Robinhood lays off nearly a quarter of its workforce after 44% Q2 Revenue drop
Online brokerage maverick Robinhood (NASDAQ:HOOD) continued to deal with falling Revenues and mounting losses, announcing that it would be laying off 780 employees, or about 23% of its workforce.
As part of the restructuring, Aparna Chennapragada, Robinhood’s Chief Product Officer, will be leaving the company.
In connection with the restructuring, Robinhood estimates that it will incur approximately $30 million to $40 million of cash restructuring and related charges, primarily related to employee severance and benefits costs (excluding the impact of share-based compensation), plus approximately $15 million to $20 million of charges related to office closures and contract termination fees, substantially all of which the company expects to incur in the third quarter of 2022.
For the three months ended June 30, 2022, Robinhood reported $318 million of Revenue, down 44% YoY from Q2-2021’s $565 million, although improved (by 6%) QoQ as compared to Q1-2022’s $299 million. Robinhood posted a Q2 net loss of $295 million.
Also troubling were the company’s reported client metrics. Monthly Active Users (MAU) decreased 1.9 million sequentially to 14.0 million for June 2022, as Robinhood said that customers “navigated the volatile market environment.” Assets Under Custody (AUC) decreased 31% sequentially to $64.2 billion, primarily driven by lower market asset valuations.
The layoffs, Revenue shortfall and quarterly loss announcement concluded a somewhat tough day for Robinhood, which earlier Tuesday was hit with a $30 million fine from New York regulator NYDFS, regarding deficiencies in Robinhood Crypto.
Regarding the layoffs and restructuring, Robinhood CEO and co-founder Vlad Tenev took to the company’s blog, as he oftentimes does, to explain the moves and what the company is dealing with now.
His note reads as follows:
As part of a broader company reorganization into a General Manager (GM) structure, I just announced that we are reducing our headcount by approximately 23%. While employees from all functions will be impacted, the changes are particularly concentrated in our operations, marketing, and program management functions.
I want to acknowledge how unsettling these types of changes are. We often talk about our mission to democratize finance for all, and one of the most cherished aspects of Robinhood is the teamwork and camaraderie involved in working towards our mission — together. I feel incredibly privileged and fortunate to have the opportunity to build with all of you.
Let me explain how we arrived at this decision. Earlier this year, I announced that we would be letting go of 9% of our workforce and focusing on greater cost discipline throughout the organization. This did not go far enough.
Since that time, we have seen additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash. This has further reduced customer trading activity and assets under custody.
Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the COVID era would persist into 2022. In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory – this is on me.
In addition, our mandate to drive greater cost discipline and accountability has made it clear that we need to change our organizational structure. We will be moving to a General Manager (GM) structure, where GMs will assume broad responsibility for our individual businesses. This change will flatten hierarchies, reduce cross-functional dependencies, and remove redundant roles and positions. There is a lot to go through here, and we will discuss our new structure in more depth at this Thursday’s All-Hands.
Our business realities don’t make this conversation any less difficult or the decisions any less painful. I share this to be as transparent as I can with all of you who work every day to deliver on our mission. We will be parting ways with many incredibly talented people today in an extremely challenging macro environment, and I want to reduce the burden of this difficult transition as much as possible.
Everyone will receive an email and a Slack message with your status – with resources and support if you are leaving. We’re sending everyone a message immediately after this meeting so you don’t have to wait for clarity. Departing Robinhoodies will be offered the opportunity to remain employed with Robinhood through October 1, 2022 and receive their regular pay and benefits (including equity vesting). They will also be offered cash severance, payment of COBRA medical, dental and vision insurance premiums and job search assistance (including an opt in Robinhood Alumni Talent Directory).
Each impacted Hoodie will be able to schedule time with our people team to discuss their specific situation live. We know that this news is tough for all Robinhoodies, and we are also offering wellness support to those who would like it.
To those who remain, I know that our new organizational structure and the departure of our colleagues will be another challenge to adapt to. In the short seven years since Robinhood launched to the world, we have adapted to challenges and forced the financial industry to adapt to us. We’ve overcome many obstacles and have emerged from each a stronger and more resilient company. This will be no different.
As always, see you this Thursday at All-Hands.