Robinhood: Active Users Continue To Fall Despite Positive Earnings

After the market closed on August 2, Robinhood Markets, Inc. (NASDAQ: HOOD) reported its first ever quarterly profit (positive US$0.03 per share) when it announced 2Q 2023 results. In addition, the company’s 2Q 2023 revenue reached US$486 million, besting analysts’ expectations of US$474 million, though shy of its all-time high (in any quarter) of US$565 million in 2Q 2021.

However, some aspects of the quarter were less constructive. First, the number of monthly active users (MAUs) on Robinhood’s platform plummeted in 2Q 2023 to 10.8 million in June 2023 from 11.8 million in March 2023. A slight offsetting positive is that the number of MAUs rose in June 2023 after falling to 10.6 million in May 2023.

To put Robinhood’s user totals in perspective, the company had 18.6 MAUs in November 2021. Even in the ugly trading days of June 2022, Robinhood had 14.0 million MAUs. 

Second, and almost certainly related to a dwindling in user base, Robinhood’s transaction revenue from options contracts and crypto trading continues to decline. Revenue from those two areas fell to US$127 million and US$31 million in 2Q 2023 from US$133 million and US$38 million, respectively. As recently as 4Q 2021, Robinhood’s revenue from options and crypto trading were US$163 million and US$48 million, respectively.


(in thousands of US dollars, except where otherwise noted)2Q 20231Q 20234Q 20223Q 20222Q 2022
Cumulative Funded Accounts (millions)
     Sequential Growth0.4%0.4%0.4%0.0%0.4%
Monthly Active Users (millions)10.811.811.412.214.0
     Sequential Growth-8.5%3.5%-6.6%-12.9%-11.9%
Assets Under Custody (US$ billions):
     Net Cash Held by Users$14$11$8$4$4
          Total Assets Under Custody (US$ billions)$89$78$62$65$64
               Sequential Growth14.1%25.8%-4.6%1.2%-31.0%
Trading Volumes:
   Equity (US$ billions)$160$160$131$161$163
   Option Contracts (millions)272272235235210
   Cryptocurrencies (US$ billions)$11$11$11$15$19
Average Account Balance (US$)$3,836$3,377$2,696$2,838$2,803
     Sequential Growth13.6%25.3%-5.0%1.2%-31.3%
Average Revenue Per User (US$)$84$77$66$63$56
     Sequential Growth9.1%16.7%4.8%12.5%5.7%
Options PFOF Revenue$127,000$133,000$124,000$124,000$113,000
Cryptocurrency PFOF-Type Revenue$31,000$38,000$39,000$51,000$58,000
Equities PFOF Revenue$25,000$27,000$21,000$31,000$29,000
Other PFOF Revenue$10,000$9,000$2,000$2,000$2,000
PFOF or PFOF-Type Revenue $193,000$207,000$186,000$208,000$202,000
All Other Revenue, Including Interest Income$293,000$234,000$194,000$153,000$116,000
Net Revenue$486,000$441,000$380,000$361,000$318,000
     Sequential Growth10.2%16.1%5.3%13.5%6.4%
Adjusted EBITDA$151,000 $115,000 $82,000 $47,000 ($80,000)
Debt – Period End$117,000$122,000$128,000$160,000$154,000
Shares Outstanding (millions)909.7900.2892.8884.8878.3

As has been the case since the Fed began raising interest rates in March 2022, Robinhood’s net interest revenue offset declining transaction revenue. Net interest revenue totaled US$234 million in 2Q 2023, up from US$208 million in 1Q 2023 and just US$55 million in 1Q 2022.

Share-based compensation (SBC), which effectively dilutes shareholders’ interests to compensate employees, came down in 2Q 2023 to US$109 million from an other-worldly US$598 million in 1Q 2023. But, this level still seems excessive in relation to US$486 million in total revenue in 2Q 2023. Robinhood expects SBC to total US$193 million to US$233 million in 2H 2023.

Robinhood looks more reasonably valued than it has in some time. Its adjusted EBITDA over the twelve months ended June 30, 2023 is positive US$395 million, which implies that Robinhood trades at a fairly rationale enterprise value-to-adjusted EBITDA multiple of 14x. (Over the twelve months ended June 30, 2022, Robinhood’s adjusted EBITDA was around negative US$390 million.) Of course, significant concerns remain; namely, the disturbing loss of MAUs in 2Q 2023, as well as uncertainties surrounding the company’s future revenue profile (namely the future of payment for order flow). 

Robinhood Markets, Inc. last traded at US$11.28 on the NASDAQ.

Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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