Boeing Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 10 speakers on the call.

Operator

Day and thank you for standing by. Welcome to the Robinhood First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Cagle, Vice President of Investor Relations for Robinhood. Please go ahead.

Speaker 1

Thank you, Liz, and thank you everyone for joining Robinhood's 1st quarter earnings call. With us today are CEO and Co Founder of Vlad Tenev and CFO, Jason Warnock. Before getting started, I want to remind you that today's call will contain forward looking statements. Actual results could differ materially from our expectations and we have no duty to provide updates of us legally required. Potential risk factors that could cause differences, including regulatory developments that we continue to monitor, are described in the press release we issued today, The earnings presentation on our Investor Relations website at investors.

Speaker 1

Robinhood.com, our Form 10 Q filed this afternoon and in our other SEC filings. Today's discussion will also include non GAAP financial measures. Reconciliations to the GAAP results

Speaker 2

We had a strong quarter. I want to call out 3 things that I'm especially proud of. First, our product philosophy continued to accelerate with Several innovative products delivered to customers and we're not slowing down. We're enabling 24 hour individual stock trading for customers By launching 24 Hour Market next week. 2nd, we're continuing to see significant growth from the new products we launched last year.

Speaker 2

And 3rd, in the face of uncertainty in the banking sector, we're continuing to see strong net deposits and improving customer satisfaction. All of this is leading to financial results that keep getting better as we move closer to GAAP profitability. I'm excited to tell you about all this. So let's start with our business results. In Q1, Customer assets under custody were up 26% sequentially to $78,000,000,000 driven by rebounding stock and Crypto valuations as well as continuing net deposits.

Speaker 2

If we look at net deposits, we saw $1,500,000,000 in March And $4,400,000,000 for all of Q1, which translates to a 29% annualized growth rate. And perhaps most importantly, All of the new products and features we've launched in the past year are continuing to drive higher customer satisfaction with Q1 Net Promoter Scores improving more than 20 points from a year ago. Now if you look at financial results, Q1, we grew total net revenues by 16% from Q4. And by keeping our costs lean, we drove nice operating leverage in our business with adjusted EBITDA up 40% sequentially. I'd also highlight that 2 new products I mentioned last quarter continue to accelerate, stock lending and instant withdrawals.

Speaker 2

Each of these had Q1 annualized revenues that grew 30% 50% above their January levels. If you combine the Q1 revenue from these two products, It's approaching the size of our equity trading business. And that's very exciting and I'm incredibly proud of how well the team is executing. Now let's turn to our 2023 roadmap. Since we launched over 8 years ago, Robinhood has introduced several innovations that With these innovations, we've disrupted the U.

Speaker 2

S. Brokerage market and grown our business. We're now broadening our offering to include areas like retirement, advisory and payments and we're expanding outside the U. S. This is not only good for customers, but it also expands our addressable market.

Speaker 2

And as you know, we've organized our 2023 roadmap into 3 areas deepening relationships with our customers, innovating for our active traders And launching new growth opportunities. Let me talk about how we're deepening our relationships with our more than 23,000,000 existing customers. Our goal is to serve the entirety of our customers' critical financial needs. We started with trading and investing and more recently We've launched spending, saving and retirement products. We track our progress here by looking at net deposits and ARPU.

Speaker 2

In Q1, net deposits grew at a 29% annualized growth rate and ARPU increased to $77 The highest level since 2021. Our focus has been on helping customers save and invest their long term money. In January, we launched Robinhood Retirement, the 1st IRA with a 1% match, no employer necessary. We've continued to enhance the product. Customers have already invested over $500,000,000 into their IRAs.

Speaker 2

It's great to see this early customer response. Team's roadmap is full and we think retirement has a ton of growth potential. We also love what we're seeing in Robinhood Gold. At the end of Q1, gold subscribers continue to increase up to $1,200,000 and gold cash sweep balances were up to $8,000,000,000 Our gold yield is now 4.65 percent and we're offering up to $2,000,000 in FDIC insurance starting June 1. We see a big opportunity here to provide differentiated value to customers and we're working hard to get the word out even more, including by launching a new marketing campaign across multiple channels.

Speaker 2

You may have seen our TV ads during the NBA playoffs. What we've seen from gold in the past 6 months gives us a lot of confidence to increase our investment and we're looking forward to unveiling some new gold features in the coming months That provide our gold customers even more differentiated value. Finally, we're going to deepen relationships with our customers even more by taking our first Our goal is to provide a personalized advisory experience, much like what high net worth individuals have traditionally received from human advisors, But at a much lower price point by using technology, we believe this can help a lot of people who want access to advice, But have been deterred by the traditional 1% annual fee, we're excited to share more with you later this year. Now let's discuss active traders. Over the past year, our work on options, including advanced charts, cash accounts and strategy builder, helped drive Q1 option contract volumes up 16% and Q1 active trader NPS up over 30 points year over year.

Speaker 2

We feel like we're on a good trajectory with options And we have now turned our focus to our core equities offering. In April, we started rolling out stock screeners, A powerful research tool with a simple and beautiful user experience our customers have come to expect from Robinhood. We really love what we've built here and we're excited to get it into more of our customers' hands. And just ahead of this call, we announced the launch of 24 Hour Market, which will make us the 1st U. S.

Speaker 2

Retail brokerage to offer 20 fourfive trading of single name stocks. This is an exciting upgrade to our stock trading product. It allows our customers to better manage their risk and take advantage of opportunities no matter what time of day they arise. We're starting with over 40 well known stocks and ETFs and plan to expand from there. And as we look ahead, We're also working to add a broader selection of assets to Robinhood.

Speaker 2

In March, we applied for a futures commission merchant license. Pending regulatory approval, we hope to launch future trading around the end of this year. There's so much more to build for our active traders and we're excited to continue to innovate for them. The 3rd part of our 2023 roadmap is exploring new growth opportunities to broaden the scope and geographical reach of our products, So we can add more customers and increase our revenues over time. In Q1, we rolled out our non custodial Robinhood wallet, Which customers have downloaded in over 130 countries around the world.

Speaker 2

Customers love having total control of their crypto and NFTs As well as the no gas fees for coin swaps on the Polygon chain, there's a lot more to build here and we're encouraged by the early user feedback. As we brought Robinhood Wallet to market, we found that one of the biggest problems was that the fiat to crypto on ramp solutions available in market We're too cumbersome and expensive to use. So we built our own that we're calling Robinhood Connect and it leverages the multiple payment rails robust trading infrastructure we've developed at Robinhood. 2 weeks ago at consensus, our crypto GM, Johan Kirbrat announced That we're offering Robinhood Connect to 3rd party developers. We're pleased by the early response we've seen and believe we're well positioned to take market share versus early entrants.

Speaker 2

Finally, we're making progress towards our ambitious goal of launching brokerage operations in the UK by the end of the year. We have an existing license in place, a brand that resonates and experienced leaders running the effort. So we're excited to launch And start driving innovation in the U. S. Market in the U.

Speaker 2

K. Market like we've done in the U. S. Over the past 8 years. We're really excited about the roadmap ahead of us and there's so much to do.

Speaker 2

With that, I'll turn the call over to Jason.

Speaker 3

Thanks, Vlad. It's good to speak with everyone today. In the Q1, we stayed focused on serving customers, growing our business and driving long term shareholder value. Our team continued to execute on our product roadmap, scale products we launched over the past year and drive adjusted EBITDA higher. As I look back over the past year, I'm incredibly proud of how our team executed to transform the financial profile of our business.

Speaker 3

While a year ago, we had our lowest quarter of adjusted EBITDA, in Q1, we matched our all time high. We grew revenues for 4 quarters in a row, We are committed to becoming profitable on a GAAP basis and we're making good progress on that front. Looking at our Q1 GAAP results, EPS was negative $0.57 This included a one time non cash charge from our founders Who canceled their 2021 equity awards that significantly reduces our SBC quarterly run rate going forward. EPS prior to the 2021 Founder Award cancellation was negative $0.03 so we're getting much closer to GAAP profitability. Now let's look at our Q1 business results.

Speaker 3

Customer assets under custody increased 26% sequentially in Q1 to $78,000,000,000 as growth stock and crypto valuations rebounded and customers continued to deposit money into Robinhood. Looking at net deposits, they were $4,400,000,000 in Q1, which translates to a 29% annualized growth rate relative to Q4 AUC. These resilient customer net deposits position us really well for continued asset growth as markets rise over time. Turning to net funded accounts, which represent unique users on our platform. They increased by 120,000 in Q1 to 23,100,000.

Speaker 3

Additionally, we now have over 250,000 retirement accounts that already have an average balance of over $2,000 The vast majority of these right retirement accounts were funded by existing customers who are significantly increasing their average AUC at Robinhood By making these IRA contributions, we're continuing to work on new disclosures to highlight progress like this as we deepen our relationships with customers. As for monthly active users, they were 11,800,000 at the end of Q1, up from 11,400,000 a quarter ago. Now let's review Q1 revenues. Total net revenues were $441,000,000 a 16% increase from Q4 As transaction and net interest revenues increased during the quarter, Q1 ARPU was $77 up from $66 last quarter And the highest level since 2021. Transaction based revenues were $207,000,000 in Q1, up 11% sequentially.

Speaker 3

Equity and options volumes picked up from Q4 and crypto volumes were in line with Q4. Moving to net interest revenues. They were $208,000,000 in Q1, up 25% sequentially. The increase was driven by Higher securities lending activity, cash sweep balances and short term interest rates versus Q4 levels, partially offset by lower average margin balances. Q1 interest earning assets were $22,000,000,000 up 21 percent or $4,000,000,000 sequentially, Primarily driven by gold customers continuing to bring more deposits to Robinhood.

Speaker 3

Looking ahead, we anticipate Q2 net interest revenues will be up roughly $15,000,000 from Q1. This outlook assumes the Q1 level of securities lending revenue and today's levels of balances, deposit rates and Fed fund rates. Of course, our Q2 results Could be higher or lower depending on how the quarter plays out. Moving on to other revenues, they were $26,000,000 in Q1, roughly flat from Q4. Gold subscribers increased for the 2nd quarter in a row to 1,200,000, up about 40,000 sequentially.

Speaker 3

We love that more customers are benefiting from Gold and this is also good news for our revenues. Gold subscribers have ARPU That is multiples of our average customer as they bring more assets and use more of our services. This is also true for newer cohorts that joined Looking ahead, as you know, Q2 is proxy season, which drives a seasonal increase in other revenue. And our SAI Technologies AIM is managing Robinhood's proxy services this year. Because of this, we continue to expect a sequential increase of around $30,000,000 for other revenues in Q2 with Q3 returning to roughly Q1 levels.

Speaker 3

I also wanted to note that with April being tax month, it's typical across the brokerage industry to see lower net deposits and trading. For us, it was great to see customers add another $1,400,000,000 of net deposits in April, in line with our Q1 average. This drove cash sweep balances to a new high of $10,000,000,000 earlier this week. For MAUs, they declined about 3% in April. And for trading, while options and equities were off 17% 27% respectively versus the Q1 monthly average, Crypto volumes were in line with Q1.

Speaker 3

We hope this color is helpful ahead of providing our monthly metrics next week. Now let's review Q1 expenses. At a high level, we really like the operating leverage we're generating as we stay disciplined on expenses. One measure we track is annualized revenue per employee. In Q1, it was $760,000 which is more than double from a year ago.

Speaker 3

It was also great to see Q1 adjusted EBITDA grow 40% from Q4, more than twice as fast as total net revenue growth. Looking more closely at our costs, let's first review OpEx prior to SBC. It was $352,000,000 in Q1, Slightly below the lower end of our full year 2023 outlook range. Looking forward, there's no change to our full year outlook. We continue to expect 2023 OpEx prior to SBC to be in the range of $1,420,000,000 to 1,480,000,000 And as a reminder, our annual employee merit increases were in March, so you'll see that full effect in Q2.

Speaker 3

Turning to SBC, it was $598,000,000 in Q1, which included the one time $485,000,000 non cash charge from the Founder Award cancellation. This Q1 result was about $30,000,000 better than our previous first quarter outlook. We're flowing this through into our full year 2023 SBC outlook to improve it to 925,000,000 to $1,005,000,000 I also wanted to highlight that over the long term, we think it's important to manage share based compensation As a percentage of revenue to lower levels, in Q1, apart from the Founder Award cancellation, SBC was 26% of total revenues, Down significantly from a year ago. And as we look ahead, we're working to lower that percentage more over time. Now turning to capital management.

Speaker 3

In Q1, our balance sheet remains strong with about $6,000,000,000 of corporate cash and investments. This includes about $500,000,000 that we moved in Q1 from cash into a laddered portfolio of treasuries and other high quality assets With an average duration of less than a year. As for capital deployment, I wanted to briefly note that we are making some progress on discussions Purchased most or all of the 55,000,000 Robinhood shares that were acquired last summer by Emergent Fidelity Technologies. We don't have any specifics to share yet, but we look forward to providing updates when we can. In closing, I'm really Q1 was the 4th consecutive quarter of revenue and adjusted EBITDA growth, and we continue to focus on driving profitable growth over time.

Speaker 3

With that, Chris, let's move to Q and A.

Speaker 1

Thank you, Jason. For the Q and A session, we'll start by answering shareholder questions From SAE Technologies, these are ranked by number of votes. We'll pass over any questions that were already answered on the call or in prior quarters. We'll also group together questions that share a common theme. After that, we'll turn to live questions from our analysts.

Speaker 1

So I'll kick it off with our first question from Sai. This one is from Jason. So two questions we're combining here. The first is Suraj P. Asks, what is the plan to be a profitable company?

Speaker 1

And Gregory P. Asks, what are the primary ways management plans to return value to shareholders in 2023?

Speaker 3

Great. Thanks for the questions. We're really focused on 3 things to drive shareholder value. First, we want to keep launching new products and improve upon We've made a lot of momentum here and our product velocity as fast as we've seen it so far as a company. So we feel really good about that.

Speaker 3

The second is, as we want to drive profitable growth and we're going to keep our costs lean and find ways to drive even more efficiency over time. This quarter, it was nice to see our adjusted EBITDA grow at twice the rate of our revenue growth, and we're working on driving leverage in our business even more over time. And then lastly, what I'd say is we want to efficiently deploy our capital. This would include how we deploy capital for organic growth opportunities, For possible M and A growth and as well over time could include returning some capital to shareholders. And I think if we do These three things really well over time, it should create a lot of shareholder value.

Speaker 3

In terms of reaching profitable growth, I don't want to predict any So we're going to keep focusing on rolling out new products and keeping our costs lean and we should get there over time. Thanks for the question.

Speaker 1

All right. Thanks, Jason. Next question is also for you. Tom, Philip S. Asks, What does Robinhood's financial position look like after all the recent regional bank failures?

Speaker 1

What does Robinhood do to ensure that it doesn't find itself in the same position as those from SBV, Signature Bank and First Republic Bank. And a similar question comes from Mashur Ahmed. With so many banks going under, what is the Robinhood exposure?

Speaker 3

Yes. Thanks for these questions. First, I think it's really important Clarify that Robinhood is not a bank. We keep our customer cash liquid and we don't have the risk of asset liability mismatch that banks have to manage. Also, it's great to see that our customers continue to deposit funds with us.

Speaker 3

Gold Cash Sweep balances were up 67 from last quarter up to $8,000,000,000 And in March when all the banking turbulence happened, our customers deposited $1,500,000,000 with us. So we think we're in a really good position and particularly as customers respond to our great offerings for Gold members. So thanks for the question.

Speaker 1

All right. Thanks, Jason. The next question is for Vlad. It's from Edward Oh, who asks, any plans to add custodial accounts to allow parents

Speaker 2

Yes. In short, absolutely. This is part of our longer term road map. And we recently launched Retirement, as you're probably aware, and we now have hundreds of thousands of customers that have multiple accounts with us. So with retirement, It was really the first time that a customer could open multiple brokerage accounts within our product.

Speaker 2

And it took a lot of work To build the infrastructure for that and build the product affordances necessary. So now it's much easier for us to add different account types. And we hear from customers. They want to teach their children about investing. They also are interested in joint accounts and would like to Collaborate with their finances and manage them with their partner.

Speaker 2

So, these things are definitely Part of the longer term roadmap, we want to make sure we continue deepening relationships with our customers as we've been doing with the launch of retirement. Keen to do it. No specific timeline to share, but stay tuned.

Speaker 1

All right. Thanks, Vlad. The next question is also from Edward Oh, who asks, Vamilhood launched IRAs about 6 months ago. How has adoption been? How does it compare to leadership expectations?

Speaker 1

And are retirement accounts a key part of Robinhood's strategy going forward?

Speaker 2

Yes. We're really pleased with the contributions we've seen so far. Over $500,000,000 in assets leading to $5,000,000 in matches to customers, and we're seeing customers continuing to bring more of their cash On to the platform, the feedback that we're hearing has been really good as well. Customers love the match. They also love the fact That we're providing recommendations and the recommendations are now being used by 2 thirds of customers that onboard onto retirement.

Speaker 2

And we're excited about that, especially when we think about what that means for the future of advisory and Providing personalized ongoing advice to our customers to help them manage their investments.

Speaker 3

One thing that I'd add is if you look at Total accounts that we added this year between brokerage and retirement was about the same number of total accounts that we opened All of last year, so it's really nice to see this kind of acceleration in new account growth.

Speaker 1

Great. Thank you, Vlad. Thank you, Jason. The next question is for Jason. And Richard S.

Speaker 1

Asks, can Robinhood shareholders have free access to gold?

Speaker 3

Yes. Thanks for the question and thanks for letting me answer this one instead of Vlad. We want to make gold the best deal in financial services. We think it's a great deal at $5 per month, just a great value overall. We're going to keep investing in the product to make it even better.

Speaker 3

And For now, we don't have any plans to give it away for free.

Speaker 1

All right. Thanks, Jason. The next question is for Vlad and it's from Sajan Ki Who asks? On the last call, it was mentioned that Robinhood was looking into adding an advisory program to their services. What will this look like?

Speaker 1

And are there plans to work with a seasoned wealth management company? Or will it be kept in house?

Speaker 2

Hi, Sujan. Yes, we mentioned it on the last call, and we are getting very excited about what we can do in advisory. We've hired some great people, in particular, our Head of Investment Strategy, Steph Gild, who's an Industry vet with 20 years of experience at large financial institutions. You might have seen She's got a weekly column where she talks about the markets, that's quite good. And, we really think that In Robinhood, we can build the expertise necessary to give our customers amazing advice.

Speaker 2

And we've got teams hard at work building a great advisory product, and we believe that we can deliver that to customers Using the teams we have in house. So, more to come obviously as the work progresses, but we think We can build something really great for customers here.

Speaker 1

Awesome. Thanks, Vlad. Vlad, the next question is also for you. GC asks, Is Robinhood exploring ways to leverage AI into its services?

Speaker 2

Yes. I think that Over the next few decades, every company will have to transform into an AI company. I mean, looking at The past 20 years and how sort of the companies that have been able to move ahead and create differentiated value Have been technology companies, in the same way that every company sort of has needed to become a technology company. I think AI will, sort of be embedded into the fabric of all companies, And that's how we're thinking about it. Robinhood has always been early to adopt new technologies like data science And machine learning, both to lower our costs and deliver product experiences and value for our customers.

Speaker 2

And we're really excited to continue to embed AI as a tool both internally and Helping us ship products even faster and incorporating into existing products and new products. So we think that The impact of AI and other tools that we've seen thus far is going to be extraordinary.

Speaker 1

All right. Thank you, Vlad. The next question is also for you. It's from Justin Peay who asks, when will Robinhood support an official trading API for

Speaker 2

Yes. This is something we're excited about and we hear from our active traders about, but We don't offer it today. If you look at Robinhood Connect, which we announced and started rolling out recently, That leverages some of the trading infrastructure on our crypto side for a developer and B2B targeted product, Making it easier for our active traders and innovating for them is top of mind. So this is definitely something we would look to offer over time. So stay tuned.

Speaker 1

All right. Next question is also for you, Vlad. Tarun Gee asks, there's a perception that Robinhood is not as safe as other Older brokerage firms like Fidelity and Schwab, is Robinhood doing anything to change this perception?

Speaker 2

At Robinhood, safety is our top Company value. And when I think about what that means, several things come to mind. First is great customer support, And we made tremendous progress over the past few years, adding more channels, improving the quality of customer support, overall making it Much better and the progress there continues. The second thing is making sure that our app and our infrastructure is reliable and available to customers, when they need us the most. And we made tremendous progress there too.

Speaker 2

The third is the safety of customers' assets within Robinhood. And as we announced earlier in the call, With Robinhood Gold, we're offering a 4.65 percent APY on customer uninvested cash, And we're also offering $2,000,000 of FDIC insurance starting June 1. So your money is going to have higher insurance In Robinhood Gold and in our cash sweep than you would get at a typical bank. I should also mention, As with every brokerage account, your brokerage assets are SIPIC insured, and we also have excess SIPIC coverage. So what does this mean?

Speaker 2

When we look at kind of how customers are engaging with the service, we're seeing higher NPS indicative of increasing customer trust. And the results speak for themselves. Customers are continuing to trust us with their deposits. When we see a lot of institutions in the banking sector and elsewhere Seeing outflows in this quarter, we're continuing to see strong inflows with $1,400,000,000 in net deposits And $4,400,000,000 in Q1. So we feel really, really good about customers increasingly trusting us.

Speaker 1

All right. Last question from Sei, and this is for Vlad. It's Sei Sei asks, How is Robinhood better or different from other platforms? What moves will Robinhood be making to become the top trading platform?

Speaker 2

Well, in my opinion, we are the most innovative trading platform in the marketplace. We've introduced several new Industry innovations that have become norms, not just zero commission, no account minimum trading, But also recently retirement with a 1% embedded match, Which we're very excited about. And with the announcement of 20 fourfive Trading, we're leading the industry once again. We're going to continue to focus on our customers. We're going to make progress launching products in a way that emphasizes customer safety, But we're going to continue to innovate and I'm very, very excited about the things that we're launching and we have launched in the past few months.

Speaker 1

All right. Thank you, Vlad. Thank you, Jason. And that concludes our shareholder questions from SAI Technologies. We really do appreciate all our shareholders taking time to ask these questions to Vlad and Jason, and we're looking forward to more next quarter.

Speaker 1

Now I will turn the call over to Liz to lead Q and A from our analysts.

Operator

Our first question comes from the line of Rich Repetto with Piper Sandler.

Speaker 4

Yes. Good evening, Vlad. Good evening, Jason. And congrats on the improved profitability in the quarter And great disclosures too. So my question is on my questions, Vlad and Jason, is on The net interest income improved 25% quarter over quarter.

Speaker 4

And Jason, I know you talked about a $20,000,000 increase, But this turned out to be $41,000,000 And I guess I'm trying to see what surprised you. I could see the fully paid securities lending was a little bit better, but What surprised you to give you that bump up in NII quarter over quarter?

Speaker 3

Yes. Thanks for the question, Rich. And we were pleased to see Pickup in NII. I mean, there's a few things that I call out. You highlighted securities lending.

Speaker 3

You'll recall that last quarter It was a particularly soft quarter for Sec lending. And at the time of the call, we were cautious in the way that we were evaluating the outlook for Q1. And the activity for Seclending in Q1 was strong. And in addition to the strength of just the activity, which increased the rebates as well as the interest we earn On collateral, we also saw rebate rates tick up meaningfully in the quarter and so this led to some outperformance. We also saw strength in customer deposits and also the flow through of interest rate on those incremental deposits beyond kind of what we were anticipating.

Speaker 3

So overall, really pleased. It was higher than we expected and we were pleased with that.

Speaker 4

Got it. And my follow-up will be on sort of the product innovation side, Vlad. And you talked a lot about advisory And hiring a new person, but I would expect when you talk to that Robinhood could do with Technology driven, I would expect. So any color, is it going to be in more of a robo advisor Type platform or any insight into what the product will look like?

Speaker 2

Yes. I don't want to share too much, but what I'll tell you is we want to go beyond just being a robo advisor, and we really want to use We want to use technology to give personalized advice at scale, much like what a high net worth individual What come to expect from a financial advisor that they'd be paying 1% AUM advisory fee for. And Robinhood can build a great experience for that, that's mobile first. And of course, we'll plan To use every technology that we think is going to be useful in the market to make that happen and deliberate in a scalable way.

Speaker 4

Thank you, guys. Very helpful.

Speaker 3

Thanks, Rich.

Operator

Our next question comes from Dan Dolev With Mizuho.

Speaker 5

Hi, guys. Excellent results. I see if I missed it, but You might provide us April trends and if yes, can you give us a sense of what is going on? Is this seasonal or how should we separate it and then I can take that off?

Speaker 3

April, thank you. Yes, the connection is a little poor, Dan, but I think we got your question. So April, as you know, is tax month and across the industry, you tend to see customer dollars Slowing for taxes and less in trading and engagement and deposits. We actually had a really strong April from a deposits perspective, 1,400,000,000 coming in, but trading was softer than what we saw in Q1. That's normal.

Speaker 3

It's expected. We saw it last And as we look across industry results, it's pretty much in line with what others are seeing as well.

Speaker 5

Perfect. And really quick follow-up. Coinbase said that they raised prices for small ticket items on crypto. Have you seen any of that

Speaker 2

Yes. We've kept the rebates On our crypto offering the same, and we've been pleased by the Market share that we have in the retail U. S. Crypto offering, we want to make sure that we offer Great pricing to customers and we think that over time, keeping the pricing very competitive is going to lead to Increased market share gains over time. So it's really, we want to make sure our pricing is awesome and the user experience Continues to be great for the crypto offering, and we think that it's got a bright future, and we see potential to grow our market share there.

Speaker 4

Great. Excellent stuff. Thank you.

Speaker 3

Thanks, Dan.

Operator

Our next question comes from the line of Alex Margreff with KeyBanc Capital Markets.

Speaker 6

Hey, everyone. Thanks for taking the question. Hey, just maybe a couple. First on Robinhood Connect, Just kind of curious how you see this product scaling just considering kind of the external nature of the product? And then any kind of comments on monetization of

Speaker 2

Yes, absolutely. I can feel that one. So really, Robinhood Connect is an on ramp for 3rd party developers to integrate fiat to crypto into their apps. And we see a big opportunity for us in this space because the infrastructure that we've developed for the Robinhood app and the Robinhood wallet To not just move money into the platform, but also integrate with various Trading partners and get great trade execution allows us to offer not just great customer experience to developers, but great pricing. So as we look at kind of the space, we see that other on ramps don't have great funding options.

Speaker 2

They either offer only card or some of them that offer bank linking are just prohibitively expensive. And in general, the costs are quite high, like north of 5% per transaction. And so we see an opportunity to take what we built on the consumer side And really offer a differentiated product for customers. In terms of monetization, We believe that, we can offer the product at lower prices and still monetize with taking

Speaker 6

That's great. Thank you. And then, just around 20 fourfive trading, just kind of curious any thoughts in terms of what sort of engagement uplift You might kind of expect or anticipate around that. Thank you.

Speaker 2

Yes. It's very hard to predict What's going to happen with 20 fourfive Trading since this is fundamentally new in the market and Robin is going to be the 1st Retail broker in the U. S. To offer this for individual names. I think that what we'd like to see is Sort of good liquidity available for these symbols and liquidity would be a little bit smoother And not as much sort of happening on the open and the close.

Speaker 2

And I think that would be really, really interesting for the markets. In terms of engagement, we have seen with hyper extended hours, which we launched last year that We saw increased volumes, but I think it's probably a little bit early to give estimates For what we'd see in terms of volumes there.

Speaker 5

Makes sense. Thank you.

Operator

Our next question comes from the line of Devin Ryan with JMP Securities.

Speaker 7

Great. Hi, Vlad. Hi, Jason. How are you?

Speaker 2

Hey, Devin. How are you doing?

Speaker 7

Doing great. Start With one for Jason on just the corporate cash. So obviously, the firm continues to sit on a lot of cash and liquidity here. Adjusted EBITDA is now very solidly positive. So it would seem like you're in an improving position to play offense.

Speaker 7

And so appreciate you're looking into repurchasing the The shares from Emergent Technologies is one use, but just love to maybe talk about or get an update on what the other top priorities are. And then on the M and A front, the type of opportunities that you're seeing in the market today. And Jason, if you can, just remind us on those financial hurdles that you need and maybe how that's interplayed with some of the recent deals that you've done for context?

Speaker 3

Yes. Thanks, Devin. Great question. So first of all, in this market backdrop, I do like having A really strong balance sheet. And as you mentioned, dollars 6,000,000,000 in cash and investments, given this market backdrop, I think, has been a source of Strength for us.

Speaker 3

I like that, but it's not an ideal capital structure. And over time, I think you'll see us continue to work on that To be even more efficient, my mind goes to the M and A front when I think about use of capital beyond just kind of running our business. And I'd say that the environment is becoming more constructive. The bid ask spread has been incredibly wide as public markets corrected and I think Private markets were a bit slow to face that reality. And I think it's been more constructive now and It's up to us to look at opportunities.

Speaker 3

You talked about hurdle rates. It's looking at things like what's the return on invested capital, Will it be accretive to our business? And then in terms of the business itself, is it going to accelerate our roadmap? And does the team, that we would acquire Kind of share the values that we have around a culture around safety and compliance, as well as an obsession for customer experience. So These are all the things that we are looking at.

Speaker 3

And like I said, I'd say that the backdrop is improving there.

Speaker 7

Okay. Great color. Thank you. Just a follow-up here, want to dig in a little bit on the Futures offering and just get a sense of what the timeline is going to look like to get into that business. And then In terms of the target audience here, how much demand are you seeing from your existing customers for this product?

Speaker 7

Or is this It's more about kind of accelerating the push with active traders and just kind of sizing the opportunity. Could this actually be more than 10% of DARTs over time? We've seen, what it is for some others, but just love to get a sense of the addressable market for you. Thanks.

Speaker 2

I'd be happy to We're very excited about launching futures trading to our customers. And As I mentioned in the call, the goal is to launch it around the end of this year, pending, of course, regulatory approvals On our application, I think as we think about it, we see 2 opportunities. 1 is Making a really great product for our active traders. As we've talked about a little bit over the past few quarters, active traders have been an increasing area of focus For us, we've been able to drive active trader NPS significantly higher in the past year. We love that our active traders are feeling the love and seeing improvements in the customer experience for the product.

Speaker 2

And we think that futures trading is an innovative new asset that will allow them to manage the risk in new ways. The second thing that we think we have an opportunity to do is, if you look at what we've done with Fractional Shares and Options Trading. Robinhood historically brought new investors to the market who haven't been investing and haven't had access These products in the past. With futures trading, we see a lot of complexity in the existing products and interfaces, which I think makes them less accessible. So one thing we'd like to do is just simplify that and make that really, really useful and easy to use in mobile.

Speaker 2

And we think that There's a lot of white space ahead of us there. And I want to give a special shout out to J. B. Mackenzie, who joined as the GM of our futures business. And I know that he's very, very excited to launch this as quickly as possible.

Speaker 2

And Maybe this question provides a little bit extra motivation, not that he needs any.

Speaker 7

Exactly. Great. Thanks so much. Appreciate that.

Operator

Our next question comes from the line of Michael Cyprys with Morgan Stanley.

Speaker 8

Great. Thanks. Good afternoon and great to see the progress inching towards GAAP profitability here. So the question is, how do you think about sustaining GAAP profitability once you cross there, you benefited from interest rates having gone higher. So if the Fed were to cut, how do you think that impacting revenues at this point?

Speaker 8

And which products and revenue pools do you think have the most compelling profitable growth over the next 12 to 24 months?

Speaker 3

Yes. Thanks, Mike. It's Jason. I'll start and we'll see if Vlad wants to add any color. In terms of Reaching and ultimately sustaining GAAP profitability, there's a couple of elements that are really important.

Speaker 3

The first continuing to improve our user experience on our existing products, expand the service capability of existing products and then also keep rolling out new products We're seeing that in our NPS score being up over 20 points overall and up over 30 points for our most active customers. So Really encouraging signals. To your point, our revenue is diversifying, interest income is becoming a larger portion of that. Things like securities lending is also contributing, but also interest on cash as well. When we think about the dynamic between rising rates and falling rates and the effect on revenue, there's a couple of things that I'd point out.

Speaker 3

First, there is A bit of a natural offset between changes in interest rates and demand for equities or trading activity. And so Well, it's not a perfect correlation. They do tend to move in opposite directions, and we think that's good for kind of the balance of our business. I'd also say that as we continue to roll out new products that that's just going to further diversify and really strengthen the revenue profile of our business. The last thing we're looking at, I mentioned it last quarter, is we are evaluating whether we want to use any kind of hedging For significant rate drops, to manage our sensitivity to interest rates, we've been looking at whether Option 4 strategy, for example, could be a way to maintain liquidity, do it at a modest cost, And not introduce any P and L variability.

Speaker 3

We haven't made a decision there yet, but it's something that we're continuing to look at.

Speaker 2

Yes. The only thing I'd add is just that I think the team has done a fantastic job over the past year diversifying our business so that We can be sustainable in a high interest rate environment. I think before, the fear that we were getting from analysts in the community was Doing great in a low interest rate environment, but what if rates tick up, how will you do then? And I think we've shown that this is a resilient business. The team moves fast Innovates and we're really pleased with how diversified the business has become and we see opportunities to keep pulling on that and Do it even further.

Speaker 8

Great. Thanks. And just a follow-up question on crypto. The regulatory environment in the U. S.

Speaker 8

Continues to tighten around crypto. So just curious your perspectives there on the regulatory landscape. What steps are you taking to protect Robinhood and what risks, if any, do you see?

Speaker 3

Yes. So the crypto environment has faced increasing regulatory scrutiny. The things that I'd point out is that we've been a safety first company for a long time. It's been a core value. In fact, it's our top company value and Vlad talked about it on these calls in the past.

Speaker 3

What this has meant is that we've been Very deliberate in the way that we expand our coin offering. We've got a rigorous coin framework and we're very careful in the way that we Evaluate those points. I'd say if you compare Robinhood to perhaps others across the industry, We consistently demonstrate that we have respect for the securities regulations of the country. And this has led to us making tough decisions on product selection. We don't offer staking.

Speaker 3

That's something that's been Under scrutiny as well. And so we'll continue to operate with that mindset. We want to be on the right side of these At the same time, we want to innovate for customers. And I think additional regulatory clarity would be super helpful on that front.

Speaker 6

Great. Thank you.

Speaker 4

Thanks.

Operator

Our next question comes from Will Nance with Goldman Sachs.

Speaker 6

Good evening.

Speaker 1

Hey, Will.

Operator

I want to follow-up on

Speaker 6

the earlier question on the securities lending. It sounds like fully paid adoption was a partial driver there. It sounds like that's you're baking in sequentially, but even the base level of margin, I think, was up 70% sequentially.

Speaker 8

So I was just wondering if

Speaker 6

you can maybe talk about How much of this was sort of environmental to the demand and what kind of rates you're able to get on that? And how much of this You think is yes, I'd maybe just talk about the sustainability in the current macro environment, particularly in light of some of the reduced engagement levels that we've seen that you're kind of referencing in the month of April.

Speaker 3

Yes. And I'd say that, thanks for your question, Will. I'd say that the securities lending business is less Beholding to kind of monthly engagement metrics, it's based more on how many of our customers have opted in, whether or not they're engaging On a monthly basis with us, we've seen overall strength in the market for securities lending this quarter. I'd say Q4 was unusually soft. It was one of the softest quarters that I've seen in the years that I've been here.

Speaker 3

But there was a strong backdrop In Q1 that continues here into Q2. So demand was higher. It allowed us with the backdrop of adding more customers to the fully paid Securities lending program to be able to lend out even more, help our customers optimize their own yield by participating. And the rebates that we saw were particularly strong. So far in Q2, we continue to see Levels kind of consistent with what we were seeing in Q1.

Speaker 6

Got it. That's super helpful. And just maybe a kind of detailed model Question on the options take rate, it seems like that's been coming down a little bit over the past several quarters and took kind of came in a little bit lower than what we were looking for. Just wondering if you could talk Drivers of that, it seems like it's been more on the rebate side and less on the actual volume.

Speaker 3

Yes, sure. So the take rate is really just an effect of mix. So no change in the pricing structure, but the tier that includes Spy Contracts has just been increasing as an overall percentage in this market backdrop and that's shown up in a reduced blended rate.

Speaker 6

Got it. Appreciate you taking the questions.

Speaker 3

You bet. Thanks Will.

Operator

Our next question comes from Ken Worthington with JPMorgan.

Speaker 8

Hi, Ken. Hi, good evening and thanks for taking the question. Can you give us an update on the new Cash Card? What has been the uptake on the new card? And any color on what transaction activity looks like there?

Speaker 3

Yes, sure. I mean, the Cash Card is off to a good start. I'd say it's really early, Ken. And the uptake It's a few hundred a couple of 100,000 customers. And what we're really working on is continuing to iterate on the value proposition.

Speaker 3

We want that card to be kind of top of wallet and we're not there yet. So the team is hard at work. We're talking to customers. We're evaluating the value proposition. I think longer term, this has potential to be a meaningful engagement driver for us and will help us deepen our relationships.

Speaker 3

But we're not there yet, but it's early. Okay.

Speaker 8

Thank you. And then maybe following up on options, Trading there continues to represent the majority of transaction revenue from Robinhood for Robinhood. We've seen index And then maybe just to help size options for us, You had 23,100,000 accounts, MAUs of 11.8. What portion of your customers Are trading options for you in this quarter or over the last year? Thanks.

Speaker 3

Sure, Ken. I'll start and we'll see if Vlad adds any colors. So first, I'd say 100 of 1000 Is the order of magnitude on options traders, so relatively small portion of our customers are engaged in options trading every month. In terms of 0 day options, we don't currently offer those. It's something that we do hear from customers that they're interested in.

Speaker 2

But we don't offer cash settled index options. We don't offer cash settled index options. We have 0 day, but they're Yes, ETF options traded on the platform.

Speaker 3

Thanks, Vlad. And so in terms of expanding that to cash settled,

Operator

Our next question comes from Matthew O'Neill with FT Partners.

Speaker 6

Yes. Hi. Thank you so much for taking my question. I just wanted to confirm the April One of the April trends, I believe it was mentioned that the MAUs were down after it was nice to see them increase and sort of book the trend this past quarter. Anything to sort of take into account there?

Speaker 6

I know there's a lot of discussions already on some of the April dynamics with tax season and so forth. Thank you.

Speaker 3

Yes, thanks for the question. So yes, we saw MAUs go from 11.8 to 11.4 In April and really what I'd point to, it's in the zone of where we were sorry, 11.5. It's in the zone of where we were in Q1. It's nice to see that it's kind of stabilized and I just point to the seasonal dynamics Of April that I referred to earlier in my comments.

Speaker 6

Understood. Thanks so much.

Operator

Our next question comes from Mark McLoughlin with Bank of America.

Speaker 9

Hey, guys. Thanks for taking my question. I had for the first one, I was curious what was the decision I wanted to know the accounting reason behind that.

Speaker 3

Yes, it's more, thanks for the question. So first of all, in the broader context, we've got $6,000,000,000 cash on our balance sheet and it just was good hygiene for us to take a small portion of that and extend the duration a bit. So it's held to maturity. It's a laddered portfolio that's rolling, so it's highly liquid and that was the logic behind it. Just looking at the fair value, it's right on kind of what the purchase price was of the portfolio.

Speaker 9

Awesome. Thank you. And then for a quick follow-up, I know in quarters past, you guys have kind of talked about expansion, especially starting kind of in the UK, Not obviously trying to monetize client cash balances with the bank charter helps when moving abroad, Makes things a lot less complicated. Any updates on international expansion or kind of how are you guys thinking about that going forward?

Speaker 2

Yes. We're making progress towards the goal of launching brokerage in the UK by the end of the year. As I mentioned in the past, we've got an existing license in place. We think that our brand is Very strong and will resonate very well in the U. K.

Speaker 2

And experienced leaders running the effort. So, stay tuned, but, we're excited to make it happen.

Speaker 5

Awesome. Thanks, guys. Thank you.

Operator

That concludes today's question and answer session. I'd like to turn the call back to Vlad Tenev for closing remarks.

Speaker 2

Yes. Thank you guys so much for listening and asking questions. We're very excited by the progress and Check out 24 hour market, very excited for that to be launching next week.

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