By Andrew Welsch
Robinhood Markets reported strong second-quarter earnings Wednesday thanks to a surge in revenue from cryptocurrency and options trading revenue.
The company's earnings, which trounced Wall Street estimates, also benefited from Robinhood's efforts to sign up more customers for new products, such as its credit card and subscription service.
Robinhood reported that EPS came in at 21 cents per share and revenue reached a record $682 million. That's up from three cents per share of earnings and revenue of $486 million for the second quarter of 2023. The stock rose in after-hours trading.
"This quarter, we kept up the pace with rapid product launches and a relentless drive to provide top value for our customers," said CEO Vlad Tenev, who pointed to the company's growing subscription service. "With Robinhood Gold reaching 2 million subscribers, we're witnessing the flywheel accelerate."
Analysts surveyed by FactSet anticipated Robinhood would report strong second quarter earnings growth. They were looking for earnings of 16 cents on revenue of $640 million. Robinhood's net income increased to $188 million, up from $25 million a year ago.
The stock price initially showed little change in after-hours trading, hovering around $17 a share. But it climbed about 3% while the company held a conference call with analysts Wednesday evening.
The earnings report landed at a volatile moment in markets, with a sharp selloff in equities earlier this week. Shares of Robinhood have plummeted 24% over the past month, and erasing some of the stock's substantial run-up earlier this year. The stock is still up 35% year to date compared with a 9% gain for the S&P 500.
Although Robinhood is best known for its commission-free trading app, it has been striving to grow other business lines and products. Investors got new data points in the quarterly report on how those efforts are proceeding. For instance, the company said its Gold subscription service, which offers investors more tools, data, and other benefits, reached a new high of 2 million subscribers, up 61% year-over-year.
Assets under custody rose 57% year over year to $139.7 billion, according to the company. And it reported record net deposits of $13.2 billion for the quarter, representing an annualized growth rate of 41%.
CFO Jason Warnick said during the earnings call that expanding other business lines is critical to the company's future. Gold subscribers tend to keep more assets at Robinhood and use more of the company's services and products, he said. Retirement assets totaled $8.7 billion compared with $0.8 billion at the end of second quarter of 2023, according to the company.
The Menlo Park, Calif.-based company has been offering customers bonuses to move money to Robinhood, a practice it says has helped it lure clients away from competitors.
While Robinhood has been developing features for its platform, it's also engaging in M&A. In June, it bought cryptocurrency exchange Bitstamp. And last month, it acquired Pluto, an investment research company that uses artificial intelligence to develop customized investment strategies. On the earnings call, executives indicated that more acquisitions may be on the horizon as the company seeks to further expand its platform for customers. And Robinhood has previously indicated an interest in wealth management.
On the earnings call, Tenev emphasized that he wants Robinhood to provide a one-stop shop for investors' financial needs.
"Long term, we are positioning Robinhood so that it will benefit from a generational wealth transfer that is only beginning now, from baby boomers to Millennials," Tenev said.
Write to Andrew Welsch at andrew.welsch@barrons.com
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August 07, 2024 18:00 ET (22:00 GMT)
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