Robinhood (Minutes): Fully Embrace Crypto, Must Globalize in the Future
The following is $Robinhood(HOOD.US) the minutes of the earnings call for Q4 2024. For the earnings interpretation, please refer to “Robinhood: Trump Sends 'Reconstruction Grace', Retail King Returns with Power”
1. Core Financial Information Review
Revenue in 2024 grew by 58%, approaching $3 billion; adjusted EBITDA increased by over 160%, reaching $1.4 billion, with an adjusted EBITDA margin rising to 48%; earnings per share for 2024 was $1.56, marking the company's first year of positive net profit.
Q4 revenue more than doubled year-on-year, reaching $1 billion; Robinhood Gold subscription users approached 3 million, driving annual Gold subscription revenue to over $170 million; annual adjusted operating expenses and stock-based compensation (SBC) reached $1.94 billion, a year-on-year increase of 7%.
The long-term tax rate is expected to be around a normal level of 20%.
4. Guidance:
a. Plans to achieve double-digit growth in 2025;
b. Expected adjusted operating expenses and SBC range from $2 billion to $2.1 billion, excluding credit loss provisions, large regulatory fines, or expenses related to the acquisition of TradePMR and Bitstamp.
c. Credit loss reserves are expected to gradually increase over time, approximately $20 million in the past few quarters;
d. More than a quarter of the $1 billion stock repurchase plan (valid for 2-3 years) has been completed, and the diluted share count is expected to remain roughly unchanged in 2025.
6. Q1 Business Progress:
a. Net deposits in January 2025 were the second highest month in the company's history;
b. Trading volumes for stocks, options, and cryptocurrencies achieved double-digit to triple-digit growth compared to a year ago, with options trading volume hitting a record high;
c. Margin balances exceeded $8 billion, doubling in 8 months since transitioning to industry-leading pricing;
d. From an annualized trading revenue perspective, the Legend desktop application (launched a few months ago at the HOOD summit) has generated $50 million in revenue, with index options reaching $15 million, both showing good incremental effects and strong weekly growth rates.
2. Detailed Content of the Earnings Call
2.1 Key Information from Executives
(1) Emphasized the launch of the Robinhood Gold Card and Robinhood Legend (a desktop platform for active traders).
(2) Launched Robinhood Derivatives, offering futures and event contracts (Note: may be similar to betting stakes, such as contracts betting on Trump's election victory).
(3) The penetration rate of Gold among new customers in the fourth quarter reached 30%, with an overall Gold penetration rate of 10%.
(4) Three major events will be held in 2025: Gold event in March, Crypto event in June, and Hood Summit at the end of the year.
(5) Plans to expand the user base of the Robinhood Gold Card, add more cryptocurrency tokens, and integrate the cryptocurrency exchange Bitstamp to enter the institutional and global markets.
(6) Robinhood is uniquely positioned at the intersection of traditional finance and DeFi, aiming to bring real assets onto crypto technology.
(7) The user activity of our self-managed virtual asset wallet app—Robinhood Wallet is also on the rise.
(8) Long-term story: a. The largest trading platform by user count; b. The leading platform in the wallet share of the younger generation; c. In the long term, the largest platform in the global financial ecosystem.
2.2 Q&A
Q: When will the Gold Credit Card be available?
A: The Gold Card will soon be launched to a broader user base. Currently, there are over 100,000 cardholders, and the company's goal is to double the number of cardholders in the coming months while balancing the speed of promotion with prudent spending and lending activities. (PS: Second curve business advancement)
Q: Will the individual stock analysis feature be improved?
A: Robinhood plans to enhance in-app information, research, and tools, including fundamental analysis and more detailed financial data charts. These features are expected to be further developed and shared at the HOOD Summit later this year.
Q: What about lending services (microloans, automatic loans)?
A: The goal is to meet customers' lending needs in the long term. Currently, the company's focus is on financing products and credit cards, with plans to expand into a broader range of lending services once these products mature.
Q: What are the obstacles to achieving the goal of capturing the top wallet market share?
A: Challenges the company faces include competition and the need for technological innovation and investment, especially in artificial intelligence and crypto technology. Robinhood aims to accelerate product and feature development to capture the over $84 trillion in assets flowing to the younger generation.
Q: What about sports contracts?
A: Robinhood plans to continue innovating in prediction markets (including sports betting). The company's goal is to launch a comprehensive event platform later this year, but it still needs to wait for clear regulations from the authoritiesQ: What does clarity in regulation refer to? The launch and staking of Crypto?
A: With increasing clarity in regulation, Robinhood will accelerate the launch of crypto tokens. A comprehensive set of rules and regulations is needed for the listing of crypto asset securities, which will enable the company to tokenize both private companies and public securities. The company has the technical capability to rapidly increase tokens and is researching the tokenization of real-world assets. While awaiting guidance from regulators, staking is also being considered, but more policy clarity is still needed.
Q: Crypto pricing strategy? Future price trends?
A: Robinhood is trying to balance customer value and shareholder returns through pricing. The recently launched Smart Exchange Routing is preparing for future integration—when the company integrates Bitstamp and starts its exchange business, it is also integrating Robinhood Legend (which is our desktop trading platform for active users).
Q: The competitive landscape of Crypto?
A: Robinhood sees growth opportunities in cryptocurrency products, including the emergence of more coins and stakes once regulation becomes clearer. The company believes that its comprehensive trading platform, which includes stocks, options, futures, and crypto integrated event contracts, is a competitive advantage. Despite potential competition, the company also expects demand for cryptocurrencies to increase.
Q: Growth trends of Legend, index options, and futures
A: Legend's annual revenue has reached $50 million, index options $15 million, and the futures business has just begun to launch. These products show strong weekly growth rates and positive customer feedback, indicating potential for continued accelerated development.
Q: Custody opportunities for advisors
A: The company believes that the advisory business is a "missed opportunity." The acquisition of TradePMR is a way to expand Robinhood's customer base, particularly among older clients nearing retirement who have substantial assets. Robinhood hopes to attract existing customers and their parents through digital experiences and personal advisory services.
Most of TradePMR's clients are entrepreneurs who see value in accessing Robinhood's 25 million customers, especially when they can inherit significant wealth from their elders. Robinhood also believes this will be an important component of the next-generation wallet-sharing platform and truly become the first platform aimed at multiple generations.
Q: The impact of interest rates on trading volume
A: The company expects that if interest rates decline, trading volume will increase, as historically, lower rates drive higher trading activity. However, the company's business is diversified and should thrive regardless of the macroeconomic interest rate environmentQ: 2025 Deposit Incentive Activities
A: The company will continue to offer deposit rewards, including personalized annual interest rate increases for retirement accounts and gold plans. These incentives have successfully driven net deposits and customer growth, with net deposits reaching $50 billion in 2024, and the company has more business growth opportunities.
Q: Is the $50 million revenue from Legend entirely new?
A: The company is confident in growth, but the data is still in the early stages. There is an incremental effect, but more data needs further observation; both new and existing customers have a high acceptance of Legend. With further development of the product suite and user experience, the company expects to achieve sustained growth.
Q: Adoption of new Gold Card members and credit cards
A: A significant portion of new Gold Card members are new users from Robinhood. In the fourth quarter, over 30% of new net deposit accounts became Gold Card users. The Gold Card is generating strong second-order effects, increasing assets under custody (AUC) and net deposits. The company plans to increase cardholders from over 100,000 to hundreds of thousands this year, including both new and existing users.
Q: International Expansion Roadmap
A: Future international expansion will follow a roadmap similar to the launch in the UK, starting with stocks and adding products based on that. Robinhood plans to continue adding new products and features in the UK, such as ISA and futures, and expand into other markets. Our goal is to enable customers to use Robinhood anywhere they have a smartphone.
The product sequence for the EU market will depend on the market, with no fixed rules. Robinhood will continue to refine the product suite in existing markets and expand based on that. Robinhood will hold its first cryptocurrency event in France around mid-year.
Q: Stablecoin Product Launch and Monetization
A: Robinhood is actively participating in the Global Dollar Network, collaborating to launch USDG, a stablecoin that can return earnings to holders. The company sees this as the future of stablecoins, as many leading stablecoins lack good methods to pass earnings to holders. Robinhood will also use stablecoins for internal settlements, leveraging its 24-hour instant settlement advantage. The company plans to continue investing in this national dollar network and looks forward to more developments in the future.
Q: Prioritization of Opportunities in Cryptocurrency, Active Traders, International Opportunities, Prediction Markets, etc., and Resource Allocation
A: Robinhood prioritizes opportunities based on potential scale and directness. The three major arcs of the company's business are: the leading active trader platform (short-term), expanding wallet share (mid-term), and international expansion (long-term). The company allocates resources based on the potential of these opportunities to generate revenue and business valueThe active trader programs, such as Robinhood Legend and Index Options, have demonstrated immediate revenue-generating capabilities, while long-term opportunities like international expansion and predictive markets are also underway.
The company believes that by leveraging artificial intelligence technology to improve efficiency and control the growth of operating expenses (OpEx), it can continue to enhance product speed and launch more features.
Q: Need more resources?
A: Robinhood is not constrained in its business development due to resource limitations. Thanks to an efficient business model and the application of artificial intelligence technology, the company is able to achieve significant growth in 2024 without a substantial increase in operating expenses. The company will continue to allocate staff as necessary to support its development plans.
Risk disclosure and statement of this article: Dolphin Research Disclaimer and General Disclosure
