10-Q

Weekly 10-Q: Did Robinhood deliver a “confetti-worthy” financial performance?

  • We take a look at how Robinhood and SoFi's performances in Q3 impact their stocks.
  • Also, Coinbase sides with Ripple in Ripple v. SEC lawsuit.
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Weekly 10-Q: Did Robinhood deliver a “confetti-worthy” financial performance?

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Last week we covered: Visa vs Mastercard — who did better this quarter?


Did Robinhood deliver a “confetti-worthy” financial performance? And, SoFi posted its Q3 earnings — what does it mean for the stock?

ROBINHOOD

Robinhood reported third-quarter earnings which ended September 30, 2022, last Wednesday:

Source: Nasdaq
  • Total net revenues increased 14% sequentially to $361 million
  • Transaction-based revenues increased 3% sequentially to $208 million
  • Options increased 10% sequentially to $124 million
  • Cryptocurrencies decreased 12% sequentially to $51 million
  • Equities increased 7% sequentially to $31 million
  • Net interest revenue increased 73% sequentially to $128 million
  • Adjusted EBITDA (non-GAAP) was positive $47 million, a sequential improvement of $127 million
  • The firm lost 1.8 million monthly active users for the period, a quarterly decrease of 12.8% to 12.2 million
  • Net loss was $175 million, or $0.20 per share, compared with net loss of $295 million, or $0.34 per share in the second quarter of 2022, a sequential improvement of $120 million or $0.14 per share
  • Operating expenses decreased 12% sequentially to $535 million

The company beat revenue and earnings estimates due to higher interest earned from rising rates — however, the plunge in crypto trading volumes globally during the quarter negatively impacted the firm. Additionally, the platform failed to sustain monthly active users at consensus expectations, reaching the lowest level since it was listed as a publicly held company.

Robinhood shares which have sold off more than 33% year-to-date were hiked 4% in after-hours trading at $11.75.

SOFI

SoFi Technologies reported Q3 financial results last week:

Source: SoFi
  • GAAP Net Revenue of $424 million up 56% from Q3 2021 — Technology Platform net revenue of $84.8 million increased 69% Y/Y, including Galileo revenue, which rose 29% Y/Y. Financial services net revenue of $49 million jumped more than threefold. 
  • $419 million Adjusted Net Revenue up 51% year-over-year
  • Adjusted EBITDA of $44 million up 332% year-over-year and up 118% sequentially
  • Net Loss of $74 million from $30 million same quarter last year
  • New Member Adds of nearly 424,000; Quarter-End Total Members up 61% year-over-year to over 4.7 million
  • New Product Adds of over 635,000; Quarter-End Total Products up 69% year-over-year to nearly 7.2 million

SoFi Technologies is seeing steady growth across its three business divisions — Lending, Technology Platforms (Galileo and Technisys), and Financial Services, which contributed to its strong quarterly performance despite a plunge in demand for its primary business of student loan refinancing. The company is leveraging its banking charter that was completed earlier this year to unlock new avenues amid the current macro environment, as the firm continues investing in new products, retaining and growing its high-income borrower base.

“The highlight of the 3Q reporting was the superb adj. EBITDA figure, which jumped by 2x vs. 2Q to $44mn and nearly 4x Y/Y. This, coupled with an upbeat guide, implies yet another ~$45mn of adj. EBITDA in 4Q at the mid-point should be very well-received by investors,” said analysts at Mizuho Group.

Source: Mizuho Group

“Another solid positive from SOFI results was the Galileo account adds, which remained healthy at 36mn Y/Y to 124.3mn. On a Q/Q basis, Galileo account adds also remained stable at +7mn Q/Q, in line with the 2Q vs. 1Q trend,” they added.


Top stories of the week

AMAZON
Amazon takes another step into the fintech realm — rolls out cash advance program for merchants

Amazon is now offering an option aimed at SMBs that makes capital available without the fixed monthly repayment options. The cash advance ties repayment to a percentage of the Amazon seller’s Gross Merchandise Sales (GMS). The service offers approved merchants capital ranging from $500 to $10 million within a few days and does not restrict borrowers to a fixed term, ask for credit checks, or charge late fees. The program is administered by Parafin, a provider of growth capital for sellers. The program launched on last Wednesday for select U.S. businesses and will be available more widely by early 2023. (Finovate)

AMEX
Amex adds pay ranges to all US jobs

American Express will start posting salary ranges on all U.S. job listings, joining firms such as Citigroup in efforts to improve pay transparency and pay equity. The company put forth the change a day before New York City’s pay transparency law took effect. The move comes as the legislatures in California, Washington, and New York have passed new rules that would require the inclusion of a reasonable pay range with help-wanted ads in those states. (Bloomberg)

COINBASE
Coinbase sides with Ripple in Ripple v. SEC lawsuit

Coinbase has become the latest organization among others to stand behind Ripple Labs in its legal battle against the SEC. The SEC sued Ripple at the end of 2020 on allegations that it sold XRP as an unregistered security. Coinbase has petitioned a federal court for permission to file a friend-of-the-court (amicus) brief in the ongoing lawsuit between the two parties – urging that authorities can’t condemn conduct as a violation of law without providing fair notice that the conduct is illegal. (CoinDesk)

UPSTART
Upstart slashes 7% of its workforce

Upstart, the AI lending platform, has laid off 7% of its total workforce (around 140 employees) from its loan applications processing department — as it faces eroding demand for loans in the US due to significant hikes in interest rates and ongoing economic challenges. The company’s share price dropped by 84% this year. (TechCrunch)

WELLS FARGO
Wells Fargo is in talks with the CFPB to resolve investigations

Wells Fargo revealed it is in talks with the CFPB to resolve inquiries and investigations involving automobile lending, consumer-deposit accounts, and mortgage lending. The bank had set aside $2 billion last quarter to deal with legal matters; however, they are unsure of the end result of these discussions. (Bloomberg)

After DOJ, SEC is examining Wells Fargo’s hiring practices
After the Department of Justice had opened a probe, the SEC has now opened an investigation regarding Wells Fargo’s hiring practices related to diversity. The news first came in June this year after a New York Times investigation found its diversity hiring policy had led some employees to conduct sham interviews for jobs that had already been filled. (Reuters)


Tweet of the week

Source: paulgrewal.eth

Chart of the week

How bad is it for the public financial market?

Source: dealroom

What’s trending

  • Are the SEC rules getting unreal? (WSJ)
  • Square, Clearpay, and the British Fashion Council partner to provide emerging designers with online storefronts (Finextra)
  • Upstart, Blend Labs, LendingTree slide after Fed rate hike hits lending stocks (Seeking Alpha)

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