Robinhood Markets, Inc. (HOOD) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Robinhood's earnings call and Q&A reveal a strong performance and optimistic outlook. Key highlights include a 50% YoY revenue increase, expanded adjusted EBITDA margin, and a significant increase in share repurchase authorization. Product development is robust, with successful new launches and international expansion. The Q&A section confirms positive sentiment, with analysts acknowledging strong growth in various business areas, including the securities lending and credit card segments. The company's strategic focus on tokenization and diversification further supports a positive market reaction. Despite some regulatory uncertainties, the overall sentiment is highly positive.

Key Financial Performance

Revenue Revenue is up 45% year-over-year to nearly $1 billion. This growth is attributed to strong product velocity and business results.

Net Deposits The third highest quarter of net deposits ever, with 6 straight quarters over $10 billion. Strong July for net deposits puts the company on track to exceed last year's total of $50 billion in net deposits.

Gold Subscribers Gold subscribers increased to a record 3.5 million, representing a 75% year-over-year growth. This is due to the broadening of the value proposition.

Interest-Earning Assets Interest-earning assets were up over 50%, driven by cash sweep, margin, and strong securities lending activity.

Adjusted EBITDA Margins Achieved 81% incremental adjusted EBITDA margins, reflecting disciplined expense management.

EPS (Earnings Per Share) Doubled EPS from a year ago, driven by revenue growth and disciplined expense management.

Trading Volumes Trading volumes were up double to triple digits across all categories, including 11 million for futures, 17 million for index options, and nearly 1 billion for prediction markets in Q2.

Gold Cash Sweep Balances Gold cash sweep balances crossed $30 billion, up more than 10x since the high-yield offer started less than 3 years ago.

Retirement Assets Retirement assets are now over $20 billion, more than doubling in the past year. This reflects customers entrusting Robinhood with their long-term serious money.

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Operating Highlights

New tooling capabilities for mobile Legend: Rapidly shipping updates for active traders.

Cortex for Gold members: Stock digest feature used by hundreds of thousands of customers.

Robinhood Strategies: Over 100,000 funded customers and $0.5 billion in assets.

Robinhood Gold cardholders: Tripled year-to-date to over 300,000 cardholders.

Retirement assets: Now over $20 billion, more than doubled in the past year.

Robinhood Banking: Launching in the fall with innovative offerings.

Stock tokens: Expanded to 30 European countries, enabling 24/7 trading and instant settlement.

Perpetual futures: Coming soon in Europe, well-received by the market.

Robinhood Chain: First Layer 2 blockchain optimized for real-world assets.

European market expansion: Expanded to 30 countries, serving over 400 million people.

Bitstamp acquisition: Closed acquisition, growing institutional business.

International customers: Now over 600,000 customers, including Bitstamp users.

Revenue growth: Up 45% year-over-year to nearly $1 billion.

Net deposits: Third highest quarter ever, exceeding $10 billion for six consecutive quarters.

Gold subscribers: Reached a record 3.5 million, 13% adoption overall, 35% for new customers.

Interest-earning assets: Up over 50%, driven by cash sweep, margin, and securities lending.

Adjusted EBITDA margins: 81% incremental margins, with disciplined expense management.

GENIUS Act: Legislative progress supporting market innovation.

Staking in the U.S.: Launched with over $750 million staked in the first month.

WonderFi acquisition: Anticipated acquisition to further expand offerings.

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Risk or Challenges

Regulatory Developments: Potential risk factors include regulatory developments that the company continues to monitor, which could materially impact results.

Acquisition Costs: The acquisition of Bitstamp is expected to add $65 million of costs in 2025, which could strain financial resources.

Future Acquisitions: Costs from the anticipated acquisition of WonderFi and provisions for credit losses are not included in the current financial outlook, posing potential financial risks.

Market Volatility: Trading volumes are highly dependent on market conditions, and any downturn could negatively impact revenues.

Crypto Market Risks: Crypto volumes are at 6-month highs, but the crypto market is inherently volatile and subject to regulatory scrutiny, which could affect future performance.

Operational Costs: Adjusted operating expenses and stock-based compensation increased by 6% year-over-year, which could pressure margins if not managed effectively.

International Expansion: Expansion into 30 European countries and the integration of Bitstamp could pose operational and compliance challenges.

Product Rollouts: The launch of new products like Robinhood Banking and perpetual futures involves execution risks and could face adoption challenges.

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Guidance & Outlook

Revenue Growth: The company projects continued revenue growth, with Q2 2025 revenue up 45% year-over-year to nearly $1 billion. Strong July net deposits suggest the company is on track to exceed last year's total of $50 billion in net deposits.

Product Expansion: Robinhood plans to launch Robinhood Banking in the fall, aiming to attract more customer assets. Additionally, perpetual futures will be rolled out in Europe soon, with the U.S. to follow.

International Growth: The company has expanded its European offering to 30 countries, serving over 400 million people. It also closed the acquisition of Bitstamp, growing its institutional business and international customer base to over 600,000.

Crypto and Blockchain Initiatives: Robinhood is focusing on tokenization and blockchain innovation, including the launch of stock tokens and the Robinhood Chain, a Layer 2 blockchain optimized for real-world assets. Staking in the U.S. has seen rapid adoption, with over $750 million staked in the first month.

Customer Asset Growth: Retirement assets have doubled year-over-year to over $20 billion. Average assets per funded customer exceeded $10,000 for the first time, nearly doubling from a year ago.

Operational Efficiency: The company expects adjusted operating expenses and SBC for 2025 to be between $2.15 billion and $2.25 billion, excluding costs from the anticipated acquisition of WonderFi and provisions for credit losses.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:When will Robinhood Banking be broadly available for customers?

A:Robinhood Banking is on track for rollout to customers later in the quarter. It has been piloted in initial markets and offers features like high yield, estate planning, seamless account integration, and cash delivery.

Q:Does Robinhood have plans to step more heavily into lending, such as personal loans, auto loans, mortgages, and other products?

A:Robinhood aims to be the place to custody all customer assets and process financial transactions. They currently offer mortgages through a partnership with Sage Home Loans, the Gold Card, and margin lending. They have ambitions to expand into all transaction types.

Q:How is Robinhood's strategy evolving around net deposits and promotional activity?

A:Robinhood continues to use promotions as part of their playbook, which have shown compelling economics and customer response. They are balancing promotional activity with cost management to ensure profitable growth. Net deposits show long-term growth despite short-term volatility.

Q:What are the long-term strategic opportunities with tokenization of private assets?

A:Robinhood sees tokenization as a way to tie crypto technology to assets with fundamental utility, such as private stocks. They aim to make private markets more accessible and are working to turn tokenization into a real product usable in both the EU and the U.S.

Q:Has Robinhood's mindset changed on applying for a banking license?

A:Robinhood currently leverages partnerships to offer competitive banking products and has not found a compelling reason to pursue a banking license. They remain open to reevaluating if the balance shifts in favor of obtaining a charter.

Q:How is Robinhood protecting its business from cyclicality in the face of market volatility?

A:Robinhood has diversified its revenue streams with nine businesses generating over $100 million annually. They manage costs effectively and focus on long-term opportunities rather than overreacting to short-term cyclicality.

Q:What is Robinhood's perspective on regulatory approval for equity tokenization in the U.S.?

A:Robinhood is working with regulators to unlock opportunities in tokenizing previously inaccessible assets like private markets. They see tokenization as a way to offer benefits like 24/7 trading and self-custody.

Q:How is Robinhood's securities lending business performing?

A:Robinhood's securities lending business reached a record $54 million in June, driven by customer onboarding, asset growth in the fully paid program, and favorable market conditions. July performance was equally strong.

Q:What is Robinhood's approach to crypto monetization and smart exchange routing?

A:Robinhood offers two ways to engage with crypto trading: market maker method with an 85 bps rebate and direct exchange trading with volume-based discounts. The blended rate in Q2 was 58 bps, increasing to mid-60s in July.

Q:How is Robinhood's credit card offering performing?

A:Robinhood has tripled the number of cardholders year-to-date, with balances growing at a slower pace due to a lag effect. The economics and performance of the credit card book are meeting expectations.

Q:What are the advantages of Robinhood Chain for real-world assets?

A:Robinhood Chain benefits from a large user base and assets under custody, making it attractive for developers and users. It focuses on tokenizing real-world assets, a unique opportunity not widely addressed by competitors.

Q:What is the progress of Robinhood's businesses generating $100 million annually?

A:Robinhood has nine businesses generating over $100 million annually, with several others approaching that threshold, including TradePMR, Bitstamp, and prediction markets.

Q:How is Robinhood ensuring competitive execution costs for tokenized equities?

A:Robinhood offers competitive pricing for tokenized equities, with a 10 bps foreign transaction fee as the only cost. They aim to pass back full value to customers and maintain tight spreads.

Q:What is the adoption rate and growth potential for Robinhood Gold subscribers?

A:Robinhood Gold has a 13% adoption rate, with 35% of new customers in Q2 joining. The company aims to make Gold an obvious choice for all customers by broadening its value proposition with products like Banking and the Gold Card.

Q:How is Robinhood building its active trader base?

A:Robinhood tracks progress through market share and Net Promoter Score, both of which are growing. They are launching new products like Legend and prediction markets to attract active traders.

Q:What is the uptake of Robinhood's prediction markets and Legend?

A:Prediction markets have seen 2 billion contracts traded cumulatively, with sports being a significant category. Legend is growing nicely, with volumes increasing in the overnight session.

Q:How is Robinhood managing expenses while driving growth?

A:Robinhood focuses on process improvement and technology to keep costs low in existing businesses, freeing up resources for growth initiatives like marketing and new product development.

Q:Review of Unclear Management Responses

A:Management avoided directly answering questions about the timeline for regulatory approval of equity tokenization in the U.S., providing only general comments about ongoing work with regulators and potential opportunities.

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Earnings Word Cloud

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