Robinhood estimates costs of workforce reduction, closure of offices
Robinhood Markets, Inc. (NASDAQ:HOOD) has just posted its annual report with the Securities and Exchange Commission (SEC).
The document includes an update on the costs stemming from the restructuring efforts announced during 2022.
On April 26, 2022, Robinhood announced the April 2022 Restructuring as part of its efforts to improve efficiency and operating costs. The April 2022 Restructuring involved approximately 330 employees, representing approximately 9% of Robinhood’s full-time employees at that time.
Robinhood allowed affected employees’ share-based awards to continue vesting over a transitional period (generally two months during which they remained employed but were not expected to provide active service), which were generally accounted for as a modification allowing a portion of the awards to vest that otherwise would have been forfeited.
However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the April 2022 Restructuring resulted in a net reduction to share-based compensation of $24 million, which was recognized in the second quarter of 2022.
In addition, Robinhood recognized $17 million of cash restructuring and related charges in the second quarter of 2022, which primarily consisted of employee-related wages, benefits, and severance expense.
As of December 31, 2022, all of the restructuring charges relating to the April 2022 Restructuring had been paid in full. On August 2, 2022, Robinhood announced the August 2022 Restructuring, which involved 780 employees, representing approximately 23% of Robinhood’s full-time employees at the time, the planned closure of two offices, and related matters.
These actions were part of a company reorganization into a general manager (GM) structure under which GMs have assumed broad responsibility for Robinhood’s individual businesses. As Robinhood continued to execute the August 2022 Restructuring, its lower headcount led it to evaluate its real estate portfolio.
In the third quarter of 2022, Robinhood decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.
In connection with the office closures describe above, Robinhood determined the carrying amount of the right-of-use assets and associated leasehold improvements exceeded their respective fair value, resulting in impairments of $30 million and $15 million.
In addition, Robinhood accelerated depreciation of $9 million related to other fixed assets.
Similar to the April 2022 Restructuring, Robinhood allowed affected employees’ share-based awards to continue vesting over a transitional period allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the August 2022 Restructuring resulted in a net reduction to share-based compensation of $53 million, which was recognized in the third quarter of 2022.
In addition, Robinhood recognized $34 million of cash restructuring and related charges primarily related to employee-related wages, benefits, and severance expense.