Codere Online Luxembourg, S.A. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. Although the request refers to 2022 Q4, this is an annual report; the supplied filing does not provide a clear standalone Q4 financial summary. Financial statements are audited and prepared under IFRS, in euros, and are carve-out statements.
Business context
Codere Online operates online sports betting and casino gaming, primarily in Spain, Mexico, Colombia, Panama and Argentina. It uses the Codere brand, technology and other services supplied in part by its controlling shareholder’s group. Management said it is shifting emphasis from growth toward profitability and sustainable operations. Italy operations were sold on December 30, 2022.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | €115.7 million | €80.3 million |
| Operating loss | €55.9 million | €71.0 million |
| Net loss | €46.4 million | €68.0 million |
| EBITDA (non-IFRS) | Negative €42.9 million | Negative €66.2 million |
| Operating cash flow | Negative €42.4 million | Negative €5.7 million |
| Cash and cash equivalents at year-end | €53.8 million, including €4.8 million restricted | €94.9 million, including €3.5 million restricted |
Revenue grew 44.2%. Sports betting generated €58.5 million and casino wagering €57.3 million. Spain revenue was €60.0 million, Mexico €45.5 million, Colombia €7.0 million and Argentina €1.1 million. Calculated from reported figures, the operating-loss margin was approximately negative 48% and the net-loss margin approximately negative 40%.
Marketing expense rose 83.4% to €88.4 million; other operating expenses increased 8.6% to €155.8 million, while personnel expense more than doubled to €15.3 million. The 2022 operating loss improved partly because FY2021 included €45.5 million of listing and transaction costs, including a €35.8 million non-cash listing expense. FY2022 also included a €744,000 one-time pre-tax loss from payment fraud.
Year-end equity was €24.5 million, down from €68.2 million; working capital remained positive at €25.5 million, compared with €73.0 million. Borrowings were €4.2 million, primarily short-term related-party debt; there were no non-current borrowings. Warrant liabilities were €1.3 million. Reported finance income of €12.5 million included approximately €4.2 million of non-cash warrant fair-value gains and €5.8 million of positive foreign-exchange effects.
Changes versus comparable periods
- Revenue increased from €80.3 million in 2021 and €70.5 million in 2020. Growth in 2022 was led by Mexico, up 82.7%, and Colombia, up 76.2%; Spain grew 20.7%. Management cited marketing, new casino games, modernization of gaming systems, relaxed COVID-era restrictions and the FIFA World Cup.
- Net loss narrowed from €68.0 million in 2021 to €46.4 million in 2022, but the company remained loss-making and EBITDA remained negative.
- Operating cash outflow increased substantially, from €5.7 million to €42.4 million, primarily reflecting higher marketing spending and expansion-related costs. Cash fell by €41.1 million during 2022.
- 2021 comparisons include the Business Combination and its listing costs; the 2020 statements are combined carve-out statements, while 2021 and 2022 are consolidated carve-out statements. Management cautions that these statements may not represent the costs or results of a fully independent public company.
Outlook, risks and unusual items
The filing gives no clear formal 2023 revenue or earnings guidance. Management’s business plan assumes continued investment and negative operating cash flow to pursue growth, with positive cash flow beginning in 2024; management said available cash was expected to fund operations through 2025. These are assumptions, not a guarantee. The filing also says losses were expected to continue at least through 2023 and that marketing efficiency and spending would be adjusted as the company pursues profitability.
The auditor’s report contains an explanatory paragraph raising substantial doubt about the company’s ability to continue as a going concern, principally because Codere Online depends on the Codere Group for its brand, certain licenses and services. Management’s assessment assumes the Codere Group’s proposed 2023 restructuring succeeds; the restructuring was expected to include €100 million of new money, but its completion and terms were uncertain at the filing date.
Controls are a significant concern: management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing four material weaknesses, including insufficient technical accounting resources, weak cash-disbursement controls, inadequate oversight of outsourced cybersecurity controls and broader control-environment deficiencies. The weaknesses contributed to the €744,000 payment fraud. Remediation was underway, with timing and cost not clearly estimated.
Other material risks include extensive gaming regulation, advertising and tax restrictions, currency volatility, customer-acquisition costs, wagering-result volatility, cybersecurity and data-protection exposure, and dependence on related-party services. The Mexico license is held by Codere Group entity LIFO; Panama and Buenos Aires license transfers remained dependent on regulatory approval. In Spain, an April 2023 regulator inquiry concerned a possible failure to block a self-excluded player; the filing notes a potential fine of up to €1 million if enforcement proceedings follow. This inquiry and the 2023 restructuring developments occurred after the 2022 year-end.
Most important facts for investors to verify
- Whether the Codere Group’s restructuring was completed on acceptable terms and whether it can continue providing essential services, brand rights and license support.
- Cash burn, unrestricted cash availability, and whether the business plan’s assumptions support the stated liquidity runway and 2024 cash-flow target.
- Progress in remediating all four material weaknesses, particularly cash disbursements, accounting expertise and controls over outsourced systems.
- License status and transfer approvals in Mexico, Panama and Buenos Aires, plus developments in the Spanish regulator inquiry.
- Whether marketing-spend reductions improve operating performance without materially weakening revenue growth or customer retention.
- The effect of carve-out presentation, related-party arrangements, non-cash warrant remeasurement and foreign-exchange gains on comparisons with future results.