An initial analysis of Robinhood’s Q1 2021 payment for order flow (PFOF) revenues sourced from company filings shows that the free-trading unicorn had a strong start to the year. Given the raucous trading activity of the first quarter, that news is not a surprise.
The aggregate revenue data helps explain how Robinhood was able to raise as much capital as it did in the first quarter despite running into issues with its technology and the United States government; the company found itself at the center of the GameStop speculative rush, which likely led to strong trading volumes, along with what The Exchange presumes was an unwelcome level of attention from regulators.
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This morning, we’re sticking close to the company’s financial results using the lens of PFOF income, which the company said during a congressional hearing constitutes the majority of its revenues.
This particular revenue growth — or the lack thereof — is a good way to understand not only Robinhood’s own results but also its larger market. If Robinhood is seeing rapid growth and strong trading volumes, we can infer with some confidence that others in its space are enjoying a related, if not similar, level of interest.
For Public.com, eToro and others like Freetrade (as well as our own understanding), how Robinhood performed recently is key. So, let’s explore the data.
An epic Q1
Per an initial TechCrunch analysis of Robinhood’s collected PFOF disclosure data for the first quarter, including its revenues from fees related to the trading of stocks that are part of the S&P 500, stocks that are not, and options incomes, here’s how the company performed:
- January aggregate PFOF revenue: $113.4 million.
- February aggregate PFOF revenue: $120.8 million.
- March aggregate PFOF revenue: $96.7 million.
Those figures sum to a Q1 2021 result worth $330.8 million. That figure compares very favorably with the company’s Q4 2020 PFOF result of $221.4 million, giving Robinhood a roughly 50% sequential-quarterly revenue growth result.
Considering only quarterly numbers, leaning on TechCrunch’s historical database and previous coverage of Robinhood 606 PFOF data, here’s what we have going back in time as far as our records allow:
- Q1 2020: $90.9 million.
- Q2 2020: $177.9 million.
- Q3 2020: $182.8 million.
- Q4 2020: $221.4 million.
- Q1 2021: $330.8 million.
On a year-over-year basis, Robinhood’s PFOF revenues grew around 267%. That explains how the company was able to raise billions in the first quarter despite incoming fire from both users and the government relating to trading-platform issues, among other concerns.
Put in less prosaic terms, each month in Robinhood’s Q1 2021 produced more PFOF revenues than its entire year-ago quarter in aggregate.
Notably, the company’s dependence on somewhat controversial options PFOF revenue dipped in the quarter. While options-derived PFOF revenue rose at the company from Q4 2020 to Q1 2021 — from $141.3 million to $197.7 million — it fell as a percentage of its total PFOF income, from around 64% in the fourth quarter of last year to around 60% in the first quarter of this year. The Exchange speculates that that could be due to active trading in GameStop and other so-called meme-stocks driving up lucrative PFOF incomes among non-S&P 500 stocks.
So what?
That Robinhood had a good first quarter is not a surprise, given what appeared to be a highly active quarter among retail investors and traders, Robinhood’s core demographic. The scale of its results, however, does help explain why the company is going public now; with growth like this, it has a very simple story to convey during its IPO process.
Coinbase, another consumer securities trading platform, albeit with a cryptocurrency focus, also had a stellar first quarter. However, shares of Coinbase have slipped since its direct listing, cutting its value from a post-debut high of $429.54 to $229.75 this morning. Coinbase also reported a strong first quarter once public.
How investors will receive Robinhood in the wake of the Coinbase direct listing is going to be a key startup story in the coming weeks as the consumer fintech unicorn moves toward becoming a company that its own users can trade.
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