Robinhood shares drop 8.5% as Q3 crypto trading volumes fall

Crypto trading giveth, and crypto trading taketh away.

After having its first half 2021 results powered by heady crypto trading volumes, online broker Robinhood (NASDAQ:HOOD) reported somewhat disappointing numbers for Q3-2021. The company’s shares, which had already drifted down by more than 10% since the beginning of September, reacted by losing about 8.5% of their value in Tuesday evening after-market trading

Robinhood said that Crypto activity declined from record highs in the prior quarter, leading to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in the third quarter of 2021 ($365 million) compared with the second quarter of 2021 ($565 million) at Robinhood.

As far as outlook goes, Robinhood said that its business is affected by many factors, including seasonality, general market conditions (including volatility) and retail trading behavior as well as significant, unanticipated market events. For the three months ending December 31, 2021 (i.e. Q4-2021), Robinhood anticipates that many of the factors that impacted third quarter results, such as seasonal headwinds and lower retail trading activity, may persist. In the absence of any changes to the market environment or exogenous events, the company believes this may result in quarterly revenues no greater than $325 million and full year revenue of less than $1.8 billion. Additionally, Robinhood expects new funded accounts for the fourth quarter will be roughly in line with the 660,000 opened in the third quarter of 2021.

In summary, for Q3:

• Total net revenues increased 35% to $365 million, compared with $270 million in the third quarter of 2020 – but as noted well below Q2’s $565 million.
• Transaction-based revenues increased 32% to $267 million, compared with $202 million in the third quarter of 2020.
  • Options increased 29% to $164 million, compared with $127 million in the third quarter of 2020.
  • Cryptocurrencies increased 860% to $51 million, compared to $5 million in the third quarter of 2020 – but again, well below the $233 million of Crypto revenue Robinhood saw in Q2.
  • Equities decreased 27% to $50 million, compared with $69 million in the third quarter of 2020.
• Loss before income tax was $1.37 billion, compared with loss before income tax of $11 million in the third quarter of 2020. Share-based compensation expense totaled $1.24 billion in the third quarter of 2021 of which $1.01 billion was recognized upon our IPO.
• Net loss was $1.32 billion, or $2.06 per diluted share, compared with net loss of $11 million, or $0.05 per diluted share in the third quarter of 2020.
• Adjusted EBITDA (non-GAAP) was negative $84 million, compared with positive $59 million in the third quarter of 2020.
• Net Cumulative Funded Accounts increased 97% to 22.4 million, compared with 11.4 million in the third quarter of 2020.
• Monthly Active Users (MAU) increased 76% to 18.9 million, compared with 10.7 million in the third quarter of 2020.
• Assets Under Custody (AUC) increased 115% to $95 billion, compared with $44 billion in the third quarter of 2020.
• Average Revenues Per User (ARPU) decreased 36% to $65, compared with $102 in the third quarter of 2020.

Vlad Tenev