Robinhood reports shrinking revenue, fewer active users 2022-04-28 15:13:30


retail brokerage company Robinhood It reported a larger-than-expected loss and shrinking revenue for the first quarter, suggesting that the small dollar trading boom that captivated Wall Street a year ago may have run out of steam.

The company’s shares rose 2% on Friday morning in choppy trading.

Robinhood emerged as one of the major players in the meme stock saga last year, with retailers signing up for accounts and helping drive rapid moves in stocks like Jim Stop. That led to tough comparisons in the first quarter, but the slowdown in trading activity was more dramatic than expected.

The Robinhood logo is displayed on a smartphone in an ordered image.

Gaby Jones | Bloomberg | Getty Images

“Our largest clients are still active, but we are seeing a more pronounced decline from those with lower balances,” CEO Vlad Tenev said in a conference call with investors and analysts. “With market uncertainty, our clients are becoming more cautious in their investment portfolios.”

Here’s what the company reported compared to what Wall Street was expecting, based on an analyst survey by Refinitiv:

  • Loss per share: 45 cents vs. 36 cents expected
  • Revenue: $299 million vs. $355.8 million forecast

For the three months ended March 31, Robinhood said its loss shrank to $392 million, or 45 cents a share, from a loss of $1.4 billion, or $6.26 a share, a year earlier. Revenue was down 43% from a year ago to $299 million.

Robinhood said monthly active users fell to 15.9 million, down from 17.7 million in the same period last year and 17.3 million in the previous quarter. The company’s average revenue per user was $53, down from $137 a year earlier and $64 in the prior quarter.

The main source of brokerage revenue is a practice known as payment for order flow. Although trading is free from a client perspective, Robinhood earns a difference on the trades you send to the big trading houses.

In an effort to drive revenue and user growth, Robinhood is introducing new products and features. The company announced in late March that it had done so Extended trading hours.

Robinhood also rolled out crypto wallets for clients earlier in April. In the first quarter, revenue from cryptocurrency trading fell to $54 million, but exceeded $36 million from stock trading. Those numbers were $88 million and $133 million, respectively, a year ago.

Options trading was the largest area of ​​revenue at $127 million, down from $198 million a year earlier.

“This story was a story of two competing forces – our accelerated product development combined with a challenging macroeconomic climate,” Tenev said.

Robinhood is also keeping an eye on its costs. Tuesday, Robinhood It said it would reduce its full-time workforce by about 9%.citing “duplicate roles and jobs” for layoffs.

The company said Thursday that it now expects operating expenses to increase between 2% and 5% in 2022, excluding equity-based compensation. Previous guidance called for an increase of 15% to 20%.

Tenev said the company aims to adjust earnings before interest, tax, depreciation and amortization — or EBITDA — by the end of the year. This metric showed a loss of $143 million in the first quarter.

Robinhood went public in July 2021 at $38 a share, but the stock has struggled to find traction. It closed at $10.09 a share on Thursday before falling after the results were announced.

Read the full press release here.