The broker reported its first GAAP profitability during the quarter.
Robinhood's shares dropped 6.91% to $11.58 in after-market hours.
After
generating a massive net loss of $511 million during the first quarter of the
year, Robinhood has returned with a net income of $25 million, according to its
second-quarter results released today (Wednesday). The American commission-free
online trading provider saw its revenue jump 10% to $486 million during
the last quarter.
Five
Consecutive Quarters of Revenue Growth
In the
last quarter, which ended on June 30, the Nasdaq-listed broker’s earnings per
share (EPS) rose to $0.03, compared to a negative EPS of $0.57 during the
first three months of the year. However, despite recording its fifth
consecutive quarter of revenue growth, Robinhood’s monthly active users (MAU)
slumped 1 million to 10.8 million.
Conversely,
the number of accounts
funded with money climbed 70,000 to 23.2 million between April and June 2023. At the end of the first quarter,
the number had grown by 120,000 to 23.1 million.
Meanwhile, Robinhood
reported growth in its total net revenue for the most recent quarter despite
generating lower transaction-based revenue during the period. The revenue was
primarily boosted by the brokerage’s 'seasonally higher' earnings
from processing proxy votes for companies.
In
addition, the revenue Robinhood had generated from the interest earned on its cash
and securities during the quarter shot up 13% to $234 million. This was “driven by
growth in interest-earning assets, higher short-term interest rates, and
increase securities lending activity,” the broker said.
On the
contrary, Robinhood’s revenue from transaction-based revenues reduced 7%
quarter-over-quarter to $193 million, with the firm’s revenues from options, cryptocurrency and
equities trading activities
trending downward 5%, 18% and 7% to $127 million, $31 million and $25 million,
respectively.
Stock
Declines despite First GAAP Profitability
Providing more details, Robinhood noted that it had generated its first GAAP profitability during
the second quarter. This refers to total earnings calculated according to the generally
accepted accounting principles (GAAP). The firm achieved the
record even as its assets
under custody ascended 13% QoQ
to $89 billion, driven by higher equity valuations and continued net deposits.
“Reaching
GAAP profitability is a testament to the work our team has done to transform
the business and better position Robinhood to drive shareholder value,” Jason
Warnick, Chief Financial Officer of Robinhood Markets, stated in the report.
“With five consecutive quarters of revenue and Adjusted EBITDA growth, we’re
continuing to drive efficiency across our operations while investing in
customer experience.”
However,
Google data shows that the price of the brokerage’s stock shrank 3.34% to
$12.44 on Wednesday, dropping a further 6.91% in after-market hours.
Source: Google data
This is
despite the fact that analysts believe that the broker’s performance during the
last quarter was better off.
“Robinhood's
strong Q2 result is another indicator that the financial services company may
be starting to come out of the woods,” Jesse Cohen, a Senior Analyst at
Investing.com, told
Finance Magnates. “While shares of the online broker fell in post-market
trading, I think a lot has to do with the negative sentiment in the market
resulting from the historic US debt downgrade.”
Cohen
added: “All in all, this is a solid report, but investors appear to be stepping
back due to broader market conditions."
After
generating a massive net loss of $511 million during the first quarter of the
year, Robinhood has returned with a net income of $25 million, according to its
second-quarter results released today (Wednesday). The American commission-free
online trading provider saw its revenue jump 10% to $486 million during
the last quarter.
Five
Consecutive Quarters of Revenue Growth
In the
last quarter, which ended on June 30, the Nasdaq-listed broker’s earnings per
share (EPS) rose to $0.03, compared to a negative EPS of $0.57 during the
first three months of the year. However, despite recording its fifth
consecutive quarter of revenue growth, Robinhood’s monthly active users (MAU)
slumped 1 million to 10.8 million.
Conversely,
the number of accounts
funded with money climbed 70,000 to 23.2 million between April and June 2023. At the end of the first quarter,
the number had grown by 120,000 to 23.1 million.
Meanwhile, Robinhood
reported growth in its total net revenue for the most recent quarter despite
generating lower transaction-based revenue during the period. The revenue was
primarily boosted by the brokerage’s 'seasonally higher' earnings
from processing proxy votes for companies.
In
addition, the revenue Robinhood had generated from the interest earned on its cash
and securities during the quarter shot up 13% to $234 million. This was “driven by
growth in interest-earning assets, higher short-term interest rates, and
increase securities lending activity,” the broker said.
On the
contrary, Robinhood’s revenue from transaction-based revenues reduced 7%
quarter-over-quarter to $193 million, with the firm’s revenues from options, cryptocurrency and
equities trading activities
trending downward 5%, 18% and 7% to $127 million, $31 million and $25 million,
respectively.
Stock
Declines despite First GAAP Profitability
Providing more details, Robinhood noted that it had generated its first GAAP profitability during
the second quarter. This refers to total earnings calculated according to the generally
accepted accounting principles (GAAP). The firm achieved the
record even as its assets
under custody ascended 13% QoQ
to $89 billion, driven by higher equity valuations and continued net deposits.
“Reaching
GAAP profitability is a testament to the work our team has done to transform
the business and better position Robinhood to drive shareholder value,” Jason
Warnick, Chief Financial Officer of Robinhood Markets, stated in the report.
“With five consecutive quarters of revenue and Adjusted EBITDA growth, we’re
continuing to drive efficiency across our operations while investing in
customer experience.”
However,
Google data shows that the price of the brokerage’s stock shrank 3.34% to
$12.44 on Wednesday, dropping a further 6.91% in after-market hours.
Source: Google data
This is
despite the fact that analysts believe that the broker’s performance during the
last quarter was better off.
“Robinhood's
strong Q2 result is another indicator that the financial services company may
be starting to come out of the woods,” Jesse Cohen, a Senior Analyst at
Investing.com, told
Finance Magnates. “While shares of the online broker fell in post-market
trading, I think a lot has to do with the negative sentiment in the market
resulting from the historic US debt downgrade.”
Cohen
added: “All in all, this is a solid report, but investors appear to be stepping
back due to broader market conditions."
Solomon Oladipupo is a journalist and editor from Nigeria that covers the tech, FX, fintech and cryptocurrency industries. He is a former assistant editor at AgroNigeria Magazine where he covered the agribusiness industry. Solomon holds a first-class degree in Journalism & Mass Communication from the University of Lagos where he graduated top of his class.
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