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What changed in Robinhood Markets, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Robinhood Markets, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+605 added−545 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in Robinhood Markets, Inc.'s 2023 10-K

605 paragraphs added · 545 removed · 388 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

75 edited+71 added−29 removed72 unchanged
Biggest changeA customer can earn passive income on their stock portfolio once they give Robinhood permission to lend out any fully paid stocks in their portfolio. Robinhood does the work of finding interested borrowers and customers get paid a share of the interest revenue earned when their shares have been loaned to borrowers. • Cash Sweep .
Biggest changeRobinhood does the work of finding interested borrowers and customers get paid a share of the interest revenue earned when their shares have been loaned to borrowers. • Cash Sweep . Our cash sweep program (“Cash Sweep”) provides additional value to our brokerage customers by allowing them to earn interest on uninvested brokerage cash swept to our partner banks.
To enable our rapid product cycle, we’ve built a proprietary experiments infrastructure that enables us to test product changes through the build process and validate research hypotheses. The iterative, customer-centric product development approach that is so core to our success is enabled by this robust internal technology. Our Customers We are empowering a new generation of financial consumers.
To enable our rapid product development cycle, we’ve built a proprietary experiments infrastructure that enables us to test product changes through the build process and validate research hypotheses. The iterative, customer-centric product development approach that is so core to our success is enabled by this robust internal technology. Our Customers We are empowering a new generation of financial consumers.
We have an ongoing trademark, copyright and service mark registration program pursuant to which we register our brand names and solution names, taglines, designs, and logos in the United States and certain other jurisdictions to the extent we determine appropriate and cost-effective.
We have an ongoing trademark, service mark, and copyright registration program pursuant to which we register our brand names and solution names, taglines, designs, and logos in the United States and certain other jurisdictions to the extent we determine appropriate and cost-effective.
Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
Failure to comply with these requirements may result result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
We believe we have designed an elegant, intuitive investing interface that provides our customers with trading functionality and market information such as historical prices, valuation multiples, recent news, analyst ratings, and more. We also launched advanced charts, which gives customers customizable, quick, simple and in-depth analysis right in the app.
We believe we have designed an elegant, intuitive investing interface that provides our customers with trading functionality and market information such as historical prices, valuation multiples, recent news, analyst ratings, and more. We also launched advanced charts, which gives customers customizable, quick, simple and in-depth analysis right in the app. • Options Trading.
We remain focused on building the best products and ultimately aim to serve all of our customers’ financial needs. Brokerage • Investing . Our platform allows our customers to invest commission-free in U.S.-listed stocks and exchange traded funds (“ETFs”), as well as related options and American Depository Receipts.
We remain focused on building the best products and ultimately aim to serve all of our customers’ financial needs. Brokerage • Investing . Our platform allows our customers to invest commission-free in U.S.-listed stocks and exchange traded funds (“ETFs”), as well as related options and American Depository Receipts (“ADR”).
In the United Kingdom, the Financial Services and Markets Act 2000 is the primary regulation for all financial services in the UK. This law enacts the Financial Conduct Authority as the main AML regulator and provides guidelines for its duties.
In the United Kingdom, the Financial Services and Markets Act 2000 is the primary regulation for all financial services in the United Kingdom. This law enacts the Financial Conduct Authority as the main AML regulator and provides guidelines for its duties.
Federal, state and SROs, including the SEC and Financial Industry Regulatory Authority (“FINRA”), can and have in the past among other things investigate, censure or fine us, issue cease-and-desist orders or otherwise restrict our operations, require changes to our business practices, products or services, limit our acquisition activities or suspend or expel a broker-dealer or any of its officers or employees.
Federal, state and SROs, including the SEC and Financial Industry Regulatory Authority (“FINRA”), can, and in some cases have in the past, among other things, investigate, censure or fine us, issue cease-and-desist orders or otherwise restrict our operations, require changes to our business practices, products or services, limit our acquisition activities or suspend or expel a broker-dealer or any of its officers or employees.
We continuously monitor our compliance with AML rules and regulations and industry standards and implement policies, procedures and internal controls in light of current legal requirements. 17 Table of Contents Cryptocurrency Regulation As noted above, in the U.S., states primarily regulate RHC as a money transmitter. RHC also is registered with the Financial Crimes Enforcement Network.
We continuously monitor our compliance with AML rules and regulations and industry standards and implement policies, procedures and internal controls in light of current legal requirements. 18 Table of Contents Cryptocurrency Regulation As noted above, in the U.S., states primarily regulate RHC as a money transmitter. RHC also is registered with the Financial Crimes Enforcement Network.
The U.S. government, including Congress, the Federal Trade Commission and the Department of Commerce, has also announced that it is reviewing the need for greater regulation for the collection, use, and other processing of information concerning consumer behavior on the internet, including regulation aimed at restricting some targeted advertising practices, and numerous states, including but not limited to California through the California Consumer Privacy Act and California Privacy Rights Act of 2020, have enacted or are in the process of enacting state-level data privacy laws and regulations governing the collection, use, and other processing of state residents’ personal data.
The U.S. government, including Congress, the Federal Trade Commission and the Department of Commerce, has also announced that it is reviewing the need for greater regulation for the collection, use, and other processing of information concerning consumer behavior on the internet, including regulation aimed at restricting some targeted advertising practices, and numerous states, including but not limited to California through the California Consumer Privacy Act, as modified by the California Privacy Rights Act, have enacted or are in the process of enacting state-level data privacy laws and regulations governing the collection, use, and other processing of state residents’ personal data.
Any of our intellectual property rights might be successfully challenged, opposed, diluted, misappropriated, or circumvented by others or invalidated, narrowed in scope or held unenforceable through administrative process or litigation in the United States or in non-U.S. jurisdictions.
Any of our intellectual property rights might be successfully challenged, opposed, diluted, misappropriated, or circumvented by others or invalidated, narrowed in scope or held unenforceable through administrative process or litigation in the U.S. or in non-U.S. jurisdictions.
We believe that the key competitive factors in our market include: • product features, quality and functionality; • operating efficiency; • engineering talent; • brand recognition; • security and trust; • cloud-based architecture; • regulatory licenses; and • vertical integration.
We believe that the key competitive factors in our market include: • product innovation, including features, quality, and functionality; • operating efficiency; • engineering talent; • brand recognition; • security and trust; • cloud-based architecture; • regulatory licenses; and • vertical integration.
We also offer a variety of formal and informal development and skills-building opportunities to our managers. For example, we launched a leadership development experience for all managers to support them in their growth and development as leaders at Robinhood.
We also offer a variety of formal and informal development and skills-building opportunities to our managers. For example, we have a leadership development experience for all managers to support them in their growth and development as leaders at Robinhood.
Our self-clearing platform, order routing system, data platform, and other back-end infrastructure deliver the capabilities that allow our customers to focus on investing, saving and spending, while also enabling us to rapidly develop products that our customers love to use. 9 Table of Contents Some of our most critical technologies include: • Core Infrastructure and Data Platform.
Our self-clearing platform, order routing system, data platform, and other back-end infrastructure deliver the capabilities that allow our customers to focus on investing, saving and spending, while also enabling us to rapidly develop products that our customers love to use. Some of our most critical technologies include: • Core Infrastructure and Data Platform.
We take pride in the fact that we are expanding the market by welcoming new investors into the financial system and helping the next generation of investors build sound long-term investing, saving, and spending habits. Customer feedback is at the heart of product development at Robinhood.
We take pride in the fact that we are expanding the market by welcoming new investors into the financial system and helping the next generation of investors build sound long-term investing, saving, and spending habits. 11 Table of Contents Customer feedback is at the heart of product development at Robinhood.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and 18 Table of Contents earnings releases, and blogs as part of our investor relations website.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website.
By taking a fresh, people-centric approach and creating a delightful, engaging customer experience, we believe we have built a trusted, category-defining brand that has made investing socially relevant for the next generation. The relationship we have built with our customers has led many to want to talk about Robinhood and share their experience with their friends and family.
By taking a fresh, people-centric approach and creating a delightful, engaging customer experience, we believe we have built a trusted, category-defining brand that has made investing socially relevant for the next generation. 13 Table of Contents The relationship we have built with our customers has led many to want to talk about Robinhood and share their experience with their friends and family.
This service enables customers to build a diversified portfolio regardless of their budget and removes a barrier to investing in higher-priced stocks, thereby providing access to a much greater selection of equities with as little as $1. • Recurring Investments.
This service enables customers to build a diversified portfolio regardless of their budget and removes a barrier to investing in higher-priced stocks, thereby providing access to a much greater selection of equities with as little as $1. 6 Table of Contents • Recurring Investments.
Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on equity and cryptocurrency valuations and trading activity. Human Capital Our Employees and Culture Robinhood employees are at the heart of our company mission. As of December 31, 2022, we had approximately 2,300 full-time employees.
Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on equity and cryptocurrency valuations and trading activity. Human Capital Our Employees and Culture Robinhood employees are at the heart of our company mission. As of December 31, 2023, we had approximately 2,200 full-time employees.
Generally, a broker-dealer’s capital is its net worth plus qualified subordinated debt less deductions for certain types of asset. Rule 15c3-1 (the "Net Capital Rule") under the Securities Exchange Act of 1934, as amended (the "Exchange Act") specifies that at least a minimum part of a broker-dealer’s assets be maintained in a relatively liquid form.
Generally, a broker-dealer’s capital is its net worth plus qualified subordinated debt less deductions for certain types of asset. Rule 15c3-1 (the “Net Capital Rule”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) specifies that at least a minimum part of a broker-dealer’s assets be maintained in a relatively liquid form.
Over time, we intend to pursue a disciplined approach to international expansion and we will consider factors such as population size and demographics, legal and regulatory environments, and general investing attitudes in potential new markets prior to pursuing such expansion.
Over time, we intend to pursue a disciplined approach to international expansion and we will consider factors such as population size and demographics, legal and regulatory environments, and general investing attitudes and the competitive landscape in potential new markets prior to pursuing such expansion.
We provide resources, opportunities, and support for career and personal growth, as well as ongoing company initiatives to maintain strong employee engagement. Talent Acquisition and Development A critical foundation of our mission is building an inclusive environment that attracts and retains exceptional talent from diverse backgrounds and experiences.
We provide resources, opportunities, and support for career and personal growth, as well as ongoing company initiatives to maintain strong employee engagement. 14 Table of Contents Talent Acquisition and Development A critical foundation of our mission is building an inclusive environment that attracts, develops and retains exceptional talent from diverse backgrounds and experiences.
If one of our regulated entities fails to maintain its required net capital, it may be subject to suspension or revocation of its registration by regulatory authorities and suspension or expulsion by these regulators could lead to the entity’s liquidation. 16 Table of Contents Money-Transmitter Regulation As money transmitters, our subsidiaries Robinhood Crypto, LLC (“RHC”) and Robinhood Money, LLC (“RHY”) are subject to regulation, primarily at the state level.
If one of our regulated entities fails to maintain its required net capital, it may be subject to suspension or revocation of its registration by regulatory authorities and suspension or expulsion by these regulators could lead to the entity’s liquidation. 17 Table of Contents Money-Transmitter Regulation As money transmitters, our subsidiaries RHC and Robinhood Money, LLC (“RHY”) are subject to regulation, primarily at the state level.
We started with a revolutionary, bold brand and design in the Robinhood app which makes investing approachable for millions. We pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated, and we continue to build relationships with our customers by introducing new products that further expand access to the financial system.
We started with a revolutionary, bold brand and design in the Robinhood app which makes investing approachable for millions. We pioneered commission-free stock trading with no account minimums, which has since been adopted by the rest of the industry, and we continue to build relationships with our customers by introducing new products that further expand access to the financial system.
Subscribers can immediately access $5,000 to $50,000 of their deposit, depending on their brokerage account balance and status, instantly so they can invest that portion of their deposit right away. • Access to Investing on Margin at More Competitive Interest Rate .
Subscribers can immediately access $5,000 to $50,000 of their deposit, depending on their brokerage account balance and status, instantly so they can invest that portion of their deposit right away. 9 Table of Contents • Access to Investing on Margin at a More Competitive Interest Rate .
Robinhood decides whether to extend margin to each customer who applies for access based on information regarding customer activity, portfolio equity or net worth criteria, investment objectives, and investing experience reported by the customer. • Stock Lending.
Robinhood decides whether to extend margin to each customer who applies for access based on information regarding customer activity, portfolio equity or net worth criteria, investment objectives, and investing experience reported by the customer. • Fully-Paid Securities Lending.
Investors should routinely monitor those web pages, in addition to our press releases, SEC filings, and public conference calls and webcasts, as information posted on them could be deemed to be material information.
Investors should 21 Table of Contents routinely monitor those web pages, in addition to our press releases, SEC filings, and public conference calls and webcasts, as information posted on them could be deemed to be material information.
To help foster our high performance culture, all employees are eligible for variable incentive pay (bonus and/or equity) and all of our compensation programs are directly linked to either a) individual or b) individual and company performance. Our flexible benefits are designed to attract the best talent and to ensure Robinhood employees are supported.
To help foster our high performance culture, all employees are eligible for variable incentive pay (bonus and/or equity) and all of our compensation programs are directly linked to individual and company performance. Our comprehensive benefits are designed to attract the best talent and to ensure Robinhood employees are supported.
Anti-Money Laundering and Counter-Terrorist Financing We are subject to anti-money laundering ("AML") laws and counter-terrorist financing laws and regulations in the United States and the United Kingdom.
Anti-Money Laundering and Counter-Terrorist Financing We are subject to anti-money laundering (“AML”) laws and counter-terrorist financing laws and regulations in the United States, the United Kingdom and the EU.
We are the authorized user of a variety of social media handles, pages, and profiles that 15 Table of Contents reflect our primary brand. In addition, we have a suite of defensively registered domains. We believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand, and maintaining goodwill.
We are the authorized user of a variety of social media handles, pages, and profiles that reflect our primary brand. In addition, we have a suite of defensively registered domain names. We 16 Table of Contents believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand, combating fraud, and maintaining goodwill.
Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our trademark rights and to determine the validity and scope of the trademark rights of others.
Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our trademark rights and to determine the validity and scope of the trademark rights of others.
We use the "Overview" tab of our Investor Relations website (accessible at investors.robinhood.com/overview) and its blog, Under the Hood (accessible at blog.robinhood.com), as means of disclosing information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (“Reg. FD”).
We use the “Overview” tab of our Investor Relations website (accessible at investors.robinhood.com/overview) and its Newsroom (accessible at newsroom.aboutrobinhood.com), as means of disclosing information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure.
As of December 31, 2022, 60% of our employees are members of at least one of our Robinhood Employee Resource Groups (“ERGs”) which are voluntary, identity or experience-based groups led by members and allies who join together to support the creation of an inclusive workplace. Each ERG is sponsored by members of our leadership team.
As of December 31, 2023, 60% of our employees are members of at least one of our Robinhood Employee Resource Groups (“ERGs”) which are voluntary, identity or experience-based groups led by members and allies who join together to foster a more inclusive workplace. Each ERG is sponsored by members of our leadership team.
Exclusive in-app educational module available to all Robinhood Crypto customers via Robinhood Learn to teach customers the basics about cryptocurrency. Customers who complete the free courses will be eligible to receive rewards, which will be paid out in cryptocurrency. Our Technology The Robinhood mobile app is the core front-end pathway through which our customers engage with us.
Our exclusive in-app educational module available to all RHC and eligible RHEC customers via Robinhood Learn that educates customers on the basics about cryptocurrency. Customers who complete these courses will be eligible to receive rewards, which will be paid out in cryptocurrency. Our Technology The Robinhood mobile app is the core front-end pathway through which our customers engage with us.
Subject to approval upon meeting eligibility criteria set by Robinhood, users can invest on margin. This allows eligible customers to borrow a limited amount of funds from Robinhood at a floating interest rate, depending on account size and holdings, to 6 Table of Contents use as additional investing capital.
Subject to approval upon meeting eligibility criteria set by Robinhood, customers can invest on margin. This allows eligible customers to borrow a limited amount of funds from Robinhood at a floating interest rate to use as additional investing capital.
This engenders trust, creates enduring long-term relationships, and has resonated with our customers. Vertically Integrated Platform We design our own products and services and deliver them through a single, app-based platform supported by proprietary technology that has been cloud-based from the start. We are a licensed introducing broker-dealer, a licensed clearing broker-dealer, and a licensed money-transmitter.
Vertically Integrated Platform We design our own products and services and deliver them through a single, app-based platform supported by proprietary technology that has been cloud-based from the start. We are a licensed introducing broker-dealer, a licensed clearing broker-dealer, and a licensed money-transmitter.
Subscribers can earn a higher interest rate on the cash swept to participating banks compared to users who do not subscribe to Gold. • Bigger Instant Deposits.
Subscribers can earn a higher interest rate on the cash swept to participating banks compared to users who do not subscribe to Gold. • Higher Match on IRA Contribution. Subscribers can earn a higher percentage match of 3% on eligible contributions compared to users who do not subscribe to Gold. • Bigger Instant Deposits.
We are the registered owners of a variety of U.S. and international trademarks and domain names that include the primary brand “Robinhood,” including variations thereof, as well as brands for other Robinhood products and services, such as our Snacks newsletter and media content.
We are the registered owners of U.S. and international trademarks, trademark applications, and registrations and domain names in the U.S. and foreign countries that include the primary brand “Robinhood,” including variations thereof, as well as brands, tag lines, and other branding elements for other Robinhood products and services, such as our Snacks newsletter and media content.
Our monthly subscription service grants subscribers access to a number of premium features. After an initial 30-day free trial, subscribers pay a flat monthly rate. Our premium features offered to Gold subscribers include: • Higher Interest on Cash Sweep.
Neither RHC nor RHEC custody any Robinhood Wallet assets. Robinhood Gold Our subscription service grants subscribers access to a number of premium features. After an initial 30-day free trial, subscribers pay a flat recurring rate. Our premium features offered to Gold subscribers include: • Higher Interest on Cash Sweep.
We also offer our Directed Share Program service that gives an issuing company the chance to set aside a certain amount of shares, at the IPO price, for a specific group of people, such as employees, valued customers, vendors, or others who have a relationship with the issuer. • Instant Withdrawals .
We also offer our Directed Share Program service that gives an issuing company the chance to set aside a certain amount of shares, at the IPO price, for a specific group of people, such as employees, valued customers, vendors, or others who have a relationship with the issuer. 7 Table of Contents Robinhood Crypto United States We offer commission-free cryptocurrency trading in the United States through Robinhood Crypto, LLC (“RHC”).
We offer crypto recurring investments, allowing customers to automatically buy crypto, commission-free, on a schedule of their choice. This feature allows customers to build positions in their favorite cryptocurrencies over time. As an agent, we route all cryptocurrency transactions initiated by customers to third-party market makers. We never act as a counterparty to our users buy or sell transactions.
This feature allows customers to build positions in their favorite cryptocurrencies over time. As an agent, we route all cryptocurrency transactions initiated by customers to third-party market makers. We never act as a counterparty to our users’ buy or sell transactions.
Our plans to pursue international expansion are uncertain and dependent on a variety of external factors, including, among other things, our obtaining required regulatory approvals, authorizations, licenses and consents, our obtaining and protecting intellectual property rights abroad, and the identification of and successful entry into new business partnerships with 11 Table of Contents third-party service providers that would be necessary to provide our products and services in the relevant local market.
Our plans to pursue international expansion are dependent on a variety of external factors, including, among other things, our obtaining required regulatory approvals, authorizations, licenses and consents, our obtaining and protecting intellectual property rights abroad, and the identification of and successful entry into new business partnerships with third-party service providers that would be necessary to provide our products and services in the relevant local market. 12 Table of Contents Competition We believe that we are changing the consumption patterns for financial products and services and growing the market, but will continue to face competition from other firms including large legacy financial institutions, large technology companies, and smaller, new financial technology entrants.
We designed our platform to provide our customers with relevant, accessible information when they need it most. Being an investor involves following a regular cycle of events—news releases, earnings announcements, transaction executions—that creates a regular cadence of content and information. We use our platform, from push notifications to widgets, to provide seamless customized updates to our customers.
Being an investor involves following a regular cycle of events—news releases, earnings announcements, transaction executions—that creates a regular cadence of content and information. We use our platform, from push notifications to widgets, to provide seamless customized updates to our customers. This engenders trust, creates enduring long-term relationships, and has resonated with our customers.
The excitement around Robinhood demonstrates how our innovative approach to financial products has built deep, loyal customer relationships and positioned us well to continue attracting new people to our platform, and sharing new product experiences with our customers. Financial Services at Internet Scale Our people-centric approach has driven customer enthusiasm and engagement, resulting in rapid adoption of our products.
We believe the excitement around Robinhood demonstrates how our innovative approach to financial products has built deep, loyal customer relationships and positioned us well to continue attracting new people to our platform, and sharing new product experiences with our customers.
Our instant withdrawals feature enables eligible customers to withdraw money from their Robinhood accounts and instantly deposit it to their bank accounts or debit cards (typically around 10 minutes but sometimes longer depending on customers’ banks) with a fee. Instant withdrawals are also available to users of the Robinhood Cash Card and Spending Account.
Our instant withdrawals feature enables eligible customers to withdraw money from their Robinhood accounts and instantly deposit it to their bank accounts or debit cards with a fee. Instant withdrawals are also available to customers of the Robinhood Cash Card and Spending Account (each described below). • Robinhood Retirement.
We rely on trademarks, patents, copyrights, trade secrets, know-how and expertise, registered domain names, license agreements, intellectual property assignment agreements, confidentiality procedures and non-disclosure agreements to establish and protect our intellectual property and proprietary rights.
We rely on trademarks, patents, copyrights, trade secrets, know-how and expertise, registered domain names, intellectual property assignment agreements, confidentiality procedures, license agreements, and non-disclosure agreements to establish and protect our intellectual property and proprietary rights, although we do not consider any individual piece of our intellectual property to be material to our business, taken as a whole.
We believe the products on our roadmap will go a long way toward making that a reality. We believe our products can transform the relationship people have with the financial system.
We plan to create an ecosystem of financial products and services that will enable people across the world to become investors. We believe the products on our roadmap will go a long way toward making that a reality. We believe our products can transform the relationship people have with the financial system.
We are determined to keep evolving to better serve our customer base. Growing with Our Customers Many of our customers are just beginning their financial journeys. As our customers grow their wealth, we believe they will continue to expand their relationship with our platform, providing an increased opportunity to meet their growing financial needs.
We also plan to continue to innovate for our active traders to drive an even better experience. Increasing Wallet Share Many of our customers are just beginning their financial journeys. As our customers grow their wealth, we believe they will continue to expand their relationship with our platform, providing an increased opportunity to meet their growing financial needs.
Cash deposited at these banks is eligible for Federal Deposit Insurance Corporation (“FDIC”) insurance. • IPO Access and Directed Share Program . Our IPO Access feature enables our customers, with no account minimums, to buy shares in participating initial public offerings (“IPOs”) at the IPO price, before trading begins on public exchanges.
Our IPO Access feature enables our customers, with no account minimums, to buy shares in participating initial public offerings (“IPOs”) at the IPO price, before trading begins on public exchanges.
Subject to approval upon meeting eligibility criteria set by Robinhood, subscribers can invest on margin at a lower rate compared to users who do not subscribe to Gold. No interest is charged on the first $1,000 in margin borrowed by each Robinhood Gold subscriber. • Professional Research.
Subscribers can invest on margin at a lower rate compared to users who do not subscribe to Gold. No interest is charged on the first $1,000 in margin borrowed by each Robinhood Gold subscriber. • Professional Research. Subscribers have unlimited access to in-depth stock research reports provided by Morningstar. • Nasdaq Level II Market Data.
Robinhood ERGs include: Asianhood, Black Excellence (BEX), Divergent (for Neurodiversity), Latinhood, Parenthood, Rainbowhood, Sisterhood, Veterans at Robinhood, and Women in Tech. 14 Table of Contents In addition to providing a supportive, safe space for employees, a number of Robinhood ERGs support specific business objectives that include recruiting, employee engagement, marketing, and more.
In addition to providing a supportive, safe space for employees, a number of Robinhood ERGs support specific business objectives that include recruiting, employee engagement, marketing, and more.
This is the first step toward offering 24/7 trading and was one of the top-requested features of Robinhood advanced customers. 10 Table of Contents Our Growth Strategies We aim to serve our customers with existing product offerings, grow with our customers over time as they build their wealth, and create new and innovative products that are relevant to new and existing customers.
Our Growth Strategies We aim to serve our customers with existing product offerings, grow with our customers over time as they build their wealth, and create new and innovative products that are relevant to new and existing customers.
See “Risk Factors—Risks Related to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property and proprietary rights. Regulation U.S. and non-U.S. laws and regulations apply to many key aspects of our current business operations and future business plans.
Regulation U.S. and non-U.S. laws and regulations apply to many key aspects of our current business operations and future business plans.
Building on the success of Robinhood Snacks, we announced the formation of Sherwood Media, LLC, a new subsidiary that will be home for news and information about the markets, economics, business, technology, and the culture of money. • Crypto Learn and Earn .
Building on the success of Robinhood Snacks, we formed Sherwood Media, LLC, a subsidiary that is the home for news and information about the markets, economics, business, technology, and the culture of money. 10 Table of Contents Throughout 2023, we offered a suite of new editorial offerings, complementing Robinhood Snacks with more always-on news updates and analysis, original reporting and new newsletter offerings. • Crypto Learn and Earn .
From Robinhood’s inception, a vast majority of our growth has come directly from customers joining our platform organically or through the Robinhood Referral Program.
From Robinhood’s inception, a vast majority of our growth has come directly from customers joining our platform organically or through the Robinhood Referral Program (defined below). Since 2023, we have increased our investment in paid marketing channels to continuously promote our brand, products, and services.
Our vertically integrated platform has enabled us to rapidly introduce new products and services such as cryptocurrency trading, dividend reinvestment, fractional shares, recurring investments, IPO Access, instant withdrawals, Robinhood Cash Card, Robinhood Gold, and Robinhood Retirement, while also supporting our ability to quickly scale.
Our vertically integrated platform has enabled us to rapidly introduce new products and services such as 24 Hour Market, Robinhood Wallet and Robinhood Retirement while also supporting our ability to scale.
Our products are designed mobile-first, allowing us to offer attractive investing, spending, and saving experiences as more people shift their daily financial services activities to the palm of their hands. Category-Defining Brand We believe Robinhood today is a symbol of retail investing and finance in America.
In addition, we continue to work to deliver an intuitive product experience including developing and implementing designs to celebrate investing milestones of our customers in a responsible way. Our products are designed mobile-first, allowing us to offer attractive investing, spending, and saving experiences as more people shift their daily financial services activities to the palm of their hands.
We seek to foster a high performance culture that is open and honest. During our weekly “all-hands” meetings, every employee has the opportunity to ask a question of our senior leadership.
We seek to foster a high-performance culture that elevates and embraces all voices. During our weekly “all-hands” meetings, every employee has the opportunity to ask a question of our senior leadership. To ensure we provide a rich experience for our employees, we conduct ongoing employee surveys to build on the competencies that are important for our future success.
We are passionate about operating Robinhood in a way that aligns with customer interests, applicable regulations, and with our own mission to democratize finance for all. We plan to create an ecosystem of financial products and services that will enable people across the world to become investors.
Our Products And Features We understand that millions of our customers have used Robinhood to enter the financial markets for the first time, and we take our responsibility to them seriously. We are passionate about operating Robinhood in a way that aligns with customer interests, applicable regulations, and with our own mission to democratize finance for all.
These regular check-ins with employees provide critical input for company decisions on how to best improve productivity, inclusion, and retention. Inclusivity is core to our culture and we seek to create an environment where all viewpoints, including opposing ones, are welcome.
Inclusivity is core to our culture and we seek to create an environment where all viewpoints, including opposing ones, are welcome.
We offer customer IRA instant deposits up to $1,000, which allows customers to immediately start investing. Customers can also get a custom recommended portfolio, build their own, or both, all commission-free. Education We believe that offering educational resources is critical to advancing our mission.
Customers’ eligible contributions to their retirement account can earn a percentage match by Robinhood (“Robinhood Retirement Match”), subject to a five-year holding period. We offer customer IRA instant deposits up to $1,000, which allows customers to immediately start investing. Customers can also get a custom recommended portfolio, build their own, or do both, all commission-free. • 24 Hour Market .
Our cash sweep program (“Cash Sweep”) provides additional value to our brokerage customers by allowing them to earn interest on uninvested brokerage cash swept to our partner banks. The interest compounds daily and is then paid out by the partner banks monthly, with customers able to track how much they’ve earned directly within the app.
The interest compounds daily and is then paid out by the partner banks monthly, with customers able to track how much they’ve earned directly within the app. Cash deposited at these banks is eligible for Federal Deposit Insurance Corporation (“FDIC”) insurance. • Instant Withdrawals .
The ability to see multiple buy and sell requests helps subscribers understand the availability or desire for a stock at a certain price. • Robinhood Wallet . A self-custody, web3 wallet that allows customers to deposit and withdraw cryptocurrencies to and from our platform with no network fees.
Subscribers have the ability to see greater depth of orders for any given stock or option. The ability to see multiple buy and sell requests helps subscribers understand the availability or desire for a stock at a certain price. Robinhood Credit Card Our Robinhood Credit Card allows us to provide our customers access to credit.
To ensure we provide a rich experience for our employees, we conduct ongoing 13 Table of Contents employee surveys to build on the competencies that are important for our future success. Our employee surveys are an important part of our culture and the results are an important part of how we make decisions about life at Robinhood.
Our employee surveys are an important part of our culture and the results are an important part of how we make decisions about life at Robinhood. These regular check-ins with employees provide critical input for company decisions on how to best improve productivity, inclusion, and retention.
We offer a variety features, there are no monthly fees, no subscription fees, no in-network ATM fees, no overdraft fees, no transfer fees, and no account minimum fees. Funds held in Robinhood Cash Card and spending account are eligible for FDIC insurance. • Round-up Rewards .
There are no monthly fees, no subscription fees, and no account minimum fees. Funds held in Robinhood Cash Card and Spending Account are eligible for FDIC insurance. Education We believe that offering educational resources is critical to advancing our mission.
We hold all settled cryptocurrencies in custody on behalf of customers in two types of wallets: (i) hot wallets, which are managed online, and (ii) cold wallets, which are managed entirely offline and require physical access controls.
The list of cryptocurrencies supported by RHEC for eligible users in select jurisdictions in the EU is available on our website at https://robinhood.com/eu/en/support/articles/about-robinhood-crypto/ . Custody We hold all settled cryptocurrencies in custody on behalf of customers in two types of wallets: (i) hot wallets, which are managed online, and (ii) cold wallets, which are managed entirely offline.
We do not utilize third-party custodians for settled cryptocurrencies, but we do utilize technology from a third-party provider to manage some of our cryptocurrency, custody, transfer, and settlement operations. In general, the overwhelming majority of cryptocurrency coins on our platform are held in cold storage, though some coins are held in hot wallets to support day-to-day operations.
We do not utilize third-party custodians for settled cryptocurrencies, but we do integrate proprietary technology from a third-party industry-standard vendor into the systems we use to support the custody, transfer and settlement operations to our wallets.
The Robinhood Wallet gives 8 Table of Contents customers full control over their cryptocurrencies, which means they hold and maintain the private key to their assets. • Robinhood Retirement .
The Robinhood Wallet gives customers full control over their cryptocurrencies, which means they hold and maintain the private key to their assets, and does not collect any portion of network or “gas” fees imposed by the applicable network. The Robinhood Wallet is a software application that users must access via a separate application.
We 7 Table of Contents do not hold cryptocurrency for our own account and, therefore, do not commingle cryptocurrencies with those of our users. Robinhood Cash Card and Spending Account Our Cash Card and Spending Account allows customers to spend with a prepaid spending card (“Robinhood Cash Card”) issued by a partner bank.
Robinhood Cash Card and Spending Account Our Cash Card and Spending Account allows customers to spend with a prepaid spending card (“Robinhood Cash Card”) issued by Sutton Bank (“Sutton”). We offer a variety of features, such as recurring investments, paycheck early access, and a cash back rewards program.
We plan to continue to innovate for our advanced customers to drive an even better experience. Expanding Internationally We believe there is a significant opportunity for Robinhood to grow internationally. The Robinhood Wallet is our first offering to customers internationally and is empowering customers around the world to custody their own crypto.
The Robinhood Wallet was our first offering to customers internationally and is empowering customers around the world to custody their own crypto. In December 2023, we launched the brokerage services in the United Kingdom on a rolling basis, and plan to reach full availability in the first half of 2024.
Robinhood Crypto We offer commission-free cryptocurrency trading using the same intuitive, mobile interface as our broader Brokerage platform. We have expanded our coverage to include every U.S. state and the District of Columbia, except for Hawaii and Nevada. We support trading in a select number of different cryptocurrencies and support real-time market data for significantly more cryptocurrencies.
We have expanded our coverage to include every U.S. state and the District of Columbia, except for Hawaii.
We have an IEB team dedicated to delivering on Robinhood’s commitment to create an inclusive environment.
We have an IEB team dedicated to delivering on Robinhood’s commitment to create an inclusive environment. In 2023, we integrated IEB education into the workflow for our leaders and people managers, incorporating mitigating bias and equity content into feedback loops, performance reviews, and promotions.
We also offer cryptocurrency transfers (“Crypto Transfers”), allowing customers to transfer cryptocurrency into and out of their Robinhood Crypto accounts without commission, with the exception of New York where our regulatory application for Crypto Transfers is still pending.
We also offer cryptocurrency transfers (“Crypto Transfers”), allowing customers to transfer cryptocurrency into and out of their RHC accounts without commission, where eligible. Additionally, we provide real-time market data for certain cryptocurrencies, including those that are not supported on RHC’s platforms, for informational purposes only.
For example, our ERGs participate in various hiring events, including hosting panels on what it’s like to work at Robinhood and how to think about career development. Employee Incentives and Benefits We offer competitive compensation for employees and benefits for themselves and their families.
For example, our Women in Tech ERG hosted their annual Women in Tech conference, providing opportunities for career development and networking. 15 Table of Contents Employee Incentives and Benefits We offer competitive compensation for employees and benefits for themselves and their families.
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Robinhood is a safety-first company. The reliability of our platform takes precedence over all else, so that we can be there for our customers when they need us the most. We relentlessly protect our customers’ security and privacy, and we only share with our counterparties what they need to fulfill our customers’ financial needs, nothing more.
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Robinhood is a safety first company. Period. We create with care, make changes thoughtfully, and we obsess over details. We don’t compromise regulatory requirements to move fast, and when we see something amiss, we move quickly to correct it. We take risks responsibly with safety as the foundation of innovation. • Radical Customer Focus .
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We build safeguards and provide education so that our customers are in the best position to succeed. We have high-quality timely customer support, and when things aren’t right, we fix them. We work closely with regulators and lawmakers to protect our customers and the broader financial system.
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Customers are at the center of our company. We listen to them, design for their needs, and aim to make our user experience simple and intuitive. We put what’s best for customers at the center of decision-making. When there are customer pain points, we fix them quickly. • Participation Is Power . We empower a new generation of investors.
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We speak simply, plainly, and truthfully, even if it’s not what others want to hear. We hold ourselves and our colleagues to the highest ethical standards. • Participation Is Power . At Robinhood, the rich don’t get a better deal.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, we received customer complaints and significant media attention as a result of the Early 2021 Trading Restrictions. 27 Table of Contents Damage to our brand and reputation could also be caused by: • cybersecurity attacks, privacy or data security breaches, or other security incidents, payment disruptions or other incidents that impact the reliability of our platform; • actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors, our customers or third-party service providers as well as complaints or negative publicity about such individuals; • future restructurings or any similar such reductions or activities in the future; • any repeat imposition of temporary trading restrictions (similar to our Early 2021 Trading Restrictions), or any outright failure to meet our deposit requirements; • litigation involving, or regulatory actions or investigations into, our platform or our business; • any failures to comply with legal, tax and regulatory requirements; • any perceived or actual weakness in our financial strength or liquidity; • any regulatory action that results in changes to, or prohibits us from offering, certain features or services; • changes to our policies, features or services that customers or others perceive as overly restrictive, unclear, inconsistent with our values or mission, or not clearly articulated; • a failure to operate our business in a way that is consistent with our values and mission; • inadequate or unsatisfactory customer support experiences; • negative responses by customers or regulators to our business model or to particular features or services; • a failure to adapt to new or changing customer preferences; • a prolonged weakness in popular equities or cryptocurrencies specifically or in U.S. equity and cryptocurrency markets generally, or a sustained downturn in the U.S. economy; and • any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole.
Biggest changeDamage to our brand and reputation could also be caused by: • cybersecurity attacks, privacy or data security breaches, or other security incidents, payment disruptions or other incidents that impact the reliability of our platform; • actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors, our customers or third-party service providers or partners as well as complaints or negative publicity about such individuals or companies; • future restructurings or any similar such reductions or activities in the future; • any repeat imposition of temporary trading restrictions (similar to our Early 2021 Trading Restrictions as defined below), or any outright failure to meet our deposit requirements; • litigation involving, or regulatory actions or investigations into, our platform or our business; • any failures to comply with legal, tax and regulatory requirements; • any perceived or actual weakness in our financial strength or liquidity; • any regulatory action that results in changes to, or prohibits us from offering, certain features, products or services; • any new policies, features, products, or services, or changes to our policies, features, products, or services, that customers or others perceive as overly restrictive, unclear, inconsistent with our values or mission, or not clearly articulated; • a failure to operate our business in a way that is consistent with our values and mission; • inadequate or unsatisfactory customer support experiences; • negative responses by customers or regulators to our business model or to particular features, products or services; • a failure to adapt to new or changing customer preferences; • a prolonged weakness in popular equities or cryptocurrencies specifically or in U.S. equity and cryptocurrency markets generally, or a sustained downturn in the U.S. economy; and • any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole. 31 Table of Contents These and other events could negatively impact the willingness of our existing customers, and potential new customers, to do business with us, which could adversely affect our trading volumes and number of Funded Customers (previously Net Cumulative Funded Accounts, see Part II, Item 7 of this Annual Report, “Key Performance Metrics”), as well as our ability to recruit and retain personnel, any of which could have an adverse effect on our business, financial condition, and results of operations, as well as the trading price of our Class A common stock.
We might continue to experience declines in the growth of our business (or negative growth) as a result of a number of factors, including slowing demand for our platform, insufficient growth in the number of customers that utilize our platform, declines in the level of usage of our platform by existing customers, macroeconomic factors, increasing competition, a decrease in the growth of our overall market, or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that have, in some instances, and could continue to reduce financial activity and the maturation of our business, among others.
We might experience declines in the growth of our business (or negative growth) as a result of a number of factors, including slowing demand for our platform, insufficient growth in the number of customers that utilize our platform, declines in the level of usage of our platform by existing customers, macroeconomic factors, increasing competition, a decrease in the growth of our overall market, or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that have, in some instances, and could continue to reduce financial activity and the maturation of our business, among others.
We have experienced significant customer growth in recent years (and in 2020 and 2021 in particular), including a significant fraction of new customers, often more than 50%, who have told us that Robinhood is their first brokerage account.
We have experienced customer growth in recent years (and significant growth in 2020 and 2021 in particular), including a significant fraction of new customers, often more than 50%, who have told us that Robinhood is their first brokerage account.
Any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents or other changes to the underlying blockchain networks might occur from time to time, causing incompatibility, technical issues, disruptions or security weaknesses to our platform.
Any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents or other changes to the underlying blockchain networks might occur from time to time, causing incompatibility, technical issues, disruptions or security weaknesses to our platform.
Our Charter and our Bylaws contain, and Delaware law contains, provisions that might have the effect of deterring takeovers by making such takeovers more expensive to the bidder and by encouraging prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover, such as a classified board, limitations on the ability of stockholders to take action by written consent, and the ability of our board to designate the terms of preferred stock and authorize its issuance without stockholder approval.
Our Charter and our Bylaws contain, and Delaware law contains, provisions that might have the effect of deterring takeovers by making such takeovers more expensive to the bidder and by encouraging prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover, such as a classified board, limitations on the ability of stockholders to take action by written consent, and the ability of our board of directors to designate the terms of preferred stock and authorize its issuance without stockholder approval.
Any unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data, including personal data, cybersecurity breach or other security incident that we, our customers or our third-party service providers experience or the perception that one has occurred or might occur, could harm our reputation, reduce the demand for our products and services and disrupt normal business operations.
Any unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data, including personal data, cybersecurity breach or other security incident that we, our customers or our third-party or fourth-party service providers experience or the perception that one has occurred or might occur, could harm our reputation, reduce the demand for our products and services and disrupt normal business operations.
We are also exposed to heightened regulatory risk because our business is subject to extensive regulation and oversight in a variety of areas, and such regulations are subject to revision, supplementation, or evolving interpretations and application, and it can be difficult to predict how they might be applied to our business, particularly as we introduce new products and services and expand into new jurisdictions.
We are also exposed to heightened regulatory risk because our business is subject to extensive regulation and oversight in a variety of areas and geographies, and such regulations are subject to revision, supplementation, or evolving interpretations and application, and it can be difficult to predict how they might be applied to our business, particularly as we introduce new products and services and expand into new jurisdictions.
Risks associated with providing investment recommendations include those arising from how we disclose and address possible conflicts of interest, inadequate due diligence, inadequate disclosure, and human error. New regulations, such as the SEC’s Regulation Best Interest and certain state broker-dealer regulations, impose heightened conduct standards and requirements on recommendations to retail investors.
Risks associated with providing investment recommendations include those arising from how we disclose and address possible conflicts of interest, inadequate due diligence, inadequate disclosure, and human error. Regulations, such as the SEC’s Regulation Best Interest and certain state broker-dealer regulations, impose heightened conduct standards and requirements on recommendations to retail investors.
Morgan Chase Bank, N.A.), and we have also partnered, on a non-exclusive basis, with Sutton Bank (“Sutton”), an Ohio-chartered bank, pursuant to a license from Mastercard International Incorporated, to offer the Robinhood Cash Card. Under the terms of our program agreement with Sutton, Robinhood Cash Card accounts for our users are opened and maintained by Sutton.
Morgan Chase Bank, N.A.), and we have also partnered, on a non-exclusive basis, with Sutton, an Ohio-chartered bank, pursuant to a license from Mastercard International Incorporated, to offer the Robinhood Cash Card. Under the terms of our program agreement with Sutton, Robinhood Cash Card accounts for our users are opened and maintained by Sutton.
Such issues are increasing in frequency and evolving in nature, including employee theft or misuse, denial-of-service attacks, and sophisticated nation-state and nation-state-supported actors engaging in attacks. The operation of our platform involves the use, collection, storage, sharing, disclosure, transfer, and other processing of customer information, including personal data.
Such issues are increasing in frequency and evolving in nature, including employee and contractor theft or misuse, denial-of-service attacks, and sophisticated nation-state and nation-state-supported actors engaging in attacks. The operation of our platform involves the use, collection, storage, sharing, disclosure, transfer, and other processing of customer information, including personal data.
Both Bitcoin and Ethereum protocols have been subject to “forks” recently that resulted in the creation of new networks, including, among others, Bitcoin Cash, BSV, Bitcoin Diamond, Bitcoin Gold, Ethereum Classic, and Ethereum Proof-of-Work. Some of these forks have caused fragmentation among platforms as to the correct naming convention for forked cryptocurrencies.
Both Bitcoin and Ethereum protocols have been subject to “forks” that resulted in the creation of new networks, including, among others, Bitcoin Cash, BSV, Bitcoin Diamond, Bitcoin Gold, Ethereum Classic, and Ethereum Proof-of-Work. Some of these forks have caused fragmentation among platforms as to the correct naming convention for forked cryptocurrencies.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition, and results of operations.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of material changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition, and results of operations.
Crypto Transfers and Robinhood Wallet also expose us to heightened risks related to potential violations of trade sanctions, including OFAC regulations, and anti-money laundering and counter-terrorist financing laws, which among other things impose strict liability for transacting with prohibited persons.
Crypto Transfers, Robinhood Wallet, and Robinhood Connect also expose us to heightened risks related to potential violations of trade sanctions, including OFAC regulations, and anti-money laundering and counter-terrorist financing laws, which among other things impose strict liability for transacting with prohibited persons.
We consider the following to be our most material risks: • We might not grow in line with historical rates. • We have limited operating experience at our current scale, which subjects us to a number of uncertainties, risks, and difficulties that could adversely affect our business. • Our results of operations and other operating metrics fluctuate from quarter to quarter, which makes these metrics difficult to predict. • We have incurred operating losses in the past and might not be profitable in the future. • Factors that affect transaction-based revenue — such as reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers, and any new regulation of, or any bans on, PFOF and similar practices — might result in reduced profitability, increased compliance costs, and negative publicity. 19 Table of Contents • We are directly and indirectly exposed to fluctuations in interest rates, and rapidly changing interest rate environments could reduce our net interest revenues and otherwise result in reduced profitability. • As registered broker-dealers, we are subject to “best execution” requirements under SEC guidelines and FINRA rules.
We consider the following to be our most material risks: • We might not grow in line with historical rates. • We have limited operating experience at our current scale, which subjects us to a number of uncertainties, risks, and difficulties that could adversely affect our business. • Our results of operations and other operating metrics fluctuate from quarter to quarter, which makes these metrics difficult to predict. • We have incurred operating losses in the past and might not be profitable in the future. • Factors that affect transaction-based revenue — such as reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers, and any new regulation of, or any bans on, PFOF and similar practices — might result in reduced profitability, increased compliance costs, and negative publicity. • We are directly and indirectly exposed to fluctuations in interest rates, and rapidly changing interest rate environments could reduce our net interest revenues and otherwise result in reduced profitability. • As registered broker-dealers, we are subject to “best execution” requirements under SEC guidelines and FINRA rules.
Any such losses could be significant, and we might not be able to obtain insurance coverage for some or all of those losses. Cryptocurrencies and blockchain technologies have been, and might in the future be, subject to security breaches, hacking, or other malicious activities.
Any such losses could be significant, and we may not be able to obtain insurance coverage for some or all of those losses. Cryptocurrencies and blockchain technologies have been, and might in the future be, subject to security breaches, hacking, or other malicious activities.
There are significant risks and costs inherent in establishing and doing business in international markets, including: • difficulty establishing and managing international entities, offices, and/or operations and the increased operations, travel, infrastructure, and legal and compliance costs associated with operations, entities, and/or people in different countries or regions; • the need to understand, interpret and comply with local laws, regulations and customs in multiple jurisdictions, including laws and regulations governing cryptocurrency-related, broker-dealer, money transmitter, or regulated entity practices, some of which might require permissions, registrations, authorizations, licenses or consents, or might be different from, or conflict with, those of other jurisdictions or foreign cybersecurity, data privacy or labor and employment laws; 31 Table of Contents • the additional complexities of any merger or acquisition activity internationally, which would be new for us and could subject us to additional regulatory scrutiny or approvals; • the need to adapt, localize, and position our products for specific countries (also known as “product-market fit”); • increased exposure to foreign fraud vectors; • increased competition from local providers of similar products and services; • challenges of obtaining, maintaining, protecting, defending and enforcing intellectual property rights abroad, including the challenge of extending or obtaining third-party intellectual property rights to use various technologies in new countries; • the need to offer customer support and other aspects of our offering (including websites, articles, blog posts, and customer support documentation) in various languages or locations; • compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act (the “FCPA”) and equivalent anti-money laundering rules and requirements, and with anti-bribery and anti-corruption requirements and sanctions regulations in local markets, by us, our employees, and our business partners; • the need to recruit and manage staff in new countries and regions to support international operations, and comply with employment law, payroll, and benefits requirements in multiple countries; • the need to enter into new business partnerships with third-party service providers in order to provide products and services in the local market, or to meet regulatory obligations; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs and differences in technology service delivery in different countries; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; • double taxation of our international earnings and potentially adverse tax consequences due to requirements of or changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • political or social change or unrest or economic instability in a specific country or region in which we operate.
There are significant risks and costs inherent in establishing and doing business in international markets, including: • difficulty establishing and managing international entities, offices, and/or operations and the increased operations, travel, infrastructure, and legal and compliance costs associated with operations, entities, and/or people in different countries or regions; • the need to understand, interpret and comply with local laws, regulations and customs in multiple jurisdictions, including laws and regulations governing cryptocurrency-related, broker-dealer, money transmitter, or regulated entity practices, some of which might require permissions, registrations, authorizations, licenses or consents, or might be different from, or conflict with, those of other jurisdictions or foreign cybersecurity, data privacy or labor and employment laws; • the additional complexities of any merger or acquisition activity internationally, which would be new for us and could subject us to additional regulatory scrutiny or approvals; • the need to adapt, localize, and position our products for specific countries (also known as “product-market fit”); • increased exposure to foreign fraud vectors; • increased competition from local providers of similar products and services; • challenges of obtaining, maintaining, protecting, defending and enforcing intellectual property rights abroad, including the challenge of extending or obtaining third-party intellectual property rights to use various technologies in new countries; • the need to offer customer support and other aspects of our offering (including websites, articles, blog posts, and customer support documentation) in various languages or locations; 35 Table of Contents • compliance with anti-bribery and anti-corruption laws, such as the FCPA and equivalent anti-money laundering and sanctions rules and requirements in local markets, by us, our employees, and our business partners; • the need to recruit and manage staff in new countries and regions to support international operations, and comply with employment law, tax, payroll, and benefits requirements in multiple countries; • the need to enter into new business partnerships with third-party service providers in order to provide products and services in the local market, or to meet regulatory obligations; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs and differences in technology service delivery in different countries; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; • double taxation of our international earnings and potentially adverse tax consequences due to requirements of or changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • political or social change or unrest or economic instability in a specific country or region in which we operate.
Our ability to compete successfully in the financial services and cryptocurrency markets depends on a number of factors, including, among other things: • maintaining competitive pricing; • providing easy-to-use, innovative, and attractive products and services that are adopted by customers; • retaining customers (such as by providing effective customer support and avoiding outages, security breaches, and trading restrictions); • recruiting and retaining highly skilled personnel and senior management; • maintaining and improving our reputation and the market perception of our brand and overall value; • maintaining our relationships with our counterparties; and 38 Table of Contents • adjusting to a dynamic regulatory environment.
Our ability to compete successfully in the financial services and cryptocurrency markets depends on a number of factors, including, among other things: • maintaining competitive pricing; • providing easy-to-use, innovative, and attractive products and services that are adopted by customers; • retaining customers (such as by providing effective customer support and avoiding outages, security breaches, and trading restrictions); • recruiting and retaining highly skilled personnel and senior management; 42 Table of Contents • maintaining and improving our reputation and the market perception of our brand and overall value; • maintaining our relationships with our counterparties; and • adjusting to a dynamic regulatory environment.
Accordingly, regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC or a court were to determine that a cryptocurrency supported by our platform is a “security” under U.S. law.
Accordingly, regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC or a court were to assert or determine that a cryptocurrency supported by our platform is a “security” under U.S. law.
If the FDIC were to determine that our users’ RHY funds held at our partner banks are not covered by deposit insurance, participating users might decide to withdraw their funds, which could adversely affect our brand and our business.
If the FDIC were to determine that our users’ funds held at our partner banks are not covered by deposit insurance, participating users might decide to withdraw their funds, which could adversely affect our brand and our business.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for a number of types of actions or 67 Table of Contents proceedings shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have subject matter jurisdiction, another state court sitting in the State of Delaware) (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for a number of types of actions or proceedings shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have subject matter jurisdiction, another state court sitting in the State of Delaware) (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as 74 Table of Contents defendants.
In 2022, FINRA also issued a regulatory notice requesting comment on complex products and options including “whether the current regulatory framework…is appropriately tailored to address current concerns raised by complex products and options.” If FINRA amends its rules to impose additional requirements on firms with respect to determining customer eligibility and/or suitability to trade options, such rule changes could result in fewer Robinhood customers being approved to trade options which could negatively impact our options trading volumes and associated revenues.
In addition, in 2022, FINRA issued a regulatory notice requesting comment on complex products and options including “whether the current regulatory framework…is appropriately tailored to address current concerns raised by complex products and options.” If FINRA amends its rules to impose additional requirements on firms with respect to determining customer eligibility and/or suitability to trade options, such rule changes could result in fewer Robinhood customers being approved to trade options which could negatively impact our options trading volumes and associated revenues.
From time to time, we have been subject, and, given the highly regulated nature of the industries in which we operate, we expect that we will be subject in the future, to a number of legal and regulatory examinations and investigations arising out of our business practices and operations, conducted by the SEC or FINRA, other federal agencies such as OFAC, and state regulatory agencies, such as the Massachusetts Securities Division (“MSD”), the California Attorney General’s Office, and the NYDFS, among other authorities.
From time to time, we have been and currently are subject, and, given the highly regulated nature of the industries in which we operate, we expect that we will be subject in the future, to a number of legal and regulatory examinations and investigations arising out of our business practices and operations, conducted by the SEC or FINRA, other federal agencies such as OFAC, and state regulatory agencies, such as the Massachusetts Securities Division (“MSD”), the California Attorney General’s Office, and the NYDFS, among other authorities.
These and other proceedings, some of which are described in Note 17 to our consolidated financial statements in this Annual Report, have in the past and might in the future relate to broker-dealer and financial services rules and regulations, including our trading and supervisory policies and procedures, our clearing practices, our trade reporting, our public communications, our compliance with FINRA registration requirements, anti-money laundering and other financial crimes regulations, cybersecurity matters, and our business continuity plans, among other topics.
These and other proceedings, some of which are described in Note 17 - Commitments & Contingencies, to our consolidated financial statements in this Annual Report, have in the past and might in the future relate to broker-dealer and financial services rules and regulations, including our trading and supervisory policies and procedures, our clearing practices, our trade reporting, our public communications, our compliance with FINRA registration requirements, anti-money laundering and other financial crimes regulations, cybersecurity matters, and our business continuity plans, among other topics.
The total value of cryptocurrencies under our control on behalf of customers is significantly greater than the total value of insurance coverage that would compensate us in the event of theft or other loss of such assets.
The total value of cryptocurrencies under our control on behalf of customers is significantly greater than the current total value of insurance coverage that would compensate us in the event of theft or other loss of such assets.
Any limits that FINRA might impose on our use of this marketing channel could make it more difficult for us to attract new customers, resulting in slower growth.
Any additional limits that FINRA might impose on our use of this marketing channel could make it more difficult for us to attract new customers, resulting in slower growth.
Attrition and workforce reductions have and might continue to adversely affect our reputation among job seekers, demoralize our remaining employees, and result in a loss of institutional know-how, reduced productivity, slower customer service response, reduced effectiveness of internal compliance and risk-mitigation programs, and cancellations of or delays in completing new product developments and other strategic projects.
Attrition and workforce reorganizations and reductions have also and might continue to adversely affect our reputation among job seekers, demoralize our remaining employees, and result in a loss of institutional know-how, reduced productivity, slower customer service response, reduced effectiveness of internal compliance and risk-mitigation programs, and cancellations of or delays in completing new product developments and other strategic projects.
Several factors could affect a cryptocurrency’s price, including, but not limited to: • Global cryptocurrency supply, including various alternative currencies which exist, and global cryptocurrency demand, which can be influenced by the growth or decline of retail merchants’ and commercial businesses’ acceptance of cryptocurrencies as payment for goods and services, 49 Table of Contents the security of online cryptocurrency exchanges and digital wallets that hold cryptocurrencies, the perception that the use and holding of digital currencies is safe and secure, and regulatory restrictions on their use. • Changes in the software, software requirements or hardware requirements underlying a blockchain network, such as a fork.
Several factors could affect a cryptocurrency’s price, including, but not limited to: • Global cryptocurrency supply, including various alternative currencies which exist, and global cryptocurrency demand, which can be influenced by the growth or decline of retail merchants’ and commercial businesses’ acceptance of cryptocurrencies as payment for goods and services, the security of online cryptocurrency exchanges and digital wallets that hold cryptocurrencies, the perception that the use and holding of digital currencies is safe and secure, and regulatory restrictions on their use. • Changes in the software, software requirements or hardware requirements underlying a blockchain network, such as a fork.
In March 2022, the SEC staff issued SAB 121 requiring crypto platforms to recognize a liability and a corresponding asset equal to the fair value of the crypto-assets the entity safeguards on behalf of users. Such accounting treatment enhances the information received by investors regarding potential liabilities upon theft or loss of crypto-assets.
In March 2022, the SEC staff issued SAB 121 requiring crypto platforms to recognize a liability and a corresponding asset equal to the fair value of the cryptocurrencies the entity safeguards on behalf of users. Such accounting treatment enhances the information received by investors regarding potential liabilities upon theft or loss of cryptocurrencies.
Risks Related to Finance, Accounting and Tax Matters Covenants in our credit agreements could restrict our operations and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted. We have entered into two credit agreements and might enter into additional agreements for other borrowing in the future.
Risks Related to Finance, Accounting and Tax Matters Covenants in our credit agreements could restrict our operations and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted. We have entered into certain credit agreements and might enter into additional agreements for other borrowing in the future.
For example, prior to our becoming self-clearing in November 2018, we relied on a third-party provider for our clearing operations, and used data collected by that third party to compute certain metrics, such as Net Cumulative Funded Accounts, that, since November 2018, we have calculated based on data sourced and processed internally.
For example, prior to our becoming self-clearing in November 2018, we relied on a third-party provider for our clearing operations, and used data collected by that third party to compute certain metrics, such as Funded Customers (formerly Net Cumulative Funded Accounts), that, since November 2018, we have calculated based on data sourced and processed internally.
Factors which might adversely affect our liquidity positions include temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, timing differences between cryptocurrency transaction settlements between us and our cryptocurrency market makers and between us and our cryptocurrency customers, fluctuations in cash held in customer accounts, a significant increase in our margin lending activities, increased regulatory capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or customer confidence 26 Table of Contents resulting in unanticipated and/or excessive withdrawals or redemptions, or a suspension of redemptions or withdrawals of customer assets.
Factors which might adversely affect our liquidity positions include temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, timing differences between cryptocurrency transaction settlements between us and our cryptocurrency market makers and between us and our cryptocurrency customers, fluctuations in cash held in customer accounts, a significant increase in our margin lending activities, increased regulatory capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or customer confidence resulting in unanticipated and/or excessive withdrawals or redemptions, or a suspension of redemptions or withdrawals of customer assets.
Any of these outcomes could have an adverse effect on our business, financial condition and results of operations. 36 Table of Contents We are involved in numerous litigation matters that are expensive and time consuming, and, if resolved adversely, could expose us to significant liability and reputational harm.
Any of 40 Table of Contents these outcomes could have an adverse effect on our business, financial condition and results of operations. We are involved in numerous litigation matters that are expensive and time consuming, and, if resolved adversely, could expose us to significant liability and reputational harm.
To the extent our investment education tools, news and information, or digital engagement practices are determined to constitute investment advice or recommendations and to the extent those recommendations fail to satisfy regulatory requirements, or we fail to know our customers, or improperly advise our customers, or if risks associated with advisory services otherwise materialize, we could be found liable for losses suffered by such customers, or could be subject to regulatory fines, penalties, and other actions such as business limitations, any of which could harm our reputation and business.
To the extent our investment education tools, news and information, or digital engagement practices are determined to constitute investment advice or recommendations and to the extent those recommendations fail to satisfy regulatory requirements, or we fail to know our customers, or improperly advise our customers, or if risks associated with advisory services otherwise materialize, we could be 53 Table of Contents found liable for losses suffered by such customers, or could be subject to regulatory fines, penalties, and other actions such as business limitations, any of which could harm our reputation and business.
Based on our investigation and that of a third-party security firm, we believe that the unauthorized party obtained names or email addresses for millions 43 Table of Contents of people, phone numbers for several thousand people, additional personal information for a few hundred people, and extensive account details for about ten people, though we believe no Social Security numbers, bank account numbers, or credit or debit card numbers were exposed and that there has been no financial loss to any customers as a result of the incident.
Based on our investigation and that of a third-party security firm, we believe that the unauthorized party obtained names or email addresses for millions of people, phone numbers for several thousand people, additional personal information for a few hundred people, and extensive account details for about ten people, though we believe no Social Security numbers, bank account numbers, or credit or debit card numbers were exposed and that there has been no financial loss to any customers as a result of the incident.
Higher interest rates also lead to higher payment obligations by our customers to us and to their creditors under mortgage, credit card, and other consumer and merchant loans, which might reduce our customers’ ability to satisfy their obligations to us, including failing to pay for securities purchased, deliver securities sold, or meet margin calls, and therefore lead to increased delinquencies, charge-offs, and allowances for loan and interest receivables, which could have an adverse effect on our net income.
Higher interest rates also lead to higher payment obligations by our customers to us and to their creditors under mortgage, credit card, and other consumer and merchant loans, which might reduce our customers’ ability to satisfy their obligations to us, including failing to pay for securities purchased, meet minimum credit card payments, deliver securities sold, or meet margin calls, and therefore lead to increased delinquencies, charge-offs, and allowances for loan and interest receivables, which could have an adverse effect on our net income (loss).
The highly automated nature of, and liquidity offered by, our payments services make us and our customers a target for illegal or improper uses, including scams and fraud directed at our stored value account and Robinhood Cash Card customers, money laundering, terrorist financing, sanctions evasion, illegal online gambling, fraudulent sales of goods or services, illegal telemarketing activities, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted or trademarked goods (in particular, digital goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or the facilitation of other illegal or improper activity.
The highly automated nature of, and liquidity offered by, our spending and payments services to move money make us and our customers a target for illegal or improper uses, including scams and fraud directed at our stored value Spending Account, Robinhood Cash Card, and Robinhood Credit customers, money laundering, terrorist financing, sanctions evasion, illegal online gambling, fraudulent sales of goods or services, illegal telemarketing activities, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted or trademarked goods (in particular, digital goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or the facilitation of other illegal or improper activity.
We track certain operational metrics using internal company data gathered on an analytics platform that we developed and operate, including metrics such as MAU, AUC and Net Cumulative Funded Accounts, as well as cohorts of our customers, which have not been validated by any independent third party and which might differ from estimates or similar metrics published by other parties due to differences in sources, methodologies, or the assumptions on which we rely.
We track certain operational metrics using internal company data gathered on an analytics platform that we developed and operate, including metrics such as Funded Customers, AUC, and MAU, as well as cohorts of our customers, which have not been validated by any independent third party and which might differ from estimates or similar metrics published by other parties due to differences in sources, methodologies, or the assumptions on which we rely.
For example, in the periods immediately following the April 2022 Restructuring and August 2022 Restructuring, we experienced higher rates of voluntary employee attrition, as well as declines in reported employee job satisfaction. We might continue to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications.
For example, in the periods immediately following the April 2022 Restructuring and August 2022 Restructuring, we experienced higher rates of voluntary employee attrition and declines in reported employee job satisfaction. We might continue to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications.
For example, some of our competitors have quickly adopted, or are seeking to adopt, some of our key offerings and services, including commission-free trading, fractional share trading, and no account minimums, since their introduction on our platform in order to compete with us.
For example, some of our competitors have quickly adopted, or are seeking to adopt, some of our key offerings and services, including commission-free trading, fractional share trading, no account minimums, and IRA match since their introduction on our platform in order to compete with us.
Our clearing operations also require a commitment of our capital and, despite safeguards implemented through both manual and automated controls, involve risks of losses due to the potential failure of our customers to perform their obligations under these transactions and margin loans.
Our clearing operations also require a commitment of our capital and, despite safeguards implemented through both manual and automated controls, involve risks of losses due to the potential failure of our customers or counterparties to perform their obligations under these transactions and margin loans.
We have also received inquiries from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading during the week of January 25, 2021 in some of the securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC 34 Table of Contents Entertainment Holdings, Inc., and specifically as to whether any employee trading in these securities 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 have also received inquiries from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading during the week of January 25, 2021 in some of the securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., and specifically as to whether any employee trading in these securities 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.
Disruptions to, destruction of, improper access to, breach of, instability of, or failure to effectively maintain our information technology systems (including our data processing systems, self-clearing platform, and order routing system) that allow our customers to use our products and services, and any associated degradations or interruptions of service could result in damage to our reputation, loss of customers, loss of revenue, regulatory or governmental investigations, civil litigation, and liability for damages.
Disruptions to, destruction of, improper access to, breach of, instability of, or failure to effectively maintain our information technology systems (including our data processing systems, self-clearing platform, and order routing system) that allow our customers to use our products and services, and any associated degradations or interruptions of service could result in damage to our reputation, loss of customers, loss of revenue, regulatory or governmental investigations, civil litigation, 45 Table of Contents and liability for damages.
For instance, we have in the past (as discussed in Note 17 to our consolidated financial statements in this Annual Report) and may in the future be subject to investigations and examinations by the NYDFS regarding, among other things, our cybersecurity practices.
For instance, we have in the past (as discussed in Note 17 - Commitments & Contingencies, to our consolidated financial statements in this Annual Report) and may in the future be subject to investigations and examinations by the NYDFS regarding, among other things, our cybersecurity practices.
For example, as a result of the Early 2021 Trading Restrictions, we faced allegations that our decision to temporarily prevent our customers from purchasing specified securities was influenced by our relationship with certain market makers.
For example, as a result of the Early 2021 Trading Restrictions (defined below), we faced allegations that our decision to temporarily prevent our customers from purchasing specified securities was influenced by our relationship with certain market makers.
To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform).
To the extent that the SEC or a court asserts or determines that any cryptocurrencies supported by our platform are securities, that assertion or determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform).
For example, during the first quarter of 2021 many customers became upset by our imposition of the Early 2021 Trading Restrictions and we saw an increase in customers choosing to transfer their accounts to other broker-dealers.
For example, during the first quarter of 2021 many customers became upset by our imposition of the Early 2021 Trading Restrictions (defined below) and we saw an increase in customers choosing to transfer their accounts to other broker-dealers.
In connection with the announcement of the February 2023 Custody Rule Proposal, Chairman Genlser noted that “Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians.” If the February 2023 Custody Rule Proposal is adopted as proposed, and we are not deemed to be a “qualified custodian,” we may be required to cease our custodial crypto offerings under certain circumstances, which would have a material adverse impact on our business and one of our primary sources of revenue.
In connection with the announcement of the February 2023 Custody Rule Proposal, Chair Gensler noted that “Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians.” If the February 2023 Custody Rule Proposal is adopted as proposed, and we are not deemed to be a “qualified custodian,” we may be required to cease our custodial crypto offerings under certain circumstances, which would have a material adverse impact on our business and one of our primary sources of revenue.
There are several considerations that we consider as part of our Crypto Listing Framework (including security or infrastructure concerns that might arise with the integration of any new cryptocurrency into the technical infrastructure that allows us to secure customer cryptocurrencies and to 55 Table of Contents transact securely in corresponding blockchains), which might operate to limit our ability to support forks.
There are several considerations that we consider as part of our Crypto Listing Framework (including security or infrastructure concerns that might arise with the integration of any new cryptocurrency into the technical infrastructure that allows us to secure customer cryptocurrencies and to transact securely in corresponding blockchains), which might operate to limit our ability to support forks.
Any failure 48 Table of Contents by us to maintain the necessary controls or to manage the cryptocurrencies we hold on behalf of our customers and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our services, and result in significant penalties and fines and additional restrictions.
Any failure by us to maintain the necessary controls or to manage the cryptocurrencies we hold on behalf of our customers and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our services, and result in significant penalties and fines and additional restrictions.
We allow customers to deposit and withdraw cryptocurrencies to and from our platform through our Crypto Transfers feature in the states RHC operates in (other than New York, where our regulatory application is still pending).
In the United States, we allow customers to deposit and withdraw cryptocurrencies to and from our platform through our Crypto Transfers feature in the states in which RHC operates (other than New York, where our regulatory application is still pending).
Owners of intellectual property rights or government authorities might seek to bring legal action against providers of payments solutions, including RHY, that are peripherally involved in the sale of infringing or allegedly infringing items.
Owners of intellectual property rights or government authorities might seek to bring legal action against providers of payments solutions, including Robinhood, that are peripherally involved in the sale of infringing or allegedly infringing items.
If our operational metrics are not accurate representations of our business, or if investors do not perceive these metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation could be significantly harmed, the trading price of our Class A common stock could decline and we might be subject to stockholder litigation, which could be costly.
If our operational metrics are not accurate representations of our business, or if investors do not perceive these metrics to be accurate, or if we discover material inaccuracies with respect to these 70 Table of Contents figures, our reputation could be significantly harmed, the trading price of our Class A common stock could decline and we might be subject to stockholder litigation, which could be costly.
Further, there are a limited number of precedents for the financial accounting treatment of 52 Table of Contents cryptocurrency assets (including related issues of valuation and revenue recognition), and no official guidance has been provided by the FASB or the SEC. Accordingly, there remains significant uncertainty as to the appropriate accounting for cryptocurrency asset transactions, cryptocurrency assets, and related revenues.
Further, there are a limited number of precedents for the financial accounting treatment of cryptocurrency assets (including related issues of valuation and revenue recognition), and no official guidance has been provided by the FASB or the SEC. Accordingly, there remains significant uncertainty as to the appropriate accounting for cryptocurrency asset transactions, cryptocurrency assets, and related revenues.
If our customers default on their obligations, including failing to pay for securities purchased, deliver securities 46 Table of Contents sold, or meet margin calls, we remain financially liable for such obligations, and although these obligations are collateralized, we are subject to market risk in the liquidation of customer collateral to satisfy those obligations.
If our customers default on their obligations, including failing to pay for securities purchased, deliver securities sold, or meet margin calls, we remain financially liable for such obligations, and although these obligations are collateralized, we are subject to market risk in the liquidation of customer collateral to satisfy those obligations.
These agreements contain various restrictive covenants, including, among other 60 Table of Contents things, minimum liquidity and tangible net worth requirements, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related person transactions.
These agreements contain various restrictive covenants, including, among other things, minimum liquidity and tangible net worth requirements, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related person transactions.
Therefore, the founders’ concentrated voting control might have the effect of delaying, preventing or deterring a change in control of our Company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our Company, and might ultimately affect the market price of our Class A common stock.
Therefore, the founders’ concentrated voting control might have the effect of delaying, preventing or deterring a change in control of our Company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a 73 Table of Contents sale of our Company, and might ultimately affect the market price of our Class A common stock.
As of December 31, 2022, our founders and their related entities hold approximately 15% of our outstanding common stock (and, as described in the following risk factor, over 50% of the voting power of our outstanding capital stock).
As of December 31, 2023, our founders and their related entities hold approximately 15% of our outstanding common stock (and, as described in the following risk factor, over 50% of the voting power of our outstanding capital stock).
Furthermore, to the extent the operation of our systems relies on our third-party service providers, through either a connection to, or an integration with, third parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential information and personal data of customers and employees might increase.
Furthermore, to the extent the operation of our systems relies on our third-party service providers, through either a connection to, or an integration with, third parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential 48 Table of Contents information and personal data of customers and employees might increase.
Our failure to maintain the required net capital levels could result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead 45 Table of Contents to the liquidation of our broker-dealer entities and winding down of our broker-dealer business.
Our failure to maintain the required net capital levels could result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation of our broker-dealer entities and winding down of our broker-dealer business.
Additionally, our insurance policies might be insufficient to cover a claim made against us by any such customers affected by any disruptions, outages, or other performance or infrastructure problems. 41 Table of Contents Our success depends in part upon continued distribution through app stores and effective operation with mobile operating systems, networks, technologies, products, hardware and standards that we do not control.
Additionally, our insurance policies might be insufficient to cover a claim made against us by any such customers affected by any disruptions, outages, or other performance or infrastructure problems. Our success depends in part upon continued distribution through app stores and effective operation with mobile operating systems, networks, technologies, products, hardware and standards that we do not control.
For example, our broker-dealer subsidiaries are each subject to the Net Capital Rule, which specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers, and our clearing and carrying broker-dealer subsidiary is subject to Rule 15c3-3 under the Exchange Act, which requires broker-dealers to maintain liquidity reserves.
For example, our broker-dealer subsidiaries are each subject to the Net Capital Rule, which specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers, and our 50 Table of Contents clearing and carrying broker-dealer subsidiary is subject to Rule 15c3-3 under the Exchange Act, which requires broker-dealers to maintain liquidity reserves.
Additionally, individuals not subject to invention assignment agreements might make adverse ownership claims to our current and future intellectual property, and, to the extent that our employees, independent contractors, or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes might arise as to the rights in related or resulting know-how and inventions.
Additionally, individuals not subject to invention assignment agreements might make adverse ownership claims to our current and future intellectual property, and, to the extent that our employees, independent contractors, or other third parties with whom we do business 66 Table of Contents use intellectual property owned by others in their work for us, disputes might arise as to the rights in related or resulting know-how and inventions.
Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we might be subject to such terms.
Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any 67 Table of Contents derivative works of the open source code on unfavorable terms or at no cost, and we might be subject to such terms.
Any failure to successfully address these risks and challenges as we encounter them, will negatively affect our growth. If our revenue growth 21 Table of Contents rate continues to decline, investors’ perceptions of our business and the trading price of our Class A common stock could be adversely affected.
Any failure to successfully address these risks and challenges as we encounter them, will negatively affect our growth. If our revenue growth rate continues to decline, investors’ perceptions of our business and the trading price of our Class A common stock could be adversely affected.
As a result of (and solely by virtue of) our implementation of SAB 121, the cryptocurrency we custody for users now appears on our balance sheet as an asset.
As a result of (and solely by virtue of) our implementation of SAB 121, the cryptocurrency we custody for users now appears on our balance sheets as an asset.
But such treatment has also caused some users to question how safeguarded crypto-assets would be treated in a platform bankruptcy. We implemented SAB 121 for the quarter ended June 30, 2022, with retrospective application to the beginning of 2022.
But such treatment has also caused some users to question how safeguarded cryptocurrencies would be treated in a platform bankruptcy. We implemented SAB 121 for the quarter ended June 30, 2022, with retrospective application to the beginning of 2022.
Any failure to develop or 63 Table of Contents maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and could result in a restatement of our consolidated financial statements for prior periods.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and could result in a restatement of our consolidated financial statements for prior periods.
The SEC, FINRA, and various state regulators have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers.
The SEC, FINRA, and various state regulators have stringent rules or proposed rules with respect to the maintenance of specific levels of net capital by securities broker-dealers.
A prolonged market weakness, such as a slowdown causing reduced trading volume in securities, derivatives, or cryptocurrency markets, has resulted, and could result in the future in reduced revenues and adversely affect our business, financial condition, and results of operations.
A prolonged market weakness, such as a slowdown causing reduced trading volume in securities, derivatives, or cryptocurrency markets, 32 Table of Contents has resulted, and could result in the future in reduced revenues and adversely affect our business, financial condition, and results of operations.
Our failure to limit returns, including as a result of fraudulent transactions, could lead payment networks or our banking partners to require us to increase reserves, 32 Table of Contents impose penalties on us, charge additional or higher fees, or terminate their relationships with us.
Our failure to limit returns, including as a result of fraudulent transactions, could lead payment networks or our banking partners to require us to increase reserves, impose penalties on us, charge additional or higher fees, or terminate their relationships with us.
As a licensed money transmitter, we are subject to obligations and restrictions with respect to the movement of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies concerning those aspects of our business considered money transmission.
As a licensed money transmitter, we are subject to obligations and restrictions with respect to 37 Table of Contents the movement of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies concerning those aspects of our business considered money transmission.
However, a determination by the SEC or a court that a cryptocurrency supported by our platform constitutes a security could also result in our determination that it is advisable to remove that and other cryptocurrencies from our platform that have similar characteristics to the cryptocurrency that was determined to be a security.
However, an assertion or determination by the SEC or a court that a cryptocurrency supported by our platform constitutes a security could also result in our determination that it is advisable to remove that and other cryptocurrencies from our platform that have similar characteristics to the cryptocurrency that was asserted or determined to be a security.
We attempt to protect our intellectual property, technology, and confidential information by requiring our employees, contractors, consultants, corporate collaborators, advisors and other third parties who develop intellectual property on our behalf to enter into confidentiality and invention assignment agreements, and third parties we share information with to enter into nondisclosure and confidentiality agreements.
We attempt to protect our intellectual property, technology, and confidential information by requiring our employees, contractors, consultants, corporate collaborators, advisors and other third parties who develop intellectual property on our behalf to enter into agreements relating to confidentiality and invention assignments, and third parties we share information with to enter into nondisclosure and confidentiality agreements.
Any failure to overcome the challenges presented by our flexible remote work policy could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, maintain product development velocity, and execute on our business strategy.
Any failure to overcome the challenges presented by our Return to Office policy and remote work policy could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, maintain product development velocity, and execute on our business strategy.
As a result, the prices of cryptocurrencies are highly speculative. The prices of cryptocurrencies have been subject to dramatic fluctuations (including as a result of the 2022 Bear Markets), which have impacted, and will continue to impact, our trading volumes and operating results and might adversely impact our growth strategy and business.
The prices of cryptocurrencies have been subject to dramatic fluctuations (including as a result of the 2022 Bear Markets), which have impacted, and will continue to impact, our trading volumes and operating results and might adversely impact our growth strategy and business.
It is not possible to prevent or detect all activities giving rise to claims and the precautions we take might not be effective in all cases. We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, excess-SIPC, cyber and data breach, crime and fidelity bond insurance.
It is not possible 68 Table of Contents to prevent or detect all activities giving rise to claims and the precautions we take might not be effective in all cases. We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, excess-SIPC, cyber and data breach, crime, and fidelity bond insurance.
In his testimony, Chair Gensler indicated that he had instructed the staff of the SEC to study, and in some cases make rulemaking recommendations to the SEC regarding, a variety of market issues and practices, including PFOF, so-called gamification, and whether broker-dealers are adequately disclosing their policies and procedures around potential trading restrictions; whether margin requirements and other payment requirements are sufficient; and whether broker-dealers have appropriate tools to manage their liquidity and risk.
In his testimony, Chair Gensler indicated that he had instructed the staff of the SEC to study, and in some cases make rulemaking recommendations to the SEC regarding, a variety of market issues and practices, including PFOF, digital engagement practices, and whether broker-dealers are adequately disclosing their policies and procedures around potential trading restrictions; whether margin requirements and other payment requirements are sufficient; and whether broker-dealers have appropriate tools to manage their liquidity and risk.
The software on which we rely might contain errors, bugs, vulnerabilities, design defects, or technical limitations that might compromise our ability to meet our objectives. Some such 40 Table of Contents problems are inherently difficult to detect and some such problems might only be discovered after code has been released for external or internal use.
The software on which we rely might contain errors, bugs, vulnerabilities, design defects, or technical limitations that might compromise our ability to meet our objectives. Some such problems are inherently difficult to detect and some such problems might only be discovered after code has been released for external or internal use.
House of Representatives held hearings on the January 2021 market volatility and disruptions surrounding GameStop and other “meme” stocks at which various members of Congress expressed concerns about various market practices, including PFOF and options 35 Table of Contents trading.
House of Representatives held hearings on the January 2021 market volatility and disruptions surrounding GameStop and other “meme” stocks at which various members of Congress expressed concerns about various market practices, including PFOF and options trading.
For example, government enforcement or regulatory authorities could seek to impose additional restrictions or liability on us arising from the use of our payments platform for illegal or improper activity, and our failure to detect or prevent such use.
For example, government enforcement or regulatory authorities could seek to impose additional restrictions or liability on us arising from the use of our spending and payments services for illegal or improper activity, and our failure to detect or prevent such use.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also believe that our leases are at competitive or market rates and do not anticipate any difficulty in leasing suitable additional space upon expiration of our current lease terms. ITEM 3. LEGAL PROCEEDINGS See Note 17 - Commitments & Contingencies, to our consolidated financial statements in this Annual Report. ITEM 4.
Biggest changeWe believe our facilities are suitable for their present and intended purposes and are operating at a level consistent with the requirements of the industry in which we operate. We also believe that our leases are at competitive or market rates and do not anticipate any difficulty in leasing suitable additional space upon expiration of our current lease terms.
ITEM 2. PROPERTIES We lease facilities under operating leases with various expiration dates through 2033. These facilities are located throughout the United States and other countries around the world, including United Kingdom, Netherlands, and India.
ITEM 2. PROPERTIES Our corporate headquarters are located in Menlo Park, California, where we currently have lease commitments for multiple facilities with various expiration dates through 2026. We otherwise lease office facilities throughout the United States and other countries around the world for engineering, sales, marketing, and operations, as well as general and administrative purposes.
Removed
Our leased locations include our corporate headquarters located in Menlo Park, California and offices in Denver, Colorado, Lake Mary, Florida, New York, New York, and Washington, D.C. We believe our facilities are suitable for their present and intended purposes and are operating at a level consistent with the requirements of the industry in which we operate.
Added
ITEM 3. LEGAL PROCEEDINGS See Note 17 - Commitments & Contingencies, to our consolidated financial statements in this Annual Report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 77 Table of Contents PART II
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MINE SAFETY DISCLOSURES Not applicable. 68 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−4 removed5 unchanged
Biggest changeIn addition, the terms of our current credit facilities contain restrictions on our ability to pay cash dividends. Sales of Unregistered Securities From January 1, 2022 through December 31, 2022 we did not sell any shares of Class A common stock (or other equity securities of Robinhood Markets, Inc.) that were not registered under the Securities Act.
Biggest changeIn addition, the terms of our current credit facilities contain restrictions on our ability to pay cash dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol "HOOD" since July 29, 2021. Prior to that time, there was no public market for our stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “HOOD” since July 29, 2021. Prior to that time, there was no public market for our stock.
The graph uses the closing market price on July 29, 2021 of $34.82 per share as the initial value of our Class A common stock. The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance. ITEM 6. [REMOVED AND RESERVED] 70 Table of Contents
The graph uses the closing market price on July 29, 2021 of $34.82 per share as the initial value of our Class A common stock. The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance. ITEM 6. [REMOVED AND RESERVED] 79 Table of Contents
As of February 21, 2023, there were seven stockholders of record of our Class B common stock and zero stockholders of record of our Class C common stock. Dividend Policy We have never declared or paid cash dividends on our capital stock.
As of February 22, 2024, there were eight stockholders of record of our Class B common stock and zero stockholders of record of our Class C common stock. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Our Class B and Class C common stock are not listed on any stock exchange nor traded on any public market. Holders of Record As of February 21, 2023, there were 81 stockholders of record of our Class A common stock.
Our Class B and Class C common stock are not listed on any stock exchange nor traded on any public market. Holders of Record As of February 22, 2024, there were 82 stockholders of record of our Class A common stock.
No proceeds currently remain from the IPO. 69 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.
Sales of Unregistered Securities From January 1, 2023 through December 31, 2023 we did not sell any shares of Class A common stock (or other equity securities of Robinhood Markets, Inc.) that were not registered under the Securities Act. 78 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.
Removed
Use of IPO Proceeds As previously disclosed, our total net proceeds from the sale of Class A common stock by us in the IPO were approximately $2.05 billion after deducting the underwriting discounts and commissions.
Removed
The offer and sale of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-257602), which was declared effective by the SEC on July 28, 2021.
Removed
We used a portion of the net proceeds we received in the IPO to repay borrowings made under our revolving lines of credit (which borrowing were utilized to fund tax withholdings due prior to the IPO closing as a result of RSU settlements in connection with the pricing of our IPO).
Removed
We used the remaining IPO proceeds for working capital, capital expenditures, and general corporate purposes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+28 added−73 removed31 unchanged
Biggest changeSBC expense for the year ended December 31, 2022 included $77 million net reversals of previously recognized expense in connection with both the April 2022 Restructuring and August 2022 Restructuring; • our Adjusted EBITDA (non-GAAP) was negative $94 million compared to positive $33 million ; • we had NCFA of 23.0 million compared to 22.7 million, for a year-over-year increase of 1% ; • we had MAU of 11.4 million in December 2022 compared to 17.3 million in December 2021, for a year-over-year decrease of 34%; • we had AUC of $62.2 billion compared to $98.0 billion , for a year-over-year decrease of 37%; • Net Deposits were $18.4 billion compared to $27.1 billion , for a year-over-year decrease of 32%, which translates to a growth rate of 19% relative to AUC for the year ended December 31, 2021; • we had ARPU of $60 compared to $103 , for a year-over-year decrease of 42%.
Biggest changeOverview With respect to the year ended December 31, 2023, as compared to the year ended December 31, 2022: • we generated total net revenues of $1.87 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%; • Net Deposits were $17.1 billion, which translates to a growth rate of 27% relative to AUC at the end of the fourth quarter of 2022, compared to $18.4 billion, which translates to a growth rate of 19% relative to AUC at the end of the fourth quarter of 2021; • we had ARPU of $80 compared to $60 , an increase of 33%; • we had MAU of 10.9 million in December 2023 compared to 11.4 million in December 2022, a decrease of 4% .
We route equity and option orders in priority to participating market makers that we believe are most likely to give our customers the best execution, based on historical performance (according to order price, trading symbol, availability of the market maker and, if statistically significant, order size), and, in the case of options, the likelihood of the order being filled is a factor as well.
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.
The time-based service condition for these awards generally is satisfied over six years. The performance-based conditions are satisfied upon the occurrence of an IPO. The market-based conditions are satisfied upon our achievement of specified share prices.
The time-based service condition for these awards is generally satisfied over six years. The performance-based conditions were satisfied upon the occurrence of an IPO. The market-based conditions are satisfied upon our achievement of specified share prices.
Change in Fair Value of Convertible Notes and Warrant Liability Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change 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.
Change in Fair Value of Convertible Notes and Warrant Liability Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change 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.
We determine the requisite service period by comparing the derived service period to achieve the market-based condition and the explicit time-based service period, using the longer of the two service periods as the requisite service period. Upon the occurrence of our IPO in 2021, we recorded a cumulative one-time share-based compensation expense determined using the grant-date fair values.
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.
No performance-based conditions exist for our post-IPO grants, and therefore for grants of Time-Based RSUs issued post-IPO, we record share-based compensation expense on a straight line basis over the requisite service period. Market-Based RSUs 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.
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.
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. Recent Accounting Pronouncements See Note 2 - Recent Accounting Pronouncements, to our consolidated financial statements in this Annual Report.
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. Recent Accounting Pronouncements See Note 2 - Recent Accounting Pronouncements, to our consolidated financial statements in this Annual Report. 99 Table of Contents
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.
They primarily relate to commitments for cloud infrastructure service and business insurance. 95 Table of Contents 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.
(3) Restructuring charges for the year ended December 31, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring and primarily consisting of $45 million of impairment and $9 million of accelerated depreciation, in each case relating to office closures, and $51 million of cash charges for employee-related wages, benefits and severance.
(2) Restructuring charges for the year ended December 31, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring, consisting of $45 million of impairment and $9 million of accelerated depreciation, in each case relating to office closures, and $51 million of cash charges for employee-related wages, benefits and severance.
We account for uncertain tax positions, including net 91 Table of Contents 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.
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.
The performance-based condition for our pre-IPO grants was satisfied upon the occurrence of the IPO in 2021, at which point we recorded a cumulative one-time share-based compensation expense determined using the awards’ grant-date fair value.
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.
See Note 12 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report for further information.
See Note 13 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report for further information.
Other Revenues Other revenues primarily consist of Robinhood Gold subscription fees, as well as proxy rebates, proxy revenues, and ACATS fees charged to users for facilitating the transfer of part or all of assets in their accounts to another broker-dealer.
Other Revenues 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.
We record share-based compensation expense for market-based equity awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable to be satisfied.
We record SBC expense for market-based equity awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable to be satisfied.
For Time-Based RSUs granted pre-IPO, we record share-based compensation expense on an accelerated attribution method over the requisite service period, as these awards include a performance-based vesting condition.
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.
Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) share-based compensation, (v) change in fair value of convertible notes and warrant liability, (vi) significant legal and tax settlements and reserves, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results.
Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) 83 Table of Contents 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.
A user need not satisfy these conditions on a recurring monthly basis or have a funded account to be included in MAU. MAU figures in this Annual Report reflect MAU for the last month of the relevant period presented. We utilize MAU to measure how many customers interact with our products and services during a given month.
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.
When customers place orders for options, cryptocurrencies, or equities on our platform, we route these orders to market makers and we receive 77 Table of Contents consideration from those market makers. With respect to equities and options trading, such fees are known as PFOF.
When customers place orders for options, cryptocurrencies, or equities on our platform, we route these orders to market makers and we receive consideration from those market makers. With respect to options and equities trading, such fees are known as PFOF.
Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, 75 Table of Contents evaluate performance, and perform strategic planning and annual budgeting.
Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.
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.
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.
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. 80 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 A discussion of our results for fiscal year 2021 compared to fiscal year 2020 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations — Comparison of the Years Ended December 31, 2020 and 2021" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022.
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. 87 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 A discussion of our results for fiscal year 2022 compared to fiscal year 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations — Comparison of the Years Ended December 31, 2022 and 2021” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023.
General and Administrative General and administrative costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for certain executives and employees engaged in legal, finance, human resources, risk, and compliance.
General and Administrative 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.
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.
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.
Share-based compensation related to remaining time-based service and market-based conditions to be met will be recorded over the remaining derived requisite service period.
SBC related to remaining time-based service and market-based conditions to be met will be recorded over the remaining derived requisite service period.
The fair value of our RSUs is estimated based on the fair value of our common stock on the date of grant. The time-based service condition for our awards is generally satisfied over four years.
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 98 Table of Contents years.
For options, our fee is on a per contract basis based on the underlying security. In the case of cryptocurrencies, our rebate is a fixed percentage of the notional order value. Within each asset class, whether equities, options or cryptocurrencies, the transaction-based revenue we earn is calculated in an identical manner among all participating market makers.
In the case of cryptocurrencies, our rebate is a fixed percentage of the notional order value. 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.
Based on our current level of operations, we believe our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months. Cash, Cash Equivalents, and Investments Our cash, cash equivalents, and investments were $6.25 billion and $6.34 billion as of December 31, 2021 and 2022.
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.
The decrease consisted of net loss adjusted for certain non-cash items and the effect of changes in operating assets and liabilities. Cash used in operating activities resulting from net loss adjusted for certain non-cash items increased by $230 million.
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.
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.
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 .
The following table presents a reconciliation of net income (loss), which is the most directly comparable GAAP measure, to Adjusted EBITDA: Year Ended December 31, (in millions) 2020 2021 2022 Net income (loss) $ 7 $ (3,687) $ (1,028) Add: Interest expenses related to credit facilities 5 20 24 Provision for (benefit from) income taxes 6 2 1 Depreciation and amortization 10 26 61 EBITDA (non-GAAP) 28 (3,639) (942) Share-based compensation (1) 24 1,572 654 Change in fair value of convertible notes and warrant liability — 2,045 — Impairment of Ziglu equity securities (2) — — 12 Restructuring charges (3) — — 105 Significant legal and tax settlements and reserves 102 55 20 Q4 2022 Processing Error (4) — — 57 Adjusted EBITDA (non-GAAP) $ 154 $ 33 $ (94) (1) For the year ended December 31, 2022, share-based compensation benefited from restructuring-related net reversals of previously recognized expense was $77 million in connection with both the April 2022 Restructuring and August 2022 Restructuring (see Note 13 - Common Stock and Stockholders' (Deficit) Equity, to our consolidated financial statements in this Annual Report for further information).
The following table presents a reconciliation of Adjusted EBITDA, to the most directly comparable GAAP measure, net loss: Year Ended December 31, (in millions) 2021 2022 2023 Net loss $ (3,687) $ (1,028) $ (541) Add: Interest expenses related to credit facilities 20 24 23 Provision for income taxes 2 1 8 Depreciation and amortization 26 61 71 EBITDA (non-GAAP) (3,639) (942) (439) 2021 Founders Award Cancellation — — 485 SBC excluding 2021 Founders Award Cancellation (1) 1,572 654 386 Significant legal and tax settlements and reserves 55 20 104 Restructuring charges (2) — 105 — Q4 2022 Processing Error (3) — 57 — Impairment of Ziglu equity securities (4) — 12 — Change in fair value of convertible notes and warrant liability 2,045 — — Adjusted EBITDA (non-GAAP) $ 33 $ (94) $ 536 _______________ (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).
With respect to cryptocurrency trading, we receive “Transaction Rebates.” In the case of equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded; that is, we receive a fixed percentage of the difference between the publicly quoted bid and ask at the time the trade is executed.
For equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded; that is, we receive a fixed percentage of the difference between the publicly quoted bid and ask at the time the trade is executed.
Operating Expenses Brokerage and Transaction Brokerage and transaction costs primarily consist of broker-dealer transaction expenses (such as fees paid to centralized clearinghouses and regulatory fees), market data expenses, cash and share-based compensation and benefits as well as allocated overhead for employees engaged in clearing and brokerage functions, and Robinhood Cash Card transactions expenses (such as network fees and card processing fees).
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.
For additional information, see Note 1 - Description of Business and Summary of Significant Accounting Policies, to our consolidated financial statements in this Annual Report. Although we believe that our estimates, assumptions, and judgments 90 Table of Contents are reasonable, they are based upon information presently available.
For additional information, see Note 1 - Description of Business and Summary of Significant Accounting Policies, to our consolidated financial statements in this Annual Report. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results might differ significantly from these estimates under different assumptions, judgments, or conditions.
Glossary Terms • Automated Customer Account Transfer Service (ACATS) : A system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another. • Churned Account: An account is considered “Churned” if it was ever a New Funded Account whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding certain Company-initiated Credits) drops to or below zero for at least 45 consecutive calendar days.
Glossary Terms • Automated Customer Account Transfer Service (“ACATS”) : A system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another. • Churned Customer: A Funded Customer is considered “Churned” if it was ever a New Funded Customer whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) drops to or below zero and has not completed a transaction using any account with a Robinhood entity for at least 45 consecutive calendar days.
(2) Includes cash and cash equivalents, cash segregated under federal and other regulations, deposits with clearing organizations and investments. (3 ) Cash Sweep is an off-balance-sheet amount. Robinhood earns a net interest spread on Cash Sweep balances based on the interest rate offered by the partner banks less the interest rate given to users as stated in our program terms.
(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.
Operations costs also include our provision for credit losses and fraud in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and chargebacks for unauthorized 78 Table of Contents debit card use.
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.
Commitments The following table summarizes our short- and long-term material cash requirements for contractual obligations as of December 31, 2022: Payments Due by Period (in millions) Total 2023 2024-2025 2026-2027 Thereafter Operating lease commitments $ 190 $ 30 $ 56 $ 36 $ 68 Non-cancelable purchase commitments (1) 1,037 309 490 238 — Total $ 1,227 $ 339 $ 546 $ 274 $ 68 ________________ (1) Non-cancelable purchase commitments are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.
Commitments The following table summarizes our short- and long-term material cash requirements for contractual obligations as of December 31, 2023: Payments Due by Period (in millions) Total 2024 2025-2026 2027-2028 Thereafter Operating lease commitments $ 145 $ 28 $ 46 $ 30 $ 41 Purchase commitments (1) 899 335 555 8 1 Total $ 1,044 $ 363 $ 601 $ 38 $ 42 _______________ (1) Purchase commitments are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.
Technology and Development Technology and development costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for engineering, data science, and design personnel who support and improve our platform and develop new products, costs for cloud infrastructure services, and costs associated with computer hardware and software, including amortization of internally developed software.
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. 85 Table of Contents 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).
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: Year Ended December 31, 2020 2021 2022 NCFA (1) (in millions) 12.5 22.7 23.0 MAU (in millions) 11.7 17.3 11.4 AUC (2) (in billions) $ 63.0 $ 98.0 $ 62.2 Net Deposits (in billions) $ 31.0 $ 27.1 $ 18.4 ARPU (in dollars) $ 109 $ 103 $ 60 74 Table of Contents ________________ (1) The following table describes the annual changes within NCFA: Year Ended December 31, (in millions) 2020 2021 2022 Beginning NCFA 5.1 12.5 22.7 New funded accounts 8.0 12.2 1.3 Resurrected accounts 0.3 0.5 0.2 Churned accounts (0.9) (2.5) (1.2) Ending NCFA 12.5 22.7 23.0 (2) The following table sets out the components of AUC by type of asset: Year Ended December 31, (in billions) 2020 2021 2022 Equities $ 53.0 $ 72.1 $ 45.8 Cryptocurrencies 3.5 22.1 8.4 Options 2.1 1.5 0.3 Cash held by users 7.9 8.8 10.8 Receivables from users (3.5) (6.5) (3.1) AUC $ 63.0 $ 98.0 $ 62.2 The following table describes the changes within AUC: Year Ended December 31, (in billions) 2020 2021 2022 Beginning AUC $ 14.1 $ 63.0 $ 98.0 Net Deposits 31.0 27.1 18.4 Net market losses 17.9 7.9 (54.2) Ending AUC $ 63.0 $ 98.0 $ 62.2 Non-GAAP Financial Measures Adjusted EBITDA We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance.
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.” 82 Table of Contents Key Performance Metrics Key performance metrics for the relevant periods were as follows: Year Ended December 31, 2021 2022 2023 Funded Customers (1) (in millions) 22.7 23.0 23.4 AUC (2) (in billions) $ 98.0 $ 62.2 $ 102.6 Net Deposits (in billions) $ 27.1 $ 18.4 $ 17.1 Growth Rate with respect to Net Deposits 43 % 19 % 27 % ARPU (in dollars) $ 103 $ 60 $ 80 MAU (in millions) 17.3 11.4 10.9 _______________ (1) The following table describes the annual changes within Funded Customers: Year Ended December 31, (in millions) 2021 2022 2023 Beginning Funded Customers 12.5 22.7 23.0 New Funded Customers 12.2 1.3 1.1 Resurrected Customers 0.5 0.2 0.2 Churned Customers (2.5) (1.2) (0.9) Ending Funded Customers 22.7 23.0 23.4 (2) The following table sets out the components of AUC by type of asset: Year Ended December 31, (in billions) 2021 2022 2023 Equities $ 72.1 $ 45.8 $ 69.4 Cryptocurrencies 22.1 8.4 14.7 Options 1.5 0.3 0.6 Cash held by Customers 8.8 10.8 21.3 Receivables from Customers (6.5) (3.1) (3.4) AUC $ 98.0 $ 62.2 $ 102.6 The following table describes the changes within AUC: Year Ended December 31, (in billions) 2021 2022 2023 Beginning AUC $ 63.0 $ 98.0 $ 62.2 Net Deposits 27.1 18.4 17.1 Net market gains (losses) 7.9 (54.2) 23.3 Ending AUC $ 98.0 $ 62.2 $ 102.6 Non-GAAP Financial Measures Adjusted EBITDA We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance.
For cryptocurrency orders, we route to market makers based on price and availability of the cryptocurrency from the market maker. Net Interest Revenues Net interest revenues consist of interest revenues less interest expenses. We earn interest revenues on margin loans to users, corporate cash and investments, segregated cash and cash equivalents, deposits with clearing organizations, and Cash Sweep.
For cryptocurrency orders, we route to market makers based on price and availability of the cryptocurrency from the market maker. Net Interest Revenues Net interest revenues consist of interest revenues less interest expenses.
See Note 8 - Investments and Fair Value Measurement, to our consolidated financial statements in this Annual Report for further information.
See Note 6 - Restructuring Activities, to our consolidated financial statements in this Annual Report for further information.
General and administrative costs also include legal expenses, other professional fees, settlements and penalties, and business insurance. 79 Table of Contents Results of Operations The following table summarizes our consolidated statements of operations data: (in millions) Year Ended December 31, 2020 2021 2022 Revenues: Transaction-based revenues $ 720 $ 1,402 $ 814 Net interest revenues 177 256 424 Other revenues 61 157 120 Total net revenues 958 1,815 1,358 Operating expenses: (1) Brokerage and transaction 114 158 179 Technology and development 215 1,234 878 Operations 135 368 285 Marketing 186 325 103 General and administrative 295 1,371 924 Total operating expenses 945 3,456 2,369 Change in fair value of convertible notes and warrant liability — 2,045 — Other expense (income), net — (1) 16 Income (loss) before income taxes 13 (3,685) (1,027) Provision for income taxes 6 2 1 Net income (loss) $ 7 $ (3,687) $ (1,028) _______________ (1) Includes share-based compensation expense as follows: Year Ended December 31, (in millions) 2020 2021 2022 Brokerage and transaction $ — $ 7 $ 5 Technology and development 18 610 212 Operations — 20 8 Marketing 1 50 4 General and administrative 5 885 425 Total share-based compensation expense $ 24 $ 1,572 $ 654 The 2020 amounts exclude the effect of share-based compensation for awards with performance-based conditions because our IPO had not occurred and, therefore, could not be considered probable.
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. 86 Table of Contents Results of Operations The following table summarizes our consolidated statements of operations data: (in millions) Year Ended December 31, 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: (1) 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) ____________________ (1) Includes SBC expense as follows: Year Ended December 31, (in millions) 2021 2022 2023 Brokerage and transaction $ 7 $ 5 $ 7 Technology and development 610 212 211 Operations 20 8 8 Marketing 50 4 5 General and administrative 885 425 640 Total SBC expense $ 1,572 $ 654 $ 871 Upon our IPO in 2021, we recognized $1.01 billion of SBC expense.
MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement.
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.
Operating Expenses Year Ended December 31, (in millions, except for percentages) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Operating expenses: Brokerage and transaction $ 114 $ 158 $ 179 39 % 13 % Technology and development 215 1,234 878 474 % (29) % Operations 135 368 285 173 % (23) % Marketing 186 325 103 75 % (68) % General and administrative 295 1,371 924 365 % (33) % Total operating expenses $ 945 $ 3,456 $ 2,369 Percent of total net revenues: Brokerage and transaction 12 % 9 % 13 % Technology and development 22 % 68 % 65 % Operations 14 % 20 % 21 % Marketing 19 % 18 % 8 % General and administrative 31 % 76 % 68 % Total operating expenses 98 % 191 % 175 % 84 Table of Contents Brokerage and Transaction Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Q4 2022 Processing Error $ — $ — $ 57 NM NM Broker-dealer transaction expenses 55 48 31 (13)% (35) % Market data expenses 21 33 26 57% (21) % Employee compensation, benefits, and overhead, excluding share-based compensation 7 14 20 100% 43 % Robinhood Cash Card transaction expenses 4 12 9 200% (25) % Share-based compensation — 7 5 NM (29) % Other 27 44 31 63% (30) % Total $ 114 $ 158 $ 179 39% 13 % Brokerage and transaction costs increased by $21 million primarily due to the $57 million Q4 2022 Processing Error, offset by a $17 million decrease in broker-dealer transaction expenses primarily driven by lower trading volume and a reduction of certain of these expenses effective in June 2021, and a $13 million decrease in other brokerage and transaction costs primarily due to lower bank charges as a result of more favorable pricing from our banking counterparties.
Operating Expenses Year Ended December 31, (in millions, except for percentages) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Operating expenses: Brokerage and transaction $ 158 $ 179 $ 146 13 % (18) % Technology and development 1,234 878 805 (29) % (8) % Operations 368 285 159 (23) % (44) % Marketing 325 103 122 (68) % 18 % General and administrative 1,371 924 1,169 (33) % 27 % Total operating expenses $ 3,456 $ 2,369 $ 2,401 Percent of total net revenues: Brokerage and transaction 9 % 13 % 8 % Technology and development 68 % 65 % 43 % Operations 20 % 21 % 9 % Marketing 18 % 8 % 7 % General and administrative 76 % 68 % 63 % Total operating expenses 191 % 175 % 130 % 91 Table of Contents Brokerage and Transaction Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Broker-dealer transaction expenses $ 48 $ 31 $ 32 (35)% 3 % Employee compensation, benefits, and overhead, excluding SBC 14 20 31 43% 55 % Market data expenses 33 26 23 (21)% (12) % Customer statements 11 8 15 (27)% 88 % SBC 7 5 7 (29)% 40 % Q4 2022 Processing Error — 57 — NM NM Other 45 32 38 (29)% 19 % Total $ 158 $ 179 $ 146 13% (18) % Brokerage and transaction costs decreased by $33 million as a result of the one time $57 million Q4 2022 Processing Error in the prior period.
See Note 6 - Restructuring Activities, to our consolidated financial statements in this Annual Report for further information. (4) Q4 2022 Processing Error: Delays in notification from third parties and process failures within Robinhood’s brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmos Health, Inc.
(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.
Examples of Company-initiated Credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments. • Daily Average Revenue Trades (DARTs) : We define DARTs for any asset class as the total number of revenue generating trades for such asset class executed during a given period divided by the number of trading days for such asset class in that period. • Fraudulent Deposit Transactions: Occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount. • Margin Book: We define Margin Book as our period-end aggregate outstanding margin loan balances receivable (i.e., the period-end total amount we are owed by customers on loans made 71 Table of Contents for the purchase of securities, supported by a pledge of assets in their margin-enabled brokerage accounts). • New Funded Account: We define a New Funded Account as a Robinhood Account into which the user makes an initial deposit, money transfer or asset transfer, of any amount during the relevant period. • Notional Trading Volume: We define Notional Trading Volume for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executed in that asset class over a specified period of time. • Resurrected Account: An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated Credits) rises above zero. • Robinhood Account : We define a Robinhood Account as a unique log-in that provides the account user access to any and all of the Robinhood products offered on our platform.
Negative balances typically result from Fraudulent Deposit Transactions (which occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount) and unauthorized debit card use, and less often, from margin loans. • Margin Book: We define Margin Book as our period-end aggregate outstanding margin loan balances receivable (i.e., the period-end total amount we are owed by customers on loans made for the purchase of securities, supported by a pledge of assets in their margin-enabled brokerage accounts). • New Funded Customer: We define a New Funded Customer as a unique person who became a Funded Customer for the first time during the relevant period. • Notional Trading Volume: We define Notional Trading Volume for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executed in that asset class over a specified period of time. 81 Table of Contents • Options Contracts Traded: We define Options Contracts Traded as the total number of options contracts bought or sold over a specified period of time.
Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results might differ from estimates.
Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results might differ from estimates. 97 Table of Contents 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.
Additionally, the number of users placing equity trades decreased 47% and the average Notional Trading Volume traded per trader decreased 5%. 81 Table of Contents Net Interest Revenues Year Ended December 31, (in millions, except for percentages) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Net interest revenues: Margin interest $ 67 $ 132 $ 177 97 % 34 % Interest on corporate cash and investments 2 1 103 (50) % NM Securities lending, net 98 136 89 39 % (35) % Interest on segregated cash and cash equivalents and deposits 14 4 57 (71) % NM Cash Sweep, net 1 3 22 200 % 633 % Interest expenses related to credit facilities (5) (20) (24) 300 % 20 % Total net interest revenues $ 177 $ 256 $ 424 45 % 66 % Percentage of total net revenues: Margin interest 7% 7% 13% Interest on corporate cash and investments —% —% 7% Securities lending, net 10% 7% 7% Interest on segregated cash and cash equivalents and deposits 2% 1% 4% Cash Sweep, net —% —% 2% Interest expenses related to credit facilities —% (1)% (2)% Total net interest revenues 19% 14% 31% Net interest revenues increased by $168 million primarily due to higher interest revenues earned from corporate cash and investments, segregated cash and cash equivalents and deposits, margin interest, and Cash Sweep, partially offset by lower interest revenues earned through securities lending.
The number of users placing option trades also decreased 18%. 88 Table of Contents Net Interest Revenues Year Ended December 31, (in millions, except for percentages) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Net interest revenues: Interest on corporate cash and investments $ 1 $ 103 $ 288 NM 180 % Margin interest 132 177 243 34 % 37 % Interest on segregated cash and cash equivalents and deposits 4 57 210 NM 268 % Cash Sweep 3 22 123 633 % 459 % Securities lending, net 136 89 79 (35) % (11) % Credit card, net — — 9 NM NM Interest expenses related to credit facilities (20) (24) (23) 20 % (4) % Total net interest revenues $ 256 $ 424 $ 929 66 % 119 % Net interest revenues as a % of total net revenues: Interest on corporate cash and investments —% 7% 16% Margin interest 7% 13% 13% Interest on segregated cash and cash equivalents and deposits 1% 4% 11% Cash Sweep —% 2% 7% Securities lending, net 7% 7% 4% Credit card, net —% —% —% Interest expenses related to credit facilities (1)% (2)% (1)% Total net interest revenues 14% 31% 50% Net interest revenues increased by $505 million.
Revenues Transaction-Based Revenues Year Ended December 31, (in millions, except for percentages) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Transaction-based revenues Options $ 440 $ 690 $ 488 57 % (29) % Cryptocurrencies 27 420 202 NM (52) % Equities 251 287 117 14 % (59) % Other 2 5 7 150 % 40 % Total transaction-based revenues $ 720 $ 1,402 $ 814 95 % (42) % Percentage of total net revenues: Options 46% 38% 36% Cryptocurrencies 3% 23% 15% Equities 26% 16% 9% Other —% —% —% Total transaction-based revenues 75 % 77% 60% Transaction-based revenues decreased by $588 million primarily driven by the market environment which had a negative impact on the number of traders and Notional Trading Volumes in all asset classes.
Revenues Transaction-Based Revenues Year Ended December 31, (in millions, except for percentages) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Transaction-based revenues Options $ 690 $ 488 $ 505 (29) % 3 % Cryptocurrencies 420 202 135 (52) % (33) % Equities 287 117 104 (59) % (11) % Other 5 7 41 40 % 486 % Total transaction-based revenues $ 1,402 $ 814 $ 785 (42) % (4) % Transaction-based revenues as a % of total net revenues: Options 38% 36% 27% Cryptocurrencies 23% 15% 7% Equities 16% 9% 6% Other —% —% 2% Total transaction-based revenues 77 % 60 % 42 % 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.
Technology and Development Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Employee compensation, benefits, and overhead, excluding share-based compensation $ 104 $ 284 $ 367 173% 29 % Share-based compensation 18 610 212 NM (65) % Cloud infrastructure services 67 267 175 299% (34) % Software and tools 22 63 105 186% 67 % Other 4 10 19 150% 90 % Total $ 215 $ 1,234 $ 878 474% (29) % Technology and development costs decreased by $356 million primarily due to a decrease in share-based compensation expense of $398 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021.
Technology and Development Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Employee compensation, benefits, and overhead, excluding SBC $ 284 $ 367 $ 308 29% (16) % SBC 610 212 211 (65)% — % Cloud infrastructure services 267 175 149 (34)% (15) % Software and tools 63 105 114 67% 9 % Other 10 19 23 90% 21 % Total $ 1,234 $ 878 $ 805 (29)% (8) % 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.
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 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.
Additionally, the number of users placing cryptocurrency trades decreased 61% and the average Notional Trading Volume traded per trader decreased 43%. The decrease was partially offset by a higher rebate rate from crypto market makers (initial increase was effective in late December 2021 and a further increase was effective in May 2022).
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.
Key Performance Metrics • Net Cumulative Funded Accounts (NCFA) : We define Net Cumulative Funded Accounts as New Funded Accounts less Churned Accounts plus Resurrected Accounts. • Monthly Active Users (MAU) : We define MAUs as the number of unique Robinhood Accounts who meet one of the following criteria at any point during a specified calendar month: a) executes a debit card transaction, b) transitions between two different screens on a mobile device while logged into their Robinhood Account or c) loads a page in a web browser while logged into their Robinhood Account.
“Growth rate” is calculated as aggregate Net Deposits over a specified 12 month period, divided by AUC for the fiscal quarter that immediately precedes such 12 month period. • Average Revenue Per User (“ARPU”) : We define ARPU as total revenue for a given period divided by the average number of Funded Customers on the last day of that period and the last day of the immediately preceding period. • Monthly Active Users (“MAU”) : We define MAUs as the number of unique 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.
(5) Annual yield is calculated by annualizing revenue/expense for the given period then dividing by the applicable average asset balance. 83 Table of Contents Other Revenues Year Ended December 31, (in millions, except for percentages) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Other revenues $ 61 $ 157 $ 120 157 % (24) % Percentage of total net revenues 6 % 9 % 9 % Other revenues decreased by $37 million compared to the prior year, mainly driven by the decreases in ACATS fees and subscription fees as a result of a decrease in paid subscribers to Robinhood Gold from 1.3 million to 1.1 million.
(5) Annual yield is calculated by dividing revenue for the given period by the applicable average asset balance. 90 Table of Contents Other Revenues Year Ended December 31, (in millions, except for percentages) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Other revenues $ 157 $ 120 $ 151 (24) % 26 % Other revenues as a % of total net revenues 9 % 9 % 8 % Other revenues increased by $31 million, primarily due to increases in proxy revenues of $17 million mainly driven by transitioning proxy services and investor communications to Say Technologies, our wholly-owned subsidiary, from a third-party proxy service company who shared in the revenues.
Provision for Income Taxes Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Provision for income taxes $ 6 $ 2 1 (67)% (50)% Provision for income taxes decreased by $1 million primarily due to a favorable provision to return true up adjustment in certain tax jurisdictions upon the completion of our 2021 U.S. income tax returns, and offset by the change in valuation allowance on our remaining U.S. federal and state deferred tax assets and by our current state taxes payable.
There will be no additional mark-to-market adjustments related to the convertible notes or warrant liability. 94 Table of Contents Provision for Income Taxes Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change 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.
The decrease was primarily driven by a decrease in receivables from users, net of $6.75 billion, partially offset by an increase of $2.35 billion for payable to users, net, an increase of $3.55 billion for securities loaned, and an increase of $517 million in securities borrowed.
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 tables below summarize the net capital, capital requirements and excess net capital of RHS and RHF as of periods presented: December 31, 2022 (in millions) Net Capital Required Net Capital Net Capital in Excess of Required Net Capital RHS $ 2,503 $ 66 $ 2,437 RHF 231 0.25 231 89 Table of Contents Cash Flows The following table summarizes our cash flow activities: Year Ended December 31, (in millions) 2020 2021 2022 Cash provided by (used in): Operating activities $ 1,876 $ (885) $ (852) Investing activities (32) (238) (60) Financing activities 1,276 5,203 — Cash used in operating activities decreased $33 million.
Cash Flows The following table summarizes our cash flow activities: Year Ended December 31, (in millions) 2021 2022 2023 Cash provided by (used in): Operating activities $ (885) $ (852) $ 1,181 Investing activities (238) (60) (582) Financing activities 5,203 — (610) Cash provided by operating activities increased $2.03 billion.
Marketing costs also include digital marketing, brand marketing, and creative services costs for creation, production, and placement of advertisements and marketing content, as well as marketing incentive expenses associated with the Robinhood Referral Program.
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.
(2) Partially as a result of the termination of the stock purchase agreement, which occurred in February 2023, the advances made to Ziglu accounted for as non-marketable equity securities were impaired to a carrying value of zero.
(4) Partially as a result of the termination of the stock purchase agreement, the advances made to Ziglu accounted for as non-marketable equity securities were impaired to a carrying value of zero. 84 Table of Contents Key Components of Our Results of Operations Revenues Transaction-Based Revenues Transaction-based revenues consist of amounts earned from routing customer orders for options, cryptocurrencies, and equities to market makers.
General and Administrative Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Share-based compensation $ 5 $ 885 $ 425 NM (52) % Employee compensation, benefits, and overhead, excluding share-based compensation 79 196 239 148% 22 % Legal expenses 56 101 76 80% (25) % Other professional fees 30 54 53 80% (2) % Impairment — — 45 NM NM Business insurance 4 25 41 525% 64 % Settlements and penalties 106 70 24 (34)% (66) % Other 15 40 21 167% (48) % Total $ 295 $ 1,371 $ 924 365% (33) % General and administrative costs decreased by $447 million primarily due to decreases in share-based compensation of $460 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021, including $323 million related to executive compensation arrangements (see Note 13 - Common Stock and Stockholders' (Deficit) Equity, t o our consolidated financial statements in this Annual Report for further information ).
Next year, we plan to increase our marketing investments in 2024 to promote our brand, products, and service. 93 Table of Contents General and Administrative Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change SBC related to 2021 Founders Award Cancellation $ — $ — $ 485 NM NM Employee compensation, benefits, and overhead, excluding SBC 196 239 216 22% (10) % SBC excluding 2021 Founders Award Cancellation 885 425 155 (52)% (64) % Settlements and penalties 70 24 126 (66)% 425 % Legal expenses 101 76 96 (25)% 26 % Other professional fees 54 53 41 (2)% (23) % Real estate related charges — 45 5 NM (89) % Other 65 62 45 (5)% (27) % Total $ 1,371 $ 924 $ 1,169 (33)% 27 % General and administrative costs 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) .
Marketing Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Employee compensation, benefits, and overhead, excluding share-based compensation $ 8 $ 37 $ 26 363% (30) % Digital marketing 36 49 21 36% (57) % Creative services 12 23 14 92% (39) % Brand marketing 29 24 14 (17)% (42) % Marketing incentives 81 121 11 49% (91) % Share-based compensation — 50 4 NM (92) % Other marketing 20 21 13 5% (38) % Total $ 186 $ 325 $ 103 75% (68) % Marketing costs decreased by $222 million partially due to a decrease in marketing incentives of $110 million, substantially all of which was due to lower costs associated with the Robinhood Referral Program, which was in line with the slower growth in our user base.
Marketing Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Digital marketing $ 49 $ 21 $ 39 (57)% 86 % Employee compensation, benefits, and overhead, excluding SBC 37 26 22 (30)% (15) % Brand marketing 24 14 21 (42)% 50 % Marketing incentives 121 11 7 (91)% (36) % SBC 50 4 5 (92)% 25 % Other marketing 44 27 28 (39)% 4 % Total $ 325 $ 103 $ 122 (68)% 18 % 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 a $47 million decrease in net interest revenues earned from securities lending transactions due to lower demand for hard-to-borrow securities. 82 Table of Contents The following table summarizes interest-earnings assets, the revenue or expense generated by these assets, and their respective annualized yields (computed based on average balance over the quarter): (in millions, except for annual yield) Margin Book (1) Cash and deposits (2) Cash Sweep (off-balance sheet) (3) Total interest-earning assets Securities lending, net Interest expenses related to credit facilities Net interest revenue Year ended December 31, 2022 December 31, 2022 $ 3,089 $ 9,530 $ 5,837 $ 18,456 December 31, 2021 6,467 10,600 2,095 19,162 Average (4) 4,778 10,065 3,966 18,809 Revenue/(expense) $ 177 $ 160 $ 22 $ 359 $ 89 $ (24) $ 424 Annual yield (5) 3.70 % 1.59 % 0.55 % 1.91 % 2.25 % Year ended December 31, 2021 December 31, 2021 $ 6,467 $ 10,600 $ 2,095 $ 19,162 December 31, 2020 3,351 6,544 1,827 11,722 Average (4) 4,909 8,572 1,961 15,442 Revenue/(expense) $ 132 $ 5 $ 3 $ 140 $ 136 $ (20) $ 256 Annual yield (5) 2.69 % 0.06 % 0.15 % 0.91 % 1.66 % Year ended December 31, 2020 December 31, 2020 $ 3,351 $ 6,544 $ 1,827 $ 11,722 December 31, 2019 642 3,186 59 3,887 Average (4) 1,997 4,865 943 7,805 Revenue/(expense) $ 67 $ 16 $ 1 $ 84 $ 98 $ (5) $ 177 Annual yield (5) 3.36 % 0.33 % 0.11 % 1.08 % 2.27 % _________ (1) Margin Book is the aggregate outstanding margin loan balances receivable.
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. 89 Table of Contents 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) Cash Sweep (off-balance sheet) (2) Credit card, net (off-balance sheet) (3) Total interest-earning assets Securities lending, net Interest expenses related to credit facilities Total net interest revenues Year ended December 31, 2023 December 31, 2023 $ 3,458 $ 10,107 $ 16,352 $ 205 $ 30,122 December 31, 2022 3,089 9,530 5,837 N/A 18,456 Average (4) 3,302 9,979 11,348 197 24,826 Revenue (expense) 243 498 123 9 $ 873 $ 79 $ (23) $ 929 Annual yield (5) 7.36 % 4.99 % 1.08 % N/A 3.52 % 3.74 % Year ended December 31, 2022 December 31, 2022 $ 3,089 $ 9,530 $ 5,837 N/A $ 18,456 December 31, 2021 6,467 10,600 2,095 N/A 19,162 Average (4) 4,519 9,931 2,920 N/A 17,370 Revenue (expense) 177 160 22 N/A $ 359 $ 89 $ (24) $ 424 Annual yield (5) 3.92 % 1.61 % 0.75 % N/A 2.07 % 2.44 % Year ended December 31, 2021 December 31, 2021 $ 6,467 $ 10,600 $ 2,095 N/A $ 19,162 December 31, 2020 3,351 6,544 1,827 N/A 11,722 Average (4) 5,432 10,137 2,109 N/A 17,678 Revenue (expense) 132 5 3 N/A $ 140 $ 136 $ (20) $ 256 Annual yield (5) 2.43 % 0.05 % 0.14 % N/A 0.79 % 1.45 % _______________ (1) Includes cash and cash equivalents, cash segregated under federal and other regulations, deposits with clearing organizations, and investments.
Additionally, we experienced a decrease in customer experience costs of $20 million, primarily due to decrease in costs related to third-party customer support vendors as we consolidated our third-party customer support centers due to the overall decrease in user transactions.
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.
Finally, we incurred an increase of $42 million in software and tools primarily driven by amortization of internally developed software and other software services utilized in delivering our products. 85 Table of Contents Operations Year Ended December 31, (in millions) 2020 2021 2022 2020 to 2021 % Change 2021 to 2022 % Change Employee compensation, benefits, and overhead, excluding share-based compensation $ 36 $ 125 $ 144 247% 15 % Customer experience 28 98 78 250% (20) % Provision for credit losses and fraud 61 108 42 77% (61) % Share-based compensation — 20 8 NM (60) % Other 10 17 13 70% (24) % Total $ 135 $ 368 $ 285 173% (23) % Operations costs decreased by $83 million primarily due to a decrease in our provision for credit losses and fraud losses of $66 million as a result of decreased user transactions and our strengthened process to identify high risk users and prevent Fraudulent Deposit Transactions and unauthorized debit card use.
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. 92 Table of Contents Operations Year Ended December 31, (in millions) 2021 2022 2023 2021 to 2022 % Change 2022 to 2023 % Change Employee compensation, benefits, and overhead, excluding SBC $ 125 $ 144 $ 75 15% (48) % Provision for credit losses and fraud 108 42 49 (61)% 17 % Customer experience 98 78 19 (20)% (76) % SBC 20 8 8 (60)% — % Other 17 13 8 (24)% (38) % Total $ 368 $ 285 $ 159 (23)% (44) % Operations costs decreased by $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.
Actual results might differ significantly from these estimates under different assumptions, judgments, or conditions. 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.
For additional information, see Note 13 - 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 April 2022 Restructuring and August 2022 Restructuring resulted in net reductions of $34 million in share-based compensation expense.
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.
Due to this and other factors, we have adjusted the carrying value of our investment in Ziglu to zero as of December 31, 2022. See Note 18 - Subsequent Events to our consolidated financial statements in this Annual Report for further information.
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.
Net Deposits and net market gains (losses) drive the change in AUC in any given period. • Net Deposits: We define Net Deposits as all cash deposits and asset transfers received from customers, net of reversals, customer cash withdrawals, and other assets transferred out of our platform (assets transferred in or out include debit card transactions, ACATS transfers, and custodial crypto wallet transfers) for a stated period. • Average Revenues Per User (ARPU) : We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period. 72 Table of Contents Overview With respect to the year ended December 31, 2022, as compared to the year ended December 31, 2021: • we generated total net revenues of $1.36 billion compared to $1.82 billion, for a year-over-year decrease of 25%; • we incurred a net loss of $1.03 billion, or -$1.17 per share, compared to net loss of $3.69 billion, or -$7.49 per share; net loss in 2021 included expense of $2.05 billion associated with the change in fair value of convertible notes and warrant liability issued in February 2021; • operating expenses were $2.37 billion compared to $3.46 billion, for a year-over-year decrease of 31%; ◦ share-based compensation (“SBC”) expense totaled $654 million compared to $1.57 billion, for a year-over-year decrease of 58% .
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.
Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators. • Asset Under Custody (AUC) : We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis.
Additionally, beginning in the fourth quarter of 2023, Robinhood Credit users are included in our calculation of MAU, although we are not restating amounts in prior periods as the impact to those figures was immaterial. • Funded Customers: We define a Funded Customer as a unique person who has at least one account with a Robinhood entity and, within the past 45 calendar days (a) had an account balance that was greater than zero (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) or (b) completed a transaction using any such account. • Assets Under Custody (“AUC”) : We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis.
These decreases were offset by an increase of employee compensation, benefits, and overhead of $83 million as our engineering and data science average headcount increased in the first half of the 2022 compared to 2021 to continue to support our platform and develop new products.
These 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.
Cash used in investing activities decreased $178 million in 2022 compared to 2021, which was primarily driven by $125 million used in business acquisitions, net of cash acquired in 2021, and to a lesser extent a reduction in expenditures related to the purchases of property and equipment and the capitalization of internally developed software.
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.
Removed
Negative balances typically result from Fraudulent Deposit Transactions (as defined below) and unauthorized debit card use, and less often, from margin loans. • Company-initiated Credits: Company-initiated Credits are amounts that are deposited into a Robinhood Account by the Company with no action taken by the user.
Added
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.
Removed
SBC expense for the year ended December 31, 2021, was primarily related to the cumulative one-time expense recognized upon our IPO.
Added
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.
Removed
For more information about Adjusted EBITDA, including the definition and limitations of such measure, and a reconciliation of net income (loss) to Adjusted EBITDA, please see “—Non-GAAP Financial Measures.” Recent Developments Restructurings In 2020 and the first half of 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus.
Added
Starting in January 2024, Net Deposits include dividend and interest inflows and Robinhood Gold subscription fees and margin interest 80 Table of Contents 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.
Removed
From the beginning of 2020 to the end of 2021, we grew net funded accounts from 5.1 million to 22.7 million and revenue from $278 million in 2019 to $1.82 billion in 2021.
Added
Each contract generally entitles the holder to trade 100 shares of the underlying stock. • Resurrected Customer: A Funded Customer is considered “Resurrected” in a stated period if it was a Churned Customer as of the end of the immediately preceding period and its balance (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) rises above zero or it completes a transaction using its account.
Removed
To meet customer and market demands, we grew our headcount from 700 at the end of 2019 to nearly 3,900 at the end of the first quarter of 2022. This rapid headcount growth led to some duplicate roles and job functions with more layers and complexity than 73 Table of Contents were optimal.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+12 added−2 removed5 unchanged
Biggest changeWe use a net interest sensitivity analysis to evaluate the effect that changes in interest rates might have on total net revenues.
Biggest changeWe use a net interest sensitivity analysis, which applies hypothetical 50, 100 or 150 basis point increases or decreases in interest rates to the period end balances of our interest-earning assets and liabilities, to evaluate the effect that changes in interest rates might have on total net revenues, net income (loss), and cash flows, prior to any income tax effects, over the next 12 months.
We manage risks associated with our securities lending activities by requiring credit approvals for counterparties, by monitoring the market value of securities loaned and collateral values for securities borrowed on a daily basis, by requiring additional cash as collateral for securities loaned or 94 Table of Contents return of collateral for securities borrowed when necessary, and by participating in a risk-sharing program offered through the OCC. 95 Table of Contents
We manage risks associated with our securities lending activities by requiring credit approvals for counterparties, by monitoring the market value of securities loaned and collateral values for securities borrowed on a daily basis, by requiring additional cash as collateral for securities loaned or return of collateral for securities borrowed when necessary, and by participating in a risk-sharing program offered through the OCC. 101 Table of Contents
However, as there were no outstanding borrowings under our credit facilities as of December 31, 2022 and 2021, we had limited financial exposure associated with changes in interest rates as of such dates.
However, as there were no outstanding borrowings under our credit facilities as of December 31, 2023 and 2022, we had limited financial exposure associated with changes in interest rates as of such dates.
We also have exposure to change in interest rates related to our variable-rate credit facilities, which are described in Note 12 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial statements in this Annual Report.
We also have exposure to change in interest rates related to our variable-rate credit facilities, which are described in Note 13 - Financing Activities and Off-Balance Sheet Risk, to our consolidated financial 100 Table of Contents statements in this Annual Report.
Removed
Interest Rate Risk Our exposure to changes in interest rates primarily relates to interest earned on our cash and cash equivalents, cash and cash equivalents segregated under federal and other regulations, deposits with clearing organizations, restricted cash, investments in debt securities and margin loans.
Added
Interest Rate Risk Our exposure to changes in interest rates primarily relates to interest revenue earned on our interest-earning assets that are subject to floating interest rates. Interest revenue is affected by various factors such as the distribution and composition of interest-earning assets and the federal funds rate.
Removed
The results of the analysis based on our financial position as of December 31, 2022 indicate that a hypothetical 100 basis point increase or decrease in interest rates would have had a positively correlated impact of approximately 10% on total net revenues.
Added
The sensitivity analysis assumes the asset and liability structure of the consolidated balance sheets would not change as a result of a simulated changes in interest rates.
Added
For our Cash Sweep program, we earn 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.
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For the vast majority of the Cash Sweep program, we have the ability to manage our net interest spread by adjusting the rate given to users as a result of changes in rates received from partner banks.
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As such, we do not consider the Cash Sweep balance to be subject to short-term interest rate risk and the sensitivity analysis excludes Cash Sweep balances.
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The impact to total net revenues, net income (loss), and cash flows, prior to any income tax effects, as a result of a hypothetical interest rate change at the end of each reporting period would be: December 31, (in millions) 2022 2023 50 basis point $ 68 $ 71 100 basis point 136 141 150 basis point 204 212 The change to total net revenues, net income (loss), and cash flows, prior to any income tax effects, would be the same as total net revenues includes net interest revenue, which captures both the impact of any incremental interest revenue and interest expense, and changes in interest rates do not have a direct impact on operating expenses.
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The impact related to the change in interest rates is positively correlated, linear, and proportional. The change in the sensitivity analysis from prior year is in line with the change in interest-earning asset balances. Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements.
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We invest in highly-rated debt securities that were considered held-to-maturity investments with average duration in the portfolio less than a year and the maximum maturity of two years.
Added
To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curve.
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Based on investment positions as of December 31, 2023, a hypothetical 100 basis point increase in interest rates across all maturities would not be significant. Any losses would only be realized if we sold the investments prior to maturity.
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We have established a comprehensive interest rate risk management policy, which formalizes our approach to managing interest rate risk arising in connection with the operation of our businesses.
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The policy sets forth policies and procedures pursuant to which we will identify interest rate risk exposure, identify and implement appropriate hedging strategies and hedging instruments, and analyze the effectiveness of our hedging strategies. Interest rate instruments will be used for hedging purposes only and not for speculation.

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