Good morning and welcome to Codere Online's Fourth Quarter 2024 Results Conference Call. All lines have been muted to minimize background noise. After the speaker's comments, there will be a question-and-answer session. Thank you. I would now like to hand the call over to Guillermo Lancha, Head of Investor Relations. Please proceed.

Thanks, operator, and welcome, everyone, to Codere Online's earnings call for the fourth quarter of 2024. Today, you will hear from our CEO, Aviv Sher; and CFO, Oscar Iglesias. Before turning the call over to Aviv, I'd like to remind everyone that during this call, we will be referring to a presentation we uploaded to our website earlier today, which includes non-IFRS preliminary and unaudited financial metrics such as net gaming revenue, adjusted EBITDA, and constant currency figures for which you can find reconciliations or disclaimers in the appendix of the presentation. These non-IFRS financial measures should be considered in addition to and not as a substitute for our IFRS results. Please note that all growth rates discussed during this call are year-on-year comparisons unless noted otherwise. Let me also remind you that our accounting information is prepared under IFRS accounting standards and that throughout this presentation all monetary figures will be in Euro unless expressed otherwise. During this call, we will make forward-looking statements including those related to our net gaming revenue and adjusted EBITDA outlooks, which are subject to numerous risks and uncertainties, including those discussed in our earnings press release and other documents filed with the SEC and which could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Finally, please note that a replay and transcript of this call will be available on our website at codereonline.com, where you can also sign up for our investor email alerts. With that, I will go ahead and pass the call on to Aviv.

Thanks, Guillermo, and thanks to everyone for joining us today. It has been an eventful few months since we spoke at the end of November, so let me provide a brief update so that everyone is up to speed on the latest developments. As you know, our former auditor Marcum unexpectedly resigned in December, but we were able to bring MaloneBailey on board as our new auditor before year-end. This allowed us not only to hit the ground running with them in early January, but also to prepare and present a credible plan to NASDAQ in our January 16th hearing, which ultimately resulted in NASDAQ granting us the maximum extension possible until May 12th to file our 2023 Annual Report. While this NASDAQ compliance issue has taken a lot more time and energy than we would have liked, we believe that things are moving in the right direction and currently expect to file our 2023 Annual Report within the extended deadline. We appreciate your patience and support throughout this process and look forward to putting this issue behind us as always continuing to deliver for our investors. Moving now into the highlights of the fourth quarter of 2024, on Page 8, we delivered 53 million in net gaming revenues. It's 5% above Q4 2023, as in the prior quarter, net gaming revenue was negatively impacted by a weaker Mexican peso. In constant currency terms, net gaming revenue would have been 57 million in the fourth quarter, 15% above the prior year period. In terms of product mix, our casino segment continued to increase its contribution with 62% of our total net gaming revenue in the fourth quarter due to the seasonal decline in sports betting during December as well as lower sports margins in Mexico throughout the quarter, primarily on the back of unfavorable NFL results. This growth in net gaming revenue was driven by a 6% increase in our number of average monthly active customers, while we were able to maintain an average monthly spend per active customer of around EUR120. Regarding customer acquisitions, we had 71,000 first-time depositors in the fourth quarter, a sequential uptick versus 67,000 acquired in the third quarter. This increase, together with a small decrease in the level of investment to acquire customers, resulted in an average CPA in the quarter of EUR211, the lowest since Q4 2023. Looking forward, and notwithstanding that the opportunity to invest in both Spain and Mexico continues to be very attractive, our Board approved a one-year share buyback plan for up to $5 million. We believe that the size of this plan is appropriate, given our current cash position and expected cash flow generation, leaving ample room for us to not only continue investing in the business if and when good opportunities present themselves, but also to support our shares over the coming years. Please note that under this plan, there is no requirement to acquire any specific number of shares and we may terminate the plan at any time. In terms of next steps, we will be sending out a convene notice later today for a shareholder meeting to be held on March 3 to approve the plan before implementing.

Thanks, Aviv. Turning now to the financial performance for the quarter on Page 10, consolidated net gaming revenue grew by 5% to nearly 53 million. This was primarily driven by our Spanish business where revenue grew 10% to 23 million. In Mexico, given the currency and sports betting margin headwinds Aviv mentioned earlier, net gaming revenue was flat versus the prior year at 25 million. Adjusted EBITDA was positive 1.9 million in the fourth quarter and included a contribution of approximately 7 million from our Spanish business. With this, we have reported positive adjusted EBITDA in each quarter throughout 2024 and 6.4 million for the full year, including a small but positive contribution from Mexico. As a reminder, country level results in 2024 include certain expenses that in 2023 were classified as undistributed B2B expenses, making for difficult prior year comparisons at the country level. Looking now at our P&L on Page 11, the 6 million swing in adjusted EBITDA in the fourth quarter was primarily driven by a 2.5 million increase in net gaming revenue and a 3 million reduction in total marketing spend. Turning now to the consolidated figures on Page 12, the 5% increase in net gaming revenue was driven by an increase in active customers, primarily in Mexico. On a constant currency basis, net gaming revenue would have been 15% instead of the reported 5%. FTDs, meanwhile, dropped by 10% in the quarter, driven by declines in both Colombia and Argentina, but also due to the comparatively lower level of total marketing investment in the quarter. Sequentially, however, FTDs grew 9% primarily due to strong results in Spain and Mexico. Despite this 10% decline in FTDs versus the prior year period, we had a 6% increase in active customers in the quarter, which reflected our continued focus on and success related to the retention and reactivation of existing customers. Turning to the Spanish operating and financial metrics, net gaming revenue in the fourth quarter increased 10% versus the prior year, driven by a higher spend per active customer together with a 3% increase in the number of active customers to 49,000 this quarter. We also had a 9% sequential increase in net gaming revenue following two quarters of sequential declines on the back of adjustments we have made to mitigate the impact from the reintroduction of welcome bonuses in the second quarter of 2024. In Mexico, net gaming revenue was 25 million in the fourth quarter, flat with the prior year period. The Mexican peso devalued by 14% in the fourth quarter of 2024, resulting in a 3.4 million headwind to our net gaming revenue; this on top of the 3 million impact in the third quarter. On a constant currency basis, our net gaming revenue would have grown 14%, notwithstanding the impact from a lower sports betting margin in the quarter equivalent to about 2 percentage points, mostly driven by unfavorable NFL results. For context, American football is one of the top sports bet on by our customers in Mexico and, as we understand it, this was more generally a very customer-friendly NFL season. Separately, we ended the year with nearly 70,000 average monthly actives, 16% above Q4 2023 and 8% above the prior quarter. As we have discussed in prior earnings calls and notwithstanding the heightened competitive landscape, we continue to believe that the opportunity to invest and grow in Mexico is as attractive as ever. On Page 15 we are including the evolution of the Mexican peso against the euro, which while comparatively more stable in recent months, experienced a devaluation, as we discussed earlier, of 14% in the fourth quarter. Looking ahead to the first quarter of 2025, the exchange rate headwind will continue, if not worsen slightly, as the peso strengthened further throughout the first quarter of 2024, making for a difficult comparison this quarter. Turning to the balance sheet on Page 16, as of December 31st we had 40 million Euros of total cash on the balance sheet, of which approximately 35 million was available, approximately 3 million less than where we ended the third quarter, due to 4 million more of cash in transit with payment service providers going into year-end, which otherwise normalized in the early days of January. In terms of our net working capital position, we ended the quarter with negative 17.5 million or around 8% of our full year net gaming revenue, which is lower than prior quarters as it reflects the continuation of a longer-term trend of more restrictive trade terms with suppliers. Looking at our cash flow on Page 17, in 2024 we generated 0.1 million of available cash, partially offset by a 0.8 million negative FX impact on ending cash balances due to the devaluation of the Mexican peso, which was only partially offset by the positive impact from a strengthening US dollar on certain cash balances we continue to hold in that currency. Moving on to our outlook for 2025 on Page 19, we are currently expecting to generate net gaming revenue of between 220 million and 230 million, a 6% increase versus 2024 at the midpoint. While this range might look conservative after having grown more than 20% in 2024, we will be facing a number of headwinds this year beyond just the impact of a weaker Mexican peso throughout the first half of 2025; for example, the recently announced new tax on deposits in Colombia and a continuation of the less restrictive promotional environment in Spain. As usual, we will see how the first half of the year plays out and adjust accordingly if and when needed. In regards to adjusted EBITDA, we expect to end the year in the range of 10 million to 15 million, as we otherwise continue to pursue a prudent balance between growth and profitability. This range reflects marketing investments at levels similar to those in 2024, which we believe are needed to support future growth of the business.

Thanks, Oscar. Before we move to Q&A, I want to thank the Codere Online team as always for their dedication and contribution to another great year. As we look ahead to 2025, challenges are inevitable, but with our strong foundation, strategic vision, and commitment of our team, I'm confident that we will overcome them and will continue to provide our customers with a safe and enjoyable online gaming experience and otherwise delivering strong results for our shareholders, employees, and other stakeholders. As always, thank you to our investors, analysts, and market participants for your interest, support, and patience. With that said, I will turn it back to the operator to open up the call to Q&A.

Thank you. We will now begin the question and answer session. Your first question comes from the line of Jeffrey Stantial with Stifel. Your line is now open.

Hey, good morning Aviv and Oscar. Thanks for taking our questions. Maybe just starting off here on guidance. Apologies if I missed this, but Oscar, can you just share with us what the pace of the Euro assumption that's embedded in the 2025 guidance? Or I guess looking at it differently, what the implied constant currency growth would be relative to the 6% as reported guidance at the midpoint? Thanks.

Yeah, you're saying the specifically on the Mexican peso or as it relates to what we have included in our guide for 2025 full year.

As it relates to what you have embedded in the guidance, but I would assume any sort of dislocation between as reported and constant would be related to that.

I'd have to take a look. Yeah, I don't have the numbers in front of me in terms of the FX forecast or estimates that we have included in our 2025 figures, but we can pull that after this call and get that over to you so you have it.

Thanks, Oscar. Regarding guidance, it appears that the implied flow-through to EBITDA is around 46%. This closely matches what you achieved in 2024, although you're comparing against some higher Euros and experiencing some moderation in NGR growth. My question is whether this is due to a cautious approach towards user acquisition investment. Is the Colombia VAT included in this? Is there anything else we should consider for 2025? Any insights would be appreciated.

Yeah, look, I think it's a couple of things. The first, as always, especially going into 2025 mid-year, we have this Club World Cup, I believe it's in the summer months, I don't know if it's June or July, taking place. So, there's lots of debate and planning that's happening as it relates to what we want to do around that event, what our objectives are. We do have at least two clubs that we sponsor that are playing in that tournament, both Real Madrid and Rayados of Monterrey. So this early in the year is also always a reason for, let's say, generic conservatism as it relates to how we guide because the, especially on the EBITDA front, the marketing investment is a very determining factor in the ultimate outcome on that front. I think that's the key piece. Aviv, I don't know if you have something to add in that regard.

No, at the moment, no.

Yeah, and Jeff, on the Colombia front, for sure, Colombia is one that even though it's a small part of our overall business, I think every year even smaller, it's still a significant issue that we're still working through. This is a relatively recent announcement, executive decree. I'm sure that those of you that follow Rush and a few others have already seen some of this information, but it's the imposition of a tax on deposits. So this is something a little bit different than what we've seen in other markets. We're still assessing how we would go about doing that in terms of collecting that VAT from a technical standpoint or otherwise to the extent permissible, absorbing part or all, and what other mitigating factors we have. So this is not going to be an overly material issue for us given the size of our business in Colombia, but it's an important one and one that we have to deal with and obviously is one that is going to condition going forward our appetite to continue investing. Even if we're investing at lower levels, I think we're going to have to see how this all plays out and then take decisions. So that is playing into a little bit, to some extent, our guide with respect to full year, which it's a little bit of a tighter range than we typically would put out this early in the year. But until that plays out, the constitutional challenge, which invariably will come over the next hopefully month or two. But once we see how that plays out and whether the tax will be in effect throughout the full year. And again, I think we have to be conservative and assume that this isn't necessarily going to be a temporary tax, that this might have a more durable staying power. So we are definitely being a little bit conservative on that front, even if Colombia is a small part of our overall business, I think these days it's something like 5%, 6% of our total NGR.

It's a significant tax that will likely make it very difficult to operate. The black market will thrive. I hope the regulator understands this soon because they are driving players toward a non-regulated environment instead of encouraging them to engage within a regulated framework where they can benefit from the gaming tax. I believe that at some point, companies will pass these taxes onto the players, leaving them with less money to spend. Once players see that the black market offers an easier way to access what they want, they may choose that route.

Right, that's perfect. That's all really great color. If I could just squeeze in maybe just one more. Maybe you talked about CPA, I think it's EUR211 during the quarter. That's down both year-on-year and sequentially. Even though, if I recall correctly, you've talked about some competitors coming into both of your markets and creating some upward pressure here. So, I guess could you just add a little bit of color here? Is this kind of just general better efficiency or sort of how should we think about some of the drivers of improving CPA that you're benefiting from? And that's all from us.

Thanks. Yes. So I think a few things happened together in Mexico mainly. I don't know why, but I think some of the competitors have slowed down their investment a little bit in the fourth quarter and we are enjoying it. Another thing is that we solved a few, let's call it, small technical problems that we had in terms of tracking and our ability to identify how good we are buying or how good we are investing our marketing money. It all happened in the fourth quarter and we see the results that the CPA is going down a bit. So it's a mix. I don't know which one is a stronger force but we solved some technical issues or managed to crack and to be better in our marketing investment decision-making, plus a little bit less competition in Mexico in the fourth quarter, so I think it helped us a little bit.

Great. Thanks very much, Aviv, Oscar. I'll pass it on.

Great, thanks Jeff.

Your next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Your line is now open.

Hey, good day, Aviv, Oscar. I want to say on the competitive dynamic, you mentioned Mexico, but the recent launch of Brazil, I know you guys aren't directly there, but have you noticed any of your competitors maybe moving some of the resources, focus, etc onto that market, which has benefited you guys or potentially some other dynamics on why that competitive intensity is going down?

I think Mexico, if you look at it, let's call it, from a macro level, is a very lucrative market but once you enter it, you see that it's not that easy to operate there and you need a huge investment, not in comparison to Brazil of course, but still you need a huge investment in order to build your brand and you need to know how to operate locally. And I think some of the competitors, let's call them the European competitors that came in, I think at the moment did not succeed as well as they thought. Probably they saw success in other markets, maybe in LatAm, and I think right now they lost a little bit of focus in this Mexico market a little bit because we all know that the World Cup is coming next year and I think all the competitors will come back again and will try again to penetrate the market. So it's not that the competition has left, but I think they took a short break maybe in the next few quarters and it's an opportunity for us; we are taking advantage of that.

You mentioned a similar level of marketing spend in 2025 compared to 2024. Is that specific to the market or is it overall? Can you break that down between Spain and Mexico?

Yeah, that would be total. The total marketing spend in 2025 being at similar levels to what we ultimately spent in 2024. We don't give country by country breakdowns, but I would say the trend that we've had in the last couple years, even though 2024, there was a strong investment in Spain, especially on the back of some of the restrictions falling away and additional promotional abilities to promote to our customers, over half of that is still Mexico.

Very good. Thanks, guys. Good luck.

Thanks, Ryan.

Your next question comes from the line of Michael Kupinski with Noble Capital Markets. Your line is now open.

Thank you. I have a couple of questions. Regarding Mexico, were there additional factors that contributed to the lowest revenue and adjusted EBITDA quarter in that segment? Aside from the timing of impactful sporting events and exchange rate challenges, was there anything else that may have influenced the results there?

Yeah, I would point to just looking at the fourth quarter specifically and even though that the CPA performance for the quarter overall was very good, I think more importantly, what we gained throughout the quarter is momentum both in Mexico specifically, going into December especially, we saw that that was really the driver to some of the lower acquisition. The CPAs that we were seeing overall were really being driven by Mexico, but that was later in the quarter. So there was momentum building within the quarter. You're not necessarily seeing those in the numbers, and that's continued into 2025. So January is a month where we've gotten off to a good start. That momentum we saw that I think Aviv mentioned briefly in terms of what we're seeing, in terms of others maybe lifting their foot off the pedal from a marketing spend standpoint was something that we saw progressively over the fourth quarter. And it's a momentum that we carry through into 2025.

Gotcha. Thank you for that color. You provided a market overview which provides some dynamic growth opportunities for your company as you expand in other markets. And I was wondering if you can talk a little bit about that and whether or not your outlook for 2025 includes growth investments outside of Mexico. And then as I look at your market overview, your Brazil and Argentina obviously represent some big opportunities for you, but there are a couple of other countries in there that have, what I would call, outsized growth, I guess from virtually zero in 2023, and that includes Peru and Chile. I was just wondering if you can kind of give us your thoughts about your growth investment spend as you kind of look into 2025 and maybe 2026 as you kind of prepare for the dynamic shifts that we'll see in terms of revenues coming from online in some of these other regions.

Yeah. Aviv, do you want to tackle that?

Yeah, yeah, let me start. I just want maybe just a small comment on your previous question regarding the results of the fourth quarter. You have all of you probably to understand that we are facing almost 20% on a yearly basis of a headwind from the currency exchange in Mexico. So let's say, even if I'm reporting that, let's say, zero growth, it's almost 20% on a yearly basis in nominal numbers. So I think our nominal results in Mexico are quite okay and we are showing and meeting the goals that we set to ourselves internally. For example, we didn't miss any of our predictions. So I think the numbers here in Euro terms are a little bit misleading in that sense because in terms of nominal numbers in Mexico we are doing okay.

Of course. Well noted. Thank you.

It's a bit misleading. We didn't have a slow quarter; we had a great quarter in nominal numbers. The currency exchange is significantly impacting us. However, it can also be beneficial, as it has been in the past. I hope the situation involving Trump and Schoenbaum improves so we can experience some positive effects. Macroeconomic factors also play a role in this scenario. In terms of your other question about other markets and opportunities, I will note several things. First of all, the Brazil opportunity is still too big for us to go for it alone. We did look into several potential partnerships. We didn't find our right match yet. We're still looking at it from time to time and we're waiting a little bit to see what's going to happen in this market, as we know there were a little bit of problems in the launch. We know that people are coming with hundreds of millions of marketing budget, so we are sitting on the bench a little bit and looking what happens there. Other markets, the problem that we are facing right now is that if I want to increase my marketing spends, my next dollar still in terms of ROI should go into Mexico or Spain because we know how to spend it and we know the ROI on it. When we are analyzing the figures, it doesn't make sense to put the next dollar into Chile or Peru at this point of time. We still have room to grow in our current, let's call them, core markets that generate very nice ROI. And the amount of money that, let's say, is available for us to penetrate a new market is not enough to turn a new market into a significant market. So the next maybe 10 million or 15 million, I can still effectively invest into our current markets without taking risks in that sense. So I think new markets, we are always looking, we are also looking for partners, but I think in the short term, we still want to grow in our core markets where we are seeing very good ROI and good success in the actions that we are taking.

Aviv, thank you. Thank you for that color. One country that you didn't mention was Argentina. I was just wondering, can you give us an update on your thoughts there?

Yeah, Argentina was, maybe, let's call it our third core market. Unfortunately, and we made a lot of efforts, we are not able to at the moment to enter the province of Argentina, where the majority of the money in the country is coming from. And we are not able to grow our business there based only on the city. We have good results, but not good enough. So until we are able to figure out, and we are trying constantly to determine how to get a province license, unfortunately, we cannot grow Argentina. Hopefully, maybe in the coming year some operators over there will be willing to sell their license. We are looking into that. But at the moment we cannot make big moves over there. We really wanted it to be our third core market. We made a lot of efforts, but up until now, we couldn't deliver on that front.

All right. Thank you for that color. I really appreciate it. That's all I have.

Thanks, Mike.

I would now like to turn the call over to Mr. Guillermo. You may begin.

Yeah, so we have no questions on the webcast either. So I guess we can conclude the call here. If anybody would like to follow up on any of the topics we discussed, feel free to reach out. And otherwise, we will be speaking again with our Q1 2025 earnings around mid-May. Thank you very much.

Thank you.

That concludes today's conference call. Thank you all for joining. You may now disconnect.