Robinhood Layoff Costs, Q2 Losses Won’t Delay Crypto Product Launches
The company seeks to use its $6 billion balance sheet to potentially acquire companies at attractive valuations
Robinhood co-founder and CEO Vlad Tenev | Photo by Lauren Sopourn for Blockworks
key takeaways
- Robinhood’s 23% headcount reduction announcement came a day before it reported a net loss of $295 million in the second quarter Wednesday
- Company estimates a nearly 10% decrease in expenses in 2022 from the prior year despite restructuring costs from two rounds of layoffs
Though Robinhood is set to take a hit on its latest round of layoffs — a sum of $45 million to $60 million — executives said the cuts would not impact the rollout of additional cryptocurrency trading products.
Such charges from Robinhood’s first round of layoffs in April amounted to $17 million. Even still, the stock and crypto trading platform expects its total 2022 operating expenses to be roughly $1.7 billion, a nearly 10% decrease from the year prior.
Robinhood CEO Vlad Tenev wrote in a blog post Tuesday that the company would be reducing the company’s headcount by 23% in the wake of reduced customer trading activity and assets under custody. The changes are particularly concentrated in Robinhood’s operations, marketing and program management divisions.
The layoffs are set to decrease Robinhood’s workforce to 2,600 staffers.
“At this new level, we believe we are appropriately staffed to be cost-efficient, while continuing to deliver great service and innovation for our customers,” Chief Financial Officer Jason Warnick said during the company’s Wednesday earnings call.
Though Tenev said the company would move to a structure in which general managers will assume broad responsibility for Robinhood’s individual businesses, he did not share details.
A Robinhood spokesperson declined to comment on how the restructuring will impact the company’s nascent crypto business.
Sam Wellalage, founder of WorkInCrypto.Global, said he expects about a third of the layoffs to stem from digital asset-focused roles.
“Most people who are losing jobs in crypto are snapped up by fintech and TradFi [companies],” Wellalage told Blockworks. “We also see a lot of hyper-growth startups snapping up these candidates.”
Robinhood’s declaration of another round of layoffs came the same day the New York State Department of Financial Services (NYFDS) imposed a $30 million penalty on Robinhood’s cryptocurrency division due to purported violations of anti-money laundering, cybersecurity and investor protection regulations.
Results and product plans
While transaction-based revenues for options and equities decreased by 11% and 19% quarter over quarter, respectively, digital assets proceeds increased by 7% to $58 million.
The company booked a net loss of $295 million in the second quarter after tallying a net loss of $392 million during the first three months of the year.
Monthly active users in June decreased 1.9 million from the previous month to 14 million. Assets under custody were down 31% quarter over quarter to $64.2 billion, primarily driven by lower asset valuations.
The price of Robinhood stock closed Wednesday at $10.31 — up 11.7% during the day’s trading session. The stock is down 44% so far in 2022 — but up nearly 23% from one month ago.
The company opened up its crypto wallet product in April to two million more eligible users. It also revealed during the quarter its plan to introduce a non-custodial wallet later this year. The standalone app is set to allow customers to trade and swap crypto, with no transaction fees, while maintaining full custody.
Executives added on Wednesday’s call that Robinhood is looking to introduce additional cryptocurrencies in a “deliberate” way as the company vies to compete with crypto-native incumbents such as Coinbase and FTX.
Asked whether Robinhood could be acquired, Tenev said, “In one word, no.”
Added Tenev: “We actually see opportunities, particularly in this market environment, to leverage the balance sheet that we have — that’s about $6 billion — to acquire companies to accelerate our roadmap.”
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