Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record net deposits of $11.2 billion in Q1, demonstrating a 44% annualized organic growth rate and a continuation of 20%+ net deposit growth.
- Significant growth in Robinhood Gold subscribers, reaching 1.7 million in Q1, a 42% increase from the previous year, with strong adoption of new gold offerings.
- Robust revenue growth of 40% year-over-year in Q1, with net income reaching $157 million and GAAP EPS of $0.18.
- Assets under custody surged to a record $130 billion, up 65% year-over-year, driven by strong net deposits and customer asset inflows.
- Continued expansion and innovation in product offerings, including the introduction of a new Robinhood Gold credit card and enhancements to the gold subscription service.
Negative Points
- Received an SEC wells notice, raising concerns about regulatory challenges, particularly in the crypto business segment.
- Despite strong growth, the company faces intense competition from other brokerages and financial platforms.
- Reliance on market conditions which can be volatile, as seen with the fluctuating crypto volumes and trading activities.
- Operational risks associated with rolling out new products like the Robinhood Gold credit card, which requires careful management of risk and customer behavior.
- Potential cannibalization of existing services with the introduction of new offerings like index options, although this is being strategically managed.
Q & A Highlights
Q: What impact will the SEC wells notice have on the business?
A (Jason Warnick, CFO): For our customers, your accounts are not affected by this. It's business as usual for Robin and crypto. We're disappointed to have received the notice. We've operated our crypto business in good faith, being very conservative in our approach. We're a highly regulated company and have applied the same legal and compliance standards we use for our brokerage to the way we run our crypto business.
Q: What are the new credit cards getting fully released? It seems that many are still on the waiting list.
A (Vladimir Tenev, CEO): We're excited about the Gold Card and the value we're providing to customers. We've seen a ton of demand, with over 1 million customers signed up for the waitlist. We're starting with an initial group in the tens of thousands of customers over the next few weeks, then we'll observe them carefully to inform the broader rollout.
Q: [24-hour] market was halted. How can we trust that the platform when markets become [volatile] what steps are being implemented to handle future volatility?
A (Vladimir Tenev, CEO): It's been awesome to see the interest in our 24-hour market offering. The ATS we use went down for the evening, affecting us and other firms that route to it. We're on the frontier with this offering, but as we continue to invest in it, the offering will improve over time and get more resilient.
Q: On the growth in new deposits and the economics of new deposits coming into a gold connected account under new promotions.
A (Jason Warnick, CFO): We love the economics of the match promotions we've been running. The payback on the 1% match is a little over a year, and on the 3% match, it's between 2 and 3 years. We're watching this closely, and the 2023 cohorts have already paid off, with 2024 looking good as well.
Q: Can you elaborate more regarding the momentum that you're seeing heading into the second quarter?
A (Jason Warnick, CFO): We're seeing strong trading across equities, options, and crypto continuing into the next quarter. Retirement assets are now crossing over $7 billion, which is remarkable growth. We're seeing great diversity of strength across the business.
Q: On the incremental margin ex SBC coming in at 75%, is that a reasonable expectation for investors to underwrite?
A (Jason Warnick, CFO): We're not providing guidance on incremental margins, but about 90% of our cost structure is fixed, giving us a lot of opportunity to drop incremental revenue to the bottom line. Even with a step-up in marketing and investments for growth, we're delivering incremental margins at 75%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
