Codere Online Luxembourg, S.A.

Thank

you for standing by. My name is Angela and I will be your conference operator today. At this time, I would like to welcome everyone to the Qatar Online Second Quarter 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to adore your question, press star one again. Thank you. I would now like to turn the call over to Mr. Guillermo Lancha, head of investor relations.

Thanks operator and welcome everyone to Qatar Online's earnings call for the second quarter of 2025. Today you will hear from our CEO, Aviv Sher and CFO Oscar Iglesias. Our executive vice chairman Moshe Ederet will also join us in the Q&A section. Please note that while our financial accounts are prepared under IFRS accounting standards, the figures reflected in today's presentation are preliminary and unedited and include certain non-IFRS financial metrics such as net gaming revenue and adjusted EBITDA for which you can find reconciliations in the appendix of the presentation in addition to the figures presented on a constant currency basis. These measures should be considered in addition to and not as a substitute for our IFRS results. Let me also remind you that 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 outlook which are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated by these statements. While these forward looking statements reflect our current expectations which we believe 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 qaudionline.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. Before jumping into operating results for Q2 and for benefit of those of you that may be new to the company just wanted to confirm that we have regained compliance with all applicable NASDAQ listing requirements following the filling of our 2023 annual report on May 1st and 2024 annual report on June 2nd. This was formally confirmed in a letter we received from NASDAQ on June 5th and thanks to all the hard work by Kodere Online and Melon Bailey teams finally puts an end to the uncertainty around our continuity as a public publicly traded company. As always we also appreciate the patience and support that all of you have shown us throughout this process. Moving now to the highlights of the net gaming revenue which was roughly flat versus the prior year period as a result of the devaluation in Mexican peso following federal election in June of last year. In constant currency terms net gaming revenue would have been nearly 61 million in the second quarter 12 percent above the prior year period. In terms of product mix the contribution from our casino segment was 61 percent of our total net gaming revenue in the second quarter reflecting a stabilization of our overall mix at around 60 percent casino following a trend of increasing contribution from that segment in recent years. Net gaming revenues in the quarter was the result of a seven percent increase in the average monthly active customers partially offset by five percent decrease in average monthly spend per active customer. Again primarily due to the weaker Mexican peso. On the acquisition front we have a strong quarter with 78,000 first-time depositors seven percent above those acquired in prior year period. This increase resulted in an average CPA in the quarter of 218 euros a small sequential uptick but largely in line with the average CPA in the prior 12 months period. Finally a quick update on our activity under the share buyback plan. Through yesterday we have repurchased around 106,000 shares under the plan for total investments of approximately seven thousand seven hundred thousand dollars. With this I will now turn the call over to Oscar to cover the financial financial highlights of the quarter. Thanks Aviz.

Turning out of the financial performance for the quarter on page 10 consolidated net gaming revenue was 55 million up slightly versus the prior year period notwithstanding the significant headwinds that we had this year that were either not a factor or less of a factor last year. These headwinds include a significant evaluation of the Mexican peso, the introduction of a value added tax on player deposits in Colombia, and the reintroduction of the welcome bonuses in Spain throughout the second quarter of 2024 which resulted in a more competitive landscape and lower level of spend from both new and existing customers. In regards to our other segment which reflects our business in Colombia Panama and the city of Buenos Aires net gaming revenue in Colombia was 1.6 million lower in the second quarter which was partially offset by 0.8 million in higher net gaming revenue in Panama. This 0.8 million equates to a doubling of net gaming revenue in that market versus the prior year period and reflects certain product improvements deployed earlier this year. Adjusted EBITDA meanwhile was positive 2.3 million in the quarter and included a contribution of 6.3 million from our Spanish business, 5% above the prior year. Mexico on the other hand was slightly negative due to the increased marketing investment leading up to and around the club world cup in particular with respect to our sponsorship of Rayados de Monterrey which finished second in the group in a tournament which produced its share of surprises and a higher level of activity for the company in what is historically a seasonally weaker period. Please note that Adjusted EBITDA excludes 1.1 million in audit related fees in excess of amounts otherwise provisioned for in our 2024 financial accounts. While we have historically excluded few items from our report of Adjusted EBITDA we believe that both the amount and the non-recurring nature of these audit related fees were an exclusion for the purpose of assessing our performance in the quarter and comparing said performance to prior periods. Looking now at our P&L on page 11, Adjusted EBITDA was 1 million above that of the second quarter of 2024 primarily on the back of successful overall cost contention throughout the business. Looking ahead we are expecting marketing spend in the back half of the year to be less than in the front half which together with our positive outlook for net gaming revenue we expect will translate into a higher level of EBITDA generation in the back half of the year. This positive outlook is primarily due to the continued strong returns that we are seeing from both existing and new players in Mexico combined with a better than originally expected evolution for the Mexican Bissell going into year end. Turning now to the consolidated figures on page 12, the 1% increase in net gaming revenue reflects a 7% increase in active customers primarily in Mexico offset by a lower spend per active. On a constant currency basis net gaming revenue would have grown 12% instead of this reported 1%. As Aviv mentioned FTDs grew 7% to 78,000 in the quarter and were mostly driven by Mexico where acquired a substantially higher amount of FTDs than in the prior year quarter as we continue to prioritize this market and work to build upon our already meaningful portfolio of customers. Turning to Spain, net gaming revenue in the second quarter was flat at 22 million reflecting a slightly higher spend per active which was offset by a 3% decline in the number of active customers. As we have been more selective at least versus prior periods in our promotional activity in Spain given the more competitive landscape that we continue to face. In Mexico, net gaming revenue was 29 million in the second quarter 3% above the prior year period. The Mexican Bissell devalued by more than 19% in the second quarter of 2025 resulting in a 5.7 million negative impact in net gaming revenue. The highest impact in any quarter since the federal elections in Mexico in June 2024. On a constant currency basis our net gaming revenue would have grown 23% so the underlying growth trend in this market is still quite strong. As mentioned before we had a significant increase in average monthly active customers to 85,000. 36% above Q2-24 albeit with lower player values but also lower upfront acquisition costs. Mexico remains our priority from a marketing investment standpoint and we expect that the scale we're building now will drive this business leading up to and throughout the 2026 World Cup which will be co-hosted by Mexico. On page 15 we are including again the evolution of the Mexican Bissell against the euro which has improved since the March peak. Looking ahead the exchange rate headwind will continue somewhat into the third quarter but to a much lesser extent than in prior quarters as we begin to lap the significant post-election devaluation of the Bissell. Turning to the balance sheet on page 16, as of June 30th we had 45 million euros of total cash on the balance sheet of which approximately 41 million was available. In terms of our net working capital position we ended the quarter with negative 24 million or around 11% of our LTM net gaming revenue which we believe is a normalized level of working capital. Looking at our cash flow on page 17 in the first half of 2025 we generated 7.5 million of available cash partially offset by a 2.1 million negative FX impact on ending cash balances due to the devaluation of both the Mexican Bissell and the US dollar on cash balances we hold in both currencies resulting in a total period cash flow generation of over 5 million. In regards to our outlook for page 19 we continue to expect net gaming revenue of between 220 and 230 million and adjusted EBITDA in the range of 10 to 15 million and otherwise remain confident in our ability to continue executing our operating and investment plan throughout the second half of this year and beyond. That's all from my end. I will now hand it back over to Aviv for closing remarks.

Thanks Oscar. Before we move to Q&A I want to thank again to all Codere online employees for their contribution in the recent months. Thanks also to the investors and analysts on this call for your support and interest. With that said we'll 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. If you dialed in and would like to ask a question please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to redraw your question simply press star 1 again. If you are called upon to ask your question and are listening by a loud speaker in your device please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from the line of Jeff Spasiel with Stifle. Your line is now open.

Hey good morning Oscar, Aviv. Thanks for taking our questions. Maybe just starting off on performance during the quarter in Spain. Now that the reintroduction of welcome bonuses is anniversary I'm curious if you're seeing any improvement in the overall competitive environment or if it's still relatively challenging. And then just in terms of sports seasonality how much of a drag was the the Euros comp this quarter? I guess net of contribution from club world cup and should we expect growth in the back half to accelerate just once this sports seasonality comp has has anniversaryed out?

Yep. I think you want to start on the competitive landscape Spain performance.

Yes so you are correct about the the regulation environment in Spain. We don't see it changing in the near future. It's still a hard competitive landscape because of that. Our competitors let's say are spending money to bring the players onto their platforms and offering generous welcome bonus. I think it's stabilized at least for us. We manage I think to find the formula in order to keep on track with our goals and KPIs. So we feel more secure and we are looking forward for any regulation changes but at least for now we don't foresee changing in the near time in the near month at least and we keep an eye on that. Regarding the question about the Euros I think for the Spanish part in Spain it was less strong than what we thought although Real Madrid advanced quite far but the interest was not that big. We had in Wimbledon we had more traction because of Alcares and maybe together Alcares and the and the Mundial de Clubes we had some interest over the summer but I think we still see seasonality so we are expecting a strong season start in this quarter.

Yeah. Having the Club World Cup definitely was helpful to to bridge this this period of of of of this slow period from a from a sports betting standpoint and I think it also helped having one of the clubs the sponsor, Rallades de Monterrey, were a shirt sponsor and they did quite well in the tournament and they also have an iconic Real Madrid player Sergio Ramos playing with them so that helped keep let's say a higher level of engagement than we were expecting but as Aviv said it's it's with the time zone difference and all the rest it was not a significant event necessarily even though there were some surprises there were some individual markets and events that or matches that that were beneficial to us from a from a trading standpoint.

Great that's that's helpful thank you for that and then shifting gears and turning over to the Mexico business Oscar or Aviv whoever wants to take this I just wanted to spend a minute on some of the recent marketing initiatives that you've called out targeting call it lower LTV players but also at a lower overall cac can you just add a bit of color in terms of of sort of where what and how these users are being sourced and then strategically I guess it's the way to think about this as it's sort of enabled by the peso devaluation is this more of a response to the competitive environment or is this just reflective of sort of constant iteration in UA strategy in a market that's still growing quite rapidly just any color to sort of frame this this direction in UA strategy would be great thanks

I'll turn it over to Aviv but it definitely wasn't in response to any strategy to mitigate the the weakness in the Mexican business I think it's it's more the the latter the UA strategy that we had and and the experimentation and trial and error that is always part of of both the acquisition and and promotional environments in our business and our sector but I'll kick it over to Aviv specifically on on what he wants to discuss with respect to the specific strategy that we that we were employing

yes exactly exactly Oscar Oscar is absolutely right as you know we are testing all kind of channels and we tasted the one of the channels mobile app we we tested it for three months there is a huge let's call it huge amount of traffic that we can source we tried to buy we thought that we are buying successfully but when evaluating this kind of traffic we saw that it's a low LTV a low CPA not exactly fitting with our strategy so we let's say we optimize it and then and and we are back on track and we see it here in the results we see it a little bit skewed because of that but overall I'm happy that we were able to analyze it on time and and to find this source and eventually to rule it out but we keep trying all kind of a UI strategies as you said and and we will keep on trying this is this is I think in the operational part the most important part of our job

great that's that's helpful thank you both and if I could just squeeze in one more here you know you talked about profitability improvement in the back half with marketing down relative to the front F is this mostly attributable to the the river plate sponsorship rolling off are you moderating marketing spend elsewhere and then how much flexibility or how much should we think about being embedded in guidance for for call it opportunistic investment heading into the world cup next year thanks

yeah I think it's it's it's a number of factors obviously you know with respect to Argentina specifically the rolling off of the sponsorship there in the early part of the year has helped us mitigate the EBITDA what otherwise would be an expectation of more of a small EBITDA loss in that market we're trying to get that market to the tax on the value added tax and deposits is having a significant significant impact in terms of net gaming revenue which is small business for us it's not overly material for us but we are and expect to continue to be able to mitigate at the at the EBITDA level going forward so that'll be a lesser lesser of an impact for us in our overall ability to meet guidance for the full year period or back half performance and beyond that I think it's it's again pointing to to the Mexican business the unit economics notwithstanding that the comments that that have you just made the portfolio in the existing customer base is performing well they're strong underlying unit economics continuation of that longer run running trend that we have in terms of improving return profile from that portfolio of customers so we're we're quite optimistic and even the last on the back of you know some of the news out of the US and and and elsewhere the Mexican BISO I think our expectations and we'll save right from one week to the next this can change but the Mexican BISO seems to be strengthening and definitely more than what we were expecting and what our current expectations going into year end are definitely better than where we were a few months back so all of these things point to let's say optimism that that that back half EBITDA generation and and performance from this business is going to be

strong great very helpful thank you both I'll pass it on

great thanks Jeff

your next question comes from the line of Michael Kopinski with Noble Capital Markets your line is now open

thank you for taking the questions appreciate that I'm constantly surprised by the level of growth that you continue to deliver in Mexico particularly on active players and I kind of want to follow up on the the previous caller's question is there something unique about that market in particular and I know I was just wondering in in terms of eventually as you kind of look to the other Latin American markets as you indicated you know the prospect to step on the accelerator in some of those other countries was just wondering if the playbook that you see in Mexico it can be applied to some of those other countries if you feel like there are better opportunities at some point that you can apply there I was just wondering if Kenny just give us your general thoughts about that

yes we do think that the playbook that we have can be applied we actually took some of our experience in Spain and moving to Mexico so we we already have proven that we are able to replicate our strategy and grow the market of course in order to execute such a strategy you need a lot of money and I'm sure that Brazil will come up in this call eventually so to replicate it in Brazil you will need a lot of money and so we do think that we can replicate it but we think in order to replicate it now and not like five years ago when we started in Mexico you need more money the media prices are a bit higher than in the past and the competition is more harsh we do enjoy less lesser competition in Mexico it's also true that the competition is as strong for example like in Spain so it also gives us some push over that and we have a local presence with with that also gives us a push so if we are talking about a new a new territory that we don't have a retail presence then maybe the test case will be little bit different so overall I think I think Mexico a lot of the stars aligned correctly for us and help us grow the market as fast as you see and continue the growth plus on a side comment I think the market itself has a organic growth that we also enjoy which I cannot give a good explanation why this market grows more than other markets but it it's still growing fast as we think because we don't have the exact numbers and but other than that I think we can replicate we will need more money and maybe a little bit different approach if it's a place where we don't have retail presence

yeah it's been a while since we've talked about the omnichannel opportunity but we've never stopped we're always looking for new ways of leveraging especially in a jurisdiction like Mexico where the our retail parent is is a leader in the market but always looking to leverage opportunities to improve that dynamic for the benefit of of both businesses and that's something that I think in all the jurisdictions where we have overlapping businesses we're looking we look to do it's not I wouldn't say it's the the driver of our outperformance I think the starting point you've said is it's still a developing market it's growing I think it's every year we're surprised that it's still growing more than even more optimistic expectations so it's a market we feel we feel like we've done the right things we feel like we have a good model but yes of course we would always look for opportunities to replicate that that elsewhere and that's you know some of the things that are under analysis.

Thanks for that color I think it was important for investors to hear that. I was also just curious about if you can just talk about you know the other Latin American countries you indicated that there were some that obviously you know fell off a little bit in that quarter and it was just wondering are there other opportunities there and if you can just outline for us the specific countries that you might see a little bit better growth coming from as we kind of go into the second half and into 2026.

I'll take it Oscar. Yeah go ahead. Yeah okay so the the I won't call it an elephant maybe a small elephant in the room is Colombia their vat that they imposed of us on us at the beginning of the year is harsh and the business there is struggling and what we've done is basically to reduce everything to the minimum so we keep it on a break even point and that's why we lost some revenues. Fortunately we were able to cover some of it with a good success in Panama but not all of the revenue loss that we had there in Colombia. So to your question on other countries in Latam, Colombia which started at the beginning of the end of last year to show very good signals that maybe we are able to invest there unfortunately fell with this vat that basically give us the business around 50% tax which very hard for us and our other competitors to operate in this market. We need to see the other competitors report. I'm especially curious about Rush Street how they are coping with that and unfortunately we found a little bit more success in Panama but it will not cover the entire Colombia. It grows very nice but both of them in terms of marketing investment are still small for us and the two core markets remain Spain and Mexico.

Yeah Mike I think the good thing is here as we start generating a little bit more cash flow from these core businesses obviously our focus is still organic growth but we start feeling more comfortable about our cash position and the ability to if the right opportunity were to arise deploying some of that cash. There's nothing specific on the horizon but I think we're starting to lift our heads and looking around and not just obviously in response to investor questions or analyst questions to what's next for us and we're nothing specific to report but we're increasingly feeling confident that there we can start exploring some of those opportunities.

Great terrific I'll let others ask questions thank you.

Great thanks Mike.

Again if you would like to ask a question please press star 1 in your telephone keypad and your next question comes from the line of Ryan Sigdall with Craig Hallam your line is now open.

Hey guys let's stay on that small elephant that is Columbia. Can you comment so NGR was down significantly given the VAT impact but curious about users and then GGR specifically.

What about the GGR slowly?

Just curious how GGR was in the quarter growth not growth what it was relative to the NGR decline basically trying to figure out how big of an impact the VAT from all impact was.

Yeah

let me just take it real performance there.

Yeah hi Ryan if I could just take it from a more generic standpoint I think the important thing to remember is that especially throughout the second quarter I think there was a lot of experimentation by all market players to try to find a way through this issue with the understanding that this would be in place at least until year end and then it's you know everyone's guess what's going to happen thereafter. I think everyone has a different opinion so we tried different things and it was a very fluid competitive environment in terms of what people were doing at different points throughout the quarter. I think we decided relatively early on that we wanted to take an approach of making sure we mitigate the impact to our balance sheet so mitigate the impact to EBITDA and cash. Obviously at the expense of some of the top lines so there's there were a number of strategies deployed there including full cash backs of the VAT impact on the customer themselves to you know making the customer hold through promotional allowances whether those were free bets or casino bonuses or otherwise but it was a very fluid situation throughout the quarter. Every operator took a little bit of a different approach I think just directionally it's safe to say that our top line impact was significant something in the order of let's say 40 percent lower than what we're expecting or otherwise would have expected without the imposition of the VAT tax on deposit but we've been successful at mitigating the impact that the operating cash flow level so that's been our approach. I think other operators may be taking a little bit of a different approach but I think what's true is everyone is struggling with the magnitude of the tax. I think there's still some work to be done collectively as a sector to make sure that the right people understand what they've actually put in place and what this means for the business over the medium long term but it's a hard question to ask because it's been a moving target throughout the quarter.

Maybe just as a follow-up is it a viable market if this continues? I guess it goes the temporary decree goes through year-end so you'd have to put in something from

yeah yeah they would have to legislate legislate permanent

but but if something if they get something burdensome like this I guess is it even a viable market for you guys should this continue?

I think for us I think the only way to answer that is that we can only answer that for ourselves because every operator has a different view on and this could play out in different ways. I think for us it's a question we would have to analyze. It's not clear but it's a question we would have to analyze.

Maybe last quick one just thoughts on repurchases cash continues to grow in the balance sheet business model is inflecting you're investing nicely while still growing that cash I guess why not lean in a little more and buy more shares here?

Yeah it's a good question. It's a discussion that we're having at the board level now on a recurring basis as opposed to from time to time. I think it's a legitimate question and one that we're analyzing but obviously as with all capital allocation decisions it's a board decision and those discussions are taking place but point taken.

Very good. Good luck guys.

Thanks Ryan.

Your next question comes from the line of Arthur Rulak with three quarts. Your line is now open.

Hi guys thanks for taking my call. Maybe just to follow up on the share repurchase. Is it just a discretionary share repurchase program at the moment versus something that's just digitized?

We've deployed different strategies and at different times since the plan has been put into place and that really the two options is more of an opportunistic repurchasing. Again always in the context of the team not having any MMPI and the other is a plan repurchase plan. So we've deployed both at different times depending on where we were and where we were or are with respect to different restrictions from a trading window standpoint. But again I think we're aligned in that we want to the extent we have opportunities to repurchase at what we think are attractive prices. I think we as a company and collectively as shareholders have an interest in doing so. We've deployed different strategies.

One other question is what type of NOLs are sitting at the company today? Because there's been a lot of investment and earlier on there's a lot of loss making. So in the context of I don't know perhaps an acquisition of the business at some point

are

there NOL benefits to someone that accrued to the buyer?

Yeah I think directionally and I'll take that one. I think directionally the answer is definitely yes. I don't have a number that on the top of my head for Mexico but obviously Mexico is now starting to inflect. So we've had three four or five years of that heavy level investment. The losses that we've been incurring and would expect that we as that business continues to generate profits we'll be able to benefit from that or any in the context of any future potential transaction. In Spain it's true as well it's a little bit more complicated because of the tax perimeter we put into place. The consolidation perimeter we put into place as of January 1, 2023 between our intermediate holding company which is a Spanish entity and our Spanish operating business in that tax reorganization that involved the let's say the migration of our business in Malta to Spain and the shuttering of that business we we do continue to have both prior to and as a consequence of losses that have generated NOLs some of which are are activated to the balance sheet some of which aren't that we would be able to use in the future. But yes, yes I think it is I would say that it's overall directionally it's a material amount and would be relevant in the context of an underwriting of the business. Thanks. Thanks Art.

That concludes our Q&A session. I will now turn the conference back over to Mr. Guillermo Lancha for closing remarks.

Thanks operator. I see that we have no questions on the webcast either so we will leave it here for today. Thank you everyone for joining and we look forward to speaking again with our Q3 results in mid-November. Thank you very much.

Ladies and gentlemen that concludes today's call. Thank you all for joining. You may now disconnect.