Playtech plc (PTEC) Earnings Call Transcript & Summary

Thank you. Welcome to Playtech's 2020 Interim Results Presentation. We've got our CEO, Mor Weizer; and our CFO, Andrew Smith. [Operator Instructions] With that, I will hand over to our CEO, Mor Weizer.

Good morning, everyone, and thank you for joining today as we review Playtech's H1 2020 performance. Starting on Slide 3. The first half of 2020 has inevitably been defined by the global pandemic and their results demonstrate the dedication and professionalism of our people during this period. My first and foremost priority throughout this time has been the safety of our people and the protection of their livelihoods. We enacted our business continuity plan in the early days of the pandemic. Actions taken included reduced traveling, self-quarantine, employees traveling between countries for 14 days and moving all our offices to remote working. Throughout Playtech, directions of our people have continued to inspire the management team and me. We did everything we could to provide a [indiscernible] platform for our employees during COVID-19. However, the levels of compassion and commitment our people demonstrated to each others and their local communities has been incredible. In various locations, Playtech has donated [ PTE ] made financial contributions to charities, provided food and equipment to those in need and offers IT equipment and technology infrastructure to local businesses to allow them to continue to operate. Overall, the response from our people has been phenomenal, and I'm prouder than ever to be CEO of this company. Our technology and digital expertise, [indiscernible] from a business perspective, the shift to remote working was seamless. Playtech is a global company. And as such, our people and teams were already familiar with working remotely in different locations in an efficient manner, ensuring the level of control and efficiency remains. I'm pleased to say that we monitor performance and delivery schedules during the period, as we always do, and that productivity was maintained throughout. For example, when developing casino games, we continuously monitor the ROI of the games developed and throughout the entirety of H1, there was no drop in performance compared to any other period. The extraordinary trading condition during the pandemic have brought us closer than ever to our licensees, and we have seen even greater demand for our products. Licensees needed as many digital solutions as possible with an increased focus across the globe on intelligent software and personalized player journeys and protection tools, and we delivered more projects than we have ever done before in previous periods. In order to help our licensees meet the increased player protection challenges during the pandemic, we offered our safer gambling tools for free during the crisis. Turning to Slide 4. In the face of this unprecedented trading environment, I'm pleased with the results the group produced in H1. Playtech was one of the first companies to see a significant impact from the pandemic, as 2 of our largest markets were among the first to experience disruption, and the H1 results demonstrate the dedication and professionalism of our people in the face of the pandemic. The effectiveness and efficiency of our business continuity plans, the flexibility and scale of our technology and the continued demand for our software. As though we remain hopeful of continued recovery in all our key markets, the effectiveness of COVID-19 response in H1 gives us confidence we are prepared to weather the effects of any second wave as robustly as we did in the first half. Andy will discuss the figures in detail in a few minutes. But overall, we had a resilient financial performance in H1 with strong operational execution when taking into consideration, the lockdowns in different countries, which closed retail locations and canceled sporting events. Early actions to protect cash flow means we are in a position to continue to invest in opportunities, such as the U.S. The scale of our technology and breadth of our product offering has continued to deliver strategic progress in key markets and I'm delighted that we received our transactional waiver in New Jersey in H1 and have since launch with bet365, and we launched imminently with GVC. We have started the licensing process in further states, and we will increase our investments into the U.S. market to capture the exciting opportunity. Structured agreements are a key strategic focus for Playtech as evidenced by Caliente now being a top 3 customer, and I'm pleased to say that we have signed 2 new structured agreements in Guatemala and Costa Rica. And we are progressing with Wplay in Colombia. We also launched our new sustainable business strategy in H1, and we will focus on solidifying our position as the leader in safer gambling technology. And finally, we have continued to progress the simplification of Playtech in order to unlock the value in the Core B2B and B2C parts of our business. We have sold certain casual gaming assets and are in early-stage discussions with a number of parties regarding the potential sale of TradeTech. Turning to Slide 5. I'm delighted to say that despite the impact of the pandemic, due to the strength of our technologies and the amazing dedication of our people that we have already delivered our 2020 strategic priorities. We have made significant progress in the U.S. in H1 as we entered the New Jersey market, launched with Bet365 and started the licensing process in further states. We also made progress establishing the light casino facility in New Jersey and started the plans for the states we intend to penetrate in the coming quarters. As I mentioned earlier, we have signed 2 new structured agreements in Guatemala and Costa Rica. Following the launch of our SaaS model in 2019, we have seen incredible demand for the products and have already surpassed our full year target and added over 50 new brands in 2020. We continue to expect our SaaS offering to provide a material new revenue stream for the group in the coming years, all it revenues will grow gradually over time. Despite the challenges presented by the pandemic, Playtech once again demonstrated its leadership in Italy, delivering a resilient performance and continue to take market share in H1, showing the strength of its brand and offerings. We continue to demonstrate leadership in safer gambling initiatives by launching Playtech Protect and are leading the industry on safer game design. And finally, we have continued to focus on our core corporate [ sense ] of gambling technology and have sold the loss-making assets of our casual gaming business and has recently announced are in discussions related to Playtech. We have also reorganized internally and moved Happybet under the Snaitech management team. I'll now hand over to Andy to take you through the financials of the business in H1.

Thank you, Mor. I'll start with Slide 7, financial highlights. Overall, we had a resilient performance in H1 despite the challenges that came with the COVID-19 pandemic. As we said at our full year results, our business began to be impacted towards the end of February as COVID-19 spread globally. In Q2, the company proved resilient. So Mor, could you put it on mute, there's a bit of background noise. In Q2, the company proved resilient and strong results from Playtech and online somewhat mitigated the impacts of retail closures and the cancellation of sporting events. Playtech acted quickly as the spread of the virus became apparent by thoroughly evaluating all means of preserving cash. Due to the strength of our operational performance and actions taken, our balance sheet remains very strong. We were cash flow positive in H1 despite the charges faced in the period, and our net debt-to-EBITDA ratio actually improved. As a precautionary measure, we drew down a majority of our revolving credit facility in the period and renegotiated our near-term covenants. Turning to Slide 8. Mor discussed earlier, some of the actions the company has taken in response to the pandemic, so I will focus on the cash preservation measures. In March, we decided to spend a share buyback program that we have commenced and a dividend that was declared as our full year results. Again, these actions preserved EUR 65 million of cash flows. The Board considered whether to make shareholder returns as part of the interim results process, and it was agreed that it would not be appropriate to do so at this time, given the uncertain economic backdrop. We also made this vertical decision to implement [ some ] reductions for almost all of our employees, including 20% Boards -- executive members of our Board and executive management. We deferred or canceled much of our planned capital expenditure and have been strict in managing our working capital. We've reduced our office and maintenance costs and renegotiated timing of our major earn-out payments in 2020. Turning now to Slide 9 we will look at the EBITDA performance by month during the period. As you can see, the group had a fantastic start of the year with very strong results in January and February. Delivering adjusted EBITDA of over EUR 80 million for the group of 12% compared to the prior year, driven by strong performances from Snaitech, Live, Sports and TradeTech. As the pandemic began to impact post the group in late February and into March, the contribution from our gambling business has declined, while TradeTech had very strong results, particularly in March and April. TradeTech's results normalized in May and June, while the most effective parts of our gambling business began to recover in June. Group EBITDA in July was strong, driven by pent-up demand a high concentration of football matches and a very strong performance from TradeTech. August was lower than July with [ caution ] in retail and a more modest outturn from TradeTech. Turning now to Slide 10. Over the coming slides, we'll look at H1 as a whole. Group revenue was down 23% due to the impact of [indiscernible] restrictions and the cancellation of sports events. Adjusted EBITDA was down with 16% as strength in TradeTech, our online businesses and the actions taken in response to pandemic limited the impact. Net profit fell by [ 49% ] driven by the decline in EBITDA as well as higher finance costs for the full year -- full period impact of the EUR 350 million bond we raised in March 2019 and the fees related to the drawdown of the RCF. Turning now to Slide 11. We will explore the performance of B2B gambling in more detail. In the U.K., the B2B gambling business fell 30%, driven by the drop in Sports revenues and retail closures. The regulated markets outside of the U.K. grew by 11% at constant currency in the period despite our sports business being impacted [indiscernible] retail closures, particularly in Greece as well as the lack of sporting events. The continued strong performance in other regulated markets outside of the U.K. means that this part of the business was a larger contributor in our U.K. B2B business for the first time. The strength of business in these markets can be seen looking at the performance of online excluding Sports in the period, we saw revenues grow 60%. We have continued to grow in unregulated markets outside of Asia as revenue grew 32% in the period, with Germany being the main contributor. Turning to Slide 12. The B2C segment is comprised of Snaitech white label, which includes Sun Bingo and retail B2C Sports. We will look at Snaitech in detail in the coming slides. Looking here the white label line, the sum [indiscernible] represents the majority of both revenue and EBITDA and saw strong growth in the period. The remainder of the white label line comprises a number of other brands, which have been significantly reduced as part of a housekeeping exercise where certain brands have been consolidated or ceased operating. Retail Sport B2C saw adjusted EBITDA down losing EUR 4.2 million in the period compared to a loss of EUR 3.6 million in the same period 2019. This business is retail-focused and was impacted in the period by retail closed in Germany and Austria as well as the cancellation of sporting events. The business remains at an early stage, and we believe the assets remain highly attractive. As Mor mentioned earlier, this business is going to be managed by the Snaitech management team going forward. Turning now to Slide 13. We will look at the performance of total Snaitech revenue decreased by 46% as a strong growth of 37% in online was not enough to offset the impact of retail closures and the cancellation of sporting events. Adjusted EBITDA was EUR 47 million, down 37% versus same period 2019. The impact to EBITDA of the drop in revenue was limited as Snaitech's franchise business model means that most of its costs are variable in nature with a low fixed cost base. Due to the variable cost nature of the business, mitigated actions taken and strength in online, Snaitech was able to remain broadly breakeven on an EBITDA basis throughout April and May, the months impacted by the retail closures and cancellation of sporting events. Turning to Slide 14. Following the challenging 2019, Playtech had an exceptional H1 as it benefited from prevailing market conditions that led to higher volatility and high trading volumes throughout much of H1. This led to net revenue growing 118%, with adjusted EBITDA of EUR 58 million. Market conditions began to normalize towards the end of H1, and this has continued into H2. As a result, we do not expect the H2 performance to match H1. We have taken steps towards more efficient balance sheet for Playtech and released EUR 10 billion of capital that was previously tied to the business with more to follow by the end of the year. Mor will discuss our [indiscernible] business going forward later in the presentation. Turning now to Slide 15, we will look at our balance sheet. As mentioned earlier, in the period, we drew down the majority of our revolving credit facility and renegotiated our covenants for the [indiscernible] of December 2020 and 30th of June 2021, purely as a precloser measure. As announced in March, we suspended shareholder distributions in order to preserve cash flows, and we preserve EUR 65 million. We continue to review potential shareholder distributions, taking into account the performance of the business, upcoming cash flows as well as overall economic trends including the impacts of the pandemic. Given the resilience of the business and the cash preservation measures taken in the period, our net debt-to-EBITDA ratio improved in the period to 1.5x compared to 1.6x at the end of 2019. Playtech has no evident refinancing requirements with our bonds maturing in October 23 and March 26. Turning now to Slide 16. As we've previously stated, the gross cash number isn't a relevant number as it includes cash held on behalf of customers and progressive [ jack pots ]. Money which does not belong to Playtech, and it's not ours to spend. The relevant starting point, therefore, is what we disclose as adjusted gross cash. This now stands at EUR 657 million, which can be found in the third row of the table. Excluding the drawdown RCF, this figure would be EUR 349 million compared to EUR 270 million at the end. As mentioned earlier, TradeTech released EUR 10 million of capital that was previously tied in the business with more to follow. Finally, on Slide 17, we look at the outlook for the remainder 2020. We would expect the online [indiscernible] team to perform strongly, but we are cautious about the outlook for retail. TradeTech was a standup performer the first half, but this performance is not expected to be repeated in H2, with market volatility currently significantly lower than that seen in the first half. Overall, although the business is performing well, we remain cautious with our outlook for the full year given the economic backdrop. Our balance sheet remains strong, allowing for selected high-return investments such as in the U.S., and we are well equipped to emerge strongly from the COVID-19 period. I'll now hand back to more to update you on our strategic priority.

Thank you, Andy. Turning to Slide 19. Our strategic focus over the last 20 years on developing industry-leading, digital-first product intelligent data-driven services and channel-agnostic technology has placed us in an exceptionally strong position to benefit from the impact COVID-19 is having on the industry. It is clear that COVID-19 has accelerated the shift to online, while also increasing the demand of digital functionality. This is having a twofold impact. Not only is there increased demand for our digital products that can function at scale. Moreover, the growth in digital demand requires intelligent data-led software and player monitoring tools. We will be accelerating many of our existing plans in order to capture the opportunities that have been created. As Andy discussed, our balance sheet is strong and gives us the financial strength to execute on these opportunities. As well as the revenue opportunities created, we have identified opportunities to rationalize costs and refocus the business. For example, we plan to reduce office costs significantly going forward as our long-term back-to-office format will be materially different to pre-COVID. We believe we can reduce our office infrastructure globally, saving material costs while also providing employees with a better work-life balance. Now turning to Slide 20. Over the next few slides, I will discuss the exciting opportunities for Playtech in both the U.S. and Latin America. Our approaches to these markets are very different, but our technology flexibility and scale means we can operate business models that capture the opportunities presented in these markets. Looking at the U.S. first, the market presents a huge opportunity in the coming years. Market sizing estimates indicate that by 2023 can be a $24.4 billion GGR market. This is driven by sports betting with over 20 states now either already offering sports betting or having fast legislation to allow it in the near future. iGaming, while currently allowed in 5 U.S. states, is gaining momentum with additional states looking at regulating. It is no longer whether it will happen, but when exactly it will. Turning to Slide 21. Playtech has an unrivalled technology and product offering when looking at capturing the opportunities in the U.S. market. We have a comprehensive sports product covering online and retail, which is considered best-of-breed. We have the world's best online casino slot games and a leading live casino product. And most importantly, our proprietary IMS platform means Playtech is the only provider in the market that has a true omnichannel solution covering online and retail sports, online slots and live casino, all integrated into the world's leading gambling technology platform. Now looking at Slide 22, I will discuss our approach to the U.S. market. As I've stated previously, we are taking a state-by-state approach to the U.S. market. We have received our transactional waiver in New Jersey and have started the licensing process in further states. We are building our U.S. presence based on the current opportunities we see and where there is most demand. We have a strong pipeline of interest for our products in multiple states, including IMS, casino, Live Casino and our entire Sports offering. We expect to be a significant strategic momentum in our U.S. business in the remainder of 2020 and beyond. We will focus on traditional B2B deals in the U.S., similar to how we built our leading presence in the U.K. over a decade ago. We will also look to do select structured agreements in the U.S., as we can equip operators with more than just breed -- as best-of-breed software, providing marketing and operational expertise. Looking ahead, I'm very, very excited about the U.S. market and Playtech's ability to capture the opportunity. Turning to Slide 23. I will discuss our continued progress in Latin America. Different to the U.S., our focus in Latin America is currently predominantly driven by structured agreements where we can add our operating and marketing expertise, along with our leading technology. Caliente continues to grow and as I mentioned, is now a top 3 licensee for the group. Following the new structured agreement signed with Wplay in 2019, the rollout is progressing as planned with the first milestone being achieved. Building on our successful relationship with Caliente, we have signed new in structured agreements with Tenlot in Guatemala and with the Red Cross in Costa Rica. The deals bring exclusivity in the respective markets, as we will be operating under the only license in each. We continue to have a strong pipeline of opportunities in the region, including in Panama, Peru, Argentina and Brazil. We believe with our existing agreements and the pipeline of opportunities that we have EUR 100 million medium-term revenue opportunity in the region, which is approximately double the current level. Turning to Slide 24. I will update you on the performance of Snaitech in H1. As Andy discussed a few minutes ago, the Snaitech business was severely impacted in the period by retail closures and the cancellation of sporting events. As the lookdown was implemented in Italy, we took decisive actions to focus on the online part of the business in order to capitalize on the strength of the Snaitech brand and reposition the business in order to cement its online presence and leadership. These actions helped Snaitech delivered 41% growth in online stakes, which help drive 75% growth in online EBITDA in H1. The strong online performance drove Snaitech to #1 market share in Italy in H1 across total online and retail betting. As Andy mentioned, the strength in online and the mitigating actions taken by Fabio and the team meant that Snaitech remained breakeven throughout [ April and May], despite the retail closures and lack of sporting events. Turning to Slide 25. I will look at the future for Snaitech. We are more excited than ever about the opportunity in Italy and the ability of Snaitech and Caliente to capture it. When we acquired the SNAI in 2018, we said one of the main attractions was the size of the Italian market and the underpenetrated online segment. We believe that the impact of the COVID-19 pandemic will accelerate the market shift to online and the SNAI with its brand strength and leading management team, combined with Playtech's technology expertise are ideally placed. Playtech's technology and scale, combined with the quality of the SNAI business and management team within the context of the market dynamics in Italy, including the unpenetrated online market, give us continued confidence that this is -- that this business will provide significant growth for Playtech in the coming years. Turning to Slide 26. I will discuss our business in Asia. Government restrictions put in place in various countries in Asia in response to the pandemic has been negatively impacted our revenues in H1 2020. Alongside the impact this had on players in Asia, some of our licensees experienced disruptions to the business, and some of their employees couldn't travel back to the Philippines and limited Internet infrastructure at home there did not allow them to work remotely. We have also been impacted by restrictions introduced on payment processing. While not targeted exclusively at the online gaming industry, the restrictions have nonetheless impacted our business and others in the industry. Following the end of H1, we changed our operating model in Asia and now have further extended our distribution network in the region going forward. The changes will provide Playtech with increased flexibility in the region including an expansion to our distribution channels. Asia remains important to the group, given its strong cash flow and the changes I mentioned should help stabilize and potentially return the business to growth in the future. Now turning to Slide 27. As the leading technology company in the gambling industry, our licensees look to us to deliver innovation that changes the way players experience gambling entertainment. Key to this approach is sustainable success. Our new ESG strategy launched in H1, which plans to consolidate our position as a global leader in safer products, data analytics and player engagement solutions and build a safe and sustainable gambling industry for the benefit of all stakeholders. As part of this strategy, Playtech will invest EUR 5 million in 5 key areas with charity and social enterprise partners that provide research programs and support to promote healthy online living. Building on work we have done previously, we will contribute expertise, research and financial support in 5 areas, including preventative education and research into digital solutions and tools. Playtech recognizes that we have a duty to extend our expertise, experience and technologies to really build a sustainable sales and entertainment-first industry for the benefit of all stakeholders. Turning to Slide 28, we will look at our ongoing asset review. Andy earlier discussed the exceptional performance of TradeTech so far in 2020. Despite the strong results, this business remains non-core as we continue our focus on our core gambling businesses. We continue to evaluate all options for TradeTech, including the potential sale. As announced in August, we are in discussions with a number of parties. The discussions are at an early stage, and there can be no certainty that any transaction will be forthcoming or whether acceptable terms will be agreed. The next asset I will discuss is Happybet, the little B2C sports betting business in Germany and Austria. This is a gambling business and fits more naturally within Playtech. We continue to believe this is a highly strategic asset given its retail presence and license in Germany as well as the changing dynamics of the German regulatory environment. I can confirm today that the exceptional Snaitech management team had a control of this business and will be running Happybet going forward. The Snaitech management team are amongst the best B2C operators in the world, and I'm excited for the future prospects of Happybet under their leadership. You will recall that our full year 2019 results, we announced that our casual and social gaming business was now a discontinued operation, and we have initiated a sale process for the business. I can confirm today that we recently sold the loss-making assets of this business and that the sale process for the remainder of the business, which is profitable, is ongoing. Now on Slide 29. As I mentioned earlier, we have delivered our strategic objectives for 2020 and we'll continue to focus on execution for the remainder of the year. In the U.S., we will progress license applications in further states, launch with further brands in New Jersey and signed further deals, leveraging our competitive advantage, the breadth of our offering and platform technology delivers in the region. Following the 2 new structured agreements signed this year, our focus will be executing and growing our pipeline of opportunities. Thirdly, following the success of our [ SaaS ] offering since its launch in 2019, we are increasing our 2020 target from 50 to over 75 new brands. We expect Snaitech to continue to leverage its leading brand and retail presence and online strength to maintain its market-leading position. We will continue to execute on our safer gambling objectives as part of our broader sustainable success strategy. And with that, we will finish, and we will take any questions you may have.

Thank you, Mor. Operator, would you be able to remind everyone how to ask a question, please.

[Operator Instructions] I will now hand back to your host.

Thank you. Could you please take the first question from Gavin Kelleher at Goodbody, please.

Just on Asia, can you give any sort of indication on what the monthly revenue run rate is at the moment? And then maybe on the U.S. I detail on the slides on the areas you're going after in the U.S. and the opportunities. Could you just give us any sort of idea on the potential quantum of investments that there will be in that market over the next few years? And then, in terms of the licensing process in the individual states, is there anything we should expect in the near term, I know it's difficult to predict, but any -- should the process speed up from here given that you've already gone through in New Jersey? And maybe those 2 to start, please?

Yes. Thanks, Kevin. Mor, do you want to take the portion on Asia and part of the U.S. and then I think Andy can discuss the U.S. investment aspects.

Yes. So I'll take the first question. Gav, I hope you are safe and well. With regards to Asia, obviously, the region remains challenging. Firstly, due to the effect of the pandemic and the government subscriptions in various countries. Some of our licensees experience disruptions to the business, some of their employees couldn't simply travel back to the Philippines. I'm not sure how many of you are familiar with the Philippines, but the Internet connection there is very limited outside the offices and the center of Manila. And obviously, disrupted the way they could operate the business remotely. It hits -- the pandemic hit part of Asia first, and there was no warning. So no surprise that it had an impact on the business. Obviously, certain government restrictions on payment processing throughout the retail, not only in China, but in other parts of the Southeast Asia, where governments are now looking to actually deal with the economy following the impact of the pandemic led to the fact that there were some more constraints on the way people can process money. People are requested to produce a lot of documentation. And obviously, it has an impact on the business. As a result, the revenues are slightly down in 2020. We are taking actions, and we have added new -- we changed the way we operate there when -- we have added a new distributor in the region alongside our existing distributor. And this will give us, obviously, more flexibility going forward. Going forward, in terms of numbers, we expect the revenues and EBITDA to pick up slightly when things return to normal after the pandemic. And the impact of the new distributor will also be a positive going forward for us.

Andy you want to -- sorry, go ahead.

Yes, no. So in terms of the Asia run rate, Gav, as for mentioned, we reported -- we changed some of our contracts to give us more flexibility, more control as well as being of both the new distributor. So what that means is that, I think we gave the run rate's nature a couple of months ago was EUR 6 million. On a like-for-like basis, it is a bit lower than that, given the problems the region's faces, as Mor mentioned. But given the revised structure of our business in Asia, the actual run rate is a bit higher than the EUR 6 million, but actually the cost increase as well. So on an EBITDA basis, the increased revenue and increased costs broadly offset one another. So the answer is, is that on an EBITDA basis, it's a little bit lower than it was before. But as Mor said, given the -- we would hope that the region would pick up and given what we've done with the new distributor, we would hope to be able to grow revenues. On the U.S. investment. It's very good to be a customer-led Gav. And with [indiscernible], we're not a B2B brand, or B2B. So it's not as if we have supplied loads of money to the U.S. to build a brand. Clearly, as I said earlier, we do have the firepower. It's a big deal came along at any required investment. It's a kind of structure deal or something that is a big difference with normal B2B deal, we can do that. In terms of the -- this let's call it, the normalized investments, as I said, it's going to be customer-led. We've got some deals in the pipeline that if we sign those will require investments. My best guess at the moment is, provided some of the deals come up, that you're probably looking at a teen number next year, somewhere maybe around EUR 15 million level, it will be broadly split by OpEx and Capex. But look, if the deals don't come off, then they won't be at that level. And if we find more deals, then it drives more investment, then we have the firepower to do that.

So just one other question for me on Happybet. Obviously, Snaitech going into [indiscernible]. What sort of time line for turnaround in that business would you give? Because I presume if the Snaitech guys can't improve it, no one can. Would be the [indiscernible]. So any sort of time line on when Happybet can improve?

I don't think we can give a time line on that. Obviously, we only just started the work. Remember, they couldn't travel. It's a retail business, and they couldn't travel to Germany and Austria. They only just started traveling to Germany and Austria, where they do have some people there, but it is difficult during the pandemic or given the pandemic it was quite difficult to travel there. And that conversations with the franchisees. Remember, this is a very attractive model, very similar to what you find in Italy that proved to be very useful and successful during the pandemic, and it's a CapEx-light -- It's a CapEx-light -- it's a CapEx-light model. It's more like Snaitech than the U.K. market. We only just started executing against the plan. So I think that it's too early to suggest the timeline, but there are obviously a lot of low-hanging fruits there, which should make it breakeven relatively quickly. It may take a little bit of time. It's not a matter of weeks or maybe a few months, it may -- it may take longer. But obviously, we have a lot of -- we do expect this business to be very attractive strategically, given in light of the changes regulator -- the coming regulatory changes in Germany. So obviously, [ fitness ] more naturally to our strategy and our core B2B and B2C gambling businesses. And in light of the size of the market and the limited sizable competitors in the market, we believe that it is an attractive opportunity in the medium, longer term.

Operator, can you please take the next question from James Wheatcroft at Jefferies, please.

Three questions, please. Firstly, more -- if you could tell us and give us a bit of a feel for the type of customer you're finding in the U.S.? Are we talking about existing customers, local customers and the kind of product that they're after? Secondly, could you give a feel for the relative size of the U.S. opportunity compared to Latin America? You've obviously given a feel for structured agreements, but then you could contextualize that for us in the U.S. And then thirdly, just thinking about retail, could you give it a feel for how across various markets where you have reached exposure, what's been happening more recently, please?

Can you repeat the last part of the question, please?

Just on retail, Mor, thinking about that you've got [indiscernible] exposure of various geographies. I'm just wondering how that is trading more retail?

Okay. With regards to the U.S., then obviously, as we indicated, the U.S. is getting a lot of focus now within Playtech. We believe that we have done a very good job in Europe. We are one of the most significant, if not the more significant, supplier in each and every regulated market that is commercially viable across Europe. We have done the same, albeit on a different basis on a structural agreement basis in Latin America. We indicated that we expect this in the Latin America, we expect, will double for us in the next -- in the medium term. And therefore, we have -- we established ourselves. We have established in Europe, and we established ourselves and continue to establish ourselves across Latin America. Obviously, I'm not sure if you are familiar with the fact that we trade more American sports than any individual or operator in the U.S., American sports in Latin America today. So we believe that between the breadth of the offering of Playtech that is consider best-of-breed and our capabilities in sports, as well as other parts of the business, we are well positioned for the U.S. market. In the U.S. market, obviously, each and every state is different, each and every state, the regulation is different. And accordingly, we are looking at opportunities in states that makes most -- that are most attractive for us and makes most commercial sense for us. We are in discussions with a lot of operators in different states, and it will be built over time. And with regards to the opportunity and the size of the opportunity, our aspiration is to become one of the most significant, if not the most significant B2B provider in the U.S. market in each and every regulated state. It's a big operation. We only just started in New Jersey. New Jersey exists for more than 7, 8 years now, actually more close to 10 years since the first bill was introduced. And we believe that it is -- it will be a gradual process. We believe that the opportunity remains -- the window of opportunity remains. We are in discussions, in some cases, we've secured certain relationships, albeit we are now translating those into final -- into long-form documents. We feel very confident that Playtech is as important, as valid and also the natural choice for a lot of operators in the U.S. market in light of the regulatory -- the changing regulatory environment in the U.S. We have also obviously started looking into certain states and structured agreements in the states. We have a very, very flexible model. Remember, we are not an operator. The cost of penetrating a state for us is very, very different than operator. We are not competing with the other operators. It's not a competition for market share. It's only limited cost to establish ourselves with the right partners in each and every state and basically provide them with a software necessary in order to operate successfully in the market. In selected fuel states, obviously, Playtech will extend it to structured agreements and I believe that over time, we will be able to replicate the success we have seen so far in Mexico and the first signs of success in Colombia, and we will replicate that success in the U.S. market. There is no real difference in approach.

Shall I say the answer on sports, especially around retail. I think when I -- we've been quite cautious on the outlook, it's frankly because I think there is a significant danger we've seen already in the U.K. of a second wave and what's that impact has actually as late July and August. If you look at specifically at Sports and retail, it's a bit too early to call it. It's simply because July was very strong, but I'd say that, that was driven by pent-up demand and that had a lot of football matches. August was a bit weaker, if you'd imagine because frankly there was -- the pent-up demand had gotten away, there wasn't many football matches. So I think what we probably need to see is how September and October perform because I think that would give us a sort of, let's call it, a more normalized level. And in terms of the performance of our SSBT, because of what I've just said, I don't want to give you the actual number. They're not performing 100% for the reasons that you can imagine. And so obviously, quite a high street, but as it's quite difficult to get the [indiscernible] of SSBTs in a short because -- before because of social distance, et cetera. So it's not a 100%, but it's not -- it's somewhere between the 2. So it's not 1 million multiple 100%. But I'd say, I think we need to see what September and October bring.

Thanks, James. Operator, can we take the next question from Richard Stuber at Numis, please.

I'm just -- a couple ones for me, please. In terms of the structured agreements, you're doing in LATAM. Can I just confirm the type of agreements they are? Are they typically sort of revenue shared with profit uplift? And is that typical for all of these structured deals or how variable are they? And the second question is just on TradeTech. Obviously, phenomenal performance in the first half. This seems like your risk limits, would they redact at all to take advantage of the volatility? Or it's as risky as it was or less risky as it was this time last year?

Yes. So I'll start with the second question. On TradeTech, as a matter of fact, following the volatile -- the volatility we saw in 2019 with a matter of exchange the risk profile and restricted that in order to create a more narrower normalized level to in order to avoid high volatility in this business. And accordingly, the level of risk we took during the pandemic was basically less or lower than before. We could have been more aggressive. We decided not to be aggressive. Obviously, it all went crazy sometime in the -- at the end of the first quarter and the second quarter. And we didn't need to do that. We didn't want to take unnecessary risks. We simply enjoy the fact that there was a lot of volatility, and this business performed strongly and is very well positioned. The volume grew, the number of customers grew. And obviously, the activity grew, and we haven't -- and we were not -- it was not needed to change the risk profile. On the structured agreements, usually, the mechanics of a structured agreement it extends beyond so far, as you know. We usually charge what we would have otherwise charge for the software. And beyond that, we put our partners with -- beyond the technology, we feel to our customers and our partners with marketing and CRM capabilities and expertise. And against that, we, in most cases, participate in or we share the profits of the business. So in essence, if you think about -- and in some cases, it's the majority of the profits. In some cases, it's 50% of the profits. So obviously, from the economics are very, very favorable to Playtech. But remember, if you take a Caliente, for example, a few years ago, it was a small business that was turning to profitability. And a few years later, this is the largest operator, by far the largest operator in Caliente that enjoys an amazing brand recognition and awareness. And then it continues to perform strongly. It continued to perform strongly throughout the pandemic and even more so as lockdowns were lifted sometime in late June. Maybe one last comment on that. In many cases, we also enjoy the upside of the value creation. So in essence, as I said, we charge for the software, we take a portion of the profit. But should the businesses being sold, then obviously, Playtech enjoys the upside as -- not as a shareholder because usually, it's not well not all the equity. But we enjoy the value created and our contribution to the value creation of those businesses. Not that they are for sale, but in case of a sale, then obviously, Playtech enjoys it.