Earnings Call Transcript - CDRO Q1 2026

Operator, Operator

Ladies and gentlemen, thank you for joining us, and welcome to the Codere Online First Quarter 2026 Financial Results Presentation. I will now hand the conference over to Guillermo Lancha, Director of Investor Relations and Communications at Codere Online. Please go ahead.

Guillermo Lancha, Director of Investor Relations and Communications

Thanks, operator, and welcome, everyone, to Codere Online's earnings call for the first quarter of 2026. Today, you will hear from our CEO, Aviv Sher; and CFO, Marcus Arildsson. Our Executive Vice Chairman, Moshe Edree, will also join us in the Q&A session. Please note that figures reflected in today's presentation are preliminary and unaudited and include certain non-IFRS financial metrics, which should be considered in addition to our IFRS results. Reconciliations and further details are available in the appendix. During this call, we will make forward-looking statements, which are subject to risks and uncertainties. While these statements reflect our current expectations, we undertake no obligation to update them after this call. A replay and transcript will be available at cohereonline.com, where investors can also sign up for e-mail alerts. Additionally, I would like to draw your attention to our recently filed annual report, where you can find detailed financial and other information regarding the company. With that, I will go ahead and pass the call on to Aviv.

Aviv Sher, Chief Executive Officer (CEO)

Thanks, Guillermo, and thank you all for joining us today. We are very pleased with how we started 2026, delivering a solid first quarter that reflects continued momentum in the business and good execution across our key markets despite a still demanding operating and regulatory environment. Starting with the highlights for the first quarter of 2026 on Page 8. We delivered a consolidated net gaming revenue of EUR 64.4 million, which represents a 13% increase versus first quarter of last year and 6% sequentially. This growth was supported by healthy underlying trends across both casino and sports betting and confirms that the top-line reacceleration we saw in the second half of 2025 has carried into the new year. Looking at the revenue mix, Casino once again accounted for the majority of our net revenue in the quarter, representing 63% of the total, with the remaining 37% coming from sports betting. This mix is very consistent with recent quarters and continues to reflect the importance of casino as a key engagement and growth driver for our business. Turning to the operating KPIs. Performance in this quarter was driven by further expansion of our active customer base. Average monthly active customers reached approximately 183,000 in Q1, which is 14% higher than the same period last year. This reflects continued strength in acquisition, combined with solid retention across our portfolio. Average monthly spend per active customer was EUR 117, around 1% below Q1 of last year. As we have mentioned before, this is consistent with a broader and more diversified customer base and does not change our positive view on the quality and long-term value of the players we are acquiring. Although we will cover this later, we are working to optimize our active customer base in Mexico. On the acquisition side, during the quarter, we acquired approximately 90,000 FTDs at an average CPA of EUR 212, which represents an increase both year-on-year and sequentially. This reflects a combination of a more competitive marketing environment at the start of the year, particularly in our core markets, and a deliberate shift in mix towards higher-value cohorts and channels. As in prior periods, we remain disciplined in our approach and continue to prioritize customer quality, profitability and lifetime value over short-term volume. With respect to capital allocation, we did not repurchase any shares under our share buyback plan during the first quarter. As a reminder, the program remains in place through the end of 2026, and we will continue to evaluate repurchases based on market conditions and business priorities. Finally, looking ahead, our outlook for the full year of 2026 remains unchanged. We continue to guide net gaming revenue in the range of EUR 235 million to EUR 245 million and adjusted EBITDA between EUR 15 million to EUR 20 million. This guidance reflects both the strong start of the year and our prudent approach to planning, taking into account the regulatory and tax environment in our markets. As always, we will continue to assess performance as the year progresses. And if current trends and execution remain consistent, we would expect to revisit our outlook after the first half of the year. Overall, we remain confident in our ability to deliver continued growth in both revenue and profitability in 2026. With that, I will now hand the call over to Marcus to walk you through the financial performance in more detail.

Marcus Arildsson, Chief Financial Officer (CFO)

Thanks, Aviv, and hello, everyone. If we turn to Slide 10, you can see our consolidated net gaming revenue and adjusted EBITDA performance by country for the first quarter of 2026. Starting with NGR. In Q1, we delivered EUR 64.4 million, representing, as Aviv mentioned, a 13% year-over-year increase compared to the first quarter of 2025, driven primarily by our two core markets, Spain and Mexico, both of which delivered solid performance. This also represented a 6% sequential increase versus an already very strong fourth quarter of 2025. In Spain specifically, NGR increased by EUR 3.6 million year-over-year to EUR 20.5 million, representing growth of 16.4% and reflecting a continued strong underlying trend. In Mexico, NGR grew by EUR 4.1 million to EUR 34.6 million, an increase of 13.4% versus Q1 of last year, which further consolidates Mexico as our largest market and the key growth driver. In other markets, which include Colombia, Panama and the City of Buenos Aires, we generated EUR 4.4 million of net gaming revenue in the quarter, broadly stable year-over-year. As expected, growth in these markets remains more volatile and continues to represent a smaller portion of the overall group, although we're seeing encouraging trends in both Panama and Colombia. Looking at the last 12 months, net gaming revenue reached EUR 231.6 million, up 7.3% versus the prior period. Spain and Mexico continue to account for the vast majority of the business, together representing over 93% of LTM net gaming revenue with Mexico contributing approximately 53% and Spain approximately 41%. This strong top-line performance translated into a further step-up in profitability. In Q1 2026, we delivered adjusted EBITDA of EUR 6 million compared to EUR 1.8 million in the first quarter of last year. Spain contributed EUR 7 million of adjusted EBITDA in the quarter, up 27% year-over-year, reflecting continued operating leverage, while Mexico delivered EUR 2.9 million of adjusted EBITDA, also representing an increase of over 60% year-over-year as the country continues to move towards profitability. Our undistributed and headquarter costs were slightly lower in the quarter at EUR 5 million despite the increase in revenues, reflecting ongoing cost discipline and operating leverage as the business scales. On an LTM basis, adjusted EBITDA reached EUR 18 million compared to EUR 6.5 million a year ago, which already positions us in the upper part of our outlook range for the full year. Overall, the first quarter shows a solid start to the year with continued revenue growth in our core markets and further improvements in profitability, consistent with the outlook Aviv mentioned earlier. Turning to our consolidated P&L on Page 11. Marketing expense was EUR 25 million in the quarter, EUR 1.2 million above Q1 of last year, but noteworthy, it was 3 percentage points lower as a percentage of NGR. The rest of our operating expenses, namely platform and content costs, gaming taxes and personnel, were in line with, if not below, the growth in NGR, resulting in adjusted EBITDA of EUR 6 million in the quarter. This translated into an adjusted EBITDA margin of around 9% compared to 3% in the first quarter of 2025. Now, turning to Page 12. We can see the operating trends behind our Q1 performance. NGR increased 13% year-on-year, supported primarily by a continued expansion of our active customer base. Average monthly actives reached approximately 183,000 players in the quarter, up 14% compared to Q1 of last year. This increase in player engagement was primarily driven by improvements in retention and reactivation of players, as acquisition remained flat at around 90,000 FTDs, in line with recent quarters. The cost per acquisition increased to approximately EUR 212 in the quarter. As discussed earlier, this reflects both a more competitive start to the year and a conscious shift towards higher-value channels and cohorts. Turning to Page 13 and Spain. Net gaming revenue in the first quarter of 2026 was EUR 25.5 million, up 16% versus Q1 2025 and 4% sequentially. This was a result of a 13% increase in the number of active customers to approximately 59,000 players. With Spain being a more mature and tightly regulated market, especially in terms of advertising, we're pleased to continue growing our portfolio of customers while maintaining strong profitability. Moving now to Mexico on Page 14. Net gaming revenue in the country increased by 13% year-on-year in the first quarter of 2026, reaching EUR 34.6 million. Growth in the quarter was primarily driven by a continued expansion of the active customer base, which increased by approximately 20% year-on-year to around 98,000 average monthly actives. This more than offset the lower average spend per active customer, reflecting the broader and more diversified player base we're continuing to build in the market. On a sequential basis, active customer levels were slightly lower compared to the fourth quarter and have continued to decline into the second quarter of 2026. This was expected and reflects the implementation of tighter promotional rules aimed at reducing the participation of bonus hunters who were taking advantage of short-term promotions. While these players had limited impact on net gaming revenue, they polluted our customer database and made segmentation more complex. We view this as a positive step that improves the overall quality and sustainability of our customer base as we head into the World Cup in the coming months. Overall, Mexico remains a key growth driver for Codere Online. We continue to invest in expanding our customer base, improving the product and customer experience and leveraging our scale. At the same time, we're being selective and disciplined in our marketing investments. For example, we have recently secured an opportunistic content partnership with a leading television broadcaster that provides brand exposure immediately following goals during football games. This has been very effective in terms of reach and visibility. And this approach reflects our focus on pursuing efficient, high-impact opportunities rather than chasing more expensive and increasingly crowded World Cup-related content that we're currently seeing across the market. And it supports our continued focus on marketing efficiency and return on investment. Now on Page 15, looking at the balance sheet briefly. We closed the quarter with EUR 56 million of total cash on the balance sheet, of which approximately EUR 51 million was available. As in prior quarters, our structural negative working capital position remained in line at EUR 22 million or approximately 10% of our LTM net gaming revenue and supported the cash generation we have seen in the quarter and that we expect going forward. Looking at cash flow on Page 16. We generated EUR 6.5 million of cash flow in the first quarter 2026. Please note that this quarter, we are breaking down how much available cash was generated or used by decreases or increases, respectively, in reserve cash. This was previously included within changes in working capital. Overall, we continue to see an encouraging trend, not only in delivering positive adjusted EBITDA, but also in converting most of it into cash flow. Having said that, the precise timing of certain cash flow items can impact the cash generation in any given quarter. Although across several quarters, this tends to even out. As a result, our available cash, as discussed, was EUR 51 million at the end of March. Very briefly on Page 18. We are maintaining our 2026 net gaming and adjusted EBITDA outlook. As Aviv mentioned, we're off to a strong start of the year, and we are comfortable in our ability to meet it. As opposed to last year, in 2026, we're enjoying some tailwinds, for example, in the Mexican exchange rate or in the Colombian gaming tax, which is more favorable this year and is helping us grow our top line. If these trends and our strong execution in Spain and Mexico hold into the second quarter, we would expect to revisit our outlook with our second quarter results. That's all from my end. I will now hand it back to Aviv for closing remarks.

Aviv Sher, Chief Executive Officer (CEO)

Thank you, Marcus. Before we move on to the Q&A session, I would like to thank all Codere Online employees for their hard work in delivering a great start to the year. I would also like to thank the investors and analysts joining us today for their ongoing support and interest in Codere Online. With that, I will now hand the call back to the operator to open the line for questions.

Operator, Operator

Your first question comes from the line of Jeffrey Stantial with Stifel.

Aidan Young, Analyst (Stifel)

This is Aidan Young on for Jeff Stantial. So starting off on guidance. If we look back historically, it looks like Q1 is typically one of the weakest quarters in terms of adjusted EBITDA seasonality. And then this year, you have the benefit of the World Cup coming in Q2 and Q3. So Marcus, can you help us think about the bridge from that EUR 6 million of EBITDA you generated in Q1 to the EUR 15 million to EUR 20 million for the year? Is it mostly marketing investment around the World Cup? Or how should we bridge those two?

Marcus Arildsson, Chief Financial Officer (CFO)

Well, it's undoubtedly we've come up to a very strong start during the first quarter. And our full-year forecast is the EUR 15 million to EUR 20 million that we had set out in the previous call as we began this year. The World Cup — in past World Cups and in past similar events, we haven't seen a tremendous amount of impact on NGR. We have seen an uplift, and we expect that for this year as well. We expect an uplift in activity, but with a limited impact on NGR and on the financials. So the World Cup is there. It's going to impact a few weeks in Q2 and a few weeks in Q3. But at this stage, we don't expect a very substantial impact on our figures.

Aidan Young, Analyst (Stifel)

Great. Turning to Mexico. It looks like Stake recently entered the market. Could you update us on the competitive environment there and whether you're seeing any upward pressure to CAC heading into the World Cup? And if I can just squeeze in one more—can you update us on the implementation of AI into your processes? Where have you been able to see some benefits? And how should we think about that as a potential impact to the model, whether through cost mitigation or revenue-enhancing initiatives?

Aviv Sher, Chief Executive Officer (CEO)

We saw the announcements of Stake coming into the market. We haven't, for example, yet seen them on TV or on Google PPC. I'm sure they will come strong on that. But at the moment, we are not seeing any of that. Some of our competitors are still down since late last year, as you all know. Other than that, we continue our activities as usual, continue to grow the database and the customer base. I don't think it has had any pressure on our CAC or LTV. On the opposite, I think it helps us a little bit. For us, we continue to comply with all regulations and taxes required in Mexico to keep operating smoothly as before and to continue to deliver the results that you're seeing. Regarding AI, to be honest, at the moment in the core business, we have not implemented AI. In supporting areas, everyone is using it. As a process right now, we are not using it in the core business. We haven't seen any AI trading benefit or anything like that that you can right now imagine or have seen in the news. We haven't seen a working product yet. We are already using it in customer service and maybe some outbound communications. We see good results. I think we need a couple more quarters before we can say that we found something really interesting in that area. It does support our operation in the day-to-day. I think every employee regularly requests another ChatGPT or Claude license. So it's not yet in the core of the business, but in the surrounding functions, we are using it.

Moshe Edree, Executive Vice Chairman

It's Moshe here. We have already engaged with Google Israel; they are supporting us in implementing tools related to Google advertising, and they will start a process with us about implementing their tools into our system.

Aviv Sher, Chief Executive Officer (CEO)

But still early. I think two more quarters and we'll see something substantial.

Operator, Operator

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

Will, Analyst (Craig-Hallum)

This is Will on for Ryan. First, I wanted to ask on Spain. You've had relatively strong performance there this quarter relative to what we've seen in prior years. Curious if you think this trend can continue and what you're seeing in terms of the competitive environment there? And then just a quick follow-up on Colombia. I know it's a relatively small exposure for you. But with the removal of the 19% VAT, you've got a new 16% consumption tax out of that. Curious how you think of investment there going forward and as well as if you're looking into any potentially new markets?

Aviv Sher, Chief Executive Officer (CEO)

In general, for the last few quarters, we're reporting growth in Spain and good results. It's important to say that we also see that the market itself grew a lot last year, according to the regulator's data. We continue to push and optimize our customer acquisition toward higher-value cohorts. We see good success with it. We also benefited from a couple of quarters of strong technology stability, which allowed us to cruise through a few big games with good results. Also important to say in the first quarter, trading margin was favorable for us with a lot of surprises along the way, so we enjoyed a favorable trading margin here. Overall, we are very happy with the result in Spain, and we think it will continue with this trend. Regarding Colombia, the 16% tax allows us to continue and operate the current database that we have, which we did with very good success. We see it in the results, although it's part of the other lines, but Colombia recovered quite nicely. Unfortunately, this current structure doesn't allow us to invest again into marketing, only to operate and reactivate the large database that we have. We are, like everyone, waiting for the results of the elections at the end of the month. Hopefully the political environment will change there and be more favorable for the business, and then we will be able to invest. We are encouraged by the results of activating the database, which we thought would be harder, but actually we did pretty well with that. If the business environment changes or when they remove the 19% completely, we are ready to make new investments into Colombia and start considering it back as a separate market with its own investment line. Regarding other markets, currently there are no plans for new markets.

Will, Analyst (Craig-Hallum)

Hope it goes in your favor.

Operator, Operator

Your next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

Michael Kupinski, Analyst (NOBLE Capital Markets)

I was just wondering in terms of — this obviously was a great quarter in terms of an inflection for EBITDA. I was just wondering, at what scale do you believe the business can consistently generate double-digit EBITDA margins? And I have a couple of follow-ups.

Marcus Arildsson, Chief Financial Officer (CFO)

Can you repeat the question just to try to really get the gist of it?

Michael Kupinski, Analyst (NOBLE Capital Markets)

Yes. I was just wondering in terms of what scale do you think the business can consistently generate double-digit EBITDA margins?

Marcus Arildsson, Chief Financial Officer (CFO)

Obviously, one of the key drivers of that is our marketing spend. The remaining cost items in the P&L, like gaming taxes and platform costs, are quite variable in nature. One of the most important expense lines is marketing. Our strategy is to continue to grow the business, but over time mature into a lower percentage of NGR in terms of marketing spend. We think to be able to get to a double-digit EBITDA margin, we need to probably be below 30% in terms of marketing as a percentage of NGR. When we get there has to be seen. I don't think we're in a position to make a precise forecast on timing, but that's how we see it. With the current cost structure and looking forward, when we start to get marketing below 30%, that's when our EBITDA margin can start to approach 20% or maybe go above 20%, but in that range. So that's sort of how we look at it, just looking out a few periods.

Moshe Edree, Executive Vice Chairman

I would add that our marketing investment is pretty much entirely discretionary. It's also a decision the management team takes as to how much we want to keep investing. If the priority at some point was to deliver double-digit EBITDA, that's something we could do by reducing investment. But what we are managing for is sustainable growth in EBITDA and for that percentage to increase over time organically relative to NGR.

Aviv Sher, Chief Executive Officer (CEO)

I think the key here is to balance. We are balancing between revenues and EBITDA as we see fit to generate the highest company value. This is the goal here.

Michael Kupinski, Analyst (NOBLE Capital Markets)

Fair enough. Obviously, you have EUR 56 million in cash and no debt. I was just wondering in terms of how management is thinking about capital allocation priorities at this point. How much cash does management believe is necessary to support its growth? So if you could just talk a little bit about capital allocation at this point?

Moshe Edree, Executive Vice Chairman

First and foremost, as a public company, we have guidelines by the Board of Directors and our forecast based on the Board's decision about the target EBITDA and organic growth. From time to time we look at whether there's anything to do with the cash beyond marketing. Up until now, there hasn't been anything substantial presented to the Board. It's not just about investing the money in marketing, but it's also to keep the same ratio on the CAC of the investment. We are keen that any additional dollars we spend in Spain or Mexico, our biggest markets, receive the same ratio of investment versus the ROI. That's how we're managing the cash. Although it seems that it's quite liquid, having EUR 50 million in cash, it's not, in my view, an amount that would trigger a large acquisition. As you know, we had a buyback process recently where we used some of this cash. But other than that, there isn't anything we are actively looking at in terms of acquisitions.

Marcus Arildsson, Chief Financial Officer (CFO)

Maybe just to add to that. A very significant part of our cash is invested in the business as working capital. We operate in five markets and have a number of payment alternatives for our customers. So a substantial portion of our cash is working capital and not readily available. We are generating cash and, net, we're adding to our cash position as we speak. As the quarters go by we will accumulate more cash. One of the levers we have to use that is to return to shareholders through our buyback. That's the position we're in at this stage. If and when opportunities come for further investments in our current markets or entry into other markets, we'll look at it, but for now the focus is on the business and working capital.

Operator, Operator

There are no further questions at this time. I will now turn the call back to Guillermo Lancha, Director of Investor Relations and Communications, for closing remarks.

Guillermo Lancha, Director of Investor Relations and Communications

Thanks, Derek. If there are no further questions, I guess we will leave it here. If anyone has any follow-ups, you know where to reach us. And if not, we will be talking again with our Q2 results by the end of July. Thanks, everyone, for joining.

Aviv Sher, Chief Executive Officer (CEO)

Thank you.

Guillermo Lancha, Director of Investor Relations and Communications

Thank you, Mr. CEO.

Operator, Operator

This concludes today's call. Thank you for attending. You may now disconnect.