Robinhood Markets Inc is cutting nearly a quarter of its workforce as a pandemic trading boom has subsided.
The app-based brokerage laid off 23 percent of its workforce as it posted a 44 percent drop in revenue from slumping trading activity, in a Tuesday earnings announcement that came a day ahead of schedule and exceeded analyst expectations.
The Menlo Park, California-based brokerage posted net sales of $318 million for its second quarter ended June 30 as revenues from stocks, options and crypto trading more than halved from $565 million years earlier, according to a filing with the US Securities and Exchange Commission.
The company said it would begin another round of layoffs that will affect 780 employees, on top of the 9 percent of full-time staff laid off earlier this year. It will also change its organizational structure to encourage greater cost discipline.
Robinhood’s total operating expenses for the second quarter were up 22 percent from the same period last year. The reorganization will cost the company between $30 and 40 million, Robinhood said.
The company posted a net loss of $295 million. Robinhood stripped out restructuring charges and reported a loss of 32 cents per share, compared to analyst estimates of a loss of 37 cents per share, according to data from Refinitiv IBES.
It was originally scheduled to report earnings on August 3, but released them a day early after publishing a blog post about the job cuts and reorganization.
Shares of Robinhood fell nearly 1 percent to $9.15 in after-hours trading.
Robinhood’s easy-to-use interface made it a hit with young investors trading cryptocurrencies and stocks like GameStop Corp from home during the COVID-19 pandemic.
But the customer base has been rocked by decades of high inflation and rising interest rates, which have sucked liquidity out of global markets and sent cryptocurrencies down.
Robinhood is one of several fintech upstarts who have begun to cut jobs ahead of an expected recession, along with crypto exchange Coinbase Global Inc, buy-now-pay-later firm Klarna and NFT platform OpenSea, while a handful of crypto firms , including Celsius Network and Voyager Digital collapsed amid the wider crypto crash.
Robinhood Chief Executive Officer Vlad Tenev said in a blog post on Tuesday that staff cuts earlier this year hadn’t gone far enough.
“As CEO, I have approved our ambitious personnel journey and taken responsibility – this is up to me,” Tenev said.
Tenev, who founded the company in 2013 with 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 stay with the company until October 1.
Transaction-based revenues in Robinhood’s three main business lines of options, stocks and cryptocurrencies were down 55 percent, while revenues from crypto transactions, which had buffered the company’s results last year, were down 75 percent year-on-year.
Robinhood’s monthly active users also appeared to fall by about a third, at 14 million for June 2022 compared to 21.3 million in the second quarter of 2021.
Fintech stocks suffered the most from a broader market decline as a risky environment coupled with higher borrowing costs and slow growth in e-commerce led traders to pull back from the fast-growing technology to date this year.
Shares of Robinhood, which sold for $38 a share in its first public offering last year, were also caught in the crosshairs of the crypto meltdown, losing nearly 88 percent.