Hello and welcome to Codere Online First Quarter 2023 Financial Results. All participants are in a listen-only mode. After the speakers' presentation, we will conduct a question-and-answer session. To [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Guillermo Lancha, Head of Investor Relations. Thank you. Please go ahead.

Thanks, operator, and welcome everyone to Codere Online's earnings call for the first quarter of 2023. Today you will hear from our CEO, Aviv Sher; and CFO, Oscar Iglesias; our Former CEO and Executive Vice Chairman, Moshe Edree, who continues to be involved in the business and is supporting the team on a daily basis, will be participating in the Q&A section. Before turning the call over to Aviv, I'd like to remind everyone that during this call we will be referring to a presentation we uploaded to our website earlier today, which includes non-GAAP financial metrics such as net gaming revenue, or adjusted EBITDA, for which you can find reconciliations in the appendix of the presentation. Let me also remind you that our accounting information is prepared under IFRS Accounting Standards, and that throughout this presentation, all monetary figures will be in euro unless expressed otherwise. Finally, please note that our replay and transcript of this call will be available on our website at codereonline.com where you can also sign up for our Investor Email alerts. With that, I will go ahead and pass the call onto Aviv.

Thank you, Guillermo, and thanks to everyone for joining the call. I'm very happy to be addressing all of you today for the first time from taking over as CEO of the company. In my new role, I'm fully committed to building upon the significant progress made under Moshe's leadership and to drive sustained growth and value for our shareholders in what is now our second year as a public company. Jumping straight into the highlights of the first quarter of 2023, on Page 7, we have delivered an impressive 55% net gaming revenue growth versus Q1 of 2022 to nearly €40 million. This was also a sequential increase of 5% quarter-on-quarter, which is no small achievement considering the staff comparison with the World Cup in the previous quarter. As we anticipated in our last call, a trend of increased contribution from Casino continued into 2023 with Casino generating 53% of our net gaining revenue this quarter. This was driven by not only progress in our cross selling of the Casino product to our sports betting customers, but also and more importantly, the strong contribution from our acquisition focus on Casino oriented players. This significant growth in net gaming revenue was driven by a 22% increase in our active customer base to nearly 124,000 together with 27% increase in average monthly spend per customer to €106. Mexico drove most of the increase in active customers with a 48% more than last year. And together with Spain, we achieved the higher spend per customer. Our customer acquisition numbers remained relatively flat compared to last year with 80,000 first time depositors in the quarter. The sequential decline in acquisition was primarily driven by the lower marketing spend in the quarter as we took our foot off the pedal a bit following the…

Thanks, Aviv. Turning to Page 9, consolidated net gaming revenue grew 55% to nearly €40 million in the first quarter driven primarily by our Mexican business, which grew 75% to nearly €18 million, together with a 40% growth in Spain to over €18 million. Columbia also contributed to this increase with over €2 million of net gaming revenue in the quarter, 55% higher than last year. Engagement from both existing and new customers following the World Cup and the relative strength of our Casino business played a significant role in this increase in the first quarter. Adjusted EBITDA meanwhile was negative €2.3 million in the first quarter, including a record €6.1 million positive contribution from Spain. This negative €2.3 million represents a significant improvement versus the negative €13.2 million in the prior year quarter, and reflects the pivot we have made to sustainable growth and profitability as discussed in our prior call. And while our focus for this year will continue to be finding a balance between the two, we continue to see significant opportunities to invest and grow in both Spain and Mexico and expect over time to establish ourselves as a leading and profitable operator in Argentina. Looking now at our P&L on Page 10, we have €11 million improvement in adjusted EBITDA in the quarter was not only driven by the significant net gaming revenue growth and consequent flow through to EBITDA, but also by the lower investments in marketing that Aviv mentioned earlier. Turning to the Spanish operating and financial metrics, net gaming revenue in the first quarter increased 40% versus the prior year quarter, despite a fat customer base due to the significant increase in spend proactive in the quarter. This improvement was driven by both growth in our Casino business where spend proactive is…

Thanks, Oscar. Before we go into the Q&A, I would just like to thank the investors and the analysts that have joined us on this call and who have otherwise continue to support us, throughout what has been turbulent times in the market. I also want to reiterate that this management team is not only committed to delivering sustainable growth, but also very excited about what we believe is the significant opportunity to create value for our shareholders. With that said, I will turn it back to the operator to open up the call to Q&A.

Thank you. [Operator Instructions] Our first question comes from Jeff Stantial from Stifel. Please go ahead. Your line is open.

Hi, there. This is Jackson Gibb on for Jeff. So you reiterated full year EBITDA guidance of $20 million to $30 million of losses, so moving in the higher end of the range, contrasting that to the first quarter loss of 2.3 million seems to suggest meaningful reacceleration in marketing investments. Could you just walk us through this thought process there and help us think through marketing spend through the remainder of the year?

Yes. Hi, Jackson. I think as it relates to we're not providing guidance in terms of our overall marketing spend for the year other than what we've guided in our Q4 call in terms of taking our foot off the pedal a little bit and prioritizing and – or balancing profitability with growth. But I think that we are cautious going into the second quarter until we have a few more months of visibility over the business and how it's trading, especially into a few of the slower sports summer months. We want to be a little bit more cautious in terms of revising guidance, but the first quarter obviously came in strong. April, April figures are continuing – a continuation of that trend. So we're optimistic that this trend will continue throughout the year that the higher yield that we're getting from customers overall because of some of the mix change we've made and some of the focus we've made and efforts on acquisition and CRM on a relative basis more focused on the Casino side of the business. We're expecting that to continue, but we want to be a little bit more cautious before we revise guidance.

Got it. That makes sense. And then just to follow up with another question on marketing spend. Revenues in Spain and Mexico were up to 3% and 8% quarter-on-quarter respectively, despite aggregate marketing spends down close to 40% and that's pretty impressive. Can you just talk a bit more on customer retention efforts post the World Cup? And how sticky you're seeing customers prove to be as you pull back a little bit on that marketing reinvestment?

Aviv, do you want to jump in on this one? Aviv?

Yes. So, basically we kind of rode the wave after the World Cup and tried to retain the customers, the new customers that came during the World Cup, and explore our product and our offering. And I think lowering a little bit the marketing investment that facing new customers didn't affect the effort that we've continued to do during the first quarter on our existing database and the new database we acquired during the World Cup. And I think those efforts actually showed good results. We introduced several mechanics that I think at least in the Casino made a lot of sense and our players really liked it. So, I think, it's very impressive actually what we did and able to grow the revenue even after the World Cup. So it means that the customers that we acquire during the year, not just the World Cup, are very good customers with the value that we expected and even more.

That's really helpful. And then if I could just switch gears a little bit, there has been some news flow suggesting momentum in Brazil to get online sports betting regulated. Given how you've been executing on the growth opportunities in your core markets, do you expect to be in Brazil day one when online sports betting is legalized? And then Oscar, how much capital would you envision needing to ramp operations there that did come to pass?

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Understood. And then if I could squeeze one more in. It looks like Mexico continues to be the largest growth driver for you guys. Just curious how you've seen the competitive landscape evolve there, maybe over the past three to six months?

In terms of competition, our biggest competitor is still ruling the market with heavy investment everywhere and we are trying to compete as hard as we can and gain position. I think in terms of market share, we were able to increase the market share year one year and maybe quarter-on-quarter even from the fourth quarter to the third quarter. But other than that, the competitor landscape is very harsh. We keep hearing of new competitors coming in, some of them even pulling out after one year. It's complicated to operate over there. And I think our little business over there give us a good advantage of the new competitors coming in. The infrastructure is very solid and helpful and our brand is growing strongly. We already see in terms of the research that we are conducting, that our brand recognitions, they went up maybe 300% or 400% year-on-year. So we are able to get our foot in there and to be recognized by more and more people in the states.

Yes, Jackson, I would just add that it's important to note that, that we're only what is it a year and a half outside of our IPO and our capital raise, and we really started ramping that heavier level of investment in the first quarter of 2022 in Mexico. So we're really only a year in, in terms of that investment, that brand building that obviously is the key and drives the overall acquisition retention machinery. So we're happy and what we're starting to see here is momentum. It's being reflected in the numbers and obviously we don't want to lose that momentum and we want to keep that going throughout this year.

Got it. Thanks for all the color and congratulations on an excellent quarter.

Great, thanks Jeff.

Thank you.

Our next question comes from Pat McCann from Noble Capital Markets. Please go ahead. Your line is open.

Hi, guys. Congrats on the quarter. I'll say first I got disconnected in the middle of a call, so hopefully none of these questions are too, too redundant with what some of the things you've already said. But my first question had to do with Spain with the cash flow margins really being pretty meaningful in this quarter. I guess I'm wondering to what extent that could be a result of maybe the shakeout of some of the less established players in the – in Spain given the regulatory environment? And just generally where you see Spain going from here is – is that the trend of improving cash flow there? Is there more room for that to continue going forward?

Yes, if I could just start with just on the – in terms of the – Aviv, let me just start with that. I'll just mention on the unit economics front in Spain as – Pat as you may know, it's the market where we have the lowest gaming tax rate. So we benefit from a special tax subsidy for being domiciled in one of the two autonomous regions in North Africa and Malia. So it's the one where we have the most operating leverage and obviously every incremental euro we have of higher net gaming revenue, a more significant part of that is flowing through to EBITDA and especially some of the cost structure, especially on the platform and tech side. There's a mix of fixed and variable, but there is a significant portion of fixed expense there that allows the flow through to be substantial. So, obviously that's a focus for us. It's a tough market as you know given the advertising restrictions. But increasingly and even more so on a go forward basis, the regulatory environment is just getting more stringent. But I think that favors incumbents that are – that have the teams and the systems and the processes in place to manage through that complexity, which as you point out becomes a barrier to entry for newcomers and also really gets existing smaller players in the market thinking twice about their commitment to the market.

Thanks. And then just to piggyback off of the previous question about the competitive landscape in Mexico, I think you mentioned on the last call that that Caliente is still spending very heavily, despite maybe the more restricted capital environment we're in, but that some of the other brands are experiencing more challenges to growth. Could you just provide any update on that as far as if you're seeing maybe other brands outside of Caliente having – continue to have trouble where the competitive landscape is getting a little more favorable for you?

Well, Caliente is still investing heavily, heavily, and we see it everywhere. We are trying to invest as well. In terms of new competitors, Rush Street came in. They started the advertising and I think they pulled out a little bit. And we don't see any other significant competitors except Bet365 that continue to push through their partnership with [indiscernible]. So in terms of competitive landscape, it didn't change much, but we are aware that other competitors are at least announcing that they're coming into the market, whether it's [indiscernible] – but I know that we released a press release on that and started advertising on TV. We still believe that the country of itself to operate is a complicated one, and it takes time to understand how to operate there. And through our retail, I think we still are gaining the competitive advantage on any newcomer that tries to advertise and go solely on the online strategy. I think through the omnichannel, we still have something else that the others don't have and we are getting our brand out there. And we are heavily invested there in marketplace in Mexico.

Great, thanks. I'll let others ask questions.

We have no further questions over the phone. I would like to turn a call back over to Guillermo for any web questions.

Thanks. So we have a couple questions coming in through the webcast. The first one is about the licenses in Mendoza. We were awarded one of the five. And the question is, who was awarded the other four? I mean, I can answer this one. It was mostly local operators with a few exceptions of us and Rush Street and the rest was just the local operators. The other question is in terms of Columbia, if Columbia is non-core due to scale, what are your midterm plans for the country?

Yes, it's a good question. I think that's we're working through. Those are the discussions that we're having internally in terms of – I think we had clear what we wanted to do near-term, and now there's discussions taking place, medium term, what's our approach, what can we change in terms of what we're doing there to establish ourselves as leaders in a market that is a sizable market within the context of Latin America. So we don't have an answer today for this call. It's one we're working through. We have – what we do have clear is that what we want to be doing in Spain, Mexico, and that we have increasingly focused and continue to be focused on Argentina and all the preparations there. We continue to be focused on stepping into a license in the Province of Buenos Aires. And we have – when we have something to announce on that, we'll announce it. But right now we're still working through options in regards to Columbia, but I think the important point here is that I think even in the quarter was a small positive adjusted EBITDA and that's the key. Just cutting the losses until we have a definitive solution in terms of what we want to do in the market.

[Operator Instructions]

Okay. We have no more questions on the webcast. So unless there is anybody else wanting to ask a question through the phone maybe we can wait a couple seconds. And if not, we can leave it here.

[Operator Instructions] I'm showing no further questions over the phone lines.

Okay. Okay, thanks. So thank you everyone for joining us today. If you want to follow up on any of the subjects we discussed, you know where to reach us. And if not, we will talk again in the back half of August with our Q2 earnings. Thank you everyone.

This concludes today's conference call. Thank you for your participation. You may now disconnect.