The Mexican government plans to increase the gambling tax rate from 30% to 50%, bringing uncertainty to the online gambling operator Codere Online. The company recently announced its third-quarter financial data, showing a slight decline in revenue but an increase in profitability, while discussing the potential impact of the tax increase on investment plans.
Business Assessment Under the Tax Increase Turmoil
Codere Online warns that the proposed tax increase in Mexico could force the company to reassess its investments in the local market. CFO Oscar Iglesias pointed out that the tax increase would affect unit economics, essentially the conversion efficiency of each dollar of profit. It is still too early to discuss specific investment plans for next year, but tax changes are undoubtedly a key factor.
Key Data from the Third Quarter Financial Report
In the third quarter, Codere Online's net gaming revenue slightly dropped from 51.7 million euros in the same period last year to 51.6 million euros, while adjusted EBITDA increased by 2.9 million euros, reaching a 93.3% increase. The company reiterated its full-year net revenue forecast of 220 million to 230 million euros, with adjusted EBITDA expected to be between 10 million and 15 million euros. In the Mexican market, net operating income was 26.8 million euros, up 0.4% year-on-year, despite the depreciation of the peso and profit margin pressure.
Depth and Competitive Outlook of the Mexican Market
Mexico is Codere Online's largest market, with third-quarter revenue of 26.8 million euros, surpassing Spain's 22 million euros. The number of monthly active players soared by 39% to about 88,300. The tax increase might inhibit new competitors from entering, Iglesias believes this could benefit existing businesses, creating a more benign competitive environment. The company is working with the government to combat the black market, emphasizing the need to prioritize the regulation of illegal operators.
Strategic Adjustments and Future Layout
In Colombia, Codere Online has scaled back its operations due to a 19% temporary VAT, and its medium-term strategy does not include this market. Vice Chairman Moshe Edree stated that unless there is a tax reform, there will be no further investment. The company is closely monitoring policy changes, but it is currently difficult to find a favorable development path.
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