Robinhood Markets, Inc. (HOOD) Earnings Call Transcript & Summary

Welcome back to the 2025 Global Exchange and Trading Conference. I'm Patrick Moley, senior research analyst covering the exchanges, brokers and trading companies. That was a nice little fireside we had with Thomas Peterffy and Rich there. But happy to be joined by another brokerage company, Robinhood. We have Chief Brokerage Officer, Steve Quirk here with us. Steve is a veteran in the brokerage industry over 35 years of experience, joined Robinhood.

Don't take me, feels like 20.

It feels like 20. You joined in January '22 from Schwab, where you ran TD's platform, but thanks so much for joining us. I think it's on a lot of people's minds because you put out a press release earlier this morning.

We did.

But maybe just to start off, can you give us kind of a state of the union on the retail trading environment, the health of the retail trader here. It seems like from your results in May, it was still pretty strong. Any insights you can kind of glean into what we're seeing here?

Sure. I think we get a lot of questions on the health of the retail customer. We're doing a lot of media this week on it because it's top of mind. We did release some metrics this morning. In those metrics, sequentially, our equity volume grew 10%. So that's a new record for Robinhood. Our option volume grew 5%. That's a new record for Robinhood on a monthly basis. Margin balances are as high as we've ever had them. cash sweep is as high as we've ever had it, and then we gave a deposit number. Deposit number was $3.5 billion. Last 2 months were $7.5 billion and $6.8 billion. We're still on a run rate that's 40% higher than where we were last year. I think what happened there is there was a bit of a pull forward with all this market activity, and we saw that in both the deposits, but also in what our customers were doing. They were very strongly buying the dip. And obviously, they've been pretty well rewarded as a result of it. As I mentioned yesterday, when we were doing some media, this is like the second occurrence where I would argue retail came to the rescue of the market, COVID probably the first. And as a result, they were rewarded. And I think that the follow-up question is often, well, what if they buy the dip and it keeps going down, which is a legitimate concern. But if you think of our customer base, they're early 30s. They have 30 more years to invest. So when they think about how they're going to invest, they approach it with a very different mindset than somebody who's 58 years old from a company they may have came from, who is close to retirement.

So I think it's easy to get lost in this minutia of month-to-month trading activity with Robinhood. But when you really sit down and look at what you're building, it's pretty compelling. Since we talked at this conference a year ago, you've launched a number of new products, kind of kicked things off with the Gold event back in October. Can you just talk about how the offering has evolved over the last 12 months and the things you have implemented to really move it forward.

Yes. I think -- and I'll just focus on the -- what I'll call the self-directed active trading side. We've done a lot. And we set out a couple of years ago, well, we set out 3.5 years ago where we looked at our most engaged customers, and they had the worst NPS score of any of our customers, and we're like this is not a model that you would like to see. So we've reversed that. They now have the highest NPS. And the way we did it is just by making the experience so much better for all of them by building all the things that they're looking for. We now have a web-based application called Legend. We have asset classes like futures, index options. We have industry-leading margin rates, industry-leading, yes, I would say that. You might not see that in some other -- some of our competitors' advertising, but we are industry-leading. So we doubled our margin book since we did that. And then we've rolled out prediction markets. So I think we just have a really healthy velocity and pace of innovation, and our customers appreciate that.

Yes. And I do want to get more granular on some of the products you laid out, but the other piece of the story is the asset accumulation piece. I think it's fascinating that you have 1 in 10 American adults that have a Robinhood account, but you have less than 0.25% of the total retail assets in the U.S. How do you think about the ability to kind of monetize and grow that asset base over time? And then maybe also as a follow-up to that, how does TradePMR and this kind of introduction into the RIA channel aid in that.

That's actually the most exciting thing about Robinhood is when you look at where we are and how quickly we've gotten to where we are and the potential of where we can go. So basically, what brought me to Robinhood is this is the next generation of investors. I grew up with that last generation. I guess I might be one of them, but I pulled a Benjamin Button and came to Robinhood, followed my kids because they were all Robinhood customers. And I think what makes it so exciting is they are the future of investing. And so in every facet of that, we get to build for them. And we get to also, in some instances, start from scratch like we did with our web-based app. Like I looked at the best of what's been built in the industry and said, "I don't have any legacy migrations or acquisitions where I have to cobble technology on top of other technology." I have done that many times, have been acquired and have acquired. And so it's kind of cool and refreshing to be able to do that. Now we have an avenue. So we've done that on the self-directed side. I'd encourage you to read Bloomberg's report on options trading and that just came out with Larry Tabb and Jackson on where we stand with respect to the industry, we will be #1 in terms of overall trading volume. We already are on the options side. You can see that equity side. It's coming pretty quickly. We can see our growth rates. But that's all self-directed. So we're competing very aggressively on the self-directed side, and we're on a path to be the #1 firm. On the other side, the wealth management side, which is a multiple, it's probably 3x the size of the self-directed side, we're just getting in there. And that same disruption that happened on the self-directed side, you should anticipate it's coming on that side of the fence. What it makes it really -- what puts us in such a unique place is, again, I'll go back to it. There's $124 trillion wealth transfer happening. They were talking about it on CNBC yesterday. And what happens is, well, first of all, people are living very long today, which is a good thing. However, that means when they pass their wealth down, they don't necessarily pass it to their children, their children are in their 60s, and they might not need it. So they're passing it down another generation. And 81% of those people fire that adviser right out of the gate. They all know that, the industry stat. So we have the recipients of that wealth sitting at Robinhood. 26 million customers that are in the accumulation phase of wealth. They're actually starting to get in their prime earnings and they're going to be recipients of much of this. Advisers want access to establish a relationship with them. That's where we're building a referral program that connects those 2. And last week, we were in Tampa at an event called Synergy, which is TradePMR, the advisory firm we bought, their large conference. They had doubled the number of people in that room. A lot of them are advisers that don't custody with TradePMR currently, hundreds of billions of dollars, but they're interested, very interested in establishing a relationship with our customers. And I think you're going to see some really cool things come out of that.

Anything you can share in terms of like how you -- the pace of expected expansion of the adviser network and how that all will play out.

The very first thing we're doing, and we're already working on it is a referral program. So essentially, if I'm -- a lot of our customers, they started in their 20s, now they're in their 30s. They had an asset pool that was this big, very comfortable managing it on their own. Now it's grown to this big, and then suddenly, they have kids and house and life gets in the way of managing this or the portfolio becomes a certain size and they're not comfortable. So they've expressed interest in sticking with us and bringing all their assets to us, but we didn't have a solution for them. Now we have that solution, and I think you should expect us to be very aggressive in the way that we attack this. The referral programs that used to exist for advisers, I think there used to be 2,500 referral RIAs that we're getting referrals from either the TD Ameritrade, Schwab, Fidelity. I'll just pick those 3. TD Ameritrade got gobbled up by Schwab. I think the number of RIAs currently getting referrals is about 250. So we'll open that back up again, and I think you can anticipate that there will be a lot of RIAs coming.

Yes. And you've seen success in accumulating assets. I want to dive into some of the specific derivative products you rolled out recently, most notably futures also have had contracts. Index options were last year, too. Of these big new products that you've rolled out, where are you seeing the most traction? I think futures you've said you expect to be the biggest for you over the longer run. But any insight into what you've seen since launch and how it's maybe stacked up to your expectations since you launched?

Well, I can give context. I remember when I was at TD Ameritrade, we rolled out futures. And it took us -- well, we hit the number of contracts mark at Robinhood in 3 months, it took 5 years. to do it at TD Ameritrade. And again, let me be fair. We launched in a very good environment. I mean, when you have the VIX sitting at 60, futures are pretty interesting products, especially when you can trade them around the clock in short and all the other things. So I think it's kind of situational like you have to deliver on all these things, especially for your most engaged customers. They want all these asset classes. Index options have been a really quickly growing class. And so people embrace those. But it's kind of -- it's more of the collection of all of them and how they fit together that I think is what's driving the -- a lot of our activity and interest.

And are you seeing -- are people coming from other platforms to trade these given the price point? And how -- what have you seen in terms of your client base adopting these products? Is it cannibalizing on the option side?

We're extremely data-driven company. So we look at the incrementality. We also look at cannibalization. Every single product we launch, we look at that and say, "Hey, I launch index options, is that eating into the Spider ETF or whatever." It's all incrementally adding to that. Like your best client at, people in brokerage in this room understand this, your best client is one that uses all of your technology and all your asset classes, and it builds -- they essentially build on each other. I think in general, like as we continue to iterate there, the strength of each one of those kind of adds to the whole collective pie. And so that's what's, I think, been pretty powerful. But we're still net ACAT positive. I brought this up last year, and I think I got a response against every single broker in America, including the one you were just talking to.

So let's talk about event contracts, that's one that where earlier this year, you tried to launch Super Bowl contracts, the CFTC got to push back on you. But since then, you've launched March Madness, NBA, NHL playoffs. What have you seen on the event contract front? What's made you comfortable in kind of expanding that offering? And where do you see that going from here?

I'm in very strong agreement with Thomas Peterffy that this is going to be very big. And when I say that, I mean the event contracts as a whole. Sports is a component of it, but the event contracts as a whole, whether it's economic indicators, derivatives of earnings on Apple or any -- like you think about the amount of areas where people have expressed a desire to express a financial interest or mitigate or hedge. Look, even the election contract, like -- we launched that. And within 1 week, we had 800,000 accounts and 0.5 billion contracts in 1 week. And by the way, we built it in 3. So you can understand how quickly we can move on these things. But I think what made it so fascinating is that it's not just something where you can trade and maybe hedge a portfolio, but it's a source of information. So I told you the number of people that were trading and the number of accounts and everything. We had far more people looking at it. And so on that evening of the election, 2 hours before the major networks were saying, "Hey, the swing states went this way," contracts had already moved. Crypto is here, tesla was here. So our customers got to see all that. It's an amazing source of information for them. Now think about it across a whole bunch of other things, economic indicators, et cetera, et cetera, et cetera. It's just such a powerful source of information. And again, I keep using this example, but like one of the really frustrating things for customers is they're Apple fans and they come out with their -- they do all their homework and they say, have the number of units, revenue, et cetera, et cetera, et cetera. Everything is nailed and then earnings comes out and boom the stock craps because of guidance or something like that. That's very frustrating. So to be able to say, hey, there's a prediction market on the variables that they chose to sort of protect that portfolio or capitalize on what they did from a research standpoint is really kind of cool. And like it's really -- like I would love to say it's new, but it's really not. It's kind of like why weather futures came out of the crop of -- instead of grains, like they basically looked at it and said, what are we really hedging here? We're hedging the weather, right? So why don't we just get right to that and not do something that's abstracted from it.

Yes. I was at the Bitcoin conference last week and the Kalshi CEO spoke and I thought it was interesting. I thought it was interesting, he was talking about how much traction they've seen in weather, but they hadn't really seen a lot of traction in economic contracts. And maybe that's just a factor of there's plenty of vehicles out there to take a view and hedge that risk away. But sticking with the topic of Kalshi, you're partnered with them for a lot of your contracts right now. I know Vlad said in the past that you have plans to build out your own event contract platform. Is that still in the cards? Because I think it basically doubles your economics if you were going to do that yourself.

Yes, we're -- I mean, you should consider us like -- we've also used forecast X. So we -- you should consider us looking at everything, including our own. The way that -- the one thing that we really like about it is like the way we're approached, let's take sports, for example. We're super aligned with our customers. And what I mean by that is you are trading with you, right? I'm not incented by you losing, which is not what happens in other models, like I want you to lose, so I win. We kind of like that model because we want to be aligned with our customers. So to the extent we can maintain that model and still have an avenue to do more of it on our own, we'll explore that.

And have your conversations with regulators improved from earlier this year.

We're very transparent with the regulators. We tell them what we're going to do in advance of what we're going to do. When they tell us we shouldn't be doing something, then we stand down and we don't do it. It's not dissimilar to crypto. Like we were the good child in crypto. We didn't have hundreds of coins. We didn't do staking lending, et cetera, when it was considered a security. And so if things change, then we'll capitalize on that.

That's a good segue into crypto, very topical right now. Over the last year, you've seen a big uptick in volumes. You closed the Bitstamp acquisition earlier this week. You announced WonderFi a little bit ago. What's the strategy around crypto? What more do you think you can be doing? And what are these acquisitions mean for the story going forward?

Yes. I'm going to talk about it, but understand that Johann is the man. He's the person who runs our crypto entity. I'm involved. I'm involved, but I'm not involved at the level he is. I think what makes Bitstamp really cool is a couple of things. Number one, we've been doing all our -- it's not dissimilar to brokerage. We've been doing all our competing on the retail side. We haven't been in the institutional space, which our competitors are in. Now we're in the institutional space. Second thing is they have existing customers, 0.5 million and then 5,000 institutional customers. They also have a ton of capabilities that we don't have. And so those capabilities exist largely in Europe now. But as things change, you should expect us to bring those capabilities here. And then finally, they have 50 licenses. And getting licenses abroad is not an easy proposition. We're exploring quite a bit and moving around internationally, but we shouldn't minimize how time-consuming and costly that can be.

Yes. And how do you think about -- I know you have aspirations to expand internationally. What is an acquisition like Bitstamp give you in terms of establishing brand recognition in markets upon which you could build out other asset classes in the future.

No, it's a good point, and I left it out to you. I'm glad you brought it up because they do have -- I mean, they're the oldest exchange. So they have recognition and they already have established relationships, which is very helpful. And whenever we go somewhere, we look at acquisition, we like at organic, we look at what we do in a lot of places we go to. So if you think about the Robinhood story, you bring 26 million customers in a very short period of time that are young and diverse. And today, we sit at 60% of U.S. households that are participating in the market. Imagine us coming into your country or region and sitting down with the elected officials and regulators, and they're sitting at 15% of their households in the market. They're very welcoming. They're like, please do what you did in the U.S. here so that they're not reliant on the government when they get to a retirement age or whatever it is. And so it's actually really exciting to be able to have those conversations and entertain ideas about where we're going next.

So you've launched in the U.K. I've seen you've expanded that product offering nicely here in the last couple of months. Singapore is another one you've announced. Where else do you have aspirations, if you care to share.

Well, we got Europe now with Bitstamp and Canada with WonderFi. I don't know if we can say, but I would say I've a lot of frequent flyer miles. So we're looking around in a lot of places. But we want to do it like in a manner -- like we're not going to jump all over the place and get ahead of ourselves. We have to do it. We want to get traction in the places we go, make sure we establish ourselves as somebody who's going to be there for a long period of time. So we'll be methodical about it.

Yes. All right. With the time we have left, I want to talk about some, I think, hot topics that we'll speak with others about at the conference. One is tokenization, one is 24/7 trading. They kind of go together some ways.

I'm glad you went to 24/7 trading because there may have been some misinformation on 24/7 trading. I can tell you with pretty much certainty that who is first there. But you can ask the regulators who talk to them.

One of the things that our previous guest said was, I thought interesting, he thought 24/7 or after hours trading was going to go from, I think he said 2% today to 20% in the next 25 years or something to that effect.

I don't think it's going to take that long. No. I do not think it's going to take that long. When we see the volumes that we're doing, May was the biggest month we've ever had, the month of April during the tariff. All the news is happening when the market's closed. So I mean, if I want to wait until the next morning to react, I'm behind the 8 ball. And we already have asset classes that trade around the clock. So the idea -- again, I probably said this too long, but I think we'll look back in a couple of years and laugh at the notion that we waited until 9:30 Eastern for trading to start. And I thought like when we first did it, we thought there would be benefits. I'm dating myself. But remember, we used to have problems with the plumbing when there'd be so many orders bunched up for the open. And like you alleviate so many things. Not only do you give customers the ability to basically buy stock XYZ whenever they want to buy it, tell a 30-year-old that they do their research and homework in the evening, tell them that they can't put that order in and they're like, what are you talking about. Like Amazon doesn't close. Why -- I lived through COVID. I didn't see a bunch of people standing on a trading floor. I know this is possible, right? So I just think -- I think that will come quicker.

There's one other thing I want to talk about. In the fall, you're planning to launch Robinhood Banking, so you'll have checking and savings accounts, right now, I think on the App Store, or from data that you shared, you're the #1 venue for new investors that are looking to open an investment account. What do you think the chances are that you see younger people choosing Robinhood for their first bank accounts as well? And do you have any predictions around how much of your customers today you think could adopt Robinhood as their primary banking relationship.

Well, we have over 3 million people on the waitlist for our credit card. And so we're being very careful about how we roll it out. But I would say the goal is really to have Robinhood be a one-stop destination. Like nobody wants multiple apps for the things they do. If they can do it all in one place and it's a pleasant experience, then that's what they want. That's where we're aiming for. And we'll have the whole family included. And you can do that with our credit cards today, have child card onetime usage as well. So I think I think there's a lot of avenues there to be able to have this all be something that you can do collectively, including crypto, of course.

All right. Last one, big picture question. if we look ahead 5 years, what do you think the biggest storylines will be in the trading space, in the retail trading space. What do you kind of think is going to be the topic du jour.

I think there's so many exciting things happening in brokerage. And as Thomas said, like technology is leading a lot of them. So the tokenization and what that's going to mean, like we have -- every customer has a strong desire to participate in these early-stage start-ups that are having all their appreciation before they hit the public market, if they ever hit the public market. Tokenization opens that door. Tokenization opens the door to real estate, all the other asset classes that basically are not really accessible by today's standards. And so I think technology is going to be amazing. I also think AI is going to be cool. We have some really cool stuff coming out from an AI standpoint, something as simple as, hey, why is my stock moving like crazy. You have to go to 5 different sources. There's 5 different reasons. We're solving that for customers through AI, it will be delivered to their lap really quickly.

And that Cortex that you introduced in March, right?

Yes. I mean you'll see more of that coming soon, very soon. And then I think the final thing would be just having a global marketplace and making this a global marketplace. I think a lot of the technologies that are now coming out just kind of erased borders, which makes it really cool for people to be able to invest in any place they want in any asset class, which is I think it's going to be amazing.