Robinhood Markets (HOOD) 13 Feb 242023 Q4 Earnings call transcript

Thank you for standing by. Welcome to the Robinhood Markets Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Chris Koegel, Vice President of Corporate FP&A and Investor Relations. Please go ahead.

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

press described Before provide materially which could regulatory from at that the presentation non-GAAP expectations, it over all and will factors remind in forward-looking that, want release can that no cause Actual the the legally our our getting and development duty comparable found required. Vlad. have earnings to to include most to will be we issued presentation. With risk to statements. can let today, differ in including call monitor, GAAP unless we contain you me SEC filings, could results consider we earnings results started, financial also I investors.robinhood.com. Today's updates turn of differences, are today's measures. Reconciliation found continue we be discussion to Potential the

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building, So the about I we're love momentum XXXX. and I'm excited

Before I map, our have discuss results. let's our financial review Jason road

everyone have speak we It's Vlad. with a XXXX. and strong QX starting today. good Thanks, XXXX, lot had a to momentum of and We

year and record growth delivered EBITDA at full incremental significant we with record Looking XX% prior delivered of profitable EBITDA record which XXXX, margins million, EBITDA margins. We more drove XXX% our adjusted high; than to costs; levels of $X.X even delivered the positive XX%, $XXX progress from revenues we we grew towards while incumbents. at adjusted looking we by margin EBITDA $X.XX make we GAAP XX%-plus as than expanded lowered see million, grew adjusted is $XXX Xx billion; revenues And time over EPS. as adjusted revenues, QX, more to and we

sixth growth delivering adjusted XXXX. positive aim earnings our also per profitable our charges share. straight from of to would quarter EBITDA. been We're with pleased results QX in have was regulatory of third QX in Aside continue quarter straight XXXX the quarter, our last and positive

our Let's quarter results. business move to fourth

see Gold newer added strong user they are we growth. We and XX% as ARPU under at which provides average which annualized are higher higher experience subscription recurring And of growth to deposits deposit even higher, rates. more over subscribers driving customer our twice is strong X.XX more improving to And asset fast delivered more time year-over-year have encouraging. We're $XX,XXX, for in Xx which growth Gold assets by adopted net foundation subscribers XX% customer, net value for our deposits customer, finished back includes their in even is million. a to of our first average long-term net to Assets a net Gold. proposition. When billion at on we're than custody we average have products QX QX of the Robinhood over delivering rate. cohorts about time. think QX our sustainable and up also grew multiples look had with revenue Xx XXXX. annualized the $XXX $XX consistently than starting Gold focused deposits QX an cohorts, Compared million. historical we since with X.X at balances

we're growth and X.X%, adoption This gold the brings to improving we keep up our working proposition. even to higher rate value this as take

the start in we added subscribers nearly saw to momentum another alone. is XX,XXX gold strong average That the January monthly XXXX. Xx have as also year, we We in

alone. about you cards Our look are customers business starting new opportunity have historical and We XX current of median nearly to our ARPU our work for they our for at customers with sharing over introduce about credit team Xx with also customers. something us our a plus. have funded customers, is with plans X/X to or and who an Currently, special Robinhood forward average. prime another of score to credit our $XXX on of on That's more hard prime This new XXX soon. for credit represents Gold credit for diversify products whom card,

Now generated expenses as outlook. sequentially fourth million, $XXX net revenues million let's to net quarter, total the came and results. increased $XX to we than better total of X% our In income in financial turn

through anticipated increased the decline by crypto subscribers. and Looking our Media other in include total added we across interest from I'd at note lending the and traction revenues nearly sec of early lower net QX saw that in revenues metrics These so revenues, drivers doubled, now revenues, lending partially quarter. into grew visibility more transaction more revenues notional revenues demand have interest as even sec were our as also investors monthly the volumes industry. Sherwood increases Gold offset net the

fourth growth at in increased expenses. even Adjusted while up And XX% we ago. with our for million, share-based This line investments. a million, drove our better outlook $XXX was quarter it our $XX from of $XXX year performing OpEx combination EBITDA than Looking compensation, million, outlook. QX adjusted was

We to another of let's our move XXXX margin growth Now and to year aim revenue expansion. deliver outlook.

Looking at revenues.

$X increasing market product share, for gains double-digit And XX-plus year since which the half our we're introductions adoption, billion, XXXX, diversified in about trading start. exciting January continued the X/X macro the XXXX, monthly revenue growth is finding strength from by positive brokers. percent and of and January That highest driven strong new transfers great in were net With backdrop, and current deposit we're to net growth, seeing was first February. net a model. the off nearly total result other early in of deposits continued Gold was

growth international We products, in continue businesses expenses. existing at single digits. Looking getting head and plan managing low new and our to in while to all count investing features, efficient more across marketing

compensation midpoint quarterly This share-based run range share-based Award million the our which XXXX. X% XXXX OpEx excluding is Our last similar of about and the to rate the half year's adjusted includes $XX up from combined Cancellation. $X.XX compensation billion, $X.XX is at outlook for of to billion for $X.XX billion, Founder back

upper timing, start marketing will to be for our as the investments likely we QX As into implied year. the anticipate we in half range of lean

growth the XXXX far, of share plan growth year wanted XX our share also we're QX. In X% backdrop out, manage margins. expand closely again and count. we to count how perspective profitable as X% in rate to to we the in have continue in manage shares like see to we also this million driving dilution to start on to to drive interest We us in We'll so nearly decreased diluted the XXXX. share revenues year. I believe plays positions to some And less. We purchase but grow XXXX, the XXXX, or expect due the

XXXX, the average XXXX forward roughly input at for Fed the rate look in neutral revenue we funds same rates fairly when the curve, was making year-over-year. First, is as it implied in a

our of than half we interest assets, of pass $XX-plus sweep majority less of that sensitive rate cash because the earning vast Second, is of interest onto billion our customers.

change interest as significant move, do a sweeps. in we So growth and yield earn tend balances assets, rates And not declining on cash the support importantly, in anticipate rates we and trading. most to third

and from when year we years XXXX, closing, we driving strong free flow profitable lot see year. think business shift the have a our is come. We we'll a tailwind. In the growth XXXX of headwind we as remain momentum rates shareholders, EPS the start work and share QX and into for and per a to we for growth being focused maximize on had to XXXX cash a to interest in So

Now back I'll turn to the Vlad. call

Thanks, Jason.

As year, about the want we most in of drive some enter excited to areas to the we're and highlight XXXX beyond. I growth

experience in we're currently to trader #X where First, market, mobile, the going active continue our in winning to on for invest user market we're share.

web tradable assets, also futures launching In traders, on selection later and offering working and for coming of addition, more index be active year. feature-rich in this with will expanding we we're the professional on a our options particular,

the XXXX. valuable opportunity on investing significantly such after same full the so ton plan hearing working And Xx. and in excited the of revenues that in share, customers when customers team want customers also team pursuing tripled to our have for hard. new the they of crypto to as to XXXX. I also increasing The our expansion, the and growing keep and like cards for tens our we into products customers off opportunities Gold the early and launching wallet for thousands accounts. And brokerage grown a launch to customer to Second, that's Robinhood that far. There's We're here. suite, a more been memberships do. grow expand to we much start more Robinhood types we're credit to new we're jurisdictions. Reflecting is Robinhood the we're momentum from look add build to We want X international on them. success to our so What road for base time, EU so we're third, account U.K., has us, international At we we've more nearly years, we even full. make and offering. by great of at And from front working is and focused The have of joint of retirement net of incredibly plan Gold deposits. past map product continue build thank to all in

to move questions. on let's Now

Vlad. you, Thank

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to you, Thank the Vlad. take what brokers? rest to of Jason. and the competing to it question the right. is level with get next Fidelity common start Vlad, All will most Robinhood for The next

Thanks for question. the

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share assets and options about excited including you as across gains track very we continued all And we offer, here, we're to So that. the to be continue the should able execute progress that and equities, market crypto.

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

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

the line from today Dolev our question Mizuho. from Dan of for And first comes

Really team. Congratulations, results. Making Amazing me proud. good.

Thank you, Dan.

Of course. Yes.

Vlad, impressed of net said other massive I know past, your Looks me, actually that tide comment, it gaining Like was To $X.X account share. the turning. is they're taking in really, I share brokers are the transfer. about So seeing really by brokerage looks like billion now? positive the have away you. from you're like you what

investing -- positive basis transfers a one And competitors. big We've net been product service. we've we investing experience. these from I The major our are been on accounts of net were the the user results coming In account a so Yes. for mean, in speak for themselves. positive in every QX, lot in.

where been from that customers of improve the and to from announced in really -- to done and from of QX. positive. all that's and the team happening. QX so service led be really wouldn't ton now functionality I on I to ton Robinhood, destination really of emphasize So hundreds improvements as which about serious continue that double service to in what deliver to And be these comfortable and it's complacent. far product our is but moving and amazing to in to in taken what's for major have coming we've of thousands both offering going types Again, quality And people to being work the competitors into of getting talk to see results new people to money. We're a think us able There's been the we've just of want people's not we're has that. it's becoming down work dollars a remains much, a get

in in you're getting in know to can talk you think, traction -- the of early for accounts I Can little and so how progress it's Because quick how days, has traction I the I huge I another U.K.? again. congrats question? been want bit about this see is, a but terms stuff. And Robinhood, a just opportunity squeeze Amazing going.

Yes. very available customers. part of Robinhood to about A additional No, making our we're excited is of hundreds that. millions of strategy big

I think U.K. customers is talked out. the of we've And so EU still about of and tens already. The U.K. rolling thousands the in

generally on the exist features in in deliver And customer expect available especially customers So our markets the to of work months. towards being things do. lot we've we're any the app know not the side, be in of that we a are There's U.S. we working to got those a that lot available coming in there's to these that can markets. U.S. And the going in crypto that

the the road improve So have there. map fast exceptionally full, grinding both is product of very been and teams at a to hard the clip

next of our the JMP line And from question Ryan Devin comes from Securities.

cash A question rates of today mentioned, the materially higher inverse interest I balances, that customer and kind Obviously kind appreciate about. the of clients. majority just sitting and trading. along And on as you here benefit correlation that of talked you're passing you with to

to So balances start kind the eventually should a of about into we magnitude move and lower, those that guys ARPU? are implications ARPU? interplay you on if rates Is cash to are thinking net from that market then about how to Or do what how could the think back positive the revenues? the move just

looked we've strong Jason. seen Yes. down, rates movement correlation and at kind the of up inverse of trading a activity pretty When moving relative we've there. to this Devin, interest is

the really between business feel up. rates good we interest natural in hedge interest we've so falling got trading nice that picking and in And a

customers average a Gold rates And of on the being comments, big a talked roughly line along rates about I expected looking so passing with portion 'XX the sweep, to interest at the 'XX. in in interest for my bit

about rates the good importantly, And really of that. mentioned, that kind interest for we tailwind most feel I we business. create falling a then as think So

macro about current So overall, revenue good really we delivering growth environment. feel strong in this

And think guys Okay. is initiatives. at then guide, can the growth a you you of X% I just just still confident Terrific. here follow-up expenses. sound the And very your on fund all Obviously, midpoint good. expense

would very to how So term, maybe assume is the these marketing you Maybe just fantastic years? of in the momentum makes parts on having a just success the maybe more growth promotions. all through expenses I in higher maybe than lean it good sense would you to there. you would just if the the of X even guys moving X%. intermediate spend. it do be in second I'm next you're a And us core quarter. that lot just mean on curious part think seem have walk had X thoughts like more the there. And question about It there some I it with leaning is sounds that because of then over with payoff

Great question.

same in team. plan initiatives That with liking to this more about focused year, really and core growth million savings our core management you're XX% opportunity plan is think in single the the maintain initiatives. we kind could is we that $XXX business. are mid- redirect that So fund which that of look digits, LTV perhaps And marketing still and up we expense on kind over and question growth in this is have drive early growth, in actually the a we're about planning growth we're then There's when term, over looking redirecting to perhaps down out first all, a of this can year, lot at take And efficiency of into the seeing. think longer baked of as that terms we spend new guidance. and leaning low high lower. more time. On that on page your of spend for core team this spend, to to even bringing The into even business us marketing, customers we to signals the the in into we XXXX, high single to be digits,

more there. want lean we so to And in

KBCM. next question of Alex the comes line from our And Markgraff from

some Just bonus the transfer and of wanted to to account come the offering. X% disclosure back the around

of that? that stacked earlier, some your expectations balance how I Or Vlad, for with average directionally mean, comments think kind these up think And the transfer was $XXX,XXX, against transfer, campaigns? how campaign. is understand kind of normal about to of that wanted we I the then, Just some new in of your it should

Yes.

just over I the So the share market activity. taken XX say, years, trading would past looking we've back, of

too. Now we're assets, coming for the

and asset increasingly saw accounts. ACATS In focus $X brokerage for be in We that to average, turning through transfers the size, that's In accounts on rollovers we're and So about growth. for pointed X% larger tax to our from We season. excited we're much promotion taxable our that. now On is retirement you are over the giving the just promo out, runs going account as billion than on driving completed ACATS retirement the customers focus the transferring on average X% And over year. assets of momentum start really kind the us

I to the color Any as more. could of or some made maybe of the part just available with of squeeze the were us sort opposed on you one the And in year if interplay Bitcoin in between Bitcoin direct observations early ETFs share could that ownership? spot

take ahead go this I'll Alex, is Jason. and that.

really pleased Bitcoin be to we're So of XX the on the ETFs day trading. of offering first all

for a that great think was I customers. outcome

in we're in And crypto far, the our stabilized. ETF, X% still trading additive. overall business. interest through think through crypto the seeing with the being we is So it's trading that's spot on ETFs, nice of but XX% About

market. the to offer good feel overall and interest we really We selection for customers. also market liquidity think the to increases in it So brings crypto

the really we're ETFs. net-net, pleased with Bitcoin So

Goldman Will next from question line the Nance comes our And Sachs. from of

the about a side revenue -- we're probably push. margin like the the from sort rates prepared know trading year. growth from the continued is sounds revenue on NII talking that's being I in around the more it of the coming commentary given side, assumption it's than expansion Just And remarks, and for

continued correct an if would the wrong that my doing guys guys to be, an in happening you are there's if X expense guess it more the I'm thought doing years you with a the surface this guide, the So better actually lot if base. in one funding like I the there's job of and like growth. But question questions, and operational -- earlier and sounds amazing growth-related you're efficiencies earning investments have underneath over expense what my -- me response there rightsizing of around assumption done asset past

we So activity? of growth-related can kind saw of -- seems end trading that the see you and year. investments? very a in we if flex how do -- of either those maybe talk discretionary and both about increase in is kind reduction like, much sort investments towards sort options know just of is of near-term crypto nice growth-related it in, How there I what the of some

almost I considered I always a think spend. marketing Yes. is mean discretionary

in as also that marketing is down, into so always up reevaluation, how up changes And mentioned that the I backdrop, or and response my earlier we're leaning how marketing, effective on to that depending is. macro the spend

update as so And we'll out we continue to see plays and go. that how

our the highlighting new XX% digits there. that was core single cost that realizing high areas we're redeploying And to earlier. perhaps business business, savings of I even Vlad we're areas in said our of of cost terms into reduction In that

say that I'd that opportunities. we're New growth is certainly decided, discretionary. pursuing growth these we've though,

there in rates expect a are would I XXXX. And say certainly I And pull strong also and that say back to we push, net did Will, continue to double-digit agree see you deposits. so wouldn't that. growth I us in kind with of

beginning continue in year-over-year, starting certainly improve at with 'XX the a of higher and than assets so we what And balance 'XX. we're to saw

story into if of And meaningful the any? year. And makes thinking European thought play expansion over that this a of time? the on sense. what's expectations course just over questions when around does All Yes. around more What the latest process this that the part -- then could be

I'll Yes, one. that take

already more bringing the We're huge the now globe. our traction really outside across seeing. we're is While it's a our part the a the growth of initial business. think focus to coming services portion for rounding We become from customers really there's big still early, our And suite, of we U.S. like product a seeing out healthy of to user opportunity international

from comes of And question Steven the Research. line from Chubak next Wolfe our

what's wanted the for just program, touch is can environment? Anagnostakis penetration backdrop, to business fully in you obscured you by think This paid give you much here. been more Michael And remind normal uptick you a us in challenging for revenue I investors Could lend where think can on update a the are from Steven. sec has given incremental that deliver drive? journey filling perspective a the in an what can you on how you

fully for the $XX we're making question. really with Thanks, the Yes. the business, QX from the securities progress pleased to enrolled increased QX from particularly of Michael, billion $XX in paid lending the program on We're that equities securities to billion. inputs lending

lending pleased that, added XXX,XXX really, us a quarter think to of customers continue is our great to into yield, we into sure sequential know, So hands basis. I get headroom augment way bit the for program still of a there's and as securities understand customers the quite make and the that. all hard penetrate work paid team that really customers. It's with fully at to to

across from showing is basis. the that's progress But we're rebate over making. At that lower moment, normalizes we're as seeing time, show think I going industry. a inputs the think that making really at we're on are that progress a up revenue the the through in the the to rates I bit, that

towards we heightened still think we we year. this run, room could and progress meaningful make to have Yes, penetration

follow-up, on expenses it. vein. my Got again I hit a different briefly to maybe And in I guess then wanted

particularly thinking how the growth? about we head headcount rear imagine some I where direction of scalability investments drive of with expense international, the per given coupled Robinhood travel the the headcount for be in making, incremental you're the should that reductions that may are largely Now view,

Yes.

good be to headcount So the so plan feel on have. about this the flat up that really is posture we roughly to we year, slightly headcount

of even more continue be for of head, us opportunity terms per there over geographies, Today, to U.S. time. there's get is vast our the there majority to expense headcount higher In does and efficient. the cost opportunity in

getting grow that of I per just us the just There's have we is infrastructure like think leverage lot for fixed the feel there, headcount business time. the employee. opportunity at And started. increasing as cost opportunity for the we real revenue company to really we we're on us over a

line Stanley. of the from Michael from comes question next our Cyprys And Morgan

could the in. I to out and you wanted about envision X in beyond guys you business ask as make to the years. over crypto next looking contributing you're how continue to investments here was as to to your I you as well on invest 'XX X an crypto, elaborate you look hoping area

amount I in EU mean we're the domestically. into large investing Yes. a crypto, both and

progress Last think in reflected we that significant I the just also seen and couple make. meaningful Connect, we've we've pricing And announcement and were much we which how the trading trader providing in market competitors. focusing clarity, believe in ton is on on-ramp made our progress improvements seen, to caught been year, probably crypto making past Robinhood experience there's technology, of there. days, share. We've this left of than better you just our that on a we've our really of

crypto as your And so wallets dollars fiat if to be you through that our building we've to crypto quick think as funds delivering gotten good about transfers money our we all power seamlessly. offering, have into those seamlessly out really getting products, into at really noncustodial movements, at possible really, retail good

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a lot from. So that came there's more where

Great.

Just a if question follow-up I could.

'XX over to mentioned grow look to in differ level you could On out But elaborate was of if -- over up term, guys drive business. Heard you look costs underlying reinvest to pace. continue top can in the in particular to and you hoping the efficiency, reduce elsewhere. expense could expenses or potentially to a you efficiency you so, at you that understanding XX% the look 'XX the contributors single-digit by the and you taking to medium those maybe targets you're would. on here may the low specific that medium steps hit steps as those may I term you how those -- side,

of business really efficiency We're of in mean terms skills focused technology. our using of last years on fine-tuning efficiency. I sure. over process Yes, been kind couple we've the

was process recruiting, find our involved. improve team the we spun that time recruiting helps business, a steps we've up have to One the XX% business think to we are save of optimizing efficiency. from project finished just just on we XX% We and that that can our on opportunities

As of an That's in the work in for locations think in earlier, we 'XX that our opportunity of there's employees mentioned progress within terms as working with vast place high-cost beyond. us over on majority I time something of U.S. can I make well the as

the So point to. big those I'd that are levers

from John from the And Company. our & comes line question next of Todaro Needham

the both components. I on X crypto have I beat. here, the Congrats on guess

the Bitcoin directly flowing of On overall on earlier about you buying versus X% ETF ETFs. the thought you platform, crypto was into the mentioned Bitcoin

from directly? away that buying that X% was was So additive migrated an Or that Bitcoin X%?

some exception. well. was as the also got sold of accounted that accounts, in retirement it ETFs the offer more We Yes. were was additive. we And and There saw spot but which our traders ETF, of for that some of really the out mostly pickup to

view customers as overall, don't good it's we really cannibalization. this So well. It's for we as and additive, think

one more. just And then

really stuff. ecosystem, MetaMask that kind pivot I the to more Robinhood does interesting. on-chain on-ramp of be DeFi the of that's think integration, It fiat to On

kind term? monetization Just integration of what term curious, short though, and with longer is then strategy that the

Yes.

collect we of So fees on the on-ramp. activity the

revenues. So on in trading monetization our also primary for of that that's platform would show then our on-ramp source the transaction-based up and any

from And comes line Piper the Patrick from our of Sandler. Moley next question

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program program. the remarks. conclude does any the like for to Tenev to today's session question-and-answer hand I'd of back This Vlad further

Great at here you look Thank much for XXXX hard next you all. Robinhood. team And We started, the quarter. Yes. to not already getting so is seeing forward questions. holiday work rest

the for and gentlemen, conference. your ladies you, in program. does conclude today's participation This Thank

day. disconnect. now may You Good