Filed pursuant to Rule 424(b)(3)

Registration No. 333-258474

Prospectus Supplement No. 1

(To Prospectus dated October 27, 2021)

Robinhood Markets, Inc.

Class A Common Stock

This Prospectus Supplement No. 1 (the “Prospectus Supplement”) updates, supplements and amends the Prospectus dated October 27, 2021 (the “Prospectus”), relating to the offer and sale from time to time of up to 97,876,033 shares of our Class A common stock by the selling stockholders identified in the Prospectus (the “Selling Stockholders”). The Selling Stockholders may sell these shares through public or private transactions at market prices prevailing at the time of sale or at negotiated prices. The timing and amount of any sale are within the sole discretion of the Selling Stockholders. We will not receive any of the proceeds from the sale of shares of our Class A common stock by the Selling Stockholders.

You should read this Prospectus Supplement in conjunction with the Prospectus, and this Prospectus Supplement is qualified by reference to the Prospectus, except to the extent that the information contained in this Prospectus Supplement supersedes the information contained in the Prospectus. This Prospectus Supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any and all additional amendments or supplements thereto.

Our Class A common stock is traded on the Nasdaq Global Select Market under the symbol “HOOD.”

Investing in our Class A common stock involves risks. See “Risk Factors” on page 65 of this Prospectus Supplement and page 32 of the Prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement is October 29, 2021.

1

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		PAGE
ITEM 1.	UNAUDITED FINANCIAL STATEMENTS
	CONDENSED CONSOLIDATED BALANCE SHEETS	4
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	6
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT	8
	NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	61
ITEM 4.	CONTROLS AND PROCEDURES	62
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	64
ITEM 1A.	RISK FACTORS	65
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	141

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements (as such phrase is used in the federal securities laws), which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. This Quarterly Report includes, among others, forward-looking statements regarding our:

•expectations for headcount growth in our engineering and regulatory and compliance teams;

•expectations regarding legal and regulatory proceedings and investigations;

•our plan to attract new customers by continuing to introduce new products and features and by continuing to invest in marketing efforts through the Robinhood Referral Program (as defined below) and other media outlets, including digital and broad-scale advertising;

•our intent to continue investing in our platform capabilities and regulatory and compliance functions as well as product innovation, educational content, technology and infrastructure, and customer support for long-term growth;

•expectations about the sufficiency of our available cash, available borrowings, and cash from operations to meet our current liquidity needs for the next 12 months; and

•expectations regarding our use of the net proceeds from our initial public offering.

Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Quarterly Report. Reported results should not be considered an indication of future performance. Factors that contribute to the uncertain nature of our forward-looking statements include, among others:

•our limited operating history;

•the difficulty of managing rapid growth and the risk of declining or negative growth;

•the fluctuations in our financial results and key metrics from quarter to quarter;

•our reliance on transaction-based revenue, including payment for order flow (“PFOF”), and the risk of new regulation or bans on PFOF and similar practices;

•the difficulty of raising additional capital (to satisfy any liquidity needs and support business growth and objectives) on reasonable terms or at all;

•the need to maintain capital levels required by regulators and self-regulatory organizations;

•the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for operational errors in clearing functions;

•the impact of negative publicity on our brand and reputation;

2

•the risk that changes in business, economic, or political conditions, or systemic market events, might harm our business;

•our dependence on key employees and a skilled workforce;

•the difficulty of complying with an extensive and complex regulatory environment and the need to adjust our business model in response to new or modified laws and regulations;

•the possibility of adverse developments in pending litigation and regulatory investigations;

•the effects of competition;

•our need to innovate and invest in new products and services in order to attract and retain customers and deepen their engagement with us in order to maintain growth;

•our reliance on third parties to perform certain key functions and the risk that operational or technological failures could impair the availability or stability of our platform;

•the risk of cybersecurity incidents, theft, data breaches, and other online attacks;

•the difficulty of processing customer data in compliance with privacy laws;

•our need as a regulated financial services company to develop and maintain effective compliance and risk management infrastructures;

•the volatility of cryptocurrency prices and trading volumes; and

•the risk that substantial future sales of Class A common shares in the public market could cause the price of our stock to fall.

Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this Quarterly Report titled “Risk Factors” and our other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Quarterly Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, Robinhood assumes no obligation to update any of the statements in this Quarterly Report whether as a result of any new information, future events, changed circumstances or otherwise. You should read this Quarterly Report with the understanding that our actual future results, performance, events and circumstances might be materially different from what we expect.

3

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,		September 30,
(in thousands, except share and per share data)	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	1,402,629	$	6,166,705
Cash and securities segregated under federal and other regulations	4,914,660		4,468,298
Receivables from brokers, dealers and clearing organizations	124,501		124,962
Receivables from users, net	3,354,142		6,099,497
Deposits with clearing organizations	225,514		316,221
Other current assets	851,138		1,674,013
Total current assets	10,872,584		18,849,696
Property, software and equipment, net	45,834		114,666
Goodwill	—		95,564
Intangible assets, net	185		35,227
Restricted cash	7,364		23,773
Other non-current assets	62,507		198,442
Total assets	$	10,988,474	$	19,317,368
Liabilities, mezzanine equity and stockholders’ (deficit) equity
Current liabilities:
Accounts payable and accrued expenses	$	104,649	$	237,147
Payables to users	5,897,242		6,811,169
Securities loaned	1,921,118		3,129,650
Other current liabilities	893,036		1,620,452
Total current liabilities	8,816,045		11,798,418
Other non-current liabilities	48,012		134,368
Total liabilities	8,864,057		11,932,786
Commitments and contingencies (Note 16)
Mezzanine equity
Redeemable convertible preferred stock, $0.0001 par value. 414,033,220 shares authorized, 412,742,897 shares issued and outstanding with a liquidation preference of $2,191,086 as of December 31, 2020. No shares authorized, issued, and outstanding as of September 30, 2021.	2,179,739		—
Stockholders’ (deficit) equity:
Preferred stock, $0.0001 par value. No shares authorized, issued and outstanding as of December 31, 2020; 210,000,000 shares authorized and no shares issued and outstanding as of September 30, 2021.	—		—
Common stock, $0.0001 par value. 777,354,000 shares authorized, 229,031,546 shares issued and outstanding as of December 31, 2020; no shares authorized, issued, and outstanding as of September 30, 2021.	1		—
Class A common stock, $0.0001 par value. No shares authorized, issued and outstanding as of December 31, 2020; 21,000,000,000 shares authorized, 725,229,836 shares issued and outstanding as of September 30, 2021.	—		73
Class B common stock, par value $0.0001. No shares authorized, issued and outstanding as of December 31, 2020; 700,000,000 shares authorized, 130,155,246 shares issued and outstanding as of September 30, 2021.	—		13
Class C common stock, par value $0.0001. No shares authorized, issued and outstanding as of December 31, 2020; 7,000,000,000 shares authorized, no shares issued and outstanding as of September 30, 2021.	—		—
Additional paid-in capital	134,307		10,837,381
Accumulated other comprehensive income	473		383
Accumulated deficit	(190,103)		(3,453,268)
Total stockholders’ (deficit) equity	(55,322)		7,384,582
Total liabilities, mezzanine equity and stockholders’ (deficit) equity	$	10,988,474	$	19,317,368

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

4

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2020		2021		2020		2021
Revenues:
Transaction-based revenues	$	201,807	$	266,797	$	484,851	$	1,138,403
Net interest revenues	50,406		63,405		114,420		193,611
Other revenues	17,317		34,721		42,020		120,416
Total net revenues	269,530		364,923		641,291		1,452,430
Operating expenses:
Brokerage and transaction	31,444		44,031		80,460		122,847
Technology and development	55,491		679,162		133,667		952,367
Operations	40,962		108,337		93,239		275,966
Marketing	39,088		86,893		152,520		283,300
General and administrative	113,494		790,060		186,781		1,038,520
Total operating expenses	280,479		1,708,483		646,667		2,673,000
Change in fair value of convertible notes and warrant liability	—		25,336		—		2,045,657
Other expense (income), net	45		(1,955)		88		(2,104)
Loss before income tax	(10,994)		(1,366,941)		(5,464)		(3,264,123)
Provision for (benefit from) income taxes	(333)		(50,244)		115		(958)
Net loss	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Net loss attributable to common stockholders:
Basic	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Diluted	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Net loss per share attributable to common stockholders:
Basic	$	(0.05)	$	(2.06)	$	(0.02)	$	(8.85)
Diluted	$	(0.05)	$	(2.06)	$	(0.02)	$	(8.85)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic	225,997,444		638,168,188		225,299,165		368,518,894
Diluted	225,997,444		638,168,188		225,299,165		368,518,894

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

5

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended  September 30,				Nine Months Ended  September 30,
(in thousands)	2020		2021		2020		2021
Net loss	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Other comprehensive income (loss), net of tax:
Foreign currency translation	194		(142)		20		(90)
Total other comprehensive income (loss), net of tax	194		(142)		20		(90)
Total comprehensive loss	$	(10,467)	$	(1,316,839)	$	(5,559)	$	(3,263,255)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended  September 30,
(in thousands)	2020		2021
Operating activities:
Net loss	$	(5,579)	$	(3,263,165)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	6,572		15,734
Provision for credit losses	44,339		61,796
Share-based compensation	5,348		1,252,584
Change in fair value of convertible notes and warrant liability	—		2,045,657
Other	2,343		(121)
Changes in operating assets and liabilities:
Segregated securities under federal and other regulations	(4,999)		84,994
Receivables from brokers, dealers and clearing organizations	(62,709)		(461)
Receivables from users, net	(1,662,798)		(2,805,032)
Deposits with clearing organizations	(121,815)		(90,707)
Other current and non-current assets	(539,103)		(957,222)
Accounts payable and accrued expenses	109,398		118,460
Payables to users	2,729,643		913,927
Securities loaned	487,904		1,208,532
Other current and non-current liabilities	541,004		805,883
Net cash (used in) provided by operating activities	1,529,548		(609,141)
Investing activities:
Purchase of property, software and equipment	(17,582)		(46,107)
Capitalization of internally developed software	(5,708)		(12,619)
Acquisitions of a business, net of cash acquired	—		(119,161)
Other	—		(1,588)
Net cash used in investing activities	(23,290)		(179,475)
Financing activities:
Proceeds from issuance of common stock in connection with initial public offering, net of offering costs	—		2,057,530
Taxes paid related to net share settlement of equity awards	—		(411,772)
Proceeds from issuance of convertible notes and warrants	—		3,551,975
Draws on credit facilities	937,700		1,958,276
Repayments on credit facilities	(937,700)		(1,958,276)
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs	1,267,350		—
Proceeds from exercise of stock options, net of repurchases	3,587		11,780
Net cash provided by financing activities	1,270,937		5,209,513
Effect of foreign exchange rate changes on cash and cash equivalents	20		(90)
Net increase in cash, cash equivalents, segregated cash and restricted cash	2,777,215		4,420,807
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period	3,069,568		6,189,659
Cash, cash equivalents, segregated cash and restricted cash, end of the period	$	5,846,783	$	10,610,466
Cash and cash equivalents, end of the period	$	2,023,654	$	6,166,705
Segregated cash, end of the period	3,815,765		4,418,298
Restricted cash, end of the period	7,364		25,463
Cash, cash equivalents, segregated cash and restricted cash, end of the period	$	5,846,783	$	10,610,466
Supplemental disclosures:
Cash paid for interest	$	2,698	$	6,183
Cash paid for income taxes, net of refund received	$	2,839	$	3,159
Non-cash financing activities:
Unpaid offering costs in connection with initial public offering	$	—	$	5,150

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

7

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of June 30, 2020	366,266,778	$	1,469,708	225,750,368	$	1	$	105,505	$	15	$	(192,470)	$	(86,949)
Net loss	—	—		—	—		—		—		(10,661)		(10,661)
Shares issued in connection with employee stock options	—	—		865,966	—		3,074		—		—		3,074
Issuance of Series F convertible preferred stock, net of issuance costs	3,360,000	41,987		—	—		—		—		—		—
Issuance of Series G convertible preferred stock, net of issuance costs	43,116,119	668,066		—	—		—		—		—		—
Vesting of early-exercised stock options	—	—		—	—		127		—		—		127
Repurchase of common stock	—	—		(11,196)	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		194		—		194
Share-based compensation	—	—		—	—		1,600		—		—		1,600
Balance as of September 30, 2020	412,742,897	$	2,179,761	226,605,138	$	1	$	110,306	$	209	$	(203,131)	$	(92,615)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

8

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

	Redeemable convertible preferred stock			Common stock(1)			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of June 30, 2021	412,742,897	$	2,179,739	232,609,957	$	1	$	151,281	$	525	$	(2,136,571)	$	(1,984,764)
Net loss	—	—		—	—		—		—		(1,316,697)		(1,316,697)
Shares issued in connection with employee stock options	—	—		2,238,444	24		5,062		—		—		5,086
Issuance of common stock in connection with initial public offering, net of issuance costs	—	—		56,729,194	6		2,052,374		—		—		2,052,380
Issuance of common stock upon settlement of restricted stock units, net of shares withheld	—	—		13,759,434	—		(411,772)		—		—		(411,772)
Conversion of preferred stock to common stock	(412,742,897)	(2,179,739)		412,742,897	41		2,179,698		—		—		2,179,739
Conversion of convertible notes to common stock	—	—		137,305,156	14		5,217,583		—		—		5,217,597
Reclassification of warrant liability to stockholders' equity	—	—		—	—		380,036		—		—		380,036
Vesting of replacement awards issued in connection with acquisition	—	—		—	—		639		—		—		639
Vesting of early-exercised stock options	—	—		—	—		108		—		—		108
Change in other comprehensive income	—	—		—	—		—		(142)		—		(142)
Share-based compensation	—	—		—	—		1,262,372		—		—		1,262,372
Balance as of September 30, 2021	—	$	—	855,385,082	$	86	$	10,837,381	$	383	$	(3,453,268)	$	7,384,582

________________

(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 for more information.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

9

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of December 31, 2019	321,626,778	$	912,411	224,802,545	$	1	$	99,439	$	189	$	(196,677)	$	(97,048)
Net loss	—	—		—	—		—		—		(5,579)		(5,579)
Shares issued in connection with employee stock options	—	—		1,883,789	—		4,514		—		—		4,514
Issuance of Series F convertible preferred stock, net of issuance costs	48,000,000	599,284		—	—		—		—		—		—
Issuance of Series G convertible preferred stock, net of issuance costs	43,116,119	668,066		—	—		—		—		—		—
Vesting of early-exercised stock options	—	—		—	—		439		—		—		439
Repurchase of common stock	—	—		(81,196)	—		—		—		(875)		(875)
Change in other comprehensive income	—	—		—	—		—		20		—		20
Share-based compensation	—	—		—	—		5,914		—		—		5,914
Balance as of September 30, 2020	412,742,897	$	2,179,761	226,605,138	$	1	$	110,306	$	209	$	(203,131)	$	(92,615)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

10

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited)

	Redeemable convertible preferred stock			Common stock(1)			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ (deficit) equity
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance as of December 31, 2020	412,742,897	$	2,179,739	229,031,546	$	1	$	134,307	$	473	$	(190,103)	$	(55,322)
Net loss	—	—		—	—		—		—		(3,263,165)		(3,263,165)
Shares issued in connection with employee stock options	—	—		5,819,965	24		11,641		—		—		11,665
Issuance of common stock in connection with initial public offering, net of issuance costs	—	—		56,729,194	6		2,052,374		—		—		2,052,380
Issuance of common stock upon settlement of restricted stock units, net of shares withheld	—	—		13,759,434	—		(411,772)		—		—		(411,772)
Conversion of preferred stock to common stock	(412,742,897)	(2,179,739)		412,742,897	41		2,179,698		—		—		2,179,739
Conversion of convertible notes to common stock	—	—		137,305,156	14		5,217,583		—		—		5,217,597
Reclassification of warrant liability to stockholders' equity	—	—		—	—		380,036		—		—		380,036
Vesting of replacement awards issued in connection with acquisition	—	—		—	—		639		—		—		639
Vesting of early-exercised stock options	—	—		—	—		281		—		—		281
Repurchases of common stock	—	—		(3,110)	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		(90)		—		(90)
Share-based compensation	—	—		—	—		1,272,594		—		—		1,272,594
Balance as of September 30, 2021	—	$	—	855,385,082	$	86	$	10,837,381	$	383	$	(3,453,268)	$	7,384,582

________________

(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 for more information.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

11

ROBINHOOD MARKETS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Robinhood Markets, Inc. (“RHM”, together with its subsidiaries, “Robinhood”, the “Company”, “we”, or “us”) was incorporated in the State of Delaware on November 22, 2013. Our most significant, wholly-owned subsidiaries are:

•Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer;

•Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer; and

•Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy and sell cryptocurrencies.

Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution. Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction. Acting as agent, we facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade. Our users have ownership of the securities, including those that collateralize margin loans, and cryptocurrencies transacted on our platform and, as a result, any such securities or cryptocurrencies owned by users are not presented in our unaudited condensed consolidated balance sheets. We do not allow users to purchase cryptocurrency on margin. We hold cryptocurrency in custody for our users’ accounts in one or more omnibus cryptocurrency wallets.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus referred to as “COVID-19” to be a global pandemic. In response to the pandemic, we have enabled nearly all of our employees, some permanently, to work remotely and have restricted business travel. As vaccination rates among the population have increased, in the fourth quarter of 2021 we started to allow some employees to voluntarily return to work in our corporate offices but the timing of any full return for those employees who are not permanently remote has not been determined and will be impacted by developments related to the pandemic. Since the onset of the COVID-19 pandemic, we have seen substantial growth in our user base, retention, engagement and trading activity metrics, as well as continued gains and periodic all-time highs achieved by the equity markets generally. During this period, market volatility, stay-at-home orders and increased interest in investing and personal finance, coupled with low interest rates and a positive market environment, especially in the U.S. equity and cryptocurrency markets, helped foster an environment that has encouraged an unprecedented number of first-time retail investors to become our users and begin trading on our platform. However, the circumstances that have accelerated the growth of our user base in recent periods, particularly in the first half of 2021, might not continue in the future. For example, our Net Cumulative Funded Accounts declined slightly in the current quarter compared to the prior quarter in the same year. At the same time, the COVID-19 pandemic has resulted, in part, in inefficiencies or delays in our business, operational challenges, additional costs related to business continuity initiatives as our workforce is largely working remotely, and increased vulnerability to cybersecurity attacks or other privacy or data security incidents. The extent of the continuing impact of COVID-19 on our business, financial condition, and results of operations will depend largely on future developments, including the duration of the pandemic, actions taken to contain COVID-19 or address its impact, our ability to reintegrate our workforce or the ability of our workforce to adapt to the long-term distributed workforce model we have adopted (with some employees part- or full-

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time remote, and others not), the impact on capital and financial markets, and the related impact on the financial circumstances of our customers, all of which are highly uncertain and difficult to predict.

Initial Public Offering

On August 2, 2021, we closed our initial public offering ("IPO") of 55.0 million shares of Class A common stock, including 2.6 million shares sold by selling shareholders, at a public offering price of $38.00 per share. On August 31, 2021, we sold an additional 4.4 million shares of Class A common stock pursuant to the option granted to the underwriters to purchase additional shares. The total net proceeds we received in the IPO were approximately $2.05 billion after deducting underwriting discounts and commissions of $90.8 million and offering expenses of $12.6 million. In connection with the completion of the IPO: 1) the Company filed its Amended and Restated Certificate of Incorporation (the “Charter”), which authorizes a total of 21.0 billion shares of Class A common stock, 700.0 million shares of Class B common stock, 7.0 billion shares of Class C common stock, and 210.0 million shares of preferred stock, 2) all shares of our outstanding redeemable convertible preferred stock automatically converted into a total of 412.7 million shares of our common stock, 3) all 233.3 million previously outstanding shares of the Company’s common stock, along with the 412.7 million shares of common stock mentioned above, were automatically reclassified into an equivalent number of shares of the Company’s Class A common stock (the “Reclassification”), 4) a total of 130.2 million shares of Class A common stock held by our founders and their related entities were exchanged for an equivalent number of shares of Class B common stock pursuant to the terms of certain exchange agreements, 5) all of our outstanding convertible notes automatically converted into 137.3 million shares of Class A common stock and 6) all warrants became exercisable at a strike price of $26.60 per share for an aggregate of 14.3 million shares of Class A common stock. As a result, following the completion of the IPO, we have three classes of authorized common stock: Class A common stock, Class B common stock, and Class C common stock, of which only Class A common stock and Class B common stock were outstanding as of September 30, 2021. Refer to Note 13 for additional information about the terms of our various classes of common stock.

Additionally, upon our IPO, we recognized $1.01 billion of share-based compensation expense related to restricted stock units (“RSUs”) for which the time-based vesting condition was satisfied or partially satisfied as the performance condition, a liquidity event, was satisfied. Upon the IPO, 24.6 million RSUs vested and 10.8 million shares of Class A common stock were withheld to meet the related tax withholding requirements.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. The condensed consolidated financial statements are unaudited, and in management’s opinion, include all adjustments, including normal recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ended December 31, 2021 or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in our final prospectus for our IPO dated July 28, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1934 on July 30, 2021 (the “Final Prospectus”). There have been no material changes in our significant accounting policies as described in our consolidated financial statements included in our audited annual consolidated financial statements for the year ended December 31, 2020, other than the adoption of the accounting pronouncement as described below in Note 2. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

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Use of Estimates

The preparation of unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances, which together form the basis for making judgments about the carrying values of assets and liabilities. Assumptions and estimates used in preparing our unaudited condensed consolidated financial statements include those related to the determination of allowances for credit losses, the capitalization and estimated useful life of internally developed software, contingent liabilities, useful lives of property and equipment, the incremental borrowing rate used to determine the present value of lease payments, the valuation and recognition of share-based compensation, the valuation of the convertible notes and warrant liability, the valuation and estimated useful lives of acquired intangible assets, uncertain tax positions, accrued liabilities, and the recognition and measurement of current and deferred income tax assets and liabilities. Actual results could differ from these estimates and could have a material adverse effect on our unaudited condensed consolidated financial statements.

Concentration of Credit Risk

We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2021		2020		2021
Market maker:
Citadel Securities, LLC	33	%	23	%	34	%	21	%
Tai Mo Shan Limited(1)	1	%	8	%	2	%	17	%
Entities affiliated with Susquehanna International Group, LLP(2)	18	%	13	%	20	%	11	%
Entities affiliated with Wolverine Holdings, L.P.(3)	10	%	13	%	10	%	10	%
All others individually less than 10%	13	%	16	%	9	%	19	%
Total as percentage of total revenue:	75	%	73	%	75	%	78	%

________________

(1)Member of Jump Trading Group

(2)Consists of Global Execution Brokers, LP and G1X Execution Services, LLC

(3)Consists of Wolverine Execution Services, LLC and Wolverine Securities LLC

We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. Default of a counterparty in equities and options trades, which are facilitated through clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us. It is our policy to review, as necessary, the credit standing of each counterparty.

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NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity. This guidance simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments, amends the accounting guidance for evaluating the classification of certain contracts in an entity’s own equity, and modifies the diluted earnings per share calculations for convertible instruments. The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. We adopted this guidance effective January 1, 2021 using the full retrospective method. The adoption of the guidance did not have a material impact on our unaudited condensed consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share, Debt—Modifications and Extinguishments, Compensation—Stock Compensation, and Derivatives and Hedging—Contracts in Entity’s Own Equity. The guidance clarifies modifications or exchanges of freestanding equity-classified written call options (e.g. warrants). The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. We adopted this guidance effective July 1, 2021. The adoption of the guidance did not have a material impact on our unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

There are no new accounting standards that we have not adopted that are material to us as of September 30, 2021.

NOTE 3: BUSINESS COMBINATIONS

On August 13, 2021, we acquired all outstanding stock of A Say Inc. and its subsidiaries ("Say Technologies"). Subsequently, we caused A Say Inc. to merge with each of its three subsidiaries and converted it into a limited liability company under the name Say Technologies LLC, which remains a wholly-owned subsidiary of RHM. New York-based Say Technologies, founded in 2017, is an investor communications and shareholder engagement platform. The acquisition of Say Technologies will allow us to empower retail investors to access their full ownership rights by facilitating proxy and issuer materials delivery and making shareholder voting on corporate matters easier.

The acquisition date fair value of the consideration transferred for Say Technologies was $132.8 million, which consisted of the following:

(in thousands)	Fair Value
Cash	$	132,168
Share-based compensation awards attributable to pre-combination services	639
Total consideration	$	132,807

We entered into holdback agreements with certain employees of Say Technologies for $11.1 million in cash payments, which are contingent upon the continuous service of the employees and treated as post-combination compensation expense over the required service period of three years. For employees of Say Technologies with unvested Say Technologies equity awards, we issued replacement awards under our 2021 Plan (as defined below in Note 13) with an estimated fair value of $6.3 million. Of this

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amount, $0.6 million was allocated to the consideration transferred and $5.7 million was allocated to post-combination services and will be expensed as compensation expense over the remaining service periods on a straight-line basis. In addition, we paid $1.9 million to cash-settle certain unvested Say Technologies equity awards, which was treated as post-combination compensation expense and recognized immediately as share-based compensation in our unaudited condensed consolidated statement of operations.

Transaction costs associated with the acquisition, which included legal, due diligence, and other professional fees, were not material.

The purchase price allocation is based on a preliminary valuation and subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available, including certain tax matters, during the measurement period (up to one year from the acquisition date). The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:

(in thousands)	Fair Value
Cash and cash equivalents	$	15,412
Accounts receivable	1,704
Goodwill	93,094
Intangible assets	34,600
Other current assets	192
Accounts payable, accrued expenses and other current liabilities	(9,354)
Deferred tax liability	(2,841)
Net assets acquired	$	132,807

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributed to the assembled workforce of Say Technologies and anticipated operational synergies. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions at the time of acquisition. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:

(in thousands, except years)	Fair Value		Useful Life
Developed technology	$	22,000	3
Customer relationships	12,000		10
Trade names	600		3
Total	$	34,600

The overall weighted average useful life of the identified amortizable intangible assets acquired is five years. The estimated fair value of the intangible assets acquired approximate the amounts a market participant would pay for these intangible assets as of August 13, 2021. We used the replacement cost method to estimate the fair value of developed technology and the relief from royalty method to estimate the fair value of trade names. A multi-period excess earnings method was used to estimate the fair value of customer relationships.

Tangible net assets were valued at their respective carrying amounts as of the acquisition date, as these amounts approximated fair value.

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Results of operations of Say Technologies were included in our results since the date of acquisition and were not material for the period ended September 30, 2021. Pro forma results of operations for Say Technologies have not been presented as the effect of this acquisition was not material.

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The carrying amount of goodwill for the period indicated was as follows:

(in thousands)	Carrying Amount
As of December 31, 2020	$	—
Additions due to business combinations	95,564
As of September 30, 2021	$	95,564

Substantially all of the additions related to the Say Technologies acquisition as disclosed in Note 3 and the remainder related to an immaterial business acquisition. There was no impairment of goodwill during the three and nine months ended September 30, 2021.

Intangible Assets

The components of intangible assets, net as of September 30, 2021 were as follows:

(in thousands, except years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Useful Life - Years
Finite-lived intangible assets
Developed technology	$	22,000	$	(964)	$	21,036	3
Customer relationships	12,000		(158)		11,842		10
Trade names	600		(26)		574		3
Domain names	163		(40)		123		12
Indefinite-lived intangible assets	1,652		—		1,652		N/A
Total	$	36,415	$	(1,188)	$	35,227

As of September 30, 2021, the estimated future amortization expense of finite-lived intangible assets was as follows:

(in thousands)	Intangible Assets
Remainder of 2021	$	2,210
2022	8,768
2023	8,768
2024	5,890
2025	1,199
Thereafter	6,740
Total	$	33,575

Amortization expense of intangible assets was not material for three and nine months ended September 30, 2020.

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There was no impairment of intangible assets during the three and nine months ended September 30, 2020 and 2021.

NOTE 5: REVENUES

Disaggregation of Revenues

The following table presents our revenue disaggregated by revenue source:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2021		2020		2021
Transaction-based revenues:
Options	$	126,769	$	163,750	$	297,677	$	526,214
Cryptocurrencies	5,282		50,723		14,840		371,413
Equities	68,818		50,459		171,013		235,772
Other	938		1,865		1,321		5,004
Total transaction-based revenues	201,807		266,797		484,851		1,138,403
Net interest revenues:
Securities lending	27,891		33,495		63,029		108,569
Margin interest	21,288		34,238		40,075		93,199
Interest on segregated cash and securities	1,359		1,071		11,991		3,112
Other interest revenue	743		853		3,259		3,050
Interest expenses related to credit facilities	(875)		(6,252)		(3,934)		(14,319)
Total net interest revenues	50,406		63,405		114,420		193,611
Other revenues	17,317		34,721		42,020		120,416
Total net revenues	$	269,530	$	364,923	$	641,291	$	1,452,430

Contract Balances

Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract with a customer and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers and clearing organizations while other revenue receivables due from our relationship with a third-party investor communications company are reported in other current assets on the unaudited condensed consolidated balance sheets.

The table below sets forth contract receivables balances for the period indicated:

(in thousands)	Contract Receivables
Beginning of period, January 1, 2021	$	111,871
End of period, September 30, 2021	115,298
Increase in contract receivables during the period	$	3,427

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The difference between the opening and ending balance of our contract receivables primarily results from the growth of our business over the period and timing differences between our performance and counterparties’ payments.

Contract liabilities consist of unearned subscription revenue which are recognized when users remit contractual cash payments in advance of the time we satisfy our performance obligations under the contract and are recorded as other current liabilities on the unaudited condensed consolidated balance sheets.

The table below sets forth contract liabilities balances for the period indicated:

(in thousands)	Contract Liabilities
Beginning of period, January 1, 2021	$	2,060
End of period, September 30, 2021	3,298
Increase in contract liabilities during the period	$	1,238

We recognized all revenue from amounts included in the opening contract liability balances in the nine months ended September 30, 2021. The difference between the opening and ending balance of our contract liability balances primarily results from the increase in subscription users and the timing difference between our performance and payments from the users.

NOTE 6: ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the allowance for credit losses, which primarily relate to unsecured balances of receivables from users due to fraudulent, unlawful or otherwise inappropriate customer behavior, such as when customers initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount (“Fraudulent Deposit Transactions”) and to a lesser extent, losses on margin borrowings, for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2021		2020		2021
Beginning balance	$	41,055	$	35,253	$	17,122	$	34,092
Provision for credit losses	20,406		25,051		44,339		61,796
Write-offs	(552)		(22,552)		$	(552)	$	(58,136)
Ending balance	$	60,909	$	37,752	$	60,909	$	37,752

During the three and nine months ended September 30, 2020, the provision for credit losses related to unsecured balances of receivables from users was $20.1 million and $43.4 million while the remaining $0.3 million and $0.9 million was related to other receivables. During the three and nine months ended September 30, 2021, the provision for credit losses related to unsecured receivables from users was $24.7 million and $59.6 million while the remaining $0.3 million and $2.2 million was related to other receivables. As of September 30, 2020 and 2021, the ending allowance for credit losses related to unsecured balances of receivables from users was $60.5 million and $35.0 million while the remaining $0.4 million and $2.8 million were related to other receivables.

During the fourth quarter of the year ended December 31, 2020, we implemented our policy to write-off unsecured balances when the balance becomes outstanding for over 180 days or when we otherwise deem the balance to be uncollectible. Previously, we did not have sufficient historical information to provide a reasonable basis upon which to write off balances.

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NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets and liabilities measured at fair value on a recurring basis as of the date indicated below were presented on our unaudited condensed consolidated balance sheets as follows:

	December 31, 2020
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,026,034	$	—	$	—	$	1,026,034
Cash and securities segregated under federal and other regulations:
U.S. Treasury securities	134,994		—		—		134,994
Other current assets:
Equity securities - user-held fractional shares	802,483		—		—		802,483
Equity securities - securities owned	3,222		—		—		3,222
Total financial assets	$	1,966,733	$	—	$	—	$	1,966,733
Liabilities
Accounts payable and accrued expenses:
Equity securities - referral program liability	$	695	$	—	$	—	$	695
Other current liabilities:
Equity securities - repurchase obligations	802,483		—		—		802,483
Total financial liabilities	$	803,178	$	—	$	—	$	803,178

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	September 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	4,006,138	$	—	$	—	$	4,006,138
Cash and securities segregated under federal and other regulations:
U.S. Treasury securities	50,000		—		—		50,000
Other current assets:
Equity securities - user-held fractional shares	1,530,971		—		—		1,530,971
Equity securities - securities owned	22,769		—		—		22,769
Total financial assets	$	5,609,878	$	—	$	—	$	5,609,878
Liabilities
Accounts payable and accrued expenses:
Equity securities - referral program liability	$	46	$	—	$	—	$	46
Other current liabilities:
Equity securities - repurchase obligations	1,530,971		—		—		1,530,971
Total financial liabilities	$	1,531,017	$	—	$	—	$	1,531,017

We measure our cash equivalents, securities segregated under federal and other regulations, equity securities owned by us for the promotional stock referral and fractional shares programs, and user-held fractional shares at fair value. Repurchase obligations in connection with our fractional shares program and equity securities that were awarded to our users as a part of our promotional stock referral program but had not been claimed as of December 31, 2020 and September 30, 2021 are also measured at fair value. We have evaluated the estimated fair value of financial instruments using available market information such as quoted market prices for the same instrument in active markets. Such instruments are classified within Level 1 of the fair value hierarchy.

During the nine months ended September 30, 2021, we did not have any transfers in or out of Level 3 assets or liabilities.

Convertible Notes and Warrant Liability

In February 2021, we issued two tranches of convertible notes (the “convertible notes”) and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (the “warrant liability”) - see Note 12 for more information. We have elected the fair value option for both tranches of the convertible notes as we believe it best reflects their underlying economics. Under the fair value option, the convertible notes are initially measured at their issuance date estimated fair value and subsequently remeasured at their estimated fair value at the end of each reporting period. Upon the closing of the IPO, all of our outstanding convertible notes and warrants were reclassified from liability to equity. See Note 12 for more information.

For the three and nine months ended September 30, 2021, we recorded expense due to changes in fair value of $27.8 million and $1,918.6 million for the convertible notes in our unaudited condensed consolidated statements of operations, none of which is attributable to the change in the instrument-specific credit risk. We have elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability.

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For the three and nine months ended September 30, 2021, due to changes in fair value, we recorded income of $2.5 million and expense of $127.1 million for the warrant liability in our unaudited condensed consolidated statements of operations.

The following table sets forth a summary of the changes in the estimated fair value of our convertible notes and warrant liability:

(in thousands)	Convertible notes		Warrant liability
Beginning of period, January 1, 2021	$	—	$	—
Issued during the period	3,299,031		252,944
Change in fair value	1,918,565		127,092
Reclassifications to equity	(5,217,596)		(380,036)
End of period, September 30, 2021	$	—	$	—

NOTE 8: INCOME TAXES

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2020			2021			2020			2021
Loss before income taxes	$	(10,994)		$	(1,366,941)		$	(5,464)		$	(3,264,123)
Provision (benefit from) for income taxes	(333)			(50,244)			115			(958)
Effective Tax Rate	3.0		%	3.7		%	(2.1)		%	—		%

Our tax provision for interim periods is determined using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, we update our estimated annual ETR and make a year-to-date calculation of the provision.

For the three months ended September 30, 2020, the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by our current state taxes payable. For the three months ended September 30, 2021, the ETR differs from the U.S. federal statutory rate primarily due to the recognition of tax benefits from share-based compensation upon the IPO offset by the change in valuation allowance on our remaining U.S. federal and state deferred tax assets.

For the nine months ended September 30, 2020, the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by our current state taxes payable. For the nine months ended September 30, 2021, the ETR differs from the U.S. federal statutory rate primarily due to the partial release of our valuation allowance resulting from the recognition of net deferred tax liabilities with the Say Technologies acquisition, and the change in valuation allowance on our remaining U.S. federal and state deferred tax assets partially offset by our current state taxes payable. The acquired net deferred tax liabilities primarily consisted of the allocation of the purchase consideration to non-deductible identifiable intangible assets related to developed technology, customer relationship and trade names.

The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the nine months ended September 30, 2021, we believe it is more likely than not that the tax benefits of the remaining U.S. net deferred tax assets may not be realized.

Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as

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amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.

NOTE 9: PROPERTY, SOFTWARE AND EQUIPMENT, NET

Property, software and equipment are presented net of accumulated depreciation and amortization and summarized as follows:

	December 31,		September 30,
(in thousands)	2020		2021
Tenant improvements	$	18,945	$	53,395
Internally developed software	16,992		25,397
Computer equipment	9,203		22,003
Furniture and fixtures	8,024		17,965
Construction in progress	9,756		27,413
Total	62,920		146,173
Less: accumulated depreciation and amortization	(17,086)		(31,507)
Property, software and equipment, net	$	45,834	$	114,666

Depreciation expense of property and equipment was $1.6 million and $3.7 million for the three and nine months ended September 30, 2020, and $4.1 million and $9.9 million for the three and nine months ended September 30, 2021.

Amortization expense of internally developed software was $1.1 million and $2.9 million for the three and nine months ended September 30, 2020 and $1.8 million and $4.7 million for the three and nine months ended September 30, 2021.

NOTE 10: OFFSETTING ASSETS AND LIABILITIES

Certain financial instruments are eligible for offset on our unaudited condensed consolidated balance sheets under GAAP. Our securities borrowing and lending agreements are subject to master netting arrangements and collateral arrangements and meet the GAAP guidance to qualify for offset. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Our policy is to recognize amounts subject to master netting arrangements on a gross basis on the unaudited condensed consolidated balance sheets. Substantially all securities borrowing and lending agreements have an open contractual term and may be terminated upon notice by either party. One of these agreements has a contractual term of 30 days with a daily minimum commitment of $25 million.

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Our assets and liabilities subject to master netting arrangements are as follows:

	December 31,		September 30,
(in thousands)	2020		2021
Assets	Securities borrowed
Gross amount of securities borrowed	$	372	$	879
Gross amount offset on the unaudited condensed consolidated balance sheets	—		—
Amounts of assets presented on the unaudited condensed consolidated balance sheets(1)	372		879
Gross amount of securities borrowed not offset on the unaudited condensed consolidated balance sheets:
Securities borrowed	372		879
Security collateral received	(361)		(816)
Net amount	$	11	$	63
Liabilities	Securities loaned
Gross amount of securities loaned	$	1,921,118	$	3,129,650
Gross amount of securities loaned offset on the unaudited condensed consolidated balance sheets	—		—
Amounts of liabilities presented on the unaudited condensed consolidated balance sheets	1,921,118		3,129,650
Gross amount of securities loaned not offset on the unaudited condensed consolidated balance sheets:
Securities loaned	1,921,118		3,129,650
Security collateral pledged	(1,787,819)		(3,017,536)
Net amount	$	133,299	$	112,114

________________

(1)Securities borrowed are included in receivables from brokers, dealers and clearing organizations on the unaudited condensed consolidated balance sheets.

We also obtain securities under margin agreements on terms which permit us to pledge and/or transfer securities to others. As of December 31, 2020 and September 30, 2021, we were permitted to re-pledge securities with a fair value of $4.63 billion and $8.46 billion under the margin agreements and $0.4 million and $0.8 million under the securities lending agreements. As of September 30, 2021, we re-pledged $235.2 million of the permitted amount with clearing organizations to meet deposit requirements. Gross obligations for securities loaned transactions are pledged entirely with collateral in the form of equity and have an open contractual maturity.

NOTE 11: OTHER CURRENT ASSETS

Other current assets primarily includes user-held fractional shares for our fractional shares program and prepaid expenses, and to a lesser extent securities owned by us for the promotional stock referral and fractional shares program and other receivables. We classify prepayments made under contracts as prepaid expenses and expense them over the contract terms. Prepaid expenses primarily include prepayments on cloud infrastructure and other software services and prepayments on insurance.

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The following table presents the detail of other current assets:

	December 31,		September 30,
(in thousands)	2020		2021
User-held fractional shares	$	802,483	$	1,530,971
Prepaid expenses	28,629		98,303
Securities owned	3,222		22,769
Restricted cash	—		1,690
Other	16,804		20,280
Total other current assets	$	851,138	$	1,674,013

NOTE 12: FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK

Revolving Credit Facilities

In September 2019, we entered into a $400.0 million committed and secured line of credit with a maturity date of September 25, 2020 (the “September 2019 Credit Facility”). In June 2020, we amended the September 2019 Credit Facility and increased the aggregate committed and secured revolving line of credit amount to $550.0 million with a maturity date of June 5, 2021. This line of credit was primarily collateralized by users’ securities held as collateral for users’ margin loans. Interest for this line of credit was determined at the time a loan was initiated and the applicable interest rate under this line of credit was calculated as a per annum rate equal to 1.25% plus the federal funds rate at the applicable time. There were no outstanding borrowings under the September 2019 Credit Facility at December 31, 2020. We were obligated to pay a commitment fee calculated as a per annum rate equal to 0.35% on any unused amount of the credit facility quarterly in arrears. The September 2019 Credit Facility was terminated in April 2021.

In October 2019, we entered into a $200.0 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”). In October 2020, we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $600.0 million with a maturity date of October 29, 2024. In April 2021, we further increased the aggregate credit amount available under the October 2019 Credit Facility to $625.0 million. Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00% or (b) the Alternative Base Rate. The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate at the applicable time. The Alternative Base Rate is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50% and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00%. If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent. There were no outstanding borrowings under the October 2019 Credit Facility at December 31, 2020 and September 30, 2021. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10% on any unused amount of the October 2019 Credit Facility quarterly in arrears.

In April 2021, we entered into a $2.18 billion committed and secured revolving line of credit, subject to certain borrowing base limitations, with a maturity date of April 15, 2022 (the “April 2021 Credit Facility”). Borrowings from the April 2021 Credit Facility must be specified to be Tranche A, Tranche B, Tranche C or a combination thereof. Tranche A loans are secured by users’ securities and are used primarily to finance margin loans. Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC Margin Deposits and cash and property in a designated

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collateral account and used for the purpose of satisfying NSCC Deposit Requirements. Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the Borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Interest for this line of credit is determined at the time a loan is initiated and the applicable interest rate is calculated as a per annum rate equal to 1.25% for Tranche A loans and 2.50% for Tranche B and Tranche C loans, plus the Short-Term Funding Rate at the applicable time. The Short-Term Funding Rate is equal to the greatest of (i) the Eurodollar Rate for a one month interest period on such day, which equals to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate and (iii) the Overnight Bank Funding Rate in effect on such day. There were no outstanding borrowings under the April 2021 Credit Facility at September 30, 2021. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50% on any unused amount of the April 2021 Credit Facility quarterly in arrears.

All of the agreements for the September 2019 Credit Facility, October 2019 Credit Facility and April 2021 Credit Facility contain customary covenants restricting our ability to incur debt, incur liens and undergo certain fundamental changes. We were in compliance with all covenants under these facilities as of December 31, 2020 and September 30, 2021, as applicable.

Convertible Notes and Warrant Liability

Convertible Notes

In February 2021, we issued two tranches of convertible notes, consisting of $2.53 billion aggregate principal amount of Tranche I convertible notes and $1.02 billion aggregate principal amount of Tranche II convertible notes. Interest on the convertible notes accrued at 6% per annum, compounding semi-annually in arrears, and was payable in kind. The convertible notes did not have a maturity date.

In the event of a public offering of our common stock to the public in an IPO on a nationally-recognized exchange in the United States, resulting in at least $500 million of gross proceeds to us (a “Qualifying IPO”) before the 12 month anniversary of the convertible notes issuance date, the convertible notes were to automatically convert into shares of our Class A common stock at a conversion price equal to the lower of (i) 70% of the cash price per share paid by investors in the Qualifying IPO and (ii) $38.29 (in the case of the Tranche I convertible notes) or $42.12 (in the case of the Tranche II convertible notes).

As our IPO was a Qualifying IPO, upon completion, the aggregate outstanding principal and accrued interest of the convertible notes converted into 137.3 million shares of Class A common stock at a conversion price of $26.60 per share.

Warrant Liability

We granted to each purchaser of the Tranche I convertible notes a warrant, equal to 15% of the aggregate proceeds invested by such purchaser, to purchase a variable number of equity securities. In aggregate, the maximum purchase amount of all warrants is $379.8 million with a strike price that was to equal the lower of (i) 70% of the price per share in the Qualifying IPO and (ii) $38.29.

As our IPO was a Qualified IPO, upon completion, the warrants became exercisable for 14.3 million shares of Class A common stock at a strike price of $26.60. As a result, the warrant liability was reclassified to additional paid-in capital, as the warrants are now exercisable for a fixed number of shares. As of September 30, 2021, the warrants have not been exercised.

Off-Balance Sheet Risk

In the normal course of business, we engage in activities involving settlement and financing of securities transactions. User securities transactions are recorded on a settlement date basis, which is

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generally two business days after the trade date for equities and one business day after the trade date for options. These activities may expose us to off-balance sheet risk in the event that the other party to the transaction is unable to fulfill its contractual obligations. In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations.

NOTE 13: MEZZANINE EQUITY, COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY

Redeemable Convertible Preferred Stock

The following table is a summary of redeemable convertible preferred stock as of December 31, 2020:

(in thousands, except share data and per share amounts)
Series	Shares Authorized	Shares Issued and Outstanding	Per Share Liquidation Preference		Liquidation Amount		Per Share Initial Conversion Price		Carrying Value of Stock, Net of Issuance Costs
A	131,913,460	131,913,460	$	0.1954	$	25,777	$	0.1954	$	16,139
B	80,263,020	80,263,020	0.6354		50,999		0.6354		50,999
C	43,788,180	43,788,180	2.5121		110,000		2.5121		109,870
D	35,774,761	35,774,761	10.1450		362,935		10.1450		362,670
E	29,887,357	29,887,357	12.4827		373,075		12.4827		372,733
F	48,000,000	48,000,000	12.5000		600,000		12.5000		599,284
G	44,406,442	43,116,119	15.5000		668,300		15.5000		668,044
	414,033,220	412,742,897			$	2,191,086			$	2,179,739

In February 2021, we authorized 244.3 million shares of Series G-1 redeemable convertible preferred stock in connection with our convertible notes. No shares of Series G-1 were issued or outstanding immediately prior to our IPO.

Immediately prior to our IPO, all outstanding shares of redeemable convertible preferred stock were converted into shares of our Class A common stock on a one-to-one basis and their carrying value of $2.18 billion was reclassified into stockholders' equity. As such, there were no shares of redeemable convertible preferred stock authorized or issued and outstanding as of September 30, 2021.

Preferred Stock

Pursuant to our Charter, our Board of Directors may issue shares of our preferred stock in one or more series and, subject to the applicable law of the State of Delaware, our Board of Directors may set the powers, rights, preferences, qualifications, limitations and restrictions of such preferred stock.

Our Board of Directors has the power to issue our preferred stock with voting, conversion and exchange rights that could negatively affect the voting power or other rights of our common stockholders, and our Board of Directors could take that action without stockholder approval. The issuance of our preferred stock could delay or prevent a change in control of Robinhood. As of September 30, 2021, no terms of the preferred stock have been designated, no shares of preferred stock were outstanding and we have no present plan to issue any shares of preferred stock.

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Common Stock

Voting Rights

We have three classes of common stock: Class A, Class B, and Class C. Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law.

Conversion of Class B Common Stock

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. All Class B common stock will automatically convert (as a class) into Class A common stock upon the earliest of (i) the date and time specified by the affirmative vote of the holders of at least 80% of the then-outstanding shares of Class B common stock, voting separately as a class, (ii) the date fixed by our Board of Directors that is no less than 61 days and no more than 180 days following the date on which the number of then-outstanding shares of Class B common stock represents less than 5% of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, (iii) the date fixed by our Board of Directors that is no less than 61 days and no more than 180 days following the date that (A) each founder is no longer providing services to our Company as an officer, employee or consultant and (B) each founder is not a director of our Company as a result of a voluntary resignation by such founder from our Board of Directors or as a result of a written request or agreement by such founder not to be renominated as a director of our Company at an annual or special meeting of stockholders, (iv) nine months after the death or total disability of both founders (subject to a delay of up to 18 months as may be approved by a majority of our independent directors) or (v) August 2, 2036, the date that is 15 years from the completion of our IPO (the “Final Conversion Date”).

Shares of Class B common stock will also automatically convert into shares of Class A common stock upon sale or transfer except for certain permitted transfers described in our Charter. In addition, each share of Class B common stock held by a stockholder who is a natural person, or held by permitted transferees or permitted entities of such natural person (each as described in our Charter) will automatically convert into shares of Class A common stock nine months following the death or total disability of such natural person (subject to a delay of up to 18 months as may be approved by a majority of our independent directors). Notwithstanding the foregoing, in the event such natural person is a founder, to the extent (i) a person designated by such founder and approved by a majority of the independent directors then in office or (ii) the other founder, in each case, has or shares voting control over the shares of Class B common stock held by the deceased or disabled founder, such shares will be treated as being held of record by such person or other founder and will not convert into shares of Class A common stock as a result of such founder’s death or total disability.

Conversion of Class C Common Stock

Upon the conversion or exchange of all outstanding shares of our Class B common stock into shares of Class A common stock, each outstanding share of Class C common stock will convert automatically into one share of Class A common stock on the date or time fixed by our Board of Directors.

Dividend Rights

Subject to the rights of any holders of our preferred stock, the holders of our common stock will be entitled to receive ratable dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for the payment of dividends.

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Right to Receive Liquidation Distributions

If we liquidate, dissolve or wind up, after all liabilities and, if applicable, the holders of each series of our preferred stock have been paid in full, the holders of our common stock will be entitled to share ratably in all remaining assets.

No Preemptive or Similar Rights

Our common stock has no preemptive or conversion rights or other subscription rights. No redemption or sinking fund provisions are applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

Warrants

As of September 30, 2021, warrants outstanding consist of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $26.60 per share. The warrants expire on February 12, 2031. The warrants can be settled in cash or in net shares at the holder’s option. In the event of a cash settlement, the number of equity securities the holder will receive is equal to their maximum purchase amount divided by the strike price. In aggregate, the maximum purchase amount of all warrants is $379.8 million. As of September 30, 2021, the warrants have not been exercised and are included as a component of additional paid in capital on the unaudited condensed consolidated balance sheets.

Equity Incentive Plans

Amended and Restated 2013 Stock Plan and 2020 Equity Incentive Plan

Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”). Options could be granted with an exercise price per share not less than the fair market value at the date of grant. Options granted generally vest over a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter. Generally, options granted are exercisable for up to ten years from the date of grant. RSUs granted generally vest quarterly on a straight-line basis and expire seven years from the date of grant. Our 2013 Plan was terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Plan (defined below) but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms. Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan. No new awards may be granted under our 2013 Plan or 2020 Plan.

2021 Omnibus Incentive Plan

In June 2021, our Board of Directors and our stockholders approved and adopted our 2021 Omnibus Incentive Plan (the “2021 Plan”). Our 2021 Plan became effective on July 27, 2021, immediately prior to the effective date of the Final Prospectus. Our 2021 Plan provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.

The aggregate number of shares available for grant under the 2021 Plan was equal to approximately 14% of the number of shares of our common stock (of all classes) outstanding immediately upon the closing of the IPO. Thereafter, any shares subject to awards under the 2013 Plan, the 2020 Plan, or the 2021 Plan that expire or terminate or are forfeited to or repurchased by the Company will again become

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available under the 2021 Plan. In addition, the number of shares available under the 2021 Plan will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031. Such annual increase will be equal to the lesser of (i) 5% of the outstanding shares of all classes of our common stock on the last day of the immediately preceding calendar year and (ii) such number of shares determined by the Board of Directors.

As of September 30, 2021, an aggregate of 316.7 million shares have been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 62.9 million shares have been issued under the plans, 127.9 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 125.9 million shares remained available for new grants under the 2021 Plan.

Stock Option Activity

A summary of stock option activity for the nine months ended September 30, 2021 is as follows:

	Number of Shares	Weighted-Average Exercise Price		Weighted- Average Remaining Life	Total Intrinsic Value (in thousands)
Balance at December 31, 2020	21,543,828	$	2.19	6.52	$	304,590
Granted during the period	—	—
Exercised during the period	(5,819,965)	2.02
Cancelled and forfeited during the period	(276,657)	4.51
Balance at September 30, 2021	15,447,206	$	2.21	5.66	$	615,827
Options vested and expected to vest at September 30, 2021	15,447,206	$	2.21	5.66	$	615,827
Options exercisable at September 30, 2021	14,040,377	$	1.79	5.49	$	565,754

Time-Based RSUs

We grant RSUs that vest upon the satisfaction of a time-based service condition, and prior to our IPO, a performance-based condition (“Time-Based RSUs”). The following table summarizes the activity related to our Time-Based RSUs for the nine months ended September 30, 2021:

	Number of RSUs	Weighted- average grant date fair value
Unvested at December 31, 2020	47,711,649	$	10.84
Granted	28,635,488	40.76
Vested	(23,261,472)	17.94
Forfeited	(2,442,812)	24.37
Unvested at September 30, 2021	50,642,853	$	32.20

The fair value as of the respective vesting dates of Time-Based RSUs that vested during the three and nine months ended September 30, 2021 was $898.8 million. No Time-Based RSUs vested during 2020.

Market-Based RSUs

We granted 27.7 million market-based RSUs to our co-founders, Mr. Tenev and Mr. Bhatt, during the year ended December 31, 2019 that were modified in May 2021 (the “2019 Market-Based RSUs”). The awards become eligible to vest based on (i) achievement of share price targets considered market vesting conditions (approximately 5.6 million, 8.3 million, and 13.8 million RSUs vest upon achievement of share price targets of $30.45, $50.75, and $101.50, respectively, with the stock price targets initially measured

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based on our IPO price and, for all RSUs that did not vest upon IPO, measured based on the average of our Class A common stock’s volume weighted average trading price for each trading day during any 60 consecutive trading days), and (ii) continuous employment by each recipient through the vesting date, which is considered a service condition. Once the number of 2019 Market-Based RSUs eligible to vest has been determined based on the satisfaction of the 2019 Market-Based RSU share price target (the “Eligible 2019 Market-Based RSUs”), half of those Eligible 2019 Market-Based RSUs will immediately vest and be settled and the remaining half vest according to a quarterly time-based vesting condition, which is satisfied based on three-month service periods retroactive to August 1, 2018 through August 1, 2024, subject to continued service on each such vesting date during that period.

A total of approximately 5.6 million of the 2019 Market-Based RSUs became Eligible 2019 Market-Based RSUs in connection with our IPO. Of these, a total of 4.0 million vested immediately upon our IPO and the remainder will be subject to vesting in equal installments on each August 1, November 1, February 1 and May 1 through August 1, 2024.

Prior to the modification, any tranche of 2019 Market-Based RSUs that had not achieved its share price target upon IPO would have been forfeited. The modification allows the awards to continue to be measured against the same price targets as were outlined in the original 2019 grant though December 31, 2025. The amendment to the 2019 Market-Based RSUs was determined to be a modification of a market condition, therefore, we estimated the pre-modification and post-modification fair value of the awards to determine the incremental fair value generated by the modification. To value the awards, we used a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the price targets might not be satisfied. If the price targets are met sooner than the derived service period, we will adjust our share-based compensation expense to reflect the cumulative expense associated with the vested award. The 2019 Market-Based RSUs had a weighted-average grant date fair value of $0.29 per RSU. Upon modification, the weighted-average incremental fair value of the 2019 Market-Based RSUs was $21.01 per RSU.

In May 2021, we granted 35.5 millionadditional market-based RSUs to Mr. Tenev and Mr. Bhatt (the “2021 Market-Based RSUs” and together with the 2019 Market-Based RSUs, “Market-Based RSUs”) with a weighted-average grant date fair value of $22.68 per RSU. These awards vest based on (i) achievement of share price targets, considered a market condition, over a period of 8 years from issuance (4.5 million will vest upon achievement of each of the $120 and $150 share price targets, and 5.3 million will vest upon achievement of each of the $180, $210, $240, $270, and $300 share price targets, in each case, measured using the average of the volume weighted average trading price for each trading day during any 60 consecutive trading days), and (ii) continuous employment by each recipient through the vesting date, which is considered a service condition. We estimated the grant date fair value of the 2021 Market-Based RSUs using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the price targets might not be satisfied. If the price targets are met sooner than the derived service period, we will adjust our share-

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based compensation expense to reflect the cumulative expense associated with the vested award. As of September 30, 2021, none of the 2021 Market-Based RSUs had vested.

The following table summarizes the activity related to our Market-Based RSUs for the nine months ended September 30, 2021:

	Number of RSUs	Weighted- average grant date fair value
Unvested at December 31, 2020	27,663,658	$	0.29
Granted	35,520,000	22.68
Vested	(4,149,548)	2.34
Forfeited	—	—
Unvested at September 30, 2021	59,034,110	$	23.46

The fair value as of the respective vesting dates of Market-Based RSUs that vested during the three and nine months ended September 30, 2021 was $157.4 million. No Market-Based RSUs vested during 2020.

2021 Employee Share Purchase Plan

In June 2021, our Board of Directors and our stockholders approved and adopted the 2021 Employee Share Purchase Plan (the “ESPP”). Our ESPP became effective on July 27, 2021, immediately prior to the effective date of the Final Prospectus. The purpose of the ESPP is to enable eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation up to the statutory maximum. The purchase price is equal to 85% of the fair market value of a share of our common stock on the first date of an offering or the date of purchase, whichever is lower.

The aggregate number of shares reserved for issuance under the ESPP was equal to approximately 2% of the number of shares of our common stock (of all classes) outstanding upon the closing of the IPO. The number of shares available under our ESPP will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031. Such annual increase will be equal to the lesser of (i) 1% of the outstanding shares of all classes of our common stock on the last day of the immediately preceding calendar year and (ii) such number of shares determined by the Board of Directors. No more than 200.0 million shares of common stock may be issued under our ESPP.

As of September 30, 2021, no purchases had been made and approximately 17.0 million shares were available for future issuance under the ESPP.

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Share-Based Compensation

The following table presents share-based compensation in our unaudited condensed consolidated statements of operations for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2021		2020		2021
Brokerage and transaction	$	6	$	6,405	$	18	$	6,417
Technology and development	992		502,748		3,532		504,773
Operations	5		16,410		23		16,416
Marketing	40		40,966		55		41,044
General and administrative	528		677,785		1,720		685,798
Total	$	1,571	$	1,244,314	$	5,348	$	1,254,448

Included in the table above, we recorded share-based compensation expense of $907.3 million related to Time-Based RSUs, $360.9 million related to Market-Based RSUs, and $1.8 million related to the ESPP during the three and nine months ended September 30, 2021. No share-based compensation was recorded in 2020 related to Time-Based RSUs, Market-Based RSUs, or the ESPP.

We capitalized share-based compensation expense related to internally developed software of nil and $0.6 million during the three and nine months ended September 30, 2020, and $19.9 million and $20.0 million during the three and nine months ended September 30, 2021.

In March 2021, we modified certain Time-Based RSUs of approximately 500 employees to remove the one-year vesting cliff, considered to be an improbable to improbable modification. The modified RSUs were revalued at the modification date, and the modified grant date fair value of the awards of $39.75 per share was used to calculate share-based compensation expense.

As of September 30, 2021, there was $2.17 billion of unrecognized share-based compensation expense that is expected to be recognized over a weighted-average period of 2.56 years.

NOTE 14: NET LOSS PER SHARE

We present net loss per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are

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allocated on a proportionate basis and the resulting loss per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis.

The following table presents the calculation of basic and diluted loss per share:

(in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2021		2020		2021
Net loss	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Less: allocation of earnings to participating securities	—		—		—		—
Net loss attributable to common stockholders	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Weighted-average common stock outstanding - basic	225,997,444		638,168,188		225,299,165		368,518,894
Dilutive effect of stock options and unvested shares	—		—		—		—
Weighted-average common stock outstanding - diluted	225,997,444		638,168,188		225,299,165		368,518,894
Net loss per share attributable to common stockholders:
Basic	$	(0.05)	$	(2.06)	$	(0.02)	$	(8.85)
Diluted	$	(0.05)	$	(2.06)	$	(0.02)	$	(8.85)

The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2021	2020	2021
Redeemable convertible preferred stock	412,742,897	—	412,742,897	—
RSUs	65,598,613	112,492,359	65,598,613	112,492,359
Stock options	24,836,871	15,447,206	24,836,871	15,447,206
Unvested shares	306,966	65,435	306,966	65,435
Warrants	—	14,278,034	—	14,278,034
ESPP shares	—	93,738	—	93,738
Total anti-dilutive securities	503,485,347	142,376,772	503,485,347	142,376,772

NOTE 15: RELATED PARTY TRANSACTIONS

Related party transactions may include any transaction between entities under common control or with a related party. We have defined related parties as members of the Board of Directors, executive officers, principal owners of our outstanding stock and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates.

In February 2021, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities - see Note 12. Two of the Tranche I

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investors were related parties prior to the completion of our IPO. Their respective aggregate outstanding principal and accrued interest of their convertible notes automatically converted into shares of Class A common stock upon the closing of our IPO.

NOTE 16: COMMITMENTS & CONTINGENCIES

Commitments

Leases

Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park and our office in New York City. Our leases have remaining terms of 1 to 12 years, and many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. We do not have any finance leases. As of December 31, 2020 and September 30, 2021 we had $49.2 million and $158.1 million of operating right-of-use assets included as non-current assets and $54.1 million and $154.5 million of operating lease liabilities: $6.1 million and $20.2 million included as other current liabilities and $48.0 million and $134.3 million as other non-current liabilities on the unaudited condensed consolidated balance sheets.

As of September 30, 2021, we have an executed operating lease that has not yet commenced for office facilities that will commence by December 2021. Under the terms of the lease, we will have the right to construct tenant improvements to the underlying asset upon commencement.

The components of lease expense were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2021		2020		2021
Fixed operating lease costs	$	2,971	$	7,115	$	8,034	$	15,905
Variable operating lease costs	791		1,232		2,218		3,684
Short-term lease costs	266		457		579		1,067
Total lease costs	$	4,028	$	8,804	$	10,831	$	20,656

Fixed operating lease costs primarily consist of monthly base rent amounts due. Variable operating lease costs are primarily related to payments made to our landlords for common area maintenance, property taxes, insurance, and other operating expenses.

Other information related to our operating leases was as follows:

	December 31,		September 30,
	2020		2021
Weighted-average remaining lease term	5.41 years		7.46 years
Weighted-average discount rate	7.02	%	6.27	%

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Cash flows related to leases were as follows:

	Nine Months Ended September 30,
(in thousands)	2020		2021
Operating cash flows:
Payments for operating lease liabilities	$	11,238	$	240
Supplemental cash flow data:
Lease liabilities arising from obtaining right-of-use assets	$	14,991	$	96,519

Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of September 30, 2021 are as follows:

(in thousands)
Remainder of 2021	$	5,807
2022	32,646
2023	34,821
2024	33,355
2025	32,436
Thereafter	125,724
Total undiscounted lease payments	264,789
Less: imputed interest	(44,385)
Less: lease incentives	(12,682)
Less: leases executed but not yet commenced	(53,185)
Total lease liabilities	$	154,537

Contingencies

Legal and Regulatory Matters

The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increasing incidence of litigation involving the brokerage industry, including class action suits that generally seek substantial damages. Damages may include, in some cases, punitive damages. Compliance and trading problems that are reported to federal and state regulators, exchanges, or other self-regulatory organizations (“SROs”) by dissatisfied customers are investigated by such regulatory bodies, and, if pursued by such regulatory body or such customers, may rise to the level of arbitration or disciplinary action. We are also subject to periodic regulatory audits and inspections.

Like other brokerage firms, we have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings.

The outcomes of legal and regulatory matters are inherently uncertain and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation.

We record an accrual for legal and regulatory matters at management’s best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. Amounts accrued for legal and regulatory contingencies in the aggregate were $39.5 million as of December 31, 2020 and $33.1 million as of September 30, 2021. With respect to matters discussed

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below for which no accrual has been made or which have a potential loss in excess of amounts accrued, we believe, based on current knowledge, that any losses or ranges of losses (in excess of amounts accrued, if applicable) as of September 30, 2021 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments, estimates, and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims.

Described below are certain historical matters as well as certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend the pending matters vigorously.

Best Execution, Payment for Order Flow, and Sources of Revenue Matters

In May 2019, the SEC’s Division of Enforcement (“Enforcement Division”) commenced an investigation into RHF’s best execution and payment for order flow (“PFOF”) practices, as well as statements concerning its sources of revenue, including the fact that, in FAQs on our website describing how it made money, and in certain communications with customers addressing the same issue, RHF had omitted PFOF when it described its revenue sources. On December 17, 2020, RHF, on a neither admit nor deny basis, consented to the entry of an SEC order (i) requiring RHF to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 17(a) of the Exchange Act and Rule 17a-4 thereunder; (ii) censuring RHF; and (iii) requiring RHF to pay a $65 million civil penalty in December 2020. RHF paid the $65 million penalty in cash and also agreed to engage an independent compliance consultant.

Beginning in December 2020, seven putative securities fraud class action lawsuits have been filed against RHM, RHF and/or RHS. The lawsuits generally allege that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). One of the cases was voluntarily dismissed without prejudice and five cases have been consolidated under the caption Inre Robinhood Order Flow Litigation in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in In re Robinhood Order Flow Litigation in May 2021, asserting a claim for violations of Section 10(b) of the Securities Exchange Act of 1934 and various state law causes of action, and seeking damages, restitution, disgorgement and other relief. In June 2021, we filed a motion to dismiss the amended consolidated complaint and a motion to deny class certification, which remain pending. The final lawsuit, filed in the United States District Court for the Southern District of Florida against RHF as well as several market makers, alleges that RHF breached its fiduciary duties to customers and that the market makers aided and abetted RHF’s breach. In October 2021, RHF and the market-maker defendants moved to transfer the case to the Northern District of California, or in the alternative, to dismiss the complaint.

March 2020 Outages

Beginning in March 2020, 15 putative class actions and one individual action were filed against RHM, RHF and RHS in state and federal district courts relating to service outages on our stock trading platform on March 2-3, 2020 and March 9, 2020 (the “March 2020 Outages”). One of the putative class actions and the individual action were voluntarily dismissed following settlements between the parties. Thirteen of the remaining putative class actions have been consolidated as Inre Robinhood Outage Litigation in the United States District Court for the Northern District of California. The one remaining putative class action has been stayed by agreement of the parties. The lawsuits generally allege that putative class members were unable to execute trades during the March 2020 Outages because our platform was inadequately

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designed to handle customer demand and RHM, RHF, and RHS failed to implement appropriate backup systems. The lawsuits include, among other things, claims for breach of contract, negligence, gross negligence, breach of fiduciary duty, unjust enrichment and violations of certain California consumer protection statutes. The lawsuits generally seek damages, restitution, and/or disgorgement, as well as declaratory and injunctive relief. In October 2021, plaintiffs filed a motion for class certification, which RHM, RHF, and RHS intend to oppose.

We also received notice that approximately 1,600 jointly represented customers may pursue arbitration of individual claims against us arising out of the March 2020 Outages, in addition to other alleged system outages. In September 2021, approximately 400 of those customers initiated an arbitration through Financial Industry Regulatory Authority (“FINRA”) Dispute Resolution.

The SEC Division of Examinations (“Examinations Division”) conducted an examination and identified a deficiency, to which RHF responded, with respect to RHF’s creation of a reasonably designed business continuity plan. In addition, FINRA conducted an investigation and certain state regulatory authorities are conducting investigations, regarding the March 2020 Outages and related procedures. RHF and RHS are cooperating with the requests from these regulators and RHF entered into a settlement with FINRA with respect to certain matters. See “—FINRA Multi-Matter Settlement” below for more information.

Options Trading and Related Customer Communications and Displays

The SEC Examinations Division conducted an examination and identified deficiencies, to which RHF responded, with respect to account takeovers, identity theft in connection with new account opening, processes for approving or rejecting certain accounts for options trading and customer support response times. Certain state regulatory authorities are conducting investigations regarding RHF’s options trading and related customer communications and displays and options trading approval process. RHF is cooperating with the regulators’ requests. FINRA also conducted an investigation and reached a settlement with RHF regarding the same options trading issues.

In February 2021, the family of Alexander Kearns, a Robinhood customer who traded options, filed a lawsuit in the Superior Court of the State of California, County of Santa Clara, against RHF, RHS and RHM in connection with Mr. Kearns’s death by suicide in June 2020. This matter was dismissed with prejudice following a settlement between the parties.

FINRA Multi-Matter Settlement

On June 30, 2021, RHF resolved with FINRA, on a no admit, no deny basis, certain investigations and examinations, including investigations into systems outages, RHF’s options product offering, and margin-related communications with customers, among others. The resolution did not address all the matters FINRA is investigating, including those relating to the Early 2021 Trading Restrictions (as defined below), account takeovers and anti-money laundering issues, RHS’s fractional shares trade reporting, customer support procedures or customer arbitration agreements. RHF and RHS will continue to cooperate with FINRA on these matters. The resolution involved the following components: (i) charges of violations of FINRA rules; (ii) a fine of $57.0 million; (iii) customer restitution of approximately $12.6 million; (iv) a censure; and (v) engagement of an independent consultant. In July 2021, we paid the $57.0 million penalty in cash. As of September 30, 2021, we had paid substantially all of the customer restitution.

RHC Anti-Money Laundering, Cybersecurity, and Other Issues

In July 2020, the New York State Department of Financial Services (“NYDFS”) issued a report of its examination of RHC citing a number of “matters requiring attention” focused primarily on anti-money laundering and cybersecurity-related issues. The matter was subsequently referred to the NYDFS’s Consumer Protection and Financial Enforcement Division for investigation. In March 2021, the NYDFS informed RHC of alleged violations of applicable (i) anti-money laundering and New York Banking Law

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requirements, including the failure to maintain and certify a compliant anti-money laundering program, (ii) notification provisions under RHC’s Supervisory Agreement with the NYDFS, and (iii) cybersecurity and virtual currency requirements, including deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security. RHC and the NYDFS have reached a settlement in principle with respect to these allegations, subject to final documentation, in connection with which, among other things, RHC expects to pay a monetary penalty and engage a monitor.

Additionally, in April 2021, the California Attorney General’s Office issued an investigative subpoena to RHC, seeking documents and answers to interrogatories about RHC’s trading platform, business and operations, application of California’s commodities regulations to RHC and other matters. RHC is cooperating with this investigation. We cannot predict the outcome of this investigation or any consequences that might result from it.

Account Takeovers

In November 2020, FINRA Enforcement commenced an investigation into RHF concerning account takeovers, or circumstances under which an unauthorized actor successfully logs into a customer account, as well as anti-money laundering and cybersecurity issues. Since February 2021, RHF has received requests for documents and information from the SEC’s Enforcement Division in connection with its investigation into account takeovers and, more recently, suspicious activity report filings and issues related to the Electronic Funds Transfer Act. Additionally, state regulators, including the New York Attorney General’s Office, have opened inquiries into RHM, RHF and RHC related to account takeovers. RHM, RHF and RHC are cooperating with these investigations and inquiries. The SEC’s Examinations Division also conducted an examination and identified deficiencies, to which RHF responded, with respect to, among other things, account takeovers and identity theft in connection with new account opening.

In January 2021, a putative class action was filed in California Superior Court (Santa Clara County) against RHF and RHS by Siddharth Mehta, purportedly on behalf of approximately 2,000 Robinhood customers whose accounts were allegedly accessed by unauthorized users. RHF and RHS removed this action to the United States District Court for the Northern District of California. Plaintiffs generally allege that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seek monetary damages and injunctive relief. In March 2021, RHF and RHS filed a motion to dismiss the amended complaint, which was granted in part and denied in part in May 2021. A second amended complaint was filed by the plaintiffs in May 2021. In June 2021, RHF and RHS filed a motion to dismiss the second amended complaint, which was granted in part and denied in part in September 2021.

Massachusetts Securities Division Matter

In December 2020, the Enforcement Section of the Massachusetts Securities Division (“MSD”) filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleges three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020. Among other things, the MSD alleges that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws. The initial complaint seeks, among other things, injunctive relief (seeking a permanent cease and desist order), censure, unspecified restitution, unspecified disgorgement, the appointment of an independent consultant and an unspecified administrative fine. The amended complaint also seeks revocation of RHF's license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers’ accounts to other broker-dealers. Additionally, revocation of

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RHF’s Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF’s registration by other state regulators. A revocation of RHF’s license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs.

In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In May 2021, the state court denied RHF’s motion for a preliminary injunction, finding that RHF would not suffer irreparable harm if MSD proceeded with the pending administrative action, but determined that RHF may seek a declaration that the disputed regulation is unlawful without first exhausting its remedies in the administrative action. In June 2021, the state court declined to stay the entire matter pending resolution of the administrative proceeding, finding that RHF is entitled to have the state court decide certain of its challenges to the Massachusetts fiduciary standard without waiting for the MSD to complete its administrative proceeding. In September 2021, the parties filed cross-motions for partial judgment on the pleadings and those motions are pending. RHF has engaged in settlement discussions with the MSD at certain times since the MSD filed its initial complaint, however, such negotiations have not been successful and RHF is currently not engaged in any such settlement discussions with the MSD.

Pinchasov v. Robinhood Financial LLC

In November 2020, plaintiff Shterna Pinchasov filed a putative class action in the Circuit Court of the 11th Judicial Circuit of Florida in and for Miami-Dade County asserting claims of negligence and breach of fiduciary duty based on allegations that RHF failed to prevent customers from using its interface for stocks that were subject to a “T1 Halt,” and seeking damages. Securities exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market, have the authority to halt and delay trading in a security, and a “T1 Halt” (or regulatory halt) may occur pending the release of material news about a company.

RHF removed this action to the U.S. District Court for the Southern District of Florida. In August 2021, plaintiff filed a motion for class certification. In September 2021, the court denied plaintiff’s motion, and a subsequent motion for reconsideration. In October 2021, plaintiff filed a petition for permission to appeal the denial of class certification, which RHF opposed.

Text Message Litigation

In October 2019, a putative class action was filed by Isaac Gordon against RHF and RHM in the Superior Court for the State of Washington, County of Spokane. The complaint alleged that RHF and RHM initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington State law. The action was removed to the Eastern District of Washington. In January 2021, the court granted the plaintiff’s motion for class certification. In June 2021, RHF filed a motion to decertify the class and disqualify class counsel. In July 2021, the court granted RHF’s motion to decertify the class, denied the motion to disqualify class counsel, and remanded the case to state court.

In August 2021, a new, substantially similar putative class action was filed by Cooper Moore against RHF in the U.S. District Court for the Northern District of California. In September 2021, RHF filed motions to transfer the case to the Western District of Washington and to dismiss the complaint. In October 2021, the court granted the motion to transfer the case and declined to rule on the motion to dismiss.

Early 2021 Trading Restrictions Matters

Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily

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restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the “Early 2021 Trading Restrictions”).

Approximately 55 putative class actions and four individual actions have been filed against one or more of RHM, RHF and RHS in various federal and state courts relating to the Early 2021 Trading Restrictions. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion filed by certain plaintiffs to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida captioned In re: January 2021 Short Squeeze Trading Litigation (the “MDL”). In May 2021, the court appointed interim lead plaintiffs’ counsel for certain claims. In July 2021, interim lead plaintiffs’ counsel filed two consolidated complaints seeking monetary damages: the first complaint asserts a federal antitrust claim; the second complaint asserts negligence and breach of fiduciary duty claims. In August 2021, defendants moved to dismiss both of these consolidated complaints. In September 2021, interim lead plaintiffs’ counsel filed an amended consolidated complaint against RHM, RHF and RHS for the negligence and breach of fiduciary duty claims, adding new claims for tortious interference with contract and business relationship, civil conspiracy and breach of the covenant of good faith and fair dealing and implied duty of care. In October 2021, RHM, RHF and RHS moved to dismiss the amended consolidated complaint for the state law claims. Additionally, the court appointed a lead plaintiff and lead counsel for federal securities claims pursuant to the Private Securities Litigation Reform Act of 1995, which will proceed separately.

RHM, RHF, RHS and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the U.S. Department of Justice, Antitrust Division, the SEC staff, FINRA, the New York Attorney General’s Office, other state attorneys general offices and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’s cell phone. There have been several inquiries based on specific customer complaints. We have also received inquiries from the SEC’s Division of Examinations and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include inquiries related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021. FINRA has also requested information about policies, procedures, and supervision related to employee trading generally. In addition, we have received information and testimony requests from certain committees and members of the U.S. Congress and Mr. Tenev, among others, has provided or will provide testimony with respect to the Early 2021 Trading Restrictions. We are cooperating with these investigations and examinations.

“For You” Document Request

In May 2021, the SEC’s Enforcement Division issued a request to RHM and RHF seeking documents and information related to the “For You” feature, which was available in the past on our website only and is not currently an active product offering on our website or platform, and other features displaying lists of securities to customers. In October 2021, RHF also received a request from FINRA for information about the “For You” feature. Robinhood is cooperating with these inquiries staff’s investigation.

Dansberger v. Robinhood Securities

In June 2021, RHS was sued by Thomas Dansberger on behalf of a putative class in the Circuit Court for Seminole County in Florida seeking monetary damages as well as declaratory and injunctive relief. Mr. Dansberger purports to represent “All Florida residents who purchased Robinhood Gold on or by January 21, 2021 and (b) who were not able to buy or sell cryptocurrencies on January 21, 2021.” The plaintiff alleged that RHS engaged in unfair and deceptive trade practices by advertising and marketing that Robinhood Gold would provide access for customers to buy and sell cryptocurrencies but failed to do so

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on January 28, 2021 when it allegedly halted the buying and selling of cryptocurrencies. In August 2021, the case was dismissed following a settlement in principle.

Registration Requirements for Member Personnel

In July 2021, RHF received a FINRA investigative request seeking documents and information related to its compliance with FINRA registration requirements for member personnel, including related to the FINRA non-registration status of Mr. Tenev and Co-Founder and Chief Creative Officer Mr. Bhatt. Robinhood is evaluating this matter and is cooperating with the investigation.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section presents management’s perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report on Form 10-Q, and should be read in conjunction with our interim unaudited condensed consolidated financial statements and notes elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2020 included in the final prospectus dated July 28, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on July 30, 2021 (the “Final Prospectus”). It is also intended to provide you with information that will assist you in understanding our consolidated financial statements, the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted for those changes. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which might not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Data as of and for the three and nine months ended September 30, 2020 and 2021 has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report on Form 10-Q. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.

We refer to our “users” and our “customers” interchangeably throughout this Quarterly Report on Form 10-Q to refer to individuals who hold accounts on our platform. However, because we do not have contracts, as defined in ASC 606, Revenue from Contracts with Customers, with our users, our users do not meet the definition of “customer” for purposes of the accounting rules. See “—Revenue Recognition” in Note 1 to our audited consolidated financial statements included in the Final Prospectus.

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Overview

Robinhood was founded on the belief that everyone should be welcome to participate in our financial system. We are creating a modern financial services platform for everyone, regardless of their wealth, income, or background. We build relationships with our customers by introducing new products with compelling value propositions that further expand access to the financial system.

Our mission to democratize finance for all drives our revenue model. We pioneered commission-free trading with no account minimums, giving smaller investors access to the financial markets. Many of our customers are getting started with less, which often means they’re trading a smaller number of shares. Rather than earning revenue from fixed trading commissions which, before Robinhood introduced commission free trading, had often ranged from $8 to $10 per trade, the majority of our revenue is transaction-based revenues earned from routing option, cryptocurrency and equity orders to market makers.

We also earn net interest revenues, primarily from our securities lending program and interest earned on margin lending and cash deposits, net of borrowing costs related to our revolving lines of credit. We also earn subscription revenue from our Robinhood Gold product.

With respect to the three months ended September 30, 2021, as compared to the three months ended September 30, 2020:

•we generated total net revenues of $365 million compared to $270 million, for year-over-year growth of 35%;

•we incurred a net loss of $1.32 billion, which included$1.24 billion of share-based compensation expense, compared to a net loss of $11 million;

•our Adjusted EBITDA was negative $84 million compared to positive $59 million;

•we had Net Cumulative Funded Accounts of 22.4 million compared to 11.4 million, for year-over-year growth of 97%;

•we had Monthly Active Users (MAU) of 18.9 million compared to 10.7 million, for year-over-year growth of 76%;

•we had Assets Under Custody (AUC) of $95 billion compared to $44 billion, for year-over-year growth of 115%;

•we had Average Revenues Per User (ARPU) of $65 compared to $102, for a year-over-year decrease of 36%; and

•we saw crypto trading activity on our platform increase significantly year-over-year but decline sequentially from record highs in the second quarter of 2021, leading to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in the third quarter of 2021, as compared to the second quarter of 2021.

For definitions of “Net Cumulative Funded Accounts”, “MAU”, “AUC” and “ARPU” please see “—Key Performance Metrics.” Adjusted EBITDA is a non-GAAP financial measure. For more information about Adjusted EBITDA, including the definition and limitations of such measure, and a reconciliation of net income (loss) to Adjusted EBITDA, please see “—Non-GAAP Financial Measures.”

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Key Performance Metrics

In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key performance metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions:

	Three Months or Month Ended September 30,
(in millions except ARPU)	2020		2021
Net Cumulative Funded Accounts(1)	11.4		22.4
Monthly Active Users (MAU)(2)	10.7		18.9
Assets Under Custody (AUC)(3)	$	44,445.6	$	95,389.9
Average Revenues Per User (ARPU)(4)	$	101.9	$	65.0

________________

(1)We define Net Cumulative Funded Accounts as the total of Net Funded Accounts from inception to a stated date or period end. “Net Funded Accounts” is the total number of Funded Accounts for a stated period, excluding “churned users” and including “resurrected users” as of the end of that period. A “Funded Account” is a Robinhood account into which the account user makes an initial deposit or money transfer, of any amount, during the relevant period, which account is designed to provide a customer with access to any and all of the products offered on our platform. Users are considered “churned” if their accounts were previously Funded Accounts and their account balance (which is measured as the fair value of assets in the user’s account less the amount due from the user) drops to or below zero dollars (which negative balances typically result from Fraudulent Deposit Transactions and, less often, from margin loans) for 45 consecutive calendar days. Users are considered “resurrected” if they were considered churned users during and as of the end of the immediately preceding period, and had their account balance increase above zero (and are not considered churned users) in the current period. “Fraudulent Deposit Transactions” occur when users initiate deposits into their accounts, make unsuccessful trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount. For more information about Fraudulent Deposit Transactions, see “—Key Components of our Results of Operations—Operating Expenses—Operations” below.

	Three Months Ended  September 30,
(in millions)	2020	2021
Beginning balance	9.8	22.5
New funded accounts	1.9	0.7
Resurrected accounts	0.1	0.1
Churned accounts	(0.4)	(0.9)
Ending balance	11.4	22.4

(2)We define MAU as the number of Monthly Active Users during a specified calendar month. A “Monthly Active User” is a unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month. A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU. Figures in the table reflect MAU for the last month of each period presented. We utilize MAU to measure how many customers interact with our products and services during a given month. MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement. Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.

(3)We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of customer margin balances, as of a stated date or period end on a trade date basis. The following table sets out the components of AUC by type of asset:

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	September 30,
(in millions)	2020		2021
Equities	$	37,727.6	$	69,185.7
Options	1,355.6		1,403.4
Cryptocurrencies	1,064.0		22,233.9
Cash held by users	6,617.4		8,784.3
Customer margin balances	(2,319.0)		(6,217.4)
Assets Under Custody (AUC)	$	44,445.6	$	95,389.9

Net Deposits and net market gains drive the change in AUC in any given period. We define “Net Deposits” as all cash deposits received from customers net of reversals, customer cash withdrawals and other equity and cash amounts transferred out of our platform (including in connection with debit card transactions and account transfers out of our platform through the Automated Customer Account Transfer Service (“ACATS”)) for a stated period.

	Three Months Ended September 30,
(in millions)	2020		2021
Beginning balance	$	33,421.5	$	102,034.8
Net Deposits	8,569.8		2,269.6
Net market gains (losses)	2,454.3		(8,914.5)
Ending balance	$	44,445.6	$	95,389.9

(4)We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period. Figures presented above represent annualized ARPU for each three-month period presented.

Non-GAAP Financial Measures

Adjusted EBITDA

We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance. In addition to total net revenues, net income (loss), and other results under GAAP, we utilize non-GAAP calculations of adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) share-based compensation, (v) change in fair value of convertible notes and warrant liability, (vi) significant legal and tax settlements, reserves and expenses, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results. This non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for or superior to financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, is not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting. The following table presents a reconciliation of net income (loss), which is the most directly comparable GAAP measure, to Adjusted EBITDA:

46

	Three Months Ended  September 30,				Nine Months Ended September 30,
(in thousands)	2020		2021		2020		2021
Net loss	$	(10,661)	$	(1,316,697)	$	(5,579)	$	(3,263,165)
Add:
Interest expenses related to credit facilities	875		6,252		3,934		14,319
Provision for (benefit from) income taxes	(333)		(50,244)		115		(958)
Depreciation and amortization	2,659		7,040		6,572		15,734
EBITDA (non-GAAP)	(7,460)		(1,353,649)		5,042		(3,234,070)
Share-based compensation	1,571		1,244,314		5,348		1,254,448
Change in fair value of convertible notes and warrant liability	—		25,336		—		2,045,657
Significant legal and tax settlements, reserves, and expenses	65,000		—		65,000		54,910
Adjusted EBITDA (non-GAAP)	$	59,111	$	(83,999)	$	75,390	$	120,945

Key Factors Driving Our Performance

Growing Our Customer Base

Sustaining our growth requires continued adoption of our platform by new customers. We will continue to introduce products and features t