Robinhood earnings miss Street expectations, shares slide

(Reuters) - Robinhood (NASDAQ:HOOD )'s third-quarter earnings missed Wall Street expectations on Wednesday, sending the brokerage's shares down 10% after the bell.

Chief Financial Officer Jason Warnick said on a media call that the difference between Street expectations and Robinhood's earnings were due to analyst models not factoring in "contra revenue" on the brokerage's match promotions.

Robinhood gives incentives to customers to bring in their assets from other brokerages, giving either a 1% or a 3% match, Warnick said.

The company's net revenue was reduced by $27 million in the third quarter due to matches paid to customers on transfers and deposits.

"That (contra revenue) was up $14 million sequentially and just was not baked into the analyst models," Warnick said.

"The match promotion dollars are recorded as an offset to revenue, and it looks like analysts just were not factoring that in enough for the quarter."

Meanwhile, the online commission-free brokerage saw a surge in trading volumes as heightened market activity and volatility sent mom-and-pop investors into the retail trading platform.

Its equity trading volumes surged 51% in July and 61% in August, compared with a year earlier.

The crypto markets have got a shot in the arm this year after the U.S. securities regulator approved exchange-traded funds to track spot prices of bitcoin and ether, boosting sentiment towards the industry.

That led to Robinhood's crypto trading volumes soaring 56% in July and 145% in August from a year earlier.

Robinhood's transaction-based revenue surged 72% to $319 million in the quarter.



The company's profit was $150 million, or 17 cents per share, in the three months ended Sept. 30, missing analysts' expectation of 18 cents per share, according to estimates compiled by LSEG.

Robinhood's net revenue jumped 36% to $637 million in the quarter, but missed expectations of $657.9 million.

Source: Investing.com