Robinhood Seeks Fresh Following as Client Rosters, Revenue Plummet

Robinhood, earnings, crypto

For Robinhood, it may feel a bit like the clock is ticking. The latest quarter showed a precipitous decline in the platform’s core business, at the same time management is seeking to broaden the appeal of new card-based and rewards initiatives.

Crypto offered a bit of bump, depending on how you looked at it — but then again, the crypto winter is here.

Commentary from the most recent earnings call spotlights a platform in the midst of transition, pulling what levers it can to cut operating expenses while it loses customers and grapples with all manner of macro (and company-specific) headwinds. With less money in their pockets, it stands to reason that investors are less inclined than they once were to roll the dice and trade the markets with fervor.

As noted on Wednesday (Aug. 3), Robinhood is laying off just under a quarter of its staff. Results also showed a 34% year-over-year decline in active users to 14 million, which in turn helped usher in a 44% drop in revenues, also year over year, to $318 million.

Read more: Robinhood Cuts 23% of Staff as Brokerage Sees 34% Drop in Monthly Active Users

Most Metrics Decline 

The supplementals released by the company also reveal that total assets under custody stood at $64 billion, down from $94 billion in the first quarter, and leagues below the $102 billion seen a year ago.

Average revenue per user was off to $56 in the quarter, where it had been $137 at the beginning of 2021. To get a sense of how activity has been slowing, consider the fact that transaction-based revenues slipped to $202 million in the latest period, where it had been $218 million in the first quarter and $451 million a year ago.

As for the cryptos? Revenues from crypto-related transactions came in at $58 million, which was up from $54 million in the first quarter, but paled compared to $233 million a year ago.

During the conference call with analysts, CEO Vlad Tenev stated that Robinhood’s customers, “many of whom are younger, it looks like they may be facing a recession for the first time in their adult lives.”

Related: Barking Mad? Robinhood CEO Sees Dogecoin as ‘Future Currency of the Internet’

High inflation and the crypto winter, he said, all culminate in less money to spend — and less money to save and invest. That’s reflected in the drop in assets custodied with the firm.

The company continues to pilot its retirement account offerings, Tenev said, and is moving toward 24/7 stock trading. Robinhood also rolled out securities lending in the quarter in a bid to bring passive income to investors, and the company’s cash card is also seeing increased traction, he said.

“We’re matching a portion of their roundups to help them build their portfolios,” Tenev said, along with cash-back options.

Chief Financial Officer Jason Warnick said that “funded accounts continue to grow and customers continue to make net deposits through the volatile environment assets under custody declined along with decreases in market valuations.” He noted that customer assets were back over $70 billion as of July.

During the question and answer session with analysts, management noted that the “best use of cash” is to fund the business and possibly use it for acquisitions.

Management also seemed to downplay the rumors of being acquired by FTX or Schwab, stating that the company is in a “great position” as a standalone firm. The regulatory environment is still evolving, too (and payment for order flow equates to about 9% of the company’s total revenues).