Third Quarter Results:
- Total net revenues increased 29% year-over-year to $467 million, primarily due to higher net interest and other revenues, partially offset by lower transaction-based revenues.
- Net interest revenues increased 96% year-over-year to
$251 million , driven by growth in interest earning assets and higher short term interest rates. - Transaction-based revenues decreased 11% year-over-year to
$185 million .- Options was unchanged at $124 million.
- Equities decreased 13% to
$27 million . - Cryptocurrencies decreased 55% to
$23 million .
- Net loss was
$85 million , or earnings per share (EPS) of -$0.09 , compared with a net loss of$175 million , or EPS of -$0.20 , in Q3 2022.- Q3 2023 EPS of -
$0.09 included -$0.11 per share impact from a regulatory accrual of$104 million .
- Q3 2023 EPS of -
- Operating expenses decreased 1% year-over-year to
$540 million .- Adjusted Operating Expenses (non-GAAP, previously Operating expenses prior to SBC) increased 5% year-over-year to
$353 million . - Share-based compensation (SBC) decreased by 25% year-over-year to
$83 million .
- Adjusted Operating Expenses (non-GAAP, previously Operating expenses prior to SBC) increased 5% year-over-year to
- Adjusted EBITDA (non-GAAP) increased 191% year-over-year to $137 million.
- Net Cumulative Funded Accounts increased by 360 thousand year-over-year to 23.3 million.
- Assets Under Custody (AUC) increased 34% year-over-year to
$87 billion , primarily driven by continued Net Deposits and higher equity valuations. - Net Deposits were
$4.0 billion , which translates to an annualized growth rate of 18% relative to AUC at the end of Q2 2023. Over the past twelve months, Net Deposits were$17.3 billion , which translates to a growth rate of 27% relative to AUC at the end of Q3 2022. - Average Revenue Per User (ARPU) increased by 27% year-over-year to
$80 . - Cash and cash equivalents totaled
$4 .9 billion compared with$6 .2 billion at the end of Q3 2022.- The year-over-year decrease was primarily driven by share purchases, movement of some corporate cash into investments, and the acquisition of
X1 Inc. (now "Robinhood Credit").
- The year-over-year decrease was primarily driven by share purchases, movement of some corporate cash into investments, and the acquisition of
- Monthly Active Users (MAU) decreased 16% year-over-year to 10.3 million.
“It's been nearly 10 years since we founded Robinhood and we're just getting started. Over the past year, we’ve put a lot more value in products like Robinhood Gold including a 4.9% annual yield on cash and a 3% match on IRA contributions,” said
“With growing market share of retail trading and increased customer adoption across Robinhood Retirement, Instant Withdrawals, Securities Lending and Robinhood Gold, we're excited to see momentum building,” said
Highlights
Robinhood’s industry-leading offerings fuel product adoption
- Robinhood Retirement continues to grow ahead of IRA season with nearly 400 thousand accounts and assets over
$1 billion less than one year after launch. - Customers are taking advantage of broadening Robinhood Gold offerings. Subscriptions grew to more than 1.3 million in the quarter, with 100 thousand added in Q3 alone.
- We have more than doubled the stocks and ETFs available in extended hours trading via Robinhood 24 Hour Market, now up to 95.
- In September, we introduced our Crypto Pricing Dashboard, showing that customers get the most crypto for their dollar at Robinhood. Check it out at: https://robinhood.com/us/en/about/crypto/.
Robinhood looks to the future as it explores and expands growth opportunities
- With an experienced team in place, we will soon launch brokerage operations in the
UK . - As another step in global expansion, we are also planning to launch crypto trading in the EU following our
UK launch. - We are continuing work to build futures trading, aiming to bring the intuitive mobile experience that customers know from Robinhood to the industry.
Robinhood purchased 55.3 million shares of its Class A common stock
- This return of capital helped drive shareholder value by reducing the company's share count by nearly 7 percent in the third quarter.
Webcast and Conference Call Information
Robinhood will host a conference call to discuss its results at
Following the call, a replay and transcript will also be available at the same website.
Financial Outlook
Based on our Q3 2023 results, our expense outlook for 2023 has changed from our prior outlook at Q2 2023 earnings (
- GAAP total operating expenses for full-year 2023 to be in the range of
$2.399 billion to$2.439 billion (including a $104 million regulatory accrual in Q3 2023), updated from our prior outlook of$2.330 billion to$2.410 billion .
- Adjusted Operating Expenses for full-year 2023 to be in the range of
$1.435 billion to$1.455 billion , an improvement of$5 million from the midpoint from our prior outlook (previously operating expenses prior to SBC) of$1.430 billion to$1.470 billion .
- SBC for full-year 2023 (including the 2021 Founders Award Cancellation of
$485 million in Q1 2023) to be in the range of$860 million to$880 million , an improvement of$50 million at the midpoint of the range from our prior outlook of$900 million to$940 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. The above expense outlook does not include potential significant regulatory matters that may arise or accruals we may determine in the future are required, as we are unable to accurately predict the size or timing of such matters or accruals. See “Non-GAAP Financial Measures” for more information on Adjusted Operating Expenses.
About Robinhood
Robinhood uses the “Overview” tab of its Investor Relations website (accessible at investors.robinhood.com/overview) and its Newsroom (accessible at newsroom.aboutrobinhood.com), as means of disclosing information to the public in a broad, non-exclusionary manner for purposes of the
“Robinhood” and the Robinhood feather logo are registered trademarks of
Contacts
Investors:
ir@robinhood.com
Press:
press@robinhood.com
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except share and per share data) | 2022 | 2023 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6,339 | $ | 4,889 | |||
Cash segregated under federal and other regulations | 2,995 | 3,448 | |||||
Receivables from brokers, dealers, and clearing organizations | 76 | 63 | |||||
Receivables from users, net | 3,218 | 3,704 | |||||
Securities borrowed | 517 | 1,204 | |||||
Deposits with clearing organizations | 186 | 275 | |||||
Asset related to user cryptocurrencies safeguarding obligation | 8,431 | 10,183 | |||||
User-held fractional shares | 997 | 1,396 | |||||
Held-to-maturity investments | — | 372 | |||||
Prepaid expenses | 86 | 75 | |||||
Other current assets | 72 | 130 | |||||
Total current assets | 22,917 | 25,739 | |||||
Property, software, and equipment, net | 146 | 123 | |||||
100 | 164 | ||||||
Intangible assets, net | 25 | 53 | |||||
Non-current held-to-maturity investments | — | 118 | |||||
Non-current prepaid expenses | 17 | 3 | |||||
Other non-current assets | 132 | 118 | |||||
Total assets | $ | 23,337 | $ | 26,318 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 185 | $ | 373 | |||
Payables to users | 4,701 | 4,325 | |||||
Securities loaned | 1,834 | 3,245 | |||||
User cryptocurrencies safeguarding obligation | 8,431 | 10,183 | |||||
Fractional shares repurchase obligation | 997 | 1,396 | |||||
Other current liabilities | 105 | 126 | |||||
Total current liabilities | 16,253 | 19,648 | |||||
Other non-current liabilities | 128 | 96 | |||||
Total liabilities | 16,381 | 19,744 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, | — | — | |||||
Class A common stock, | — | — | |||||
Class B common stock, | — | — | |||||
Class C common stock, | — | — | |||||
Additional paid-in capital | 11,861 | 12,054 | |||||
Accumulated other comprehensive income (loss) | — | (4 | ) | ||||
Accumulated deficit | (4,905 | ) | (5,476 | ) | |||
Total stockholders’ equity | 6,956 | 6,574 | |||||
Total liabilities and stockholders’ equity | $ | 23,337 | $ | 26,318 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | YOY% Change | Three Months Ended | QOQ% Change | ||||||||||||||
(in millions, except share, per share, and percentage data) | 2022 | 2023 | 2023 | ||||||||||||||
Revenues: | |||||||||||||||||
Transaction-based revenues | $ | 208 | $ | 185 | (11) | % | $ | 193 | (4) | % | |||||||
Net interest revenues | 128 | 251 | 96 | % | 234 | 7 | % | ||||||||||
Other revenues | 25 | 31 | 24 | % | 59 | (47) | % | ||||||||||
Total net revenues | 361 | 467 | 29 | % | 486 | (4) | % | ||||||||||
Operating expenses(1)(2): | |||||||||||||||||
Brokerage and transaction | 33 | 39 | 18 | % | 39 | — | % | ||||||||||
Technology and development | 185 | 202 | 9 | % | 207 | (2) | % | ||||||||||
Operations | 65 | 41 | (37) | % | 36 | 14 | % | ||||||||||
Marketing | 19 | 28 | 47 | % | 25 | 12 | % | ||||||||||
General and administrative | 233 | 230 | (1) | % | 159 | 45 | % | ||||||||||
Total operating expenses | 535 | 540 | 1 | % | 466 | 16 | % | ||||||||||
Other (income) expense, net | — | 2 | NM | (2 | ) | NM | |||||||||||
Income (loss) before income taxes | (174 | ) | (75 | ) | (57) | % | 22 | (441) | % | ||||||||
Provision for (benefit from) income taxes | 1 | 10 | 900 | % | (3 | ) | (433) | % | |||||||||
Net income (loss) | $ | (175 | ) | $ | (85 | ) | (51) | % | $ | 25 | (440) | % | |||||
Net income (loss) attributable to common stockholders: | |||||||||||||||||
Basic | $ | (175 | ) | $ | (85 | ) | $ | 25 | |||||||||
Diluted | $ | (175 | ) | $ | (85 | ) | $ | 25 | |||||||||
Net income (loss) per share attributable to common stockholders: | |||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.09 | ) | $ | 0.03 | |||||||||
Diluted | $ | (0.20 | ) | $ | (0.09 | ) | $ | 0.03 | |||||||||
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders: | |||||||||||||||||
Basic | 882,356,575 | 895,108,790 | 904,984,863 | ||||||||||||||
Diluted | 882,356,575 | 895,108,790 | 921,269,749 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended | YOY% Change | ||||||||||
(in millions, except share, per share, and percentage data) | 2022 | 2023 | |||||||||
Revenues: | |||||||||||
Transaction-based revenues | $ | 628 | $ | 585 | (7) | % | |||||
Net interest revenues | 257 | 693 | 170 | % | |||||||
Other revenues | 93 | 116 | 25 | % | |||||||
Total net revenues | 978 | 1,394 | 43 | % | |||||||
Operating expenses(1)(2): | |||||||||||
Brokerage and transaction | 94 | 114 | 21 | % | |||||||
Technology and development | 698 | 608 | (13) | % | |||||||
Operations | 242 | 119 | (51) | % | |||||||
Marketing | 74 | 79 | 7 | % | |||||||
General and administrative | 727 | 1,036 | 43 | % | |||||||
Total operating expenses | 1,835 | 1,956 | 7 | % | |||||||
Other (income) expense, net | 2 | — | — | % | |||||||
Loss before income taxes | (859 | ) | (562 | ) | (35) | % | |||||
Provision for income taxes | 3 | 9 | 200 | % | |||||||
Net loss | $ | (862 | ) | $ | (571 | ) | (34) | % | |||
Net loss attributable to common stockholders: | |||||||||||
Basic | $ | (862 | ) | $ | (571 | ) | |||||
Diluted | $ | (862 | ) | $ | (571 | ) | |||||
Net loss per share attributable to common stockholders: | |||||||||||
Basic | $ | (0.99 | ) | $ | (0.64 | ) | |||||
Diluted | $ | (0.99 | ) | $ | (0.64 | ) | |||||
Weighted-average shares used to compute net loss per share attributable to common stockholders: | |||||||||||
Basic | 875,055,571 | 898,999,464 | |||||||||
Diluted | 875,055,571 | 898,999,464 |
(1) The following table presents operating expenses as a percent of total net revenues:
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||
2022 | 2023 | 2023 | 2022 | 2023 | ||||||||||
Brokerage and transaction | 9 | % | 8 | % | 8 | % | 10 | % | 8 | % | ||||
Technology and development | 51 | % | 43 | % | 43 | % | 71 | % | 44 | % | ||||
Operations | 18 | % | 9 | % | 7 | % | 25 | % | 9 | % | ||||
Marketing | 5 | % | 6 | % | 5 | % | 8 | % | 6 | % | ||||
General and administrative | 65 | % | 49 | % | 33 | % | 74 | % | 74 | % | ||||
Total operating expenses | 148 | % | 115 | % | 96 | % | 188 | % | 141 | % |
(2) The following table presents the SBC in our unaudited condensed consolidated statements of operations for the periods indicated:
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||
(in millions) | 2022 | 2023 | 2023 | 2022 | 2023 | |||||||||
Brokerage and transaction | $ | 2 | $ | 2 | $ | 2 | $ | 4 | $ | 6 | ||||
Technology and development | 25 | 51 | 56 | 166 | 161 | |||||||||
Operations | — | 3 | 1 | 5 | 6 | |||||||||
Marketing | — | 1 | 1 | 3 | 3 | |||||||||
General and administrative | 83 | 26 | 49 | 316 | 614 | |||||||||
Total SBC | $ | 110 | $ | 83 | $ | 109 | $ | 494 | $ | 790 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
(in millions) | 2022 | 2023 | 2022 | 2023 | |||||||||||
Operating activities: | |||||||||||||||
Net loss | $ | (175 | ) | $ | (85 | ) | $ | (862 | ) | $ | (571 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||
Depreciation and amortization | 15 | 19 | 44 | 54 | |||||||||||
Impairment of long-lived assets | 47 | 12 | 47 | 12 | |||||||||||
Provision for credit losses | 9 | 14 | 28 | 29 | |||||||||||
Share-based compensation | 110 | 83 | 494 | 790 | |||||||||||
Other | 8 | (39 | ) | 8 | (39 | ) | |||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Securities segregated under federal and other regulations | 20 | — | — | — | |||||||||||
Receivables from brokers, dealers, and clearing organizations | 14 | 54 | 13 | 13 | |||||||||||
Receivables from users, net | 92 | (391 | ) | 2,565 | (502 | ) | |||||||||
Securities borrowed | (73 | ) | (244 | ) | (139 | ) | (687 | ) | |||||||
Deposits with clearing organizations | 88 | (52 | ) | 127 | (89 | ) | |||||||||
Current and non-current prepaid expenses | 18 | 17 | 29 | 26 | |||||||||||
Other current and non-current assets | 14 | 58 | 5 | — | |||||||||||
Accounts payable and accrued expenses | (38 | ) | 94 | (45 | ) | 145 | |||||||||
Payables to users | (400 | ) | (786 | ) | (1,080 | ) | (376 | ) | |||||||
Securities loaned | 56 | 263 | (2,228 | ) | 1,411 | ||||||||||
Other current and non-current liabilities | (12 | ) | 6 | (39 | ) | 5 | |||||||||
Net cash provided by (used in) operating activities | (207 | ) | (977 | ) | (1,033 | ) | 221 | ||||||||
Investing activities: | |||||||||||||||
Purchases of property, software, and equipment | (6 | ) | (1 | ) | (25 | ) | (1 | ) | |||||||
Capitalization of internally developed software | (8 | ) | (5 | ) | (22 | ) | (14 | ) | |||||||
Purchases of available-for-sale investments | — | — | (24 | ) | — | ||||||||||
Proceeds from sales and maturities of available-for-sale investments | 14 | — | 19 | 10 | |||||||||||
Purchases of held-to-maturity investments | — | (76 | ) | — | (651 | ) | |||||||||
Proceeds from maturities of held-to-maturity investments | — | 75 | — | 167 | |||||||||||
Acquisitions of a business, net of cash and cash equivalents acquired | — | (90 | ) | — | (90 | ) | |||||||||
Other | (11 | ) | — | (19 | ) | — | |||||||||
Net cash used in investing activities | (11 | ) | (97 | ) | (71 | ) | (579 | ) | |||||||
Financing activities: | |||||||||||||||
Proceeds from issuance of common stock under the Employee Stock Purchase Plan ("ESPP") | — | — | 13 | 9 | |||||||||||
Taxes paid related to net share settlement of equity awards | (2 | ) | (4 | ) | (9 | ) | (9 | ) | |||||||
Payments of debt issuance costs | — | — | (10 | ) | (10 | ) | |||||||||
Draws on credit facilities | 10 | 10 | 21 | 20 | |||||||||||
Repayments on credit facilities | (10 | ) | (10 | ) | (21 | ) | (20 | ) | |||||||
Change in principal collected from customers due to | — | (3 | ) | — | (3 | ) | |||||||||
Proceeds from exercise of stock options, net of repurchases | 1 | — | 6 | 2 | |||||||||||
Repurchase of common stock | — | (608 | ) | — | (608 | ) | |||||||||
Net cash used in financing activities | (1 | ) | (615 | ) | — | (619 | ) | ||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (2 | ) | — | (2 | ) | — | |||||||||
Net decrease in cash, cash equivalents, segregated cash and restricted cash | (221 | ) | (1,689 | ) | (1,106 | ) | (977 | ) | |||||||
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period | 9,385 | 10,069 | 10,270 | 9,357 | |||||||||||
Cash, cash equivalents, segregated cash and restricted cash, end of the period | $ | 9,164 | $ | 8,380 | $ | 9,164 | $ | 8,380 | |||||||
Cash and cash equivalents, end of the period | $ | 6,187 | $ | 4,889 | $ | 6,187 | $ | 4,889 | |||||||
Segregated cash, end of the period | 2,954 | 3,448 | 2,954 | 3,448 | |||||||||||
Restricted cash in other current assets, end of the period | 1 | 26 | 1 | 26 | |||||||||||
Restricted cash in other non-current assets, end of the period | 22 | 17 | 22 | 17 | |||||||||||
Cash, cash equivalents, segregated cash and restricted cash, end of the period | 9,164 | 8,380 | 9,164 | 8,380 | |||||||||||
Supplemental disclosures: | |||||||||||||||
Cash paid for interest | $ | — | $ | 2 | $ | 6 | $ | 8 | |||||||
Cash paid for income taxes, net of refund received | $ | 1 | $ | 7 | $ | 4 | $ | 9 |
Reconciliation of GAAP to Non-GAAP Results
(Unaudited)
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||
(in millions) | 2022 | 2023 | 2023 | 2022 | 2023 | |||||||||||||||
Net income (loss) | $ | (175 | ) | $ | (85 | ) | $ | 25 | $ | (862 | ) | $ | (571 | ) | ||||||
Net margin | (48) | % | (18) | % | 5 | % | (88) | % | (41) | % | ||||||||||
Add: | ||||||||||||||||||||
Interest expenses related to credit facilities | 6 | 6 | 5 | 18 | 17 | |||||||||||||||
Provision for (benefit from) income taxes | 1 | 10 | (3 | ) | 3 | 9 | ||||||||||||||
Depreciation and amortization | 15 | 19 | 15 | 44 | 54 | |||||||||||||||
EBITDA (non-GAAP) | (153 | ) | (50 | ) | 42 | (797 | ) | (491 | ) | |||||||||||
Less: SBC | ||||||||||||||||||||
2021 Founders Award Cancellation | — | — | — | — | 485 | |||||||||||||||
SBC excluding 2021 Founders Award Cancellation(1) | 110 | 83 | 109 | 494 | 305 | |||||||||||||||
Restructuring charges(2) | 90 | — | — | 107 | — | |||||||||||||||
Significant legal and tax settlements and reserves | — | 104 | — | 20 | 104 | |||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 47 | $ | 137 | $ | 151 | $ | (176 | ) | $ | 403 | |||||||||
Adjusted EBITDA margin (non-GAAP) | 13 | % | 29 | % | 31 | % | (18) | % | 29 | % |
(1) SBC excluding 2021 Founders Award Cancellation benefited from restructuring-related net reversals of previously recognized expense as follows:
$53 million for the three months endedSeptember 30, 2022 in connection with the reduction in force announced onAugust 2, 2022 (the “August 2022 Restructuring”);$77 million for the nine months endedSeptember 30, 2022 in connection both with the reduction in force announced onApril 26, 2022 (the “April 2022 Restructuring”) andAugust 2022 Restructuring.
(2) Restructuring charges includes:
$90 million for the three months endedSeptember 30, 2022 related to theAugust 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$107 million for the nine months endedSeptember 30, 2022 related to both theApril 2022 Restructuring andAugust 2022 Restructuring and consisting of$47 million of impairments 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.
Reconciliation of GAAP to Non-GAAP Results
(Unaudited)
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||
(in millions) | 2022 | 2023 | 2023 | 2022 | 2023 | |||||||||
Total operating expenses (GAAP) | $ | 535 | $ | 540 | $ | 466 | $ | 1,835 | $ | 1,956 | ||||
Less: SBC | ||||||||||||||
2021 Founders Award Cancellation | — | — | — | — | 485 | |||||||||
SBC Excluding 2021 Founders Award Cancellation1 | 110 | 83 | 109 | 494 | 305 | |||||||||
Less: Restructuring Charges | 90 | — | — | 107 | — | |||||||||
Less: Significant legal and tax settlements and reserves | — | 104 | — | 20 | 104 | |||||||||
Adjusted Operating Expenses (Non-GAAP) | $ | 335 | $ | 353 | $ | 357 | $ | 1,214 | $ | 1,062 |
(1) 2022 amounts include an aggregate benefit of
Reconciliation of GAAP to Non-GAAP Financial Outlook
(Unaudited)
Financial Outlook for the Year Ending | |||||||
Prior Outlook(1) (in millions) | Updated Outlook (in millions) | Change (in millions) | |||||
Total operating expenses (GAAP) | increased by | ||||||
Less: SBC | |||||||
2021 Founders Award Cancellation | no change | ||||||
SBC excluding 2021 Founders Award Cancellation | decreased by | ||||||
Less: Significant legal and tax settlements and reserves | not included in prior outlook | $104 | increased by | ||||
Adjusted Operating Expenses (non-GAAP) | decreased by |
(1) Prior Outlook provided at Q2 2023 Earnings on
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding the expected financial performance of
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, and Adjusted Operating Expenses. 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) SBC, (v) significant legal and tax settlements and reserves, and (vi) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results.
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.
Adjusted Operating Expenses
Adjusted Operating Expenses is defined as GAAP total operating expenses minus (i) share-based compensation (or SBC), (ii) significant legal and tax settlements and reserves, and (iii) other significant expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing expenses. The amount and timing of the excluded items are unpredictable, are not driven by core results, of operations, and render comparisons with prior periods less meaningful. We believe Adjusted Operating Expenses 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. Adjusted Operating Expenses 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. In
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
We define “Net Cumulative Funded Accounts” as New Funded Accounts less Churned Accounts plus Resurrected Accounts (each as defined below). We define a “New Funded Account” as a Robinhood Account into which the user makes an initial deposit, money transfer or asset transfer, of any amount, during the relevant period. We define a "Robinhood Account" as a unique log-in that provides the account user access to any and all of the products offered on the Robinhood platform, with the exception of Robinhood Credit. A Robinhood Account is considered “Churned” if it was ever a New Funded Account whose account 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. "Company-initiated Credits" are amounts that are deposited into a Robinhood Account by the Company with no action taken by the user. Examples of Company-initiated 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. A Robinhood 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. Accounts held by Robinhood Credit customers who a) had a credit balance or transaction during Q3 2023 and b) did not already have a Robinhood Account, are also considered New Funded Accounts.
Monthly Active Users (“MAU”)
We define MAUs as the number of unique Robinhood Accounts who meet one of the following criteria at any point during a specified calendar month: a) executes a debit card transaction, b) transitions between two different screens on a mobile device while logged into their Robinhood Account or c) loads a page in a web browser while logged into their Robinhood Account. A user need not satisfy these conditions on a recurring monthly basis or have a funded account to be included in MAU. MAU figures in this press release reflect MAU for the last month of the relevant 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. We do not currently include Robinhood Credit customers in our calculation of MAU.
Assets Under Custody (“AUC”)
We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis. Net Deposits and net market gains (losses) drive the change in AUC in any given period.
Net Deposits
We define “Net Deposits” as all cash deposits and asset transfers 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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