Robinhood strikes gold in Q1 earnings: Analyst

Robinhood Markets (HOOD) shares are rising in extended-hours trading after topping Wall Street's first quarter earnings estimates. Citizens JMP Director of Financial Technology Research Devin Ryan joins Market Domination Overtime to break down the earnings and the company's accelerating growth.

Robinhood brought in $329 million in transaction-based revenue in its first quarter, topping the estimated $255.3 million. New net deposits also rose over 40%, and Ryan tells Julie Hyman and Josh Lipton that "the asset gathering here is just incredibly strong."

He adds that despite Robinhood's status as a platform for first-time traders, the company has "made a huge effort to really expand their offering to be more attractive to active traders, which can be larger-balance individuals and also higher-revenue individuals for the firm."

He points to new offerings like its 1% matching retirement account and the company's international expansion as contributing factors to Robinhood's increased growth.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Melanie Riehl

Video transcript

Robinhood shares jumping here after delivering a beat on revenue in the first quarter.Here for a closer look at the quarter is Devin Ryan citizens, J MP, Director of Financial Technology Research, Devin, it is good to have you.So uh listen, Devin Robin Hood reports, investors like what they see here, at least initially, the stocks up almost 6% in the after hours.Devin le let's start there.What do you make of the report?Yeah, it looks great.Um It's the bottom line but um you know, some of the things that stand out uh obviously questions around what type of growth Robin Hood can deliver and uh they put up 40% revenue growth so terrific top line growth and then they're just um really focused on profitable growth.So that means containing expenses.And so as a result of all that they uh delivered really strong E uh uh II I think it was around $250 million for context.It did 500 million for all of uh 2023.So you're just seeing really strong growth, uh they're gap profitable.So 18 cents of eps on a gap basis.Uh we were looking for uh you know, six cents.So, you know, just really big beep and, and probably the biggest thing that, that I'm focusing on is, you know, the asset gathering here is just incredibly strong.So they're net new deposits, which is essentially bringing new customers assets on the platform was over 40% in the quarter.So, you know, that's compared to a lot of industry incumbents that are in the mid single digits, you know, 5 6% Robin Hood's north of 40%.So they're seeing an acceleration with all of the strong offerings they have in the market right now.And Devin, how are they doing that?Are they taking market share from those more entrenched players?Are they getting new investors online?How where are those customers sort of coming from?Yeah, it's, it's, it's like all fronts uh is, is the answer um you know, they're going after active traders.Um So Robin Hood, I think is known as kind of the platform for first time traders, but they've made a huge effort to really expand their offer and to be more attractive to active traders which um can be larger balance individuals and also um higher revenue um individuals for the firm.And so that's been a success.Um They're going after um higher balance customers overall with their 1% deposit match.Um They now have a retirement um account where they have a 3% match and that's been a big offer in the market.And then obviously now they're just going international.So there's just so many areas and, you know, they've competed very well with having a very high, um you know, essentially yield on their cash.So that's been attracted to customers with interest rates moving higher.And they've essentially passed all that on to the customers.But now they've really enhanced their gold subscription offering where there's numerous other facets that you really make that value proposition.Pretty interesting.And the credit card is another piece that's still on the comp.So that's something we'll be watching.But um really great growth and we don't see that slow, to be honest.Devin, let me ask you, uh you know, switching gears here, the sec notify the company that staff made this uh preliminary determination to recommend filing this, this enforcement action.Devin, I'm just curious, you know, how many questions you're getting from clients about that?And, and what are you telling them?Yeah.So I think this is something that for the industry, if you've been following has been kind of an ongoing back and forth with the SEC and we cover some of the other companies that are in court with the SEC right now.So it's not something that I would say is overly surprising.You know, Robin Hood is obviously trying to operate a compliant uh brokerage in our opinion.And so they want to work with their Right.And so, um you know, I think when you think about the, the overall business model, you know, they only offer a small subset of cryptocurrencies.I could see a scenario where they pull back a bit on the offering, but a lot of the activity more recently is being driven by enthusiasm into Bitcoin.And Bitcoin is clearly an asset that it appears the SEC does not have an issue with.So, so I think they're going to have to work with the regulators and, and find a solution here.Um But our, you know, current base case here is that they will get to a positive outcome.And then the other piece of it is that, you know, crypto for Robin Hood is just one piece of what's driving.Um This company, as I talked about, all these net flows into the business are from areas that I would say are probably not related to that part of the business.Um And, you know, the, the revenue from cryptocurrencies was up 232%.It's a smaller part of the business to be sure.Is that a function again of new accounts coming on or is that a function of the, you know, what we've seen in terms of trading of cryptocurrencies?Yeah, I think it's really a function of what we're seeing in the marketplace.So just a resurgence and engagement in the space, you know, the Bitcoin ETF S um were um kind of transformation in our opinion to bring interest into the industry and, and liquidity.Uh But, you know, a lot of people still wanna trade the underlying Cryptocurrency.And so um people are buying and selling Bitcoin and, and some of the other cryptocurrencies on their platform.But there's just been a, a really renewed interest in this ecosystem more broadly, Rob.It has, I think a very strong value proposition with their crypto trading and I think has been operating um in a way where they're trying to work with regulators.So that's where um I think they're gonna continue to, to, you know, try to do things.Um and, and, and find a solution here with their, with their regulators.But um they have a really good offering and I think they've had a lot of success there.We see that um you probably pulling back a little bit in the near term just with volumes in the industry, but I think that um crypto volumes can remain still very high with engagement building.Devin.Great to see you as always.Thanks a lot.Appreciate it.Thanks.Yahoo Finance is gonna get a closer insight on the company's quarter with Robin Hood CEO of Lad 10 of you don't want to miss that.