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

This section presents management’s perspective on our financial condition and results of operations, including performance metrics that management uses to assess company performance. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report, and should be read in conjunction with our interim unaudited condensed consolidated financial statements and notes elsewhere in this Quarterly Report and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2022 Form 10-K. It is also intended to provide you with information that will assist you in understanding our consolidated financial statements, the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted for those changes. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which might not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Data as of and for the three and six months ended June 30, 2022 and 2023 has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.

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

Glossary Terms

• Automated Customer Account Transfer Service (“ACATS”)**: A system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another.

• Churned Account:** An account is considered “Churned” if it was ever a New Funded Account whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding certain Company-initiated Credits) drops to or below zero for at least 45 consecutive calendar days. Negative balances typically result from Fraudulent Deposit Transactions (as defined below) and unauthorized debit card use, and less often, from margin loans.

• Company-initiated Credits:** Company-initiated Credits are amounts that are deposited into a Robinhood Account by the Company with no action taken by the user. Examples of Company-initiated Credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.

*•*Daily Average Revenue Trades (“DARTs”): We define DARTs for any asset class as the total number of revenue generating trades for such asset class executed during a given period divided by the number of trading days for such asset class in that period.

• Fraudulent Deposit Transactions: Occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount.

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

• New Funded Account: We define a New Funded Account as a Robinhood Account into which the user makes an initial deposit, money transfer or asset transfer, of any amount, during the relevant period.

• Notional Trading Volume: We define Notional Trading Volume for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executed in that asset class over a specified period of time.

• Options Contracts Traded:** We define Options Contracts Traded as the total number of options contracts bought or sold over a specified period of time. Each contract generally entitles the holder to trade 100 shares of the underlying stock.

• Resurrected Account: An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated Credits) rises above zero.

• Robinhood Account**: We define a Robinhood Account as a unique log-in that provides the account user access to any and all of the Robinhood products offered on our platform.

Key Performance Metrics

• Net Cumulative Funded Accounts (“NCFA”)**: We define Net Cumulative Funded Accounts as New Funded Accounts less Churned Accounts plus Resurrected Accounts.

• Monthly Active Users (“MAU”)**: We define MAUs as the number of unique Robinhood Accounts who meet one of the following criteria at any point during a specified calendar month: a) executes a debit card transaction, b) transitions between two different screens on a mobile device while logged into their Robinhood Account or c) loads a page in a web browser while logged into their Robinhood Account. A user need not satisfy these conditions on a recurring monthly basis or have a funded account to be included in MAU. MAU figures in this Quarterly Report reflect MAU for the last month of the relevant period presented. We utilize MAU to measure how many customers interact with our products and services during a given month. MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement. Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.

• Assets Under Custody (“AUC”)**: We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis. Net Deposits and net market gains (losses) drive the change in AUC in any given period.

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

*•*Growth Rate and Annualized Growth Rate with respect to Net Deposits: When used with respect to Net Deposits, "growth rate" and "annualized growth rate" provide information about Net Deposits relative to total AUC. "Growth rate" is calculated as aggregate Net Deposits over a specified 12 month period, divided by AUC for the fiscal quarter that immediately precedes such 12 month period. "Annualized growth rate" is calculated as Net Deposits for a specified quarter multiplied by 4 and divided by AUC for the immediately preceding quarter.

• Average Revenue Per User (“ARPU”)**: We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period.

Overview

Robinhood was founded on the belief that everyone should be welcome to participate in our financial system. We are creating a modern financial services platform for everyone, regardless of their wealth, income, or background.

Our mission is to democratize finance for all. We use technology to provide access to the financial system in a way that is simple and convenient for our customers. We believe investing should be familiar and welcoming, with a simple design and an intuitive interface, so that customers are empowered to achieve their goals. We started with a revolutionary, bold brand and design in the Robinhood app which makes investing approachable for millions. We pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated, and we continue to build relationships with our customers by introducing new products that further expand access to the financial system. Through these efforts, we believe we have made investing culturally relevant and understandable, and that our platform is enabling our customers to become long-term investors and take greater control of their finances.

Financial Results and Performance

With respect to the three months ended June 30, 2023, as compared to the three months ended June 30, 2022:

• we generated total net revenues of $486 million compared to $318 million, for a year-over-year increase of 53%.

• we generated net income of $25 million, or $0.03 per share, compared to a net loss of $295 million, or -$0.34 per share;

• operating expenses were $466 million compared to $610 million, for a year-over-year decrease of 24%;

◦SBC expense totaled $109 million compared to $164 million, for a year-over-year decrease of 34%. SBC expense for the three months ended June 30, 2022 included a $24 million net reversal related to the April 2022 Restructuring;

*•*our Adjusted EBITDA (non-GAAP) was positive $151 million compared to negative $80 million, for year-over-year increase of $231 million;

• we had NCFA of 23.2 million compared to 22.9 million, for year-over-year growth of 1%;

• we had MAU of 10.8 million compared to 14.0 million, for a year-over-year decrease of 23%;

• we had AUC of $88.8 billion compared to $64.2 billion, for a year-over-year increase of 38%, primarily due to increasing asset values between the periods;

• Net Deposits were $4.1 billion, which translates to an annualized growth rate of 21%, compared to $5.2 billion, which translates to an annualized growth rate of 22%. Over the past twelve months, Net Deposits were $16.1 billion, which translates to a growth rate of 25% relative to AUC at June 30, 2022;

• we had ARPU of $84 compared to $56, for a year-over-year increase of 50%.

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

Recent Developments

Acquisition of X1

On June 21, 2023, we entered into a definitive agreement to acquire all of the outstanding equity of X1 Inc., a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The aggregate consideration to be paid in cash is approximately $104 million, subject to customary purchase price adjustments set forth in the definitive agreement and customary closing conditions. The transaction closed on July 3, 2023, refer to Note 3 - Business Combinations to our unaudited consolidated financial statements in this Quarterly Report.

Ongoing Efficiency Efforts

As part of our ongoing efforts to improve efficiency and operating costs, we continuously evaluate whether we are appropriately staffed in the normal course of business. During the three months ended June 30, 2023, we reduced our staff in certain departments as we saw increased productivity and opportunities for greater efficiency while continuing to deliver great service and innovation for our customers. As a result, we recognized nearly $10 million of employee-related wages, benefits, and severance expense.

2021 Founders Award Cancellation

In February 2023, we cancelled the 2021 Market-Based RSUs granted to our founders of 35.5 million unvested shares. We recognized $485 million SBC expense related to the cancellation during the six months ended June 30, 2023. No further expense associated with these awards will be recognized after the cancellation. No other payments, replacement equity awards or benefits were granted in connection with the cancellation.

Key Performance Metrics

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

						Three Months Ended June 30,
						2022						2023
NCFA(1) (in millions)						22.9						23.2
MAU (in millions)						14.0						10.8
AUC(2) (in billions)						$	64.2					$	88.8
Net Deposits (in billions)						$	5.2					$	4.1
ARPU (in dollars)						$	56					$	84

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(1)The following table describes the annual changes within NCFA:

						Three Months Ended June 30,
(in millions)						2022						2023
Beginning NCFA						22.8						23.1
New funded accounts						0.4						0.2
Resurrected accounts						0.1						0.1
Churned accounts						(0.4)						(0.2)
Ending NCFA						22.9						23.2

(2)The following table sets out the components of AUC by type of asset:

						Three Months Ended June 30,
(in billions)						2022						2023
Equities						$	51.2					$	62.8
Cryptocurrencies						8.6						11.5
Options						0.5						0.5
Cash held by users						8.1						17.2
Receivables from users						(4.2)						(3.2)
AUC						$	64.2					$	88.8

The following table describes the changes within AUC:

						Three Months Ended June 30,
(in billions)						2022						2023
Beginning AUC						$	93.1					$	78.4
Net Deposits						5.2						4.1
Net market gains (losses)						(34.1)						6.3
Ending AUC						$	64.2					$	88.8

Non-GAAP Financial Measures

Adjusted EBITDA

We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance. In addition to total net revenues, net income (loss), and other

results under GAAP, we utilize non-GAAP calculations of adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) SBC, (v) significant legal and tax settlements and reserves, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results. This non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for or superior to financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items are unpredictable, are not driven by core results of operations, and render comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.

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

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions)			2022						2023						2022						2023
Net income (loss)			$	(295)					$	25					$	(687)					$	(486)
Add:
Interest expenses related to credit facilities			6						5						12						11
Provision for (benefit from) income taxes			1						(3)						2						(1)
Depreciation and amortization			17						15						29						35
EBITDA (non-GAAP)			(271)						42						(644)						(441)
2021 Founders Award Cancellation			—						—						—						485
SBC excluding 2021 Founders Award Cancellation(1)			164						109						384						222
Restructuring charges(2)			17						—						17						—
Significant legal and tax settlements and reserves			10						—						20						—
Adjusted EBITDA (non-GAAP)			$	(80)					$	151					$	(223)					$	266

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(1)SBC excluding 2021 Founders Award Cancellation included a net reduction of $24 million as a result of the reversal of previously recognized expense for stock awards that were forfeited in connection with the April 2022 Restructuring.

(2)Restructuring charges related to the April 2022 Restructuring and primarily consisted of employee-related wages and benefits and severance expenses.

Results of Operations

The following table summarizes our unaudited condensed consolidated statements of operations data:

(in millions)						Three Months Ended June 30,												Six Months Ended June 30,
			2022						2023						2022						2023
Revenues:
Transaction-based revenues						$	202					$	193					$	420					$	400
Net interest revenues						74						234						129						442
Other revenues						42						59						68						85
Total net revenues						318						486						617						927
Operating expenses:(1)
Brokerage and transaction						30						39						61						75
Technology and development						245						207						513						406
Operations						86						36						177						78
Marketing						23						25						55						51
General and administrative						226						159						494						806
Total operating expenses						610						466						1,300						1,416
Other (income) expense, net						2						(2)						2						(2)
Income (loss) before income taxes						(294)						22						(685)						(487)
Provision for (benefit from) income taxes						1						(3)						2						(1)
Net income (loss)						$	(295)					$	25					$	(687)					$	(486)

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(1)Includes SBC expense as follows:

						Three Months Ended June 30,												Six Months Ended June 30,
(in millions)						2022						2023						2022						2023
Brokerage and transaction						$	1					$	2					$	2					$	4
Technology and development						59						56						141						110
Operations						1						1						5						3
Marketing						(2)						1						3						2
General and administrative						105						49						233						588
Total SBC expense						$	164					$	109					$	384					$	707

Comparison of the Three and Six Months Ended June 30, 2022 and 2023

Revenues

Transaction-Based Revenues

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Transaction-based revenues
Options			$	113					$	127					12		%				$	240					$	260					8		%
Cryptocurrencies			58						31						(47)		%				112						69						(38)		%
Equities			29						25						(14)		%				65						52						(20)		%
Other			2						10						400		%				3						19						533		%
Total transaction-based revenues			$	202					$	193					(4)		%				$	420					$	400					(5)		%
Transaction-based revenues as a % of total net revenues:
Options			36%						26%												39%						28%
Cryptocurrencies			18%						6%												18%						7%
Equities			9%						5%												11%						6%
Other			1%						3%												—%						2%
Total transaction-based revenues			64%						40%												68%						43%

Transaction-based revenues decreased by $9 million and $20 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year, primarily driven by the market environment, which had a negative impact on the number of traders across all asset classes, and a decrease in Notional Trading Volumes across cryptocurrencies and equities, partially offset by an increase in Options Contracts Traded.

Crypto DARTs decreased from 0.4 million to 0.2 million, for both the three and six months ended June 30, 2023, compared to the same periods in the prior year. Additionally, the number of users placing cryptocurrency trades decreased 39% and 38% and the average Notional Trading Volume traded per trader decreased 20% and 23%. The decrease was partially offset by a higher rebate rate from crypto market makers.

Equities DARTs decreased from 1.6 million to 1.5 million and 1.7 million to 1.5 million, for the three and six months ended June 30, 2023, compared to the same periods in the prior year. The number of users placing equity trades decreased 16% and 7% while the average Notional Trading Volume per trader increased 9% and 6%. Additionally, we experienced lower equity rebate rates due to reduced spreads in securities pricing.

Options Contracts Traded were up 35% and 24% for the three and six months ended June 30, 2023, compared to the same periods in the prior year. Options DARTs increased from 0.5 million to 0.6 million and remained flat at 0.6 million, compared to the same periods in the prior year. However, the number of users placing option trades decreased 18% and 23%. Further, we experienced lower option rebate rates due to reduced market volatility and the mix of ticker symbols traded as different ticker symbols pay different rebate rates.

Net Interest Revenues

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Net interest revenues:
Interest on corporate cash and investments			$	10					$	74					640		%				$	11					$	142					NM
Margin interest			39						57						46		%				74						110						49		%
Interest on segregated cash and cash equivalents and deposits			6						52						767		%				7						97						NM
Securities lending, net			23						27						17		%				47						53						13		%
Cash sweep			2						29						NM						2						51						NM
Interest expenses related to credit facilities			(6)						(5)						(17)		%				(12)						(11)						(8)		%
Total net interest revenues			$	74					$	234					216		%				$	129					$	442					243		%
Net interest revenues as a % of total net revenues:
Interest on corporate cash and investments			3		%				15		%										2		%				15		%
Margin interest			12		%				12		%										12		%				12		%
Interest on segregated cash and cash equivalents and deposits			2		%				10		%										1		%				10		%
Securities lending, net			7		%				6		%										8		%				6		%
Cash sweep			1		%				6		%										—		%				6		%
Interest expenses related to credit facilities			(2)		%				(1)		%										(2)		%				(1)		%
Total net interest revenues			23		%				48		%										21		%				48		%

Net interest revenues increased by $160 million and $313 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year. The increase was driven by the higher short term interest rate environment due to the rise in the federal funds rate, which is an input to our floating margin rate calculation and impacts the interest rate we receive on investable assets. Net interest revenues from margin interest also increased due to the higher interest rate while our Margin Book balance declined year-over-year. Segregated cash and cash equivalents and deposits as well as cash sweep balances increased year-over-year, which also contributed to the higher net interest revenues.

The following table summarizes interest-earning assets, the revenue or expense generated by these assets, and their respective annualized yields (computed based on average balance over the quarter):

(in millions, except for annualized yield)			Margin Book(1)			Cash and deposits(2)			Cash sweep (off-balance sheet)(3)			Total interest-earning assets						Securities lending, net			Interest expenses related to credit facilities			Net interest revenue
Three Months Ended June 30, 2023
June 30, 2023			$	3,314		$	10,758		$	11,903		$	25,975
March 31, 2023			3,117			10,405			8,881			22,403
Average(4)			3,216			10,582			10,392			24,189
Revenue/(expense)			57			126			29			212						$	27		$	(5)		$	234
Annual yield(5)			7.09%			4.76%			1.12%			3.51%												3.87		%
Three Months Ended March 31, 2023
March 31, 2023			$	3,117		$	10,405		$	8,881		$	22,403
December 31, 2022			3,089			9,530			5,837			18,456
Average(4)			3,103			9,968			7,359			20,430
Revenue/(expense)			53			113			22			188						$	26		$	(6)		$	208
Annual yield(5)			6.83%			4.53%			1.20%			3.68%												4.07		%
Three Months Ended June 30, 2022
June 30, 2022			$	4,142		$	9,717		$	2,408		$	16,267
March 31, 2022			5,292			10,983			2,275			18,550
Average(4)			4,717			10,350			2,341			17,408
Revenue/(expense)			39			16			2			57						$	23		$	(6)		$	74
Annual yield(5)			3.31%			0.62%			0.34%			1.31%												1.70		%
Six Months Ended June 30, 2023
June 30, 2023			$	3,314		$	10,758		$	11,903		$	25,975
December 31, 2022			3,089			9,530			5,837			18,456
Average(4)			3,201			10,144			8,870			22,215
Revenue/(expense)			110			239			51			400						$	53		$	(11)		$	442
Annual yield(5)			6.87		%	4.71		%	1.15		%	3.60		%										1.99		%
Six Months Ended June 30, 2022
June 30, 2022			$	4,142		$	9,717		$	2,408		$	16,267
December 31, 2021			6,467			10,600			2,095			19,162
Average(4)			5,304			10,159			2,251			17,714
Revenue/(expense)			74			18			2			94						$	47		$	(12)		$	129
Annual yield(5)			2.79		%	0.35		%	0.18		%	1.06		%										0.73		%

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(1) Margin Book is the aggregate outstanding margin loan balances receivable.

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

(3) Cash sweep is an off-balance-sheet amount. Robinhood earns a net interest spread on Cash Sweep balances based on the interest rate offered by the partner banks less the interest rate given to users as stated in our program terms.

(4) Average balance rows present a simple average of the ending balances as of each of the indicated dates for the relevant period.

(5) Annual yield is calculated by annualizing revenue/expense for the given period then dividing by the applicable average asset balance.

Other Revenues

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Other revenues			$	42					$	59					40		%				$	68					$	85					25		%
Other revenues as a % of total net revenues			13%						12%												11%						9%

Other revenues increased $17 million for both the three and six months ended June 30, 2023, compared to the same periods in the prior year, primarily due to increases in proxy revenues of $15 million and $16 million as a result of the growth in our proxy service.

Operating Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Operating expenses:
Brokerage and transaction			$	30					$	39					30		%				$	61					$	75					23		%
Technology and development			245						207						(16)		%				513						406						(21)		%
Operations			86						36						(58)		%				177						78						(56)		%
Marketing			23						25						9		%				55						51						(7)		%
General and administrative			226						159						(30)		%				494						806						63		%
Total operating expenses			$	610					$	466					(24)		%				$	1,300					$	1,416					9		%
Percent of net revenues:
Brokerage and transaction			9		%				8		%										10		%				8		%
Technology and development			77		%				43		%										83		%				44		%
Operations			27		%				7		%										29		%				8		%
Marketing			8		%				5		%										9		%				6		%
General and administrative			71		%				33		%										80		%				87		%
Total operating expenses			192		%				96		%										211		%				153		%

Brokerage and Transaction

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Broker-dealer transaction expenses			$	5					$	9					80%						$	14					$	18					29%
Employee compensation, benefits, and overhead, excluding SBC			5						9						80%						10						15						50%
Market data expenses			7						5						(29)%						14						11						(21)%
SBC			1						2						100%						2						4						100%
Other			12						14						17%						21						27						29%
Total			$	30					$	39					30%						$	61					$	75					23%

Brokerage and transaction costs increased by $9 million and $14 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year, primarily due to increases in broker-dealer transaction expenses of $4 million for both periods, mainly driven by increases in clearing

fees due to higher option trading activities. In addition, for the six months ended June 30, 2023, other brokerage and transaction costs increased $6 million, mainly driven by expenses associated with certain new products and features launched during the second quarter of 2022.

Technology and Development

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Employee compensation, benefits, and overhead, excluding SBC			$	106					$	84					(21)		%				$	210					$	163					(22)		%
SBC			59						56						(5)		%				141						110						(22)		%
Cloud infrastructure services			48						35						(27)		%				104						67						(36)		%
Software and tools			27						27						—		%				48						56						17		%
Other			5						5						—		%				10						10						—		%
Total			$	245					$	207					(16)		%				$	513					$	406					(21)		%

Technology and development costs decreased by $38 million and $107 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year, primarily due to decreases in employee compensation, benefits, and overhead of $22 million and $47 million and SBC expense of $3 million and $31 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs. For the three and six months ended June 30, 2022, SBC expense included a net reduction of $16 million and employee compensation, benefits, and overhead included $6 million of separation related expenses due to the April 2022 Restructuring. Additionally, we experienced decreases in cloud infrastructure services of $13 million and $37 million, primarily due to decreases in user transactions and cost optimization efforts focusing on improvements in utilization of cloud infrastructure. For the six months ended June 30, 2023, these decreases were offset by an $8 million increase in software and tools primarily driven by amortization of internally developed software and other software services utilized in delivering our products.

Operations

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Employee compensation, benefits, and overhead, excluding SBC			$	42					$	21					(50)%						$	85					$	42					(51)%
Provision for credit losses and fraud			12						6						(50)%						23						17						(26)%
Customer experience			27						6						(78)%						57						11						(81)%
SBC			1						1						—%						5						3						(40)%
Other			4						2						(50)%						7						5						(29)%
Total			$	86					$	36					(58)%						$	177					$	78					(56)%

Operations costs decreased by $50 million and $99 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year, primarily due to decreases in expenses associated with customer experience of $21 million and $46 million as we consolidated our third-party customer support centers due to overall decreases in user transactions. Additionally, employee compensation, benefits, and overhead decreased $21 million and $43 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs. For the three and six months

ended June 30, 2022, other employee compensation expense included approximately $3 million of separation related expenses due to the April 2022 Restructuring.

Marketing

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Digital marketing			$	5					$	6					20		%				$	11					$	13					18		%
Brand marketing			1						5						400		%				2						11						450		%
Employee compensation, benefits, and overhead, excluding SBC			7						6						(14)		%				16						11						(31)		%
Marketing incentives			3						2						(33)		%				7						3						(57)		%
SBC			(2)						1						150		%				3						2						(33)		%
Other			9						5						(44)		%				16						11						(31)		%
Total			$	23					$	25					9		%				$	55					$	51					(7)		%

For the three months ended June 30, 2023, marketing costs increased slightly by $2 million. For the six months ended June 30, 2023, marketing costs decreased by $4 million, primarily related to a decrease in other employee compensation, benefits, and overhead of $5 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs. This decrease was partially offset by an increase in brand marketing of $9 million, primarily due to higher expenses spent on brand advertising campaigns.

General and Administrative

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
SBC related to 2021 Founders Award Cancellation			$	—					$	—					NM						$	—					$	485					NM
Employee compensation, benefits, and overhead, excluding SBC			64						58						(9)		%				128						112						(13)		%
SBC excluding 2021 Founders Award Cancellation			105						49						(53)		%				233						103						(56)		%
Legal expenses			17						27						59		%				44						59						34		%
Other professional fees			17						9						(47)		%				33						16						(52)		%
Settlements and penalties			11						—						NM						23						8						(65)		%
Other			12						16						33		%				33						23						(30)		%
Total			$	226					$	159					(30)		%				$	494					$	806					63		%

General and administrative costs decreased by $67 million and increased by $312 million for the three and six months ended June 30, 2023, compared to the same periods in the prior year. The increase for the six months ended June 30, 2023 was due to the 2021 Founders Award Cancellation of $485 million. For the three and six months ended June 30, 2023, due to reduced average headcount as part of our efforts to improve efficiency and operating costs, other SBC decreased by $56 million and $130 million and employee compensation, benefits, and overhead decreased by $6 million and $16 million. In addition, settlements and penalties decreased by $11 million and $15 million, which were partially offset by increases in legal expenses of $10 million and $15 million. Refer to Note 16 - Commitments & Contingencies of our unaudited condensed consolidated financial statements in this

Quarterly Report for more information. For the three and six months ended June 30, 2022, other SBC included a net reduction of $6 million and other employee compensation expense included approximately $7 million of separation related expenses due to the April 2022 Restructuring.

Provision for (Benefit from) Income Taxes

			Three Months Ended June 30,																		Six Months Ended June 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Provision for (benefit from) income taxes			$	1					$	(3)					(400)		%				$	2					$	(1)					(150)		%

Provision for income taxes decreased by $4 million and $3 million for the three and six months ended June 30, 2023, compared to the same period in the prior year, primarily due to the change in business operations related to our ongoing efficiency efforts for the three months ended June 30, 2023, offset by the non-deductible cancellation of the 2021 Founders Award Cancellation, and the change in valuation allowance on our U.S. federal and state deferred tax assets offset by our current taxes payable.

Liquidity and Capital Resources

Sources and Uses of Funds

Our principal sources of liquidity are cash flows generated from operations, and our cash, cash equivalents, and liquid investments. Other sources of future funds may include potential borrowing capacity under our revolving lines of credit and potential issuance of new debt or equity. Our liquidity needs are primarily to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities and further build our business, the potential purchase of most or all of the remaining Robinhood shares purchased by Emergent Fidelity Technologies, and for general capital needs (including capital requirements imposed by regulators and SROs and cash deposit and collateral requirements under the rules of the Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), and the Options Clearing Corporation (“OCC”)). Based on our current level of operations, we believe our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months.

Liquid Assets

Our cash and cash equivalents were $6.34 billion and $5.83 billion as of December 31, 2022 and June 30, 2023. Our liquid investment portfolio comprised of available-for-sale securities were $10 million as of December 31, 2022. We had no available-for-sale securities as of June 30, 2023. Held-to-maturity investments that are maturing in one year can also be a source of liquidity, which were $321 million as of June 30, 2023. See Note 7 - Investments and Fair Value Measurement, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.

Revolving Lines of Credit

As of June 30, 2023, we had a total of $2.81 billion in committed revolving lines of credit. See Note 11 - Financing Activities and Off-Balance Sheet Risk, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.

Commitments

The following table summarizes our short- and long-term material cash requirements as of June 30, 2023:

			Payments Due by Period
(in millions)			Total						Remainder of 2023						2024-2025						2026-2027						Thereafter
Operating lease commitments			$	175					$	16					$	55					$	36					$	68
Purchase commitments(1)			985						240						501						244						—
Total			$	1,160					$	256					$	556					$	280					$	68

(1)Purchase commitments are determined based on contracts that are enforceable and legally binding and that specify all significant terms. They are primarily commitments for cloud infrastructure and data services and business insurance.

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

Cash Flows

The following table summarizes our cash flow activities:

						Six Months Ended June 30,
(in millions)						2022						2023
Cash provided by (used in):
Operating activities						$	(826)					$	1,198
Investing activities						(60)						(482)
Financing activities						1						(4)

Cash provided by operating activities increased $2,024 million. The increase consisted of net loss adjusted for certain non-cash items and the effect of changes in operating assets and liabilities. Cash provided by operating activities resulting from net loss adjusted for certain non-cash items increased by $526 million. This was primarily due to lower net loss and higher SBC expense during six months ended June 30, 2023 as a result of the 2021 Founders Award Cancellation. Cash provided by operating activities resulting from changes in operating assets and liabilities increased $1,498 million. The increase was primarily driven by increases of $3,432 million for securities loaned and $1,090 million in payables to users, partially offset by decreases of $2,584 million for receivables from users, net and $377 million for securities borrowed.

Cash used in investing activities increased $422 million compared to the prior period. The change was primarily driven by an increase in cash used in investing activities of $485 million from purchases of held-to-maturity investments, partially offset by an increase of $5 million in cash provided by investing activities related to proceeds from maturities of available-for-sale investments.

Cash used in financing activities increased $5 million compared to the prior period which was primarily driven by decreases of $4 million in cash provided by financing activities from proceeds from issuance of common stock from the Employee Share Purchase Plan (”ESPP”) and $3 million from proceeds from exercise of stock options, net of repurchases.

Regulatory Capital Requirements

Our broker-dealer subsidiaries (RHF and RHS) are subject to the SEC Uniform Net Capital Rule, administered by the SEC and FINRA, which requires the maintenance of minimum net capital, as defined. Net capital and the related net capital requirements may fluctuate on a daily basis. RHS and RHF compute net capital under the alternative method as permitted by the SEC Uniform Net Capital Rule.

The table below summarizes the net capital, capital requirements, and excess net capital of RHS and RHF:

						June 30, 2023
(in millions)						Net Capital						Required Net Capital						Net Capital in Excess of Required Net Capital
RHS						$	2,639					$	71					$	2,568
RHF						$	342					$	0.25					$	342

As of June 30, 2023, our broker-dealer subsidiaries were in compliance with their respective regulatory capital requirements.

Critical Accounting Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in our unaudited condensed consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results might differ significantly from these estimates under different assumptions, judgments, or conditions.

There have been no material changes to our critical accounting estimates during the six months ended June 30, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our 2022 Form 10-K.

Recent Accounting Pronouncements

See Item 1 of Part I, “Unaudited Financial Statements — Note 2 - Recent Accounting Pronouncements.”