Q3 2024 Earnings Summary
- Strong Customer Demand and Engagement with New Products: Robinhood's new offerings, such as Robinhood Legend, index options, futures, and event contracts like the presidential election market, are witnessing high customer demand and positive feedback. For instance, the presidential election market saw over 10 million contracts traded even before the full rollout, indicating strong engagement. This strategy to win over active traders is expected to increase market share and drive revenue growth.
- High Demand for Gold Credit Card and Subscription Growth: The Robinhood Gold credit card has a waitlist close to 2 million customers, with about 100,000 users already onboarded who are loving the product. This significant demand demonstrates potential for revenue growth as the card scales up. Additionally, Robinhood Gold subscriptions reached an all-time high of 2.2 million in Q3, adding over 850,000 subscribers in the past year, leading to a record annualized recurring subscription revenue of over $110 million.
- Effective Promotional Strategies Driving Net Deposits and Assets Under Custody: Robinhood's promotional offers, such as matches on deposits and Hood Week promotions, have successfully attracted net deposits, marking the third straight quarter with over $10 billion in net deposits and totaling $39 billion over the past year. The Hood Week promotion alone brought in $2 billion in just two weeks. This has contributed to assets under custody growing 76% year-over-year to a record $152 billion, signaling strong potential for future revenue growth.
- Robinhood's equity fee capture declined by approximately 20% sequentially, indicating potential pressure on revenue generation from equity trading. This decline was attributed to customers buying larger, more liquid names, affecting the take rate.
- Concerns about decoupling between revenues and assets under custody (AUC) amid rate cuts and subdued trading activity, which may continue with further Federal Reserve rate cuts, potentially impacting Robinhood's revenues.
- Potential risks associated with the cautious rollout of the Robinhood Gold credit card due to concerns about significant near-term losses if not managed carefully, suggesting challenges in managing credit risk as the company expands into new business areas. Despite high demand with nearly 2 million customers on the waitlist, only about 100,000 customers have been onboarded so far.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Operating Expenses & SBC | FY 2024 | $1.85B to $1.95B at the midpoint | $1.85B to $1.95B, with expectations to finish near the top end | no change |
Share Repurchase Program | FY 2024 | $1 billion share repurchase authorization | $1 billion share repurchase program (with $97M repurchased in Q3 and plans to continue in Q4) | no change |
Contra Revenues | Q4 2024 | no prior guidance | Expected to grow sequentially similar to Q2–Q3 growth and to slow in 2025 as the 1% Gold deposit boost winds down | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong net deposits & AUC growth | • Q4: 21% net deposit rate, AUC > $100B • Q1: 44% annualized deposit growth, AUC $130B • Q2: 41% deposit growth, AUC $140B | • Q3: 29% net deposit growth, AUC $152B, aided by promotions | Continues to grow each quarter; promotional strategies remain effective |
Robinhood Gold & credit card | • Q4: 1.42M Gold subscribers, credit card ARPU potential ~$300 • Q1: 1.7M Gold subscribers, new Gold card rollout in small cohorts • Q2: 2M Gold subs, ~60% YoY growth | • Q3: 2.2M Gold subscribers, cautious credit card rollout (~100K users; waitlist ~2M) | Continued expansion; heightened credit caution but strong demand |
Broadening offerings for active traders | • Q4: Plans for index options/futures, more advanced web features • Q1: Ongoing 24hr market ($10B+ volume), futures in development • Q2: 24hr market $30B volume, futures gap | • Q3: Launched futures & index options; unveiling “Legend” desktop platform | Multiple new tools; strong push to win active traders |
Continued market share gains | • Q4: Net positive asset inflows from major competitors, avg > $100K per transfer • Q1: 25% of net transfers from other brokerages, higher avg balances • Q2: Gains in equities and options | • Q3: No direct mention of competitor share gains, but transaction volumes rose ~72% YoY | Q3 didn’t emphasize competitor share; overall volume still growing |
Outages or reliability | • Q4: Not mentioned [no data] • Q1: Brief 24hr market outage due to third-party ATS • Q2: Third-party ATS outage (Blue Ocean), $30B volume to date | • Q3: Not mentioned [no data] | Not discussed in Q3; previous issues tied to third-party providers |
Declining MAUs from crypto | • Q4: Not mentioned [no data] • Q1: No explicit mention of MAU declines; broad-based engagement • Q2: Deemphasized MAU metric, volatility heavily tied to crypto | • Q3: Not mentioned [no data] | No further MAU commentary in Q3; crypto-driven fluctuations still implicit |
Robinhood Legend, index options, event contracts | • Q4: Not mentioned • Q1 & Q2: No mention of Legend or event contracts; index options targeted for Q4 2024 | • Q3: “Legend” launched for desktop, index options & election contracts introduced | New Q3 products; designed to expand active-trader reach and engagement |
Declining equity fee capture | • Q4: Continued decline with no specific trajectory | • Q3: Down ~20% sequentially due to customer shift to large-cap names | Sustained pressure; mix shift drives lower capture |
Caution on Gold credit risk | • Q4: No explicit caution but prime-plus customer base noted • Q1: Prudent card rollout in small cohorts • Q2: No data | • Q3: Emphasis on careful scaling to manage credit risk | Heightened caution; large waitlist but slow, deliberate rollout |
Success of new active trader offerings | • Q4: Focus on advanced web platform & planned futures/index options expansions • Q1: Emphasis on advanced tools, futures & index options • Q2: Margin & options traction | • Q3: Futures, index options, and Legend all well received; potential 9-figure revenue | High potential impact; optimistic early adoption |
International expansion | • Q4: Crypto in EU, U.K. brokerage live, revenue via margin & lending • Q1: Brief mention of EU/UK opportunities • Q2: Emphasis on EU/UK, Bitstamp deal | • Q3: Not mentioned [no data] | No Q3 update; prior calls highlighted it as a major growth lever |
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Interest Rate Sensitivity
Q: Are you seeing upside from rate cuts and margin growth?
A: Yes, each 25 basis point rate cut impacts revenue by about $40 million. We've seen strong growth in margin balances following rate reductions, continuing into October. Additionally, about 400,000 customers joined our securities lending program this year, adding several billion in equities. We believe falling rates will be a tailwind for growth, with options trading at an all-time high in Q3 and equities hitting a multiyear high. -
Index Options and Futures
Q: Can you explain the economics of index options and futures?
A: Our non-gold customers will pay $0.50 per contract for index options, while gold members pay $0.35. For futures, non-gold pricing is $0.75 per contract, and gold members get $0.50. We anticipate futures becoming a nine-figure business based on competitor volumes. Exchange fees will be passed through to customers, and these products offer high incremental margins due to our largely fixed cost base. -
Deposit Trends and Promotions
Q: What are the results of recent deposit promotions?
A: Our deposit matches have been successful, bringing in $2 billion during a two-week Hood Week promotion. We've seen payback periods of around one year for 1% matches and 2–3 years for 3% retirement matches. This is our third consecutive quarter with over $10 billion in net deposits, supporting a long-term growth trend of over 20%. -
Revenue and AUC Relationship
Q: Does the revenue–AUC relationship hold amid rate cuts?
A: We remain confident in the relationship between revenue and assets under custody (AUC). The Q3 revenue was influenced by a seasonal reduction in proxy revenue of about $30 million and an increase of $14 million in contra revenues due to match promotions. The 1% boost on gold deposits contributed most of the incremental contra revenue and is winding down in November. -
Event Contracts Strategy
Q: What's your strategy around election event contracts?
A: We aim to offer all product categories to customers, especially active traders. Listing event contracts like the presidential election market aligns us with the forefront of financial innovation. These regulated swaps serve as legitimate hedging instruments for institutions, and we believe retail customers should have access to them as well. -
Presidential Election Market
Q: How is the presidential election market performing?
A: We rolled it out to 100% of customers after starting this Monday. Feedback is very positive, with social media resonating strongly. Yesterday, we did about 10 million contracts before full rollout and even more today. -
Product Rollout Approach
Q: How do you approach product launches and velocity?
A: Our rollout speed depends on the product. For example, the presidential election market was fully rolled out within days. For products like the credit card, we are scaling prudently to manage potential losses, having onboarded about 100,000 customers from a 2 million waitlist. We expect to multiply this number over the next year. -
Crypto Rebates Increase
Q: What drove crypto rebates higher to 48 bps?
A: We've been experimenting with crypto rebates, increasing the rate from about 35 basis points to 48 basis points in October. This balances offering great prices to customers while generating returns for shareholders. -
Equity Fee Capture Decline
Q: Why did equity fee capture decline by 20% sequentially?
A: The decline was due to lower volatility and a customer mix shift toward larger, more liquid names. -
Robinhood Legend Feedback
Q: Any observations on Robinhood Legend users?
A: Users of Robinhood Legend are among our most active traders, showing high velocity. We rolled it out to 1,000 people during the keynote, filling the slots in 45 seconds. Early feedback is very positive, and the community response is strong.