The difficult macroeconomic climate is causing smaller investors to pull back from trading, Robinhood CEO and co-founder Vlad Tenev said Thursday (April 28) during the company’s quarterly earnings call.
During the quarter ended March 31, the company saw decreases in trading volumes, monthly active users and assets under custody.
“For most of our history, Robinhood has operated in a period of low interest rates, low inflation and rising markets,” Tenev said. “Our customers are now experiencing all three of these trends going in the opposite direction, perhaps for the first time in their lives. As a result, some are engaging with us less regularly and reducing their trading activities.”
Smaller Customers Are Trading Less Frequently
The number of Monthly Active Users (MAU) decreased 10% year over year, with 15.9 million for March 2022, compared with 17.7 million for March 2021.
The number of MAU has declined each quarter since hitting a high of 21.3 million in the second quarter of 2021. In the most recent quarter, the number decreased 8%, compared with 17.3 million for December 2021.
The company attributed the sequential decline in March to users with lower balances who are engaging less in the current market environment.
“When we look a level deeper, our larger customers are still remaining active, but we are seeing more pronounced declines from those that have lower balances,” Tenev said. “With the uncertainty in the market, our customers became more cautious with their portfolios, trading less frequently and in smaller amounts across all asset classes.”
See also: After Spurt of Pandemic-Driven Hiring, Robinhood Cuts 9% of Full-Time Staff
User Account Growth Has Leveled Off
The number of Net Cumulative Funded Accounts increased 27% year over year, reaching 22.8 million in the first quarter of 2022, up from 18.0 million in the first quarter of 2021. Compared to the previous quarter, though, Net Cumulative Funded Accounts increased only slightly compared with 22.7 million as of Dec. 31, 2021.
The number of Net Cumulative Funded Accounts has leveled off after a steep rise in the second quarter of 2021. After leaping from 18.0 million in the first quarter of 2021 to 22.5 million in the second quarter of 2021, the number went to 22.4 million, 22.7 million and 22.8 million, respectively, in the following quarters.
In a press release, Robinhood attributed the growth in the second quarter of 2021 to the addition of 7.1 million new funded accounts “primarily driven by large customer interest in cryptocurrencies.”
Related: Robinhood to Acquire Crypto Asset Platform Ziglu
Reporting Key Performance Indicators
In other news, Robinhood announced that it is going to start reporting certain limited purpose statistical and operational results on a monthly basis.
These monthly metrics for Robinhood’s top key performance indicators (KPIs) will include information about user growth, engagement and trading, Chief Financial Officer Jason Warnick said during the call. With this change, the company will no longer provide revenue guidance.
“Given the volatility of our revenue, particularly transaction-based revenues from trading activity, we believe providing monthly disclosures of our top KPIs is preferable to forward-looking guidance,” Warnick said. “So far in April, we’re seeing trading volumes in line with what we were seeing throughout most of Q1.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More