Robinhood puts up a surprise profit, but monthly active users — and shares — fall

Robinhood Markets Inc. on Wednesday reported second-quarter earnings that beat expectations despite a drop in transaction sales and monthly active users, but management at the stock-trading app said the company expects to spend a bit less this year.

Shares fell 5.8% after hours on Wednesday.

The online trading company reported second-quarter net income of $25 million, or 3 cents a share, contrasting with a loss of $295 million, or 34 cents a share, in the same quarter last year. Revenue rose to $486 million, compared with $318 million in the prior-year quarter.

Analysts polled by FactSet expected Robinhood

to report an adjusted loss of 1 cent a share, on revenue of $473 million.

Robinhood also reported a drop from the prior quarter in transaction revenues and monthly active users: Transaction-based revenues fell from the prior quarter for options, crypto and stocks, while monthly active users fell by 1 million from the prior quarter, to 10.8 million.

Robinhood has been hoping for a bigger rebound in trading volumes and trader engagement, after the fervor of 2021 ran into deeper apprehension over inflation, a recession and the collapse of crypto exchange FTX in months past.

Both the S&P 500 Index
and the price of bitcoin

have rebounded so far this year. But Third Bridge analyst Andrew McGee, citing commentary from other industry experts, said Robinhood could run up against more difficulties re-engaging users, after placing restrictions on some stock trades at the height of the meme-stocks craze more than two years ago.

“MAU’s [monthly active users] were highlighted as the highest-risk area for Robinhood by our specialists due to historical trends demonstrating that when retail traders lose significant amounts of money, they never come back,” he said. “Additionally, the specialists believe the customers that left during the GameStop incident won’t return due to a lack of trust in the company.”

Still, the company said it expects total operating expenses for the full year to be between $2.33 billion and $2.41 billion, with the midpoint of that range a bit better than earlier expectations for $2.345 billion to $2.485 billion.

The company in May debuted 24-hour trading, five days a week. It has also introduced retirement IRA savings services, a cash sweep program, and in July bought a platform that offers a no-fee credit card. Executives on Wednesday said the company was still “on track” to launch brokerage services in the U.K. by the end of the year.

Management said it “continues to pursue purchasing most or all” of the leftover 55 million shares bought by Emergent Fidelity Technologies, a company co-founded by FTX founder Sam Bankman-Fried, last year.

“Discussions are ongoing with the related parties and we will continue to provide updates as appropriate,” Robinhood said Wednesday.

Shares of Robinhood have climbed 53.8% so far this year. By comparison, the S&P 500 Index
is up 18.1% over that period.

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