What a difference a year makes.
Robin Hood (HOOD) – Get the Class A report from Robinhood Markets, Inc.fashionable brokerage in 2021 now seems to be the ghost of itself.
And things are not about to change.
The fintech has just released its first quarter results and it is the exact reverse of its excellent performance achieved during the same period in 2021. Revenue fell 43% to $299 million in the first quarter compared to one year earlier. This decline was due to a 48% drop to $218 million in revenue generated by transactions carried out by Robinhood customers, the company said in a press release.
What is striking is to see that the share of trading has gone from 80.46% of revenues to 72.9% in one year. This data suggests that the volume of transactions conducted through Robinhood has decreased significantly. In detail, transactions related to options trading fell by 36% in one year to 127 million dollars. It was then the carnage for the crypto and stock-related operations that had contributed to Robinhood’s fame and emergence.
Crypto trading revenue fell 39% to $54 million from the first quarter of 2021. Equity trading revenue fell 73% to $36 million year-over-year.
A sharp drop in active users
Robinhood has become hugely popular among retail investors buying and selling meme stocks and cryptocurrencies, following the hit of COVID-19, forcing governments to release trillions of dollars in cash relief for the unemployed and companies in difficulty.
But that money has dried up with the full reopening of many countries, ending fiscal and monetary stimulus. The Federal Reserve began raising interest rates last month and expects further hikes.
The trading app was also popular with Gen Zers who were taking their first steps into finance. These young traders were particularly united in supporting meme stocks like GameStop (EMG) – Get the Class A report from GameStop Corp. and AMC Entertainment (CMA) – Get the Class A report from AMC Entertainment Holdings, Inc. with outdated business models. The same traders had contributed to the euphoria around crypto, such as bitcoin and ethereum which hit all-time highs last November.
One of the most worrying signs with Robinhood now is the steep drop in active users that Robinhood has seen. Monthly active users (MAUs) fell 10% to 15.9 million during the first quarter, the company said. The company recorded 17.7 million MAUs in the first three months of 2021, “during which we experienced high transaction volumes and account openings as well as high market volatility, particularly in certain sectors “.
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The decline is also from quarter to quarter. Indeed, on a sequential basis, MAUs decreased by 8% compared to 17.3 million for December 2021.
“The sequential decline was primarily attributable to users with lower balances, who are less engaged in the current market environment,” Robinhood said.
A difficult environment
As a result, average revenue per user (ARPU) unsurprisingly decreased 62% to $53 from $137 in Q1 2021. On a sequential basis, ARPU decreased 18% from $64 in Q4 2021 .
“The declines were primarily related to lower transaction-based revenue due to the current market environment, which negatively impacted the number of traders and notional trading volumes across all asset classes” , explained the company.
This quarterly performance from Robinhood unsurprisingly heightened concerns about Robinhood’s near-term future. The shares fell 11.40% to $8.94 after the close. The company went public on Wall Street last July at a price of $38 per share with a market capitalization of nearly $32 billion. The stock lost 76.5% or more than $24 billion in market capitalization.
Brokerage is taking the brunt of the retail downturn: the company said this week that it plans to lay off 10% of its workforce. But he does not give up despite rumors about his future.
“We see our clients affected by the macro environment, which is reflected in our results this quarter,” said Jason Warnick, Chief Financial Officer of Robinhood Markets. “At the same time, we have also made progress on our long-term plans and continue to pursue them aggressively.”
The trading app managed to disrupt the entire brokerage industry by cutting fees, eventually forcing much larger competitors to follow suit. It multiplies the initiatives to try to regain the momentum of 2021.
The brokerage has just decided to integrate four cryptocurrencies into the assets to be traded on its platform. Apart from these new assets, Robinhood has also just attempted to woo retail investors behind the crypto price surge in 2021. The brokerage will be rolling out a crypto wallet to over 2 million customers. This wallet allows users to trade crypto outside of Robinhood.
The company also acquired British crypto firm Ziglu, which allows UK-based customers to buy and sell 11 cryptocurrencies, earn yield through its Boost products, pay with debit cards and move and spend money, even abroad, at no cost, according to the company.