simple average of month-end balances in a given period.

For the year ended December 31, 2023 the average balance for Credit card, net is calculated using the period from June 30, 2023 to December 31, 2023 based on Robinhood Credit’s acquisition date of July 3, 2023.

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

Other Revenues

1 unchanged sentence

(in millions, except for percentages) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Other revenues $ 157 $ 120 $ 151 (24) % 26 %

Percentage of total net revenues 6 % 9 % 9 %

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.

Other revenues as a % of total net revenues 9 % 9 % 8 %

Other revenues increased by $31 million, primarily due to increases in proxy revenues of $17 million mainly driven by transitioning proxy services and investor communications to Say Technologies, our wholly-owned subsidiary, from a third-party proxy service company who shared in the revenues.

Additionally subscription revenues increased $7 million due to an increase in Robinhood Gold subscribers from 1.14 million to 1.42 million.

Operating Expenses

1 unchanged sentence

(in millions, except for percentages) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Operating expenses:

15 unchanged sentences

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

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

Broker-dealer transaction expenses $ 48 $ 31 $ 32 (35)% 3 %

Employee compensation, benefits, and overhead, excluding SBC 14 20 31 43% 55 %

Market data expenses 33 26 23 (21)% (12) %

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

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

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

Customer statements 11 8 15 (27)% 88 %

SBC 7 5 7 (29)% 40 %

Q4 2022 Processing Error — 57 — NM NM

Other 45 32 38 (29)% 19 %

Total $ 158 $ 179 $ 146 13% (18) %

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.

Brokerage and transaction costs decreased by $33 million as a result of the one time $57 million Q4 2022 Processing Error in the prior period.

The decrease was partially offset by an $7 million increase in customer statement costs in response to our efforts to continuously modify, enhance, and improve our process of providing timely and accurate customer information and notifications regarding their account activities.

In addition, employee compensation, benefits, and overhead also increased by $11 million due to increases in headcount which continue to support our business and new initiatives.

Starting in the fourth quarter of 2023, we began to pass option trading fees onto users, which will reduce broker-dealer transaction expenses in future periods.

Technology and Development

1 unchanged sentence

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

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

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

Employee compensation, benefits, and overhead, excluding SBC $ 284 $ 367 $ 308 29% (16) %

SBC 610 212 211 (65)% — %

Cloud infrastructure services 267 175 149 (34)% (15) %

2 unchanged sentences

Total $ 1,234 $ 878 $ 805 (29)% (8) %

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.

Technology and development costs decreased by $73 million primarily due to a decrease of $59 million in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.

In addition, cloud infrastructure services decreased $26 million due to decreases in user transactions and cost optimization efforts focusing on improvements in utilization of cloud infrastructure.

These decreases were partially offset by a $9 million increase in software and tools primarily driven by amortization of internally developed software and other software services utilized in delivering our products.

SBC expense remained flat primarily due to SBC expense in the period ended December 31, 2022 containing net reductions of $18 million related to both the April 2022 Restructuring and August 2022 Restructuring.

Year Ended December 31,

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

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

Customer experience 28 98 78 250% (20) %

Employee compensation, benefits, and overhead, excluding SBC $ 125 $ 144 $ 75 15% (48) %

Provision for credit losses and fraud 108 42 49 (61)% 17 %

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

Customer experience 98 78 19 (20)% (76) %

SBC 20 8 8 (60)% — %

Other 17 13 8 (24)% (38) %

Total $ 368 $ 285 $ 159 (23)% (44) %

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.

Operations costs decreased by $126 million primarily due to a decrease of $69 million in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency.

For the year ended December 31, 2022, other employee costs included $12 million in severance expenses related to the April 2022 Restructuring and the August 2022 Restructuring.

Additionally, expenses associated with customer experience decreased by $59 million as we consolidated our third-party customer support centers due to overall decreases in user transactions.

Further, provision for credit losses and fraud losses increased by $7 million primarily due to a $19 million provision for credit losses related to Robinhood Credit (Refer to Note 7 - Allowance for Credit Losses and Credit Card Expected Loss Liability to our consolidated financial statements in this Annual Report for more information), partially offset by a $13 million decrease 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 platform.

Year Ended December 31,

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

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

Digital marketing $ 49 $ 21 $ 39 (57)% 86 %

Creative services 12 23 14 92% (39) %

Employee compensation, benefits, and overhead, excluding SBC 37 26 22 (30)% (15) %

Brand marketing 24 14 21 (42)% 50 %

Marketing incentives 121 11 7 (91)% (36) %

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

SBC 50 4 5 (92)% 25 %

Other marketing 44 27 28 (39)% 4 %

Total $ 325 $ 103 $ 122 (68)% 18 %

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:

Years ended December 31,

(in millions) 2020 2021 2022

Beginning balance, January 1 $ — $ 1 $ —

Fair value of current period awards 86 127 14

Changes in estimate of unclaimed awards for current and prior periods 1 — —

Reversals related to unclaimed, expired awards (8) (10) (4)

Claimed awards (78) (118) (10)

Ending balance, December 31 $ 1 $ — $ —

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.

Marketing costs increased by $19 million primarily due to higher expenses in digital marketing of $18 million and brand marketing of $7 million mainly due to increased advertising campaigns.

These increases were partially offset by decreases in employee compensation, benefits, and overhead of $4 million due to reduced average headcount as part of our efforts to improve efficiency and operating costs and marketing incentives of $4 million substantially all of which was due to lower costs associated with the Robinhood Referral Program as we increased our investments in paid marketing channels such as digital marketing and brand marketing.

Next year, we plan to increase our marketing investments in 2024 to promote our brand, products, and service.

General and Administrative

1 unchanged sentence

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Share-based compensation $ 5 $ 885 $ 425 NM (52) %

Employee compensation, benefits, and overhead, excluding share-based compensation 79 196 239 148% 22 %

SBC related to 2021 Founders Award Cancellation $ — $ — $ 485 NM NM

Employee compensation, benefits, and overhead, excluding SBC 196 239 216 22% (10) %

SBC excluding 2021 Founders Award Cancellation 885 425 155 (52)% (64) %

Settlements and penalties 70 24 126 (66)% 425 %

Legal expenses 101 76 96 (25)% 26 %

Other professional fees 54 53 41 (2)% (23) %

Impairment — — 45 NM NM

Business insurance 4 25 41 525% 64 %

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

Real estate related charges — 45 5 NM (89) %

Other 65 62 45 (5)% (27) %

Total $ 1,371 $ 924 $ 1,169 (33)% 27 %

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 .

General and administrative costs increased by $245 million primarily due to the SBC related to the 2021 Founders Award Cancellation of $485 million, a $102 million increase in settlements and penalties and a $20 million increase in legal expense related to certain historical regulatory matters (See Note 17 - Commitments & Contingencies t o our consolidated financial statements in this Annual Report for further information) .

These increases were partially offset by decreases of $270 million in other SBC and $23 million in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.

For the year ended December 31, 2022, other SBC expense included net reductions of $34 million related to the April 2022 Restructuring and August 2022 Restructuring, and other employee compensation expense included a $15 million separation related expenses due to the April 2022 Restructuring and August 2022 Restructuring.

Further, real estate related charges decreased $40 million due to a prior-year impairment of $45 million related to the August 2022 Restructuring.

Change in Fair Value of Convertible Notes and Warrant Liability

1 unchanged sentence

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

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

2 unchanged sentences

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

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

Provision for Income Taxes

1 unchanged sentence

(in millions) 2021 2022 2023 2021 to 2022

% Change 2021 to 2022

Provision for income taxes $ 2 $ 1 $ 8 (50)% 700%

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.

Provision for income taxes increased by $7 million primarily due to the nondeductible 2021 Founders Award Cancellation, non-deductible regulatory matters and our current taxes payable offset by the change in valuation allowance on our remaining U.S.

federal and state deferred tax assets.

Liquidity and Capital Resources

4 unchanged sentences

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

Our cash, cash equivalents, and investments were $6.25 billion and $6.34 billion as of December 31, 2021 and 2022.

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

Liquid Assets

Our cash and cash equivalents were $6.34 billion and $4.84 billion as of December 31, 2022 and 2023.

Our liquid investment portfolio comprised of available-for-sale securities of $10 million as of December 31, 2022.

We had $500 million available-for-sale securities classified as cash and cash equivalents as of December 31, 2023.

Held-to-maturity investments maturing within one year, which can also be a source of liquidity, were $413 million as of December 31, 2023.

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

Revolving Lines of Credit

3 unchanged sentences

Payments Due by Period

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

(in millions) Total 2024 2025-2026

Operating lease commitments $ 145 $ 28 $ 46 $ 30 $ 41

Non-cancelable purchase commitments (1)

Purchase commitments (1)

899 335 555 8 1

1 unchanged sentence

_______________

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

(1) 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.

10 unchanged sentences

RHF 196 0.25 196

As of December 31, 2023, our broker-dealer subsidiaries were in compliance with their respective regulatory capital requirements.

The following table summarizes our cash flow activities:

5 unchanged sentences

Financing activities 5,203 — (610)

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.

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.

Cash provided by operating activities increased $2.03 billion.

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

Cash provided by operating activities resulting from net loss adjusted for certain non-cash items increased by $649 million.

This was primarily due to lower net loss and higher SBC expense during 2023 as a result of the 2021 Founders Award Cancellation.

Cash provided by operating activities resulting from changes in operating assets and liabilities increased $1.38 billion.

The increase in cash provided by operating activities was primarily driven by increases of $3.53 billion for securities loaned and $2.17 billion in payables to users, partially offset by decreases of $3.68 billion related to receivables from users, net and $568 million for securities borrowed.

Cash used in investing activities increased $522 million compared to the prior period.

The change was primarily driven by an increase in cash used in investing activities of $759 million from purchases of held-to-maturity investments and $93 million primarily related to the acquisition of Robinhood Credit, net of cash and cash equivalents acquired.

These were partially offset by $282 million in cash provided by investing activities related to proceeds from maturities of held-to-maturity investments.

Cash used in financing activities increased $610 million compared to the prior period which was primarily driven by using cash of $608 million to repurchase Robinhood Class A common stock.

Critical Accounting Estimates

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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.

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.

Allowance for Credit Losses and Credit Card Expected Loss Liability

The amount of the allowance for credit losses represents management’s estimate of expected credit losses over the remaining expected life of our financial assets measured at amortized cost considering available information from internal and external sources.

The allowance for credit losses provides for unsecured balances of receivables from users due to Fraudulent Deposit Transactions, losses on margin lending, and reserves on proxy revenue receivables.

The allowance for credit losses takes into account relevant available information including the nature of the collateral, potential future changes in collateral values, and historical credit loss information.

The amount of the credit card expected loss liability represents management’s estimate of expected credit losses from off-balance sheet credit exposure over the remaining expected life of credit card receivables originated under an arrangement with Coastal Bank where Coastal Bank is the legal lender and originator, the party to which the customer has a credit-borrower relationship, and the legal owner of the credit card receivables.

We are responsible to pay Coastal Bank customer balances that are ultimately charged off or deemed uncollectible, generally when balances become outstanding for over 180 days.

The credit card expected loss liability takes into account information from internal and external sources, including historical collection data, charge off trends by FICO cohort, and market data.

For additional information, see Note 13 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report.

Business Combinations

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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.

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The fair value of our RSUs is estimated based on the fair value of our common stock on the date of grant.

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

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.

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.

The time-based service condition for our awards is generally satisfied over one or four

For Time-Based RSUs granted pre-IPO, we record SBC 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 SBC expense determined using the awards’ grant-date fair value.

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

Market-Based RSUs

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time-based service conditions, performance-based conditions, and market-based conditions.

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

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

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

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

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

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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.

We record SBC 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.

We determine the requisite service period by comparing the derived service period to achieve the market-based condition and the explicit time-based service period, using the longer of the two service periods as the requisite service period.

Upon the occurrence of our IPO in 2021, we recorded a cumulative one-time share-based compensation expense determined using the grant-date fair values.

Share-based compensation related to remaining time-based service and market-based conditions to be met will be recorded over the remaining derived requisite service period.

Upon the occurrence of our IPO in 2021, we recorded a cumulative one-time SBC expense determined using the grant-date fair values.

SBC related to remaining time-based service and market-based conditions to be met will be recorded over the remaining derived requisite service period.

Common Stock Valuations

Prior to our IPO, given the absence of a public trading market for our common stock and in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of fair value of our common stock.

These factors included:

• independent third-party valuations of our common stock;

• 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;

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

• our financial condition, results of operations, and capital resources;

• the industry outlook;

• the valuation of comparable companies;

• the lack of marketability of our common stock;

• the likelihood of achieving a liquidity event, such as an IPO or a sale of our company, given prevailing market conditions;

• the history and nature of our business, industry trends, and competitive environment; and

• general economic outlook including economic growth, inflation, unemployment, interest rate environment, and global economic trends.

Our board of directors determined the fair value of our common stock by first determining the enterprise value of our business, and then allocating the value among the various classes of our equity securities to derive a per share value of our common stock.

The enterprise value of our business was primarily estimated by reference to the closest round of equity financing or tender transaction preceding the date of the valuation.

In a few cases, we also utilized the income or market approaches.

The income approach estimates enterprise value based on the estimated present value of future cash flows the business is expected to generate over its remaining life.

The estimated present value is calculated using a discount rate reflective of the risks associated with an investment in a similar company in a similar industry or having a similar history of revenue growth.

The market approach estimates value based on a comparison of the subject company to comparable public companies.

From the comparable companies, a representative market value multiple is determined and then applied to the subject company’s financial forecasts to estimate the value of the subject company.

In allocating the enterprise value of our business among the various classes of stock prior, we primarily used the option pricing method (“OPM”), which models each class of stock as a call option with a unique claim on our assets.

After the allocation to the various classes of stock, a discount for lack of marketability (“DLOM”), is applied to arrive at a fair value of the common stock.

A DLOM is meant to account for the lack of marketability of a stock that is not traded on public exchanges.

In addition, we also considered any secondary transactions involving our capital stock.

In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange and assigned the transactions an appropriate weighting in the valuation of our common stock.

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.

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.

Prior to our IPO, the absence of an active market for our common stock required the board of directors, the members of which we believe had extensive business, finance and venture capital experience, to determine the fair value of our common stock for purposes of granting stock-based awards and for calculating stock-based compensation expense.

We obtained contemporaneous third-party valuations to assist the board of directors in determining fair value.

These contemporaneous third-party valuations used the methodologies, approaches, and considerations that were consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

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.

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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