Retail brokerage firm Robinhood reported a bigger-than-expected loss and shrinking revenue for the first quarter, showing signs that the small-dollar trading boom that captivated Wall Street a year ago may have lost momentum.
Shares of the company rose 2% in volatile trading on Friday morning.
Robinhood emerged as one of the main players in last year’s meme stock saga, with retailers signing up for accounts and helping fuel rapid moves in stocks like GameStop. That made for harsh comparisons in the first quarter, but the slowdown in trading activity was even more dramatic than expected.
The Robinhood logo displayed on a smartphone in an arranged photo.
Gaby Jones | Bloomberg | Getty Images
“Our larger customers remain active, but we are seeing larger declines for those with smaller balances,” CEO Vlad Tenev said on a conference call with investors and analysts. “With the uncertainty in the market, our clients have become more cautious with their portfolios.”
Here’s what the company reported, compared to Wall Street expectations, based on a poll of analysts by Refinitiv:
- Losses per share: 45 cents vs. 36 cents expected
- Revenue: $299 million versus $355.8 million expected
For the three months ended March 31, Robinhood said its loss narrowed to $392 million, or 45 cents a share, from a loss of $1.4 billion, or $6.26 a share a year ago. Revenue fell 43% year over year to $299 million.
Robinhood said its monthly active users declined to 15.9 million, compared to 17.7 million in the year-ago period and 17.3 million in the previous quarter. The company’s average revenue per user was $53, compared to $137 a year ago and $64 in the previous quarter.
The broker’s primary source of income is a practice known as paying for flow of orders. Although trading is free from the client’s perspective, Robinhood earns a spread on the trades it sends to major trading houses.
To drive revenue and user growth, Robinhood has introduced new products and features. The company announced in late March that it had extended extended trading hours.
Robinhood also launched crypto wallets for customers in early April. In the first quarter, crypto trading revenue fell to $54 million, but that surpassed $36 million from equity trading. Those numbers were $88 million and $133 million a year ago, respectively.
Options trading was the largest area of revenue at $127 million, compared to $198 million a year ago.
“This story was the story of two competing forces — our accelerated product development versus a difficult macroeconomic climate,” Tenev said.
Robinhood also pays attention to its costs. On Tuesday, Robinhood said it would cut its full-time workforce by about 9%, citing “duplication of roles and job functions” for the layoffs.
The company said Thursday it now expects operating expenses to increase between 2% and 5% in 2022, excluding stock-based compensation. Previous projections called for a 15% to 20% increase.
Tenev said the company is targeting positive adjusted EBITDA — or earnings before interest, taxes, depreciation and amortization — by the end of the year. That metric showed a loss of $143 million in the first quarter.
Robinhood went public in July 2021 at $38 per share, but the stock has struggled to gain traction. It closed at $10.09 a share on Thursday before falling after the earnings release.
Read the full press release here.