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 2023 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 months ended March 31, 2023 and 2024 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 platforms.

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.

We periodically review and revise our key performance metrics to reflect changes in our business. Previously, we considered our Monthly Active Users (“MAU”) a key performance metric as it was an input measure used by our management and board of directors to understand and evaluate our business. As our business has evolved, we have shifted our focus to deepening our relationships with customers and increasing wallet share by increasing Gold Subscribers and Net Deposits and plan to keep investing in our existing products and features, such as Robinhood Gold, Robinhood Retirement, and deposit matches, while also launching new products like credit cards. Due to this strategic shift, MAU is no longer an input used by our management or board of directors to understand and evaluate our business. Effective for the first quarter of 2024, while we will continue to report MAUs in our earnings materials for informational purposes only, we no longer report MAU in our Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K as we no longer consider it to be a key performance metric for our Company. Additionally, starting this quarter, we have added Gold Subscribers as a key performance metric, as management and our board of directors believes that this metric is an important measure of our progress towards increasing wallet share as increasing Gold Subscribers is part of our focus in doing so.

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• Funded Customers:** We define a Funded Customer as a unique person who has at least one account with a Robinhood entity and, within the past 45 calendar days (a) had an account balance that was greater than zero (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) or (b) completed a transaction using any such account. We define an Investment Account as a funded individual brokerage account or a funded individual retirement account (“IRA”). As of March 31, 2024, a Funded Customer can have up to three Investment Accounts - individual brokerage account, traditional IRA, and Roth IRA.

• 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 from, as well as dividends and interest received by customers, net of reversals, customer cash withdrawals, margin interest, Gold subscription fees, and other assets transferred out of our platforms (assets transferred in or out include debit card transactions, Automated Customer Account Transfer Service transfers, and custodial crypto wallet transfers) for a stated period. Prior to January 2024, Net Deposits did not include inflows from dividends and interest or outflows from Robinhood Gold subscription fees and margin interest, although we have not restated amounts in prior periods as the impact to those figures was immaterial.

*•*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 number of Funded Customers on the last day of that period and the last day of the immediately preceding period. Figures in this Quarterly Report represent ARPU annualized for each three-month period presented.

• Gold Subscribers: We define a Gold Subscriber as a unique person who has at least one account with a Robinhood entity and who, as of the end of the relevant period (a) is subscribed to Robinhood Gold and (b) has made at least one Robinhood Gold subscription fee payment.

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.

• Cash Sweep: We define Cash Sweep as the period-end aggregate balances in our brokerage sweep program (i.e., the period-end total amount of participating users’ uninvested brokerage cash that has been automatically “swept” or moved from their brokerage accounts into deposits for their benefit at a network of program banks). This is an off-balance-sheet amount. Robinhood earns a net interest spread on Cash Sweep balances based on the interest rate offered by the banks less the interest rate given to users as stated in our program terms.

• Churned Customers: A Funded Customer is considered “Churned” if it was ever a New Funded Customer whose account balance (measured as the fair value of assets in the account less any amount due from the user and excluding amounts that are deposited into a Funded Customer

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account by the Company with no action taken by the unique person) drops to or below zero and has not completed a transaction using any account with a Robinhood entity for at least 45 consecutive calendar days. Negative balances typically result from fraudulent deposit transactions (which occur when users initiate deposits into their accounts, make trades on our platforms using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount) and unauthorized debit card use, and less often, from margin loans.

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

• New Funded Customers: We define a New Funded Customer as a unique person who became a Funded Customer for the first time during the relevant period.

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

• 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 Customers: A Funded Customer is considered “Resurrected” in a stated period if it was a Churned Customer as of the end of the immediately preceding period and its balance (excluding amounts that are deposited into a Funded Customer account by the Company with no action taken by the unique person) rises above zero or it completes a transaction using its account.

Overview

Robinhood was founded on the belief that everyone should be welcome to participate in our financial system. We are creating modern financial services platforms 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 has since been adopted by the rest of the industry, and we continue to build relationships with our customers by introducing new products that further expand access to the financial system. Through these efforts, we believe we have made investing culturally relevant and understandable, and that our platforms are 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 March 31, 2024, as compared to the three months ended March 31, 2023:

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• we generated total net revenues of $618 million compared to $441 million, an increase of 40%;

• we generated net income of $157 million, or a diluted EPS of $0.18, compared to a net loss of $511 million, or -$0.57 diluted EPS;

• operating expenses were $460 million compared to $950 million, a decrease of 52%;

◦SBC expense totaled $62 million compared to $598 million, a decrease of 90%;

◦SBC expense for the three months ended March 31, 2023 included a $485 million charge related to the 2021 Founders Award Cancellation;

*•*our Adjusted EBITDA (non-GAAP) was $247 million compared to $115 million, an increase of 115%;

• we had 23.9 million Funded Customers compared to 23.1 million, an increase of 3%, and Investment Accounts increased by 1.1 million to 24.4 million;

• we had AUC of $129.6 billion compared to $78.4 billion, an increase of 65%, primarily driven by higher equity and cryptocurrency valuations and continued Net Deposits;

• Net Deposits were $11.2 billion, an annualized growth rate of 44% relative to AUC at the end of the fourth quarter of 2023, compared to $4.4 billion, an annualized growth rate of 29% relative to AUC at the end of the fourth quarter of 2022. Over the past twelve months, Net Deposits were $23.9 billion, a growth rate of 30% relative to AUC at the end of the first quarter of 2023;

• we had ARPU of $104 compared to $77, an increase of 35%;

• we had Gold Subscribers of 1.68 million compared to 1.18 million, an increase of 42%;

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.

Key Performance Metrics

Key performance metrics for the relevant periods were as follows:

						Three Months Ended March 31,
						2023						2024						% Change
Funded Customers(1) (in millions)						23.1						23.9						3		%
AUC(2) (in billions)						$	78.4					$	129.6					65		%
Net Deposits (in billions)						$	4.4					$	11.2					NM
ARPU (in dollars)						$	77					$	104					35		%
Gold Subscribers (in millions)						1.18						1.68						42		%

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

						Three Months Ended March 31,
(in millions)						2023						2024						% Change
Beginning Funded Customers						23.0						23.4						2		%
New Funded Customers						0.3						0.5						67		%
Resurrected Customers						0.1						0.2						100		%
Churned Customers						(0.3)						(0.2)						(33)		%
Ending Funded Customers						23.1						23.9						3		%

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

						Three Months Ended March 31,
(in billions)						2023						2024						% Change
Equities						$	55.3					$	81.5					47		%
Cryptocurrencies						11.5						26.2						128		%
Options						0.4						1.2						200		%
Cash held by Customers						14.2						24.8						75		%
Receivables from Customers (primarily margin balances)						(3.0)						(4.1)						37		%
AUC						$	78.4					$	129.6					65		%

The following table describes the changes within AUC:

						Three Months Ended March 31,
(in billions)						2023						2024						% Change
Beginning AUC						$	62.2					$	102.6					65		%
Net Deposits						4.4						11.2						NM
Net market gains						11.8						15.8						34		%
Ending AUC						$	78.4					$	129.6					65		%

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 (vi) 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

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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 income (loss), which is the most directly comparable GAAP measure, to Adjusted EBITDA:

									Three Months Ended March 31,
(in millions)															2023						2024
Net income (loss)															$	(511)					$	157
Add:
Interest expenses related to credit facilities															6						6
Provision for income taxes															2						5
Depreciation and amortization															20						17
EBITDA (non-GAAP)															(483)						185
Less: SBC
2021 Founders Award Cancellation															485						—
SBC Excluding 2021 Founders Award Cancellation															113						62
Adjusted EBITDA (non-GAAP)															$	115					$	247

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Results of Operations

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

(in millions)												Three Months Ended March 31,
															2023						2024
Revenues:
Transaction-based revenues																		$	207					$	329
Net interest revenues																		208						254
Other revenues																		26						35
Total net revenues																		441						618
Operating expenses:(1)
Brokerage and transaction																		36						35
Technology and development																		199						196
Operations																		42						44
Marketing																		26						67
General and administrative																		647						118
Total operating expenses																		950						460
Other (income) expense, net																		—						(4)
Income (loss) before income taxes																		(509)						162
Provision for income taxes																		2						5
Net income (loss)																		$	(511)					$	157

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(1)Includes SBC expense as follows:

												Three Months Ended March 31,
(in millions)																		2023						2024
Brokerage and transaction																		$	2					$	2
Technology and development																		54						44
Operations																		2						2
Marketing																		1						2
General and administrative																		539						12
Total SBC expense																		$	598					$	62

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Comparison of the Three Months Ended March 31, 2023 and 2024

Revenues

Transaction-Based Revenues

															Three Months Ended March 31,
(in millions, except for percentages)																					2023						2024						% Change
Transaction-based revenues:
Options																					$	133					$	154					16		%
Cryptocurrencies																					38						126						232		%
Equities																					27						39						44		%
Other																					9						10						11		%
Total transaction-based revenues																					$	207					$	329					59		%
Transaction-based revenues as a % of total net revenues:
Options																					30%						25%
Cryptocurrencies																					9%						20%
Equities																					6%						6%
Other																					2%						2%
Total transaction-based revenues																					47%						53%

Transaction-based revenues increased by $122 million primarily driven by an $88 million increase in cryptocurrencies, a $21 million increase in options, and a $12 million increase in equities.

Cryptocurrencies revenues increased primarily driven by an 88% increase in the average Notional Trading Volume traded per trader and a 57% increase in the number of users placing cryptocurrency trades.

Options revenues increased primarily driven by a 26% increase in Options Contracts Traded and the number of users placing option trades also increased 13%. However, we experienced lower option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates.

Equities revenues increased primarily driven by a 23% increase in the average Notional Trading Volume traded per trader and a 12% increase in the number of users placing equity trades.

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Net Interest Revenues

															Three Months Ended March 31,
(in millions, except for percentages)																					2023						2024						% Change
Net interest revenues:
Margin interest																					$	53					$	72					36		%
Interest on corporate cash and investments																					68						70						3		%
Interest on segregated cash, securities, and deposits																					45						58						29		%
Cash Sweep																					22						39						77		%
Securities lending, net																					26						15						(42)		%
Credit card, net																					—						6						NM
Interest expenses related to credit facilities																					(6)						(6)						—		%
Total net interest revenues																					$	208					$	254					22		%
Net interest revenues as a % of total net revenues:
Margin interest																					12		%				12		%
Interest on corporate cash and investments																					15		%				12		%
Interest on segregated cash, securities, and deposits																					10		%				9		%
Cash Sweep																					5		%				6		%
Securities lending, net																					6		%				2		%
Credit card, net																					—		%				1		%
Interest expenses related to credit facilities																					(1)		%				(1)		%
Total net interest revenues																					47		%				41		%

Net interest revenues increased by $46 million. The increase was driven by growth in interest-earning assets balances and the higher short-term interest rate environment due to the rise in the federal funds rate, which positively impacted the interest rate we receive on these assets.

Net interest revenues from our securities lending activities decreased as we generated less net interest revenues from margin-based securities lending activities (“Margin Securities Lending”), offset by higher interest revenues from Fully-Paid Securities Lending. Net interest revenues from Margin Securities Lending decreased primarily due to lower demand on “hard-to-borrow” securities which also resulted in lower cash collateral balances. Fully-Paid Securities Lending increased primarily due to higher collateral balances and higher short-term interest rate.

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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			Cash and deposits(1)			Cash Sweep (off-balance sheet)			Credit card, net (2)			Total interest-earning assets						Securities lending, net			Interest expenses related to credit facilities			Total net interest revenues
Three Months Ended March 31, 2024
March 31, 2024			$	4,115		$	10,328		$	19,049		$197			$	33,689
December 31, 2023			3,458			10,107			16,352			205			30,122
Average(3)			3,763			10,007			17,576			201			31,547
Revenue (expense)			72			128			39			6			245						$	15		$	(6)		$	254
Annualized yield(4)			7.65%			5.12%			0.89%			11.94%			3.11%												3.22%
Three Months Ended December 31, 2023
December 31, 2023			$	3,458		$	10,107		$	16,352		$205			$	30,122
September 30, 2023			3,580			9,102			13,563			197			26,442
Average(3)			3,490			9,412			14,737			202			27,841
Revenue (expense)			66			125			37			5			233						$	9		$	(6)		$	236
Annualized yield(4)			7.56%			5.31%			1.00%			9.90%			3.35%												3.39%
Three Months Ended March 31, 2023
March 31, 2023			$	3,117		$	10,405		$	8,881		N/A			$	22,403
December 31, 2022			3,089			9,530			5,837			N/A			18,456
Average(3)			3,122			10,135			7,458			N/A			20,715
Revenue (expense)			53			113			22			N/A			188						$	26		$	(6)		$	208
Annualized yield(4)			6.79%			4.46%			1.18%			N/A			3.63%												4.02%
			—%

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

(2) Credit card, net consists of i) an off-balance sheet amount representing 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; ii) an on-balance sheet amount representing purchased credit card receivables by Credit Funding Trust that is included in receivables from users, net on the unaudited condensed consolidated balance sheets. Under the Program Agreement, Robinhood Credit has the ability to purchase credit card receivables originated and held for a period by Coastal Bank. Robinhood Credit collects interest from purchased credit card receivables. As of March 31, 2024, $177 million was off-balance sheet and $20 million was on-balance sheet. Refer to Note 9 - Financing Activities and Off-Balance Sheet Risk to these unaudited condensed consolidated financial statements for more information.

(3) Average balance rows represent the simple average of month-end balances in a given period.

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

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Other Revenues

															Three Months Ended March 31,
(in millions, except for percentages)																					2023						2024						% Change
Other revenues																					$	26					$	35					35		%
Other revenues as a % of total net revenues																					6%						6%

Other revenues increased $9 million primarily due to increased subscription revenues of $6 million due to an increase in Gold Subscribers.

Operating Expenses

															Three Months Ended March 31,
(in millions, except for percentages)																					2023						2024						% Change
Operating expenses:
Brokerage and transaction																					$	36					$	35					(3)		%
Technology and development																					199						196						(2)		%
Operations																					42						44						5		%
Marketing																					26						67						158		%
General and administrative																					647						118						(82)		%
Total operating expenses																					$	950					$	460					(52)		%
Percent of total net revenues:
Brokerage and transaction																					8		%				5		%
Technology and development																					45		%				32		%
Operations																					10		%				7		%
Marketing																					6		%				11		%
General and administrative																					147		%				19		%
Total operating expenses																					216		%				74		%

Brokerage and Transaction

															Three Months Ended March 31,
(in millions)																					2023						2024						% Change
Employee compensation, benefits, and overhead, excluding SBC																					$	6					$	9					50%
Market data expenses																					6						6						—%
SBC																					2						2						—%
Broker-dealer transaction expenses																					9						1						(89)%
Other																					13						17						31%
Total																					$	36					$	35					(3)%

Brokerage and transaction costs decreased by $1 million primarily driven by a $8 million decrease in broker-dealer transaction expenses as starting in the fourth quarter of 2023, we began to pass option trading fees onto users. The decrease was partially offset by increases in other brokerage and transaction costs of $4 million and employee compensation, benefits, and overhead of $3 million, driven by an increase in average headcount to continue support our business and newly launched products and features.

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Technology and Development

															Three Months Ended March 31,
(in millions)																					2023						2024						% Change
Employee compensation, benefits, and overhead, excluding SBC																					$	79					$	74					(6)		%
SBC																					54						44						(19)		%
Cloud infrastructure services																					32						43						34		%
Software and tools																					29						28						(3)		%
Other																					5						7						40		%
Total																					$	199					$	196					(2)		%

Technology and development costs decreased $3 million primarily due to decreases in SBC of $10 million and employee compensation, benefits, and overhead of $5 million driven by reduced average headcount as part of our efforts to improve efficiency and operating costs. The decreases were offset by an increase in cloud infrastructure expenses of $11 million to meet increased capacity requirements for our platforms to support higher trading volumes.

Operations

															Three Months Ended March 31,
(in millions)																					2023						2024						% Change
Employee compensation, benefits, and overhead, excluding SBC																					$	21					$	19					(10)%
Provision for credit losses and fraud																					11						17						55%
Customer experience																					5						4						(20)%
SBC																					2						2						—%
Other																					3						2						(33)%
Total																					$	42					$	44					5%

Operations costs increased by $2 million primarily due to an increase of $6 million in provision for credit losses and fraud mainly driven by a $8 million provision for credit losses related to Robinhood Credit, partially offset by a $2 million decrease 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 platforms. The increase was also partially offset by a $2 million decrease in employee compensation, benefits, and overhead driven by reduced average headcount as part of our efforts to improve efficiency.

Marketing

															Three Months Ended March 31,
(in millions)																					2023						2024						% Change
Digital marketing																					$	7					$	28					300		%
Brand marketing																					6						17						183		%
Employee compensation, benefits, and overhead, excluding SBC																					5						7						40		%
Marketing incentives																					1						4						300		%
SBC																					1						2						100		%
Other																					6						9						50		%
Total																					$	26					$	67					158		%

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Marketing costs increased by $41 million, primarily due to higher expenses in digital marketing of $21 million and brand marketing of $11 million, as we increased our investments in paid marketing channels to promote our brand, products, and services.

General and Administrative

															Three Months Ended March 31,
(in millions)																					2023						2024						% Change
Employee compensation, benefits, and overhead, excluding SBC																					$	54					$	57					6		%
Legal expenses																					32						21						(34)		%
SBC excluding 2021 Founders Award Cancellation																					54						12						(78)		%
Other professional fees																					7						12						71		%
SBC related to 2021 Founders Award Cancellation																					485						—						NM
Settlements and penalties																					8						2						(75)		%
Other																					7						14						100		%
Total																					$	647					$	118					(82)		%

General and administrative costs decreased by $529 million primarily due to the 2021 Founders Award Cancellation of $485 million which occurred during the prior year period and a decrease in other SBC of $42 million attributed to stock awards becoming fully vested in prior periods.

Provision for Income Taxes

												Three Months Ended March 31,
(in millions)																		2023						2024						% Change
Provision for income taxes																		$	2					$	5					150		%

Provision for income taxes increased by $3 million primarily due to the growth of our business 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 investments. Other sources of future funds may include potential borrowing 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 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.

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Liquid Assets

As of March 31, 2024, our cash and cash equivalents were $4.72 billion, and our liquid investment portfolio included available-for-sale securities of $500 million classified as cash and cash equivalents. Held-to-maturity investments maturing within one year can also be a source of liquidity and were $495 million as of March 31, 2024. See Note 5 - Investments and Fair Value Measurement, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.

Revolving Credit Facilities and Credit Card Funding Trust

As of March 31, 2024, we had a total of $3.00 billion in committed revolving credit facilities and a borrowing amount up to $100 million for our Credit Card Funding Trust. See Note 9 - 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 for contractual obligations as of March 31, 2024:

			Payments Due by Period
(in millions)			Total						Remainder of 2024						2025-2026						2027-2028						Thereafter
Operating lease commitments			$	138					$	21					$	47					$	30					$	40
Purchase commitments(1)			840						265						565						9						1
Total			$	978					$	286					$	612					$	39					$	41

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(1) Purchase commitments are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated. The primarily relate to 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.

Regulatory Capital Requirements

Our broker-dealer subsidiaries (RHF and RHS) are subject to Rule 15c3-1 (the "SEC Uniform Net Capital Rule") under the Exchange Act, 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 as of periods presented:

						March 31, 2024
(in millions)						Net Capital						Required Net Capital						Net Capital in Excess of Required Net Capital
RHS						$	2,324					$	90					$	2,234
RHF						$	291					$	0.25					$	291

As of March 31, 2024, our broker-dealer subsidiaries were in compliance with their respective regulatory capital requirements.

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Cash Flows

The following table summarizes our cash flow activities:

						Three Months Ended March 31,
(in millions)						2023						2024
Cash provided by (used in):
Operating activities						$	828					$	(623)
Investing activities						(481)						(47)
Financing activities						(11)						(30)

Cash provided by operating activities decreased $1,451 million. While we had higher net income, this was partially offset by a decrease in non-cash add-backs driven by higher SBC expense in 2023 as a result of the 2021 Founders Award Cancellation. The decrease was further driven by changes in operating assets and liabilities that had a negative impact on our cash provided by operating activities. These changes primarily included an increase in securities segregated under federal and other regulations resulting from the purchase of U.S. Treasury securities of $692 million and an increase in receivables from users, net balances of $853 million driven by increased customer trading and activities and timing differences in settlements. For periods that end on a weekend or a bank holiday, our settlements receivable and customer payable balances typically will be higher than for periods ending on a weekday.

Cash used in investing activities decreased $434 million compared to the prior period. The change was primarily driven by a decrease in cash used in investing activities of $316 million from fewer purchases of held-to-maturity investments and an increase of $152 million in cash provided by investing activities related to proceeds from maturities of held-to-maturity investments.

Cash used in financing activities increased $19 million compared to the prior period primarily driven by an increase in taxes paid related to net share settlement of equity awards of $38 million partially offset by $17 million in borrowings under our Credit Card Funding Trust which were subsequently used to purchase receivables.

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 on 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 three months ended March 31, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates” in our 2023 Form 10-K.

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Recent Accounting Pronouncements

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