Robinhood’s earnings drop due to drop in crypto trading

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Robinhood Markets Inc.’s revenue fell in the third quarter compared to the previous one, weighed down by a sharp decline in client cryptocurrency trading.

The popular trading app reported revenue of $ 365 million, down 35% from $ 565 million in the previous quarter. Year-over-year revenue increased 35% from $ 270 million in the third quarter of 2020.

Robinhood recorded a net loss of $ 1.3 billion for the quarter, or $ 2.06 per diluted share, which the company attributed to stock compensation expenses. For the second quarter Robinhood recorded a loss of $ 502 million and for the period of the previous year it recorded a loss of $ 11 million.

Some 660,000 new accounts were funded in the third quarter, but growth was not enough to offset the slight decline the company saw in net cumulative funded accounts. This metric dropped from 100,000 to 22.4 million during the period.

Robinhood had previously warned that seasonal trading patterns could weigh on revenue and account growth in the quarter. But the company largely missed analysts’ earnings expectations. The company’s revenue from routing transactions from clients to high-speed trading companies – a practice known as payment for order flow – was $ 267 million over the course of the year. of the quarter, down approximately 41% from the previous quarter, but up 32% year-on-year. .

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Much of that drop was due to a sharp drop in cryptocurrency trading revenues, which fell 78% to $ 51 million from $ 233 million in the previous quarter. Quarterly income from stock and options trading fell 3.8% and 0.6% respectively.

“Historically our growth has been in waves – surges have occurred during times of heightened volatility or market events,” Jason Warnick, CFO of Robinhood, said in a media call after the publication. results. “Going forward, we plan to continue to see the ebb and flow of our growth with market conditions, as well as product launches.”

Over the past year and a half, Robinhood has been enjoying the retail boom that has driven stocks and cryptocurrencies soaring. But it was affected in the third quarter by changes in the trade preferences of individual investors. In the second quarter, for example, the company said nearly two-thirds of cryptocurrency revenue was attributable to dogecoin transactions, a parody token that has earned more than 15,500% since the start of the year when its price fell. peaked in May. Dogecoin has since struggled to gain momentum after falling sharply from its high.

Robinhood shares, which debuted on the stock exchange in July, fell about 8.4% to $ 36.25 after-hours, slipping below its initial public offering price of $ 38 per share .

Robinhood said he expects seasonal downturns to persist in the fourth quarter, with quarterly revenues not exceeding $ 325 million and annual revenues below $ 1.8 billion. Going forward, the company said it was focusing on products for users. He said more than a million customers have signed up for crypto wallets, which allow users to move digital assets in and out of the app.

Write to Caitlin McCabe at [email protected]

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Appeared in the print edition of October 27, 2021 under the title “Crypto-Trade Lull Cuts Into Results At Robinhood”.

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