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Cover and table of contents

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 March 31, 2022


☐			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 class			Trading Symbol			Name of each exchange on which registered
Class A Common Stock $0.0001 par value per share			HOOD			The Nasdaq Stock Market

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 o Accelerated filer o Non-accelerated filer ý 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 April 29, 2022, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 743,881,607 and 127,955,246.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION		PAGE
ITEM 1.	U naudited F inancial S tatements
	C ondensed C onsolidated B a lance S heets	4
	C onde n s ed C onsolidated S tatements of O perations	5
	Condensed C o n solidated S tatements of C o mprehensive L oss	6
	C on densed C onsolidated S tatements of C ash F lows	7
	C ondensed C onsolidated S tatements of S tockholders ’ (D eficit) E quity	8
	N otes to U naudited C ondensed C onsolidated F inancial S tatements	10
ITEM 2.	M anagement ’s D iscussion and A nalysis of F i nancial C ondition and R esults of O pe r ations	32
ITEM 3.	Q uantitative and Q ualitative D is c losures A bout M arket Risk	47
ITEM 4.	C on trols and P rocedures	48

PART II - OTHER INFORMATION
ITEM 1.	L egal P roceedings	50
ITEM 1A.	R isk F actors	51
ITEM 2.	U nregistered S ales of E quity S ecurities and U se of P roce eds	98
ITEM 3.	D efaults U pon S enior S ecurities	99
ITEM 4.	M ine S afety D isclosures	99
ITEM 5.	O th er I nf ormation	99
ITEM 6.	E xhibit I ndex	100
	S ig n atures	102

CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) 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;
expectations regarding our pending transaction with Ziglu Limited;
expectations about the sufficiency of our available cash, available borrowings, and cash from operations to meet our liquidity needs for the next 12 months; and
expectations regarding our use of the net proceeds from our initial public offering (“IPO”).

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 history;
the difficulty of managing our growth effectively, including our recent workforce reduction, 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;
the difficulty of raising additional capital (to satisfy any liquidity needs and support business growth and objectives) on reasonable terms or at all;
the need to maintain capital levels required by regulators and self-regulatory organizations;
the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for operational errors in clearing functions;
the impact of negative publicity on our brand and reputation;
the risk that changes in business, economic, or political conditions, or systemic market events, might harm our business;
our dependence on key employees and a skilled workforce;
the difficulty of complying with an extensive and complex 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 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 could be exploited to facilitate illegal payments; and
the risk that substantial future sales of Class A common shares in the public market 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.

Table of Contents

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 31,		March 31,
(in millions, except share and per share data)	2021		2022
Assets
Current assets:
Cash and cash equivalents	$	6,253	$	6,191
Cash and securities segregated under federal and other regulations	3,992		4,458
Receivables from brokers, dealers, and clearing organizations	88		124
Receivables from users, net	6,639		5,215
Deposits with clearing organizations	328		294
User-held fractional shares	1,834		1,929
Investments	27		40
Prepaid expenses	92		75
Other current assets	30		29
Total current assets	19,283		18,355
Property, software, and equipment, net	146		166
Goodwill	101		100
Intangible assets, net	34		32
Restricted cash	24		24
Operating lease right-of-use-assets	129		155
Non-current prepaid expenses	44		35
Other non-current assets	8		5
Total assets	$	19,769	$	18,872
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	252	$	249
Payables to users	6,476		7,149
Securities loaned	3,651		2,151
Fractional shares repurchase obligation	1,834		1,929
Operating lease liabilities	22		23
Other current liabilities	112		80
Total current liabilities	12,347		11,581
Operating lease liabilities, non-current	129		160

Total liabilities	12,476		11,741
Commitments and contingencies (Note 13)


Stockholders’ equity:

Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 735,957,367 shares issued and outstanding as of December 31, 2021; 21,000,000,000 shares authorized, 741,852,763 shares issued and outstanding as of March 31, 2022.	—		—
Class B common stock, par value $0.0001. 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of December 31, 2021; 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of March 31, 2022.	—		—
Class C common stock, par value $0.0001. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021; 7,000,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022.	—		—
Additional paid-in capital	11,169		11,400
Accumulated other comprehensive income (loss)	1		—
Accumulated deficit	(3,877)		(4,269)
Total stockholders’ equity	7,293		7,131
Total liabilities and stockholders’ equity	$	19,769	$	18,872

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
(in millions, except share and per share data)		2021		2022
Revenues:
Transaction-based revenues		$	420	$	218
Net interest revenues		62		55
Other revenues		40		26
Total net revenues		522		299

Operating expenses:
Brokerage and transaction		41		31
Technology and development		117		266
Operations		67		91
Marketing		102		34
General and administrative		137		268
Total operating expenses		464		690

Change in fair value of convertible notes and warrant liability		1,492		—
Other income, net		(1)		—
Loss before income taxes		(1,433)		(391)
Provision for income taxes		12		1
Net loss		$	(1,445)	$	(392)
Net loss attributable to common stockholders:
Basic		$	(1,445)	$	(392)
Diluted		$	(1,445)	$	(392)
Net loss per share attributable to common stockholders:
Basic		$	(6.26)	$	(0.45)
Diluted		$	(6.26)	$	(0.45)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic		230,685,464		867,769,168
Diluted		230,685,464		867,769,168

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended March 31,
(in millions)		2021		2022
Net loss		$	(1,445)	$	(392)
Other comprehensive loss, net of tax:

Foreign currency translation		—		(1)
Total other comprehensive loss, net of tax		—		(1)
Total comprehensive loss		$	(1,445)	$	(393)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
(in millions)	2021		2022
Operating activities:
Net loss	$	(1,445)	$	(392)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	4		12
Provision for credit losses	16		8
Share-based compensation	9		220

Change in fair value of convertible notes and warrant liability	1,492		—

Changes in operating assets and liabilities:
Segregated securities under federal and other regulations	135		—
Receivables from brokers, dealers, and clearing organizations	(51)		(36)
Receivables from users, net	(2,029)		1,417
Deposits with clearing organizations	(97)		34
Operating lease right-of-use assets	(6)		(26)
Current and non-current prepaid expenses	(20)		26
Other current and non-current assets	616		2
Accounts payable and accrued expenses	126		(2)
Payables to users	(56)		673
Securities loaned	110		(1,500)
Current and non-current operating lease liabilities	7		32
Other current and non-current liabilities	(693)		(31)
Net cash provided by (used in) operating activities	(1,882)		437
Investing activities:
Purchase of property, software, and equipment	(9)		(13)
Capitalization of internally developed software	(2)		(8)

Purchase of investments	—		(14)
Sales of investments	—		1

Net cash used in investing activities	(11)		(34)
Financing activities:


Taxes paid related to net share settlement of equity awards	—		(3)
Proceeds from issuance of convertible notes and warrants	3,552		—
Draws on credit facilities	1,000		11
Repayments on credit facilities	(1,000)		(11)

Proceeds from exercise of stock options, net of repurchases	6		3
Net cash provided by financing activities	3,558		—

Net increase in cash, cash equivalents, segregated cash and restricted cash	1,665		403
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period	6,190		10,270
Cash, cash equivalents, segregated cash and restricted cash, end of the period	$	7,855	$	10,673
Cash and cash equivalents, end of the period	$	4,795	$	6,191
Segregated cash, end of the period	3,050		4,458
Restricted cash, end of the period	10		24
Cash, cash equivalents, segregated cash and restricted cash, end of the period	$	7,855	$	10,673
Supplemental disclosures:
Cash paid for interest	$	1	$	3
Cash paid for income taxes, net of refund received	$	3	$	1

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Table of C ontents

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)


	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in millions, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of December 31, 2020	412,742,897	$	2,180	229,031,546	$	—	$	134	$	1	$	(190)	$	(55)
Net loss	—	—		—	—		—		—		(1,445)		(1,445)
Shares issued in connection with stock option exercise, net of repurchases	—	—		3,225,828	—		6		—		—		6
Vesting of early-exercised stock options	—	—		—	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		9		—		—		9
Balance as of March 31, 2021	412,742,897	$	2,180	232,257,374	$	—	$	149	$	1	$	(1,635)	$	(1,485)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Table of C ontents

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)


	Redeemable convertible preferred stock			Common stock(1)			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in millions, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of December 31, 2021	—	$	—	863,912,613	$	—	$	11,169	$	1	$	(3,877)	$	7,293
Net loss	—	—		—	—		—		—		(392)		(392)
Shares issued in connection with stock option exercise, net of repurchases	—	—		1,438,358	—		4		—		—		4
Issuance of common stock upon settlement of RSUs	—	—		4,672,769	—		—		—		—		—
Shares withheld related to net share settlement	—	—		(215,731)	—		(3)		—		—		(3)
Vesting of early-exercised stock options	—	—		—	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		(1)		—		(1)
Share-based compensation	—	—		—	—		230		—		—		230
Balance as of March 31, 2022	—	$	—	869,808,009	$	—	$	11,400	$	—	$	(4,269)	$	7,131

(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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”, 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
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.

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. Acting as agent, 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, including those that collateralize margin loans, and cryptocurrencies transacted on our platform and, as a result, any such securities or cryptocurrencies owned by users are not presented on our unaudited condensed consolidated balance sheets (refer to Note 2 for more information on cryptocurrency accounting pronouncements recently issued and not yet adopted). We do not allow users to purchase cryptocurrency on margin. We hold cryptocurrency in custody for our users’ accounts in one or more omnibus cryptocurrency wallets.

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, 2022 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, 2021 (“2021 Form 10-K”).

There have been no material changes in our significant accounting policies as described in our consolidated financial statements included in our audited annual consolidated financial statements for the year ended December 31, 2021. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. 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.

Table of Con tents

Use of Estimates

In accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures, on the unaudited condensed consolidated financial statements. We base our estimates on current and 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 those related to revenue recognition, the determination of allowances for credit losses, the capitalization and estimated useful life of internally developed software, contingent liabilities, useful lives of property and equipment, the incremental borrowing rate used to determine the present value of lease payments, the valuation and recognition of share-based compensation, the valuation of the convertible notes and warrant liability, the valuation and estimated useful lives of acquired intangible assets, uncertain tax positions, accrued liabilities, and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results.

Concentration 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 March 31,
		2021		2022
Market maker:
Citadel Securities, LLC		27	%	22	%

Entities affiliated with Susquehanna International Group, LLP(1)		12	%	12	%

Entities affiliated with Wolverine Holdings, L.P.(2)		9	%	10	%





All others individually less than 10%		33	%	28	%
Total as percentage of total revenue:		81	%	72	%

(1)Consists of Global Execution Brokers, LP and G1X Execution Services, LLC

(2)Consists of Wolverine Execution Services, LLC and Wolverine Securities LLC

Concentrations of Credit

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.

Table of Con tents

NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

There are no recently adopted accounting pronouncements that are material to us as of March 31, 2022.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract. The guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the timing of adoption and impact of this new guidance on our financial statements.

In March 2022, the staff of the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”) which provides illustrative guidance for entities to consider when they have obligations to safeguard crypto-assets held in custody on behalf of their platform users. SAB 121 states that the entity should carry a liability accompanied by an asset of the same value on its balance sheet representing the platform user’s crypto-assets held in custody measured at fair value initially and at each subsequent reporting period. Accompanying disclosures should be made relating to the entity’s safeguarding obligations for crypto-assets held for its platform users. This guidance should be reflected no later than the financial statements covering the first interim or annual period ending after June 15, 2022, with retrospective application as of the beginning of the fiscal year to which the interim or annual period relates. Early adoption is permitted. We will adopt this guidance for the interim period ending June 30, 2022. Upon adoption we expect to recognize a significant asset and liability and to provide the necessary accompanying disclosures. Had we adopted SAB 121 for the period ended March 31, 2022, we would have recognized a corresponding platform user crypto-asset and liability of approximately $20 billion on the unaudited condensed consolidated balance sheet.

Table of Con tents

NOTE 3: REVENUES

Disaggregation of Revenues

The following table presents our revenue disaggregated by revenue source:


	Three Months Ended March 31,
(in millions)		2021		2022
Transaction-based revenues:
Options		$	198	$	127
Cryptocurrencies		88		54
Equities		133		36
Other		1		1
Total transaction-based revenues		420		218

Net interest revenues:
Margin interest		28		35
Securities lending		35		24
Interest on segregated cash and securities		1		1
Other interest revenue		1		1
Interest expenses related to credit facilities		(3)		(6)
Total net interest revenues		62		55

Other revenues		40		26

Total net revenues		$	522	$	299

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 due from our relationship with a third-party investor communications company are reported in other current assets on the unaudited condensed consolidated balance sheets.

Contract liabilities, which 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 Receivables		Contract Liabilities
Beginning of period, January 1, 2022	$	83	$	3
End of period, March 31, 2022	90		3
Changes during the period	$	7	$	—

Table of Con tents

The difference between the opening and ending balances of our contract receivables primarily results from timing differences between our performance and counterparties’ payments. We recognized substantially all revenue from amounts included in the opening contract liability balances in the three months ended March 31, 2022.

NOTE 4: ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the allowance for credit losses, which substantially all relate to unsecured balances of receivables from users due to “Fraudulent Deposit Transactions” and losses on margin lending. Fraudulent Deposit Transactions are fraudulent, unlawful or otherwise inappropriate customer behavior, such as when customers 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.


	Three Months Ended March 31,
(in millions)		2021		2022
Beginning balance		$	34	$	40
Provision for credit losses		16		8
Write-offs		(19)		(28)
Ending balance		$	31	$	20

NOTE 5: INVESTMENTS AND FAIR VALUE MEASUREMENT

Investments

We invest in marketable debt securities which are classified as available-for-sale. We elected the fair value option on our available-for-sale debt securities and carry them at fair value with adjustments to fair value presented in other expense (income), net on our unaudited condensed consolidated statements of operations. Investments on our unaudited condensed consolidated balance sheet consisted of the following:


	December 31, 2021
(in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Debt securities:
Asset-backed securities	$	5	$	—	$	—	$	5
Commercial paper	14		—		—		14
Corporate bonds	7		—		—		7
Government bonds	1		—		—		1
Total investments	$	27	$	—	$	—	$	27

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	March 31, 2022
(in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Debt securities:
Asset-backed securities	$	8	$	—	$	—	$	8
Commercial paper	19		—		—		19
Corporate bonds	12		—		—		12
Government bonds	1		—		—		1
Total investments	$	40	$	—	$	—	$	40

All of our debt securities as of December 31, 2021 and March 31, 2022 had a stated contractual maturity or redemption date within one year.

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, 2021
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	4,004	$	—	$	—	$	4,004


Investments:
Asset-backed securities	—		5		—		5
Commercial paper	—		14		—		14
Corporate bonds	—		7		—		7
Government bonds	1		—				1
User-held fractional shares	1,834		—		—		1,834
Other current assets:
Equity securities - securities owned	14		—		—		14
Total financial assets	$	5,853	$	26	$	—	$	5,879

Liabilities


Fractional share repurchase obligations	$	1,834	$	—	$	—	$	1,834
Total financial liabilities	$	1,834	$	—	$	—	$	1,834

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	March 31, 2022
(in millions)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,624	$	—	$	—	$	1,624


Investments:
Asset-backed securities	—		8		—		8
Commercial paper	—		19		—		19
Corporate bonds	—		12		—		12
Government bonds	1		—		—		1
User-held fractional shares	1,929		—		—		1,929
Other current assets:
Equity securities - securities owned	10		—		—		10
Total financial assets	$	3,564	$	39	$	—	$	3,603

Liabilities


Fractional shares repurchase obligations	$	1,929	$	—	$	—	$	1,929
Total financial liabilities	$	1,929	$	—	$	—	$	1,929

During the three months ended March 31, 2022, we did not have any transfers in or out of Level 3 assets or liabilities.

Convertible Notes and Warrant Liability

In February 2021, we issued two tranches of convertible notes (the “convertible notes”) and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (the “warrant liability”). We elected the fair value option for both tranches of the convertible notes as we believe it best reflects their underlying economics. Under the fair value option, the convertible notes were initially measured at their issuance date estimated fair value and subsequently remeasured at their estimated fair value at the end of each reporting period. Upon the closing of our IPO, all of our outstanding convertible notes and warrants were reclassified from liability to equity and the fair value was no longer required to be remeasured.

For the three months ended March 31, 2021, we recorded expense of $1.4 billion and $116 million due to changes in fair value of the convertible notes and warrant liability, respectively, in our unaudited condensed consolidated statements of operations. No such expense related to the convertible notes was attributable to the change in the instrument-specific credit risk. We elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability.

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The significant unobservable inputs used in the fair value measurement of the convertible notes and warrant liability included:


	March 31, 2021
	Convertible notes			Warrant liability
Fair value of common stock	$	41.41		$	41.41
Instrument discount	10		%	10		%
Volatility	60		%	60		%
Discount rate(1)	30%/35%			N/A
Risk free rate	0.03		%	0.03		%
Conversion probability:
IPO by June 30, 2021	90		%	90		%
Next financing by June 30, 2021 followed by IPO by December 31, 2021	10		%	10		%

(1) Discount rate of 30% was applied on Tranche I and 35% was applied on Tranche 2. This represents the discount rate associated with the downside scenarios.

The following table sets forth a summary of the changes in the estimated fair value of our convertible notes and warrant liability:


(in millions)	Convertible notes		Warrant liability
Beginning of period, January 1, 2021	$	—	$	—
Issued during the period	3,299		253
Change in fair value	1,376		116

End of period, March 31, 2021	$	4,675	$	369

NOTE 6: INCOME TAXES


	Three Months Ended March 31,
(in millions, except percentages)		2021			2022
Loss before income taxes		$	(1,433)		$	(391)
Provision for income taxes		12			1
Effective tax rate		(0.8)		%	(0.3)		%

Our tax provision for interim periods is determined using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, we update our estimated annual ETR and make a year-to-date calculation of the provision.

For the three months ended March 31, 2021 and March 31, 2022, the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by current taxes payable.

The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the three months ended March 31, 2022, we believe it is more likely than not that the tax benefits of the remaining U.S. net deferred tax assets may not be realized.

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Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.

NOTE 7: OFFSETTING ASSETS AND LIABILITIES

Our policy is to recognize amounts related to our security borrowing and lending agreements subject to master netting arrangements on a gross basis on the unaudited condensed consolidated balance sheets although they are eligible for offset under GAAP. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Substantially all securities borrowing and lending agreements have an open contractual term and may be terminated upon notice by either party. Within these agreements, one has a contractual term of 30 days with a daily minimum commitment of $25 million and another has a contractual term of 21 days with a daily minimum commitment of $35 million.

Our assets and liabilities subject to master netting arrangements are as follows:


	December 31,		March 31,
(in millions)	2021		2022
Assets	Securities borrowed
Gross amount of securities borrowed	$	0.3	$	0.6
Gross amount offset on the unaudited condensed consolidated balance sheets	—		—
Amounts of assets presented on the unaudited condensed consolidated balance sheets(1)	0.3		0.6
Gross amount of securities borrowed not offset on the unaudited condensed consolidated balance sheets:
Securities borrowed	0.3		0.6
Security collateral received	(0.3)		(0.6)
Net amount	$	—	$	—

Liabilities	Securities loaned
Gross amount of securities loaned	$	3,651.0	$	2,150.9
Gross amount of securities loaned offset on the unaudited condensed consolidated balance sheets	—		—
Amounts of liabilities presented on the unaudited condensed consolidated balance sheets	3,651.0		2,150.9
Gross amount of securities loaned not offset on the unaudited condensed consolidated balance sheets:
Securities loaned	3,651.0		2,150.9
Security collateral pledged	(3,426.8)		(1,976.7)
Net amount	$	224.2	$	174.2

(1)Securities borrowed are included in receivables from brokers, dealers and clearing organizations on the unaudited condensed consolidated balance sheets.

We also obtain securities under margin agreements on terms which permit us to pledge and/or transfer securities to others. As of December 31, 2021 and March 31, 2022, we were permitted to re-pledge securities with a fair value of $9.21 billion and $7.23 billion under the margin agreements and $0.3 million and $0.6 million under the securities lending agreements. As of March 31, 2022, we re-pledged $234.0 million of the permitted amount with clearing organizations to meet deposit requirements.

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NOTE 8: FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK

Revolving Credit Facilities

In October 2019, we entered into a $200.0 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”). In October 2020, we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $600.0 million with a maturity date of October 29, 2024. In April 2021, we further increased the aggregate credit amount available under the October 2019 Credit Facility to $625.0 million. Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00% or (b) the Alternative Base Rate. The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate (as defined in the agreement) at the applicable time. The Alternative Base Rate is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50% and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00%. If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate (as defined in the agreement) as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent. There were no outstanding borrowings under the October 2019 Credit Facility at December 31, 2021 and March 31, 2022. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10% on any unused amount of the October 2019 Credit Facility quarterly in arrears.

In April 2021, we entered into a $2.18 billion committed and secured revolving line of credit, subject to certain borrowing base limitations, with a maturity date of April 15, 2022 (the “April 2021 Credit Facility”). Borrowings from the April 2021 Credit Facility must be specified to be Tranche A, Tranche B, Tranche C or a combination thereof. Tranche A loans are secured by users’ securities purchased on margin and are used primarily to finance margin loans. Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC margin deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC deposit requirements. Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Interest for this line of credit is determined at the time a loan is initiated and the applicable interest rate is calculated as a per annum rate equal to 1.25% for Tranche A loans and 2.50% for Tranche B and Tranche C loans, plus the Short-Term Funding Rate at the applicable time. The Short-Term Funding Rate is equal to the greatest of (i) the Eurodollar Rate for a one month interest period on such day, which equals to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement) in effect on such day. There were no outstanding borrowings under the April 2021 Credit Facility at December 31, 2021 and March 31, 2022. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50% on any unused amount of the April 2021 Credit Facility quarterly in arrears.

In April 2022, we entered into a $2.28 billion committed and secured revolving line of credit (the “April 2022 Credit Facility”) with a maturity date of April 10, 2023, amending and restating the April 2021 Credit Facility. Under circumstances described in the agreement for the April 2022 Credit Facility, the aggregate commitments may be increased by up to $1.14 billion, for a total commitment under the agreement of $3.65 billion. The April 2022 Credit Facility terms are the same as the April 2021 Credit Facility in all material aspects except for the Short-Term Funding Rate is equal to the greatest of (i) Daily Simple SOFR (as defined in the agreement) plus 0.10%, (ii) the Federal Funds Effective Rate (as defined in the

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agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement), in each case, in effect on such day.

The October 2019 Credit Facility, April 2021 Credit Facility, and April 2022 Credit Facility contain customary covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions. We were in compliance with all covenants under these facilities as of December 31, 2021 and March 31, 2022, as applicable.

Off-Balance Sheet Risk

In the normal course of business, we engage in activities involving settlement and financing of securities transactions. User securities transactions are recorded on a settlement date basis, which is generally two business days after the trade date for equities and one business day after the trade date for options. These activities may expose us to off-balance sheet risk in the event that the other party to the transaction is unable to fulfill its contractual obligations. In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations.

NOTE 9: COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY

Preferred Stock

As of March 31, 2022, no terms of the preferred stock have been designated, no shares of preferred stock were outstanding and we have no present plan to issue any shares of preferred stock.

Common Stock

We have three authorized classes of common stock: Class A, Class B, and Class C. Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law.

The convertible notes issued in February 2021 (see Note 5 for further information) were converted into 137.3 million shares of Class A common stock at a conversion price of $26.60 per share upon completion of our IPO.

Warrants

As of March 31, 2022, warrants outstanding consisted of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $26.60 per share for a maximum purchase amount of $380 million. The warrants expire on February 12, 2031 and can be exercised in cash or for net shares at the holder’s option. As of March 31, 2022, the warrants have not been exercised and are included as a component of additional paid in capital on the unaudited condensed consolidated balance sheets.

Equity Incentive Plans

Amended and Restated 2013 Stock Plan and 2020 Equity Incentive Plan

Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”). Our 2013 Plan was

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terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Plan (defined below) but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms. Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan. No new awards may be granted under our 2013 Plan or 2020 Plan.

2021 Omnibus Incentive Plan

Our 2021 Omnibus Incentive Plan (the “2021 Plan”) became effective on July 27, 2021, and provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.

As of March 31, 2022, an aggregate of 360 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 77 million shares had been issued under the plans, 154 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 129 million shares remained available for new grants under the 2021 Plan.

Stock Option Activity

A summary of stock option activity for the three months ended March 31, 2022 is as follows:


	Number of Shares	Weighted-Average Exercise Price		Weighted- Average Remaining Life	Total Intrinsic Value (in millions)
Balance at December 31, 2021	14,527,468	$	2.20	5.37	$	226
Granted during the period	4,463,248	14.15
Exercised during the period	(1,422,856)	2.47
Cancelled and forfeited during the period	(81,193)	7.66
Balance at March 31, 2022	17,486,667	$	5.21	5.44	$	145
Options vested and expected to vest at March 31, 2022	17,486,667	$	5.21	5.44	$	145
Options exercisable at March 31, 2022	12,442,934	$	1.92	4.90	$	144

Time-Based RSUs

We grant RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”). The following table summarizes the activity related to our Time-Based RSUs for the three months ended March 31, 2022:


	Number of RSUs	Weighted- average grant date fair value
Unvested at December 31, 2021	49,428,070	$	31.78
Granted	36,926,801	13.49
Vested	(4,551,630)	27.65
Forfeited	(4,087,935)	30.07
Unvested at March 31, 2022	77,715,306	$	23.43

Market-Based RSUs

In 2019 and 2021, we granted to our founders RSUs that vest upon the satisfaction of both the achievement of share price targets and the continued employment by each recipient (“Market-Based

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RSUs”). The following table summarizes the activity related to our Market-Based RSUs for the three months ended March 31, 2022:


	Number of RSUs	Weighted- average grant date fair value
Unvested at December 31, 2021	58,918,844	$	23.50
Granted	—	—
Vested	(115,264)	2.34
Forfeited	—	—
Unvested at March 31, 2022	58,803,580	$	23.54

Share-Based Compensation

The following table presents share-based compensation on our unaudited condensed consolidated statements of operations for the periods indicated:


	Three Months Ended March 31,
(in millions)	2021		2022
Brokerage and transaction	$	—	$	1
Technology and development	1		82
Operations	—		4
Marketing	—		5
General and administrative	8		128
Total	$	9	$	220

Included in the table above, we recorded share-based compensation expense of $129 million related to Time-Based RSUs, $84 million related to Market-Based RSUs, $4 million related to the 2021 Employee Share Purchase Plan (“ESPP”), and $2 million related to options during the three months ended March 31, 2022. Share-based compensation expense related to options was immaterial during the three months ended March 31, 2021. No share-based compensation was recorded during the three months ended March 31, 2021 related to Time-Based RSUs, Market-Based RSUs, or the ESPP.

We capitalized share-based compensation expense related to internally developed software of $10 million during the three months ended March 31, 2022. The corresponding amount during the three months ended March 31, 2021 was immaterial.

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As of March 31, 2022, there was $2.1 billion of unrecognized share-based compensation expense that is expected to be recognized over a weighted-average period of 2.28 years. Scheduled vesting for awards outstanding as of March 31, 2022, is as follows:


(in millions, except for number of shares)

	Number of Shares(1)	Expense
Remainder of 2022	20,911,890	$	708
2023	27,019,754	669
2024	20,776,835	426
2025	12,895,735	274
2026	2,348,400	35
Total	83,952,614	$	2,112

(1) Excludes future ESPP shares and Market-Based RSUs for which the share price target has not been met as we cannot forecast the vesting of these shares.

The above schedule excludes an estimate for forfeitures, which are recognized as they occur, and future equity grants.

NOTE 10: NET LOSS PER SHARE

We present net loss per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting loss per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis.

The following table presents the calculation of basic and diluted loss per share:


(in millions, except per share data)	Three Months Ended March 31,
		2021			2022
Net loss			$	(1,445)		$	(392)
Less: allocation of earnings to participating securities			—			—
Net loss attributable to common stockholders			$	(1,445)		$	(392)

Weighted-average common stock outstanding - basic			230,685,464			867,769,168
Dilutive effect of stock options and unvested shares			—			—
Weighted-average common stock outstanding - diluted			230,685,464			867,769,168

Net loss per share attributable to common stockholders:
Basic			$	(6.26)		$	(0.45)
Diluted			$	(6.26)		$	(0.45)

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The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:


	Three Months Ended March 31,
		2021	2022
Redeemable convertible preferred stock		412,742,897	—
RSUs		81,820,160	136,525,285
Stock options		18,096,127	17,486,667
Unvested shares		187,885	7,362
Warrants		—	14,278,034
ESPP shares		—	634,603
Total anti-dilutive securities		512,847,069	168,931,951

NOTE 11: RELATED PARTY TRANSACTIONS

Related party transactions may include any transaction between entities under common control or with a related party. We have defined related parties as members of the Board of Directors, executive officers, principal owners of our outstanding stock and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates.

In February 2021, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (see Note 5 for further information). Two of the Tranche I investors were related parties prior to the completion of our IPO.

Pursuant to Rule 15c3-1 under the Exchange Act (the “SEC Uniform Net Capital Rule”), capital contributed to RHS is included in its net capital calculation and may not be withdrawn for one year from the time of contribution. A total of $2.0 billion of the gross proceeds received from the convertible note issuance was contributed to RHS in February 2021 and the restriction lapsed in February 2022. No capital has been returned to the parent company.

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NOTE 12: LEASES

Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park and our office in New York City. Our leases have remaining terms of 1 to 11 years, and many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. We do not have any finance leases.

The components of lease expense were as follows:


	Three Months Ended March 31,
(in millions)		2021		2022
Fixed operating lease costs		$	4	$	9
Variable operating lease costs		1		2
Short-term lease costs		—		—
Total lease costs		$	5	$	11

Fixed operating lease costs primarily consist of monthly base rent amounts due. Variable operating lease expenses are primarily related to payments made to our landlords for common area maintenance, property taxes, insurance, and other operating expenses.

Other information related to our operating leases was as follows:


	December 31,		March 31,
	2021		2022
Weighted-average remaining lease term	7.29 years		7.74 years
Weighted-average discount rate	6.27	%	6.17	%

Cash flows related to leases were as follows:


	Three Months Ended March 31,
(in millions)	2021		2022
Operating cash flows:
Payments for operating lease liabilities	$	2	$	3
Supplemental cash flow data:
Lease liabilities arising from obtaining right-of-use assets	$	9	$	32

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Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of March 31, 2022 are as follows:


(in millions)
Remainder of 2022	$	26
2023	36
2024	35
2025	34
2026	25
Thereafter	106
Total undiscounted lease payments	262
Less: imputed interest	(56)
Less: lease incentives	(23)

Total lease liabilities	$	183

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NOTE 13: COMMITMENTS & CONTINGENCIES

We are subject to contingencies arising in the ordinary course of our business, including contingencies related to legal, regulatory, non-income tax and other matters. We record an accrual for loss contingencies at management’s best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded. Amounts accrued for contingencies in the aggregate were $85 million as of December 31, 2021 and $104 million as of March 31, 2022. In our opinion, an adequate accrual had been made as of March 31, 2022 to provide for the probable losses of which we are aware and for which we can reasonably estimate an amount.

Legal and Regulatory Matters

The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increasing incidence of litigation involving the brokerage industry, including class action suits that generally seek substantial damages. Damages may include, in some cases, punitive damages. Compliance and trading problems that are reported to federal and state regulators, exchanges, or other SROs by dissatisfied users are investigated by such regulatory bodies, and, if pursued by such regulatory bodies or such users, may rise to the level of arbitration or disciplinary action. We are also subject to periodic regulatory audits and inspections.

We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings. The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation.

With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of March 31, 2022 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments, estimates, and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims.

Described below are certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend these matters vigorously.

Best Execution, Payment for Order Flow, and Sources of Revenue Matters

Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS. Five cases were consolidated in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in May 2021, alleging violations of Section 10(b) of the Exchange Act and various state law causes of action based on claims that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). Plaintiffs seek damages, restitution, disgorgement, and other relief. In February 2022, the court granted Robinhood’s motion to dismiss the amended consolidated complaint without prejudice. In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss.

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March 2020 Outages

A consolidated putative class action lawsuit relating to service outages on our stock trading platform on March 2-3, 2020 and March 9, 2020 (the “March 2020 Outages”) is pending in the United States District Court for the Northern District of California. The lawsuit generally alleges that putative class members were unable to execute trades during the March 2020 Outages because our platform was inadequately designed to handle customer demand and we failed to implement appropriate backup systems. The lawsuit includes, among other things, claims for breach of contract, negligence, gross negligence, breach of fiduciary duty, unjust enrichment and violations of certain California consumer protection statutes. The lawsuit generally seeks damages, restitution, and/or disgorgement, as well as declaratory and injunctive relief. Plaintiffs’ motion for class certification, which we oppose, is currently pending.

In September 2021, approximately 400 jointly-represented customers initiated an arbitration of individual claims against us arising out of the March 2020 Outages and other alleged system outages. Robinhood is contesting the claims, and a hearing has been scheduled for September 2022.

Options Trading and Related Customer Communications and Displays

Certain state regulatory authorities are conducting investigations regarding RHF’s options trading and related customer communications and displays and options trading approval process. RHF is cooperating with the regulators’ requests. FINRA also conducted an investigation and reached a settlement with RHF regarding the same options trading issues.

RHS Trade Reporting, Large Options Position Reporting, and ACATS Processing

In June 2021 RHF resolved with FINRA, on a no admit, no deny basis, certain investigations and examinations. As previously disclosed, that resolution did not address all the matters FINRA is investigating. In April 2022, FINRA Enforcement staff requested additional information related to RHS’s reporting of fractional share trades, as applicable, to a Trade Reporting Facility (“TRF”), the Over-the-Counter Reporting Facility (“ORF”), the Order Audit Trail System (“OATS”), and the Consolidated Audit Trail (“CAT”); reporting of accounts holding significant options positions to the Large Option Position Report (“LOPR”) system; and processing of certain requests for transfers of assets from Robinhood through the Automated Customer Account Transfer Service (“ACATS”), an automated industry system for account asset transfers. RHS is cooperating with these investigations.

RHC Anti-Money Laundering, Cybersecurity, and Other Issues

In July 2020, the New York State Department of Financial Services (“NYDFS”) issued a report of its examination of RHC citing a number of “matters requiring attention” focused primarily on anti-money laundering and cybersecurity-related issues. The matter was subsequently referred to the NYDFS’s Consumer Protection and Financial Enforcement Division for investigation. In March 2021, the NYDFS informed RHC of alleged violations of applicable (i) anti-money laundering and New York Banking Law requirements, including the failure to maintain and certify a compliant anti-money laundering program, (ii) notification provisions under RHC’s Supervisory Agreement with the NYDFS, and (iii) cybersecurity and virtual currency requirements, including deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security. RHC and the NYDFS have reached a settlement in principle with respect to these allegations, subject to final documentation, in connection with which, among other things, RHC expects to pay a monetary penalty and engage a monitor.

Additionally, in April 2021, the California Attorney General’s Office issued an investigative subpoena to RHC, seeking documents and answers to interrogatories about RHC’s trading platform, business and operations, application of California’s commodities regulations to RHC, customer disclosures, and other matters. RHC is cooperating with this investigation. We cannot predict the outcome of this investigation or any consequences that might result from it.

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Account Takeovers

In November 2020, FINRA Enforcement commenced an investigation into RHF concerning account takeovers, or circumstances under which an unauthorized actor successfully logs into a customer account, as well as anti-money laundering and cybersecurity issues. Since February 2021, RHF has received requests for documents and information from the SEC’s Enforcement Division in connection with its investigation into account takeovers and, more recently, suspicious activity report filings and issues related to the Electronic Funds Transfer Act. Additionally, state regulators, including the New York Attorney General’s Office, have opened inquiries into RHM, RHF, and RHC related to account takeovers. We are cooperating with these investigations and inquiries.

In January 2021, Siddharth Mehta filed a putative class action in California state court against RHF and RHS, purportedly on behalf of approximately 2,000 Robinhood customers whose accounts were allegedly accessed by unauthorized users. RHF and RHS removed this action to the United States District Court for the Northern District of California. Plaintiff generally alleges that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seek monetary damages and injunctive relief. In April 2022, the parties reached a settlement in principle.

Massachusetts Securities Division Matter

In December 2020, the Enforcement Section of the Massachusetts Securities Division (“MSD”) filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020. Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws. MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF's license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers’ accounts to other broker-dealers. Additionally, revocation of RHF’s Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF’s registration by other state regulators. A revocation of RHF’s license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs.

In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In September 2021, the parties filed cross-motions for partial judgment on the pleadings. In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful. The MSD has filed a notice of appeal. A hearing on the two remaining counts alleged by the MSD in its amended administrative complaint is scheduled to begin in September 2022.

Text Message Litigation

In August 2021, Cooper Moore filed a putative class action against RHF alleging that RHF initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington state law. The complaint seeks statutory and treble damages, injunctive relief, and attorneys’ fees and costs. The case is currently pending in the U.S. District

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Court for the Western District of Washington. RHF filed a motion to dismiss the complaint. In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss.

Early 2021 Trading Restrictions Matters

Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the “Early 2021 Trading Restrictions”).

A number of individual and putative class actions related to the Early 2021 Trading Restrictions were filed against RHM, RHF, and RHS, among others, in various federal and state courts. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida (the “MDL”). The court subsequently divided plaintiffs’ claims against Robinhood into three tranches: federal antitrust claims, federal securities law claims, and state law claims. In July 2021, plaintiffs filed consolidated complaints seeking monetary damages in connection with the federal antitrust and state law tranches. The federal antitrust complaint asserted one violation of Section 1 of the Sherman Act; the state law complaint asserted negligence and breach of fiduciary duty claims. In August 2021, we moved to dismiss both of these complaints. In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care. In November 2021, the court dismissed the federal antitrust complaint without prejudice, and plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act. In January 2022, we moved to dismiss the federal securities law complaint, and plaintiffs filed an amended complaint in connection with the federal antitrust tranche. In January 2022, the court dismissed the state law complaint with prejudice. Plaintiffs have taken an appeal to the United States Court of Appeals for the Eleventh Circuit. In February 2022, Robinhood moved to dismiss the amended complaint filed in connection with the federal antitrust tranche.

RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the U.S. Department of Justice, Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’s cell phone. There have been several inquiries based on specific customer complaints. We have also received requests from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021. The SEC’s Division of Examinations concluded their examinations related to the Early 2021 Trading Restrictions. In February 2022, SEC staff notified us of their findings to which we responded in April 2022. FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally. In addition, we have received information and testimony requests from certain committees and members of the U.S. Congress and Mr. Tenev, among others, has provided testimony with respect to the Early 2021 Trading Restrictions. We are cooperating with these investigations and examinations.

Registration Requirements for Member Personnel

In July 2021, RHF received a FINRA investigative request seeking documents and information related to its compliance with FINRA registration requirements for member personnel, including related to the

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FINRA non-registration status of Mr. Tenev and Co-Founder and Chief Creative Officer Mr. Bhatt. Robinhood is cooperating with the investigation.

IPO Litigation

In December 2021, Philip Golubowski filed a putative class action in the U.S. District Court for the Northern District of California against RHM, the officers and directors who signed Robinhood’s IPO offering documents, and Robinhood’s IPO underwriters. Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act of 1933, as amended (the “Securities Act”). Plaintiff seeks compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs. In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter, and in March 2022, the court appointed lead plaintiffs, who are expected to file an amended complaint in June 2022.

In January 2022, Robert Zito filed a complaint derivatively on behalf of Robinhood against Robinhood’s directors at the time of its IPO in the U.S. District Court for the District of Delaware. Plaintiff alleges breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act. Plaintiff’s claims are based on allegations of false or misleading statements in Robinhood’s IPO offering documents, and plaintiff seeks an award of damages and restitution to the Company, injunctive relief, and an award for attorney’s fees and costs. In March 2022, the district court entered a stay of this litigation pending resolution of Robinhood’s motion to dismiss in the Golubowski securities action discussed above.

NOTE 14: SUBSEQUENT EVENTS

Pending Acquisition of Ziglu

On April 16, 2022, we entered into a definitive agreement to acquire all outstanding equity of Ziglu Limited (“Ziglu”), a U.K.-based electronic money institution and crypto-asset firm that allows customers to buy and sell eligible cryptocurrencies, earn yield via its ‘Boost’ products, pay using a debit card, and move and spend money without fees. The aggregate consideration to be paid by us is estimated to be approximately $170 million, subject to customary purchase price adjustments set forth in the definitive agreement and payable primarily in cash while the remainder will be paid with a number of shares of our stock to be determined at closing. The transaction is subject to regulatory approval and other customary closing conditions and is expected to close no later than the first quarter of 2023.

Workforce Reduction

On April 26, 2022, we announced a reduction in force 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 reduction in force involves approximately 330 employees, representing approximately 9% of our full-time employees. We estimate that we will incur approximately $17 million to $23 million of cash restructuring and related charges primarily related to employee severance and benefits costs (excluding the impact of share-based compensation), substantially all of which we expect to incur in the second quarter of 2022.

With respect to share-based compensation, also as part of this reduction in force, we modified a portion of affected employees’ stock awards to allow for a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of previously recognized share-based compensation expense, which was primarily recognized using the accelerated attribution method, for stock awards that have been forfeited in connection with this reduction in force, we expect to recognize a net reduction of share-based compensation of approximately $30 million to $36 million in the second quarter of 2022. This estimate may change due to future changes in our stock price.

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Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS