Robinhood Q3 FY2021 Earnings Report Preview: What to Look For

Focus on HOOD monthly active users

Key Takeaways

  • Analysts estimate a loss per share of $1.16 in Q3 FY 2021 vs. a loss per share of $2.16 in Q2 FY 2021.
  • Monthly active users are expected to rise compared to the previous quarter.
  • Revenue is expected to fall compared to Q2 FY 2021.

Robinhood Markets Inc. (HOOD) completed its maiden quarter as a publicly-traded company in September after its much-anticipated initial public offering (IPO) this summer. In the previous quarter that ended in June, the company more than doubled its revenue. But its main source of revenue—payment for order flow (PFOF)—may now be in jeopardy. Securities and Exchange Commission (SEC) Chief Gary Gensler has signaled that he was open to banning PFOF, a controversial practice where brokerages earn commissions by sending customers' trades to market makers for execution.

Investors are likely to focus on Robinhood's dependance on PFOF, along with its overall financial strength, when it reports earnings on October 26, 2021 for Q3 FY 2021. Analysts expect a narrower loss per share compared to Q2 2021, but revenue is expected to decline.

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 increase slightly from Q2 FY 2021.

Shares of Robinhood have outperformed the broader market since they began trading on the Nasdaq in late July. The stock skyrocketed in early August shortly following the IPO, but it has since lost most of those gains.

One Year Total Return for S&P 500 and Robinhood
Source: TradingView.

Robinhood Earnings History

The amount of earnings data available for Robinhood is limited because the company only recently became a publicly-traded company, which requires it to publicly file its financial results with the SEC. In mid-August, Robinhood reported quarterly earnings for Q2 FY 2021, the three-month period ended June 30, 2021, its maiden report as a publicly-traded company.

The company posted a loss per share of $2.16 in Q2 FY 2021, a significant deterioration from the EPS of $0.09 in the year-ago quarter. Revenue, however, beat analysts' estimates, rising 131.5% year over year (YOY). Robinhood highlighted strong growth in commission-free cryptocurrency trading on its platform during the quarter. The company said that Q2 was the first quarter where a majority of new customers placed their first trade in crypto rather than equities.

Analysts expect a mixed financial performance for Robinhood in Q3 FY 2021 on a sequential basis. They expect a net loss of $1.16 per share, narrowing significantly from the net loss per share in Q2. Revenue is expected to fall 22.4% on a quarter-on-quarter (QOQ) basis.

As mentioned, Robinhood has limited publicly-available financial data. In its amended IPO registration form with the SEC, it provided data on EPS and revenue, but not on MAU, for Q3 FY 2020. The company reported a loss per share of $0.05 on revenue of $269.5 million. Thus, on a year-over-year (YOY) basis, analysts expect Robinhood's loss per share to widen dramatically even as revenue rises 62.8% in Q3 FY 2021.

Robinhood Key Stats
  Estimate for Q3 FY 2021 Q2 FY 2021 Q2 FY 2020
Earnings Per Share ($)  -1.16 -2.16 0.09
Revenue ($M) 438.7 565.3 244.2
Monthly Active Users (M) 21.9 21.3 10.2

Source: Visible Alpha; Robinhood.

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 PFOF. More users trading means the company is able to send more trades to market makers for trade execution in return for rebates. In Q2 FY 2021, Robinhood's MAUs rose 108.8% compared to the year-ago quarter. Analysts expect a slight increase of 2.8% in Q3 compared to Q2 FY 2021.

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  2. Robinhood Markets Inc. "Robinhood Markets, Inc. to Announce Third Quarter 2021 Results on October 26, 2021." Accessed Oct. 21, 2021.

  3. Visible Alpha. "Financial Data." Accessed Oct. 20, 2021.

  4. Robinhood Markets Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 5. Accessed Oct. 21, 2021.

  5. Robinhood Markets Inc. "Robinhood Reports Second Quarter 2021 Results." Accessed Oct. 21, 2021.

  6. Securities and Exchange Commission. "Form S-1/A Robinhood Markets, Inc.," Page 128. Accessed Oct. 21, 2021.

  7. Robinhood Markets Inc. "Form 10-Q for the quarterly period ended June 30, 2021," Page 40. Accessed Oct. 21, 2021.