Robinhood Markets (HOOD) 7 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to Robinhood Third Quarter 2023 Earnings Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to turn the call over to Chris Koegel, Vice President of Corporate FP&A and Investor Relations.

thank everyone and QX joining Carmen, call. earnings you, you for to Robinhood's Thank are Co-Founder, CEO CFO, today us With and Jason Vlad Warnick. and Tenev;

issued in today's monitor unless statements. differences, this that we presentation SEC Before our will and materially could earnings the the in we started, I cause can release to the to including also are Potential earnings press expectations, today, you our results getting to on presentation. we Reconciliations will other GAAP provide risk no Investor comparable the updates be that want from investor.rbi.com, our developments contain required, include we at continue results found Actual Form our that metrics. most forward-looking non-GAAP described filings. discussion have could legally in Relations afternoon to website Today's XX-Q differ regulatory financial remind filed call and factors consider

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customers million over later, Almost XX serving in the years XX we're U.S.

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emerges a are depleted I at at, I tensions been highs look at household company investors. ever. explain increase. rates ensure being XX-year than are continuing years challenging has few things a Geopolitical X to environment rapid to past strategy, to and on Interest companies most largest As environment to the I'm our the financial believe that goes excited high-level of But let's saying we world. we continue profitable we to review first, one about and of the our financial It macro into results. without to talk the this at for level savings want business the are and challenging stronger Robinhood you clip. grow can progress. from execute QX in our

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of all adjusted a were in costs put And our Robinhood year big to expansion. GAAP by first This had business, EBITDA a lean, to we than market investments net but international heard keeping total QX. markets, service product, and up I a that is QX, from revenues more our make customer the this lot in our bull And doubled across reality. ensure making just We is not company XX% in want in conditions. past a work of over You've year while We mention margin me all sustainable quarter public a profitability year-over-year. as ago. in

culture. are of XXx over company. the in people of of the highest incumbents can motivated talent ensuring crank and the the across all more talented groups caliber that highly Second, resources. the And have company history even of motivating now our believe past the execute year, on believe highest small we and over turned strongly people concentration headcount the I I have very retaining with we positions. hiring, and we

velocity number product Third, several and highest key improving We in use a been by to we've our is We now, right And quality. recorded fast, simultaneously product metrics our the velocity. metrics, history. of this. service our track move

map, as let's growth deepening which our X road know, to areas: turn traders for our into organized and customers, we've relationships innovating new you opportunities. with XXXX active our launching Now

a of most portion relationships important a Let's Success for Robinhood financial This Robinhood to our relationship our net our strategy deepening continues deepening part #X healthier customers. first relationships subscribers customers. talk large our more business with our diversified by customers. we're deposits. about Gold that and means and be to you track how lead Gold with our here should will in and of in the becomes progress this focus

new adding on environment Gold cash and and uninvested X.X% the more lot by customers Over save X% we contributions. and a evolves past IRA a to on APY were invest, for the ways year, put a in value as looking match

million, added $XXX,XXX growth and accelerating As $XXX,XXX a now year. QX in and are as over alone is the $X.X past we over result, subscriptions

Today, than dollars more at Xx up of rate. of customers have thousands assets are IRAs opened customers Gold us customers of with X% rate customers. of tens average and under they've Gold non-gold more year-over-year, XX% custody, that in subscribers new than and Gold the Robinhood are joining double and

in we creating hard and As special our awesome to customers. XX be July, a been work acquiring we a got Gold taking we've credit majority for look steps the Ulti to of and card, that of something gold number X right of them planned ahead, now. customers an After is our subscribers, has team make we're reality. want at

hear more You'll this year. next about early

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and active track here the traders, We market platform are progress laser-focused we on share. being for our #X by

our has Our systematically would ] streamlined with options XX/X equities and more In an speed platform option active on particular trading usability. past Robinhood flow, introduced of another lead doubled we and number to on an trade XX-hour available and chain that simulator to a using app and P&L the quarter, ETFs customization consider been the [ pricing, than removing market. on stocks limitation emphasis any focus trader

see our crypto some we that so spreads on transactions. mobile interface For user changes the our that offer rolled customers, crypto on to out can we've clearly customers the

is for against This them. all-in easier other to their and great a execution customers see of makes see cost deal it Robinhood compare of platforms giving it how

As traders, continue equities share and see and options QX we year-over-year. from our we market share deliver our active market retail of to both QX, our increased trading In for grow.

Let futures hard of me futures. at the building from We're to product, closer offering work revenue best getting our millions believe about designed we Competitors what unveiling futures is have of now talk we particularly trading. been generate hundreds annual mobile. there and on

build continue expand the a we we execute, to have take and real over opportunity time. So share market, X-figure market believe as revenue business a we to

exploring map growth our XXXX opportunities. part new is road third of The

come. built are have XX% nearly customers a there that business potential alone, been customers international XX focused in the we expansion. we across our evolve the the more into serves adults. base as Here, to of where with globe. can one we customer In them, serve years on our U.S. business believe majority And laser billions outside the But million of American the we U.S. is

capabilities build expansion to been Our approach organically. for has the international

us multiple manner allows while in to capabilities our This geos. sharing a scale capital-efficient easily across

we the with first of brokered round-the-clock individual stocks. example, Robinhood became U.S. a trading XX-hour off For launch the of market,

benefit Our and as customers will platform XX-hour available at market launch. other the from be in enhancements the U.K. in U.K. will this

the a happening to in in are and crypto across in coming brokerage did eliminating in our regulatory the we to U.S. the Crypto weeks, EU, we look the launch excited Also from we're coming will commissions market U.K. the Two the benefits clear market. that bring that serve in launch the major framework just operations trading weeks: relatively like to better in EU. we'll pond first, capabilities forward We in things

on to and disrupt continue to us, I'm our has energized Robinhood potential We're for all share that industry. of there's market by innovate our reflect excited long-term to and in map gain our much I about ahead front customers, road As do. really grow assets, the so

that, over to With the turn I'll call Jason.

stayed today. everyone shareholder the good In we our quarter, growing on third driving It's long-term business to serving focused and value. customers, speak Vlad. Thanks, with

believe very track XXXX, we delivering Our on and ago, to adjusted the delivering record. a team execute environment shot map and than good business. we years our roughly this revenues revenue on road while in continues our strong operating record in is leverage product year X EBITDA annual be a our different prior macro Xx to In of have growing

XX% subscribers, through We're alone, the And of momentum grew to new X% QX, to X pleased products. billion customers leading XXX,XXX members really in Taking Gold our Robinhood $X and a of quarters see Securities over of to products. done X with increased in with X.X for match are has we're biggest trading also over build subscribers over to in contribution Robinhood excited Gold pace customers few AUC million bringing nearly over Retirement total lending is in making seen growing at double increase roughly also for the enrolled we've share our the QX new look $XX million to market the balances. us retail excited withdrawals total of instant. XXX,XXX continuing by see customer past of billion season. adoption years. and and IRA new nearly our

drivers revenue our moving higher. that love we So keep

our up $XX and grew from the in is third billion quarter. a ago. which the $X strong at XX they growth what typically translates slow XX% look quarter quarter. Net XX% annual They over year at deposits at past Let's remained XX%. the in a to results ended QX, an months, billion, rate were business AUC seasonally in

net a strength long-term in over and tailwind powerful were markets to time. will equity the of optimistic that our deposits appreciation While market be challenging QX, business we're continued customer

financial let's to our turn results. Now

public GAAP of time of as As net a company, generating reminder, for last million $XX or quarter, the we reached profitability a EPS. income first $X.XX

QX disclosed. would $X.XX back regulatory This This results which have to net million been $XX quarter, as or accrual previously led a net a QX we quarter. matters, to similar moving income loss for $XX share, we to loss have last per positive million been or $X.XX prior a to negative this income million of of $XXX per with share. recorded would historical accrual

nearly margins million million compared a $XXX Adjusted EBITDA and ago. adjusted year from QX, EBITDA $XXX as over XX%, In public is generated $XXX year, of the year was past a first a QX XX improvement company. points our million we which to up in

So higher things: is the active our on of natural question internationally. even first, how trading serve #X to revenues. over time. want we growing X profitability more drive in expand financial We become needs and customers' focused do We're

lean Second, we we want stay as to scale.

fixed, margins we is supports on which our high costs to XX% continue cost Our roughly we incremental push leverage will can. operating and wherever structure and fixed

profitability we So have we a to of as to and over time, forward we look path think good our we progress go. higher sharing levels

$XXX in volumes. were seasonally QX in primarily revenues revenue let's as by revenues. million, $XXX ago. transaction offset down and crypto was from lower were Revenues growth QX revenues interest revenues review lower X% Transaction-based to revenues. were from due QX down proxy a X% up Total sequentially, Now net lower year million, XX% net

lower net short-term to and assets were up in $XXX driven interest rates, increase lending. sequentially. million interest higher by X% securities by They partially Moving was QX, offset interest-earning revenues. The

watching we of a the are are so in part their couple cyclical areas far ahead, Looking lower QX ranges. of that in

securities is Specifically, the activity average. below third QX-to-date quarter lending well

over level in highest the net credit drove free year, which third a QX lower the was quarter. balances Additionally, buying in we've seen

moderated, interest QX But So credit we securities net than far if has levels. the hundred roughly anticipate increased dollars. have of free current net credit and revenue QX, levels million lower few will continue, free balances $XX be buying million in so balances lending a QX by

customers have we QX, lending beyond enroll more credit grow deposits, net for securities card constructive customer to as and and we continue our Looking business. to prepare interest a much outlook and attract revenue cash net

deposits another revenue. were sequentially QX Sherwood million growth revenues. I in to other proxy declined and advertising Gold to added color $XX what October. share on revenues and net additional as by subscriptions want of to contributed to billion on lower Moving in some seasonally Robinhood. partially another customers offset and $X we in XX,XXX saw accounts also funded Media We They

Additionally, and in October about trading trading to want often and to equities October volumes also roughly XX% below. November that in the note picked we around options up crypto line December from monthly QX I were averages, and lower September relative volumes see holidays. were

we expenses, was by significant reflects XXXX for while Starting levels. $XXX lowering total continue prior progress full adjusted total year at long-term Looking expenses, XX% our regulatory our year-to-date investing growth outlook brings million with and below of operating make our billion driving it less to SBC range. which QX, accrual, revenues. $X.XX OpEx, from costs to This in the efficiency or

invest our invest Reflecting drive while our the are over highly lower adjusted feel discipline OpEx our on focused for base business of our we a long fixed to we As for on scale year-to-date, progress good term. time, continuing and about to the term percentage we expense revenue. long as cost leveraging

we business, including targeted credit growth marketing and make while keep card. in to in our across and plan the U.K. driving some product launches, So QX, efficiency to investments plan futures we for

also expenses related I elevated We mentioned short-term matters some to anticipate historical legal the earlier. regulatory

QX to brings billion our has million, full slightly level. which Given lowers save the this, outlook the adjusted year track billion. OpEx $X.XXX $XX range XXXX planning and adjusted we're in million our on from of around This of XXXX to OpEx full range million outlook our year $XXX us $XXX midpoint to to $X.XXX for

year was We're million It managing outlook in from range. as down Turning costs ago. below to a of share-based percentage XX% compensation. QX, a closely. in revenue, our SBC SBC, QX, was prior $XX XX%

on So over of focused scale it revenue. the closer driving as to our business years, we're coming XX% we

we're an QX, outlook to ahead again additional SBC Looking lowering XXXX our by million. $XX

$XXX is $XXX range Our of updated million, outlook for million SBC $XX million. XXXX full $XX a of implies to year million which range a to QX

of an we if XXXX. $XXX basis, our on put Just the which context, about midpoint an savings $XXX over that in at that's million QX represents versus of annualized to look range million, annual

Looking at of year full QX initial quarters, through diluted dilution, purchase, share prior X.X% well up were to our less. X shares the first our or below outlook X%

to turn management. let's Now capital

drive focused are sheet balance strong into while on opportunities We maintaining value. and capital growth shareholder deploying a that

We we nearly million of XX year, QX, our $XXX EBITDA still finished Over we to $XXX and XX. the past shares generated adjusted acquire million the purchase and over of deployed million stock in to on have in know like $X.X lot but we billion this balance a strength and macro nearly quarter investments. it cash with and of sheet the backdrop, We we still cash provides. of hand, optionality

opportunity momentum In new producing closing, a we building our we're outcomes while shareholders. experience of believe ahead deliver financial I'm and huge and excited customer have for We can about great enhance the us. believe we capabilities

to that, Chris, Q&A. let's move With

Thank you, right. All Jason.

After prior answering common theme. addressed number to For the by pass our questions These share We'll by from Say a analysts. questions that, in Q&A ranked shareholder start we'll questions questions session, over from that or we votes. of together we'll already this call live any also Technologies. quarters. group that are turn We'll on

our it say, first off these X are and with question put together from I'll I Jason. here, So for kick

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questions. the for Thanks

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to Jeremy asks, for fruition?" When and to So Brandsey J. management add asks, come tab", be "we to dividend ask continue a feature "would that forecasting will dividend it possible a information tool.

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answer Yes, happy that. to

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going our are important merger-related competitors a couple to integrations that right of also think I key now. through note it's

So integrations to complaining TD products through mobile we've that that those they're convert forced merging we've abandon and asked actually ETRADE customers they'd really seen with being Ameritrade satisfied to a user the Schwab to. of Stanley with being some got and interfaces the Morgan about like, lot not of

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you. Z. convince "what to doing asked, net Right. investors Robinhood is to The for grow worth?" when also and Todd question than Robinhood accounts is stay transfer a next other higher they reach to long-term rather with

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focus biggest in is our Robinhood of area investment So around here Gold.

Robinhood As high we're of earn rate advantage allows Gold a to when take and which in cash a environment competitive cash, yield even you the launched on customers rate uninvested know, not on high investing. they're

and protection. So get right to up that's FDIC X.X% insurance now, is in million nice bonus APY you a $X.XX

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a bonus that to the fully slated IRA year else. you your be deal is limits extra getting over find in retirement that anywhere with new could basically, which can't a So just an X,XXX, by to $XXX increase funding you account, contributions that's

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want you elsewhere. us, if to better So a get with retire you can't deal

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balances is that have very increasing Gold The been a rate. upshot healthy at of

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actually we're deeper. our at making valuable think demonstrated improve. work better. of churn you're continues most retention, paying and to just with and actually But off, hard wallet and customers getting strategy customers we our these that We're think and progress share particularly started. do in seeing creating are better seeing and relationships increasing this Our I significantly And we're

can is "what Bradley next each Jason for asks, do become order profitable in The consistently from quarter?" throughout who S. to question Robinhood

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are The will question Europe?" asks, R. "when going come and B. to Thomas X-parter. you Vlad "when Massey asks, and for is Robinhood for international?" next

Great of is basically questions. those The to answer both now.

announced the to We weeks. excited but on say to for will of U.K. knocking getting the brokerage also that pond in we come should coming heels I'm the really with prepared EU close offering the right actually U.K. U.K., literally, be in launching across the to in in and our the live remarks maybe opening in there we're on earlier the be And not we doors be brokerage crypto trading launch. the team launch. I'll the So my going that's

steps first what exciting. of opportunity market launches a expand these big internationally. customers the growing see business are with in addressable our the for us can as of they're really we They products. both serve financial And we So the

next Say shareholders We and our All questions to Vlad of questions taking our concludes ask Technologies. appreciate to those shareholder more right. quarter. forward time Thank you, Jason and Vlad. from That look

from to turn our Now over analysts. I'll to Carmen the lead Q&A call

Instructions] [Operator

with Dolev coming Dan Our from Mizuho. first question is

despite have results questions, Great environment. ones. quick X I X difficult the

know you on of a what I can have some tremendous makes Can much quick share. us And what maybe it's gaining much so then you but gain guys follow-up. very I Robinhood tell so Vlad, environment, share? a color makes amount share? you are difficult give So getting us you

Dan. Thanks, Yes.

active So trader offerings. talking yes, about our

platform I active been we As share. #X is and our the traders earlier, have gaining for mentioned goal to be

You're right out pointed of that seen I quarters for to last transactions increase. And year-over-year. X share and options market our the continue equity we've sequentially,

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We're as equities the and toward customer. dug optimized a noticed of that deeply we looking And in across the used board. into novice it trading of at experience past, it. We for more we'd sort it the really

active more how for a the explanation orders place different of an unnecessary for someone to was the an reduce we active and lot saw lot of of types opportunity streamline process. more and it and a was of to that there So steps in trader,

rolling been to informed start to the coming across the but work see in of lot board, the across in also we've customers the you're turning just attention data there out more our make more to in that data our to weeks. And We're to trading flows, going decisions. not And the experience. doing giving a

coming got not for really ways of got up that charging new you gap, of are And play the And XX-hour is to to We've pricing go of their I've besides options, innovative that to just $X.XX money continuing features. that things share and close accrue. options, that Promoter adding -- our also the of and gains kind and up competitors advantage a lots the continue to pricing strong we're gains to continuing table things stakes anywhere crypto per this pockets. across also to is trader our And but And out all there. and are lots hundreds most contract can't value just that's Robinhood, drive to contracts market leading typical familiar, for in active of else of to is us. significant aren't for trades that to obviously, like continuing seeing mention equities Robinhood those and you're are seeing Score NPS that across for and find Net adds

have quick traders like if follow-up. to little do bit to a ETF. from talk I for maybe it opportunity future great mean could Can the place looks me it Robinhood a a be Terrific. you exists? benefit the about I Bitcoin

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what prepared remarks people I we've a asset a obviously, more and inflation And long-held to are me heard Bitcoin mention more to thesis the a environment, Robinhood user ways attractive that that become continuing to diversify you're diversification. it's seeing their a interested maybe high in actually as made improvements think is interface. And the to exposure. has its inflation native mainstream form. in in lot stakeholders been good has for that There in been crypto a early offer of Bitcoin you in hedge.

in the really, talked the that. cost but spread has think call There's Robinhood a maybe really aware transparency how of customers Dan, and customers We're all showing execution. about, we've not pricing, And aren't I lot before, of of competitive around they're in it.

we're We they're And crypto how just that looking it. their more great currencies. a I of portfolio will their to solve we have see more customers So solved believe with and to getting into ability that diversify think problem. deal

leader be we're more there's about progress a the -- think I there. we to we've a yes, that to to lot So excited continue And made, and want do.

Securities. Our Ryan with next question is from line of JMP Devin the

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Yes. making? And about talking you're you're when international, to referring specifically market

I am, now, Right yes.

I focus obviously to look, lots lots our Yes, do and Yes. there's in right business. now, our think

trades kind all just Where consumer is process and to out, As there we're stuff particularly category. to building laser-focused offering obviously win that new as stand pointed the now best customers' infrastructure is on market. you to active make we're in that out we ways consumer. trading, we're the the on internationally there's an where of offering to there's to our leverage sure We doing a that of side consumer we're making kind want market BXB we're

to Gold want And market consumer of sure as our resources of ways that of can product towards there's subscription. offering. possible We lots are many pointed as make monetize fit that we the

powerful, U.K, heard a more can We and so, in, lot revenues. as be securities early that in that, not that stages. You've product, just it's lending we in if the interest-based have of the just and think confidence other

makes Once certainly obviously Market term. really diversifying point something for Making not considering. as to So the start we're near the with. yes, that we But getting a we'd focused or BXB to where familiar we're it's open into on priority, be sense

-- and appreciate net card strategy. of then new interest And kind credit new just the disclosure the on here cards. a around the follow-up XX I Okay.

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But that guys so excited out seeing about it, seeing we're you want thing customers it. most sure the make we'll rolling it that And I'm to is prudently.

think and going think design right I experience love lot you're spent to the of a getting really time it. and just user I we've the

comes question line Steven the Wolfe Research. next Our Chubak with of from

on Anagnostakis just one Michael is This for for here Stephen. Maybe on Jason expense.

had disciplined expense the on that continue be you You noted to will front.

You highlighted expense fixed largely base.

recently. think do that we what rate organic core a about 'XX, you growth you expense -- as consistently to As growth reasonable XX% that growth see delivered expense beyond sustain

the the for Appreciate of operating a made lean Michael. say do We've work last be productivity in platform not more years. And Thanks, and and continue way our got We've we ton that going operate. lean more and to driving more efficient That for we're costs growth. running the done. on that X.X we're and there to I'd to question. progress even to said, across Yes. over efficiency invest

of terms in than us of ahead opportunity us of lot a behind including the international. business, see We

place to huddle during the XXXX the the a So investments of this you time I'm of year teams appreciate some number when are planning. sure areas. is can we're in going smart

But it's to on So specifically a expect while early revenue year. OpEx for to opportunity me manage next we longer OpEx. in -- intention in for growth there's grow making comment our to investments, our that over expect horizon, a even to see we us than we rate is think be that way And there's you the lean costs. faster that bit should the

and wanted follow-up, just have driving up but here. We've example, remained to you Great. needs in trends And subdued, can then for touch pick some volume crypto, what's pretty Bitcoin again, to seen my activity the performance I there? Ethereum, stronger what think to to divergence happen And and Robinhood, do for that but both back in at speak you industry-wide on crypto?

Yes.

me build can platform. activity hard for broader it's the our on on what think and focused focused I cryptocurrency market. capabilities, opportunity tell you the an we're this We're as to predictions on. speculate I build to using

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Stanley. with John is line Cyprys next for Michael the comes of with our It moment One from from Morgan of Needham. next question. the line Our Todaro question

regulatory crypto Vlad, around earlier U.S. a that framework clearer the you mentioned the had in EU

understand EU look Just or trying there? U.S.? kind we envision more trading in what Would and to in point you you could Just can kind the of to? products that assets the that tangibly of kind anything context, tangibly that services for of to

and in I what expect, to a in the But really are to general, given Europe be assets be. of in props tell offer of the the U.S. set clarity launch that's get don't capabilities and of want the in ahead to couple you going yes, able value do as a coming weeks to different we

need Any I would some quickly recently market, relist other And of at it just clarity Taking Coinbase looking the assets. you [indiscernible] of the X these and some there? side guys to add on. resolved? you can the get with crypto some? Okay. I U.S. give another comfortability What that to ongoing delisted Is they guess if of

Yes.

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next question JPMorgan. Our Ken Worthington from line is of the with

ACAT footnotes you and to former where Hood where the and Robin contrast and to out, eTrade today talked mentioned release are love I'd getting ACATs then X% and customers. more Ameritrade One ACATs of in from you from When seeing compare for active of that lastly, inflows firm going known activity and generally ACATs are in about the effect. go coming are from generally And the out then to. of you traditionally And you going trading? that firms sort did match. the into what maybe are mentioned

Yes.

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really nothing to out there. call So

where it Are firms different as the ACATs Okay. out of assets coming are out heading sort And same where clients then so you're set getting going to Or of going you've well? towards? is a they got the in? -- are firms

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and from of have Barclays. Benjamin Budish line We the time for question X it's from more

the on basis came there the to out. for can regarding the take you Ben. in anything take here it you or I down the This is X drivers Is rate? ask It so O'Brien quarter-over-quarter. share driving points looks as options what's about wanted change Chris to like

Yes.

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field I'll one. that Yes,

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Michael question from Stanley. next line Cyprys Our the Morgan of from

the sure answered technical some phone just Having options. around question difficulties before. if index this It's not with you

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about slated for now, index particular, right in options, As XXXX. midyear that's for

it. Got

then And just a on just Okay. if I question, advice. follow-up could,

set What marketplace? points you in opportunity the should the you there's of do for about sort you're pricing financial are Just providing curious level space advice. How what think if that how thinking the do And address? pain customers look the there with to about right about where might think you of be?

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offer if attractive except customers at point really money, technology modern you're price give that of a CEO advice make type that a think worth could there's high-end of get company a We the available high we want to paying to and you everyone. lot that using or of opportunity a a by real individual, financial the net to

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remarks. concludes this Tenev period. Q&A back Vladimir will turn final it to And the for I

you, at journey. this we're call. Yes. our the beginning you And listening everyone. Very have only Thank excited of to to

So to much more build.

So to work. we're Thank going to get back you.

for Thank joining. all you

disconnect. may You now