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 nine months ended September 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:** A Robinhood 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: A Robinhood 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 products offered on the Robinhood platform, with the exception of Robinhood Credit.

Key Performance Metrics

• Net Cumulative Funded Accounts (“NCFA”)**: We define Net Cumulative Funded Accounts as New Funded Accounts less Churned Accounts plus Resurrected Accounts. Robinhood Credit customers who a) had a credit balance or transaction during Q3 2023 and b) did not already have a Robinhood Account, are also considered New Funded 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. We do not currently include Robinhood Credit customers in our calculation of MAU.

• 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 September 30, 2023, as compared to the three months ended September 30, 2022:

• we generated total net revenues of $467 million compared to $361 million, for a year-over-year increase of 29%;

• we incurred a net loss of $85 million, or -$0.09 per share, compared to a net loss of $175 million, or -$0.20 per share, for a year-over-year decrease of 51%;

• operating expenses were $540 million compared to $535 million, for a year-over-year increase of 1%.

◦SBC expense totaled $83 million compared to $110 million, for a year-over-year decrease of 25%. SBC expense for the three months ended September 30, 2022 included a $53 million net reversal in connection with the August 2022 Restructuring;

*•*our Adjusted EBITDA (non-GAAP) was $137 million compared to $47 million, for year-over-year increase of 191%;

• we had NCFA of 23.3 million compared to 22.9 million, for year-over-year growth of 2%;

• we had MAU of 10.3 million compared to 12.2 million, for a year-over-year decrease of 16%;

• we had AUC of $86.5 billion compared to $64.6 billion, for a year-over-year increase of 34%, primarily due to continued Net Deposits and higher equity valuations;

• Net Deposits were $4.0 billion, which translates to an annualized growth rate of 18%, compared to $2.7 billion, which translates to an annualized growth rate of 17%. Over the past twelve months, Net Deposits were $17.3 billion, which translates to a growth rate of 27% relative to AUC at September 30, 2022;

• we had ARPU of $80 compared to $63, for a year-over-year increase of 27%.

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 loss to Adjusted EBITDA, please see “—Non-GAAP Financial Measures” below.

Recent Developments

Share Repurchase and Share Retirement

On August 30, 2023, we agreed to repurchase 55,273,469 shares of our Class A common stock from USMS for $10.96 per share. The transaction closed on August 31, 2023. We repurchased and subsequently retired all of the shares for an aggregate amount of $608 million, which included $2 million transaction costs. As of September 30, 2023, we have accrued $3 million related to the 1% excise tax on net share repurchases as a result of the Inflation Reduction Act of 2022. Refer to Note 13 - Common Stock and Stockholders' (Deficit) Equity to our unaudited consolidated financial statements in this Quarterly Report.

Regulatory Accrual

We are working to resolve certain historical regulatory matters and as part of these efforts, we accrued an expense of $104 million in the third quarter of 2023 related to these previously disclosed matters. Refer to Note 17 - Commitments & Contingencies to our unaudited consolidated financial statements in this Quarterly Report.

Acquisition of Robinhood Credit

On June 21, 2023, we entered into a definitive agreement to acquire all of the outstanding equity of X1, a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The transaction closed on July 3, 2023. The aggregate consideration paid in cash was $104 million. Refer to Note 3 - Business Combinations to our unaudited consolidated financial statements in this Quarterly Report. Subsequently in August 2023, X1 was renamed to Robinhood Credit.

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. There was no similar reduction or expense incurred for the three months ended September 30, 2023.

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 nine months ended September 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 September 30,
						2022						2023
NCFA(1) (in millions)						22.9						23.3
MAU (in millions)						12.2						10.3
AUC(2) (in billions)						$	64.6					$	86.5
Net Deposits (in billions)						$	2.7					$	4.0
ARPU (in dollars)						$	63					$	80

---

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

						Three Months Ended September 30,
(in millions)						2022						2023
Beginning NCFA						22.9						23.2
New funded accounts						0.3						0.3
Resurrected accounts						0.1						0.1
Churned accounts						(0.4)						(0.3)
Ending NCFA						22.9						23.3

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

						Three Months Ended September 30,
(in billions)						2022						2023
Equities						$	50.7					$	61.4
Cryptocurrencies						9.4						10.2
Options						0.4						0.4
Cash held by users						8.1						18.0
Receivables from users						(4.0)						(3.5)
AUC						$	64.6					$	86.5

The following table describes the changes within AUC:

						Three Months Ended September 30,
(in billions)						2022						2023
Beginning AUC						$	64.2					$	88.8
Net Deposits						2.7						4.0
Net market losses						(2.3)						(6.3)
Ending AUC						$	64.6					$	86.5

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 September 30,												Nine Months Ended September 30,
(in millions)			2022						2023						2022						2023
Net loss			$	(175)					$	(85)					$	(862)					$	(571)
Add:
Interest expenses related to credit facilities			6						6						18						17
Provision for income taxes			1						10						3						9
Depreciation and amortization			15						19						44						54
EBITDA (non-GAAP)			(153)						(50)						(797)						(491)
2021 Founders Award Cancellation			—						—						—						485
SBC excluding 2021 Founders Award Cancellation(1)			110						83						494						305
Restructuring charges(2)			90						—						107						—
Significant legal and tax settlements and reserves			—						104						20						104
Adjusted EBITDA (non-GAAP)			$	47					$	137					$	(176)					$	403

---

(1)SBC excluding 2021 Founders Award Cancellation benefited from restructuring-related net reversals of previously recognized expense as follows:

• $53 million for the three months ended September 30, 2022 in connection with the August 2022 Restructuring;

• $77 million for the nine months ended September 30, 2022 in connection both with the April 2022 Restructuring and August 2022 Restructuring.

(2)Restructuring charges include:

• $90 million for the three months ended September 30, 2022 related to the August 2022 Restructuring, consisting of $47 million of impairments and $9 million of accelerated depreciation, in each case relating to office closures, and $34 million of cash charges for employee-related wages, benefits and severance; and

• $107 million for the nine months ended September 30, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring and consisting of $47 million of impairments and $9 million of accelerated depreciation, in each case relating to office closures, and $51 million of cash charges for employee-related wages, benefits and severance.

Results of Operations

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

(in millions)						Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2023						2022						2023
Revenues:
Transaction-based revenues						$	208					$	185					$	628					$	585
Net interest revenues						128						251						257						693
Other revenues						25						31						93						116
Total net revenues						361						467						978						1,394
Operating expenses:(1)
Brokerage and transaction						33						39						94						114
Technology and development						185						202						698						608
Operations						65						41						242						119
Marketing						19						28						74						79
General and administrative						233						230						727						1,036
Total operating expenses						535						540						1,835						1,956
Other (income) expense, net						—						2						2						—
Loss before income taxes						(174)						(75)						(859)						(562)
Provision for income taxes						1						10						3						9
Net loss						$	(175)					$	(85)					$	(862)					$	(571)

---

(1)Includes SBC expense as follows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(in millions)						2022						2023						2022						2023
Brokerage and transaction						$	2					$	2					$	4					$	6
Technology and development						25						51						166						161
Operations						—						3						5						6
Marketing						—						1						3						3
General and administrative						83						26						316						614
Total SBC expense						$	110					$	83					$	494					$	790

Comparison of the Three and Nine Months Ended September 30, 2022 and 2023

Revenues

Transaction-Based Revenues

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Transaction-based revenues:
Options			$	124					$	124					—		%				$	364					$	384					5		%
Cryptocurrencies			51						23						(55)		%				163						92						(44)		%
Equities			31						27						(13)		%				96						79						(18)		%
Other			2						11						450		%				5						30						500		%
Total transaction-based revenues			$	208					$	185					(11)		%				$	628					$	585					(7)		%
Transaction-based revenues as a % of total net revenues:
Options			34%						27%												37%						28%
Cryptocurrencies			14%						5%												17%						7%
Equities			8%						5%												10%						6%
Other			1%						3%												1%						2%
Total transaction-based revenues			57%						40%												65%						43%

Transaction-based revenues decreased by $23 million and $43 million for the three and nine months ended September 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.

Crypto DARTs decreased from 0.3 million to 0.2 million for both the three and nine months ended September 30, 2023, compared to the same periods in the prior year. Additionally, the number of users placing cryptocurrency trades decreased 29% and 35%. Notional Trading Volumes decreased for both periods and average Notional Trading Volume traded per trader decreased 35% and 27%.

Equities DARTs increased from 1.5 million to 1.6 million and remained flat at 1.6 million, for the three and nine months ended September 30, 2023, compared to the same periods in the prior year. We experienced lower equity rebate rates due to reduced spreads in securities pricing and the number of users placing equity trades decreased 5% and 18%. The Notional Trading Volume decreased for the nine months ended September 30, 2023 while it increased for the three months ended September 30, 2023. The decrease was partially offset by increases in the average Notional Trading Volume per trader of 9% and 7%.

Options DARTs increased from 0.5 million to 0.6 million and remained flat at 0.6 million, for the three and nine months ended September 30, 2023, compared to the same periods in the prior year. Options Contracts Traded were up 28% and 25%, while the number of users placing option trades decreased 9% and 20%. 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 September 30,																		Nine Months Ended September 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Net interest revenues:
Interest on corporate cash and investments			$	29					$	75					159		%				$	40					$	217					443		%
Margin interest			48						67						40		%				122						177						45		%
Interest on segregated cash and cash equivalents and deposits			20						59						195		%				27						156						478		%
Cash sweep			8						35						338		%				10						86						760		%
Securities lending, net			29						17						(41)		%				76						70						(8)		%
Credit card, net			—						4						100		%				—						4						100		%
Interest expenses related to credit facilities			(6)						(6)						—		%				(18)						(17)						(6)		%
Total net interest revenues			$	128					$	251					96		%				$	257					$	693					170		%
Net interest revenues as a % of total net revenues:
Interest on corporate cash and investments			8		%				16		%										4		%				15		%
Margin interest			13		%				14		%										12		%				13		%
Interest on segregated cash and cash equivalents and deposits			6		%				13		%										3		%				11		%
Cash sweep			2		%				7		%										1		%				7		%
Securities lending, net			8		%				4		%										8		%				5		%
Credit card, net			—		%				1		%										—		%				—		%
Interest expenses related to credit facilities			(2)		%				(1)		%										(2)		%				(1)		%
Total net interest revenues			35		%				54		%										26		%				50		%

Net interest revenues increased by $123 million and $436 million for the three and nine months ended September 30, 2023, compared to the same periods in the prior year. The increases were 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 segregated cash and cash equivalents and deposit and margin interest also increased due to the higher interest rate while the respective interest-earning assets balances declined year-over-year. Cash sweep balance increased year-over-year, which also contributed to the higher net interest revenues.

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

(in millions, except for annualized yield)			Margin Book(1)			Cash and deposits(2)			Cash Sweep (off-balance sheet)(3)			Credit card, net (off-balance sheet)(4)			Total interest-earning assets						Securities lending, net			Interest expenses related to credit facilities			Total net interest revenues
Three Months Ended September 30, 2023
September 30, 2023			$	3,580		$	8,612		$	13,563		$197			$	25,952
June 30, 2023			3,314			10,758			11,903			184			26,159
Average(5)			3,447			9,685			12,733			191			26,056
Revenue (expense)			67			134			35			4			240						$	17		$	(6)		$	251
Annualized yield(6)			7.77%			5.53%			1.10%			8.38%			3.68%												3.85%
Three Months Ended June 30, 2023
June 30, 2023			$	3,314		$	10,758		$	11,903		$184			$	26,159
March 31, 2023			3,117			10,405			8,881			N/A			22,403
Average(5)			3,216			10,582			10,392			N/A			24,281
Revenue (expense)			57			126			29			N/A			212						$	27		$	(5)		$	234
Annualized yield(6)			7.09%			4.76%			1.12%			N/A			3.49%												3.85%
Three Months Ended September 30, 2022
September 30, 2022			$	4,085		$	9,374		$	2,969		N/A			$	16,428
June 30, 2022			4,142			9,717			2,408			N/A			16,267
Average(5)			4,114			9,546			2,689			N/A			16,348
Revenue (expense)			48			49			8			N/A			105						$	29		$	(6)		$	128
Annualized yield(6)			4.67%			2.05%			1.19%			N/A			2.57%												3.13%
			—%
Nine Months Ended September 30, 2023
September 30, 2023			$	3,580		$	8,612		$	13,563		$197			$	25,952
December 31, 2022			3,117			9,530			8,881			N/A			21,528
Average(5)			3,349			9,071			11,222			N/A			23,740
Revenue (expense)			177			373			86			4			640						$	70		$	(17)		$	693
Annualized yield(6)			7.05%			5.48%			1.02%			N/A			3.59%												3.89%
Nine Months Ended September 30, 2022
September 30, 2022			$	4,085		$	9,374		$	2,969		N/A			$	16,428
December 31, 2021			6,467			10,600			2,095			N/A			19,162
Average(5)			5,276			9,987			2,532			N/A			17,795
Revenue (expense)			122			67			10			N/A			199						$	76		$	(18)		$	257
Annualized yield(6)			3.08%			0.89%			0.53%			N/A			1.49%												1.93%

---

(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) Credit card, net is an off-balance sheet amount, which represents customer principal amounts funded by Coastal Bank under the Program Agreement. Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue. The balance for June 30, 2023 and annualized yield is based on Robinhood Credit’s acquisition date of July 3, 2023. Refer to Note 3 - Business Combinations of our unaudited condensed consolidated financial statements in this Quarterly Report for more information.

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

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

Other Revenues

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Other revenues			$	25					$	31					24		%				$	93					$	116					25		%
Other revenues as a % of total net revenues			7%						7%												10%						8%

Other revenues increased $6 million and $23 million for the three and nine months ended September 30, 2023, compared to the same periods in the prior year. This was primarily due to increases in proxy revenues of $2 million and $18 million mainly driven by replacing a third-party investor communications company, which provided Robinhood a share of the revenue they earned as a rebate, with Say Technologies, our wholly-owned subsidiary, who does not share the revenue it earns for the proxy services. Additionally subscription revenues increased $3 million for both periods due to an increase in Robinhood Gold subscribers from 1.1 million to 1.3 million.

Operating Expenses

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions, except for percentages)			2022						2023						% Change						2022						2023						% Change
Operating expenses:
Brokerage and transaction			$	33					$	39					18		%				$	94					$	114					21		%
Technology and development			185						202						9		%				698						608						(13)		%
Operations			65						41						(37)		%				242						119						(51)		%
Marketing			19						28						47		%				74						79						7		%
General and administrative			233						230						(1)		%				727						1,036						43		%
Total operating expenses			$	535					$	540					1		%				$	1,835					$	1,956					7		%
Percent of net revenues:
Brokerage and transaction			9		%				8		%										10		%				8		%
Technology and development			51		%				43		%										71		%				44		%
Operations			18		%				9		%										25		%				9		%
Marketing			5		%				6		%										8		%				6		%
General and administrative			65		%				49		%										74		%				74		%
Total operating expenses			148		%				115		%										188		%				141		%

Brokerage and Transaction

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Broker-dealer transaction expenses			$	8					$	11					38%						$	22					$	29					32%
Employee compensation, benefits, and overhead, excluding SBC			6						8						33%						16						23						44%
Market data expenses			7						6						(14)%						21						17						(19)%
SBC			2						2						—%						4						6						50%
Other			10						12						20%						31						39						26%
Total			$	33					$	39					18%						$	94					$	114					21%

Brokerage and transaction costs increased by $6 million and $20 million for the three and nine months ended September 30, 2023, compared to the same periods in the prior year, primarily due to increases in broker-dealer transaction expenses of $3 million and $7 million, mainly driven by increases in clearing fees due to higher option trading activities. We note that starting in the fourth quarter of 2023 we will begin to pass option trading fees onto users, which will reduce broker-dealer transaction expenses significantly in future periods. In addition, for the nine months ended September 30, 2023, other brokerage and transaction costs increased $8 million, mainly driven by full year expenses associated with certain new products and features that launched during the second quarter of 2022.

Technology and Development

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Employee compensation, benefits, and overhead, excluding SBC			$	91					$	74					(19)		%				$	301					$	237					(21)		%
SBC			25						51						104		%				166						161						(3)		%
Cloud infrastructure services			36						40						11		%				140						107						(24)		%
Software and tools			28						30						7		%				76						86						13		%
Other			5						7						40		%				15						17						13		%
Total			$	185					$	202					9		%				$	698					$	608					(13)		%

Technology and development costs increased $17 million for the three months ended September 30, 2023. The increase was primarily due to an increase of $26 million in SBC expense as the three months ended September 30, 2022, included a net reduction of $22 million from the August 2022 Restructuring. The increase was partially offset by a decrease of $17 million in employee compensation, benefits and overhead driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.

Technology and development costs decreased $90 million for the nine months ended September 30, 2023, primarily due to a decrease of $64 million in employee compensation, benefits and overhead consistent with the three-month change described above and a $33 million decrease in cloud infrastructure services driven by decreases in user transactions and cost optimization efforts focusing on improvements in utilization of cloud infrastructure. These decreases were partially offset by a $10 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 September 30,																		Nine Months Ended September 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Employee compensation, benefits, and overhead, excluding SBC			$	38					$	17					(55)%						$	123					$	59					(52)%
Provision for credit losses and fraud			9						16						78%						32						33						3%
Customer experience			14						4						(71)%						71						15						(79)%
SBC			—						3						NM						5						6						20%
Other			4						1						(75)%						11						6						(45)%
Total			$	65					$	41					(37)%						$	242					$	119					(51)%

Operations costs decreased by $24 million and $123 million for the three and nine months ended September 30, 2023, compared to the same periods in the prior year, primarily due to employee compensation, benefits, and overhead decreases of $21 million and $64 million driven by reduced average headcount as part of our efforts to improve efficiency. For the three and nine months ended September 30, 2022, other employee costs included approximately $3 million and $9 million in severance expenses related to the April 2022 Restructuring and the August 2022 Restructuring. For the three and nine months ended September 30, 2023, provision for credit losses and fraud increased by $7 million and $1 million primarily due to a $10 million provision for credit losses related to Robinhood Credit (refer to Note 3 - Business Combinations of our unaudited condensed consolidated financial statements in this Quarterly Report for more information), partially offset by decreases in expenses related to Fraudulent Deposit Transactions as we continued to strengthen our process to identify high risk users and prevent these transactions on our platform. Further, expenses associated with customer experience decreased by $10 million and $56 million as we consolidated our third-party customer support centers due to overall decreases in user transactions.

Marketing

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Digital marketing			$	4					$	11					175		%				$	15					$	24					60		%
Employee compensation, benefits, and overhead, excluding SBC			6						5						(17)		%				22						16						(27)		%
Brand marketing			1						2						100		%				3						13						333		%
Marketing incentives			2						2						—		%				9						5						(44)		%
SBC			—						1						NM						3						3						—		%
Other			6						7						17		%				22						18						(18)		%
Total			$	19					$	28					47		%				$	74					$	79					7		%

For the three and nine months ended September 30, 2023, marketing costs increased by $9 million and $5 million, primarily due to higher expenses in digital marketing of $7 million and $9 million and brand marketing of $1 million and $10 million, primarily due to increased advertising campaigns. These increases were partially offset by decreases in other employee compensation, benefits, and overhead of

$1 million and $6 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.

General and Administrative

			Three Months Ended September 30,																		Nine Months Ended September 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			62						54						(13)		%				190						166						(13)		%
SBC excluding 2021 Founders Award Cancellation			83						26						(69)		%				316						129						(59)		%
Settlements and penalties			1						107						NM						24						115						379		%
Legal expenses			16						21						31		%				60						80						33		%
Other professional fees			10						14						40		%				43						30						(30)		%
Real estate related charges			47						—						(100)		%				47						1						(98)		%
Other			14						8						(43)		%				47						30						(36)		%
Total			$	233					$	230					(1)		%				$	727					$	1,036					43		%

General and administrative costs decreased by $3 million for the three months ended September 30, 2023. The decrease was primarily due to a decrease of $57 million in other SBC and an $8 million decrease in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency and operating costs. For the three months ended September 30, 2022, other SBC expense included a net reduction of $28 million related to the August 2022 Restructuring. The decrease was partially offset by increases of $106 million in settlement and penalties and $5 million in legal expenses. Refer to Note 17 - Commitments & Contingencies of our unaudited condensed consolidated financial statements in this Quarterly Report for more information.

General and administrative costs increased by $309 million for the nine months ended September 30, 2023 primarily due to the 2021 Founders Award Cancellation of $485 million, a $91 million increase in settlements and penalties, and a $20 million increase in legal expenses. The increase was partially offset by decreases of $187 million in other SBC and $24 million in employee compensation, benefits, and overhead consistent with the three-month change described above. For the nine months ended September 30, 2022, other SBC also included a net reduction of $6 million related to the April 2022 Restructuring.

Real estate related charges include impairments on our operating leases or lease improvements and lease terminations. For the three and nine months ended September 30, 2022, the $47 million related to impairments due to the August 2022 Restructuring.

Provision for Income Taxes

			Three Months Ended September 30,																		Nine Months Ended September 30,
(in millions)			2022						2023						% Change						2022						2023						% Change
Provision for income taxes			$	1					$	10					900		%				$	3					$	9					200		%

Provision for income taxes increased by $9 million and $6 million for the three and nine months ended September 30, 2023, compared to the same period in the prior year, primarily due to the non-deductible 2021 Founders Award Cancellation, non-deductible regulatory matters and the change in

valuation allowance on our remaining U.S. federal and state deferred tax assets and offset by our current taxes payable, and by the partial release of our valuation allowance resulting from the recognition of net deferred tax liabilities in connection with the Robinhood Credit acquisition.

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, 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 $4.89 billion as of December 31, 2022 and September 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 September 30, 2023. Held-to-maturity investments that are maturing in one year can also be a source of liquidity, which were $372 million as of September 30, 2023. See Note 8 - 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 September 30, 2023, we had a total of $2.81 billion in committed revolving lines of credit. See Note 12 - 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 September 30, 2023:

			Payments Due by Period
(in millions)			Total						Remainder of 2023						2024-2025						2026-2027						Thereafter
Operating lease commitments			$	146					$	7					$	55					$	31					$	53
Purchase commitments(1)			944						175						520						249						—
Total			$	1,090					$	182					$	575					$	280					$	53

(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:

						Nine Months Ended September 30,
(in millions)						2022						2023
Cash provided by (used in) provided by:
Operating activities						$	(1,033)					$	221
Investing activities						(71)						(579)
Financing activities						—						(619)

Cash provided by operating activities increased $1,254 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 $516 million. This was primarily due to lower net loss and higher SBC expense during the nine months ended September 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 $738 million. The increase was primarily driven by increases of $3.64 billion for securities loaned and $704 million in payables to users, partially offset by decreases of $3.07 billion for receivables from users, net and $548 million for securities borrowed.

Cash used in investing activities increased $508 million compared to the prior period. The change was primarily driven by an increase in cash used in investing activities of $651 million from purchases of held-to-maturity investments and $90 million used for the acquisition of Robinhood Credit, net of cash and cash equivalents acquired. These were partially offset by $167 million in cash provided by investing activities related to proceeds from maturities of held-to-maturity investments. During the nine months ended September 30, 2023, we also had $24 million less cash used for purchases of available-for-sale securities as well as $24 million less cash used for purchases of property, software, and equipment.

Cash used in financing activities increased $619 million compared to the prior period which was primarily driven by an increase in cash used in financing activities of $608 million from the repurchase of Class A common stock. This increase was partially offset by decreases in cash provided by financing activities of $4 million from proceeds from issuance of common stock under the ESPP and $4 million in 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:

						September 30, 2023
(in millions)						Net Capital						Required Net Capital						Net Capital in Excess of Required Net Capital
RHS						$	2,735					$	77					$	2,658
RHF						$	275					$	0.25					$	274

As of September 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 nine months ended September 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.”