Codere loses 10% of its online players in Spain after betting advertising regulations

Codere's online gaming subsidiary lost 10% of its players in Spain in the first quarter of 2022 compared to the same period a year earlier, as recently revealed to the SEC, the United States stock market regulator. This is the first quarter in which it is possible to compare the effect that some of the measures of the online gambling advertising decree prepared by the Ministry of Consumer Affairs may have had, when compared with the period immediately prior to its entry into force.

Bookmakers ads on sports broadcasts remained until August of last year, once the grace period that was given when the rule was approved in November 2020 to respect the contracts in force has expired. But many restrictions (in the case of promotional activities, advertisements on some websites and social networks, or limits on the activity of so-called tipsters or betting tipsters) came into force on May 1, 2021.

The data sent to the SEC reflects that the online subsidiary of the Spanish gaming multinational closed the first quarter of 2022 with 32,643 active players in Spain, 10% less compared to the 36,275 in the first quarter of 2021, just before the entry in force of that part of the decree.

The company highlights that, despite the decrease in the number of active players, in the first quarter of this year it has already recovered and even exceeded the level of turnover prior to the norm, with an increase in its turnover in Spain of 24%. year-on-year and 15% compared to the previous quarter. The subsidiary has linked this regulation promoted by Alberto Garzón's department with the poor results of last year, when its losses quadrupled to exceed 68 million euros.

In the presentation of results for the fourth quarter, the CEO of Codere Online, Moshe Edree, pointed out that the 2021 financial year had been "not only impacted by our limited financial resources", but also "by the new restrictions in what continues to be our largest market by revenue, Spain", which is also the only one to record a positive gross operating profit (Ebitda).

"These restrictions had a greater than expected impact on our business, negatively affecting our financial and operating metrics, particularly in the second and third quarters," Edree explained. Thus, in the third quarter of last year, which coincided with the full entry into force of the decree, the number of active users in Spain plummeted to 28,000, 22% below the first quarter of 2021.

But Edree highlighted on March 31 the recovery registered in Spain in the last quarter of 2021, which has continued (although with less vigor) at the start of 2022. "The positive thing about Spain is that we are already seeing a complete recovery" , said the Israeli executive, "both in terms of billing, and of those players who continue to play." In addition, it is "recruiting new players that are coming through our own channels, the brand, and organic channels." "The quality of the players is much higher than what we have seen before," he said.

In the last results conference, the financial director of Codere Online, Óscar Iglesias, insisted on this idea when highlighting that the subsidiary in Spain has already recovered its level of invoicing prior to the regulation that Consumer introduced based on the experience of the temporary veto that introduced during confinement, which encouraged Garzón's ministry to toughen its initial proposal.

The data is "very encouraging" and "the beginning of what we believe is a positive trend for our Spanish business", according to Iglesias, who stressed to analysts "the importance of our omnichannel approach": "Having a physical presence", its network of betting shops in Spain, "allows you to reach consumers in a way that is not available to online operators, especially when promotional and marketing activity is restricted".

Edree highlighted in that conference that the group is "gaining some market share" in Spain, although its focus is on Latin America, where its sponsorship agreement with Real Madrid is maintained. In the presentation of annual results, the Israeli explained that the group is taking advantage of the gap left by the decree to announce itself at dawn.

"We are already maximizing and optimizing this slot for our brand exposure." Spain "is a great market, for Codere and not only for the online area, but also for retail", and thanks to its multi-channel strategy and its "hundreds" of stores, "we can maintain our share".

Codere's online subsidiary, which last summer regretted the "negative stance" of the Spanish Government against bookmakers, began operations in Spain in 2014. In parallel to the dismissal of its parent company from the Spanish Stock Exchange, it went public in December in the United States through the merger with the special purpose acquisition company (SPAC, for its acronym in English) DD3 Acquisition Corp. II. Since then, its shares have plummeted nearly 70%.

Recently, that subsidiary has warned there of the risk of losing your license in Spain due to the accumulation of sanctions very serious due to non-compliance with state or regional gaming regulations. Its parent company has an open file from the National Securities Market Commission (CNMV) for "accounting inconsistencies" in various subsidiaries in Latin America, which could constitute a possible "very serious" violation of the Securities Market Law.

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