Plus500 Ltd. (PLUS) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Plus500 Preliminary Results for FY 2021. My name is Daisy, and I'll be coordinating today's call. [Operator Instructions] I will now hand over to your host, David, to begin. So David, please go ahead.

Good morning, everyone. I'm David Zruia, Plus500's CEO. And I'm joined by Elad Even-Chen, our Group CFO. Thank you for joining us today. Turning to Slide 2, which shows the agenda for today. Once we've run through the presentation, we will be happy to take your questions. I will start today with a brief strategic overview. Just to remind you of our vision, on Slide 4, which is for Plus500 to enable trusted and intuitive access to financial opportunities for our customers across a wide range of financial instruments, countries and devices. This is being driven by our continuing progress as a global multi-asset fintech group supported by organic investment in targeted acquisitions. This will help to further diversify our revenue base and drive higher customer retention. The strength of our vision and strategic positioning was significantly validated in 2021 by a number of important proof points achieved in the year. In particular, we delivered a strong set of results ahead of market expectations. We developed and launched a new proprietary share-dealing platform. We executed the group's first-ever acquisition, which ensures diversification of our offering and extended our product offering into the futures and options on futures market, which is a significant growth opportunity for the group, in particular in the U.S., but also globally. And we developed a range of new customer retention and monetization technology. These achievements provide comprehensive evidence that we have clear vision and strategy on which we are already delivering against. Our vision, strategy and performance are supported by a robust investment case on Slide 5. We operate in a supportive market environment with access to a number of significant long-term growth opportunities. Our ability to activate this growth opportunity is the result of our powerful propriety technology, which drives our operational excellence, our market-leading product offering and our cutting-edge marketing approach. Supported by a robust financial foundation, these factors have ensured that we have been able to maintain a long-standing high-value customer base. This is highlighted on the next slide, which shows that last year we achieved a major milestone in reaching a total of 22 million customers registered on our platforms. This is the first time we have disclosed this number. This achievement reflects our market-leading offering and has been driven by continued investment in marketing technologies and platform development. The substantial latent registered customer base represent a major opportunity for continued customer retention, activation and monetization initiatives with a view to triggering higher conversion rates. Ultimately, of course, this will enable us to access further growth in our active customer base, thereby increasing revenue and EBITDA over time. These dynamics have resulted in a number of clear differentiators and areas of competitive advantages for Plus500 on Slide 7. Firstly, we have built a long track record of financial performance with over 25 percentages compound annual growth in revenue since the IPO year with an average EBITDA margin of approximately 57% in that time. We have remained debt-free since the business was established and have returned approximately $1.4 billion to our shareholders since our IPO in 2013. This track record is testament to the quality of our people. Our headquarters are in Israel, a major global hub for technology and innovation where there is a skilled and educated workforce, which is highly trained in technological development. We have fostered a high-performance organizational culture that reflects Israel's technology-based environment. This has been led by highly skilled management team with specialties, expertise and experience in technology and finance. Our agile customer-centric business model with its unique edge in attracting and retaining customers through multiple channels has ensured that we have consistently driven an attractive ROI over time. All of these factors are a consequence of the strength of our proprietary technology on Slide 8, which reminds our fundamental competitive advantage. Our technology enables Plus500 to respond with agility to customer requirements, fast-emerging market developments and regulatory changes. At the heart of our technological capability is that every element of our technology is fully and seamlessly integrated and interconnected across our operations, systems architecture, product and marketing capabilities. It has taken us many years to develop this technology with consistent upgrades, continued innovation and the introduction of a range of new features, new services and new capabilities over the last decade. As a result, Plus500 is now a highly developed business with a long track record of innovation and a market-leading technological capability operated by highly skilled engineers and specialists. The next slide illustrates our technology stack in action, showing the main steps of customers journey. This starts with our marketing technology, which includes artificial intelligence characteristics and its optimization process is made as a result of its big data capabilities. Once a customer has decided independently to open an account on our platforms, the operational element of our technology is initiated. At that point, customers go through a stringent, rigorous verification and onboarding process in accordance with applicable regulation, supported by 24/7 localized customer return and a best-in-class payment processing service, utilizing a range of possible payment methods for our customers. Once onboarded, the next stage of the customer journey is the product experience, including a range of educational and training tools, new features, new analysis tools, new products and new financial instruments. This journey is supported and secured by a robust system infrastructure with a powerful CRM platform, cybersecurity and antifraud protection features, and a robust risk management framework. Also, it is important to note our scalable and reliable system architecture and platforms capabilities, which cater for our customers' training activities. The evidence of our success is in our numbers on Slide 10. As you can see, we have consistently delivered growth and value on all financial and operational metrics over a long period of time. We have further added to this track record in 2021, as highlighted on Slide 11. Our strategic road map continues to be based on expanding our core product offering, launching new products and deepening engagement with our customers. We made progress in each of these areas in 2021. We made ongoing investment in our core product offering of CFDs with further expansion in the range of features, functionality and instruments and product enhancements for customers. In line with our strategic goals, we also successfully launched a new proprietary share-dealing platform, Plus500 Invest, which includes over 1,500 financial instruments, comprising of the world's most-popular equities. We executed our first-ever acquisition of Cunningham Commodities, a regulated futures commission merchant, and Cunningham Trading Systems, a technology trading platform provider. As a result, we have immediately expanded our geographic footprint and product offering in the significantly growing but underpenetrated U.S. retail credit market in futures and options on futures. We will continue to invest in future growth through further organic investment and by actively targeting additional acquisitions as well as by activating potential strategic partnerships to further drive our strategic position as a global multi-asset fintech group. I will now hand over to Elad to take you through our operational performance.

Thanks, David, and good morning, everyone. Our strong performance during the year outlined on Slide 13 was well ahead of prepandemic levels and driven by our ongoing success in customer retention, monetization and activation. This ensures that we maintain continued high customer engagement, including a high level of active customers on our platform. This was fundamentally achieved as a result of the scalability of our business and our robust system architecture, which enables our platforms to handle tens of millions of transactions every year. In 2021, for example, we seamlessly and efficiently managed over 57 million customer trades on our platforms with consistent service delivery maintained for our customers despite many significant waves of demand, which ramps up at very short notice. Customer income, our key underlying growth driver, was around $703 million, demonstrating the high-quality revenue and earnings streams of our business. Client deposits, a key measure of our customer confidence and trust in Plus500, remained very strong at around $2.1 billion. This operational performance translated into excellent financial results on Slide 14, highlighting our clear strategic approach and robust business model. Total revenue was at the level of $718.7 million, EBITDA was at the level of $387.1 million, and margins were around 54%. This drove cash conversion to 99%, helping us to end the year with cash balances of $750 million, up from $594 million at the end of last year. With the business remaining debt-free, as has been the case since its inception, and following our excellent financial performance in 2021, Plus500 remains in an outstanding financial position from which to invest in sustainable long-term growth and continue to deliver value for shareholders. Now I will run through the progress we made to further develop each of our product offerings during the year, starting with our core product on Slide 15. CFDs remain an attractive product for our customers around the world as well as offering the ability for customers to trade and leverage and to access market liquidity. Our product offering is aligned with regulatory requirements in the countries in which we operate, ensuring customer protection and education through elements like our free unlimited demo account and negative balance protection. With our offering, customers have the comfort that they are trading on attractive commercial terms and they can access everything they need through one multichannel solution. With a long track record in innovating our CFD platform, we offer customers a wide range of financial instruments in asset classes on a global basis. We continued to add more instruments, features and analysis tools to our core product offering during 2021 to help further deepen customer engagement. Future growth of our core product offering will be driven by further expansion of our reach and footprint through entering new markets, further developing our technology, including the launch of new associated technologies, launching new instruments and enhancing our offer. On the next slide, you can see how our core product track record has enabled us to achieve leadership positions across certain key markets. According to investing trends, we remain the largest CFD provider in Germany and Spain. We were also ranked as the fastest-growing trading platform in the U.K. and the most chosen CFD platform for mobile app in both Australia and Singapore. We also have a leading position in both app installs and rankings. On Slide 17, you can see that there is a substantial untapped customer demand potentially available outside of our current geographic footprint. We will continue to target new potential markets to launch our core product offering through obtaining operating licenses in those markets, either organically or via acquisitions. Trend target markets include various countries in the Americas, Asia and the Middle East with new regulated markets in which we do not currently operate and where there is a huge growth potential being a particular focus. Slide 18 gives some context on the growth outlook for our futures and options on futures product offerings both in the U.S. and globally. There were record derivative volumes traded last year, 50% of which were futures contracts and 75% of which were commodities and equity futures. In addition, crypto continues to move into mainstream, with, for example, the launch of Ether, Micro-Ether and Micro-Bitcoin Futures by the CME last year. We believe that this is a major strategic opportunity for Plus500 as we look to expand in this significant potential market, which is being driven by the substantial management focus and continued investments in technology and people. Supported by a clear regulatory framework, Plus500 has a real opportunity to be a technology disruptor in this market where the competitive environment is fragmented, the utilization of technology is relatively limited and the range of asset classes for customers to access is becoming increasingly broad and accessible. On Slide 19, you can see how we plan to disrupt this market. With this integration of Cunningham and CTS now well underway, we have already recruited a number of R&D specialists with a specific focus on leveraging our best-in-class technology to optimize the acquirers. Ultimately, this will enable us to deliver market access to the millions of potential U.S. customers looking for new trading opportunities and ideas. We can also cater for higher potential trading volume as a result of our strong financial foundation and balance sheet. We are, therefore, very confident that we will be able to offer accessible futures and options on future products to a mass retail audience, delivering on a major market opportunity for our business. I will now hand back to David.

Thanks, Elad. On to our new share-dealing platform, Plus500 Invest, on the next slide. This product offering provides more diversification, acts as a customer retention tool and gives us access to new marketing opportunities. At this early stage, the product is already live on over 15 countries across Europe and was recently launched as a dedicated mobile app for Android. With continued organic investment being made in Plus500 Invest, it will be rolled out soon on iOS and in additional target markets in 2022. New equities and ETFs will be added, helping to drive the further expansion of the group's product range in the future. Slide 21 provides some highlights on the main developments of our technology during the year. For those who are not familiar with our business model, let me say that Plus500 is a technology company with a high-performance entrepreneurial culture and a strong track record of more than 13 years of developing the most-innovative technologies in our space. On the back of our plan to incrementally invest approximately $50 million in our R&D capability between 2021 and 2023, we continue to invest in this area during the year. This was evidenced by our ongoing recruitment of talented engineers, programmers, web designers and product managers at our R&D centers in Israel. Also, during the year, the operations team implemented additional technologies to enable new payment methods and develop additional tools to support product launches and further improvements in customer service. We continue to invest in systems architecture to support customer requirements. The implementation of Google Cloud Services provides further flexibility, security and scale to the platforms, additional server capacity and redundancy as well as enhanced data analysis, data processing and business intelligence capabilities. Our platforms have consistently delivered the capacity to support significant volumes, including the multiple volume spikes, which are rapidly and sometimes instantly arising on demands in recent years. All this activity ensures that Plus500 continues to lead the industry across the mobile and tablet space. Over 83 percentages of our CFD-related revenue was generated from mobile or tablet devices and more than 79 percentage of CFD-related customer trade took place on mobile or tablet services in 2021. Moving to Slide 22 on KPIs by region. Importantly, all metrics remain well ahead of prepandemic levels. Our active customer base remained robust at over 407,000, supported by another strong year of new customers onboarded of over 196,000. The development of our customer base over recent years has been driven by continued significant investment in our marketing technology as well as an ongoing focus on initiatives to drive customer retention, monetization and activation. Average revenue per user in 2021 was strong at over $1,760 while average user acquisition cost was at the level of $877 with ongoing investment in strategic markets to help us attract high-value customers. Average user acquisition cost is expected to rise steadily over time as our customer profile continues to shift to higher-value customers and as we start to invest in attracting customers to the new products and target customers in strategic geographies. Elad will now take you through our marketing investment starting on Slide 23.

Thanks, David. We have a multilayered and diverse approach to marketing, fundamentally driven by our technology. With the support of key strategic partners, such as Google, we operate multiple marketing initiatives in paid search and organic search as well as running numerous content marketing and PR campaigns. I'd like to note that Plus500 is considered to be a leader within the marketing technology space and our superior technology is being optimized every year to deliver continuous improvement in our results. The value of our marketing strategy can be seen by the revenue trajectory of our long-term customer cohorts outlined in the graph on Slide 24, which shows cumulative revenue per customer from the date of their initial deposits to the end of 2021. You can see that 2015 customer cohort on the long dark blue line has generated total revenue of around $5,000 per customer on a cumulative basis over 7 years while 2015 AUAC was at the level of approximately $1,200, demonstrating the strong ROI delivered over the years. This highlights the long-term value delivered by our approach to an investment in marketing. The next slide shows the return achieved from our investment in marketing technology in recent years with each bar chart showing cumulative returns from annual customer cohorts. For example, the graph on the right shows that we have already generated revenue of $444 million in 2 years from the investment of $221 million we made in 2020 with much more to come in the future. I will now hand back to David.

Thanks, Elad. Over the last year, we have placed an increased emphasis and investment on developing new retention and monetization technologies. On Slide 26, you can see some examples of initiatives related to these technologies, many of which were introduced in 2021, that we are currently running. This includes tailored and multichannel customer notification strategies to drive retention, conversion and build trust with customers. We have also launched a new premium account for customers, which offers features, such as professional trading webinars, weekly analysis research and additional tools. We also make sure customers have a site of important news and market events, which can present them with compelling trading opportunities. Turning to Slide 27, which shows the average position duration on our platform since 2017 against the total number of new open positions. You can see that in 2021 the average position duration increased against a record year in 2020. This is clear evidence that our retention strategies are having the desired effect and that our customers trust our offering to cater their long-term trading needs. The next slide is further evidence of our success in customer retention in our core business. As you can see, our customer relationship remains high quality and long term with nearly 80 percentages of our revenue for 2021 coming from customers trading with us for more than 1 year. The strong level of customer loyalty gives us great confidence that our customers are using our platform on a sustainable long-term basis and is the consequence of our continuous investment in our product offering, our consistently innovative mindset and our ongoing customer-centric approach. With these factors in mind, we see significant long-term potential from the 2021 customer cohorts going forward. I will now hand back to Elad.

Thanks, David. I will now discuss risk management and regulation starting on Slide 30. We have a robust risk management framework with 3 lines of defense which is implemented across the business with ultimate oversight of the Board. We aim to ensure that our risk exposures are aligned with our risk appetite across our product portfolio with market risks being managed through internalization. We targeted hedging that took place in 2021 to cover any remaining exposure which may be breached predefined risk limits. This is supported by real-time monitoring technology embedded in the group's platforms, which is driven by specific tailored algorithm and sophisticated technology. This approach aligns our interest with our customers, helping to deliver a more stable revenue stream over time. As evidence of this, our revenue represents around 98% of customer income that has been generated since Plus500's IPO in 2013. We are currently investigating and testing a more holistic, automated hedging capability and will provide information on this approach if and when it is implemented. Finally, on this slide, it is worth noting that at the current time our view is that approximately $450 million of our capital is being retained for regulatory and other purposes, including working capital, hedging and clearing requirements. Clearly, with around $750 million in cash balances at the year-end of last year, we had substantial headroom over and above this required level of capital. Now turning to regulation on the next slide. We thought it would be interesting to show you the established global regulatory network in which we operate across our product offering. IOSCO, that's International Organization of Securities Commissions, sets global regulatory guidelines and approaches. And these are implemented by its members, including each regional regulator, as applicable. Plus500 has maintained a highly robust, customer-centric approach to compliance, supported by our expertise in the applicable regulatory standards and our long-standing relationships with regional regulators in the markets and industries in which we operate. With an established global regulatory network, outlined on the next slide, we remain well positioned for potential future changes to the regulatory environment. Global regulatory alignment has continued in the market in which we operate with recent regulatory changes being mirrored across various territories. The most recent regulatory changes in the CFD industry were implemented by the Australian Securities and Investment Commission in Australia in early 2021. We are supportive of and complying with these changes, which are expected to enhance the CFD trading landscape and provide additional protection for our customers. The impact of these regulatory changes on our operational and financial performance is in line with our initial expectations. Our portfolio of operating licenses was further strengthened with the addition of a new license in Estonia granted by the Estonian Financial Supervision Authority last week. This new license will further support our business across European markets in our core product offering and is supported by the establishment of a new local operating subsidiary in Estonia. Our portfolio of licenses is an increasingly valuable asset for Plus500 given its scarcity and the growing complexity of obtaining new licenses. We are currently actively looking to broaden this portfolio with applications in process for several licenses in additional markets. I will now hand back to David.

Thanks, Elad. The next slide covers our progress in the areas of governance and sustainability during the year. There were a number of independent nonexecutive director appointments made to the Board during the year, including the appointment of the renowned global economics and business leader Professor Jacob Frenkel as Chairman of the Board. These appointments have ensured that the presentation of women on the Board is well ahead of the 33 percentage target set by the FTSE Women Leaders Review framework. In addition, through their global networks of contact, these appointments have enabled greater access to the new growth markets, in particular, the U.S. We remain focused on our key priorities in ESG, in particular, customer care and organizational culture. Customer care and protection are supported by measures such as negative balance protection and maintenance margin protection on our CFD platform. We continue to introduce educational and training tools and features on our platforms to help inform customers of the potential risk involved in trading. On organizational culture, we operate working environment, which empowers ongoing improvements in employee development through training, learning and career progression. This culture has helped to drive employee attraction and retention and has ultimately led to enhancements in the capability of our technology. I will now hand back to Elad.

Thanks, David. Now moving to the financial overview, starting on Slide 35. Since our IPO in 2013, we have generated a total of $2.4 billion cash from operations, supported by an average operating cash conversion of 99% since that time. This has supported our approach to shareholder returns for which we have delivered around $1.4 billion through dividends and share buybacks. We are delighted to announce today further attractive shareholder returns of $200.2 million for the year. This includes dividend payments of $120 million, which comprised of a final dividend of $37.8 million and a special dividend of $22.2 million, both of which we announced today and are to be distributed in July 2022. In addition, we distributed an interim dividend of $60 million in November 2021. Our shareholder returns for 2021 also include share buyback programs of $80.2 million. This comprised of a new program announced today to purchase up to $55 million of the company's shares, which includes a special program of $29.8 million. The program of $12.6 million was announced in August 2021 in respect of H1 2021, with an additional program of $12.6 million announced in October 2021 as part of full year 2021 final program. The special dividend and the special share buyback program are directly related to the benefits relating to Plus500 accreditation as Preferred Technological Enterprise by the Israeli tax authority. Our shareholder return policy is to return at least 50% of net profits to shareholders as a normal return on a half-year basis with 50% of this distribution being made by way of dividend. In addition, the Board will continue to consider paying special dividends and conducting special buybacks at year-end. Now let's look at the financials for the year, starting with our income statement on Slide 36. Revenue was driven by consistent levels of customer income during the year, which resulted in a strong EBITDA performance which was also supported by our lean and flexible cost base. Net profit was at the level of $310.6 million and basic earnings per share was at the level of $3.06 supported by the updated corporate tax rate of 12% for Plus500, following the achievement of the Preferred Technological Enterprise accreditation which has now been successfully extended up to and including the year of 2026. Our lean and flexible cost base on Slide 37 remained well controlled. 72% of our costs were variable and therefore, positively correlated to enhance performance and higher volume. Marketing investment remained at a relatively high level as planned at around $172.1 million and will continue to make to ensure that we can capture opportunities to drive attractive return on investment. Total SG&A expenses were at the level of $334.1 million, the major element of which were this marketing investment as well as processing costs and payroll expenses. Turning to the balance sheet on Slide 38. Our business has never created any debt and our balance sheet remains very healthy. Plus500, therefore, remains in a great position to continue to invest in growth opportunities and business continuity. Slide 39 covers the cash flow. Plus500 remains highly cash generative, supported by a low level of capital expenditure due to our automated processes and technological capabilities, with 99% operating cash conversion achieved in 2021. With net cash generated from operations of $405.5 million and after the completion of the share buyback program, totaling to $64.9 million, and dividend payment of $144.9 million, cash balances at the end of the year increased significantly to $749.5 million. I will now hand back to David.

Thanks, Elad. Let's now look at the outlook on Slide 41. The Board continues to expect that Plus500 will deliver sustainable growth from all of our product offering over the medium to long term. This expectation is supported by our significant operational and financial momentum over recent years, which validates Plus500's strategic road map. Future growth will be enabled by ongoing investment in developing our position as a global multi-asset fintech group, in particular, to further organic investment by actively targeting additional acquisitions and through potential strategic partnerships. The positive momentum achieved in recent years has continued to date in 2022, driven by the underlying strength of customers' income. Consequently, the Board remains confident about Plus500's prospects for 2022. So that's it from us. We will be happy to take your questions now. Feel free to ask us questions directly over the phone or post them on the webcast facility. And Rob, our Head of IR, will put your questions to us. Thank you.

Our first question is from Ian White from Autonomous Research.

A few questions from my side, please. First of all, when you talk about rest of the world opportunities on Slide 17, what specific launches do you have in the pipeline there, please? I understand that you can basically already offer the CFD product in third countries already. So I just wondered if you could clarify the specific opportunities you're considering to expand the scope of the business, please. Question 2 -- yes, sorry, sorry, I'll go one at a time.

Sure. No worries. Please.

I'm just going to say question 2, customer acquisition costs have increased quite significantly in 3Q and 4Q. Just can you talk us through what you're seeing there and what's driving that increase, please? And finally, I think I'm right in saying that there's an ongoing legal case involving the group in Israel, where customers alleged some malpractice with the trading platform. Can you provide us with an update on that, please? What is the potential risk to the group? And when do you expect that to be resolved in one way or another, please?

So as for the question with respect to the other regions and where we expect to extend ourselves, we did indicate also within the announcement this morning that we're currently looking to extend operations into the Americas, very much also into Asia with respect to the regulated areas such as Japan, for instance, also within the Middle East, very much we're familiar with the regulation application within the UAE and other regions. So those are the main places that currently we're working at. I hope that answers your question. As for the average user acquisition cost, indeed, we saw an increase associated with the recruitment of the new customers. I must admit it aligned with the strategy of the company, and we commented on that also from the beginning of the year and also before that. You could have seen we've been within an AUAC level for H2 or Q4, the associated costs also in H2 2015 and very much the 2015 ROI, you could have seen the level of return of more than 5x of the lifetime value associated with those customers. So not only we're bringing more valuable customers from the strategic jurisdictions, if it's from the U.K., Germany, Spain, Australia and so on, we do see an increase of the average of the deposits from those customers. And along the way, we also see an increase of the duration in the system. You could have seen that 79% of the revenues of 2021 was associated with customers that are with us for more than 1 year. It's a record number. It reflects kind of the activity of those customers, the duration that they are staying within the system and how much they are also potentially to generate for us. And so we have the full comfort to say those customers that we are bring green today with a greater level of cost will generate for us also a greater level of revenue. And it costs money, obviously, to bring valuable customers and it's fine because we're looking for the longer term. Plus500 is well established. It has the deep pocket and a very strong balance sheet which is without any debt with more than $750 million, and we can very much cater that. As for the third question, the litigation case, you are right to say that it's out there, understanding for the last few years. That litigation is very much associated solely with the Israeli regulated subsidiary, which represent approximately 1% only of the group's operation. Very much that case is associated with a very minimal potential effect to the group, and we don't see any material impact to come to crown and any associated provisions already within the account as reviewed by our auditors, PwC, and the legal advisers.

That's helpful. Just one clarification on question 1, please. When you're talking about Japan and the UAE, am I right in thinking these would be new CFD licenses to offer leverage products. Am I on the right lines there, please?

That's true.

Our next question comes from Martin Price from Jefferies.

I just had 2 questions, if I may. First, on the U.S. rollout, I was wondering if you could provide us with some more detail on the launch time line from here. Just be interested to know when you expect to have platform functionality in a position that would give you confidence in ramping up marketing expenditure. And secondly, I was just wondering if you could provide some more detail on the appetite for future acquisitions, specifically just being interested to know which assets or new capabilities are a particular interest to you.

Sure. So referring to the U.S. acquisition, so as you recall, Plus500 has purchased both the Cunningham Commodities, which is the regulated FCM; and CTS, which is a technological entity operating the T4, which is a trading platform offered as a white label to other FCMs. We currently work in all verticals to enhance the business. First of all, we are -- we have amended many of the procedures and the actual business of both Cunningham and CTS. We're already working on increasing the current base of customers for both. There are B2C areas and B2B areas in both companies that we are enhancing. In parallel to this, we are already developing a new platform and a simple-to-use futures trading platform with a lookalike of Plus500, which will be rolled out in steps, gradually in the States. Once ready, also, we have prepared a marketing plan that we will initiate, and we will start spending marketing in the States only later on once the product is ready. I hope that answers the first question. Regarding the second one, so of course, that we are actually looking for additional acquisitions. With a cash balance of approximately $750 million at the end of the year. We have the appetite, and we believe that we should conduct some. We are looking at bolt-on as well as more larger potential acquisitions if it is in the CFD area with new licenses in new geographies or if it is in new areas, meaning new products that we would like to launch. We didn't disclose specifically which product it is, but we are looking on few areas to enter using acquisition.

Our next question is from Vivek Raja from Shore Capital.

I had a couple, please. The first one is a follow-up to the U.S. opportunity. So just thinking about the sort of rollout and investment plans you've got there and, obviously, the costs you've already incurred for acquiring entities there, can you just give us a sense of what sort of time line you expect to make a payback there? What sort of time period you think is realistic for that? And then the second question was, I'm just wondering within the sort of overall CFD business whether you're seeing much change in terms of flow, in terms of the assets that clients are trading, say, FY '21 compared to 2020 and then prepandemic. That's it.

So as for the payback, very much, we acquired the Cunningham Commodities and CTS with a very minimal level of investment with a view that Plus500 technological means and capabilities will be the one to lead away. Now as you could have seen, also the operational strength of Cunningham over the years is very much there. They generate revenues on a consolidated basis of approximately $20 million plus/minus. So very much we do expect to see that level of return, but that's kind of a sidekick, I would say. The logic and the view here is for a much, much greater scale of operation. That's why we entered that market, not for the $30 million or the $50 million level of revenue recognition, we are for the bigger picture. And we do have the view and the ability, as we've done with the CFD framework historically a decade ago. We do believe that we'll be the disruptive player within the futures and options on futures segment in the U.S. to a large, expanded, bringing retail audience from the U.S. and to provide them the best retail technological capability to trade on those various asset classes. And I believe it answers also your second question, the intention or the view of the retail customers or the sophisticated accredited customers is obviously aligned with whatsoever is with the increased level of volatility or movement we saw in the market. So was in 2020 with the commodities, so was in 2021 with the indices and other kind of asset classes, everything is also very much visible on the Plus500 trading platform. And we do provide all the customer sentiment, all the popular reference point for the instrument. And there is always kind of a big variation between the asset classes. But the beauty of Plus500 is actually to be a multi-asset fintech group to cater all of those asset classes on 1 only set of solutions rather than just to potentially be that financial adviser.

Next question comes from Sam Raikundlia (sic) [ Shailesh Raikundlia ] from Liberum.

This is Shailesh Raikundlia from Liberum. I had three. One is a follow-up on the previous 2 questions, really. Just on the additional revenue opportunity. Obviously, you have highlighted kind of the U.S. acquisition and the share dealing. I was just wondering whether there is any way of giving some sort of magnitude of sort of the additional revenue potential that you have there, particularly in 2022 and '23 on top of, obviously, the CFD, which has been doing very well. So just a sense of the sort of step change in revenues we would expect once both those businesses are up and running to their full capacity. The second question is just on the costs as well related, obviously, and back end of last year, you highlighted the fact that you're accelerating sort of your investment to transition to the multi-asset platform. And again, I was just sort of trying to get some sort of quantification about the additional cost that we are talking about there. Or do we look at that as just a business as usual for the short term and then that fall off back in 2023? So just a sense of a bit more detail on the cost side. And finally, just highlighting the sort of $450 million of regulatory capital that you have disclosed this morning. As I said, I'd highlight about $300 million of excess capital. I appreciate the fact that some of that will be used for bolt-on acquisitions. But does that sort of signify that in the medium to long term that the level of capital you are happy to hold is around $450 million, $500 million? Or i.e., should we expect high levels of capital returned in the absence of acquisitions?

So as for the U.S., I believe we just also answered kind of for the shorter term of the next few months before we launch our short midterm new solution and platform and applications. We very much are going with the run rate of Cunningham as indicated just now with $20-plus million. And once it would become more established, we very much disclose it as another stream of revenue. Till then, I believe, from a materiality point of view, it's less there kind of to split it. As for the third question, David can take the second one. Very much the $450 million takes into account various components as for the regulatory capital itself. That's where the hedging and clearing activities, working capital and so on. Yes, indeed, within the year of 2022, Plus500 puts for itself certain strategic missions to going vertical. And therefore, we do have the buffer for new acquisitions once and as may be applicable, we'll, of course, announce and provide more information.

Yes, regarding the cost. So the increase in investment is incremental. It doesn't happen all at once. It's already -- part of this is already embedded with the numbers of 2021. And of course, over the time, we will incrementally gradually increase it, but it also -- it's expected to come with an increase in revenues over the medium to long term.

And of course, you can comment as well that as indicated this morning within the announcement that we're continuing to spend and to invest within the technological development as for the $50 million of investment within our R&D centers in Israel. So very much we're aligned with that strategy and we'll continue to invest within the new technological means.

[Operator Instructions] We have no further questions on the telephone line, so I'll hand over to Rob to take any webcast questions.

Thank you. Just one question on the webcast. Have the changes in Apple's privacy regulations affected marketing efficiency or costs?

Sorry. Can you come again? I didn't hear as well.

Sure. The changes in Apple's privacy regulations, are they affecting marketing efficiency?

Yes. Sorry. So no, the answer is straightforward. No. We have mitigated it. Technically we found solutions as soon as the issue was raised using a third-party provider, and we know to do the tracking in a quite similar level to how it was done prior to the new changes, and there is no effect on the actual marketing and methodology or performance or costs.

Great. Thank you. No other questions on the webcast.

Thank you. We have no further questions, so I hand back over to the management team for any closing remarks.

So thank you, everyone, for the questions. Maybe just to sum up, we further strengthened our strategic position with a strong performance last year and with a positive start to 2022, leaving us well placed to deliver sustainable growth over the medium to long term. Thank you, everyone.

Thank you very much.