Codere Online (CDRO) Q3 2025: Mexico Net Gaming Revenue Rebounds 29% in Early Q4, Offsetting Flat Quarter
Codere Online’s Q3 flat top-line masked a sharp reacceleration in Mexico and Spain through mid-November, as early Q4 trends show a 17% YoY rebound led by 29% growth in Mexico. Management flagged new gaming tax headwinds but sees a more favorable competitive landscape emerging, with double-digit growth targeted into 2026.
Summary
- Mexico Growth Signal: Net gaming revenue in Mexico rebounded sharply in early Q4 after currency and margin drag in Q3.
- Acquisition Efficiency: Customer acquisition cost (CPA) hit a multi-year low, but player value mix remains under scrutiny.
- Tax and Regulatory Overhang: Looming tax hikes in Mexico and Colombia reshape capital allocation and market strategy.
Performance Analysis
Codere Online’s Q3 2025 was marked by flat net gaming revenue at 52 million, with underlying drivers revealing a complex mix of regional shifts and cost discipline. Spain’s net gaming revenue rose 5% year-over-year, while Mexico was flat, both impacted by a weaker Mexican peso and an unusually low sports betting margin in September. The casino segment contributed a higher-than-normal 65% of net gaming revenue, reflecting the margin squeeze in sports betting.
Customer acquisition surged, with first-time depositors (FTDs) up 26% to 85,000, driven by Mexico, and at the lowest CPA since Q1 2023. However, average monthly spend per active customer fell 10%, offsetting an 11% increase in actives. Adjusted EBITDA nearly doubled year-over-year to $2.9 million, powered by a 4 million reduction in marketing spend and cost optimization, even as platform and content costs rose. Cash flow generation remained solid, with 11.5 million in available cash for the first nine months, despite FX headwinds and share repurchases.
- Mexico Currency Drag: Peso devaluation cut 1.3 million from Mexico’s Q3 net gaming revenue, masking underlying 5% constant-currency growth.
- Marketing Pullback: Marketing spend hit a post-listing low, supporting EBITDA expansion as customer acquisition efficiency improved.
- Colombia Headwind: Deposit tax continued to erode Colombia’s contribution, prompting management to deprioritize further investment absent regulatory change.
While Q3 headline growth was muted, management’s disclosure of 17% net gaming revenue growth through mid-November (29% in Mexico, 14% in Spain) signals a rapid turnaround that could reshape the growth narrative into 2026.
Executive Commentary
"More importantly, we are seeing encouraging recent trends with a re-acceleration of net gaming revenue in the fourth quarter through November 15 to 17% above last year, including a 29% growth in Mexico and 14% growth in Spain, which make us confident that the business is on track to return to double-digit top-line growth in the fourth quarter and which we hope will continue into next year."
Aviv Sher, CEO
"Adjusted EBITDA was 1.4 million above that of the third quarter of 2024, on the back of a 4 million reduction in marketing spend, partially offset by higher platform and content costs...we are reiterating our expectation to meet both our net gaming revenue guide of between $220 and $230 million and adjusted EBITDA on the range of $10 to $15 million."
Oscar Iglesias, CFO
Strategic Positioning
1. Mexico: Tax Shock and Competitive Realignment
The Mexican government’s planned gaming tax hike from 30% to 50%—expected January 2026—has become the defining strategic variable. While this will pressure margins and force a reassessment of capital allocation, management expects the move to chill new entrant activity, potentially easing competitive intensity for incumbents like Codere Online. The team is actively reviewing supplier and partner agreements to mitigate the impact but acknowledges that unit economics will shift, and investment appetite will be recalibrated accordingly.
2. Spain: Marketing Optimization and Regulatory Tailwinds
Spain’s market, which faced heightened competition after the reintroduction of welcome bonuses, is now stabilizing. Codere’s refined operating model and brand strength have enabled a return to growth in both actives and spend per customer. Management is more constructive on Spain’s outlook than last quarter, seeing potential upside if further regulatory restrictions benefit established brands.
3. Acquisition Strategy: Efficiency Versus Quality
Acquisition cost per customer (CPA) fell to a multi-year low in Mexico as the team tapped new traffic sources, but this came with a tradeoff: lower player lifetime values. Management is now shifting focus to optimize for higher-value customers, expecting CPA to rise moderately as quality improves. The business intelligence (BI) function is central in this ongoing optimization, balancing volume and value to maximize returns.
4. Capital Allocation: Share Buybacks and Cash Discipline
Codere Online expanded its share buyback program by 50% (to $7.5 million) and extended its duration, signaling confidence in intrinsic value. Cash flow discipline remains a priority, with marketing investments tightly managed and a steady cash balance maintained even after buybacks and FX headwinds.
5. Regulatory Risk Management: Colombia and Beyond
With Colombia’s tax on deposits undermining profitability, management has effectively frozen new investment in the market, treating it as a cash cow rather than a growth lever. The team is closely monitoring for potential tax reversals or political shifts but is otherwise focused on core markets where regulatory frameworks are more stable or manageable.
Key Considerations
This quarter’s results reflect a company in transition, balancing near-term regulatory shocks with operational momentum in core markets. Codere Online’s approach to acquisition cost, capital deployment, and regulatory navigation will define its ability to sustain and scale growth in 2026 and beyond.
Key Considerations:
- Mexico Tax Impact: The impending tax hike will reshape margin structure, unit economics, and investment appetite in Codere’s largest market.
- Acquisition Mix Optimization: Rapid FTD growth at lower CPA must be matched with improved player value to ensure sustainable growth.
- Spain’s Brand Leverage: Codere’s strong brand and operating discipline position it to capitalize on potential regulatory tightening.
- Colombia Deprioritization: The business is deprioritizing Colombia due to unsustainable tax dynamics, focusing resources elsewhere.
- Shareholder Alignment: Expanded buybacks and cautious cash management demonstrate management’s confidence and discipline.
Risks
Regulatory risk remains the primary challenge, with Mexico’s tax hike set to materially impact profitability and capital allocation. Currency volatility, particularly in Mexico, continues to distort reported results and cash flow. Competitive responses to regulatory changes in both Mexico and Spain are unpredictable, and further regulatory tightening in Colombia or other markets could undermine growth plans. Management’s ability to optimize acquisition quality and adapt to evolving tax regimes will be critical to maintaining momentum.
Forward Outlook
For Q4 2025, Codere Online expects:
- Double-digit net gaming revenue growth, with early Q4 trends already 17% above prior year
- Continued strong EBITDA contribution, supported by disciplined marketing spend
For full-year 2025, management reiterated guidance:
- Net gaming revenue between $220 and $230 million
- Adjusted EBITDA between $10 and $15 million
Management highlighted several factors that will shape the outlook:
- Mexico tax changes and their impact on profitability and competition
- Ongoing acquisition strategy optimization to improve player value
Takeaways
Codere Online is navigating a pivotal period, with regulatory and currency headwinds offset by operational momentum and cost discipline. The company’s ability to adapt to Mexico’s new tax regime and sustain acquisition quality will determine its growth trajectory into 2026.
- Mexico’s Regulatory Pivot: The tax increase will challenge margins but could create a more favorable landscape for incumbents if new entrants retreat.
- Acquisition Model Evolution: Shifting from volume to value in customer acquisition will be necessary to support sustainable growth and margin expansion.
- 2026 Watchpoint: Investors should monitor management’s response to the tax environment and competitive shifts, as well as the impact of the 2026 World Cup on Mexico’s gaming market.
Conclusion
Codere Online’s Q3 flat performance belies significant momentum in core markets, with early Q4 trends pointing to a sharp rebound. The company faces a regulatory inflection in Mexico, but disciplined execution, brand strength in Spain, and shareholder-aligned capital allocation position it well for the next phase of growth—provided it can adapt to a tougher tax and competitive environment.
Industry Read-Through
Codere Online’s experience highlights the growing regulatory and tax volatility facing online gaming operators in emerging and established markets alike. The Mexican tax hike is likely to reshape market structure, favoring incumbents with scale and compliance infrastructure, while discouraging new entrants. Acquisition cost optimization and player value management are becoming central to sector profitability as customer behavior and regulatory frameworks evolve. Spain’s regulatory tightening could also signal a broader European trend toward favoring established brands. Operators in similar markets should expect increased scrutiny on tax, compliance, and marketing practices, with capital allocation and acquisition efficiency as key differentiators.