Robinhood Reports Fourth Quarter and Full Year 2022 Results

Robinhood Markets, Inc.

Robinhood Co-Founders cancel nearly $500M of their share-based compensation
Board of Directors authorizes Robinhood to pursue purchasing its shares that
Emergent Fidelity Technologies Ltd. bought in May 2022

MENLO PARK, Calif., Feb. 08, 2023 (GLOBE NEWSWIRE) -- 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 Ended December 31,								YOY% Change			Three Months Ended September 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 Ended December 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 Ended December 31,						Three Months Ended September 30,			Year Ended December 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 Ended December 31,						Three Months Ended September 30,			Year Ended December 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 Ended December 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	)		$	—			$