Codere Online warns of Mexico uncertainty amid tax rise threat
Codere Online has warned of uncertainty around its position in Mexico, as a proposed rise to gambling tax could impact its business in the market.
Codere Online reported its Q3 earnings on Monday. It said net gaming revenue for the period had dropped slightly to €51.6 million from the €51.7 million reported last year.
Adjusted EBITDA for Q3 was up €2.9 million or 93.3% compared to €1.5 million last year, with Codere Online reiterating its full-year NGR guidance of between €220 million-€230 million and adjusted EBITDA of €10 million-€15 million.
The company’s NGR in Mexico was €26.8 million, a 0.4% year-on-year rise. Codere Online CEO Aviv Sher noted revenue had been flat in Mexico despite a 5% devaluation of the peso and a consistently low sports betting margin.
However, Mexico is in the process of increasing its tax rate on gambling from 30% to 50%, as part of the government’s 2026 budget.
The hike hasn’t yet been approved, but CFO Oscar Iglesias, who will shortly be replaced by Marcus Arildsson, expects it to come into effect from 1 January.
“The discussions around capital allocation, I think, is a broader one, and it’s in the context of the discussions we’re having at the board level,” he told analysts during the earnings call, in response to questions on its position in the market.
“The tax obviously factors into that in terms of our appetite and willingness to invest into the market because it has an impact on the unit economics, the flow-through of every dollar of NGR to EBITDA in the business.
“It’s still a little bit early to say what that means in terms of our plans for next year to invest in Mexico.”
Mexico government targeting the wrong side of legality
Mexico continues to be Codere Online’s biggest market, with its €26.8 million in Q3 revenue ahead of the €22 million achieved in its home market of Spain.
Its monthly active players in Mexico soared by 39% to approximately 88,300, compared to 50,200 in Spain.
Elsewhere, Codere Online is working with the Mexican government to highlight the prevalence of the black market in the country.
Iglesias said the government should be looking to bring illegal operators onshore as a source of additional revenue.
“Directionally, obviously, a tax increase is not good,” Iglesias explained. “We always are looking for governments to look to increase compliance with anyone operating offshore or operating in the grey or black markets. That’s the first place we prefer for governments to look for additional revenues.
“We are partnered with the Mexican government. We are partnered with governments in every market in which we operate, and we are going to find a way through this and continue to be confident that the Mexican market is going to be a winner for us over the short, medium and long term.”
Tax rise might ease competitive landscape in Mexico
Iglesias did note the incoming tax increase could dampen the competitive landscape in Mexico, perhaps benefitting well-established players such as Codere Online.
“While it is difficult to know how other operators will react, we are expecting that this tax increase may have a chilling effect on both new market entrants in regards to their appetite for further investment in the Mexican market and on those not yet operating in Mexico, but with near or medium-term plans or ambitions to enter the market,” Iglesias said.
“It is difficult to quantify the impact of that chilling effect, [but] we would at least directionally expect a more benign competitive landscape in Mexico going forward, which we believe will be to our and other incumbents’ benefit.”
Codere Online five-year strategy does not include Colombia
In the company’s Q1 results, Codere Online said it was pulling back in Colombia because of the 19% temporary VAT. Sher reiterated this strategic change on the business’ post-Q2 earnings call.
The VAT is set to come to an end from the start of 2026, but the company is working under the assumption it will either be renewed or made permanent.
Speaking on the Monday call, Codere Online executive vice-chairman Moshe Edree said the operator’s short to mid-term strategy “does not include Colombia”.
“We just monetise it as it is. So we’re not going to invest any further unless the tax will change,” he said.
Iglesias added more colour: “We continue operating under the assumption that this will continue, that this will get legislated in a more permanent way.
“That said, that may not necessarily be the case. If it’s not the case, then we will rethink what it is we want to do. Obviously, that’s a game changer and fixes the primary problem in Colombia, which is the unit economics are not good in the context of a tax on customer deposits. It is a situation we’re monitoring.
“As things stand today, it’s a tough market for us to find a way forward that makes sense for us.”