Robinhood Markets, Inc. Q3 FY2024 earnings call

• Focus areas: Winning the active trader market, increasing wallet share, expanding internationally.
• Q3 net deposits were $10 billion or more for the third straight quarter, YTD net deposits $34 billion. Customer assets under custody reached a record high of $152 billion.
• Options contracts up 47% Y/Y to a new record, YTD total 1.2 billion contracts.
• Robinhood Gold subscriptions hit 2.2 million, Gold card rolled out to 100k customers, app store ratings 5/5, 95% retention post-first transaction, Gold card customers contributing higher net deposits.
• Hood Summit introduced Index Options, Futures, and Robinhood Legend; Index Options and Futures offer industry-leading pricing, Robinhood Legend is a desktop platform for active traders.

In Q3, Robinhood's financial performance included: Transaction-based revenues grew 72% year-over-year. Net interest revenues increased 9%. Other revenues grew by 42%. Assets under custody grew 76% to a record $152 billion. Net deposits were $34 billion year-to-date. Options contracts were up 47% year-over-year to a new record, with year-to-date total at 1.2 billion contracts. Robinhood Gold subscriptions hit an all-time high of $2.2 million in Q3.

• Q4 expected to be near the top end of the adjusted OpEx and SBC range of $1.85 billion to $1.95 billion.
• Started 1 billion share repurchase program, allocated 97 million to repurchase 5 million shares in Q3.
• October saw net deposits north of $4 billion, cash suite balances over $25 billion, equity notional volumes highest in over three years, option contracts one of the highest months ever, crypto notional volumes over $5 billion on track to exceed Q3 average.

• Credit risk with scaling Robinhood Gold card, need to manage to profitably scale.
• Regulatory developments that could impact the business.
• Impact of interest rate cuts on margin utilization, SEC lending activity, and transaction activity, with potential offsetting forces to consider.

Q: When will the Robinhood Gold card be available to all users?

A: Vlad Tenev said the waitlist is near 2 million, rolled out to ~100k customers, working to get it out as quickly as possible while managing economics to avoid near-term losses.

Q: Are there any plans to introduce a way to send or receive money to other Robinhood users?

A: Vlad Tenev said they experimented before, focus on Gold card now but anticipate growing offerings to do what other consumer finance apps do.

Q: How will gold continue to add value to users and what new benefits planned?

A: Vlad Tenev said gold provides value in all market environments, gold subscribers get better pricing on index options and futures, will keep investing in gold and make new products better for gold users.

Q: Can you describe the plans for the live tax gain and loss monitoring?

A: Jason Warnick said realized P&L tool shipped, employee beta testing for tax lots ongoing, team pushing to get it to customers soon.

Q: What is the level of signups to date for Robinhood Legend and incremental signups?

A: Vlad Tenev said product not fully ungated, rolled out to multiples, early feedback positive.

Q: How is the presidential election market doing and its impact on retention?

A: Vlad Tenev said rolled out to 100% of customers this week, feedback good, part of winning active trader market by being at forefront of innovation.

Q: On index options and futures trading economics, margins, and equity fee capture decline?

A: Jason Warnick said index options non-gold price $0.50/contract, gold $0.35/contract; futures non-gold $0.75/contract, gold $0.50/contract; equity take rate affected by volatility and mix.

Q: Cadence of customer pickup for futures and index contracts in 4Q, timing of rollout?

A: Vlad Tenev said futures focus on election next week, Outrights to be rolled out in coming months, index options coming in coming months.

Q: Interest rate sensitivity, margin, SEC lending, offsetting forces?

A: Jason Warnick said rate times balance roughly $40 million per 50 basis points cut, margin balances growing, SEC lending has business inputs with upside, naturally hedged model with tailwinds from falling rates.

Q: Product innovation and launch pace, future product development?

A: Vlad Tenev said product rollout depends on type, e.g., presidential election market rolled out quickly, credit card rolled out prudently to manage credit risk.

Q: Expenses for futures/index offerings, crypto rebates higher?

A: Jason Warnick said crypto rebates experimented with, moving up, futures/index options benefit from 90% fixed costs base.

Q: Relationship between revenues and AUC, confidence amid rate cuts?

A: Vlad Tenev said Q2-Q3 bridge includes seasonal proxy revenue and contra revenues, expect Q4 contra revenues to step up then slow, confident longer term.

Q: Deposit trends and strategy for deposit bonuses?

A: Jason Warnick said customers respond to match promotions, payback periods tracked, Hood Week promotions brought in $2 billion, long-term trend of 20%+ net deposit growth.

Q: Strategy around election-related event contracts, considering bigger into betting-type products?

A: Vlad Tenev said listed event contracts as regulated swaps for institutions, make available for retail as part of being at frontier of innovation, provides data source for predictions.