Robinhood Markets, Inc. Q4 FY2024 Earnings Call

Thank you to everyone for joining Robinhood’s Q4 and Full-Year 2024 Earnings Call. Joining today are CEO and Co-Founder Vlad Tenev; CFO, Jason Warnick; and senior manager of Investor Relations, Jack Riehemann. Vlad and Jason will offer opening remarks and then open the call to Q&A. During the Q&A portion of the call, we will answer questions from institutional research analysts, and we will also answer questions from retail analysts, who may hold an ownership position in Robinhood. As a reminder, today's call will contain forward-looking statements. Actual results could differ materially from our expectations, and we have no duty to provide updates unless legally required. Potential risk factors that could cause differences, including regulatory developments that we continue to monitor, are described in the press release we issued today, the earnings presentation, and our SEC filings, all of which can be found at investors.robinhood.com. Today's discussion will also include non-GAAP financial measures. Reconciliation to the GAAP measures we consider most comparable can be found in the earnings presentation. With that, please welcome, Vlad and Jason.

All right. Good to see everyone. Thank you for being here for our first live video earnings call. Hopefully this is both informative and entertaining for everyone. Let me first start by saying that this was a big quarter for us. We did over $1 billion in revenue for the first time as a public company, really for the first time in the history of the company. And that capped off what was a record breaking year with over $3 billion in revenue for the whole year. I would say that this was driven by a lot of things and let me remind you of the three priorities we have as a public company: The first one is being number one in active traders, the second is being number one in wallet share for the next generation, and our long-term goal is being the number one global financial ecosystem. I'm really proud of the product velocity in 2024. The team executed unbelievably well. A couple of things to point out: We began scaling the Robinhood Gold Card. This wasn't just a me-too credit card. I think we did a nice job building a revolutionary credit card and it has both best-in-class rewards and user experience. Additionally, we launched Robinhood Legend at the Hood Summit event just a couple of months ago, our first desktop platform built specifically for active traders. What’s been even more amazing than the initial launch is that we've not only rolled it out but the team has been executing really well, adding new features every week. It's been energizing to see the customer feedback and to see the team respond to that. New indicators and features are landing almost weekly. Lastly, we added a whole new derivatives business with Robinhood Derivatives, offering both futures outrights and event contracts, which is an innovative new asset class that our customers are excited about. As a result of this product velocity, we saw fantastic business results. I mentioned the $1 billion in revenue for the quarter and $3 billion for the full year, which, by the way, was up 58% from 2023, and almost double from two years ago. We track various metrics, with market share up 30% year-over-year for both equities and options. We had record net deposits of over $50 billion, which reflects nearly 50% growth, substantially exceeding traditional brokerages. Additionally, gold subscribers reached a record 2.6 million, which is an 80% growth year-over-year, leading to a gold attach rate of over 10% across the overall customer base. In Q4, over 30% of new customers who joined have adopted gold. We’re closing in on 3 million gold subscribers. We have three big events planned for 2025: A gold event in March in San Francisco, our first crypto event in June in France, and then Hood Summit for our active traders, which received great feedback. So we’re excited to share more about 2025, but first I want to turn it over to Jason for business and finance results.

Thanks, Vlad. Q4 was a record-setting quarter and 2024 was a record-setting year. We reached new highs for many of our financial measures and KPIs, including assets under custody, net deposits, gold subscribers, revenues, adjusted EBITDA, and earnings per share. Here's some highlights from the full year 2024: Revenues were up 58% to nearly $3 billion, adjusted EBITDA up over 160% to $1.4 billion, and adjusted EBITDA margin grew to 48%. This really shows the operating leverage in our business, with over 80% of top line growth dropping to the bottom line. For our first full year of positive net income, earnings per share was $1.56. We built strong momentum entering 2025 and are focused on delivering another year of profitable growth. We saw revenues in Q4 more than double year-over-year to $1 billion, driven by strong transactions, earning assets, securities lending, and gold subscriptions. As you mentioned, Vlad, gold subscribers are closing in on 3 million, driving annualized subscription revenue higher to now above $170 million. We stayed disciplined on expenses in Q4, bringing full-year adjusted operating expenses and SBC to $1.94 billion, up 7% year-over-year and well within our original outlook. You may recall a couple of years ago, we set a goal to bring share-based compensation as a percentage of revenue down to around 10%, down from higher levels in the past, and we're proud to have achieved that milestone in 2024. We also had a large tax benefit in Q4 due to our strong performance, and we have now released most of our valuation allowance. We expect long-term tax rates to normalize in the mid-20% range. Looking ahead to 2025, we plan for another year of double-digit revenue growth driven by product innovation, market share gains, and expansion into new markets. Our expectation for adjusted OpEx and SBC is in the range of $2.0 billion to $2.1 billion. Notably, this doesn't include provisions for credit losses or regulatory charges related to our acquisitions. Also, our long-term expectation for provisions of credit losses is around $20 million in the past few quarters, gradually increasing over time. Additionally, we’re a quarter of the way through our $1 billion share buyback program and anticipate our diluted share count will be roughly flat in 2025. We're seeing strong momentum to start the year, with January net deposits being our second highest month ever and trading volumes for equities, options, and crypto all showing double to triple-digit growth year-over-year. For example, January option volumes were all-time highs. We're also encouraged by the early progress of new products launched in recent months, including annualized trading revenue, Legend, at $50 million, and index options at $15 million, both showing strong week-over-week growth. We feel great about our business performance and remain focused on profitable growth in 2025.

It's really amazing to see how quickly Legend has become a $50 million business. That product rolled out about two months ago. Index options too at $15 million, incredibly strong. Many of you joined us for Investor Day just last December in New York, where we outlined our long-term strategy. In a nutshell, we believe there are multiple ways to grow Robinhood tenfold over the next decade. It's ambitious, but we believe we have the right team, talent, and culture to achieve this. On the active trader front, we're committed to making Legend the best platform for active traders on the market. Our active traders should feel at a disadvantage using any other platform. We'll be expanding our offerings and creating a comprehensive platform for event contracts. We are growing the Robinhood Gold Card from roughly 100,000 cardholders today to multiples of that. Expect to hear more at our gold event in March. Our goal for the long-term financial ecosystem is substantial; we plan to enhance our crypto offerings, making big additions in assets. We've recently added seven new assets since our last election, and as we receive more regulatory clarity, it will keep accelerating. Furthermore, we are investing in Robinhood Wallet, a non-custodial crypto wallet, which will connect customers to thousands of additional coins. The goal is also to use Bitstamp, integrating it to expand into institutional markets while taking advantage of their international reach in over 50 countries. Moreover, I’m particularly excited about tokenization, bridging traditional finance and DeFi. Robinhood stands out at this intersection, enabling us to bring real assets onto crypto technology. This means equities, private investments, and other valuable assets can be tokenized to take full advantage of the crypto revolution. I’ve detailed this in my op-ed with the Washington Post, so definitely check that out. We plan to make significant progress not just abroad, but in the U.S. as well. The team is working hard, and our roadmap is full. Let’s open it up to questions.

Thanks, Vlad. For the Q&A session, we'll start with the top shareholder questions from Say Technologies. We filtered out questions already addressed on this call or previous quarters and grouped together similar themes. After the Say questions, we'll turn to live questions from our analysts. Our first question is from Ali D who asks, when will the gold credit card be available to a broader audience? Vlad?

Thanks, Ali. Very soon. Thank you, by the way, to all the customers who have expressed interest in the gold card. The demand has been immense, driven by the amazing product experience. We have just over 100,000 card holders and we are working to double that number in the next few months with hopes of expanding that further throughout the year. We're keen to move fast but need to balance the demand with being extremely prudent about spending and borrowing activity. Jason, do you want to add anything?

Yes, I'd just say, you know, Vlad, you and I have heard Ravi, who runs credit at Robinhood, talk about the importance of caution in the short term for our long-term ambitions. We're striving to strike the right balance as quickly as we can for our customers.

Thank you both. Our next question comes from Alex B, who asks if Robinhood will offer the ability to do deeper analysis on individual stocks within the app, including charts for financial data over time, such as revenue and net income, and features to compare metrics against other companies?

Yes, thank you. I acknowledge Alex B for having two of the top three voted questions. In short, yes. Our aim is for Robinhood to offer the absolute best information, research, and tools in-app. We began by ensuring our transaction process was top-notch, and over time we are enhancing our research capabilities. We've focused on enriching the charting and technical analysis experience, which you can see in Robinhood Legend's success at a $50 million annualized revenue rate within just a few months. We want to enhance our fundamentals and analysis tools too, and the team is working on it. More updates will come at the Hood Summit later this year.

Thanks, Vlad. We have another question from Alex B, who asks if Robinhood will offer loans such as microloans or auto loans?

Over the long term, we aim to meet all our customers' financial needs. We want to provide a platform where you can buy, sell, or hold any financial asset and conduct all financial transactions. Lending needs are critical for our customers, and we plan to address them in several ways. We've revamped our margin offering in the past six months, leading to more than doubled margins. While there's still much room for growth in this area, we aim to optimize our margin product. For our Credit Card, we've made strong progress in growing our loan book as more customers onboard. Once we have these elements running smoothly, we’ll address a broader range of customer borrowing needs. So once again, we look forward to the Robinhood Gold event in March.

That concludes our top shareholder questions from Say Technologies. We appreciate all shareholders for submitting these questions and look forward to more next quarter. Now we will open the floor for live questions. Our first question comes from Mike Cyprys from Morgan Stanley. Mike?

Great. Hey, Vlad. Hey Jason. Congrats on the strong results here. Great to see. You outlined an ambitious goal to be number one in wallet share for the next generation and to broaden your services beyond trading. Given the initial success with retirement and the waitlist for the credit card, could you discuss potential hurdles you may face in achieving this ambitious goal? How you might overcome them and what progress you anticipate in '25? Thank you.

Yes. I'll take that one, Mike. Thanks for the question. We see a huge opportunity ahead. Our long-term vision is to be the destination for customers to buy, sell, or hold any financial asset or transact in any financial service. We want to ensure relevance as the financial home for the next generation. There are challenges in this space, and we understand that we’re not the only ones pursuing this aspiration. Many competitors want to capture their customers' financial needs. We intend to continue innovating, investing in technology, and fine-tuning the right products to stay advantageous amidst two major technological shifts in our industry: artificial intelligence and crypto technology. Our team, culture, and talent are aligned to achieve this, and we intend to capture $84 trillion that is anticipated to flow to younger generations over the next few decades.

Great, thanks, Vlad. Just a moment while we get our next question. Our next question comes from Dan Dolev at Mizuho. Dan?

Hey, team, great job as always, epic results again. I have a quick question on sports contracts. You mentioned it at the Analyst Day; it piqued our interest. We conducted our own internal survey, revealing significant opportunity since many users are engaged in sports betting. You initially launched, then shut it down temporarily. Can you elaborate on your long-term plans for this critical area? Appreciate it.

Thanks, Dan. Yes, prediction markets are the future, not just for active trading but for news and information too. Robinhood will lead the charge. Last year we saw great success with the presidential election market, becoming one of the few platforms offering trading for it. You can expect us to launch a comprehensive events platform that gives access to prediction markets, with various contracts available later this year. We’re working diligently, acknowledging that regulatory clarity is still a hurdle, particularly with sports betting, but our belief in this space will guide us forward. We're set to not only embrace these markets but to push for regulatory clarity across the industry.

Thank you, Vlad. Just a moment, please. Our next question comes from Patrick Moley at Piper Sandler. Patrick?

Yes, good afternoon. Thanks for taking the question. I have a two-part question about the crypto offering. Vlad, you mentioned accelerating the rollout of available tokens as we receive more regulatory clarity. Can you clarify what you mean by regulatory clarity? Are we expecting comprehensive legislation, or do you see something else that can facilitate your expansion? Also, I didn't see staking mentioned in your remarks. Is that still something in your plans?

Yes, absolutely. We don’t face technological barriers to adding tokens or services like staking; they’re available in the EU, where adoption is strong. We have the engineering and infrastructure to implement tokens quickly. You may have seen our ability to list the Trump token swiftly. What we need is better regulatory clarity across multiple domains. We’ve been adding more assets, but the true potential lies in applying crypto technology to practical assets, which would come under securities regulation. We’re continuing to work on resolution in both the U.S. and abroad.

A couple of points I want to add. Additional guidance is needed, particularly for coins resembling securities. I'm encouraged by the administration’s supportiveness of innovation in the crypto space, benefiting both customers and companies like Robinhood competing in this arena.

Thank you both. Our next question comes from Tanner from Future Investing. Tanner?

Hey, guys. Thank you for having me. You offer some of the most attractive pricing for crypto in the market, yet your take rate seems to be rising significantly. Could you provide insight into your pricing strategy and where you think it will stabilize over time?

Sure. Thanks, Tanner. Our take rate was only 10 basis points when we started, and we've been experimenting with that balance to ensure customers still receive excellent value while also considering returns for shareholders. Recently, we noticed a slight increase in take rate, up 9 basis points this quarter. We’re still exploring, and this does not mean we’ll keep increasing it. We’re focused on offering more enticing pricing for high-volume traders.

Yes. I would add that we’ve rolled out a feature called Smart Exchange Routing, providing customers with options to see the exact exchange price, and we are preparing to integrate Bitstamp further. Active traders in the crypto space have asked for the ability to engage with order routes, which we’re working towards. Early results have been promising, and while maintaining industry-leading pricing is important, we want to offer customers more choices.

Thanks, Vlad. Our next question comes from Steven Chubak of Wolfe Research. Steven?

Thanks, Vlad. Thanks, Jason, for taking my questions. I wanted to discuss the crypto conversation and the evolving competitive landscape. Given your strong crypto offering that allows for meaningful growth while maintaining pricing power, how would you characterize the revenue opportunities from launching more altcoins and getting into staking and lending? Secondly, could you talk about the risks involved? A common question we receive is how you assess the risk of bigger competitors potentially entering the space with attractive pricing.

Regarding the risk, the entry of more competitors suggests that crypto is gaining mainstream acceptance. We've noticed much more activity and growing customers trading crypto. Thus, as competition increases, the demand for crypto is also expected to rise.

To add on, customers appreciate that trading crypto on Robinhood is combined with equities, options, and the new futures. We recognize the opportunities to roll out our offerings and believe continuing our investments in technology will position Robinhood at the forefront of this space.

Thanks for the questions. Our next question comes from Brian Bedell at Deutsche Bank. Brian?

Great, thanks. If I can bundle one question regarding new initiatives such as the Legend platform, index options, and futures: How should we understand the growth rate of these offerings? Did you see an initial surge in uptake followed by a slowdown, or are you seeing acceleration?

You want to take that?

Sure. Legend is now up to a $50 million annual revenue run rate, with index options now at $15 million, just recently rolled out to more users. Futures have also just initiated rollout. The growth rates for these offerings are strong week-over-week. Overall, I feel optimistic as we showcase our ability to capture market share. Early signals indicate strong growth, particularly from our recent launches.

Yes, and these initiatives are compounding positively. The rollout of index options on Robinhood Legend further aids growth. We’re also noticing vast opportunities expanding into options that will enhance customer satisfaction.

Thanks, Vlad and Jason. Our next question comes from Devin Ryan at Citizens JMP. Devin?

Thanks so much. Hi, Vlad. Hi, Jason. How are you?

Hey, Devin.

Hey, Devin.

Congratulations on ending the year on a high note with strong business momentum. I’d like to shift gears a bit and discuss the custody opportunity for advisors. With the recent announcement regarding TradePMR, could you share any feedback from advisors and interest in your custody services while explaining how you plan to differentiate within this large market?

Yes, I see advisory as a major opportunity and will tackle it aggressively. Advisors, including TradePMR customers, are particularly excited about access to the Robinhood customer base. Robinhood customers have expressed a desire for human advisors, especially those nearing retirement. We intend to bridge that gap; by doing so, we can serve both customer segments effectively. Many advisors in TradePMR are entrepreneurs and see the value in reaching Robinhood's growing customer base as they inherit wealth over the coming decades. We see this as part of our wallet share approach for the next generation, establishing Robinhood as the multigenerational solution. We’ll first unveil the credit card experience designed for family involvement before expanding advisory and investment management solutions.

Thanks, Vlad. One moment for our next question. Our next question comes from Amit from Amit Is Investing.

Hey, Vlad. Hey, Jason. Thanks for taking my question and congrats again on an incredible quarter. Last year, you all suggested that as rates decrease, you’d expect a rise in trading volumes, and that appears to be coming to fruition. Right now, we are in a Goldilocks zone where rates are strong enough for your net interest income to sustain but not low enough to undermine that income. Is your 2025 guidance similar to the view that falling rates will enhance trading volumes, or do you have a broader perspective on rates’ impact on your business?

I’ll address that. Thank you for the question. We expect another year of double-digit growth in revenue. The precision surrounding guidance has focused on operating expenses at $2 billion to $2.1 billion. We've witnessed the relationship where rates move one way and trading moves another way. As we see updated expectations around rate cuts, I believe there is still potential for them to decrease this year, meaning perhaps one or two cuts are on the horizon. Our model is designed to thrive independently of macro conditions. We’ve seen increased trading volumes with rate decreases, helping us maintain solid earnings. We're diversifying our business, now with nine revenue areas over $100 million. We feel well-positioned.

I want to emphasize that we’re building a business that won’t depend solely on external factors for revenue. Our yields like Gold Sweep aim to maintain competitive margins, even as we adjust to rates while achieving a small but healthy margin. This applies to margin as well, which will become more competitive if rates drop, but we remain optimistic about our market share.

Thanks for the question. One moment while we get our next question from Alex Markgraff at KeyBanc. Alex?

Hi, everyone. Thanks for taking my question. As we consider growth drivers for 2025, I’d love to hear your thoughts on deposit incentive strategies. These proved successful in 2024. What are your updated views for 2025? Jason, could you clarify on the $50 million Legend revenue? Is that entirely incremental at this point?

Regarding incrementality, we've observed strong evidence that Legend is indeed incremental. Let's allow it to develop further before determining more clarity. We've witnessed strong adoption from existing users, alongside onboarding new customers. Regarding deposit incentives, we currently have one for retirement, focusing on incoming transfers and rollovers, which we've seen a significant smooth transition in, generating positive results. We’re experimenting with APY boost incentives for the Gold program, which are increasingly personalized. Expect to see more of these incentives as we keep advancing.

We've grown our deposit base significantly, reaching $50 billion in net deposits. We anticipate continued growth opportunities.

Thank you both. Our next question comes from Ben Budish at Barclays. Ben?

Hi, good evening, and thanks for taking the question. I would like to understand more about the new Gold members. How many of them are net new to Robinhood? What kind of activities are associated with the adoption of the card, and are you seeing larger balances and stronger deposits?

We’re putting a lot of investment into the Gold program, and that progress is evident. When a person becomes a Gold subscriber, their growth of Assets Under Custody and net deposits occur at a much faster pace. This leads to higher product adoption too. We’ve achieved a significant increase in the attach rate, especially within the first stages of a customer’s journey. In Q4, from the net new funded accounts, over 30% became Gold subscribers, showcasing our success with the attach rate.

Currently, we have over 100,000 cardholders, and we expect to increase that number significantly. Many individuals from our waitlist are not currently Gold members, marking a promising opportunity for us.

Thank you, Vlad and Jason. Our next question comes from Roy from Crossroads Investing. Roy?

Thanks for having me, guys. Tremendous quarter. I was excited to see the launch of options in the U.K. this week. Could you share more about international expansion and whether future expansions will follow a similar roadmap as the U.K. launch, starting with equities and then building on that with specific country products?

Hey Roy, the short answer is yes. We are investing a lot in international expansion this year. We're thrilled about the Options launch, which makes us one of the few brokers to offer options trading in the U.K. Customers there wanted it, and we delivered, and the response was very positive. Moving forward, we’ll continue to enhance our offerings. The advantage of our integrated platform is that developments in the U.S. will benefit international markets. For example, post-regulatory clarity, we’ll aim to offer futures trading in the U.K. and EU. Our goal is to be widely accessible to customers wherever they are, leveraging smartphone technology. We're not just enhancing existing product suites but also expanding into new markets.

In terms of a product rollout sequence, launching in the U.K. started with crypto; then for the U.K. brokerage, there isn't a strict pattern we’ll adhere to—it will depend on each specific market we enter.

Yes, I want to highlight our upcoming events. We’re very focused on the Gold event, but we're also excited about our first Crypto event in France slated for midyear. Our agenda is already packed with thrilling developments.

Thanks, Jason. Our next question comes from Ken Worthington of JPMorgan. Ken?

Hey, good afternoon. Thanks for taking the question. I want to delve deeper into the credit card. You have balances both on and off balance sheet—could you explain the economics related to both and how credit risk is handled between those two categories?

Yes, credit risk is quite similar between on and off balance sheets. We're retaining the risk, and the economics are also quite aligned. As we advance, we will continue to evaluate and optimize our strategies.

Thank you, Jason. Our next question comes from John Todaro for Needham. John?

Hey, guys, congrats on a great quarter. Back in December, Vlad, you expressed positivity towards Stable Coins, which have grown tremendously in the past few months. Are there opportunities for you to launch direct product offerings centered around Stable Coins and monetize more from that adoption?

Yes, indeed. As you're likely aware, we've engaged with USDG, working alongside other companies on a global dollar network for a Stable Coin that enjoys yield benefits. Many leading Stable Coins today lack an effective yield return mechanism for holders, making them less useful for holding long-term. We also see the value of Stable Coins in our business. We’ve been utilizing them for weekend settlements, which proves beneficial for our operations. Robinhood stands to gain as more companies realize their potential, promoting more institutional Stable Coin adoption across the industry. Expect more updates regarding the dollar global network as we continue to invest in this field.

That's great. Thanks, Vlad. Our last question comes from Evan from Stock Market News. Evan?

Awesome. I appreciate you guys for having me. Thank you for taking the question. Congratulations on the quarter! With so many opportunities discussed, I’d love to understand how you prioritize these, both by scale and immediacy of resource deployment. Do you think additional people or resources are needed to pursue all these opportunities?

Yes, yes. Resource and capital allocation is part of our role. In effect, these are our three strategic arcs. The first focuses on active traders, which are the more immediate revenue-generating opportunities. Each product enhancement immediately leads back into revenue streams. For example, Robinhood Legend and index options have seen a huge uptick in revenue within a short time. These arcs will reinforce one another, allowing growth into broader market segments with the revenue from active traders enabling us to explore new features and functions. Although we’re driving numerous initiatives, we are maintaining operational efficiency and keeping OpEx growth minimal, working alongside AI technologies to maximize productivity. We can continue to expand while managing our overall expenses effectively.

We’re ambitious about driving growth and allocate resources sensibly where needed. Our significant growth in 2024 was achieved without a considerable increase in operational expenditures—it’s a testament to our expense-light business model. I’ve highlighted previously that about 90% of our operating expenses are fixed costs, which was evident in the fourth quarter as more than 8% of the additional revenue converted into profit. While we're looking around, we’re not limiting resource allocation where necessary; we’re indeed rolling out as much as we can manage with high-quality standards for our products.

Thanks, Jason. Thanks, Vlad. That concludes the Q&A portion of our call. Before we end, I’d like to allow Vlad to offer closing remarks. Vlad?

I want to thank Jack for his help today. I know we promised Chris in the flash, but he was under the weather. Jack, you did very well. I’d like to thank everyone for joining us today. Hopefully, you enjoyed the new format, both retail analysts and institutional analysts joining us. This was a strong quarter, but we’re just getting started. An exciting year lies ahead as our team is energized by the opportunities in front of us, eager to deliver more to our customers. Thank you.

Thanks, everyone.