Robinhood Markets, Inc. (“Robinhood”) (NASDAQ: HOOD) today
announced financial results for the fourth quarter and full year of
2022, which ended December 31, 2022.
Fourth Quarter Results:
- Total
net revenues increased 5% sequentially to
$380 million.
-
Transaction-based revenues decreased 11%
sequentially to $186 million.
- Options were
unchanged at $124 million.
- Cryptocurrencies
decreased 24% to $39 million.
- Equities
decreased 32% to $21 million.
- Net
interest revenue increased 30% sequentially to $167
million, driven by higher short-term interest rates and growth in
interest earning assets.
- Net
loss was $166 million, or earnings per share (EPS) of
-$0.19, compared with net loss of $175 million, or EPS of
-$0.20, in the third quarter of 2022, a sequential improvement of
$9 million or $0.01 per share.
- This includes a
-$0.08 EPS impact from the combination of a $57 million loss
from the Q4 2022 Processing Error (as defined), as well as a
$12 million Ziglu equity security impairment.
-
Operating expenses decreased 0.2% sequentially to
$534 million.
-
Operating expenses prior to share-based compensation
(SBC) decreased 12% sequentially to $374 million,
which included a $57 million Q4 2022 Processing Error.
- Operating
expenses prior to SBC, restructuring charges, and Q4 2022
Processing Error were $319 million, an improvement of
$16 million from the third quarter.
- Share-based compensation
expense increased 45% sequentially to $160 million,
primarily due to a net reversal of $53 million related to the
August 2022 Restructuring recorded in the third quarter that did
not recur in the fourth quarter.
- Adjusted
EBITDA (non-GAAP) was positive $82 million, a sequential
improvement of 74%.
- Net
Cumulative Funded Accounts increased by approximately 50
thousand sequentially to 23.0 million.
- Monthly
Active Users (MAU) decreased 0.8 million sequentially to
11.4 million, as customers continued to navigate the volatile
market environment.
- Assets
Under Custody (AUC) decreased 4% sequentially to $62
billion, primarily driven by lower market valuations for growth
stocks and crypto assets, partially offset by continued net
deposits.
- Net
Deposits were $4.8 billion, which translates to an
annualized growth rate of 30% relative to AUC at the end of the
third quarter. Over the past twelve months, Net Deposits were $18.4
billion, which translates to a growth rate of 19%.
- Average
Revenues Per User (ARPU) increased to $66 from $63 in the
third quarter.
- Cash and
cash equivalents totaled $6.3 billion
compared with $6.2 billion at the end of the third quarter.
Full Year Results:
- Total
net revenues were $1.36 billion.
- Net
loss was $1.03 billion, or EPS -$1.17 per share.
- Operating
expenses were $2.37 billion.
- Operating
expenses prior to SBC were $1.72 billion.
- Operating expenses
prior to SBC, restructuring charges, and Q4 2022 Processing Error
were $1.55 billion.
- Share-based
compensation expense was $654 million.
- Adjusted
EBITDA (non-GAAP) was negative $94 million.
"Looking back over the past year, I’m incredibly
proud of the tremendous execution of our team on our 2022 product
roadmap. We’re now starting to see meaningful traction on a number
of the products we launched, which gives us confidence they can
grow into significant business lines over time,” said Vlad Tenev,
CEO and Co-Founder of Robinhood Markets. “Additionally, co-founder
Baiju Bhatt and I announced today that we cancelled nearly $500
million of our share-based compensation to ensure the company has
as many resources as possible to deliver value to customers and
shareholders.”
“We stayed focused in the fourth quarter on
serving customers, growing our business, and driving long-term
shareholder value," said Jason Warnick, Chief Financial Officer of
Robinhood Markets. "We continued to deliver on our product roadmap
and kept our costs lean. On the capital management front, our Board
authorized us to pursue purchasing most or all of our shares that
Emergent Fidelity Technologies bought in May 2022. The proposed
share purchase underscores the confidence the Board of Directors
and management team have in our business.”
Highlights
Robinhood continues to deliver on product
roadmap
- In December, we announced Robinhood
Retirement. It is the first and only IRA to offer a 1% match for
every eligible dollar contributed.
- Robinhood Wallet app has begun
rolling out to more than 1 million waitlisted users. The
self-custody wallet serves as a portal to web3 and allows users to
trade and swap crypto.
- Since the September 2022 launch of
our Gold cash sweep program with 3.00% interest, we have continued
to raise the yield and are now offering 4.15%. Customers have
contributed several billion to the Gold cash sweep program since
the launch.
- Building on the success of
Robinhood Snacks, we announced the formation of Sherwood Media, LLC
-- a new subsidiary that will be home for news and information on
the markets, economics, business, technology, and the culture of
money.
Robinhood Co-Founders cancel nearly $500M of their
share-based compensation
- Vlad Tenev and Baiju Bhatt
announced today that they cancelled their 2021 pre-IPO market-based
restricted stock unit awards which total 35.5 million of currently
unvested shares.
- This lowers our GAAP operating
costs by up to $50 million per quarter starting in Q2, and it has
already reduced our fully diluted share count by 3.5 percent.
- We will also record a one-time
accounting charge related to the cancellation of founder share
based compensation in Q1 2023, which is expected to be roughly $485
million.
Robinhood Board of Directors authorizes, subject to
final approval, Robinhood to pursue purchasing most or all of the
55 million remaining Robinhood shares that Emergent Fidelity
Technologies Ltd. bought in May 2022
- The proposed share purchase
underscores the confidence the Board of Directors and management
team have in our business.
- Our balance sheet is strong with
over $6 billion in cash, which we believe enables us to continue to
invest in and execute on future growth opportunities, while further
enhancing shareholder value.
- Since there is limited precedent
for this type of situation, we cannot predict when, or if, the
share purchase will take place. We will provide updates as
appropriate.
Webcast and Conference Call
Information
Robinhood will host a conference call to discuss
its results at 2 p.m. PT / 5 p.m. ET today, February 8, 2023.
The live webcast of Robinhood's earnings conference call can be
accessed at investors.robinhood.com, along with the earnings press
release and accompanying slide presentation.
Following the call, a replay and transcript will
also be available at the same website.
Financial Outlook
As a result of the progress we have made on our
cost reduction initiatives, including the reductions in force
announced April 26, 2022 (the "April 2022 Restructuring") and
August 2, 2022 (the "August 2022 Restructuring"), we expect:
- GAAP total operating expenses for
full-year 2023 to be in the range of $2.375 billion to $2.515
billion.
- total operating expenses prior to
share-based compensation for full-year 2023 to be in the range of
$1.420 billion to $1.480 billion.
- share-based compensation for
full-year 2023 to be in the range of $955 million to $1.035
billion. This includes a one-time accounting charge related to the
cancellation of founder share-based compensation in the first
quarter of 2023, which is expected to be roughly $485 million. We
expect the rest of the 2023 SBC to be in a range of $470 million to
$550 million.
Actual results might differ materially from our
outlook due to several factors, including the rate of growth in net
new funded accounts which affects several costs including variable
marketing costs, the degree to which we are successful in
preventing fraud, our ability to manage web-hosting expenses
efficiently, and our ability to achieve productivity improvements
in customer service, among other factors.
About Robinhood
Robinhood Markets is on a mission to democratize
finance for all. With Robinhood, people can invest with no account
minimums through Robinhood Financial LLC, buy and sell crypto
through Robinhood Crypto, LLC, spend, save, and earn rewards
through Robinhood Money, LLC, and learn about investing through
easy-to-understand educational content.
Robinhood uses the "Overview" tab of its
Investor Relations website (accessible at
investors.robinhood.com/overview) and its blog, Under the Hood
(accessible at blog.robinhood.com), as means of disclosing
information to the public in a broad, non-exclusionary manner for
purposes of the Securities and Exchange Commission's ("SEC")
Regulation Fair Disclosure (Reg. FD). Investors should routinely
monitor those web pages, in addition to Robinhood’s press releases,
SEC filings, and public conference calls and webcasts, as
information posted on them could be deemed to be material
information.
"Robinhood" and the Robinhood feather logo are
registered trademarks of Robinhood Markets, Inc. All other names
are trademarks and/or registered trademarks of their respective
owners.
Contacts
Investors:ir@robinhood.com
Press:press@robinhood.com
ROBINHOOD MARKETS,
INC.CONSOLIDATED BALANCE
SHEETS(Unaudited)
|
December 31, |
|
December 31, |
|
|
2021 |
|
|
|
2022 |
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
6,253 |
|
|
$ |
6,339 |
|
Cash segregated under federal and other regulations |
|
3,992 |
|
|
|
2,995 |
|
Receivables from brokers, dealers, and clearing organizations |
|
88 |
|
|
|
76 |
|
Receivables from users, net |
|
6,639 |
|
|
|
3,218 |
|
Securities borrowed |
|
— |
|
|
|
517 |
|
Deposits with clearing organizations |
|
328 |
|
|
|
186 |
|
Asset related to user cryptocurrencies safeguarding obligation |
|
— |
|
|
|
8,431 |
|
User-held fractional shares |
|
1,834 |
|
|
|
997 |
|
Prepaid expenses |
|
92 |
|
|
|
86 |
|
Other current assets |
|
57 |
|
|
|
72 |
|
Total current assets |
|
19,283 |
|
|
|
22,917 |
|
Property, software, and equipment, net |
|
146 |
|
|
|
146 |
|
Goodwill |
|
101 |
|
|
|
100 |
|
Intangible assets, net |
|
34 |
|
|
|
25 |
|
Non-current prepaid expenses |
|
44 |
|
|
|
17 |
|
Other non-current assets |
|
161 |
|
|
|
132 |
|
Total assets |
$ |
19,769 |
|
|
$ |
23,337 |
|
Liabilities and stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued expenses |
$ |
252 |
|
|
$ |
185 |
|
Payables to users |
|
6,476 |
|
|
|
4,701 |
|
Securities loaned |
|
3,651 |
|
|
|
1,834 |
|
User cryptocurrencies safeguarding obligation |
|
— |
|
|
|
8,431 |
|
Fractional shares repurchase obligation |
|
1,834 |
|
|
|
997 |
|
Other current liabilities |
|
134 |
|
|
|
105 |
|
Total current liabilities |
|
12,347 |
|
|
|
16,253 |
|
Other non-current liabilities |
|
129 |
|
|
|
128 |
|
Total liabilities |
|
12,476 |
|
|
|
16,381 |
|
Commitments and contingencies |
|
|
|
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, 764,888,917
shares issued and outstanding as of December 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, 127,862,654
shares issued and outstanding as of December 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 and 2022. |
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
11,169 |
|
|
|
11,861 |
|
Accumulated other comprehensive income (loss) |
|
1 |
|
|
|
— |
|
Accumulated deficit |
|
(3,877 |
) |
|
|
(4,905 |
) |
Total stockholders’ equity |
|
7,293 |
|
|
|
6,956 |
|
Total liabilities and stockholders’ equity |
$ |
19,769 |
|
|
$ |
23,337 |
|
ROBINHOOD MARKETS,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
Three Months EndedDecember
31, |
|
YOY%Change |
|
Three Months EndedSeptember
30, |
|
QOQ%Change |
(in millions, except share, per share, and percentage data) |
|
2021 |
|
|
|
2022 |
|
|
|
|
2022 |
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
Transaction-based revenues |
$ |
264 |
|
|
$ |
186 |
|
|
(30) |
% |
|
$ |
208 |
|
|
(11) |
% |
Net interest revenues |
|
63 |
|
|
|
167 |
|
|
165 |
% |
|
|
128 |
|
|
30 |
% |
Other revenues |
|
36 |
|
|
|
27 |
|
|
(25) |
% |
|
|
25 |
|
|
8 |
% |
Total net revenues |
|
363 |
|
|
|
380 |
|
|
5 |
% |
|
|
361 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
Operating expenses(1)(2): |
|
|
|
|
|
|
|
|
|
Brokerage and transaction |
|
29 |
|
|
|
85 |
|
|
193 |
% |
|
|
33 |
|
|
158 |
% |
Technology and development |
|
282 |
|
|
|
180 |
|
|
(36) |
% |
|
|
185 |
|
|
(3) |
% |
Operations |
|
98 |
|
|
|
43 |
|
|
(56) |
% |
|
|
65 |
|
|
(34) |
% |
Marketing |
|
42 |
|
|
|
29 |
|
|
(31) |
% |
|
|
19 |
|
|
53 |
% |
General and administrative |
|
332 |
|
|
|
197 |
|
|
(41) |
% |
|
|
233 |
|
|
(15) |
% |
Total operating expenses |
|
783 |
|
|
|
534 |
|
|
(32) |
% |
|
|
535 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net |
|
— |
|
|
|
14 |
|
|
NM |
|
|
— |
|
|
NM |
Income (loss) before income taxes |
|
(420 |
) |
|
|
(168 |
) |
|
(60) |
% |
|
|
(174 |
) |
|
(3) |
% |
Provision for (benefit from) income taxes |
|
3 |
|
|
|
(2 |
) |
|
(167) |
% |
|
|
1 |
|
|
(300) |
% |
Net income (loss) |
$ |
(423 |
) |
|
$ |
(166 |
) |
|
(61) |
% |
|
$ |
(175 |
) |
|
(5) |
% |
Net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
(423 |
) |
|
$ |
(166 |
) |
|
|
|
$ |
(175 |
) |
|
|
Diluted |
$ |
(423 |
) |
|
$ |
(166 |
) |
|
|
|
$ |
(175 |
) |
|
|
Net income (loss) per share attributable to common
stockholders: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.49 |
) |
|
$ |
(0.19 |
) |
|
|
|
$ |
(0.20 |
) |
|
|
Diluted |
$ |
(0.49 |
) |
|
$ |
(0.19 |
) |
|
|
|
$ |
(0.20 |
) |
|
|
Weighted-average shares used to compute net income (loss) per share
attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
Basic |
|
859,932,743 |
|
|
|
889,239,632 |
|
|
|
|
|
882,356,575 |
|
|
|
Diluted |
|
859,932,743 |
|
|
|
889,239,632 |
|
|
|
|
|
882,356,575 |
|
|
|
|
|
Year EndedDecember 31, |
|
% Change |
(in millions, except share, per share, and percentage data) |
|
|
2021 |
|
|
|
2022 |
|
|
Revenues: |
|
|
|
|
|
|
Transaction-based revenues |
|
$ |
1,402 |
|
|
$ |
814 |
|
|
(42) |
% |
Net interest revenues |
|
|
256 |
|
|
|
424 |
|
|
66 |
% |
Other revenues |
|
|
157 |
|
|
|
120 |
|
|
(24) |
% |
Total net revenues |
|
|
1,815 |
|
|
|
1,358 |
|
|
(25) |
% |
|
|
|
|
|
|
|
Operating expenses(1)(2): |
|
|
|
|
|
|
Brokerage and transaction |
|
|
158 |
|
|
|
179 |
|
|
13 |
% |
Technology and development |
|
|
1,234 |
|
|
|
878 |
|
|
(29) |
% |
Operations |
|
|
368 |
|
|
|
285 |
|
|
(23) |
% |
Marketing |
|
|
325 |
|
|
|
103 |
|
|
(68) |
% |
General and administrative |
|
|
1,371 |
|
|
|
924 |
|
|
(33) |
% |
Total operating expenses |
|
|
3,456 |
|
|
|
2,369 |
|
|
(31) |
% |
|
|
|
|
|
|
|
Change in fair value of
convertible notes and warrant liability |
|
|
2,045 |
|
|
|
— |
|
|
(100) |
% |
Other (income) expense, net |
|
|
(1 |
) |
|
|
16 |
|
|
NM |
Income (loss) before income taxes |
|
|
(3,685 |
) |
|
|
(1,027 |
) |
|
(72) |
% |
Provision for (benefit from) income taxes |
|
|
2 |
|
|
|
1 |
|
|
(50) |
% |
Net income (loss) |
|
$ |
(3,687 |
) |
|
$ |
(1,028 |
) |
|
(72) |
% |
Net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
Basic |
|
$ |
(3,687 |
) |
|
$ |
(1,028 |
) |
|
|
Diluted |
|
$ |
(3,687 |
) |
|
$ |
(1,028 |
) |
|
|
Net income (loss) per share
attributable to common stockholders: |
|
|
|
|
|
|
Basic |
|
$ |
(7.49 |
) |
|
$ |
(1.17 |
) |
|
|
Diluted |
|
$ |
(7.49 |
) |
|
$ |
(1.17 |
) |
|
|
Weighted-average shares used
to compute net income (loss) per share attributable to common
stockholders: |
|
|
|
|
|
|
Basic |
|
|
492,381,190 |
|
|
|
878,630,024 |
|
|
|
Diluted |
|
|
492,381,190 |
|
|
|
878,630,024 |
|
|
|
________________(1) The following table presents
operating expenses as a percent of total net revenues:
|
Three Months EndedDecember
31, |
|
Three Months EndedSeptember
30, |
|
Year EndedDecember 31, |
|
2021 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
Brokerage and transaction |
8 |
% |
|
22 |
% |
|
9 |
% |
|
9 |
% |
|
13 |
% |
Technology and development |
78 |
% |
|
47 |
% |
|
51 |
% |
|
68 |
% |
|
65 |
% |
Operations |
27 |
% |
|
11 |
% |
|
18 |
% |
|
20 |
% |
|
21 |
% |
Marketing |
12 |
% |
|
8 |
% |
|
5 |
% |
|
18 |
% |
|
8 |
% |
General and administrative |
91 |
% |
|
52 |
% |
|
65 |
% |
|
76 |
% |
|
68 |
% |
Total operating expenses |
216 |
% |
|
140 |
% |
|
148 |
% |
|
191 |
% |
|
175 |
% |
(2) The following table presents the
share-based compensation in our unaudited condensed consolidated
statements of operations for the periods indicated:
|
Three Months EndedDecember
31, |
|
Three Months EndedSeptember
30, |
|
Year EndedDecember 31, |
(in millions) |
|
2021 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
Brokerage and transaction |
$ |
1 |
|
$ |
1 |
|
$ |
2 |
|
$ |
7 |
|
$ |
5 |
Technology and development |
|
105 |
|
|
46 |
|
|
25 |
|
|
610 |
|
|
212 |
Operations |
|
4 |
|
|
3 |
|
|
— |
|
|
20 |
|
|
8 |
Marketing |
|
9 |
|
|
1 |
|
|
— |
|
|
50 |
|
|
4 |
General and administrative |
|
199 |
|
|
109 |
|
|
83 |
|
|
885 |
|
|
425 |
Total share-based compensation expense |
$ |
318 |
|
$ |
160 |
|
$ |
110 |
|
$ |
1,572 |
|
$ |
654 |
ROBINHOOD MARKETS,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)
|
Three Months EndedDecember
31, |
|
Year Ended December 31, |
(in millions) |
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Operating activities: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
(423 |
) |
|
$ |
(166 |
) |
|
$ |
(3,687 |
) |
|
$ |
(1,028 |
) |
Adjustments to reconcile net income (loss) to net cash
used in operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
11 |
|
|
|
17 |
|
|
|
26 |
|
|
|
61 |
|
Impairment of long-lived assets |
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
45 |
|
Provision for credit losses |
|
16 |
|
|
|
8 |
|
|
|
78 |
|
|
|
36 |
|
Share-based compensation |
|
318 |
|
|
|
160 |
|
|
|
1,572 |
|
|
|
654 |
|
Change in fair value of convertible notes and warrant
liability |
|
— |
|
|
|
— |
|
|
|
2,045 |
|
|
|
— |
|
Other |
|
(1 |
) |
|
|
19 |
|
|
|
(1 |
) |
|
|
35 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Segregated securities under federal and other regulations |
|
50 |
|
|
|
— |
|
|
|
135 |
|
|
|
— |
|
Receivables from brokers, dealers, and clearing organizations |
|
36 |
|
|
|
(1 |
) |
|
|
36 |
|
|
|
12 |
|
Receivables from users, net |
|
(557 |
) |
|
|
821 |
|
|
|
(3,362 |
) |
|
|
3,386 |
|
Securities borrowed |
|
— |
|
|
|
(378 |
) |
|
|
— |
|
|
|
(517 |
) |
Deposits with clearing organizations |
|
(12 |
) |
|
|
15 |
|
|
|
(102 |
) |
|
|
142 |
|
Current and non-current prepaid expenses |
|
(23 |
) |
|
|
4 |
|
|
|
(135 |
) |
|
|
33 |
|
Other current and non-current assets |
|
63 |
|
|
|
(23 |
) |
|
|
(54 |
) |
|
|
(26 |
) |
Accounts payable and accrued expenses |
|
16 |
|
|
|
(17 |
) |
|
|
134 |
|
|
|
(62 |
) |
Payables to users |
|
(336 |
) |
|
|
(695 |
) |
|
|
578 |
|
|
|
(1,775 |
) |
Securities loaned |
|
521 |
|
|
|
411 |
|
|
|
1,730 |
|
|
|
(1,817 |
) |
Other current and non-current liabilities |
|
45 |
|
|
|
8 |
|
|
|
122 |
|
|
|
(31 |
) |
Net cash provided by (used in) operating activities |
|
(276 |
) |
|
|
181 |
|
|
|
(885 |
) |
|
|
(852 |
) |
Investing activities: |
|
|
|
|
|
|
|
Purchase of property, software, and equipment |
|
(17 |
) |
|
|
(3 |
) |
|
|
(63 |
) |
|
|
(28 |
) |
Capitalization of internally developed software |
|
(8 |
) |
|
|
(7 |
) |
|
|
(20 |
) |
|
|
(29 |
) |
Acquisitions of a business, net of cash acquired |
|
(6 |
) |
|
|
— |
|
|
|
(125 |
) |
|
|
— |
|
Purchase of investments |
|
(27 |
) |
|
|
(1 |
) |
|
|
(27 |
) |
|
|
(25 |
) |
Sales of investments |
|
— |
|
|
|
23 |
|
|
|
— |
|
|
|
42 |
|
Other |
|
— |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(20 |
) |
Net cash provided by (used in) investing activities |
|
(58 |
) |
|
|
11 |
|
|
|
(238 |
) |
|
|
(60 |
) |
Financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of common stock in connection with initial
public offering, net of offering costs |
|
(5 |
) |
|
|
— |
|
|
|
2,052 |
|
|
|
— |
|
Proceeds from issuance of common stock under the Employee Stock
Purchase Plan |
|
7 |
|
|
|
3 |
|
|
|
7 |
|
|
|
16 |
|
Taxes paid related to net share settlement of equity awards |
|
(10 |
) |
|
|
(3 |
) |
|
|
(422 |
) |
|
|
(12 |
) |
Proceeds from issuance of convertible notes and warrants |
|
— |
|
|
|
— |
|
|
|
3,552 |
|
|
|
— |
|
Payments of debt issuance costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
Draws on credit facilities |
|
10 |
|
|
|
— |
|
|
|
1,968 |
|
|
|
21 |
|
Repayments on credit facilities |
|
(10 |
) |
|
|
— |
|
|
|
(1,968 |
) |
|
|
(21 |
) |
Proceeds from exercise of stock options, net of repurchases |
|
2 |
|
|
|
— |
|
|
|
14 |
|
|
|
6 |
|
Net cash provided by (used in) financing activities |
|
(6 |
) |
|
|
— |
|
|
|
5,203 |
|
|
|
— |
|
Effect of foreign exchange rate changes on cash and cash
equivalents |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
(1 |
) |
Net increase (decrease) in cash, cash equivalents,
segregated cash and restricted cash |
|
(340 |
) |
|
|
193 |
|
|
|
4,080 |
|
|
|
(913 |
) |
Cash, cash equivalents, segregated cash
and restricted cash, beginning of the period |
|
10,611 |
|
|
|
9,164 |
|
|
|
6,190 |
|
|
|
10,270 |
|
Cash, cash equivalents, segregated cash
and restricted cash, end of the period |
$ |
10,271 |
|
|
$ |
9,357 |
|
|
$ |
10,270 |
|
|
$ |
9,357 |
|
Cash and cash equivalents, end of the period |
$ |
6,253 |
|
|
$ |
6,339 |
|
|
$ |
6,253 |
|
|
$ |
6,339 |
|
Segregated cash, end of the period |
|
3,992 |
|
|
|
2,995 |
|
|
|
3,992 |
|
|
|
2,995 |
|
Restricted cash (current and non-current), end of the period |
|
25 |
|
|
|
23 |
|
|
|
25 |
|
|
|
23 |
|
Cash, cash equivalents, segregated
cash and restricted cash, end of the period |
$ |
10,270 |
|
|
$ |
9,357 |
|
|
$ |
10,270 |
|
|
$ |
9,357 |
|
Supplemental disclosures: |
|
|
|
|
|
|
|
Cash paid for interest |
$ |
6 |
|
|
$ |
6 |
|
|
$ |
12 |
|
|
$ |
12 |
|
Cash paid for income taxes, net of refund received |
$ |
3 |
|
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
4 |
|
Non-cash operating activities: |
|
|
|
|
|
|
|
Asset related to user cryptocurrencies safeguarding obligation |
$ |
— |
|
|
$ |
(930 |
) |
|
$ |
— |
|
|
$ |
8,431 |
|
User cryptocurrencies safeguarding obligation |
$ |
— |
|
|
$ |
(930 |
) |
|
$ |
— |
|
|
$ |
8,431 |
|
Reconciliation of GAAP to Non-GAAP
Results(Unaudited)
|
|
Three Months EndedDecember
31, |
|
Three Months EndedSeptember
30, |
|
Year Ended December 31, |
(in millions) |
|
|
2021 |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Net income (loss) |
|
$ |
(423 |
) |
|
$ |
(166 |
) |
|
$ |
(175 |
) |
|
$ |
(3,687 |
) |
|
$ |
(1,028 |
) |
Net margin |
|
|
(117 |
)% |
|
|
(44 |
)% |
|
|
(48 |
)% |
|
|
(203 |
)% |
|
|
(76 |
)% |
Add: |
|
|
|
|
|
|
|
|
|
|
Interest expenses related to
credit facilities |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
20 |
|
|
|
24 |
|
Provision for (benefit from) income taxes |
|
|
3 |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
Depreciation and amortization |
|
|
9 |
|
|
|
17 |
|
|
|
15 |
|
|
|
26 |
|
|
|
61 |
|
EBITDA (non-GAAP) |
|
|
(405 |
) |
|
|
(145 |
) |
|
|
(153 |
) |
|
|
(3,639 |
) |
|
|
(942 |
) |
Share-based compensation(1) |
|
|
318 |
|
|
|
160 |
|
|
|
110 |
|
|
|
1,572 |
|
|
|
654 |
|
Change in fair value of
convertible notes and warrant liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,045 |
|
|
|
— |
|
Impairment of Ziglu equity
securities(2) |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
Restructuring charges(3) |
|
|
— |
|
|
|
(2 |
) |
|
|
90 |
|
|
|
— |
|
|
|
105 |
|
Significant legal and tax
settlements and reserves |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
20 |
|
Q4 2022 Processing
Error(4) |
|
|
— |
|
|
|
57 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
57 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
(87 |
) |
|
$ |
82 |
|
|
$ |
47 |
|
|
$ |
33 |
|
|
$ |
(94 |
) |
Adjusted EBITDA margin
(non-GAAP) |
|
|
(24 |
)% |
|
|
22 |
% |
|
|
13 |
% |
|
|
2 |
% |
|
|
(7 |
)% |
________________(1) In 2022, share-based
compensation benefited from restructuring-related net reversals of
previously recognized expense:
- $53 million for the three months
ended September 30, 2022, in connection with the August 2022
Restructuring;
- $77 million for the year ended
December 31, 2022, in connection with both the April 2022 and
August 2022 Restructurings.
(2) Partially as a result of the termination of
the stock purchase agreement, which occurred in February 2023, the
advances made to Ziglu accounted for as non-marketable equity
securities were impaired to a carrying value of zero.(3)
Restructuring charges included:
- A final adjustment related to
office closures that were part of the August 2022 Restructuring for
the three months ended December 31, 2022;
- $90 million for the three months
ended September 30, 2022, related to the August 2022 Restructuring,
consisting of $47 million of impairments and $9 million of
accelerated depreciation, in each case relating to office closures,
and $34 million of cash charges for employee-related wages,
benefits and severance; and
- $105 million for the year ended
December 31, 2022, related to both the April 2022 Restructuring and
August 2022 Restructuring, consisting of $45 million of impairment
and $9 million of accelerated depreciation, in each case relating
to office closures, and $51 million of cash charges for
employee-related wages, benefits and severance.
(4) Q4 2022 Processing Error: Delays in
notification from third parties and process failures within
Robinhood’s brokerage systems and operations in connection with the
handling of a 1-for-25 reverse stock split transaction of Cosmos
Health, Inc. (“COSM”), a NASDAQ-listed company, on December 16,
2022, allowed customers, for a limited time, to execute trades
selling more shares than they held in their accounts. This caused a
temporary short position in that ticker symbol which Robinhood
covered out of corporate cash within the same trading day. The
resulting loss of $57 million is recorded within brokerage and
transaction in the consolidated statement of operations.
|
Three Months EndedDecember
31, |
|
Three Months Ended September 30, |
|
Three Months EndedDecember
31, |
|
Three Months Ended September 30, |
|
|
2021 |
|
|
2022 |
|
|
2022 |
|
2021 |
|
|
2022 |
|
|
2022 |
|
(in millions, except percentage data) |
$ |
|
$ |
|
$ |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
Brokerage and transaction (GAAP) |
$ |
29 |
|
$ |
85 |
|
$ |
33 |
|
8 |
% |
|
22 |
% |
|
9 |
% |
Less: SBC |
|
1 |
|
|
1 |
|
|
2 |
|
— |
% |
|
— |
% |
|
1 |
% |
Brokerage and transaction prior to SBC
(non-GAAP) |
|
28 |
|
|
84 |
|
|
31 |
|
8 |
% |
|
22 |
% |
|
8 |
% |
Technology and development (GAAP) |
|
282 |
|
|
180 |
|
|
185 |
|
78 |
% |
|
47 |
% |
|
51 |
% |
Less: SBC |
|
105 |
|
|
46 |
|
|
25 |
|
29 |
% |
|
12 |
% |
|
7 |
% |
Technology and development prior to SBC
(non-GAAP) |
|
177 |
|
|
134 |
|
|
160 |
|
49 |
|
|
35 |
|
|
44 |
% |
Operations (GAAP) |
|
98 |
|
|
43 |
|
|
65 |
|
27 |
% |
|
11 |
% |
|
18 |
% |
Less: SBC |
|
4 |
|
|
3 |
|
|
— |
|
1 |
% |
|
1 |
% |
|
— |
% |
Operations prior to SBC (non-GAAP) |
|
94 |
|
|
40 |
|
|
65 |
|
26 |
% |
|
10 |
% |
|
18 |
% |
Marketing (GAAP) |
|
42 |
|
|
29 |
|
|
19 |
|
12 |
% |
|
8 |
% |
|
5 |
% |
Less: SBC |
|
9 |
|
|
1 |
|
|
— |
|
2 |
% |
|
— |
% |
|
— |
% |
Marketing prior to SBC (non-GAAP) |
|
33 |
|
|
28 |
|
|
19 |
|
10 |
% |
|
8 |
% |
|
5 |
% |
General and administration (GAAP) |
|
332 |
|
|
197 |
|
|
233 |
|
91 |
% |
|
52 |
% |
|
65 |
% |
Less: SBC |
|
199 |
|
|
109 |
|
|
83 |
|
55 |
% |
|
29 |
% |
|
23 |
% |
General and administration prior to SBC
(non-GAAP) |
|
133 |
|
|
88 |
|
|
150 |
|
36 |
% |
|
23 |
% |
|
42 |
% |
Total operating expenses (GAAP) |
$ |
783 |
|
$ |
534 |
|
$ |
535 |
|
216 |
% |
|
140 |
% |
|
148 |
% |
Less: SBC |
|
318 |
|
|
160 |
|
|
110 |
|
87 |
% |
|
42 |
% |
|
31 |
% |
Total operating expenses prior to SBC
(non-GAAP) |
$ |
465 |
|
$ |
374 |
|
$ |
425 |
|
129 |
% |
|
98 |
% |
|
117 |
% |
|
Three Months EndedDecember
31, |
|
Three Months Ended September 30, |
|
Three Months EndedDecember
31, |
|
Three Months Ended September 30, |
|
|
2021 |
|
|
2022 |
|
|
|
2022 |
|
2021 |
|
|
2022 |
|
2022 |
|
(in millions, except percentage data) |
$ |
|
$ |
|
$ |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
Brokerage and transaction (GAAP) |
$ |
29 |
|
$ |
85 |
|
|
$ |
33 |
|
8 |
% |
|
22 |
% |
|
9 |
% |
Less: SBC |
|
1 |
|
|
1 |
|
|
|
2 |
|
— |
% |
|
— |
% |
|
1 |
% |
Less: Restructuring charges |
|
— |
|
|
— |
|
|
|
1 |
|
— |
% |
|
— |
% |
|
— |
% |
Less: Q4 2022 Processing Error |
|
— |
|
|
57 |
|
|
|
— |
|
— |
% |
|
15 |
% |
|
— |
% |
Brokerage and transaction prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
28 |
|
|
27 |
|
|
|
30 |
|
8 |
% |
|
7 |
% |
|
8 |
% |
Technology and development (GAAP) |
|
282 |
|
|
180 |
|
|
|
185 |
|
78 |
% |
|
47 |
% |
|
51 |
% |
Less: SBC |
|
105 |
|
|
46 |
|
|
|
25 |
|
29 |
% |
|
12 |
% |
|
7 |
% |
Less: Restructuring charges |
|
— |
|
|
— |
|
|
|
17 |
|
— |
% |
|
— |
% |
|
5 |
% |
Technology and development prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
177 |
|
|
134 |
|
|
|
143 |
|
49 |
% |
|
35 |
% |
|
39 |
% |
Operations (GAAP) |
|
98 |
|
|
43 |
|
|
|
65 |
|
27 |
% |
|
11 |
% |
|
18 |
% |
Less: SBC |
|
4 |
|
|
3 |
|
|
|
— |
|
1 |
% |
|
1 |
% |
|
— |
% |
Less: Restructuring charges |
|
— |
|
|
— |
|
|
|
13 |
|
— |
% |
|
— |
% |
|
4 |
% |
Operations prior to SBC, restructuring charges, and Q4 2022
Processing Error (non-GAAP) |
|
94 |
|
|
40 |
|
|
|
52 |
|
26 |
% |
|
10 |
% |
|
14 |
% |
Marketing (GAAP) |
|
42 |
|
|
29 |
|
|
|
19 |
|
12 |
% |
|
8 |
% |
|
5 |
% |
Less: SBC |
|
9 |
|
|
1 |
|
|
|
— |
|
2 |
% |
|
— |
% |
|
— |
% |
Less: Restructuring charges |
|
— |
|
|
— |
|
|
|
1 |
|
— |
% |
|
— |
% |
|
— |
% |
Marketing prior to SBC, restructuring charges, and Q4 2022
Processing Error (non-GAAP) |
|
33 |
|
|
28 |
|
|
|
18 |
|
10 |
% |
|
8 |
% |
|
5 |
% |
General and administration (GAAP) |
|
332 |
|
|
197 |
|
|
|
233 |
|
91 |
% |
|
52 |
% |
|
65 |
% |
Less: SBC |
|
199 |
|
|
109 |
|
|
|
83 |
|
55 |
% |
|
29 |
% |
|
23 |
% |
Less: Restructuring charges |
|
— |
|
|
(2 |
) |
|
|
58 |
|
— |
% |
|
(1) % |
|
16 |
% |
General and administration prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
133 |
|
|
90 |
|
|
|
92 |
|
36 |
% |
|
24 |
% |
|
26 |
% |
Less: SBC |
|
318 |
|
|
160 |
|
|
|
110 |
|
87 |
% |
|
42 |
% |
|
31 |
% |
Less: Restructuring charges |
|
— |
|
|
(2 |
) |
|
|
90 |
|
— |
% |
|
(1) % |
|
25 |
% |
Less: Q4 2022 Processing Error |
|
— |
|
|
57 |
|
|
|
— |
|
— |
% |
|
15 |
% |
|
— |
% |
Total operating expenses prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
$ |
465 |
|
$ |
319 |
|
|
$ |
335 |
|
129 |
% |
|
84 |
% |
|
92 |
% |
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2022 |
|
2021 |
|
|
2022 |
|
(in millions, except percentage data) |
|
$ |
|
$ |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
Brokerage and transaction (GAAP) |
|
$ |
158 |
|
$ |
179 |
|
9 |
% |
|
13 |
% |
Less: SBC |
|
|
7 |
|
|
5 |
|
— |
% |
|
— |
% |
Brokerage and transaction prior to SBC
(non-GAAP) |
|
|
151 |
|
|
174 |
|
9 |
% |
|
13 |
% |
Technology and development (GAAP) |
|
|
1,234 |
|
|
878 |
|
68 |
% |
|
65 |
% |
Less: SBC |
|
|
610 |
|
|
212 |
|
34 |
% |
|
16 |
% |
Technology and development prior to SBC
(non-GAAP) |
|
|
624 |
|
|
666 |
|
34 |
|
|
49 |
% |
Operations (GAAP) |
|
|
368 |
|
|
285 |
|
20 |
% |
|
21 |
% |
Less: SBC |
|
|
20 |
|
|
8 |
|
1 |
% |
|
1 |
% |
Operations prior to SBC (non-GAAP) |
|
|
348 |
|
|
277 |
|
19 |
% |
|
20 |
% |
Marketing (GAAP) |
|
|
325 |
|
|
103 |
|
18 |
% |
|
8 |
% |
Less: SBC |
|
|
50 |
|
|
4 |
|
3 |
% |
|
— |
% |
Marketing prior to SBC (non-GAAP) |
|
|
275 |
|
|
99 |
|
15 |
% |
|
8 |
% |
General and administration (GAAP) |
|
|
1,371 |
|
|
924 |
|
76 |
% |
|
68 |
% |
Less: SBC |
|
|
885 |
|
|
425 |
|
49 |
% |
|
31 |
% |
General and administration prior to SBC
(non-GAAP) |
|
|
486 |
|
|
499 |
|
27 |
% |
|
37 |
% |
Total operating expenses (GAAP) |
|
$ |
3,456 |
|
$ |
2,369 |
|
191 |
% |
|
175 |
% |
Less: SBC |
|
|
1,572 |
|
|
654 |
|
87 |
% |
|
48 |
% |
Total operating expenses prior to SBC
(non-GAAP) |
|
$ |
1,884 |
|
$ |
1,715 |
|
104 |
% |
|
127 |
% |
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2022 |
|
2021 |
|
|
2022 |
|
(in millions, except percentage data) |
|
$ |
|
$ |
|
% of Total Net Revenues |
|
% of Total Net Revenues |
Brokerage and transaction (GAAP) |
|
$ |
158 |
|
$ |
179 |
|
9 |
% |
|
13 |
% |
Less: SBC |
|
|
7 |
|
|
5 |
|
— |
% |
|
— |
% |
Less: Restructuring charges |
|
|
— |
|
|
1 |
|
— |
% |
|
— |
% |
Less: Q4 2022 Processing Error |
|
|
— |
|
|
57 |
|
— |
% |
|
4 |
% |
Brokerage and transaction prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
|
151 |
|
|
116 |
|
9 |
% |
|
9 |
% |
Technology and development (GAAP) |
|
|
1,234 |
|
|
878 |
|
68 |
% |
|
65 |
% |
Less: SBC |
|
|
610 |
|
|
212 |
|
34 |
% |
|
16 |
% |
Less: Restructuring charges |
|
|
— |
|
|
23 |
|
— |
% |
|
2 |
% |
Technology and development prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
|
624 |
|
|
643 |
|
34 |
% |
|
47 |
% |
Operations (GAAP) |
|
|
368 |
|
|
285 |
|
20 |
% |
|
21 |
% |
Less: SBC |
|
|
20 |
|
|
8 |
|
1 |
% |
|
1 |
% |
Less: Restructuring charges |
|
|
— |
|
|
16 |
|
— |
% |
|
1 |
% |
Operations prior to SBC, restructuring charges, and Q4 2022
Processing Error (non-GAAP) |
|
|
348 |
|
|
261 |
|
19 |
% |
|
19 |
% |
Marketing (GAAP) |
|
|
325 |
|
|
103 |
|
18 |
% |
|
8 |
% |
Less: SBC |
|
|
50 |
|
|
4 |
|
3 |
% |
|
— |
% |
Less: Restructuring charges |
|
|
— |
|
|
2 |
|
— |
% |
|
— |
% |
Marketing prior to SBC, restructuring charges, and Q4 2022
Processing Error (non-GAAP) |
|
|
275 |
|
|
97 |
|
15 |
% |
|
8 |
% |
General and administration (GAAP) |
|
|
1,371 |
|
|
924 |
|
76 |
% |
|
68 |
% |
Less: SBC |
|
|
885 |
|
|
425 |
|
49 |
% |
|
31 |
% |
Less: Restructuring charges |
|
|
— |
|
|
63 |
|
— |
% |
|
5 |
% |
General and administration prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
|
486 |
|
|
436 |
|
27 |
% |
|
32 |
% |
Total operating expenses (GAAP) |
|
$ |
3,456 |
|
$ |
2,369 |
|
191 |
% |
|
175 |
% |
Less: SBC |
|
|
1,572 |
|
|
654 |
|
87 |
% |
|
48 |
% |
Less: Restructuring charges |
|
|
— |
|
|
105 |
|
— |
% |
|
8 |
% |
Less: Q4 2022 Processing Error |
|
|
— |
|
|
57 |
|
— |
% |
|
4 |
% |
Total operating expenses prior to SBC, restructuring
charges, and Q4 2022 Processing Error (non-GAAP) |
|
$ |
1,884 |
|
$ |
1,553 |
|
104 |
% |
|
115 |
% |
Reconciliation of GAAP to Non-GAAP
Financial Outlook(Unaudited)
|
Year Ended December 31, 2022 |
|
Financial Outlook for the Year Ending
December 31, 2023 |
|
(in millions) |
|
(in millions) |
|
(year- over-year change) |
Total operating expenses (GAAP) |
$2,369 |
|
$2,375 - $2,515 |
|
flat to 6% increase |
Less: SBC |
|
|
|
|
|
Founder Pre-IPO Market Based Cancellation(1) |
N/A |
|
485 |
|
NM |
SBC(2) |
|
654 |
|
$470 - $550 |
|
decrease 16% to 28% |
Total operating expenses prior to SBC (non-GAAP) |
$1,715 |
|
$1,420 - $1,480 |
|
decrease 14% to 17% |
Less: Restructuring charges |
|
105 |
|
N/A |
|
N/A |
Less: Q4 2022 Processing Error |
|
57 |
|
N/A |
|
N/A |
Total operating
expenses prior to SBC, restructuring charges, Q4 2022 Processing
Error (non-GAAP) |
$1,553 |
|
$1,420 - $1,480 |
|
decrease 5% to 9% |
________________(1) Reflects the $485 million
non-cash accounting charge associated with Founders' 2021 pre-IPO
market-based RSUs cancelled in the first quarter 2023.(2) These
amounts include an aggregate benefit of $77 million from
share-based compensation net reversals in connection with the April
2022 and August 2022 Restructurings.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking
statements regarding the expected financial performance of
Robinhood Markets, Inc. and its consolidated subsidiaries (“we,”
“Robinhood,” or the “Company”) and our strategic and operational
plans, including (among others) statements regarding the future
impact on Robinhood of our co-founders cancelling their 2021
pre-IPO market-based share awards; our plans to continue enhancing
our offerings to customers; our plans to pursue purchasing most or
all of our shares that Emergent Fidelity Technologies Ltd. bought
in May 2022, and all statements and information under the headings
“Financial Outlook" and "Reconciliation of GAAP to Non-GAAP
Financial Outlook." 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 press release. 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 experience at our current scale; the difficulty of
managing our business effectively, including the risk of continued
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; our exposure to fluctuations in interest rates;
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; 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
can be found in Part II, Item 1A of our Quarterly Report on Form
10-Q for the quarter ended September 30, 2022, which was filed on
November 3, 2022, as well as in our other filings with the SEC, all
of 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 of this press
release, February 8, 2023, 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 press release
whether as a result of any new information, future events, changed
circumstances, or otherwise. You should read this press release
with the understanding that our actual future results, performance,
events, and circumstances might be materially different from what
we expect. Final results for the full year, which will be reported
in our Annual Report on Form 10-K for the year ended December 31,
2022, may vary from the information in this press release. In
particular, until our financial statements are issued in our Annual
Report on Form 10-K, we may be required to recognize certain
subsequent events (such as in connection with contingencies or the
realization of assets) which could affect our final results.
Non-GAAP Financial Measures
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
margin, operating expense prior to share-based compensation, and
operating expenses prior to share-based compensation, restructuring
charges, and Q4 2022 Operational Error. 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. Reconciliations of these non-GAAP measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are provided in the financial tables included
in this release.
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.
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.
Adjusted EBITDA Margin
Adjusted EBITDA Margin is calculated as Adjusted
EBITDA divided by total net revenues. The most directly comparable
GAAP measure is net margin (calculated as net income (loss) divided
by total net revenues). We believe Adjusted EBITDA Margin 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. Adjusted EBITDA Margin is used by our management
internally to make operating decisions, including those related to
operating expenses, evaluate performance, and perform strategic
planning and annual budgeting.
Operating Expense Prior to Share-Based
Compensation
Operating expense prior to share-based
compensation is defined as the applicable GAAP operating expense
line item minus the share-based compensation (or SBC) included
within such line item. We believe operating expense prior to SBC
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
cost structure.
Operating Expenses Prior to Share-Based
Compensation, Restructuring Charges, and Q4 2022 Processing
Error
Operating expenses prior to share-based
compensation, restructuring charges, and Q4 2022 Processing Error
is defined as GAAP total operating expenses minus share-based
compensation (or SBC), restructuring charges, and Q4 2022
Processing Error. We believe operating expenses prior to SBC,
restructuring charges, and Q4 2022 Processing Error 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 cost structure.
Key Performance Metrics
In addition to the measures presented in our
unaudited condensed consolidated financial statements, we use the
key performance metrics described below to help us evaluate our
business, identify trends affecting our business, formulate
business plans, and make strategic decisions.
Net Cumulative Funded Accounts
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 below) and unauthorized
debit card use, 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.
“Fraudulent Deposit Transactions” occur when
users initiate deposits into their accounts, make trades on our
platform using a short-term extension of credit from us, and then
repatriate or reverse the deposits, resulting in a loss to us of
the credited amount.
Monthly Active Users (“MAU”)
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 this release 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.
Assets Under Custody (“AUC”)
We define AUC as the sum of the fair value of
all equities, options, cryptocurrency and cash held by users in
their accounts, net of receivables from users, as of a stated date
or period end on a trade date basis. Net Deposits and net market
gains drive the change in AUC in any given period.
Net Deposits
We define “Net Deposits” as all cash deposits
and asset transfers received from customers, net of reversals,
customer cash withdrawals, and other assets transferred out of our
platform (assets transferred in or out include debit card
transactions, Automated Customer Account Transfer Service (“ACATS”)
transfers, and custodial crypto wallet transfers) for a stated
period.
Average Revenue Per User (“ARPU”)
We define ARPU as total revenue for a given
period divided by the average of Net Cumulative Funded Accounts on
the last day of that period and the last day of the immediately
preceding period. Figures in this release represent annualized ARPU
for each three-month period presented.
Growth Rate and Annualized Growth Rate with
respect to Net Deposits
When used with respect to Net Deposits, "growth
rate" and "annualized growth rate" provide information about Net
Deposits relative to total AUC. "Growth rate" is calculated as
aggregate Net Deposits over a specified 12 month period, divided by
AUC for the fiscal quarter that immediately precedes such 12 month
period. "Annualized growth rate" is calculated as Net Deposits for
a specified quarter multiplied by 4 and divided by AUC for the
immediately preceding quarter.
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