BUSINESS COMBINATIONS

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

NOTE 3: BUSINESS COMBINATIONS

Acquisition of X1

On July 3, 2023, we acquired all of the outstanding equity of X1 Inc. (“X1”), a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The acquisition of X1 allows us to provide access to credit for our customers. In August 2023, X1 was renamed Robinhood Credit.

The acquisition date fair value of the consideration transferred for Robinhood Credit was $104 million, which was entirely paid in cash. 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 millions	Fair Value
Cash and cash equivalents	$	14
Receivable from users, net	3
Prepaid expenses	1
Other current assets	23
Goodwill	64
Intangible assets	36
Accounts payable and accrued expenses	(36)
Other non-current liabilities	(1)
Net assets acquired	$	104

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 Robinhood Credit 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 millions, except years)	Fair Value		Useful Life
Developed technology	$	25	4
Customer relationships	10		7
Trade name	1		1
Total	$	36

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 July 3, 2023. We used the replacement cost method to estimate the fair value of developed technology, and 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.

Pro forma results of operations for Robinhood Credit have not been presented as the effect of this acquisition was not material.

Credit Card Program

The Robinhood Credit credit card program is funded under a program agreement between Robinhood Credit and Coastal Community Bank (“Coastal Bank”) (the “Program Agreement”), where Coastal Bank is the originator and owner of customer principal balances (refer to Note 12 - Financing Activities and Off-Balance Sheet Risk for more information). Robinhood Credit is responsible for administering the credit card program on a mobile app, including, (i) setting customer credit limits within Coastal Bank’s underwriting standards, (ii) loan servicing, (iii) remitting collected principal from customers to Coastal Bank, and (iv) offering and maintaining the customer rewards program. Coastal Bank is responsible for (i) funding the customer credit, (ii) reporting customer credit activities, and (iii) holding customer receivables. Additionally, Robinhood Credit is responsible to pay Coastal Bank customer balances that are ultimately charged off or deemed uncollectible, generally when balances become outstanding for over 180 days (refer to Note 7 - Allowance for Credit Losses for more information).

Under the Program Agreement, Robinhood Credit collects interest from customers that carry a balance and pays interest on the amount funded by Coastal Bank, with the difference between those amounts resulting in net interest revenue. In addition, Robinhood Credit earns revenue from interchange fees from each credit card transaction. As an agent, Robinhood Credit recognizes interchange revenue net of a revenue share paid to Coastal Bank, certain fees paid to third-parties, and rewards paid to customers. From the date of the acquisition through September 30, 2023, Robinhood Credit revenues were not material to our unaudited condensed consolidated statements of operations.