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Robinhood’s monthly active users, EBITDA readings ’look very strong: Analyst

Mizuho Senior Financial Technology Analyst Dan Dolev joins Yahoo Finance Live to break down Robinhood's earnings.

Video Transcript


DAVID BRIGGS: All right, an earnings frenzy continues, shares of Robinhood trading up more than 3% after reporting Q4 earnings. Let's break down the numbers with Dan Dolev, Mizuho Americas Senior Financial Technology Analyst. Nice to see you, sir. So what stands out? What do investors like about this report?

DAN DOLEV: Yeah, hey. Thanks for having me on the show again. I think if I look at the results right now, the one thing that stands out is the MAUs, the Monthly Average-- Average Users. They're still coming down, but the rate of decline is actually getting less bad, which is a huge positive, in my view.

Obviously, there are also the RPU, the average Revenue Per User, is climbing. I think it went from 63 to 66. And sort of the highlight or the creme de la creme of the reporting is EBITDA. They're moving from $47 million of adjusted EBITDA positive to $82 million. So that's a huge step up in EBITDA.

So kind of like if you kick the tires on this one, you're getting, like, solid revenue, higher interest income, not as much decline in RPU or an improvement in the decline in-- sorry-- in MAUs, better RPU, and much better EBITDA. So the cost controls are working. So I think across the board, it looks really strong.

PRAS SUBRAMANIAN: Hey, Dan. We tease this coming up with a-- saying this is a transformative-- transformative year for Robinhood. Why do you think that's the case?

DAN DOLEV: Yeah, I think they've sort of matured, right? I think that the-- you started out-- when you started out-- or when people started looking at Robinhood last in 2021, it felt like this sort of meme stock, you know, crypto kamikaze kind of stock, right? And I think, really, management has stepped up. I met with Vlad recently.

And I think that they really understood, hey, we need to be adults about this. We need to turn this into a viable long-term winning exchange that caters to younger people. And I think they've accomplished that, right? And I think the next step is going to be even more interesting, which is they're offering retirement products, and they're actually targeting international markets. So I think sort of the next two years of Robinhood are going to be more exciting than the last two years.

DAVID BRIGGS: What is the hangover from the FTX mess and where crypto is today?

DAN DOLEV: It's-- the hangover is more on the sentiment. I mean, I'm not as big of an expert on, like, the government has the-- has the funds in custody, the stake, you know, Sam's stake in it. Let's leave that aside. From a fundamental perspective, I think right now that the hangover is more just about general crypto sentiment.

If I look across the board in all the companies that we cover, right, in terms of the exposure to crypto, Robinhood is actually surprisingly not as-- it has this, like, cachet of being this meme sort of crypto center, but it's really not, right? They make the vast majority of their revenues on equities, options, and interest income. Crypto is just a small portion. So I don't think it's as impacted. If you're looking to short a crypto exchange, Robinhood is not your name. It's Coinbase, et cetera, et cetera.

PRAS SUBRAMANIAN: Hey, Dan, just switching gears to Affirm stock, shares have moved lower here after announcing earnings. They're announcing some layoffs as well. What's your kind of main takeaways here with Affirm?

DAN DOLEV: Yeah, I know. Now I'm turning from, like, laughing to I want to cry. So the mood-- my mood just changed dramatically now, so I'm going to put on a sad face. But look, this was very disappointing. I think the most disappointing thing to me personally on Affirm-- and I'm a big bull on Affirm, and I do-- I do believe in a long-term story-- is that you knew that provision-- so let me just explain this.

Sort of the provision, which is a headwind to revenue, is going up, right? You knew that. It went from 1.5% to 1.9%. That was a known thing. We did the deep dive on it, and that drags down your take rate, right? And because it takes down your take rate, you knew this was coming.

What we didn't see was coming is that they actually missed their volumes-- they missed the low end of the volume. And that's kind of like an ouch, right? Like, you don't want to see that. Like, I can live with take rate pressure because of an accounting procedure or measurement. It's harder to digest a GMV miss, a volume miss. So I think that's kind of what stands out on Affirm.

By the way, I want to say one good thing. I know this stock is-- the stock is tanking, and I do expect the stock to come down tomorrow, but I want to say one good thing. Delinquencies, which has been a huge issue, they're actually coming down. Like, if you look at the 30-day delinquencies, they're coming down literally across the board.

So they can underwrite really, really well. Maybe that's also related to the volume miss because they're closing the funnel. They're not giving as many people loans. This could be the explanation. So they're balancing volume versus delinquencies very well. But it doesn't look good at the bottom line, and that's why the stock is trading down.

DAVID BRIGGS: And these aren't just layoffs. These are nearly 20%. This is a massive headcount cut. Is this a buy now, pay later industry problem and/Apple getting into that sector? Or is it more of an Affirm problem?

DAN DOLEV: No, it's an industry problem. Actually, that's a great point you're making. So we published a note this morning on PayPal, actually. We did-- we looked at a-- we looked at the 20 biggest merchant partners to PayPal, and we looked at checkout trends. And sort of the byproduct, the exhaust of this, was we actually also looked at some buy now, pay later, you know, like, Affirm, Afterpay, Klarna.

And what you're seeing is that January and December, you're seeing a consistent slowdown in traffic to those websites. It's almost like you could have predicted the GMV miss here. I think it's a macro/e-comm issue more than it is an Affirm-specific issue. Affirm is best-in-class. As George Bush used to say, make no mistake-- it's best-in-class, but it's suffering headwind from a bad macro and bad, I guess, sentiment around lending.

DAVID BRIGGS: Man, when you are best-in-class and you are down 17%, that is not a class you want to be in. Dan Dolev, thank you, my friend. Appreciate it.