Robinhood reports 43% revenue decline

Robinhood Markets company

Hood -2.82%

Revenue fell to $299 million in the first quarter, down 43% from the same period last year and the company’s fifth consecutive quarterly decline.

The company cut its losses to $392 million from $1.4 billion in the same period last year. Its stock was down 10% in aftermarket trading Thursday.

Robinhood Hood -2.82%

She spent huge amounts of money to expand her business. Operating expenses for the first quarter totaled $690 million, an increase of nearly 50% over the same period last year. Earlier this week, the company surprised markets by laying off 9% of its full-time employees, tacitly acknowledging that its expenses were too high.

Robinhood has signed millions of investors during the Covid-19 pandemic. Now he is struggling to hold on to them. No-fee brokerage Robinhood relies on trading volume to generate revenue. It sends customer orders to high-speed trading firms in exchange for cash in a controversial practice called payment for order flow.

Robinhood’s monthly active users fell 10% to 15.9 million in March, from 17.7 million in the same month in 2021.

When there are fewer customer orders, the brokerage makes it less. Robinhood’s transaction-based revenue nearly halved to $218 million from $420 million.

The company faces stiff competition in trading from more established brokerages with deep pockets. Fidelity Investments focused on the Reddit audience and recently launched Bitcoin investing in 401(k)s. Asset management giant Vanguard Group bought Just Invest last summer to offer customized portfolios.

Chief Financial Officer Jason Warnick said Robinhood is trying to break out of a period of hyper-growth while continuing to build services for clients with the added challenge of doing so during a bear market.

Despite the losses, Mr. Warnick said the company is confident in its direction. “We are building a really strong foundation for future growth,” he said.

Aparna Chennapragada’s chief product officer says Robinhood’s educational materials are meant to be small and consumable as the company seeks to democratize commerce.


picture:

Mickey-Pierre-Louis in The Wall Street Journal

Mr. Warnick said the current market, which is characterized by high interest rates and low asset prices, has made investors more cautious. He said they are trading less and in smaller quantities. “They definitely pay attention to the overall environment,” he said.

Robinhood shares are down 73% since their initial public offering in July 2021, and 86% from the $70.39 level recorded on August 8 last year.

Robinhood is adding a slew of new products to build its user base and bring in new revenue streams such as leveraging the crypto movement.

Earlier this month, Robinhood announced that users can trade four more cryptocurrencies – including the favorite Shiba Inu. It has announced that it will acquire UK-based crypto firm Ziglu Limited.

In response to user demand, it has launched a digital wallet, a separate account type that will allow users to transfer cryptocurrency from the Robinhood platform. Previously, users could buy and sell, but they had to keep their assets inside their Robinhood accounts.

The company has also added support for the Lightning Network, a standalone service designed to make bitcoin payments faster and cheaper.

Momentum in crypto is unpredictable. Prices of cryptocurrencies such as bitcoin, ether and dogecoin are down about a third from their November peak, and trading volume on the largest exchanges is down about 70% since October, according to data from research firm CryptoCompare. This fallout is featured in Robinhood’s earnings reports.

In the second quarter of 2021, Robinhood said that cryptocurrency trading reached $233 million, more than half of its transaction revenue. However, last quarter that number fell to $54 million.

Robinhood has since added some subscription-type services in an effort to settle investments – launching a recurring crypto investing feature in September to enable clients to add a fixed amount of money on a daily, weekly or monthly schedule.

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Last month, Robinhood extended its trading hours from 7 a.m. to 8 p.m. ET, saying it was looking to move to around-the-clock trading in the future.

It has also launched a cash card that allows investors to link their deposits to direct paychecks and automatically invest a portion of them in each pay period, among other features.

Robinhood also leans on its marketing promise to democratize trading – adding features that make investing easier for new users.

“For me, the accessibility of the design is very important because so many people [a cellphone] Chief Product Officer Aparna Chennapragada said of the mobile app-based brokerage:

“Not everyone has a laptop,” she said.

The brokerage added a 24-hour customer service line in the fall, with Ms. Chinapragada surprised to see the company receiving not only early investors’ questions — like how to sign in — but questions from more sophisticated investors.

She said the company’s educational materials focus on small-scale, consumable information meant not to be intimidating or full of jargon.

Write to Paul Vigna at Paul.Vigna@wsj.com and Jenna Telesca at jenna.telesca@wsj.com

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