Robinhood(HOOD)2024-10-31 00:12Financial Data and Key Metrics - Q3 net deposits were $10 billion for the third consecutive quarter, bringing year-to-date net deposits to $34 billion, surpassing the 2020 record of $31 billion [8] - Customer assets under custody reached a record high of $152 billion, up 76% year-over-year [15] - Q3 revenues grew 36% year-over-year to $637 million, with adjusted EBITDA nearly doubling to $268 million and adjusted EBITDA margins expanding by 13 points to 42% [16] - Net income for Q3 was $150 million, or $0.17 per share, marking the fourth straight quarter of GAAP profitability [16] - Year-to-date revenues of nearly $2 billion have already surpassed last year's record of $1.9 billion, with GAAP diluted EPS of $0.55 [9] Business Line Performance - Transaction-based revenues grew 72% year-over-year, driven by higher volumes and market share gains across all trading products [17] - Options contracts increased 47% year-over-year, equity volumes rose 65%, and crypto volumes surged over 100% [17] - Net interest revenues increased 9% due to growth in interest-earning assets and improved securities lending activity [17] - Other revenues grew 42%, driven by a record 2.2 million Robinhood Gold subscribers, contributing over $110 million in annualized recurring revenue [18] Market Performance - Robinhood Gold subscriptions hit an all-time high of 2.2 million in Q3, with the Gold card showing strong customer retention rates of approximately 95% [10][12] - The company's crypto rebates increased to 48 basis points in October, up from 44 basis points in Q3 and 35 basis points at the start of the year [25] - The presidential election market saw over 10 million contracts traded on its first full day, with strong customer engagement [28] Strategic Direction and Industry Competition - Robinhood's strategy focuses on winning the active trader market, increasing wallet share, and expanding internationally [7] - The company launched Robinhood Legend, a state-of-the-art desktop platform, doubling its addressable market by targeting web-based traders [29][30] - New products like Index Options and Futures are expected to significantly expand the company's market share and revenue potential [27][28] - The company is scaling its Robinhood Gold card rollout cautiously to manage credit risk while meeting high customer demand [33] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to scale the Gold card significantly over time, citing strong customer feedback and behavior [13] - The company is focused on driving profitable growth, with expectations to finish near the top end of its full-year adjusted OpEx and SBC outlook range of $1.85 billion to $1.95 billion [21] - Management highlighted the strong momentum in October, with net deposits exceeding $4 billion and cash suite balances surpassing $25 billion [24] Other Important Information - The company initiated a $1 billion share repurchase program in July, repurchasing 5 million shares in Q3 and deploying over $700 million to repurchase approximately 60 million shares year-to-date [22][23] - Robinhood is winding down its 1% gold deposit boost promotion in November to focus on more effective customer acquisition strategies [19][20] Q&A Session Summary Questions and Answers - Robinhood Gold Card Rollout: The Gold card waitlist is close to 2 million, with 100,000 customers onboarded so far. The company plans to scale the card to multiples of its current level over the next year [32][33] - Money Transfer Feature: While the focus is on scaling the Gold card, the company is considering expanding offerings to include peer-to-peer money transfers in the future [34] - Impact of Rate Cuts on Robinhood Gold: The company is investing in new benefits for Gold subscribers, such as differentiated pricing on Index Options and Futures, to maintain value in a declining rate environment [36][37] - Tax Gain and Loss Monitoring: Robinhood has launched a realized P&L tool and is beta testing tax lot selection features, with plans to roll them out to customers soon [39] - Robinhood Legend Desktop Platform: Early feedback on the new desktop platform is extremely positive, with high engagement from active traders [43][44] - Presidential Election Market: The election market saw strong customer engagement, with over 10 million contracts traded on its first full day [46][48] - Index Options and Futures Economics: Index options are priced at $0.50 per contract for non-Gold users and $0.35 for Gold users, while Futures are priced at $0.75 and $0.50, respectively. These products are expected to contribute significantly to revenue growth [52][53] - Interest Rate Sensitivity: Each 25 basis point rate cut impacts the company by approximately $40 million, but falling rates are expected to drive higher trading activity and margin utilization [61][65] - Product Rollout Strategy: The company is cautious with product rollouts, particularly for the Gold card, to manage credit risk and ensure profitability [69][70] - Crypto Rebates: Crypto rebates increased to 48 basis points in October, reflecting the company's focus on balancing customer pricing and shareholder returns [72] - Deposit Trends and Promotions: Recent promotional offers, such as the Hood Week promotion, brought in $2 billion in deposits, with payback periods of around one year for 1% matches and two to three years for retirement matches [80][82] - Election-Related Event Contracts: The company views event contracts as a way to offer innovative products to active traders and provide reliable market predictions [85]