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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 001-40691
______________________
Robinhood Markets, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware   46-4364776
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)
85 Willow Rd
Menlo Park, CA 94025
(Address of principal executive offices, including zip code)
(844) 428-5411
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Class A Common Stock
$0.0001 par value per share
HOOD The Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o    Accelerated filer o    Non-accelerated filer ý  Smaller reporting company  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  

As of April 29, 2022, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 743,881,607 and 127,955,246.
1



TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1.
4
5
6
7
8
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.

1

CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements (as such phrase is used in the federal securities laws), which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. This Quarterly Report includes, among others, forward-looking statements regarding our:
expectations regarding legal and regulatory proceedings and investigations;
expectations regarding our pending transaction with Ziglu Limited;
expectations about the sufficiency of our available cash, available borrowings, and cash from operations to meet our liquidity needs for the next 12 months; and
expectations regarding our use of the net proceeds from our initial public offering (“IPO”).
Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Quarterly Report. Reported results should not be considered an indication of future performance. Factors that contribute to the uncertain nature of our forward-looking statements include, among others:
our limited operating history;
the difficulty of managing our growth effectively, including our recent workforce reduction, and the risk of declining or negative growth;
the fluctuations in our financial results and key metrics from quarter to quarter;
our reliance on transaction-based revenue, including payment for order flow (“PFOF”), and the risk of new regulation or bans on PFOF and similar practices;
the difficulty of raising additional capital (to satisfy any liquidity needs and support business growth and objectives) on reasonable terms or at all;
the need to maintain capital levels required by regulators and self-regulatory organizations;
the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for operational errors in clearing functions;
the impact of negative publicity on our brand and reputation;
the risk that changes in business, economic, or political conditions, or systemic market events, might harm our business;
our dependence on key employees and a skilled workforce;
the difficulty of complying with an extensive and complex regulatory environment and the need to adjust our business model in response to new or modified laws and regulations;
2

the possibility of adverse developments in pending litigation and regulatory investigations;
the effects of competition;
our need to innovate and invest in new products and services in order to attract and retain customers and deepen their engagement with us in order to maintain growth;
our reliance on third parties to perform some key functions and the risk that operational or technological failures could impair the availability or stability of our platform;
the risk of cybersecurity incidents, theft, data breaches, and other online attacks;
the difficulty of processing customer data in compliance with privacy laws;
our need as a regulated financial services company to develop and maintain effective compliance and risk management infrastructures;
the volatility of cryptocurrency prices and trading volumes;
the risk that our platform could be exploited to facilitate illegal payments; and
the risk that substantial future sales of Class A common shares in the public market could cause the price of our stock to fall.
Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this Quarterly Report titled “Risk Factors” and our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Quarterly Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, Robinhood assumes no obligation to update any of the statements in this Quarterly Report whether as a result of any new information, future events, changed circumstances or otherwise. You should read this Quarterly Report with the understanding that our actual future results, performance, events and circumstances might be materially different from what we expect.

3

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, March 31,
(in millions, except share and per share data) 2021 2022
Assets
Current assets:
Cash and cash equivalents $ 6,253  $ 6,191 
Cash and securities segregated under federal and other regulations 3,992  4,458 
Receivables from brokers, dealers, and clearing organizations 88  124 
Receivables from users, net 6,639  5,215 
Deposits with clearing organizations 328  294 
User-held fractional shares 1,834  1,929 
Investments 27  40 
Prepaid expenses 92  75 
Other current assets 30  29 
Total current assets 19,283  18,355 
Property, software, and equipment, net 146  166 
Goodwill 101  100 
Intangible assets, net 34  32 
Restricted cash 24  24 
Operating lease right-of-use-assets 129  155 
Non-current prepaid expenses 44  35 
Other non-current assets
Total assets $ 19,769  $ 18,872 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses $ 252  $ 249 
Payables to users 6,476  7,149 
Securities loaned 3,651  2,151 
Fractional shares repurchase obligation 1,834  1,929 
Operating lease liabilities 22  23 
Other current liabilities 112  80 
Total current liabilities 12,347  11,581 
Operating lease liabilities, non-current 129  160 
Total liabilities 12,476  11,741 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 735,957,367 shares issued and outstanding as of December 31, 2021; 21,000,000,000 shares authorized, 741,852,763 shares issued and outstanding as of March 31, 2022.
—  — 
Class B common stock, par value $0.0001. 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of December 31, 2021; 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of March 31, 2022.
—  — 
Class C common stock, par value $0.0001. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021; 7,000,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022.
—  — 
Additional paid-in capital 11,169  11,400 
Accumulated other comprehensive income (loss) — 
Accumulated deficit (3,877) (4,269)
Total stockholders’ equity
7,293  7,131 
Total liabilities and stockholders’ equity $ 19,769  $ 18,872 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
4

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
(in millions, except share and per share data) 2021 2022
Revenues:
Transaction-based revenues $ 420  $ 218 
Net interest revenues 62  55 
Other revenues 40  26 
Total net revenues 522  299 
Operating expenses:
Brokerage and transaction 41  31 
Technology and development 117  266 
Operations 67  91 
Marketing 102  34 
General and administrative 137  268 
Total operating expenses 464  690 
Change in fair value of convertible notes and warrant liability 1,492  — 
Other income, net (1) — 
Loss before income taxes (1,433) (391)
Provision for income taxes 12 
Net loss $ (1,445) $ (392)
Net loss attributable to common stockholders:
Basic $ (1,445) $ (392)
Diluted $ (1,445) $ (392)
Net loss per share attributable to common stockholders:
Basic $ (6.26) $ (0.45)
Diluted $ (6.26) $ (0.45)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic 230,685,464  867,769,168 
Diluted 230,685,464  867,769,168 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
5

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended
 March 31,
(in millions) 2021 2022
Net loss $ (1,445) $ (392)
Other comprehensive loss, net of tax:
Foreign currency translation —  (1)
Total other comprehensive loss, net of tax —  (1)
Total comprehensive loss $ (1,445) $ (393)
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
6

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
 March 31,
(in millions) 2021 2022
Operating activities:
Net loss $ (1,445) $ (392)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 12 
Provision for credit losses 16 
Share-based compensation 220 
Change in fair value of convertible notes and warrant liability 1,492  — 
Changes in operating assets and liabilities:
Segregated securities under federal and other regulations 135  — 
Receivables from brokers, dealers, and clearing organizations (51) (36)
Receivables from users, net (2,029) 1,417 
Deposits with clearing organizations (97) 34 
Operating lease right-of-use assets (6) (26)
Current and non-current prepaid expenses (20) 26 
Other current and non-current assets 616 
Accounts payable and accrued expenses 126  (2)
Payables to users (56) 673 
Securities loaned 110  (1,500)
Current and non-current operating lease liabilities 32 
Other current and non-current liabilities (693) (31)
Net cash provided by (used in) operating activities (1,882) 437 
Investing activities:
Purchase of property, software, and equipment (9) (13)
Capitalization of internally developed software (2) (8)
Purchase of investments —  (14)
Sales of investments — 
Net cash used in investing activities (11) (34)
Financing activities:
Taxes paid related to net share settlement of equity awards —  (3)
Proceeds from issuance of convertible notes and warrants 3,552  — 
Draws on credit facilities 1,000  11 
Repayments on credit facilities (1,000) (11)
Proceeds from exercise of stock options, net of repurchases
Net cash provided by financing activities 3,558  — 
Net increase in cash, cash equivalents, segregated cash and restricted cash 1,665  403 
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period 6,190  10,270 
Cash, cash equivalents, segregated cash and restricted cash, end of the period $ 7,855  $ 10,673 
Cash and cash equivalents, end of the period $ 4,795  $ 6,191 
Segregated cash, end of the period 3,050  4,458 
Restricted cash, end of the period 10  24 
Cash, cash equivalents, segregated cash and restricted cash, end of the period $ 7,855  $ 10,673 
Supplemental disclosures:
Cash paid for interest $ $
Cash paid for income taxes, net of refund received $ $

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
7

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

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




See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

8

ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

Redeemable convertible preferred stock
Common stock(1)
Additional
paid-in
capital
Accumulated other comprehensive
income
Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares) Shares Amount Shares Amount
Balance as of December 31, 2021 —  $ —  863,912,613  $ —  $ 11,169  $ $ (3,877) $ 7,293 
Net loss —  —  —  —  —  —  (392) (392)
Shares issued in connection with stock option exercise, net of repurchases —  —  1,438,358  —  —  — 
Issuance of common stock upon settlement of RSUs —  —  4,672,769  —  —  —  —  — 
Shares withheld related to net share settlement —  —  (215,731) —  (3) —  —  (3)
Vesting of early-exercised stock options —  —  —  —  —  —  —  — 
Change in other comprehensive income —  —  —  —  —  (1) —  (1)
Share-based compensation —  —  —  —  230  —  —  230 
Balance as of March 31, 2022 —  $ —  869,808,009  $ —  $ 11,400  $ —  $ (4,269) $ 7,131 
________________
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information.


See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
9

ROBINHOOD MARKETS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Robinhood Markets, Inc. (“RHM”, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013. Our most significant, wholly-owned subsidiaries are:
Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer;
Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer;
Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy, sell, and transfer cryptocurrencies; and
Robinhood Money, LLC (“RHY”), which offers a pre-paid debit card (the “Robinhood Cash Card”) and a spending account that help customers invest, save, and earn rewards.
Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution. Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction. Acting as agent, we facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade. Our users have ownership of the securities, including those that collateralize margin loans, and cryptocurrencies transacted on our platform and, as a result, any such securities or cryptocurrencies owned by users are not presented on our unaudited condensed consolidated balance sheets (refer to Note 2 for more information on cryptocurrency accounting pronouncements recently issued and not yet adopted). We do not allow users to purchase cryptocurrency on margin. We hold cryptocurrency in custody for our users’ accounts in one or more omnibus cryptocurrency wallets.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC for interim financial reporting. The condensed consolidated financial statements are unaudited, and in management’s opinion, include all adjustments, including normal recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2022 or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).
There have been no material changes in our significant accounting policies as described in our consolidated financial statements included in our audited annual consolidated financial statements for the year ended December 31, 2021. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain prior-period amounts have been reclassified to conform to the current period’s presentation. The impact of these reclassifications is immaterial to the presentation of the unaudited condensed consolidated financial statements.
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Use of Estimates
In accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures, on the unaudited condensed consolidated financial statements. We base our estimates on current and historical experience and other assumptions we believe to be reasonable under the circumstances. Assumptions and estimates used in preparing our unaudited condensed consolidated financial statements include those related to revenue recognition, the determination of allowances for credit losses, the capitalization and estimated useful life of internally developed software, contingent liabilities, useful lives of property and equipment, the incremental borrowing rate used to determine the present value of lease payments, the valuation and recognition of share-based compensation, the valuation of the convertible notes and warrant liability, the valuation and estimated useful lives of acquired intangible assets, uncertain tax positions, accrued liabilities, and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results.
Concentration of Revenue and Credit Risk
Concentrations of Revenue
We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows:
Three Months Ended
March 31,
2021 2022
Market maker:
Citadel Securities, LLC 27  % 22  %
Entities affiliated with Susquehanna International Group, LLP(1)
12  % 12  %
Entities affiliated with Wolverine Holdings, L.P.(2)
% 10  %
All others individually less than 10% 33  % 28  %
Total as percentage of total revenue: 81  % 72  %
________________
(1)Consists of Global Execution Brokers, LP and G1X Execution Services, LLC
(2)Consists of Wolverine Execution Services, LLC and Wolverine Securities LLC

Concentrations of Credit
We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. Default of a counterparty in equities and options trades, which are facilitated through clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us. It is our policy to review, as necessary, the credit standing of each counterparty.



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NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
There are no recently adopted accounting pronouncements that are material to us as of March 31, 2022.
Recently Issued Accounting Pronouncements Not Yet Adopted
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract. The guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the timing of adoption and impact of this new guidance on our financial statements.
In March 2022, the staff of the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”) which provides illustrative guidance for entities to consider when they have obligations to safeguard crypto-assets held in custody on behalf of their platform users. SAB 121 states that the entity should carry a liability accompanied by an asset of the same value on its balance sheet representing the platform user’s crypto-assets held in custody measured at fair value initially and at each subsequent reporting period. Accompanying disclosures should be made relating to the entity’s safeguarding obligations for crypto-assets held for its platform users. This guidance should be reflected no later than the financial statements covering the first interim or annual period ending after June 15, 2022, with retrospective application as of the beginning of the fiscal year to which the interim or annual period relates. Early adoption is permitted. We will adopt this guidance for the interim period ending June 30, 2022. Upon adoption we expect to recognize a significant asset and liability and to provide the necessary accompanying disclosures. Had we adopted SAB 121 for the period ended March 31, 2022, we would have recognized a corresponding platform user crypto-asset and liability of approximately $20 billion on the unaudited condensed consolidated balance sheet.
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NOTE 3: REVENUES
Disaggregation of Revenues
The following table presents our revenue disaggregated by revenue source:
Three Months Ended
March 31,
(in millions) 2021 2022
Transaction-based revenues:
Options $ 198 $ 127
Cryptocurrencies 88 54
Equities 133 36
Other 1 1
Total transaction-based revenues 420 218
Net interest revenues:
Margin interest 28 35
Securities lending 35 24
Interest on segregated cash and securities 1 1
Other interest revenue 1 1
Interest expenses related to credit facilities (3) (6)
Total net interest revenues 62 55
Other revenues 40 26
Total net revenues $ 522 $ 299
Contract Balances
Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables due from our relationship with a third-party investor communications company are reported in other current assets on the unaudited condensed consolidated balance sheets.
Contract liabilities, which consist of unearned subscription revenue, are recognized when users remit cash payments in advance of the time we satisfy our performance obligations and are recorded as other current liabilities on the unaudited condensed consolidated balance sheets.
The table below sets forth contract receivables and liabilities for the period indicated:
(in millions) Contract Receivables Contract Liabilities
Beginning of period, January 1, 2022 $ 83  $
End of period, March 31, 2022 90 
Changes during the period $ $ — 
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The difference between the opening and ending balances of our contract receivables primarily results from timing differences between our performance and counterparties’ payments. We recognized substantially all revenue from amounts included in the opening contract liability balances in the three months ended March 31, 2022.
NOTE 4: ALLOWANCE FOR CREDIT LOSSES
The following table summarizes the allowance for credit losses, which substantially all relate to unsecured balances of receivables from users due to “Fraudulent Deposit Transactions” and losses on margin lending. Fraudulent Deposit Transactions are fraudulent, unlawful or otherwise inappropriate customer behavior, such as when customers initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount.
Three Months Ended
March 31,
(in millions) 2021 2022
Beginning balance $ 34  $ 40 
Provision for credit losses 16 
Write-offs (19) (28)
Ending balance $ 31  $ 20 
NOTE 5: INVESTMENTS AND FAIR VALUE MEASUREMENT
Investments
We invest in marketable debt securities which are classified as available-for-sale. We elected the fair value option on our available-for-sale debt securities and carry them at fair value with adjustments to fair value presented in other expense (income), net on our unaudited condensed consolidated statements of operations. Investments on our unaudited condensed consolidated balance sheet consisted of the following:
December 31, 2021
(in millions) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Debt securities:
Asset-backed securities $ $ —  $ —  $
Commercial paper 14  —  —  14 
Corporate bonds —  —  7
Government bonds —  —  1
Total investments $ 27  $ —  $ —  $ 27 
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March 31, 2022
(in millions) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Debt securities:
Asset-backed securities $ $ —  $ —  $
Commercial paper 19  —  —  19 
Corporate bonds 12  —  —  12 
Government bonds —  — 
Total investments $ 40  $ —  $ —  $ 40 
All of our debt securities as of December 31, 2021 and March 31, 2022 had a stated contractual maturity or redemption date within one year.
Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis were presented on our unaudited condensed consolidated balance sheets as follows:
December 31, 2021
(in millions) Level 1 Level 2 Level 3 Total
Assets
Cash equivalents:
Money market funds $ 4,004  $ —  $ —  $ 4,004 
Investments:
Asset-backed securities —  — 
Commercial paper —  14  —  14 
Corporate bonds —  — 
Government bonds — 
User-held fractional shares 1,834  —  —  1,834 
Other current assets:
Equity securities - securities owned 14  —  —  14 
Total financial assets $ 5,853  $ 26  $ —  $ 5,879 
Liabilities
Fractional share repurchase obligations $ 1,834  $ —  $ —  $ 1,834 
Total financial liabilities $ 1,834  $ —  $ —  $ 1,834 
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March 31, 2022
(in millions) Level 1 Level 2 Level 3 Total
Assets
Cash equivalents:
Money market funds $ 1,624  $ —  $ —  $ 1,624 
Investments:
Asset-backed securities —  — 
Commercial paper —  19  —  19 
Corporate bonds —  12  —  12 
Government bonds —  — 
User-held fractional shares 1,929  —  —  1,929 
Other current assets:
Equity securities - securities owned 10  —  —  10 
Total financial assets $ 3,564  $ 39  $ —  $ 3,603 
Liabilities
Fractional shares repurchase obligations
$ 1,929  $ —  $ —  $ 1,929 
Total financial liabilities $ 1,929  $ —  $ —  $ 1,929 
During the three months ended March 31, 2022, we did not have any transfers in or out of Level 3 assets or liabilities.
Convertible Notes and Warrant Liability
In February 2021, we issued two tranches of convertible notes (the “convertible notes”) and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (the “warrant liability”). We elected the fair value option for both tranches of the convertible notes as we believe it best reflects their underlying economics. Under the fair value option, the convertible notes were initially measured at their issuance date estimated fair value and subsequently remeasured at their estimated fair value at the end of each reporting period. Upon the closing of our IPO, all of our outstanding convertible notes and warrants were reclassified from liability to equity and the fair value was no longer required to be remeasured.
For the three months ended March 31, 2021, we recorded expense of $1.4 billion and $116 million due to changes in fair value of the convertible notes and warrant liability, respectively, in our unaudited condensed consolidated statements of operations. No such expense related to the convertible notes was attributable to the change in the instrument-specific credit risk. We elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability.
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The significant unobservable inputs used in the fair value measurement of the convertible notes and warrant liability included:
March 31, 2021
Convertible notes Warrant liability
Fair value of common stock $ 41.41  $ 41.41 
Instrument discount 10  % 10  %
Volatility 60  % 60  %
Discount rate(1)
30%/35%
N/A
Risk free rate 0.03  % 0.03  %
Conversion probability:
IPO by June 30, 2021 90  % 90  %
Next financing by June 30, 2021 followed by IPO by December 31, 2021 10  % 10  %
________________
(1) Discount rate of 30% was applied on Tranche I and 35% was applied on Tranche 2. This represents the discount rate associated with the downside scenarios.


The following table sets forth a summary of the changes in the estimated fair value of our convertible notes and warrant liability:
(in millions) Convertible notes Warrant liability
Beginning of period, January 1, 2021 $ —  $ — 
Issued during the period 3,299  253 
Change in fair value 1,376  116 
End of period, March 31, 2021 $ 4,675  $ 369 
NOTE 6: INCOME TAXES
Three Months Ended
March 31,
(in millions, except percentages) 2021 2022
Loss before income taxes $ (1,433) $ (391)
Provision for income taxes 12 
Effective tax rate (0.8) % (0.3) %
Our tax provision for interim periods is determined using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, we update our estimated annual ETR and make a year-to-date calculation of the provision.
For the three months ended March 31, 2021 and March 31, 2022, the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by current taxes payable.
The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the three months ended March 31, 2022, we believe it is more likely than not that the tax benefits of the remaining U.S. net deferred tax assets may not be realized.
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Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.
NOTE 7: OFFSETTING ASSETS AND LIABILITIES
Our policy is to recognize amounts related to our security borrowing and lending agreements subject to master netting arrangements on a gross basis on the unaudited condensed consolidated balance sheets although they are eligible for offset under GAAP. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Substantially all securities borrowing and lending agreements have an open contractual term and may be terminated upon notice by either party. Within these agreements, one has a contractual term of 30 days with a daily minimum commitment of $25 million and another has a contractual term of 21 days with a daily minimum commitment of $35 million.
Our assets and liabilities subject to master netting arrangements are as follows:
December 31, March 31,
(in millions) 2021 2022
Assets Securities borrowed
Gross amount of securities borrowed $ 0.3  $ 0.6 
Gross amount offset on the unaudited condensed consolidated balance sheets —  — 
Amounts of assets presented on the unaudited condensed consolidated balance sheets(1)
0.3  0.6 
Gross amount of securities borrowed not offset on the unaudited condensed consolidated balance sheets:
Securities borrowed 0.3  0.6 
Security collateral received (0.3) (0.6)
Net amount $ —  $ — 
Liabilities Securities loaned
Gross amount of securities loaned $ 3,651.0  $ 2,150.9 
Gross amount of securities loaned offset on the unaudited condensed consolidated balance sheets —  — 
Amounts of liabilities presented on the unaudited condensed consolidated balance sheets 3,651.0  2,150.9 
Gross amount of securities loaned not offset on the unaudited condensed consolidated balance sheets:
Securities loaned 3,651.0  2,150.9 
Security collateral pledged (3,426.8) (1,976.7)
Net amount $ 224.2  $ 174.2 
________________
(1)Securities borrowed are included in receivables from brokers, dealers and clearing organizations on the unaudited condensed consolidated balance sheets.
We also obtain securities under margin agreements on terms which permit us to pledge and/or transfer securities to others. As of December 31, 2021 and March 31, 2022, we were permitted to re-pledge securities with a fair value of $9.21 billion and $7.23 billion under the margin agreements and $0.3 million and $0.6 million under the securities lending agreements. As of March 31, 2022, we re-pledged $234.0 million of the permitted amount with clearing organizations to meet deposit requirements.
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NOTE 8: FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK
Revolving Credit Facilities
In October 2019, we entered into a $200.0 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”). In October 2020, we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $600.0 million with a maturity date of October 29, 2024. In April 2021, we further increased the aggregate credit amount available under the October 2019 Credit Facility to $625.0 million. Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00% or (b) the Alternative Base Rate. The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate (as defined in the agreement) at the applicable time. The Alternative Base Rate is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50% and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00%. If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate (as defined in the agreement) as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent. There were no outstanding borrowings under the October 2019 Credit Facility at December 31, 2021 and March 31, 2022. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10% on any unused amount of the October 2019 Credit Facility quarterly in arrears.
In April 2021, we entered into a $2.18 billion committed and secured revolving line of credit, subject to certain borrowing base limitations, with a maturity date of April 15, 2022 (the “April 2021 Credit Facility”). Borrowings from the April 2021 Credit Facility must be specified to be Tranche A, Tranche B, Tranche C or a combination thereof. Tranche A loans are secured by users’ securities purchased on margin and are used primarily to finance margin loans. Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC margin deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC deposit requirements. Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Interest for this line of credit is determined at the time a loan is initiated and the applicable interest rate is calculated as a per annum rate equal to 1.25% for Tranche A loans and 2.50% for Tranche B and Tranche C loans, plus the Short-Term Funding Rate at the applicable time. The Short-Term Funding Rate is equal to the greatest of (i) the Eurodollar Rate for a one month interest period on such day, which equals to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement) in effect on such day. There were no outstanding borrowings under the April 2021 Credit Facility at December 31, 2021 and March 31, 2022. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50% on any unused amount of the April 2021 Credit Facility quarterly in arrears.
In April 2022, we entered into a $2.28 billion committed and secured revolving line of credit (the “April 2022 Credit Facility”) with a maturity date of April 10, 2023, amending and restating the April 2021 Credit Facility. Under circumstances described in the agreement for the April 2022 Credit Facility, the aggregate commitments may be increased by up to $1.14 billion, for a total commitment under the agreement of $3.65 billion. The April 2022 Credit Facility terms are the same as the April 2021 Credit Facility in all material aspects except for the Short-Term Funding Rate is equal to the greatest of (i) Daily Simple SOFR (as defined in the agreement) plus 0.10%, (ii) the Federal Funds Effective Rate (as defined in the
19

agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement), in each case, in effect on such day.
The October 2019 Credit Facility, April 2021 Credit Facility, and April 2022 Credit Facility contain customary covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions. We were in compliance with all covenants under these facilities as of December 31, 2021 and March 31, 2022, as applicable.
Off-Balance Sheet Risk
In the normal course of business, we engage in activities involving settlement and financing of securities transactions. User securities transactions are recorded on a settlement date basis, which is generally two business days after the trade date for equities and one business day after the trade date for options. These activities may expose us to off-balance sheet risk in the event that the other party to the transaction is unable to fulfill its contractual obligations. In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations.
NOTE 9: COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Preferred Stock
As of March 31, 2022, no terms of the preferred stock have been designated, no shares of preferred stock were outstanding and we have no present plan to issue any shares of preferred stock.
Common Stock
We have three authorized classes of common stock: Class A, Class B, and Class C. Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law.
The convertible notes issued in February 2021 (see Note 5 for further information) were converted into 137.3 million shares of Class A common stock at a conversion price of $26.60 per share upon completion of our IPO.
Warrants
As of March 31, 2022, warrants outstanding consisted of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $26.60 per share for a maximum purchase amount of $380 million. The warrants expire on February 12, 2031 and can be exercised in cash or for net shares at the holder’s option. As of March 31, 2022, the warrants have not been exercised and are included as a component of additional paid in capital on the unaudited condensed consolidated balance sheets.
Equity Incentive Plans
Amended and Restated 2013 Stock Plan and 2020 Equity Incentive Plan
Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”). Our 2013 Plan was
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terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Plan (defined below) but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms. Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan. No new awards may be granted under our 2013 Plan or 2020 Plan.
2021 Omnibus Incentive Plan
Our 2021 Omnibus Incentive Plan (the “2021 Plan”) became effective on July 27, 2021, and provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.
As of March 31, 2022, an aggregate of 360 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 77 million shares had been issued under the plans, 154 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 129 million shares remained available for new grants under the 2021 Plan.
Stock Option Activity
A summary of stock option activity for the three months ended March 31, 2022 is as follows:
Number of Shares Weighted-Average Exercise Price Weighted- Average Remaining Life
Total Intrinsic Value
(in millions)
Balance at December 31, 2021 14,527,468 $ 2.20  5.37 $ 226 
Granted during the period 4,463,248  14.15 
Exercised during the period (1,422,856) 2.47 
Cancelled and forfeited during the period (81,193) 7.66 
Balance at March 31, 2022 17,486,667  $ 5.21  5.44 $ 145 
Options vested and expected to vest at March 31, 2022 17,486,667 $ 5.21  5.44 $ 145 
Options exercisable at March 31, 2022 12,442,934 $ 1.92  4.90 $ 144 
Time-Based RSUs
We grant RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”). The following table summarizes the activity related to our Time-Based RSUs for the three months ended March 31, 2022:
Number of RSUs Weighted- average grant date fair value
Unvested at December 31, 2021 49,428,070  $ 31.78 
Granted 36,926,801  13.49 
Vested (4,551,630) 27.65 
Forfeited (4,087,935) 30.07 
Unvested at March 31, 2022 77,715,306  $ 23.43 
Market-Based RSUs
In 2019 and 2021, we granted to our founders RSUs that vest upon the satisfaction of both the achievement of share price targets and the continued employment by each recipient (“Market-Based
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RSUs”). The following table summarizes the activity related to our Market-Based RSUs for the three months ended March 31, 2022:
Number of RSUs Weighted- average grant date fair value
Unvested at December 31, 2021 58,918,844  $ 23.50 
Granted —  — 
Vested (115,264) 2.34 
Forfeited —  — 
Unvested at March 31, 2022 58,803,580  $ 23.54 
Share-Based Compensation
The following table presents share-based compensation on our unaudited condensed consolidated statements of operations for the periods indicated:
Three Months Ended
March 31,
(in millions) 2021 2022
Brokerage and transaction $ —  $
Technology and development 82 
Operations — 
Marketing — 
General and administrative 128 
Total $ $ 220 
Included in the table above, we recorded share-based compensation expense of $129 million related to Time-Based RSUs, $84 million related to Market-Based RSUs, $4 million related to the 2021 Employee Share Purchase Plan (“ESPP”), and $2 million related to options during the three months ended March 31, 2022. Share-based compensation expense related to options was immaterial during the three months ended March 31, 2021. No share-based compensation was recorded during the three months ended March 31, 2021 related to Time-Based RSUs, Market-Based RSUs, or the ESPP.
We capitalized share-based compensation expense related to internally developed software of $10 million during the three months ended March 31, 2022. The corresponding amount during the three months ended March 31, 2021 was immaterial.
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As of March 31, 2022, there was $2.1 billion of unrecognized share-based compensation expense that is expected to be recognized over a weighted-average period of 2.28 years. Scheduled vesting for awards outstanding as of March 31, 2022, is as follows:
(in millions, except for number of shares)
Number of Shares(1)
Expense
Remainder of 2022 20,911,890  $ 708 
2023 27,019,754  669 
2024 20,776,835  426 
2025 12,895,735  274 
2026 2,348,400  35 
Total 83,952,614  $ 2,112 
(1) Excludes future ESPP shares and Market-Based RSUs for which the share price target has not been met as we cannot forecast the vesting of these shares.
The above schedule excludes an estimate for forfeitures, which are recognized as they occur, and future equity grants.
NOTE 10: NET LOSS PER SHARE
We present net loss per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting loss per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis.
The following table presents the calculation of basic and diluted loss per share:
(in millions, except per share data) Three Months Ended
March 31,
2021 2022
Net loss $ (1,445) $ (392)
Less: allocation of earnings to participating securities —  — 
Net loss attributable to common stockholders $ (1,445) $ (392)
Weighted-average common stock outstanding - basic 230,685,464  867,769,168 
Dilutive effect of stock options and unvested shares —  — 
Weighted-average common stock outstanding - diluted 230,685,464  867,769,168 
Net loss per share attributable to common stockholders:
Basic $ (6.26) $ (0.45)
Diluted $ (6.26) $ (0.45)
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The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
  Three Months Ended
March 31,
2021 2022
Redeemable convertible preferred stock 412,742,897  — 
RSUs 81,820,160  136,525,285 
Stock options 18,096,127  17,486,667 
Unvested shares 187,885  7,362 
Warrants —  14,278,034 
ESPP shares —  634,603 
Total anti-dilutive securities 512,847,069  168,931,951 
NOTE 11: RELATED PARTY TRANSACTIONS
Related party transactions may include any transaction between entities under common control or with a related party. We have defined related parties as members of the Board of Directors, executive officers, principal owners of our outstanding stock and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates.
In February 2021, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (see Note 5 for further information). Two of the Tranche I investors were related parties prior to the completion of our IPO.
Pursuant to Rule 15c3-1 under the Exchange Act (the “SEC Uniform Net Capital Rule”), capital contributed to RHS is included in its net capital calculation and may not be withdrawn for one year from the time of contribution. A total of $2.0 billion of the gross proceeds received from the convertible note issuance was contributed to RHS in February 2021 and the restriction lapsed in February 2022. No capital has been returned to the parent company.
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NOTE 12: LEASES
Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park and our office in New York City. Our leases have remaining terms of 1 to 11 years, and many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. We do not have any finance leases.
The components of lease expense were as follows:
Three Months Ended
March 31,
(in millions) 2021 2022
Fixed operating lease costs $ $
Variable operating lease costs
Short-term lease costs —  — 
Total lease costs $ $ 11 
Fixed operating lease costs primarily consist of monthly base rent amounts due. Variable operating lease expenses are primarily related to payments made to our landlords for common area maintenance, property taxes, insurance, and other operating expenses.
Other information related to our operating leases was as follows:
December 31, March 31,
2021 2022
Weighted-average remaining lease term 7.29 years 7.74 years
Weighted-average discount rate 6.27  % 6.17  %
Cash flows related to leases were as follows:
Three Months Ended
March 31,
(in millions) 2021 2022
Operating cash flows:
Payments for operating lease liabilities $ $
Supplemental cash flow data:
Lease liabilities arising from obtaining right-of-use assets $ $ 32 
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Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of March 31, 2022 are as follows:
(in millions)
Remainder of 2022 $ 26 
2023 36 
2024 35 
2025 34 
2026 25 
Thereafter 106 
Total undiscounted lease payments 262 
Less: imputed interest (56)
Less: lease incentives (23)
Total lease liabilities $ 183 

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NOTE 13: COMMITMENTS & CONTINGENCIES
We are subject to contingencies arising in the ordinary course of our business, including contingencies related to legal, regulatory, non-income tax and other matters. We record an accrual for loss contingencies at management’s best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded. Amounts accrued for contingencies in the aggregate were $85 million as of December 31, 2021 and $104 million as of March 31, 2022. In our opinion, an adequate accrual had been made as of March 31, 2022 to provide for the probable losses of which we are aware and for which we can reasonably estimate an amount.
Legal and Regulatory Matters
The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increasing incidence of litigation involving the brokerage industry, including class action suits that generally seek substantial damages. Damages may include, in some cases, punitive damages. Compliance and trading problems that are reported to federal and state regulators, exchanges, or other SROs by dissatisfied users are investigated by such regulatory bodies, and, if pursued by such regulatory bodies or such users, may rise to the level of arbitration or disciplinary action. We are also subject to periodic regulatory audits and inspections.
We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings. The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation.
With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of March 31, 2022 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments, estimates, and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims.
Described below are certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend these matters vigorously.
Best Execution, Payment for Order Flow, and Sources of Revenue Matters
Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS. Five cases were consolidated in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in May 2021, alleging violations of Section 10(b) of the Exchange Act and various state law causes of action based on claims that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). Plaintiffs seek damages, restitution, disgorgement, and other relief. In February 2022, the court granted Robinhood’s motion to dismiss the amended consolidated complaint without prejudice. In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss.
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March 2020 Outages
A consolidated putative class action lawsuit relating to service outages on our stock trading platform on March 2-3, 2020 and March 9, 2020 (the “March 2020 Outages”) is pending in the United States District Court for the Northern District of California. The lawsuit generally alleges that putative class members were unable to execute trades during the March 2020 Outages because our platform was inadequately designed to handle customer demand and we failed to implement appropriate backup systems. The lawsuit includes, among other things, claims for breach of contract, negligence, gross negligence, breach of fiduciary duty, unjust enrichment and violations of certain California consumer protection statutes. The lawsuit generally seeks damages, restitution, and/or disgorgement, as well as declaratory and injunctive relief. Plaintiffs’ motion for class certification, which we oppose, is currently pending.
In September 2021, approximately 400 jointly-represented customers initiated an arbitration of individual claims against us arising out of the March 2020 Outages and other alleged system outages. Robinhood is contesting the claims, and a hearing has been scheduled for September 2022.
Options Trading and Related Customer Communications and Displays
Certain state regulatory authorities are conducting investigations regarding RHF’s options trading and related customer communications and displays and options trading approval process. RHF is cooperating with the regulators’ requests. FINRA also conducted an investigation and reached a settlement with RHF regarding the same options trading issues.
RHS Trade Reporting, Large Options Position Reporting, and ACATS Processing
In June 2021 RHF resolved with FINRA, on a no admit, no deny basis, certain investigations and examinations. As previously disclosed, that resolution did not address all the matters FINRA is investigating. In April 2022, FINRA Enforcement staff requested additional information related to RHS’s reporting of fractional share trades, as applicable, to a Trade Reporting Facility (“TRF”), the Over-the-Counter Reporting Facility (“ORF”), the Order Audit Trail System (“OATS”), and the Consolidated Audit Trail (“CAT”); reporting of accounts holding significant options positions to the Large Option Position Report (“LOPR”) system; and processing of certain requests for transfers of assets from Robinhood through the Automated Customer Account Transfer Service (“ACATS”), an automated industry system for account asset transfers. RHS is cooperating with these investigations.
RHC Anti-Money Laundering, Cybersecurity, and Other Issues
In July 2020, the New York State Department of Financial Services (“NYDFS”) issued a report of its examination of RHC citing a number of “matters requiring attention” focused primarily on anti-money laundering and cybersecurity-related issues. The matter was subsequently referred to the NYDFS’s Consumer Protection and Financial Enforcement Division for investigation. In March 2021, the NYDFS informed RHC of alleged violations of applicable (i) anti-money laundering and New York Banking Law requirements, including the failure to maintain and certify a compliant anti-money laundering program, (ii) notification provisions under RHC’s Supervisory Agreement with the NYDFS, and (iii) cybersecurity and virtual currency requirements, including deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security. RHC and the NYDFS have reached a settlement in principle with respect to these allegations, subject to final documentation, in connection with which, among other things, RHC expects to pay a monetary penalty and engage a monitor.

Additionally, in April 2021, the California Attorney General’s Office issued an investigative subpoena to RHC, seeking documents and answers to interrogatories about RHC’s trading platform, business and operations, application of California’s commodities regulations to RHC, customer disclosures, and other matters. RHC is cooperating with this investigation. We cannot predict the outcome of this investigation or any consequences that might result from it.
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Account Takeovers
In November 2020, FINRA Enforcement commenced an investigation into RHF concerning account takeovers, or circumstances under which an unauthorized actor successfully logs into a customer account, as well as anti-money laundering and cybersecurity issues. Since February 2021, RHF has received requests for documents and information from the SEC’s Enforcement Division in connection with its investigation into account takeovers and, more recently, suspicious activity report filings and issues related to the Electronic Funds Transfer Act. Additionally, state regulators, including the New York Attorney General’s Office, have opened inquiries into RHM, RHF, and RHC related to account takeovers. We are cooperating with these investigations and inquiries.
In January 2021, Siddharth Mehta filed a putative class action in California state court against RHF and RHS, purportedly on behalf of approximately 2,000 Robinhood customers whose accounts were allegedly accessed by unauthorized users. RHF and RHS removed this action to the United States District Court for the Northern District of California. Plaintiff generally alleges that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seek monetary damages and injunctive relief. In April 2022, the parties reached a settlement in principle.
Massachusetts Securities Division Matter
In December 2020, the Enforcement Section of the Massachusetts Securities Division (“MSD”) filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020. Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws. MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF's license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers’ accounts to other broker-dealers. Additionally, revocation of RHF’s Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF’s registration by other state regulators. A revocation of RHF’s license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs.
In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In September 2021, the parties filed cross-motions for partial judgment on the pleadings. In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful. The MSD has filed a notice of appeal. A hearing on the two remaining counts alleged by the MSD in its amended administrative complaint is scheduled to begin in September 2022.
Text Message Litigation
In August 2021, Cooper Moore filed a putative class action against RHF alleging that RHF initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington state law. The complaint seeks statutory and treble damages, injunctive relief, and attorneys’ fees and costs. The case is currently pending in the U.S. District
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Court for the Western District of Washington. RHF filed a motion to dismiss the complaint. In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss.
Early 2021 Trading Restrictions Matters

Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the “Early 2021 Trading Restrictions”).
A number of individual and putative class actions related to the Early 2021 Trading Restrictions were filed against RHM, RHF, and RHS, among others, in various federal and state courts. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida (the “MDL”). The court subsequently divided plaintiffs’ claims against Robinhood into three tranches: federal antitrust claims, federal securities law claims, and state law claims. In July 2021, plaintiffs filed consolidated complaints seeking monetary damages in connection with the federal antitrust and state law tranches. The federal antitrust complaint asserted one violation of Section 1 of the Sherman Act; the state law complaint asserted negligence and breach of fiduciary duty claims. In August 2021, we moved to dismiss both of these complaints. In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care. In November 2021, the court dismissed the federal antitrust complaint without prejudice, and plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act. In January 2022, we moved to dismiss the federal securities law complaint, and plaintiffs filed an amended complaint in connection with the federal antitrust tranche. In January 2022, the court dismissed the state law complaint with prejudice. Plaintiffs have taken an appeal to the United States Court of Appeals for the Eleventh Circuit. In February 2022, Robinhood moved to dismiss the amended complaint filed in connection with the federal antitrust tranche.
RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the U.S. Department of Justice, Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’s cell phone. There have been several inquiries based on specific customer complaints. We have also received requests from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021. The SEC’s Division of Examinations concluded their examinations related to the Early 2021 Trading Restrictions. In February 2022, SEC staff notified us of their findings to which we responded in April 2022. FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally. In addition, we have received information and testimony requests from certain committees and members of the U.S. Congress and Mr. Tenev, among others, has provided testimony with respect to the Early 2021 Trading Restrictions. We are cooperating with these investigations and examinations.
Registration Requirements for Member Personnel
In July 2021, RHF received a FINRA investigative request seeking documents and information related to its compliance with FINRA registration requirements for member personnel, including related to the
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FINRA non-registration status of Mr. Tenev and Co-Founder and Chief Creative Officer Mr. Bhatt. Robinhood is cooperating with the investigation.
IPO Litigation
In December 2021, Philip Golubowski filed a putative class action in the U.S. District Court for the Northern District of California against RHM, the officers and directors who signed Robinhood’s IPO offering documents, and Robinhood’s IPO underwriters. Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act of 1933, as amended (the “Securities Act”). Plaintiff seeks compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs. In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter, and in March 2022, the court appointed lead plaintiffs, who are expected to file an amended complaint in June 2022.
In January 2022, Robert Zito filed a complaint derivatively on behalf of Robinhood against Robinhood’s directors at the time of its IPO in the U.S. District Court for the District of Delaware. Plaintiff alleges breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act. Plaintiff’s claims are based on allegations of false or misleading statements in Robinhood’s IPO offering documents, and plaintiff seeks an award of damages and restitution to the Company, injunctive relief, and an award for attorney’s fees and costs. In March 2022, the district court entered a stay of this litigation pending resolution of Robinhood’s motion to dismiss in the Golubowski securities action discussed above.
NOTE 14: SUBSEQUENT EVENTS
Pending Acquisition of Ziglu
On April 16, 2022, we entered into a definitive agreement to acquire all outstanding equity of Ziglu Limited (“Ziglu”), a U.K.-based electronic money institution and crypto-asset firm that allows customers to buy and sell eligible cryptocurrencies, earn yield via its ‘Boost’ products, pay using a debit card, and move and spend money without fees. The aggregate consideration to be paid by us is estimated to be approximately $170 million, subject to customary purchase price adjustments set forth in the definitive agreement and payable primarily in cash while the remainder will be paid with a number of shares of our stock to be determined at closing. The transaction is subject to regulatory approval and other customary closing conditions and is expected to close no later than the first quarter of 2023.
Workforce Reduction
On April 26, 2022, we announced a reduction in force as part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing needs of our customers. The reduction in force involves approximately 330 employees, representing approximately 9% of our full-time employees. We estimate that we will incur approximately $17 million to $23 million of cash restructuring and related charges primarily related to employee severance and benefits costs (excluding the impact of share-based compensation), substantially all of which we expect to incur in the second quarter of 2022.
With respect to share-based compensation, also as part of this reduction in force, we modified a portion of affected employees’ stock awards to allow for a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of previously recognized share-based compensation expense, which was primarily recognized using the accelerated attribution method, for stock awards that have been forfeited in connection with this reduction in force, we expect to recognize a net reduction of share-based compensation of approximately $30 million to $36 million in the second quarter of 2022. This estimate may change due to future changes in our stock price.
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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 on Form 10-Q (“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 2021 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, 2021 and 2022 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. The definition of “customer” under Exchange Act Rule 15c3-3 means any person from whom or on whose behalf a broker or dealer has received or acquired or holds funds or securities for the account of that person. However, because we do not earn consideration from users (other than Robinhood Gold Subscribers and debit card users), users are not “customers” as defined in ASC 606, Revenue from Contracts with Customers. Accordingly, our users do not meet the definition of “customer” for purposes of the accounting rules. See “—Revenue Recognition” in Note 1 to our audited consolidated financial statements included in our 2021 Form 10-K.

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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 mobile phone 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, and the Robinhood app now makes investing approachable for millions. We pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated, and we have continued 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 March 31, 2022, as compared to the three months ended March 31, 2021:
we generated total net revenues of $299 million compared to $522 million, for a year-over-year decrease of 43%;
we incurred a net loss of $392 million, which included $220 million of share-based compensation expense, compared to a net loss of $1.4 billion, which included expense of $1.5 billion associated with the change in fair value of convertible notes and warrants issued in February 2021;
our Adjusted EBITDA was negative $143 million compared to positive $115 million;
we had Net Cumulative Funded Accounts of 22.8 million compared to 18.0 million, for year-over-year growth of 27% as we added 7.1 million new funded accounts primarily driven by large customer interest in cryptocurrencies during the second quarter of 2021, and 0.7 million resurrected accounts, partially offset by 3.0 million churned accounts;
we had Monthly Active Users (MAU) of 15.9 million compared to 17.7 million, for a year-over-year decrease of 10%, as we experienced high trading volumes and account sign-ups as well as high market volatility, particularly in certain sectors, during the prior period;
we had Assets Under Custody (AUC) of $93.1 billion compared to $80.9 billion, for year-over-year growth of 15%, as result of the growth in our user base;
we had Average Revenues Per User (ARPU) of $53 compared to $137, for a year-over-year decrease of 62%. The decreases were primarily related to lower transaction-based revenue driven by the current market environment, which had a negative impact on the number of traders and notional trading volumes in all asset classes.
For definitions of “Net Cumulative Funded Accounts”, “MAU”, “AUC” and “ARPU” please see “—Key Performance Metrics.” 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.”

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Recent Developments
Pending Acquisition of Ziglu
On April 16, 2022, we entered into a definitive agreement to acquire all outstanding equity of Ziglu, a U.K.-based electronic money institution and crypto-asset firm that allows customers to buy and sell eligible cryptocurrencies, earn yield via its ‘Boost’ products, pay using a debit card, and move and spend money without fees for approximately $170 million. See Note 14 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.

Workforce Reduction

Through 2020 and first half of 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus. From the beginning of 2020 to the end of 2021, we grew net funded accounts from 5.1 million to 22.7 million and revenue from $278 million in 2019 to $1.8 billion in 2021. To meet customer and market demands, we grew our headcount from 700 at the end of 2019 to nearly 3,900 as of March 31, 2022. This rapid headcount growth led to some duplicate roles and job functions and more layers and complexity than are optimal. As part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing needs of our customers, we announced a reduction in force on April 26, 2022 (see Note 14 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information). We also scaled back hiring plans for the remainder of 2022 and we expect headcount at year-end 2022 to be roughly flat compared with the end of 2021, as we continue to grow our workforce at a reduced rate. We will continue to accelerate our product momentum through 2022 and will retain and continue to hire exceptional talent in key roles and provide additional learning and career growth opportunities for our employees.

COVID-19 Update
In the fourth quarter of 2021, we elected to become a “Remote First” company. When this program is fully implemented following the cession of COVID-19 exemptions, a large segment of our employees will have no assigned location or regular in-office requirement, some teams will need to live within a commutable distance to an office location for regulatory and business reasons, and a small segment of our workforce will still need to come into the office. All employees will have access to our offices throughout the country and, as vaccination rates among the population have increased, we have opened our corporate offices to provide all employees with the option of voluntarily returning to an office. The timing of any full return for those employees who will eventually be required to come into the office has not been determined and will be impacted by developments related to the pandemic, such as the severity and transmission rate of the virus and its variants.
Following the March 2020 onset of the COVID-19 pandemic, we saw substantial growth in our user base, retention, engagement, and trading activity metrics, and over the course of the pandemic we saw periodic all-time highs achieved by the equity markets generally. During this period, market volatility, stay-at-home orders, and increased interest in investing and personal finance, coupled with low interest rates and a positive market environment, especially in the U.S. equity and cryptocurrency markets, helped foster an environment that encouraged an unprecedented number of first-time retail investors to become our users and begin trading on our platform. However, we have seen the growth of our user base in recent periods slow compared to the accelerated growth we experienced in 2020 and the first half of 2021. Additionally, to the extent that government stimulus measures enacted in response to the pandemic contributed to an increase in customer engagement, that benefit may not have continued as those stimulus measures have expired.
The COVID-19 pandemic has resulted, in part, in inefficiencies and delays in our business, operational challenges, additional costs related to business continuity initiatives as our workforce continues to work remotely, and increased vulnerability to cybersecurity attacks or other privacy or data
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security incidents. The extent of the continuing impact of COVID-19 on our business, financial condition, and results of operations will depend largely on future developments, including the duration of the pandemic, actions taken to contain COVID-19 or address its impact, our ability to adapt to the long-term distributed Remote First workforce model we have adopted, the impact on capital and financial markets, and the related impact on the financial circumstances of our customers, all of which are highly uncertain and difficult to predict.

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
March 31,
2021 2022
Net Cumulative Funded Accounts(1) (in millions)
18.0  22.8 
Monthly Active Users (MAU)(2) (in millions)
17.7  15.9 
Assets Under Custody (AUC)(3) (in billions)
$ 80.9  $ 93.1 
Average Revenues Per User (ARPU)(4)
$ 137  $ 53 
    
________________
(1)A Robinhood account is designed to provide a user with access to any and all of the products offered on our platform. We define “Net Cumulative Funded Accounts” as New Funded Accounts less Churned Accounts plus Resurrected Accounts (each as defined below). A “New Funded Account” is a Robinhood account into which the account user makes an initial deposit or money or asset transfer, of any amount, during the relevant period. An account is considered “Churned” if it was ever a New Funded Account and its 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 in Note 4 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information) and, less often, from margin loans. An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated credits) rises above zero. Examples of credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.

Three Months Ended
 March 31,
(in millions) 2021 2022
Beginning Net Cumulative Funded Accounts 12.5  22.7 
New funded accounts 5.7  0.5 
Resurrected accounts 0.4  0.1 
Churned accounts (0.6) (0.5)
Ending Net Cumulative Funded Accounts 18.0  22.8 
(2)We define MAU as the number of Monthly Active Users during a specified calendar month. A “Monthly Active User” is a unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month. A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU. Figures in the table reflect MAU for the last month of each 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.
(3)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. The following table sets out the components of AUC by type of asset:

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Three Months Ended
March 31,
(in billions) 2021 2022
Equities $ 65.1  $ 68.5 
Options 2.0  1.1 
Cryptocurrencies 11.6  19.7 
Cash held by users 7.6  9.2 
Receivables from users (5.4) (5.4)
Assets Under Custody (AUC) $ 80.9  $ 93.1 
Net Deposits and net market gains drive the change in AUC in any given period. 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. The following table describes the changes within Assets Under Custody:
Three Months Ended
March 31,
(in billions) 2021 2022
Beginning AUC $ 63.0  $ 98.0 
Net Deposits 10.6  5.7 
Net market gains (losses) 7.3  (10.6)
Ending AUC $ 80.9  $ 93.1 
(4)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. Figures presented above represent annualized ARPU for each three-month period presented.

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) share-based compensation, (v) change in fair value of convertible notes and warrant liability, (vi) 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
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a reconciliation of net income (loss), which is the most directly comparable GAAP measure, to Adjusted EBITDA:
Three Months Ended
March 31,
(in millions) 2021 2022
Net loss $ (1,445) $ (392)
Add:
Interest expenses related to credit facilities
Provision for income taxes 12 
Depreciation and amortization 12 
EBITDA (non-GAAP) (1,426) (373)
Share-based compensation 220 
Change in fair value of convertible notes and warrant liability 1,492  — 
Significant legal and tax settlements and reserves
40  10 
Adjusted EBITDA (non-GAAP) $ 115  $ (143)
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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,
2021 2022
Revenues:
Transaction-based revenues $ 420  $ 218 
Net interest revenues 62  55 
Other revenues 40  26 
Total net revenues 522  299 
Operating expenses:(1)
Brokerage and transaction 41  31 
Technology and development 117  266 
Operations 67  91 
Marketing 102  34 
General and administrative 137  268 
Total operating expenses 464  690 
Change in fair value of convertible notes and warrant liability 1,492  — 
Other income, net (1) — 
Loss before income taxes (1,433) (391)
Provision for income taxes 12 
Net loss $ (1,445) $ (392)
_______________
(1)Includes share-based compensation expense as follows:
Three Months Ended
March 31,
(in millions) 2021 2022
Brokerage and transaction $ —  $
Technology and development 82 
Operations — 
Marketing — 
General and administrative 128 
Total share-based compensation expense $ $ 220 

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Comparison of the Three Months Ended March 31, 2021 and 2022
Revenues
Transaction-Based Revenues

Three Months Ended
March 31,
(in millions, except for percentages) 2021 2022 % Change
Transaction-based revenues
Options $ 198 $ 127 (36) %
Cryptocurrencies 88 54 (39) %
Equities 133 36 (73) %
Other 1 1 —  %
Total transaction-based revenues $ 420 $ 218 (48) %
Transaction-based revenues as a % of total net revenues:
Options 38% 42%
Cryptocurrencies 17% 18%
Equities 26% 12%
Other —% —%
Total transaction-based revenues 81% 72%
Transaction-based revenues decreased by $202 million primarily driven by the market environment which had a negative impact on the number of traders and notional trading volumes in all asset classes. We define “daily average revenue trades” 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.
Our daily average revenue trades for equities decreased by 65% from 5.1 million to 1.8 million. The number of users placing equity trades decreased 46% and the average notional volume traded per trader was down 24%.
Our daily average revenue trades for options decreased by 40% from 1.1 million to 0.7 million. The number of users placing option trades decreased 44% while the average number of contracts traded per trader was up 33%.
While cryptocurrencies revenue benefited from a higher rebate rate from crypto market makers effective in late December 2021, it was offset by lower trading volumes. Our daily average revenue trades for cryptocurrencies decreased by 76% from 1.4 million to 0.3 million. The number of users placing cryptocurrency trades decreased 61% and the average notional volume traded per trader was down 22%.
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Net Interest Revenues

Three Months Ended
March 31,
(in millions, except for percentages) 2021 2022 % Change
Net interest revenues:
Margin interest $ 28 $ 35 25  %
Securities lending 35 24 (31) %
Interest on segregated cash and securities 1 1 —  %
Other interest revenue 1 1 —  %
Interest expenses related to credit facilities (3) (6) 100  %
Total net interest revenues $ 62 $ 55 (11) %
Net interest revenues as a % of total net revenues:
Margin interest 5% 12%
Securities lending 7% 8%
Interest on segregated cash and securities 1% —%
Other interest revenue —% —%
Interest expenses related to credit facilities (1)% (2)%
Total net interest revenues 12% 18%
Net interest revenues decreased by $7 million primarily due to lower interest revenues earned through securities lending activities and increased interest expense related to our revolving credit facilities, partially offset by higher interest revenue earned on margin borrowings.
Net interest revenues earned from securities lending transactions decreased $11 million mainly driven by lower demand in hard-to-borrow securities. Interest expense increased $3 million as a result of commitment and unused fees related to the April 2021 Credit Facility (see Note 8 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information). These decreases were partially offset by higher interest revenue earned on margin borrowings of $7 million due to an increase in both the average per-user margin balance and the average number of margin borrowers. Average margin receivables outstanding increased from $4.9 billion due from 218 thousand average users to $5.9 billion due from 244 thousand average users. Robinhood users must be Robinhood Gold subscribers in order to enable margin borrowing in their accounts. The first $1,000 in margin borrowed by each user is not charged interest. In late March 2022, we increased our margin rates to 3% from 2.5%, and will increase the rate to 3.5% in May. We anticipate floating this rate along with the Federal Rate changes moving forward.
Other Revenues
Three Months Ended
March 31,
(in millions, except for percentages) 2021 2022 % Change
Other revenues $ 40  $ 26  (35) %
Other revenues as a % of total net revenues 7% 9%
Other revenues decreased by $14 million which was substantially all due to a decrease relating to ACATS fees charged to users for facilitating the transfer of their account to another broker-dealer.
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Operating Expenses
Three Months Ended
March 31,
(in millions, except for percentages) 2021 2022 % Change
Operating expenses:
Brokerage and transaction $ 41 $ 31 (24) %
Technology and development 117 266 127  %
Operations 67 91 36  %
Marketing 102 34 (67) %
General and administrative 137 268 96  %
Total operating expenses $ 464 $ 690 49  %
Percent of net revenues:
Brokerage and transaction % 10  %
Technology and development 22  % 89  %
Operations 13  % 30  %
Marketing 20  % 11  %
General and administrative 26  % 90  %
Total operating expenses 89  % 230  %
Brokerage and Transaction
Three Months Ended
March 31,
(in millions) 2021 2022 $ Change
Broker-dealer transaction expenses $ 16  $ 9 (44)%
Market data expenses 7 (13)%
Employee compensation, benefits, and overhead, excluding share-based compensation 5 67%
Cash management transaction expenses 2 —%
Share-based compensation —  1 NM
Other 12  7 (42)%
Total $ 41 $ 31 (24)%
Brokerage and transaction costs decreased by $10 million primarily due to decreases in broker-dealer transaction expenses of $4 million, driven by a decrease in market price fluctuations that impacted fractional shares transactions, and $2 million in regulatory fees, as well as a decrease in bank charges, included in other brokerage and transaction costs, of $5 million as a result of more favorable pricing from one of our banking counterparties. These decreases were partially offset by an increase in other employee compensation, benefits, and overhead of $2 million as our brokerage teams have grown to support the growth of our user base and platform and an increase in share-based compensation expense of $1 million as vesting conditions were met upon our IPO in 2021.
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Technology and Development
Three Months Ended
March 31,
(in millions) 2021 2022 % Change
Employee compensation, benefits, and overhead, excluding share-based compensation $ 51 $ 102 100  %
Share-based compensation 1 82 NM
Cloud infrastructure services 54 56 %
Software and tools 10 21 110  %
Other 1 5 400  %
Total $ 117 $ 266 127  %
Technology and development costs increased by $149 million primarily due to an increase in share-based compensation expense of $81 million as vesting conditions were met upon our IPO in 2021 and an increase in other employee compensation, benefits, and overhead of $51 million as our engineering, data science, and design teams have grown to support the growth of our user base and develop new products. Additionally, we experienced an increase of $11 million in costs for other software services utilized in delivering our products.
Operations
Three Months Ended
March 31,
(in millions) 2021 2022 % Change
Employee compensation, benefits, and overhead, excluding share-based compensation $ 22 $ 43 95%
Customer experience 16 30 88%
Provision for credit losses and fraud 18