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].
ere Online Luxembourg(CDRO) - 2023 Q4 - Annual Report