Robinhood Earnings, how good were they?
Before starting I just want to say that I very much like how Robinhood allows retail traders to submit questions. This shows me the dedication they have toward the retail investor and shows their priorities. It is unusual and very few companies do this. I’m a fan of this.
The numbers do kind of speak for itself, let’s see how the stacked up:
Robinhood Q1’24 Earnings
Net deposits of 11 billion, more than double last year's average. 75% of net deposits of customer who are with Robinhood for over a year, a positive sign because although I very much like the way this business is going, you must be cautious when you look into those numbers on how much is driven on market sentiment. As Robinhood facilitates the younger generation of retail investors, inflows can be volatile based on uptrending or downtrending markets. But with these deposits, little over half went to brokerage, about a quarter to cash sweeps, and the other 20% to retirement.
April has shown 5 billion in inflows, so that is almost half of Q1 deposits in a single month, a very good sign but once again with these numbers, due to the nature of the typical Robinhood investor, I stay cautious of getting overly excited, at the end I will explain more on why this is.
The income side of the business looks very good. Gold subscribers had 8 times the… someone coughed through it, but my guess is account balance, as the next line was “an average over $40.000”, grew net deposits about twice as fast and had 5 times the retirement adoption. Gold ARPU is multiples of average customers, as yearly subscription revenue is approaching 100 million. Gold subscribers grew to 1.7 million, up 42% YoY.
And although we can see the increases in income, this is not where I am most amazed by this business. because the expenses side is where the real magic is happening when it comes to net income. General and administrative spend was down 82%. It went from 647 million in Q1’23, to 118 million in Q1’24. This was offset in a minor way with a 158% increase in marketing spend, increasing from 26 million during Q1’23, to 67 million during Q1’24.
They also mentioned how they are now focussed on maximising EPS and FCF per share, as they want to return capital to shareholders.
So let me explain why I’m cautious about these numbers. During the earnings call, Robinhood mentioned how Q1 deposits are more than double last years average. This coincides with crypto having an incredibly strong run at the end of 2023, going into 2024. What we can also see in the in balance sheet is that the company has a lot more activity in crypto under the line item “User cryptocurrencies safeguarding obligation”. It increased by about 80%. With that we have to keep in mind how the company explained how certain numbers increased to the highest numbers since ‘21, the covid-bubble. I guess that what I am trying to say is that it is the treasure hunters that you have to look out for as these are the first to get their money out of the markets when markets stop going up.
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