UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

______________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ________ to ________

Commission File Number: 001-40691

______________________

Robinhood Markets, Inc.

(Exact name of registrant as specified in its charter)

______________________

Delaware	46-4364776
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

85 Willow Rd

Menlo Park, CA 94025

(Address of principal executive offices, including zip code)

(844) 428-5411

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock - $0.0001 par value per share	HOOD	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  o    No  ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý Smaller reporting company  ☐ Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  ☒

As of August 16, 2021, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 725,288,102 and 130,155,246.

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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 INCOME (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	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	56
ITEM 4.	CONTROLS AND PROCEDURES	57
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	58
ITEM 1A.	RISK FACTORS	59
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	133
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	135
ITEM 4.	MINE SAFETY DISCLOSURES	135
ITEM 5.	OTHER INFORMATION	135
ITEM 6.	EXHIBIT INDEX	136
	SIGNATURES	138

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of the federal securities laws, which statements 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 “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. These forward-looking statements include statements about:

•our estimates of the size of our market opportunities;

•our ability to effectively manage our growth;

•our ability to successfully enter new markets, including any expansion into international markets, and comply with any applicable laws and regulations;

•our ability to invest in and develop our products and services to operate with changing technology;

•the expected benefits of our products to our customers and the impact of our products on our business;

•the effects of increased competition from our market competitors;

•the success of our marketing efforts and the ability to grow brand awareness and maintain, protect and enhance our brand;

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

•our ability to attract and retain our customers;

•our ability to maintain the security and availability of our platform;

•our ability to attract and retain key personnel and highly qualified personnel;

•our expectations regarding the impacts of accounting guidance;

•our expectations regarding litigation and regulatory proceedings;

•our expectations regarding share-based compensation;

•our ability to collect, store, share, disclose, transfer, receive, use and otherwise process customer information and other data, and compliance with laws, rules and regulations related to data privacy, protection and security;

•our ability to comply with modified or new laws and regulations applying to our business, and potential harm to our business as a result of those laws and regulations;

•the impact of adverse economic conditions;

•our expectations regarding the continuing impact of COVID-19 on our business;

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•our expectations regarding the loss of our status as an emerging growth company;

•our anticipated uses of net proceeds from our initial public offering (“IPO”);

•the increased expenses associated with being a public company; and

•other statements described in this Quarterly Report on Form 10-Q under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and trends that we believe may affect, among other things, our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon these forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by law.

You should read this Quarterly Report on Form 10-Q and the documents that we reference within it with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

3

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,		June 30,
(in thousands, except share and per share data)	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	1,402,629	$	5,077,752
Cash and securities segregated under federal and other regulations	4,914,660		5,374,594
Receivables from brokers, dealers and clearing organizations	124,501		209,792
Receivables from users, net	3,354,142		5,423,643
Deposits with clearing organizations	225,514		272,204
Other current assets	851,138		1,542,902
Total current assets	10,872,584		17,900,887
Property, software and equipment, net	45,834		71,078
Restricted cash	7,364		17,273
Non-current assets	62,692		99,344
Total assets	$	10,988,474	$	18,088,582
Liabilities, mezzanine equity and stockholders’ deficit
Current liabilities:
Accounts payable and accrued expenses	$	104,649	$	292,851
Payables to users	5,897,242		7,768,181
Securities loaned	1,921,118		2,642,900
Other current liabilities	893,036		1,536,344
Total current liabilities	8,816,045		12,240,276
Convertible notes	—		5,189,783
Other non-current liabilities	48,012		463,548
Total liabilities	8,864,057		17,893,607
Commitments and contingencies (Note 14)
Mezzanine equity
Redeemable convertible preferred stock, $0.0001 par value. 414,033,220 and 658,311,424 authorized at December 31, 2020 and June 30, 2021. 412,742,897 issued and outstanding at December 31, 2020 and June 30, 2021. Liquidation preference of $2,191,086 at December 31, 2020 and June 30, 2021.	2,179,739		2,179,739
Stockholders’ deficit:
Common stock, $0.0001 par value, 777,354,000 and 1,057,152,204 shares authorized at December 31, 2020 and June 30, 2021. 229,031,546 and 232,609,957 shares issued and outstanding at December 31, 2020 and June 30, 2021.	1		1
Additional paid-in capital	134,307		151,281
Accumulated other comprehensive income	473		525
Accumulated deficit	(190,103)		(2,136,571)
Total stockholders’ deficit	(55,322)		(1,984,764)
Total liabilities, mezzanine equity and stockholders’ deficit	$	10,988,474	$	18,088,582

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	2020		2021		2020		2021
Revenues:
Transaction-based revenues	$	187,413	$	451,167	$	283,044	$	871,606
Net interest revenues	39,998		67,709		64,014		130,206
Other revenues	16,800		46,457		24,703		85,695
Total net revenues	244,211		565,333		371,761		1,087,507
Operating expenses:
Brokerage and transaction	28,612		37,812		49,016		78,816
Technology and development	44,971		156,347		78,176		273,205
Operations	30,464		101,065		52,277		167,629
Marketing	43,510		94,159		113,432		196,407
General and administrative	38,636		111,346		73,287		248,460
Total operating expenses	186,193		500,729		366,188		964,517
Change in fair value of convertible notes and warrant liability	—		528,052		—		2,020,321
Other expense (income), net	(100)		710		43		(149)
Income (loss) before income tax	58,118		(464,158)		5,530		(1,897,182)
Provision for income taxes	534		37,507		448		49,286
Net income (loss)	$	57,584	$	(501,665)	$	5,082	$	(1,946,468)
Net income (loss) attributable to common stockholders:
Basic	$	22,783	$	(501,665)	$	2,050	$	(1,946,468)
Diluted	$	22,783	$	(501,665)	$	2,050	$	(1,946,468)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.10	$	(2.16)	$	0.01	$	(8.41)
Diluted	$	0.09	$	(2.16)	$	0.01	$	(8.41)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic	225,091,413		232,223,019		224,953,736		231,459,227
Diluted	244,338,145		232,223,019		244,539,192		231,459,227

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2021		2020		2021
Net income (loss)	$	57,584	$	(501,665)	$	5,082	$	(1,946,468)
Other comprehensive income (loss), net of tax:
Foreign currency translation	(42)		23		(174)		52
Total other comprehensive income (loss), net of tax	(42)		23		(174)		52
Total comprehensive income (loss)	$	57,542	$	(501,642)	$	4,908	$	(1,946,416)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

6

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
(in thousands)	2020		2021
Operating activities:
Net income (loss)	$	5,082	$	(1,946,468)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	3,913		8,694
Provision for credit losses	23,933		36,745
Share-based compensation	3,777		10,134
Deferred income taxes	(88)		1
Change in fair value of convertible notes and warrant liability	—		2,020,321
Other	19		—
Changes in operating assets and liabilities:
Segregated securities under federal and other regulations	—		(214,990)
Receivables from brokers, dealers and clearing organizations	(116,703)		(85,291)
Receivables from users, net	(769,581)		(2,104,430)
Deposits with clearing organizations	(113,112)		(46,690)
Other current and non-current assets	(156,252)		(730,233)
Accounts payable and accrued expenses	18,248		182,214
Payables to users	2,913,253		1,870,939
Securities loaned	91,468		721,782
Other current and non-current liabilities	159,206		676,393
Net cash provided by operating activities	2,063,163		399,121
Investing activities:
Purchase of property, software and equipment	(11,689)		(22,085)
Capitalization of internally developed software	(4,573)		(5,777)
Net cash used in investing activities	(16,262)		(27,862)
Financing activities:
Proceeds from issuance of convertible notes and warrants	—		3,551,975
Draws on credit facilities	907,700		1,348,276
Repayments on credit facilities	(892,700)		(1,348,276)
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs	557,297		—
Proceeds from exercise of stock options, net of repurchases	584		6,690
Net cash provided by financing activities	572,881		3,558,665
Effect of foreign exchange rate changes on cash and cash equivalents	(174)		52
Net increase in cash, cash equivalents, segregated cash and restricted cash	2,619,608		3,929,976
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	$	5,689,176	$	10,119,635
Cash and cash equivalents, end of the period	$	794,482	$	5,077,752
Segregated cash, end of the period	4,887,330		5,024,610
Restricted cash, end of the period	7,364		17,273
Cash, cash equivalents, segregated cash and restricted cash, end of the period	$	5,689,176	$	10,119,635
Supplemental disclosures:
Cash paid for interest	$	2,582	$	3,083
Cash paid for income taxes	$	417	$	3,128

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

7

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT

(Unaudited)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ deficit
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance at March 31, 2020	321,626,778	$	912,411	225,567,600	$	1	$	103,205	$	57	$	(250,054)	$	(146,791)
Net Income	—	—		—	—		—		—		57,584		57,584
Shares issued in connection with employee stock plans	—	—		182,768	—		515		—		—		515
Issuance of Series F convertible preferred stock, net of issuance costs	44,640,000	557,297		—	—		—		—		—		—
Vesting of early-exercised stock options	—	—		—	—		154		—		—		154
Change in other comprehensive income	—	—		—	—		—		(42)		—		(42)
Share-based compensation	—	—		—	—		1,631		—		—		1,631
Balance at June 30, 2020	366,266,778	$	1,469,708	225,750,368	$	1	$	105,505	$	15	$	(192,470)	$	(86,949)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ deficit
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance at March 31, 2021	412,742,897	$	2,179,739	232,257,374	$	1	$	149,217	$	502	$	(1,634,906)	$	(1,485,186)
Net loss	—	—		—	—		—		—		(501,665)		(501,665)
Shares issued in connection with employee stock plans	—	—		355,693	—		782		—		—		782
Vesting of early-exercised stock options	—	—		—	—		113		—		—		113
Repurchases of common stock	—	—		(3,110)	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		23		—		23
Share-based compensation	—	—		—	—		1,169		—		—		1,169
Balance at June 30, 2021	412,742,897	$	2,179,739	232,609,957	$	1	$	151,281	$	525	$	(2,136,571)	$	(1,984,764)

8

ROBINHOOD MARKETS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT

(Unaudited)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ deficit
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance at December 31, 2019	321,626,778	$	912,411	224,802,545	$	1	$	99,439	$	189	$	(196,677)	$	(97,048)
Net Income	—	—		—	—		—		—		5,082		5,082
Shares issued in connection with employee stock plans	—	—		1,017,823	—		1,440		—		—		1,440
Issuance of Series F convertible preferred stock, net of issuance costs	44,640,000	557,297		—	—		—		—		—		—
Vesting of early-exercised stock options	—	—		—	—		312		—		—		312
Repurchase of common stock	—	—		(70,000)	—		—		—		(875)		(875)
Change in other comprehensive income	—	—		—	—		—		(174)		—		(174)
Share-based compensation	—	—		—	—		4,314		—		—		4,314
Balance at June 30, 2020	366,266,778	$	1,469,708	225,750,368	$	1	$	105,505	$	15	$	(192,470)	$	(86,949)

	Redeemable convertible preferred stock			Common stock			Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ deficit
(in thousands, except for number of shares)	Shares	Amount		Shares	Amount
Balance at December 31, 2020	412,742,897	$	2,179,739	229,031,546	$	1	$	134,307	$	473	$	(190,103)	$	(55,322)
Net loss	—	—		—	—		—		—		(1,946,468)		(1,946,468)
Shares issued in connection with employee stock plans	—	—		3,581,521	—		6,579		—		—		6,579
Vesting of early-exercised stock options	—	—		—	—		173		—		—		173
Repurchases of common stock	—	—		(3,110)	—		—		—		—		—
Change in other comprehensive income	—	—		—	—		—		52		—		52
Share-based compensation	—	—		—	—		10,222		—		—		10,222
Balance at June 30, 2021	412,742,897	$	2,179,739	232,609,957	$	1	$	151,281	$	525	$	(2,136,571)	$	(1,984,764)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

9

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 equities, options and cryptocurrencies 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 equities, options, or cryptocurrencies for cash from the transaction counterparty or to sell equities, options or cryptocurrencies 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. The COVID-19 pandemic has negatively impacted the global economy and caused significant volatility in the financial markets. In response to the pandemic, we have enabled nearly all of our employees to work remotely and have restricted business travel. Throughout 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 the COVID-19 pandemic, we have seen an increasing interest in personal finance and investing, coupled with low interest rates and a positive market environment, especially in the U.S. equity markets, that has encouraged an unprecedented number of first-time retail investors to become our customers and begin trading on our platform. At the same time, the COVID-19 pandemic has resulted, in part, in inefficiencies or delays in our business, operational challenges and additional costs related to business continuity initiatives as our workforce has fully transitioned to remote working. The extent of the impact of COVID-19 on our business and financial results will depend largely on future developments, including the duration of the pandemic, actions taken to contain COVID-19 or address its impact, the ability to reintegrate our workforce or to adapt to the long-term distributed workforce model (with some employees part- or full-time remote, and others not) we expect to adopt, 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 cannot be predicted.

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,

10

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.

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, uncertain tax positions, 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.

Deferred offering costs

We have capitalized qualified legal, accounting and other direct costs related to our efforts to raise capital through a sale of our common stock in an IPO. Deferred offering costs are included in other current assets on the unaudited condensed consolidated balance sheets and will be deferred until the completion of the IPO, at which time they will be reclassified to additional paid-in capital as a reduction of the IPO proceeds. If we terminate the planned IPO or there is a significant delay, all of the deferred offering costs will be immediately written off to operating expenses. As of December 31, 2020 and June 30, 2021, $1.3 million and $9.5 million of deferred offering costs were capitalized.

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Concentration of credit risk

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2021		2020		2021
Market maker:
Citadel Securities, LLC	36	%	14	%	34	%	21	%
Tai Mo Shan Limited(1)	1	%	29	%	2	%	20	%
Entities affiliated with Susquehanna International Group, LLP(2)	21	%	9	%	20	%	11	%
Entity affiliated with Jane Street Group	1	%	12	%	1	%	9	%
Entities affiliated with Wolverine Holdings, L.P.(3)	8	%	8	%	10	%	8	%
All others individually less than 10%	10	%	7	%	9	%	11	%
Total as percentage of total revenue:	77	%	79	%	76	%	80	%

________________

(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. It is our policy to review, as necessary, the credit standing of each counterparty.

NOTE 2: RECENT 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.

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 June 30, 2021.

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NOTE 3: REVENUES

Disaggregation of revenues

The following table presents our revenue disaggregated by revenue source:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2021		2020		2021
Transaction-based revenues:
Options	$	111,148	$	164,604	$	170,908	$	362,464
Cryptocurrencies	5,320		233,103		9,558		320,690
Equities	70,606		52,012		102,195		185,313
Other	339		1,448		383		3,139
Total transaction-based revenues	187,413		451,167		283,044		871,606
Net interest revenues:
Securities lending	28,633		39,448		35,138		75,074
Margin interest	10,958		31,230		18,787		58,961
Interest on segregated cash and securities	1,436		931		10,632		2,041
Other interest revenue	526		1,368		2,516		2,197
Interest expenses related to credit facilities	(1,555)		(5,268)		(3,059)		(8,067)
Total net interest revenues	39,998		67,709		64,014		130,206
Other revenues	16,800		46,457		24,703		85,695
Total net revenues	$	244,211	$	565,333	$	371,761	$	1,087,507

Receivables and Contract Balances

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. Receivables primarily consist of transaction-based revenue receivables due from market makers and are reported in receivables from brokers, dealers and clearing organizations and other revenue receivables due from our partnership with a third-party investor communications company and 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)	Receivables
Beginning of period, January 1, 2021	$	111,871
End of period, June 30, 2021	147,168
Increase in receivables during the period	$	35,297

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

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Contract liabilities consist of unearned subscription revenue which are recognized when users remit contractual cash payments in advance of us satisfying 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, June 30, 2021	3,605
Increase in contract liabilities during the period	$	1,545

We recognized all revenue from amounts included in the opening contract liability balances in the six months ended June 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 4: 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 June 30,				Six Months Ended June 30,
(in thousands)	2020		2021		2020		2021
Beginning balance	$	27,070	$	30,875	$	17,122	$	34,092
Provision for credit losses	13,985		20,342		23,933		36,745
Write-offs	—		(15,964)		$	—	$	(35,584)
Ending balance	$	41,055	$	35,253	$	41,055	$	35,253

During the three and six months ended June 30, 2020, the provision for credit losses related to unsecured balances of receivables from users was $13.4 million and $23.3 million while the remaining $0.6 million and $0.6 million was related to other receivables. During the three and six months ended June 30, 2021, the provision for credit losses related to unsecured receivables from users was $19.0 million and $34.9 million while the remaining $1.3 million and $1.8 million was related to other receivables. As of June 30, 2020 and 2021, the ending allowance for credit losses related to unsecured balances of receivables from users was $40.4 million and $32.9 million while the remaining $0.7 million and $2.4 million were related to other receivables.

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

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NOTE 5: 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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	June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	1,927,574	$	—	$	—	$	1,927,574
U.S. Treasury securities	349,984		—		—		349,984
Other current assets:
Equity securities - user-held fractional shares	1,430,855		—		—		1,430,855
Equity securities - securities owned	18,874		—		—		18,874
Total financial assets	$	3,727,287	$	—	$	—	$	3,727,287
Liabilities
Accounts payable and accrued expenses:
Equity securities - referral program liability	$	389	$	—	$	—	$