Robinhood Markets, Inc.

Good day, and thank you for standing by. Welcome to the Robinhood fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be questions and answers from retail shareholders provided by Say Technologies, followed by a live question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Chris Cagle, Vice President and Head of Investor Relations. Please go ahead.

Thank you, Lateef. Welcome, everyone, and thank you for joining us for Robinhood's fourth quarter earnings call. With us today are CEO and co-founder Vlad Tenev and CFO Jason Warnick. Before getting started, I want to remind you that today's conference call will contain certain forward-looking statements about our financial outlook and plans. 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 our press release issued today, the related slide presentation on our investor relations website, Our Form 10-Q filed November 2, 2022, and in our other SEC filings. Today's discussion will also include non-GAAP financial measures. Reconciliations to the GAAP results we consider most comparable can be found in the earnings presentation on our Investor Relations website at investors.robinhood.com. With that, let me turn it over to Vlad.

Thanks for the intro, Chris, and thanks to everyone for joining. This earnings call marks the end of our first full calendar year as a public company, and I think it's a great opportunity to really evaluate ourselves and reflect on how the year went, what we promised, what we delivered, and how we responded to the twists along the way. Looking back one year at the Q4 2021 earnings call, we committed to the following things. Expanding equities trading hours, which we delivered with hyperextended hours in March. Introducing a new day-to-day spending experience, and we delivered Robinhood cash card in March also. Rolling out our fully paid securities lending product, which we provided with the launch of stock lending in May. Adding IRAs, which we launched in December with Robinhood retirement. The first and only IRA with a built-in match, no employer necessary. We committed to providing faster and more money movement options, which we delivered with the launch of debit card funding, instant withdrawals, and support for USDC and Robinhood crypto. And we committed to open up our crypto platform internationally, which we did with the launch of our non-custodial Robinhood wallet. When we laid this out a year ago, we didn't anticipate a land war in Europe or inflation at a 40-year high, prompting one of the most aggressive tightening policies we've ever seen from the Fed. This led to a sharp drawdown in growth stocks and a frigid crypto winner. All these factors presented extraordinary challenges for our customers and our company to navigate. So nine months ago, we committed to returning to adjusted EBITDA profitability in Q4. This was an aggressive goal, and we delivered it a quarter ahead of schedule. by both lowering costs and increasing revenues. We also diversified our business as our net interest revenues more than doubled over the course of the year. And to help customers generate more income in the new environment, we launched a revamped Robinhood Gold that offers customers an incredible 4.15% interest rate on their cash, among the highest rates out there. We also strengthened our core business with a number of improvements to our trading products, like options in cash accounts, advanced charts, and 24-7 live chat customer support. We did all this and more while having to make some difficult decisions. We ended 2022 with about a third less headcount than a year before. I want to congratulate the team for their tremendous execution. Our product velocity has never been higher, and the quality of talent at Robinhood has never been greater. I also want to mention, and Jason will discuss further in his section, that we had a processing error on a corporate action that led to a $57 million expense. This was really disappointing. We've done a full postmortem and remediated the issue. It's important for us to build a culture of accountability. So following this event, I made the decision to eliminate the executive team's 2022 cash bonuses. It's my responsibility to make sure that we learn from this, adjust our systems and processes accordingly, and ensure that we do everything we can to prevent errors like this from happening again. Before I review our Q4 product roadmap, I want to provide a couple shareholder updates. As founders, Baiju and I have always been motivated by our mission, and our goal has been to build a financial services company that does right by our employees, delivers extraordinary value to our customers, and in doing so, generates healthy returns for our shareholders. It took tremendous sacrifice on behalf of many people throughout 2022 to get Robinhood to the healthy position we're in today. And so at the end of the year, Beju and I were reflecting on this, and we were thinking about whether there was more that we could do personally. So we decided we would cancel nearly $500 million of our combined share-based compensation. This lowers our GAAP operating costs by up to $50 million per quarter starting in Q2, and it has already reduced our fully diluted share count by 3.5%. Second, we also announced today that our board of directors has authorized us to pursue purchasing most or all of the Robinhood shares that Emergent Fidelity Technologies bought last May. The board and management team are incredibly confident about the future of our business. We also have a fortress balance sheet with over $6 billion of cash and feel very well positioned to execute on our growth plans. So we think this repurchase will be accretive over time and removes a distraction for shareholders. Since there isn't much precedent for situations like these, we can't predict how long this will take, but we'll keep you posted as is appropriate. Now I'll cover Q4 business results. While assets under custody was down 4% in Q4 from Q3 due to lower valuations for growth stocks in crypto, customer portfolios had a great start to 2023. In January, as valuations rebounded, customer assets grew by 20% to $75 billion, the highest level in the past nine months. This January outperformance is a good reminder of the importance of investing through the cycle. So we're encouraged that customers continue to entrust us with billions of dollars each quarter, including nearly $5 billion of net deposits in Q4. Now we've talked a lot about our product velocity and all the new products we launched last year. And as we've continued to work on them, we're now starting to see meaningful traction on several of our new products, which gives us confidence that they can grow into significant business lines over time. First is stock lending, which we launched last May to help customers generate passive income by lending the stocks they're holding. It had some good early results by reaching about 15 million of annualized revenue in Q3. Since then, the team has kept iterating on the product relentlessly, speaking with customers, improving onboarding, making more equities available to lend, and migrating to a new collateral agent. By the end of January, We had over 1 million customers enrolled and we generated over 30 million in annualized revenue. As we look ahead, we see lots of opportunities to improve the product even more and make it even more accessible and useful to customers. Next, Robinhood Gold. In September, we launched an industry-leading 3% yield on cash and then raised the yield three more times to reach our current 4.15% rate. The customer response has been terrific. As more and more customers feel, we're giving them access to one of the best and easiest opportunities to earn yield in the US. Gold subscribers increased in Q4 for the first time in over a year, and gold net promoter scores have moved way up. We've also seen gold cash suite balances grow to 6 billion at the end of January. That's up by about a billion per month since the launch. We're excited to keep investing in our gold offering and deepening these relationships this year. In Q4, we also launched instant withdrawals, a new money movement option to help customers who want faster access to their money for everyday needs at a competitive 1.5% fee. We're seeing strong early adoption here, growing from 1% of total withdrawals when we launched in October to 7% in January, translating to about 20 million of annualized revenue. These are just a few examples of how the products we've launched over the past year are now gaining traction. and we see a path for many of them to drive meaningful revenue growth from here. Finally, I want to give you a preview of our 2023 product roadmap. While the macro uncertainty is leading some companies to pull back, we plan to stay aggressive, as we believe investing through the cycle is the right long-term strategy. So let me highlight a few of the opportunities we're working on. First, deepening relationships with our existing customers. As we grow into a larger, more diversified company, We're shifting our focus from just adding users to driving net deposits as well. Retirement is off to a good start and we're working to take our first steps on the path to advisory, which can bring even more customers into the market in the future. Second is becoming the best destination for advanced customers. Last year, we made a ton of progress by launching several new products and features that drove advanced customer NPS significantly higher, a great sign for growth and retention. This year, We'll go beyond tools and improved experience and really innovate for our advanced customers. We're excited to show you what we have in store. Third, international. We recently launched Robinhood Wallet, which empowers customers around the world to custody their own crypto. We're getting more aggressive this year and have set a goal to offer brokerage services in the UK by the end of 2023. I'm also excited that we hired JB McKenzie, an industry veteran from Schwab and TD Ameritrade, to lead our international brokerage efforts. We're really excited about the year ahead. The roadmap is full, and there's so much to do. With that, I'll turn it over to Jason.