Robinhood shares drop 8.5% as Q3 crypto trading volumes fall
Crypto trading giveth, and crypto trading taketh away.
After having its first half 2021 results powered by heady crypto trading volumes, online broker Robinhood (NASDAQ:HOOD) reported somewhat disappointing numbers for Q3-2021. The company’s shares, which had already drifted down by more than 10% since the beginning of September, reacted by losing about 8.5% of their value in Tuesday evening after-market trading
Robinhood said that Crypto activity declined from record highs in the prior quarter, leading to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in the third quarter of 2021 ($365 million) compared with the second quarter of 2021 ($565 million) at Robinhood.
As far as outlook goes, Robinhood said that its business is affected by many factors, including seasonality, general market conditions (including volatility) and retail trading behavior as well as significant, unanticipated market events. For the three months ending December 31, 2021 (i.e. Q4-2021), Robinhood anticipates that many of the factors that impacted third quarter results, such as seasonal headwinds and lower retail trading activity, may persist. In the absence of any changes to the market environment or exogenous events, the company believes this may result in quarterly revenues no greater than $325 million and full year revenue of less than $1.8 billion. Additionally, Robinhood expects new funded accounts for the fourth quarter will be roughly in line with the 660,000 opened in the third quarter of 2021.
In summary, for Q3:
- Total net revenues increased 35% to $365 million, compared with $270 million in the third quarter of 2020 – but as noted well below Q2’s $565 million.
- Transaction-based revenues increased 32% to $267 million, compared with $202 million in the third quarter of 2020.
- Options increased 29% to $164 million, compared with $127 million in the third quarter of 2020.
- Cryptocurrencies increased 860% to $51 million, compared to $5 million in the third quarter of 2020 – but again, well below the $233 million of Crypto revenue Robinhood saw in Q2.
- Equities decreased 27% to $50 million, compared with $69 million in the third quarter of 2020.
- Loss before income tax was $1.37 billion, compared with loss before income tax of $11 million in the third quarter of 2020. Share-based compensation expense totaled $1.24 billion in the third quarter of 2021 of which $1.01 billion was recognized upon our IPO.
- Net loss was $1.32 billion, or $2.06 per diluted share, compared with net loss of $11 million, or $0.05 per diluted share in the third quarter of 2020.
- Adjusted EBITDA (non-GAAP) was negative $84 million, compared with positive $59 million in the third quarter of 2020.
- Net Cumulative Funded Accounts increased 97% to 22.4 million, compared with 11.4 million in the third quarter of 2020.
- Monthly Active Users (MAU) increased 76% to 18.9 million, compared with 10.7 million in the third quarter of 2020.
- Assets Under Custody (AUC) increased 115% to $95 billion, compared with $44 billion in the third quarter of 2020.
- Average Revenues Per User (ARPU) decreased 36% to $65, compared with $102 in the third quarter of 2020.
Vlad Tenev, CEO and Co-Founder of Robinhood Markets said:
“This quarter was about developing more products and services for our customers, including crypto wallets. More than one million people have joined our crypto wallets waitlist to date. With 24/7 live phone support, we believe that Robinhood is becoming the most trusted and intuitive platform for retail and crypto investors. And looking ahead, we’re committed to delivering tax-advantaged retirement accounts to help everyone invest for the long term.”
Robinhood opened the waitlist for crypto wallets, one of its most heavily requested products. More than 1 million customers have signed up to date. Robinhood’s crypto wallets feature is designed to help make crypto more accessible for the average investor, with an intuitive user experience and low-cost, competitive pricing. The feature is being built in public, gathering critical feedback from customers, and employing new multi-factor authentication verification in-app to ensure a secure and reliable experience.
Robinhood also launched crypto recurring investments, allowing customers to automatically buy crypto, commission-free, on a schedule of their choice. This product allows customers to build positions in their favorite cryptocurrencies over time while lowering the stress of timing the markets.
Robinhood Snacks, a digestible financial news content, is now available from directly within the Robinhood app. The Snacks newsletter is already one of the most widely consumed newsletters in the U.S. with 23.3 million unique readers in Q3. In addition, the Snacks podcast was downloaded 10.8 million times in the quarter. Robinhood also launched Snacks on Snapchat, making Snacks one of the first financially-oriented educational channels to ever be made available on Snapchat’s Discover tab.
In the last week, Robinhood started rolling out its Recommendations engine, which helps customers get started by providing new customers who have yet to place their first trade a set of diversified portfolios to choose from.
Recently, Robinhood entered the late stages of testing ACATS-In, which will allow customers to transfer their existing investments into Robinhood. The company plans to roll out this feature to customers in the months ahead.
As part of Robinhood’s new product roadmap, the company is committed to delivering tax-advantaged accounts for retirement and while there is not a definitive timeline on this product, the company will continue to provide updates on its progress.
IPO Access continues to attract issuers and engage customers. To date, Robinhood has partnered with 12 companies that have made their IPOs available to its customers. These companies come from a wide range of industries including consumer, enterprise software, healthcare, and sustainable blockchain. Six of these companies have crossed 30 days since their listing on the platform. In these six IPOs, Robinhood customers held over 80% of their allotted shares 30 days post-IPO, further demonstrating the platform’s ability to connect issuers with a dedicated retail shareholder base.
In Q3, seven additional issuers have joined the recently acquired Say Technologies platform to provide individual investors with access to company events like earnings calls, with 18 issuers total using the platform. Use cases for Say Connect continue to evolve beyond earnings call Q&A, as companies are now utilizing the Say Connect platform for Annual Shareholder Meeting Q&A and retail shareholder Q&A forums.
Robinhood also reminded investors that many of the company’s pre-IPO shareholders are subject to lock-up agreements or market standoff agreements that limit their sale of shares of the company’s stock during a lock-up period that expires immediately prior to December 1, 2021.