Robinhood: A $57 million mistake and ‘tremendous sacrifices’

The challenges of the last year were strikingly clear in Robinhood‘s earnings call. 

The call marked the end of its first full calendar year as a public company. However, it was rocky, with two rounds of layoffs and significant contagion from crypto’s various scandals. 

In December, internal slip-ups added salt to the wound. A glitch in Robinhood’s system allowed customers to improperly short a meme stock and cost the company $57 million in one day. 

“A year ago, we didn’t anticipate a land war in Europe or inflation at a 40-year high prompting one of the most aggressive tightening policies we’ve ever seen from the Fed,” said CEO Vlad Tenev. “This led to a sharp drawdown in growth stocks and a frigid crypto winter. All these factors presented extraordinary challenges for our customers and company to navigate.”

Profitable EBITA after ‘tremendous sacrifices’

The company fell short of  Q4 earnings expectations. However, Tenev remained positive.

“Nine months ago, we committed to returning to adjusted EBITA profitability in Q4. This was an aggressive goal, and we delivered it a quarter ahead of schedule by lowering costs and increasing revenues,” he said. 

Vlad Tenev CEO Robinhood
Vlad Tenev, CEO of Robinhood

Adjusted EBITA rose 74% in Q4 to $82 million, a significant improvement from where the year started, at a loss of $143 million. Drastic measures were taken to achieve this goal, including eliminating the executive team’s 2022 cash bonuses and other “streamlining” initiatives, such as the mass layoffs earlier in the year. 

“It took tremendous sacrifice on behalf of many people throughout 2022 to get Robin Hood to the healthy position we’re in today,” said Tenev. 

Despite this, Monthly Active Users were declining, along with assets under custody. The last quarter’s 30% increase in deposits saved the year’s declining growth rate, which had dropped from $5.5 million in Q1 to $2.7 million in Q3. 

Transaction-based revenues were also down 11% to $186 million, which the company attributed to lower equity and crypto revenues, but net interest revenues were up. The company reported sequential growth of 30%, reaching $167 million in Q4 with an increasing distribution of sources. 

An ‘aggressive’ product rollout

Much of the focus of the call was on Robinhood’s product rollout over the year. 

The company had spent the past year continuing to pursue an “aggressive” product rollout set out at the beginning of 2022. In the future, this looks to continue.

Taking into account the “frigid crypto winter,” the focus for 2023 has moved away from cryptocurrencies, despite the company stating that they felt crypto is “here to stay.” 

Instead, Tenev stated that they would look at three main growth areas in the year ahead. 

  1. Deepening relationships with existing customers – Towards the end of 2022, the company released higher interest rates on their Gold product and the Robinhood Retirement solution that Tenev stated would be particularly useful for freelancers and gig workers. 
  2. Becoming the best place for advanced customers – Tenev stated that the company is working to improve functionality in this area. 
  3. International expansion.

The company decided in Q4 to terminate its deal with Ziglu, resulting in a $12 million charge. For many, this was going to be the company’s springboard to UK expansion, casting doubt on Robinhood’s plans to go global. 

Tenev assured that the company continued to set its sights on international reach. He cited the globally available Robinhood Wallet and the initiation of brokerage options in the UK as steps towards this goal. 

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  • Isabelle Castro Margaroli

    Isabelle is a journalist for Fintech Nexus News and leads the Fintech Coffee Break podcast.

    Isabelle's interest in fintech comes from a yearning to understand society's rapid digitalization and its potential, a topic she has often addressed during her academic pursuits and journalistic career.