Robinhood posts 44% slump in revenue, slashes headcount by 23%

© Reuters. FILE PHOTO: The logo of Robinhood Markets, Inc. is seen at a pop-up event on Wall Street after the company's IPO in New York City, U.S., July 29, 2021. REUTERS/Andrew Kelly

By Hannah Lang and Michelle Price

(Reuters) -Robinhood Markets Inc said on Tuesday it was slashing 23% of its staff as it posted a 44% decline in revenue on slumping trading activity, in an earnings announcement that came a day earlier than scheduled and beat analyst expectations.

The Menlo Park, California-based brokerage posted net revenue for the second quarter ended June 30 of $318 million as revenue from equity, options and crypto trading more than halved, compared with $565 million a year earlier, according to a filing with the U.S. Securities and Exchange Commission.

The company said it would commence another round of layoffs affecting 780 employees, on top of the 9% of full-time staff laid off earlier this year. It will also change its organizational structure to drive greater cost discipline.

Robinhood (NASDAQ:HOOD)'s total operating expenses for the second quarter rose 22% on the same period last year. The reorganization will cost the firm between $30 million to $40 million, Robinhood said.

The company posted a net loss of $295 million. Stripping out the restructuring charges, Robinhood reported a loss of 32 cents per share versus analyst estimates of a loss of 37 cents per share, according to Refinitiv IBES data.

It was originally scheduled to report earnings on Aug. 3, but released them a day early after publishing a blog post about the job cuts and reorganization.

Robinhood's shares were down nearly 1% at $9.15 in after-hours trading.

Robinhood's easy-to-use interface made it a hit among young investors trading from home on cryptocurrencies and stocks such as GameStop Corp (NYSE:GME) during the COVID-19 pandemic.

But its customer base has been spooked by decades-high inflation and rising interest rates, which have sucked liquidity out of global markets and sent cryptocurrencies slumping.

Robinhood is one of many fintech upstarts that have started slashing jobs ahead of an expected recession, along with crypto exchange Coinbase (NASDAQ:COIN) Global Inc., buy-now-pay-later company Klarna and NFT platform OpenSea, while a handful of crypto companies including Celsius Network and Voyager Digital collapsed amid the broader crypto crash.

Robinhood Chief Executive Officer Vlad Tenev said in a blog post Tuesday that staff cuts earlier this year had not gone far enough.

"As CEO, I approved and took responsibility for our ambitious staffing trajectory – this is on me," Tenev said.

Transaction-based revenues across Robinhood's three main business lines of options, equities and cryptocurrencies fell 55%, with crypto transaction revenue, which had buffered the company's results last year, falling 75% year-on-year.

Robinhood's monthly active users also appeared to fall by roughly a third, at 14 million for June 2022 compared with 21.3 million in the second quarter of 2021.

Fintech stocks bore the brunt of a broader market decline as a risk-off environment coupled with higher funding costs and sluggish e-commerce growth led to traders pull back from high-growth tech so far this year.

Shares of Robinhood, which were sold at $38 a share in its initial public offering last year, were also caught in the crosshairs of the crypto meltdown and have shed nearly 88%.