Robinhood Q2 FY 2022 Earnings Report Recap

HOOD beat earnings estimates, missed on revenue and monthly active users

Key Takeaways

  • Monthly Active Users (MAU) were below analysts' consensus estimates.
  • The MAU metric is a useful indicator of user engagement and is positively correlated with the company's revenue performance and other key metrics.
  • The company on Aug. 2 announced a second round of major job cuts, slashing its number of full-time employees by 23% after top of reducing staff by 9% earlier this year.
Robinhood Earnings Result
 Metric  Beat/Miss/Match  Reported Value  Analysts' Prediction
Earnings Per Share ($)  Beat  -$0.34  -$0.37
Revenue ($M)   Miss  $318.0 $328.1 
Monthly Active Users (M)   Miss  14.0  15.3

Robinhood (HOOD) Financial Results: Analysis

Robinhood Markets Inc. (HOOD) reported mixed results in its Q2 FY 2022 earnings report on Aug. 2. The company beat estimates on earnings, posting a loss per share of $0.34 compared to $0.37 per share expected by analysts. But revenue came in far below expectations, falling 44.0% year over year (YOY) as monthly active users also missed by a wide margin. The company also announced a second round of major job reductions to lower operating expenses, following a first round of job cuts earlier this year.

HOOD Monthly Active Users

Robinhood's MAU fell by 1.9 million in Q2. The company defines 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.

Robinhood considers MAUs a useful indicator of user engagement, and the number of MAUs 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 that the company is able to send more trades to market makers for trade execution in return for rebates. Robinhood's PFOF has received intense scrutiny from U.S. regulators.

HOOD's New Job Reductions and Forecasts

Robinhood in April announced plans to reduce its workforce by 9% after increasing its staff dramatically during the pandemic. The company saw explosive growth in revenue and monthly active users as many investors sheltered at home during the pandemic amid low-interest rates and stimulus payments to millions of U.S. consumers. Operating costs fell 12% sequentially in Q2, aided by job reductions. The company on Aug. 2 announced more reductions-in-force, reducing full-time employment by another 23%. Robinhood forecast that both the April and August job reductions will lower GAAP total operating expenses in FY 2022 to between $2.5 billion to $2.6 billion, a decline of 25% to 29% from the previous year.

In the company's earnings release, Chief Financial Officer (CFO) Jason Warnick commented on the job reductions. "While the decision to make an additional reduction in force was a difficult one, we believe that it was the right decision and positions us to deliver on our mission," he said.

Robinhood shares jumped by as much as 16.5% as of 10:14am Eastern Daylight Time (EDT) in the wake of the earnings release. During the past 12 months, Robinhood has lagged the market, posting a total return of -78.0% compared to -6.0% for the S&P 500.

Robinhood's next earnings report (for Q3 FY 2022) is estimated to be released on Oct. 25, 2022.

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