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Form 10-Q Robinhood Markets, Inc. For: Sep 30

November 7, 2023 4:12 PM EST
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 001-40691
______________________
Robinhood Markets, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware 46-4364776
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification No.)
85 Willow Rd
Menlo Park, CA 94025
(Address of principal executive offices, including zip code)
(844) 428-5411
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock
$0.0001 par value per share
HOODThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý     Accelerated filer o    Non-accelerated filer o  Smaller reporting company  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  
As of November 1, 2023, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 737,937,831 and 126,844,136.




TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

1


CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of Robinhood Markets, Inc. (together with its subsidiaries, “we”, “Robinhood”, or the “Company”) contains forward-looking statements (as such phrase is used in the federal securities laws), which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “estimate,” “predict,” “potential”, or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. This Quarterly Report includes, among others, forward-looking statements regarding:
our expectations regarding legal and regulatory proceedings and investigations;
our expectation that we will soon launch brokerage operations in the UK, our plans to launch crypto trading in the EU following our UK launch, and our intent to continue expanding our operations outside of the United States;

our expectations for no credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies; and

our belief that, based on our current level of operations, our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months.
Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Quarterly Report. Reported results should not be considered an indication of future performance. Factors that contribute to the uncertain nature of our forward-looking statements include, among others:
our limited operating experience at our current scale;
the difficulty of managing our business effectively, including the size of our workforce, and the risk of declining or negative growth;
the fluctuations in our financial results and key metrics from quarter to quarter;
our reliance on transaction-based revenue, including payment for order flow (“PFOF”), and the risk of new regulation or bans on PFOF and similar practices;
our exposure to fluctuations in interest rates and rapidly changing interest rate environments;
the difficulty of raising additional capital (to provide liquidity needs and support business growth and objectives) on reasonable terms, if at all;
the need to maintain capital levels required by regulators and self-regulatory organizations (“SROs”);
the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for processing, operational, or technical errors in clearing functions;
2

the impact of negative publicity on our brand and reputation;
the risk that changes in business, economic, or political conditions that impact the global financial markets, or a systemic market event, might harm our business;
our dependence on key employees and a skilled workforce;
the difficulty of complying with an extensive, complex, and changing regulatory environment and the need to adjust our business model in response to new or modified laws and regulations;
the possibility of adverse developments in pending litigation and regulatory investigations;
the effects of competition;
our need to innovate and invest in new products and services in order to attract and retain customers and deepen their engagement with us in order to maintain growth;
our reliance on third parties to perform some key functions and the risk that processing, operational or technological failures could impair the availability or stability of our platform;
the risk of cybersecurity incidents, theft, data breaches, and other online attacks;
the difficulty of processing customer data in compliance with privacy laws;
our need as a regulated financial services company to develop and maintain effective compliance and risk management infrastructures;
the volatility of cryptocurrency prices and trading volumes;
the risk that our platform and services could be exploited to facilitate illegal payments; and
the risk that substantial future sales of Class A common stock in the public market, or the perception that they may occur, could cause the price of our stock to fall.
Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this Quarterly Report titled “Risk Factors” and our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Quarterly Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, Robinhood assumes no obligation to update any of the statements in this Quarterly Report whether as a result of any new information, future events, changed circumstances, or otherwise. You should read this Quarterly Report with the understanding that our actual future results, performance, events, and circumstances might be materially different from what we expect.
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 (“Reg. FD”). Investors should routinely monitor those web pages, in addition to our press
3

releases, SEC filings, and public conference calls and webcasts, as information posted on them could be deemed to be material information. Visitors to Robinhood’s blog, Under the Hood (accessible at blog.robinhood.com), which it had used for this purpose, will be redirected to its Newsroom. The contents of our websites are not intended to be incorporated by reference into this Quarterly Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
4

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

5

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31,September 30,
(in millions, except share and per share data)20222023
Assets
Current assets:
Cash and cash equivalents$6,339 $4,889 
Cash segregated under federal and other regulations2,995 3,448 
Receivables from brokers, dealers, and clearing organizations76 63 
Receivables from users, net3,218 3,704 
Securities borrowed517 1,204 
Deposits with clearing organizations186 275 
Asset related to user cryptocurrencies safeguarding obligation8,431 10,183 
User-held fractional shares997 1,396 
Held-to-maturity investments 372 
Prepaid expenses86 75 
Other current assets72 130 
Total current assets22,917 25,739 
Property, software, and equipment, net146 123 
Goodwill100 164 
Intangible assets, net25 53 
Non-current held-to-maturity investments 118 
Non-current prepaid expenses17 3 
Other non-current assets132 118 
Total assets$23,337 $26,318 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$185 $373 
Payables to users4,701 4,325 
Securities loaned1,834 3,245 
User cryptocurrencies safeguarding obligation
8,431 10,183 
Fractional shares repurchase obligation997 1,396 
Other current liabilities105 126 
Total current liabilities16,253 19,648 
Other non-current liabilities128 96 
Total liabilities16,381 19,744 
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.0001 par value. 210,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022; and September 30, 2023.
  
Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 764,888,917 shares issued and outstanding as of December 31, 2022; 21,000,000,000 shares authorized, 735,575,641 shares issued and outstanding as of September 30, 2023.
  
Class B common stock, $0.0001 par value. 700,000,000 shares authorized, 127,862,654 shares issued and outstanding as of December 31, 2022; 700,000,000 shares authorized, 126,983,025 shares issued and outstanding as of September 30, 2023.
  
Class C common stock, $0.0001 par value. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and September 30, 2023.
  
Additional paid-in capital11,861 12,054 
Accumulated other comprehensive income (loss) (4)
Accumulated deficit(4,905)(5,476)
Total stockholders’ equity
6,956 6,574 
Total liabilities and stockholders’ equity$23,337 $26,318 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
6

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
 September 30,
(in millions, except share and per share data)2022202320222023
Revenues:
Transaction-based revenues$208 $185 $628 $585 
Net interest revenues128 251 257 693 
Other revenues25 31 93 116 
Total net revenues361 467 978 1,394 
Operating expenses:
Brokerage and transaction 33 39 94 114 
Technology and development185 202 698 608 
Operations65 41 242 119 
Marketing19 28 74 79 
General and administrative233 230 727 1,036 
Total operating expenses535 540 1,835 1,956 
Other (income) expense, net 2 2  
Loss before income taxes(174)(75)(859)(562)
Provision for income taxes1 10 3 9 
Net loss$(175)$(85)$(862)$(571)
Net loss attributable to common stockholders:
Basic$(175)$(85)$(862)$(571)
Diluted$(175)$(85)$(862)$(571)
Net loss per share attributable to common stockholders:
Basic$(0.20)$(0.09)$(0.99)$(0.64)
Diluted$(0.20)$(0.09)$(0.99)$(0.64)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic882,356,575 895,108,790 875,055,571 898,999,464 
Diluted882,356,575 895,108,790 875,055,571 898,999,464 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
6

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
 September 30,
Nine Months Ended
 September 30,
(in millions)2022202320222023
Net loss$(175)$(85)$(862)$(571)
Other comprehensive loss, net of tax:
Foreign currency translation(1) (2) 
Net loss on hedging instruments (1) (4)
Total other comprehensive loss, net of tax(1)(1)(2)(4)
Total comprehensive loss$(176)$(86)$(864)$(575)
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
 September 30,
(in millions)20222023
Operating activities:
Net loss$(862)$(571)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization44 54 
Impairment of long-lived assets 47 12 
Provision for credit losses28 29 
Share-based compensation494 790 
Other8 (39)
Changes in operating assets and liabilities:
Receivables from brokers, dealers, and clearing organizations13 13 
Receivables from users, net2,565 (502)
Securities borrowed(139)(687)
Deposits with clearing organizations127 (89)
Current and non-current prepaid expenses29 26 
Other current and non-current assets5  
Accounts payable and accrued expenses(45)145 
Payables to users(1,080)(376)
Securities loaned(2,228)1,411 
Other current and non-current liabilities(39)5 
Net cash provided by (used in) operating activities(1,033)221 
Investing activities:
Purchases of property, software, and equipment(25)(1)
Capitalization of internally developed software(22)(14)
Purchases of available-for-sale investments(24) 
Proceeds from sales and maturities of available-for-sale investments19 10 
Purchases of held-to-maturity investments (651)
Proceeds from maturities of held-to-maturity investments 167 
Acquisitions of a business, net of cash and cash equivalents acquired (90)
Other(19) 
Net cash used in investing activities(71)(579)
Financing activities:
Proceeds from issuance of common stock under the Employee Stock Purchase Plan (“ESPP”)
13 9 
Taxes paid related to net share settlement of equity awards(9)(9)
Payments of debt issuance costs(10)(10)
Draws on credit facilities21 20 
Repayments on credit facilities(21)(20)
Change in principal collected from customers due to Coastal Bank (3)
Proceeds from exercise of stock options, net of repurchases6 2 
Repurchase of common stock (608)
Net cash provided by (used in) financing activities (619)
Effect of foreign exchange rate changes on cash and cash equivalents(2) 
Net decrease in cash, cash equivalents, segregated cash and restricted cash(1,106)(977)
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period10,270 9,357 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$9,164 $8,380 
Reconciliation of cash, cash equivalents, segregated cash and restricted cash, end of the period:
Cash and cash equivalents, end of the period$6,187 $4,889 
Segregated cash, end of the period2,954 3,448 
Restricted cash in other current assets, end of the period1 26 
Restricted cash in other non-current assets, end of the period22 17 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$9,164 $8,380 
Supplemental disclosures:
Cash paid for interest$6 $8 
Cash paid for income taxes, net of refund received$4 $9 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
8

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)
Common stockAdditional
paid-in
capital
Accumulated other comprehensive
loss
Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of June 30, 2022878,257,164 $ $11,581 $ $(4,564)$7,017 
Net loss— — — — (175)(175)
Shares issued in connection with stock option exercise, net of repurchases289,539 — 1 — — 1 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld6,167,086 — (2)— — (2)
Change in other comprehensive loss— — — (1)— (1)
Share-based compensation— — 0114 — — 114 
Balance as of September 30, 2022884,713,789 $ $11,694 $(1)$(4,739)$6,954 


Common stockAdditional
paid-in
capital
Accumulated other comprehensive lossAccumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of June 30, 2023909,694,702 $ $12,581 $(3)$(5,391)$7,187 
Net loss
— — — — (85)(85)
Shares issued in connection with stock option exercise, net of repurchases328,963 — — — — — 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld7,808,470 — — (4)— — — — (4)
Repurchase and retirement of Class A common stock (55,273,469)— (611)— — (611)
Change in other comprehensive loss— — — (1)— (1)
Share-based compensation— — 88 — — 88 
Balance as of September 30, 2023862,558,666 $ $12,054 $(4)$(5,476)$6,574 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.


9

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

Common stockAdditional
paid-in
capital
Accumulated other comprehensive
income (loss)
Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2021863,912,613 $ $11,169 $1 $(3,877)$7,293 
Net loss— — — — (862)(862)
Shares issued in connection with stock option exercise, net of repurchases2,152,493 — 6 — — 6 
Issuance of common stock in connection with Employee Stock Purchase Plan1,529,727 — 13 — — 13 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld17,118,956 — (9)— — (9)
Change in other comprehensive loss— — — (2)— (2)
Share-based compensation— — 515 — — 515 
Balance as of September 30, 2022884,713,789 $ $11,694 $(1)$(4,739)$6,954 

Common stockAdditional
paid-in
capital
Accumulated other comprehensive income (loss)Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2022892,751,571 $ $11,861 $ $(4,905)$6,956 
Net loss— — — — (571)(571)
Shares issued in connection with stock option exercise, net of repurchases1,125,929 — 2 — — 2 
Issuance of common stock in connection with Employee Stock Purchase Plan1,225,069 — 9 — — 9 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld22,729,566 — (9)— — (9)
Repurchase and retirement of Class A common stock (55,273,469)— (611)—  (611)
Change in other comprehensive loss— — — (4)— (4)
Share-based compensation— — 802 — — 802 
Balance as of September 30, 2023862,558,666 $ $12,054 $(4)$(5,476)$6,574 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
10

ROBINHOOD MARKETS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Robinhood Markets, Inc. (“RHM” and, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013. Our most significant, wholly-owned subsidiaries are:
Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer;
Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer;
Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy, sell, and transfer cryptocurrencies and is responsible for the custody of user cryptocurrencies held on our platform;
Robinhood Money, LLC (“RHY”), which offers a pre-paid debit card (the “Robinhood Cash Card”) and a spending account that help customers invest, save, and earn rewards; and
Robinhood Credit, Inc. (“Robinhood Credit”), which offers a no-fee credit card with rewards on each purchase.
Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution. Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction. We facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade. Our users have ownership of the securities they transact on our platform, including those that collateralize margin loans, and, as a result, such securities are not presented on our unaudited condensed consolidated balance sheets, other than user-held fractional shares which are presented gross. Our users also have ownership of the cryptocurrencies they transact on our platform (none of which are allowed to be purchased on margin and which do not serve as collateral for margin loans), and we recognize a liability to reflect our safeguarding obligation along with a corresponding asset on our balance sheet related to the cryptocurrencies we hold in custody for users.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC for interim financial reporting. The condensed consolidated financial statements are unaudited, and in management’s opinion, include all adjustments, including normal recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2023 or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”).
There have been no material changes in our significant accounting policies as described in our audited consolidated financial statements included in our 2022 Form 10-K. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
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Certain prior-period amounts have been reclassified to conform to the current period’s presentation. The impact of these reclassifications is immaterial to the presentation of the unaudited condensed consolidated financial statements and had no impact on previously reported total assets, total liabilities and net loss.
During the three months ended March 31, 2023, we reorganized our management reporting structure from a single entity-level reporting unit into four reporting units. As a result, we performed a goodwill impairment assessment immediately before and after the reorganization. This quantitative assessment did not result in impairment, considering the fair value of each reporting unit was substantially in excess of the corresponding carrying amount of net assets. We continue to operate and report financial information in one operating segment.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances. Assumptions and estimates used in preparing our unaudited condensed consolidated financial statements include, but are not limited to, those related to revenue recognition and share-based compensation, the determination of allowances for credit losses, valuation of user cryptocurrencies safeguarding obligation and corresponding asset, investment valuation, capitalization of internally developed software, useful lives of property, software, and equipment, valuation and useful lives of intangible assets, incremental borrowing rate used to calculate operating lease right-of-use assets and related liabilities, impairment of long-lived assets, determination of hedge effectiveness, uncertain tax positions, income taxes, accrued and contingent liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results.
Concentrations of Revenue and Credit Risk
Concentrations of Revenue
We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202320222023
Market maker:
Citadel Securities, LLC12 %11 %17 %12 %
All others individually less than 10%44 %26 %46 %28 %
Total as percentage of total revenue:56 %37 %63 %40 %

Concentrations of Credit Risk
We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. Default of a counterparty in equities and options trades, which are facilitated through clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us. It is our policy to review, as necessary, the credit standing of each counterparty.
In March 2023, certain U.S. banks failed and were taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”). Our exposure to impacted U.S. banks was immaterial. However, we took steps to
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help ensure that the loss of all or a significant portion of any uninsured amount would not have had an adverse effect on our ability to pay our operational expenses or make other payments.
Investments
We invest in marketable debt securities and determine the classification at the time of purchase.
Available-for-sale investments are recorded at fair value. We have elected the fair value option for our available-for-sale investments as we believe carrying these investments at fair value and taking changes in fair value through earnings best reflects their underlying economics. Fair value adjustments are presented in other (income) expense, net and interest earned on the debt securities as net interest revenues in our unaudited condensed consolidated statements of operations.
Held-to-maturity investments are securities that we have both the ability and positive intent to hold until maturity and are recorded at amortized cost. Interest income is calculated using the effective interest method, adjusted for deferred fees or costs, premium, or discount existing at the date of purchase. Interest earned is included in net interest revenues in our unaudited condensed consolidated statements of operations. We evaluate held-to-maturity investment for credit losses on a quarterly basis. We do not expect credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies. We monitor remaining securities by type and standard credit rating. There was no reserve for credit losses as of September 30, 2023.
Derivatives and Hedging Activities
All derivatives are recorded at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate the derivative in a hedging relationship and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting if elected. As part of our interest rate risk management strategy, we use interest rate floors designated as cash flow hedges which involve the receipt of offsetting cash flows from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Changes in fair value of the cash flow hedges are recognized in accumulated other comprehensive income (loss) (“AOCI”) and are subsequently reclassified to net interest revenues as interest payments are received on the hedged item. We assess hedge effectiveness on a quarterly basis to ensure all hedges remain highly effective. If the derivative financial instruments designated as cash flow hedges are deemed ineffective, changes in the fair value of the derivative financial instrument are recognized directly in net interest revenues.
We are exposed to credit risk if counterparties to our derivative contracts do not perform pursuant to the terms of our interest rate floors. Should a counterparty fail to perform under the terms of our interest rate floors, our credit exposure is limited to the net positive fair value and accrued interest owed from the failing counterparty. We mitigate counterparty credit risk through credit approvals, credit limits and monitoring procedures, as appropriate.

We enter into master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. Our derivative contracts do not require collateral to be posted by us or the counterparties.




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NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
There are no recently adopted accounting pronouncements that are material to us as of September 30, 2023.
Recently Issued Accounting Pronouncements Not Yet Adopted
There are no new accounting pronouncements that we have not yet adopted that are material to us as of September 30, 2023.
NOTE 3: BUSINESS COMBINATIONS
Acquisition of X1
On July 3, 2023, we acquired all of the outstanding equity of X1 Inc. (“X1”), a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The acquisition of X1 allows us to provide access to credit for our customers. In August 2023, X1 was renamed Robinhood Credit.
The acquisition date fair value of the consideration transferred for Robinhood Credit was $104 million, which was entirely paid in cash. The purchase price allocation is based on a preliminary valuation and subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available, including certain tax matters, during the measurement period (up to one year from the acquisition date). The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:
In millions
Fair Value
Cash and cash equivalents$14 
Receivable from users, net3 
Prepaid expenses
1 
Other current assets23 
Goodwill64 
Intangible assets36 
Accounts payable and accrued expenses(36)
Other non-current liabilities(1)
Net assets acquired$104 
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributed to the assembled workforce of Robinhood Credit and anticipated operational synergies. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions at the time of acquisition. The following table sets forth the
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components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:
(in millions, except years)
Fair ValueUseful Life
Developed technology$25 4
Customer relationships10 7
Trade name
1 1
Total$36 
The overall weighted average useful life of the identified amortizable intangible assets acquired is five years. The estimated fair value of the intangible assets acquired approximate the amounts a market participant would pay for these intangible assets as of July 3, 2023. We used the replacement cost method to estimate the fair value of developed technology, and a multi-period excess earnings method was used to estimate the fair value of customer relationships.
Tangible net assets were valued at their respective carrying amounts as of the acquisition date, as these amounts approximated fair value.
Pro forma results of operations for Robinhood Credit have not been presented as the effect of this acquisition was not material.
Credit Card Program
The Robinhood Credit credit card program is funded under a program agreement between Robinhood Credit and Coastal Community Bank (“Coastal Bank”) (the “Program Agreement”), where Coastal Bank is the originator and owner of customer principal balances (refer to Note 12 - Financing Activities and Off-Balance Sheet Risk for more information). Robinhood Credit is responsible for administering the credit card program on a mobile app, including, (i) setting customer credit limits within Coastal Bank’s underwriting standards, (ii) loan servicing, (iii) remitting collected principal from customers to Coastal Bank, and (iv) offering and maintaining the customer rewards program. Coastal Bank is responsible for (i) funding the customer credit, (ii) reporting customer credit activities, and (iii) holding customer receivables. Additionally, Robinhood Credit is responsible to pay Coastal Bank customer balances that are ultimately charged off or deemed uncollectible, generally when balances become outstanding for over 180 days (refer to Note 7 - Allowance for Credit Losses for more information).
Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue. In addition, Robinhood Credit earns revenue from interchange fees from each credit card transaction. As an agent, Robinhood Credit recognizes interchange revenue net of a revenue share paid to Coastal Bank, certain fees paid to third-parties, and rewards paid to customers. From the date of the acquisition through September 30, 2023, Robinhood Credit revenues were not material to our unaudited condensed consolidated statements of operations.


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NOTE 4: GOODWILL AND INTANGIBLE ASSETS
Goodwill
The carrying amount of goodwill for the period indicated was as follows:
(in millions)
Carrying Amount
As of December 31, 2022
$100 
Additions due to Robinhood Credit
64 
As of September 30, 2023
$164 
There was no impairment of goodwill during the nine months ended September 30, 2023.
Intangible Assets
The components of intangible assets, net as of September 30, 2023 were as follows:
(in millions, except years)
Gross Carrying ValueAccumulated AmortizationNet Carrying ValueWeighted Average Remaining Useful Life - Years
Finite-lived intangible assets
Developed technology$48 $(18)$30 3.11
Customer relationships23 (3)20 7.29
Trade names1  1 0.78
Indefinite-lived intangible assets2 — 2 
Total$74 $(21)$53 
As of September 30, 2023, the estimated future amortization expense of finite-lived intangible assets was as follows:
(in millions)
Finite-lived intangible assets
Remainder of 2023$5 
202414 
20259 
20269 
20276 
Thereafter8 
Total$51 
Amortization expense of intangible assets was $5 million and $9 million for three and nine months ended September 30, 2023.
There was no impairment of intangible assets during the three and nine months ended September 30, 2023.
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NOTE 5: REVENUES
Disaggregation of Revenues
The following table presents our revenue disaggregated by revenue source:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2022202320222023
Transaction-based revenues:
Options$124$124$364$384
Cryptocurrencies512316392
Equities31279679
Other211530
Total transaction-based revenues208185628585
Net interest revenues:
Interest on corporate cash and investments
297540217
Margin interest4867122177
Interest on segregated cash and cash equivalents and deposits205927156
Cash sweep8351086
Securities lending, net29177670
Credit card, net44
Interest expenses related to credit facilities(6)(6)(18)(17)
Total net interest revenues128251257693
Other revenues253193116
Total net revenues$361$467$978$1,394
For our fully-paid securities lending program under which we borrow fully-paid shares from participating users and lend them to third parties (“Fully-Paid Securities Lending”), we earn revenue for lending certain securities based on demand for those securities and portions of such revenues are paid to participating users, and those payments are recorded as interest expense. The program was launched during the three months ended June 30, 2022. The following table presents interest revenue earned and interest expense paid from Fully-Paid Securities Lending:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2022202320222023
Interest revenue$5 $12 $5 $35 
Interest expense(1)(2)(1)(5)
Fully-Paid Securities Lending, net
$4 $10 $4 $30 
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Contract Balances
Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables related to proxy revenues due from issuers are reported in other current assets on the unaudited condensed consolidated balance sheets.
Contract liabilities, which primarily consist of unearned subscription revenue, are recognized when users remit cash payments in advance of the time we satisfy our performance obligations and are recorded as other current liabilities on the unaudited condensed consolidated balance sheets.
The table below sets forth contract receivables and liabilities for the period indicated:
(in millions)Contract ReceivablesContract Liabilities
Beginning of period, January 1, 2023$60 $3 
End of period, September 30, 202358 4 
Changes during the period$(2)$1 
The change in contract receivables primarily results from lower transaction-based revenue in cryptocurrencies driven by the market environment which had a negative impact on the number of traders and notional trading volume, partially offset by increased revenues from our proxy services. In addition, contract receivable balances were impacted by timing differences between our performance and counterparties’ payments. We recognized all revenue from amounts included in the opening contract liability balances in the nine months ended September 30, 2023.
NOTE 6: RESTRUCTURING ACTIVITIES
April 2022 Restructuring
On April 26, 2022, we announced a reduction in force (the “April 2022 Restructuring”) as part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing needs of our customers. The April 2022 Restructuring involved approximately 330 employees, representing approximately 9% of our full-time employees at that time.
We allowed affected employees’ share-based awards to continue vesting over a transitional period (generally two months during which they remained employed but were not expected to provide active service), which were generally accounted for as a modification allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the April 2022 Restructuring resulted in a net reduction to share-based compensation of $24 million, which was recognized in the second quarter of 2022 (refer to Note 13 - Common Stock and Stockholders' (Deficit) Equity for more information).
In addition, we recognized $17 million of cash restructuring and related charges in the second quarter of 2022, which primarily consisted of employee-related wages, benefits, and severance expense. All of the restructuring charges relating to the April 2022 Restructuring were paid in full as of the third quarter of 2022.
August 2022 Restructuring
On August 2, 2022, we announced an additional reduction in force involving approximately 780 employees, representing approximately 23% of our full-time employees at the time, the planned closure of two offices, and related matters (the “August 2022 Restructuring”). These actions were part of a Company
18

reorganization into a general manager (“GM”) structure under which GMs have assumed broad responsibility for our individual businesses. As we continued to execute the August 2022 Restructuring, our lower headcount led us to evaluate our real estate portfolio. On September 30, 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.
In connection with the office closures described above, we determined the carrying amount of the right-of-use assets and associated leasehold improvements exceeded their respective fair value, resulting in impairments of $32 million and $15 million. We utilized a probability-weighted approach and market estimates from a third-party real estate brokerage firm to project sublease income cash flows, net of brokerage commissions, for each of the office spaces and applied a market rate of return on similar assets as a discount factor to determine fair value. We attributed the impairments on a relative carrying value basis between the right-of-use assets and leasehold improvements. In addition, we accelerated depreciation of $9 million related to other fixed assets. The impairments were recognized in general and administrative expense on our unaudited condensed consolidated statements of operations.
Similar to the April 2022 Restructuring, we allowed affected employees’ share-based awards to continue vesting over a transitional period allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the August 2022 Restructuring resulted in a net reduction to share-based compensation of $53 million, which was recognized in the third quarter of 2022 (refer to Note 13 - Common Stock and Stockholders' (Deficit) Equity for more information).
In addition, we recognized $34 million of cash restructuring and related charges primarily related to employee-related wages, benefits, and severance expense. As of September 30, 2022, $21 million of the restructuring charges relating to the August 2022 Restructuring remained unpaid and were included in accounts payable and accrued liabilities on our unaudited condensed consolidated balance sheets, all of which were paid off in the fourth quarter of 2022.
NOTE 7: ALLOWANCE FOR CREDIT LOSSES
Our allowance for credit losses relates to unsecured balances of receivables from users due to Fraudulent Deposit Transactions, losses on margin lending, and reserves on proxy revenue receivables. 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. The following table summarizes the allowance for credit losses as a reduction of receivables from users, net on the unaudited condensed consolidated balance sheet:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)2022202320222023
Beginning balance$18 $20 $40 $18 
Provision for credit losses9 4 28 19 
Write-offs(9)(7)(50)(20)
Ending balance$18 $17 $18 $17 
Credit Card Expected Loss Liability
Under the Program Agreement with Coastal Bank, Robinhood Credit is responsible to pay Coastal Bank customer balances that are ultimately charged off or deemed uncollectible, generally when balances become outstanding for over 180 days. Robinhood Credit estimates the related expected credit losses liability using a current expected credit losses model by evaluating historical collection data as well as
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considering charge off trends and market data by FICO cohort. The following table summarizes the credit card expected loss liability, a new liability in this quarter, as part of accounts payable and accrued expenses on the unaudited condensed consolidated balance sheet:
Three and Nine Months Ended September 30,
(in millions)
2023
Beginning balance$ 
Opening balance from acquisition of Robinhood Credit
16 
Provision for credit losses10 
Payments to Coastal Bank
(4)
Ending balance$22 


NOTE 8: INVESTMENTS AND FAIR VALUE MEASUREMENT
Investments
Available-for-sale
At December 31, 2022, our available-for-sale investments, which are included in other current assets on the audited consolidated balance sheets, was $10 million with no significant unrealized gains or losses. These investments had a stated contractual maturity or redemption date within one year. As of September 30, 2023, we had no available-for-sale investments. Refer to Fair Value of Financial Instruments below for further details.
Held-to-maturity
We had no held-to-maturity investments as of December 31, 2022. The following table summarizes our held-to-maturity investments as of September 30, 2023:
September 30, 2023
(in millions)Amortized CostAllowance for Credit LossesUnrealized GainsUnrealized LossesFair Value
Debt securities:
Corporate debt securities$225 $ $ $(2)$223 
U.S. Treasury securities149    149 
U.S. government agency securities49    49 
Certificates of deposit48    48 
Commercial paper19    19 
Total held-to-maturity investments$490 $ $ $(2)$488 
There were no sales of held-to-maturity investments during the three and nine months ended September 30, 2023.
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The table below presents the amortized cost and fair value of held-to-maturity investments by contractual maturity; the maximum maturity is two years:
September 30, 2023
(in millions)Within 1 Year1 to 2 YearsTotal
Amortized cost
Debt securities:
Corporate debt securities$125 $100 $225 
U.S. Treasury securities131 18 149 
U.S. government agency securities49  49 
Certificates of deposit48  48 
Commercial paper19  19 
Total held-to-maturity investments$372 $118 $490 
Fair value
Debt securities:
Corporate debt securities$124 $99 $223 
U.S. Treasury securities132 17 149 
U.S. government agency securities49  49 
Certificates of deposit48  48 
Commercial paper19  19 
Total held-to-maturity investments$372 $116 $488 
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Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis were presented on our unaudited condensed consolidated balance sheets as follows:
December 31, 2022
(in millions)Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$735 $ $ $735 
Other current assets:
Available-for-sale investments:
Commercial paper 5  5 
Government bonds3   3 
Corporate bonds 2  2 
Equity securities - securities owned8   8 
Asset related to user cryptocurrencies safeguarding obligation 8,431  8,431 
User-held fractional shares997   997 
Total financial assets$1,743 $8,438 $ $10,181 
Liabilities
User cryptocurrencies safeguarding obligation$ $8,431 $ $8,431 
Fractional shares repurchase obligations997   997 
Total financial liabilities$997 $8,431