Codere Online talks up ‘compelling’ Mexico opportunity, pulls back from Colombia

Codere Online said double-digit growth in Mexico helped to push revenue up year-on-year in Q1, despite a devaluation of the country’s currency, while the operator “stopped efforts in Colombia” due to the impact of the new gambling VAT.

Net gaming revenue for the three months to 31 March hit €57 million ($63.9 million). This beat the €53 million posted in the previous year by 8%, Codere Online said in its earnings report on Friday.

Key to this increase was growth in Mexico, where revenue climbed 15% year-on-year. Codere Online also saw revenue increase within its “other” segment, but revenue in its core Spain market was down slightly.

On Mexico, the operator noted it was able to post growth despite devaluation of the local currency. The Mexican peso devalued by more than 16% in Q1, resulting in a €5 million headwind to net gaming revenue. On a constant currency basis, revenue would have grown 34% year-on-year.

However, despite this, the company continued to talk up further growth opportunities in the country. This could be seen with the 31% annual increase in average monthly active customers – albeit, Chief Financial Officer Oscar Iglesias said, with lower player values than in previous years.

“Going forward, we will continue to explore and optimise all sources of customer traffic and otherwise continue to believe that the opportunity to invest and grow in Mexico is still very compelling,” Iglesias said in an earnings call.

Codere Online looks to Panama

In terms of activity elsewhere, revenue in Spain was 2% lower year-on-year at €21.9 million. This was despite average monthly active customers rising by 4% from the previous year.

Codere Online’s “other” segment recorded a revenue increase of 10% to €4.5 million. This includes activity in LatAm markets such as Colombia, Panama and Argentina. The group said that like other operators, it was impacted by new VAT rules in Colombia. This led to it slowing plans in the country.

The tax rate is set at 19% of player deposits and came into force on 21 February.

“We had to stop our efforts over there,” CEO Aviv Sher said. “We started to see good results in Colombia. But I think everybody knows what happened in Colombia in the past few months with the VAT regime that they introduced.”

Sher said he expected Panama to pick up on that lost revenue in Colombia in future. “We do see some improvement in Panama in recent months. So, we have some expectations to mitigate some of the issues that we have in Colombia with Panama. And probably in the coming months, we will see investment increase a little bit with Mexico to reach our targets.”

CFO Oscal Iglesias added: “I think Colombia is still a TBD in terms of what we do there to mitigate the tax on deposits. But incrementally, Panama is performing well, and we made some product changes, some – there’s been some new developments there that have helped us make our product more attractive.”

Operator ‘defensive’ on wider growth plans

Looking ahead, Sher said the operator will be “defensive” with its wider growth plans. He did, however, highlight next year’s football World Cup – which is partly being hosted in Mexico – as a key opportunity.

“In terms of new markets, currently, we are, let’s say, staying defensive with our business plan, maybe just to mitigate a little bit with Colombia to see what’s going on over there, because it’s hurting us a little bit,” Sher said.

“I think going forward to next year with the World Cup, we will have a more aggressive budget to be able to capitalise on this large event and to continue and maintain our position in Mexico.”

Net loss in Q1

The operator did not publish a full breakdown of its financial performance in Q1. However, it did offer some insight into other data from the quarter.

This included that EBITDA increased 44% year-on-year to €1.3 million. Adjusted EBITDA was also 6% higher at €1.8 million for the period.

However, net loss came in at €0.7 million compared to a €3.4 million profit in the previous year. This was primarily due to interest expenses, whereas last year the group drew interest income.

Looking ahead, Codere Online said it expects to achieve between €220 million and €230 million in revenue for the full year. Adjusted EBITDA is forecast be in a range of €10 million to €15 million. Both are in line with previously stated guidance.

Codere Online keen to leave Nasdaq issue behind

The group also used its Q1 earnings to update issues with its Nasdaq listing. In November Nasdaq threatened to delist the company for not meeting its rules for filing updates with the SEC.

It was granted an extension by the Nasdaq hearings panel in January after failing to file its annual report (Form 20-F) on time for the year ended 31 December 2023. Nasdaq in February then confirmed the operator would keep its listing – if it filed its 2023 annual report on or before 12 May.

Codere Online met this deadline but has not filed its 2024 report on time, with the operator expecting to receive another delisting notice as a result. However, it expects to file the late report by the end of the month, which will allow the company to move past the issue, according to Sher.

“We will be appealing this new delisting determination and requesting both a new hearing panel and further stay of any trading suspension,” Sher said. “That said, and as already disclosed to the market, we expect to file our 2024 annual report by the end of May. So, would expect to regain compliance with Nasdaq listing requirements ahead of any hearing actually taking place.

“In short, while we may still have a couple of noisy weeks ahead of us, given the communication we are required to make to the market, we expect to finally be putting this issue behind us soon. As always, we appreciate the patience and understanding that all of you have shown us throughout this process and look forward to getting back to business as usual.”