Robinhood revises restructuring charge estimate, to close additional offices
A couple of months after online brokerage Robinhood announced its plans to slash a quarter of its workforce, the company has updated its restructuring plans, with the changes resulting in a restructuring cost hike.
In an SEC filing, Robinhood says its lower headcount has led it to evaluate its real estate portfolio. On September 30, 2022, Robinhood decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which are recent leases that have not been occupied. No employees are being terminated as a result of these actions.
Robinhood expects these additional office closures will result in incremental restructuring-related charges of approximately $45 million (substantially all of which will be incurred in the third quarter of 2022). The company also expects this decision will generate additional run-rate savings of approximately $4 million per quarter, starting in the fourth quarter of 2022 and running through the first quarter of 2024, and savings of lesser amounts thereafter.
As a result of these actions, Robinhood is revising its originally estimated restructuring charge range of $45 million to $60 million. The new estimate is that Robinhood will incur total restructuring-related charges of approximately $90 million to $105 million (excluding the impact of share-based compensation) in connection with the August 2022 Restructuring, substantially all of which Robinhood expects to incur in the third quarter of 2022.
This updated range consists of approximately $30 million to $40 million of cash restructuring and related charges (as originally estimated) primarily related to employee severance and benefits costs (excluding the impact of share-based compensation) and approximately $60 million to $65 million of charges related to office closures and contract termination fees (including impairments of approximately $50 million).
The brokerage continues to expect a net reversal of share-based compensation of $40 million to $50 million in the third quarter of 2022 as a result of the August 2022 Restructuring.