Robinhood Stock Rises on Q4 Revenue Beat and Surprise Profit
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Robinhood (NYSE: HOOD) stock is trading higher in US postmarket price action today after the company reported its Q4 earnings which showed that it not only topped revenue estimates in the quarter but also posted a surprise profit in the quarter.
Robinhood reported revenues of $471 million which were 24% higher YoY and well ahead of the $457 million that analysts expected. Importantly, it reported a per share profit of 3 cents while analysts expected it to post a per share loss of 1 cent.
Robinhood stock rises on better-than-expected earnings
In his prepared remarks, the company’s CEO Vlad Tenev said, “2023 was a strong year as our product velocity continued to accelerate, our trading market share increased, and we started to expand globally.”
He added, “And we’re off to an even better start in 2024, as we’ve already brought in more Funded Customers and Net Deposits through the first half of Q1 than we did in all of Q4 2023.”
Key takeaways from HOOD’s Q4 earnings
Looking at the breakdown of Robinhood’s Q4 revenues, the company’s net interest income rose 41% YoY to $236 million even as it fell from the Q3 high of $251 million. Robinhood’s transaction-based revenues which include revenues from trading of stocks, options, and cryptos rose 8% to $200 million.
The key driver of the rise in transaction-based revenues was cryptocurrency whose revenues rose 10% to $43 million and equity revenues which rose 19% YoY to $25 million. However, the company’s option revenues fell 2% YoY to $121 million.
The company’s “Other Revenues” also rose 30% to $35 million “primarily driven by higher revenues from Gold subscriptions and Sherwood Media.”
Robinhood reported record numbers for annual revenues, EBITDA, and EBITDA margins in 2023 mostly aided by strong growth in interest income.
Robinhood reported a fall in MAUs
Robinhood’s funded customers increased by 420,000 to 23.4 million while the average revenue per user rose 23% to $81. However, the monthly active customer (MAU) count continued to fall and came in at 10.9 million which is 4% lower than the corresponding quarter last year. Robinhood’s MAUs peaked in mid-2021 – so did the company’s trading volumes amid the meme stock mania. Since then, the metric has fallen gradually.
Commenting on the quarter’s performance, the company’s CFO Jason Warnick said, “We drove record full-year revenues and substantially higher margins, and in Q4 we had positive GAAP net income. In 2024, we aim to continue delivering profitable growth as we work to maximize earnings per share over time to drive long-term shareholder value.”
HOOD is expanding internationally
Robinhood has been looking to expand globally and started offering stock broking services in the UK late last year. To begin with, Robinhood would let UK users trade in around 6,000 US stocks and ADRs without brokerage and any forex charges throughout the day on all trading days. It would also offer 5% AER on the uninvested cash.
Prior to Robinhood, Webull and Public also entered the UK market in 2023. Robinhood sees a big opportunity in the UK where only about 12% of retail household savings are in stocks which is less than a third of the US.
During the earnings call, Tenev said, “after launching crypto in the EU and brokerage in the U.K., we have tens of thousands of international customers so far. What we’re hearing from customers is that they want more of the full Robinhood product suite, so we’re working to build that for them. We’re also pursuing opportunities to expand into more jurisdictions.”
Robinhood expects profitable growth in 2024
Robinhood expects profitable growth to continue in 2024 as well and forecasts operating expenses in 2024 to be between $1.85 billion to $1.95 billion. It expects its 2024 headcount to be similar to 2023 despite international expansion.
“Today, the vast majority of our head count is in higher-cost U.S. geographies, and there’s opportunity there over time. I think the real opportunity for us on head count is really just increasing revenue per employee. And there, we feel like we’re just getting started,” said Warnick.
Robinhood is upbeat on its 2024 outlook on expectations that a fall in interest rates would fuel trading volumes.
Warnick said, “With the current macro backdrop, we’re finding for strong growth in 2024, driven by continued 20-plus percent net deposit growth, increasing Gold adoption, double-digit gains and trading market share, exciting new product introductions, and our diversified revenue model.”
HOOD gained market share in Q4
He added, “And the year is off to a great start. January net deposits were nearly $4 billion, of which about one-third was net positive transfers in from other brokers. That January result was the highest monthly total since the first half of 2021, and we’re seeing continued strength in early February.” Notably, Robinhood gained market share in the quarter despite the fall in MAUs.
The company ended the quarter with $4.8 billion in cash which was lower than the $6.3 billion that it had at the end of 2022. The company attributed share repurchases, the acquisition of X1 Inc., and the movement of some cash into investments to the decline in its cash pile.
HOOD stock is trading around 10% higher in postmarkets. The stock however still trades at less than a third of its IPO price after the tumultuous sell-off in growth stocks many of which still trade at a fraction of their all-time highs despite the broader markets having risen to new record highs.
