Shares of U.S. broker-dealer Robinhood Markets ( NASDAQ:HOOD ) plunged more than 15% in aftermarket trading on Wednesday after the company reported third-quarter 2024 results, indicating a decline in revenue and net profit from a record second quarter in Robinhood.
On the front line, Robinhood reported revenue of $637 million in Q3 2024 – up 36% year-on-year from Q3 2023, but down 7% from its record Q2 result of $682 million. Net income of $150 million was down from $188 million in the second quarter.
Shares of Robinhood were trading (before the results were announced) at a 52-week high, closing Wednesday at $28.21. Robinhood shares are changing hands at around $25, down 11.4%.
Vlad Tenev, CEO and Co-Founder of Robinhood, said of Q3,
“I’m really proud of our Q3 results and how smoothly our product engine is humming along. Last month, we introduced Robinhood Legend, our new desktop offering, and announced index options, futures, and a real-time profit and loss tool coming soon. And just this week, we launched the Presidential Election Market. We have a ton of momentum and we’re just getting started.”
Jason Warnick, Robinhood’s Chief Financial Officer added,
“The third quarter was another strong quarter as we grew revenue 36% year-over-year and pared most of that down to the bottom line. We entered 2024 with the goal of delivering another year of profitable growth, so we’re excited to have already broken the previous year’s records for revenue and EPS.”
On the revenue side of the equation, Robinhood reported that total net revenue rose 36% year-over-year to $637 million (but again down from Q2 2024), broken down as follows:
- Trading-based revenue increased 72% year-over-year to $319 million, driven primarily by options revenue of $202 million, up 63%, cryptocurrency revenue of $61 million, up 165%, and equity revenue $37 million, up 37%.
- Net interest income increased 9% year-over-year to $274 million, primarily due to an increase in interest-earning assets.
- Other revenue increased 42% year-over-year to $44 million, driven primarily by increased Gold subscription revenue.
- Total net income decreased by $27 million in the third quarter of 2024 (and $13 million in the second quarter of 2024) due to struggles paid to customers for transfers and deposits.
On the expenses side, Robinhood – which has prioritized cost control of late – said total operating expenses in Q3 2024 fell 10% year-over-year to $486 million. This includes a regulatory accrual of $10 million, which compares to a regulatory accrual of $104 million in the third quarter of 2023. Adjusted operating expenses (non-GAAP) increased 12% year-over-year to $397 million, primarily due to increased marketing investments and development. Stock-based compensation (SBC) fell 5% year-over-year to $79 million.
Other financial highlights for Robinhood in Q3 2024 included:
- Funded Customers increased by 1.0 million year over year to 24.3 million.
- Investment Accounts increased by 1.5 million year-on-year to 25.1 million.
- Assets Under Custody (AUC) increased 76% year-over-year to $152.2 billion, driven by continued net deposits and higher equity and cryptocurrency valuations.
- Net deposits were $10.0 billion, a 29% year-over-year growth rate over AUC at the end of Q2 2024. In the trailing twelve months, net deposits were $39.0 billion, a 45% year-over-year growth rate AUC at the end of the third quarter 2023.
- Average revenue per user (ARPU) increased 31% year-over-year to $105.
- Gold subscribers grew by 860k, or 65%, year over year to 2.2 million.
- Cash and cash equivalents totaled $4.6 billion compared to $4.9 billion at the end of Q3 2023.