Online broker Robinhood Markets (NASDAQ:HOOD) has released its financial results for the second quarter of 2023, which ended June 30, 2023.

Second Quarter Results:

• Total net revenues increased 10% sequentially to $486 million, primarily due to seasonally higher proxy revenue and higher net interest revenues, partially offset by lower transaction-based revenues.
• Transaction-based revenues decreased 7% sequentially to $193 million.
  • Options decreased 5% to $127 million.
  • Cryptocurrencies decreased 18% to $31 million.
  • Equities decreased 7% to $25 million.
• Net interest revenue increased 13% sequentially to $234 million, driven by growth in interest earning assets, higher short term interest rates, and increased securities lending activity.
• Net income was $25 million, or earnings per share (EPS) of $0.03, compared with a net loss of $511 million, or EPS of -$0.57, in Q1 2023.
  • Q1 2023 EPS of -$0.57 included a -$0.54 EPS impact from a one-time $485 million share-based compensation (“SBC”) expense related to our co-founders cancelling their 2021 market-based restricted stock unit awards in February 2023 (the “2021 Founders Award Cancellation”).
• Operating expenses decreased by $484 million sequentially to $466 million, primarily due to the 2021 Founders Award Cancellation in Q1.
  • Operating expenses prior to SBC increased $5 million sequentially to $357 million.
  • SBC decreased by $489 million sequentially to $109 million, primarily due to the 2021 Founders Award Cancellation in Q1.
• Adjusted EBITDA (non-GAAP) increased 31% sequentially to $151 million. Adjusted EBITDA margin (non-GAAP) increased 5 points sequentially to 31%.
• Net Cumulative Funded Accounts increased 70 thousand sequentially to 23.2 million.
• Monthly Active Users (MAU) decreased 1.0 million sequentially to 10.8 million.
• Assets Under Custody (AUC) increased 13% sequentially to $89 billion, primarily driven by higher equity valuations and continued net deposits.
• Net Deposits were $4.1 billion, which translates to an annualized growth rate of 21% relative to AUC at the end of Q1 2023. Over the past twelve months, Net Deposits were $16.1 billion, which translates to a growth rate of 25% relative to AUC at the end of Q2 2022.
• Average Revenue Per User (ARPU) increased to $84 from $77 in Q1 2023.
• Cash and cash equivalents totaled $5.8 billion compared with $5.5 billion at the end of Q1 2023.

Vlad Tenev, CEO and Co-Founder of Robinhood Markets, made special note of the company’s ability to become profitable after several consecutive quarters of losses since Robinhood went public in 2021:

“In Q2, we reached a significant milestone by achieving GAAP profitability for the first time as a public company. Guided by our bold product roadmap we’re continuing to innovate for our customers, grow assets, gain market share, and change the industry for the better.”

Jason Warnick, Chief Financial Officer of Robinhood Markets added:

“Reaching GAAP profitability is a testament to the work our team has done to transform the business and better position Robinhood to drive shareholder value. With five consecutive quarters of revenue and Adjusted EBITDA growth, we’re continuing to drive efficiency across our operations while investing in customer experience. Looking ahead, we remain focused on delivering for customers and growing our business.”

Robinhood Q2 2023 Highlights

Robinhood scales existing products in continued push to deepen relationships with customers

• Robinhood Retirement continues to see strong adoption with IRA assets to date nearing $1 billion and we are introducing a 3% IRA match for Robinhood Gold customers.
• Customers continue to take advantage of our Robinhood Gold cash sweep program which now offers a 4.9% yield. Robinhood Gold cash sweep balances have more than doubled since the start of the year, increasing to $11 billion.
• As of July, Robinhood 24 Hour Market is available to all customers who can now invest in select stocks and ETFs on their own schedules, five days a week.

Robinhood invests in new growth opportunities, accelerating product roadmap delivery

• Bringing us closer towards our goal of serving the entirety of our customers’ critical financial needs, in July we acquired X1, a platform that offers a no-fee stainless steel credit card with rewards on each purchase.
• We remain on track to launch brokerage services in the UK by the end of the year and have started to hire for key roles.
• Sherwood Media, LLC, a subsidiary of Robinhood Markets Inc., is building out its sales and partnerships functions and in June announced a multi-year partnership with Nasdaq.

Robinhood continues to pursue purchasing most or all of the remaining 55 million shares purchased by Emergent Fidelity Technologies in May 2022

• Discussions are ongoing with the related parties and we will continue to provide updates as appropriate.
• Since there is limited precedent for this type of situation, we cannot predict when, or if, the share purchase will take place.

Financial Outlook

Based on our Q2 2023 results, our expense outlook for 2023 has improved from our prior outlook at Q1 2023 earnings (May 10th, 2023). We now expect:

• GAAP total operating expenses for full-year 2023 to be in the range of $2.330 billion to $2.410 billion, an improvement of $45 million at the midpoint of the range from our prior outlook of $2.345 billion to $2.485 billion.

• total operating expenses prior to SBC for full-year 2023 to be in the range of $1.430 billion to $1.470 billion, unchanged at the midpoint of the range from our prior outlook of $1.420 billion to $1.480 billion.

• SBC for full-year 2023, including the 2021 Founders Award Cancellation ($485 million in Q1 2023), to be in the range of $900 million to $940 million, an improvement of $45 million at the midpoint of the range from our prior outlook of $925 million to $1.005 billion.

The company said that actual results might differ materially from outlook due to several factors, including the rate of growth in net new funded accounts which affects several costs including variable marketing costs, the degree to which we are successful in preventing fraud, our ability to manage web-hosting expenses efficiently, and our ability to achieve productivity improvements in customer service, among other factors.

About Robinhood

Robinhood Markets is on a mission to democratize finance for all. With Robinhood, people can invest with no account minimums through Robinhood Financial LLC, buy and sell crypto through Robinhood Crypto, LLC, spend, save, and earn rewards through Robinhood Money, LLC, and learn about investing through easy-to-understand educational content.