Robinhood Reports Q1 Results, Crypto Revenue Takes a Hit

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Robinhood, the popular cryptocurrency and stock trading platform, has released its first quarter results, disclosing a significant decline in revenue for its crypto trading business.

Robinhood’s Q1 2023 Results Show Increase in Overall Revenue Despite Crypto Revenue Drop

The earnings report for Q1 2023, published on May 10, revealed that the company generated $38 million in crypto trading revenues during the period, marking a 30% decrease compared to the same quarter in 2022 when it reached $54 million.

Moreover, Robinhood experienced a 16% increase in revenue from the previous quarter. The primary source of earnings was interest, attributable to the recent and rapid rate hikes by the United States Federal Reserve.

Currently, Robinhood holds approximately $12 billion worth of crypto under its custody, denoting a 50% rise over the quarter. However, this figure indicates a 40% decline when compared to the corresponding period last year.

Robinhood experienced a remarkable increase in its total revenue compared to the previous year, despite the decline in crypto trading revenue. During the first quarter of 2023, the company disclosed net revenue of $441 million, indicating a substantial surge of approximately 47.5% in comparison to the corresponding period in 2022 when it reached $299 million.

The decrease in Robinhood’s crypto revenue aligns with the overall downturn in market capitalization for digital assets during the same period. The global market cap for cryptocurrencies stood at $2.1 trillion on March 31, 2022. However, it witnessed a substantial 40% decline, plummeting to $1.2 trillion on the corresponding date this year.

The number of monthly active users on the Robinhood platform also experienced a year-on-year decrease. While the first quarter of 2022 witnessed nearly 16 million monthly active users, the most recent earnings report indicated just under 12 million users. Nevertheless, this figure still represents an increase of 400,000 users from the previous quarter.

Robinhood’s overall financial performance resulted in a net loss of $511 million. The company clarified in a press release that this loss was primarily influenced by a one-time expense of $485 million related to share-based compensation.

The expense arose from the cancellation of market-based restricted stock unit awards by the co-founders in February 2023. This net loss marks a 30% increase in losses compared to the previous year and represents the largest loss for Robinhood since Q3 2021.

In addition, Robinhood expressed its intention to potentially acquire a majority or all of the 55 million shares from Emergent Fidelity Technologies, an offshore investment vehicle utilized by FTX founder Sam Bankman-Fried to acquire an 8% stake in Robinhood.

The company stated that ongoing discussions are taking place with the relevant parties, but the timing and occurrence of the share purchase remain uncertain.

Coinciding with that day, Robinhood made an announcement regarding the implementation of round-the-clock trading for 43 of its highly sought-after exchange-traded funds (ETFs) and stocks, which encompass prominent companies like Apple, Tesla, and Amazon. The rollout is set to commence on May 16 and is anticipated to be accessible to all users by June.

Following the release of these financial results, Robinhood shares experienced a slight decrease during regular trading hours but subsequently rose by 3% in after-hours trading, as reported by Google Finance.

Robinhood Announces 24-Hour Trading on Weekdays

On Wednesday, Robinhood, popularly known for its HOOD stock, shared news about a significant enhancement to its stock trading service.

Commencing on Monday, May 16, users will gain the capability to engage in round-the-clock trading of stocks and ETFs throughout the entire week. This noteworthy update was revealed alongside the release of the company’s financial results for the first quarter.

The extended trading hours will be in effect from Monday at 8:00 a.m. ET until Friday at 8:00 p.m. ET. Robinhood will provide the opportunity for continuous trading on a selection of over 40 stocks and ETFs, which includes well-known entities such as Apple (AAPL) and Tesla (TSLA).

Vlad Tenev, the co-founder and CEO of Robinhood, expressed excitement about this enhancement during the company’s earnings call. He emphasized that the extended trading hours empower customers to effectively manage their risks and capitalize on opportunities regardless of the time they arise.

The Menlo Park, California-based trading platform, previously criticized for its reliance on payment for order flow, has been actively introducing new features to boost revenue and achieve profitability. The recent results exceeded Wall Street expectations, surpassing the projected $422 million revenue.

Although monthly active users in the first quarter reached 11.8 million, representing a rise from the fourth quarter of 2022, they experienced a decline of approximately 25% compared to the previous year. Despite this, Robinhood shares witnessed a positive trend, increasing by around 3% on Thursday.

CFO Jason Warnick highlighted that the continuous rollout of new products will diversify and strengthen the company’s revenue profile. Robinhood launched IRA accounts in January, offering a 1% match, which has already attracted over $500 million in customer investments. Additionally, the platform has plans to introduce advisory services and futures trading by the end of the year, pending regulatory approval.

Amid recent banking turbulence, Robinhood has successfully enticed customer deposits by offering Gold tier subscribers a 4.65% yield on their uninvested cash. Warnick emphasized that, unlike banks, Robinhood keeps customer cash liquid, avoiding the risk of asset-liability mismatch. The platform saw a significant influx of customer deposits, amounting to $1.5 billion in March, further solidifying their position in the market.

While Robinhood faced challenges during the pandemic, including layoffs and market volatility, the company adapted to the changing investment landscape. The low-interest-rate environment and the GameStop “meme stock” frenzy resulted in increased usage among young retail investors.

Robinhood has responded by diversifying its business lines, aiming for long-term profitability and growth while meeting the financial needs of its user base.

Vlad Tenev expressed confidence in the resilience of the business, noting the fast-paced innovation and the successful diversification of the company’s offerings. He emphasized the team’s commitment to seizing opportunities and driving further expansion in the future.

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