What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-27 · 229 added, 197 removed, 325 unchanged (57% of the section changed)

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Factors that could cause such differences are discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

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

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

Key Performance Metrics

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

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

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

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

• Funded Customers:

We define a Funded Customer as a unique person who has at least one account with a Robinhood entity and, within the past 45 calendar days (a) had an account balance that was greater than zero (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) or (b) completed a transaction using any such account.

Individuals who share a funded joint investing account (which launched in July 2024) are each considered to be a Funded Customer.

• Assets Under Custody (“AUC”) :

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

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

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

• Net Deposits:

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

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

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

• Growth Rate with respect to Net Deposits:

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

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

We define Net Deposits as all cash deposits and asset transfers from customers, as well as dividends, interest, and cash or assets earned in connection with Company promotions (such as account transfer and retirement match incentives and free stock bonuses) received by customers, net of reversals, customer cash withdrawals, margin interest, Gold subscription fees, and assets transferred off of our platforms for a stated period.

Prior to the second quarter of 2024, Net Deposits did not include inflows from cash or assets earned in connection with Company promotions and prior to January 2024, Net Deposits did not include inflows from dividends and interest or outflows from Robinhood Gold subscription fees and margin interest, although we have not restated amounts in prior periods as the impact to those figures was immaterial.

• Average Revenue Per User (“ARPU”) :

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

• Monthly Active Users (“MAU”) :

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

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

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

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

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

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

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

• Gold Subscribers:

We define a Gold Subscriber as a unique person who has at least one account with a Robinhood entity and who, as of the end of the relevant period (a) is subscribed to Robinhood Gold and (b) has made at least one Robinhood Gold subscription fee payment.

Glossary Terms

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

• Churned Customer:

• Cash Sweep :

We define Cash Sweep as the period-end total amount of participating users’ uninvested brokerage cash that has been automatically “swept” or moved from their brokerage accounts into deposits for their benefit at a network of program banks.

This is an off-balance-sheet amount.

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

• Churned Customers:

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

Negative balances typically result from Fraudulent Deposit Transactions (which occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount) and unauthorized debit card use, and less often, from margin loans.

Negative balances typically result from Fraudulent Deposit Transactions (which occur when users initiate deposits into their accounts, make trades on our platforms using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount) and unauthorized debit card use, and less often, from margin loans.

• Growth Rate with respect to Net Deposits:

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

• Investment Accounts:

We define an Investment Account as a funded individual brokerage account, a funded joint investing account, or a funded individual retirement account (“IRA”).

As of December 31, 2024 , a Funded Customer can have up to four Investment Accounts - individual brokerage account, joint investing account (which launched in July 2024), traditional IRA, and Roth IRA.

• Margin Book:

We define Margin Book as our period-end aggregate outstanding margin loan balances receivable (i.e., the period-end total amount we are owed by customers on loans made for the purchase of securities, supported by a pledge of assets in their margin-enabled brokerage accounts).

• New Funded Customer:

• New Funded Customers:

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

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

• Resurrected Customer:

• Resurrected Customers:

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

With respect to the year ended December 31, 2024, as compared to the year ended December 31, 2023:

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

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

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

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

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

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

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

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

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

• total net revenues increased 58% to $2.95 billion compared to $1.87 billion;

• net income was $1.41 billion, or diluted earnings per share (“EPS”) of $1.56, compared to a net loss of $0.54 billion, or diluted EPS of -$0.61.

Net income included the impact of:

◦ a $369 million deferred tax benefit, primarily from the release of the Company's valuation allowance on most of its net deferred tax assets;

◦ a $55 million benefit due to a reversal of an accrual as part of a regulatory settlement.

◦ The year ended December 31, 2023 included an expense of $485 million from the 2021 Founders Award Cancellation (the “2021 Founders Award Cancellation”);

• total operating expenses decreased 21% to $1.90 billion compared to $2.40 billion;

◦ SBC expense decreased 65% to $304 million compared to $871 million;

• Adjusted EBITDA (non-GAAP) increased 167% to $1.43 billion compared to $0.54 billion ;

• Funded Customers increased 8% to 25.2 million compared to 23.4 million and Investment Accounts increased by 10% to 26.2 million compared to 23.8 million;

• AUC increased 88% to $192.9 billion compared to $102.6 billion, driven by continued Net Deposits and higher equity and cryptocurrency valuations;

• Net Deposits were $50.5 billion, which translates to a growth rate of 49% relative to AUC at the end of the fourth quarter of 2023, compared to $17.1 billion, which translates to a growth rate of 27% relative to AUC at the end of the fourth quarter of 2022;

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

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

• ARPU increased 53% to $122 compared to $80;

• Gold Subscribers increased 86% to 2.64 million compared to 1.42 million.

Adjusted EBITDA is a non-GAAP financial measure.

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

Recent Developments

Pending Business Acquisitions

In June 2024, we entered into an agreement to acquire all outstanding equity of Bitstamp, a globally-scaled cryptocurrency exchange with retail and institutional customers, for an aggregate consideration of approximately $200 million, subject to customary purchase price adjustments and payable in cash.

In November 2024, we entered into an agreement to acquire all outstanding equity of TradePMR, a custodial and portfolio management platform for registered investment advisors, for cash consideration of approximately $180 million and post-close equity compensation of approximately $120 million, for aggregate consideration and post-close compensation of approximately $300 million.

The purchase consideration is subject to customary purchase price adjustments.

Both pending acquisitions are subject to customary closing conditions, including regulatory approvals, and are expected to close in the first half of 2025.

Key Performance Metrics

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Growth Rate with respect to Net Deposits 19% 27% 49%

43 % 19 % 27 %

ARPU (in dollars)

$ 60 $ 80 $ 122

MAU (in millions)

Gold Subscribers (in millions)

1.14 1.42 2.64

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Cryptocurrencies 8.4 14.7 35.2

Options 1.5 0.3 0.6

Options and futures (2)

Cash held by Customers 10.8 21.3 33.3

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

Receivables from Customers (primarily margin balances) (3.1) (3.4) (8.0)

AUC $ 62.2 $ 102.6 $ 192.9

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(2) Futures consists of futures, options on futures, and swaps, including event contracts, which we launched during the fourth quarter of 2024.

The following table describes the changes within AUC:

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

Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii)

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

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

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

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

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items are unpredictable, are not driven by core results of operations, and render comparisons with prior periods and competitors less meaningful.

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

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

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

Moreover, Adjusted EBITDA is a key measurement used by

our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.

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

Year Ended December 31,

(in millions) 2022 2023 2024

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

Net income (loss) $ (1,028) $ (541) $ 1,411

Interest expenses related to credit facilities 24 23 24

Provision for income taxes 2 1 8

Provision for (benefit from) income taxes 1 8 (347)

Depreciation and amortization 61 71 77

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SBC Excluding 2021 Founders Award Cancellation (1)

1,572 654 386

Significant legal and tax settlements and reserves (2)

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Impairment of Ziglu equity securities (5)

Change in fair value of convertible notes and warrant liability

Adjusted EBITDA (non-GAAP) $ (94) $ 536 $ 1,429

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

(2) For the year ended December 31, 2024, significant legal and tax settlements and reserves included a $55 million benefit due to a reversal of an accrual as part of a regulatory settlement.

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

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

(3) $57 million for the year ended December 31, 2022 due to delays in notification from third parties and process failures within Robinhood’s brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmos Health, Inc.

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

(4) Q4 2022 Processing Error was due to delays in notification from third parties and process failures within Robinhood’s brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmos Health, Inc.

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

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

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

With respect to cryptocurrencies trading, we receive “Transaction Rebates” when routing to market makers.

In the case of options, our fee is on a per contract basis based on the underlying security.

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

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

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

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

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

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Net interest revenues consist of interest revenues less interest expenses.

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

We incur interest expenses in connection with our revolving credit facilities and borrowings by the Credit Card Funding Trust.

Other Revenues

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

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

Robinhood Match Incentives

We offer a match incentive on customers’ eligible contributions to their retirement accounts and, from time to time, an incentive on other transfers of assets to our platform.

All match incentives are recognized as a reduction to revenue when earned.

The matches are allocated to certain revenue categories on a proportional basis.

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.

Brokerage and transaction costs primarily consist of cash compensation and employee benefits, SBC, as well as allocated overhead for employees engaged in clearing and brokerage functions, market data expenses, expenses related to our instant withdrawals feature, fees paid to centralized clearinghouses and regulatory fees, customer statement-related costs, and other brokerage and transaction costs such as costs related to our Cash Sweep and securities lending programs.

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

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

Operations costs also include our provision for credit losses and fraud primarily in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and credit card expected losses.

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

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

Technology and development costs primarily consist of costs incurred to support and improve our platforms and develop new products, costs associated with computer hardware and software, including amortization of internally developed software, and compensation and benefits, including SBC, for engineering, data science, and design personnel, as well as allocated overhead.

Operations costs consist of customer service related expenses, including cash compensation and employee benefits, SBC, 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).

Provision for Credit Losses

The provision for credit losses consists of expected credit losses related to credit card and brokerage products.

For credit card related, we have two types of provision for credit losses:

i) one related to off-balance sheet credit card principal receivables, and ii) one related to on-balance sheet purchased credit card and interest receivables.

Brokerage-related provision for credit losses primarily relates to unsecured balances of receivables from users due to Fraudulent Deposit Transactions and losses on margin lending.

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

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.

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

General and administrative costs also include legal expenses, other professional fees, business insurance, and real estate charges including impairments on our operating leases and leasehold improvements, lease terminations, and settlements and penalties.

Results of Operations

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Operations 249 116 112

Provision for credit losses 36 43 76

Marketing 103 122 272

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Total operating expenses 2,369 2,401 1,897

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

Other income (expense), net (16) 3 10

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

Provision for income taxes 2 1 8

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

Income (loss) before income taxes (1,027) (533) 1,064

Provision for (benefit from) income taxes 1 8 (347)

Net income (loss) $ (1,028) $ (541) $ 1,411

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$ 654 $ 871 $ 304

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

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

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

Comparison of the Years Ended December 31, 2024 and 2023

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Total transaction-based revenues 60 % 42 % 56 %

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

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

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

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

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

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

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

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

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

Transaction-based revenues increased by $862 million primarily driven by increases of $491 million in cryptocurrencies, $255 million in options, and $73 million in equities.

Cryptocurrencies revenues increased as a result of a 77% increase in the average Notional Trading Volume traded per trader and a 72% increase in the number of users placing cryptocurrency trades.

In addition, cryptocurrencies revenues benefited from a higher rebate rate from crypto market makers (a rebate increase was effective in May 2024).

The increase was offset by $19 million of match incentives paid to our customers (Refer to Note 1 - Description of Business and Summary of Significant Accounting Policies to our consolidated financial statements in this Annual Report for more information).

O ptions revenues increased due to a 29% increase in the number of users placing option trades and a 43% increase in Options Contracts Traded.

In addition, we experienced higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates.

The increase was offset by $43 million of match incentives paid to our customers .

Equities revenues increased as a result of a 45% increase in the average Notional Trading Volume traded per trader and a 23% increase in the number of users placing equity trades.

The increase was partially offset by lower equity rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates.

The increase was offset by $10 million of match incentives paid to our customers.

Net Interest Revenues

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Net interest revenues:

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

Margin interest $ 177 $ 243 $ 319 37 % 31 %

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

Interest on segregated cash, cash equivalents, securities, and deposits 57 210 261 268 % 24 %

Interest on corporate cash and investments 103 288 256 180 % (11) %

Cash Sweep 22 123 179 459 % 46 %

Securities lending, net 89 79 94 (11) % 19 %

Credit card, net — — 9 NM NM

Credit card, net — 9 24 NM 167 %

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

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Net interest revenues as a % of total net revenues:

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

Margin interest 13% 13% 11%

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

Interest on corporate cash and investments 7% 16% 9%

Interest on segregated cash, cash equivalents, securities, and deposits 4% 11% 9%

Cash Sweep 2% 7% 6%

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Total net interest revenues 31% 50% 38%

Net interest revenues increased by $505 million.

The increase was primarily driven by growth in interest-earning assets balances and the higher short-term interest rate environment due to the rise in the federal funds rate, which positively impacted the interest rate we receive on these assets.

Net interest revenues increased by $180 million, driven by growth in most of our interest-earning asset balances except for corporate cash and investments.

Between September 2024 and the end of 2024, the Federal Reserve lowered interest rates by a total of 100 basis points, which negatively impacted our net interest revenues and adversely affected our customers returns on cash deposits.

We anticipate any potential future rate cuts by the Federal Reserve will have a similar impact.

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

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

(off-balance sheet) (2)

Cash Sweep (off-balance sheet)

Credit card, net (2)

(off-balance sheet) (3)

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

Total interest-earning assets Securities lending, net Interest expenses related to credit facilities (5)

Total net interest revenues

Year ended December 31, 2024

December 31, 2024 $ 7,909 $ 9,943 $ 26,064 $ 391 $ 44,307

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

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

5,082 10,252 21,352 261 36,947

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Annual yield (4)

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

6.28 % 5.04 % 0.84 % 9.20 % 2.81 % 3.00 %

Year ended December 31, 2023

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

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

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

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

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

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

Revenue (expense) 243 498 123 9 $ 873 $ 79 $ (23) $ 929

Annual yield (4)

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_______________

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

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

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

(3) Credit card, net is an off-balance sheet amount, which represents customer principal amounts funded by Coastal Bank under the Program Agreement.

Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net intere st revenue.

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

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

(2) Credit card, net consists of i) an off-balance sheet amount representing customer principal amounts funded by Coastal Bank under the Program Agreement.

ii) an on-balance sheet amount representing purchased credit card receivables by the Credit Card Funding Trust.

Robinhood Credit collects interest from customers that carry balances and pays interest on the amount funded through the Credit Card Funding Trust, with the difference in those amounts resulting in net interest revenues.

As of December 31, 2024, $202 million was off-balance sheet and $189 million was on-balance sh eet.

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

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

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

(5) Includes interest expenses related to our revolving credit facilities and the Trust borrowing;

interest expense related to the Credit Card Funding Trust is included in the credit card, net interest yield calculation.

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

Other Revenues

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Other revenues:

Gold subscription revenues

$ 68 $ 75 $ 109 10% 45%

Proxy revenues

44 61 60 39% (2)%

8 15 26 88% 73%

Total other revenues $ 120 $ 151 $ 195 26% 29%

Other revenues as a % of total net revenues:

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

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

Gold subscription revenues

Proxy revenues

Other 1% 1% 1%

Total other revenues

Other revenues increased by $44 million primarily driven by increased Gold subscription revenues of $34 million due to an increase in Gold Subscribers.

Additionally, other revenues increased $11 million due to advertising revenue from Sherwood Media, which was launched during the second quarter of 2023.

Operating Expenses

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Operations 249 116 112 (53) % (3) %

Provision for credit losses

36 43 76 19 % 77 %

Marketing 103 122 272 18 % 123 %

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Operations 18 % 6 % 4 %

Provision for credit losses

Marketing 8 % 7 % 9 %

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(in millions) 2022 2023 2024 2022 to 2023

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

Employee compensation, benefits, and overhead, excluding SBC $ 20 $ 31 $ 36 55 % 16 %

Market data expenses 26 23 26 (12) % 13 %

Instant withdrawals 1 7 20 (12) % 186 %

Broker-dealer transaction expenses 31 32 16 3 % (50) %

Customer statements 8 15 15 88 % — %

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Total $ 179 $ 146 $ 164 (18) % 12 %

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

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

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

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

Brokerage and transaction costs increased by $18 million primarily driven by a $13 million increase in expenses related to our instant withdrawals feature due to higher customer activities.

Other brokerage and transaction costs increased $11 million also primarily driven by higher customer activities in our Cash Sweep and securities lending programs.

Additionally, employee compensation, benefits, and overhead increased by $5 million due to increased average headcount to continue support of our brokerage business.

These increases were partially offset by a decrease of $16 million in broker-dealer transaction expenses mainly due to passing option trading fees onto users starting in the fourth quarter of 2023.

Technology and Development

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Total $ 878 $ 805 $ 818 (8) % 2 %

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

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

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

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

Technology and development costs increased by $13 million primarily due to increases of $40 million in cloud infrastructure expenses and $9 million in software and tools to meet increased capacity requirements for our platforms to support higher trading volumes.

These increases were partially offset by decreases of $21 million in employee, compensation, benefits, and overhead, and of $19 million in SBC due to decreased average headcount as part of our efforts to improve efficiency and operating costs.

Year Ended December 31,

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Employee compensation, benefits, and overhead, excluding SBC $ 144 $ 75 $ 72 (48) % (4) %

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

Customer experience 78 19 18 (76) % (5) %

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Total $ 249 $ 116 $ 112 (53) % (3) %

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

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

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

Further, provision for credit losses and fraud losses increased by $7 million primarily due to a $19 million provision for credit losses related to Robinhood Credit (Refer to Note 7 - Allowance for Credit Losses and Credit Card Expected Loss Liability to our consolidated financial statements in this Annual Report for more information), partially offset by a $13 million decrease in expenses related to Fraudulent Deposit Transactions as we continued to strengthen our process to identify high risk users and prevent these transactions on our platform.

Operations costs decreased by $4 million primarily due to a decrease of $3 million in employee compensation, benefits, and overhead due to decreased average headcount as part of our efforts to improve efficiency and operating costs.

Provision for credit losses

Year Ended December 31,

(in millions) 2022 2023 2024 2022 to 2023

Provision for credit losses - credit card related $ — $ 21 $ 55 NM 162 %

Provision for credit losses - brokerage related 36 22 21 (39) % (5) %

Total $ 36 $ 43 $ 76 19% 77 %

Provision for credit losses cost increased by $33 million primarily due to a $34 million increase related to our credit card program that was launched during the third quarter of 2023.

Year Ended December 31,

(in millions) 2022 2023 2024 2022 to 2023

Digital marketing $ 21 $ 39 $ 119 86 % 205 %

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

Brand marketing 14 21 45 50 % 114 %

Employee compensation, benefits, and overhead, excluding SBC 26 22 33 (15) % 50 %

Marketing incentives 11 7 16 (36) % 129 %

Creative services 14 10 12 (29) % 20 %

SBC 4 5 8 25 % 60 %

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Total $ 103 $ 122 $ 272 18 % 123 %

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

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

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

Marketing costs increased by $150 million primarily due to higher expenses in digital marketing of $80 million, brand marketing of $24 million, and other marketing of $21 million, as we increased our investments in paid marketing channels and other marketing initiatives to promote our brand, products, and services.

Additionally, employee compensation, benefits, and overhead increased by $11 million due to increased average headcount to support increased marketing initiatives.

General and Administrative

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(in millions) 2022 2023 2024 2022 to 2023

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

Employee compensation, benefits, and overhead, excluding SBC $ 239 $ 216 $ 235 (10) % 9 %

SBC excluding 2021 Founders Award Cancellation 425 155 88 (64) % (43) %

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

Legal expenses 76 96 71 26 % (26) %

Other professional fees 53 41 47 (23) % 15 %

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

Real estate related charges 45 5 2 (89) % (60) %

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

Settlements and penalties 24 126 (29) 425 % NM

Other 62 45 41 (27) % (9) %

Total $ 924 $ 1,169 $ 455 27 % (61) %

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

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

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

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

Change in Fair Value of Convertible Notes and Warrant Liability

Year Ended December 31,

(in millions) 2021 2022 2023 2021 to 2022

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

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

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

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

Provision for Income Taxes

General and administrative costs decreased by $714 million primarily due to a decrease of $485 million related to 2021 Founders Award Cancellation which occurred in 2023.

In addition, settlements and penalties expenses decreased $155 million primarily due to a $55 million reversal of an accrual as part of a regulatory settlement.

Provision for (Benefit from) Income Taxes

Year Ended December 31,

(in millions) 2022 2023 2024 2022 to 2023

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

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

federal and state deferred tax assets.

Provision for (benefit from) income taxes $ 1 $ 8 $ (347) 700 % NM

Benefit from income taxes increased by $355 million primarily due to a $369 million deferred tax benefit, primarily from the valuation allowance release on the U.S.

federal and certain state deferred tax assets.

Refer to Note 9 - Income Taxes to our consolidated financial statements in this Annual Report for more information on the valuation allowance release.

Liquidity and Capital Resources

Sources and Uses of Funds

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

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

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

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

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

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

Liquid Assets

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

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

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

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

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

Revolving Lines of Credit

As of December 31, 2023, we had a total of $2.80 billion in committed revolving lines of credit.

See Note 13 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report for further information.

As of December 31, 2024, we had cash and cash equivalents of $4.33 billion, held-to-maturity investments of $398 million, and stablecoin of $361 million.

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

Revolving Credit Facilities and Credit Card Funding Trust

As of December 31, 2024, we had a total of $3.00 billion in committed revolving credit facilities and a borrowing amount up to $300 million for our Credit Card Funding Trust.

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

The following table summarizes our short- and long-term material cash requirements for contractual obligations as of December 31, 2024:

Payments Due by Period

(in millions) Total 2024 2025-2026

(in millions) Total 2025-2026 2027-2028 2029 Thereafter

Operating lease commitments $ 189 $ 56 $ 50 $ 23 $ 60

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637 601 35 1 —

Robinhood match incentives commitments (2)

142 142 — — —

Credit Card Funding Trust borrowing principal and interest 131 131 — — —

Total $ 1,099 $ 930 $ 85 $ 24 $ 60

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

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

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

These primarily relate to commitments for cloud infrastructure and data services and business insurance.

(2) Robinhood match incentives commitments represent non-cancelable future match payments on eligible cash deposits made by Robinhood Gold users .

The future match payments are forfeited if deposits are not held on the platform during the specific earning period.

In addition to lease and purchase commitments, we have two committed financing agreements:

one with a contractual term of 30 days and a daily minimum commitment of $25 million and another with a contractual term of 21 days with a daily minimum commitment of $35 million.

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

Repurchase Program

On May 28, 2024, we announced that our board of directors approved the Repurchase Program authorizing us to repurchase up to $1 billion of our outstanding Class A common stock to return value to shareholders.

As of December 31, 2024, we had made share repurchases of $257 million under the Repurchase Program.

Refer to Part II, Item 5 and Note 13 - Common Stock and Stockholders' Equity to our consolidated financial statements in this Annual Report for more information about the Repurchase Program.

Regulatory Capital Requirements

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

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

Our FCM subsidiary (RHD) is subject to CFTC Regulation 1.17, administered by the CFTC and the NFA, which requires the maintenance of minimum net capital, as defined by CFTC Regulation 1.17.

Net capital and the related net capital requirements may fluctuate on a daily basis.

The table below summarizes the net capital, capital requirements and excess net capital of RHS, RHF, and RHD as of periods presented:

December 31, 2024

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RHF 248 0.25 248

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

As of December 31, 2024, these subsidiaries were in compliance with their respective regulatory capital requirements.

The following table summarizes our cash flow activities:

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Financing activities — (610) (345)

Cash provided by operating activities increased $2.03 billion.

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

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

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

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

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

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

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

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

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

Operating activities

Net cash provided by operating activities decreased $1.34 billion compared to the prior period primarily due to:

• a decrease of $567 million in non-cash items due to higher SBC expense in 2023 as a result of the 2021 Founders Award Cancellation;

• a decrease of $369 million in non-cash deferred income taxes, primarily from the release of the Company's valuation allowance on most of its net deferred tax assets in 2024;

• an increase of $4.29 billion in receivables from users driven by higher margin balance due to lower rates;

• an increase of $397 million in securities segregated under federal and other regulations driven by cash used to purchase of U.S treasury securities;

• an increase of $341 million in other current and non-current assets driven by cash used to purchase of stablecoin;

• increases of $2.20 billion in securities loaned and $1.96 billion in payable to users, both driven by increased customer activities.

Investing activities

Net cash used in investing activities decreased $434 million compared to the prior period primarily due to:

• an increase of $556 million from collection of purchased credit card receivables;

• an increase of $376 million from proceeds from maturities of held-to-maturity investments;

• an increase of $203 million driven by fewer purchases of held-to-maturity investments;

• an increase of $748 million driven by purchases of credit card receivables by the Credit Card Funding trust.

Financing activities

Net cash used in financing activities decreased $265 million compared to the prior period primarily due to:

• a decrease of $351 million from less common stock repurchases;

• an increase of $132 million from borrowings by the Credit Card Funding Trust to purchase credit card receivables;

• an increase of $232 million from taxes paid related to net share settlement of equity awards.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.

The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Based on this definition, we have identified the critical accounting estimates addressed below.

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

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

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

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

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

Allowance for Credit Losses and Credit Card Expected Loss Liability

Allowance for Credit Losses

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

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

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

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

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

The amount of the allowance for credit losses represents management’s estimate of expected credit losses from off-balance sheet credit exposure over the remaining expected life of credit card receivables originated under an arrangement with Coastal Bank.

Coastal Bank is the legal lender and originator, the party to which the customer has a credit-borrower relationship, and the legal owner of the credit card receivables.

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

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

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

Allowance for credit losses takes into account information from internal and external sources and market data, which is estimated based on outstanding customer credit card principal balances owned by Coastal Bank and anticipated future customer payment rates based on past portfolio performance, both of which are unobservable inputs.

The measurement of this liability using this method approximates fair value.

For additional information, refer to Note 12 - Financing Activities and Off-Balance Sheet Risk to our consolidated financial statements in this Annual Report.

Business Combinations

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

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

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

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

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

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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 operate and report financial information in one operating segment.

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.

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 reporting unit is less than its carrying amount, then additional impairment testing is not required.

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Share-based Compensation

Time-Based RSUs

We have granted RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”).

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

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

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

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

Market-Based RSUs

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.

time-based service conditions, performance-based conditions, and market-based conditions (“Market-Based RSUs”).

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

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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.

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

Common Stock Valuations

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

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

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

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

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

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

We determined 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.

Remaining SBC related to the Market-Based RSUs was fully recorded over the remaining derived requisite service period by December 31, 2024.

Previously recognized SBC related to the Market-Based RSUs will not be reversed even if the specified share prices are not achieved.

Recent Accounting Pronouncements

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis