Codere Online (CDRO) Q2 2025: Mexico Active Users Jump 36%, Offsetting Currency and Tax Headwinds

July 31, 2025 | By EarningsIQ Research

Codere Online’s Q2 reveals robust user growth in Mexico, counterbalancing currency devaluation and regulatory tax shocks in Colombia. Underlying momentum in core markets, especially Mexico, is masked by FX and tax volatility, yet management signals confidence in higher EBITDA for the back half. Investors should monitor the company’s evolving capital allocation stance, particularly as cash generation improves and share repurchases remain under review.

Summary

• Mexico User Base Expansion: Active customers in Mexico surged, demonstrating resilient demand despite currency drag.
• Colombia Tax Shock: VAT on deposits slashed profitability, forcing operational retrenchment and highlighting regulatory risk.
• Capital Allocation Under Review: Growing cash reserves and opportunistic buybacks signal flexibility as management weighs further deployment options.

Performance Analysis

Codere Online’s Q2 headline results reflect a business navigating a complex mix of currency, regulatory, and competitive forces. Net gaming revenue (NGR), the company’s core metric representing total gaming receipts less bonuses and player incentives, was essentially flat in reported terms but would have grown 12% YoY on a constant currency basis, underscoring the impact of the Mexican peso’s 19% devaluation. Mexico remains the company’s growth engine, with net gaming revenue up 3% YoY despite severe FX headwinds and a 36% surge in average monthly actives. However, average spend per customer declined, a function of both currency and a deliberate shift toward lower cost acquisition channels.

Spain, which now contributes 40% of NGR, delivered stable results as the market absorbed the return of aggressive welcome bonuses and persistent competition. In Latin America outside Mexico, Colombia’s business shrank sharply due to the newly imposed VAT on player deposits—estimated to have cut top-line by about 40%—while Panama doubled NGR off a small base. Adjusted EBITDA improved YoY, benefiting from disciplined cost control and lower upfront acquisition costs, with profitability expected to strengthen as marketing spend moderates in the second half.

• Mexican Peso Devaluation: FX impact reduced reported growth by nearly 20 percentage points, masking underlying momentum.
• Active User Growth: Mexico’s active customer base rose to 85,000, up 36% YoY, reflecting continued market penetration.
• Colombia VAT Impact: Regulatory changes forced a defensive posture, prioritizing EBITDA over market share in the region.

Cash generation was solid, with €45 million on the balance sheet and positive free cash flow, positioning Codere Online for opportunistic investments or increased buybacks.

Executive Commentary

Strategic Positioning

1. Mexico: Scalable Growth Amid FX Volatility

Mexico is now Codere Online’s clear strategic focus, accounting for over half of NGR and showing strong organic growth in user acquisition and engagement. Management’s willingness to absorb lower average customer spend in exchange for higher volume reflects a playbook aimed at maximizing scale ahead of the 2026 World Cup, which will be co-hosted by Mexico. The company continues to test and refine user acquisition (UA, digital marketing to attract new players) channels, rapidly iterating to optimize cost per acquisition and lifetime value.

2. Spain: Competitive Stability and Selective Promotions

Spain’s market remains fiercely competitive, with operators reintroducing aggressive welcome bonuses. Codere Online has responded with more selective promotional investment, prioritizing profitability over pure volume growth. The Spanish segment remains a stable cash generator, with management signaling no near-term regulatory relief but confidence in their ability to maintain share through disciplined execution.

3. Latin America Diversification: Regulatory and Execution Risk

Colombia’s VAT on deposits has fundamentally altered economics, forcing Codere Online to shift focus to breakeven operations and minimize cash burn in the region. Panama, while showing promising growth, remains too small to offset Colombian weakness. Management acknowledged the need for significant investment and local presence to replicate the Mexican model in other LatAm markets, especially Brazil, and remains cautious about scaling aggressively without regulatory clarity or competitive advantage.

4. Capital Allocation: Buybacks and Optionality

With €45 million in cash and positive cash flow, Codere Online is increasingly focused on capital deployment. The board continues to review share buybacks, having repurchased 106,000 shares to date, and is weighing further repurchases versus potential organic or inorganic expansion. The company has accumulated material net operating loss (NOL, tax shield from prior losses) carryforwards in Spain and Mexico, which could enhance future profitability or M&A attractiveness.

Key Considerations

This quarter’s results highlight Codere Online’s ability to drive growth in core markets while navigating external shocks. Strategic resource allocation, especially in marketing and capital deployment, will be critical as the company balances scale ambitions with profitability and regulatory risk.

Key Considerations:

• Mexico World Cup Tailwind: User base expansion positions the company to capitalize on the 2026 World Cup, but FX volatility remains a persistent risk.
• Colombia Viability: High tax burden may render the market non-viable if VAT persists, requiring ongoing reassessment of investment and operational approach.
• Spain Margin Focus: Selective promotional spending and stable customer metrics support ongoing cash flow, but limited growth upside under current regulatory conditions.
• Cash Deployment Optionality: Growing cash balance provides flexibility for buybacks, M&A, or accelerated investment in new markets as opportunities arise.

Risks

Codere Online faces significant external risks, including FX volatility in Mexico, regulatory unpredictability in Latin America, and intensifying competition in Spain. The Colombian VAT case exemplifies how abrupt policy changes can upend market economics. Management’s ability to dynamically reallocate resources and maintain profitability will be tested if similar shocks occur in other key markets.

Forward Outlook

For Q3 2025, Codere Online guided to:

• Continued positive NGR momentum in Mexico, with FX headwinds expected to moderate as the company laps post-election devaluation.
• Lower marketing spend in the second half, driving higher EBITDA generation.

For full-year 2025, management maintained guidance:

• Net gaming revenue of €220–230 million
• Adjusted EBITDA of €10–15 million

Management emphasized strong performance from the Mexican customer portfolio and improving expectations for the peso, while acknowledging ongoing uncertainty in Colombia and a stable but competitive Spanish market.

• Focus remains on organic growth in core markets
• Potential for increased capital deployment as cash generation improves

Takeaways

Codere Online’s Q2 underscores the company’s resilience and operational discipline in the face of adverse macro and regulatory shocks. The business remains highly levered to Mexico’s growth trajectory, with Spain providing a stable base and Colombia highlighting the risks of regulatory overreach in emerging markets.

• Mexico Drives Upside: Underlying user and revenue momentum remains robust, setting up for a potential inflection as FX headwinds abate.
• Disciplined Cost Management: Adjusted EBITDA improvement despite top-line noise signals effective operational control and marketing discipline.
• Watch Capital Deployment: Investors should monitor management’s stance on buybacks and potential expansion, as improving cash flow opens up strategic options.

Conclusion

Codere Online is executing well in its core markets, with Mexico’s growth offsetting regulatory and FX headwinds elsewhere. The company’s capital allocation flexibility and focus on profitable scale set the stage for further upside, but external risks—especially regulatory and currency—remain material watchpoints.

Industry Read-Through

Codere Online’s experience this quarter highlights several broader trends for the online gaming sector. First, regulatory unpredictability can rapidly reshape market viability, as seen with Colombia’s VAT case, reinforcing the need for geographic and product diversification. Second, currency volatility in emerging markets can obscure true operational momentum, requiring investors to look beyond headline numbers to constant currency performance. Finally, disciplined capital allocation and the ability to scale user acquisition efficiently are emerging as key differentiators in a competitive, maturing industry. Operators with strong local presence and flexible marketing strategies, like Codere Online in Mexico, are best positioned to capture upside from major events such as the World Cup, while those overexposed to regulatory risk or lacking scale may struggle to sustain profitability.

CDRO Consumer Discretionary Online Gaming LatAm Expansion Currency Risk Regulatory Membership Buybacks