1210: The Best Trade May Be the One You Don’t Make | with Shiv Verma, CFO, Robinhood

0:00CFO THOUGHT LEADER: Support for CFO Thought Leader comes from OneStream, Trusted Data, Faster Decisions, and Salesforce. Explore new research on the future of finance and AI at Salesforce.com slash CFO Report. Hello, this is Martino Cadoni, CFO at Depot, and you are listening to the CFO Thought Leader podcast. This is episode 1210. I had an offer to go join J.P. Morgan as an investment banker in New York. I grew up in California. I went to school out there. So I've been there my whole life and I wanted to try out Wall Street. So you can look back and say maybe I made the right decision, maybe I had the wrong decision.

0:42But instead of staying with them, decided to try the Wall Street thing. I learned a ton. You know, I did the two-year analyst and went through it. This was 06 to 08 when the markets were falling apart. And so if anyone's watched the big short, that's what I was doing. So I was doing structure credit and CLOs. I was the analyst on the team building the models. And then in 08, when the financial crisis hit, I then joined a hedge fund and bought back everything that we originated at par for five cents on the dollar. And so got to see a lot very, very early on in my career. It was great foundation.

1:11We still hire a lot of ex-bankers on the finance team today. As much as it was long hours and a ton of work, I think you just get a really, really good foundation for whatever you choose to do.

1:22CFO THOUGHT LEADER: Hi, it's Jack. On today's show, we speak with Shiv Verma, CFO of Robinhood. Finance leaders are often measured by the investments they help make. But what about the ones they stop? In an environment where speed is rewarded and every new opportunity arrives carrying its own case for urgency, restraint can look like hesitation. Yet the harder judgment may be deciding when the expected return does not justify the risk and having the confidence to say so. The modern CFO is expected to enable growth without becoming its automatic approval mechanism. So where does healthy discipline end and excessive caution begin?

2:10CFO THOUGHT LEADER: Our guest offers a memorable answer, one that turns the language of trading into a lesson about knowing when not to act. Our talk with CFO Shid Verma begins after this.

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4:03CFO THOUGHT LEADER: Hello, CFO Shiv Verma is with us. Shiv began his career inside the Oakland A's data-driven baseball operation, then moved into credit research and portfolio management before crossing into operating finance. Since joining Robinhood in 2018, he's helped steer the company through rapid growth, public market scrutiny, and an expanding financial platform. Now, as CFO, he's helping weigh product velocity, global expansion, AI investment, and the economics of a far more diversified business. Shiv, welcome. No, thank you for having me. I really appreciate the kind words to start. please we're really eager to have you look back for us and uh try to figure out how you landed inside uh the oakland athletics there the the billy bean money ball operation how did that happen yeah it was it was a great way to start your career so i grew up in the east bay central valley huge bay area sports fan and going to a's games since i was four years old with the bash brothers There's Mark McGuire and Jose Canseco and Dennis Eckersley.

5:15So when I was in college, I just reached out to them cold and said, hey, I was graduating early. I'd finished my classes. And so I'd love to come work for you and do anything for free. Much to my chagrin, they took me up on the offer and I got to meet their baseball ops team. And then I ended up working for them. And it's one of the coolest experiences I could imagine. So I worked on the baseball ops team. It was Billy Bean, David Force, and Farhan Zahidi. for those who know them faran zahidi who was my direct manager then went on to be the uh the president of the giants and the gm of the dodgers and has this great career and david force was was the gm along with billy and that was the whole team like we were in the room you know talking baseball every day playing poker with the players watching batting practice um i really learned things i still use today uh the value of using data it sounds simple now but 20 25 years ago that was not obvious especially in sports uh being lean and scrappy i mean one of our one of our disciplines at Robinhood is being lean and disciplined.

6:10And I took that away in every way they did. And so I love my time there. And I still look buck family on a lot of the memories I learned.

6:17CFO THOUGHT LEADER: When you do leave, are you thinking of moving into a traditional banking career or what's on your mind? Yeah. So I had an offer to go join JP Morgan as an investment banker in New York. I grew up in California. I went to school out there. So I've been there my whole life and I wanted to try out Wall Street. So you can look back and say, maybe I made the right decision, maybe I had the wrong decision. But instead of staying with them, decided to try the Wall Street thing. I learned a ton. I did the two-year analyst and went through it. And this was 06 to 08 when the markets were falling apart. And so if anyone's watched the big short, that's what I was doing.

6:53So I was doing structure credit and CLOs. I was the analyst on the team building the models. And then in 08, when the financial crisis hit, I then joined a hedge fund and bought back everything that we originated at par for five cents on the dollar. And so got to see a lot very, very early on in my career. It was great foundation. We still hire a lot of ex-bankers on the finance team today. As much as it was long hours and a ton of work, I think you just get a really, really good foundation for whatever you choose to do.

7:19CFO THOUGHT LEADER: Just reflecting a little more on those banking years. I mean, was there an early investment call that taught you something about judgment or your judgment? Yeah. So in 08, I joined a hedge fund, as I imagine. And this was six weeks before Lehman Brothers went under and the entire world felt like it was falling apart. And we had this great CEO and CIO who was a mentor to me and helped me learn how to invest on the buy side. And one of the main things I took away from him was the best trade you ever make is often the trade you don't make. And so it is really, really easy to make an investment and sell yourself into it and get excited about it.

8:00Whether you're doing a financial investment or now even Robinhood or making investment, it is really hard to ask the right questions and know when to say no. And so when we are looking at things internally today, whether it's funding a new investment, whether it's a marketing campaign, whether it's an M &A deal, I still use that mindset of a lot of times the best thing we do is to not say yes. Now, that doesn't mean we want to grow. we're saying a lot of things, but trying to balance that business enablement and controllership. And so growing up in the financial crisis and coming through the credit background, it's very different now being on the equity side and being at a hyper growth company, a technology company and wanting to invest.

8:36But I think it's a nice balance of having started my career on that credit side of the house. Yeah.

8:41CFO THOUGHT LEADER: And your time from portfolio management, I'm wondering, I always like this point of comparison with operating companies. Is there a belief from your portfolio management years that has failed you in some way inside an operating company? Yeah, it's a great question. So I was portfolio manager at PIMCO and a couple other places. And your whole job there is to look at the company, tell about the financials, invest the management team. But I remember you go to these conferences and you speak with the CFO and the CEO and you say, why aren't you growing faster? Why is EBITDA down? Why are your margins down?

9:17being on the other side now for 10 plus years it is hard it is really easy to sit in the ivory tower and and and make proclamations and ask what folks are doing it is incredibly hard to be in there every single day to be in the wheat so looking at the kpis to driving the results to work with the engineers i love it i wouldn't change it for the world but i think a lot of folks who have only spent their career on the buy side or the sell side and looking at the investment side and not having been in-house, they miss a little bit of what does it really take to actually drive change. And we have so many great people, whether it's our engineering or product team or other functions as well to do that, that I think sometimes that gets lost when you're just looking at the quarterly financials and trying to judge it from outside looking at it.

9:58But it is a really good lens, especially when we went from being private to being public, knowing how public market investors think, knowing what they're looking for, understanding the criteria. I go to conferences now and I joke with our IR team, sometimes I go sit on the other side of the table because I'm used to being the portfolio manager who's asking the manager team the questions and now we're on this side. And so I think having both of those lenses is actually a pretty unique vantage point and it's something that aids us when we're building our internal plan.

10:26CFO THOUGHT LEADER: Was there a particular career chapter that influenced how you evaluate risk the most? I mean, which chapter might have really shaped how you think about that? Yeah, I think it was the first 10 years. And so, as I mentioned, growing up in 06 to 08, in 06 to 07, those were the boom years and structure credit was all the rage. And then quickly seeing how fast it can fall in 08, I think that was a wide eye opener. If I go from 08 to 2011, what I learned then is when opportunity strikes, you need to be ready. So some of the smartest folks that I knew, when everything was falling apart, they were looking at it and said, this doesn't make any sense.

11:07and they really put their capital to work then. And so knowing how to do that risk-adjusted framework, when I went to the second part of the portfolio manager career and your managing portfolios, it was ingrained into us that everything is risk-adjusted return. It is really easy to get a great return by taking outsized risk, but we were always evaluated on what's your risk-adjusted return. So whether you're looking at a sharp ratio or an information ratio, and so that's still how we look at things today. You want to be making investments and you want to be taking some of those big bets, but you also have to understand the downside.

11:38And so I think that's a lot of what we take today. And so it's probably the entirety of the first 10 years, but really my formal years were growing up during the GFC. And so you take a lot of those lessons for when to be careful, but also when to go big when you see certain opportunities arise.

11:54CFO THOUGHT LEADER: So what is it that, you know, why did you leave investing for an operating role? What was it? And would you have done it sooner now as you look back? Yeah, great question. I don't know if I would have done it sooner. I really enjoyed my first 10 plus years of invest meeting and being on that buy side and learned a ton and made some great relationships and people that I still value today. The reason I made the switch was I grew up in California. I'm a hippie vegetarian. That's my entire family. And so on the East Coast, I loved the work. Just the culture, the scene, it wasn't for me. So I always knew I wanted to come back out West.

12:32and I'd gone, I did two stints in New York. And the second time was my wife was doing her residency out there and she was finishing up and ready to come back out West. And so I started thinking about what I wanted to do. And so I called one of my mentors from the investment side. And this was 2014, 2015, 2016. And he said, have you heard this thing called FinTech? FinTech wasn't even a word. It was just starting to come about. The first of them were coming. And he's like, Shiv, I think you'd be really good at this. And you have an investment background, but I know you're itching to try more, you should look into it.

13:04And so I started to look at both investment firms on the West Coast, but also some newer fintech companies. And I said, well, if I'm coming back home, I'm going to Silicon Valley, let's see if we can join the gold rush and try something different. And so I talked to a lot of different companies. And I really like the idea of being in a mission driven company, especially having spent so many years on Wall Street. Again, I love the work and the intellectual side of it. I just didn't get the fulfillment out of it. And so the first thing I did is I joined a fintech that was mission-driven. It's called Opportune.

13:35It helped people, usually with lower socioeconomic wealth, to get access to credit. And so really, really great mission-driven company in the fintech space. And realized I love being on the operating side, digging into problems, and being part of that team. And so when I was looking for my next opportunity, that's where I found the Robinhood. And it was right place, right time. When I joined Robinhood, there were 180 people, a couple million customers, and just starting to inflect. And I feel super fortunate to have gotten in at that space. But having done something right before, I think was really valuable because I saw that I enjoyed this part of it.

14:14And then once I found the right company and right fit, this is where I want to be for hopefully the rest of my career.

14:20CFO THOUGHT LEADER: So how has leading finance at Robinhood maybe changed the way you lead in general? You know, what's the change in this operating environment as far as leadership goes? Yeah, it's a great question. So I joined as a team of one. I was hired as the treasurer and to build out that team. And as I mentioned, we were small. And so it's been really organic in building out the team over time. And so our prior CFO, Jason Warnick, he joined from Amazon. He was there for 20 years and then recently retired. He's one of my favorite people, mentors, friends. I learned a lot of leadership from him. And so I still use a lot of those principles today.

15:01And so part of it is, you know, you hire great people, you empower them, you don't micromanage, you try to hire people that are smarter than you, and that you just hire people that you have both high EQ, but also high IQ. And so for us, it's really important that people come in and they want to work hard and we're known to have a high performance culture, but also people you want to spend 10, 12 hours a day with. And so we look for a mix of that. And to your question for how do you lead, a lot of it is I just do what I think comes natural to me and hopefully the rest comes best. And so, for example, I go really deep in the weeds.

15:39I am the best when I'm actually looking at the raw model and understanding it and going that. And it doesn't mean I don't trust the team or I don't micromanage. But also people know if I'm going to look at something like we can't stay at the 40 ,000 foot view, we have to go super deep. And so I say just be your authentic self and let people do great. and then the other thing i've learned over time is uh as you build out the team uh if opportunity happens just say yes and so this is something that i i share with some of our younger folks and what jason had shared with me but for example when i was hired to be the treasurer about six months later jason said hey could you run ir i said i've never done ir before he said ah you're a former investor you'll figure it out um a few months later he said hey we don't have a finance team can you build it out i've never done finance before he said ah you're a smart guy you'll figure it out.

16:26And if I look back throughout the way, some of the best leadership opportunities I've had or the other opportunities are just do what's needed and just say yes. And so that's what I teach a lot of our younger folks today and that everyone's looking for more scope or they want to make impact or they want to be a leader of the company. I said, there's two things you can do. Just crush your core responsibilities, whatever that is, even if it doesn't seem like that big, own it, crush it, give it 150%. Two, if you see something that's broken or an opportunity opportunity happens, just go fix it. Just say yes.

16:58And so that's a little bit of what we do. And I think it just naturally happens. But yeah, I give a lot of credit to Jason. I give a lot of credit to the team. We're all still trying to figure it out. And it's amazing to have gone from a team of one to now, you know, helping lead a finance team of over 200 people and a company of nearly 3 ,000 people and just seeing how far we've come in the past eight years.

17:18CFO THOUGHT LEADER: Well, Shiv, we probably will have a few more career-related questions for you. But right now, we'd love to find out about Robinhood, understand better, what does business offer today? What is this opportunity about now? Yeah, absolutely. So if you start with the mission, it's democratized finance for all. And that's how we build all of our products. They're really just not posters on the wall. It's what we take and embed them. And if you look at how we started, we started with commission-free trading. Very simple. There was a pain point in the markets. Most consumers didn't have access to the equity market.

17:58There was high minimums, there was high fees, and there was a lot of jargon. And so that's how we started mobile first platform in the cloud, great design. If you look at where we are today, we've evolved into the financial super app, where that's what we aspire to be. To be honest, we said that five years when we went public, and we were still learning what it meant. But what it means for us is serving every single one of your customers' needs. And so any financial transaction, any asset you want to custody, you should be able to do that at Robinhood. And so how does the business look today? We have the core brokerage business, that's your equities trading, that's your options trading, big active trader platform.

18:36And we're number one in market share and options and number two on equities and gaining. So really kind of being in that ecosystem. The second part of our business, we have a big crypto business as well, so anything you want to do on the crypto side, whether it's trading assets, we're really focused on the infrastructure layer. So we have the Robinhood chain that just came out. We have the Robinhood wallet, so we can hold it in DeFi. We think crypto and the blockchain is here to stay and is going to be a big part of the financial ecosystem. So building that out, we then have what we call our money business, which is banking and credit.

19:06So we have banking, you can have checking and savings, you can get the Robinhood credit card. And so if you want to be able to spend, save, do that. And then we have a big kind of passive investment, Vegas. So whether it's your retirement, we have our 30 billion retirement assets, ETFs, kind of creating long term wealth. I have my daughter's accounts on here. I have a young daughter. So you can have custodial accounts, you can have trust accounts. And so building out that whole hub. And then if I look at our last bucket, we call it a global financial ecosystem. We're going global. And so today we are, we start in the US, we're now in Canada, the UK, Europe, Singapore, and we have a pending acquisition of Indonesia closing, so getting broader there.

19:45And an ecosystem means B2B or institutional. And so when we talk to our institutional or B2B customers, they want the same thing traditional retail wants. Low cost, easy to use, great design. And so that's how we're starting to build that out. We bought a crypto exchange a few years ago called Bitstamp that's doing great. We bought an RA custodian called Trade PMR a few years ago and going great. And so we're starting to build that out so we've come a long way from just commission-free stock trading to really building out this financial ecosystem um and you can start to see that in in uh in the financial super app and then it's translating to the financial profile so for your uh for your listeners and viewers you know big picture that we're about five billion of run rate arr about three billion of eboda we have 13 businesses doing over 100 million of arr we call them cylinders And so a big diversified platform across a lot of different business lines.

20:37And the fun part is we're just getting started. And there's a whole lot of things we still have in the hopper.

20:43CFO THOUGHT LEADER: You mentioned acquisition was always part of the strategy. You used acquisitions to enter, as you explained, the crypto market, but also the advice arena. Which move has changed the business the most? Yeah, it's a great question. You know, I'll start with our capital allocation philosophy. And so we are a growth company. The beauty of Robinhood, we run lean and discipline. And a lot of our investments are just through organic growth. And so first and foremost, we go into organic. Then we go into M &A. Our criteria for M &A are tech, talent, speed to market. So if you look at our acquisitions today, it's good tech.

21:22We don't buy things on mainframes. It's things that we feel good about. Great teams. And so most of the acquisitions we've done, the founders then become the GMs of those business views internally. Makes sense. We bought them because they were beating us at something we wanted to do. And so then we asked them to come lead it rather than saying, hey, we know how to do it. And we've had some real success there with leaders coming in and even taking on broader responsibilities. least. And the last thing is speed to market. It is a land grab. So can it accelerate us by 18 to 24 months is the rough mental heuristic.

21:52Then of course, it needs to pass all the IRR and NPV and internal thresholds we look at. But that's a little bit of the philosophy. And then the last thing is shareholder return. And so any additional capital we return to shareholders, we have a$1.5 billion share repurchase program and continue to do that. So when I look across all of those, we're in the proverbial spot where we can have our cake and eat it too. We can invest for organic growth, we can do M &A, and we can return capital shareholders. So to answer your question directly, which has had the biggest impact, I look at it on, of the three arcs that we're on, where are we going to use M &A?

22:25So our three arcs are we want to win an active traders, we want to grow wallet share, we want to be the dominant global financial ecosystem. The active trader arc, we have not done much in M &A. That is our core business, we know how to do that. Steve Quirk, our chief brokerage officer, came from Thinkorswim and has built out a great platform. And so we tend to use it less. Where we use M &A is those middle two arcs, wallet share and global ecosystem. And so the reason for that is these are our longest arcs. The wallet share is three to five years. The ecosystem is five to 10. There's only so much you can build.

22:56But if you start with M &A on some of those longer term arcs, you could pull them forward. And so, you know, we mentioned the Bitstamp exchange or the advice. Those are things that over the next 10 years we knew we wanted to do, but one, it wasn't one that we saw we were doing recently, and two, it wasn't our core skill set. And so that's why we've accelerated in there. And so every company does it a little bit differently, but for us, we tend to make more of our M &A investments on the longer time horizon arcs.

23:23CFO THOUGHT LEADER: To understand really the revenue model that Robinhood has, how it makes money, we think of subscriptions, we think of through transactions, we think of interest. which lens maybe explains it best? Yeah, so you can take a couple lenses. One that many of our investors use is transaction revenue versus net interest revenue versus other, which tends to be subscription. And so if you look at our core business, we're roughly 50 to 60 % transaction revenue, but that's diversified across a lot of different business lines. So it's equities, it's options, it's crypto, it's event contracts. It's now the credit card, which has transaction revenue in there and interchange.

24:04And so that is a customer doing something, and you get a transaction fee on it. Now you work for very, very small amounts, but at scale that adds up to the$5 billion of revenue that I was mentioning. And so our philosophy is we want to pass on most of the value to customer, nearly everything, work for thin amounts of margins, build with high fixed costs and low variable costs, and then you can have really high incremental margins. And so that's how our transaction revenue is based. And depending on the macro environment, it can be fixed, to 60 % of revenue. The second line item is net interest revenue.

24:38That is where we earn a small margin typically on things like cash. And so we have a high yield suite program where we paid a vast amount of the interest to customers, about 3.5%. We keep a very tiny margin. There's about 30 billion plus in that program. And that adds up over time. We have other areas that you have a small amount of net interest margin, whether it's securities lending or the banking products. And so that's kind of the second larger bucket. It's not transaction-based. It's more based on the total assets you have and what's your small take rate on that. And then the third is it's other, but most of our other revenue tends to be subscription revenue.

25:16And so we have a Robinhood Gold product. It's$5 a month or$50 a year. We think it's the best deal in financial services akin to the Costco model. There's about 5 million customers on there. And so that's kind of recurring revenue stream. We don't really think about it even as recurring revenue. and the reason we do it, we do it more because it's a loyalty product and it drives engagement and cross-sell and our customers love it. But that's the line item there. The one thing I really enjoy in our business is it is diversified. And so I mentioned the 13 different business lines doing 100 million of ARR that are baked into those.

25:47They are across all the different buckets. Some of them are transaction-based, some of them are NIMB-based, some of them are others. Some of them are non-brokerage businesses like our credit card that just joined there. and so it's really nice to have kind of this diversity of business. The other part is it's a natural hedge in the macro environment. So what I mean by that is let's say interest rates are low. What you'll see is asset valuations will be higher, there'll be more investment in trading, so transaction revenue will be higher, but NIM will probably be lower. Conversely, if you're in a higher interest rate environment, asset valuations will be lower, you'll probably see less trading, but NIM will be higher because people save more.

26:26And so there's this really nice natural hedge in financial services across these business lines. And so what we really focus is on, can we serve customers? Can we pass on value? And then if you do that and you build this across a diversified business, that's a really great return for shareholders as well.

26:41CFO THOUGHT LEADER: We like to understand better your lines of sight into the business. I mean, before revenue appears, which signal tells you the most? Is it net deposits, product adoption, or trading activity. How am I doing this? Am I close? 100%. So our Northstar KPI is net deposits. That is our customers trusting us with their hard-earned assets. And so this is what we tell investors. This is what we tell the teams internally. Everything we're building for is how do we get customers to trust us more? And I think net deposits is a great way to do that. So net deposits then drives AUC. And the largest predictor of revenue over time is just assets under custody.

27:24And so we have a chart in our investor day from a few years ago that shows as assets grow, the scale of revenue correlation is about 90 % plus. And so it's great for shareholders and it's great for customers. And so that's our Northstar KPI. When I go into each of the three different buckets, they are gold on one to two Northstar KPIs. If I start with transaction revenue, it's just market share. Every single team is gold in market share. Equities, options, cryptos, event contracts. the reason we do this is we don't do revenue or even down to profitability is it's market agnostic and so if markets are going up and your and your revenues are going up and your volumes are going up you could pat yourself on the back but it could really just be the market conversely if the markets are doing well and volumes of revenue slowing but you're gaining market share you actually might miss that you're doing well and so we use market share for all of them now we put financial constraints on there and we have pricing principles because one way to grow market share is just eat your margin or even go negative, which is not how we run the business.

28:24So it's a really nice way to look at it where you have to grow market share, but you have to stay within the financial principles. If I look at our second bucket, grow wallet share, that is net deposits and gold subscribers. So net deposits, we just talked about. Gold is our subscription product. And so that's what we ask the teams to kind of drive in that bucket. And then in the third bucket, which is global ecosystem on the consumer side it's just net funded accounts for them they are early in their journey they are gold on growing users and making sure that they're starting the ecosystem there and so nfas are their top kpis and then for the institutional side it either tends to be market share or their equivalent of net deposits which might be net asset flows or something like that so very consistent across the business there's a ton of submetrics that every team is gold on but what i tell investors and for everyone who wants to understand robin hood's business.

29:13If we are growing net deposits, the business will do well. And then if we are getting market share across all of our different products, that's how you should be evaluating us.

29:22CFO THOUGHT LEADER: I was looking over some of the, what I would call, I guess, milestone headlines out there. One came front and center. Robinhood raised$2.2 billion through zero coupon convertibles. I'd like to ask, why was that the right financing? yeah it's a great question um first question i get asked is well why did you even do the financing you know we're you're in the fortunate position we have six billion dollars plus on the college we're spitting off more free cash flow i know what to do with why did you why did you raise incremental capital for the first time in five years um i was trained in the mantra of you raise the capital when you can not when you need it um it's much harder to to do it in times of when you actually need it rather than the markets are doing well so that was kind of the first point um the second thing is we did it in a way that was really beneficial to shareholders and so uh it was two billion dollar plus convert but first it was zero percent coupon so there's no cash interest and so that that's great for shareholders um second because it was a convert uh the way we structure it is there is no dilution on the convert until the stock goes from at the time we are you know around 110 to 230 plus so over a hundred percent gain that is the first time shareholders would actually take any dilution.

30:37And then third, we took some of that capital, we did a$300 million share repurchase on day one because we believe in it and we still think we have a long way to go. And so you add that piece in there and then you don't take a dollar of dilution until we're over$300 share price. And so you put it all together and the convert market was incredibly strong. They're giving us capital 0 % interest rate. We can structure in a way for equity shareholders where we can do a large share repurchase on day one and not take any dilution until a very high share price increase. And it seemed like the right time to take in some capital.

31:10What it does is it just gives us flexibility. As I mentioned, we look at organic growth, we look at M &A, and then we do shareholder return. And this is just one tool. But if you put together a strong macro backdrop and that we were a very nice first-time issuer, large in scale with high volatility, so we could get great terms, it just gave us an even stronger balance sheet and a little bit extra optionality.

31:31CFO THOUGHT LEADER: we want to quickly touch on ai with you there's cortex customer support and fraud detection all using ai today where is the clearest value though yeah a great great question so um we are fully ai pill this is something we've been focused on for years so uh vlad our ceo and and co-founder has another ai company that he also started and so that's kind of the the world that we live in And so he's making sure that we are fully embracing it. When ChatGPT Enterprise came out in 2022, we were on the phone with Sam the first weekend trying to get access to it. And so we've been making sure that we had these tools for a long time.

32:10So where did we start? The first, the easy things were software development and customer service. Like that's where we started. Software development really increased our productivity. And we've shared some numbers before that, you know, when I looked at the middle of this year, our commit velocity, which it's a proxy for how fast we're shipping. if I go back to the start of last year, it had already doubled since then. And that was up even more than the year before. And so one of these reasons is, is really empowering your software developers, but also your entire team with some of these AI tools.

32:39The next thing we did is we looked at customer service. It was the lowest hanging fruit, one of the biggest cost items. And so, you know, we've shared before that we took out, you know, over nine figures of savings of cost based between customer service and other operational things from that. But those were kind of the early days. So we built all the customer service in-house. We didn't use a third party. and so today we deflect about 70 % of our customer service tickets using AI. Now what are we focusing on is how do we really take those gains and make the products better? And so you mentioned a couple of them.

33:11You have Cortex, which is an AI assistant for customers. We now have a genetic trading. It's a way for customers to go in and have their agents in trading. And so the easy stuff with software development and customer service now is how do you build a 10x product? It's really easy to say, I just want to put AI into my products or I'm going to have agents. But unless you do it well, it's not helpful for customers. And so when we think about where the world is going, there will be some things like the Robinhood Assistant or Cortex where you can just go in and talk to your agent, it'll help. There'll be other things like agents.

33:42Agents is just a way to abstract a customer problem away. It doesn't matter what it is, it's a pain point. And so we started with both trading. We also did it on a credit card where you can have agentic payments. And so you're going to see us use more and more of these agentic products to help our customers with pain points. And then the last piece we're really focusing on is just increasing productivity and shipping velocity internally. So we started with software developers. Now, everybody at Robinhood has these tools. We don't token maximize. And so that was by design, but we really want to encourage people to use them, to use them well.

34:13We built our own harness internally. And so if you want to go in and create an agent, we makes it super simple. You can create an agent and extracts all of the layers behind it, such as needing to go through Okta, the security logins. It's one portal you go in and you can do that. And so really giving our teams the tools and then we're investing in training and education for our employee workforce people are hungry for these tools but they need help and how to use them so we'll do weekend hackathons we'll have people share ideas with others there'll be shared skills across the firm and so that's really we're making our investments and then we should be judged on our product velocity like one of the best ways to see these tools working is are you shipping faster for customers and so that's one of the things that we're looking at constantly and you see it now and we get asked you know how so many times, how is it, are you shipping so fast?

34:57And it's a lot of different things internally, whether we have a GM model or run lead and discipline, we got rid of committees, but now using these AI tools is another way to really help accelerate that.

35:07CFO THOUGHT LEADER: Yeah, we often hear about speed and accelerating how work gets done inside the finance organization when we ask CFOs about AI. But we wonder if anywhere has AI moved beyond faster work to maybe improve finance decision-making? Are you seeing that yet? Yeah, absolutely. So a couple things I'll point you to internally. We're doing kind of the basic blocking and tackling, like can you automate journal entries? Can you reduce workflows? I think that's helpful for finance. but to your point how do we make it to improve insights that's something i'm super excited about so there is a team within finance where we've built our own internal we call it an insight engine and it's built on the back of some of our ai tools and instead of needing to go to an analyst and saying hey can you can you help me understand what happened with this trend you can go directly to the insights engine you can either see it or you can talk to it and can share it so we start with a couple of very simple use cases one of them was capital allocation where is capital allocation going?

36:10Where's our engineers? What are they working on? What is their productivity? Then we expanded it to marketing because that's one of our other bigger buckets. Now we're expanding it to across everything we do. I look at that tooling and it is phenomenal and it's less than six months old. And so I think if you're in a finance org, it's important to do both. You have to do the meat and potatoes using these AI tools to help automate some of your workflows or improve the efficiency of your teams is kind of a priori, but where you can really take the jump is when you can start to turn to insights and you can help to drive things better.

36:43We automate a ton of our reports now. One of the things in finance is you're constantly producing reports and ingestion and you're trying to get not just the what, but the why. A lot of that is a lot of tedious work. And so being able to automate that then allows a lot of the team to be more freer for the higher level things to focus on. And so it's across all of these different buckets. It's automation, it's It's doing the meat and potatoes work, but then it's also trying to focus on kind of these insights and how you make great decisions going forward.

37:09CFO THOUGHT LEADER: We always, again, we always like to put a lens on some of the trade-offs that finance folks are involved in helping their companies make. I mean, as Robinhood adds products, what's harder, judging durable adoption or separating growth from market activity? Yeah, it's a great question. So we spend a lot of time on when we're building a product, who is the customer? What pain point are you solving? And then we go to what is the ROI and how do we build it? You always start with the customer. We have a set of pricing principles that we give to all of our GMs and our product managers and engineering leaders.

37:51And so when they're building it, they have a framework for using. So for example, one of the things we say is what are the unit economics? I always start with unit economics. you know it's interesting jason i mentioned before my predecessor coming from amazon he always starts with what's the five to ten year pnl we still look at that i think that's incredibly important but i'm trained in starting with what are the unit economics i'm a simple man like what are the what are the costs what are the inputs um how's it going to look then we go to um can you minimize the variable costs so i've said this publicly before i hate variable costs we try to make as much fixed costs as possible and so when you do that if you do the hard work up front and you automate things and you do it at fixed costs, you can work for a thin margin for customers, but then the entirety goes to profits as incremental margins.

38:37So that's some of the things we build. And then we look at the scale. Can this be a$100 million ARR business in some amount of time? We have internal time horizon. It's not enough to have a great IRR and a great product anymore. You also have to make sure it can get to scale. So that's some of the things we look at. And then to your point, depending on the product, is this revenue durable? Are you solving the customer pain point? Is it transaction revenue? Is it NIM? Is it sticky revenue? Where does it fit? All of those are kind of downstream impacts, but the most important part is, are you solving the customer pain point?

39:09And then is it a good ROI and if it passes their pricing principles? If so, then we want to fund it. Then it's just stackering against all of your other priorities you're looking at, but we usually don't start with, is this a durable revenue stream or what kind of revenue is it? What's it going to look like? That's a little bit backwards. It's start with the customer and then make sure it's a great business And then it's something we want to fund.

39:30CFO THOUGHT LEADER: Well, great, great overview for us. We are up to what we like to refer to as our finance strategic moment question. Again, this might have happened anytime during your career, but what comes to mind when we ask for a finance strategic moment? Yeah, it's a great question. There's a lot of different ways we could go, but I'll share a story that, you know, that we've shared publicly before. But in 2022, you know, we had just come off the IPO, the markets were turning, interest rates were rising, there was a big period of uncertainty. And we had to do a very painful change to the company. And so we went from a centralized model, we have a CPO, a CTO, a COO, to a GM model.

40:13And then we also had to reduce about 30 to 40 % of our workforce. The beauty of Robinhood was we was always spitting out free cash flow and we were growing fast so we know what to do with, but we never burned cash. And we had gone from 2 ,000 people to about 4 ,000 people in 18 months. And we just got away from solving hard problems and using engineering to kind of throwing bodies at the problem. And so we did the proverbial, we had to rebuild the plane while flying it. We were in the public markets, we went through it, it was very painful. And finance had to help lead that. One of the main things I spent during that time was working with Flat is what do you want the future of the company to be and how should that look like and what should the goals be, what should the KPIs be.

40:54And so we ripped apart the company. We went back to first principles. We started building for active traders. We had never built for them before. It was when we talked to our customers, it was our most engaged customers actually had the lowest NPS. That was incredibly backwards. And the reason was we had never built for them. We had just built a product that was so good that they started to come. but we weren't solving their pain points. And so this is when we came up with the three ARC framework, you know, win in active traders, number one in wallet share, global financial ecosystem. We redid all our KPIs to focus on market share and net deposits and gold subscribers.

41:29We went to the GM model, we reduced the workforce. It was one of the hardest things I've ever had to do from the human element and working with the employees to trying to do this while being public. But where I look at where we are today, five years ago, if we wouldn't have done those hard things, there's no way we'd be in the position to be here. And so that's one that always comes to mind. And I give Vlad and the team a lot of credit. You know, he came to Jason and me and he said, what would it take to get us to be back to break even to cash flow positive like ASAP? And what do we need to do?

42:00And what does the company need to look like? And what should we be doing? And there was no sacred cows. Start from scratch. And in finance, we built that plan and we knew it would be painful. And we understood the ramifications. We went through the pros and cons. And then once we decided as a leadership team to go through with it, then we did it. And we just meticulously executed. And our stock went from the IPO price of$38 down to$8. We were trading at cash value that people had written us off. But we could see internally what was happening. We could see the customer pain points starting to be solved.

42:31We could see the NPS going back up. We could see the engagement rising. And so we just kept at it. And now I look at where we are today. S &P 500, nearly$100 billion company with close to 30 million customers and$400 billion of assets, and none of that would have been possible. And so as hard as it was, I feel incredibly humbled and proud to have been part of the team to help right-size the ship and be able to start growing for customers again.

43:00CFO THOUGHT LEADER: AI is changing the finance function, but how much business value is it actually delivering. According to new research from Salesforce, 90 % of finance leaders using AI report a positive return on investment. And as AI agents enter the picture, finance leaders are seeing opportunities to improve productivity, reduce costs, and strengthen forecasting. But there's another side to the story. CFOs are also confronting growing revenue complexity with more subscription, consumption-based, and hybrid business models to manage. And that raises an important question. How can finance leaders gain the visibility they need to make better decisions while putting AI to work?

43:50CFO THOUGHT LEADER: Salesforce explores these challenges and the opportunities ahead in its latest CFO research. Discover what finance leaders are saying about AI, revenue complexity, and the evolving CFO role. Visit salesforce.com slash CFO report. That's salesforce.com slash CFO report. There are CFOs who are building their careers in far quieter corners. you've seen Robinhood grow under near constant scrutiny since 2018. And we wonder what does leading finance in that environment demand? Yeah, it's a great question. I think the main thing is you never get too high or you never get too low. You know that when everything seems like it's falling apart and it's a really hard time, it's probably not as bad as it seems.

44:47at the same time when everything's going well and you're in hyper growth mode and you're the darling everybody loves, it's probably not going to last forever. And so what we always remind employees of after every earnings, myself and Vlad and the team, we go up and we talk to them and we say, as hard as it is, don't look at the stock price. I know we're a stock trading app and we have that. Focus on customers, focus on the inputs, do the right things and good things will happen. And so I think being a finance leader who can help do that really resonates with the company. If the leadership team, or in particular finance, is always worried or saying this isn't working or is getting too excited, that resonates down.

45:24But if you just remind employees, hey, we're in this for the long time, we're going to serve customers, we have such a great opportunity, that's something that I really focus on. One other thing that I like to use, and again, I took this from Jason, who trained us, is finance's role is equal parts controllership and business enablement. It's the Amazon model. It's not bean counters. You're not going in there to say no. your job as the finance leader is to go to get to a yes. Now you have to take controllership seriously. That is the only way it works in particular when you're a public company that is incredibly important but you also have to be focused on business enablement.

46:00So all of the finance leaders that we train and that we work with we really try to ingrain that in them. That's not enough to be controllership or business enablement. You have to do both and that's one of the things I love at Robin. I'm still an IC. I still work at a lot of projects and being able to do that reminds me of a business enablement. But you also have to be able to say no. You have to be able to say no and do the hard things. I still personally approve every headcount and every marketing dollar that comes through that hasn't changed. One, it gives me a good view of the business. But two, it reminds people of the importance of being lean and discipline, that controllership side.

46:31So that's a little bit of how we run it internally.

46:35CFO THOUGHT LEADER: You explained how you worked beside an experienced CFO for years before stepping into the role. You saw the company grow up along with your career. What surprised you as you took on the role? What didn't you know? You didn't expect maybe? I didn't know this is part of the job. What was it when you finally got there despite being in such close proximity? Yeah, it's a good question. I'm still learning and still trying to figure it out. And I think that's one of the beauties of it. No matter what you do, there's still always much more to do. So Jason had done a great job and we had been working in that transition for a while and I had gradually taken on more of the team.

47:16So I think when he actually chose to retire and when I took on the big chair, the internal transition was pretty smooth and there wasn't anything different. And most employees, it was kind of, okay, this is the same thing. Should have been doing planning and approving headcount in dollars for a while. And so that wasn't a surprise. I think the external side, I'd run Investor Relations before and I'd done a lot of IR with Jason. But I think the seeing the amount that it is, it was probably the biggest surprise. And so if I look at what changed the most, I think internally, it's pretty similar. But externally, the investor engagement, the press and media engagement, working with business partners, externally regulators, like that's some of it that was kind of the that I needed to learn and was a little bit of a change.

48:02And so it's been wonderful. I love being able to tell our story. I feel super fortunate, whether it's investors or media or business partners and regulators. But it was just a reminder of time is sacred. There's only so many hours in the day and everything you want to do. And I think for people who are starting out as CFOs, whether they grew up internally or taking it on, realizing the amount of time commitment it is on the IR side and the press and engagement and business partner side, that was probably the biggest change.

48:30CFO THOUGHT LEADER: We always like to ask our guests to reflect a little bit on the personal side. Sarah you've been there quite a few years so I don't know if your colleagues don't know everything about you already but what's something that they might not know some pursuit that you had some interest some past milestone you can even give us a Oakland athletics story if you like no great question so a couple tidbits that my friends or family know well I'm a voracious reader. It's my catharsis. It's still what I love to do. I have a young daughter at home, and after she goes to bed, I either log on and work, or I like to read, or if I'm traveling, and so I'm usually reading three or four different books at one time.

49:11I just jump around depending on what's interesting, so that's one. The second thing I'll share with you is I'm a Jeopardy buff. I've been watching the show since I was as young as I can remember, and I've been trying out for the show probably for the past 20 years. I've gotten to the final round twice, And so the way it works is about a hundred thousand people take the test every year. They call about 2 ,000 people who pass the test for in-person auditions. And then of that 2 ,000 people, about 500 people get on every year. So I've made it to that last step twice. And so one of these days, I think I'll hopefully make it on there.

49:45I have a very strange memory. I can remember facts and things from years ago or from books that I've read. And so it serves me well in jeopardy. And so it's fun. It's a good story. And hopefully one of these days I'll be able to see if I can make it onto the show.

49:59CFO THOUGHT LEADER: What about a book for your fellow CFOs out there, something that's influenced your thinking or you thought was worthwhile? There's a lot I'm sure that you don't prescribe to, but what would you tell us? Yeah, absolutely. I'll give you a couple of my favorites. The first is The Outsiders by Thorndike. I think it's the best book I've ever read on capital allocation. And once I read it, I actually shared it with Vlad and others people internally. And I was like, hey, we have to read this. And it tells some stories of what are the best capital allocators of public companies in general? What have they ever done?

50:34Really, really enjoyed that. Another book is The Goal. It's a famous book from the 70s or 80s, MBA 101. It tells the operational processes of the factory. We gave it to the entire leadership team a few years ago. It is a really good way of looking at constraint theory and bottlenecks. And for software development, it's very relevant. And so that's one I find that's very helpful. Another one is Only the Paranoid Survive. It's by the old Intel CEO. And he's got some great stories in there. But there's a thought exercise that we often use internally when Intel was not doing well. And he said, hey, if a new CEO came in, what would they do from scratch?

51:11And what would they do and start over? And then instead of waiting for someone new to come in, should we do that? And so oftentimes, we'll kind of use some of that thought exercise internally for trying to make a hard decision. If a new CEO were to come in from scratch and look at this, how would that do? And so I thought that was a good takeaway. But yeah, there's a whole litany of books out there, but those are a couple of my favorites.

51:31CFO THOUGHT LEADER: Wonderful. Great selections for us. We're up to our last question. This is where we ask you to look forward finally. And what we'd like to know are your priorities for the coming 12 months. What would those be? Yeah, it's pretty similar to what we're doing before. The first is keep shipping for customers. I mean, that is our bread and butter. You have to be delivering a product velocity. You can never get complacent. And so really making sure that we keep shipping and we keep thinking about the customers. The second is how do we continue to make sure that we are best in class in using AI? And we talked about that a lot, but that's both on the internal side and for the customer side.

52:11We are such early days on there, but how do we make sure that we can be a leader on that, not just in financial services, but across public companies? So that's one that we're focused on. And the third is just keep making progress on our mission. You know, Vlad is starting to say more publicly that one thing we're really focused on is ownership. We think this is a moment in time right now where the American public is looking for ownership. And we are one of the best ways to provide that, whether it's across equities or other asset classes, private assets, public assets. And so we're really making a big push in how to make sure that Americans get ownership in the financial ecosystem.

52:45If we keep working on that, I think good things will happen. But those are probably our top three priorities for the next few months.

52:51CFO THOUGHT LEADER: And Shiv Verma, thank you for joining us on CFO Thought Leader. Awesome. Thank you for having me.

53:21CFO THOUGHT LEADER: your finance executive, contribute your experience. It takes just a few minutes, and you'll receive early access to the findings. Visit cfothoughtleader.com slash benchmarking.