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

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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 and nine months ended September 30, 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.

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. Individuals who share a funded joint investing account (which launched in July 2024) are each considered to be a Funded Customer.
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 customers, as well as dividends, interest, and cash and assets earned in connection with Company promotions (such as account transfer and retirement match incentives and free stock bonuses) 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 the second quarter of 2024, Net Deposits did not include inflows from cash and assets earned in connection with Company promotions and 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.

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 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.

*•*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.

Investment Accounts: We define an Investment Account as a funded individual brokerage account, a funded joint investing account, or a funded individual retirement account (“IRA”). As of September 30, 2024, a Funded Customer can have up to four Investment Accounts - individual brokerage account, joint investing account (which launched in July 2024), traditional IRA, and Roth IRA.
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 September 30, 2024, as compared to the three months ended September 30, 2023:

total net revenues increased 36% to $637 million compared to $467 million;
net income was $150 million, or diluted EPS of $0.17, compared to a net loss of $85 million, or diluted EPS of -$0.09;
total operating expenses decreased 10% to $486 million compared to $540 million;

◦SBC expense decreased 5% to $79 million compared to $83 million;

*•*Adjusted EBITDA (non-GAAP) increased 96% to $268 million compared to $137 million;

Funded Customers increased 4% to 24.3 million compared to 23.3 million, and Investment Accounts increased by 1.5 million to 25.1 million;
AUC increased 76% to $152.2 billion compared to $86.5 billion, driven by continued Net Deposits and higher equity and cryptocurrency valuations;
Net Deposits were $10.0 billion, an annualized growth rate of 29% relative to AUC at the end of the second quarter of 2024, compared to $4.0 billion, an annualized growth rate of 18% relative to AUC at the end of the second quarter of 2023. Over the past twelve months, Net Deposits were $39.0 billion, a growth rate of 45% relative to AUC at the end of the third quarter of 2023;
ARPU increased 31% to $105 compared to $80; and
Gold Subscribers increased 65% to 2.19 million compared to 1.33 million;

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 September 30,
	2023		2024		% Change
Funded Customers(1) (in millions)	23.3		24.3		4	%
AUC(2) (in billions)	$	86.5	$	152.2	76	%
Net Deposits (in billions)	$	4.0	$	10.0	NM
ARPU (in dollars)	$	80	$	105	31	%
Gold Subscribers (in millions)	1.33		2.19		65	%

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


	Three Months Ended September 30,
(in millions)	2023	2024	% Change
Beginning Funded Customers	23.2	24.2	4	%
New Funded Customers	0.3	0.4	33	%
Resurrected Customers	0.1	0.1	—	%
Churned Customers	(0.3)	(0.4)	33	%
Ending Funded Customers	23.3	24.3	4	%

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


	Three Months Ended September 30,
(in billions)	2023		2024		% Change
Equities	$	61.4	$	106.4	73	%
Cryptocurrencies	10.2		19.5		91	%
Options	0.4		1.2		200	%
Cash held by Customers	18.0		30.6		70	%
Receivables from Customers (primarily margin balances)	(3.5)		(5.5)		57	%
AUC	$	86.5	$	152.2	76	%

The following table describes the changes within AUC:


	Three Months Ended September 30,
(in billions)	2023		2024		% Change
Beginning AUC	$	88.8	$	139.7	57	%
Net Deposits	4.0		10.0		NM
Net market gains (losses)	(6.3)		2.5		NM
Ending AUC	$	86.5	$	152.2	76	%

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 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 September 30,				Nine Months Ended September 30,
(in millions)	2023		2024		2023		2024
Net income (loss)	$	(85)	$	150	$	(571)	$	495
Add:
Interest expenses related to credit facilities	6		6		17		18
Provision for income taxes	10		3		9		11
Depreciation and amortization	19		20		54		55
EBITDA (non-GAAP)	(50)		179		(491)		579
Add: SBC
2021 Founders Award Cancellation	—		—		485		—
SBC Excluding 2021 Founders Award Cancellation	83		79		305		227
Significant legal and tax settlements and reserves	104		10		104		10
Adjusted EBITDA (non-GAAP)	$	137	$	268	$	403	$	816

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,
	2023			2024			2023			2024

Revenues:
Transaction-based revenues		$	185		$	319		$	585		$	975
Net interest revenues		251			274			693			813
Other revenues		31			44			116			149
Total net revenues		467			637			1,394			1,937

Operating expenses:(1)
Brokerage and transaction		39			39			114			114
Technology and development		202			205			608			610
Operations		41			50			119			140
Marketing		28			59			79			190
General and administrative		230			133			1,036			385
Total operating expenses		540			486			1,956			1,439
Other income (expense), net		(2)			2			—			8
Income (loss) before income taxes		(75)			153			(562)			506
Provision for income taxes		10			3			9			11
Net income (loss)		$	(85)		$	150		$	(571)		$	495

(1)Includes SBC expense as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2024		2023		2024
Brokerage and transaction	$	2	$	2	$	6	$	7
Technology and development	51		48		161		144
Operations	3		1		6		5
Marketing	1		3		3		6
General and administrative	26		25		614		65
Total SBC expense	$	83	$	79	$	790	$	227

Comparison of the Three and Nine Months Ended September 30, 2023 and 2024

Revenues

Transaction-Based Revenues


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except for percentages)	2023		2024		% Change		2023		2024		% Change
Transaction-based revenues:
Options	$	124	$	202	63	%	$	384	$	538	40	%
Cryptocurrencies	23		61		165	%	92		268		191	%
Equities	27		37		37	%	79		116		47	%
Other	11		19		73	%	30		53		77	%
Total transaction-based revenues	$	185	$	319	72	%	$	585	$	975	67	%
Transaction-based revenues as a % of total net revenues:
Options	27%		32%				28%		28%
Cryptocurrencies	5%		9%				7%		14%
Equities	5%		6%				6%		6%
Other	3%		3%				2%		2%
Total transaction-based revenues	40%		50%				43%		50%

Transaction-based revenues increased by $134 million and $390 million for the three and nine months ended September 30, 2024, primarily driven by increases of $38 million and $176 million in cryptocurrencies, $78 million and $154 million in options, and $10 million and $37 million in equities.

Cryptocurrencies revenues increased as a result of a 57% and 77% increase in the average Notional Trading Volume traded per trader and a 31% and 32% increase in the number of users placing cryptocurrency trades. In addition, cryptocurrencies revenues benefited from a higher rebate rate from crypto market makers (an increase was effective in May 2024).

Options revenues increased due to a 23% and 20% increase in the number of users placing option trades and a 47% and 37% increase in Options Contracts Traded. In addition, we experienced higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates. Option revenues decreased by $17 million and $25 million due to match incentives paid to our customers (Refer to Note 3 - Revenues to our unaudited condensed consolidated financial statements in this Quarterly Report for more information).

Equities revenues increased primarily driven by a 41% and 32% increase in the average Notional Trading Volume traded per trader and a 14% and 15% increase in the number of users placing equity trades. The increase was partially offset by lower equity rebate rates due to 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)	2023			2024			% Change		2023			2024			% Change
Net interest revenues:
Margin interest	$	67		$	83		24	%	$	177		$	228		29	%
Interest on corporate cash and investments	75			67			(11)	%	217			203			(6)	%
Interest on segregated cash, securities, and deposits	59			61			3	%	156			187			20	%
Cash Sweep	35			46			31	%	86			129			50	%
Securities lending, net	17			19			12	%	70			68			(3)	%
Credit card, net	4			4			—	%	4			16			300	%
Interest expenses related to credit facilities	(6)			(6)			—	%	(17)			(18)			6	%
Total net interest revenues	$	251		$	274		9	%	$	693		$	813		17	%
Net interest revenues as a % of total net revenues:
Margin interest	14		%	13		%			13		%	12		%
Interest on corporate cash and investments	16		%	10		%			15		%	9		%
Interest on segregated cash, securities, and deposits	13		%	10		%			11		%	10		%
Cash Sweep	7		%	7		%			7		%	7		%
Securities lending, net	4		%	3		%			5		%	4		%
Credit card, net	1		%	1		%			—		%	1		%
Interest expenses related to credit facilities	(1)		%	(1)		%			(1)		%	(1)		%
Total net interest revenues	54		%	43		%			50		%	42		%

Net interest revenues increased by $23 million and $120 million for the three and nine months ended September 30, 2024. These increases were driven by growth in our total interest-earning assets balance. These increases were offset by decreases in interest revenues earned from corporate cash and investments driven by lower cash and cash equivalents balances and lower short-term interest rate environment. In September 2024, the Federal Reserve lowered interest rates by 50 basis points, which will negatively impact our net interest revenues and adversely impact our customers’ returns on their cash deposits.

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 (5)		Total net interest revenues
Three Months Ended September 30, 2024
September 30, 2024	$	5,499	$	11,149	$	24,485	$309	$	41,442
June 30, 2024	4,956		10,164		20,858		212	36,190
Average(3)	5,350		10,055		22,473		270	38,148
Revenue (expense)	83		128		46		4	261		$	19	$	(6)	$	274
Annualized yield(4)	6.21%		5.09%		0.82%		5.93%	2.74%						2.87%

Three Months Ended June 30, 2024
June 30, 2024	$	4,956	$	10,164	$	20,858	$212	$	36,190
March 31, 2024	4,115		10,328		19,049		197	33,689
Average(3)	4,431		10,249		19,823		201	34,704
Revenue (expense)	73		134		44		6	257		$	34	$	(6)	$	285
Annualized yield(4)	6.59%		5.23%		0.89%		11.94%	2.96%						3.28%

Three Months Ended September 30, 2023
September 30, 2023	$	3,580	$	9,102	$	13,563	$197	$	26,442
June 30, 2023	3,314		10,758		11,903		184	26,159
Average(3)	3,458		10,057		12,870		191	26,576
Revenue (expense)	67		134		35		4	240		$	17	$	(6)	$	251
Annualized yield(4)	7.75%		5.33%		1.09%		8.38%	3.61%						3.78%

Nine Months Ended September 30, 2024
September 30, 2024	$	5,499	$	11,149	$	24,485	$309	$	41,442
December 31, 2023	3,458		10,107		16,352		205	30,122
Average(3)	4,511		10,075		19,958		228	34,772
Revenue (expense)	228		390		129		16	763		$	68	$	(18)	$	813
Annual yield(4)	6.74%		5.16%		0.86%		9.36%	2.93%						3.12%

Nine Months Ended September 30, 2023
September 30, 2023	$	3,580	$	9,102	$	13,563	$197	$	26,442
December 31, 2022	3,089		9,530		5,837		N/A	18,456
Average(3)	3,255		10,119		10,215		N/A	23,589
Revenue (expense)	177		373		86		4	640		$	70	$	(17)	$	693
Annual yield(4)	7.25%		4.91%		1.12%		N/A	3.62%						3.92%

(1) Includes cash and cash equivalents, cash, cash equivalents, 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 the Credit Card Funding Trust. Robinhood Credit collects interest from customers that carry balances and pays interest on the amount funded through the Credit Card Funding Trust, with the difference in those amounts resulting in net interest revenues. As of September 30, 2024, $202 million was off-balance sheet and $107 million was on-balance sheet. The balance for June 30, 2023 is based on Robinhood Credit’s acquisition date of July 3, 2023. Refer to Note 10 - Financing Activities and Off-Balance Sheet Risk to our unaudited condensed consolidated financial statements in this Quarterly Report 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.

(5) Includes interest expenses related to our revolving credit facilities; interest expense related to the Credit Card Funding Trust is included in the credit card, net interest yield calculation. Refer to Note 10 - Financing Activities and Off-Balance Sheet Risk to our unaudited condensed consolidated financial statements in this Quarterly Report for more information.

Other Revenues


	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions, except for percentages)	2023			2024			% Change		2023			2024			% Change
Other revenues:
Gold subscription revenues	$	20		$	28		40	%	$	55		$	77		40	%
Proxy revenues	8			8			—	%	53			53			—	%
Other	3			8			167	%	8			19			138	%
Total other revenues	$	31		$	44		42	%	$	116		$	149		28	%
Other revenues as a % of total net revenues:
Gold subscription revenues	4		%	5		%			4		%	4		%
Proxy revenues	2		%	1		%			4		%	3		%
Other	1		%	1		%			—		%	1		%
Other revenues as a % of total net revenues	7		%	7		%			8		%	8		%

Other revenues increased $13 million and $33 million for the three and nine months ended September 30, 2024 as a result of increased Gold subscription revenues of $8 million and $22 million due to an increase in Gold Subscribers. For the nine months ended September 30, 2024, other revenues also increased by $6 million from Sherwood Media LLC (“Sherwood Media”) advertising revenue, which was launched during the second quarter of 2023.

Operating Expenses


	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions, except for percentages)	2023			2024			% Change		2023			2024			% Change
Operating expenses:
Brokerage and transaction	$	39		$	39		—	%	$	114		$	114		—	%
Technology and development	202			205			1	%	608			610			—	%
Operations	41			50			22	%	119			140			18	%
Marketing	28			59			111	%	79			190			141	%
General and administrative	230			133			(42)	%	1,036			385			(63)	%
Total operating expenses	$	540		$	486		(10)	%	$	1,956		$	1,439		(26)	%
Percent of total net revenues:
Brokerage and transaction	8		%	6		%			8		%	6		%
Technology and development	43		%	32		%			44		%	31		%
Operations	9		%	8		%			9		%	7		%
Marketing	6		%	9		%			6		%	10		%
General and administrative	49		%	21		%			74		%	20		%
Total operating expenses	115		%	76		%			141		%	74		%

Brokerage and Transaction


	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2023		2024		% Change	2023		2024		% Change
Employee compensation, benefits, and overhead, excluding SBC	$	8	$	9	13%	$	23	$	27	17%
Market data expenses	6		7		17%	17		19		12%
Customer statements	3		4		33%	11		11		—%
SBC	2		2		—%	6		7		17%
Broker-dealer transaction expenses	11		3		(73)%	29		7		(76)%
Other	9		14		56%	28		43		54%
Total	$	39	$	39	—%	$	114	$	114	—%

Brokerage and transaction costs remained flat for both the three and nine months ended September 30, 2024. Other brokerage and transaction costs increased by $5 million and $15 million due to higher expenses related to our instant withdrawals feature driven by higher activities. Additionally, employee compensation, benefits, and overhead increased by $1 million and $4 million driven by increased average headcount to continue support brokerage business. These increases were offset by decreases of $8 million and $22 million in broker-dealer transaction expenses as we began to pass option trading fees onto users starting in the fourth quarter of 2023.

Technology and Development


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2023		2024		% Change		2023		2024		% Change
Employee compensation, benefits, and overhead, excluding SBC	$	74	$	67	(9)	%	$	237	$	216	(9)	%
SBC	51		48		(6)	%	161		144		(11)	%
Cloud infrastructure services	40		49		23	%	107		138		29	%
Software and tools	30		32		7	%	86		90		5	%
Other	7		9		29	%	17		22		29	%
Total	$	202	$	205	1	%	$	608	$	610	—	%

Technology and development costs increased by $3 million and $2 million for the three and nine months ended September 30, 2024 primarily due to increases in cloud infrastructure expenses of $9 million and $31 million to meet increased capacity requirements for our platforms to support higher trading volumes. These increases were partially offset by decreases in employee compensation, benefits, and overhead of $7 million and $21 million and SBC of $3 million and $17 million, driven by reduced average headcount as part of our efforts to improve efficiency and operating costs.

Operations


	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2023		2024		% Change	2023		2024		% Change
Employee compensation, benefits, and overhead, excluding SBC	$	17	$	18	6%	$	59	$	54	(8)%
Provision for credit losses - credit card related	11		17		55%	11		41		273%
Provision for credit losses - brokerage related	3		6		100%	18		16		(11)%
Customer experience	4		4		—%	15		13		(13)%
SBC	3		1		(67)%	6		5		(17)%
Other	3		4		33%	10		11		10%
Total	$	41	$	50	22%	$	119	$	140	18%

Operations costs increased by $9 million and $21 million for the three and nine months ended September 30, 2024, primarily due to increases of $6 million and $30 million of provision for credit card losses.

Marketing


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2023		2024		% Change		2023		2024		% Change
Digital marketing	$	11	$	26	136	%	$	24	$	85	254	%
Brand marketing	2		5		150	%	13		32		146	%
Employee compensation, benefits, and overhead, excluding SBC	5		9		80	%	16		24		50	%
Robinhood referral program	2		4		100	%	5		10		100	%
SBC	1		3		200	%	3		6		100	%
Other	7		12		71	%	18		33		83	%
Total	$	28	$	59	111	%	$	79	$	190	141	%

Marketing costs increased by $31 million and $111 million for the three and nine months ended September 30, 2024, primarily due to higher expenses in digital marketing of $15 million and $61 million, brand marketing of $3 million and $19 million as well as other marketing of $5 million and $15 million, as we increased our investments in paid marketing channels and other marketing initiatives to promote our brand, products, and services. In addition, employee compensation, benefits, and overhead increased by $4 million and $8 million driven by increased average headcount to support increased marketing initiatives.

General and Administrative


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2023		2024		% Change		2023		2024		% Change
Employee compensation, benefits, and overhead, excluding SBC	$	54	$	57	6	%	$	166	$	175	5	%
SBC excluding 2021 Founders Award Cancellation	26		25		(4)	%	129		65		(50)	%
Legal expenses	21		13		(38)	%	80		62		(23)	%
Other professional fees	14		11		(21)	%	30		34		13	%
Settlements and penalties	107		13		(88)	%	115		20		(83)	%
SBC related to 2021 Founders Award Cancellation	—		—		NM		485		—		NM
Other	8		14		75	%	31		29		(6)	%
Total	$	230	$	133	(42)	%	$	1,036	$	385	(63)	%

General and administrative costs decreased by $97 million and $651 million for the three and nine months ended September 30, 2024, primarily due to decreases of $94 million and $95 million in settlements and penalties and $8 million and $18 million in legal expenses associated with certain historical regulatory matters. In addition, other SBC decreased by $1 million and $64 million attributed to stock awards becoming fully vested in prior periods. The decrease for the nine months ended September 30, 2024 was also due to the 2021 Founders Award Cancellation of $485 million which occurred during the first quarter in 2023.

Provision for Income Taxes


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2023		2024		% Change		2023		2024		% Change
Provision for income taxes	$	10	$	3	(70)	%	$	9	$	11	22	%

Provision for income taxes decreased by $7 million for the three months ended September 30, 2024 primarily due to the decrease in our current U.S. federal and state taxes payable as a result of an increase in excess tax benefits from share-based compensation, offset by the change in valuation allowance on our U.S. federal and state deferred tax assets.

Provision for income taxes increased by $2 million for the nine months ended September 30, 2024 primarily due to the increase in our current U.S. federal and state taxes payable as a result of business growth, offset by the change in valuation allowance on our U.S. federal and state deferred tax assets.

If the improvements in the U.S. operating results continue, we believe a reasonable probability exists that, within the next 24 months, sufficient positive evidence may become available to reach a conclusion that a significant portion of the U.S. valuation allowance would no longer be required.

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.

Liquid Assets

As of September 30, 2024, our cash and cash equivalents were $4.61 billion, which included a $750 million liquid investment portfolio of available-for-sale securities. Held-to-maturity investments maturing within one year can also be a source of liquidity and were $527 million as of September 30, 2024. See Note 6 - 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 September 30, 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 10 - 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 September 30, 2024:


	Payments Due by Period
(in millions)	Total		Remainder of 2024		2025-2026		2027-2028		Thereafter
Operating lease commitments	$	125	$	7	$	47	$	30	$	41
Purchase commitments(1)	740		130		582		27		1
Robinhood match incentives commitments(2)	109		15		94		—		—
Credit Card Funding Trust borrowing principal and interest	94		—		94		—		—
Total	$	1,068	$	152	$	817	$	57	$	42

(1) Purchase commitments are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated. These primarily relate to commitments for cloud infrastructure and data services and business insurance.

(2) Robinhood match incentives commitments represent non-cancelable future match payments on eligible cash deposits made by Robinhood Gold users. The future match payments are forfeited if deposits are not held on the platform during the specific earning period.

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:


	September 30, 2024
(in millions)	Net Capital		Required Net Capital		Net Capital in Excess of Required Net Capital
RHS	$	2,597	$	121	$	2,476
RHF	$	297	$	0.25	$	297

As of September 30, 2024, our broker-dealer subsidiaries were in compliance with their respective regulatory capital requirements.

Cash Flows

The following table summarizes our cash flow activities:


	Nine Months Ended September 30,
(in millions)	2023		2024
Cash provided by (used in):
Operating activities	$	221	$	1,243
Investing activities	(579)		(182)
Financing activities	(619)		(167)

Cash provided by operating activities increased $1.02 billion primarily driven by increased net income of $1.07 billion, 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. Further, changes in operating assets and liabilities had a positive impact on our cash provided by operating activities. These changes primarily included an increase in securities loaned due to continuous growth in our securities lending program. The increase was offset by an increase in receivables from users, net due to higher customer margin balance, driven by increased customer activities.

Cash used in investing activities decreased $397 million compared to the prior period. The change was primarily driven by a decrease of $182 million from fewer purchases of held-to-maturity investments and an increase of $272 million related to proceeds from maturities of held-to-maturity investments.

Cash used in financing activities decreased $452 million compared to the prior period primarily driven by a $511 million decrease in funds spent on common stock repurchases and $95 million in borrowings under our Credit Card Funding Trust to purchase credit card receivables. The decrease was partially offset by an increase of $146 million in taxes paid related to net share settlement of equity awards.

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 nine months ended September 30, 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.

Recent Accounting Pronouncements

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

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