Financial services company Robinhood (NASDAQ:HOOD) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 40.3% year on year to $682 million. It made a GAAP profit of $0.21 per share, improving from its profit of $0.03 per share in the same quarter last year.
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Robinhood (HOOD) Q2 CY2024 Highlights:
- Revenue: $682 million vs analyst estimates of $642.6 million (6.1% beat)
- EPS: $0.21 vs analyst estimates of $0.15 (37.3% beat)
- Gross Margin (GAAP): 87.4%, up from 84.6% in the same quarter last year
- EBITDA Margin: 31.5%, in line with the same quarter last year
- Free Cash Flow of $47 million is up from -$635 million in the previous quarter
- Funded Customers: 24.2 million, up 1 million year on year
- Market Capitalization: $15.12 billion
With a mission to democratize finance, Robinhood (NASDAQ:HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Online Marketplace
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales Growth
Robinhood's revenue growth over the last three years has been mediocre, averaging 16.7% annually. This quarter, Robinhood beat analysts' estimates and reported impressive 40.3% year-on-year revenue growth.
Ahead of the earnings results, analysts were projecting sales to grow 15.9% over the next 12 months.
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Usage Growth
As an online marketplace, Robinhood generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Over the last two years, Robinhood's users, a key performance metric for the company, grew 2.2% annually to 24.2 million. This is one of the lowest rates of growth in the consumer internet sector.
In Q2, Robinhood added 1 million users, translating into 4.3% year-on-year growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Robinhood because it measures how much the company earns in transaction fees from each user. Furthermore, ARPU gives us unique insights as it's a function of a user's average order size and Robinhood's take rate, or "cut", on each order.
Robinhood's ARPU growth has been exceptional over the last two years, averaging 27.1%. The company's ability to increase prices while growing its users demonstrates its platform's value, as its users are spending significantly more than last year. This quarter, ARPU grew 34.6% year on year to $113 per user.
Key Takeaways from Robinhood's Q2 Results
We enjoyed seeing Robinhood's impressive revenue growth this quarter. We were also excited its revenue and earnings outperformed Wall Street's estimates. Overall, this was a good quarter with some key positives. The stock remained flat at $17.07 immediately after reporting.
So should you invest in Robinhood right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.