Robinhood’s revenue more than doubled to $ 565 million in the second quarter, supported by a massive surge in crypto trading, the stock trading app said in its first earnings report as a publicly traded company on Wednesday.
But stocks rose after the company warned that a slowdown in trading activity would hurt earnings for the current quarter. Investors may also worry whether volatile cryptocurrencies can continue to provide such a tailwind. Robinhood recently lost more than 9% in pre-trading.
Revenue grew more than 131% over the period of $ 244 million a year ago, and was near the high range of the company’s forecast of $ 546 million to $ 574 million.
Revenue from crypto trading was $ 233 million, more than half of all transaction-based revenue of $ 451 million for the second quarter. The revenue share of cryptocurrency rose from 17% in the first quarter to over 51%.
More than 60% of the accumulated net funded accounts traded crypto in the quarter. In the second quarter of 2020, crypto-based revenue was just $ 5 million.
Customer trading options contributed $ 165 million to transaction-based revenue last quarter, and stocks totaled $ 52 million. Robinhood also generates income from its gold subscription service.
Assets under custody rose 205% to $ 102 billion in the second quarter of 2021, compared to $ 33 billion in the second quarter of last year.
Robinhood warned investors that third quarter results could be hurt by a slowdown in trading after a record quarter in the second quarter.
“For the three months ending September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and significantly fewer refinanced accounts than in the previous quarter,” the company said in the earnings release.
Robinhood stock rose 6.7% in earnings on Wednesday to $ 49.80.
Robinhood reported a net loss of $ 502 million, or $ 2.16 per share. That’s within the expected net loss of $ 487 million to $ 537 million that the company projected. The brokerage made a profit in the same quarter last year. The costs related to the change in the fair value of convertible bonds and warrants were $ 528 million in the second quarter of 2021.
The total number of funded accounts (tied to a bank account) was 22.5 million in the second quarter, in line with Robinhood’s forecast. That is an increase of 18 million in the first quarter, an increase of 151% year over year.
Crypto trading, which Robinhood first introduced in 2018, has grown significantly in recent years. Robinhood offers seven different digital coins, including Bitcoin, Ethereum, and Litecoin. Dogecoin, a meme-inspired token, accounted for 34% of its cryptocurrency transaction-based revenue in the first quarter.
Robinhood explicitly cited Dogecoin as the driving force behind crypto revenue and warned of a slowdown in trading activity in the digital asset.
“If the demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available to trade on our platform, our business, financial condition and results of operations could be adversely affected,” Robinhood said in a 10Q the bell.
Robinhood makes money on crypto by routing orders to market makers that the company says offer “competitive prices” and takes a percentage of the order value. Bitcoin price hovered around $ 45,000 on Wednesday, up more than 50% year over year.
Robinhood went public on Nasdaq last month, hitting the public markets it seeks to democratize for amateur investors. Robinhood stocks have had a wild ride since debut. After falling for the first few days of trading, the company had a meme stock moment when it rebounded 50% amid retail investor interest.
Earlier this month, news that certain Robinhood shareholders will sell up to 97.9 million shares over time weighed the stock. Robinhood said the SEC informed the brokerage on Aug. 13 that they are reviewing the S-1 resale and that no sales can be made until SEC officials have completed their review and declared effective.