Following Robinhood’s first earnings call post-IPO, shares dropped nearly 10% at market open Thursday. Although the brokerage more than doubled its revenue over the three months ended in June from this time last year, the company revealed that crypto trading had begun driving most of that momentum.
Robinhood CEO Vlad Tenev and CFO Jason Warnick told retail investors and analysts on an earnings call the evening of Aug. 18 that the company’s engineering team was hyper-focused on further building out its crypto trading function, and that it was prioritizing the addition of digital wallets and new coins to its platform.
Crypto wallets are “a key priority for our teams at Robinhood,” Tenev said on the call, adding that “offering crypto wallets and the ability to deposit and withdraw cryptocurrencies is tricky to do at scale.” Here’s what else we learned about the company on Wednesday:
Robinhood is growing fast
Robinhood has ballooned in size over the past year: The company posted $565.3 million in net revenue for the quarter, more than twice that of the same period last year. Even so, the company is running at a net loss of $501.7 million, compared with $57.6 million in net income over the same quarter in 2020.
Tenev said that the company has been aggressively hiring: adding engineers, doubling its customer support staff, and expanding its management team. The brokerage says it hopes to have a 24/7 phone support team before the end of this year.
Robinhood is trading a lot of crypto—especially Doge
Cryptocurrency, which Tenev said was the focus of a “very small team” at Robinhood just earlier this year, has become a key driver of the company’s revenue. More than $233 million (or about 41%) of revenue derived from crypto transactions in the three months ended in June, and more than a quarter of revenue—$144.5 million—came just from Dogecoin.
“This is the first quarter where we saw a larger share of new customers place their first trade in crypto rather than in equities,” Tenev said. Robinhood has been working to upgrade its systems and make its crypto trading function more “resilient to surges and trading volume,” he added.
It’s possible that Robinhood’s overall trading activity may slow down in the second half of this year—as investors tend to trade more at all brokerages in the first half of the year, Warnick said.
The company is racing to diversify
Robinhood’s cryptocurrency business is helping diversify the company’s revenue streams, which are at present heavily reliant on money it makes from passing its trades to market makers for execution, a practice called payment for order flow, or PFOF.
As PFOF has come under closer scrutiny from regulators and investors—again—the company has said in recent months it is bent on further diversifying its revenue streams, although payment for order flow still made up 79% of its total revenue this quarter. “We want to be the single place that our customers go to for all things money,” CFO Warnick said on the call.
The company is focused on its cash management solutions, which include a high-yield savings account and debit card. It’s also planning to roll out securities lending, Warnick said. The company also reiterated that it is looking into adding retirement accounts as well as joint accounts with beneficiaries.
Robinhood’s investors want hoodies
Robinhood’s earnings call opened up to questions from retail investors, who submitted more than 1,300 queries ahead of the call via Say Technologies, the company communications platform Robinhood said it would acquire for $140 million earlier this month. (Say was cofounded by Jeff Cruttenden, who also cofounded retirement savings app Acorns.) Investors asked questions about everything from wallets to whether the company would allow users to gift stocks to one another to when they would be able to buy HOOD hats and hoodie jackets.
“I can’t make a commitment right now,” Warnick said about offering swag. “But I will say that we’ll look at this.”
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