On the back of Codere Online’s Q3 results, CEO Aviv Sher sat down with EGR to talk about the operator’s recent financial performance and ongoing developments in its core markets, Spain and Mexico.
In a global regulatory landscape that is constantly changing, Sher also details how the Nasdaq-listed firm continues to deal with whatever is thrown its way as well as why he feels the company continues to be undervalued.
In Mexico, where revenue was flat, politicians are planning on hiking the GGR tax rate to 50%, while the looming potential of returning advertising restrictions in Spain is also a concern. There is also the ongoing VAT on deposits in Colombia, which continues to impact operators including Codere in the Latam market.
But, despite those issues, Sher is resolute. Here, he explains why the future remains bright for the business and how a sharp focus on ROI is key to success.
EGR: What is your reaction to Codere Online’s Q3 performance?
Aviv Sher (AS): Q3 was, let’s call it, just okay. We had some headwinds, like the rest of the industry. Almost all of September, and the beginning of October, we had a very low sports margin. It’s affected us, but it affected our competitors even more.
Having said that, the analysts and I are quite positive. We see good KPIs in other areas. In that sense, we are in a good shape.
EGR: As you continue to monitor the VAT on deposit developments in Colombia, what are your short- to long-term goals for the market?
AS: Though the VAT should expire at the end of the year, we are anticipating that it will become permanent, unfortunately. If it becomes permanent, this market will be very tough for us to grow in. We will maintain it, maybe do something similar to what we’ve done in Argentina.
Maybe we will rebuild it slowly in order to see how we can produce EBITDA. The methodology is to invest where we see ROI. At the moment, we don’t see ROI in Colombia, or very low ROI. In order for us to continue, we need to be able to create ROI. We will work hard on that.
In Argentina, we are slowly seeing results on all those activities, whether it’s through product enhancements, pushing casino more than sports, those kinds of optimisations. I suspect in Colombia, if the VAT remains permanent as we anticipate, we will need to go back and rebuild the business from scratch and grow it slowly. We cannot invest like we did after the IPO. We will need to invest slowly.
EGR: Mexico’s GGR tax rate is set to be increased to 50%. As it is one of your core markets, does this alter your strategy over the next 12 months?
AS: Unfortunately, it’s a huge tax. I don’t think we are going to revise our strategy. It burdens the business a lot, but it doesn’t kill the business. If we are not able to somehow offset it, we are expecting the EBITDA margins to go down. It will slow our growth; but it’s still a growth market, we will still invest. We will just need more patience in order to achieve the targets there. But for us, it will remain a core market.
It’s important to say, operating in South America, where regulation and legislation frameworks are changing constantly, is hard. But in this very choppy water, we are able to navigate the ship correctly and grow our business and our EBITDA. I’m still positive about Mexico. I think we will be able to continue and operate well there and establish ourselves as one of the top operators.
EGR: With potential plans from the Spanish regulator around deposit limits and self-exclusion scheme in the offing, could this effect growth in the market?
AS: Since it [the advertising ban] was removed last year, we have been anticipating that the regulations would come back. For us, it’s not necessarily bad news. Regulation benefits large brands and we are one of the top brands in Spain. Any advertising restrictions or promotion restrictions are bad for the business, probably pushing some players to play with the black market.
As we talk now, the regulation is not clear. We need to wait and see, probably by mid-December, because there are many interpretations to what they are suggesting. We need to be a little bit more patient to see how dramatic it is.
EGR: You mentioned regulations are constantly changing. Does that make it difficult to plan long term if you never know what’s around the corner?
AS: No, we are not working like that. We are planning long term. Almost all the plans that we are submitting are five-year plans. We need to deal with whatever is coming on a day-to-day basis and we are adjusting accordingly. Luckily, we are living in an online world, so we are adjusting quickly.
EGR: In the Q3 analyst call, AI was brought up. Where is Codere Online using the technology?
AS: It was a good question. On a macro-level, everybody’s dealing with that. Unfortunately, I also believe that a lot of people think that it’s a bubble. I don’t think it’s a bubble, but I do think that our expectations from AI are more advanced than what it can currently achieve. We see it with the products that we’ve been offered, whether it’s market predictions or engine recommendations. We see good results; we don’t see great results.
We are investing on the business side, by creating content, supporting bots for customer service. On the B2B side, AI is very advanced, and we see a lot of benefits. We did not reduce personnel because of that. But it is helping and we are able to produce more with less.
EGR: How important was it to have Oscar Iglesias help the transition with Marcus Arildsson’s arrival as CFO?
AS: I think it’s very important. Oscar was a very good professional with many years at Codere and Codere Online. He understood the business. Gambling from the outside looks like you are clicking on spin and winning or losing money, but there are many other operations that are happening in the background, especially in finance, in order to create the revenue. The CFO that is coming in has a big challenge to learn this part and to control it. But other than Oscar, we have a very good finance team.
EGR: Looking ahead, how do you feel about Codere Online’s immediate future?
AS: The company is performing well. Maybe the share price is currently not showing it, unfortunately, but all the KPIs that we are projecting and showing are strong. It is true that the regulated frameworks around the world are shaky, and the whole industry is suffering, but, as a medium-sized player, we have a strong team, strong foundations, and we are leading the company into good results.
I truly believe that Codere Online is a little bit undervalued at this moment. We will continue to deliver and hopefully continue to lead the market in certain areas as before with sponsorships, activation, promotions, product, experience and entertainment. As a global player, we’re proving ourselves, and hopefully next year, with the World Cup, we can be even stronger.
The post Codere Online CEO: Mexico remains a growth market despite impending GGR tax increase first appeared on EGR Intel.
Aviv Sher tells EGR the omnichannel operator remains committed to its core markets of Spain and Mexico despite impending headwinds, as well as the challenge new CFO Marcus Arildsson will face
The post Codere Online CEO: Mexico remains a growth market despite impending GGR tax increase first appeared on EGR Intel.