Robinhood Markets Inc. is cutting nearly a quarter of its workforce as the pandemic-related trading boom plummets.
The app-based brokerage firm laid off 23 percent of its employees as it posted a 44 percent drop in revenue on slumping trading activity in an earnings announcement on Tuesday, a day ahead of schedule and beating analysts’ expectations.
The Menlo Park, Calif.-based brokerage firm reported net sales of $318 million for the second quarter ended June 30, as revenue from stocks, options and crypto trading more than halved, compared to $565 million dollars in the prior year, according to a filing with the US Securities and Exchange Commission.
The company said it would start another round of layoffs that will affect 780 employees, in addition to the 9 percent of full-time workers laid off earlier this year. It will also change its organizational structure to achieve greater cost discipline.
Robinhood’s total cost of ownership increased 22 percent in the second quarter compared to the same period last year. The reorganization will cost the company between $30 million and $40 million, Robinhood said.
The company posted a net loss of $295 million. Excluding restructuring costs, Robinhood reported a loss of 32 cents per share versus analyst estimates of 37 cents per share, according to Refinitiv IBES data.
It was originally scheduled to report the results on August 3, but released them a day early after a blog post about the job cuts and restructuring was published.
Robinhood shares fell nearly 1 percent to $9.15 in after-hours trading.
Robinhood’s user-friendly interface made it a hit with young investors trading cryptocurrencies and stocks like GameStop Corp from their homes during the COVID-19 pandemic.
But its client base has been spooked by decades of high inflation and rising interest rates, which have drained liquidity from global markets and crashed cryptocurrencies.
Robinhood is one of many fintech newbies that have started shedding jobs ahead of an expected recession, along with crypto exchange Coinbase Global Inc, buy-now pay later firm Klarna and NFT platform OpenSea, during a handful of crypto companies including Celsius Network and Voyager Digital collapsed amid the broader crypto crash.
Vlad Tenev, Robinhood’s chief executive officer, said in a blog post Tuesday that the downsizing earlier this year didn’t go far enough.
“As CEO, I have approved our ambitious workforce plan and taken responsibility for it – that’s on me,” Tenev said.
Tenev, who founded the company in 2013 with his Stanford University roommate Baiju Bhatt, told employees they would receive a Slack message about their status. Those who lose their jobs will be allowed to remain with the company until October 1.
Transaction-based revenue across Robinhood’s three main businesses, options, stocks and cryptocurrencies, fell 55 percent, with revenue from crypto transactions, which cushioned the company’s results last year, falling 75 percent year-over-year.
Robinhood’s monthly active users also appeared to have declined by about a third, to 14 million in June 2022, compared to 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 has caused merchants to back away from high-growth tech so far this year.
Shares of Robinhood, which sold for $38 a share when it went public last year, also caught the crosshairs of the crypto meltdown, down almost 88 percent.
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