Codere Online reported its third-quarter earnings on Monday, showing a slight dip in net gaming revenue to €51.6 million from €51.7 million in the same period last year. Despite this minor decrease, adjusted EBITDA rose significantly, reaching €2.9 million, a notable 93.3% increase from the previous year’s €1.5 million. The company maintained its full-year net gaming revenue (NGR) guidance of between €220 million and €230 million and expects an adjusted EBITDA of €10 million to €15 million.
In Mexico, Codere Online’s NGR stood at €26.8 million, marking a modest 0.4% year-on-year increase. CEO Aviv Sher pointed out that this stability in revenue was achieved despite a 5% devaluation of the peso and consistently low margins in sports betting, which highlights the resilience of their operations in the Mexican market.
However, looming over Codere Online’s operations in Mexico is the government’s proposal to increase the gambling tax rate from 30% to 50%, as part of the 2026 budget plans. Although this tax hike has yet to be approved, CFO Oscar Iglesias, soon to be succeeded by Marcus Arildsson, anticipates its implementation beginning January 1st.
Iglesias addressed analysts during the earnings call, emphasizing the importance of capital allocation discussions in light of the proposed tax changes. The potential tax increase, he noted, is a significant factor affecting the company’s willingness to invest further in the Mexican market, given its potential impact on unit economics and the conversion of every dollar of NGR to EBITDA.
“We haven’t yet determined how this will influence our investment plans for Mexico next year,” he remarked, reflecting the uncertainty faced by the company as it navigates this challenging fiscal environment.
Despite the challenges, Mexico remains Codere Online’s largest market, with Q3 revenue exceeding that of its home market in Spain, where NGR was €22 million. The company also reported a notable 39% increase in monthly active players in Mexico, reaching approximately 88,300 compared to 50,200 in Spain. This growth underscores the strategic importance of the Mexican market for Codere Online.
In addition to navigating tax challenges, Codere Online is collaborating with the Mexican government to address the pervasive black market for gambling in the country. Iglesias advocated for more stringent measures against illegal offshore operators as a means to increase government revenue and ensure fair competition.
“Directionally, a tax increase isn’t favorable,” Iglesias explained. “Governments should focus on enhancing compliance and targeting offshore or grey market operations as the initial step for additional revenue streams. We are committed to working alongside the Mexican government and other markets to navigate these challenges, maintaining our confidence in Mexico’s potential as a strategic market for the short, medium, and long term.”
On the flip side, Iglesias noted that the proposed tax hike might alter Mexico’s competitive landscape, potentially benefiting established players like Codere Online. “While predicting competitors’ reactions is challenging, we anticipate the tax increase could deter new market entrants and those planning to venture into Mexico in the near or medium term,” he commented, suggesting that a reduced competitive environment might ultimately advantage well-established operators like Codere Online.
Looking beyond Mexico, Codere Online has set its sights away from Colombia, as revealed in their Q1 results, citing a 19% temporary VAT as a prohibitive factor. This strategic withdrawal was confirmed during the company’s post-Q2 earnings call. Though the VAT is scheduled to cease in early 2026, the company is operating under the assumption it might be made permanent or renewed.
During the recent earnings call, executive vice-chairman Moshe Edree clarified the company’s stance: “Our short to mid-term strategy doesn’t include Colombia. We’re monetizing the existing operations without further investments unless the tax situation changes.”
Iglesias elaborated, acknowledging the difficulties posed by the Colombian tax structure. “We’re proceeding with the assumption that the current tax climate will persist. Should circumstances change, we’d reconsider our strategy as it would significantly improve the unit economics, addressing the primary challenge in Colombia — the tax on customer deposits. Currently, it’s a tough market to navigate profitably,” he concluded.
This cautious yet strategic approach by Codere Online reflects the broader challenges and opportunities faced by the igaming industry as it adapts to evolving tax landscapes and regulatory environments in key markets. While Mexico poses immediate challenges, the potential for a more favorable competitive landscape offers a silver lining, balancing out the complex dynamics at play in Codere Online’s operational strategy.
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