Codere Online talks up ‘compelling’ Mexico market after Q1 growth

Codere Online has strategically recalibrated its operations in Colombia following the introduction of a new gambling VAT, while eyeing growth opportunities in Panama to offset this shift.

In its latest earnings report, Codere Online highlighted a notable year-on-year increase in revenue during Q1, attributed largely to impressive double-digit growth in Mexico, despite challenges posed by local currency devaluation. The operator has consequently halted initiatives in Colombia due to the adverse effects of the recently implemented gambling VAT.

For the quarter ending March 31, Codere Online reported a net gaming revenue of €57 million ($63.9 million), representing an 8% increase from the €53 million achieved in the same period last year.

The primary driver behind this revenue surge was growth in Mexico, where revenue soared by 15% year-on-year. However, revenue in Codere’s core Spanish market experienced a slight downturn, while the “other” segment—which encompasses LatAm markets including Colombia, Panama, and Argentina—saw an increase of 10% to €4.5 million.

Interestingly, despite the Mexican peso’s devaluation of more than 16% during Q1, which dampened revenue by approximately €5 million, Codere Online demonstrated resilience. Notably, had the currency remained stable, revenue growth would have reached an impressive 34%. The CFO, Oscar Iglesias, noted a 31% annual rise in average monthly active customers, although with a reduction in individual player values compared to prior years.

“Looking forward, we will actively seek to optimize and enhance all traffic sources. The investment potential in Mexico remains compelling,” Iglesias stated during the earnings call.

Codere Online Shifts Focus to Panama

In terms of geographical performance, Codere Online reported a 2% year-on-year revenue decline in Spain, totaling €21.9 million, despite a 4% increase in average monthly active customers. As the company navigates its Colombian exit, it anticipates that Panama may help recoup some lost revenue. CEO Aviv Sher remarked, “We are beginning to see improvements in Panama, and we expect to adjust our investments there to further mitigate the impact from Colombia.”

The new VAT in Colombia, set at 19% on player deposits and enacted on February 21, has led Codere Online to reassess its strategic outlook in the region. “We had to pause our initiatives in Colombia,” Sher acknowledged. “While we were starting to see positive results, the recent VAT changes significantly altered our operational landscape.”

Operator Takes a Defensive Stance on Growth Initiatives

As Codere Online contemplates its growth strategy, Sher emphasizes a cautious approach amidst ongoing challenges—particularly in Colombia. However, with major international events like next year’s football World Cup, which will partially occur in Mexico, he views significant opportunities on the horizon.

“Currently, we are adopting a defensive stance concerning our business plan to navigate the situation in Colombia. Nevertheless, the World Cup presents a valuable chance to be more aggressive in our budgeting to capitalize on this substantial event,” Sher remarked.

Assessing Q1 Financial Health

While Codere Online provided a general overview rather than a detailed financial breakdown for Q1, key insights emerged from the earnings report. EBITDA rose by 44% year-on-year to €1.3 million, while adjusted EBITDA also registered a 6% increase to €1.8 million.

Despite these positive indicators, the company faced a net loss of €0.7 million, in stark contrast to a €3.4 million profit in the previous year. This shift resulted primarily from mounting interest expenses, as compared to interest income recorded in the prior period. Looking ahead, Codere Online anticipates annual revenue ranging from €220 million to €230 million, aligning with previously communicated forecasts.

Codere Online Addresses Nasdaq Listing Concerns

Additionally, during its Q1 earnings update, Codere Online discussed ongoing challenges related to its Nasdaq listing. The company faced a delisting threat in November due to delays in filing its SEC updates. Following a successful appeal for an extension, Codere did meet the May 12 deadline for its 2023 annual report. However, the company now anticipates another delisting notice due to the late filing of its 2024 report, which is expected to be submitted by the end of the month.

“We will be appealing the latest delisting determination and requesting another hearing panel, along with a further stay on any trading suspension,” noted Sher. “We expect to resolve this issue shortly, as we are on track to file our 2024 annual report before any hearings occur.”

“While we may experience some turbulence over the next few weeks, we appreciate the patience shown by our stakeholders and look forward to resuming normal operations,” Sher concluded.