Core Points - Codere Online has filed its annual report on form 20-F for the year ended December 31, 2023, with the U.S. SEC within the extension period granted by the Nasdaq Hearings Panel [1] - The company plans to release its first quarter 2025 results on May 16, 2025, prior to 8:30 AM US Eastern Time, followed by a conference call to discuss the results and provide a business update [2] - The earnings press release and related materials will be available on Codere Online's website, and a recording of the conference call will be accessible afterward [3] Company Overview - Codere Online, launched in 2014, is part of the Codere Group and operates as a leading online gaming operator in Spain and Latin America, offering online sports betting and casino services [5] - The company operates in key markets including Spain, Mexico, Colombia, Panama, and Argentina, and its online business is supported by the physical presence of Codere Group throughout Latin America [5]

Company Operations and Structure - Codere Online has only operated as an independent company since June 4, 2021, following the spin-off of its online casino and sports betting businesses [136]. - The company has operations in emerging markets such as Mexico, Panama, Colombia, and Argentina, which may present additional costs and risks [130]. - Codere Online's ability to continue as a going concern is based on management's expectations regarding operating performance and the completion of Codere Group's recapitalization on October 15, 2024 [200]. - Codere Online relies on Codere Group for critical services, and any termination of service agreements could impact its operations and financial condition [202]. - Codere Newco controls approximately 65.7% of the outstanding Ordinary Shares, which may lead to conflicts of interest and affect corporate governance [281]. Regulatory Environment - The online gaming industry is subject to extensive regulation, including a 20% tax on gross gaming revenue in Spain, which can significantly impact profitability [146]. - Codere Online relies on licenses to conduct operations, and failure to renew or obtain these licenses could adversely affect its business [141]. - The company faces increased regulatory pressure, including advertisement restrictions and limitations on payment methods, which could impact operations [145]. - The DGOJ has introduced strict requirements for player protection and fraud prevention, with new regulations effective from March 15, 2024 [150]. - The Spanish Gaming Law imposes severe penalties for serious infringements, including potential license revocation [161]. Financial Performance and Risks - Codere Online's net gaming revenue for the year ended December 31, 2023, shows approximately 46% derived from online sports betting and 54% from online casino products [210]. - Changes in taxation or the interpretation of tax laws could adversely affect Codere Online's business, as gaming taxes are a significant percentage of revenues [164]. - The company may require additional capital to support growth plans, which may not be available on favorable terms [130]. - Codere Online's operations are subject to a 19% VAT tax on online deposits and a 1% stamp duty on documents effective from February 22, 2025, which may adversely affect its business in Colombia [166]. - The company faces increased regulatory and tax compliance costs due to potential new taxes, which could materially impact its financial condition [167]. Market and Competitive Landscape - Codere Online operates in a highly competitive environment, facing competition from larger companies and illegal gaming activities, which could adversely affect its revenues and profitability [190][192]. - Increased competition from retail operators as the threat of the COVID-19 pandemic diminishes may adversely affect Codere Online's online sports betting business [174]. - Codere Online plans to expand its operations in high-growth Latin American markets, including Colombia, Panama, and Argentina, and explore new markets like Brazil and Peru [187]. Technology and Cybersecurity - Codere Online's technology and information systems must continuously evolve to keep pace with rapid technological developments in the online gaming market [204]. - The company is vulnerable to cyberattacks, which could lead to significant business disruption and financial losses, as evidenced by a cyber-related fraud incident in 2022 [216]. - Codere Online's reliance on third-party platforms for app distribution may impact its ability to deliver offerings effectively, especially with frequent changes in mobile operating systems [222]. Legal and Compliance Issues - Codere Online has identified material weaknesses in its internal control over financial reporting, which could affect market perception [133]. - The company faces potential fines of up to €35 million or 7% of global annual revenue under the new AI Act, which will be enforced starting August 1, 2024 [209]. - Codere Online's operations could be adversely affected by legal proceedings, including tax disputes and regulatory investigations, which may arise in the future [246]. - The company may face legal challenges related to the ownership of open source software, which could lead to costly licenses or operational disruptions [229]. Economic and Geopolitical Factors - The ongoing geopolitical tensions and economic instability could significantly impact Codere Online's operations and financial results [177]. - The Mexican peso depreciated by approximately 22.5% in 2024, weakening from 17.6 MXN per EUR to 21.6 MXN per EUR by the end of December [183]. - The company is subject to military service obligations for its employees in Israel, which may lead to labor shortages and impact operations [259]. Management and Governance - Codere Online's management has incurred significant legal and compliance costs since becoming a public company in Q4 2021, which are expected to increase further [247]. - The company faces reputational damage and diminished customer confidence due to increased fraud or misuse of its products and services [242]. - Codere Online's success is dependent on maintaining its brand and the skill of its management team, with potential impacts from losing key personnel [130]. Shareholder and Market Considerations - Codere Online's existing shareholders' proportionate ownership interest will decrease if additional Ordinary Shares are issued, potentially depressing the market price of the Ordinary Shares [295]. - Codere Online is not expected to pay any dividends on the Ordinary Shares in the foreseeable future [298]. - Codere Online qualifies as a "foreign private issuer," allowing it to disclose less information than U.S. public companies, potentially limiting information available to shareholders [301].

Financial Data and Key Metrics Changes - The company reported net gaming revenues of €53 million for Q4 2024, a 5% increase compared to Q4 2023. In constant currency terms, net gaming revenue would have been €57 million, reflecting a 15% increase year-on-year [10][14] - Adjusted EBITDA for Q4 2024 was €1.9 million, with a total adjusted EBITDA of €6.4 million for the full year [15][16] - The company ended the year with €40 million in total cash, of which approximately €35 million was available [22] Business Line Data and Key Metrics Changes - The casino segment contributed 62% of total net gaming revenue in Q4 2024, driven by a seasonal decline in sports betting [10] - In Spain, net gaming revenue grew by 10% to €23 million, while in Mexico, it remained flat at €25 million due to currency and sports betting margin headwinds [14][20] - The number of average monthly active customers increased by 6%, with 71,000 first-time depositors in Q4 2024, up from 67,000 in Q3 2024 [11][12] Market Data and Key Metrics Changes - The Mexican peso devalued by 14% in Q4 2024, impacting net gaming revenue by approximately €3.4 million [20][22] - Despite the currency headwinds, the company reported a 16% increase in average monthly active customers in Mexico compared to Q4 2023 [21] Company Strategy and Development Direction - The company plans to implement a one-year share buyback plan for up to $5 million, reflecting confidence in its cash position and expected cash flow generation [12] - The management emphasized the attractiveness of investment opportunities in Spain and Mexico, despite the competitive landscape [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a weaker Mexican peso and new tax regulations in Colombia, which could impact future growth [24][40] - The company expects net gaming revenue for 2025 to be between €220 million and €230 million, reflecting a 6% increase at the midpoint compared to 2024 [24] Other Important Information - The company successfully transitioned to a new auditor, MaloneBailey, after the resignation of its former auditor, Marcum [7][8] - The management highlighted the importance of maintaining a balance between growth and profitability in their future strategies [25] Q&A Session Summary Question: What is the Euro assumption embedded in the 2025 guidance? - The CFO indicated that he would need to check the specific FX forecast included in the 2025 figures and follow up after the call [33] Question: Is the implied flow-through to EBITDA a function of conservatism around user acquisition investment? - The CFO noted that the upcoming Club World Cup in mid-2025 is a factor in their conservative guidance, as marketing investment is crucial for outcomes [36] Question: Have competitors shifted focus to Brazil, affecting competitive intensity in Mexico? - The CEO mentioned that while competitors have not left Mexico, some have taken a short break, providing an opportunity for the company to capitalize on [58] Question: What are the growth investment plans outside of Mexico? - The CEO stated that while they are looking at opportunities in Brazil, the focus remains on core markets where they see good ROI, and they are cautious about entering new markets [80][81] Question: What is the situation in Argentina? - The CEO expressed challenges in entering the province of Argentina, which limits growth potential, and they are actively seeking opportunities to obtain a license [84]

Codere Online Q4 2024 Earnings Disclaimer This presentation (this "Presentation"), its contents and any information provided during the meeting to present this document are for discussion purposes only, and must not be relied upon for any purpose. This Presentation is not for release, publication or distribution, in whole or in part, in or into any jurisdiction where such distribution would be unlawful. Certain terms used throughout this Presentation are defined in the Defined Terms section included at the ...

Codere Online Luxembourg, S.A. (NASDAQ:CDRO) Q4 2024 Earnings Call Transcript February 20, 2025 8:30 AM ET Company Participants Guillermo Lancha - Head of Investor Relations Aviv Sher - Chief Executive Officer Oscar Iglesias - Chief Financial Officer Conference Call Participants Jeffrey Stantial - Stifel Ryan Sigdahl - Craig-Hallum Capital Group Michael Kupinski - Noble Capital Markets Operator Good morning and welcome to Codere Online Fourth Quarter 2024 Results Conference Call. All lines have been placed ...

Core Insights - Codere Online reported a solid financial performance for Q4 2024, with net gaming revenue reaching €52.6 million, a 5% increase compared to Q4 2023 [2][4] - The company achieved a full-year net gaming revenue of nearly €212 million, exceeding its initial outlook of €185-200 million [4][10] - For 2025, Codere Online anticipates net gaming revenue of €220-230 million and Adjusted EBITDA of €10-15 million [4][10] Financial Performance - Q4 2024 net gaming revenue by region: - Spain: €22.8 million, up 10% from Q4 2023 - Mexico: €25.1 million, flat compared to Q4 2023 - Other regions: €4.6 million, up 10% from Q4 2023 - Total: €52.6 million, up 5% from Q4 2023 [2][4] - Full-year 2024 net gaming revenue by region: - Spain: €87.7 million, up 16% from 2023 - Mexico: €106.6 million, up 30% from 2023 - Other regions: €17.3 million, up 19% from 2023 - Total: €211.6 million, up 23% from 2023 [2][4] Operational Metrics - Average Monthly Active Players (000s) for Q4 2024: - Spain: 48.7, up 3% from Q4 2023 - Mexico: 68.9, up 17% from Q4 2023 - Other regions: 29.8, down 9% from Q4 2023 - Total: 147.5, up 6% from Q4 2023 [2][4] - Full-year 2024 average monthly active players: - Spain: 49.7, up 17% from 2023 - Mexico: 64.4, up 23% from 2023 - Other regions: 30.8, down 8% from 2023 - Total: 144.9, up 13% from 2023 [2][4] Future Outlook - The company plans to implement a share buyback program of up to $5.0 million, subject to shareholder approval, reflecting confidence in future cash flow generation [4][10] - Codere Online is assessing the impact of a new 19% value-added tax on online deposits in Colombia, effective February 21, 2025 [10]

Core Points - Codere Online has received approval from the Nasdaq Hearings Panel to continue its listing on Nasdaq, contingent upon the filing of its 2023 Annual Report by May 12, 2025 [1][2] - The Panel's decision follows a hearing on January 16, 2025, where the Company presented its plan to regain compliance with Nasdaq Listing Rule 5250(c)(1) [2] - The Company is working with a new auditor to complete the 2023 Annual Report and expects to meet the deadline set by the Panel [2] - Codere Online will release its fourth quarter 2024 results on February 20, 2025, followed by a conference call to discuss the results and provide a business update [3][4] Company Overview - Codere Online, launched in 2014, is a leading online gaming operator in Spain and Latin America, offering online sports betting and casino services [5] - The Company operates in key markets including Spain, Mexico, Colombia, Panama, and Argentina, supported by Codere Group's physical presence in these regions [5]

Group 1 - Pomerantz LLP is investigating claims on behalf of investors of Codere Online Luxembourg, S.A. regarding potential securities fraud or unlawful business practices by the company and its officers [1] - On December 27, 2024, Codere disclosed that Marcum LLP resigned as its independent registered public accounting firm due to their inability to complete certain audit procedures, which led to a 3.84% drop in Codere's share price, closing at $6.77 [2] - Pomerantz LLP is recognized for its expertise in corporate, securities, and antitrust class litigation, having recovered numerous multimillion-dollar damages awards for victims of securities fraud and corporate misconduct [3]

Financial Performance - Revenue for the six months ended June 30, 2024, increased to €102,108 thousand, up 36.8% from €74,635 thousand in the same period of 2023[4] - Operating income for the period was €1,629 thousand, a significant improvement compared to an operating loss of €11,307 thousand in the prior year[4] - Net income for the period was a loss of €251 thousand, an improvement from a loss of €325 thousand in the same period last year[5] - Total revenue for the six months ended June 30, 2024, was €102,108 thousand, an increase of 36.9% compared to €74,635 thousand for the same period in 2023[67] - Operating income for the group was €1,629 thousand for the first half of 2024, compared to a loss of €11,307 thousand in the same period of 2023[67] - Net income for the period was a loss of €251 thousand, a significant improvement from a loss of €325 thousand in the first half of 2023[67] Assets and Liabilities - Total assets decreased to €71,776 thousand as of June 30, 2024, down from €74,152 thousand at the end of 2023, primarily due to a reduction in current assets[2] - Current liabilities decreased to €46,684 thousand from €52,105 thousand at the end of 2023, indicating improved liquidity management[2] - Total liabilities decreased from €47,000 thousand as of December 31, 2023, to €41,517 thousand as of June 30, 2024, primarily due to a reduction in trade payables[12] - Current assets as of June 30, 2024, totaled €62,033 thousand, compared to €65,280 thousand as of December 31, 2023, reflecting a decrease of 4.3%[69] - Total assets increased to €71,776 thousand as of June 30, 2024, from €74,152 thousand as of December 31, 2023, indicating a decrease of 5.0%[69] - Equity attributable to equity holders of the parent was €18,930 thousand as of June 30, 2024, down from €21,639 thousand at the end of 2023, a decline of 12.5%[69] Cash Flow and Financial Position - Cash and cash equivalents at the end of the period were €40,433 thousand, down from €41,278 thousand at the beginning of the period[7] - The company reported a net cash used in operating activities of €237 thousand, an improvement from €5,528 thousand used in the same period last year[7] - Cash and cash equivalents were €40,433 thousand as of June 30, 2024, compared to €41,278 thousand as of December 31, 2023[74] - Current borrowings at amortized cost decreased to €4,680 thousand as of June 30, 2024, from €5,105 thousand as of December 31, 2023[88] Operational Highlights - The company is focused on expanding its online gambling operations in Spain, Mexico, Colombia, Panama, and Argentina[9] - Codere Online is exploring new product developments and technological advancements to enhance its service offerings in the online gambling sector[9] - Online sports betting revenue reached €44,359 thousand, up 22% from €36,296 thousand year-over-year, while online casino wagering increased by 50% to €57,709 thousand from €38,339 thousand[105] - The geographical breakdown of revenues showed significant growth in Mexico, with revenues rising to €49,187 thousand from €31,959 thousand year-over-year, representing a 54% increase[106] Risks and Compliance - Codere Online is exposed to liquidity risk due to potential mismatches between financing needs and sources, including cash on balance sheet and future cash flows[128] - The company has a credit risk exposure primarily related to trade receivables and current financial assets, with no significant exposure to any single counterparty[131] - Codere Online's financial systems currently rely significantly on human intervention, and efforts are being made to reduce this reliance[124] - The company is subject to various market risks, including exchange rate risk, as its functional currency is the euro, affecting its financial assets and liabilities denominated in other currencies[125][129] - Codere Online's expected credit loss is estimated based on external risk parameters, with a loss given default of 100%[132] - The company has faced certain contingencies involving litigation and compliance, which could impact its financial condition[133] Corporate Governance - Codere Online's Board of Directors underwent changes, with new appointments made in April and June 2024, including the appointment of Daniel Valdez and Gonzaga Higuero[138][140] - The company is in advanced discussions to appoint a new independent registered public accounting firm following the resignation of Marcum due to IT control deficiencies[170] Recapitalization and Future Outlook - The company completed a recapitalization on October 15, 2024, converting over €1.2 billion of debt into equity and receiving a €60 million cash injection, reducing its debt to €190 million, approximately 0.5 times its EBITDA for 2023[167] - Codere Online's management believes the company has adequate resources to continue operations for the next twelve months, supported by a recapitalization completed on October 15, 2024[18]

Group 1 - The core viewpoint is that Codere Online (NASDAQ: CDRO) shares were upgraded from Hold to Buy due to impressive growth and profitability that the market has not fully recognized [1] - The analyst focuses on undercovered companies, maintaining a watchlist of over 50 companies across sectors such as technology, software, electronics, and energy transition [1] - The analyst has over 7 years of personal investment experience and aims to identify asymmetric investment opportunities for achieving market-beating returns [1]