eToro revenue down 40pct QoQ, posts a net loss of $100 million
Israeli social trading network eToro today announced its third quarter results, which showed a strong performance in terms of revenue growth. However, the multi-asset brokerage company posted worse-than-expected Q3 net income triggered by a 94 percent year-over-year increase in its operational expenses.
According to the investor update published by eToro, the company was able to amass a total trading commission of $222 million, which is up 66 percent from the third quarter of 2020. However, the figure was 38 percent lower compared to $362 million in the second quarter.
As per the report, total operating expenses – excluding stock-based compensation and merger-related expenses – came in at $203 million. That nearly doubled from a year earlier due to higher marketing expenses and investments to scale the company’s “fast-growing business.”
Despite the bullish performance, the company’s adjusted EBITDA for the Q3 2021 was -$25 million, largely driven by “significant investments in growth initiatives,” including marketing, it said.
Summing up, eToro reported a net loss of $98 million, primarily due to a non-cash charge of $60 million in stock-based compensation for its employees and $11 million of transaction costs related to the business combination with FTCV. Going public through a blank-cheque company was originally scheduled for a Q3 closing at a massive $10.4 billion valuation. However, meeting investors to pitch a direct listing may have hit a bump as the SPAC boom might be fading away.
According to the letter from the CEO, Yoni Assia, “As we approach the close of 2021, there is a growing number of retail investors around the world actively engaging with capital and crypto markets. Our users are investing in the companies they believe in and those they engage with. With market prices reaching all time highs, we are seeing more widespread adoption of eToro’s platform and we expect retail participation to continue to grow as more people appreciate the benefits of taking control of their finances.”
eToro has been among the biggest beneficiaries of the retail investing COVID-19 boom. While eToro’s social investing product did most of the success since its inception 15 years ago, cryptocurrency trading on the platform took off. Trading commissions generated from digital asset trading accounted for nearly two thirds of the total commissions eToro earned in 2021.
But in the third quarter, crypto trading activity declined from record highs earlier in the year, leading to considerably fewer new funded accounts.
eToro added 1.6 million new clients in the second quarter, an 8 percent increase from the same period last year, but down from Q2’s 2.6 million new registered users. It had 24.8 million total users and 2.14 million funded accounts as of September 30, 2021. Assets under administration (AUA) now stands at $10.6 billion, up 13 percent compared with Q2’s $9.4 billion.