- Cryptocurrency trading revenue was up 304% but still missed analyst estimates.
- Robinhood generates fee-based revenue known as "Transaction Rebates" for routing its users' cryptocurrency trades to market makers.
- The company is planning a full launch of its crypto wallets in Q1 FY 2022.
|Robinhood Earnings Results|
|Metric||Beat/Miss/Match||Reported Value||Analysts' Prediction|
|Cryptocurrency Trading Revenue||Miss||$48M||$51.7M|
Source: Predictions based on analysts' consensus from Visible Alpha
Robinhood (HOOD) Financial Results: Analysis
Robinhood Markets, Inc. (HOOD) reported mixed Q4 FY 2021 earnings results. The company posted a loss per share of $0.49 compared to earnings per share (EPS) of $0.02 in the year-ago quarter. The loss was significantly larger than what analysts were expecting. Revenue, however, beat expectations, rising 14.2% year over year (YOY). Robinhood's cryptocurrency trading revenue missed analyst forecasts.
The company's shares were down more than 15% at one point during extended trading. Robinhood's shares began trading on the Nasdaq at a price of $38 per share on July 29, 2021, after the company completed its initial public offering (IPO). The shares are down 69.4% from that initial opening price. By comparison, the S&P 500 is down 1.9% over the same period.
HOOD Cryptocurrency Trading Revenue
Robinhood reported $48 million in revenue from cryptocurrency trading on its platform, up 304% from the year-ago quarter. The company generates the majority of its revenue from transaction fees related to the trading of equities, options, and cryptocurrencies. This form of revenue, which the company calls "transaction-based revenue," is generated through the collection of fees that the company receives in return for routing its users' trades to market makers. In respect to equities and options trading, these fees are known as payment for order flow (PFOF), a controversial practice that has come under scrutiny from the Securities and Exchange Commission (SEC). In respect to cryptocurrency trading, these fees are referred to by Robinhood as "Transaction Rebates."
While Robinhood's cryptocurrency trading revenue has soared over the past year, cryptocurrencies have been losing value over the past several months.
The company is a planning a full launch of its crypto wallets in Q1 FY 2022. A crypto wallet is a place where cryptocurrencies can be stored securely. Robinhood has completed alpha testing on its wallets and has already launched a public beta version.
Robinhood said that it expects to generate total revenue of less than $340 million in Q1 FY 2022. At the top end of its estimate, that would imply a revenue decline of 35% compared to Q1 FY 2021, in which trading activity was heightened, particularly for certain "meme stocks."
Robinhood's next earnings report (for Q1 FY 2022) is expected to be released on May 12, 2022.
Visible Alpha. "Financial Data." Accessed Jan. 25, 2022.
Robinhood Markets Inc. "Robinhood Reports Fourth Quarter and Full Year 2021 Results." Accessed Jan. 27, 2022.
The Wall Street Journal. "Robinhood IPO Prices at $38 a Share." Accessed Jan. 27, 2022.
Yahoo! Finance. "Robinhood Markets, Inc. (HOOD): Historical Data." Accessed Jan. 27, 2022.
Yahoo! Finance. "SPDR S&P 500 ETF Trust (SPY): Historical Data." Accessed Jan. 27, 2022.
Robinhood Markets Inc. "Form 10-Q for the Quarterly Period Ended Sept. 30, 2021," Page 48. Accessed Jan. 27, 2022.
The Wall Street Journal. "Bitcoin Price Tumbles After Wall Street Selloff." Accessed Jan. 27, 2022.
The Wall Street Journal. "Bitcoin Price Falls Below $35,000 in Tandem With Stock Selloff." Accessed Jan. 27, 2022.
Investing.com. "Robinhood Markets Inc (HOOD): Financials—Earnings." Accessed Jan. 27, 2022.