Robinhood Markets, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGE Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 105 Consolidated Balance Sheets 107 Consolidated Statements of Operations 108 Consolidated Statements of Comprehensive Income (Loss) 109 Consolidated Statements of Cash Flows 110 Consolidated Statements of Mezzanine Equity and Stockholders’ (Deficit) Equity 111 Notes to the Consolidated Financial Statements Note 1 - Description of Business and Summary of Significant Accounting Policies 114 Note 2 - Recent Accounting Pronouncements 128 Note 3 - Business Combinations 129 Note 4 - Goodwill and Intangible Assets 131 Note 5 - Revenues 132 Note 6 - Restructuring Activities 133 Note 7 - Allowance for Credit Losses and Credit Card Expected Loss Liability 135 Note 8 - Investments and Fair Value Measurement 135 Note 9 - Derivatives and Hedging Activities 139 Note 10 - Income Taxes 140 Note 1 1 - Property, Software, and Equipment, net 143 Note 12 - Securities Borrowing and Lending 143 Note 13 - Financing Activities and Off-Balance Sheet Risk 144 Note 14 - Common Stock and Stockholders' (Deficit) Equity 146 Note 1 5 - Net Income (Loss) per Share 152 Note 16 - Leases 153 Note 17 - Commitments & Contingencies 154 102 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Robinhood Markets, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Robinhood Markets, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), mezzanine equity and stockholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 103 Table of Contents Description of the Matter Transaction-based revenues As discussed in Note 1 and Note 5 to the consolidated financial statements, the Company recognized transaction-based revenues of $785 million for the year ended December 31, 2023, of which $744 million is comprised of revenues earned from routing user orders to market makers when the performance obligation is satisfied, which is at the point in time when a routed order is executed by the market maker. The Company’s transaction-based revenues from routing user orders involves a significant volume of transactions and is earned from various market makers and is sourced from multiple systems across the Company’s information technology environment. Auditing transaction-based revenues from routing user orders was complex and involved significant audit effort to identify, test, and evaluate the Company’s relevant systems used to process and record transaction-based revenues from routing user orders. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the revenue recognition process for transaction-based revenues from routing user orders. With the involvement of our information technology professionals, we identified and tested the relevant systems used to process and record transaction-based revenues earned from routing user orders and tested the relevant information technology general controls over those systems. Our audit procedures included, among others, testing on a sample basis the completeness and accuracy of the underlying data and calculations used to record transaction-based revenues from routing user orders, obtaining external confirmation of revenue recognized and transaction price from market makers, and comparing revenue recognized to cash receipts. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2017. San Jose, California February 27, 2024 104 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Robinhood Markets, Inc. Opinion on Internal Control Over Financial Reporting We have audited Robinhood Markets, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Robinhood Markets, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Robinhood Credit, Inc., formerly known as X1, Inc., which is included in the 2023 consolidated financial statements of the Company and constituted less than one percent of total assets as of December 31, 2023 and less than one percent of consolidated total net revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Robinhood Credit, Inc. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), mezzanine equity and stockholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 27, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, 105 Table of Contents and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Jose, California February 27, 2024 106 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED BALANCE SHEETS December 31, (in millions, except share and per share data) 2022 2023 Assets Current assets: Cash and cash equivalents $ 6,339 $ 4,835 Cash segregated under federal and other regulations 2,995 4,448 Receivables from brokers, dealers, and clearing organizations 76 89 Receivables from users, net 3,218 3,495 Securities borrowed 517 1,602 Deposits with clearing organizations 186 338 Asset related to user cryptocurrencies safeguarding obligation 8,431 14,708 User-held fractional shares 997 1,592 Held-to-maturity investments — 413 Prepaid expenses 86 63 Other current assets 72 207 Total current assets 22,917 31,790 Property, software, and equipment, net 146 120 Goodwill 100 175 Intangible assets, net 25 48 Non-current held-to-maturity investments — 73 Non-current prepaid expenses 17 4 Other non-current assets 132 122 Total assets $ 23,337 $ 32,332 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 185 $ 384 Payables to users 4,701 5,097 Securities loaned 1,834 3,547 User cryptocurrencies safeguarding obligation 8,431 14,708 Fractional shares repurchase obligation 997 1,592 Other current liabilities 105 217 Total current liabilities 16,253 25,545 Other non-current liabilities 128 91 Total liabilities 16,381 25,636 Commitments and contingencies (Note 17) Stockholders’ equity: Preferred stock, $ 0.0001 par value. 210,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022; and December 31, 2023. — — Class A common stock, $ 0.0001 par value. 21,000,000,000 shares authorized, 764,888,917 shares issued and outstanding as of December 31, 2022; 21,000,000,000 shares authorized, 745,401,862 shares issued and outstanding as of December 31, 2023. — — Class B common stock, par value $ 0.0001 . 700,000,000 shares authorized, 127,862,654 shares issued and outstanding as of December 31, 2022; 700,000,000 shares authorized, 126,760,802 shares issued and outstanding as of December 31, 2023. — — Class C common stock, par value $ 0.0001 . 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2023. — — Additional paid-in capital 11,861 12,145 Accumulated other comprehensive income (loss) — ( 3 ) Accumulated deficit ( 4,905 ) ( 5,446 ) Total stockholders’ equity 6,956 6,696 Total liabilities and stockholders’ equity $ 23,337 $ 32,332 See Accompanying Notes to the Consolidated Financial Statements. 107 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, (in millions, except share and per share data) 2021 2022 2023 Revenues: Transaction-based revenues $ 1,402 $ 814 $ 785 Net interest revenues 256 424 929 Other revenues 157 120 151 Total net revenues 1,815 1,358 1,865 Operating expenses: Brokerage and transaction 158 179 146 Technology and development 1,234 878 805 Operations 368 285 159 Marketing 325 103 122 General and administrative 1,371 924 1,169 Total operating expenses 3,456 2,369 2,401 Change in fair value of convertible notes and warrant liability 2,045 — — Other (income) expense, net ( 1 ) 16 ( 3 ) Loss before income taxes ( 3,685 ) ( 1,027 ) ( 533 ) Provision for income taxes 2 1 8 Net loss $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Net loss attributable to common stockholders: Basic $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Diluted $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Net loss per share attributable to common stockholders: Basic $ ( 7.49 ) $ ( 1.17 ) $ ( 0.61 ) Diluted $ ( 7.49 ) $ ( 1.17 ) $ ( 0.61 ) Weighted-average shares used to compute net loss per share attributable to common stockholders: Basic 492,381,190 878,630,024 890,857,659 Diluted 492,381,190 878,630,024 890,857,659 See Accompanying Notes to the Consolidated Financial Statements. 108 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, (in millions) 2021 2022 2023 Net loss $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Other comprehensive loss, net of tax: Foreign currency translation — ( 1 ) — Net losses on hedging instruments: Net losses arising during the period — — ( 4 ) Reclassification adjustment for net losses included in net loss — — 1 Net loss on hedging instruments — — ( 3 ) Total other comprehensive loss, net of tax — ( 1 ) ( 3 ) Total comprehensive loss $ ( 3,687 ) $ ( 1,029 ) $ ( 544 ) See Accompanying Notes to the Consolidated Financial Statements. 109 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in millions) 2021 2022 2023 Operating activities: Net loss $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 26 61 71 Impairment of long-lived assets — 45 5 Provision for credit losses 78 36 43 Share-based compensation 1,572 654 871 Change in fair value of convertible notes and warrant liability 2,045 — — Other ( 1 ) 35 3 Changes in operating assets and liabilities: Securities segregated under federal and other regulations 135 — — Receivables from brokers, dealers, and clearing organizations 36 12 ( 13 ) Receivables from users, net ( 3,362 ) 3,386 ( 298 ) Securities borrowed — ( 517 ) ( 1,085 ) Deposits with clearing organizations ( 102 ) 142 ( 152 ) Current and non-current prepaid expenses ( 135 ) 33 37 Other current and non-current assets ( 54 ) ( 26 ) ( 48 ) Accounts payable and accrued expenses 134 ( 62 ) 134 Payables to users 578 ( 1,775 ) 396 Securities loaned 1,730 ( 1,817 ) 1,713 Other current and non-current liabilities 122 ( 31 ) 45 Net cash provided by (used in) operating activities ( 885 ) ( 852 ) 1,181 Investing activities: Purchases of property, software, and equipment ( 63 ) ( 28 ) ( 2 ) Capitalization of internally developed software ( 20 ) ( 29 ) ( 19 ) Purchases of available-for-sale investments ( 27 ) ( 25 ) — Proceeds from sales and maturities of available-for-sale investments — 42 10 Purchases of held-to-maturity investments — — ( 759 ) Proceeds from maturities of held-to-maturity investments — — 282 Acquisitions of a business, net of cash and cash equivalents acquired ( 125 ) — ( 93 ) Other ( 3 ) ( 20 ) ( 1 ) Net cash used in investing activities ( 238 ) ( 60 ) ( 582 ) Financing activities: Proceeds from issuance of common stock in connection with initial public offering, net of offering costs 2,052 — — Proceeds from issuance of common stock under the Employee Stock Purchase Plan ("ESPP") 7 16 14 Taxes paid related to net share settlement of equity awards ( 422 ) ( 12 ) ( 12 ) Proceeds from issuance of convertible notes and warrants 3,552 — — Draws on credit facilities 1,968 21 20 Repayments on credit facilities ( 1,968 ) ( 21 ) ( 20 ) Payments of debt issuance costs — ( 10 ) ( 10 ) Change in principal collected from customers due to Coastal Bank — — 1 Proceeds from exercise of stock options, net of repurchases 14 6 5 Repurchase of common stock — — ( 608 ) Net cash provided by (used in) financing activities 5,203 — ( 610 ) Effect of foreign exchange rate changes on cash and cash equivalents — ( 1 ) — Net decrease in cash, cash equivalents, segregated cash, and restricted cash 4,080 ( 913 ) ( 11 ) Cash, cash equivalents, segregated cash, and restricted cash, beginning of the period 6,190 10,270 9,357 Cash, cash equivalents, segregated cash, and restricted cash, end of the period $ 10,270 $ 9,357 $ 9,346 Reconciliation of cash, cash equivalents, segregated cash, and restricted cash, end of the period: Cash and cash equivalents, end of the period $ 6,253 $ 6,339 $ 4,835 Segregated cash, end of the period 3,992 2,995 4,448 Restricted cash in other current assets, end of the period 1 1 46 Restricted cash in other non-current assets, end of the period 24 22 17 Cash, cash equivalents, segregated cash, and restricted cash, end of the period $ 10,270 $ 9,357 $ 9,346 Supplemental disclosures: Cash paid for interest $ 12 $ 12 $ 12 Cash paid for income taxes, net of refund received $ 6 $ 4 $ 9 See Accompanying Notes to the Consolidated Financial Statements. 110 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY Redeemable convertible preferred stock Common stock Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders’ (deficit) equity (in millions, except for number of shares) Shares Amount Shares Amount Balance as of December 31, 2020 412,742,897 $ 2,180 229,031,546 $ — $ 134 $ 1 $ ( 190 ) $ ( 55 ) Net loss — — — — — — ( 3,687 ) ( 3,687 ) Shares issued in connection with stock option exercise, net of repurchases — — 6,832,725 — 14 — — 14 Issuance of common stock in connection with Employee Stock Purchase Plan — — 298,031 — 7 — — 7 Issuance of common stock in connection with initial public offering, net of issuance costs — — 56,729,194 — 2,052 — — 2,052 Issuance of common stock upon settlement of RSUs — — 32,133,589 — — — — — Shares withheld related to net share settlement — — ( 11,160,525 ) — ( 422 ) — — ( 422 ) Conversion of preferred stock to common stock ( 412,742,897 ) ( 2,180 ) 412,742,897 — 2,180 — — 2,180 Conversion of convertible notes to common stock — — 137,305,156 — 5,218 — — 5,218 Reclassification of warrant liability to stockholders' equity — — — — 380 — — 380 Vesting of replacement awards issued in connection with acquisition — — — — 1 — — 1 Share-based compensation — — — — 1,605 — — 1,605 Balance as of December 31, 2021 — $ — 863,912,613 $ — $ 11,169 $ 1 $ ( 3,877 ) $ 7,293 See Accompanying Notes to the Consolidated Financial Statements. 111 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY Redeemable convertible preferred stock Common stock (1) Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ (deficit) equity (in millions, except for number of shares) Shares Amount Shares Amount Balance as of December 31, 2021 — $ — 863,912,613 $ — $ 11,169 $ 1 $ ( 3,877 ) $ 7,293 Net loss — — — — — — ( 1,028 ) ( 1,028 ) Shares issued in connection with stock option exercise, net of repurchases — — 2,318,267 — 6 — — 6 Issuance of common stock in connection with Employee Stock Purchase Plan — — 1,907,241 — 16 — — 16 Issuance of common stock upon settlement of restricted stock units, net of shares withheld — — 24,613,450 — ( 12 ) — — ( 12 ) Change in other comprehensive loss — — — — — ( 1 ) — ( 1 ) Share-based compensation — — — — 682 — — 682 Balance as of December 31, 2022 — $ — 892,751,571 $ — $ 11,861 $ — $ ( 4,905 ) $ 6,956 See Accompanying Notes to the Consolidated Financial Statements. 112 Table of Contents ROBINHOOD MARKETS, INC. CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY Common stock (1) Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ (deficit) equity (in millions, except for number of shares) Shares Amount Balance as of December 31, 2022 892,751,571 $ — $ 11,861 $ — $ ( 4,905 ) $ 6,956 Net loss — — — — ( 541 ) ( 541 ) Shares issued in connection with stock option exercise, net of repurchases 2,449,169 — 5 — — 5 Issuance of common stock in connection with Employee Stock Purchase Plan 1,968,081 — 14 — — 14 Issuance of common stock upon settlement of restricted stock units, net of shares withheld 30,267,312 — ( 12 ) — — ( 12 ) Repurchase and retirement of Class A common stock ( 55,273,469 ) — ( 611 ) — — ( 611 ) Change in other comprehensive loss — — — ( 3 ) — ( 3 ) Share-based compensation — — 888 — — 888 Balance as of December 31, 2023 872,162,664 $ — $ 12,145 $ ( 3 ) $ ( 5,446 ) $ 6,696 _______________ (1) The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. See Note 1 - Description of Business and Summary of Significant Accounting Policies, for further information. See Accompanying Notes to the Consolidated Financial Statements. 113 Table of Contents ROBINHOOD MARKETS, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Robinhood Markets, Inc. (“RHM” and, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013. Our most significant, wholly-owned subsidiaries are: • Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer; • Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer; • Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy, sell, and transfer cryptocurrencies and is responsible for the custody of user cryptocurrencies held by users on our platform; and • Robinhood Money, LLC (“RHY”), which offers the Robinhood Cash Card and a Spending Account that help customers invest, save, and earn rewards. • Robinhood Credit, Inc. (“Robinhood Credit”), which offers a no-fee credit card with rewards on each purchase. Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution. Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction. We facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade. Our users have ownership of the securities they transact on our platform, including those that collateralize margin loans, and, as a result, such securities are not presented on our consolidated balance sheets, other than user-held fractional shares which are presented gross. Our users also have ownership of the cryptocurrencies they transact on our platform (none of which are allowed to be purchased on margin and which do not serve as collateral for margin loans); however, following our adoption of SAB 121, we recognize a liability to reflect our safeguarding obligation along with a corresponding asset on our balance sheet related to the cryptocurrencies we hold in custody for users. On August 2, 2021, we closed our IPO of 55.0 million shares of Class A common stock. On August 31, 2021, we sold an additional 4.4 million shares of Class A common stock pursuant to the option granted to the underwriters to purchase additional shares. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The impact of these reclassifications is immaterial to the presentation of the consolidated financials statements taken as a whole. 114 Table of Contents Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances. Assumptions and estimates used in preparing our consolidated financial statements include, but are not limited to, those related to revenue recognition, SBC, the determination of allowances for credit losses, valuation of user cryptocurrencies safeguarding obligation and corresponding asset, investment valuation, capitalization of internally developed software, useful lives of property, software, and equipment, valuation and useful lives of intangible assets, incremental borrowing rate used to calculate operating lease right-of-use assets and related liabilities, impairment of long-lived assets, uncertain tax positions, income taxes, accrued and contingent liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results. Segment Information Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. We operate and report financial information in one operating segment as our CODM only reviews consolidated financial information to allocate resources and assess performance. Substantially all of our revenues and assets are attributed to or located in the United States. In August 2022, we announced a reorganization into a general manager (“GM”) structure under which GMs have assumed broad responsibility for our individual businesses. Immediately after the GM reorganization, we began developing processes and controls to enable us to produce sufficiently precise and timely business level financial information that did not exist within the enterprise resource planning system at the time of the announcement. We continue to work with each GM to review and iterate on their respective discrete financial information while also investing in building the technical capabilities necessary to automate the process of producing the GM level financial information. We continue to improve our reporting of GM level financial information that may eventually be—but is not currently—shared with and used by the CODM to allocate resources and determine performance, which would potentially change the conclusion of one operating segment. We will continue to monitor and evaluate the information provided to the CODM to assess all applicable accounting standards relevant to the determination of our segments. Revenue Recognition Transaction-Based Revenues We primarily earn transaction-based revenues from routing user orders for options, cryptocurrencies, and equities to market makers when the performance obligation is satisfied, which is at the point in time when a routed order is executed by the market maker. The transaction price for options is on a per contract basis, while for equities it is primarily based on the bid-ask spread of the underlying trading activity. For cryptocurrencies, the transaction price is a fixed percentage of the notional order value. For each trade type, all market makers pay the same transaction price. Payments are collected monthly in arrears from each market maker. Net Interest Revenues Net interest revenues consist of interest revenues less interest expenses. 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. We incur interest expenses in connection with our revolving credit facilities. 115 Table of Contents Other Revenues Other revenues primarily consists of Robinhood Gold subscription fees. Our contract with users are for a term of 30 days and renew automatically each month. Subscription revenue is recognized ratably over the subscription period as the performance obligation is satisfied. Other revenues also consist of proxy rebates, proxy revenues, and ACATS fees charged to users. Proxy rebates are revenues earned through our partnership with a third-party investor communications company. We provide certain shareholder information to the third-party company, which is used to send investor materials to shareholders, such as materials related to shareholder meetings and voting instruction forms. We earn a share of the revenue the third-party company receives from issuers, and recognize the revenue when the performance obligation of providing data is satisfied. During 2022, we terminated our partnership with the third-party proxy service provider and began using Say Technologies, a wholly-owned subsidiary, to provide proxy and investor communications services. We now earn proxy revenue directly from issuers. Proxy services are made up of two performance obligations, (i) distribution of proxy materials to shareholders and (ii) collection, tallying, and reporting of shareholder response during a voting event. Revenue is recognized at a point in time upon satisfaction of these performance obligations. ACATS fees are charged to users for facilitating the transfer of part or all of their accounts to another broker-dealer. We recognize revenue when our performance obligation of administering the transfer is satisfied. Concentrations of Revenue and Credit Risk Concentrations of Revenue We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows: Year Ended December 31, 2021 2022 2023 Market maker: Citadel Securities, LLC 22 % 16 % 12 % Entities affiliated with Wolverine Holdings, L.P. (1) 10 % 8 % 6 % Entities affiliated with Susquehanna International Group, LLP (2) 12 % 8 % 2 % Tai Mo Shan Limited (3) 15 % 3 % 1 % All others individually less than 10% 18 % 24 % 19 % Total as percentage of total revenue: 77 % 59 % 40 % _______________ (1) Consists of Wolverine Execution Services, LLC and Wolverine Securities, LLC. (2) Consists of Global Execution Brokers, LP and G1 Execution Services, LLC. (3) Member of Jump Trading Group. Concentrations of Credit Risk We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. Default of a counterparty in equities and options trades, which are facilitated through clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us. It is our policy to review, as necessary, the credit standing of each counterparty. 116 Table of Contents In March 2023, certain U.S. banks failed and were taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”). Our exposure to impacted U.S. banks was immaterial. However, we took steps to help ensure that the loss of all or a significant portion of any uninsured amount would not have had an adverse effect on our ability to pay our operational expenses or make other payments. 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, 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. For the year ended December 31, 2022, brokerage and transaction costs included $ 57 million as a result of the Q4 2022 Processing Error. Technology and Development 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 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 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. Advertising costs are expensed as incurred and were $ 101 million, $ 52 million and $ 74 million in the years ended December 31, 2021, 2022, and 2023. General and Administrative 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. For the year ended December 31, 2023, general and administrative costs included a $ 485 million SBC charge related to the 2021 Founders Award Cancellation. Employee Retirement Benefits We offer a defined contribution 401(k) plan to full-time employees. Employees may elect to contribute to a traditional 401(k) plan, which qualifies as a deferred compensation arrangement under Section 401 of the Code. In this case, participating employees defer a portion of their pre-tax earnings. Employees may 117 Table of Contents also contribute to a Roth 401(k) plan using post-tax dollars. We match employee contributions up to 3 %, and have incurred $ 10 million, $ 14 million, and $ 12 million of expense related to matching for the years ended December 31, 2021, 2022, and 2023. Research and Development Costs Research and development costs described in Accounting Standards Codification (“ASC”) 730, Research and Development, are expensed as incurred. Our research and development costs consist primarily of employee compensation and benefits for our engineering and research teams, including SBC. Research and development costs recorded in operating expenses under ASC 730 were $ 438 million, $ 381 million, and $ 349 million for the years ended December 31, 2021, 2022, and 2023. Share-based Compensation Common Stock Fair Value The fair value of our common stock is determined on the grant date using the closing price of our common stock, which is traded on the Nasdaq Global Select Market. 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 were consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Stock Options We estimate the fair value of stock options granted to employees using the Black-Scholes option-pricing model. The fair value of stock options is recognized as compensation on a straight-line basis over the requisite service period. Forfeitures are accounted for when they occur. The Black-Scholes option-pricing model incorporates various assumptions in estimating the fair value of stock-based awards. In addition to the fair value of our common stock, these variables include: Expected volatility —As we do not have sufficient trading history of our common stock, we estimate the volatility of our common stock on the date of grant using the blended approach which considers the weighted average of historical stock price of our own stock and comparable publicly-traded companies over a period equal to the expected term of the award. Expected term —We determine the expected term based on the average period the stock options are expected to remain outstanding using the simplified method, generally calculated as the midpoint of the stock options’ vesting term and contractual expiration period, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Risk-free interest rate —Based on the U.S. Treasury yield curve that corresponds with the expected term at the time of grant. Expected dividend yield —We utilize a dividend yield of 0 % as we have not paid, and do not anticipate paying, dividends on our common stock. Assumptions used in valuing non-employee stock options are generally consistent with those used for employee stock options with the exception that the expected term is over the contractual life. 118 Table of Contents Time-Based RSUs We have granted Time-Based RSUs that vest upon the satisfaction of a time-based service condition. Prior to our IPO, our Time-Based RSUs vested based upon the satisfaction of both a time-based service condition and a performance-based condition, namely the occurrence of a liquidity event such as the IPO. 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 one or four years . 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. SBC related to the remaining time-based service after the IPO was recorded over the remaining requisite service period. 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 We have granted RSUs that vest upon the satisfaction of all the following conditions: 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 were 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 an IPO, and expected capital raise percentage. 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 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 SBC expense determined using the grant-date fair values. Remaining SBC related to the Market-Based RSUs will be recorded over the remaining derived requisite service period. Previously recognized SBC related to the Market-Based RSUs will not be reversed even if the specified share prices are not achieved unless the requisite service is not rendered. Net Income (Loss) per Share We present net income (loss) per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting income (loss) per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis. Basic earnings per share is computed by dividing net income available to our common stockholders, adjusted to exclude earnings allocated to participating securities, by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential 119 Table of Contents common shares outstanding during the period. The computation of the diluted earnings per share of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted EPS of Class B common stock does not assume the conversion of those shares to Class A common stock. Cash and Cash Equivalents Cash and cash equivalents include deposits with banks and money market funds or highly liquid financial instruments with maturities of three months or less at the time of purchase. We maintain cash in bank accounts at financial institutions that exceed federally insured limits. We also maintain cash in money market funds which are not FDIC insured. We are subject to credit risk to the extent any financial institution with which we conduct business is unable to fulfill contractual obligations on our behalf. As we have not experienced any losses in such accounts and we believe that we have placed our cash on deposit with financial institutions which are financially stable, we do not have an expectation of credit losses for these arrangements. Cash Segregated Under Federal and Other Regulations We are required to segregate cash for the exclusive benefit of customers and proprietary accounts of brokers in accordance with the provision of Rule 15c3-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We continually review the credit quality of our counterparties and have not experienced a default. As a result, we do not have an expectation of credit losses for these arrangements. Segregated cash also includes certain customer funds for which we are an agent and custodian on behalf of our customers that are reflected on our consolidated balance sheets, and for which we follow statutory requirements to keep these funds segregated. Restricted Cash We are required to maintain restricted cash deposits to back letters of credit for certain property leases. We have no ability to draw on such funds as long as they remain restricted under the applicable agreements. Restricted cash also includes customers’ credit card payments that we collect on behalf of other financial institutions that are pending remittance. Cash subject to restrictions that expire within one year is included in other current assets in our consolidated balance sheets. For the years ended December 31, 2022 and 2023, current restricted cash balances included in other current assets in our consolidated balance sheets were $ 1 million and $ 46 million. Cash subject to restrictions that exceed one year is included in other non-current assets in our consolidated balance sheets. For the years ended December 31, 2022 and 2023, non-current restricted cash balances were $ 22 million and $ 17 million. Securities Borrowing and Lending We operate a securities lending program under which shares that users have pledged to us to collateralize their margin borrowing are lent by us to third parties (“Margin Securities Lending”) and a Fully-Paid Securities Lending program under which we borrow fully-paid shares from participating users and lend them to third parties. We also occasionally borrow securities from third parties for operational purposes, and we occasionally lend to third parties securities that we hold for our own account (such as our holdings to support fractional share operations). When we lend securities to third parties, the borrower provides cash as collateral. We earn interest revenue on cash collateral deposited by borrowers, and we can also earn additional revenue for lending certain securities based on demand for those securities. For our Fully-Paid Securities Lending, portions of such revenues are paid to participating users, and those payments are recorded as interest expense. When we borrow securities from users participating in the Fully-Paid Securities Lending program (or from third parties), we provide cash as collateral and we record a receivable representing our right to the return of that collateral. The amount of that receivable is presented in “securities borrowed” on our 120 Table of Contents consolidated balance sheets. In the case of our Fully-Paid Securities Lending program, the cash collateral is held by a third-party bank in a deposit account pledged to the user, which we administer as the user’s agent. Users are not entitled to interest on such account, and any interest earned is for our benefit. Our authorization from users to lend shares that collateralize their margin borrowing is found in our margin account agreement, our borrowing of fully-paid shares from users is conducted under the terms of our Fully-Paid Securities Lending program to which users consent when they enroll in that program, and substantially all of our securities lending and borrowing transactions with third parties are conducted under the terms of an industry-standard master securities loan agreement (“MSLA”), which has an open contractual term and may be terminated upon notice by either party. We have also entered into fixed-term securities lending agreements with two financial institution counterparties (the “Fixed-Term Securities Lending Agreements”). One of these agreements has a contractual term of 30 days per lending transaction with a daily minimum commitment of $ 25 million and the other has a contractual term of 21 days per lending transaction with a daily minimum commitment of $ 35 million. Under these two agreements we lend to the counterparties (for a fixed term) securities that collateralize users’ margin borrowing, and we obtain cash collateral from the counterparties that we use to provide liquidity support for our margin lending to users. Each of the MSLAs and Fixed-Term Securities Lending Agreements establishes a master netting arrangement between the lender and the borrower. A master netting arrangement is an agreement between two counterparties that creates a right of set-off for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. In connection with our securities borrowing and lending activities, however, our policy is to recognize all amounts that are subject to master netting arrangements on a gross basis in our consolidated balance sheets even though some of those amounts may be eligible for offset (i.e., to be presented on a net basis) under GAAP. Cash Sweep Our users may elect to participate in Cash Sweep, which allows them to earn interest on their uninvested brokerage cash. As these balances are automatically swept to our partner banks they are not reflected on the consolidated balance sheet. Cryptocurrencies We act as an agent in the cryptocurrency transactions that users initiate on our platform. We have determined we are an agent, for accounting purposes, because we do not control the cryptocurrency before delivery to the user, we are not primarily responsible for the delivery of cryptocurrency to our users, we are not exposed to risks arising from fluctuations of the market price of cryptocurrency before delivery to the user, and we do not set the prices charged to users. After purchasing cryptocurrency on the platform, users are the legal owners of cryptocurrency held under custody by us and users have all the rights and benefits of ownership, including the rights to appreciation and depreciation of the cryptocurrency. We do not allow users to purchase cryptocurrency on margin and cryptocurrency does not serve as collateral for margin loans. We hold cryptocurrency in custody for users in one or more omnibus cryptocurrency wallets; we do not utilize third-party custodians. We hold cryptographic key information and maintain internal record keeping for the cryptocurrencies we hold in custody for users, and we are obligated to secure such assets from loss or theft. Based on the terms of our user agreement, the structure of our crypto offerings, and applicable law, after consultation with internal and external legal counsel, we believe the cryptocurrency we hold in custody for users of our platform should be respected as users’ property (and should not be available to satisfy the claims of our general creditors) in the event we were to enter bankruptcy. For additional information relating to platform bankruptcy generally, see Part I, Item 1A of this Annual Report, “Risk Factors—Risks Related to Cryptocurrency Products and Services—Cryptocurrency laws, regulations, and accounting standards are often difficult to interpret and are rapidly evolving in ways that are difficult to predict. Changes in these laws and regulations, or our failure to comply with them, could negatively impact cryptocurrency trading on our platform. ” 121 Table of Contents User cryptocurrencies safeguarding obligation and the corresponding asset on the consolidated balance sheets represent our obligation to safeguard crypto assets held in our custody on behalf of our users. We carry these at fair value as prescribed by SAB 121. We are obligated to safeguard user assets from loss, theft, or other misuse. Any loss, theft, or other misuse would impact the measurement of the asset. Investments We invest in marketable debt securities and determine the classification at the time of purchase. Available-for-sale investments are recorded at fair value. We have elected the fair value option for our available-for-sale investments as we believe carrying these investments at fair value and taking changes in fair value through earnings best reflects their underlying economics. Fair value adjustments are presented in other (income) expense, net and interest earned on the debt securities as net interest revenues in our consolidated statements of operations. Held-to-maturity investments are securities that we have both the ability and positive intent to hold until maturity and are recorded at amortized cost. Interest income is calculated using the effective interest method, adjusted for deferred fees or costs, premium, or discount existing at the date of purchase. Interest earned is included in net interest revenues in our consolidated statements of operations. We evaluate held-to-maturity investment for credit losses on a quarterly basis. We do not expect credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies. We monitor remaining securities by type and standard credit rating. Derivatives and Hedging Activities All derivatives are recorded at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate the derivative in a hedging relationship and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting if elected. As part of our interest rate risk management strategy, we use interest rate floors designated as cash flow hedges which involve the receipt of offsetting cash flows from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Changes in fair value of the cash flow hedges are recognized in accumulated other comprehensive income (loss) (“AOCI”) and are subsequently reclassified to net interest revenues as interest payments are received on the hedged item. We assess hedge effectiveness on a quarterly basis to ensure all hedges remain highly effective. If the derivative financial instruments designated as cash flow hedges are deemed ineffective, changes in the fair value of the derivative financial instrument are recognized directly in net interest revenues. We are exposed to credit risk if counterparties to our derivative contracts do not perform pursuant to the terms of our interest rate floors. Should a counterparty fail to perform under the terms of our interest rate floors, our credit exposure is limited to the net positive fair value and accrued interest owed from the failing counterparty. We mitigate counterparty credit risk through credit approvals, credit limits and monitoring procedures, as appropriate. We enter into master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. Our derivative contracts do not require collateral to be posted by us or the counterparties. 122 Table of Contents Credit Card Program The Robinhood Credit card program is funded under the Program Agreement between Robinhood Credit and Coastal Bank, where Coastal Bank is the originator and owner of customer principal balances. Robinhood Credit is responsible for administering the credit card program on a mobile app, including, (i) setting customer credit limits within Coastal Bank’s underwriting standards, (ii) loan servicing, (iii) remitting collected principal from customers to Coastal Bank, and (iv) offering and maintaining the customer rewards program. Coastal Bank is responsible for (i) funding the customer credit, (ii) reporting customer credit activities, and (iii) holding customer receivables. Additionally, Robinhood Credit is responsible to pay Coastal Bank customer balances that are ultimately charged off or deemed uncollectible, generally when balances become outstanding for over 180 days. Robinhood Credit estimates the related credit card expected loss liability using a current expected credit losses model by evaluating historical collection data as well as considering charge off trends and market data by FICO cohort. Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue. In addition, Robinhood Credit earns revenue from interchange fees from each credit card transaction. As an agent, Robinhood Credit recognizes interchange revenue net of a revenue share paid to Coastal Bank, certain fees paid to third-parties, and rewards paid to customers. Fair Value of Financial Instruments We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we may use various valuation approaches, including market, income and/or cost approaches. The fair value hierarchy requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is a market-based measure considered from the perspective of a market participant. Accordingly, even when market assumptions are not readily available, our own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. The fair value measurement accounting guidance describes the following three levels used to classify fair value measurements: Level 1 Inputs: unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by us Level 2 Inputs: quoted prices for similar assets and liabilities in an active market, quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly Level 3 Inputs: unobservable inputs that are significant to the fair value of the assets or liabilities A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The carrying amounts of certain financial instruments approximate their fair value due to the short-term nature, which include cash and cash equivalents, cash segregated under federal and other regulations, receivables from brokers, dealers, and clearing organizations, receivables from users, net, deposits with clearing organizations, other current assets, accounts payable and accrued expenses, payable to users, securities loaned, and other current liabilities. Receivables From Brokers, Dealers, and Clearing Organizations Receivables from brokers, dealers, and clearing organizations include receivables from market makers for routing user orders for execution and other receivables from third-party brokers. These 123 Table of Contents receivables are short term and settle within 30 days. We continually review the credit quality of our counterparties and have not experienced a default. As a result, we do not have an expectation of credit losses for these arrangements. Receivables From Users, Net Receivables from users, net are primarily made up of margin receivables. Margin receivables are adequately collateralized by users’ securities balances and are reported at their outstanding principal balance, net of an allowance for credit losses. We monitor margin levels and require users to deposit additional collateral, or reduce margin positions, to meet minimum collateral requirements and to avoid automatic liquidation of their positions. We apply the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses for receivables from users. We have no expectation of credit losses for receivables from users that are fully secured, where the fair value of the collateral securing the balance is equal to or in excess of the receivable amount. This is based on our assessment of the nature of the collateral, potential future changes in collateral values, and historical credit loss information relating to fully secured receivables. In cases where the fair value of the collateral is less than the outstanding receivable balance from a user, we recognize an allowance for credit losses in the amount of the difference, or unsecured balance, immediately. The provision for credit losses is recorded as operations expense on the consolidated statement of operations. We write-off unsecured balances when the balance becomes outstanding for over 180 days or when we otherwise deem the balance to be uncollectible. Deposits With Clearing Organizations We are required to maintain collateral deposits with clearing organizations such as Depository Trust & Clearing Corporation and Options Clearing Corporation which allow us to use their security transactions services for trade comparison, clearance, and settlement. The clearing organizations establish financial requirements, including deposit requirements, to reduce their risk. The required level of deposits may fluctuate significantly from time to time based upon the nature and size of users’ trading activity and market volatility. We earn interest on these deposits which is included as net interest revenues in the consolidated statements of operations. As we have not experienced historic defaults, we do not have an expectation of credit losses for these arrangements. As of December 31, 2023, $ 50 million of our U.S. treasury securities were pledged to a clearing organization to meet margin requirements for our security lending program. Fractional Share Program We operate our fractional share program for the benefit of our users and maintain an inventory of securities held exclusively for the fractional share program. This proprietary inventory is recorded within other current assets on our consolidated balance sheets. When a user purchases a fractional share, we record the cash received for the user-held fractional share as pledged collateral and an offsetting liability to repurchase the shares as we concluded that we did not meet the criteria for derecognition under the accounting guidance. We measure our inventory of securities, user-held fractional shares and our repurchase obligation at fair value at each reporting period via the election of the fair value option, with realized and unrealized gains and losses recorded in brokerage and transaction expenses in our consolidated statement of operations. We do not earn revenue from our users when they purchase or sell fractional shares from us. We earn transaction-based revenue when shares are purchased from or routed to market makers to fulfill fractional share transactions. 124 Table of Contents Other Current Assets Other current assets include restricted cash subject to restrictions that expire within one year, other receivables, stablecoin assets owned by us that are considered financial assets, deferred costs of Robinhood Match Incentive Program (defined below), interest and dividends receivable, and securities owned by us used for the Robinhood Referral program and fractional share program. Robinhood Match Incentive Program Match incentives on customers’ eligible contributions to their retirement accounts and transfers of assets to our platform are subject to forfeiture if the recipient does not hold the contributed funds or transferred assets in their account for a specified period of time. The match incentive amount is deferred and recognized over the specified period of time as a reduction to revenue. If match funds are forfeited, we adjust the deferred match incentive balance and recognize any difference between the deferred match incentive balance and funds recuperated as an adjustment to revenue. For the year ended December 31, 2023, the amount recognized as a reduction of revenue was immaterial. We review the deferred match incentive balance for impairment. For the year ended December 31, 2023, no impairment was recognized. Robinhood Referral Program The stock rewarded under this program is included in other current assets in our consolidated balance sheets. Our inventory of settled shares is initially recorded at cost and marked to fair market value at each reporting period, with gains and losses from changes in the fair market value of the shares recorded within marketing expense in our consolidated statement of operations. Shares are derecognized when they are claimed by the user and delivered to the users’ account. We record an accrued liability within other current liabilities in our consolidated balance sheets at the time the bank account is linked with the expense recorded within marketing expense in our consolidated statement of operations. The liability is initially recorded at the fair market value of the assigned share or shares upon the reward being earned by the referred user (i.e., upon bank linkage) and marked to fair market value until claimed or reversed, with gains and losses also recorded within marketing expense. The liability is derecognized when the share is claimed by the user and delivered to the users’ account. Property, Software, and Equipment Property, software, and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is recorded on a straight-line basis over the useful life of the asset, which is as follows: Property, Software, and Equipment Useful Life Computer equipment 3 years Fixture and furniture 7 years Tenant improvements Shorter of estimated useful life or lease term Internally developed software 3 years Repairs and maintenance that do not enhance or extend the asset’s function and/or useful life are charged to expenses as incurred. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized. Internally developed software is capitalized when preliminary development efforts are successfully completed and it is probable that the project will be completed and the software will be used as intended. Capitalized costs consist of SBC, salaries, and payroll related costs for employees, and fees paid to third-party consultants who are directly involved in development efforts. Capitalized costs are amortized over 125 Table of Contents the estimated useful life of the software on a straight-line basis and included in technology and development in the consolidated statements of operations. We expense software development costs as they are incurred during the preliminary project stage. Non-Marketable Equity Securities Investments in non-marketable equity securities without readily determinable fair values are initially recorded at cost and are subsequently adjusted to fair value for impairments and price changes from observable transactions in the same or a similar security from the same issuer. Non-marketable equity securities are included in other non-current assets on the consolidated balance sheets and the related balances were not material for the periods presented. Leases We elected to apply the short-term lease measurement and recognition practical expedient to our leases where applicable, thus leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Operating lease right-of-use assets and operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date for each lease. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate because the interest rate implicit in most of our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate that we would pay to borrow on a collateralized basis with similar terms and payments as the lease. Operating lease right-of-use assets also include any prepaid lease payments and lease incentives. Our lease agreements generally contain lease and non-lease components. Non-lease components, which primarily include payments for maintenance and utilities, are combined with lease payments and accounted for as a single lease component. We include the fixed non-lease components in the determination of the right-of-use assets and operating lease liabilities. We record the amortization of the right-of-use asset and the accretion of lease liability as rent expense and allocate it as overhead in the consolidated statements of operations. Business Combinations We account for acquisitions of entities or asset groups that qualify as businesses in accordance with ASC 805, “Business Combinations”. The purchase price of the acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination and is allocated to reporting units expected to benefit from the business combination. We test goodwill for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that goodwill might be impaired. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach. In testing for goodwill impairment, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is not more likely than not that the fair value of a 126 Table of Contents reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if we conclude otherwise, we proceed to a quantitative assessment. The quantitative assessment compares the estimated fair value of a reporting unit to its book value, including goodwill. If the fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. However, if the book value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Intangible Assets, Net Intangible assets are carried at cost and amortized on a straight-line basis over their estimated useful lives. We evaluate the remaining estimated useful life of its intangible assets being amortized on an ongoing basis to determine whether events and circumstances warrant a revision to the remaining period of amortization. Impairment of Long-lived Assets We evaluate the recoverability of long-lived assets, including property, software, and equipment, leases, and finite-lived intangible assets whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable compared to the undiscounted future net cash flows the assets are expected to generate. The impairment test is performed at the asset group level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When the test results indicate that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third–party independent appraisals, as considered necessary. Payables to Users Payables to users represent users’ funds on deposit, and/or funds accruing to users as a result of settled trades and other security related transactions. Loss Contingencies We are subject to claims and lawsuits in the ordinary course of business, including arbitration, class actions and other litigation, some of which include claims for substantial or unspecified damages. We are also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. We review our lawsuits, regulatory inquiries and other legal proceedings on an ongoing basis and provide disclosures and record loss contingencies in accordance with the loss contingencies accounting guidance. We establish an accrual for losses at management’s best estimate when we assess that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. Accrual for loss contingencies are recorded in accounts payable and accrued expenses on the consolidated balance sheets and expensed in general and administrative expenses in our consolidated statements of operations. We monitor these matters for developments that would affect the likelihood of a loss and the accrued amount, if any, and adjust the amount as appropriate. Income Taxes Income tax expense is an estimate of current income taxes payable in the current fiscal year based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences and carryforwards that we recognize for financial reporting and income tax purposes at enacted tax rates expected to be in effect when taxes are actually paid or recovered. 127 Table of Contents We account for income taxes under the asset and liability method, which requires recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements, but have not been reflected in our taxable income. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe that they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets including, but not limited to, historical cumulative loss experience and expectations of future earnings, tax planning strategies, and the carry-forward periods available for tax reporting purposes. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our tax provision would increase or decrease in the period in which the assessment is changed. We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits. 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 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. Related Parties We have defined related parties as members of our board of directors, executive officers, principal owners of our outstanding stock, and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates. Related party transactions may include any transaction between entities under common control or with a related party. NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract. The guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis, including interim periods within those fiscal years. Early adoption is permitted. We adopted this guidance effective January 1, 2023. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures. In December 2023, the FASB issued Accounting Standards Update 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets.” This guidance requires entities to measure crypto assets within the scope of this guidance at fair value with changes in fair value recognized in net income, and provides comprehensive disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. We adopted this guidance effective January 1, 2023. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures. 128 Table of Contents Recently Issued Accounting Pronouncements Not Yet Adopted In October 2023, the FASB issued Accounting Standards Update 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This amendment will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets. The amendments in this guidance will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. We are currently evaluating the impacts of the amendment on our consolidated financial statements. In November 2023, the FASB issued Accounting Standards Update 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in guidance improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures. In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income taxes (Topic 740): Improvements to Income Taxes Disclosures.” This guidance requires annual disclosure of specific categories in the rate reconciliation and provides additional information for reconciling items that meet a quantitative threshold. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures. NOTE 3: BUSINESS COMBINATIONS Acquisition of X1 On July 3, 2023, we acquired all of the outstanding equity of X1 Inc. (“X1”), a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The acquisition of X1 allows us to provide access to credit for our customers. In August 2023, X1 was renamed Robinhood Credit. The acquisition date fair value of the consideration transferred for Robinhood Credit was $ 104 million, which was entirely paid in cash. The purchase price allocation is based on a preliminary valuation and subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available, including certain tax matters, during 129 Table of Contents the measurement period (up to one year from the acquisition date). The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition: In millions Fair Value Cash and cash equivalents $ 14 Receivable from users, net 3 Prepaid expenses 1 Other current assets 48 Goodwill 72 Intangible assets 36 Accounts payable and accrued expenses ( 44 ) Other current liabilities ( 25 ) Other non-current liabilities ( 1 ) Net assets acquired $ 104 The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributed to the assembled workforce of Robinhood Credit and anticipated operational synergies. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions at the time of acquisition. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition: (in millions, except years) Fair Value Useful Life Developed technology $ 25 4 Customer relationships 10 7 Trade names 1 1 Total $ 36 The overall weighted average useful life of the identified amortizable intangible assets acquired is 5 years. The estimated fair value of the intangible assets acquired approximate the amounts a market participant would pay for these intangible assets as of July 3, 2023. We used the replacement cost method to estimate the fair value of developed technology, and a multi-period excess earnings method was used to estimate the fair value of customer relationships. Tangible net assets were valued at their respective carrying amounts as of the acquisition date, as these amounts approximated fair value. During the fourth quarter of 2023, we recorded a $ 7 million measurement period adjustment to accounts payable and accrued expenses with a corresponding increase to goodwill, and an adjustment to increase other current assets and other current liabilities by $ 25 million based on facts and circumstances as of the acquisition date. Pro forma results of operations for Robinhood Credit have not been presented as the effect of this acquisition was not material. From the date of the acquisition through December 31, 2023, Robinhood Credit revenues were not material to our consolidated statements of operations. 130 Table of Contents NOTE 4: GOODWILL AND INTANGIBLE ASSETS Goodwill The following table summarizes the carrying amount of goodwill: December 31, (in millions) 2022 2023 Beginning balance $ 101 $ 100 Less: Accumulated impairment — — Beginning balance, net 101 100 Additions due to business combinations (1) — 68 Post-acquisition adjustments ( 1 ) 7 Ending balance $ 100 $ 175 _______________ (1) Substantially all of the additions related to the acquisition of Robinhood Credit as disclosed in Note 3 - Business Combinations, and the remainder related to other immaterial business acquisitions. There was no impairment of goodwill for the years ended December 31, 2022 and 2023. Intangible Assets The following tables summarize the components of intangible assets: December 31, 2022 (in millions, except years) Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Remaining Useful Life - Years Finite-lived intangible assets Developed technology $ 23 $ ( 10 ) $ 13 1.70 Customer relationships 12 ( 2 ) 10 8.62 Indefinite-lived intangible assets 2 — 2 N/A Total $ 37 $ ( 12 ) $ 25 December 31, 2023 (in millions, except years) Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Remaining Useful Life - Years Finite-lived intangible assets Developed technology $ 48 $ ( 21 ) $ 27 2.98 Customer relationships 23 ( 4 ) 19 7.04 Trade names 1 ( 1 ) — — Indefinite-lived intangible assets 2 — 2 N/A Total $ 74 $ ( 26 ) $ 48 Amortization expense of intangible assets was $ 3 million, $ 9 million, and $ 14 million for the years ended December 31, 2021, 2022, and 2023. There was no impairment of intangible assets for the years ended December 31, 2022 and 2023. 131 Table of Contents As of December 31, 2023, the estimated future amortization expense of finite-lived intangible assets was as follows: (in millions) Finite-lived Intangible Assets 2024 $ 14 2025 9 2026 9 2027 6 2028 3 Thereafter 5 Total $ 46 NOTE 5: REVENUES Disaggregation of Revenues The following table presents our revenues disaggregated by revenue source: Year Ended December 31, (in millions) 2021 2022 2023 Transaction-based revenues: Options $ 690 $ 488 $ 505 Cryptocurrencies 420 202 135 Equities 287 117 104 Other 5 7 41 Total transaction-based revenues 1,402 814 785 Net interest revenues: Interest on corporate cash and investments 1 103 288 Margin interest 132 177 243 Interest on segregated cash and cash equivalents and deposits 4 57 210 Cash Sweep 3 22 123 Securities lending, net 136 89 79 Credit card, net — — 9 Interest expenses related to credit facilities ( 20 ) ( 24 ) ( 23 ) Total net interest revenues 256 424 929 Other revenues 157 120 151 Total net revenues $ 1,815 $ 1,358 $ 1,865 For our Fully-Paid Securities Lending program, we earn revenue for lending certain securities based on demand for those securities and portions of such revenues are paid to participating users, and those payments are recorded as interest expense. The program was launched during the three months ended 132 Table of Contents June 30, 2022. The following table presents interest revenue earned and interest expense paid from Fully-Paid Securities Lending: Year Ended December 31, (in millions) 2022 2023 Interest revenue $ 11 $ 44 Interest expense ( 2 ) ( 7 ) Fully-Paid Securities Lending, net $ 9 $ 37 Contract Balances Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables related to proxy revenues due from issuers are reported in other current assets on the consolidated balance sheets. Contract liabilities, which primarily consist of unearned subscription revenue, are recognized when users remit cash payments in advance of the time we satisfy our performance obligations and are recorded as other current liabilities on the consolidated balance sheets. The table below sets forth contract receivables and liabilities balances for the periods indicated: December 31, 2022 (in millions) Contract Receivables Contract Liabilities Beginning of the period, January 1, 2022 $ 83 $ 3 End of the period, December 31, 2022 60 3 Changes during the period $ ( 23 ) $ — December 31, 2023 (in millions) Contract Receivables Contract Liabilities Beginning of period, January 1, 2023 $ 60 $ 3 End of period, December 31, 2023 87 4 Changes during the period $ 27 $ 1 The change in contract receivables was primarily driven by increases in trading volume for Cryptocurrencies, Equities, and Options for the month ended December 31, 2023 compared to the same period in the prior year. Receivable balances are also impacted by the timing differences between our performance and counterparties’ payments. We recognized all revenue from amounts included in the opening contract liability balances for the year end December 31, 2023. NOTE 6: RESTRUCTURING ACTIVITIES April 2022 Restructuring On April 26, 2022, we announced the April 2022 Restructuring as part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing 133 Table of Contents needs of our customers. The April 2022 Restructuring involved approximately 330 employees, representing approximately 9 % of our full-time employees at that time. We allowed affected employees’ share-based awards to continue vesting over a transitional period (generally two months during which they remained employed but were not expected to provide active service), which were generally accounted for as a modification allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of SBC expense that had been previously recognized (under the accelerated attribution method, generally), the April 2022 Restructuring resulted in a net reduction to SBC of $ 24 million, which was recognized in the second quarter of 2022 (refer to Note 14 - Common Stock and Stockholders' (Deficit) Equity, for more information). In addition, we recognized $ 17 million of cash restructuring and related charges in the second quarter of 2022, which primarily consisted of employee-related wages, benefits, and severance expense. As of December 31, 2022, all of the restructuring charges relating to the April 2022 Restructuring had been paid in full. August 2022 Restructuring On August 2, 2022, we announced the August 2022 Restructuring, which involved 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 assumed 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. In the third quarter of 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied. In connection with the office closures describe above, we determined the carrying amount of the right-of-use assets and associated leasehold improvements exceeded their respective fair value, resulting in impairments of $ 30 million and $ 15 million. We utilized a probability-weighted approach and market estimates from a third-party real estate brokerage firm to project sublease income cash flows, net of brokerage commissions, for each of the office spaces and applied a market rate of return on similar assets as a discount factor to determine fair value. We attributed the impairments on a relative carrying value basis between the right-of-use assets and leasehold improvements. In addition, we accelerated depreciation of $ 9 million related to other fixed assets. The impairments were recognized in general and administrative expense on our consolidated statements of operations. Similar to the April 2022 Restructuring, we allowed affected employees’ share-based awards to continue vesting over a transitional period allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of SBC expense that had been previously recognized (under the accelerated attribution method, generally), the August 2022 Restructuring resulted in a net reduction to SBC of $ 53 million, which was recognized in the third quarter of 2022 (refer to Note 14 - Common Stock and Stockholders' (Deficit) Equity, for more information). In addition, we recognized $ 34 million of cash restructuring and related charges primarily related to employee-related wages, benefits, and severance expense. As of December 31, 2022, all of the restructuring charges relating to the August 2022 Restructuring had been paid in full. 134 Table of Contents NOTE 7: ALLOWANCE FOR CREDIT LOSSES AND CREDIT CARD EXPECTED LOSS LIABILITY Allowance for Credit Losses Substantially all of the allowance for credit losses relate to unsecured balances of receivables from users due to Fraudulent Deposit Transactions, losses on margin lending, and reserves on proxy revenue receivables. The following table summarizes the allowance for credit losses: Year Ended December 31, (in millions) 2021 2022 2023 Beginning balance $ 34 $ 40 $ 18 Provision for credit losses 78 36 24 Write-offs ( 72 ) ( 58 ) ( 26 ) Ending balance $ 40 $ 18 $ 16 Credit Card Expected Loss Liability The following table summarizes the credit card expected loss liability as part of accounts payable and accrued expenses on the consolidated balance sheets: Year Ended December 31, (in millions) 2023 Beginning balance $ — Opening balance from acquisition of Robinhood Credit 23 Provision for credit losses 19 Payments to Coastal Bank ( 11 ) Recoveries 1 Ending balance $ 32 NOTE 8: INVESTMENTS AND FAIR VALUE MEASUREMENT Investments Available-for-sale As of December 31, 2022, our available-for-sale investments, which are included in other current assets on the consolidated balance sheets, were $ 10 million with no significant unrealized gains or losses. These investments had a stated contractual maturity or redemption date within one year. As of December 31, 2023, we had a $ 500 million time deposit that was an available-for-sale investment classified as cash equivalents on the consolidated balance sheets. This investment has a maturity of three months or less at the time of purchase, and an aggregate market value equal to amortized cost. Refer to Fair Value of Financial Instruments below for further details. 135 Table of Contents Held-to-maturity We had no held-to-maturity investments as of December 31, 2022. The following table summarizes our held-to-maturity investments as of December 31, 2023: December 31, 2023 (in millions) Amortized Cost Allowance for Credit Losses Unrealized Gains Unrealized Losses Fair Value Debt securities: Corporate debt securities $ 205 $ — $ — $ ( 1 ) $ 204 U.S. Treasury securities 202 — — — 202 U.S. government agency securities 42 — — — 42 Certificates of deposit 34 — — — 34 Commercial paper 3 — — — 3 Total held-to-maturity investments $ 486 $ — $ — $ ( 1 ) $ 485 There were no sales of held-to-maturity investments during the year ended December 31, 2023. The table below presents the amortized cost and fair value of held-to-maturity investments by contractual maturity; the maximum maturity is two years: December 31, 2023 (in millions) Within 1 Year 1 to 2 Years Total Amortized cost Debt securities: Corporate debt securities $ 153 $ 52 $ 205 U.S. Treasury securities 184 18 202 U.S. government agency securities 39 3 42 Certificates of deposit 34 — 34 Commercial paper 3 — 3 Total held-to-maturity investments $ 413 $ 73 $ 486 Fair value Debt securities: Corporate debt securities $ 152 $ 52 $ 204 U.S. Treasury securities 184 18 202 U.S. government agency securities 39 3 42 Certificates of deposit 34 — 34 Commercial paper 3 — 3 Total held-to-maturity investments $ 412 $ 73 $ 485 136 Table of Contents Fair Value of Financial Instruments Financial assets and liabilities measured at fair value on a recurring basis as of the date indicated below were presented on our consolidated balance sheets as follows: December 31, 2022 (in millions) Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 735 $ — $ — $ 735 Other current assets: Equity securities - securities owned 8 — — 8 Commercial paper — 5 — 5 Government bonds 3 — — 3 Corporate bonds — 2 — 2 Asset related to user cryptocurrencies safeguarding obligation — 8,431 — 8,431 User-held fractional shares 997 — — 997 Total financial assets $ 1,743 $ 8,438 $ — $ 10,181 Liabilities User cryptocurrencies safeguarding obligation $ — $ 8,431 $ — $ 8,431 Fractional shares repurchase obligations 997 — — 997 Total financial liabilities $ 997 $ 8,431 $ — $ 9,428 137 Table of Contents December 31, 2023 (in millions) Level 1 Level 2 Level 3 Total Assets Cash equivalents: Time deposit $ — $ 500 $ — $ 500 Money market funds 146 — — 146 Deposits with clearing organizations: U.S. Treasury securities 50 — — 50 Other current assets: Stablecoin 20 — — 20 Equity securities - securities owned 10 — — 10 Other non-current assets: Money market funds - escrow account 2 — — 2 Asset related to user cryptocurrencies safeguarding obligation — 14,708 — 14,708 User-held fractional shares 1,592 — — 1,592 Total financial assets $ 1,820 $ 15,208 $ — $ 17,028 Liabilities User cryptocurrencies safeguarding obligation $ — $ 14,708 $ — 14,708 Fractional shares repurchase obligations 1,592 — — 1,592 Total financial liabilities $ 1,592 $ 14,708 $ — $ 16,300 The fair value for certain financial instruments that are not required to be measured or reported at fair value was presented on our consolidated balance sheets as follows: December 31, 2023 (in millions) Level 1 Level 2 Level 3 Total Assets Held-to-maturity investments: Corporate debt securities $ — $ 204 $ — $ 204 U.S. Treasury securities 202 — — 202 U.S. government agency securities — 42 — 42 Certificates of deposit — 34 — 34 Commercial paper — 3 — 3 Total held-to-maturity investments $ 202 $ 283 $ — $ 485 The fair values used for held-to-maturity investments are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems. Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided. During the year ended December 31, 2023, we did not have any transfers in or out of Level 3 assets or liabilities. 138 Table of Contents Safeguarded user cryptocurrencies Safeguarded user cryptocurrencies were as follows: Year Ended December 31, (in millions) 2022 2023 Bitcoin (BTC) $ 2,327 $ 6,149 Ethereum (ETH) 2,341 3,761 Dogecoin (DOGE) 2,802 3,319 Other 961 1,479 Total user cryptocurrencies safeguarding obligation and corresponding asset $ 8,431 $ 14,708 The fair value of the user cryptocurrencies safeguarding obligation and the corresponding asset were determined based on observed market pricing representing the last price executed for trades of each cryptocurrency as of December 31, 2022 and 2023. NOTE 9: DERIVATIVES AND HEDGING ACTIVITIES As of December 31, 2023, we had two interest rate floors that were designated as cash flow hedges of interest rate risk associated with our margin receivables. One interest rate floor with a notional amount of $ 2 billion was effective as of June 30, 2023 and another with a notional amount of $ 1 billion will be effective in the first quarter of 2024. Both interest rate floors have a maturity of six months . As of December 31, 2023, the fair value of hedging instruments was immaterial and included in other current assets in our consolidated balance sheets. We had no derivatives and hedging activities during the year ended December 31, 2022. Amounts reported in AOCI related to interest rate floors will be reclassified to net interest revenues as interest payments are received or paid on the hedged items. During the next 12 months, we expect to reclassify $ 3 million of losses from AOCI as a reduction to net interest revenues. As of December 31, 2023, we hedged our exposure to the variability in future cash flows for forecasted transactions over a maximum period of one year . The following table summarizes the amount of gain or loss recognized in AOCI on our consolidated financial statements: Year Ended December 31, (in millions) 2023 Derivatives designated as hedging instruments: Loss on derivatives included in effectiveness assessment $ ( 4 ) Loss reclassified from AOCI into net interest revenues included in effectiveness assessment 1 Total $ ( 3 ) 139 Table of Contents The following table summarizes the components of AOCI related to hedging activities on our consolidated financial statements: Year Ended December 31, (in millions) 2023 Beginning balance $ — Other comprehensive loss before reclassifications, net of tax ( 4 ) Reclassification adjustment for net losses included in net interest revenues, net of tax 1 Other comprehensive loss after reclassifications, net of tax $ ( 3 ) Ending balance $ ( 3 ) NOTE 10: INCOME TAXES The components of income (loss) before income taxes were as follows: Year Ended December 31, (in millions) 2021 2022 2023 Domestic $ ( 3,687 ) $ ( 1,028 ) $ ( 534 ) Foreign 2 1 1 Income (loss) before income taxes $ ( 3,685 ) $ ( 1,027 ) $ ( 533 ) The components of the provision for (benefit from) income taxes were as follows: Year Ended December 31, (in millions) 2021 2022 2023 Current: Federal $ — $ — $ 5 State 5 1 3 Foreign — — — Total current tax expense (benefit) 5 1 8 Deferred: Federal ( 1 ) — — State ( 2 ) — — Foreign — — — Total deferred tax expense (benefit) ( 3 ) — — Total provision for (benefit from) income taxes $ 2 $ 1 $ 8 140 The reconciliation of statutory federal income tax rate and our effective income tax rate was as follows (in percentages): Year Ended December 31, 2021 2022 2023 Federal tax benefit at statutory rate 21.0 % 21.0 % 21.0 % State tax benefit, net of federal benefit 3.6 1.8 ( 1.9 ) Foreign rate differential — — — Share-based compensation ( 0.5 ) ( 12.3 ) ( 29.7 ) Research and development credits 1.3 3.6 5.6 Non-deductible change in convertible notes and warrant ( 0.3 ) — — Non-deductible regulatory settlements ( 11.7 ) ( 0.3 ) ( 4.6 ) Permanent differences — ( 0.1 ) ( 0.2 ) Other — 0.1 0.4 Change in valuation allowance ( 13.5 ) ( 13.9 ) 8.0 Total provision for (benefit from) income taxes ( 0.1 ) % ( 0.1 ) % ( 1.4 ) % Significant components of our deferred tax assets and liabilities consisted of the following: Year Ended December 31, (in millions) 2022 2023 Deferred tax assets: User cryptocurrencies safeguarding obligation $ 2,167 $ 3,660 Net operating loss carryforwards 266 176 Tax credit carryforwards 134 161 Research and Experimentation expenditure amortization 83 151 Share-based compensation 85 43 Accruals and other liabilities 21 29 Lease liabilities 38 27 Other 15 19 Total deferred tax assets $ 2,809 $ 4,266 Deferred tax liabilities: Asset related to user cryptocurrencies safeguarding obligation $ ( 2,167 ) $ ( 3,660 ) Right of use assets ( 24 ) ( 17 ) Depreciation and amortization ( 10 ) ( 14 ) Total deferred tax liabilities ( 2,201 ) ( 3,691 ) Valuation Allowance ( 607 ) ( 574 ) Net deferred tax assets $ 1 $ 1 141 The reconciliation of the beginning and ending amount of the deferred tax asset valuation allowance was as follows: Year ended December 31, (in millions) 2021 2022 2023 Balance at beginning of period $ 27 $ 495 $ 607 Charged/(credited) to net income 471 112 ( 34 ) Charges utilized/(write-offs) ( 3 ) — 1 Balance at end of period $ 495 $ 607 $ 574 The realization of tax benefits of net deferred assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on all available evidence for the year ending December 31, 2023, we believe it is more likely than not that the tax benefits of the remaining U.S. federal, state, and certain foreign net deferred tax assets may not be realized, and accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by approximately $ 33 million for the year ended December 31, 2023. As of December 31, 2023, we have $ 635 million of U.S. federal, $ 647 million of state, and $ 4 million of non-U.S. net operating loss carryforwards available to reduce future taxable income. Of the U.S. federal net operating loss carryforwards, $ 635 million will carryforward indefinitely. Our state net operating losses begin to expire in 2024 , while our non-U.S. net operating losses do not expire. As of December 31, 2023, we have utilized federal and state net operating losses generated from tax years 2013 through 2021. We have U.S. federal tax credit carryforwards of $ 152 million that will begin to expire in 2041 , if not utilized, and state tax credit carryforwards of $ 98 million that will begin to expire in 2026 . As of December 31, 2023, we have utilized U.S. federal and state tax credits generated from tax years 2014 through 2021. Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization. We had unrecognized tax benefits of approximately $ 58 million and $ 74 million as of December 31, 2022 and 2023. These unrecognized tax benefits, if recognized, would not affect the effective tax rate. We record interest and penalties related to unrecognized tax benefits in income tax expenses. There were no interest or penalties accrued during the years ended December 31, 2022 and 2023. The reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows (in millions): Year Ended December 31, 2022 2023 Unrecognized benefit - beginning of period $ 46 $ 58 Gross increases - current year tax positions 16 16 Gross increases - prior year tax positions — — Gross decrease - prior year tax positions ( 4 ) — Unrecognized benefit - end of period $ 58 $ 74 We file in U.S. federal, various state, and foreign jurisdictions. The tax years from 2014 remain open to examination by the U.S. federal and state authorities, due to carryover of unused net operating losses and tax credits. The tax years from 2020 remain open for the most significant foreign jurisdiction. 142 NOTE 11: PROPERTY, SOFTWARE, AND EQUIPMENT, NET Property, software, and equipment are presented net of accumulated depreciation and amortization and summarized as follows: Year Ended December 31, (in millions) 2022 2023 Internally developed software $ 106 $ 122 Leasehold improvements 52 39 Computer equipment 32 27 Furniture and fixtures 14 13 Construction in progress 23 30 Total 227 231 Less: accumulated depreciation and amortization ( 81 ) ( 111 ) Property, software, and equipment, net $ 146 $ 120 Depreciation expense of property and equipment was $ 15 million, $ 26 million, and $ 16 million for the years ended December 31, 2021, 2022, and 2023. Amortization expense of internally developed software was $ 7 million, $ 26 million, and $ 41 million for the years ended December 31, 2021, 2022, and 2023. In connection with our August 2022 Restructuring, we recognized an impairment of $ 15 million associated with our leasehold improvements and accelerated depreciation of $ 9 million related to other fixed assets for the year ended December 31, 2022. Refer to Note 6 - Restructuring Activities for more information. NOTE 12: SECURITIES BORROWING AND LENDING When we lend securities to third parties we receive cash as collateral for the securities loaned. In the table below, the cash collateral we hold related to loaned securities is presented in “securities loaned” and the fair value of securities lent is presented in “security collateral pledged.” Similarly, when we borrow securities from third parties or fully-paid securities from users, we provide cash collateral. In the table below, the amount of that cash collateral is presented in “securities borrowed” and the fair value of the securities received is presented in “security collateral received.” Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers; however, we do not net securities borrowing and lending transactions. Therefore, activity related to securities borrowing and lending activities are presented gross in our consolidated balance sheets. 143 The following tables set forth certain balances related to our securities borrowing and lending activities: December 31, (in millions) 2022 2023 Assets Securities borrowed Gross amount of securities borrowed $ 517 $ 1,602 Gross amount offset on the consolidated balance sheets — — Amounts of assets presented on the consolidated balance sheets 517 1,602 Gross amount of securities borrowed not offset on the consolidated balance sheets: Securities borrowed 517 1,602 Security collateral received ( 509 ) ( 1,536 ) Net amount $ 8 $ 66 Liabilities Securities loaned Gross amount of securities loaned $ 1,834 $ 3,547 Gross amount of securities loaned offset on the consolidated balance sheets — — Amounts of liabilities presented on the consolidated balance sheets 1,834 3,547 Gross amount of securities loaned not offset on the consolidated balance sheets: Securities loaned 1,834 3,547 Security collateral pledged ( 1,629 ) ( 3,188 ) Net amount $ 205 $ 359 As described in Note 1 - Description of Business and Summary of Significant Accounting Policies, we obtain securities on terms that permit us to pledge and/or transfer securities to others. As of December 31, 2022 and 2023, we were permitted to re-pledge securities with a fair value of $ 4.36 billion and $ 4.78 billion under margin account agreements with users, and securities with a fair value of $ 18 million and an immaterial balance that we had borrowed under MSLAs with third parties. Under the Fully-Paid Securities Lending program, as of December 31, 2023, we were permitted to re-pledge securities with a fair value of $ 14.03 billion including securities with a fair value of $ 1.54 billion that we had borrowed from users. As of December 31, 2022 and 2023, we had re-pledged securities with a fair value of $ 1.63 billion and $ 3.19 billion, in each case under MSLAs and Fixed-Term Securities Lending Agreements with third parties. In addition, as of December 31, 2022 and 2023, we had re-pledged $ 231 million and $ 676 million of the permitted amounts under the margin account agreements with clearing organizations to meet deposit requirements. NOTE 13: FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK Revolving Credit Facilities October 2019 Credit Facility In October 2019, we entered into a $ 200.0 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”). In October 2020, we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $ 600.0 million with a maturity date of October 144 29, 2024. In April 2021, we further increased the aggregate credit amount available under the October 2019 Credit Facility to $ 625.0 million. Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00 % or (b) the ABR. The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate (as defined in the agreement) at the applicable time. The ABR is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50 % and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00 %. If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate (as defined in the agreement) as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent. In December 2022, the terms of the October 2019 Credit Facility were amended. Under the amendment, the October 2019 Credit Facility bears interest, at our option, at a per annum rate of either (a) the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.00 % or (b) the Alternative Base Rate. The Adjusted Term SOFR Rate is equal to the Term SOFR Rate for such interest period, published by the Term SOFR Administrator, plus the applicable Term SOFR Adjustment at the applicable time. The Term SOFR Adjustment is (i) 0.11 % per annum for an interest period of one month; (ii) 0.26 % per annum for an interest period of three months; and (iii) 0.43 % per annum for an interest period of six months. If the Adjusted Term SOFR Rate is less than the floor of 0 %, such rate shall be deemed to be equal to the floor. As amended, the ABR is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50 % and (iii) the Adjusted Term SOFR for a one month Interest Period plus 1.00 %. There were no outstanding borrowings under the October 2019 Credit Facility, as amended, at December 31, 2022 and 2023. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10 % on any unused amount of the October 2019 Credit Facility quarterly in arrears. April 2023 Credit Facility On March 24, 2023, RHS, our wholly-owned subsidiary, entered into the Second Amended and Restated Credit Agreement (the “April 2023 Credit Agreement”) among RHS, as borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, amending and restating the $ 2.275 billion 364-day senior secured revolving credit facility entered into in April 2022. The April 2023 Credit Agreement provides for a 364-day senior secured revolving credit facility with a total commitment of $ 2.175 billion. Under circumstances described in the April 2023 Credit Agreement, the aggregate commitments may be increased by up to $ 1.0875 billion, for a total commitment under the April 2023 Credit Agreement of $ 3.2625 billion. Borrowings under the credit facility must be specified to be Tranche A, Tranche B, Tranche C or a combination thereof. Tranche A loans are secured by users’ securities purchased on margin and are used primarily to finance margin loans. Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC margin deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC deposit requirements. Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Exchange Act. Borrowings under the April 2023 Credit Agreement will bear interest at a rate per annum equal to the greatest of (i) Daily Simple Secured Overnight Financing Rate (“SOFR”) plus 0.10 %, (ii) the Federal Funds Effective Rate (as defined in the April 2023 Credit Agreement) and (iii) the Overnight Bank Funding Rate (as defined in the April 2023 Credit Agreement), in each case, as of the day the loan is initiated, plus an applicable margin rate. The applicable margin rate is 1.25 % for Tranche A loans and 2.5 % for Tranche B and Tranche C loans. Undrawn commitments will accrue commitment fees at a rate per annum equal to 0.5 %. 145 The April 2023 Credit Agreement requires RHS to maintain a minimum consolidated tangible net worth and a minimum excess net capital, and subjects RHS to a specified limit on minimum net capital to aggregate debit items. In addition, the April 2023 Credit Agreement contains certain customary affirmative and negative covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions. Amounts due under the April 2023 Credit Agreement may be accelerated upon an “event of default,” as defined in the April 2023 Credit Agreement, such as failure to pay amounts owed thereunder when due, breach of a covenant, material inaccuracy of a representation, or occurrence of bankruptcy or insolvency, subject in some cases to cure periods. The October 2019 Credit Facility, as amended, and the April 2023 Credit Facility contain customary covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions. We were in compliance with all covenants under these facilities as of December 31, 2022 and 2023, as applicable. Credit Card Funding Trust Robinhood Credit has a trust subsidiary that has entered into an arrangement with a financial institution to purchase up to $ 100 million of credit card receivables originated by Coastal Bank under the Program Agreement, providing incremental availability to offer customer credit. Since inception of the arrangement and as of December 31, 2023, no purchases have occurred and no balances were outstanding with this financial institution. Off-Balance Sheet Risk Coastal Bank Program Agreement Under the Program Agreement, most recently amended in November 2023, Coastal Bank may fund up to $ 300 million of credit card receivables. Robinhood Credit pays Coastal Bank interest which accrues daily based on the average balance of advances during the month at the federal funds rate plus a margin of 3.75 % on the first $ 150 million and 3.00 % on such amounts in excess of $ 150 million. The credit card receivables and the funding from Coastal Bank are treated as off-balance sheet, considering Coastal Bank is the legal lender and originator, the party to which the customer has a creditor-borrower relationship; and the legal owner of the receivables. As of December 31, 2023, off-balance sheet customer principal amounts funded under the Program Agreement were approximately $ 205 million. The related accrued interest payable and interest expense were immaterial. Transaction Settlement In the normal course of business, we engage in activities involving settlement and financing of securities transactions. User securities transactions are recorded on a settlement date basis, which is generally two business days after the trade date for equities and one business day after the trade date for options. These activities may expose us to off-balance sheet risk in the event that the other party to the transaction is unable to fulfill its contractual obligations. In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations. NOTE 14: COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY Preferred Stock Pursuant to our Charter, our board of directors may issue shares of our preferred stock in one or more series and, subject to the applicable law of the State of Delaware, our board of directors may set the powers, rights, preferences, qualifications, limitations and restrictions of such preferred stock. As of 146 December 31, 2023, no terms of the preferred stock were designated, and no shares of preferred stock were outstanding. Common Stock Voting Rights We have three authorized classes of common stock: Class A, Class B, and Class C. Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law. Conversion of Class B Common Stock Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. All Class B common stock will automatically convert (as a class) into Class A common stock upon the earliest of (i) the date and time specified by the affirmative vote of the holders of at least 80 % of the then-outstanding shares of Class B common stock, voting separately as a class, (ii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date on which the number of then-outstanding shares of Class B common stock represents less than 5 % of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, (iii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date that (A) each founder is no longer providing services to our Company as an officer, employee, or consultant and (B) each founder is not a director of our Company as a result of a voluntary resignation by such founder from our board of directors or as a result of a written request or agreement by such founder not to be renominated as a director of our Company at an annual or special meeting of stockholders, (iv) nine months after the death or total disability of both founders (subject to a delay of up to 18 months as may be approved by a majority of our independent directors), or (v) August 2, 2036, the date that is 15 years from the completion of our IPO. Shares of Class B common stock will also automatically convert into shares of Class A common stock upon sale or transfer except for certain permitted transfers described in our Charter. In addition, each share of Class B common stock held by a stockholder who is a natural person, or held by permitted transferees or permitted entities of such natural person (each as described in our Charter) will automatically convert into shares of Class A common stock nine months following the death or total disability of such natural person (subject to a delay of up to 18 months as may be approved by a majority of our independent directors). Notwithstanding the foregoing, in the event such natural person is a founder, to the extent (i) a person designated by such founder and approved by a majority of the independent directors then in office or (ii) the other founder, in each case, has or shares voting control over the shares of Class B common stock held by the deceased or disabled founder, such shares will be treated as being held of record by such person or other founder and will not convert into shares of Class A common stock as a result of such founder’s death or total disability. Conversion of Class C Common Stock Upon the conversion or exchange of all outstanding shares of our Class B common stock into shares of Class A common stock, each outstanding share of Class C common stock will convert automatically into one share of Class A common stock on the date or time fixed by our board of directors. 147 Dividend Rights Subject to the rights of any holders of our preferred stock, the holders of our common stock will be entitled to receive ratable dividends, if any, as may be declared from time to time by our board of directors out of funds legally available for the payment of dividends. Right to Receive Liquidation Distributions If we liquidate, dissolve or wind up, after all liabilities and, if applicable, the holders of each series of our preferred stock have been paid in full, the holders of our common stock will be entitled to share ratably in all remaining assets. No Preemptive or Similar Rights Our common stock has no preemptive or conversion rights or other subscription rights. No redemption or sinking fund provisions are applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future. The convertible notes issued in February 2021 were converted into 137.3 million shares of Class A common stock at a conversion price of $ 26.60 per share upon completion of our IPO. Warrants As of December 31, 2023, warrants outstanding consisted of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $ 26.60 per share. The warrants expire on February 12, 2031 and can be exercised with cash or net shares settled at the holder’s option. In aggregate, the maximum purchase amount of all warrants is $ 380 million. As of December 31, 2023, the warrants have not been exercised and are included as a component of additional paid in capital on the consolidated balance sheets. Share Repurchase and Retirement On August 30, 2023, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with the United States Marshal Service (the “USMS”), for and on behalf of the United States, pursuant to which we agreed to repurchase 55,273,469 shares of the Company's Class A common stock from the USMS for $ 10.96 per share. The transaction closed on August 31, 2023. We repurchased, and subsequently retired, all of the shares for an aggregate amount of $ 608 million, recorded entirely in additional paid-in capital on the consolidated balance sheet in absence of retained earnings, which included $ 2 million in transaction costs. As of December 31, 2023, we have accrued $ 3 million, also recorded in additional paid-in capital, related to the 1% excise tax on net share repurchases as a result of the Inflation Reduction Act of 2022. Equity Incentive Plans Amended and Restated 2013 Stock Plan and 2020 Equity Incentive Plan Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”). Our 2013 Plan was terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Plan (defined below) but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms. Any shares that were or otherwise would 148 become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan. No new awards may be granted under our 2013 Plan or 2020 Plan. 2021 Omnibus Incentive Plan Our 2021 Omnibus Incentive Plan (the “2021 Plan”) became effective on July 27, 2021, and provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards. Under the 2021 Plan, options could be granted with an exercise price per share not less than the fair market value at the date of grant. Options granted generally vest over a four-year term from the date of grant, at a rate of 25 % after one year , then monthly on a straight-line basis thereafter. Generally, options granted are exercisable for up to ten years from the date of grant. RSUs granted mostly vest monthly on a straight-line basis and expire seven or ten years from the date of grant. As of December 31, 2023, an aggregate of 405 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 131 million shares had been issued under the plans, 69 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 205 million shares remained available for new grants under the 2021 Plan. On January 1, 2024, an additional 43.6 million shares became available for grant under the 2021 Plan pursuant to its annual evergreen feature. Stock Option Activity A summary of stock option activity for the year ended December 31, 2023 is as follows: Number of Shares Weighted-Average Exercise Price Weighted- Average Remaining Life Total Intrinsic Value (in millions) Balance at December 31, 2022 15,226,096 $ 4.73 4.68 $ 72 Granted during the period — — Exercised during the period ( 2,443,991 ) 2.07 Expired during the period ( 179,524 ) 13.14 Forfeited during the period ( 461,015 ) 14.15 Balance at December 31, 2023 12,141,566 $ 4.78 3.76 $ 100 Options vested and expected to vest at December 31, 2023 12,141,566 $ 4.78 3.76 $ 100 Options exercisable at December 31, 2023 10,667,515 $ 3.50 3.57 $ 100 The weighted-average grant date fair value of options granted during the years ended December 31, 2022 was $ 14.15 . No options were granted during 2021 nor 2023. The fair value of each stock option was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions: Year Ended December 31, 2021 2022 2023 Dividend yield N/A 0 % N/A Risk-free interest rate N/A 1.61 % N/A Expected volatility N/A 40.72 % N/A Expected term (years) N/A 4.61 N/A The total intrinsic value of options exercised during 2021, 2022, and 2023 was $ 179 million, $ 25 million, and $ 20 million. The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the market value of the stock at the time of exercise. The total 149 grant date fair value of options that vested during 2023 was $ 7 million and was immaterial for 2021 and 2022. Time-Based RSUs We have granted Time-Based RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”). The following table summarizes the activity related to our Time-Based RSUs for the year ended December 31, 2023: Number of RSUs Weighted- average grant date fair value Unvested at December 31, 2022 56,116,782 $ 18.55 Granted 24,267,715 9.84 Vested ( 31,081,439 ) 15.77 Forfeited ( 14,751,060 ) 18.41 Unvested at December 31, 2023 34,551,998 $ 14.99 The fair value of Time-Based RSUs vested during 2021 2022 and 2023 was $ 1,054 million, $ 542 million and $ 490 million , respectively. Market-Based RSUs In 2019 and 2021, we granted Market-Based RSUs to our founders under which vesting is conditioned upon both the achievement of share price targets and the continued employment by each recipient over defined service periods. There were no Market-Based RSUs granted during 2022 or 2023. As of December 31, 2023, none of the 2021 Market-Based RSUs had vested based on share price targets. In February 2023, we cancelled the 2021 Market-Based RSUs of 35.5 million unvested shares. We recognized $ 485 million SBC expense related to the cancellation during the year ended December 31, 2023 , which was included in the general and administrative expense in our consolidated statements of operations. No further expense associated with these awards was recognized after the cancellation. No other payments, replacement equity awards or benefits were granted in connection with the cancellation. The following table summarizes the activity related to our Market-Based RSUs for the year ended December 31, 2023: Eligible to Vest (1) Not Eligible to Vest (2) Total Number of RSUs Weighted- average grant date fair value Unvested at December 31, 2022 806,858 57,650,926 58,457,784 $ 23.50 Granted — — — — Vested ( 461,062 ) — ( 461,062 ) 2.34 Cancelled — ( 35,520,000 ) ( 35,520,000 ) 22.68 Unvested at December 31, 2023 345,796 22,130,926 22,476,722 $ 25.67 _______________ (1) Represents RSUs that became eligible to vest upon achievement of share price targets and vest upon satisfaction of time-based service requirements. (2) Represents RSUs that have not yet become eligible to vest because share price targets have not yet been achieved. The fair value of Market-Based RSUs that vested during 2021, 2022, and 2023 was $ 161 million,$ 5 million and $ 5 million. 150 2021 Employee Share Purchase Plan Our ESPP became effective on July 27, 2021 and enables eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15 % of their eligible compensation up to the statutory maximum. The purchase price is equal to 85 % of the fair market value of a share of our common stock on the first date of an offering or the date of purchase, whichever is lower. The ESPP has an automatic rollover feature, whereby employees begin a new 12-month offering period if the fair value of the Company’s common stock on a purchase date is less than that on the original offering date. The aggregate number of shares reserved for issuance under the ESPP will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031. Such annual increase will be equal to the lesser of (i) 1 % of the outstanding shares of all classes of our common stock on the last day of the immediately preceding calendar year and (ii) such number of shares determined by the board of directors. No more than 200 million shares of common stock may be issued under our ESPP. In the year ended December 31, 2023 , 2 million shares were purchased under the ESPP at a weighted-average price of $ 7.09 . The fair value of shares to be issued under our ESPP was estimated on the grant date using the Black-Scholes option pricing model. As of December 31, 2023 , approximately 30.4 million shares remained available for issuance under the ESPP. On January 1, 2024, an additional 8.7 million shares became authorized for issuance under the ESPP pursuant to its annual evergreen feature. Share-Based Compensation The following table presents SBC in our consolidated statements of operations for the periods indicated: Year Ended December 31, (in millions) 2021 2022 2023 (1) General and administrative $ 885 $ 425 $ 640 Technology and development 610 212 211 Operations 20 8 8 Brokerage and transaction 7 5 7 Marketing 50 4 5 Total $ 1,572 $ 654 $ 871 _______________ ( 1) Included in the table above, we recorded SBC expense of $ 567 million related to Market-Based RSUs, $ 292 million related to Time-Based RSUs, $ 8 million related to ESPP, and $ 4 million related to options for the year ended December 31, 2023. The tax benefits recognized in the consolidated statements of operations for SBC were $ 73 million for year ended December 31, 2023 and were no t material during the years ended December 31, 2021 and 2022. In March 2021, we modified certain Time-Based RSUs of approximately 500 employees to remove the one-year vesting cliff, considered to be an improbable to improbable modification. The modified RSUs were revalued at the modification date, and the modified grant date fair value of the awards of $ 39.75 per share was used to calculate SBC expense. We have capitalized SBC expense related to internally developed software of $ 35 million , $ 28 million , and $ 17 million for years 2021, 2022, and 2023. The April 2022 Restructuring and the August 2022 Restructuring resulted in net reductions of $ 24 million and $ 53 million in SBC expense, respectively. Both reductions were substantially related to 151 Time-Based RSUs. The net reductions were primarily recognized in technology and development expense, $ 16 million and $ 22 million, and general and administrative expense, $ 6 million and $ 28 million. As of December 31, 2023, there was $ 355 million of unrecognized SBC expense that is expected to be recognized over a weighted-average period of 1.08 years. NOTE 15: NET LOSS PER SHARE We present net income (loss) per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting income (loss) per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis. The following table presents the calculation of basic and diluted loss per share: (in millions, except per share data) Year Ended December 31, 2021 2022 2023 Net loss $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Net loss attributable to common stockholders $ ( 3,687 ) $ ( 1,028 ) $ ( 541 ) Weighted-average common shares outstanding - basic 492,381,190 878,630,024 890,857,659 Dilutive effect of stock options and unvested shares — — — Weighted-average common shares used to compute diluted loss per share 492,381,190 878,630,024 890,857,659 Net loss per share attributable to common stockholders: Basic $ ( 7.49 ) $ ( 1.17 ) $ ( 0.61 ) Diluted $ ( 7.49 ) $ ( 1.17 ) $ ( 0.61 ) The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions that were not satisfied by the end of the period: Year Ended December 31, 2021 2022 2023 Time-Based RSUs 49,440,344 56,156,677 34,625,253 Market-Based RSUs 58,918,844 58,457,784 22,476,722 Stock options 14,527,468 15,226,096 12,141,566 Early-exercised stock options 15,126 — — Warrants 14,278,034 14,278,034 14,278,034 ESPP 246,179 364,427 305,692 Total anti-dilutive securities 137,425,995 144,483,018 83,827,267 152 NOTE 16: LEASES Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park, CA and our office in New York City, NY. Our leases have remaining terms of less than one year to nine years , and many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. We do not have any finance leases. See Note 6 - Restructuring Activities, for further information relating to impacts on leases due to the April and August 2022 Restructurings. In 2022, we executed agreements to assign some of our operating leases to third-party assignees who assumed all of our obligations, liabilities, covenants, and conditions under the assigned leases. As a result of these agreements, we derecognized the related right-of-use assets of $ 28 million and lease liability of $ 33 million and recognized an immaterial amount of net gain. As of December 31, 2023 , we have an executed operating lease for office facilities that had not yet commenced and is expected to commence in the second quarter of 2024. Under the terms of the lease, we will have the right to construct tenant improvements to the underlying asset upon commencement. Lease assets and liabilities recognized on our consolidated balance sheets were as follows: December 31, (in millions) Classification 2022 2023 Lease Right-of-use Assets Operating lease assets Other non-current assets $ 92 $ 68 Lease Liabilities Current operating lease liabilities Other current liabilities 21 20 Non-current operating lease liabilities Other non-current liabilities 127 89 Total lease liabilities $ 148 $ 109 Fixed operating lease costs primarily consist of monthly base rent amounts due. Variable operating lease costs primarily relate to common area maintenance, property taxes, insurance, and other operating expenses. The components of lease expense were as follows: Year Ended December 31, (in millions) 2021 2022 2023 Fixed operating lease costs $ 24 $ 33 $ 21 Variable operating lease costs 6 7 7 Short-term lease costs 1 — 1 Total lease costs $ 31 $ 40 $ 29 Other information related to our operating leases was as follows: December 31, 2022 2023 Weighted-average remaining lease term 7.59 years 6.57 years Weighted-average discount rate 6.52 % 7.2 % 153 Cash flows related to leases were as follows: Year Ended December 31, (in millions) 2021 2022 2023 Operating cash flows: Payments for operating lease liabilities $ 6 $ 23 $ 39 Supplemental cash flow data: Lease liabilities arising from obtaining right-of-use assets (1) $ 97 $ 32 $ ( 8 ) _______________ (1) For the years ended December 31, 2021 and 2022, lease liabilities arising from obtaining right-of-use assets primarily related to initial recognition of new leases during the respective years. For the year ended December 31, 2023, lease liabilities arising from obtaining right-of-use assets primarily related to a lease modification, partially offset by remeasurements resulting from reassessments of existing lease terms. Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of December 31, 2023 are as follows: (in millions) 2024 $ 28 2025 28 2026 18 2027 15 2028 15 Thereafter 41 Total undiscounted lease payments 145 Less: imputed interest ( 28 ) Less: lease incentives ( 1 ) Less: leases executed but not yet commenced ( 7 ) Total lease liabilities $ 109 NOTE 17: COMMITMENTS & CONTINGENCIES We are subject to contingencies arising in the ordinary course of our business, including contingencies related to legal, regulatory, non-income tax and other matters. We record an accrual for loss contingencies at management’s best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded. Amounts accrued for contingencies in the aggregate were $ 85 million and $ 190 million as of December 31, 2022 and 2023. In our opinion, an adequate accrual had been made as of each such date to provide for the probable losses of which we are aware and for which we can reasonably estimate an amount. Legal and Regulatory Matters The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increase in litigation and regulatory investigations involving the brokerage and cryptocurrency industries. Litigation has included and may in the future include class action suits that generally seek substantial and, in some cases, punitive damages. Federal and state 154 regulators, exchanges, or other SROs investigate issues related to regulatory compliance that may result in enforcement action. We are also subject to periodic regulatory audits and inspections that have in the past and could in the future lead to enforcement investigations or actions. We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings. The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation. With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of December 31, 2023 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims. Described below are certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend these matters vigorously. Best Execution, Payment for Order Flow, and Sources of Revenue Civil Litigation Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS. Five cases were consolidated in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in May 2021, alleging violations of Section 10(b) of the Exchange Act and various state law causes of action based on claims that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). Plaintiffs seek unspecified monetary damages, restitution, disgorgement, and other relief. In February 2022, the court granted Robinhood’s motion to dismiss the amended consolidated complaint without prejudice. In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss. In October 2022, the court granted Robinhood’s motion in part and denied it in part. In November 2022, Robinhood filed a motion for judgment on the pleadings, which the court denied in January 2023. State Regulatory Matters Certain state regulatory authorities have conducted investigations regarding RHF’s options trading and related customer communications and displays, options and margin trading approval process, the March 2020 Outages, and customer support prior to June 2020. RHF reached settlements with several state regulators including the Alabama Securities Commission, the California Department of Financial Protection and Innovation, the Colorado Division of Securities, the Delaware Department of Justice - Investor Protection Unit, the New Jersey Bureau of Securities, the South Dakota Division of Insurance, and the Texas State Securities Board, under which we paid a monetary penalty of $ 200,000 per state. RHF has reached additional state settlements and anticipates reaching more as part of a multi-state settlement related to these issues totaling up to approximately $ 10 million. FINRA previously conducted an investigation and reached a settlement with RHF regarding many of these issues. The New York Attorney General is conducting an investigation into brokerage execution quality. We are cooperating with this investigation. 155 Brokerage Enforcement Matters FINRA Enforcement staff are conducting investigations related to, among other things, RHS’s reporting of fractional share trades, as applicable, to a Trade Reporting Facility, the Over-the-Counter Reporting Facility, the Order Audit Trail System, and the Consolidated Audit Trail; RHS’s reporting of accounts holding significant options positions to the Large Option Position Report system; processing of certain requests for transfers of assets from Robinhood through the Automated Customer Account Transfer System; responses to Electronic Blue Sheets requests from FINRA; the Q4 2022 Processing Error; RHF’s and RHS’s compliance with FINRA registration requirements for member personnel; marketing involving social media influencers and affiliates; collaring the prices of certain trade orders; RHS’s and RHF’s compliance with best execution obligations and RHS’s compliance with FINRA Rule 6190; RHS’s and RHF’s compliance with regulations governing the delivery of required documents; and matters related to RHS’s and RHF’s supervision of technology. We are cooperating with these investigations. RHS has received requests from the SEC Division of Enforcement regarding its compliance with Regulation SHO’s trade reporting and other requirements in connection with securities lending, fractional share trading, the Q4 2022 Processing Error, and responses to Electronic Blue Sheets requests, and previously received similar requests from FINRA examinations staff. RHS and RHF have also received requests from the SEC Division of Enforcement and FINRA Enforcement staff related to RHS’s and RHF’s compliance with recordkeeping requirements, including requests regarding off-channel communications. We are cooperating with these investigations. Robinhood Crypto Matters RHC has received subpoenas from the California Attorney General’s Office seeking information about, among other things, RHC’s trading platform, business and operations, custody of customer assets, customer disclosures, and coin listings. RHC also has received investigative subpoenas from the SEC regarding, among other topics, RHC’s cryptocurrency listings, custody of cryptocurrencies, and platform operations. RHC is cooperating with these investigations. Account Takeovers, Anti-Money Laundering, and Cybersecurity Matters FINRA Enforcement and the SEC Division of Enforcement are investigating account takeovers (i.e., circumstances under which an unauthorized actor successfully logs into a customer account), as well as anti-money laundering compliance and cybersecurity issues, including the November 2021 Data Security Incident. The SEC’s Division of Enforcement is also investigating issues related to compliance with the Electronic Funds Transfer Act. We are cooperating with these investigations. Massachusetts Securities Division Matter In December 2020, the MSD filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020. Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws. MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF’s license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers’ accounts to other broker-dealers. Additionally, revocation of RHF’s 156 Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF’s registration by other state regulators. A revocation of RHF’s license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs. In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In September 2021, the parties filed cross-motions for partial judgment on the pleadings. In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful. In August 2023, the Massachusetts Supreme Judicial Court reversed the decision of the Massachusetts Superior Court. In January 2024, we settled this matter with the MSD related to supervision of certain product features and marketing strategies, the March 2020 Outages, and our options trading approval process, as well as the November 2021 Data Security Incident, under which we paid a $ 7.5 million fine and agreed to engage an independent consultant to review, among other things, implementation of the FINRA independent’s recommendations, policies and procedures regarding certain application features, and cybersecurity measures. RHF has dismissed its state court action. Text Message Litigation In August 2021, Cooper Moore filed a putative class action against RHF alleging that RHF initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington state law. The complaint seeks unspecified total statutory and treble monetary damages, injunctive relief, and attorneys’ fees and costs. The case is currently pending in the U.S. District Court for the Western District of Washington. RHF filed a motion to dismiss the complaint. In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss. In August 2022, the court denied RHF ’ s motion to dismiss. The parties have reached a settlement in principle to resolve this matter and the court has granted preliminary approval. Early 2021 Trading Restrictions Matters Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the “Early 2021 Trading Restrictions”). A number of individual and putative class actions related to the Early 2021 Trading Restrictions were filed against RHM, RHF, and RHS, among others, in various federal and state courts. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida (the “MDL”). The court subsequently divided plaintiffs’ claims against Robinhood into three tranches: federal antitrust claims, federal securities law claims, and state law claims. In July 2021, plaintiffs filed consolidated complaints seeking unspecified monetary damages in connection with the federal antitrust and state law tranches. The federal antitrust complaint asserted one violation of Section 1 of the Sherman Act; the state law complaint asserted negligence and breach of fiduciary duty claims. In August 2021, we moved to dismiss both of these complaints. In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care. In January 2022, the court dismissed the state law complaint with prejudice. In August 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the district court’s order. 157 In November 2021, the court dismissed the federal antitrust complaint without prejudice. In January 2022, plaintiffs filed an amended complaint in connection with the federal antitrust tranche and Robinhood moved to dismiss the amended complaint. In May 2022, the court dismissed the federal antitrust complaint with prejudice. Plaintiffs have appealed the court’s order to the United States Court of Appeals for the Eleventh Circuit. In November 2021, plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act. The complaint seeks unspecified monetary damages, costs and expenses, and other relief. In January 2022, we moved to dismiss the federal securities law complaint. In August 2022, the court granted in part and denied in part Robinhood’s motion to dismiss. In November 2023, the court denied Plaintiffs’ motion for class certification without prejudice. RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), DOJ, Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev's cell phone. There have been several inquiries based on specific customer complaints. We have also received requests from the SEC Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021. We are cooperating with these investigations. FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally. In January 2023, approximately 4,700 jointly represented customers filed a statement of claim with FINRA to initiate arbitration of individual claims against RHF and RHS arising out of the Early 2021 Trading Restrictions. A motion to sever the arbitration was granted in July 2023 and any customer seeking to proceed with a claim is required to file a separate individual arbitration. IPO Litigation In December 2021, Philip Golubowski filed a putative class action in the U.S. District Court for the Northern District of California against RHM, the officers and directors who signed Robinhood’s initial public offering (“IPO”) offering documents, and Robinhood’s IPO underwriters. Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act of 1933, as amended (the “Securities Act”). Plaintiff seeks unspecified compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs. In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter, and in March 2022, the court appointed lead plaintiffs. In June 2022, plaintiffs filed an amended complaint. In August 2022, Robinhood filed a motion to dismiss the complaint. In February 2023, the court granted Robinhood’s motion without prejudice. In March 2023, plaintiffs filed a second amended complaint. In January 2024, the court granted Robinhood’s motion to dismiss the second amended complaint without leave to amend. In February 2024, plaintiffs filed a notice of appeal to the 9th Circuit. In January 2022, Robert Zito filed a complaint derivatively on behalf of Robinhood against Robinhood’s directors at the time of its IPO in the U.S. District Court for the District of Delaware. Plaintiff alleges breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act. Plaintiff’s claims are based on allegations of false or misleading statements in Robinhood’s IPO offering documents, and plaintiff seeks an award of unspecified damages and restitution to the Company, injunctive relief, and an award for attorney’s fees and costs. In March 2022, the district 158 court entered a stay of this litigation pending resolution of Robinhood’s motion to dismiss in the Golubowski securities action discussed above. In August 2022, a shareholder sent a letter to the RHM board of directors demanding, among other things, that the board of directors pursue causes of action on behalf of the Company related to allegations of misconduct in connection with the Early 2021 Trading Restrictions, Robinhood’s IPO offering documents, and the November 2021 Data Security Incident. The board of directors has formed a Demand Review Committee that is reviewing the demand. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None.