- Analysts estimate EPS of -$0.36 vs. -$6.26 in Q1 FY 2021.
- The number of monthly active users is expected to rise YOY.
- Revenue is expected to decline for the first time in at least two years.
Robinhood Markets Inc. (HOOD) enjoyed a year and a half of hyper growth in 2020 and the first half of 2021, just before it went public. During that period, the company's net funded accounts more than quadrupled as retail investors stuck at home amid the pandemic used Robinhood's platform to invest and trade. Those boom days are ending fast. Robinhood's growth is fading and a key sign of that is the company's announcement on April 26 that it's slashing about 9% of its full-time workforce.
Investors will be focusing on whether Robinhood has been able to prevent a further slowdown in its revenue growth when the company reports earnings on April 28, 2022 for Q1 FY 2022. Analysts expect Robinhood to report another loss per share as revenue falls for the first time in at least nine quarters.
Investors will also be watching Robinhood's monthly active users (MAUs), a key metric that it uses to gauge user engagement and which is positively correlated with revenue. Analysts expect the company's MAUs to rise but at the slowest pace out of any quarter in at least the past two years.
Shares of Robinhood have underperformed the broader market since they began trading on the Nasdaq in late July 2021 after the company went public through an initial public offering (IPO). The stock skyrocketed in early August shortly following the IPO. Since then, it has been on a gradual downward trajectory and began to lag the market around mid-November. Robinhood has lost more than two-thirds of its market value since going public.
Robinhood Earnings History
Robinhood reported mixed results in its Q4 FY 2021 earnings report. The company's loss per share came in significantly wider than analysts had forecasted. It was also the fourth straight quarter of losses per share. Revenue, however, beat estimates, rising 14.2% year over year (YOY). It was the slowest pace of revenue growth out of any quarter in at least the past two years. The company highlighted that it nearly doubled the number of customers on its platform during FY 2021.
In Q3 FY 2021, Robinhood missed consensus estimates for both earnings and revenue. The company reported its third straight loss per share. Revenue rose 35.4% compared to the year-ago quarter, sharply slower than the triple-digit quarterly pace of growth the company had been accustomed to achieving during at least the past year and a half. The company's transaction-based revenue, which was up 32% YOY, was largely driven by an 860% YOY rise in revenue generated by cryptocurrency transactions.
Analysts expect Robinhood's revenue to weaken considerably in Q1 FY 2022. The company is expected to report its fifth straight quarter of losses per share as revenue falls 31.3% YOY. It would mark the first quarter of declining revenue in at least the past nine quarters. For full-year FY 2022, analysts expect Robinhood to report its second straight year of losses per share, albeit a significantly smaller loss than in the previous year. Annual Revenue is expected to expand 0.6%, marking a drastic deceleration from the past two years.
|Robinhood Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||-0.36||-6.26||-0.23|
|Monthly Active Users (M)||18.4||17.7||8.6|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focusing on the number of MAUs. Robinhood defines a MAU as a unique user who performs any one of the following actions during the relevant month being measured: makes a debit card transaction; transitions between two different screens on a mobile device; or loads a page in a web browser while logged into their account. Quarterly figures presented in the table above represent the last month of each period being represented. Robinhood considers MAUs a useful indicator of user engagement and is positively correlated with the company's revenue performance and other key metrics. Robinhood generates the majority of its revenue through payment for order flow (PFOF). More users trading means the company is able to send more trades to market makers for trade execution in return for rebates.
Robinhood's MAUs have consistently grown over the past couple of years, although the pace of growth has begun to decelerate. MAUs rose as much as 212.9% YOY in the second quarter of FY 2020 before slowing to a pace of 170.9% YOY in Q3 FY 2020. Growth accelerated slightly in the fourth quarter, but then slowed to a pace of 105.9% YOY in the first quarter of FY 2021. MAU growth continued to decelerate throughout the rest of FY 2021, reaching a pace of 47.9% YOY in Q4 FY 2021. Analysts expect a further slowdown to 4.1% YOY in Q1 FY 2022.
Another related key metric that Robinhood investor will watch is average revenue per user (ARPU). ARPU can broadly be defined as a metric that takes total revenue generated during a given period and divides it by a measure of the company's net funded accounts over the same period. It provides a useful gauge of how much revenue is being generated per user. ARPU offers a snapshot of how well Robinhood is monetizing its user base. Robinhood's ARPU grew solidly throughout FY 2020. But after rising 65.2% YOY in Q1 FY 2021, ARPU has fallen at an accelerating rate in each of the subsequent three quarters. ARPU fell by 39.6% YOY in the final quarter of FY 2021, and analysts expect ARPU to fall a further 54.2% YOY in Q1 FY 2022.
Robinhood Markets Inc. "A Message from our CEO and Co-Founder Vlad Tenev."
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Robinhood Markets Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 68.
Robinhood Markets Inc. "Form 10-K for the fiscal year ended December 31, 2021," Pages 67-68.